Can we make management a profession?

Q: Let's start with the question, why is the model of management as a profession appealing? What do you like about that idea?

Joel M. Podolny: We define occupations as professions to the degree to which they serve society. And unless management lives up to that service standard, it frankly calls into question what business schools are actually doing. At some level, we then become just trade schools. And we fail to fulfill a university's mission of creating and disseminating knowledge in the interest of society.

Rakesh Khurana: Joel got right to the heart of the issue: If management is not a profession, why do business schools belong in a university? Prior to the establishment of university-based business schools, there were hundreds of for-profit business schools in the United States, educating tens of thousands of students.

The argument for why business education belonged in a university, rather than in the world of commercial vocational education, was threefold. One was that those vocational schools were preparing students for a job, not a career. The second was that they were merely equipping students with technical skills, without any sense of the larger purpose to which those skills should be applied, no sense of responsibility for how to use those skills. And the third was that there was real knowledge to be obtained that went beyond just technical rudimentary knowledge—knowledge that also required the application of judgment and experience. By placing business education in the university, with its knowledge and research function, there would be continuous contribution to, and enhancement of, that body of knowledge.

It was on those grounds that the folk notions of management as an art, or something that you learned as an apprentice, were dismissed; and the notion that management belonged as a university subject of study was created.

JP: Now this is why it's important for those of us in business schools. But you also could ask the question, why is it important for society that management be a profession? If you think about all of the great changes of the twentieth century, there were few that were as dramatic as the shift of power and resources into the hands of management.

So, given the power and resources that are under the control of managers and corporations, it is highly problematic if management does not actually have a professional service ethic.

RK: Right. Business is one of the greatest institutions in society. It does more to lift people out of poverty than any government plan has done. So it should be recognized as a critical and vital institution, deserving of leadership that is regarded as professional.

It's also important for our students. You know, business schools now get some of the best and brightest students, who before might have gone into medicine, or law, or academic research. And they want to be professionals, rather than just hired hands. In fact, I think it's an important part of their self-identity, especially in our society, where work greatly informs who you are. So we do our students a disservice if we allow them to believe that their work only has utilitarian consequences. It denies them the possibility that their work can be connected to advancing the public good. It denies them some aspirational quality to their work. And that aspirational quality is tremendously important in giving someone a sense of meaning and purpose.

We live in a complicated world, and our students often find themselves in positions of great responsibility and power. They need to have some sense of not just the immediacy of the decisions they make, but some way of connecting to the broader implications: What is the impact of these decisions on my peers? My fellow practitioners? How does this advance the notion of a service ethic? How does this advance the societal welfare?

The inability to make that connection denies the possibility that you can actually get meaning out of your work.

JP: To bring this full circle, one of the things that has struck both Rakesh and me is the degree to which many of our students want to both experience personal success and have positive societal impact.

And if those of us who are in the management education business can, in fact, elaborate a concept of management as a profession, then we make that possible. Conversely, if we don't do that, we contribute to a cynicism about what management is about—that those who are the best at it are those who just act in their own narrow self-interest.

Q: What do you mean when you say "management"? Are you including business management? Nonprofit management? Government management? What's the terrain you're talking about?

JP: Formally, I think both of us would probably go back to Max Weber and think about managers as those who control the means of production. And that could apply across sectors. What is probably true, though, is that what sector and what industry you're in is going to have an impact on the tension between you acting in your own self-interest and in society's interest. There are some industries and some sectors where it is going to require more wisdom, more art in leadership, to actually reconcile that tension between personal desire for success and positive societal impact.

RK: This is where business schools have a slight challenge, in terms of the notion of management as a profession, versus, say, medicine or law. Many of the traditional "high" professions were based on the idea of an individual practitioner. The doctor opened up his own practice; the lawyer could operate as a solo practitioner. The difficulty—and the difference—in the nature of the managerial task is that, by its very nature, it's embedded in an organization. There are no solo-practitioner managers.

Management is inherently an interactive task that involves obligations and responsibilities to multiple individuals, and often has to be practiced not only within the realm of the market, but also within the realm of a bureaucracy or an organization. Those are some of the unique challenges that management as a profession faces. And the challenge for business schools is that we don't have the institutional systems that medicine and law have: professional associations, licensing, and so forth—the American Bar Association or the American Medical Association. The entire burden of creating institutional systems has been placed on the business school itself. And that's a very difficult task for a single institution.

