THE CHALLENGES OF STRATEGIC PHILANTHROPHY

AT MEHARRY MEDICAL COLLEGE, FY 2002

MEHARRY MEDICAL COLLEGE TEAM BUILDING CASE STUDY

Case Project Written by:

Charles J. Hicks, II, Ph.D.

HRD Consulting Services

Perspectives on Meharry Medical College

Founded 125 years ago, in 1876, Meharry Medical College is an internationally

recognized leader in health professions training and health disparities research among
African Americans and other underrepresented minorities. Located in Nashville,
Tennessee, Meharry is a private institution comprised of four professional schools:
Medicine, Dentistry, Graduate Studies & Research, and Allied Health. Meharry’s three
core businesses are teaching, research, and the clinical enterprise. The total enrollment
is 910 fulltime students.

Meharry has operated with a low tuition revenue base (reflecting its mission),
subsisted with modest levels of annual gifts and a small endowment (reflecting a
historically undercapitalized research infrastructure), and supported a patient care
enterprise that required institutional subsidies rather than contributed to the financial
health of the College (reflecting both its mission and inadequate public funding support).
With small to negative operating margins, no operating reserves, and a meager
endowment, Meharry frequently found itself petitioning others for financial support in
order to survive.

Today, an academically strong, fiscally sound, well managed, and visionary

Meharry is poised for its most far-reaching advancement in years. Meharry has clearly
defined its niche and aggressively is seeking new friends, strategic partners, and
investors.

Uniqueness of Meharry Medical College

The College’s primary mission of training African American health professionals

distinguishes it from the vast majority of educational institutions. Specific numbers best
illustrate Meharry’s achievements: The College has graduated more than 3,400
physicians and over 1,200 dentists over the last fifty years. These providers are
culturally sensitive professionals who are committed to providing care to the
underserved. Over 50% of all graduates work in underserved urban centers and rural
communities, caring for economically disadvantaged people who lack access to quality,
affordable services.

Current Capability (strengths) and Risks (vulnerabilities)

The Educational Enterprise at Meharry has always operated with a low tuition
revenue base, by choice. Meharry has a very small endowment, only one-tenth the size
of the endowments of the average of all U.S. medical schools. The College receives a
modest level of annual, unrestricted gifts from its alumni and friends.

Hicks@HRDConsultingServices.com / 410-466-9023 1
 THE CHALLENGES OF STRATEGIC PHILANTHROPHY
AT MEHARRY MEDICAL COLLEGE, FY 2002

The absence of endowments for faculty positions, student financial aid, and key
infrastructure components such as the library, that are found in most private academic
health science centers put Meharry’s educational enterprise at a distinct disadvantage.
Meharry’s financial structure is actually more similar to that of a small public college,
without the usefulness of a state government appropriation. Meharry’s educational
revenue base has been and continues to be dependent on Title III funds from the U. S.
Department of Education, and Centers of Excellence funds from the U. S. Department of
Health and Human Services.

Consistent with its mission, Meharry’s Clinical Enterprise has focused primarily on
providing care to Medicaid and uninsured patients. Until recently, Meharry did not
receive public support from local or state governments to help subsidize indigent care,
nor did it have higher forms of reimbursement to cross-subsidize uninsured indigent
patients or to support education and research missions similar to that at most academic
health centers. Today, Metropolitan Nashville General Hospital is located on Meharry’s
campus. The clinical faculty of Meharry provides the physicians who are staff at MNGH.

The Research Enterprise suffers from a number of shortcomings. First, small to

negative operating margins and results force Meharry to use scarce unrestricted
philanthropic gifts for operating expenses rather than applying those revenues toward
endowment or other forms of investment in the research infrastructure. Revenue
limitations -- in particular, endowment and clinical income -- also have prevented pursuit
of attractive grant opportunities. Many RFPs are unanswered because Meharry cannot
generate required philanthropic matching funds or institutional support.

Proposed Five to Ten Year Strategic Philanthropic Initiative

Historically Black Colleges and Universities (HBCUs), including Meharry Medical

College, have sought philanthropic support not as a strategic objective to assure
excellence, but as a tactical necessity in order to stay open. The pursuit of strategic
objectives, based on comprehensive financial planning tools, is a relatively recent
phenomenon at HBCUs.

The best strategic fundraising occurs when the importance of raised monies is
understood as one contributor to the overall financing of an institution, as opposed to
being viewed as the “icing on the cake”. Presently, Meharry has an endowment of $69
million of which $25 million is invested in marketable securities. Academic institutions
consider their restricted and unrestricted endowments as reliable sources of funds to
help finance the entire range of their operating needs. Furthermore, most academic
institutions strive to establish the level of endowed funds at 2-3 times the size of their
operating budgets. The fiscal year 2002 operating budget at Meharry is $102 million.

