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May 2000, Volume 68, Number 3 |
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May 2000, Volume 68, Number 3 |
The Stanford Business School at 75 YearsBy JANET ZICH WHAT A GREAT TIME FOR A STARTUP! Production was up after the post-World War depression, and so were corporate profits and personal income. Calvin Coolidge himself had put his presidential seal upon the economy. "The business of America," he declared, "is business." That message was not lost on Coolidge's secretary of commerce, Herbert Hoover. Hoover, a civilian hero for his work in putting war-torn Europe back on its feet, maintained strong ties to Stanford. He had graduated from the University in 1895 and was now a trustee. For years, Hoover had entertained the idea of establishing a graduate business school on the West Coast to stem the tide of young men going east for their education and then staying. By 1924, the time was ripe. Hoover found venture capital for his school in that bastion of old-boy camaraderie and influence, San Francisco's Bohemian Club. He proposed the idea to his fellow Bohemians at his encampment, "Camp Cave Man," beneath the redwoods of the club's summer getaway at the Bohemian Grove, a few hours' north of the City. Their response was enthusiastic, and a small group volunteered as fundraisers. Thanks to them, more than 50 businesses and individuals pledged $250,000 in seed money, payable over the following five years, to the new school. In the fall of 1925, the Graduate School of Business opened its doors in Jordan Hall, a building in the Stanford Quad. It had 16 students, who paid $375 for the year's tuition, three faculty members, and a dean who was something of an expert at founding business schools. Willard E. Hotchkiss already had started two undergraduate business programs, one at the University of Minnesota and another at Northwestern.
Observed one early student, Dale Morrison, MBA '32: "We always suspected the administration and faculty used us as guinea pigs to determine how much pressure a class could take and still end up with a satisfactory number of survivors." Only two of the first class survived long enough to graduate. But for the students who stayed, these were heady times. Elden Smith, who matriculated in 1927, recalled the atmosphere of the early days in the Bulletin, a predecessor of this magazine, when he wrote of the "urge of the faculty to make the School a success, the optimism of us students who saw only time between us and great business accomplishments, and, on the outside, the unlimited bullishness of our future employers who were then busily running the Dow Jones average up to 380 and proclaiming a 'New Era.' We visualized ourselves in high-paying, responsible positions in a relatively short period of time," wrote Smith, MBA '30. "As matters turned out, we were rapidly deflated, and I suppose we were lucky to have stayed off the WPA rolls." The events of 1929 need no retelling. The stock market crash and the following decade-long economic depression would have an enormous impact on the world. At the Business School, the Depression not only affected the pipe dreams of the School's early students but also helped shape the curriculum for the next 30 years and all but destroyed the reputation of its founder, who had since been elected president of the United States. "In 1932, President and Mrs. Hoover returned to their home on the campus," wrote Frank E. Hayward, MBA '34, in a 1988 letter to Professor John Troxell. "The students greeted the Hoovers as they were driven in an open touring car through the campus to their house on the hill. I had never before or since seen anyone appear so completely exhausted as did ex-President Hoover." Still, Hoover recovered enough to invite Hayward's entire class to his campus home a few weeks later. They sat on the floor in a circle as Hoover spent two hours answering written questions from each of them. "I shall never forget what a truly great mind he possessed and how witty he was," wrote Hayward. "Unfortunately, these outstanding qualities never seemed to have come through during his days in office."