JP: That's interesting. I had never thought about Rakesh's point about the individual role relation. For the doctor, the professional obligation is between the doctor and the patient. Or for the lawyer, it's between the lawyer and the client. But when we talk about management as a profession, what is actually quite problematic is: Who is the other? Or what are the sets of others that define the professional obligation? Is it the customer? Is it the shareholder? Is it the community more broadly?

In fact, as we think about what it means to elevate management to a profession, part of it seems to be a broadening of the obligations to different others, where those others actually have a tension, in terms of their interest. That's not to say the doctor is also not trying to reconcile tensions. A doctor has to focus on cost and, at the same time, maintain the obligation to the patient. But the professional obligation is about the patient, not about the cost.

On the other hand, when we talk about managers, we're actually saying the cost is part of the professional obligation, and the customer is part of the professional obligation. But would you want to resolve that by actually reducing the role obligations to define "profession"?

So for example, Michael Jensen's proposition is: "We've got one obligation. We're the agents of capital. And our professional obligations turn into fiduciary obligations as agents of capital." But what if you want to actually define "professional obligation" more broadly?

RK: Professional obligation may have been easier to define in the nineteenth or twentieth centuries. But in the twenty-first, where professionals have multiple obligations, and people play multiple and sometimes conflicting roles, this is exactly the kind of discussion that could be beneficial. I think that a discussion among business schools about this notion that, for management, a broader set of professional obligations exist in tension could be a vanguard of conversation that other professions could actually learn from.

For example, in medicine, where doctors now have to consider not only their obligation to the patient, but also cost management, so that healthcare can be provided to a larger number of members of society. Using that example, and recognizing that quality healthcare is a scarce resource, we might be able to, in fact, develop a useful dialog about when you are faced with conflicting tensions.

Law faces similar tensions. Consider the professional obligations of a corporate counsel: To whom is a corporate counsel responsible? Is it to the person they work for within an authority/employment relationship? Is it to the profession and to justice?

I think such a line of debate may, in fact, take us from being behind on the discussion of management as a profession to the vanguard of discussions of what it means to be a profession in the twenty-first century.

JP: That's a great observation. If you think about medicine, some of the problems that have arisen could be framed as not figuring out how to integrate some of the objective realities around cost and scarcity with a professional ethic.

Q: Going back to this more general view of management as cutting across all sectors, does it make it easier to have that conversation about what professional obligations are, because it breaks out of the corporate model and is viewed in a more general way?

JP: Professional obligations are going to play out for individual managers in their particular context. We can have a conversation about management as a profession writ large, and the obligation of a profession collectively to society. And it may be that it helps us analytically to think about it when we're trying to generalize across sectors.

But at the end of the day, there is a manager working in a particular corporation. So it's actually not going to be helpful to that manager if we end up defining professional obligations in a way that broadens them to such a degree that a manager can't apply it to the context which he or she is in.

RK: As researchers, we like to find generalizable ideas that cut across contexts, but in fact, because we also serve the practice and our students, I think we want to make our students more sensitive to the context within which they're operating. That allows them, on some level, to make adjustments, and figure out how to reconcile the tensions.

JP: Right. Right. That being said, while we both agree that it would be a mistake to teach in a way that doesn't attend to the particularities of the different contexts, I think we also agree that there are great learnings to be had by having representatives from all sectors involved in the conversation, not necessarily because any sector-specific principle is generalizable, but because there are learnings across the sectors.

One example that runs from the nonprofit sector to the for-profit sector has been around mission, and around the role that mission and purpose play in an organization, in terms of enriching the meaning of work and, by consequence, the motivation that individuals have to pursue the organizational goals.

RK: I think that's right. And I also think that there are not only learnings, in terms of practices that can be used, there is also a recognition that there's an interdependence among a variety of institutions.

So it's not an issue of business or society. It's business and society.

Q: Would a clearer sense of management as a profession create another obligation for managers, an obligation to that profession?

JP: I think it is safe to say that once the standard is set, you can't not live up to it. But until the standard is set, anything goes. In fact, I think a lot of the critiques of management education that reached a fever pitch after Enron and WorldCom were critiques of the "anything goes" approach.

