Confusion in the Hallowed Halls-the evolution of business schools and business context
Two events at a distance of nearly exactly half a century illustrate the relationship between business schools and context. On October 4, 1957 theSoviet Unionannounced, and governments around the world confirmed, that it had succeeded in putting an artificial satellite into low Earth orbit. TheUnited Stateswas so shocked that then President Eisenhower formalized this surprise and its possible consequences as the SputnikCrisis. Within the year, the U.S. Congress passed the National Defense Education Act, providing funding toUSeducation at all levels, in response to a prevailing sense thatU.S.science, engineering and mathematics were at riskof falling behind in the all-encompassing contest with theSoviet Union. Galvanizing business schools was part of this broader package.
On September 15, 2008, the U.S. Federal Government chose to induce a large investment bank, Lehmann Brothers, to file for bankruptcy. There had been some forewarning from the fitful adjustments to the so-called Sub-Prime Crisis of 2007 and the distressed sale of Bear Stearns to J.P. Morgan Chase one weekend in March 2008. There were also premonitions of recession related to the excessive imbalances in the world economy, the length of the preceding boom and the violence of a series of country and corporate crashes in the preceding years. Yet when the systemic crash came, and global financial markets experienced by analogy what amounted to collective heart failure, it came as a near total surprise.
Response to the two crises could scarcely be more divergent. The response to the SputnikCrisis was for the U.S.to invest heavily in the physical and social sciences, the one to demonstrate U.S.capabilities and the other to produce reasoned solutions to social problems. In the intervening years, departments of economics and the social sciences have flourished in the university. But in 2009, the U.S. Congress was in no mood to pass a National Defense Business and Finance Education Act to respond to the Global Financial Crisis. Rather, university departments of economics and business schools were seen as part of the problem. As Robert Salomon from the Stern School, New York, writes on his blog, business schools are good at training technicians, but not good at training analysts who cross “disciplinary boundaries to create a greater understanding… for how individual parts interrelate to affect the whole”. 
Just as the Sputnikcrisis of October 1957 swept awayAmerica’s sense of invulnerability to nuclear attack, the crisis of September 2008 shattered reigning assumptions about the way markets work, while exposing how precarious the security of individuals could be in the face of a financial tsunami. As of February 2009 participants and observers of allkinds were peering at a protracted bear market that seemed to have ominous parallels to the bear market of 1929 to 1932. (See Figure 1). Fear gripped market participants, regulators, and private citizens. What had caused the crash, people asked? Were we on trackto a new Great Depression? What measures should be taken to halt the downward spiral?
There had been some signals that we were moving into uncharted waters. But in retrospect it is clear that there was no agreement as to whether market signals indicated that we had moved into a new virtual economy, where the old rules of the game no longer held, or whether we were living through an unprecedented expansion of the global market but without adequate equipment to assess the fast-moving global scene. Definitely, the familiar indicators of economic activity were registering that the general context of business had evolved dramatically over the past 50 years. Figure 2 depicts the S&P500 index since the late 1950s. The index is a window on collective views of the future—as stockprices may be defined as expected discounted cash flows divided by the number of shares outstanding. Both expectations and discount rates are functions of what decision-makers thinkthe future will hold. The steep gradient of the index during the 1990s projected a robust optimism about the future. In contrast, the extraordinary fluctuation of the index during just the past ten years reveals pronounced uncertainty about the future.
Similarly, the collapse of the former communist system, the rapid entry to world markets ofChina,Indiaand the various republics from the former Soviet sphere of influence, along with the partial spread of market-democratic institutions from theU.S.and the European Union, prompted widely different interpretations of the way the world was heading. The prevailing mood of the two decades and more was that humanity faced unprecedented opportunity to create an inclusive global polity and economy beyond hegemony and imperial rule. Perhaps an unintended consequence of this optimism was that developed and emerging economies alike became prone to heightened risk-taking, as the presumption tookhold that the instruments of the State would provide protections of private interest at a level not provided before. Greater risk-taking in the context of such globally linked economies and interests announced both greater expected gain and greater uncertainty.
Whatever the background to and the causes of the crash were, we contend that one contributing factor has been the tunnel vision of business schools in their focus on teaching “how to” tools, at the expense of the larger question of the purpose and societal value of the business school. To motivate a consideration in response to this larger question, it may be useful to ponder, although it may be difficult to test, the following hypothesis:
The financial crisis produced during the first decade of the 21st century would not have occurred had more participants to financial transactions been more financially literate.
The hypothesis is useful because it may suggest that in a world in which the institutions of contemporary finance are so pervasive and powerful, not all of those who engage in financial transactions are adequately apprised of the assumptions of the theories and models they have been taught, aware of the products they might be buying or selling, or alerted to the consequences of the decisions they are taking. Those who were ensnared in the crisis of financial transactions include both members of households as well as the captains of industry. As ChuckPrince, then CEO of Citigroup was quoted as saying: “As long as the music is playing, you’ve got to get up and dance. We’re still dancing”.  This assertion came after Kenneth Lewis, then CEO of Bank of America, had explained to Bloomberg in July 2007 “We…are starting to say ‘no’ (to leveraged loans) more than we were before. And it’s not because we’re out of money…” As subsequent events and revelations have cast doubts about the command such executives may have been able to exercise over their enterprises, we ask how business schools may prepare future executives to gain command.
The wrath directed at one element of business school faculty and the profession they serve, namely finance, cannot be ignored. In fact, the wrath responds as much to instances of blatant malfeasance and fraud in practice (e.g. Madoff), to the sanctioning of greed as a desirable characteristic of the person in business (e.g. Lewis, The Big Short), as by the calcifying, doctrinaire postures of segments of the fields of finance and, particularly, financial economics.
There are two clear challenges facing the business school in preparing future executives. The first is that business has never succeeded in establishing an agreed deontology, whereby an action may be judged by its adherence to an agreed rule of ethics. This may seem surprising if we consider the academic rationale for a business school in service to business in terms of first principles: understanding enterprise; understanding markets; and understanding how enterprises interact with markets. But if we place the institution of firms and markets in the turbulent context of the history and evolution of human affairs, the task becomes unavoidably complex, not least because the boundaries of the subject remain wide open to constant revision and challenge.
