Harvard Business School Working Knowledg e Archive

Derek Bok: Business Lessons for Education Leaders

9/1/2003
Is higher education becoming too chummy with the private sector? What can each learn from the other? An interview with the former Harvard President. Plus: Book excerpt.

Is education selling out to commercial interests? That's the timely topic tackled by former Harvard President Derek Bok in a recent book, Universities in the Marketplace: The Commercialization of Higher Education. Mallory Stark sat down with Bok to discuss the implications for business leaders who are both products of and users of the educational system.

Bok is the 300th Anniversary University Professor and Faculty Chair of the Hauser Center for Nonprofit Organizations at Harvard University.

Stark: Your book suggests that universities have some things to learn from the corporation in terms of influencing faculty to be more diligent about cutting costs and evaluating work that goes on in the classroom.

Bok: I think two things stand out. First of all, when people think of universities, they tend to think of education and research, and they don't realize how many activities go on within a university that are really quite similar to corporate functions. A university like Harvard has a real estate department, an investment firm, a large human resource activity, a publishing company, a huge buildings and grounds and construction management department, a legal department, an insurance company, and many more corporate-style functions.

Clearly business is well ahead of universities in understanding how to operate activities of this kind in the most efficient way. Since universities have a great interest in managing their support activities as efficiently as possible—they want to save as many dollars as they can for education and research—they should have a strong incentive to borrow from business whatever is useful so that they can manage these functions, which run into the hundreds of millions of dollars, in an efficient manner.

I would say that universities today are far more relevant to the future success of business than they were several years ago.

More important than that, I think, is the corporate tradition of constantly experimenting with their products and methods of production and evaluating the results in order to achieve a more effective and satisfying product that is more closely aligned with consumer needs.

Unfortunately in education, the same process rarely occurs, as I point out in the book. Simply ask yourself how much major products used every day like television sets, computers, and automobiles have changed and improved over the last fifty or seventy years. And then ask yourself how different is college teaching from what it used to be fifty or seventy years ago. You'll immediately see a dramatic difference. There are some embellishments and technological support for college teaching, but it's pretty much the same as it was years ago. Yet, all the commercially produced products are greatly different, and either of much better quality, or much less expensive, or both.

Of course there are differences between producing products and teaching classes. But certainly part of the reason for the greater improvement in commercial products is the fact that professors in a university and those who administer universities are not constantly trying new methods of teaching and learning. They are not testing rigorously to see which new initiatives work better than others, discarding the ones that don't do so well and encouraging the wider use of those innovations that do seem to be effective.

In any human activity, if you are not continuously engaged in some process of enlightened trial and error to try to improve what you're doing, you're not going to make much progress. So I think universities have much to learn from businesses in that respect.

Q: On the other hand, what can business leaders learn from universities?

A: Well, that's a harder question to answer. I won't try to suggest what business can learn from universities but rather what business can gain from universities. And I think the potential gains are increasing all the time because as we become an increasingly knowledge-based economy, what universities do becomes more and more relevant to progress in business. That is because companies depend more and more on highly trained people, on expert knowledge, and on new discoveries. Those are the prime products that universities are supposed to produce. So I would say that universities today are far more relevant to the future success of business than they were several decades ago.

The trend, I'm sure, is upward. We're going to become more and more sophisticated, more and more highly trained, more and more in need of advanced knowledge. It is very important that universities and business work together because the success of business means a prosperous economy and jobs and all sorts of things that matter to Americans, who in turn support universities. So we have a responsibility to help others benefit from our knowledge as much as we can.

What I try to do in this book, however, is point out that it's very important to do this the right way, and not in a way that endangers important values within the university which, if compromised sufficiently for long enough, will weaken the university and lessen the contribution that it can make to society and to business.

Q: Is there something inherent about the organizational structure of universities that fosters innovation that businesses can adopt?

