Business schools redefine their mission to society

The idea of management as a profession is due for a revival.

That was the bold notion that sparked the birth of US business education a century ago, when the first business schools -- Harvard, Dartmouth's Tuck School, and the Wharton School at the University of Pennsylvania, among them -- sought to create a class of professional managers to pilot companies in the interest of the larger society.

But today's business schools have strayed from that original mission of stewardship, according to Rakesh Khurana , associate professor of organizational behavior at Harvard Business School.

While trumpeting their production of leaders, they have failed to define leadership in the context of the public good and enshrined as their highest ideal the maximizing of shareholder value, he contended.

And fewer than half of today's graduates of elite business schools become managers. Most work as highly paid intermediaries -- consultants, investment bankers, or speculators -- who prod their clients to consolidate operations or cut costs to further shareholder value.

``The loss of that narrative about managers as the protagonists in business is what accounts for the incoherence of contemporary business education," Khurana suggested in an interview.

Khurana is writing a book, titled ``From Higher Aims to Hired Hands: The Social Transformation of American Business Education," scheduled to be published in 2007. The book could fuel a dialogue on how MBAs should be trained, and to what end. But even before it lands on bookstore shelves next year, Khurana's critique, which he outlined at forums at Harvard last month and at Cambridge University in England in March, already is provoking fierce debate in business academia.

``He's confused," Steven N. Kaplan , professor of entrepreneurship and finance at the University of Chicago, said bluntly. ``It's hard to understand why he's saying there's a problem or a failure. By and large, the goal of maximizing shareholder value does the right thing for companies. And in the long run, it's good for the economies in which companies operate. You serve society by creating value."

Khurana is no stranger to tweaking conventional wisdom. In a widely discussed earlier book, ``Searching for a Corporate Savior," the Harvard business professor disputed the link between CEO charisma and corporate performance, detailing how often high-profile chief executives fail to deliver the results that their companies expect.

This time he'll argue that misdeeds at companies like Enron, WorldCom, and Tyco can be traced in part to a ``de-professionalization" of managers who put the pursuit of profits over their commitment to the broader society. In a white paper co-authored with his Harvard Business School colleague Nitin Nohria and research associate Daniel Penrice , Khurana wrote that one diagnosis of the epidemic of financial abuses in recent years is ``a widespread failure among CEOs and other senior executives (along with board members, auditors, financial analysts, and others) to uphold their professional obligations."

The push to elevate management to a profession, like law or medicine, was a Progressive response to Populist cries to break up the conglomerates of the late 1800s and early 1900s, Khurana said. The founders of the early business schools believed companies should be managed in the interest of lofty goals such as advancing democracy and freedom.

While such sentiments continued to animate business education for much of the last century, they've collided head-on in recent decades with the rise of the ``shareholder rights" movement and the quickening pace of globalization. Some of the early proponents of shareholders rights were social activists working to make publicly held corporations more responsive to their communities, but the movement was hijacked by institutional investors clamoring for higher profits.

Globalization has posed its own problems for the dreamers of an enlightened management class. ``In a globalized world," Khurana noted, ``the values of freedom and democracy aren't universally held." Exhibit A are the Internet companies, like Google Inc. and Yahoo Inc., that have bowed to Chinese government demands to restrict content.

Thus, business schools have turned to the concept of leadership. But without imbuing that concept with vision or accountability, they've reduced it to a marketing term devoid of real meaning, Khurana maintained. ``To say you're producing leaders for a society really is to create a covenant with society," he said, adding it is time for business schools to hold up their end of this social compact by promoting collective goals like creating good products and working conditions.

Among other prescriptions, Khurana said business schools need to fulfill the ideals on which they were founded by reinstilling the idea of management as a profession. He said deans should rethink the direction of their programs, require students to take competency exams, develop the equivalent of a Hippocratic oath for managers, and create ``evergreen" programs for graduates to refresh their education.

``You have to create a new class of managers whose interests go beyond themselves," Khurana said. ``If business people really behaved like professionals, you wouldn't need regulations. Corporations have become the most powerful institutions in our society. Those institutions are too important to be not trusted."

Robert Weisman can be reached at weisman@globe.com.