The Golden Passport
Page 6
Here’s what Taylor did for the American psyche: He gave it what it wanted, and when it wanted it. By raising efficiency to a virtue, he spoke to a national character that prided itself on being early to bed. His insistence that knowledge was power reinforced Americans’ notion of their meritocracy, even if the dictates of Taylorism actually required industrial aristocracy. In doing so, it promised, somewhere, somehow, to get to the heart of the riddle of how to have a Jeffersonian democracy and a Hamiltonian economy at once. It never did.
Here’s what Taylor did for Taylor: He got rich. As historian Judith Merkle put it, “Taylor’s system was an entrepreneurial scheme for selling organizational methods as science.”24 Taylor used the leisure earned from his own business success to put his mind to higher goals: He won the U.S. Lawn Tennis Association doubles championship using a patented spoon-shaped racket of his own design. He invented a Y-shaped putter for golf that was banned from the sport due to the “mechanical advantage” it brought to the game. Undeterred, he became an expert on grass and helped create the fast greens found on all golf courses to this day.
It also gave him megalomania: When Gay asked Taylor to join the faculty of HBS in 1913, Taylor declined with characteristic grandiosity: “I am conducting in Philadelphia here an even larger school for scientific management than the one which you have in Cambridge.”
Here’s what Taylor did for art: He was an inspiration to Charlie Chaplin, who parodied a Taylorized factory in his satire Modern Times. Taylor gave John Dos Passos enough to merit an entire mini-biography in the author’s sprawling novel USA, the punch line of which was a damning indictment of the American quest for efficiency-above-all-else:
But Fred Taylor never saw the working of the American plan; in 1915 he went to the hospital in Philadelphia suffering from a breakdown. Pneumonia developed; the nightnurse heard him winding his watch; on the morning of his fiftyninth birthday, when the nurse went into his room to look at him at fourthirty, he was dead with his watch in his hand.25
4
The First Decade: 1910–1919
Edwin Gay did what he was asked to do. With just a few months to prepare between the formal establishment of the Harvard Business School on March 30, 1908, and the start of the 1908–09 academic year, he put together a program of instruction for the fall semester.
Instruction was given by a combination of full-time faculty and “in those courses which peculiarly require the knowledge derived from actual experience in modern methods, by business or professional men.” That included the likes of Frederick Taylor, Boston department store chain magnate Edward Filene (Retail Merchandising), and New York banker Thomas Lamont (Promotion and Flotation). In 1908–09, HBS counted 13 outside lecturers in railroading; 10 in insurance, including Sylvester Dunham, president of Travelers Insurance; as well as the likes of the Economist’s F. W. First (London Money Markets). HBS students were also welcomed into the offices of numerous local companies for field study, including the Boston Gas Company, Filene’s Department Store, General Electric, Kidder Peabody, Houghton Mifflin, and the Waltham Watch Factory.
The bulk of HBS’s students in the early years came from Harvard itself. Of 80 students in 1908–09, 42 had degrees from Harvard, and 59 hailed from Massachusetts. In 1909–10, 42 of 91 students were Harvard’s own. Enrollment grew steadily in the first five years of the School’s existence, rising from 33 first-year students in 1908 to 77 in 1912. At the same time, the number of colleges represented grew from 14 to 42. The average age of the first-year students hovered around 23 years.
To further ensure that the top management point of view was embedded in his curriculum, Gay established a Visiting Committee of those very top managers, including railroad magnates and bankers, to audit the new school’s efforts. The first of those audits, conducted in the middle of the School’s first decade, stressed the need for more practice and less theory, and noted a lack of “business presence” in the students.1 Another thing the Committee noticed: deficiencies in English. For the first several years of its existence, the School found it necessary to provide remedial instruction in written English to its students, who apparently hadn’t arrived at HBS at the top of their colleges’ honor rolls.
What, exactly, were HBS students learning? A survey of the first decade of the School shows a number of established subjects such as accounting and corporate finance, which were largely taught in a “descriptive” manner—with a point of view of the outsider, not the top executive. But students were required to inhabit the mind of a manager, eventually, as evidenced by the subjects of second-year MBA theses in 1917–18, including “A Scheduling System for the Brass Valve Department of a Specific Manufacturing Company,” and “The Routing Problem in a Certain Electric Heating Company.” In other words, HBS wasn’t producing pointy-headed graduate students who found their satisfaction in books and theories. As Frederick Taylor had done, there were some sleeves being rolled up, even if it wasn’t with the express aim of picking up a shovel. (The thesis requirement, however, was abandoned in 1922.) Too stuck in the finer details of topics such as fire insurance and bookbinding, the School didn’t have time, either, to preach the kind of dogma that economics departments specialized in, including Adam Smith’s notion that in a free market, self-interest maximizes the good of all. But that—and more extreme versions thereof—would come soon enough.
