The History of Business Schools
A History of Undergraduate Business Education
From the very beginning of our history, business leaders and educators recognized that America’s industries and sectors needed to be guided by a stream of broad-minded, responsible, and competent leaders.
The history of business education in the United States reveals that undergraduate business schools were founded upon values of excellence, leadership, broad-mindedness, and service. The most important issue in our discipline has been one of means rather than ends. We know that our purpose is to produce leaders, but what is the best way to develop future business leaders? Should more primacy be given to theory or practice in the classroom? Is it the responsibility of business schools or business organizations to develop leaders? Historically, there have been two schools of thought on this issue: the idealists and the pragmatists.
The Idealists of the AACSB (1916-present): The Association for the Advancement of Collegiate Schools of Business began as a meeting between the deans of America’s leading business schools in 1916 to promote the improvement of university business education. Collectively, these schools and their leaders believed: “The best way to develop future business leaders is to put them in our business schools.”
The Pragmatists of the Academy Companies (1956-Present): The phenomenon of academy companies began in the 20th century with firms like Hewlett Packard, IBM, Procter & Gamble, and more that pioneered significant talent development practices that made them as famous for their alumni as they were for their work. Most successful among them was General Electric, whose Management Development Institute at Crotonville was the first corporate management program in the world. The philosophy of the academy companies was: “The best way to develop future leaders is to send them to our organizations: we have the capabilities to develop leaders at every level.”
The Idealists of ICSS (1957-1965): The Interuniversity Council on the Superior Student, founded in 1957 by the University of Colorado at Boulder’s Joseph W. Cohen, was an organization of representatives from colleges and universities with honors programs in various academic units and disciplines. Cohen and the leadership of the ICSS believed that honors programs were the best way to remind an institution of its educational ideals and counteract the decline in quality that many public and private institutions faced due to ballooning enrollments following World War II. The American Honors Movement was predicated on the idea that “the best way to develop future business leaders is by putting them together in a single program where we can invest more into their total development than what they’d ordinarily receive.”
Making the Case for Professional Education (1820-1880)
As more professional schools found their way into universities, it was hoped that a new class of educated practitioners could raise the standards of the professions themselves. This effort, however, was not without its detractors.
The turn of the 20th century heralded a new paradigm for higher education in the United States. Previously, universities offered a classical education in Western literature, Greek and Latin, history, and mathematics; but, as the country underwent a second industrial revolution which placed particular demands on a new labor force, what began as a few aspersions later became a campaign of severe criticisms. The charge? Universities were too old-fashioned. As former President of Harvard Charles W. Eliot wrote in The New Education in 1869: “What can I do with my boy? I can afford, and I am glad, to give him the best training to be had. I want to give him a practical education; one that will prepare him, better than I was prepared, to follow my business or any other active calling. The classical schools and the colleges do not offer what I want.”
Around the same time as the publication of that essay, Harvard established its Dental School in 1867, the Massachusetts Institute of Technology and Michigan developed schools of pharmacy and architecture in 1868, and the developments continued. The creation of professional schools in universities promised to produce a new class of individuals who could universally raise the standards of professional quality and conduct; in so doing, the professions themselves would improve their legitimacy and militate against reputational damage and societal harm. While the schools of more and more professions seemed to be welcomed enthusiastically into the university ecosystem, the same warmth was hardly extended to those who clamored for schools of business.
Warranted or not, many educators believed that business education had no place in a liberally-minded university: and, for a while, it didn’t. It was the commercial schools and business colleges – founded by business magnates like George Eastman or run independently – that met the need for trained businesspeople. These institutions were located in major industrial cities and taught practical business subjects like arithmetic, bookkeeping, penmanship, and business correspondence. So, it was thought, why bother with a university-based school of business? In a speech to the graduates of the Pierce College of Business and Shorthand in 1891, Andrew Carnegie claimed that classically-educated people were “adapted for life on another planet” and that he was glad graduates’ “time has not been wasted upon dead languages, but has been fully occupied in obtaining a knowledge of shorthand and typewriting.” Thorstein Veblen, an economist and sociologist, thought that “no gain comes to the community at large from increasing the business proficiency of any number of its young men,” as it did for other professionals like surgeons, physicians, engineers, and pharmacists. Just the same, intellectuals like John Jay Chapman felt that “a School of Business means a school where you learn to make money.”
Therefore, the argument for a university-based business school needed to be based upon what a liberally educated business professional would be expected to do differently from all the rest. Would they be just another face on the assembly line? Would they be nothing more than a fancified clerk behind a tying machine? Neither. The liberally educated business professional would be expected to be a leader: not only in the business sector but in society at large.
