How Dr. Papadakis Runs a University Like a Company

PHILADELPHIA -- At a Drexel University
campus forum last May, professors
complained about funding cuts at the library.
Rather than apologize for the belt-tightening, President Constantine Papadakis told them he'd
prefer to have an all-digital library with no books at all.

Some faculty members and students were horrified. An architecture professor said printed books were essential to his field. Another professor compared the Drexel library to that of a community college. "It boggles the mind that someone like a university president could envision a library without books," wrote the student newspaper, the Triangle, in an editorial.

In an interview, Dr. Papadakis says he was exaggerating to make a point: Spending too
heavily on books, periodicals and the buildings that house them is a waste in the digital era.
The spat was nothing new for the 59-year-old Greek immigrant, who revels in making comments designed to shock the status quo as he introduces hard-nosed business practices to one of America's centers of learning.

Many universities are grappling with how business-minded they should be. Harvard University's president, Lawrence H. Summers, has clashed with faculty members over his hierarchical management style. The university is also debating whether its money managers should be rewarded with Wall Street-style bonuses. At Columbia University, an aggressive push to collect royalties on university-owned patents has led to legal fights with licensees.

But few university presidents have a hard-core business style quite like Dr. Papadakis's. He has deployed sophisticated marketing tactics, tried to
improve productivity by digitizing coursework and has beefed up the 114-year-old institution by taking over a troubled medical school. He has quintupled the university's endowment to $470 million, doubled
undergraduate enrollment to 9,800 and recorded an $83 million surplus in 2004 on revenue of more than $500 million.

At the same time, Drexel scores well below the top tier of U.S. universities on a range of academic and standard-of-life measures. Dr. Papadakis's critics say the university's financial focus conflicts with other values that might improve its standing.

For instance, Dr. Papadakis is averse to raising the annual budget for Drexel's library, which is equivalent to $500 per student. Some rivals
spend double that amount. "I'm not going to do something stupid" just to gain prestige, he
says. While Drexel is keen to attract top students, there's a periodic tug-of-war within the Drexel inner sanctum over how much financial aid and scholarship money to offer.

"It's the most market-driven institution I've ever worked with," says George Dehne, president
of George Dehne & Associates Inc., a consulting firm that specializes in academia. Mr. Dehne
describes Dr. Papadakis as "a piece of work" and says, "I don't know what other institution
could handle him."

Courting 'Customers'
Dr. Papadakis is part showman -- a promotional CD-ROM is tucked inside a pocket on his business card -- and part numbers jockey. The former Bechtel Corp. executive exhorts his marketing staff to find more paying "customers," better known as students. He keeps a knife from Crete on display in his office and jokes that he uses it to slash budgets.

Unlike some university presidents, Dr. Papadakis doesn't teach and doesn't have tenure. His
salary of $805,000 makes him one of America's highest paid university presidents, according
to the Chronicle of Higher Education, which ranks him No. 6. He lives like a corporate leader,
too, in a 10,000-square-foot Georgian mansion that was donated to the university. Drexel's
first couple entertained a total of 1,500 people there last year, says Dr. Papadakis, who says he
uses the property to help raise money. His high-profile salesmanship has lured big gifts,
including $10 million from Drexel alumnus and tobacco magnate Bennett LeBow.

"I'm worth my money," Dr. Papadakis says.

The son of a doctor, Dr. Papadakis went to engineering college in Greece, followed by
graduate studies in engineering at the University of Cincinnati and the University of Michigan,
where he earned a doctorate. He spent a dozen years at Bechtel, the giant construction
company, rising to become chief engineer. He re-entered academia and later became dean of
engineering at Cincinnati. There, Dr. Papadakis recalls docking a professor's pay as
punishment for giving all "A" grades in a thermodynamics course.

Dr. Papadakis arrived at Drexel in 1995 with a straightforward challenge: survival. The
university was in a downward spiral. Enrollment was falling. Drexel's concrete urban campus
was in disrepair -- for example, an 11-story dormitory had been boarded up for about a decade
-- and the university was running low on money.

Dr. Papadakis, who is known as "Taki," recalls showing up for his first day of work on a Friday in August. No one was there. Drexel employees didn't work Fridays during the summer.

He told his staff they could start working five days a week or take a 20% pay cut. When a group of professors asked to be part of his strategic planning effort, Dr. Papadakis recalls telling them: "Fine. Give up your tenure. If we fail, we fail together." He didn't hear from the group again.

"Make no mistake," he told the assembled throng of students, faculty and visiting dignitaries
during in his inaugural address in May 1996. "Higher education is a business."

The president says his focus on making money is born from a desire to keep down tuition
costs and improve Drexel's quality of life, rather than from a "lust for profit." He resisted
efforts by some board members to raise cash by selling off Drexel's valuable collection of art
and antiques, including a famous 18th-century clock. Instead, the art and the clock became
part of Drexel's marketing effort. They're housed in an ornate "picture gallery" on campus
that's used by admissions officers to woo prospective parents and students.

As Drexel's finances stabilized in the late 1990s, Dr. Papadakis orchestrated the academic
equivalent of a corporate merger. He vastly increased the university's size by agreeing to take
over management of a big medical school, MCP Hahnemann University, which was losing
millions of dollars as part of Allegheny Health,Education and Research Foundation, a
bankrupt health-care group. In 2002, Drexel took outright control, renaming it the Drexel
University College of Medicine.

Beyond the extra tuition income, Dr. Papadakis saw a chance to win federal science grants and
revenue from conducting clinical trials for drug companies. In taking over the medical school,
he also got a nursing school where enrollment has been booming. The medical school last year
had a surplus of about $2.6 million, says Drexel.

