The Golden Passport

by Duff McDonald

  Despite her significant contributions to the field of business history—Larson wrote Jay Cooke: Private Banker in 1936 and coauthored (with Norman S. B. Gras) the School’s first Casebook in American Business History in 1939—she was initially limited to her research, with little to no focus on teaching, and wasn’t promoted to the faculty (as an assistant professor) until 1936, seven years after giving up a professorship for the opportunity to come to HBS. The next step up took less time, if only marginally so: She was made an associate professor in 1942. But at that point, she hit the glass ceiling. (HBS did make her a full professor in 1961, the year she retired. But it was a ceremonial gesture, nothing more. The fact that the powers that be at the School considered the move a congratulatory one rather than a final reminder of the career-long insult they had perpetrated on her says more than enough about sexism at HBS in the 1960s.)

  Despite the fact that Larson was the first woman to get her foot into the door of the Faculty Club at HBS, the School and its historians have little to say about her or her work. In Melvin Copeland’s 1958 history of the School, he only mentions her in an appendix of appointments. Jeffrey L. Cruikshank’s A Delicate Experiment, published in 1987, makes no mention of Larson whatsoever. The second female faculty member, Elizabeth Abbott Burnham, joined in 1945, and she and Larson were the sole women on the faculty until the early 1960s. But it took another generation for a female to gain significant recognition as a professor. That woman, Regina Herzlinger, was also the first female to be awarded tenure. In 1981.

  Today, the faculty includes a number of high-profile women, including Anita Elberse, the youngest female professor to be tenured; Robin Ely, a professor of business administration who is also the senior associate dean of culture and community; Karen Mills, who previously served in President Obama’s cabinet as the head of the Small Business Administration; Youngme Moon, the senior associate dean for strategy and innovation at the School; Amy Edmondson, who specializes in leadership; Frances Frei, an expert in service models; Rebecca Henderson, who focuses on energy and the environment; Myra Hart, a cofounder of Staples; Nancy Koehn; Linda Hill; and Rosabeth Moss Kanter, the grand old lady of the faculty.

  If the hiring of Henrietta Larson signified a shift in HBS’s attitude toward female faculty, it signified nothing whatsoever about its attitude toward female students.

  HBS professors didn’t show the slightest interest in teaching women until 1937. That year, the director of Radcliffe’s Training Course in Personnel Administration persuaded two HBS professors, Fritz J. Roethlisberger and T. North Whitehead, to teach a course there.5 But another quarter century passed before HBS granted women admission full-time. That delay stands as one of the greatest embarrassments in the history of an institution that claims to be focused on making the world a better place. After all, the first women matriculated at New York University and Columbia University in their founding years, 19006 and 1916,7 respectively.

  In 1952, the president and council of Radcliffe College voted to discontinue what was then called the Management Training Program due to lack of funds. HBS offered to cosponsor the program in order to save it: It would determine the curriculum and absorb half of the program’s annual deficit, making it possible for the program to promote itself nationally and increase enrollment.8

  A problematic advocate emerged for the renamed Harvard-Radcliffe Program in Business Administration: Stanley F. Teele, dean of HBS from 1955 to 1962. Teele was a mixed blessing for the Radcliffe women. While he believed that women and men did not merit the same level of business education, he nevertheless advocated for women’s admission into the second year of the MBA program, which ultimately led to their full-time admission.

  In 1955, at the start of his deanship, a new curriculum was introduced for the program. But it was still tailored to women, in that it rested on the assumption that women would either work in small firms or at the department level of large companies. “The basic understandings of the program,” Teele said at the time, “are those of long-range significance which have value in the home and in the community.”9 In other words, even a well-educated businesswoman belonged at home.

