The black sheep of America’s business schools has been fleecing itself, a new audit reveals. The scandal-besmirched Bloch School of Management in Missouri had been struggling to boost its brand, increase enrollment, and raise its profile. The ill-fated solution? Put out false rankings data and over-spend on faculty.
So while the University of Missouri-Kansas City school added 21% to enrollment numbers over the past five years, it racked up a 600% increase in its operational deficit, from $1.5 million in 2009 to $10.6 million in 2014, according to the just-released Pricewaterhouse Coopers audit.
The school, named for its benefactor, Henry Bloch, co-founder of H&R Block tax services, has recently fallen into infamy after revelations that it sent fudged rankings data to the Princeton Review, and that an exceptionally well-compensated former professor had been closely involved in production of a dubious journal article that named the professor and the school No. 1 in the world for innovation management research.
That professor, Michael Song, with former dean Ten-Kee Tan, had organized the submission of inflated rankings data to the Princeton Review, previous audits and a Kansas City Star investigation suggested. Song had also helped write an article in the Journal of Product Innovation Management that named him the best innovation management researcher in the world, and Bloch the best school in that field – ahead of Stanford, MIT, and INSEAD. Song resigned in February. He had been the third-highest-paid employee in the entire university, hauling in $400,000 a year. Tan, who went on leave from Bloch in 2013 because of reported pancreatic cancer, had been raking in an annual salary that ranged from $430,000 in 2011/12 to around $500,000 from 2012 to 2014, and $407,000 for this academic year. He’s no longer employed with the school.
NATIONAL AND GLOBAL AMBITIONS DROVE DEFICIT: REPORT
Bloch’s crusade to push itself ahead in the B-school game lay behind the massive increase in deficit, PwC reported.
“The School, along with campus leadership has made historical decisions to invest in and build the Bloch School of Management’s national and global brand,” the audit report says. “These decisions are a primary factor in the increase in School expenditures and resulting deficit.
“Revenues from anticipated enrollment growth were to cover some of the increased compensation expenses for new faculty. However, faculty compensation expenses have grown faster than allocated enrollment revenues.”
Here it must be noted that Song and Tan alone cost some $4 million in salary over the period the audit covers. It should also be noted that Bloch dean David Donnelly, according to public records, makes $425,000 a year to head the school, which is unranked by any major publications, while, for example, Richard Lyons, dean of the elite Haas School of Business at U.C. Berkeley, makes $400,000.
FACULTY IN, FACULTY OUT
The rankings scandal has thrown the school into turmoil. A week after Song resigned, professor John Norton quit. He had told PwC in an earlier audit that Song had pressured him to submit false data to the Princeton Review, and he had feared for his job security. Norton had been receiving around $160,000 in annual salary. Using Haas as an example again, a senior professor at that top-tier B-school, James Wilcox, makes only about $25,000 more than Norton had been earning.
Donnelly, in a memo to faculty and staff concerning the latest PwC audit, said the report showed Bloch “had some areas for improvement” but “also noted that significant strides have taken place since I became dean to increase fiscal transparency and increased (sic) communication with our Bloch stakeholders.”
Donnelly had been acting dean since May 2013 and was appointed dean in March.
A THIRD OF FACULTY NOT KEEN ON BLOCH CAREER
The Princeton Review in February tossed Bloch from its rankings, and the Journal of Product Innovation Management has backed away from supporting the validity of the Bloch article’s No. 1 findings regarding Song and the school.
A 2014 faculty job satisfaction survey at Bloch found that about 30% wouldn’t choose to work there if they had to “do it all over again,” and that 53% said the school’s priorities had changed in ways that negatively affected their work (actually a lower percentage than the university as a whole, at 60%).
The University has “great confidence in the current direction of the Bloch School,” spokesperson Stacy Downs says. “Under David Donnelly’s guidance, the school has implemented a new culture of fiscal responsibility based on increased training, attention to detail and strong tone from the top.”
UMKC officials are pleased with the university’s investment in the Bloch School, Downs says. “The Bloch School is achieving its goals of attracting more students by developing programs, hiring additional excellent faculty and raising awareness of its high-quality academic programs,” Downs says. “As the audit noted, enrollment has grown 21% in recent years and the Bloch School dean reports that the school has the largest, strongest faculty in Bloch School history. Bloch has a plan in place to reduce that deficit over time, while continuing to grow enrollment.”
Reserve funds taken from the university to balance Bloch’s budget “will be repaid over the next several years,” Downs says. “It’s not out of the ordinary for an academic unit to run a deficit on occasion, based on a variety of factors from enrollment shifts to state funding decreases to program investments.”