Harvard Business School

Transcript

I came to the School in 1963, after having been defeated for the U.S. Senate by Edward Kennedy. And I had been here briefly before I ran for the Senate, but I came back, and Dean Baker said, "Alright, we'll hire you for one year. And half your time will be spent trying to spread the light of Harvard in the developing world." Now these were the great days of the Kennedy administration, when the notion was there was no problem in the world that the U.S. couldn't solve, with the help of Harvard.

I had just come from Washington, where I had worked in government for something like five years, part of it in the Kennedy administration. So I had a lot of friends down there. One of them was Walt Rostow, ex-professor of MIT, who was, at that time, the head of the policy planning staff in the State Department. So I went down and saw Walt. I said, "Walt, the great day has come. Harvard ready to go to the developing world and spread the light." He said, "Wonderful. Where do you want to go?" I said, "I don't know. What have you got in mind?" He said, "Well, the President has just made a major speech in San Jose, Costa Rica, pledging the United States to support the integration of these six countries in Central America. And they need managers: public sector, private sector. So why don't you go there?" And he said, "Six countries, all very different. Very interesting research opportunities for your faculty. And we can get you an AID contract to pay for it."

Well, I thought to myself, "It sounds very interesting." But Harvard Business School had never had a government contract. Harvard faculty, which I knew would have to approve this, was rather allergic to government. Red tape, bureaucracy, all that kind of thing. Academic freedom. So I said to Walt, "Well, listen, how about could we get a letter from the President inviting us to do this?" He said, "Sure, George. My secretary's sick. You go out there. You write whatever letter you like. We'll get Jack to sign it." So I'm sitting there, "Dear Dean Baker: The national interest requires," stuff. A couple of weeks later, I'm sitting in my office, and the Dean calls me up and says, "George, I just got a letter from the President!" I said, "No kidding. What did it say?" "Wants us to go to Central America."

So that's how it began. Now, that was the early spring of '63. I took a team of nine students—doctoral candidates, recent graduates—to Central America, under a preliminary AID contract, before we had decided to actually do anything, to make a study of the region to prepare a report to the Harvard Business School faculty, on which they would have to vote. And so we conducted something like 400 interviews in the region.

Part of the purpose of this study was to find out whether it was feasible for us to establish any kind of institution or program for the training of managers in the region. And I found that the business community was not very enthusiastic. They said, "What do you know about Central America? And anyway, management is something you learn by experience. It's not something a bunch of professors can teach. And especially foreigners."

I went to the national universities, which were in a state of uproar, with student riots regularly stopping any activity at all. And, of course, they were allergic to anything that smacked of capitalism. And their notion of academics was highly theoretical, in the European model. So it became perfectly obvious that nothing was going to be done that had anything to do with any of the national universities. It had to be independent. And it seemed to me that anything that was going to be done should likewise have nothing to do with any of the national governments, which were in a state of continual turmoil. So it became obvious, I think, that anything that was going to be done had to be regional, and had to be totally independent.

Before I went down I asked people, around New York and elsewhere, the names of leaders in Central America who were crucial to this effort. And everybody said, "Well, there's one guy. If he's with you, you cannot fail. If he isn't, you cannot win. Francisco De Sola of El Salvador." So I went to see him. In fact, I met him in the residence of the U.S. Ambassador in El Salvador, Murat Williams. And "Don Chico," as he was called, who was a marvelous man, became one of my dearest friends.

Don Chico took me off into a little room, and he said, "Alright, what is this that you are talking about?" And I described to him the idea, and I described to him the case method—the idea that professors actually went out into factories, and into the field, to find out how things were done, and to identify problems. Incidentally, when I talked to the universities, the last thing they had in mind was any professors going into factories and fields to find out anything. So I described the idea to De Sola, and he said, in his wonderful serious and solemn way, "We have to do it. It will be difficult, but we have to do it."

So he assembled a group of leaders from the six countries, which became kind of the initial committee for the establishment of something. Nobody knew what. Something. And he said, "Is there a way in which we can demonstrate what you mean by management education?" So we planned a series of three three-week mini-Advanced Management Programs. I recruited for those programs the very best professors Harvard had—Dan Throop Smith, Hugo Uyterhoeven, Milt Brown, Phil Thurston, Tom Kennedy. I don't remember the whole list, but it was—Wick Skinner. It was a wonderful group of people, just as teachers. They knew nothing about Central America, but they knew how to teach.

But before we get to those, which started in the spring of '64, of course, we came back and reported to the faculty, in the fall of '63, the result of this initial exploration, with a recommendation that we should agree to receive the millions of dollars that AID was eager to provide to us because of the letter from the President.

Incidentally, there was another added benefit that the letter of the President provided. AID had very strict regulations about how these things were to be done. They wanted MBAs graduated in three years, and things like that. I knew that wasn't feasible. With the letter from the President, we could get whatever deal we wanted from AID. And it was very generous, and very flexible. . . .

Now, this was early in Dean Baker's administration, and he was anxious about how the faculty would regard this initiative, because it was different from the others we had done. Harry Hansen had helped start a school in Ahmedabad, India. Steve Fuller, in the Philippines. There was a program in Turkey, a program in Iran. All of this was done with foundation help. Much of it was not really institution-building, so much as it was helping existing institutions.

