The business school: A problem in organizational design

In 1949 I came to Carnegie Institute of Technology to assist in the organi- zation of a new business school, the Graduate School of Industrial Admin- istration (GSIA). Its central educational mission was to offer a master’s degree in Industrial Administration for persons wishing to prepare for a career in management, but the plans also called for Ph.D. programs in both business and economics and a strong emphasis upon research.

None of the senior members of the new faculty came from business school backgrounds, and it quickly became their avowed purpose to change business school education to resemble, more closely than was then customary, professional training in engineering and medical science. In the latter two fields there was a strong current at this time toward increased emphasis on the sciences, physical and biological, respectively, that provided the fundamental knowledge base for the profession.

Research in a business school may, of course, cover a wide spectrum from studies aimed at advancing fundamental knowledge about human behavior, economics, and even mathematics to studies aimed rather directly at improving business practice. Regardless of where the research lies on the spectrum, the fact that it is carried on in the environment of a business school presumably means that it has some relevance, direct or indirect, for business. Later, I will discuss the criteria of relevance.

1. The Information Base of the Professional School

The objectives of all professional schools—engineering, medicine, law, education, business, architecture, or what not—can be stated as (1) education and training for prospective or present practitioners in the profes-sion and (2) for persons wanting to do research in the professional school, to advance knowledge relevant to the practice of the profession. We should expect, therefore, that at an appropriate level of generality, the organizational design problems of all professional schools will be essentially the same.100

Information101 relevant to the accomplishment of a professional school’s teaching and research goals comes from two main sources. First, it comes from the world of practice: its institutional environment and the skills and techniques for handling professional problems. Second, the professional school must provide access to information and skills within the sciences that are relevant to the improvement of professional practice. In the case of the business school, these sciences include economics, psychology, sociology, applied mathematics, and computing science. The business school (that is, its faculty, collectively) must understand such things as the principle of marginalism, human motivation, political processes, linear programming, problem-oriented computer languages, and probability theory.

In one-to-one correspondence with the two main bodies of information and skill the professional schools need to possess are two sets of social systems that possess the knowledge: the social system of practitioners, and the social systems of scientists in the relevant disciplines. These systems themselves have elaborate institutions and procedures for storing, transmitting, developing, and applying knowledge. In business, the institutions are business firms, trade associations, and professional management societies. In the sciences, the institutions are graduate schools, research institutes, and professional societies. The main way for an organization to get access to the information and skill that are stored and transmitted by a social system is to participate in the system. Hence, the business school must participate effectively in the social system of business, on the one hand, and in the social systems of the relevant sciences, on the other.

2. Liberal and Professional Education

We must not confuse the distinction between knowledge from the disciplines and knowledge from the profession with the distinction that is often made between “liberal” and “utilitarian” knowledge. Pierson, in his study of American business education, speaks of universities as being “the product of two distinct and sometimes conflicting traditions. According to the first .. . , knowledge is pursued for its own sake… Most proponents of this view . . . would regard direct preparation for particular careers as basically alien to the purpose of academic work . . . The other great tradition… would leave ample room for those students desiring to prepare for particular careers. According to this tradition, the search for truth is not impugned because it proves useful.30

Those responsible for organizing the Graduate School of Industrial Administration assumed that the goals of a university include both the pursuit of knowledge for its own sake and the application of knowledge to practical pursuits. They saw no reason why knowledge about physics or history should be useless; and no more reason why knowledge about inventory control or organization structure should not be intellectually and aesthetically challenging. They viewed the idea that utility is the only touchstone of relevance in the professional school, and inutility the only touchstone in the disciplines as a mischievous doctrine causing untold harm to education in both domains. Education cannot go on satisfactorily without intellectual challenge and excitement. The professional school must be vigorous in research as well as teaching and must provide a solid intellectual core to the professional as well as the disciplinary portion of its concerns.

3. Knowledge Requirements for Research

Invention calls on two quite different kinds of knowledge: knowledge about needs to be filled and knowledge about things that can be done (i.e., about the laws of nature and what they make possible). Invention is easiest when it can operate at one extreme or the other of the range from end-use requirements to laws of nature. The effective sales engineer and product engineer, on one end of the range, immerse themselves in information from the end-use environment, trying to discover what products customers would like to have, and what improvements in existing products. Then they apply known technology to provide the new or improved products.

