The learning business

December 22, 1995

Interest in particular aspects of management is fluctuating with the general climate. It almost concurs with the business cycle. Over the past decades, various themes have been in high demand on the management lecture and consultancy circuit. In the 1960s - an era, in which growth potential seemed unlimited - strategic planning for such growth by means of portfolio analysis and diversification was the "hot" topic.

The 1970s saw the widespread application of computing technology. Planning was now supposed to be all-encompassing and an almost automatic exercise that only required certain information inputs to lead to the correct course of action. At the same time, the two oil shocks began to undermine the belief in unlimited growth. Scenario analysis was added to the list of business techniques, and the first applications of cost-value analysis were developed.

The 1980s and l990s saw the emergence of truly global competition in many industries and the final breakthrough of information technology in the organisation. Both trends led to an almost brutal price and value competition and allowed quantum leaps in productivity. (The application of information technology, however, was different from the uses envisioned by the early computer prophets. The computer remained but a limited tool in planning; its true value was in speeding up operations, a point well made by Peter Drucker .) In the 1980s, such business concepts (some call them fads) as total quality management, lean management, the learning organisation, and, most lately, business reengineering surfaced. Strategic planning, of course, means a comprehensive assessment of institutional strengths and weaknesses as well as environmental trends and the selection of appropriate institutional responses, sometimes by making painful choices. Total quality management entails setting of measurable standards of performance, the maintenance of zero-defects in operations, the dissemination of the quality concept with all staff (as opposed to a quality control section) and the search for the causes of defects, if necessary, by stopping the production line. The learning organisation is concerned with institutional rather than individual learning through mental models, shared vision and teams.

In the words of Michael Hammer and James Champy, business reengineering entails the fundamental, radical, reengineering of organisational processes to achieve improvements by one or more orders of magnitude. Organisational processes are being judged in their entirety; the direct contribution of every step to customer or client value is being assessed. Organisational structures are irrelevant. The reengineering of organisational processes should have various goals. Responsibilities should be bundled, work should be done at times and places where it makes most sense, employees should make most decisions themselves, coordination requirements should be reduced to a minimum and "case managers" should be the central client-organisation interface.

Since the 1980s, higher education institutions find themselves sharing some of the same dilemmas as traditional business. Higher education has become a mature market. While it is still an entry gate to most higher positions in government or business, its marginal utility is declining. No longer can the university offer the prestige and automatic rewards it once did. Perhaps two dozen institutions worldwide can today offer the student what every university offered 75 years ago - the knowledge that a degree would open the doors to a rewarding position.

Most institutions have to operate in a more difficult climate. Competition is becoming more global. Tanzanians, for example, are increasingly sending their children to India for an engineering education. There, they can get quality education cheaper than in their own country.

In a competitive marketplace, the issue is not only one of prestige but one of institutional resources and, in the extreme, one of survival.

Can the university benefit from strategic planning, total quality management or business reengineering? That depends. Higher education presents a startling paradox: institutions and research universities make the learning of both professors and students their main objective. Yet, they are places with a very slow, almost glacial, pace of institutional learning.

Institutions have tried to introduce one or the other concepts. Most often, strategic planning and total quality management were at the centre of institutional efforts. So far, total quality management, which requires measurable outputs, has only touched some aspects of the research university. The selection of researchers and projects and the allocation of funds is subjected to an often rigorous process of peer reviews. Often, however, the genuine worries about the freedom of science and the somewhat more self-serving concerns are too strong to allow for genuine total quality management. The concept has met with more success in administration and teaching-oriented institutions.

Strategic planning has been more successful. Universities have discovered this topic only during the past decade, a full 20 years after private business. Strategic planning processes have helped to catalyse institutional development at many institutions, even such august ones as Yale University or Cornell University. Just starting on self-reflection is probably the major step for any university. In Germany, very few institutions have even reached this stage.

The exercise of strategic planning can be recommended without reservations. It provides institutions with a lever to start reflecting about the own organisation. This in itself is a major achievement, even if no direct organisational changes result from the process. Often, unfortunately, strategic planning coincided with the need for cost-cutting. An institution not yet in the unfortunate situation of having to retrench should start with strategic planning as soon as possible to prepare for the future.

Various trends have caused the reengineering boom in the business world: increasingly aggressive global competition, more demanding customers, a new type of employee and the enabling role of information technology. Institutions may benefit from the application of reengineering in administration. The simple introduction of networked information technology could bring about the desired improvement by orders of magnitude in Germany.

For teaching and research, however, the concept of business reengineering must be viewed with considerable scepticism. It must be questioned whether teaching is a "business process", in which value is being delivered to the "customer" (the student). This process is highly individualised and personalised. Reengineering may take place if a "virtual organisation" takes over the role of the actual organisation as propagated by Nicholas Negroponte. Direct professor-student contact would be minimised - contacts would take place through the Internet. To some extent, this may be possible. In advanced research dialogue, the Internet has already revolutionised the way we conduct research. But what would change in undergraduate teaching? Would the virtual organisation not be slower and less efficient than classroom dialogue and direct feedback? Critical questions such as this one must be asked before applying business concepts to our core processes. In this sense, it may even be beneficial that universities are among the more conservative places when it comes to adopting the latest management fads.

Detlef Muller-Boling is director of the CHE Centre for the Development of Higher Education, Gutersloh.

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