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✔✔✔✔✔ An anonymous source has provided a Deputy Fact Checker with a secret consultant's report commissioned by the Brodhead Administration to bolster its case for the Kunshan Initiative. We believe there are five more reports like this.
Loyal Readers, rather than support the Initiative in general, and its focal point, Fuqua's proposed Master of Management Studies degree (MMS) in particular, on page after page the consultant, China Market Research Group, identifies more challenge than opportunity. Roadblocks. Pitfalls. Impossible hurdles.
This report is a direct, frontal assault on the Brodhead Administration's assertions about Kunshan's financial viability, its ability to attract students, and the quality of the likely applicants.
Financial viability? Yes. With no endowment, the new Duke Kunshan University will be heavily dependent on tuition income. The study finds the average student and his or her parents willing to pay $15,000 for the nine month masters degree at the heart of Duke's plans. Using numbers in the Duke Kunshan Planning Guide given to the Academic Council, which we will detail below, Fact Checker calculates Duke is budgeting for tuition of approximately $40,000.
In passing, the Planning Guide says Duke's tuition for the MMS concentrating on global health will be even higher, $46,200. This is the only specific reference we have seen.
And if that were not enough, every corporation approached by the consultants exhibited minimal interest in hiring holders of the MMS -- and declared it would not give financial help to people seeking the degree as Duke anticipates.
What corporations? A Who's Who of consultants (McKinsey, Bain included), banks (Citigroup, HSBC included), health care companies (Pfizer, J&J, GE Healthcare included), chemical companies (Shell, DuPont included) and many others. Chinese government agencies in the survey said they would not help to pay for an MMS, but they do offer $5,000 contributions (but no time off) toward the cost of a higher regarded MBA.
Small wonder this report was kept under tight wraps.
This report arrived at Allen Building in December. The timeline raises the very substantial issue of why these findings were glossed over so briefly in the Planning Guide finally surrendered to the Academic Council in March.
BACKGROUND
Kunshan was envisioned as a "comprehensive research university, including both undergraduate and graduate programs." Indeed, Dean Blair Sheppard of Fuqua said when the city of "Kunshan realized that Duke's initial presence was likely to be more than the business school, they agreed to underwrite half of all the operating losses.. in addition to providing land, building and maintenance for free, where their initial promise was to provide only the land and building."
But since the heady days of 2008 and 2009, the administration has throttled back to provide for more measured growth, so for the first six years, the principal offering will be the two-semester MMS degree. After starting with approximately 70 students -- presumably in the fall of 2012, if the Durham faculty approves -- the projection is an increase to 625 students in 2016-17, a span of five years.
There's never been any hint from Allen Building of the Kunshan reaction to this reduction.
The unspoken reason for throttling back in Kunshan was a strategic decision to go full blast into nine other international cities. It became necessary to conserve resources. As concerns and opposition to Kunshan have built, the Administration has put the other nine cities further and further out of the public's eye.
The MMS degree will be offered in Kunshan with several different specializations. "Tracks in environmental management (joint with Fuqua and the Nicholas School), in health care management (joint with Fuqua and the Duke Global Health Institute) and in public management (joint with Fuqua and the Sanford School) are in advanced planning."
Sheppard is clandestinely negotiating to open a campus in Shanghai for the premiere MBA program, and fourth and fifth MMS tracks specializing in finance and accounting. It is obvious this will rob Kunshan of its luster.
From Sheppard, under the heading "Problems" and the keyword "Trust" in a PowerPoint presentation: "It would be really important to manage the deal (with Shanghai) and discussions with Kunshan to avoid loss of the very good relationships we have with them. So far, so good."
The dean says -- without calling Kunshan a backwater -- that the MBA, and finance and accounting tracks "won't work" unless in a financial center. Or as the Planning Guide conceded, "Even though we believe that China is a crucial opportunity for Duke, it may be less clear why we chose the Municipality of Kunshan..."
The MMS degree is designed for students who have no work experience, to enroll immediately after earning a bachelors. By an overwhelming margin, people seeking the more traditional and arduous two-year MBA degree have several years of work experience before enrolling.
Unlike traditional moves overseas, the Kunshan campus is not an extension of Durham, designed to enhance the Duke experience here. Rather, it is "an important node on Duke's overall strategy to become a global networked university" with campuses around the world that the Brodhead Administration envisions to serve the country where they are located. Thus, while taught in English, Kunshan is a school for Chinese students.