At the other end of the range, scientists immerse themselves in knowledge of natural science, determining what questions about natural phenomena have not been answered and applying available research techniques (or inventing new ones) to answer these questions.

Research becomes more difficult when its undertakes to extend farther along the entire range. Product engineering becomes more difficult when, going beyond the needs reported by customers, it tries to conceive what needs customers would have if only they knew they had them! One way to do this is to turn to the environment of scientific knowledge, asking what uses the materials and processes located there might have. Similarly, pure science becomes more difficult when it goes beyond the environment of science itself and looks to areas of application for unanswered questions; then seeks to apply the methods of science to answer them. Improving nails and improving hammers, each separately, is easier but generally of less value than designing powerful new combinations of nails and hammers that are especially suited to each other.

Many of the very good problems in pure science have been posed from outside. Industrial chemistry provided much of the impetus for basic research in biochemistry, and electronic computing and communication devices for basic research in solid state physics. The contacts during World War II of economics with military operating problems led to operations research and a revolution in the theory of the firm. The need to understand and deal with the Great Depression launched Keynesian economics. Necessity is indeed the mother of important inventions, including many that are important to the basic sciences.

These alternative ways of doing science disclose a whole range of opportunities for the business school. The business school is not simply a place where researchers with strong applied interests can use known principles of economics or psychology, or known statistical methods, to solve practical business problems. It can be a productive and challenging environment for basic researchers who understand and can exploit the advantages of having access to the “real world” as a generator of basic research problems and a source of data. The business school must be made attractive to such scientists if it is to do its job.

4. Fundamental Research in Other Professional Schools

Everything said above about basic research in business schools could be said equally of schools of engineering and medicine. Leading engineering schools, especially in the decades just after World War II, might almost better be described as schools of science than schools of engineering. Most of the research topics they pursued would be appropriate to physics, chemistry, or mathematics departments. Relatively little research was aimed at engineering design. Much of the fundamental work in bio- chemistry in the past half century was carried on in medical schools.

In fact, the pure science emphasis in both strong engineering schools and strong medical schools created serious concern about whether the needs of the practicing professions were being met. In engineering schools today, there has been a substantial growth in research on engineering design. This development was made possible by basic research on artificial intelligence and human cognition that provided a foundation for inquiring into and understanding the design process as a process of thought and decision- making.

5. Access to the Knowledge Base: Business

How can business schools participate effectively in the business system? Historically, the schools have tried to do this in several ways. They have sought faculty members with management experience, encouraged faculty consulting practice and offered consulting and applied research services to business, brought in businessmen as occasional lecturers and adjunct professors, and offered mid-career courses as another way to bring managers within their walls. How well have these methods worked?

Faculty with Business Experience. Seeking faculty members with manage- ment experience has provided a number of outstanding successes and innumerable failures and mediocre outcomes. The problem lies in attracting away from their business careers the kinds of managers who can perform well in these roles. A low-level manager with modest prospects for further rise in business is unlikely to shine more brightly in the one environment than the other. What such managers bring to the business school is ability, not business experience, for they have operated at too low levels for their experience to have much value in instruction.

Managers approaching retirement sometimes view the business school as a less stressful environment than business. Of course there is no evidence that the desire for semi-retirement produces professorial excellence. These experienced managers may also suffer from the dangerous illusion that good business teaching consists in “telling the students how I did it.” Managers who are looking for a new range of experience, have an affinity for things intellectual, and catch the excitement of a first-rate university environment are the rare birds who must be netted at all costs.

Typical business school faculty members, however, even on the applied end of the curriculum, will not have had much or any experience as managers. The school must provide ways for those who have followed academic careers to get access to the business environment. (It must provide these ways even for those who have had business experience, for that experience will recede rapidly into the past.)

Consulting Practice and Field Research. While consulting practice is poten- tially an excellent route of access to the business environment, its potential will be realized only if there is a strong institutional tradition of nonroutine consulting at a high professional level, and against routine consulting. The practice must also remain within reasonable limits of time—an average of one day a week is a rule of thumb that many schools have found practical.