The proposed strategic philanthropic initiative is to increase Meharry’s

unrestricted and restricted endowments to $300 - $350 million over the next 5-10 years.
In 1997, Meharry embarked on a seven-year campaign to raise $125 million. To date,
$65 million has been raised and $50 million in cash has been received. Of the $50
million in cash received, $16 million has been added to the endowment.

Hicks@HRDConsultingServices.com / 410-466-9023 2
 THE CHALLENGES OF STRATEGIC PHILANTHROPHY
AT MEHARRY MEDICAL COLLEGE, FY 2002

OVRERVIEW & STATUS OF CONSULTING SERVICES

Given Meharry Medical College’s history, uniqueness, the current capability of its
three Enterprises, the promise of its overall future relied heavily upon the
leadership demonstrated through the Division of Institutional Advancement in
successfully implementing and achieving the goals of the proposed five to ten
year Strategic Philanthropic Initiative as outlined by Garvin S. Maffett, Ed.D, Vice
President of the Division of Institutional Advancement. First, since January of
2002, the Division of Institutional Advancement had undergone a reorganization
in the composition of the senior management staff, and as well, in its
organizational structure. The organizational structure and senior management
staff composition both reflected a leadership commitment and a state of
preparedness for addressing the future challenges and requirements for
implementing and achieving the goals of this Strategic Philanthropic Initiative.

Secondly, to facilitate the Division’s transition, two team-building sessions were

conducted to assist in preparing a state of readiness for change; assist in the
infusion of new staff members; enable the operation of the new organizational
design; and, to immobilize the team’s commitment for the revised Divisional
vision/mission statement, the new ground rules for staff engagement, and the
current campaign goals. In addition, the Team Retreats were used to build
support and begin the process for formulating and launching a five year strategic
plan that will be backed-up with annual operating plans for each of the five
Departments within the Division of Institutional Advancement.

Thirdly, a new set of performance indicators were identified that would be used
to monitor progress against the targets of the Strategic Philanthropic Initiative.
Those performance measures were: Return on Assets, Profitability, Sales
Revenue Generated, Market Share, Quality of Service/Products, and Employee
Satisfaction.

Fourthly, each Department would have in place an annual operating plan with
key performance indicators that would drive team and individual performance
outcomes. These plans would detail specific measurable performance indicators
that are linked with team and individual performance targets. In addition, a
parallel financial incentive system would be formulated whereby Divisional
individual and team performance standards will be integrated into Meharry’s
performance appraisal system and linked to each employee’s annual individual
performance plan. The intent of this system was to differentiate between those
performance standards that “meet expectations” from those that “exceed
expectations,” emphasizing a performance based criteria that “rewards for
results delivered” vs. the somewhat usual criteria that emphasized rewards for

Hicks@HRDConsultingServices.com / 410-466-9023 3
 THE CHALLENGES OF STRATEGIC PHILANTHROPHY
AT MEHARRY MEDICAL COLLEGE, FY 2002

the “level of effort dispersed.” It is also necessary for management to

differentiate and highlight the rewards for results derived through team efforts
as well as the achievements derived through the individual initiative of individual
team members.

To establish a benchmark for monitoring the progress of Divisional and Team

performance against goals over time, an additional management tool was put
into place. The Denison Organizational Culture Survey is a diagnostic
management tool that aligns leadership strategies, team performance, and
organizational culture traits to bottom-line financial performance measures. This
instrument was administered to the full staff, and given the 88% completion rate
a presentation of the report was made to the Senior Management Team for their
discussion, review, analysis, strategy planning, and implementation.

This report provided a baseline benchmark that compares the Division with other
high performing organizations whose profiles are found in the third and fourth
quartiles. As well, it provides a diagnostic analysis of the Division’s current
capability and potentials, strategic leadership insights, identification of strengths,
the critical management levers, and the team initiatives that would provide an
opportunity for realizing the desired performance standards at the departmental,
team, and individual levels in the Division of Institutional Advancement. As such,
to date, this process has provided the leadership of the Division of IA with a
context for doing strategic and operational planning, a database for strategy
formulation and deployment, a process for energizing a cohesive team, and a
game plan for creating and managing the desired future of the Division.

These interventions were designed to have an impact at the management, team,

and operational levels within the Division of Institutional Advancement. The
quantified benefits of this series of organizational interventions were projected to
realize a 30% improvement factor across the Division and it was anticipated that
this would begin to be realized during the second and third quarter of FY 2002.
Such improvements should be observable and measurable and are likely to begin
manifesting in both behavioral terms (team cohesion and individual staff
member’s drive for results) as well as in quantifiable measures regarding daily
internal operational efficiency (innovative problem solving, advance planning,
and increased efficiency in meeting deadlines) within the Departments of the
Division. Since this expectation was declared at the outset, the recommended
go-forward strategy was for the Senior Management Team to discuss and clarify
their expectations with their team members, and to define and set improvement
(stretch) targets/goals that would be tracked and monitored as an overall
measure of the Division’s operational performance and effectiveness on a daily,
monthly, and quarterly basis.

Hicks@HRDConsultingServices.com / 410-466-9023 4