The second challenge facing top executives is to steer their enterprises through complexity. We argue here that business schools should take a leaf from Herbert Simon’s suggestion that business operates not according to absolute criteria of perfect information, but according to a “bounded rationality”, whereby human rationality is fashioned by the information acquired, the cognitive limitations of the human mind, and the finite amount of time available to make decisions. Given the inherent imperfection of human cognition, it follows that business schools exist, in Alfred North Whitehead’s definition of universities in 1928, to inspire imaginative thought, resisting the pedantic comfort of inert ideas, and continuously battling the forces of mediocrity.
Because business enterprises occupy such a salient place in human affairs, the schools that serve them cannot avoid, indeed we argue they should aspire to be, centers of controversy and not just sources of skills for the service of the community. It is this schizophrenia, as purveyors of supposedly objectiveknowledge and vortexes of passionate debate that inhabit business schools and is the clue to making them great. In developing this argument, we trace in stylized form the interactions between context and schools over the last century and more, and round off our discussion with some suggestions on building the global context into the heart of business school scholarship.
The need to advance understanding of the evolution of business context and its global character, in particular, is accentuated by a rather unsettling level of ignorance about institutional influences. For example, U.S. Senator Bernie Sanders responded on 9 November 2010 to the publication of the detailed report of the U.S. Federal Reserve Bankdelineating its support of both U.S.and non-U.S. banks in conjunction with its efforts to contain the disintegration of the banking system, “Has the Federal Reserve become the Central Bankof the world?” An effective response to Senator Sanders question would be “de facto, yes, but it became so several decades ago.” 
WHERE ARE WE NOW?
We sketch very briefly, three periods in the development of business schools in order to illustrate the changing context of business schools, and how this context was reflected in the content taught by them. The three periods may be categorised in the following way: from 1881 to 1940, when states tooka backseat to markets; from 1940 to the mid-1970s, when big government and big business both subscribed to the assumptions of managerialism; and from 1971 to the present, when the phenomenon called globalization tookhold.
Era 1: 1881 – 1940 – The Ascendance of Markets as Justification for the Conduct of Business
The establishment of the first university-based business schools was driven in large part by self-styled progressives who sought effective regulation of business, a revived commitment to public service, an expansion of the scope of government, and a curbing of social conflict through “scientific management”. The authority of science, superseding but borrowing from the authority of the Scriptures, was to be applied to the pursuit of social progress. Bringing business schools into the university would help to legitimize business. This was the spirit informing the founding in 1916 of the AACSB-the Association to Advance Collegiate Schools of Business. From the start, the practical problem to solve was: should university-based business schools, in the words of HBS (HBS) assistant dean C.P. Biddle, train “hands” or “educate heads”. At the time, the bias among those business leaders supportive of the concept of business as a profession, as against a simple money-earning activity, tilted decidedly in favor of training heads about the social responsibility of managers. As Owen D. Young, chairman of General Electric and international business statesman, clearly stated in his address at the dedication of the new group of buildings comprising the George F. Baker Foundation for the Graduate School of Business Administration at Harvard, America’s business leaders had to be “not only highly skilled in history, politics and economics…but men who have also that moral and religious training which tends to develop character”. Young went on, in the biblical language of liberal Protestantism, “it is the trust of Harvard to maintain and from which may be renewed through generation after generation the high ideals, the sound principles, the glorious tradition, which makes a profession. Today and here business formally assumes the obligations of a profession, which means responsible action as a group, devotion to its own ideals, the creation of its own codes, the capacity for its honors, and the responsibility for its own discipline, the awards of its own service”.
Striving for an ideal of a rounded manager was the declared ambition. Implementation, as Young implied in his speech, lay ahead, and there was much to be done. The typical course requirement for 34 AACSB schools in 1928 included: accounting, financial organization, managerial finance, elementary economic theory, advanced economic theory; markets, English, a foreign language, law, government, mathematics, statistics, science, geography, general business organization and so on, down to philosophy.  Not surprisingly, by 1941, when the U.S. entered the world war, a business degree was still a poor relation in the university; the objective of establishing a profession was still distant; and the content of what was taught was at most an introduction to doing business in the United States.
There were some notable achievements, though. FrederickTaylor’s studies in efficiency,  for example, were not only adopted by U.S. industry and taught at Harvard; they were exported, as Stalin, too, was a great admirer of Taylor. Hugo Münsterberg’s Psychology and Industrial Efficiency  was a counter-point to Taylor and influenced the critique of rapidly industrializing post Great War America. Perhaps of longer term influence on business studies was the shift in status between managers and owners in such corporations as the Ford Motor Company, General Motors (GM), General Electric(GE) or DuPont. In their book, The Modern Corporation and Private Property, published in 1932, Adolph A. Berle and Gardiner C. Means argued that dispersed shareholders had yielded actual control of corporate policy to managers. In such corporations, the management process depended heavily on co-ordination by committee; control inside the corporation over the tiers of managers required the organization to be run through capital budgeting techniques; and sales depended on the availability of consumer finance to bring the customer to buy. Business, in short, was a collective undertaking.
As World War II unfolded, James Burnham published The Managerial Revolution: What is happening to the world. According to Burnham, “…a new form of exploitive society (which I call “managerial society”) is not only possible but is a more probable outcome of the present than socialism…”  Burnham, originally a militant in the Socialist Workers’ Party, became a leading spokesman of the conservative movement in the USA—a precursor of the end-of-century “neo-cons”, whose founding members also emerged from the ranks of the anti-Stalinist left. In a comparatively short period of time, which he dated from World War I, a new class of managers had emerged who were driving towards “social dominance, for power and privilege, for the position of the ruling class”. Elaborating on Berle and Means’ idea of the separation of ownership and control in large corporations, Burnham argued that, regardless of whether ownership was corporate and private or statist and governmental, the essential demarcation between the ruling elite (executives and managers on the one hand, and bureaucrats and functionaries on the other) and the mass of society was not ownership so much as it was control of the means of production. This dominance by the new bureaucratic élite over the mode of production was common, he suggested, to the economic formations of Hitler’s Germany, Stalin’s Russia and the New Deal of Franklin D. Roosevelt.  In short, management was a universal phenomenon.