Research that brings faculty members inside the business firm for many hours—gathering data by observation and interview or collaborating in research with management personnel—is probably at least as valuable as consulting. There need be no sharp line between the two, except: (1) the faculty member and the firm should both be crystal clear as to when they are doing the one, and when the other; (2) the faculty member should receive payment for consulting, not for research; (3) the research agreement should not promise valuable results to the firm, although such results should be welcomed if they appear; (4) research calls for an agreement between the school and the firm, consulting on a direct relation between the professor and the firm.

Research plays an especially important role in gaining access to the business environment for junior faculty and those farthest from the applied end of the curriculum. Whether the research is “applied” or “basic” is irrelevant. What is critical is that conduct of the research bring about massive exposure of faculty members to actual behavior inside the business firm.

6. Access to the Knowledge Base: The Sciences

Some business school faculty members will be recruited from the scientific disciplines that are relevant to business. Provided that certain rather difficult conditions are met, this group will provide access to the bodies of scientific knowledge that are associated with their disciplines. Of course quality is the first concern.

This is a fact that business schools must take into account in their faculty planning. The school must provide the conditions that will convince talented scientists that they can do significant, fundamental work in the business school environment, and do it more effectively there than in a traditional department in their discipline. High salaries will help in the persuasion, but will not do the job unaided.

The most convincing argument for the business school as a superior research environment for scientists is that it will expose them to problems of end use, arising from the business environment, that they can transform into exciting, non-routine problems of fundamental research. Nearly a half century of success with this strategy at a number of business schools makes the argument more persuasive than it was a generation ago. But even today, it will appeal mostly to the adventuresome, to the mavericks.

The business school will not recruit or retain many first-rate scientists if it insists that all research done within its walls must have direct relevance to business. It can demonstrate its respect for basic research by valuing among its faculty at least some members whose work does not have obvious business relevance but does command high respect in its discipline. Equally important, it is essential that tests of relevance, when applied, take account of the tortuous many-step process by which basic knowledge may gradually be brought to bear on problems of practice.

It has been demonstrated that it is possible to recruit good scientists to professional school faculties and to create an environment where they will be productive. It has been done by respecting scientists’ desires for identification with, and approval by, their scientific disciplines. An economist who is not respected by economists is unlikely to achieve self- respect from contributions to management science. A certain part of the activity of such faculty members will result simply in good science, not particularly relevant to business. If all their activity is of this kind, then the point of their being in the business school has been lost.

7. The Professional School in the University

There is no single answer to the question of how far the professional school should depend on other departments in the university for teaching in the disciplines, or how far it should be self-contained. It needs them whether or not those disciplines are represented elsewhere on the university faculty.

The business school must have effective communication with members of the departments representing the relevant disciplines; and joint appointments, with the “jointness” more than nominal, are almost essential to maintaining such communication. Joint appointees can perform their function only if they are more than minimally acceptable to their disciplinary colleagues. Second-class citizens cannot do the job. Some of the faculty with joint appointments need to be sufficiently strongly identified with their business school functions to take a vigorous role in staff and curriculum planning in the school.

One way in which the professional school can strengthen its ties with the disciplines is to provide funds for fundamental research in areas broadly relevant to its mission, and to make those funds available to appropriate scientists in the disciplines, particularly to groups who link the school with the disciplines.

8. The Knowledge Base: Synthesis

The business school envisaged in these pages would include one faculty cohort drawn from the scientific disciplines and a second, more “applied” cohort trained in business subjects. The barrier between these two sets of social systems must not be allowed to transfer itself from the outside world to the interior of the school itself. A social system left to itself gravitates toward equilibrium—maximum entropy, so to speak. The position of maximum entropy for a professional school is the one in which the faculty trained in the profession is absorbed in the culture of the profession, whereas the faculty trained in an underlying discipline is absorbed in the culture of that discipline, leaving a deep gulf between them.

This position of equilibrium does not permit the business school to perform its teaching and research functions effectively. The “practical” segment of the faculty becomes dependent on the world of business as its sole source of knowledge, and is likely to become a slightly out-of-date purveyor of almost-current business practice. Similarly, under equilibrium, the discipline- oriented segment of the professional school faculty becomes dependent on its disciplines of origin for goals, values, and approval. Sealed off from the practitioner’s environment, that environment becomes inaccessible and irrelevant as a source of data, research problems, or development and application of innovations.