It worked. Student enrollment rose consistently through the decade. Looking through decidedly rosy glasses, some speculated that the lack of jobs was a blessing in disguise because it provided time to study up for the coming boom. The Bulletin forecast that trained minds would be in demand when good times returned, "minds which are not made delirious by the frenzied orgy of prosperity and which cannot be paralyzed by the fear of a bottomless depression." The faculty also grew under Jackson—to 50 by the end of the decade. Jackson was a stern, no-nonsense type who looked every inch the dean. But those students who had the temerity to approach him remember him for his individual acts of kindness—arranging financial aid for a student who couldn't pay the registrar, writing a fellow Rotarian to recommend a student for a hard-to-get job, quietly visiting a student stricken with pneumonia. This sense of community was seen among everyone connected with the Business School during those Depression years. The first alumni/ae clubs were founded during the thirties, first in Southern California and shortly thereafter in the Bay Area. In 1931, under the leadership of Jack McDowell, MBA '32, students formed the Business School Club, which sponsored a weekly 50-cent dinner for students and faculty, followed by a brief address by a local businessman. In April 1933, club members presented $200 to Stanford President Ray Lyman Wilbur to establish a loan fund for needy business students. The Business School Loan Fund was no empty gesture. By Jackson's retirement in 1956, it exceeded $55,000.
But the situation in far-off Europe was having an effect. For the first time that decade, enrollment dropped. There were nearly 50 no-shows in the MBA Class of '41. The explanation: "the uncertainty caused by the European war, coupled with an increase in business activity." One who did show was Edward Beyer, MBA '41. In a 1998 letter to Professor Troxell, Beyer recalled his graduation. "June 1941 was a month of mixed emotions. It was obvious that the United States could no longer avoid the European War. A number of classmates were being called into military service from the ROTC. Many of us tried to offer our services but were put on hold. We were all anxious to get on with our lives." By the fall of 1941, the entering MBA class was 28 percent smaller than the previous year's. To help make up the difference, Jackson initiated a "special emergency defense program" for college seniors. In January 1942, the School established secretarial training for more than 100 undergraduate students, "chiefly girls," who would learn shorthand, typewriting, office practice and administration, and secretarial accounting, which they were expected to put to good use "in war industries, in the military service, and the like." By spring, the Business School began offering a continuous four-quarter course, leading to a degree in industrial administration, that would "prepare men for work in essential defense industries." In the fall, 50 college graduates selected by the War Department arrived to work six continuous quarters for a simultaneous MBA degree and second lieutenancy in the Quartermaster Corps. And by war's end, the School, in cooperation with the U.S. Office of Education, was offering 12-week off-site programs in "Management Practices in War Industries" to working adults.
Captain Richard J. Taylor (ex '39) flew "the Hump" for 18 months, delivering war materiel to the Chinese. Clifford Barbanell, MBA '46, led his infantry company across the Rhine at a bridge in a place called Remagen. Carl Schott (ex '39) returned his crew and crippled B-24 to England with two engines shot away. Franklin Lindsay (ex '41) parachuted into Yugoslavia and worked his way into Germany, where he spent seven months "mostly running from the Gestapo." Thayer Hopkins, who had dropped out of the MBA Class of 1942, was reported missing in action over Berlin. (He returned, and graduated in 1946.) George Lindahl and James Donlon, both MBA '39, were taken prisoner by the Japanese, and Donlon was one of 83 Americans who survived the torpedoing of a Japanese prison ship and were then hidden by guerrillas until they could be removed to safety in Australia. John Allen, MBA '37, survived four invasions. The last one was at Normandy. John Marsh, MBA '41, and former MBA student Gordon Onstott were not so fortunate. Both were killed in action there. THE END OF WORLD WAR II BROUGHT AN UNEXPECTED DELUGE of students to the Business School, and the School was delighted to accommodate it. In fact, in January 1946, 120 new and 14 returning students were admitted at midyear, added to those who had enrolled as usual the previous fall. By the fall of 1946, it was official: The student population would be allowed to more than double, from a maximum of 200 to 500. Faculty were trickling back from the war effort and, on the social front, the annual dinner was back, after having been canceled "for the duration."