Era 2: 1940 – 1971 – Managerial Capitalism and Managing a War and Its Aftermath
Burnham’s bookmay be seen as an opening salvo proclaiming the dominance of the managerial ethos, which remained unchallenged in business schools for three decades after 1945. Because the concept of managerialism is so central to the evolution of business schools, a number of points about Burnham’s argument are worth recording: one is that, despite his abnegation of Marxism, the Marxist structure of his thinking is evident in the concept of one type of society giving way to another. His is also evidently a class analysis. Bureaucrats, like aristocrats and owners before them, are out to maximize the benefits of their positions. Not least, the publication of his book coincided with the rush toWashingtonD.C. of leaders from business, finance and law to lay the foundations for victory in 1945. The rush announced the marriage between big government and big business that laid the basis for the hegemony of managerialism in the decades following Allied victory in 1945. Would the managers be “maximizers” of their own interests, or serve their time in the public interest? The ethos of the business school ideal required that they do, and be seen to do, the first.
In the decades following the end of WWII, the world came to be profoundly shaped by US initiatives, the dynamics of capitalism and the Cold War between the USand the Soviet Union, their allies, and their ideologies. Belief in the ability of government to manage highly complex operations  had been strengthened by U.S. experience during the war, while the arsenal of tools and many of the agencies from the war years survived into the post-war years. But what was their purpose, and that of the managerial ethos to be? After 1945, and especially as the conflict with the communist powers grew in intensity, America’s high living standards and public institutions became a showcase of what could be achieved in a free and open society. Thomas Carroll, vice-president in charge of the Ford Foundation’s business school program, was quoted as saying in the wake of the Soviet Union’s successful launch of the Sputnik in October 1957: the challenge from the Soviet Union’s economic and industrial growth “concerns very directly the business leaders in our country…and the business, engineering and science educators of our country”.  Improving the education of business was thus cast as a patriotic duty in the context of the war against socialism at home, and the Soviet system abroad.
The mood was captured by the incoming administration of President Kennedy, who confided the running of the country to “the best and the brightest”. The emblematic figure in this galaxy was Robert McNamara, Harvard MBA (1939), assistant professor of accounting at HBS, later President of the Ford Motor Company and President Kennedy’s Secretary of Defense. McNamara was a “quant”, trained in economics, familiar over his career with the new techniques of “management science”, and eager to incorporate the tools of quantitative analysis and the behavioral sciences into the running of America’s great corporations and the federal government. These were the same ideas that a few missionaries operating through the Carnegie and Ford Foundations were determined to inject into business schools. As Herbert Simon, a University of Chicago trained political scientist and eventually Nobel Prize winner in economics, expressed it, he and his friends formed “ a revolutionary cell that would forever reshape business education”, which they described as “ a wasteland of vocationalism that needed to be transformed into science-based professionalism”. James Howell, one of the authors of the Ford Foundation’s report, Higher Education for Business, is quoted as observing that the report ended up establishing “the educational paradigm that has guided the nation’s business schools” to the present.
The intent of the report was to redefine the business school curriculum and research on what its authors considered to be a rigorous and scientific basis, to bring them into line with university graduate studies in law or medicine, and as the way forward to creating a profession of management that could stand comparison with other professions. Here lay the major difference with the ideal of a management profession as envisaged by Owen D. Young in his 1927 speech at Harvard: For Owen, a business leader had to be armed with a moral compass, be steeped in the techniques of business, and beknowledgeable about history, politics and economics. The Gordon-Howell concept of a profession was quite different: it was to make business studies a peer to graduate studies in professional schools. This required a new type of faculty, a reform of the curriculum and a transformation of doctoral programs.
With the active support of the Ford and Carnegie foundations, business schools rapidly raised the proportion of full time faculty with doctoral degrees; and the number of scholarly journals with a quantitative bent multiplied as outlets for business school faculty. A curriculum that aspired to professional standards, according to the AACSB, had to be rooted in “the fields of economics, accounting, statistics, business law or legal environment of business, business finance, marketing and management”. Doctoral programs for business studies widened their recruitment to attract candidates from other disciplines, such as sociology, psychology or political science. Harvard’s more qualitative, and case-based program, was replaced in the hierarchy of doctoral programs by the quantitative training provided at such schools as Carnegie-Mellon, Stanford, and Chicago.
By the early 1970s, the overall impact of the Ford Foundation on business schools was becoming evident. Faculty were better trained; research was more scholarly; a wider range of disciplines were introduced into business schools, their curricula had become more standardised, and the Harvard case method was being replaced in other schools by more theoretically-grounded courses. There were grounds to believe that business schools could begin to measure up to the intellectual rigor associated with post-graduate studies in other subjects incorporated in the university’s academic enterprise.
For our purpose, the important point to note is that the Carnegie and Ford Foundation reports on business schools shared in the prevailing optimism about the power of the social sciences to better the world. The mood of hubris was captured in President Kennedy’s Inaugural Speech, which he ended by calling on his fellow citizens to go forth knowing “on earth God’s workmust truly be our own”.  But doing God’s work on earth proved elusive, and social scientists turned out to be fickle.
Era 3: 1971 – 2010 – The end of Bretton Woods and the expanding complexities of globalization
Two key components of the managerial ethos which triumphed in the decades after World War II were that management was to serve the public interest, and that it was to synthesise disparate strands of the complex of human and material realities. Both came to be challenged, starting sometime in the mid-1960s, by a congeries of developments:
- Student movements broke out in the late 1960s around the world, preaching self-fulfilment rather than constraint, sexual liberation rather than continence, and rebellion against authority. Individualism, free love and free markets were the beneficiaries.
- The Japanese and German economies, and their companies, were seen as sweeping to success, compared to the perceived failings in American corporations and public policy. The lesson here was that theUnited Statesshould act forcefully in pursuit of US national interests on the world scene, asJapanandGermanywere perceived to be doing.
- Generally, growing numbers of members of society perceived a gap between the promise made on behalf of management and its delivery. Arguably, it was not that managers were boastful. Rather, it was the exaggerated claims made in the social sciences on management’s behalf, peaking to hubris in the late 1950s in theUnited Statesunder the shadow of theSoviet Union’s success in putting the Sputnikinto orbit that prompted the backlash.