America’s First Undergraduate Business Schools (1881-1957)
The first undergraduate business schools – at public and private schools alike – shared the common goals of promoting a liberal education, developing professional proficiency, and producing future leaders.
Joseph Wharton, an American industrialist, founded the first university-based business school at the University of Pennsylvania in 1881. In his book The Pragmatic Imagination, Steven A. Sass records that “Wharton had designed his new school to ‘fit a young man…for efficient public service’ as well as the struggle of commercial life.” These two aims would find representation in the founding charters of many undergraduate business schools that followed Wharton’s: the College of Commerce at UC Berkeley in 1898; the School of Accounts, Commerce, and Finance at NYU in 1900; the School of Business Administration at the University of Texas at Austin in 1917; the School of Commerce at the University of North Carolina and the School of Business Administration at Emory in 1919; the School of Business Administration at the University of Michigan in 1924; the School of Commerce at the University of Virginia in 1955; and the School of Business Administration at Georgetown University in 1957.
Borrowing from commercial business schools, the first university business schools taught practical subjects like money and taxation, industry and commerce, commercial ethics, finance, statistics, economics, and accounting. But, make no mistake, these schools also required a great degree of liberal education and intellectual engagement. For example, according to Sass, Wharton’s original plans for his business school included a thesis requirement for all seniors. Many other business schools required coursework in philosophical studies, political and legal studies, and other subjects in the liberal arts.
Most of all, the motif that was evident across the many undergraduate business schools of this era was the resolve to create leaders. This was true across public and private institutions. Of the private schools: New York University sought to prepare students for “the administration or management of business organizations” and Emory hoped to produce graduates with “broad social vision for business and public affairs.” Of the public schools: the University of Texas at Austin’s leadership believed that “attention should be called to the fact that leading schools emphasize the social responsibility of the individual businessman”; the University of North Carolina’s former dean D.D. Carroll wrote that “business then takes its place as one of the great avenues of consecration to the common weal; and statesmanlike leadership and achievement in this field are rich in human benefaction”; lastly, Michigan aspired to “assure education in the relationship between business management and the more general interests of the community.”
Thus, the first 50 years of undergraduate business education succeeded in laying the foundation for a strong tradition. The early leaders of these business schools, who were idealists to their core, exhibited a united front in their values and intentions.
The American Honors Movement and Business Honors Programs (1957-1965)
In light of the failure of undergraduate business schools to live up to their own standards in the 1950s and 1960s, business honors programs were developed to represent an education that was fitting for a ‘future executive’.
In 1916, a group of deans of America’s leading business schools met together in the faculty club at the University of Chicago to lay plans for what was then called the American Association of College School of Business (AACSB). As more and more university business schools emerged, the AACSB stood to unify a set of disparate tones into a powerful, unified chorus. Together, the AACSB’s leaders shepherded business education through a surge of business activity in the 1920s and an economic depression in the 1930s. By the time World War II arrived, the discipline was thrust into a period of upheaval. Both undergraduate and graduate business schools experienced significant declines in enrollment and diverted their human capital and educational resources to support the U.S. Department of Defense. In the years following the war, American universities were confronted with more demand than they had ever seen before due to the GI Bill and the increased prioritization of advanced education in response to the Sputnik Crisis. All disciplines – and especially business education – had to change their admissions standards, class sizes, and grading policies in response to a new era of ‘mass education.’
The American Honors Movement in the 1950s and 1960s seeded honors programs across disciplines to preserve the ideals and standards that appeared to be submerged in a wave of widespread expediency and indifference to the student experience in higher education. Honors educators (like those who were part of the University of Colorado at Boulder’s ICSS organization) believed that universities, in their attempts to scale, had abdicated their sole responsibility as a social institution: to provide an impactful educational experience capable of developing the latent potential of America’s future leaders.
The first honors programs in undergraduate business schools began in 1959 to correct the problems facing the discipline: the curricula did not encourage critical thinking and originality enough, the faculty were incentivized to focus too much on their research at the expense of mentoring students, business schools hardly encouraged the exposure of their students to other disciplines and perspectives, and business graduates themselves viewed their careers through a ‘vocational’ lens rather than one of service and impact. Accordingly, business honors programs in the 1960s provided extensive liberal arts courses, extensive personal advising and faculty mentorship, discussion-based seminars that required theses and long-form papers, and leadership development programming like meetings with prominent business executives.