  In classic HBS fashion, Teele chalked up early low enrollment numbers to outside forces: “Many college advisors and prospective applicants [are prejudiced] against a program which does not permit the student, regardless of qualifications, to work for an advanced degree.” But his proposed solution, which he arrived at from the wrong direction—to boost enrollment, not because it was the right thing to do—was a sign of progress regardless: accepting qualified graduates of the Harvard-Radcliffe Program into the second year of the MBA program.10

  One year, Teele insisted that women’s admissions test scores be interpreted differently than men’s scores.11 Then, just a few paragraphs later, he made the case for admitting women into the second year of the MBA program again, this time because of a growing trend of women remaining in the workplace despite having families. Never mind that other business schools had been educating women since the early 1900s.12 HBS was not a follower, even if that meant it had to occasionally put forth its own silly rationalizations for catching up to the times.

  By 1958, Teele was still torn. While he still felt that women were not qualified to receive the same education as men, the demand for women to have an advanced degree was becoming too strong to ignore: “The demand is not great enough . . . to [open] up the Harvard Business School to women. However, there is a growing need to provide the opportunity for some graduates to earn an MBA degree. Pressure . . . is coming from education, from government, and from a growing number of business firms.” And one other place as well: “In the past several months four graduates have begun work on a Master’s degree in other colleges.”13 HBS only put its sexism aside when it was directly threatened by other schools.

  And so, in 1959, three Harvard-Radcliffe graduates enrolled in the second year of the MBA program. By 1962, newly appointed dean George Baker was sufficiently impressed with HBS’s female students’ performance that he appointed an ad hoc committee to study whether or not to even bother continuing the Harvard-Radcliffe Program.14 The next year, they shuttered it, and eight female students enrolled at HBS full-time.15

  Sexism continued to dominate conversations about admitting women at HBS. In 1964, when discussing the lack of both females and “Negro men,” Baker claimed that “the main problem appears to be to convey more adequately the fact that there is a strong demand for able graduates of this School in both categories.”16 In other words, it was not HBS’s fault that they were not receiving more women applicants, it was that women were not aware of the opportunities available to them in the workplace. This stood in direct contradiction with the history of female enrollment at other business schools, in particular Stanford,17 which graduated its first females in 1930. At the time, the view of females in the HBS universe was better understood by the fact that the dean’s wife gave the wives of HBS graduates a “PHT” degree, for “Put Hubby Through.”18

  Baker’s comments about minority admissions were equally tin-eared. In 1968, when the topic of America’s racial inequality could no longer be ignored, even at HBS, he made the preposterous claim that HBS’s involvement in addressing the country’s racial problems “has been wide, deep, and unpublicized.”19 Of the very specific—and well-publicized—problem of paltry minority admissions, Baker blamed society itself, not HBS, for the School’s poor performance to that point. “The School has endeavored for years to increase the number of black students in its programs,” he wrote, as if there had been some mysterious impediment to its ability to simply increase the number of black students in its programs. And so when they finally caved to societal pressure—more than twenty-five black students were admitted into the class of 1970—the best explanation for the sudden shift that Baker could come up with was that “the black community is becoming more aware of the very real opportunities that exist in business for blacks.” Why blame your admissions policy when “the black
community” itself is more deserving of such?

  Things finally started to improve from there, if haltingly so. In 1969, a woman was named a Baker Scholar for the first time, and women were also allowed to move into the campus dormitories.20 The 1969–70 class counted fifty women on its roster. But even then, it wasn’t exactly as if they felt welcome. Said a 1971 alumna: “At the beginning of the first year, there was a feeling on the part of some of the men enrolled that the School had bent its standards to let under-qualified African Americans and women in, and that therefore, because of us, 10 white guys per section didn’t get in. It seemed that the white males resented the blacks more than they resented the women in terms of chair space. But we were all sort of tokens, perceived that way.”21 The professors, too. Said a 1973 alumna: “We had professors who, in the middle of a class, would look at the women and the African-Americans and say, ‘Is this too difficult for you?’”22

  By 1995, women still made up only 28 percent of the class.23 Just a few years later, in 1998, six male students were disciplined for a pattern of inappropriate behavior toward female students. The scandal made national headlines, and many women expressed relief that someone had finally spoken up about a “frat-boy” culture at the School. “Harvard Business School grads feel very strongly about the brand name,” a 1992 alumna told the Boston Globe. “It’s like a dysfunctional New England family. You’ve got to keep a stiff upper lip and keep everything inside and not talk about it.”24

  Female graduates from the 1960s through the present have expressed disappointment that HBS, supposedly a school that addresses the whole person, and the whole life, spent so little time discussing the various trade-offs and challenges that women face in the workforce and in the decisions to start a family or not.