With the managerial ethos under challenge, two opposing schools of thought emerged within business schools. The functionalist school, both deductive from a priori principles and prescriptive for policy choice, is exemplified by such developments as the efficient markets hypothesis, agency theory, and transaction cost analysis. If left to themselves, managers-whether in public or private enterprises- the influential Chicago School of finance argued, are maximizers for their own interest, as Burnham said they were in 1941. The school presumes a degree of universality in the fundamental conditions of enterprise that permits the application of normative rules in finance and business across cultural and political boundaries. By contrast, the realist school focuses on doing business in a world as one encounters it: diverse, multi-form, complicated by many religions and languages, bearers of their own memories and ideals, and composed of over 200 separate territories at vastly different levels of prosperity, ranging from Singapore to Haiti. The realist school produced the capstone business policy course at HBS (and elsewhere) to focus on policy issues faced by managers. The functionalist school, particularly represented through departments of economics and of finance, came to provide the dominant paradigm of business schools, while business policy was replaced by business strategy, applying Michael Porter’s paradigm of competitive strategy, which presumes that the contest among nations is analogous to the contest of business enterprise in markets.
The crucial insight linking the two schools is expressed by Yves Doz and C. K. Prahalad, who write that the dilemma of managers in the world today is to “recognize the balance of the forces of global integration and local responsiveness to which a business is subject”. It is this perspective that provides the bridge between business studies and the vast intellectual hinterland of studies about business context—a hinterland that includes international and comparative politics, public policy, sociology, history, cultural studies, as well as all branches of economics, finance, human relations and psychology. So for the rest of this section, we outline the components and dynamics of the process we call globalization—the stuff out of which corporate policy has to be made.
Four components of the globalization process
Looking backfrom the vantage point of the present, it may be said that the roots of the transformative process of human affairs, that we have come to identify under the rubric of globalization, is rooted in four distinct, but inter-related developments in the world polity dating from the late 1960s and first half of the 1970s.
- Re-creation of the world market under the aegis of the western powers, and by the United Statesin particular. With the world on a dollar standard, arguably as of August 1971, when President Nixon announced an end to the dollar’s convertibility into gold, global financial markets grew by leaps and bounds, providing a high risk, but also highly flexible, medium through which global interdependence could grow.
- A political contagion of transition towards representative forms of government around the globe, starting in Portugal, Spainand Greecein the 1970s and then reaching around the world. Only two alternative governance formulas were left in the field: one was theocracy, present particularly in the Islamic world; the other was the Asian developmental state, initially exemplified in Taiwan,  but currently powerfully represented in the regime of mainlandChina.
- The transformation of the state system, associated with the implosion of the Soviet Union, the multiplication of the number of sovereign states in the global system, and the primacy of theUSA. Collapse of the Soviet Union broughtChina,Indiaand centralEastern Europeon to world markets, and raised the global labor force overnight by 3 billion people. Subsequently,China’s rapid insertion into the world economy transformed the Asian balance of power, asChinagrew from parity withRussiaandIndiain 1990 to an economy three times that ofIndiaand four times that ofRussia.
- The growth of the transnational industrial or service corporation, initially based in a home country of the developed world, but increasingly originating from developing countries, such as Mexico, India or China. All available indicators, such as the need to recuperate the cost of investment in new technologies or the estimated global sales of foreign subsidiaries, point to the continued expansion of international production and the deepening of interdependence in the world economy, beyond that achieved by international trade alone. The “new diplomacy” is characterized by bargains between a diversity of states and corporations, where control over outcomes can be negotiated.
A number of considerations flow from the above. The four, inter-related developments interact in a myriad of ways over the years, each one of them moving at their own rhythm and according to their very different components. That is why the two different visions prominent in the post-cold war debate about where the world was heading in the twenty-first century are open to challenge. One view, akin to the functionalist school in business schools, had the world converging on western political norms, western economic policy, and a market-driven process of world integration. The alternative view, similar to the realist school, was that nothing was written in advance, rather the reverse. The historical world, in which we live, this line argues, is one of inherited inequalities, different capabilities, and very diverse motivations.
We argue that these two views, one of divergence and diversity, the other of convergence and integration, are the two contradictory forces which are at workin the world today, and which–in their different ways—the functionalist and realist schools of thought have isolated and helped to interpret for business school purposes. But they have done so largely autonomously of each other, and in a process that has not given nearly enough weight to the political dimensions which underpin world markets. If we wish to linkcorporate policy and market economics into the study of the world as it is, and as it may/not be becoming, our definition of the world process is that simultaneity and non-synchronization in the dynamics of global transformation have led the old dialectics of the Cold War system to be replaced by a global process of change at the level of markets, societies, and cultures. In effect, the new world system to emerge in the course of the two decades since the Soviet Union’s collapse has come to be characterized by both convergent and divergent trends, which we can characterize as complementary opposites: a diversity of states in a non-homogeneous world, penetrated and shaped by global markets, operating powerfully to create a more homogeneous world civilization; alongside aspirations to create a system of global governance out of the world’s existing institutional frameworkas the counterpart to a world of relentless competition between states, corporations, or currencies. At the same time, the prospects for an increasingly wealthy and inclusive world as global civil society develops towards a higher civilization are juxtaposed with a world of history where the forces of globalization operate as a stimulant to divergence, to conflicts and to a ruthless competition between peoples, states and corporations.
It is this double movement between the forces driving towards the prospect of a radiant future and the world’s very divergent capabilities to adapt that lie at the heart of the new dialectics in global affairs. Cold War dialectics was structured by the global configuration of the international system; the post-Cold War dialectics is a global process working at the level of cultures, markets and politics, and where corporations are often the leading revolutionaries. It is in this context, we contend, that business school must operate for the opening decades of the twenty-first century, and most, probably, well beyond.