A: I think universities are more decentralized. Because they have always been in the business of requiring innovation in their research and scholarship, universities have learned that innovation in ideas cannot be directed from a central command post. Universities must give a lot of autonomy to creative individuals even though there will be a certain amount of what might appear to be waste and messiness involved. You will get more creative advances in the long run.

Whether corporations have learned this from universities or come across it independently, it's no accident that in their treatment of scientists, at IBM for example, businesses are much closer to a university model than they would be for workers on an assembly line.

Q: The theme of your book is that universities are in danger of losing their core academic values to commercialization. Should employers, who are in effect the consumers of the product turned out by universities and business schools, be concerned about the quality of the education of their future employees?

A: Yes, I think every profession needs to communicate in some fashion what its needs are and how they're changing because it is the responsibility of professional schools and universities to remain in touch. Most businesses realize that things are changing so fast that what universities really need to do is prepare people to succeed over a much longer period, not simply prepare students for their first day at work. But unless there is a close interaction between professional schools and the professions, there is a danger that faculties will get too academic, too out of touch.

On the other hand, if they're too responsive to business, then they become trade schools. That may produce some immediate advantage as long as businesses stay the same. But as things evolve and new challenges develop, the graduates of trade schools are going to be less effective than they ought to be in performing their functions in the market sector.

So there's always a creative tension. You need to keep some distance, but you need to stay in touch. The great challenge to professional schools is maintaining that balance because the natural tendency is to flip over to either becoming a trade school on the one hand or an ivory tower on the other. What you really need is creative tension that keeps an uneasy equilibrium in which you're neither too much one way nor too much the other.

Q: What are the particular challenges faced by business schools in this market-driven environment?

A: From the corporate side, I think competition is a good thing and I think there may be advantages in having some corporate universities and corporate-produced educational products. At the same time, I think there are some real dangers to universities if they begin to go into partnership with corporations to provide education on a for-profit basis. This model can work where the customers for education are highly sophisticated and able to determine the educational value of the program. For example, in the field of executive training where corporations are the customers, they are presumably in a position to compare very carefully the qualities of different programs available to them. The market then should work quite well and competition will produce higher quality offerings.

When you move into other kinds of education, however—for example, providing distance education to give some sort of business certificate or even an MBA and market it around the world to lots of people who don't know very much about education—people will gravitate to whatever university has a lot of prestige and will give them a certificate that they think will impress other people. In these circumstances, there's a real danger that the quality of education will be much less than it should be. To be specific, the great danger is that if you market such programs on a for-profit basis, you'll provide a very flashy product with excellent visuals and high quality of lecturing, but without the kind of interactive problem-solving methods in which real learning takes place.

It's no accident that in their treatment of scientists, at IBM for example, businesses are much closer to a university model.

Everything we know about learning says that if you treat students as a passive audience and deliver highly polished lectures to them, the students will not learn as much as they will when they have to work through the material themselves. That requires interactivity with teachers and that's expensive and drives up your variable costs. As a result, a high-quality Internet program probably isn't any cheaper than teaching students on campus. So naturally if you're selling education to an unsophisticated audience to make a profit, you'll go for the less effective but very slick, well-marketed lecture method, and students will suffer.

Q: Do you think that technology will play a significant role in higher education in the future?

A: Yes, I think technology has a great future because with the Internet we have something we didn't have with motion pictures, radio, and television—the earlier great technological breakthroughs that were supposed to revolutionize higher education but didn't. Unlike them, the Internet and related technology allow interactivity, for immediate feedback, for problem solving, for discussion among the students themselves and with the professor. That's the kind of flexibility we haven't had before and it is critical to really effective learning.

On the other hand, you have a tremendous growing market for education in mid-career. The greatest single change in higher education in the last thirty years is this burgeoning appetite for education, even among people doing the most important work in society, who feel at strategic moments in their career that they need a further dose of education. The problem is that it can be very difficult for these people in mid-career to spend a lot of time to come to a place such as Cambridge. It's expensive and takes too much time away from their jobs, where they are much needed. Technology offers a way of overcoming this problem by reaching people at their place of work at a time when they want education. The new technology allows us to provide that education in a much more effective way.

