The Golden Passport

by Duff McDonald

  For many of the nation’s manufacturers, the end of the war resulted in the loss of their largest customer—the U.S. government. The majority of the research conducted at HBS between 1942 and 1945 was concerned with postwar adjustment problems. One such project dealt with how the nation could safeguard the solvency of aircraft manufacturers. Another addressed the disposal of surplus aircraft. And a third focused on the disposal of government-owned shipbuilding facilities.10

  Just five years later, with another war unfolding in Korea, the School formed a Mobilization Analysis Center, led by Associate Dean Stanley Teele. In the span of just eighteen months, thirty-six members of the faculty tackled nine separate research projects with a total budget of $620,000, for the Departments of the Army, Air Force, Commerce, and Defense.11

  16

  The Darling of the Business Elite: Donald David

  Donald K. David, the third dean of the Harvard Business School, was homegrown: Born in Moscow, Idaho, on February 15, 1896, the 1916 graduate of the University of Idaho worked for a year in his family’s retail business before enrolling at HBS in the fall of 1917. He joined the School’s research staff after graduation, and in 1920 Donham asked him to take on a role as an assistant dean. Over the next half decade, David served as an instructor in marketing, where he relied on personal experience in the family business to help set up the School’s course in retailing. He was appointed associate professor of marketing in 1926.

  But he didn’t stick around. In 1927, David resigned to take the job of executive vice president (and later president) of the Royal Baking Powder Company, a position offered to him by his close friend William Ziegler Jr., a longtime friend of HBS himself. In 1932, that company was merged with Standard Foods, and Donald was elected president of the combination, renamed American Maize-Products, a position he held until he returned to HBS in 1942 as Donham’s successor-in-waiting. As an example of how things work at HBS, David was named the William Ziegler Professor of Business Administration upon his return, a chair he had convinced Ziegler to fund to the tune of $1 million back when Ziegler had poached him from HBS in 1927.

  In the simplest sense, David represented a continuation of the status quo at HBS. Despite his fourteen-year absence from the faculty, he had stayed close to the School by serving on its Visiting Committee and was Donham’s own choice as his successor. His first few years as dean were also spent carrying the war-related efforts Donham had initiated through to fruition. As an HBS case study might tell you, however, even handpicked and personally groomed successors eventually depart from their predecessor’s path. And it wasn’t long before the differences between Wallace Donham’s HBS and that of Donald David were clear to see.

  While Donham had arrived at HBS with experience as a corporate lawyer under his belt, he was a thinker and a theorizer at heart, energized more by his interactions with the likes of Elton Mayo and Alfred North Whitehead than with corporate executives. And even though he clearly believed that the fate of Western civilization lay in the hands of his educated managerial elite, he expended as much effort admonishing businessmen for their failure to live up to his expectations as he did praising them when he thought they had.

  Donald David saw things a little differently. Much more a creature of the corporate boardroom than of the Ivory Tower, he was a “staunchly probusiness conservative”1 opposed to government intervention in the private sector. If Donham’s businessman should know better, David’s did know better. As far as David was concerned, says Bert Spector, a professor at Northeastern University’s D’Amore-McKim School of Business, “[b]usiness executives could fill the void of leadership in postwar America by bringing their own unique skills to bear on an uncertain and dangerous world.” David said so himself: “The effective businessman has, it seems to me, two special abilities. He is skilled in the art and science of the purposeful organization of men and things. He is also trained in the taking of risks and the facing of uncertainties. He makes his decisions and carries out his actions after a considered appraisal of the risks involved. These twin capacities—purposeful organization and the exercise of judgment leading to action—are needed today as never before.”2

  Once the Allied victory was in hand, too, David made quite clear his view that the business community owed the American public no further apology for the excesses of the past. As far as David was concerned, the public should not only be thankful for its managerial elite, but be looking to it for moral guidance to boot. “Morals of business men are better today than they have ever been,” he told a reporter for the New York Times in 1949, “and they are vastly better than in most other segments of the community.”3

  When a 1949 Harvard Business Review article, “The Public Looks at Business,” found that a large portion of the public disagreed with that conclusion and were instead “convinced that business is at best amoral and at worst greedy,” David saw that simply as a failure of communication. “Too few businessmen are articulate,” he later wrote, and that led to “suspicion of his motives [and] doubt of his sincerity.” Others saw the disconnect in a more patronizing light, the result of a lack of education rather than of communication: “An increasing number of progressive business leaders . . . are trying to educate their employees to see the close identity between their individual interests and the interests of the enterprise which employs them,” wrote McKinsey’s Marvin Bower in 1949. “They know that the well-informed employee will not cast a vote that creates an unfavorable atmosphere for business. . . .”4

  With helpful messages like that, David quickly became “a darling of the nation’s business elite,”5 which demonstrated its gratitude with a marked increase in corporate giving to the School that culminated with a John D. Rockefeller Jr.–led $12 million fundraising in 1949. The Rockefeller piece of that total—$5 million—was used to construct Aldrich Hall, named in honor of his father-in-law. Others who contributed: General Electric, R. H. Macy, Goldman Sachs, Thomas Lamont, Charles Cotting, Ford Motor Company, Standard Oil, IBM, J. Spencer Love, American Can, Lever Brothers, Procter & Gamble, Gillette, Stop & Shop, Kidder Peabody, Goodyear Tire & Rubber, and Bankers Trust. In large part, these were either graduates of HBS or companies run by graduates of HBS.6 Corporate assets were being sent to their alma mater out of some argument that it was good for the American economy.

