Editor's note: The following was excerpted from a keynote address by Charles Soderquist, president of the Cal Aggie Alumni Association and a UC regent, at the recent UC Management and Leadership Conference. By Charles Soderquist I've been asked to share some thoughts about the university; thoughts from an "outside" perspective as a businessman, an alum and as a new regent. This isn't easy. Between my arrival at UC Davis in 1969 as a laboratory assistant and today, I've been "inside" variously as employee (lab assistant and staff research associate in the Department of Environmental Toxicology), student (MS 1975, Ph.D. 1985 in agricultural and environmental chemistry, UC Extension in Creative Writing, UC Extension in Management), teacher (instructor in UC Extension's Hazardous Materials Certificate Program, adjunct professor of entrepreneurship in the Graduate School of Management), director and president (Cal Aggie Alumni Association), donor of time and money, friend and supporter, critic and gadfly, alumni regent. My view as a businessman In keeping with UC tradition, last week I hired a famous, respected and very expensive consultant to give me a report on your company. Here is what she found. She told me that your company is a 127-years-old, not-for-profit business that offers three major products: education, research and public service. Revenues on sales of these products exceeded $10 billion last year. Some 136,000 or so employees operate 46 million square feet of facilities at nine major divisional sites plus over 150 other locations. You sold 163,000 educational packages at about $4,000 a pop to clients last year. Over 1 million clients have purchased your company's educational services since your founding. You sold over $4 billion of research products last year at a gross profit of 43 percent and gave away a few hundred million dollars of public service as a "loss-leader" to enhance sales of the other two product lines. Your largest single client is the owner of the state in which you operate. Last year it purchased over $2 billion of product best described as "future good." You continue to dabble in a number of minor products of questionable profitability such as health services, the right to use certain intellectual property you've developed, and the publishing of books. Finally, she mentioned that a considerable and increasing amount of revenue is coming as gifts, much of it from satisfied, prior clients. Your president reports to a 30-member board of directors who represent about 23 million shareholders. Your company is very decentralized for a Fortune 500, with each of the nine major divisions (each nearly $1 billion businesses by themselves) allowed to operate on their own within certain budget and procedural constraints. These divisions are led by CEOs who report to the president of the company. The employees at each division report to that division's CEO, though not all employees choose to see it that way. Three differences My consultant noted that your company differs from other Fortune 500 companies she's reviewed in a number of ways. Allow me to relate three. * First, about 7,000 of your 136,000 employees are granted jobs for life, irrespective of their performance. * Second, though your "turn on inventory" is about one year, you have an inordinately high "work in progress." That is, it takes your company about 4.5 years to produce your main product. Remarkably, you somehow continue to succeed at selling this product, even though you almost always deliver it late; often up to a year late, sometimes worse. And, more remarkable still, your clients continue to pay for the product while you are late in producing it! Most remarkable of all, the consultant said, you have consistently increased sales of education in spite of double-digit price increases to your clients over the past decade. * Third, in spite of a severe cut in sales to your major client beginning five years ago, and the huge re-engineering and downsizing programs that your board of directors and president then instituted, the quality of your products has remained high and the demand from your clients has increased! A most unusual company, my consultant concluded. My view as an alum Alumni see you less as a company, more as an institution. They have emotional attachments--good and bad. They remember the past vividly, but find it difficult to track you in the present. They read the same papers that the rest of California reads, so they see all the bad news. Interestingly, even though four years have passed, I do still hear about David Gardner's severance package. Apparently, memories of certain events fade less quickly than others. The damage is incalculable. Your university has over a million alumni, some 850,000 who are still living. One of every 35 adults in California is an alum. Think about that: 600,000 Californians spent over four years of their lives with you. Most of them are satisfied clients. Think what you could do if you could harness the positive energy of 600,000 people as supporters of your institution. I say that nothing from the past matters. When I tell someone I'm a graduate of the University of California, they judge the value of that relative to today. If I'm lucky, maybe last week. The listener does not care (and cannot know) how wonderful things were 50 or 20 or two years ago. As an alum, the value of my education at UC is judged by the present and the future. This is best summed up by a quote from a Sacramento State graduate that I recently saw in their alumni newsletter. The gentleman said: "I look at my education as an appreciating asset." My view as a regent As a CEO, I've found boards to be a very valuable pain in the ass. At the inception of one of my companies, I assembled an advisory board that was a who's-who of Sacramento business. But I got so tired of hearing all the things that could and would go wrong with my company that I disbanded the board. Too much negativity. Turned out five years later that they were substantially right in their concerns and warnings. And I've been a director for other people's companies. As a director, I've found the management of the companies a giant pain in the ass. They never listen, they don't take my sage advice, they make tons of silly mistakes. But then I look around, and I ask myself who else could I get to run this company. So I try for incremental victories and small gains, trusting that management generally knows more about running any venture than we outsiders do. So, I suggest to you that this tension between boards and management that you see at your company is really no different than that of any other company. It's how things are. It's the standard dynamic. Except one thing: surprises. Personally, I don't even like nice surprises. In defense of your board of directors--the regents--I would suggest you minimize the surprises. I believe they'll try to do the same for you.