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Lunch with Mimi: David Gray

by on November 13, 2012 7:52 AM

Early this year, David Gray was named the new senior vice president for finance and business. In this role, he oversees the offices of the physical plant, human resources, university police, investment management, auxiliary and business services, corporate controller, legal services, and commonwealth-campus business operations.

Originally from Williamsport, he graduated from Penn State with a bachelor’s degree in political science in 1977, and a master’s degree in public administration in 1979. Prior to returning to his alma mater, he served three years as the senior vice president for administration, finance, and technology as well as treasurer at the University of Massachusetts.

Town&Gown founder Mimi Barash Coppersmith sat down with Gray at the Nittany Lion Inn to discuss his reasons for accepting the job and the financial challenges and outlook for Penn State moving forward.

Mimi: You’ve been on the job here since February. You applied for this job last fall, when most of us in Happy Valley had no idea what was coming up. You obviously went through the process, got the job, and I’d love to know the real reason that motivated you to come back to Happy Valley. You and your wife were well positioned in the wonderful state of Massachusetts, and we won you here — thank God.

David: First and foremost, we’re dealing with a world-class, premier university that I have just had enormous respect for. So much so that we sent our son here as an out-of-state student. He graduated from Penn State two years ago. We were happy to pay out-of-state tuition for him to engage in the industrial-engineering program. That helped to renew our acquaintance with Penn State and just remind us of what a rich resource this is and how much we love this place. It’s deeply engrained in our family roots. My wife and I met here in graduate school. My parents, both deceased now, were alums. My wife’s father, who is also deceased, was an alum. We are Penn Staters through and through. When the knock came on my door last September from a search consultant asking me if I have an interest in pursuing this opportunity at Penn State, I said Yes, absolutely, because I have a tremendous level of respect. By the time I worked through the interview process and came back as a finalist, it was the week after President Spanier and Coach Paterno had been terminated from their positions with the university. I met with President Erickson. It was very unexpected. When the offer came my way a few weeks later, right around Thanksgiving, I reflected with my wife. And we said all those things we hold near and dear with which we view Penn State, none of that has really changed. This is a remarkably resilient, great institution with wonderful faculty, and it will bounce back. And I want to be part of that. So, I arrived here in February to help President Erickson and the team to rebuild something of tremendous value to Pennsylvania and to all Penn Staters.

Mimi: What is the toughest part of this job?

David: This role, the senior vice president for business and finance, is a large, expansive job. This would be a challenging job under the best of circumstances. Even if we were in normal times, this would be a challenging professional opportunity. And, obviously, these are anything but normal times for Penn State. We have the greatest challenge in the university’s history that we’re facing. We will and are meeting that challenge. I would suggest that some of the changes that have already been made are moving us in a very positive direction. One, I think we’ve established a national-leadership profile, even in terms of the changes in the board of trustees and their new tone of openness, transparency, and public engagement. These are very significant changes in how Penn State operates. All of the committee meetings are open to public participation. In view of the fact that you’re never going to please everyone, you have to concentrate on doing the right thing.

Mimi: I agree. Nearly $20 million has been expended so far on the Sandusky case. Can you give us a long-term estimate on its potential cost and impact on Penn State?

David: The hardest part in developing a real projection of total cost of all of this really hinges on the unknowns of the claims that will be asserted by victims of Sandusky’s crimes. Those will probably be the largest category of the expenses associated with all of this. And to some considerable extent, they will be covered by our liability insurance. We have stacked liability-insurance coverage, which means we have multiple policies and multiple carriers of our liability coverage.

Mimi: In hindsight, that was pretty good judgment.

David: In hindsight, that was very good judgment. The nature of our insurance program, I believe, provides for very robust coverage in total. Thankfully, most of our insurers are standing behind the university. We’ve got nothing but reassurance from them that they will honor our liabilities once they’re fully known. We don’t know yet the precise number of victims that may step forward and serve claims of abuse at Sandusky’s hands, in which the university has some culpability, but we have engaged Ken Feinberg as the mediator for claims that come forward from victims. That process will begin to unfold very quickly. We will be reaching out to victims, understanding who they are, what the nature of their claim is, what the nature of the university’s involvement is, and then coming up with what we believe is a fair and responsible settlement offer to each of those victims. I think that whatever we’re spending there is a wise investment in making sure that the university is putting its best foot forward and that we’re enhancing that reputation and reminding people that the core of our greatness as an institution is what we do in teaching, research, and public service. Our research profile only gets better year by year. Our success is legendary. These are really the points of attraction that made me want to come back and be a part of Penn State.

