Educating the Managers
SEGAL, HARVEY H .
Educating the Managers The Empire Builders: Inside the Harvard Business School By J. Paul Mark Morrow. 303 pp. $17.95. The Leadership Factor By John P. Kotter Free Press. 161 pp....
...It has also led pension fund managers, who oversee the greater part of U.S...
...Specifically, the author focuses on ways of overcoming bureaucratic and political impediments to the identification, development and retention of people who are able to inspire, coax or coerce others to move in new directions...
...The courts moved in the same direction...
...corporations to survive in an increasingly competitive world economy...
...After more than 250 pages of unrelieved muckraking, Mark incongruously concludes that "keeping Harvard Business School strong is in all our best interests...
...19.95...
...By the end of the 1920s, there were so many stockholders in big companies like AT&T and the Pennsylvania Railroad that none was dominant...
...Shareholders began losing power in the 1880s and early 1890s once the states— notably New Jersey and Delaware— enacted chartering provisions that gave managers more discretion, thus easing the way for the creation of trusts...
...To an extent unmatched by any other institution, the B-school is responsible for promoting the business strategy that feathers the nests of corporate managers at enormous costs to the ownershareholders...
...It will be a world for which, at least today, most corporations are not prepared...
...But how he reaches his conclusions is of small concern...
...None of this seems to have occurred to J. Paul Mark...
...According to B-school doctrine, however, the proper aim of the manager is to maximize "corporate wealth," defined as the buildings, equipment, credit, retained earnings, and labor services he effectively controls...
...it is his message, not his method, that counts: "It would help greatly if we could take the concept of the professional manager who can manage anything and drive a stake through its ever so resilient heart...
...That won't wash...
...It has contributed to a credentialism that limits the opportunities of bright young people with diverse educational experience, fosters standardized thinking and deepens the bureaucratic lassitude afflicting large corporations...
...Reviewed by Harvey H. Segal Former editorial writer, Washington "Post, " New York "Times...
...The bulk of this thoughtful little book is devoted to the correction of leadership deficiencies in American business...
...It will be a world in which bureaucratic managers are increasingly irrelevant and dangerous...
...Few now deny the separation of capital ownership from control, and the consequent domination of business corporations by autonomous, self-perpetuating management structures...
...Not only are they excruciatingly dull, they're weak foundations for building meaningful analyses...
...It shows no comparable discernment when reporting on corporate America...
...Ten years ago Alfred D. Chandler Jr...
...Students who are exposed to them without a grounding in such basic disciplines as economics, economic history, statistics, accounting and psychology come away with little more than familiarity with a series of anecdotes...
...vice president, Citicorp In its coverage of AIDS—whether in news stories or obituaries—the press routinely distinguishes between the basic syndrome and such secondary symptoms as pneumonia...
...As a result, market prices of corporate shares are lower than they would be under tight, profit-maximizing management...
...But with the revival of Western Europe, the spectacular rise of Japan and the newly industrialized countries, and the wrenching worldwide inflation of the 1970s and early 1980s, the halcyon years of managerial capitalism came to an end...
...It just may be that he and his like-minded colleagues will play a constructive role in replacing the now moribund managerial capitalism with something more viable...
...In context of managerial capitalism Harvard's Graduate School of Business Administration occupies a position of more than academic significance...
...It influences how managers think about their careers...
...The other baleful influence of the B-school has been its making the Master of Business Administration degree a virtual passport to highly paid, executivetrack jobs...
...Since 1908 the school has led the way in bringing vital new ideas to the marketplace...
...Although such activity is at the moment declining, most chief corporate executives aside from founder-entrepreneurs are not very secure in their tenure...
...I can't...
...There were no grounds for shareholder complaints in the two decades following World War II, when the United States dominated the ruined world economy and our corporations had little trouble selling anything they produced...
...The B-School (as it is familiarly known by both graduates and those who could only aspire to attend) is no ordinary house of higher learning...
...In distinguishing between good and bad management practices, Kotter relies heavily on questionnaires...
...In this century managerial power was greatly enhanced with the rapid growth of investment holdings by members of the rising middle class...
