From Higher Aims to Hired Hands

Business schools are today's dominant institutions for the education of future managers. The academic background they provide within universities is the unavoidable path toward the administration of large corporations. Nevertheless, being dominant also made them the focal point of multiple criticisms, from their inability to do their job (Mintzberg's 2004 book on MBAs for example) to their refusal to fully embrace their role in our societies (economic crisis, ethical dilemma, corporate scandals). Therefore, the excellent book written by Rakesh Khurana, professor at Harvard Business School, is an essential guide to understand the history of American capitalism through the emergence and evolution of business school.

At the beginning of the twentieth century, managers were neither owner nor worker and thus were lacking legitimacy regarding corporate administration. They had to wait until the post‐Second World War era to be seen as essential. It is only at that time that Chandler's “visible hand” had been put in charge of large and complex organizations that could not simply count on Adam Smith's invisible hand to survive and grow anymore. However, from the 1980s onwards, managers have come to be considered as the key players for America's economic success to be seen as cowards unable and unwilling to take necessary decisions in their corporations. Besides, the birth of investor capitalism in the early 1990s put them backstage and called corporate executives and shareholders into the light; the invisible hand of the market was back in business. According to Khurana, this well‐known history needs to be completed by an understanding of the source of this legitimacy claimed by corporate managers. This particular history is linked to the emergence of a specific form of education that has shaped management as a profession: the university‐based business school. The author examines the emergence, the development and the institutionalization of business schools, a process that led to its central role in today's American economy.

The first part of the book deals with the professionalization project in American business education from the late nineteenth century to the beginning of the Second World War. Although salaried managers are today's taken‐for‐granted form of corporate administration, they only emerge as a significant, yet indefinite, profession around the late 1870s, between firms owners and workers. In hardly 50 years, managers achieved to constitute themselves as a recognized group detaining a legitimate control over American companies, thus designing a new economic and social order. This new way of organizing and administering corporations, which structures the economic system as we know it today, was founded on three major institutions: science, the professions and American research university. According to Khurana, it is based on these three pillars that the control of large corporations by “professional” managers came to be accepted. In this emerging context, the future managerial elite needed modern management to be attached to these institutions, and they achieved their quest for legitimacy by founding the university‐based business school. From the first one created in 1881 by Joseph Wharton to the explosion of the early twentieth century (by 1930, 132 universities offered business as a major), the training of managers was mainly a professionalization project based on the view of management as a science. However, the numerous students, professors and newly written handbooks of that period of time was not enough to conceal the lack of theory and discipline that even faculty members officially acknowledged. As Stanford's dean Willard Hotchkiss said in 1920, the American business school was still “a very ill‐defined institution”. From one school to another, the organization, as well as the curricula, could widely change, the quality of the teachers was unequal at best, and the relationships with potential employers were fluctuating. However, these operational problems were not the main concern since the very purpose of the university‐based business school remained to be defined. The attempt to address this challenge led the deans of major business schools to found the American Association of Collegiate Schools of Business (AACSB) in 1916. In doing so, they tried to provide a base to build a consensus on the purpose, not only to their institution but also on the organizations of the schools, their curriculum, the pedagogy and so on. For them, it was the only way to constitute management as a legitimate profession.

During the second part of the book, Khurana analyses the institutionalization of business schools between the end of the Second World War and the early 1970s economic crisis. This period was, for the newly legitimate university‐based business schools, the best of times and the worst of times. The postwar era was a period of economic growth in the USA and of social recognition for business schools. They were finally accepted as the professional school for corporate managers. However, management as a discipline was still almost inexistent, best described as an amalgamation of subjects without any unified research methods or theoretical approach. As the author says:

[…] a survey of business school research that was published during the 1950s showed that the era's research consisted largely of superficial, anecdotal examples or broad generalizations that were rarely subjected to rigorous testing or peer review.

