A man of many faces

Howard Davies is a cut above most vice-chancellors: he's come to the LSE via the Foreign Office and the City - and is boosting it with his experience of the world, writes Lucy Hodges

When Howard Davies became director of the London School of Economics, he moved from the sparkling new premises of the Financial Services Authority (FSA) in Canary Wharf to the cruddy buildings of the UK's flagship social science powerhouse in Holborn. It must have been sobering for a man who has glided smoothly from one top job to another - controller of the Audit Commission, director-general of the CBI, deputy governor of the Bank of England, chairman of the FSA - to find himself in such cramped and shabby surroundings.

But Davies is an optimist. "He is committed to the work ethic, disdains ostentation and hype and pays little heed to panache," says the former British ambassador Sir Nicholas Henderson, in a portrait of Davies in his book Old Friends and Modern Instances.

Such characteristics have stood the new LSE director in good stead. After much wheeler-dealing in Whitehall - with Lord Falconer and the Treasury, in particular - and chats with bankers, Davies is about to announce a big expansion of the school. It will grow from 7,500 full-time students to 9,000 over the next four to five years.

That's because he has managed to buy a large government building put up in 1905 with a lovely frontage overlooking nearby Lincoln's Inn Fields. Architects are now being sought to redesign the space. After it has been refurbished, it will have cost between £40m-£50m, he thinks. "It's going to be a new academic building," he says. "The problem we really have here is teaching space. The quality of our space is poor. The weakness of the School is the facilities. We are chock-a-block at the moment."

You can say that again. The LSE, founded by Beatrice and Sidney Webb in 1895 to improve society by studying its problems, was built for a different era. Many of the School's illustrious academics occupy tiny, shabby rooms, and lecturing space is limited and past its sell-by date. Now, in a world of ferocious global competition between universities, and with top-up fees about to change the domestic landscape, it is essential that the LSE raises its game.

Under its previous director, Professor Tony Giddens, the eminent sociologist and Tony Blair's favourite guru, the LSE thrived. The library was upgraded into a spectacular new development, streets were pedestrianised, the School's profile was raised and last year it was left with a surplus of more than £11m. Now Davies can literally cash in on that as part-payment for the new building.

The expansion will be in management education, specifically in Masters programmes that contain a management element, such as management and economics, or management and finance, and which carry fees of £8,000-15,000 a year. The LSE has thought long and hard about establishing a business school and running its own Masters in business administration. MBA programmes are extremely lucrative and the School, because of its international reputation and subject mix, would be well placed to offer one.

"We think that the MBA market is currently overserved," says Davies. "Some people would say saturated. There are loads of MBAs. For us to go in with a 'me-too' MBA would be a mistake. We have looked at this very carefully and have decided that the LSE's competitive advantage is in Masters programmes that have a management component, but that also have other elements we can deliver in a social sciences institution, which other people would find it harder to deliver."

When Davies arrived a year ago, the LSE was at capacity with no room for expansion at all. In addition, it did not have a clear idea what to do about management education. In the last 12 months, it has devised a strategy for its shape and size, and made decisions about the proportion of undergraduates it takes and their composition, according to Davies.

As a specialist social science institution, the School lacks the big money that flows in through research funding for the sciences. That makes it more dependent than most on overseas students, who at present make up about one-half the undergraduate body. After a review, the LSE has decided that is about the right mix for an institution that is concerned with solving the problems of the world. "At 50-50, it seems quite comfortable," says the director. "We have taken the view that we will maintain a strong UK undergraduate programme."

With its reputation at home and abroad for educating future political leaders and policy wonks, the LSE has no difficulty attracting applicants. It receives 10 applications for every overseas undergraduate place and 12 applications for every domestic place. Despite this, some people inside the School have argued that the LSE should turn itself into an entirely postgraduate institution. But Davies is against this. In the long run, an undergraduate programme roots a university in the life of the United Kingdom to a greater extent than a graduate programme does, he says.

"If you look at the people who actually support the school in the long run - the alumni, the governors and the council - they are predominantly the people who had their main academic experience here. We have a lot of alumni from the United States who were here for a year and are now very wealthy, but they tend to give most of their money to their first college, where they watched the football game and lost their virginity and all that stuff."

Another advantage is that, from a purely financial point of view, undergraduates give security because they stay for three years. That makes the income stream for the institution safe for a period of time. Postgraduates on Masters programmes are usually there for only one year, which means the college is more vulnerable if the Masters market collapses suddenly in a country. That makes a combination of undergraduate and postgraduate students preferable, Davies believes.

Back in the 1970s, Davies joined the Foreign Office after a degree in history and languages at Oxford, because the diplomatic service was seen as the most difficult thing to get into. It was a challenge. In the event he found he social side of diplomatic life uncongenial and, in any case, decided he was not cut out to be a civil servant. He viewed government employment as too unadventurous and lacking in scope for his organising aspirations, according to his former boss, Nicko Henderson, in his portrait of him.

Certainly the LSE should be a challenge - for a while, at any rate. And it gives full rein to his organisational powers, even if it brings some unwelcome socialising in the shape of vice-chancellors' drinks parties. If one spies Davies at such an event, he always looks as though he would rather not be there. The next minute, he has disappeared.

The LSE director gives the impression of having a low boredom threshold. Perhaps that is why he busies himself with such a variety of activities - teaching seminars on financial regulation, acting in LSE plays and jetting round the world to meet alumni and raise money. Last year, students staged a protest against top-up fees on the 11th floor outside his office. Davies, as you might imagine, was completely unfazed by the demonstration, appearing, if anything, to enjoy the interruption to his day.

The LSE staff seem to like him. "He is very bright, affable and approachable," says one. "He lacks any kind of defensiveness and is a very good listener," says another. It may well be to his advantage that he is not an academic, because no one can be snooty about his subject area. Certainly his glittering record as a civil servant and in running various quangos has given him unrivalled management and networking skills. The LSE will have cause to thank him for the new expansion.

RENAISSANCE MAN: HIS LIFE AND WORK

AGE: 53

EDUCATION: Davies took a first degree in history and languages at Merton College, Oxford, then an MSc in management sciences at Stanford University in California

JOBS: Foreign Office; special adviser to the Chancellor of the Exchequer Nigel Lawson; management consultant with McKinsey and Company; controller of the Audit Commission; director-general of the CBE; deputy governor of the Bank of England; chairman of the Financial Services Authority.

GONGS: He is knighted but doesn't like to be called "Sir". When he arrived at the LSE, Davies sent out a message saying "I would like to be called Howard, rather than 'director', 'sir' or any other moniker. Behind my back you may call me other things, but that is your affair."

INTERESTS: Sport. He used to play six-a-side football regularly with John Birt and Greg Dyke at a ground on the South Bank, but had to give up because of a knee injury. In fact, Birt had to carry him off the field three times as a result of injuries suffered in the fray. Davies now confines himself to cricket, playing for Barnes Common cricket club, which recently toured in Barbados.

He also enjoys acting in plays. At Oxford, he engaged in amateur dramatics, expressing a wish to be an actor. It was in this milieu, says the former ambassador Sir Nicholas Henderson, that he met Peter Stothard, former editor of The Times, who became one of his closest friends.

l.hodges@independent.co.uk