McCombs School

Despite the despairing cries of professors and students of the movement to corporatize institutions of higher learning, there is no debate that the business-ification of the ivory tower has proved incredibly, undeniably useful to students: They can now fill out student loan applications without assistance, have perfected the art of shading in bubbles on test forms and made the period freshman year during which they consider majoring in philosophy considerably shorter.  

At our own University, the latest iteration of corporatization is Shared Services, a cost-saving plan to centralize certain administrative functions that other participating universities have hailed as an opportunity to listen to even more hold-music while waiting to contact IT. The latest to argue in favor of the plan is McCombs School of Business Dean Thomas Gilligan, who did so in an Op-Ed piece published in this newspaper Thursday.

Some were flabbergasted that a business dean would advocate in favor of changes that replicate business practices, while others were simply surprised to see that a Sooner alumnus could write a coherent article. Most would agree, however, that Gilligan is out-of-touch with the technical turn the conversation has taken, offering up simple platitudes despite the fact that both sides are now using mathematics to support their respective arguments.

As someone who appreciates Gilligan’s time in the Reagan administration, however, I feel that it is my duty to explain some of Gilligan’s points, some of which may have been misinterpreted by those opposed to Shared Services. 

Gilligan has been criticized for asserting that a Shared Services system would “[increase] opportunities for administrative staff.” Opponents were curious how the plan, set to eliminate 500 positions and likely result in a more demanding workload for the staff who remain, would live up to this claim. They can stop wondering: the “administrative staff” Gilligan was referring to were not those facing attrition and relocation, but the set of managerial and executive administrators that the new Shared Services center will inevitably necessitate.  This supervisory staff will gain the opportunity to lead a team of subordinates and pad their resumes for future, more lucrative positions in the private sector. As for those who lose their positions, they will get the opportunity to enter the job market and receive a free, real-world lesson in supply and demand.

His hotly contested claim that Shared Services would result in “improvements in quality standards” also came under attack. Opponents of the plan pointed to testimonials from other universities, in which affected faculty and staff reported an increase in waiting periods for service and complicating a functional system. 

Again, critics are misinterpreting Gilligan’s words. Gilligan wrote that there would be improvements in service quality standards. Administrators love standards: writing them, talking about them, encouraging others to adopt them. All of this takes lots of work for executive-level administrators who have to spend precious time locating best practices, copy-pasting those practices and going to lush conferences to discuss those practices.  

Finally, many may have taken issue with Gilligan’s insistence that “Shared Services was not and is not an Accenture initiative.” Critics were surprised not only that Gilligan could effectively differentiate between the past and present tense, but that he would breeze over what opponents view as a close relationship, marked by cronyism and a lack of transparency.  Sure, Accenture executive Stephen Rohleder wrote an Op-Ed in the Austin American-Statesman recommending the program for the University before it even began, was proposed by a strategic planning committee led by Rohleder and incubated in a steering committee stacked with individuals with close ties to Accenture, but it is not an Accenture initiative.  

Dissenters will continue to argue that Gilligan, the second highest-paid administrator at UT, is supporting this plan because of the money he stands to make, in the form of donations to the business school and future lucrative deanships at colleges in need of a prudent leader. However, Gilligan isn’t stupid. If he wanted to work in the public sector and be rich, he would have been a football coach.

That Gilligan is so insistent on cutting administrative services in these “difficult” times and hasn’t considered taking a pay cut from his $541,500 salary isn’t hypocrisy; it’s capitalism in higher education. 

Opponents of Shared Services, please, put your protest signs down and go work your second part-time jobs. Shared Services is the future.  

Griswold is a government senior from Indianapolis.

The McCombs School of Business Foundation has established revenue-generating enterprises to benefit the business school, while also attracting thousands of dollars in private gifts each year.

As an independent nonprofit, the foundation benefits the McCombs School of Business and provides close to $5 million in contributions to the school and more than $600,000 in scholarships each year. The foundation also supplements business school dean Thomas Gilligan’s salary with an extra $100,000 and doubles the salaries of some lecturers and professors through compensation for their work with a training program for professionals.

