Bold Predictions on the Future of Universities

Professor and author, Clayton Christensen, argues that major change does not disrupt an industry through slow evolution.  Rather, after several indicators have signaled a changing environment, a tipping point occurs where the flow turns into a flood.  He created a stir when he predicted that in fifteen years half of U.S. universities may be in bankruptcy, though he hedged this bold statement with a “may be” rather than a “will be.”  Since the prediction is a year and a half old, I guess we are down to 13 and a half years.

A prediction that higher education will undergo major change is not bold.  It is the only sector of the economy that has not experienced such turmoil.  Thirty years ago, the two remaining relatively unaffected sectors were health care and education.  If the changes wrought to health care since then are any harbinger, then higher education is in for a ride.

While most discussions on the university of the future try to envision a prototype, Christensen’s service is to question the structure of the higher education industry itself.  His percentage can be disputed and a more complex dynamic is likely in which some schools fail, others scrape along, some merge, others form close alliances where each specializes in delivering education in specific disciplines to the students of all members, and some private universities seek to turn into publically funded ones. 

To take a step back, future blog entries will examine the higher education sector’s current state as the basis for imagining its future.

Dr. Thomas Begley is dean of the Lally School of Management at Rensselaer Polytechnic Institute.

Business School Dean Gurus

Frequently, conferences for business schools feature a dean from one of the top 10 MBA programs in the U.S.  As the keynote speaker, this dean inevitably addresses the topic of the current state of the MBA.  Generally, the dean presents a perspective governed by the heady view from the heights of business school education.  Just as often, the dean’s view holds little application for most in the audience. 

Conditions affecting top 10 programs are so different as to be irrelevant for most business schools.  A few years ago, the dean of a top program told the audience that the two-year, full-time MBA’s long history of success will continue despite all the noise to the contrary in the media.  He was presenting an accurate view for his program.  Top 10 schools receive so many applications from accomplished and smart prospective students that they could easily handle a decline in volume without blinking an eye.  However, most in the audience had already experienced significant drops in applications and couldn’t relate. 

There are over 500 accredited business schools in the U.S. out of an estimated population of more than 2,000 schools.  So the top 10 represent less than two percent of accredited schools nationally and 0.5 percent of all U.S. business schools.  The Occupy movement of a few years ago claimed that the top one percent of wealthiest people in the country could not comprehend how the other 99 percent lived.  The same could be said for the top business schools in relation to the rest. 

Dr. Thomas Begley is dean of the Lally School of Management at Rensselaer Polytechnic Institute.

Economic Forces on Higher Education

The economy is improving and with it the health of many colleges and universities.  But that is not the case for all schools.  Higher education is confronting conflicting forces.  On one hand, the increasing cost of a college degree raises questions about affordability.  On the other hand, the cost of delivering a college education is increasing as well.  Some schools are in a bind, especially small, historically liberal arts colleges.

A college facing difficulty may have some of these characteristics: A small endowment leaves it almost completely tuition dependent.  It got caught up in the academic arms race to provide ever more attractive living environments to lure students.  The substantial sums it borrowed for new construction to create these environments have saddled it with debt, which requires high annual payments to service.  Fewer high school graduates, especially in the Northeast and Midwest, have generated greater competition, making it harder to recruit students.  To attract students, it has had to increase the financial aid it offers. 

The new construction was undertaken instead of refurbishing existing buildings, so the college has deteriorating older buildings that it cannot afford to repair.  Since it is not hiring or filling vacant positions, existing faculty and staff shoulder more of the burden while talented faculty leave.  It is eliminating majors with low enrollments, exploring possibilities with nearby schools to share courses, and looking to develop on-line education.

Many smaller colleges may fit this description.  I am rooting for them, but their path is not clear.

Dr. Thomas Begley is dean of the Lally School of Management at Rensselaer Polytechnic Institute.

A New School Year

In academics, we have an opportunity not available to people in most other professions.  Each Fall, we start out fresh, with renewed spirit and energy.  The academic cycle is annual, which has its benefits and drawbacks, but one of the main benefits is that each Fall we take in a cohort of new students at undergraduate, masters, and Ph.D. levels.  These cohorts arrive excited, nervous, and eager to get started.  Their energy is contagious. 

