The Golden Passport

by Duff McDonald

  Ford reportedly asked David to be president of the foundation, but David declined.2 He later explained his reasoning: The foundation’s board thought it wouldn’t be “wise” if he maintained a seat on the board of the Ford Motor Company while also serving as chairman of the Ford Foundation. He didn’t want to resign the first, so he was named vice chairman of the foundation and chairman of its executive committee. How that constituted a “wiser” arrangement is anybody’s guess. David also convinced Ford to bring Charlie Wilson, former chairman of General Electric, on whose board David had also sat, onto the foundation’s board.

  David was already Ford II’s “most trusted counselor in philanthropic matters.”3 Once ensconced at the foundation, he played a central role in throwing around the kind of money that HBS could only dream of. When David stepped down as dean, HBS’s endowment sat at around $11 million and its annual budget at $4 million.4 The Ford Foundation, on the other hand, was sitting on an endowment of about $500 million, making it the largest philanthropic foundation in the world. And Donald David was going to help them figure out how to spend it.

  Obviously, it would be a conflict of interest to sit on the foundation’s board while also being a strong advocate for HBS. How could he balance the two roles? It turned out that he didn’t have to: In a 1949 letter report prepared for John D. Rockefeller Jr. about HBS, his associate Lindsley Fiske Kimball included the following remark: “In confidence, I have discovered that there is an implied commitment on the part of The Ford Foundation to supply $5,000,000 basic endowment. . . . When David accepted election, he told the group he did not see how he could be at the same time a responsible trustee and a petitioner for a large amount of money. He was then told that the money he was after had already been committed and that therefore he should feel no reticence.”5

  Rakesh Khurana points out that the foundation approached its desire to transform American business schools on two fronts. The first was an effort to increase the focus in MBA programs on quantitative analysis and the behavioral sciences, à la GSIA. Those changes ran counter to the ideological underpinnings of HBS’s whole approach. But if members of the foundation tried to implement these reforms without at least the tacit support of the School, they ran the risk of being steamrolled by an institution that had shown a marked capacity for co-opting change and redirecting it toward its own idiosyncratic ends. As Mie Augier and James March put it in The Roots, Rituals, and Rhetorics of Change: North American Business Schools after the Second World War, “It was expected by [Donald David and Thomas Carroll], and by the leadership at HBS, that any program of support for management education would necessarily involve support for HBS.”6

  That came by way of the secondary front: the foundation’s desire to increase the proportion of business school faculty with doctorates. When the foundation committed $3.3 million to a program for improving doctoral studies in business and economics, HBS received the bulk of it, $2 million. Part of the deal: HBS had to expand its doctoral program beyond its historical case-based approach—to that point, it was basically a training ground for new faculty—to include more quantitative work.

  An interesting side note: According to remarks from Bernard Berelson, a behavioral scientist who joined the foundation in 1951, Donald David was also initially opposed to the new social science emphasis because he believed it would limit HBS’s access to foundation monies—not because it could be pushed out by the likes of GSIA, but by Harvard’s own Department of Social Relations. Said Berelson: “[T]hat first year and a half or so [spanning 1955–57] was a continuing sort of running skirmish between Don and the Program where Don was pushing the Program, [saying], ‘Look, we can easily make a deal here. Just deal us in and I’m your friend. If you deal us out, I’m going to oppose you at every turn.’ And we were trying to compromise that out by my saying that properly qualified stuff at the Business School, of course, was in. The old Henderson studies would have been in, and certainly the Hawthorne study would have been in. . . . But not everything at the Business School. That wasn’t quite enough for Don.”7

  The intramural debates spilled into the public eye when both the Ford and Carnegie foundations issued highly critical reports on the state of American business education. Both called for an overhaul of the curriculum in the form of more rigorous and scientific approaches—particularly in the realm of operations research—in the direction of GSIA. And they called for an overhaul of faculty training and research, the latter away from the HBS case-based descriptive approach and toward more fundamental discipline-based research. HBS had failed to discover Gay’s promised “science of business” through cases, so the new management science was going to derive its principles from theory and not from practice. The kind of research they were doing at . . . GSIA.

  If that seemed like a death knell for the HBS model, you wouldn’t have known it by looking at the effects of the reports on HBS itself. The School essentially ignored the call to teach students business as engineering and stayed true to the case method instead, in the process reaffirming its true differentiating characteristic from other MBA programs. And if HBS “was not in the vanguard of research-oriented business schools,”8 in large part due to the case orientation having “impeded [its] ability to sustain the record of innovative research it had gained after [the Hawthorne studies],”9 it was still regarded as the top teacher-of-teachers in the field. And that was enough for the foundation—with no small thanks to Donald David—to consider it worthy of significant largesse. All told, HBS received more than any other business school in the Ford Foundation’s push to reform business education during the years 1953–64, a total of $5.2 million.10