Joe Holt, CEO of the Austin region of JP Morgan Chase and chairman of the foundation’s board of trustees, said the foundation’s leadership is aware of the weight transparency has on its credibility with donors. 

“There is no transfer of funds unless they are approved by trustees,” Holt said. “That level of transparency created credibility with donors and alumni. In all the things that are swirling around right now, the most important thing we can do is make sure that the intent is right and the actions are transparent.”

According to the most recent IRS records available, donors contributed more than $97,000 in 2011. But the foundation’s primary source of revenue is from the Executive Education Program, a training program for professionals. 

Five business faculty members provide training at conferences for corporations and state agencies and are compensated by the foundation in amounts ranging from about $300,000 for senior management lecturer Gaylen Paulson to almost $570,000 for John Daly, communication studies and management professor. This compensation is in addition to their University salaries. Other professors occasionally provide training through the program, but their compensations are not listed individually on tax records.

The program brought in about $7.4 million in revenue during the 2011 fiscal year. The foundation uses the money toward regular philanthropic operations, Holt said.

Like other external foundations, the business school foundation has allowed donors to establish enterprises benefitting the University that would face legal constraints if carried out by the University itself.

Dallas attorney Del Williams, former chairman of the foundation’s board, said former business school dean George Kozmetsky initially set up the foundation so that private gifts could be invested in stocks — something state laws prohibited at the time. 

Kozmetsky laid the groundwork for the MBA Investment Fund, LLC, which was created in 2001 as the first private investment company managed by students, Williams said.

Business school spokesman David Wenger said the fund operates under a management agreement with the foundation.

“The MBA Investment Fund manager has full discretion to manage the fund while giving quarterly accountability reports to the foundation,” Wenger said. “While every attempt is made to increase the value of the fund, its primary purpose is to serve as a real-world educational experience for the student portfolio managers.”

In addition to establishing the investment fund, the foundation has also helped the business school with property acquisition. In 2011, the foundation purchased the property where Players Restaurant sits on Martin Luther King Jr. Boulevard for $3 million. The University then bought the property from the foundation for $1.5 million as part of a deal to obtain the property below its appraised value of $2.5 million. State law prohibits the University from purchasing property at more than the appraised value. 

The University plans to use the property to expand the AT&T Executive Education and Conference Center and construct a graduate business school building. The owners of Players can continue to operate on the property for up to 10 years.

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Printed on Tuesday, April 30, 2013 as: McCombs Foundation profits from enterprises 

Gross Receipts: $7,953,730

Total assets: $16,213,291

Total liabilities: $1,089,474

Net assets: $15,123,817

Year founded: 1978

Number of people on board: 9

Employees: 48

Led by Susie Brown, associate dean for business affairs, the McCombs School of Business Foundation gives millions of dollars annually to the business school and provides more than $600,000 for scholarships through the Ex-Students Association.

Joe Holt, chairman of the foundation’s board of trustees, said the foundation’s main source of revenue is the Texas Executive Education program, a management-training program for individuals and corporations.

The foundation provides supplemental salary to various McCombs professors and lecturers for working the executive education seminars.

Business school dean Tom Gilligan also receives a $100,000 supplement to his salary through the foundation.

MBA students benefit from the foundation through the MBA Investment Fund, the first private investment company managed by students, which was created by former dean George W. Gau. About 20 students work as portfolio managers and investment counselors for the investment every year.

Students study in the Reliant Productivity Center at the McCombs school of Business, Monday afternoon. This room will be among others featured in McCombs virtual building tour, giving students visual access to the school without ever stepping foot in it.

Photo Credit: Sam Ortega | Daily Texan Staff

Prospective and current UT students will soon be able to view the interior of the McCombs School of Business building without having to physically step inside it. 

A virtual tour featuring pictures and videos of the business school will be available in March for students to access. Finance juniors Nicole Logan and Sunny Das helped push the virtual tour initiative as business school representatives in UT’s Student Government

Logan said the virtual tour will be available on the McCombs School website and the business admissions website as soon as the videos are edited. 

“These videos are going to serve as an online tour for prospective students who do not have the ability to travel to see McCombs or for students to look at the different resources when they are comparing different schools,” Logan said.

