Chapter 1: Introduction

Richard L. Schmalensee, Thomas A. Kochan

Overview

At MIT, Alfred Sloan had a vision of a different kind of business school, one that promoted a closer association between science, engineering, and industry. Sloan imagined a school that did more than just teach best practices—he foresaw a school that helped define them.

--Richard Wagoner, Chief Executive Officer, General Motors

In the early 1950s, the Carnegie Corporation and the Ford Foundation commissioned reports that called on universities to build a new management profession based on rigorous academic research, particularly in economics and behavioral science. About the same time, Alfred P. Sloan, the architect of both the modern day General Motors and the dominant corporate form of the twentieth century, proposed that MIT create a School of Management that would leverage the Institute's rich scientific and technical strengths and build on the strong tradition of management education at MIT extending back to the previous century. So began an experiment in inventing the modern management profession and professional education programs at MIT and in other universities in America and, later, in other parts of the world.

As the above quote from GM's current CEO Richard Wagoner suggests, Alfred Sloan, the Ford Foundation, and the Carnegie Corporation would be proud of what has been accomplished. In the ensuing years:

• The tools of modern corporate finance and capital market analysis were developed, drawn heavily on theoretical advances in economics. The widespread use of these tools has enabled capital to flow more efficiently to its best uses, in particular to the new entrepreneurial ventures that would usher in the information age. At Sloan in the early 1970s, Robert Merton, Fisher Black, and Myron Scholes developed the mathematical theory of option pricing, which both reshaped financial markets and was recognized by a Nobel Prize.

• Theories and practices guiding management-employee relations moved from methods developed largely for military organizations to principles based on economics and behavioral science for motivating and empowering employees, building high performance work systems based on teamwork, and better negotiating organizational change and resolving conflicts. In 1957, MIT's Douglas McGregor introduced his famous Theory Y and challenged managers to reexamine their assumptions about employees. Following in this tradition, over the next three decades Sloan faculty would call for a transformation of labor management policy and practice, be among the first to study and propose how to better integrate work and family life, and develop an entirely new field for managing the process of technological innovation.

• The advances in computing power led to creation of another new field, the study of Management Information Systems. Sloan School faculty pioneered in the development of "decision support systems," which demonstrated the power of information technology to inform management decisions, not just to automate payroll and billing. Sloan research demonstrated the importance of organizational factors in determining the value of information technology, a lesson being learned anew in the Internet age.

• Management science was born out of the fields of operations research and statistics, computer modeling became the dominant tool guiding research and teaching in this area, and the field of operations management (or production) was transformed. At MIT and Sloan, the field of system dynamics was born, and generations of students were trained to use this and other modeling tools to understand complex situations and solve complex problems.

The list could go on. A few other management schools could cite comparably important breakthroughs and contributions by their faculty. But no profession can afford to sit still, especially when the world around it continues to change. So flash forward fifty years to the present. Is it once again time to ask basic questions about what principles should guide the second fifty years of management practice and education?

On the weekend of October 10–12, 2002, alumni, faculty, and students of the MIT Sloan School of Management took up these basic questions as we celebrated the School's 50th Anniversary. Our goal was to engage a broad range of leaders from all corners of the world in an exploration of the present challenges, future opportunities, and expectations facing managers, the organizations they build, and the constituencies they should serve in the next 50 years.

This book summarizes the discussions that took place at the convocation and presents the research papers, prepared by student-faculty teams, that served to stimulate them. We present this not simply to report on the convocation, though it was an unforgettable event, but to begin similar discussions with others who share a commitment to using the knowledge, tools, and experience of management scholars, educators, and professionals to address the critical issues and problems we encounter in our world today and to prepare for tomorrow's management challenges. We invite you to engage in this discussion with us by exploring the vision for the future that emerged from the convocation.