  While a meaningful portion of that money went to the School’s efforts to train international teachers in the HBS mold—the topic of the next chapter—the bulk of it went toward expanding the School’s doctoral program, which had been around since 1922, when the Harvard Corporation had first authorized the School to grant a “Doctor of Commercial Science,” or DCS, degree. In the years before the war, however, more pressing financial needs had left the program more of an aspiration than anything else, with Wallace Donham admitting in 1937, “It is regrettable that we are forced to plan rather than to perform in this critical area, because of lack of funds.”11

  That planning quickly turned into positioning once Donald David got a whiff of the Ford Foundation’s future plans. Despite a total of just forty-nine people earning the degree through 1950,12 in 1951 David cited HBS’s “definite obligation” to help other business schools develop a “professional approach toward business education.”13 And voilà! In 1953, the faculty voted in favor of a Ford-funded enlargement of its doctoral program, while at the same time replacing the DCS degree with a “Doctor in Business Administration,” or DBA.14

  This was artful maneuvering of the most time-sensitive sort. According to Elton Mayo’s protégé Fritz Roethlisberger, up until the late 1950s, “[t]he Doctoral program had been a sideshow . . . [its] most important function . . . to produce more locals for the Faculty of our own MBA program.” More to the point, he admitted that its doctoral graduates were of little or no use pretty much anywhere but at HBS: “[A] graduate of the early program usually had training in only one method of research and one method of teaching. If he wanted to go into teaching as a career, he had to stay at the School or go to one which used the same methods.”15

  But once there was real money on the table, change happened almost overnight, with HBS claiming to have rejiggered a doctoral program that had been of value solely to itself into one of value to business education in general. Within a couple of years, the School was able to claim that 60 out of 100 doctoral degree holders were working in academic life, including 80 percent of those who had received them in the previous decade.16 In 1958, the foundation gave the School $1.1 million to expand the program even further. And so it did. In 1967, it set two records—46 DBAs awarded, including the first ever awarded to women, of which there were three.17 In the course of a single
decade, 224 men graduated from the Program, 79 percent of whom ended up working on the faculties of 70 different institutions.

  HBS sustained that sense of “definite obligation” for as long as Ford money was flowing its way. But it was harder to summon when that money dried up. Mind you, they didn’t explain it that way. Just three years after reaffirming its commitment to the program,18 an “intensive review” in 1970 led to its opposite, a reduction in admissions intended “to enhance [the] quality of student.”19 In 1974, only 47 doctoral students were admitted, down from 90 in 1969,20 and in 1979, it had tightened the screws to the point that only 7 percent of applicants were accepted—a total of 12.21 Forty years later, it remains a fraction of its late 1960s self. In 2014, the incoming class numbered just 25.

  As for Donald David, he had given the School quite the parting gift. When David died in 1979, Professor Myles L. Mace summed it up quite nicely, telling the Harvard Crimson, “He did a superlative job of translating the values of the Business School to business leaders such as Henry Ford and Mr. Rockefeller.”22

  The foundation reports had criticized U.S. business schools for lacking rigor, for being too vocational, and not analytical or conceptual enough. The Ford report, in particular, singled out HBS for its injudicious (read: exclusive) use of clinical methods, saying it offered “little or no training in research methods other than case preparation. No central body of theory was recognized, nor were there any core fields required of all candidates beyond what was necessary for the MBA. And, as in the MBA program, managerial problem-solving was emphasized.” However, the report continued, “Harvard has now begun to move away from this extreme ‘administration-as-an-art’ emphasis in its doctoral program. The school is attaching more importance to systematic knowledge and to training in research methods, and the program is now conceived as building on more than what is required for the MBA degree. . . . Since 1957 the School has, we understand, taken further steps to build analytical content and training in research methods into its doctoral program.”23 That effort reached its purest expression in the work of Michael Porter on competition, which was rooted in microeconomics.

  Here’s what they didn’t do: Run at a sprint, like so many other business schools did, in the direction of Carnegie Tech, which was “obviously much more oriented toward a sophisticated kind of research training than . . . Harvard.”24 Whatever changes were being made on the margin, they stuck to the case method of research above all else, and their attitude toward the “new” academic social science was one of tolerance, not warm embrace. They would be rewarded for their restraint. By the 1970s, the criticism had been flipped on its head: The programs needed to produce more practical and actionable content—more relevance.25

  HBS was thus spared being a target of criticism when the effect of the foundations’ reports were continually reassessed over the next three decades. In a 2005 Harvard Business Review story, “How Business Schools Lost Their Way,” authors Warren Bennis and James O’Toole put an exclamation point on an idea that had been coalescing for several years. With the encouragement of the foundations, they wrote, many leading business schools had adopted “an inappropriate—and ultimately self-defeating—model of academic excellence.”26

  Too focused on “scientific” rigor at the expense of practical relevance, those schools hired professors with limited real-world experience, who focused on abstract analysis with no grounding in actual business practice, and who sought their affirmation in peer-reviewed journals that tended to be of interest to no one but themselves. Even worse, the tenure track had been infected with it all, effectively trapping business school faculties in a deteriorating cycle. The result, according to J.-C. Spender and Rakesh Khurana: “Although the foundation reports certainly intended to promote greater emphasis on the disciplines, they were not intended to persuade business schools against preparing managers to deal with practical problems. Yet that was what was happening.”27

  But not at Harvard! Noting that “[d]eans and faculties at a few top-tier institutions are conscientiously struggling to find ways to conduct rigorous research without abandoning their professional missions,” Bennis and O’Toole singled out HBS, arguing that its “continued emphasis on case studies makes practitioners an integral part of the educational process.”