It's not that business schools were teaching that it was okay to behave illegally. But there certainly was not enough attention being paid to the difference between the legal standard and a standard of professional accountability.

RK: The concept of management as a profession serves other functions that I can think about. One is it makes explicit the implicit social contract that every individual has with society, with respect to their occupation. It says, "Trust us to exercise control and judgment over a very important societal function. And in return, we will make every effort to ensure that our members who practice this profession will not abuse that trust that society has placed in us." So there's a kind of privilege in being considered a professional in society, as part of the social contract.

A second thing is that there are all these aspirational professional codes. The Hippocratic Oath, for example. These codes can't solve problems, but they can—and do—create a way of thinking through problems in the context of what a person's ultimate professional obligations are.

It also creates social capital between the people who are practicing that profession. It makes them recognize that, in fact, they have an obligation among themselves to self-govern. A professional code for managers might compel a board of directors, before it gave a compensation contract that was not linked to performance, perhaps to think twice and to ask, "What does this mean for us as individuals who are custodians, and responsible for these resources?"

This would, I think, help also infuse some level of trust in the profession. Because if you believe that an individual will act in a way that's consistent with professional obligations, you don't spend as much time monitoring. The difficulty you encounter if you don't have this perceived ability to self-govern is the response of society when it says, "This group is incapable of self-governing, and we know there are problems with the market governing certain kinds of transactions, because of information asymmetries, or whatever else. So the only choice we have left is the law."

And the law is a heavy-handed way to insure good behavior. It's expensive. It's one-size-fits-all. Ideally, what you really want is self-governance. But the only way you get self-governance is by creating conditions that allow for self-governance, like an articulation of group purpose, or some way of monitoring norms.

For students in business schools, it can be as simple as infusing the students with a sense of responsibility—in some ways, socializing them by having them recognize the obligations that they've taken up.

JP: The issue of the social contract is very important in two ways. One, as Rakesh points out, when society feels that an occupation has defaulted on its part in the contract, then law comes in as the solution. We see the cost in a very vivid way these days, with Sarbanes-Oxley. It's very tangible, the cost we are all paying, because in effect management could not self-govern. And it couldn't self-govern, in part, because what has been lacking—this is the other side of what Rakesh was saying—is a notion of stewardship and responsibility in peoples' minds as they think about their enactment of the profession.

So there is a compact between the board and those of us who are here now. But there's also a compact between those who went before in the profession, and those who will come after. And if we are the generation that defaults, we have defaulted both on those prior, as well as those who come subsequently. But I think it would be very hard to find somebody on a board who thinks about it in those terms. The only time you actually find it is in partnerships of professional service firms. And then it's a compact among a relatively small group of individuals.

But the aspiration for management to be a profession is that that same guiding ethic that you can see in professional service firms, and that notion of stewardship, and obligation both to the past and the future—you would like to have that extend to the profession broadly.

RK: I think this is particularly true in business, because society grants corporations their license to operate. It's a privilege, in fact. It's like any other license that is granted, from a driver's license to a medical license. It comes with some recognition that you agree to some minimal sets of behavior. But at the same time, what you want is the expected, aspirational behavior. The problem with the law is that it sets the absolute bottom—the minimal acceptable behavior.

And all these things work in tandem with each other. You end up having to strengthen laws when people aren't even conforming to minimal role expectations, or minimal expectations of decent behavior. And you can see this in the wake of the scandals, when you heard people say, "Why weren't these people behaving like professionals?"

That then forced us to think about what it means to be "a professional." It's an easy term to throw around—I go to a professional barber. Or I have a professional landscaper. And I think it's a term that may be overused. But when you really get down to the root of what it means to be a professional, it has both a technical component, in terms of a common body of knowledge, and the development of ideas, but it also has a normative component, which is, how does one use that knowledge? And to what end is one using that knowledge?

So it has this ethic of service. And when you combine the two, it becomes a very powerful institution.

Q: You gave an example of a board granting a contract that doesn't have the right incentives. That's an example of non-professional management. How do you think about setting the bar for what constitutes professional quality management?

RK: Well, at a minimal level: "I will not lie." That would be a good starting place. "I will not lie in the course of exercising my professional obligations. And even when not asked, I will provide the information necessary." That would be another good minimum one. But I think the ultimate response is, "I will create value for society, rather than extract it." An obligation to create value would be a good start.