Even Dr. Papadakis's most ardent critics acknowledge the improvement in the university's
financial performance. They argue that its academic quality has been compromised by big
classes, cramped teaching spaces and overstretched faculty.

"Papadakis wants to cram as many bodies into the university as he can, as long as the suckers
are willing to pay," says Robert Zaller, a Drexel history professor and a vocal critic of the
regime.

The Princeton Review's guide to colleges ranks Drexel third worst of 357 universities for "long
lines and red tape," based on surveys of Drexel students. Drexel also scores poorly in the
Review for its unsightly campus and unhappy students.

The university says it has several new buildings planned or under construction. It also says it
has made progress in streamlining bureaucratic machinery such as course registration and
financial aid.

For all the financial success, Dr. Papadakis and his lieutenants harbor an ambition to vault Drexel into the top tier of American universities, as ranked by the magazine U.S. News and World Report. Drexel has been rising in recent years but hasn't cracked the top 100. In the 2005 survey, Drexel ranked No. 106.

One key reason is the school's low retention rate. Only 57% of freshmen stick it out until graduation. Drexel offers a five-year program for ndergraduates that alternates study with work outside the university. Student leaders believe that contributes to the dropout rate. Some schools ranked just ahead of Drexel boast graduation rates of 70% or higher.

Pitch for Aid
One typical solution is to increase the amount of scholarship and financial aid. At 8 a.m. a few
weeks ago, Joan McDonald, vice president for enrollment management, came to Dr. Papadakis's conference room to make a pitch for setting aside more financial aid. She proposed raising the total to $68.7 million, up from $60 million, or about 27% of total tuition revenue.

The new figure would bring her closer to the 30% rate offered by some competing schools.
Dr. Papadakis told her he was alarmed by the potential loss of revenue.

"You have to, Taki," Ms. McDonald said, noting Drexel's desire to raise its graduation rate.
"The retention rate is fine," Dr. Papadakis said.
"That's the first time I've heard that," she shot back.
"Well, maybe $63 million. You have some leeway. But not $68.7 million," Dr. Papadakis
responded.

Another reason Drexel hasn't cracked the top 100: Only 75% of its faculty members are full
time. That's far below the rivals Drexel has in its sights, such as Pittsburgh's Carnegie Mellon
University. Ranked No. 22 among U.S. universities in the U.S. News survey, Carnegie Mellon
has a 93% full-time faculty.

For Dr. Papadakis, the full-timer issue poses a dilemma, since one of his bedrock ideas is to
encourage the use of Internet-based courses that can be taught by inexpensive part-time or
non-tenure-track teachers. As he envisions it, experienced Drexel professors will create digital
courses containing computerized coursework accessible via the Internet. They'll be offered on
campus but can also be used to teach "distance learning" students who don't take part in faceto-
face instruction in Philadelphia. For the most part, these courses can be taught by junior or
part-time faculty.

"Technicians can teach them" at lower cost, says Dr. Papadakis, quickly adding that he is
exaggerating when he uses the word "technicians."

The interim provost, Ali Houshmand, acknowledges that as Drexel pushes toward its goal of
putting 10% of its courses online, dangers arise, from quality control to the way the university
deploys the scarce resource of faculty time. Some tenure-track professors, who are eager to be
published, dislike e-learning courses because they are labor intensive. Distance learning, they
say, can end up being one-on-one tutorials with students scattered around the country. Dr.
Papadakis says that is probably true.

The debate has reached a flashpoint over a for-profit subsidiary, e-Learning Inc., created by
Drexel with $4 million from the university's general operating funds. In 2002, it began marketing "distance learning" degree programs to off-campus Drexel students. The subsidiary shares about 50% of the revenue with Drexel deans and faculty members who create and control course content.

Today, the fast-growing program has 1,800 students in business, education, engineering,
nursing and other programs. It brings in about $14 million in revenue and is generating annual
profit of about $2 million.

But e-Learning's success is creating turf battles. On a recent afternoon, Dr. Papadakis found
himself arbitrating a squabble over whether e-Learning could charge the university for helping

Drexel's faculty create digital courses.
Some faculty members worry that students admitted to the "distance learning" programs aren't
the intellectual equal of their on-campus counterparts. About 95% of e-Learning applicants are accepted compared with about 70% for on-campus applicants. Arthur Zamkoff, president and
CEO of e-Learning, says admission requirements are identical for both. He says the discrepancy exists because e-Learning staffers weed out weak candidates through an e-mail correspondence even before they complete an application.

Dr. Papadakis prizes the university's scientists for their ability to attract federal grants, but he's
sometimes cautious about approving funds to beef up Drexel's physical infrastructure. The
tension was clear during a recent meeting with the medical school's top management, held on
the 19th floor of the aging Hahnemann tower in central Philadelphia.

"We running out of research space," said Bill Stephenson, vice provost for research. Dr.
Stephenson noted that Drexel scientists attract $300 in research funds per square foot, versus a
national average of $250.

He proposed putting up a one-story building to house 10 labs and 10 offices, costing between
$6 million and $8 million, perhaps financed with a 30-year bond offering. It would be a stopgap
measure until a new research facility, still in the planning stage, opens in about five years.

Dr. Papadakis cut him off. "How long until I get my money back?" he asked. Thirty years is
unacceptable, but "six years is okay," he said. He instructed Dr. Stephenson to work with

Drexel's chief financial officer to come up with a better financing scheme. They developed a
plan that passed muster and the interim building is scheduled for completion this November.

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