When the ICSS dissolved in 1965, there was no question that it had succeeded in spreading honors programs across the United States. In fact, new honors innovations continued several decades into the future. The only question was: did honors programs still represent the ideals on which they were founded? And, as far as business education was concerned: did business honors programs succeed in reminding undergraduate business schools of their mandate to develop leaders?
The Second Wave of Undergraduate Business Schools (1970-1990)
As the demand for a business education increased, more universities established degree programs and business schools. These schools were decidedly less idealistic and selective than their predecessors.
Around the same time that honors programs in business schools were getting underway, several major foundations like the Carnegie and Ford Foundations sponsored studies on the state of business education. The results, published in Gordon and Howell’s Higher Education and Pierson’s The Education of the American Businessman, signaled an ignominious failure. For example, Howell reported that even member schools of the AACSB fell below the minimum standards expected by the organization. As far as the quality of students in business schools were concerned, the implications of these relaxed standards were disastrous. Students were found to be among the least intellectually capable on campus, with an accompanying disregard for greater questions of the moral responsibility of the business professional and the role of business in society. While the 1960s showed some signs of reform-minded improvements across business schools, the trends described in the studies remained largely unchanged. An AACSB bulletin published in 1966 conveyed that business education lacked consistency in aims across its constituent institutions.
In the 1970s and 1980s, the discipline experienced yet another surge of new business schools. By this point, many of the Ivy League schools and flagship private and public institutions of the Northeast, Midwest, South, and West had created some form of a business school; in fact, many of them had appeared in the first 60 years of the 1900s. This new wave brought new market entrants in the form of large and small regional schools – both public and private. These schools were more vocational in design than the model of the business school that was introduced earlier in the century, focusing less on ‘business as a whole’ in favor of particular industries and prioritizing specialization in replacement of a liberalized curriculum.
At the 1984 Business Higher Education Forum held in Scottsdale, Arizona, Jim Baughman of General Electric’s Crotonville commented on baccalaureate-granting business schools saying, “Standards vary enormously across the 617 programs and these 215,000 graduates, and yet, their degrees read the same.” Only two years later, John Byrne, writing for BusinessWeek in 1986, reported that fewer than a third of America’s business schools met the minimum accreditation standards set by the AACSB. A former business school dean quoted in the article wrote that many of these schools were ‘diploma mills’ that performed a function which closely resembled selling the degree.
Thus, it appeared that business schools no longer uniformly embraced their mandate to develop leaders. Instead, a large number seemed to only be interested in upskilling the future white-collar class of America.
An Education for Tomorrow’s Leaders
It’s time to continue the centuries-old tradition of identifying and cultivating future leaders in America’s undergraduate business schools. This time, we’re bringing efforts that happened in isolation into coordination.
The Business Scholars Institute began at Georgetown McDonough out of a recognition of the importance of our tradition. We believe that undergraduate business schools today still play an important role in the development of future leaders in business, while also acknowledging the challenges that the discipline has faced over its long history. Our aim is to bring together the many stakeholders in this space – business schools, staff and administrators, honors and leadership program directors, student leaders, and alumni – under a new canopy of vision and inspiration. Simply put, we want to unify efforts that previously occurred within institutional silos.
The influence of Jesuit values positions Georgetown McDonough and the Business Scholars Institute with a unique perspective on the issue of how best to develop tomorrow’s leaders. A central idea to Georgetown’s educational mission is that of cura personalis, or, care for the whole person. We understand the idea of “the whole person” in a professional education as including the professional, the scholar, the citizen, and the individual in every human being. By means of this framework, we can see that many of the negative excesses in our discipline – classes of vocationally-minded students, the over-emphasis on specialization in our curricula, and more – often stem from a fixation on ‘the professional’ at the expense of the other dimensions.
Another idea that shapes our outlook is the Jesuit notion of ‘formation,’ the co-active process by which a person is shaped from within and without, and how that relates to the creation of future leaders in business. We believe that there is a “pivotal decade” from the age of 18 to 28 which is the most consequential to a person’s future attainment as a professional. During the first four years of that period, undergraduate business schools are the primary custodians of a student’s potential; with that said, the formational process continues even after they graduate. Indeed, we are convinced that the relationships a person builds, the organizations in which they are employed, as well as where and how they choose to continue their education play an equal formative role in the latter six years of the ‘pivotal decade.’
To return to the original question posed: what is the best way to develop future leaders in business? We believe it is by creating a cross-institutional community of promising talent that begins in the undergraduate years and continues into the late stages of a person’s career. In other words, the education for tomorrow’s leaders is more than a single school, specialized program, social group, or blue-chip organization; it is the impact of each as they are ordered along an individual’s personal and professional journey. The whole of which is greater than the sum of its parts.