JP: In thinking about setting the bar, I would think about the notion of a normative task. As Rakesh mentioned earlier, professional standards are less about providing some computer-like algorithms for how to act than about how to frame a choice. And what does that then imply for this question of what it means to behave as a professional? It means that you are going to be aware of the trade-offs. And when you make a decision, you make it with full knowledge and understanding of the consequences. It's not that there's not uncertainty, or that unanticipated things can't happen, but when you make a decision on behalf of the shareholder, you're aware of the consequences for the employees. And you make the decision with that in mind.

So if there is a way to both satisfy the shareholder and satisfy the employees, or satisfy the shareholder, the employees, and the customer, you've at least gone to the trouble of developing an analytic discipline for thinking about problems that tries to acknowledge those diverse obligations. As opposed to looking at problems in a situationalist way, which says, "What is the way in which I get out of this situation, so that I do the best for me?" It's a "professional" mindset that you bring to the table.

RK: Here are just two specific examples I can think of. Hewlett-Packard has been in the news because of pretexting. When you read the reports, they kept asking the question to their corporate counsel, as well as to the outside counsel, "Is this legal?" rather than asking the question "Is this the right thing to do?"

Same thing when you look at all the write-offs and financial misstatements that were made by a variety of different companies during the corporate scandals of a few years ago. The question always was, "Is this GAAP compliant?" rather than, "Does this reflect the economic reality of the company?" What you want is people asking the latter question, not the former. The former is an important first step. But the latter question is the consequential one.

And the second level of questions are, "Is this the right thing to do? Does it meet the higher standards we have set for ourselves? Or is this about the minimum bar?" So, as Joel said, it's really a framing issue. That said, as educators, while we need to acknowledge the importance of framing, we also have to be careful to not give our students so many frames that they just take what's convenient or expedient at the moment.

It's easy to have a convenient framework, and just pick the one that serves one's purposes for the moment. But what business schools need to do is create an opportunity for a deeper, more complete understanding. When I went through the MBA program, in the ethics class, there was a framework for basically justifying almost any action, everything from child labor to sending a defective product out to the market. Some were defended on utilitarian grounds. Others were caveat emptor.

But it's not enough to simply provide people with tool kits and frameworks. The purpose of education—especially professional education—is also to provide some notion of guidance. And that's what the Hippocratic Oath does. That's what taking an oath of the Bar does. Not to say that those professions have always lived up to them, but those oaths are a way of actually holding members of those professions accountable.

JP: Right. This notion that MBA programs should provide graduates with a framework for guiding professional action is, I think, very central. And I think it's very unappreciated. But to the degree to which we give it greater attention, it begins to have tremendous implications for how we then think about how we educate.

One of the things that—at SOM, as well as at a lot of other schools—we're thinking hard about is the relationship of the disciplinary frameworks to what management practice is. One of the problems has been that, if the disciplinary framework becomes the dominant framework, it starts to drive out the professional framework. Each academic discipline has its own framework. Sociology talks a lot about power, so then power becomes the dominant lens. Or economics will talk about utility and cost and benefits. But if those become the dominant frame, what can then drop out of people's approach to evaluating a problem is that broader set of obligations to the profession—not to the academic discipline—that we were talking about earlier in the conversation.

RK: That's a really good way to go. As a business school professor it's easy to turn back to my discipline, because it feels comfortable. Because each discipline is very clear about its values and expectations. But business school professors, whatever their discipline, should acknowledge that one of their responsibilities is to help improve the practice of management, rather than saying, "Oh yeah, I teach at a business school. I really don't care that much about management." That's where academics have failed in the social contract they have with their students, and with the institution within which they're working.

JP: The relationship between the disciplines and the practice of management is very subtle. Because the value added, obviously, of the scholars who are in business schools is their tie to the academic disciplines. But at the same time, if the disciplinary frameworks are completely superimposed over the practice, then they obscure, rather than help to support and clarify, the act of practice.

We've had these dichotomies, certainly, since the time of the Carnegie and Ford Foundation reports, which just have not helped at all—dichotomies between rigor and relevance, or applied and theoretical. And they have really gotten in the way of: How can disciplinary knowledge be valued? How can it serve and inform practice?