The global spread of business schools
The business of teaching business is largely dominated by theUS, thoughIndiahas obvious potential to challenge this position in volume of schools accredited in the sub-continent. Membership of the accreditation agencies with international membership indicates a heavy bias to theUS, the Commonwealth, Europe and Latin America, with a growing if recent participation by schools from greaterChina(mainland, Hong Kong, andTaiwan). Many schools teaching business studies are not accredited by the AACSB or EFMD. Given the variety of schools, and lackof uniformity in standards, it cannot come as a surprise that the growing demand from students, schools and employers to sort out the wheat from the chaff has been supplied by the business press. While the methodologies vary, the rankings have exerted considerable influence on business schools. They have caused top business schools to become even more selective, helped to widen the gap between top tier schools and the rest, and given prominence to such criteria as the number of articles produced by faculty in leading journals, salaries of graduates, or the financial contributions to schools by their alumni. In short, business schools have been successful in responding to the metrics of the rankings’ algorithms that, ironically, have been devised by journalists. In short business schools have allowed others to do the job of defining their product’s standing in the market place.
Что делать?—Our Position
Using the title of Lenin’s famous 1902 pamphlet, we ask: What is to be done? (Что делать?) In our discussion, we have argued that, whether or not the business school chooses to be a center of controversy in the best tradition of the university or a training center of people practicing business, it has never been able to avoid the controversies that swirl about the practice of business. The historical context of the business school has been at least as dynamic as the business context its faculties may have sought to study, and it has been transformed in ways that would have been difficult to anticipate. We argue that the business school now is poised to re-make itself in ways that positions it as a more viable academic unit of the university and a contributor of value to the pressing needs of society.
PREMISE: BUSINESS SCHOOLS MUST EDUCATE STUDENTS TO UNDERSTAND BUSINESS CONTEXT
Because business context is complex, the role and function of the business school is complex. To demonstrate the complexity of business context, we apply a pentagon of interacting factors to describe business context: market systems, potential resources, technology, politics/state decision-making, and institutions. The pentagon is, thus, a theater for the clash of the myths or ideologies people use as prisms through which to make sense of an otherwise incomprehensible experience. All points of the pentagon have their own dynamic, and are endogenous to human existence. In a man-made world, there is no deus ex machina.
- Market systems are the conventional and almost exclusive focus of the business school. Market systems comprise the interplay between enterprises, on the one hand, and markets, on the other. The dynamism of these systems is driven by five flows that often follow distinct paths: the flow of products (value), the flow of payment, the flow of information (about prices, product specifications, etc.), the flow of risk, and the flow of rights. Specific players arise to enable different flows, and the jockeying for position paints a complex picture of rivalry, cooperation, and the struggle for efficiency gains within the system.
- Technology, as the artifacts of problem solving, is rooted in the coded knowledge of the human species, and hence susceptible to propagation and diffusion. With more than 90% of all known scientists in the world’s history now alive, and a massive and expanding infrastructure of education around the world, laboratories are conducting the basic science for five great waves of technology—computation, telecommunications, biotechnology, nanotechnology and alternatives to the dense energy standard of oil. Their diffusion is ensured by the secular fall of transport and communications costs, which in turn extend the reach of corporate planning processes and alters significantly the balance of relations between states and corporations. Corporations in turn are caught in a gale of “creative destruction”, to use the famous phrase coined by Austrian economist, Joseph Schumpeter.
- Politics/state decision-making. Politics embraces all undertakings where the wills of two or more people are harnessed to a particular task. Politics is not just what politicians do. This extensive definition avoids the trap of state-centrism, a prevalent doctrine which claims that the only and ultimate political players are the states, the state system which they cohabit, their varied institutions, parties and interests, their domestic political processes, the relations between them and whatever goes on in international organizations. States share their powers with varied entities – other bureaucracies, corporations, non-governmental organizations, churches, diasporas, or mafias—so that authority in the world system is exercised by many agents, operating alongside and often in disregard of states.
- Potential resources (supply and demand). The sociology of consumption encompasses efforts to acquire, consume, and dispose of assets. Consumption is, thus, sensitive to the demographics of a region and serves as an external driver for the growth of the business enterprise, and its innovativeness and investment in quality improvement. Analogously, the distribution of natural resources is far from uniform across the globe. One can only wonder what the status and condition ofHaitiwould be were most of the accessible oil on the planet located on its shores. Both supply of and demand for potential resources are closely related to delivery systems, and hence to technological developments.
- Institutions. Markets are embedded in social and political institutions, and do not exist independently of the rules and conventions that establish them. A national business system is defined as holding a number of components:  state institutions deal with financial markets structures and labor market regulations. Financial institutions may be categorized as primarily capital market or bank-based. Labor market regulations are the product of national social contracts, the details of which can determine whether an investment is made. A business system also coordinates economic activities among stakeholders. This yields a spectrum of types from lose co-ordination among firms, as in the UK, through highly hierarchical and authoritative structure of business interest representation, such as in Germany and Austria, or state-centered business representation as in France or China. Finally, a business system influences how firm policy is made—its governance—and the organizational attributes that enable the firm to transform its resources into outputs using the skills and knowledge of their employees in codified or tacit routines. This touches on the level of workforce skills in the short term, the development of collective competencies in the medium term, and, in the long-run, the dynamic capability of innovation.
In the wake of the recent Global Financial Crisis of 2008, the Dotcom Bust of 2001, or, more generally, effectively any sharp downturn in the business cycle, widely expressed discontent with examples of malfeasance, fraud, or greed on the part of perceived large numbers of people in business indicates an appreciation of institutions that either are presumed to govern business conduct or a normative assessment of what the institutions should govern. Ethics, morality, and the elements of whatever would constitute business as a profession would be defined in reference to the institutions that are relevant for defining business context.
The interactions of the influences of the pentagon indicate both the potential scope for scholarship in a business school as well as the complexity of business context. Our experience is that each corner of the pentagon should be presented to students from the perspective of the relevant disciplines, before any cross disciplinary efforts are undertaken.
PREMISE: ALTERNATIVE VERSIONS OF THE FUTURE MUST BE CONNECTED TO DECISION-MAKING
A theme unifying all approaches is dealing with the future: the paradox for corporate leadership is that the future is inescapable, and weknow little about it. How we consider the future should be the source of reasoning as to why we allocate resources now in the way we do because the future is where riskand reward lie.
