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State of the University Address

by Steven B. Sample
President, University of Southern California
February 26, 2003

A little more than nine years ago, the University of Southern California embarked on a bold fundraising drive aptly named "Building on Excellence." Today the entire Trojan Family celebrates the completion of that campaign this past December 31, and the fact that this campaign has proven to be the most successful university fundraising campaign in history!

Many heroes contributed to the success of the Building on Excellence campaign, but the biggest hero of all is Dr. Kenneth Leventhal. Dr. Leventhal, who joined the USC Board of Trustees in 1977, served as the national chairman of this fundraising drive and worked tirelessly to make it the great success that we now celebrate. In fact, in the last couple of years, Ken has essentially worked full?time on the campaign, and he and his fellow trustees are to be congratulated on the pivotal role they played. Collectively our trustees donated some $800 million to the campaign. That in and of itself is worthy of note, but our trustees also provided much of the impetus and enthusiasm for the campaign as it progressed over the years.

I have had the privilege of working with four great board chairmen during the past dozen years: Forrest Shumway, Malcolm Currie, John Argue (who passed away last summer), and Stanley Gold. All of these chairmen helped to define, and were deeply committed to, the vision and goals behind the Building on Excellence campaign.

USC's deans played a central role as well, serving as the backbone of the campaign, while our faculty participated in the campaign to a degree unprecedented in our history and, perhaps, in the history of all of higher education. Members of our staff were dependable, hard?working contributors to the campaign, especially those who worked full?time in fundraising. Alumni leaders, not just in this country but around the world, participated in important ways. Sometimes the best person to solicit funds from a potential donor is someone who has led the way by personally donating a considerable amount of money himself. Our donors amplified their support of USC by letting others know about the great things this university is accomplishing and how much more it can accomplish. Finally, our friends and neighbors, especially those in the communities surrounding our University Park and Health Sciences campuses, continued to provide their steadfast support for our academic mission, research programs, and community?building efforts.

I want to review some of the financial aspects of this campaign, but before doing so, let me remind all of us that our principal raison d'etre is our students. From freshmen to postdoctorals, they come to USC for an education that will enhance their lives and their careers. Some of them are the first in their families to attend or graduate from college; many of them are still unsure about themselves and their career paths. But all are seeking knowledge, inspiration, new friendships and experiences, and challenges. They want to make a difference in their own lives, in our university community, and in the world; and it is our sacred mission to provide the instructional, research, and community?service opportunities which are necessary for their intellectual growth and personal development.

Financial Goals of the Campaign

Our campaign total now stands at $2.85 billion or, more precisely, $2,850,143,933. As I indicated earlier, ours is the most successful campaign in the history of higher education. We're ahead of Harvard, which is number three, by a quarter of a billion dollars, and we?re just slightly ahead ? by $6 million ? of second?place Columbia University. Now, $6 million is a tiny fraction of $2.85 billion: one might compare it to winning a high?scoring basketball game by only one point. But small margin or no, we?ll take the win!

When we began the Building on Excellence campaign in 1993, we were met with grave skepticism, bordering on disbelief, that we would be able to meet our original goal of raising $1 billion in seven years. But we quickly achieved a level of momentum that propelled us beyond our original goal in just four and a half years. So we raised the bar to $1.5 billion, and then exceeded that goal in the sixth year of the campaign. So we raised the goal to $2 billion and extended the duration of the campaign to nine years, through December 31, 2002. We surpassed the $2 billion mark in early 2002. When I conveyed this fact to the trustees, they said, "Steve, no more!" So we let the campaign run its course through December 31 and wound up exceeding our goal by $850 million.

One of the things that is sometimes confusing about a fundraising campaign in a university is the difference between cash donations actually received in a given calendar year, versus progress toward a goal that includes not only cash gifts but also pledges. We compete with other universities in both cash received in a single year, and gifts and pledges accumulated over a period of several years as part of a multi?year campaign.

It's very important not to double count when a pledge is monetized. A university may receive a pledge for $10 million and count that in its campaign total, and then a few years later, when the donor monetizes his pledge, the university may be tempted to double count both the pledge and the cash in its campaign total. Some universities succumb to this temptation, but USC does not.

A major purpose of a campaign is not simply to accumulate gifts and pledges over a period of years, but also to increase the level of annual cash received. When we began this campaign, USC's annual cash received was at a level of about $100 million. We hoped that by the end of the campaign, we would be close to $200 million a year in cash received. Doubling the annual cash received is a common goal in fundraising campaigns. But our performance far outstripped our goal. By fiscal year 2001 USC had reached a steady?state level of cash received of $300 million. And last fiscal year we received $585 million in cash, which was by far the highest in the country among all universities, and well ahead of Harvard.