RK: And I think even the framing within those dichotomies has been false.

JP: Right.

RK: Just to give a crude example, in the auto industry in the 1970s, there was a trade-off between quality and price. American automobile companies would say, "If you want quality, we're going to charge you $100,000 for a car. You can't have both. There's a trade-off." And on one level, that appeals to our simplistic ways of thinking. Because it could be drawn on a curve.

But it turns out there was no trade-off. What Toyota did was build quality into the process. And it turns out you got both high quality and lower prices. Or in the mining industry, Alcoa is an example. There was a view that there had to be a trade-off between safety and price. If we wanted worker safety, the price of aluminum would have to go up.

It turns out that if you build safety into the process, not only can you lower the number of accidents, you also lower the amount of waste and extra materials. We have this same kind of false dichotomy in business education today. It's not rigor or relevance. It's both. The best research demonstrates both.

JP: The economists will talk about being at the efficiency frontier. And it is certainly true that if you're at the efficiency frontier, then there's a trade-off. But the idea that management education—

RK: Is at the best of all worlds—

JP: —has somehow gotten to a point of highest efficiency, either in terms of application of disciplinary knowledge, or in terms of relevance for practice, is clearly not the case. I don't think there's anybody who would say that. Just like I don't think there's anybody who would say that the automotive industry is anywhere near an immovable efficiency frontier.

And the truth is that's what innovation is about. Innovation is about pushing out the frontier, of figuring out, in our case: "How do you teach? How do you educate? How do you do research? How do you bring scholars together, so that you can get more of both?"

So to just assume we're in this static world, where there is a trade-off—if you get more of one, you're giving up more of the other—you actually will end up leading to a self-fulfilling prophecy.

Q: Can the idea of management as a profession provide more than just a frame for viewing how you make decisions? Can it also change the way managers view themselves?

RK: I think it does. A profession becomes part of your identity, your sense of self, and conception of who you are. It becomes part of how you dress. It becomes part of your manner. It feels like a vocation, a calling. It fills you with a sense of purpose.

And that's the beauty of it. That's what I want to infuse my students with, that they've chosen a noble profession. But that making it noble depends on them. They have a huge opportunity to create real value for society and help rid society of some of its most vexing problems. And that they should not be embarrassed by it. They shouldn't have this notion of, "Well, I'll get educated, and I'll earn a lot of money, and then I'll give back to society." You're always finding ways to give back. In fact, in the pursuit of doing your job, what you're doing is giving back.

JP: I'm told by the alumni of SOM's earliest classes that Larry Isaacson, who was one of the very revered teachers in the institution, would tell students when they arrived, "You're going to feel us trying to transform you. And you're going to want to push back and say, 'I don't want to be transformed.'"

RK: But that's what we're paid to do!

JP: And he would say, "If you are not transformed, this is going to be a waste of two years. That's why you're here. That is what is going to happen. You are going to be transformed in terms of your identity. You're going to be transformed in terms of your aspirations. And you're going to be transformed in terms of what you value."

When we talk about management as a profession, we're talking about giving some specificity to that notion of transformation. I think if you talk to almost anybody who's been through a two-year MBA program, certainly at any of the leading institutions, they will talk about it as a transformative experience.

The question we haven't been asking enough is, transformed into what? But if we establish this notion of management as a profession, and the set of obligations that that implies, that becomes the transformation that must happen, in order for us to live up to our mission as a management school, and to live up to the university's mission of what it's trying to do, in terms of its education function.

RK: And I actually think the students will find the education even more engaging.

You know it really goes back to the Greek notion of paideia, which holds that the purpose of education is to become a more complete person. An excellent business education not only addresses technical issues, it addresses the existential issues: What does it mean to be a good person? How do I do my job well? That's what education is supposed to be doing. It's not just the technical element; it's the way that you become a whole person.

The Greeks would let their slaves take all the technical education they wanted, all the math, and all the engineering. But they would never let their slaves study the liberal arts or humanities, because they worried that the slaves would start asking themselves, "Why am I a slave?" You do your students a disservice if you don't actually help them recognize or fully utilize and explore the possibilities of education.

Q: What sense of profession do you think MBA students graduate with now?

