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Harvard Business School Centennial

Cambridge, Mass.

As prepared for delivery

We are in the midst of a crisis that fundamentally challenges our understanding of business, finance, and the world economy. Nearly every day has brought surprising and unsettling developments, as venerable institutions have disappeared or been transformed, as governments have assumed previously unimagined responsibilities, and as all of us have wondered what this means for our lives, our nation, and our world. During these uncertain days, we gather to celebrate the centennial of Harvard Business School. In more than one respect, this is an historic occasion, and it is fitting that we consider the lessons of the past as we confront our future.

On April 10, 1933, the Harvard Business School community gathered in Memorial Church in Harvard Yard for a rather subdued launch of the School’s 25th anniversary celebration. HBS Alumni Bulletin later reported “it was plainly evident that the speakers and the audience felt, and in large part understood, that the University, the Business School and the country at large had definitely bade farewell to a state of things that probably would never be seen again.”

One of the featured speakers that evening was Wallace B. Donham, then in his 14th year as HBS dean. His address was titled “The Failure of Business Leadership and the Responsibility of Universities,” and it bemoaned “the inability of business and political leadership to rise to new heights” required by the “unprecedented situation,” familiar to us now as the Great Depression. Though moderate by nature, Donham urged that “bold policies … bold anything is needed at this time.” In June of 1933, with Roosevelt newly in office, Donham warned in a speech to local businessmen that “[e]verything ahead of us is dangerous. There isn’t a power the President has asked for that isn’t dangerous. But there isn’t a power or a combination of powers he has asked for so dangerous as continuing to do nothing.”

Not surprisingly perhaps, Dean Donham believed that the most pressing concern of the day was to equip American business leadership with the skills and breadth of vision to reach beyond narrow, economic self-interest and pursue business objectives in a way that would contribute to social stability and progress. For Donham, it was not enough for executives to understand their own businesses. Rather, they needed a grasp of their industries as a whole, and, more fundamental still, an understanding of the relationship between their particular interests and broader social and economic structures. The guiding purpose of business education, in his view, was to provide a new class of leaders with the specialized knowledge – of marketing, production, finance – to manage the modern corporation, but also the breadth of vision to make business a force for good.

In this project, university-based business schools had a special role to play. The central purpose of the Harvard Business School was to make a profession of business, which meant that the project would be pursued in a university environment where this new class of professionals would be exposed to intellectual rigor, a wide range of disciplines, and diverse points of view. In short, HBS would educate manager-statesmen motivated not by profit alone, but by the improvement of society. As HBS today states its mission: “We educate leaders who make a difference in the world.”

This mission has a new urgency. Until now business school students have graduated with great confidence. They joined the fraternity of “masters of the universe,” as Tom Wolfe named them in Bonfire of the Vanities. They created a world in which the market became the organizing metaphor. Today, markets are disordered, and we are working frantically to fix a broken financial system. Never have we more needed leaders who make a difference. But how do we shape them and how do we determine the sort of difference they will make?

The University and the Business School have, from the outset, been partners in the project of management education, and we will share the challenge of defining our common course for the decades ahead. What do we have to offer one another, our students, and the world? Here, I am reminded of the story of the stonecutters, which I came across in the writings of Peter Drucker, but which I gather is a bit of an old chestnut in management circles:

A man came across three stonecutters and asked them what they were doing. The first replied, “I am making a living.” The second kept on hammering while he said, “I am doing the best job of stonecutting in the entire county.” The third looked up with a visionary gleam in his eye and said, “I am building a cathedral.”

The first stonecutter is simply doing a day’s work for a day’s pay, for the material reward he receives in exchange for his labor. The substance of his work, the purpose of his work, the context of his work do not matter.

The second stonecutter has higher aspirations. He wants to be the best. We know him well. Harvard does an outstanding job of producing students like the second stonecutter. Yearly, each of our schools enrolls a highly talented student body, and we entrust them to a faculty working at the very frontier of human knowledge. We demand that these students and faculty be excellent, for we see Harvard’s own excellence reflected in them and their achievement. HBS is no different. It admits a small fraction of its thousands of applicants and turns out graduates who command the best jobs in finance, banking, consulting, and marketing. Brilliant, analytical, highly trained, and driven, they are creative and pragmatic actors who have helped to bring about one of the most sustained and extraordinary periods of prosperity in our history. Now many of these graduates are to be found in the midst of this crisis — and in the midst of the efforts to resolve it.

The second stonecutter is an unshakable individualist. He believes in the power of the human mind, and its capacity for reason, in the drive for quality and results, and in the usefulness of reducing complex reality to a simple equation. His world is competitive and meritocratic. It is cosmopolitan; he measures himself against the “whole county” as the story has it – even the whole world.

Yet somehow the vision of the second stonecutter is also incomplete. The focus on the task, the competition, the virtuosity, is a kind of blindness. Consumed with individual ambition, the second stonecutter misses the fundamental interconnectedness of human kind, of societies and of economies. This stonecutter fails to see that there would be no stones to cut if there were not a community building a cathedral.

