Business School for Dummies?

It may seem obvious, but the accrediting group AACSB is studying whether biz-school research should be relevant to the corporate world — and how to make it so.

Should the research being done by America’s business schools have to offer relevant lessons for business?

A task force of AACSB International, the school-accrediting organization that also goes by the moniker Association to Advance Collegiate Schools of Business, admits that it is going very slowly as it ponders that question. To business professors, it points out, the case is not all that obvious.

“It is not easy to fix something when people cannot agree it is broken,” is the way the “Impact of Research” task force put it in the opening words of a recent final report. After suggesting in a preliminary draft last August that business schools should try harder to produce research with real-world applications, it got significant feedback that the organization should leave basic, “pure” research alone, even if it did not have immediate relevance in the business world.

The controversy reflected long-simmering complaining among finance executives and other managers that the graduates being hired today come from an academic environment nearly devoid of business street-sense and acumen.

Seven months after the controversial draft was released were spent weighing the language for the final report, to make it clearer that AACSB’s real goal is move in the direction of more applied research. That is something it wants to do, by creating more incentives for professors to do practical work, and by building more links between the research world and corporations that have definite research-related needs.

“The reality is that we think that there is a role for irrelevant research,” says AACSB vice president Daniel LeClair with a laugh. LeClair, who also holds the title “chief knowledge officer,” notes that the task force felt firmly that, as the final report says, “intellectual contributions in the form of basic theoretical research can and have been extremely valuable even if not intended to directly impact practice.” Advancing econometrics is one area in which such pure research has been helpful in developing methodology, rather than practice, LeClair notes.

Why Tiptoe?

To some people who have lived in both worlds — as accounting professors and as corporate CFOs, for example — there’s little reason to tiptoe around the real issue: that far too little business-school research is geared to real business needs.

Much of the research that Santa Clara University accounting professor Chris Paisley sees at his own school “is borderline ridiculous,” he says. He has the perspective of someone who came to teaching eight years ago, after serving 15 years as CFO of 3 Com Corp. Sure, some research “strikes me as interesting” — as did a study showing that “when a retiring CEO stays on the board, companies apparently outperform the market.” Other studies, though, seem “obvious” to him. For example, “if a retiring CEO un-retires, to take over again as CEO, the second time he/she retires the new CEO will insist that they no longer be on the board.”

Beyond the mildly interesting and the obvious, though, research is “most of the time completely irrelevant,” says Paisley, who himself doesn’t do research, and is on a non-tenure track that involves teaching only.

The split between university-based pragmatists and pure researchers is what has the AACSB treading a minefield. And the diplomats on the task force argue that there is a need for both kinds of research — just more of the kind that serves corporate executives.

“It’s the old issue of rigor versus relevance,” explains Gabriel Hawawini, chaired professor of finance at INSEAD in Fontainebleau, France, and currently serving as visiting professor of finance at the University of Pennsylvania’s Wharton School. Also a member of the AACSB task force, he says the group’s “feeling was that research should be both rigorous and relevant. It’s finding the right combination there, and moving away from the myth that there must be a tradeoff.”

The rigor, as he sees it, comes mainly from academicians reviewing each others’ work, making sure it meets a high standard. But it is in that peer-review emphasis, and the publishing in academic journals that grows from it, that schools may fail to make sure that more of their research is geared to actual needs of business — the kind of needs that often are exposed during executive education programs that draw on business cases, for example.

So the task force is taking steps to make sure that schools do both kinds of research, while rather delicately trying to suggest that the reason for the study in the first place is to give practical research the major boost it needs. And it hopes to encourage new links between that academic and business communities, where few now exist.

Seven Recommendations

The first of its seven recommendations, for example, says that accreditation guidelines will be developed “to require schools to demonstrate the impact of faculty intellectual contributions on targeted audiences.” That applies to both practical, business-aiding research, for which companies are the target, and the kind of pure research aimed at academics — in cases where academics are in fact the targets of the research.

“The task force believes that there are ways to increase the value and visibility of business school research in general,” says LeClair. “And part of that is to increase the role of practical research,” along with research that has policy implications.

One recent corporate-finance example, cited on page 23 of the 48-page AACSB document, involves the studies that underlay reports illustrating how stock options were being routinely, and improperly, backdated by companies to historically low prices that gave employees “in the money” compensation without the taxation that should go with such pay. That work showed how scholarship “by business school faculty also can and should inform policy,” according to the task force report, which suggested that such an inter-working with policy is too rare. The research, credited to professors at the University of Iowa and New York University, also led to exposure of the stock-option backdating scandal in the Wall Street Journal, and may have laid the ground work for prosecution of cases against companies that acted improperly.

Another recommendation — that “efforts to create incentives for greater diversity in institutional missions and faculty intellectual contributions” be encouraged — relates to the awareness that business schools often discourage work for such publications as the Harvard Business Review, so popular with corporate managers, in favor of peer-reviewed academic journals rarely seen by executives. “Widely read journals sometimes don’t get the respect among acadmic colleagues,” notes LeClair.

An article in Economist.com about the August AACSB draft noted, for example, that many schools seem driven by the need to cement their reputations, and that of their professors, by “being seen in the right journals.” And the more than 20,000 articles published by schools each year tends to be “highly quantitative, hypothesis-driven and esoteric.”

The other five recommendations are geared to finding ways to build bridges between academics and professional associations “such as the Academy of Management”; creating awards to recognize high-impact faculty research; and encouraging “best practices for creating linkages between academic research and practice” — a concept, incidentally, that could have been taken right out of HBR.

So with the seven months of groundwork laid, what will AACSB do next?

The need to take a long-term view of change, with so many academics on both sides of the research issue, has the AACSB planning pilot studies, benchmarking exercises around the world, and partnerships with other organizations to help produce guidelines for change. “Most business schools are part of bigger institutions, and they have their own processes that relate to journal articles, for example,” says LeClair. For schools with little background in pragmatic research, it could also be a costly transition.

“Please don’t laugh at us academics,” says LeClair with a resonant laugh of his own. “But we’re going to set up another task force.”

Coming Thursday: Where B-School Research Excels: Why finance research is the main exception to the rule that business-school studies aren’t relevant.

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