London Business School’s Big Expansion Plans

London Business School is seeking to dramatically expand its size by acquiring a new building within walking distance of its campus near St. Regent’s Park in London, according to Dean Sir Andrew Likierman. The new building is expected to be the centerpiece of a major fundraising campaign as the school attempts to move closer toward a U.S. model of funding with far more support from alumni.

Sir Andrew, an accounting professor who became dean in January of 2009, made his comments in a wide-ranging interview with Poets&Quants. He also shared his views on the value of the MBA degree, his opinion of MBA rankings and the pressure they place on schools to manipulate data for advantage, and the school’s positioning in an increasingly competitive marketplace. But Sir Andrew made clear that the school’s single biggest challenge is that it has run out of space and currently has little money to fund expansion.

“Our greatest challenge as a school is very much the fact that we are short of space,” says Sir Andrew. “We are absolutely full. We would like to be bigger, have more faculty, and do more as an institution. That means we need more money. That is a familiar cry. But we operate in the middle of London, and London is not cheap as a place. The challenge is particularly acute for us because we don’t have the endowment the major American schools have. It is extraordinarily small by U.S. standards. We don’t have the luxury of being able to fall back on a central fund.”

London’s current endowment is less than 20 million pounds, or less than $31.5 million. By comparison, the endowment at Harvard Business School tops $2 billion. Even Babson College, a second-tier school primarily known for its entrepreneurship MBA program, has an endowment that is nearly eight times the current London fund—some $243 million. London’s comparatively small endowment limits its ability to compete for the best students and faculty and to provide world-class facilities.

Sir Andrew concedes that convincing alumni to more consistently ante up won’t be easy. “A lot of the people who came through here are from the early years when the state provided funds,” he says. “There was no sense that people had to put their hands in their pockets for that. We are trying to increase the number (of alumni who give to the school) in future years.”

ONLY 14% OF LBS ALUMS PARTICIPATE IN THE SCHOOL’S ANNUAL GIVING CAMPAIGN

At London Business School, for example, only 14% of the school’s alumni give back to the school on an annual basis. That is a sharp contrast to the numbers at major American schools where there is a tradition of giving. Dartmouth’s Tuck School of Business set a new record for participation by alumni in its annual giving campaign with 70.5% of all living alums making a contribution last year. At Yale University’s School of Management, 46% of its MBA alums reached into their pockets to donate money to the school; the University of Virginia’s Darden School was the beneficiary of a 43% alumni giving rate, while Stanford Graduate School of Business reported a 41% participation rate by MBA alums.

“We are moving away from the European model and closer to the U.S. model,” says Sir Andrew. “We are at the moment setting up a campaign, which we will announce next year. We want to have our wish list sorted out. The new building will be a centerpiece of that campaign. It would be a substantial addition to our building.”

Unlike many top business schools often housed in relatively new and spacious quarters, London Business School occupies a magnificent domed and arched building officially owned by the Queen and set across the street from the lovely green rounds of Regent’s Park. But the hallways are narrow and there are few places for students to gather and work in teams. Most students have to cross a busy street and walk down a residential block to find a place for their team meetings. With the addition of more students and programs over the years, the school has outstripped the capacity of its buildings.

Sir Andrew says that London Business School has asked for planning permission to construct a huge lecture hall under the front lawn, among other capital improvements aimed at lessening the crowded conditions. Within three years, Sir Andrew expects to enroll one more stream of 75 students in its full-time MBA program, which just took in 404 students. “It won’t be a dramatic increase, but we plan increases in other programs as well,” he added.

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