Das, who is an out-of-state student from Rochester, N.Y., said he intends for the virtual tour to enable students to view facilities available to them. 

Logan said the virtual tour evolved from an initiative she began working on last semester that was originally a series of videos which featured current UT students describing areas around the McCombs School of Business. 

“My platform when running for business representative was to increase freshmen involvement, so that was the main intent of these videos,” Logan said. 

Freshmen business students offered their own perspectives on the benefits of the virtual tour. 

“I think it’s pretty cool because the business school has lots to offer, but it gets confusing,” business honors freshman Hoai Truong said.

Business freshman Alex Nam said virtual depictions could aid students, particularly freshmen, in navigating the business school. 

“I think it will give a good idea about what the place looks like,” Nam said.  

Das said that he intends on expanding the virtual tour to include more areas around campus. He said the process of taking pictures and videos around the business school took only a day, and the process would be repeatable around the rest of campus. 

“I think these videos are going to be a great thing for McCombs,” Logan said. ”They show all of the great things McCombs has to offer and will really help draw students to our school. This is an initiative I am so excited about.”

Printed on Tuesday, February 2, 2013 as: Students create virtual tour of business school

Nicole Renaux graduated from the Red McCombs School of Business in May 2010 and got a job at Black Star Co-op, a beer brewery and pub that is owned cooperatively by about 3,000 of its customers. At Black Star, the workers are organized democratically. For a reasonable fee, anybody can be an owner and run for the board of directors and participate in beer design meetings. The workers are split into four functional teams — beer, kitchen, business and pub — and they elect their team leaders and a board-staff liaison to keep the workers accountable to the board. Renaux says of her time in McCombs, “We were primed to work for Fortune 500s ... I had limited experience in small business education and nothing in democratic businesses.” She believes her education didn’t adequately prepare her for the job she currently holds.

Renaux would have liked to have learned the types of skills that are necessary to meet the challenges of a democratically managed workplace — for instance, practical instruction in how to deal with accountability and discipline when there is no explicitly designated manager. She is not alone in that wish. Many incoming students at campuses nationwide are demanding that more of their course work be dedicated to topics of moral and ethical import.

The McCombs School isn’t oblivious to changing trends. Robert Prentice, director of the Business Honors Program and a professor of business law and ethics says that he has seen an increasing number of “kids who want to make a difference, they want to make money to pursue their passion.” But currently, the school requires that less than one percent of the total coursework required for an undergraduate degree be dedicated to ethics. Worse, the little coursework that is necessary to satisfy this requirement has not been effective. “There is no strong correlation between character and ethical action or between philosophical background and ethical action,” said Prentice. Prentice had a hand in creating “Ethics Unwrapped,” a series of videos currently on the McCombs School’s website. The videos are based on the recently developed study of behavioral ethics and focus on how people make ethical decisions.

Because she works in a democratic workplace, Renaux says,  “You don’t just have to impress one person to get promoted; you have to impress all your co-workers.” When all your co-workers evaluate you and a different owner is walking through the door every few minutes, there is no place to hide.

After a year on the job Renaux was elected to be the board-staff liaison at Black Star Co-op. Despite the title, traditional roles do not necessarily apply: Owners are customers and contribute ideas for new brews; food service staff can be elected to managerial positions and interact with owners. In an “Ethics Unwrapped” video titled “Role Morality,” the narrator explains that people are willing to break their personal ethics codes as long as it fits with the role they play at work or in society. Renaux says that McCombs teaches particular roles, such as finance and marketing, which can stifle innovation in addition to acting in ways that may befit the role but harm the business.

Perhaps the most damaging role we are all expected to play is that of employee. Carlos Perez de Alejo is executive director of Cooperation Texas, based in Austin, where he instructs people  on how to start worker cooperatives. One of the biggest challenges he faces is teaching students to break out of the “employee” mentality, forgetting work the instant they punch out and submitting to authority. Once a person becomes an empowered “owner,” there is a spillover into communities, culture and society. Given the economic and societal benefits of democratic workplaces, McCombs should listen to students and integrate non-traditional business structures such as social enterprises, benefit corporations, nonprofits and cooperatives into its curricula.

Nill is an ecology, evolution and behavior senior from San Antonio.