These two factors create very great possibilities for meeting the student demand in an effective way, and I would be very surprised if you didn't see, as you are already seeing, a sustained, rapidly increasing delivery of education via the Internet. That's why I think it's so important that it be done in the right way and not used as a profit center where all too often you're going to deliver an inferior product.

Mallory Stark is a business information librarian at Baker Library, Harvard Business School, specializing in organizations.

Book Excerpt: <i>Universities in the Marketplace</i>

The Relevance of Business

If every business practice were truly at odds with the ideal university, there would be good reason to resist the growth of commercialization. But is the world of business as alien to the affairs of academic institutions as many scholars seem to think? Before writing companies off as irrelevant, those who care for higher education should ask themselves whether the corporate sector could have some valuable lessons to offer universities.

Corporations, after all, seem very successful at carrying out the functions society has assigned them. No other form of organization—government-owned factories, collective farms, cooperatives, or what you will—has done as well at mobilizing capital to produce the goods and services people want at reasonable prices. Granted, private enterprise is not perfect. Some firms gain too much market power and charge excessive prices; some corporate executives cheat and break the law to get ahead; some businesses take advantage of the ignorance of their customers or exploit the weakness of their employees. Still, the private corporation—guided by the marketplace, stimulated by competition, and regulated by government—seems to possess a set of incentives that drive its members to do remarkably well in responding to the desires of consumers and achieving high levels of productive efficiency.

In contrast, the university strikes many critics as a kind of anarchy, ill-suited for any purpose other than securing the comfort and convenience of the tenured professors. Officials of the university have very little authority over their senior faculty. The latter have virtually complete license to do as they choose, thanks to the security of tenure buttressed by the safeguards of academic freedom. Since it is difficult to monitor closely the work of highly educated professionals, faculty members can travel more than the university rules allow or remain at home most of the day tending their garden or enjoying their hobbies without much fear of detection. So long as they meet their scheduled classes and refrain from criminal acts or other grossly improper behavior, they can stay happily in their jobs until they retire.

Despite these apparent weaknesses, American research universities have also been unusually successful in carrying out their appointed tasks. In the eyes of most informed observers, here and abroad, they are the best in the world at what they do. Their preeminence may seem surprising in view of their loose, anarchic structure. Yet research universities turn out to have a web of incentives subtler than those in more hierarchical institutions, but effective nonetheless for carrying out most of their basic functions and responsibilities.

In the case of science and scholarship, for example, a tenured professor may never publish anything and still keep his job. But few professors ever receive tenure in a major university unless they are strongly motivated to work hard at their research. The sheer satisfaction of arriving at a novel idea, discovering a secret of nature, or crafting a well-constructed article or book gives a powerful incentive to sustain their interest and dedication. Success brings further rewards in the form of prizes, job offers, salary increases, invitations to conferences, and other signs of recognition. In many disciplines, especially the sciences, research requires outside grants, which in turn depend on the continued ability to win approval for one's projects from qualified peers. Last, but far from least, there is the fear of being regarded as inconsequential by one's colleagues, one's students, or, even worse, by oneself. Together, these pressures constitute a formidable set of stimuli, driving the typical professor in a research university to go to great lengths to succeed as a scientist or scholar.

Another set of incentives causes professors to work hard at the critical task of evaluating and selecting candidates to serve as junior faculty members or tenured colleagues. Conscientious people, of course, are naturally inclined to pay close attention to matters of such concern to fellow scholars being considered for appointment. In addition, faculty members have a strong personal interest in keeping up the reputation of the academic unit to which they belong. Membership in a highly regarded department adds to one's own reputation and helps attract able graduate students with whom to work. Making first-rate appointments also enlivens the intellectual community in which one lives and works. It is true that faculty politics, favoritism, and gender discrimination will sometimes enter into deliberations over appointments and promotions. On the whole, however, professors who serve on search committees or on panels to review promotions spend remarkable amounts of time studying the writings of prospective appointees and discussing their merits with other members of the faculty.

