Saturday, June 23, 2012

UVA's PEU Presidency

The controversy surrounding the University of Virginia's Board of Visitors' firing of President Teresa Sullivan is founded in management theory.  Sullivan's differed from the Board.  News reports shared the Board's displeasure with Sullivan's failure to eliminate low volume programs and layers of educators and staff.  For being "incremental" in her approach, President Sullivan lost her job.  She was effectively fired by the Board.

UVA's Board appointed McIntire School of Commerce head Dr. Carl Zeithaml as Interim President.  Disclosure:  I graduated from UVA with a B.S. in Commerce in 1980.  Fortunately, it was prior to private equity's evolution from leveraged buyout organizations (LBOs).  However, a more refined name (than LBO) did not eliminate greed as the central core.

McIntire embraced alternative assets and private equity underwriters (PEUs).  PEU is my pet name for the greed and leverage boys, hence the name of this blog.  Under Zeithaml's leadership UVA's undergraduate business school implemented a tuition premium, i.e. massively higher fees to obtain the coveted McIntire degree.  I like to think of McIntire's "differential tuition" as a PEU education management fee. 

Back to the ouster of Dr. Sullivan, which outraged professors, alumni and the public   Resignations flew from high profile professors, the Board, and alumni donors.  The Associated Press stated:

"Zeithaml said he is suspending negotiations for his takeover as University President until the Board of Visitors meets next week."

"Suspending takeover negotiations," it doesn't get more explicit than that.  Dr. W. Edwards Deming, the legendary management guru, taught:

"Quality starts in the board room."  

Dr. Deming continued to learn until his death in 1993.  In his final years he stressed transformation of management using his system of profound knowledge.  Deming decried LBO's (and their eventual PEU brethren) as harmful to constancy of purpose.  PEUs employ financial machinations like "optimizing capital structure" (loading up debt) and "liquidity recapitalizations" (bleeding cash via debt-financed special dividends).  They also rob resources with annual management fees. 

Near the end of his life, Deming said "It comes down to one thing, the human spirit."  Many of today's management practices crush the human spirit with an over reliance on extrinsic motivators and obsession with outcome targets.  "Meet the numbers or we'll find someone who will" is a common management threat.  This is the essential message from the Board of Visitors to President Sullivan.   .

The human spirit remained alive at Mr. Jefferson's University, as people sought information on what happened and why.  The Board didn't take a full vote on asking for Sullivan to step down.  It hired a public relations firm to manage any blowback.  When governance fires a leader outside the sunlight, how are people in the organization to interpret the act?  How should they behave going forward to avoid a similar fate?  UVA's Board drove in fear, which is deadly for an organization wanting to survive.      . 

"The most important things are unknown and unknowable."--Dr. W. Edwards Deming

What's the cost of a surprise firing of UVA's President?  What's the cost of a school in chaos?.

This decision ultimately rests in Governor Bob McDonnell's hands, given his power of political appointment.  He is the fox guarding Mr. Jefferson's University, only McDonnell has two pups matriculating to UVA.  It should be an interesting week.

Update 4-26-15:  Dr. Deming said his message came down to one thing, the human spirit.  PEUs and their horrific management practices can be seen in a powerful story of how management crushes that very thing.