The third stonecutter embraces a broader vision. Interesting, I think, that the parable has him building a cathedral — not a castle or a railway station or a skyscraper. Testimony in part, of course, to the antiquity of the tale. But revealing in other ways as well. The very menial work of stonecutting becomes part of a far larger undertaking, a spiritual as well as a physical construction. This project aspires to the heavens, transcending the earthbound — and indeed transcending the timebound as well, for cathedrals are built not in months or even years, but over centuries. A lifetime of work may make only a small contribution to a structure that unites past and future, connects humans across generations and joins their efforts to purposes they see as far larger than themselves.

What is the meaning of this parable for us, in this moment, at Harvard and at HBS? Why and how do we strive to create stonecutters of the third sort? We have been reminded often these past few weeks about the perils of enshrining material reward as the purpose and measure of work. We know we must do better than to create a society of stonecutters like the first man. The second man is more admirable — more like much of our rhetoric and indeed commendable in many ways.

But as I was thinking about giving this speech today, I went back and reread a talk Kim Clark shared with me in 2003, an address he delivered on business ethics in the wake of the Enron scandals. It is a powerful statement about the need for the highest levels of integrity by all business leaders and about the responsibilities of places like HBS to set and inculcate ethical standards. Yet as I read it I was struck that even if everything Kim had called for had been fully achieved, it would have had little impact on averting the crisis of the last few weeks. The crisis we confront has not arisen from any widespread breakdown in individual ethics, though we have certainly seen failures of personal responsibility and an unwillingness by some to anticipate or accept the consequences of their actions. But essentially, what we have witnessed is a broader and more systematic crisis that has arisen from a failure of wider vision, a failure to acknowledge our interconnectedness, a failure to recognize how one’s own stonecutting is inescapably part of a larger project. And though human beings have always been bound together, we have never before been so thoroughly and instantaneously interconnected. As we have learned, a world defined by global markets is a world without boundaries. A crisis on Wall Street can bankrupt Iceland.

The third stonecutter reminds us that the individual is not enough, that we want to make a difference in and for the world – as it is today and as it will be in the future.

What do these lofty thoughts mean about how we do education for business as well as how we undertake the wider business of education? What do they mean for HBS and for Harvard University?

For 100 years, HBS has strived to situate technical expertise within a broader vision, an intellectually curious approach to the problems of business. Leadership that makes a difference in the world — that makes the right difference in the world — must be thinking like the third stonecutter – who doesn’t simply look to his left and his right to make sure he is the best, but looks up and out with his sights on the cathedral. This is a matter of both values and vision — of a commitment to purposes beyond one’s self but also a grasp of wider imperatives and understandings. Leaders are accountable for more than themselves; they must be both willing and able to accept that responsibility.

In recent years, HBS has been the subject of innumerable appeals and approaches from other parts of Harvard eager to enlist the School’s expertise — and prestige. Everyone seeks HBS’s competence and confidence. And everyone is interested in leadership — leadership in public service, in medicine, in law, in education. Every part of Harvard commits itself to generating leaders. But leadership is a means; it is not an end in itself. It must be about more than the distinction or excellence of the leaders. A focus on leadership must not become an exercise in self-satisfaction or congratulation. Leaders exist to serve followers, and leaders’ successes must be measured not simply by their power to move others, but by the directions in which they take those who follow them.

Just as recent upheavals can remind us that a leader must by definition be committed to a group larger than herself, they can also remind us that there is an important reciprocity to pursue between HBS and the other parts of the University that have so eagerly sought its engagement. What can HBS gain from its presence within this extraordinary institution? Can the University help HBS answer the question: Where should leadership lead to; what should it lead for? Or to return to our parable: how will the stonecutter’s perfectly honed stones be used?

We can see all around us examples of HBS students and graduates offering their answers to these questions, and we need their skills desperately. We need leaders who will dedicate themselves to extricating us from the financial mess in which we now find ourselves; we need leaders to help us sort out appropriate regulatory structures in the wake of this crisis; we need leaders to help us address the impact of this crisis on families and individuals; we need leaders who will organize us to combat climate change; we need leaders who can help to deliver the wonders of modern medicine to the tens of thousands of American and global citizens in need of basic health care. These are scientific problems; these are economic problems; these are political problems, but they are also fundamentally problems of organization, management and leadership. They are problems that connect us to others here and across the globe, to our children and our children’s children, and the world in which they will live.

They are also problems that occupy scholars, the kind of problems that are the business of universities. Like a cathedral, a university is a creation of generations and even centuries. It represents aspirations that transcend the instrumental, aspirations that privilege the timeless over the timely, aspirations that reach across societies and nations and centuries beyond the ambitions or achievements of any single individual to serve larger and more lasting purposes. A university also generates the knowledge and understanding across its many schools and disciplines that can support such a vision, that cannot just enable but actually compel us to look beyond ourselves.

A university asks all its students to be the third stonecutter. It should lift their sights to the cathedral spire; it reminds them at once of their importance and their insignificance in face of the tasks at hand. It reminds them of their interconnectedness to people across time and space. It affirms fundamental values of universality and of community. It both respects tradition and embraces change.

Business education that takes advantage of such a setting has the opportunity to produce not just leaders that make a difference in the world but leaders who make a difference for the world. That should be the goal for both HBS and Harvard University in the century to come.

– Drew Gilpin Faust