If Gay had proved himself up to the task of crafting an early identity for the new School, he found less success in the other, less enjoyable, task of raising money. He had a few big wins, including bringing Chicago publisher Arch Shaw into the fold, the many implications of this will be discussed. A $125,000 gift from Edmund Cogswell Converse of New York endowed a professorship of banking in 1911–12, and another $125,000 endowed the James J. Hill Professorship of Transportation in 1914–15. But money was hard to come by in the early years. A Herculean effort by both administrators and other friends of HBS brought the endowment to over $450,000, but in 1917 that only provided income of $20,492.2
Businessmen, it seemed, were quite prepared to devote their time to helping shape the curriculum of a pool of students from which they could hire, but they weren’t quite ready to step up and finance the entire operation. A committee led by then-retired Charles Eliot pegged the endowment needs of the School in 1912 at $600,000, but Gay found few takers and also found himself at odds with Harvard’s own fundraising efforts.
In 1911, Gay asked Lowell, the newly inaugurated president of the university, to endorse a $1 million endowment drive. It was a sensitive ask, in large part because both Gay and Lowell had set their sights on the Rockefellers’ General Education Board as a potential source of funds, Gay for HBS and Lowell for Harvard proper. While accounts of the kerfuffle between the two vary, in the end Gay did not approach the GEB for funds, and he was therefore obligated to scrounge elsewhere. At some point, however, tensions rose so high that Lowell demanded Gay’s resignation in 1912. Gay refused, and managed to stick around for another five years. And although Lowell had shut down one avenue of possible funds for the fledgling business school, he was by all accounts a long-term supporter of the project.
Gay took a leave of absence during the 1917–18 school year to head to Washington, D.C., in service of the U.S. government during World War I. When he returned to Cambridge from Washington, though, he realized that he’d had enough, and resigned in August 1919 to become president of the New York Evening Post Corporation. And he left on a high note: In 1919–20, enrollment hit 412 students, almost double the previous high of 232 students in 1916–17, and more than fourfold its 1917–18 wartime enrollment of just 97. All-told, Gay spent eleven years as dean of HBS, and while he later claimed to have regretted taking a detour from his academic studies, he was a singular force in putting a flimsy idea on firm enough footing that it not only outlived the projections of its early detractors but went on to become the most prominent business school on the planet.
Whether he had any idea what he had helped create is a ma
tter for historians, although it would have been impossible for him to have foreseen the brand trifecta that HBS became part of nearly one hundred years later, when Goldman Sachs, McKinsey & Company, and the Harvard Business School stood above all other comers in the realm of MBAs. What he did try to do was to make HBS everything at once—a friend of business, a fount of independent and important research on the topic of business, a teaching institution nonpareil, and a producer of businessmen with an eye on the greater good. He didn’t pull it off—no subsequent dean has managed to do so, either, largely because a school can be two or three but not all four of those things at once—but he certainly gave it his best.
It shouldn’t come as much of a surprise that the first decade of HBS yielded few graduates who would go on to carve their names in the stone of business history. It was a time of turmoil and transition in American business, and while HBS students might have been in the vanguard of a new educational era, their presence therein removed them from the land grab of actual competition, which was still pretty much a free-for-all at the time.
While a handful of companies were early adopters when it came to hiring MBAs—AT&T placed a “standing order” for all available graduates—the unsentimental forces of demand and supply told another story. Starting salaries for Harvard MBAs declined from $2,144 in 1910 to $1,450 by the middle of the decade.3 Their greatest reward was the cultural cachet that comes attached to a Harvard degree, even if it came courtesy of the child (HBS) that had been reluctantly adopted by the parent (Harvard itself). The School certainly wasn’t producing anything remotely close to the output of the reigning leadership factory of the time: the United States Military Academy. Of West Point’s 1,058 graduates between 1802 and 1866, 35 became corporate presidents, 48 chief engineers, and 8 corporate treasurers.4 But the days when HBS could compete on that front weren’t too far off. They would come, in large part, because of the most enduring decision made in the history of the Harvard Business School: the use of the case method as the anchor of its approach to the teaching of business.
5
The Case for the Case Method
The case method is the Harvard Business School’s signature contribution to the field of business education. It is the foundation of their pedagogical approach. It is the object of their financial devotion, having consumed more research funds than all the rest of the School’s efforts combined. The ability to write and teach cases effectively is the primary measure of faculty performance at HBS. It is also the primary means by which the School has spread the gospel of its thinking about business, while at the same time becoming a significant source of extracurricular revenue for the School (along with its publishing imprint and the Harvard Business Review). The connections with industry that arise from the use of cases have put HBS faculty much closer to actual practitioners of business than are those at any other School. Companies generally love having cases written about them, if not the actual experience of having HBS suck up the valuable time of the executives involved.
Harvard swears by the case method. Outsiders wonder if that devotion has become an albatross around its neck. For all the power of the HBS brand, its utterly unique view of faculty development via case research and teaching means the School has long played an idiosyncratic role in the market for academic talent, albeit much less of one in recent years. Because a case study is by its very nature backward looking, an overemphasis on such has led to the accusation that Harvard MBAs graduate armed with conventional answers to conventional questions. Proponents argue that the more important aspect of the case method is how the students learn, not what they learn. While that may indeed be true, it doesn’t follow that what they learn is not important. Because it is, along with what they imagine they learn from it, including such things as “decision making,” “leadership,” and “taking responsibility.”