...The Empire Builders is an insider's narrow view of the B-school that spotlights invidious distinctions among the predominantly male faculty, their sedulous pursuit of fat corporate consulting fees, and conflicts between their duties as teachers and their obligations as corporate directors and/or consultants —conflicts that would be more shocking if we were not in the eighth year of Ronald Reagan's reign...
...This policy, of course, produces greater discretionary power and perquisites for management, to the detriment of stockholder wealth...
...Happily, though, John Kotter isn't alone...
...It haunts MBA education...
...From the latter's point of view, the manager ought to be striving for maximum present and future profits, thereby ensuring the highest possible price for his company's outstanding shares of stock...
...Yet unlike legal cases that are the basis for court-made law, most Harvard business case studies are of doubtful utility...
...Having answered many similar inquiries during my years at Citicorp, I'm skeptical about the candor of the respondents...
...That concept is still very influential...
...corporations are managed to serve the interests of their employees, white and blue collar, rather than those of their shareholder-owners...
...And the gap between the reality and the potential—the differences between what corporations are earning and what they could earn—attracts raiders, much as honey does flies...
...We are told, for example, that Harvard's President Derek Bok— who in 1979 sacked a B-school dean serving on no fewer than eight corporate boards while his faculty was encouraging students to use "strategic misrepresentation" in negotiations—openly criticized the school's case-study system because "it does not provide an ideal way of communicating concepts and analytical methods...
...Far from telling top managers what they want to hear, John P. Kotter, a B-school professor of Organizational Behavior and Human Resource Management, berates them for their shortcomings and sounds a warning: "For the rest of this century, we shall probably continue to see a world of business that looks fundamentally different from the 1950s and 1960s...
...of the Harvard Business School coined the expression "managerial capitalism" in The Visible Hand, his much admired historical account of the evolution of management...
...It is used to justify tragic staffing decisions, some of the more outrageous acquisitions by raiders, and many of the least successful diversification efforts seen in the last two decades...
...Yet by the time it was canonized by Chandler, American managerial capitalism—which had never really achieved legitimacy—was already under siege...
...Maybe he can name one new idea...
...It will be a world in which even the best 'professional' managers are ineffective unless they can also lead...
...Surely in these circumstances Mark should have been able to go beyond blandly asserting in the Epilogue that "the case system needs to be monitored more closely, perhaps by an independent agency," so that it isn't abused as a wedge for faculty consulting assignments...
...It will be a world of intense competitive activity among very complex organizations...
...In his (or perhaps his publisher's) preoccupation with the scandalous and the sensational, Mark fails to address substantive issues...
...corporate stocks, to join the raiders' ranks as active participants in leveraged buyouts and other deals...
...Case studies are supposed to be accurate simulations of actual business situations, and students—playing the role of managers—are graded on how intelligently they draw inferences about what decisions are appropriate to the circumstances...
...It is America's principal fountainhead of conventional managerial wisdom as well as the center of an enormously powerful oldboy corporate network...
...A glimmer of hope emerges from The Leadership Factor...
...This was analyzed early in the century by Thorstein Veblen and Walther Rathenau, and later systematically documented by Adolf A. Berle and Gardiner C. Means...
...The rise and persistence until recently of managerial capitalism is in large part explained by accidents of history...
...Since these institutional investors must fund levels of retirement benefits that were sharply increased by the inflation of the '70s and early '80s, they are rightly concerned about the ability of U.S...
...The aggregate value of corporate takeovers, leveraged buyouts and "voluntary" restructurings rose from $12 billion in 1975 to $185 billion in 1985, a level that was pretty much sustained until last October's market crash...
...Managerial capitalism then survived the Depression mainly because the outlook was dismal and the dispirited investors were docile...
...He must be aware that the method, installed by a B-school dean who happened to be a lawyer, has long been under sharp attack...
...We're told of takeovers, financial restructurings or the sentencing of Ivan Boesky without a hint that they are all manifestations of the same underlying problem—the breakdown of what has come to be called managerial capitalism...
...There is an abundance of evidence to support the charge that most U.S...
...Granted, one fresh voice can not end 80 years of slavish B-school adherence to the corporate status quo...
...The current assault on incumbent corporate managements is widely attributed to the avariciousness of raiders, or what one critic calls "speculator's capitalism...
...In general, it will be a world in which the leadership factor in management will become increasingly important—for prosperity and even survival...
Vol. 71 • February 1998 • No. 2