FC has seen nothing to support the statement in the Duke Kunshan Planning Guide that our China programs will "complement and enhance Durham programs."
For the initial Fuqua programs, some -- and only some -- of the faculty will come from Durham, many of them for a maximum of six weeks. This rotation of professors provides the only prospect for intercourse between the campuses. Other faculty will be hired specifically for Kunshan; and there will be ample use of adjuncts.
A Deputy Fact Checker has learned, that quite apart from the Duke experience, a comparable school, Washington University in St. Louis, has found it very difficult to get MBA faculty to go live in China. The solution has been to rotate professors in and out every one or two weeks.
This is consistent with the experience at Johns Hopkins University; it failed to recruit sufficient medical staff to start a medical school abroad.
THE CONSULTANT'S REPORT
CMRG -- which we will profile at the end of our essay -- conducted in depth interviews and held focus groups. It talked extensively to students at five leading Chinese universities; significantly Wuhan University, our silent partner in Kunshan that the Brodhead Administration insists is a ranking school, not among them. It also talked to executives at 40 major corporations and government agencies.
✔✔✔ KEY FINDING -- The average Chinese student (remember, please, the entire student body in Kunshan will be Chinese) will only be willing to pay $15,000 in United States dollars tuition for the degree.
While Duke has not announced specifics, the Planning Guide includes a chart showing that in the academic year 2016-2017, Duke anticipates tuition revenue of $24.5 million dollars. This financial model anticipates 625 students -- and while the Guide does not do the math, FC does: that's tuition of approximately $40,000 per year. The Planning Guide states, "In the minds of many Chinese, high price signals high quality, and it is important that Duke-Kunshan programs be seen as operating at the highest international standards."
Since the new university in Kunshan will have no endowment and will derive most of its revenue from tuition, this indicates a severe blow to financial models that the administration has distributed.
$15,000. $40,000. This was kissed off with one sentence buried in the Planning Guide given to the Academic Council: "Some interviewees express concern about price points."
This is not the first consultants report to express concern over Duke's intended tuition. FC has learned that in 2008, the Boston Consulting Group did a study for Fuqua that "identified the initial price point as a source of concern." And a year later, the Huron Consulting Group noted "US-style education programs would not be self-supporting and would require identified subsidy sources."
Later in this essay, we will make a demand upon President Brodhead for the immediate release of the full text -- full -- of these and other documents.
Quite apart from the consultant's report, FC has learned that $15,000 is the "going rate" for an MBA degree -- not the lesser MMS -- in China. Our source says this is "conventional wisdom in thinking about collaborations."
The authority for this is a provost at a top-tier American university.
✔✔✔ KEY FINDING -- "Most students think admissions standards for the China program will be lower than for the program at Duke in the U.S. since they believe the smartest and most talented students will always choose to study overseas." Note the word always.
Duke has hinted at this bump in its own internal reports, rather obtusely saying it could not predict the quality of possible applicants.
In other words, we have consultants indeed making a prediction on quality -- a negative one -- while the Brodhead Administration leads us to believe no such prediction is possible.
KEY ✔✔✔ FINDING -- The "vast majority of students" and their families have a "strong preference" for going overseas for graduate education. "Intense interest." 64 percent of students who think they may seek graduate degrees only want a school outside of China.
Of the 36 per cent willing to stay in China, 66 percent prefer a university run by the Chinese themselves to a school such as Duke where tuition is likely to be ten times higher than at a Chinese-run school.
Do the math: the pool for Duke in Kunshan is just over ten percent of the college graduates who might be interested in a higher degree of this nature. Not ten percent of all graduates, just ten percent of those who seek a higher degree.
The consultants say Duke should try to remedy this by offering scholarships to any Chinese who graduates in the top ten percent of his or her class at a major university. Which sounds attractive until you put a price tag on it, and realize it will only add to horrendous operating losses already expected since almost all income is from tuition.
Indeed the Brodhead Administration has been most vague in saying how it would avoid a student body in Chinese made up only of the rich and those favored by the government. There are no announced plans to respect a core Duke value, open admissions.