  By 2005, 35 percent of students in the MBA program were women.25 But problems persisted, including a lack of female protagonists in case studies, a marked differential in grades between the genders, and the occasional episode of outright sexism. Dean Nitin Nohria made inclusion one of the main goals of his administration, but the School’s bungling of the solution to at least one part of the problem—the grading differential—was laid out in a scathing New York Times exposé in September 2013. (More on that in chapter 61.)

  Today, the School counts a remarkably long list of prominent females among its alumni, including Meg Whitman (’79), the CEO of Hewlett Packard Enterprise and former CEO of eBay; Sheryl Sandberg (’95), the chief operating officer of Facebook; Claudia Sender (’02), the CEO of TAM, Brazil’s largest airline; Ann Moore (’78), the former CEO of Time Inc.; Judy Dimon (’82), who has a storied career in nonprofit and philanthropic work, particularly education, and is the wife of classmate Jamie Dimon; Barbara Franklin (’64), the secretary of commerce under George H. W. Bush; Mary Erdoes, the chairman and CEO of J. P. Morgan Asset Management; Elaine Chao (’79), secretary of labor under George W. Bush; Ana Patricia Botín, the CEO of Santander UK; Abigail Johnson (’88), the CEO of Fidelity Investments; Joanna Barsh (’81), a longtime partner at McKinsey & Company; and Barbara Minto (’65), the developer of the Minto Pyramid Principle, a method of thinking and writing that is used by almost every consultant on the planet.

  28

  The Legitimizer: Alfred Chandler

  Alfred Chandler was not the first person to study a large-scale diversified manufacturing enterprise. Credit for that goes to Peter Drucker and his 1946 book, Concept of the Corporation, which later functioned as a kind of blueprint for modern corporate organization. Nor was Chandler the first business historian at HBS. Norman S. B. Gras had been lured to the School in 1927 with the nation’s first chair in business history. Chandler didn’t land at HBS until 1970, nearly fifty years after Gras. But Chandler did what Gras had never been able to do—he made the study of business history sexy, both at HBS and elsewhere.

  Back to the beginning, though. Shortly after his arrival at HBS, Gras launched the Harvard Studies in Business History, a series of company histories, of which he wrote two himself: one on the First National Bank of Boston (1937) and another on the Harvard Co-operative Society (1942). When the School launched the Journal of Business and Economic History in 1928, Edwin Gay served as editor and Gras as managing editor. But the journal was shuttered in 1932 due to a lack of funding and clarity as to its ultimate mission.1 A successor, Business History Review, wasn’t founded until 1954.

  Another pre-Chandler effort at business history at Harvard was its Research Center in Entrepreneurial History, a joint effort between Arthur Cole, the School’s librarian, the economist Joseph Schumpeter (the man who coined the term creative destruction), Edwin Gay, and others. Active for just a single decade, from 1948 to 1958, the center helped solidify one of Western capitalism’s main tenets—that the ongoing destruction of individual businesses and fortunes was the price of a better life for all. HBS remains firmly of the opinion that the general prosperity produced by the “capitalist engine” far outweighs the wreckage it leaves behind. But that debate has only gotten more heated in 2016.