Some of these dynamics can be seen in the historical development of American business schools. Originally spawned, in most cases, within economics departments, they gradually moved toward the business envi- ronment until the “pure” economists constituted minority enclaves. This led the economists, in turn, to seek separation from the business school.31 Similar histories can be traced in the relation of psychology departments to schools of education and science departments to engineering schools.

A professional school administration has an unceasing task of preventing the system from moving toward the equilibrium it would otherwise seek, an equilibrium that means mediocrity for the professional school and inability to fulfill its special functions. All efforts to avoid this state of death must aim at lowering the barriers that impede communication between the discipline- oriented and the profession-oriented wings of the faculty. The specific measures that will best achieve this end range from the simple and concrete to the sophisticated and subtle Such a “trivial” matter as office locations may be important. Homogeneous office grouping of faculty—almost guaranteeing homogeneous luncheon groups and the restriction of casual conversation to homogeneous clusters—is the worst possible arrangement; but it will normally emerge unless it is deliberately avoided.

Departmental structures must not be allowed to develop within the professional school, or, if they are unavoidable, their importance must be minimized. It may be necessary to give specialized subgroups some particular responsibilities for the recruitment and evaluation of faculty within their specialties—but not autonomy. Curricular planning, too, can best be done by groups that cut across disciplinary boundaries. Marketing is an important function in business institutions, but influence processes are an important topic in social psychology, and consumer choice a topic in economics. As they are all concerned with the same human behavior, they need to be brought together, not separated, in the curriculum. Almost every curricular area can be organized so that practical management problems are rubbed up against economic and psychological theories and mathematical techniques—and conversely.

Parallel opportunities for communication across boundaries can be sought in research. There is no guaranteed magic in interdisciplinary research, but if faculty members from different disciplines find them-selves in frequent contact, a pair or triad will occasionally discover an area of common interest where they want to undertake joint work. The task of the school’s administration is not to establish sterile formal plans for interdisciplinary work but to encourage contacts that will cause projects to develop spontaneously. Encouragement of doctoral theses that require the student to work with faculty members from several disciplines often acquaints faculty with each other’s work.

These examples do not exhaust the possibilities for lowering the barriers to communication between disciplines. These and others will be found if the administration of the professional school takes the lowering of barriers as a major goal of its policy. To do this, the organization must be willing to expend energy continually to oppose the social forces that would otherwise push it toward equilibrium with its disciplinary environment.

9. Art and Science

A deep source of communication difficulty between the discipline-oriented and the practice-oriented members of a professional school faculty stems from the difference between science and art, between analysis and synthesis, between explanation and design. The pure scientist wishes to explain phenomena in nature; the practitioner wishes to devise actions or processes or physical structures that serve some specified purpose.

Analysis leading to explanation is generally thought to be itself suscep- tible of analysis and systemization, hence to be teachable. Synthesis aimed at design is generally thought to be intuitive, judgmental, not fully explicit, hence an art. Medicine, engineering, management, teaching are arts.

A full solution of the organizational problem of the professional schools hinges on developing an explicit, abstract, intellectual theory of the processes of synthesis and design; a theory that can be analyzed and taught in the same way that the laws of chemistry, physiology, and economics can be analyzed and taught. As I mentioned earlier, considerable progress has been made toward this development because the decisionmaking process underlying design is now sufficiently well understood so that computer programs can automate it and simulate it in significant instances.

Our increasing ability to approach synthesis and design as rigorous intellectual disciplines supplies a missing component for the construction of an effective professional school organization. They thereby give us means for increasing the intellectual attractiveness of the school’s practitioner-oriented concerns, and making it easier to establish meaningful communication between the discipline-oriented and business-oriented members of the faculty.

10. A Parallel Problem: Research and Development

I have emphasized throughout that the same organizational problem is shared by all the professional schools: the problem of bridging the gap between the social system that produces scientific knowledge and the social system where professional practice takes place. But this problem is also present in all kinds of research and development organizations. I have already discussed R&D organization in these terms in the last part of the commentary on Chapter II.

Source: Simon Herbert A. (1997), Administrative Behavior, Free Press; Subsequent edition.

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