Besides, the average business school student was grading lower than others on standardized tests […] How have business schools achieved to grow in such a poor academic context? Khurana identifies four main reasons: the emergence of the organizational society, the recognition of management as a legitimate social function, the economic context that provide expansion to the American higher education system and the emergence of powerful philanthropic foundations willing to strengthen American universities in a context of Cold War. The attribution of federal funding for business schools during this period generated pressures for external accountability in terms of quality assessment (pedagogy, relevance of training and specialization). The benefits of substantial steady grants from large foundations (Carnegie, Rockfeller and Ford) led business schools to depend on them and thus to accept their conditions of accreditation, bringing them to a process of homogeneity. Therefore, during the postwar era, “standardization became the path to legitimacy” (p. 236). Gradually, these foundations acted, not only as financial resources, but also as neutral arbiters advocating on behalf of society:

Overall, the changes in business education that occurred in the 1950s and 1960s had their origins in specific agendas developed by the Carnegie and Ford foundations, and were driven by individuals who had both foundation and business school affiliations (p. 238).

The last part of the book analyses the last past decades as the triumph of the market and the abandonment of the professionalization project. Indeed, the ideal of a profession, structured by the mastery of specific knowledge combined with a certain moral code, shifted. According to Khurana, this period of economic crisis has undermined the legitimacy of “professional” managers thus leading to drop managerialist ideology upon which it was based. By the late 1970s, the blooming of MBAs (only one‐third of them were AACSB accredited) led to an impoverishment in the quality of the degrees and some of them came, as the dean of Berkeley said, “very close to selling the degree”. In this context, three groups of business schools emerged: the leading American research universities (the Ivy League and a few others), the large regional business schools with AACSB‐accredited MBA programs and finally “schools offering vocational programs in which academic requirements were modest and obtaining a degree fairly painless” (p. 293). Focusing on the first group, Khurana analyses the way business schools conceived their role and the role of business in society, the nature of management research and education and the profile of their average student. These evolutions in the elite schools during the 1980s and the 1990s came to the unintended disappearance of the professionalization project. What Khurana calls the “disciplining” of business schools corresponds to a shift in several pedagogical and academic foundations: the ascendancy of economics, the increase of quantitative analysis and a claimed distance between research in business schools and the practices in management. The vacuum created by the abandonment of managerialism has been filled, during the 1990s, by a perspective derived from economics (mainly around the efficient‐market hypothesis). To the author, this approach led very little place for judgment or responsibility, thus discrediting the need for strong training of corporate managers and concluding any attempt for the constitution of a profession. During this last period and until today in America, business education became mainly seen as a marketable commodity. “Thus, it is hardly surprising that university business schools […] now willingly adopted the concept of higher education as a purely instrumental system of production and consumption” (p. 334). Given that during the 1950s AACSB failed to enforce meaningful standards, the 1980s logically acted a complete loss of the original purpose of constituting management as a profession taught in university‐based business schools.

Not only is this book fully documented and well‐written, but its author also achieves here a truly complete social science analysis. Although the historical perspective is clearly embraced, sociological dynamics are not forgotten. Identifying business school as organizations seeking legitimacy led Khurana to really develop an institutionalist view of the phenomenon. From the introduction to the conclusion, the analysis is strengthened by a solid conceptual basis constituted of a subtle understanding of institutional dynamics. Besides, the developments on the sociology of profession in the first chapter allow the author and the readers to better grasp what is at stake in the history of American business school. It is a pleasure to discover such a meticulous work that is not only methodologically strong but is also conceptually powerful. The quality of this historical work is enriched by its developments in social sciences which allow an exceptional production. However, one main remark can be made. Indeed, this historical perspective leads to a macroscopic study that could forget the fact that the last institutionalists analysis have tried to get closer to the field in order to see actual actors and local practices. Studying large‐scale tendencies is an historical classic but the process of institutionalization requires at least a mesoscopic analysis – if not microscopic. Therefore, this book could find some conceptual improvements in the idea of institutional work, which is “the purposive action of individuals and organizations aimed at creating, maintaining and disrupting institutions” (see the review of Lawrence, Suddaby and Leca's book in this issue). This concept aims at understanding the role played by agency, actors and social practices could find a wonderful field of study in this book. However, this remark is mainly made to achieve the idea of a critical book review and to suggest further complementary readings; the work done here by Khurana remains both strong and riveting