The fifties was a time of consolidation. The School celebrated its 25th anniversary in 1950. Over the quarter-century it had conferred 1,630 MBA degrees, 12 PhDs, and 69 wartime degrees (14 in industrial administration and 55 ABs). All graduates could gather under the wing of the alumni association, founded in 1946. In 1952, the Executive Development Program, which later became the Executive Education Program, offered its first classes to business managers. (The Sloan Program followed in 1957.) To help support the School, University trustees approved the creation of the Stanford Business School Fund in 1954. And in a first example of international outreach—setting a theme that would be realized more fully in the sixties—in 1955, the Business School faculty helped rehabilitate the School of Business Administration at the University of the Philippines in Manila. For the first time in two decades, things seemed to be going smoothly at the School. But in the country at large, business schools found themselves under attack from university administrators and several of the largest thinktanks for their emphasis on "best practice" in current business at the expense of solid academic study. Two of the School's future faculty members played roles in the movement toward more rigorous management education. George Leland Bach was head of the economics department at Carnegie Institute of Technology when, in the early fifties, William Larimer Mellon of Pittsburgh's powerful Mellon family tapped him as head of the institute's nascent business school. Bach took a year off from teaching to find out what the business world wanted and how much of it academia was actually offering. "At the end of the year," Bach told this magazine some years later, "I had a fairly clear picture of a new curriculum." For his new business school, he said, "We wanted a block of faculty members to provide the disciplinary foundations for the applied fields to business. For this group, we preferred people from the disciplines and the quantitative methods. We were especially interested in educators who were willing to be interdisciplinary where necessary—to solve real, complex problems rather than making each problem fit an existing discipline. And we wanted people who were interested in the real world. Theory has a powerful role to play in education for management, but the real work of an MBA program is using that theory to help solve business problems. We didn't want people who just wanted to sit and spin off theory." Bach was describing what he hoped to install at the new graduate business school in Pittsburgh. The pattern he outlined would become the model for an improved Stanford Business School. While Bach was founding Carnegie Mellon's b-school, a young economist named James Howell, working with Aaron Gordon of UC-Berkeley, was reporting to the Ford Foundation on what he saw as the state of contemporary American business schools. He and Gordon found that business schools "tended to rank down with education, agriculture, and home economics in terms of status on the university campus," Howell recalled in an interview last year. The report that Gordon and Howell published in 1959 was a scathing one, and it helped to revolutionize management education in general, Stanford's in particular. Dean Jackson had retired in 1956. Now, while the School was in a holding pattern under acting dean Carleton (Bud) Pederson, Stanford President Wallace Sterling recruited two of his trustees to help find a dean who would put needed reforms in place. They were business leaders Edmund Littlefield, MBA '38, and Ernest C. Arbuckle, MBA '36. Sterling eventually realized that Arbuckle was the man he wanted for the job. "Arbuckle didn't want to be dean," Howell recalls. "He had other things to do. But Wally Sterling took him to New York and essentially had Herbert Hoover put the pressure on him. Herbert Hoover met with Arbuckle at the Waldorf-Astoria and didn't let him out of the room until he said, yes, he'd be dean." THE MODERN ERA HAD BEGUN. Arbuckle was dean from 1958 until 1968. During those years, he doubled the size of the faculty and greatly increased the number and quality of MBA and PhD applicants. He also increased operating and capital budgets seven-fold and oversaw the construction of the School's first building. Under Arbuckle's watch, the School's attention turned to other countries and an alphabet soup of international outreach began and grew. The International Center for Advancement in Management Education (ICAME) brought faculty members from other countries to Stanford under a grant from the Ford Foundation. The Escuela en Administracíon de Negocios para Graduados (ESAN), a full-time graduate school of business, was established in Peru by Business School faculty. Other faculty members went to Iran, Ethiopia, Australia, Yugoslavia, India, Korea, and France to spread the word. Perhaps most important, under Arbuckle's tenure the School hired a core of star academics—including Bach and Howell. Chuck