For those of us who are administrators, after exams end for the Spring semester, the halls turn much quieter as most students go off to engage in summer jobs, trips, and other non-university activities.  For the first few weeks, I enjoy the relative peace and quiet.  Summer is often a time when we attack projects that we did not have time for during the school year.  However, after a few weeks, I start missing the buzz in the hallways and the activities of faculty members as they engage with their teaching.  It gets too quiet.  By the time new students arrive and current ones return, I welcome the change.

The Fall brings a period of renewal, a new beginning, a time when horizons for the coming school year look broad and filled with possibilities.  Orientations for new students, the start of classes, initial meetings of dormant committees, and social events to greet new and returning students reinforce the feeling of new beginnings.  I have experienced this phenomenon for well over three decades now, but I never cease to feel its powerful tug.

Dr. Thomas Begley is dean of the Lally School of Management at Rensselaer Polytechnic Institute.

Ethics and Shareholder Value

Ethics and shareholder value can maintain an uneasy co-existence.  The general impression in business is that it is difficult to maintain high ethical standards and succeed.  The “everybody does it” attitude is used as a justification for unethical behavior in the workplace.  If ethical behavior clashes regularly with firm performance, then employees are forced to choose between acting ethically versus making money for their companies.  The power of financial gain at the expense of ethics creates a strong dynamic toward unethical choices.

The question is so central to discussion of business ethics that it has been studied frequently.  The results are equivocal.  Overall, the findings indicate a small positive relationship between ethics and financial performance.  This conclusion results mainly from “meta-analyses.” 

A meta-analysis statistically analyses the combined results of many individual studies on a topic, attempting to summarize their general tendencies.  The basic principle is that an individual study may be biased by a large number of factors, but when you combine the results of many studies, the results should be much more valid.  However, many individual studies have had difficulties in their methodology and a number have not found a positive ethics-performance relationship.

In addition, in academic research, most studies that do not find relationships predicted are not deemed worthy for publication, so we do not know whether there are such studies nor how numerous they may be.  So our ability to predict any kind of relationship with confidence is limited.  The implications of this status deserve further consideration.

Dr. Thomas Begley is dean of the Lally School of Management at Rensselaer Polytechnic Institute.

A Morality Tale on Business Ethics Education

I once was a faculty affiliate of a center for business ethics and its interim co-director for a year.  The center was funded by a large gift from executives of a seventy-year old, publicly-traded, family-owned and run company.  Each of the four generations of family members had added to its success. 

An attempted hostile takeover had driven the company into the arms of a prominent private equity firm, where this supposed white knight had yanked it from under the family’s feet.  Bitter at actions they considered duplicitous and immoral, the executives decided that business schools needed to focus more on educating young students on business ethics.  Thus, they funded a center.

The center sponsored case writing and seed research on business ethics and brought in executives from industry as guest speakers.  It led the school to offer its first ever course on business ethics.

The center also offered an annual award to an individual or company that had been exemplary in advocating for business ethics.  One year, a very worthy recipient emerged.  At the time, business schools were struggling to promote ethics because faculty were new to the topic and felt unsure of how to teach it.  So the firm held weeklong sessions multiple times a year to educate business faculty in teaching ethics and financed the attendance of two academics per school per year.  It would be hard to find a greater contributor to ethics teaching in business schools.

That company was Arthur Anderson.  Two years later, complicit as its auditor in Enron’s falsifications, it was out of business.                                      

Dr. Thomas Begley is dean of the Lally School of Management at Rensselaer Polytechnic Institute.

The Influence of Pressure to Perform on Ethical Violations

One type of unethical behavior strikes me as arising from a very powerful motivator: the pressure to perform.  It is quite high in many organizations and the consequences of not performing are serious. 

Recent research finds that a supervisor’s ethical practices exert the strongest influence on employee ethical behavior.  Temptation to act unethically is strong when the supervisor is not monitoring behavior.  It is stronger when the pervading ethos is, “I don’t care how you do it, just do it.”  As a variation on a saying goes, the boss does not care about the storms you encountered at sea, but did you bring in the ship?  That position is usually accompanied by, “In fact, I don’t want to know how you did it.”  It is strongest when the supervisor actively advocates the unethical behavior.

The need to meet sales targets is a classic case where pressure is strong.  Sales organizations often measure sales over a particular period of time, say quarterly, and offer incentives to those meeting their targets and/or penalties to those who do not.  So salespeople may offer illegal inducements to a customer to push an order he planned to make next month ahead into this one or they hold back an order received until next quarter because they already have reached this quarter’s target or they record sales that were not completed as if they were.  The supervisor may even encourage the behavior because her own targets are based on those of subordinates. The temptation is natural, so companies need strong counter-measures to prevent it.