  So here’s what happened: In the early 1950s, a science-happy America—which included its philanthropists—decided that business should be taught and researched as if it were akin to physics. Carnegie Tech’s Lee Bach, way out ahead on the issue, upended the competitive landscape in just five years, and seemed poised to run away with being the standard-bearer of a whole new era in business education, and maybe even the bulk of the money to be spent by the world’s largest philanthropy in its efforts to bring that era about.

  Looking down at it all from his perch atop HBS, Donald David correctly realized that it was one of those moments when influence could be irrevocably lost. Because he wasn’t going to be able to turn HBS on a dime, he did the next-best thing and finessed his way onto the board of the Ford Foundation, the lead-up to which he spent repositioning an ineffectual doctoral program as a renewed and passionate investment in the future.

  In exchange for signing on to a thesis that explicitly favored HBS’s disruptive rival, Carnegie Tech, David managed to help steer more Ford money toward HBS than anywhere else, largely to fund its commitment to dramatically enlarge its doctoral program. But that commitment ended abruptly when the Ford money ran out, at which point HBS went back to business as usual. In the end, says Spender, the School stuck as closely as they were able to management as an art form while the rest of the profession headed off in search of that ever-elusive management as science.28

  The language in the Ford report barely papers over the fact that despite the heavy presence of HBS people within the foundation itself, theirs was “a marriage of convenience for which neither had unbounded enthusiasm, but each found [it] more useful than open hostility.”29 By including HBS, the foundation not only legitimized the entire project, but in doing so also managed to “neutralize a major potential opponent within the community . . . and avoided a risky confrontation.”30

  When it came to research, HBS stayed true to its case-based approach while the rest of the field chased Carnegie Tech way too far down the theoretical rabbit hole, the implications of which are still being felt today. Harvard’s decision to stay case-heavy has come under its own criticism, but Donald David still got what he wanted: At a time of great change, HBS kept its seat at the top table without really having to change at all. It’s quite the feat, when you think about it.

  But it’s also really nothing new. HBS has always delighted in its idiosyncrasies, and when it seems as if it’s changing, maybe going a little more with the flow, there’s a good chance it’s just pretending to do so. Put another way: It doesn’t give a damn what anybody else thinks, even if it sometimes seems that it might.

  HBS has always plowed its own furrow, for example, when it comes to hiring and promoting professors. From the very beginning, they have followed the practice of hiring their own best doctoral students, whereas nearly every other top-tier school in the world has an unwritten rule against doing so. Until only recently, HBS has truly valued only one kind of research, which is clinically based, qualitative, field-based research, which dovetails with the interest in writing cases, the result of which is that HBS, almost alone among its peers, consciously sought concentration, rather than dilution, of its academic gene pool. “HBS delights in coming up with its own criteria in terms of the people it promotes,”31 says Julian Birkinshaw of the London Business School.

  Of course, such a strategy does have its benefits. First, it allows different kinds of talent to emerge at HBS than would have emerged elsewhere. Another one: Because the School has also emphasized the quality of actual teaching ability far more than any other business school, one of the main benefits of enrolling at HBS has always been that even if they weren’t in the hands of master researchers, th
e students have been in the hands of master teachers. By all accounts, that’s still largely true today, although the School’s recent efforts to broaden beyond non-HBS-trained faculty has resulted in a more research-focused faculty that lacks the pure teaching orientation of decades past.

  On the other hand, such practices have, without a doubt, made HBS the most incestuous business school on the planet. And that incestuousness comes at a cost. As remarkable as it sounds, it is actually a high-risk gambit for junior faculty to take a job at HBS. For faculty at most of the elite schools, a failure to make tenure at one school does not necessarily preclude the likelihood of doing so elsewhere. But it’s a different story at HBS. Because of its idiosyncratic approach to research, many of those who have not made the grade at HBS have had to drop down to a lower-level school such as Babson College.

  HBS’s doctoral program got a shot in the arm in 2004, when Hansjörg Wyss (’65) made a $25 million gift in support of it.32 (In appreciation, HBS did the usual: It named a building after him.) In accepting the gift, Dean Kim Clark noted that “[one] of the greatest challenges facing business schools today is a growing shortage of outstanding faculty.” It was the same problem that Donald David had promised to help solve fifty years before. And just like the first time, HBS showed itself ready to do its part—as long as somebody else was willing to pay for it.

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  Spreading the Gospel

  There is no question that the GSIA-led insurgency—and the identity crisis it caused—put HBS and other leading American business schools on the back foot in the late 1950s. But those were domestic issues. On the international front, they were still advancing, with their “American” identity intact. G.I. Joe’s job was done; his rear guard was the American management mystique. If the rest of the world sat in admiration of the productive capacity of American industry, it stood in awe of American management.