From the perspective of management, we may explore what the future holds for us by segmenting it artificially into two parts: that aspect of the future that business leadership might shape by its own actions; and that aspect that will condition what happens to the firm. Strategy in this view becomes the means by which leaders create and take control of the future, whereas policy relates more to organizational structures, processes, and routines that cumulatively orchestrate and deliver on strategic objectives. Put another way, strategy is about vision, analysis and configuration, whereas policy is concerned with implementation and the delivery of results. Effective corporate strategy and policy depend essentially on context. But both strategy and policy have to be deployed under the shadow of the future: to the extent that the firm’s leadership considers that through strategy they have the means to shape the future, both risk and reward may be formally recognized as possibilities; but to the extent that the firm’s future is shaped for it by markets, demand, technology changes and political factors beyond its control, and outside even of itsken, the future is indeterminable.
To see through the darkglass separating us from the future we combine our reflections on the past with our imaginations of the possible. We have, therefore, to see the world through the meanings that the people whom we study give it, that is, through their myths, their partial understanding, and their interests and ideologies. We have to discover the rationalities of living people, rather than assume, as we often hear, that “managers are maximizers”, or that “business people are greedy”. Maximizers of what, we may ask? Family comfort? National glory? Self-esteem measured by the esteem others attribute to them? And what are the criteria which people draw up to assess their objectives, if indeed they have any? And we must do so in a world which is full of the din of ideologies. Nationalists demand self-determination, free marketers proclaim the need for an efficient global economy, techno-optimists see the cure for human problems in universal access, religious zealots call for the peoples to follow God’s path to salvation. The future, in the modern world, has become the object, in the words of the French author Paul Valéry, ” of an experiment of which we can say only one thing—that it tends to estrange us more and more from what we were, or what we thinkwe are, and that is leading us, we do not know, and can by no means imagine, where”.
This estrangement between future and past is rooted in the tension introduced between what may be called “world” and “local time”.  World time lives in world markets, flourishes on communications, substitutes memory for choice and trade-offs, embraces all populations of the world, and offers the means to satisfy desires for reward and retribution that have lain dormant in the dreams of individuals or even more of civilizations. Local time stretches far beyond the life of individuals into mythologized pasts which populate the many mental landscapes of the world’s peoples, with holy places, ruins and legends. It is conditioned by long-dead technologies and its distances are measurable in the hours, days or weeks and months which journeys took by foot or horseback. It is bound by history and geography. It is rooted in the malleable memories of communities, in their habits and languages. Its rationality is exclusive of choice, of trade-offs and of aliens. Its appeal is to the inner well-springs of loyalties on which it draws. Local time cultivates trust and tribalism, as two sides of the same coin. It is patient and particularistic. Its expressions are secretive, and its reflexes are coded. But it also lives in and is seduced by world time. This is the stuff out of which we conceive the future.
The business school must embrace both the functionalist and the realist approaches to scholarship if it is to deliver value to the world of business practice. The complexities characterising the world of business practice provide the justification for the business school as an academic unit in the contemporary university. At present scholarship of the business school is tilted heavily toward functionalism.
We recommend that the business school must reset its purpose as an academic unit of the university so as to assure that all influences of the pentagon and the interactions among them are addressed in the scholarship of its members—both faculty and students.
Our recommendation has a series of implications for the business school and for the university. Among these are the following.
Implication1. We recognize that the conventional MBA program addresses but one corner of the pentagon: market systems. To prepare the future person of business who would have an appreciation of context, the MBA program can consciously draw its students from different backgrounds and strive to engineer substantive interaction among them to foster transfer ofknowledge. There are limits, though, as to what this could achieve. MBA programs should incorporate a course of study that deliberately surveys and explores the influences of the pentagon and tendencies of these influences to vary over time and space. MBA graduates are functional generalists. Without this commitment to imparting an appreciation of context, the MBA graduate is handicapped inknowing when, where and how to apply the general functionalknowledge of the MBA curriculum. A corollary to this implication is that the MBA program should not be recognized as a terminal degree for the executive who seeks significant responsibility for an enterprise. In this respect, the MBA program is not necessarily the program that should establish the reputation or efficacy of the business school in the university. Moreover, as business context evolves—sometimes abruptly—the business school must adapt its curriculum to capture the changes and to anticipate future changes in the context that the student will face.
The business school must recognize that the practical tools and methods with which it endows its students have been forged from problems and solutions met in the past. Students, however, are walking into an uncertain world that will deliver them challenges we have not yet observed. To endow students with powers of abstract thinking, anchored on an appreciation of the points of the pentagon and how they might interact, would seem to be both pragmatic and humane.
European schools, in particular, have favored accelerated programs that condense the curriculum into 12 months of study or less. A focus on the functional may be practical. The MBA program should not exclude contributions from the realists, though, as windows to the world of practice should be opened to the students matriculated in these programs to inspire them to seekfurther study or to thinkcritically about the future.
Implication 2. The business school is a professional school, thus it must serve a relatively well-defined community of external interests in the professions of business and management. As an academic unit of a university the business school shares a purpose with other academic units to inspire imaginative thought through its intellectual enterprise. The faculty of the business school must cultivate the skills to engage people in business and others in the university in substantive and effective dialogue. As such, the faculty of the business school may serve the university distinctively as intermediaries between those in the world of practice and those in the world of scholarship. Drawing upon the diverse resources of the university, the faculty of the business school may heighten appreciation of business context. Analogously, drawing upon the experiential data from the world of practice, the faculty of the business school may reinforce the relevance of the scholarship of the university. This relates as much to the design and delivery of curricula, as it does to the design and execution of the research enterprise.
Implication 3: To deliver value to society as an academic unit of a university the business school should develop and manage a portfolio of programs to serve diverse audiences that would demand education in the functions and context of business. There should be a wider variety of academic programs combining skill-building with deliberate orientation in specific business contexts. The business school should do this with the intention of preparing constructive citizens who will either pursue career paths in business or who will pursue career paths that induce them to interact with business. Examples of audiences and associated programs with expectations:
- For students with no significant experience in business and with undergraduate degrees in areas other than business, a masters in business enterprise. The purpose of this program is to prepare graduates for entry level positions to career paths with moderate advancement opportunities and to do so by shifting from business to the academic world the cost of orienting a novice. This program would also enhance understanding of how one’s life’s pursuit depends on and interacts with business. The latter group of students includes the aspiring musician, painter, dancer, thespian, chef, and politician. Content of the program should begin with a phase of skill-building in fundamentals of running a business: accounting, finance, operations management, and marketing. In a second phase the fundamentals should be reinforced in a small number of specific contexts: transportation, financial services, manufacturing, the arts, culinary, for example. The program should be completed within one academic year. This program prepares the student for a range of options for further study, possibly after gaining work experience that deepens the student’s appreciation of business context.