JP: I think right now we're in a world that is relatively high variance. There are some who clearly have very high aspirations for themselves, and for what their peers can and should be doing. And then there are others for whom that's not a part of what they aspired to accomplish in business school. On some level, we must insist that there is a bar that is actually being set. And that part of graduation has to be about having those sets of aspirations. As opposed to: If you've got them, that's great. But if you don't have them, that's fine too, as long as you do what's legal. But that's where we are now.

RK: Most of our students come in wanting to make a difference in the world, but there are some who just want the credential. Credentials can surely be useful. But those latter students don't get out of business school what they could—or should. They graduate without taking advantage of an important opportunity. But at the same time, I'm optimistsic. I think there is a sense, even among business schools, that getting an MBA has got to be about something bigger than just self-interest, something more than credentialism or developing an elite social network. Because if that's all it is, then that's not enough justification for using the enormous amount of societal resources that a university-based business school uses. Maybe this is a personal view, but I just can't see that as enough of a justification for why a business school belongs in a university. Why couldn't the University of Phoenix Online just deliver MBA education better?

JP: Or a software firm?

RK: Or a corporate training facility? Business schools create a lot of value. But I think we could create a lot more.

JP: I think a sense of a profession is something that our students want. There are ebbs and flows, in terms of the degree to which different generations make professionalism and service a part of their generational identity. People talk about the generations that served in World War II as having a strong sense of service about their person, and their obligation to society. And the generation of the 1960s, and the Civil Rights Movement, that was also a generation where that notion of obligation and service and calling was present.

Now when people are talking about the millennial generation, it's the same thing. Service and societal obligation are part of their set of personal aspirations. It's not clear yet that they frame it as being an aspiration with respect to management and their careers, however. I think they want it as part of their careers, but it's not being framed that way, yet. And that's, I think, where those of us who are in the education business come in. Our obligation is to show how what they want for themselves as part of their personal aspirations can actually be very integral to what their careers can be.

RK: Joel and I agree. Look, a self-interested, self-indulgent corporate leadership is not an inevitability. There's a better model. And I think that better model can be found in the flawed but durable institution that we call a profession. This was part of the original purpose of the founding of the university-based business school, but it's not something that we have purposefully and explicitly tried to address. And I think we are at an inflection point at the beginning of the twenty-first century. The complexity of the problems that we are facing, which are global in nature, requires bodies of knowledge that cut across disciplines, and requires skills and leadership, where people can work across a variety of institutions. Pandemics. Global climate change. Issues around poverty. Global imbalances around that. Issues around primary education. I mean, these are the things that hold the whole social order together.

JP: Reconciling diversity on dimensions we've never even thought about.

RK: Religion.

JP: Exactly.

RK: So an enlightened business leadership, an enlightened managerial leadership is desperately needed by society right now. And in many ways, this presents a huge opportunity for the university to reconnect with society. When we can demonstrate that we are actively working on solving society's big problems, universities can regain the respect and the stature that they had in the early twentieth century, when we were seen as part of the civilizing process and not some isolated ivory tower. And I think it's a way for us to reconnect to our own mission, because the purpose of the university is not to maximize its endowment. The purpose of the university is to serve society. And I think business schools have an opportunity of reminding the rest of the university about these obligations as well.

Q: If you had the power right now, which of the institutions of a profession would you create for management? What practical things does the institution of management need going forward?

JP: Well, if you literally could wave a wand, I think you would like to have in place self-governing professional associations that would be a mechanism for monitoring behavior, in a way that would ensure that you're not going to have to default to law. Because when law comes in, it does so in a very adversarial way. Again, I'll go back to Sarbanes-Oxley. Nobody is experiencing that law as something they are part of, as something that is there to help them and protect them and guide them to do the right thing.

But that is exactly what professional associations do when they are well functioning, whether we're talking about engineers, or architects, or doctors, or lawyers. The professional association is a protection. It is a guide for those who are doing the right thing. And absent that, individuals will keep finding themselves in situations where they may want to do the right thing. They may feel they've done the right thing. But then they worry about a whole separate set of things, such as, "can I be assured that, if we are sued, I'm protected on that ground?" As opposed to just worrying about doing the right thing. And I think that's what you would ideally try to put into place. What do you think?