So this was certainly the first time we had undertaken anything with the U.S. government, and it was to build a new institution, which didn't exist. So the dean was enthusiastic, I think, because this was the tenor of the times. It was the Kennedy mystique. It was part of doing good all over the world. At various points, we had forty members of the Harvard Business School faculty involved in some way or other in the Central American project. Writing cases, teaching. Even today, Michael Porter spends time at INCAE; Jim Austin.

So the times were such as to encourage this kind of an effort, enthusiastically. This was before Vietnam, before Watergate, before the world had become kind of tainted, from the United States' point of view.

So the report went to the faculty. The dean was nervous. He had President Pusey come to the faculty meeting. In order to show objectivity, he had requested a professor, Abraham Zaleznik, to go to Central America, knowing that Abe would write a negative report. And Abe went around and said, "This is not the place for us. It's too small, too poor. We should go to San Paulo, or somewhere else."

So the faculty had before it the two reports—Abe's report, and my report—and we had a debate. I don't remember what the vote was, but it was not overwhelming. It was in favor of INCAE, but it certainly wasn't unanimous. But it was enough for the dean to say, "Okay, we'll go with it." And I know that Pusey was very excited by this.

We all went to the Dean's house, I recall, and had some drinks, and Baker called De Sola in San Salvador to tell him the good news. And De Sola, of course, was delighted. That was followed by the first of these executive programs in Antigua, Guatemala, in an old convent. I taught in it, and Hugo Uyterhoeven, and Milt Brown, Phil Thurston. And it was a fantastic success. De Sola had called up all his friends in the six countries and said, "You've got to come." And when he said that, they came.

So we had the top business people from the six countries, along with a number of government officials. And it was very exciting. They all got so excited by the process, you know, and by the great teaching of our faculty, who didn't pretend to know anything about Central America, but they didn't have to. Everybody there knew about Central America. All they had to do was get them to wrestle with the problems.

And then we had a sequel to that, out in the middle of nowhere, in Panama; Boquete, Panama. It was held in an old high school, with no sides, because the climate was such that all you needed for a high school in Boquete was a roof and a floor. So here we were, in this place. Again, all of the hot shots from Harvard came to this place. Four hours, it was, out from Panama City.

And I had the problem of putting up blackboards. Because as you know, our faculty requires blackboards. And they can't just be any old blackboards. They have to be very, very strong blackboards, because our faculty likes to pound them. Well, the ceiling in this high school was very high. There were no blackboards. So I had the problem of finding two-by-fours that I could splice together, and reach from the floor to the ceiling, and then getting blackboards to put on them. Well, my Spanish wasn't too good in those days. And there was a carpenter in this town who thought I was crazy mad, splicing two-by-fours to get to the ceiling. But together we did it, and we had blackboards flown up from Panama City in an old DC-3, and erected blackboards which the professors could pound.

We had interpreters come down from New York, from the U.N. None of their equipment worked. And they'd plug it in. No. No light. So we found this guy who worked for a private telephone company in Panama who happened to live in Boquete. He came, fixed the whole thing overnight. It was the day before the program was supposed to open. I had no idea what I was going to do. Nothing worked. He comes in like out of the sky. Fixes it.

And this was typical of the early days of INCAE. Any number of small and big problems which could have been the end. But because of De Sola's determination, and because of just luck, it took off. . . .

The short programs were designed to sort of prefabricate an alumni population, you see, and get a body of business support. Because I wanted them to know that this wasn't a Harvard project, this was their project, which we were helping them to create. AID wanted us to make three-year contracts. I said no, we want one-year contracts, because I want to be able to say to the Central Americans, at any point, "We stop if you don't do your part of it." So these programs were partly to show what management education was, but also to generate the organizational structure which the establishment of a new institution requires.

Now, after Antigua, in the spring of '64, this group got together, under De Sola's leadership, and said, "We've got to have an institution. We've got to have a school." And they were arguing about where it should be. De Sola wanted it in Guatemala, because Antigua was a very beautiful place. But the Nicaraguans were determined to have it there. And they got Rene Schick, who was the dictator in charge of Nicaragua at the time, to offer anything: land, power, roads. Anything that the group wanted, he would provide. And Nicaragua didn't have any of the regional institutions.

So the decision was, "We'll put it in Nicaragua." The Harvard School of Design sent a couple of guys down. We flew over Nicaragua, and picked the place we wanted to put INCAE, about 11 kilometers outside of Managua. And we said to the Nicaraguan community, and the government, "Here's where we want it." Overnight—this is what you can do with a dictatorship—overnight, houses were torn down. The land was INCAE's. Beautiful site. A plateau outside of the city. Beautiful buildings were built. We had a wonderful architect. Lovely campus. And that was the first institution of INCAE. . . .

The earthquake, yes. . . .