  Not yet ensconced at HBS, Chandler had nevertheless been hanging around Cambridge in the late 1940s, studying under the legendary sociologist Talcott Parsons, whose “structural functional” approach to the evolution of human institutions and how those institutions shape society as a whole showed the influence of Émile Durkheim, Vilfredo Pareto, and Max Weber. In Parsons’s courses, Chandler came into first contact with the work of Berle and Means, Chester Barnard, and Elton Mayo.2 In 1949, Chandler was invited to join the Research Center in Entrepreneurial History. Schumpeter died just a year later, in 1950, and while Chandler built on Schumpeter’s work, the two differed on what they considered the primary source of change in the second industrial revolution. Schumpeter’s hero was the daring entrepreneur; Chandler’s was the modern manager and his organizational charts.

  But it was a death in the family that ultimately set Chandler on the course to greatness. Shortly after arriving in Cambridge, Chandler’s great-aunt Lucy Poor died, and she left him an apartment in nearby Brookline. In the basement, Chandler found the papers of her father (and his great-grandfather), Henry Varnum Poor, the editor of the American Railroad Journal from 1849 to 1861 and later a cofounder of business information provider Standard & Poor’s.

  Whereas most people would look at the Railroad Journal and see an industry rag, Chandler saw history, and lots of it: the seeds of the modern construction industry, the creation of modern Wall Street, the invention of managerial hierarchies and the control systems they used, the beginning of modern labor relations, the first modern oligopoly, and society’s answer to that oligopoly—government regulation of big business. Most important, he saw the power of Poor’s “proclivity to make empirical comparisons that would yield useful theoretical generalizations.”3

  A job working with Elting Morison of MIT editing the letters of Theodore Roosevelt provided the insight that “decisions, many with long-term consequences, had to be made on insufficient information and with great uncertainty as to their outcomes.” At MIT, Chandler began the work that proved the through-line of his entire career, a study of structural change in large American corporations. That led to an invitation from one Alfred Jr. to another: Alfred P. Sloan Jr., the legendary chief of General Motors, asked Chandler to work as a research assistant (along with Fortune writer John McDonald) on My Years with General Motors. That, in turn, led to an understanding of how GM’s organizational structure evolved as it expanded both geographically and in diversity of product. And that led to . . . Strategy and Structure.

  The central argument of Chandler’s first book, according to Thomas McCraw, was “that businesses, like other organizations, are governed by inertia; that they change their overall direction (which Chandler calls their ‘strategy’) only when forced by competitive pressures to do so; and that a change in strategy is likely to be successful only if accompanied by a decisive change in organizational structure.”4 If you’re looking to sound informed about Chandler, all you need
to do is raise your eyebrows and ask about the chicken and the egg: Does strategy precede structure? Or vice versa? (Google it. The amount of ink that’s been spilled on the question is downright shocking.) Chandler, who later revealed that the original title of the work was Structure and Strategy, considered the debate a sideshow and the book a study of “the complex interconnections in a modern industrial enterprise between structure and strategy in an ever-changing external environment.”5 Because business, like life, doesn’t happen sequentially. It happens all at once.

  The “M-form” organizational structure that Chandler observed (with small variations) across the companies he analyzed—DuPont, General Motors, Sears, and Standard Oil—was, by midcentury, the dominant organizational form in most large American companies. Senior managers of product or geographic divisions were given relative autonomy over the functional activities of production, sales, and purchasing. Above them, top managers monitored those divisions’ performance—primarily through the finance and controller functions—and on the basis of that made plans for the future and allocated resources accordingly.

  In 1970, HBS offered Chandler the Straus Professorship of Business History. He accepted, and proceeded to reorganize the second-year course in Business History, changing it from “Business in the Historical Environment” to “The Coming of Managerial Capitalism: The United States.” The elective, which had enjoyed only modest student interest over the previous half century, emerged as a favorite, with 44 percent of students signing up by the mid-1980s6 and student evaluations placing it in the top three or four of some eighty electives. The professors who taught it didn’t teach a “great person” theory of history, according to McCraw, but took a Chandlerian approach instead: “[Our] real subject is the relentlessness of change—shifts in the external environment of business, in industrial and corporate structures, in technological possibilities, and in managerial prerogative.”7