French business schools seek out new investors
As public sector funding is cut, the country’s schools are turning entrepreneurial
Some of France’s most prestigious business schools are in need of new money.
Those institutions funded by the state, including many of the country’s prestigious grandes écoles, have been doubly hit by successive cuts in funding from the French Chambers of Commerce and Industry (CCI) and the local taxe d’apprentissage, or apprenticeship tax.
The CCI Paris Ile-de-France, which provides ESCP Europe, Essec Business School and HEC with €10m each a year, last year revealed plans that could see the total elimination of this financial support over the next three years.
This represents a net loss of about 10 per cent of these schools’ total funding pot, according to Hamid Bouchikhi, professor of management and entrepreneurship and co-chair of the management department at Essec.
But what particularly concerns Mr Bouchikhi, other faculty and some of their students, is a plan by the Paris CCI to open a new avenue for funding from private investors by creating a holding company to manage its shareholdings in these institutions.
There are plenty of highly ranked, privately owned business schools in France, most notably the country’s top institution Insead.
The Paris CCI’s plan would create an entity valued at €2bn. More significantly, it would open the capital fund for schools to private investors, which Mr Bouchikhi claims will have interests in conflict with those of academia.
“The business model of the top management schools is not compatible with the standards of profitability of private investors,” he says. “Private investors will be tempted to sacrifice academic research and some lessons for budgetary reasons.”
Students are concerned too, mainly about the damage that could be done to the reputation of their alma maters.
“I don’t want to study at the Coca-Cola Business School,” Benoit de Angelis, a fourth year masters in management degree student at Essec, says.
The Paris CCI’s proposals would mean that these institutions would become private sector companies but with one shareholder, the CCI itself. However, it would be an unusual kind of privatisation: unlike in other countries, the chambers of commerce are not an association of local businesses but a public sector body.
“The funding of management schools is not only the problem of chambers of commerce and other stakeholders in these schools, it is a matter of national interest,” Mr Bouchikhi says.
“Instead of transforming our management schools into companies, we need to consider them as academic institutions that combine professionalisation and intellectual training and make France shine.”
Vincenzo Vinzi, dean and president of Essec, defends the changes, noting that as a non-profit organisation his school will be reinvesting any surplus made from commercial activities to improve teaching.
“Deans and presidents of business schools in France now have a dual role,” he says. “As presidents, they need to be business leaders. They also need to be entrepreneurs and build new profit centres.”
Essec now has a business unit offering custom programmes developed in partnership with companies to meet their training needs. This unit “is a token of our will to go after new revenue streams,” Mr Vinzi says.
Investors offer a good opportunity for French business schools to start “practising what they preach” to students, Mr Vinzi adds. But Frédéric Fréry, management professor at ESCP Europe, is concerned that the involvement of investors could have negative effects on core business school activities.
By definition, these investors are looking for profitability, he says, which could mean scrapping “costly activities”, such as research, in favour of profitable ones, such as corporate training.
He describes the involvement of private investors as “dangerous” to the proper functioning of French business schools, which risks undermining their global standing.
Funding is a challenge for business schools worldwide, says Vincent Mangematin, dean and chief academic officer at Kedge Business School. This Grande École, founded in Bordeaux in 1874, is managed and financed by the Bordeaux Chamber of Commerce.
“Privately held business schools worldwide have been developing high quality standards [and] it could be the same in France.”
The challenge is not a question of investors, but a question of governance, according to Mr Mangematin. “To successfully evolve, the French business schools need the academic body as engaged as possible,” he says. “They are the actors of the transformation and of the differentiation.”
Back at Essec, Mr de Angelis admits that something needs to be done to put leading French institutions on a firm financial footing. “Don’t get me wrong, I enjoy the co-operation between firms and business schools,” he says.
“But I don’t want this co-operation to become a hierarchical relationship. I don’t think PE actors, or firms for that matter, can ensure the independence of the teaching, let it be for financial or ideological or practical reasons.”
The best way for a business school to find funds is through a foundation, according to Mr de Angelis, funded by alumni like himself. But he admits that this will take time — and French business schools are not yet prepared.