Bonini, Harper Boyd, Chuck Horngren, Bob Jaedicke, Hal Leavitt, Gerry Meier, Bill Miller, Jerry Miller, Mike Ray, Oscar Serbein, Ezra Solomon, Jim Van Horne, Gene Webb, and Robert Wilson all joined Stanford during those years. Not long after, Howell recalls, "There was one year when the presidents of the American Finance Association, the American Accounting Association, and the American Marketing Association were all on our faculty." The businessman Arbuckle fit in wonderfully with this high-powered bunch of academics, says Howell. "And one of the reasons is he stood in awe of academics. He was a graduate of this School and he admired many of the senior professors who were here. And they, almost to a man, strongly supported the new dean and strongly supported change." Shortly before Arbuckle left the Business School in 1968, a recent graduate, Captain Paul Bucha, MBA '67, earned the Congressional Medal of Honor near Phuoc Vinh, Binh Duong Province, Republic of Vietnam, for "conspicuous gallantry and intrepidity in action at the risk of his life above and beyond the call of duty." How times had changed in a decade. The Arbuckle years had seen the placidity of the Eisenhower era give way to the idealism of the Kennedy thousand days, extinguished with the president's assassination in Dallas in 1963. In the following four years, there were civil rights marches, free-speech protests, urban riots, two more horrifying assassinations, and increasing unrest with a war not officially a war. Ford Motor Company CEO Arjay Miller, who had seen the Detroit riots up close, was a man for the times. Where the School under Arbuckle began to look outside the country's borders, Arjay Miller, who became dean in 1969, turned its eyes to the problems at home (see Arjay Miller profile). Miller had made the formation of what is now the Public Management Program a condition of his acceptance of the deanship, and the program was up and running in a few years. He hired an African American as assistant admissions director and stepped up minority outreach, which had made only the most tentative steps under his predecessor. He hired the School's first women faculty members. The fact that the two young professors were treated coolly by some of their male colleagues only emphasized the need for their presence. And Miller also enrolled far more female MBA students than ever before. Women students had been around since 1925. Stanford was, after all, a coeducational institution. But until the seventies, women were assumed to be there to "catch a husband," learn how to balance his checkbook, and understand what he was talking about when he came home from a hard day at the office. Even the otherwise enlightened Arbuckle had told the Bulletin in 1968 that he welcomed women students in the classroom because "they raise the competitive spirit of the men. The men work harder to prove that it is a man's world after all." During the Arbuckle era, the Ford Foundation had become an important funding source for business education and was supplying a major portion of the "reformed" Stanford Business School's budget. But by the time Miller arrived, the foundation had decided to apply its largesse elsewhere. "This became lovingly known as 'the cliff problem'" (as in falling off the cliff), recalls Miller's associate dean Robert Jaedicke. But Miller managed to steer clear of the cliff. He turned to fellow board members and other contacts from his Ford Motor days and became a champion fundraiser for the School. "We used to say that Arbuckle put up the buildings and Arjay provided the furniture—the chairs, you know," says Ezra Solomon. Miller owed part of his success at fundraising to associate deans like Jaedicke, who could take over his faculty responsibilities and give him the time to go out and raise money. "The irony is, when Lee Bach first approached me about coming to the School, I didn't like to raise money," recalls Miller. "When I got out here and found out that Jaedicke was such an outstanding associate dean and could implement general policy, I thought, all right, I'll raise money." Mike Spence, who succeeded Jaedicke as dean of the School, once remarked that Jaedicke spent longer "deaning" than anyone but J. Hugh Jackson. Jaedicke did indeed spend two decades in the dean's office—first as associate dean to Miller; then as acting dean until a successor to Miller, Rene McPherson, was found; and finally as dean in his own right, after McPherson, suffering from the aftereffects of a car accident, resigned. Miller liked to say that the difference between managing businessmen and managing academics was like the difference between herding sheep and herding goats. By the time he took office, Jaedicke was a proven goatherder. The seventies had ended with the hostage crisis in Iran. Some 444 days later, in January 1981, when the hostages, including U.S. Consul General Richard Morefield, Sloan '74, were finally returned, the United States was quite a different place. Once again a war was over, a