Mimi: For a guy that’s been on the job for less than a year, you sound like someone that’s been here for at least 10 years. Your enthusiasm and your grasp of the whole situation are really reassuring.

David: The thing that I’ve really come to appreciate is what a wonderful team we have here at Penn State. The people that sit around the table at the President’s Council are tremendous colleagues, wonderful professionals, and very able. The people that I work with every day in the finance and business unit are just outstanding professionals who contribute in such a great way. They have really stepped up to the plate during Penn State’s hour of need and have delivered tremendous results.

Mimi: Is your job too big?

David: It’s an expansive role, but I would say No, it’s not too big. Among the areas that report to me are the offices of corporate control, investor management, human resources, police department, physical plant, and the social vice president, who is responsible for commonwealth-campus business-office relationships and real estate matters. In addition, I have indirect relationships with information and technology services (ITS). IT is part of my background, so I am very comfortable with that. What makes a job too big is if you don’t have really competent professionals to work with, in whom you can invest trust that they can manage their areas quite capably and that you are comfortable with delegation. I am blessed to have wonderful, able, seasoned professionals that are in these leadership roles, and so, therefore, it’s a manageable footprint. I would be the first person to go to the president and say that we need you to think about reconfiguration if I truly thought I was biting off more than I could chew, because it isn’t about me. It’s about the success of the institution. I don’t feel that our configuration is out of balance.

Mimi: You seem to have a remarkably balanced perspective — not just on Penn State, but also on life. Any advice you can give to those of us who need more confidence?

David: What I’ve told our employees, friends, and family is that the core values of this university and its people are what will help it to transcend and move through this period of difficulty. It is they who really provide the resiliency to Penn State University. The administrators and staff are the people that make this place looking great every day. I have told our physical plant what a marvelous job they do. Our groundskeepers and custodians work so hard to make sure that this place presents well. That’s one of the most dramatic things that I’ve noticed over the years. It’s always been a beautiful campus, but never more so than it is today. And that’s the first impression that it leaves with people from prospective students or parents. It’s that obvious pride in Penn State University that everybody connected to the university has. That is why Penn State will bounce back from this. That’s why I have such an infectious spirit of enthusiasm and positive outlook on the long-term prospects for Penn State.

Mimi: It’s interesting. This whole event has also done a reasonable job of getting the town committee and the university to have more conversations about becoming one team, one community together. To what extent did that work, do you think?

David: It’s working well. From the first day I arrived here, it was really evident to me that there was a strong relationship between the university and the community. I wasn’t walking in to a situation that was in any way damaged. It was a very healthy relationship with mutual respect.

Mimi: Can you give us a report card on our financial stability, football’s future, faculty, and staff?

David: Penn State is remarkably strong from a financial perspective. But, credit ratings hinge on many factors and are subject to continuous review. Due to all that has occurred over the past year, our credit ratings are under review, which is understandable. Agencies have an obligation to work with a very close eye on everything that occurs. I can tell you that one of the things that made Penn State such an attractive opportunity for me was how well managed it has been historically. The financial ratios reveal the fact that this has been an institution that’s been thoughtfully and conservatively managed. That’s what Penn Staters can look at with some degree of confidence and know that we have the rainy day funds to withstand a storm, so we can deploy those resources now to help see us through. That’s a credit to generations of leaders at Penn State who managed this place very prudently.

Mimi: Sometime in the next decade, we are going to have to rebuild that.

David: Specifically with the situation of football, call me an optimist. In Coach [Bill] O’Brien, I see a person of great integrity and leadership, who has not only galvanized a whole team of young men with such a degree of spirit and purpose, but has helped to galvanize the community and rally Penn Staters, students, faculty, and alums in an unbelievable way. What tremendous pride I think we all feel when we see that team come together and perform as it has, under the most difficult circumstances imaginable. I think they’ve become a great source of pride.

Mimi: They’re getting better every week!

David: That makes me believe that we can weather the storm of the NCAA sanctions, all of the things that we have to abide by under the terms, punishing as they may be. But it is the spirit, strength, and determination that’s been the evidence, from Coach O’Brien on down, that gives me great optimism that we’ll see our way through the difficulties of the next few years with the loss of scholarships and the sanctions. The Penn State alums and the Penn State community are riding behind us, filling the seats of the stadium. We’ll make it through to a degree that most folks in the world beyond would find unimaginable.