Dr. Thomas Begley is dean of the Lally School of Management at Rensselaer Polytechnic Institute.

How Do You Promote Ethical Behavior in the Workplace?

In my last post, I identified three contributors to unethical behavior in the workplace: the opportunity for gain, the desirability of the gain, and the lack of constraints on behavior.  Logically, if we are trying to promote ethical behavior, we will want to minimize the opportunities and desirability while maximizing the constraints.  However, practically speaking, opportunity and desirability are so difficult to control that the best approach usually relies on increasing the constraints.

To use the same example as my last post, it is difficult to minimize the opportunity to gain from insider trading because it would require us to minimize insider information, but managers make decisions all the time intended to increase the performance of their firms – and we want them to – so reducing available information hinders their effectiveness.  It is difficult to minimize desirability of the gain because it would require changing human behavior.  If interest in financial gain was not a feature of human psychology, then opportunities to make money would be irrelevant.  How likely is that?

The best tool we have is to create sufficiently powerful constraints to deter the unethical behavior.  In the U.S., we have built barriers to engaging in the unethical behavior: insider trading is difficult because strong laws prohibit it; we have increased the likelihood of being caught: regulators actively monitor patterns of trading surrounding major company events, keeping a particularly close eye on company executives and their associates; and we dole out serious penalties for infractions: prosecutors seek heavy fines and even jail.

Dr. Thomas Begley is dean of the Lally School of Management at Rensselaer Polytechnic Institute.

What Leads to Unethical Behavior in the Workplace?

As my last blog indicated, the assumption behind teaching about business ethics is that it will increase the likelihood of ethical behavior in the workplace.  That raises the question about how we can promote ethical behavior at work more generally. 

Essentially, unethical decisions arise when the opportunity for gain and the desirability of the gain are unhindered by constraints on behavior.  Let’s take each of the three separately.

An opportunity for gain exists when someone knows that certain activity will lead to a positive outcome.  For example, in insider trading, someone with ties to a company learns information about it that, when it becomes public, will produce a predictable change in its stock price.  He/she then buys or sells company stock before the information becomes public to profit from the information.

Desirability of a gain is the value an individual places on an outcome.  It is human nature to avoid thoughts that interfere with one’s ability to obtain the expected gain.  The inside trader rationalizes that the information won’t really affect the stock price or concentrates on the value obtained from the money in improving one’s life.

Unhindered constraints involve a lack of barriers to engaging in the unethical behavior, to being caught, or to being punished sufficiently to act as a deterrent.  Historically, Japan illustrates all three.  Insider trading laws have been so weak that they have not inhibited the activity.  Regulatory agencies have not carefully monitored such trading.  If caught, penalties delivered minimal adverse effects.

Dr. Thomas Begley is dean of the Lally School of Management at Rensselaer Polytechnic Institute.

Have Attempts to Teach Business Ethics Succeeded?

Business ethics as a field still has some rough edges.  Business schools mainly have included specialists in business ethics on their faculties rather than rely on philosophy departments.  Philosophers tend to fit uneasily in business schools because of how different their concerns are from their colleagues.  Management professors who venture in the other direction often encounter similar issues. 

The key challenge is to translate ethical principles to business practice.  Students do not need to understand the profundities of philosophy to benefit from consideration of ethical issues.  A management professor does not have to delve into the deepest areas of philosophical debate, nor someone grounded in philosophy to understand the intricacies of finance, accounting, or marketing, to to teach business ethics effectively.  In fact, beyond a modest point, depth of attention in either direction may serve more as a distraction. 

Regardless of the tensions, business students get significantly more exposure to ethics than they used to.  Does it change their later thinking in the face of ethical dilemmas?  Comparatively little research has tested this question and it is inconclusive.  Assessing the influence of an ethics course on an employee five years after he took it is very difficult.  That observation is much more prevalent in academics than one might think.  For example, we know as little about the effect of a course on international business on global orientation, or instruction in organizational behavior on interpersonal effectiveness, five years later.  Essentially, we think these topics are important enough in educating business students that we are willing to try without being sure of the answer.

Dr. Thomas Begley is dean of the Lally School of Management at Rensselaer Polytechnic Institute.