Education in the US

* Education is a State responsibility, not Federal* $800 billion industry, second largest after healthcare.*For post-secondary, there are 10,000 institutions with

17 million students (2001), worth $300 billion.* High school graduates expected to grow by 11%, 1999-08.* Institutions have vast autonomy, little interference from the state* The for-profit sector represents 12% of the industry.* Graduate enrolment is about 2 million in 2001.* A bachelor degree holder will earn 80% more than a

high school diploma.

The 3-Tier Higher Education System inthe State of California

* Community Colleges (Santa Monica College etc.)

* State Universities(Teaching) (California State University, North Ridge etc.)

* Higher Level State Universities(Teaching & Research) (University of California, Berkeley, LA etc.)

Interesting Features of the US University System

* Large amount of government budget allocation* Fund raising role, endowments, external contributions* Great diversity in the system of management* Freedom from interference by the state* Strict system of accountability in the state schools* Wide range of academic standards, accreditation is voluntary* Wide opportunity for creativity and talent development

and a lot of academic freedom

Importance of Endowment

- Buys faculty, students and state of the art infrastructure- Measure of alumni loyalty and industry confidence- Ensures quality of life on campus- Measure of the wealth of the institution- Ability to weather lean times- Financial stability and flexibility to grow and prosper

University’s Endowment(2001)(in millions)

Harvard $17,951Yale $10,700Texas Univ. System $9,364Princeton $8,359Stanford $8,250MIT $6,135

In the MIT Case:

In 2001: Value of endowment lost 3.7% of investment valueIn 2002: Value expected to shrink a further 8%

Stanford Sources of Funds - 2001/2($1.9b)

36% Sponsored research25% Endowment/Investment income15% Student Income [14,000 students]8% Healthcare services income6% Expendable gifts10% Other income

Expenditures - 2001/2

54% Salaries and benefits20% Maintenance, utilities, libraries, student stipends,

other services15% Other operating expenses11% Linear Accelerator center

Univ. of California, Berkeley(2000/1)

Income: $1,231 million.

State of California 35.6%Student Fees 13.3% [33,000 students]Auxiliaries and Sales 10.8%Endowments 4.2%Other Funds 5.7%Federal Contracts and Grants 17.9%State Contracts 2.1%Private Gifts 10.6%

Percentage of Alumni who contribute to their Alma Mater

Princeton 49%Yale 36%Caltech 35%Stanford 32%MIT 31%Harvard 27%Michigan 17%UC Berkeley 12%

University Management in US

(Freedom and Divestment of Powers)

Board of TrusteePresident - External Relations, Fund RaisingProvost - Chief Academic/Administrator and BursarySenate - Chaired by an elected Professor

Reporting to the President:

VP (Development)CFOVP (Business Affairs)CEO/Director of CompaniesVP (Communications)President, Alumni Association

Reporting to the Provost:

Deans of SchoolsDean of Student AffairsDean of AdmissionDirector of Faculty/Staff HousingVice Provost - Land & BuildingsVice Provost - Extended EducationVice Provost - Research & Graduate PolicyUniversity Librarian

Range of University Academic Standard:

Top Ivory League: Harvard, MIT, Stanford , Princeton (Private, non-profit)

Most liberal, open system:University of Phoenix (Private, for profit)

Accreditation:Accreditation is entirely VOLUNTARYHowever students are eligible to get state funding if

institution is accredited.Only the institution is accredited, not courses

Effect of Economic Downturn:

- State institutions: State grants for state institutions cut- Private Institution: left to management but

generally has to impose cuts- Endowment value, external contributions

have reduced

Effect:- Increase of tuition fees (MIT - 4.7% in 2002/3)- Lower salary increases- Less financial aid- Staff Lay-off- Postponement of faculty hiring and labs

Entrepreneurship Development

- Silicon Valley best example- Most universities have Incubator Centers, Technology

Licensing & Patenting Office- Entrepreneurship sabbatical(Stanford University)

Stanford Research Park

- Home to 140 companies- Employs 25,000 workers

Secret of Success of Silicon Valley

* Long tradition of entrepreneurial spirit in the West coast* Conducive climate of the West coast* Abundant venture capital* Many companies operate in the area* Stanford alumni are ingrained with entrepreneurship and

the concept of entrepreneurship sabbatical* Availability of expertise

Issues in Malaysian Higher Education:

- Racial composition- Distribution of Economic Wealth/New Economic Policy- Socio-Political Scenario- National Policies on Education - Primary, Secondary, Post-Second- History of Higher Education- The Current Language Debate- Racial Composition and University Entrance- Accreditation of courses

Governing Acts on Higher Education in Malaysia:

University and University Colleges Act:Private Higher Educational Institution Act:

University and University Colleges Act:

- Chancellor appointed by the King- Vice Chancellor appointed by the Minister of Education- Members of BOD appointed by the MOE- BOD meets every month- VC is Chief Academic and Chief Executive Officer- Almost 85% of budget provided by the government- New courses need to be approved by MOE- Student Tuition is Minimal

Private Higher Educational Institution Act:

- University is private, for profit- Chancellor appointed by MOE upon recommendation by BOD- President appointed by MOE upon recommendation by BOD- Setting up of university only by invitation of the MOE- Government does not provide any funding- Evaluation by LAN and approval by MOE compulsory before

starting course- BOD meets quarterly- President is CEO and entirely responsible for profitability- President is Chief Academic and Chief Executive Officer- Tuition Fee is Higher than Government Universities

Challenges Ahead In Managing MMU

* The expected changes in the country’s political scenario* The ever changing educational policies and scenarios* University’s role in the MSC* Needs of the parent company* To sustain university’s leadership position and

company’s profitability * To expand the endowment collection

Prospective Areas For Malaysian Universities:

* Fund raising effort* Accreditation of programs - Differing agencies* Program approval by MOE* Academic promotion standards* Greater empowerment of university officers* Percentage of graduate students

Comparison between US and Malaysian universities:

- Cost of operation of US universities many times higher- Philantrophic spirit is significant in US- Entrepreneurial spirit far higher in the US- Greater autonomy in US- Larger fund availability in US

Strength of US Sytem

- Availability of vast amounts of funds- Freedom encourages entrepreneurship, innovation and creativity- Fertile ground for realizing ones potential and ability- Nation of immigrants invokes spirit of ‘must work hard to succeed’- Equal opportunities for all races and sexes- No apparent racial problems or serious racial divide

University Expenditure in Malaysia

University of Malaya (UM) : $75 million [23,000 students]MMU : $25 million [14,000 students]

Magnitude of scale UC,B:UM is 16 times.

Source of fund:

University of Malaya : 80% from the governmentMMU : 70% student fees