Students looking to pursue a graduate business education at UT may have to look beyond the iconic Red McCombs School of Business on 21st Street and Speedway. To be specific, they may only have to walk a few extra blocks to get to the glossy new building dedicated to graduate students.

In its August meeting, the UT System Board of Regents approved plans for an estimated $155 million to spend on a new building, parking garage and an expansion of the AT&T Conference Center to be completed by February 2017. The new building falls under the System’s Capital Improvement Program, an initiative to enhance and renovate UT System facilities. It will specifically house the Master in Business Administration program.

According to the board’s Facilities Planning and Construction Committee proposal, they hope the new building helps attract professionals returning to school to get their degrees. In addition, the proposal also emphasized a separation between business undergraduate and graduate students.

“The mixture of professional graduate students with undergraduate students impairs the School’s ability to meet all of the unique needs of either group,” it stated.

“Our plan is to have a large number of small learning spaces to allow for negotiation and teamwork projects to take place, which is essential in the business world,” Eric Hirst, associated dean for graduate programs in the McCombs School, said.

With graduate and undergraduate business students currently in the same building, professors must market their curriculum to larger crowds. However, professors will have more flexibility in the new facility.

“These classrooms will permit our faculty to teach more hands-on custom courses focusing on a variety of interesting topics,” Hirst said. “This will expose our students to a plethora of new learning experiences, and improve the quality of their education by a long shot.”

In order to put the McCombs School ahead of its competition, Hirst said the new graduate school will draw upon the experiences of other business masters programs.

“We want to learn from both the successes and the failures of others,” Hirst said. “We’re planning on going ahead. We’re Texas after all.”

Although the current graduate business students probably will not attend classes in the new building, Hirst said its potential to improve McCombs’ reputation will benefit all its graduates.

“This is part of a long-term plan,” he said. “This facility will help draw top tier business grads and put us solidly among the top business schools in the country. The quality of the degree will only go up, which is a huge benefit for everyone.”

Brian Williams, president of the Black Graduate Business Association, said he thinks having a separate building for business graduate students will be a great improvement and help recruit quality students.

“This is a huge step in the right direction, considering the rigors and challenges of being a McCombs graduate student,” he said. “This will give McCombs a graduate building on par with other top-tier institutions and dedicate to us the resources we need for our programs.”

Williams said a new graduate building would only add to the McCombs School’s already strong reputation.

“So many people wish to come to McCombs because they know it’s a special place,” he said. “This really takes it up a notch, though.”

Williams said this project is representative of UT’s increasing campus size and effort to accommodate a growing student population.

“I will definitely be jealous about not being able to take classes there,” Williams said.

The UT System Board of Regents granted permission to the University to negotiate the purchase of another piece of land at its meeting Wednesday, according to The Daily Texan. The land is in the area currently leased by Schlotzsky’s Deli on 20th and Guadalupe streets.

This news comes less than a week after the University purchased a parcel of land located one block south, currently where Players Restaurant stands. The purchase came with a little bit of help from the McCombs School of Business Foundation, an independent educational foundation meant to financially support the business school.

The two areas of land are located right next to the AT&T Executive Education and Conference Center, which is partially owned by the school.

All recent actions lead to an inevitable expansion of the business school.

Despite the unparalleled time commitment navigating a complex state institution takes, laying the foundations for a new building at the same meeting in which a proposal to raise tuition by 2.6 percent is being challenged is tragically ironic.

The business school has a deeper donor base than any other school on campus. But every new building is partly funded by a loan taken out by the college, and the interest and principal of the loan is typically paid by that entity. Most of that money comes from students.

At some point, we have to question whether one of the most financially sound colleges on campus needs a new building or whether the creation has more to do with creating a legacy for a dean — in this case, Thomas Gilligan.

Gilligan, who served at the University of Southern California before coming to UT in 2008, has expressed troubling views on tuition in the past. Earlier this year at a town hall meeting at the business school, Gilligan said he believes that tuition is “inelastic to demand” — in other words, no matter the price, people will pay for it.

Asking students to foot the bill for a building they may never use is untimely at best. If the regents do decide to raise tuition, Gilligan’s island will continue to drift even further offshore.