Moreover, about 80 percent of the pledges in our Building on Excellence campaign have been monetized as of this date. That's very surprising. One would expect at the end of a campaign to have perhaps 40 percent of the campaign total, or even 50 percent, still in the form of pledges. But in actual fact, almost all of our pledges have been monetized.

Key Factors in the Success of the Campaign

How did we achieve what is truly a spectacular success? I think it was due to three factors. First and foremost, the affection and support of the Trojan Family. Second, a new emphasis on "compelling excellence" (which I shall discuss later on in more detail). And third, the extensive and intensive involvement of our deans and faculty in the fundraising process itself.

Trojan Family
First, let me elaborate on why the Trojan Family served as a key factor in the campaign. The Trojan Family includes not just our alumni, but also our current students, parents, faculty, staff, trustees, donors, neighbors, and athletic fans. All of these people are, or can become, members of the Trojan Family through their devotion to USC and its mission. We proudly say that membership in the Trojan Family is lifelong and worldwide, and indeed the bonds among Trojans around the world are extraordinarily strong. Let's take for instance Dr. Ken Leventhal, our national campaign chairman whom I mentioned earlier. He graduated from UCLA, not from USC. But Ken has spent 26 years of his life as a USC trustee. He is a Trojan through and through, and he and his wife Elaine gave $15 million as a naming gift to USC's School of Accounting to help kick off the campaign.

Compelling Excellence
The second key to the success of this campaign is what we call compelling excellence. Shortly after Alan Kreditor, a former dean of one of our professional schools, became senior vice president for university advancement, he said to me, "You know, Steve, I think this campaign is going to have to be structured a little differently from other campaigns." I asked him what he meant, and he replied: "We will of course depend upon the sentiment and affection that members of the Trojan Family feel for this institution. That will be an important basis for running the campaign. But we need a second basis, and that is compelling excellence." I asked him what he meant by "compelling excellence." He said, "Steve, imagine a potential donor: he's a Stanford graduate; he doesn't feel any bond with USC; indeed, if anything, he feels a bit of antipathy toward all things Trojan. But his interests in terms of his private philanthropy are in a particular field, and in that particular field our faculty are so damned good that this donor feels compelled to make his gift to USC."

All of us quickly adopted Kreditor's philosophy. As a result, more than half of the $2.85 billion raised in this campaign came from non?USC alumni. Of course, I don't want to shortchange our own alumni. Donations from USC alumni alone exceeded our original $1 billion campaign goal. And the percentage of alumni making annual donations to USC rose from about 13 percent at the campaign's beginning to 34 percent today. However, the fact that more than half of our campaign money came from other universities' alumni stunned our competitors nationwide.

This is the only university in history to have received four gifts, each of which totaled $100 million or more. Three of these mega?gifts came from non?alumni. Walter Annenberg, a graduate of Penn, gave us $120 million at the beginning of the campaign to establish the USC Annenberg Center for Communication. Alfred Mann, a double graduate of UCLA, gave us $113 million to establish the Alfred E. Mann Institute for Biomedical Engineering here at USC. The W. M. Keck Foundation gave us $110 million as a naming gift for our School of Medicine, even though Robert Day, chairman of the foundation that provided the gift, is not an alumnus of USC. The fourth $100 million megagift again came from the Annenberg Foundation, but this time our own alumna and trustee Wallis Annenberg was a driving force behind the gift.

Part of our story about compelling excellence is based on the dramatic improvement in the academic quality of USC's undergraduate program. From the fall of 1991 to the fall of 2002, our average SAT scores went from 1070 to 1335. That's a 265?point increase, which we believe is unmatched by any other university in the last decade. In addition to a mean SAT score of 1335, our incoming freshmen have a grade point average of 3.96. USC now gets 10 applicants for every opening in the freshman class, and most of our freshmen come from the top 6 percent of their high school class.

Twelve years ago, about 10 percent of our entering freshman class were legacies ? that is, students whose parents or grandparents are USC alumni. As we cranked up the academic standards here at USC, there was widespread concern that the percentage of legacies in the freshman class would shrink. But do you know what happened? When we boosted our standards, we suddenly were flooded with thousands of applications from Trojan legacies. Today almost 20 percent of our freshman class are legacies, so our commitment to the Trojan Family has actually been enhanced by higher academic standards.

UCLA and UC Berkeley are two wonderful universities with which we compete directly. USC passed UCLA in mean SAT scores a few years ago, and we just learned that our mean SAT scores are now 35 points higher than those of Berkeley.