  Where David did not depart from his predecessor was in his conviction that what was good for business was good for America. More precisely, he continued the School’s cherished tradition of arguing that executives acting in their own economic self-interest were in fact acting on behalf of all Americans, even protecting them. But if Donham’s bogeyman was the existential chaos brought about by rapid industrialization, David’s was something scarier and more real, the Cold War communist who sought nothing less than the destruction of America.

  In the summer of 1949, for example, the Harvard Business Review issued a special supplement written by David titled “Business Responsibilities in an Uncertain World.” “The adversaries are democracy and totalitarianism,” he wrote, and exhorted business leaders to help preserve “democracy and our way of life.” America’s best defense, he argued, wasn’t just nuclear weaponry but robust economic performance as well. If that message sounded familiar to some Americans, it was because they were hearing it elsewhere as well. Consulting giant McKinsey & Company’s official history, for example, credits the firm with “helping capitalism work better at a time when its credibility was still in doubt around the world.”7

  If the official responsibilities of every dean of HBS include hiring faculty, overseeing the curriculum, and raising money, the unofficial ones include sounding the alarm about America’s leadership void—from the perspective of HBS, this is a permanent state of affairs—and the need for HBS graduates to fill it. In a December 1949 speech, David sounded it loud and clear: “The world has practically gone to socialism, and the United States is rapidly drifting toward a welfare state. . . . We are faced with ideological conflict, a war of ideas.
”8

  The role David saw for businessmen, writes Northeastern’s Bert Spector, “was to enlist in that war and help correct the misdirection away from free-market capitalism and toward socialism.”9 To that end, David argued not just for the retreat of government back to its pre–New Deal state but for business to push it back even further, taking responsibility for social issues away from it as well. And with that, he had tied it all together: The totalitarian threat was also a domestic one, and any encroachment on the “freedom” of business to do as it would was essentially an assault on freedom itself.

  That David saw the time as ripe for a corporate power grab in American life wasn’t exactly surprising. Whereas before the war, Americans had viewed large bureaucracies with suspicion, attitudes had softened in light of their crucial contributions to the winning of the war. In his 1946 study of General Motors, Concept of the Corporation, management guru Peter Drucker concluded that the large corporation had become “the representative institution of American society,”10 in that it “sets the standards for the way of life and the mode of living of our citizens.”11 War had made America monopolist, but it had also reinforced the authority of hierarchies.

  Drucker was right. By the 1950s, Company Man was ascendant in American life, a capitalist soldier who marched to the steady beat of corporate conformity. A nation exhausted from war happily traded in its individuality in exchange for a steady paycheck and a degree of career stability not seen since before the Great Depression. The majority had little reason to reflexively question authority, especially when loyalty and subservience were repaid in the form of stable careers and ever-rising prospects.12 By 1949, nearly one-half of American workers were on the payroll of a corporation.13

  “They are wry about it, to be sure; they talk of the ‘treadmill,’ the rat race, of the inability to control one’s direction,” wrote William H. Whyte in The Organization Man. “But they have no great sense of plight; between themselves and organization they believe they see an ultimate harmony. . . .”14 For comfort, all they had to do was look at the numbers. In 1949, half of the goods made, grown, or mined in the world came from America. Americans ate 3.5 times as much as the global average, a feast they could afford due to the fact that their income was 15 times greater.15 And it stood out even among developed nations: By 1950, U.S. gross domestic product per capita of $3,204 was more than double Germany’s $1,374 and 50 percent above Britain’s $2,094.16

  And so it was only natural that by the late 1940s, interest in business degrees was surging. Whereas in 1919, just 110 MBAs had been awarded nationwide, in 1949 that number had grown to 3,897, despite a mere 50 percent increase in population during that time. Likewise, in 1919 only 3.2 percent of undergraduate degrees were in business, but by 1949 that proportion had more than quadrupled, to 13 percent.17 To David, that was at least partly due to the fact that even America’s youth understood the clear and present danger, and had realized that “freedom of opportunity, freedom of choice, and freedom for true competition can best be preserved through the operation of a free economy.”18

  Just as Donald David worried that the whole capitalist system could collapse in the event that business executives failed to take on a broader social role, there were those who thought that it would fail if they did. In 1958, the Harvard Business Review ran a story by marketing consultant Theodore Levitt, “The Dangers of Social Responsibility,” in which Levitt argued that executives should focus on one thing and one thing only: maximizing profits. While the consensus view in that argument would swing demonstrably in Levitt’s direction in the late 1970s, at the time, the view of David’s camp—that “bigness imposed a social burden on corporations”—became “a generally, if not universally, accepted tenet of American business thinking.”19 But you could also see it another way, which is that bigness elicited an instinct toward maintaining order not just within companies but in the broader socio-economy in which they operated.

