From Higher Aims to Hired Hands: The Social Transformation of American Business Schools and the Unfulfilled Promise of Management as a Profession

Business schools should reassert their intellectual status not focus on revenue, says Malcolm Gillies

February 12, 2009

The time is ripe for the reinvention of business schools, Rakesh Khurana proclaims at the end of his history of the cradle of American capitalism. The business school, from Wharton's tentative steps in 1881, sought to legitimise business as a profession to rival medicine or law. But it was deflected from this path after the Second World War by the on-rush of social science methodologies, and in the 1970s by increasing recourse to models of investor capitalism.

Business schools, originally founded to turn out generalist administrators, have ended up producing agent-managers whose self-interest is deliberately aligned with that of shareholders. In so doing, these schools have lost their legitimacy and inhabit a moral void. Now, says Khurana, is the time to reclaim the founding professional ethos: "the ultimate purposes of management and of business schools as institutions are now up for grabs".

Published at the end of 2007, From Higher Aims to Hired Hands is even more relevant amid today's economic shambles. Those higher aims are of professional duty, stewardship, custodianship and social responsibility - strange words in the context of the activities of Jerome Kerviel, Bernie Madoff or even Sir "Fred the Shred" Goodwin. The hired hands to which he refers belong to the short-lived 21st-century CEO, buying and selling corporations' assets while endowed with stock options and golden parachutes.

What was, even as late as 2007, dismissed as a case of a few corporate bad apples has since been exposed as a pyramid of illusion, deceit, fraud and roguery. And the question is increasingly asked: where were these greedy people trained, or where did they train others? (In the case of Madoff, he had been the chairman of Yeshiva University's Business School, as well as treasurer of its trustees.)

Khurana's is an insightful work of sociology and of history. It is about the business school's many transformations in relation to professions and disciplines; in relation to the changing face of capitalism through its progressive, depressive, managerial and investor phases; in relation to societal and industrial expectations; and in relation to public interest and self-interest.

His argument becomes less integrated, and somewhat less convincing, in the final historical lap, from about 1970, as he pursues themes into the present day. He certainly chooses to walk on the darker side of the contemporary educational street: the tyranny of the rankings, the commercialisation of the MBA, an "existential crisis" and, above all, the corrupting and pervasive forces of agency theory.

Most novel and most distinctively American in his historical account is the role played by foundations - Ford, Rockefeller and Carnegie - in the reform and "disciplining" (through social science methodologies) of business education in the two decades after the Second World War. This is, for him, a decidedly mixed blessing.

But this is not merely a book about business schools. The business-school story is paralleled in two dozen American professions, from accounting to veterinary medicine, from civil engineering to pharmacy. (Khurana even includes the noble profession of "funeral direction", whose first American university school was founded in 1914.)

What is curious about the business school, among these many fields of professional education, is its jagged trajectory. It initially embraces the professionalisation project, but during the Depression runs into crises of confidence in management's abilities to balance corporate and societal responsibilities.

The business school then exalts managers as analytical decision-makers in the postwar period before finally deprofessionalising them through churning out incentivised shareholders' agents who, with "no permanent commitment to any collective interests or norms, represented the antithesis of the professional".

Ultimately, however, From Higher Aims to Hired Hands is a broad-brush critique of American higher education. It, too, has seen these transformations, from aims to hands, but in macrocosm. As Khurana, a Harvard professor of leadership development, observes: the broader educational mission has been lost; only the ubiquitous empty rhetoric of "excellence" and "leadership" remain. Even the professional paragons - law and medicine - have been marketised, and so, to a degree, deprofessionalised.

The sciences (asserting truth) and the arts (perhaps asserting culture), along with university administrations, have now "willingly adopted the concept of higher education as a purely instrumental system of production and consumption", he argues.

For Khurana, then, the return to higher aims is an urgent task for all in universities. Business schools, despite their deprofessionalisation and current moral back-footedness, remain at or near the top of institutional hierarchies, and so have a special role to play. Demoralised and increasingly corporatised, universities look to their business schools to understand how to be respected in the world of markets. Hierarchies of intellect have now been replaced by hierarchies of revenue, in which business stands supreme.

Much of Khurana's story is familiar in UK higher education, even if our story starts in later decades and is less exclusively graduate in focus and less revenue-driven in status. The dilemma of which stakeholders now to serve - students, faculty, industry, governments, philanthropists - is the same, although the proportions are different. Our governments maintain more of a stake, for instance, and our philanthropists command less authority. Yet the quest for a new legitimacy is truly transatlantic, both for universities and for business schools.

From Higher Aims to Hired Hands: The Social Transformation of American Business Schools and the Unfulfilled Promise of Management as a Profession

By Rakesh Khurana

Princeton University Press 542pp, £24.95

ISBN 9780691120201

Published 10 October 2007

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