HBS has sacrificed at least some measure of research rigor by favoring practical corporate relevance. Not only that, but its main research product has never been entirely free of bias, from the very get-go: Because companies have veto power over any cases that are written about them, the majority suffer from positive bias, among other things, including an overestimation of the importance of individuals in complex organizations, a tendency to allow corporate executives to claim foresight when it did not exist, and the infiltration of public relations into the shaping of cases. The list goes on.
Because the method is so important to HBS in so many ways—it is the cornerstone of their brand, of everything they do—its strengths and weaknesses will be discussed in a number of chapters to follow. This first one will address the origins—arguably, the invention—of the method at HBS, the challenges involved in gaining early momentum, as well as other issues the School’s early embrace of the method gave rise to, some of which have yet to be resolved.
In 1911, just three years into HBS’s existence, publisher and ardent HBS supporter Arch Shaw informed Edwin Gay of what he considered a fundamental flaw in the School’s pedagogical approach. The way he saw it, the coursework was too general and too descriptive; it was failing to imbue in the MBAs one of the most crucial abilities required of any executive, and especially senior ones: they didn’t simply need to learn problem-solving skills, they need to learn problem-identifying skills too. The students, he told Gay, “wouldn’t recognize a problem if they saw one.” Gay’s response: “If you know so much about it, why don’t you tackle it yourself?”1
The two ended up tackling it together. On Shaw’s urging, Gay inaugurated a second-year course, called Business Policy, to integrate the functional disciplines taught in the first year in order to give second-year students a “top management” point of view. Shaw convinced fifteen senior managers to participate in the course. Each manager conducted three sessions with students over the course of a week. In the first, they explained a real-life “problem” they had faced and answered any questions about it. In the second, students handed in an analysis of the problem, along with a proposed solution. In the third, the manager discussed the reports. In this lay the roots of the School’s primary differentiating factor in the decades ahead: the collection, distillation, and teaching of real-life corporate problems, via the case method.
While Shaw deserves credit for his part in helping push the School toward a problem-based approach to teaching, the fact of the matter is that Gay had been focused on it from the beginning. Indeed, in the 1908–09 course catalog for the School, Gay had laid the plans for teaching that included that very thing: “In the courses on Commercial Law the case-system will be used. In the other courses an analogous method, emphasizing class-room discussion in connection with lectures and frequent reports on assigned topics,—what may be called the ‘problem-method,’—will be introduced as far as practicable.”
Gay’s inspiration for the approach came partly from Harvard Law School, where decades earlier, dean Christopher Columbus Langdell had revolutionized the teaching of law, moving away from the reading of statutes themselves and toward judicial opinions. Gay’s other inspiration was Germany’s Gustav von Schmoller, who had seen the potential of case-type teaching in economics and the social sciences. The only thing holding Gay back from a full-scale implementation was a lack of actual cases and of professors capable of teaching in such a way.
In And Mark an Era, his history of HBS in the first half of the twentieth century, Melvin Copeland points out that at its founding, one of HBS’s primary competitors for students was Harvard Law School itself. The same holds true today; while HBS is currently obsessed with the fact of its eclipse by the Stanford Graduate School of Business in the minds of today’s tech-savvy youth, many of the smartest students seeking a career in business still choose law school as their starting point instead of business school. And if Gay was going to compete with that, he had to differentiate his school while also showing that it could compete with its sister school when it came to the quality of its teaching.
At the same time that Gay was pushing the “problem method,�
� he was also pushing for more classroom discussion. He even had a particular professor in mind as his guinea pig: Melvin Copeland. Gay convinced Copeland, who had studied under Gay while earning his doctorate in economics and spent a year at HBS before leaving for New York University, to return to the School in 1912. He then asked him to conduct an experiment in one of the first-year courses, Commercial Organization. The students were arbitrarily divided between two professors, Copeland and Paul T. Cherington, with Cherington using lectures and Copeland a more conversational approach. Cherington, one of the country’s earliest marketing experts, wrote Advertising as a Business Force (1912) and The Elements of Marketing (1920).
Just over a week into the semester, Gay asked Copeland how the experiment was progressing. “Oh, I’ve found enough to talk about so far,” Copeland replied, proud of himself as he’d only had two days to prepare before classes had begun. “That is not the question,” replied the dean. “Have you found enough to keep the students talking?”2 From that day forth, Copeland later wrote, he did no more lecturing in that course or any other, instead turning to the Socratic method of teaching, which is the core of the case method.
In a 1915 article, “Teaching the Profession of Business at Harvard,” Benjamin Baker reiterated what by that point had become a familiar refrain: “The profession of business cannot be taught from text-books,” he wrote. “Actual business problems, as the business executive has to meet and deal with them, are as unlike any purely text-book presentation of them as the sick person calling at the young doctor’s office is unlike the ‘symptoms’ in the medical text-book. So, as the young doctor must learn to diagnose by service in the hospitals, the student of the profession of business must learn to recognize and deal with business facts by dealing with actual business situations.”3