✔✔✔ KEY FINDING -- Corporations doing business in China would only give "slightly higher consideration" to applicants with a Duke MMS. However, they would not offer higher initial salaries; they agree promotions might come faster if the degree holder proved his or her worth.
And the corporations uniformly refuse to help at all with scholarships. The consultants write, "None of the employers interviewed would be willing to partially pay for fresh university graduates to earn a Duke MMS..."
This is a severe blow to the Brodhead Administration's financial model that assumes substantial outside charitable support. Compare please with the Planning Guide: "We anticipate that many students will have corporate, government or other sponsorship to help defray the costs of their education. We should charge these third-party payers full cost." And compare please with Sheppard in a February 27th e-mail to his faculty: "....companies care about the growth of quality education in China and are willing to support it."
We repeat. The December consultant's report said companies would not be willing to pay. The deans e-mail in February and the Planning Guide given to the faculty in March said they would. Why didn't the planning guide flag what the consultants found?
✔✔✔ KEY FINDING -- As for government jobs, decisions on hiring are made with heavy emphasis on performance on an entrance examination, rather than on the reputation of a candidate's university, so "government jobs are not a viable target for placing Duke MMS graduates."
There are other concerns as well:
✔✔✔ KEY FINDING -- Many prospective students interviewed by the consultants feel the MMS program is "too brief to learn much of value." "Nine months is not enough time." They think several years of working experience first would be "more useful." Many think they would be better off skipping an MMS, and after working several years, shooting for the traditional MBA.
✔✔✔ KEY FINDING -- Almost all prospective students interviewed at five leading universities (but not Wuhan, Duke's partner in Kunshan that supposedly has a high reputation within China) state they would have any interest in a MMS with a specialty in Foundations in Business. Only 10 percent had any interest at all in other proposed specialties in global health, environment and public management.
Duke has highly touted the MMS with Global Health specialization. One student: "You take only four courses about topics in health. I don't think that will make any difference when I am looking for a job."
And from the consultants: "Private employers in the health care sector interviewed for this study confirm that they are more interested in hiring applications with technical (scientific and medical) expertise," rather than a business school degree.
✔✔✔ KEY FINDING -- "The majority of students and many employers perceive foreign university programs in China as being diluted versions of the programs they offer in their home countries and that most foreign universities (have as their motive) for being in China to 'cash in' on local demand."
Or as Dean Sheppard put it in a February 27th memo to his faculty, he picked the MMS because it "does not demand significant faculty presence to offer." And again "...it should be possible within a fairly short period to be making money on our China activities."
KEY ✔✔✔ FINDING -- Some of the students and parents interviewed said Duke should offer at least two months of the nine month MMS program on its Durham campus. But the majority pooh poohed, feeling "two months overseas is too little time to benefit fully from the overseas experience."
Obviously by spending more time in the U.S., they would obviate the entire purpose of Kunshan.
BACKGROUND ON CONSULTING GROUP
The China Market Research Group is headquarted in Shanghai. It identifies five "team members" on line, including James, no last name, who says he is an American who grew up in Hong Kong and graduated from Duke with a degree in Asian history and minor in Chinese language.
As all consultant reports, this one has its inane moments. Imagine paying top dollar for a report that states "Students learn about foreign universities by talking with friends and classmates who have gone overseas to study, (from) on line forums.. and (from) popular study-abroad portals (which help) students apply for overseas study programs."
As all reports from good consultants, this one suggests another, broader study.
SUMMARY - The consultants report undermines assumptions that Duke has made about the revenue it will receive from tuition in China. The report points to the need for huge subsidies to make up the difference.
We call upon President Brodhead for the immediate release of all consultant reports. In addition, we call for immediate release of the 24 missing pages that were omitted from the version of the Planning Guide given to the Academic Council. We call for release of the 30 page appendix. And we advise Loyal Readers those are just the documents we have been able to find out about.
Brodhead should recognize that the escalating debate on campus about the Administration's global aspiration is an honest undertaking which he should enable and not disdain. It is not only the fullness of the debate that is at stake. So is Brodhead's credibility.
FC profoundly thanks our anonymous source for his/her love of this university, for faith in transparency and accountability, and for understanding the necessity and wisdom of including faculty and other stakeholders in planning and decision making.
Thank you for reading and supporting Fact Checker. GO DUKE!