A huge halo effect occurs when an undergraduate program is truly excellent. Let me tell you a story. A few years ago someone conducted a poll to determine the public's perception of the quality of law schools in the United States. Survey respondents were asked to name the 10 best law schools in the country. When the answers were compiled, the survey found that the law school at Princeton University always placed near the top. The problem is, Princeton doesn?t have a law school. But Princeton does have one of the best undergraduate programs anywhere, and that fact creates a halo which ultimately enhances the public's perception of the quality of the university as a whole.

Then, too, our having won nine NCAA national championships, 24 conference championships, and a Heisman Trophy over the past nine years contributed to the success of the Building on Excellence campaign. In fact, USC's Department of Intercollegiate Athletics raised $142 million as part of the campaign, which is by far the most that has ever been raised by that department in a nine?year period.

Deans and Faculty
The third key to the success of USC's Building on Excellence campaign was the high level of faculty and decanal involvement. The greatest single asset we had in this campaign, and indeed the greatest single asset we have in the university, is our outstanding deans and faculty. They initiated most of the fundraising efforts that comprised this campaign, and they often patiently spent two to three years cultivating a potential donor. As it happens, donors give to faculty and deans much more than they give to university presidents and vice presidents. That's why practically every gift, and every part of our endowment, is earmarked at the time it comes in. No large pot of fungible funds resulted from this campaign; rather, our fundraising consisted primarily of numerous investments made by individual donors, which investments were then used to further the work of specific faculty and programs in accordance with the donor's wishes.

Improving USC

What has been the overall result of the Building on Excellence campaign? For one thing, USC's endowment has more than quadrupled. We have 125 new endowed chairs and professorships, and we have 25 new and expanded research institutes or centers, including the Casden Institute for the Study of the Jewish Role in American Life, the Zilkha Neurogenetic Institute, the Donald P. and Katherine B. Loker Hydrocarbon Research Institute, the Annenberg Center for Communication, the Daniel J. Epstein Department of Industrial and Systems Engineering, the Norman Lear Center for the Study of Entertainment and Society, the Alfred E. Mann Institute for Biomedical Engineering, the Wrigley Institute for Environmental Studies, the Lloyd Greif Center for Entrepreneurial Studies, and the Harold E. and Henrietta C. Lee Breast Center. I'm pleased to say that most of these centers involve more than one academic department or school, thereby directly supporting USC's emphasis on interdisciplinary research and teaching.

As a result of our campaign we've received five school?naming gifts, each of which was the largest gift of its kind at the time it was made. The five schools are the USC Leventhal School of Accounting; the USC Marshall School of Business; the USC Rossier School of Education; the USC Thornton School of Music; and the Keck School of Medicine of USC. These five naming gifts had an electrifying effect on the faculty and students of those schools. The fact that a donor is not only willing to put her money into a school or program, but also wants to associate her family name with the school, makes a tremendous difference to the faculty, students, and alumni of that school. As my wife Kathryn and I travel around the country talking to alumni, we find that even those alums who graduated many decades ago adopt the new name of the school from which they graduated. Thus an alumnus might say, "I graduated in 1960 from the Marshall School of Business," even though the gift from Gordon Marshall didn't change the name of the school until 1997.

An important asset of USC's overall fundraising effort is what we call our Good Neighbors Campaign. Before we introduced this program, we were raising about $100,000 a year from faculty and staff for United Way. But in 1994 we launched our Good Neighbors Campaign as a way for our faculty and staff to contribute to programs that directly benefit the neighborhoods surrounding our two campuses. As a result, we're now raising about $700,000 a year in voluntary contributions from faculty and staff through the Good Neighbors Campaign. Over the past nine years we've invested nearly $5 million in our neighborhoods, mainly through joint ventures between USC-based organizations and community groups.

This is not an example of noblesse oblige; rather, it is USC forming respectful partnerships with our neighbors to achieve common goals for the community. The programs funded by the Good Neighbors Campaign were a major factor in Time magazine's designating USC as the College of the Year 2000. These community programs also aided USC's overall fundraising and recruitment efforts, because students now come to USC expecting to take part in community service. That is a special feature of a USC undergraduate education which sets us apart and gives us a competitive edge in student recruitment.

Through the Building on Excellence campaign we've received many gifts for new or improved USC buildings and grounds, including funds to create the Kathleen McCarthy Quadrangle. I believe this large green expanse between Doheny Memorial Library and Leavey Library is one of the most beautiful quads in America. We have also opened new facilities and are building others, including the International Residential College at Parkside; the Zilkha Neurogenetic Institute; the Harlyne J. Norris Cancer Research Tower; the Jane Hoffman and J. Kristoffer Popovich Hall for the Marshall School of Business, the Ralph and Goldy Lewis Hall for the School of Policy, Planning, and Development; the Ronald Tutor Hall of Engineering; the Louis J. and Helene Galen Athletics Center; Dedeaux Field, which was completely renovated; an addition to the Donald P. and Katherine B. Loker Hydrocarbon Research Institute; the Katherine B. Loker Track Stadium; and the wonderful renovation of Bovard Auditorium.