RK: If I were a dean of a business school, two things would happen. There'd be some system for certifying the knowledge of our students, just so they couldn't ever stand up and say, "Well I didn't understand accounting." Wait! But you have an MBA!

Of course we would have to figure out the body of knowledge we'd really want to test our students on, but I think that would be relatively easy to figure out.

The second thing would be an oath upon graduation. Just as a start—an oath you make to yourself and to the profession of management. But I think Joel's exactly right, that a professional association provides a community of practice for people to talk about the difficult issues and how to resolve them.

JP: So just to introduce some disagreement into this, to make this more interesting, the oath works, for me, at least insofar as it implies a code. The certification I would put pretty low on the list. Part of it is that if you look at what doctors and lawyers are certified for, it actually has very little to do with their professional obligation. You pass the Bar because you know the laws of a particular state. But the fact that you may know the laws probably does not predict the degree to which you can actually live up to the standards of the profession.

The code, to me, gets certainly closer, and in that direction. But then I worry that, absent some notion of an enforcement mechanism and some notion of an institution or governing body that's interpreting the code, no one will know when somebody is actually adhering to the code, even if outsiders think they didn't. Conversely, no one will know when somebody's violated the code, even when insiders think they didn't.

RK: I think you're right. The capacity for self-governance definitely depends on a strong professional association. And my thinking about the oath is that this will ultimately depend on leadership and support from a vanguard of alumni who see the oath as an important differentiator, and who will step forward to create the structures, the communities, to support this effort. And those structures and communities will become meaningful, so that people will want to belong to them. They will become a source of status, a source of honor.

On the certification of knowledge, the issue is not, I think, with the top business schools. The problem is that the MBA has become increasingly commodified. Part of being a profession is you don't see your degree as a commodity. Rather, you see it as something rare, valued, and difficult to obtain. I get about 12 emails a day offering me an MBA from a variety of institutions. The largest grantor of MBAs today is a for-profit institution in the United States. So the top business schools need to find meaningful ways of distinguishing themselves from the diploma mills that are proliferating.

JP: I still worry that for-profit institutions could play the skills game too. What if the University of Phoenix starts offering online LASIK surgery training? You could imagine that, in some ways. But why doesn't it exist? It doesn't exist because, among universities, there arose, starting with their alumni, starting with the faculty, a notion that as a profession, it's not just about, can we do the skills? It is more than that. It is about, can we live up to a professional ideal?

RK: That's a great example. A master carpenter would probably make as good a surgeon, mechanically, as a surgeon who went to medical school. The high-level hand-eye coordination skills probably are the same. But why was it that barbers were rescinded the right to give surgeries? Part of it was that we didn't just want surgeons to know what to do, we also wanted them to know why they were doing it. It wasn't just the technical that mattered; it was the "why."

JP: It's interesting to think about this in a global context. One of the tests you could think about—because it links to legitimacy—is whether other countries look at your profession in your country as emblematic of what they would want in theirs. Right?

RK: Yes. Right.

JP: The medical profession in the United States would certainly be seen as emblematic. It'd be interesting to run a similar test for the management profession in the United States. If you went to the society at large and said, "Would you like to see U.S.-trained MBAs come in, en masse, and manage your institutions? Do you think you would be better off as a society?" I think there would be a more mixed reaction. I think those who would be in favor would be those who presumably own the capital. And those who would be less in favor might be those who were worried about that elusive societal obligation.

RK: If I could take that point further, we're operating in an ever more globalized, economically interdependent world, where there are so many nations with weak social institutions. So the notion of a professional management class that recognizes its higher responsibility, I think, is more important than ever.

Otherwise it gets easy for a company to move out of a place where it feels constrained by, for example, environmental laws, and go to a place where there is no enforcement of environmental law, or perhaps even no environmental laws on the books. Or, a company could go to a place where there are no child-labor regulations. In the global economy, having managers who see themselves as professionals matters more, because you don't have the competing institutions to balance out, to ameliorate the externalities.

JP: I remember at Stanford the head of a large multinational corporation talking about the fact that, from his perspective, he didn't feel as if he had the power to affect a lot of social, political, and economic dynamics in this increasingly global economy. But what was clear was others believed he did, in a way that they didn't in the past. His point was, if others believe that we have that power, we have to start acting as if we do, even if we don't. Otherwise, we will be blamed and assigned responsibility for not responding appropriately.