Finally, the keen competition for applicants among rival colleges and universities creates a powerful incentive for each institution to try to match or exceed its rivals in providing students with programs, services, and facilities of every kind. No country boasts such an array of academic opportunities to suit every vocational or intellectual purpose. No country offers undergraduates such a wealth of student services and extracurricular activities. From computers to gymnasia to huge catalogues stuffed with courses, American universities vie with each other to meet virtually every legitimate desire that able young people can express. Critics may claim that the resulting competition leads to excessive duplication of programs or to unnecessary services and amenities for undergraduates, but no one can deny that university officials are highly motivated to attract students by responding to their needs.

Contrary to popular impressions, then, research universities have a network of incentives that serve quite well to inspire presidents, deans, and professors to work hard at most of their appointed tasks. But the incentives are not perfect. On three important counts, the environment in most research universities does not do enough to encourage the behaviors needed for the sake of the students, the society, and the well-being of the institution itself. In these respects, at least, it is conceivable that universities have something to learn from the world of commercial enterprise.

In the first place, university administrators do not have as strong an incentive as most business executives to lower costs and achieve greater efficiency. To be sure, academic leaders want to eliminate waste. Every dollar saved from building maintenance or personnel administration is a dollar more for education and research. Since deans and presidents are under constant pressure to meet demands for new academic programs and added faculty and facilities, they are naturally anxious not to squander scarce resources on administrative or support services. Still, there are several reasons for suspecting that university officials will be less successful than business executives in operating efficiently. Presidents and deans lack the experience of most corporate managers in administering large organizations. Because the principal purposes of their universities are academic, they must be intellectual leaders more than administrators. For this reason, their backgrounds and training are almost always in research and teaching rather than administration. Once in office, their success is measured much more by their accomplishments in building academic programs than by their record in achieving greater efficiency. They cannot win huge bonuses by cutting costs; indeed, the ethos of the university keeps them from earning sums remotely comparable to those of top business leaders. Finally, though cost savings are helpful to universities, they are rarely a matter of life and death. No research university has ever ceased to exist because of inefficiency. In contrast, losing one's job for poor performance, being taken over by corporate raiders, and going bankrupt under pressure from more efficient rivals are ever-present possibilities for most company executives. Like the threat of imminent execution, the fear of extinction works famously to concentrate the mind.

The point of these comparisons is not that universities should give massive bonuses to reward their presidents, still less that major research institutions should be allowed to go bankrupt periodically. Rather, the moral of the story is simply that corporations have long had powerful reasons to work especially hard at operating efficiently and that universities may consequently have something to learn from their experience. True, seeking cost savings in teaching and research is a hazardous undertaking that can do more harm than good, as we will discover in a moment. Even so, every major university spends hundreds of millions of dollars each year on such business-like functions as food service, building maintenance, construction, and personnel. In these domains, certainly, corporate practice and experience may have valuable lessons to teach.

A second important lesson universities can learn from business is the value of striving continuously to improve the quality of what they do. Because of the growing speed of innovation and change, businesses have been trying particularly hard in recent years to transform their organizations so that they can learn and adapt more quickly. In today's world, as former Shell executive Arie de Geus has remarked, "the ability to learn faster than your competitor may be the only sustainable source of competitive advantage."6 To excel in this way, corporate executives have made major efforts to decentralize their organizations and give more discretion to semi-autonomous groups to experiment and innovate.

Universities, too, need to learn and adapt more quickly, but they have succeeded only partially. Faculties do work hard at improving their research. Unfortunately, the same cannot be said of their teaching and educational programs. Take almost any product—automobiles, computers, television sets, and so forth—and compare the improvement over the past twenty-five years with the progress in the quality of college instruction. Most commercial products are distinctly superior to what they were a quarter century ago. In contrast, most college teaching remains, with a few technological embellishments, very much as it was twenty-five years ago—or even fifty years ago, for that matter.