Our campaign greatly strengthened our balance sheet, primarily by dramatically increasing our endowment. This improvement in our financial strength led our chief business officer, Dennis Dougherty, to devise a plan which would use inexpensive debt capital, backed by endowment, to fund the largest building program in USC's history. Indeed, over the next six years, we'll be building 1.4 million square feet of new research laboratories, teaching facilities, and dormitories.

The campaign also greatly expanded our donor count: in all, some 350,000 people made contributions to the Building on Excellence campaign. The money they contributed is very important, but the voluntary support that prompted their donations is equally as important. As the saying goes, "Where your treasure is, there will your heart be also." This campaign allowed us to strengthen our boards of councilors and establish an outstanding Board of Overseers for the Keck School of Medicine. This board of overseers comprises a wide variety of exceptionally strong community leaders who genuinely believe that USC and its medical school have the potential to transform Los Angeles in the years ahead.

USC's Future

Transforming Los Angeles is a good segue to considering the future of USC and its initiatives. Should we start a new campaign? If so, when? And what should be the philosophy behind such a campaign? The Keck School of Medicine of USC, the USC School of Engineering, and the USC College of Letters, Arts and Sciences are already planning new fundraising initiatives. Should we encourage those initiatives to go forward on their own, or should we somehow weave them together into an overall fundraising effort?

We are also involved in several other new initiatives to enhance USC's academic and research mission. The College is in the process of hiring 100 new senior faculty ? outstanding professors from around the world ? who will increase the number of faculty in the College by 25 percent. The Keck School of Medicine is planning to hire 135 new research faculty. The graduate student initiative established by Provost Lloyd Armstrong last year involves raising $100 million to support and improve graduate education. We're also continuing to evaluate our graduate programs in order to ensure that the ones we retain will be among the best in the country.

Provost Armstrong and a committee of leading faculty are currently developing a new strategic plan for USC. Our first strategic plan, which was approved by the trustees in 1994, and a subsequent update of that plan approved in 1998, have both been resoundingly successful. These strategic plans were tied to, and undergirded, the Building on Excellence campaign. Because of the interplay between fundraising and our strategic planning, we were able to reach many of our programmatic goals ahead of time.

One of the greatest virtues of the 1994 plan and the 1998 update is that they are concise documents. I have never seen an academic plan before that was less than 150 pages long with 47 highest?priority goals. But USC's strategic plan was only 15 pages long, including the appendices; as a consequence, it was read by a large number of people. The provost has given me his assurance that the new plan will also be short and succinct.

In addition to brevity and focus, it is imperative that the new strategic plan reflect and contribute to Los Angeles' new role as a global city. After all, our university grew up with Los Angeles. When USC was founded in 1880 in a small white?frame building, Los Angeles was a dusty little village of 10,000 people. As the needs of a growing Los Angeles became apparent, USC was there to meet those needs.

Today Los Angeles has a new role of global importance ? it is de facto the capital city of the Pacific Rim. This vast region, which includes much of the Americas and Asia, is playing an increasingly important role in the world's economy and political structure. The capital of the Pacific Rim is not Singapore or San Francisco or Tokyo or Sydney; rather, the capital of the Pacific Rim is Los Angeles and Southern California. USC needs to support this new role for Los Angeles, not only for the good of the city, but also for the good of our students. Indeed, USC's international appeal and focus is not limited to Asia. Recently the London Times published an article reporting that USC is now the favorite American university for British students who choose to go abroad for their college education.

When Kathryn and I were recruited to USC in 1991, we found a healthy sense of dissatisfaction on which to build. Everyone on campus was saying, "We?re not satisfied with what we are today. We want to be better, and we can be better." The first strategic plan grew out of that sense of dissatisfaction and achieved spectacular results. I think the new plan will also reflect this ambitious and healthy dissatisfaction.

We all know that momentum is a vector, having both a magnitude and a direction. USC's momentum right now is very large, and its direction is upward. Upward momentum is difficult to build but easy to lose. Therefore we must continue to work hard and build on our current success, especially since so many of the institutions with which we compete are in a weakened condition.

This is decidedly not the time for us to slow up or take a breather. Rather, we must keep pressing upward toward increasingly lofty goals. We must fire up the furnaces of ambition to a white heat, and take advantage of the extraordinary and exciting opportunities before us. Thus our celebration of the completion of our Building on Excellence campaign does not mark the close of our efforts to make USC a better university; rather, it signals a new beginning.