Mimi: The sale on season tickets. I was pleased to see that. Were you any part of that?

David: I have been. I’ve worked really closely with Dr. [Dave] Joyner, our athletic director, and his team, and he has been very collaborative. We thought it was very important to show some considerable support to the fans and the supporters of the university that have stood by the team and the athletics department, and we cut some breaks to them in exchange for that tremendous show of support. It’s important for the support of the community and the players that are out there, who we must be reminded have done nothing wrong. They have gone out there on the field representing Penn State University to the best of their abilities and are very deserving of our full support.

Mimi: State support started declining in recent times, and some commonwealth campuses struggle to break even. Is this an area financially where we need to look at some really serious financial decisions?

David: President Erickson launched a budget-planning task force and asked the provost, Rob Pangborn, and me to coach this task force. Specifically, to look out of the next two to five years at the challenges Penn State is facing and to deal with them in a strategic and systemic way — because he agreed with the premise that the challenges are of a magnitude that we’re not going to get by fine-tuning or cutting around the edge. The things that we’re facing are of a structural nature, and they need to be responded to accordingly, so we’ve actually, as part of that task force, created six subcommittees, one of which is looking specifically at campus structures, delivery systems, and the demographics of the state. The demographics of the Commonwealth of Pennsylvania are not monolithic — they are very regional, and as you look from east to west you see a relatively robust demographic picture in southeastern Pennsylvania, a very strong demographic picture of growth in south-central Pennsylvania as the suburbs of Baltimore and Washington work their way north into southern Pennsylvania. But as we move to the western half of the state, the further west you go, the more difficult things become. The demographics are harsh, and the competition is intense, not only with other public institutions but also with small private liberal arts colleges that discount their tuition and fees. We are looking at a serious prospect of realignment of that delivery system.

Mimi: Especially with the capacity of the World Campus.

David: Exactly. One of our six subcommittees is looking specifically at the World Campus and how we continue to grow that at the pace that it’s been growing recently, which is 20 or more percent per year. We looked recently at our graduate enrollments across the entire university over the last 10 years. Were it not for the World Campus enrollments, we would actually be at a decline in our graduate enrollments. But more and more of our graduate enrollment is shifting to online delivery. They are the most rapidly growing part of Penn State’s delivery system, and we need to figure out ways in which we can continue to have that growth drive us into the future. There are still programs that aren’t necessarily fully brought into the online delivery mode, and we need to convince those folks. The College of Liberal Arts is the largest player in the World Campus of all the various colleges at Penn State. For traditionally aged students, 18 to 23 year olds, they’re going to want to continue to come and have the full experience. But for the adult nontraditional students, the folks that are in midcareer, they don’t want the hassle at the end of a long workday of having to leave their spouse and their kids at home to drive to a campus to go take courses. And what we’re finding is they vastly prefer the online motive of receiving their program.

Mimi: We have an unusual situation for the first time in the history of the institution where we have internal and external dissension about the board of trustees. It’s one of those hot topics. You’ve been at another sizeable public institution, and now you’re here and familiar with us. Tell us about the composition of boards around the country in your experience.

David: Many boards, including the board of trustees at the University of Massachusetts, were heavy with political appointees. In the case of the UMass board, there are approximately 20 members, all of which are named by the governor, including the chairperson. There is a disproportionate degree of influence being exercised by governors and legislators. For other universities, you’ll often have a board that’s predominated by political appointments, even as state appropriations and support of public higher education is falling off rapidly. We used to look longingly at the governance model that Penn State has because of its diverse representation from which people are chosen — the industry representatives, the agricultural representatives, the elected alumni, and then a small number of political appointees represent the fact that it’s a public institution. I think it’s a very balanced model. While certainly every institution ought to be looking at ways in which it can improve its governance, the composition of Penn State’s board of trustees wouldn’t be at the top of my mind of things that need to be changed. It’s actually, I think, a very healthy and balanced composition.

Mimi: It could stand to be a little bit smaller.

David: I think so. Thirty-two members is a large number. Some degree of turnover is always healthy. One could argue about what the appropriate length would be.

Mimi: There is some improvement that could be done. Thank you for speaking with me.

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