- For students with experience or with heightened interest in a sector who seekpositions with progressively more responsibility in enterprises in the sector, a masters program in management in the sector. This program also begins with a phase of skill-building in fundamentals of management relevant for the sector, followed by extensive study of problems and issues relevant to enterprises in the sector. Such a program could be designed for global health care management, management of global finance, management of retail enterprises, management of fashion enterprises, etc. and should be completed within one calendar year. This program should commit the school and the student to a protracted relationship that disciplines both to follow critically the evolution of the business context in the sector of interest.
- For students with or without experience in a sector who seekpositions of skill-based specialization, a masters program in the function in the sector. This program also begins with a phase of rigorous skill-building relevant for the sector, followed by extensive study of problems and issues relevant to enterprises in the sector. Such a program could be designed for quantitative finance, tax, investor relations, etc. and could be completed in one year depending upon the student’s preparation. Such a program should prepare the school and the student to following the advance of the practice of the function.
- For working students, the executive MBA is a valuable degree because it combines class-room work in all the functional and corporate policy areas taught in a business school, with the practical experience gained in the workplace that would enhance appreciation of business context. In addition, students tend to be in their mid-thirties, with first or advanced degrees in engineering, the sciences, or other disciplines having already achieved significant positions and experience in their organizations. Head hunters acknowledge that this combination of learning on the job and theoretical learning is considered of much greater worth than skills acquired exclusively from the classroom experience. The implication for a business school is that there are grounds to consider re-allocating resources from the MBA to the EMBA.
- For students with management experience seeking positions of significant responsibility, an executive doctoral degree. This would be a course of study which requires a basic functional indoctrination of any of the preceding masters programs. As a doctoral program, it requires mastery of disciplines relevant for the study of business context-the behavioural, economic, and political sciences- and a thorough indoctrination in research methods. The focus of this program of study would be to engender in the student a deep understanding of building alternative futures of business context which would influence the trade-offs of business decision making. Ideally, the student pursuing the executive doctorate would secure a position in industry after completing two years of residency and would complete an extended research project in the enterprise(s) that employs him/her. Upon completion of the doctorate the student would be a candidate for a clinical faculty position in a business school or for a position of heightened responsibility in business enterprise. As a clinical faculty member, the individual would dedicate him/herself to applied research grounded in the sector of his/her thesis. The executive doctorate is the program that the business school should seek to determine its standing among other business schools. The underlying reason for this is that people who follow such a program are being launched on a career of learning and action in a business context that evolves over time and space, and requires constant questioning and learning. It imposes on the business school a different contract than we see from alumni relations with graduates of the bachelors and masters programs. These graduates from an executive doctoral program become part of the enterprise of the business school over a life time to help ensure that the business school delivers value to constituencies in the ever evolving business context.
Essentially, we are drawing out a program for an 8 year doctorate, with a strong applied bent, designed for aspiring board members.
Implication 4: The business school must strive to make a conscious contribution to the enterprise of the university, namely, to all of its scholars. This is especially the case for undergraduate schools of business. For example, if language skills and basic numeracy were considered essential for any university graduate to become a constructive citizen of the 19th century, then considering the significance of financial institutions in the 21st century the business school should deliver a requirement to make the university graduate (irrespective of field of study) financially literate. More generally, though, for both undergraduate and graduate study, the business school should strive to educate students of other disciplines of the primitives—markets, enterprise, and their interaction—as these are intrinsic to determining how the value of human enterprise is delivered to society. Analogously, the business school must consciously draw from other disciplines of the university in order to accomplish its mission. It is only in the one category of influences, market systems, that the business school is capable of scholarship. The other four points of the pentagon matter for business context, and the university is a deep resource for contributing to understanding of these influences on business context. The business school must exploit these intellectual resources systematically and deliberately in order to achieve its mission, and it must demonstrate to the university that the intellectual resources of its faculty and students are relevant for educating the university graduate irrespective of major field of study in order to prepare the student for the challenges and complexities of modern society.
 Financial Times 10 July 2007
 Lewis, Michael The Big Short: inside the doomsday machine New York, W.W. Norton & Co. Inc., March, 2010.
4 Indeed, it is arguable that management can never be a profession in the manner of the law, engineering or medicine, see Richard Barker, “No, management can never be a profession”, Harvard Business Review, July-August, 2010.
 Tom Dagenais and David Gautschi, Net Markets: Driving Success in the B2B Market in a Networked Economy, New York, McGraw-Hill Companies, 2002.
 Alfred North Whitehead, The Aims of Education, and other essays,New York, The Free Press, 1929.
7 Financial Times 1 December 2010
 Rakesh Khurana. From Higher Aims to Hired Hands : the social transformation of American business schools and the unfulfilled promise of management as a profession,PrincetonUniversity press, Princeton andOxford, 2007.
 As one writer wrote in the Edinburgh Review, referring to the Great Exhibition of 1851, “to seize the living scroll of human progress, inscribed with every successive conquest of man’s intellect.” Quoted in Robert Nisbet, “The Idea of Progress,” Literature of Liberty 1979 2(1): 7-37; J.B.Bury, The Idea of Progress: An Inquiry into its origin and growth, London: Macmillan, 1920; Samuel Haber, Efficiency and Uplif: Scientific Management in the Progressive Era 1890-1920, Chicago, University of Chicgao, 1964; Carl L.Becker, The Heavenly City of the Eighteenth Century Philosophers, Yale University Press, 2nd Edition, 2003; Gertrude Himmelfarb, The Roads to Modernity: The British, French, and American Enlightenments, New York, Kopf, 2004;
 Khurana, p.148.