  Donald David oversaw both an overhaul of the curriculum and the introduction of a number of important new programs at the School, in particular the introduction of Executive Education as well as Harvard’s only legitimate nod to the concerns of the workingman, the School’s Trade Union Program, which ran for more than two decades. (Both will be discussed in later chapters.) But it was his philosophical contribution—an unapologetic, muscular articulation of big business’s midcentury view of itself and its role in society—that is his most significant legacy. Wallace Donham prepared HBS for its moment on the public stage. Donald David stepped onto it.

  In December 1954, shortly before his retirement, David received a letter from John D. Rockefeller Jr. that made quite clear what kind of friend David was to big business. “What a monument it is to your farseeing breadth of vision, wisdom and dauntless courage!” Rockefeller wrote. Rockefeller knew he had a fellow Cold Warrior in David. In a report prepared for him about HBS in 1949, his investigator reported, “There is unanimity of purpose, there is a wholly constructive point of view, there is progressive thought with no discernible pink tinge. . . .”20

  David helped propel the leaders of American business to a position of social dominance unmatched before or since, and HBS was right there alongside them. For a brief moment in time, HBS graduates literally ran the country, at least from an economic point of view, and it was Donald David who engineered the last leg of their rise to peak power. One need look no further than two publications by HBS faculty near the end of his tenure to understand HBS’s view of itself and the business world that it was supposed to be “studying”: The Attack on Big Business and The Evaluation and Administration of a Salesgirl’s Behavior. With those issues taken care of, it was off to the club for a drink with William Ziegler Jr.

  17

  From the “Retreads” to the Crème de la Crème

  In 1942, Dean Donald David asked Assistant Dean Eugene Zuckert to oversee the creation and launch of a “War Industry Training” course with the goal of taking businessmen left “stranded” by the war economy and retaining them for positions in war-related industries. Zuckert first brought the Office of Education on board as the sponsor of the program. The next step was to appeal to HBS’s corporate friends for three-pronged help. For starters, companies could aid in identifying executives left “stranded” in their cities. Having done so, they could pay for them to attend a four-month course at HBS. And finally, they could hire the “retreads” (a nickname they quickly acquired at HBS) at the completion of the course.1

  It was a tall order. In late 1942, both General Electric and Kodak balked, taking the position that any executive who was worth such an investment would have already found a way to contribute to the war effort. Zuckert then approached Buffalo’s Curtiss-Wright Corporation, a manufacturer of aircraft parts that ranked second only to General Motors in the value of its wartime production contracts, having made nearly 150,000 aircraft engines and 30,000 planes. Executives at Curtiss-Wright balked, too, but only at the first part. Why should the company pay for the retraining of executives who didn’t work for it, the director of its airplane division asked, when it had so many on its payroll who would also benefit from such a course?

  That single conversation led to the most significant development in business education since the founding of the business schools themselves: the concept of Executive Education, in which companies send their own executives to business school programs. With Curtiss-Wright on board, others followed—nineteen different companies sponsored more than 25 percent of the 121 “retreads” who attended the first War Industry Training course in February 1943. “These men were sent by their companies with the expectation that upon completion of the course they could be given positions of greater responsibility than they had held previously,” Dean David wrote in 1944. By that point, 80 percent of the students taking the course were company sponsored.

  At HBS, it was as if they’d discovered that at least some old dogs really can be taught new tricks. “Carefully selected men in the age group between 30 an
d 50 years have no difficulty in taking hold of new ideas,” David wrote in HBS’s trademark condescending tone, “and they can understand things which men who lack the judgment that comes from experience and maturity cannot be taught.”2 The School wasted no time in seizing an obvious opportunity, and by 1945 the war training program had been reconfigured as an “Advanced Management Program” (AMP) with a curriculum spanning six subjects: Production Organization and Engineering, Marketing Administration, Cost and Financial Administration, The Supervisor and Union Labor, Management Controls, and Corporate Organization and Administration.

  The original course was just fourteen weeks, a length surely influenced by the country’s desperate need for able executive talent at the time. With those exigencies removed, one might have expected the School to expand it, but they did just the opposite: The AMP program was shortened to thirteen weeks. While one might reasonably wonder how much “upgrading” one man could experience in just three months, there was another overriding factor to consider, which was the amount of time that companies would allow their most promising executives to be away from their desks. And at thirteen weeks, HBS had landed on a win-win-win situation. Sponsoring companies got their management upgrades, not to mention a beefing up of the corporate resume. HBS found itself a new source of revenue with much fatter margins (due to the compressed schedule) than its primary one, the MBA. (The School has never been shy about admitting that surpluses from AMP have funded deficits in the MBA and research programs almost from the get-go.3) And midlevel executives obtained not just new knowledge, but something even better: a certificate from Harvard that could easily be misrepresented as an actual MBA degree.