RK: If you want the power to basically shape the trajectory of society and social welfare, with that comes a set of obligations and responsibilities. Because business is increasingly being asked to do things that we used to depend on the state to do. And so with that comes a set of higher-order responsibilities. And even if you don't want them, if the perception is that you have responsibility, you are obligated to act in a way that is consistent with that.

Q: So what are some of the challenges to the idea of management being a profession? Or are there downsides? For instance, would it impose limitations on individuals or organizations that don't exist now? Or are there other challenges?

JP: Short-term, of course, the downside is the difficulty that it actually presents, in terms of implementation. It's a tall order. But longer-term, I go back to where we started. There is no stable long-term for business education in universities if management is not going to be a profession.

Rakesh is exactly right. Then the company training programs, the online MBAs—they can be the trade schools. But if universities behave just like trade schools—if that's all they do—at some point, the universities' legitimacy will be undermined. They will be perceived as simply perpetuating unjustifiable inequality in access and privilege and wealth.

RK: Right. If you get exactly the same training at the University of Phoenix Online as you receive at an elite business school, that undermines the concept of management as a profession. And it is the obligation of the elite business schools to impart not only a common body of knowledge, but also a sense of obligation or commitment to using that knowledge for advancing the societal interest. Further, it is incumbent on us in universities to encourage the development of a community of practice.

JP: Right.

Q: Is the idea of a profession in conflict with market forces? Is that a challenge?

JP: It's a tension. There are those who are certainly willing to pay for a set of behaviors that, in the short-term, are not necessarily going to be consistent with professional aspirations.

Now, in saying I think there is a tension, I'm not saying that it can't be resolved. But it is hard. Go back to Rakesh's earlier example—it wasn't trivial for Toyota to figure out how to get both less expensive cars and more efficient cars.

RK: And one of the things that we have to recognize is that, in fact, professional logic is different than market logic. Markets and professions are different institutions. Just like organizational logic or bureaucratic logic is different than market logic. The thing that we have to be careful of is not to deny the legitimacy of other institutions. Ronald Coase won a Nobel Prize showing that the market doesn't solve all problems. You have to create organizations and authority mechanisms for some set of problems. If anybody could call themselves a doctor, and we didn't have medical schools, anybody would be able to just self-diagnose, and then go to the pharmacy and dispense themselves whatever drugs they wanted.

JP: Why a pharmacy? I'd like to submit they go to WebMD.

RK: Right. Or go to WebMD. That's a simplistic and incorrect—not to mention a potentially dangerous—way of looking at the world. The world is complicated and institutions are complicated. And professional institutions all have to operate at some level. Just to take a very simple example, markets don't work well when the professionals that we use to guide their good behavior also fail.

In the case of many of the most flagrant—and even the less flagrant—recent business scandals, the gatekeepers that we had assigned—lawyers, analysts, auditors—when they failed, the markets failed.

JP: Let me offer a positive example. You know the story of Long-Term Capital Management. Were it not the case that a set of banks were able to behave in a professional way, to come together to bail out Long-Term Capital, then the financial implications could have been horrific for everybody.

So we actually can point to moments where, in small numbers, groups have come together, behaved in a way that could be characterized as in keeping with a "profession," and actually saved the market. So markets and professions don't always have to be in tension. But markets don't exist in a vacuum. They exist as part of a broader infrastructure.

We have to acknowledge that infrastructure. And we have to also acknowledge that, if markets are completely unchecked by all other institutions, that at the end of the day, they will be undermined, in just the way that Long-Term Capital and the dynamics that followed from it could have completely undermined that particular market. We need more behavior like that which was shown when the Fed brought together a number of these banks and said, "Can we behave as a profession, as guardians of these capital markets that we've been entrusted with?" And it worked.

Is it always going to work? Long-Term Capital was the first of the hedge funds. We now have over 5,000 of them. The amount of capital that is now leveraged, relative to what was leveraged then, is much greater. And so we are at risk. And if we can't be assured that there will be the same professional behavior underlying the market, what will happen? The markets will crash. And the solution will be for law to come in and make for less effective business institutions and less effective markets.

RK: And then you'll get the heavy hand of the state, supplanting both the markets and the profession.