 Owen D.Young, « Dedication Address », Harvard Business Review, July 1927, Volume V, No.4.pp. 385-394.
 Frederick W. Taylor, The Principles of Scientific Management (New York: Harper Bros., 1911
 Hugo Münsterberg, Psychology and Industrial Efficiency,Boston, Mifflin, 1913.
 Adolph A.Berle and Gardiner C.Means, The modern corporation and private property. London: Transaction Publishers,New Brunswick, Transaction Publishers, 1932.
 James Burnham, The Managerial Revolution: What is happening in the World,New York; AJohn Day Book, 1941.p.71.
 Irving Kristol,. Neoconservatism: The Autobiography of an Idea.New York: The Free Press, 1995.
 Burnham, The Managerial Revolution, p. 71
 The title of one of the earliest analyses by a political scientist of Hitler’s Germany, Franz Neumann, Behemoth: The Structure and Practice of National Socialism, 1933-1944, 2nd ed. with new appendix,Toronto,New York [etc.] Oxford University Press, 1944.
 The Managerial Revolution, p.31.
 There is a massive literature on the cold war. The doyen of cold war studies is: John Lewis Gaddis, Strategies of Containment: A critical Appraisal of Post-War American National Security Policy, New York, Oxford University Press,1982; The United States and the End of the Cold War: Implications, Reconsiderations, Provocations, New York, Oxford University press, 1992; We Now Know: Rethinking Cold War History, Oxford: Oxford University Press, 1997; The Cold War, London, Penguin, 2007. See also a very readable book by Mike Sewell, The Cold War, Cambridge U.K, Cambridge University Press, 2002.
 Russell Ackoff, Introduction to Operations Research, with C. W. Churchman and E. L. Arnoff. John Wiley & Sons:New York, 1957.
 Cited in Rakesh Khurana, p.240, froml Steven L.Schlossman, Michael W.Sedlak, Harold S.Wechsler, The “New Look”: The Ford Foundation and the Revolution in Business Education,Los Angeles, Graduate Management Admission Council, 1987.
 David Halberstam, The Best and the Brightest, Ballantine Books, 1972.
 Quoted in Khurana, pp.253-54., quoted from Edward Shils, The Calling of Education: The Academic Ethic and Other Essays on Higher Education,Chicago,University ofChicago press, 1997.
 Robert Gordon, James Howell, Higher Education for Business,New York:ColumbiaUniversity press, 1959.
 See Khurana, pp.273-288.
 Quoted in Khurana, p.110.
 John F. Kennedy, Inaugural Address, Friday, January 20, 1961.
 Porter, M., 1980. Competitive strategy: Techniques for analyzing industries and competitors. London: Free Press.Porter, M., 1990. The competitive advantage of nations.New York: Free Press.
 See Jonathan Story, The Frontiers of Fortune: Capital Propsects and Casualties in the Markets of the Future, London, Financial Times, 2000. 4th ed.
 On market globalization, Martin Wolf, Why Globalization Works: The Case for the Global Market Economy, New Haven: Yale University Press, 2004; Jagdish Bhagwati, In Defense of Globalization, New York, Oxford University Press, 200. A flat earth view of globalization, Thomas Freidman, The World is Flat: A Brief History of the Twenty-First Century, New York, Farrar, Strauss, Giroux, 2005. A more jaundiced view, Joseph E.Stiglitz, The Roaring Nineties: A New History of the World’s Most Prosperous Decade,New York, Norton, 2003;
 See Robert Wade, Governing the Market: Economic Theory and the Role of Government in East Asian Industrialisation.Princeton. 1990.
 C.K.Prahalad, Yves L.Doz, The Multi-National Mission: Balancing Local Demands and Global Vision. New York, The Free Press, 1987; Christopher A.Bartlett, Sumantra Ghoshal, Managing Across Borders: The Transnational Solution,Boston,HarvardBusinessSchool Press, 1989.
 Stopford, J. and Strange, S., 1991. Rival states, rival firms: Competition for world market share.Cambridge:University ofCambridge Press, 1-31.
 Fukuyama, F., 1989. “The end of history”. The National Interest. Thomas Friedman, The World is Flat: a brief history of the twenty-first century,New York: Farrar, Strauss and Giroux, 2005.
 There is a huge literature on the diversity of capitalisms; Douglas C. North, Institutions, Institutional Change and Economic Performance, Political Economy of Institutions and Decisions, Cambridge UP, 1991; Colin Crouch, Wolfgang Streeck, Political Economy of Modern Capitalism. Mapping Convergence and Diversity. Sage.1997; John Zysman, « How Institutions Create historically Rooted Trajectories of Growth », Industrial and Corporate Change, Vol.3.No.1.1994.pp.243-283; Peter A. Hall, David Soskice, Varieties of Capitalism: The Institutional Foundations of Comparative Advantage,London,OxfordUniversity press, 2001.
 Thomas P. Hughes, Human-Built World, How to Think about Technology and Culture,Chicago,University of Chicago Press, 2004.
 Peter Schwartz, Peter Leyden, “The Long Boom: A History of the Future 1980-2020”, Wired July 1997.
 Susan Strange, 1988, States and Markets : An Introduction to International Political Economy,London : Pinter.
 See Whitley, R., 1999. Divergent capitalisms: The social structuring and change of business systems. Oxford:OxfordUniversity Press.
 Nelson, Richard R. & Sidney G. Winter. 1982. An Evolutionary Theory of Economic Change.Cambridge:Belknap Press; Teece, David J., Gary Pisano, & Amy Shuen. 1997. “Dyanmic Capabilities and Strategic Management”. Strategic Management Journal, 18(7): 509-33.
 Sydney Finkelstein, Charles Harvey, and Thomas Lawton, Breakout Strategy: Meeting the Challenge of Double-Digit Growth, McGraw Hill, 2007.
 Thomas Lawton, Jonathan Story, “Reaching Across the Market: The global dynamics of Business-state relations”, Handbook on Business and Government, Oxford University Press, March 2010.
 Quoted in Peter Schwartz, The Art of the Long View: Planning for the Future in an Uncertain World.New York. Doubleday, 1991.
 For a discussion on world and local time, see Zaki Laïdi, Un Monde privé de sens,Paris, Fayard 1994.