The University reached a multi-million dollar deal with Players restaurant to purchase its land near the UT AT&T Executive Education and Conference Center. Eventually the University may construct a building to house the graduate business program, according to University officials.

The transactions took place Tuesday in increments dispersed by various purchasers. The McCombs School of Business Foundation, which is independent from the University, paid Players an initial $3 million cash plus a 10-year lease for the Players establishment at no rent, said Kevin Hegarty, chief financial officer and vice president for the University.

Hegarty said the University then bought the property along West Martin Luther King Boulevard from the foundation for $1.5 million cash and assumed the 10-year lease that is worth about $1 million. He said the property was appraised at $2.5 million.

“The University is not, by law, allowed to purchase property at higher than the appraised value so the [foundation] helped pay,” Hegarty said. “Foundations are set up around the University to benefit the University.”

Hegarty said under the 10-year lease the University can call off the lease with six months’ notice and would pay Players about $100,000 for each year left on the lease. The payback method also applies if Players calls off the deal, which the establishment can do after two years into the lease, he said.

He said there are no firm plans for the property, but the foundation may have proceeded with the deal for possible plans for a business graduate school building.

“One natural unit that would be interested in this is the business school,” Hegarty said. “That’s to be determined.”

The Daily Texan spoke with Eric Hirst, associate dean for business graduate programs, in February when the University first began negotiations with Players. Hirst said the business school was considering plans for a new building to house the MBA graduate program because the current McCombs’ business school classrooms do not allow for teamwork, which is essential to the program.

“When we look at our current facilities, we’re not able to do what management does,” Hirst said. “That affects our ability to engage in teaching.”

Hegarty said the deal is very different from 2004 when the University tried to acquire the land through eminent domain, virtually sidestepping the owners to seize the land for public use.

“The transaction was very amicable,” Hegarty said. “They were pleased with it, we were pleased with it.”

Winning the second consecutive National Energy Finance Challenge for the McCombs School of Business proves that the school has one of the best energy finance courses in the country, said members of the team that won this year’s title and $10,000 in prize money.

The seventh-annual challenge concluded last month and required five graduate students in the MBA program to present a finance plan for energy development to some of the energy industry’s most influential leaders. The McCombs students went up against 15 other top schools in the nation including Yale, Purdue and Columbia.

“We were really thrilled to win against a lineup of really tough competition,” said team member Chris Wolf. “It shows McCombs is one of the best in the nation.”

Wolf said the team, comprised of himself, John Shaddix, Jake Stroud, Sudamsh Bai Reddy and Ben Beyer, had one weekend to research a case written by Chevron. The team had to come up with a hypothetical finance plan that would not only develop an oil field in an impoverished African nation, but also finance social programs that would benefit citizens of the nation.

Wolf said the team knew they had submitted a good plan for the challenge, but understood winning would be difficult.

“We knew we had a good product and had worked really hard, but we also knew the talent of the other schools,” Wolf said. “We were pleasantly surprised to win at that level of competition.”

The challenge, which began seven years ago under the direction of the McCombs Energy Finance Group, a student organization, makes participants think critically about current issues facing the industry, said John Butler, clinical associate professor at the McCombs School’s Energy Management and Innovation Center.

“The idea is that Chevron, who writes the case every year, stops and looks around and focuses on real issues they are dealing with right now,” Butler said. “They make it into a case for our students.”

Butler said the event also gives leaders in the industry such as sponsors Chevron, ExxonMobil, ConocoPhillips, Bank of America, Merrill Lynch, Morgan Stanley and EMIC a chance to meet with students.

Sudamsh Bai Reddy said he knew the competition would be stiff when they presented their plan for financing social programs to a hypothetical government, but he said he never expected the judges in the final round of competition to be so tough.

“They tried to show what happens in a real negotiation with a country’s government,” Bai Reddy said. “We started to present three or four slides but after we started they began questioning us like an actual negotiation.”

Beyer said the ability to interact with leading industry officials was a great part of the challenge.

“We presented to the CFO of Chevron and got to represent McCombs on a national stage,” Beyer said. “It was an honor. You don’t get to do that every day in the classroom.”