Republican father figure was in office, and the business of America was business. But this time the businesses of choice were investment banking and the industry surrounding the new "personal" computers ("We saw VisiCalc and said, 'Ooh, neat!'" Chris Dorst, MBA '82, recalled a decade later). Jaedicke, the consummate academic who was named dean in 1983, was a complete turnaround in style from the businessmen who preceded him. He greatly preferred horseback riding (in roundups, no less) to the gentleman's game of golf. "Bob didn't own a suit until he became dean," says Professor Emeritus James Porterfield. "Arbuckle used to chide him, 'You can't go to San Francisco dressed like that!'" Students had changed as well. Older, smarter, most with at least a few years' experience in business, they were also more demanding of the stars who had been assembled to teach them. They included more women, more minorities, and more international students. Though the mix was—is—still not complete, it was obvious that the days of the "West Coast, white boys' finishing school," as it had once been known, were over. Jaedicke nurtured and added to the faculty that Arbuckle and Miller had recruited. The nineties would see a payoff in the form of two Nobel prizes—one to William Sharpe, who had been hired by Arbuckle, and the other to Myron Scholes, a Miller recruit. And Miller's "goatherder" turned into a champion fundraiser in his own right. Thirteen endowed chairs were established during Jaedicke's deanship, bringing the School's total to 35, and the amount of student financial aid also was greatly expanded. And the three-story, $16.8 million Edmund W. Littlefield Center was dedicated in the fall of 1988. A year later, on October 17, 1989, caterers were putting the finishing touches on a wine and cheese buffet set up outside the Littlefield Center. A reception was scheduled for 5:15; it was to be a get-acquainted party for faculty and the new MBA Class of 1991. At 5:07, a 7.1 temblor hit the Bay Area. The University was battered, and the Business School sustained damages that would ultimately cost $7.4 million in repair and retrofitting. As the campus emptied, a number of people dropped by the caterers' table to help themselves to one for the road. Repair of the aging GSB Building was only one of the problems A. Michael Spence faced upon taking office on September 1, 1990. Jackson Library was closed by the earthquake, and the Class of 1991 would graduate before it reopened. Pundits were arguing whether the United States was in a recession or a depression. MBA graduates were facing the toughest job market in recent memory. The University was in a fierce, costly fight with the federal government over indirect research costs. And, perhaps the unkindest cut of all, in a study for the Graduate Management Admissions Council, business schools were accused of spending more time on building "elegant abstract models" than on helping students "understand the messy, concrete reality of international business." In the face of a tight budget and sagging public opinion, Spence turned the Business School's sights outward. He offered incentives to faculty to do more field-based research and to make the content of their courses more international in scope. He built partnerships with industry through a number of research initiatives and centers. He stressed the importance of technology, especially information technology, and formed alliances throughout the University and particularly with the School of Engineering. And this career academic, who enjoys nothing more than a day on the Bay on his sailboard, became a master fundraiser, responsible for building both the Schwab Residential Center, to house MBA students and executive education participants, and the Knight Building, for top administrators and emeritus faculty. AS THE SCHOOL ENTERS ITS FOURTH QUARTER-CENTURY, it bears little resemblance to the institution founded by Herbert Hoover and his friends back in 1925. It has gone from borrowed quarters in the old chemistry building to three office and classroom buildings and the Schwab residential complex. Even in today's dollars, the original $250,000 in seed money pales beside the School's current $386.9 million endowment. There are more than 100 faculty now, including tenure-line professors and lecturers, and more than 700 MBA students on campus in any one year. The School has granted 14,896 MBA degrees and 522 PhDs in 75 years, and its commitment to lifelong education can be seen in part in the 6,435 working managers who have completed the Sloan Program or the Stanford Executive Program. And there is a new dean, the School's eighth. Like his mentor Ernest Arbuckle, Dean Robert Joss is a Business School graduate and a businessman with a great respect for academics. One cannot predict where he will lead the School, but it is safe to say that he will make his own history, dealing with his own set of circumstances, both internal and external.
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