From Higher Aims to Hired Hands: The Social Transformation of American Business Schools (review)

American business schools are in an existential crisis. From the corporate scandals of the last 10 years, to the mercenary role of executive MBA programs, to the guru worship of corporate CEOs and others, to the variable quality of students and the doubtful connections between business school faculty and management practice, it is difficult to think of what else could go wrong with the American business school in the new century. Rakesh Khurana’s outstanding book provides us with a theoretically sophisticated and sympathetic history of the American business school that explains in very convincing fashion how we got here and what (possibly) the future holds. From Higher Aims to Hired Hands won the 2007 Best Professional/Scholarly Publishing Book in Business, Finance and Management from the Association of American Publishers, and it is very easy to see why.

The major theme of the book is that business education began as a professional project for a rising managerial class created by twentieth-century industrial capitalism. Professionalized managers were supposed to maintain U.S. industrial competitiveness, win the Cold War, and produce a professional class of managers with a combination of technical expertise, human resource experience, and a broad understanding of the relationship between business leadership and the central dilemmas facing twentieth-century American society. Business schools sought to tie their role as producers of future leaders to the big issues that motivated university study and research. They aspired to be professional schools following the models of medicine and law.

But a funny thing happened on the way to the professional forum—the great foundations (Ford, Rockefeller, and Carnegie) provided millions of dollars in funding to reform business school education after World War II. Foundation reports called for greater disciplinary rigor, greater emphasis on quantitative research among faculty, more rigorous selection of students, and systematic training in the foundational disciplines of psychology, sociology, economics, statistics, and organizational behavior. The purpose of this focus was to improve the overall intellectual quality of business education, making it more on par with the activities of the rest of the university. In practice, this handed disciplinary control of business school curricula to economists, de-emphasizing case studies, managerial practice, human relations, and soft managerial skills.

Unfortunately for the rest of us, the rise of economics as the disciplinary center for business school curriculum dovetailed almost exactly with the switch from industrial to finance capitalism. The new and hip place to be as an enterprising young MBA was the consulting firm or the private hedge fund. For business educators, these developments produced the ultimate in organizational contradictions in agency theory. Agency theory takes the would-be professional managers that the pre-War business school idealized and turns them into opportunistic “agents” seeking to dupe the Jesus-like “principals” out of their hard-earned investment dollars. The purpose of business education shifted to controlling these potential deviants who sought to destroy shareholder value, completely de-legitimating the original professional project advanced by the founders of University-based business education in the first place.

In Khurama’s mind, the seriously harmful results of these long-term developments are present for all to see. Business students became obsessed with making more and faster money. Agency theory’s description of opportunistic self-interested behavior turned an unfortunate deviant condition into an inevitability that actually encouraged business students to behave in the very fashion agency theory described. In the process, the American business school became a place to network among students aspiring to join the new American wealthy, where what one learns is replaced by alumni networking, “customer satisfaction”, and returns on educational investment measured in hundreds of thousands of dollars.

This is a powerful, compelling, and well-researched narrative. It serves as a useful complement to Jacob Mintzberg’s discussions of the state of business management education (in Managers, Not MBAs, for example). Far from a...