Some faculty members will cry foul, claiming that teaching is simply not comparable to a piece of merchandise. But protestations of this kind cannot hide the fact that very few universities make a serious, systematic effort to study their own teaching, let alone try to assess how much their students learn or to experiment with new methods of instruction. Instead, faculty members invoke all manner of rationalizations—academic freedom, professional autonomy, privacy—or resist efforts to subject their teaching to outside scrutiny.

Some years ago, an instructor at the University of California, Berkeley, Uri Treisman, broke with this tradition by trying to discover why African-American students in his calculus course performed so much more poorly than their Asian-American classmates. He quickly found that the two groups studied in very different ways. While Asian-Americans worked together, African-Americans studied alone. As a result, when an Asian-American student had difficulty understanding a problem, other students were at hand to help her over her difficulty. In contrast, African-American students who were stymied lacked any comparable peer support and tended to become discouraged and to fall further and further behind. Unlike most other instructors, Treisman proceeded to test his observation by persuading a sample of African-Americans to study in groups. The results were striking. When African-American students worked together, not only did their calculus grades improve markedly; they were more likely than the other African-Americans to finish the course, remain as science majors, and graduate from college.7

What happened next tells much about attitudes within the academy toward efforts to examine teaching and learning to discover how they can be improved. If researchers had made a discovery of this kind on a problem of scientific interest, investigators around the country would have reacted quickly by trying to replicate the findings and to discover whether the effects of studying in groups carried over into other fields besides calculus. In Treisman's case, however, though it is believed that significant group effects occur only in some subjects and not others, no such response took place. As a result, though Treisman's methods have spread to other campuses, no one yet knows exactly when group studying improves learning and when it does not.

Many faculty members will not like to admit that anything as crass as money could be needed to induce professors to work harder at teaching their students. It is more comforting to think that the desire for truth and respect for learning offer motivation enough. Nevertheless, the record shows that the typical campus environment fails to inspire the faculty to do all they should to meet the needs of their students. While every research university has a number of dedicated teachers, none can claim that nearly all of its professors work consistently hard at their teaching. Studies abound on the effectiveness of various technologies and innovations to improve instruction, but few faculty members have studied this literature, and even fewer universities make a comprehensive effort to use the findings to enhance the quality of teaching on their campus. It is at least worth considering, therefore, whether the profit motive might provide the incentive needed to break through this wall of inertia.

Recent history has also shown that business methods and incentives can have a useful role to play even in the cherished domain of academic research. For decades, the federal government has been contributing billions of dollars each year to support university research. Although the public doubtless derives much pride and satisfaction from the advances scientists have made in pushing back the boundaries of knowledge, no one doubts that the dominant motive for giving all this money is to finance discoveries that will someday lead to useful new products, successful medical treatments, and labor-saving technologies. Yet prior to 1980, when Congress passed the Bayh-Dole Act, few universities could pretend that they were making much effort to review the work in their laboratories for advances that could be put to practical use. Only when Congress expanded their rights to seek patents and collect royalties for their discoveries did campus administrators mount a serious effort to help the public gain a greater return on the billions of tax dollars invested in academic research. In this case, then, the profit motive proved decisive in causing universities to fulfill their responsibility to serve the public.

The point of these remarks is simple. Left to itself, the contemporary research university does not contain sufficient incentives to elicit all of the behaviors that society has a right to expect. In some respects, corporations, moved by pecuniary incentives, do a better job than universities of carrying out the tasks society has given them. The motives that inspire professors may be nobler than those that animate corporate leaders, but in some respects, at least, they have proved less effective. Professors who look down on business would do well to bear this point in mind before dismissing the ways of commerce as irrelevant to the academy.

Excerpted with permission from the author from Universities in the Marketplace: The Commercialization of Higher Education. Princeton University Press, 2003.

Notes:

6. Arie P. De Geus, The Living Company (1997).

7. Uri Treisman, "Studying Students Studying Calculus: A Look at the Lives of Minority Mathematics Students in College," The College Mathematics Journal (1992): 362.