It was when Tacho Somoza was dictator. And -- yeah, a very bad earthquake. Managua was demolished. And the Somoza government was receiving millions and millions of dollars of aid to rebuild and recover. But everybody was a little nervous about Somoza having all this money, because they didn't know quite what he was going to do with it. And Somoza, to his credit, wanted to do the right thing, but he said, "Nobody will believe me." So he came to INCAE, and he said, "Will you take charge of rebuilding in Nicaragua? Because you've got the talent, and all I get is blame."

So they called up Harvard. I guess I spoke to them. And the faculty was very nervous about this, because they thought they were sort of being used by Somoza, and that he was going to get them in trouble, and they didn't know how to do this, and so on. So we found folks at the -- at the Kennedy School.

The Kennedy School at that time had a center which was sort of a mini Agency for International Development. The Center for International Development, or something. And they had development experts there. And we got a couple of them to go down, and based at INCAE. And INCAE, with their help, did indeed design, plan, program the redevelopment of, and renovation of Nicaragua. And they did it well, and safely.

Now later on, of course, came the war in Nicaragua, and the Contra-Sandinista civil strife. And I could tell you about that. . . .

The students had left because they didn't want to get shot. Understandable. And indeed, INCAE had opened a second campus in Costa Rica in order to provide education during the civil war. But the Nicaraguan campus was open, was there. John Ickes was in charge. And he turned it into a hospital for Sandinista soldiers. Which was a brilliant step, because the Sandinistas won.

Now, after the Sandinistas won, of course everybody was very worried about what was going to happen to INCAE, because some people thought they were a rather unsavory bunch, the junta. Tomas Borge, and Jaime Wheelock, and the rest of them. So the INCAE faculty called us up up here and said, you know, "We're worried about academic freedom. We're worried about being able to get foreign exchange. We're worried about all these things. Can you help us?" And I said, "Well, what do you think we can do?" And they said, "Well, maybe you could threaten to withdraw Harvard's support from INCAE because of this event." I said, "Sure we can do that." But by that time, of course, Harvard had very little to do with INCAE, except sending people who wanted to go there. So it was a meaningless threat, but the junta didn't know that.

So the junta came, and we had a breakfast with them in the Faculty Club, a bunch of us. Jim Austin, and me, and Jim Heskett, I think, and some others. And they were in their jungle greens. I couldn't believe it. These guys who had just won this spectacular civil war. And they said, "We want INCAE to stay, because we need help." They talked about INCAE as though it would be the Council of Economic Advisors, you know, for the junta. "We have to train our young men to manage the Somoza enterprises," said they. Somoza owned 80 percent of Nicaragua, and now the Sandinistas had it, and they didn't know how to do anything.

So INCAE ran crash programs, mini AMPs, for the Sandinista folks who were going to have to go out and run the enterprises. Well, so the junta said, "We want INCAE to stay. Please, please stay." So we very seriously said, "Well, what about foreign exchange? What about academic freedom? What about this?" "Anything you want! Anything you want!" So INCAE stayed. The Sandinista government couldn't have been more cooperative. The school flourished. . . .

Clark Wilson, he was a hero, an early hero of INCAE. He was the first rector. And he had the problem of getting students to come in, and to pay for them. Clark did a fantastic job, and then Wick Skinner, and Harry Strachan. All these were Harvard people. And they ran the school in the early years. Now we trained a large number of Central Americans to be the faculty, and they went back. And some of them stayed in INCAE, but unfortunately some of them took their Harvard education and went off to make some money, which wasn't exactly what we had designed.

About fifteen years ago, INCAE had its first rector who was a graduate of the school. Total independence from Harvard, from any kind of connection. And indeed, for most of its life, it has been entirely autonomous. Of course, it has used and enjoyed Harvard connections, both in terms of training its faculty, and having Harvard faculty go and spend time there doing research, or teaching, or whatever. And many of our faculty have, I think, benefited from it. In fact, I would say about forty of our faculty have, in one way or another, benefited from INCAE. . . .

I began a research project in rural Panama, the Veraguas province of Panama, where for three years my students and I watched a radical bishop literally change a province, in terms of poverty reduction, health, so on. I wrote a book about this called Engines of Change, which was how I became a professor, actually. When I started here I really didn't think I was going to be a professor. But that work was well-received. Sam Huntington wrote the foreword, you know.

That work, which explored the change process, and how it occurred, and what the characteristics of a successful engine of change were. That work, I think, was very important for INCAE, because it established from the beginning that this was not a school for capitalism, nor communism, nor socialism. It was a school about the management of real problems, in a place that was changing radically all the time. So the management of change became, I think, perhaps its most important intellectual focus. And I like to think that the work we did in Veraguas had something to do with that.

It was very important that it not be perceived as an ideological imposition, in other words. It had to be homegrown, focused on the reality of Central America. And the Sandinistas saw that. I mean, capitalism, socialism, communism—you've got to run the tractor plant, you know, whatever. And it was interesting in that case, because while they were anti-American, the people running these factories said, "Look, the spare parts come from Indianapolis. If we're going to borrow money, dollars are better than rubles. And the markets—where are we going to sell this stuff? Not in Russia."

So just the fact of running the place had a very profound impact on the Sandinistas, who liked to think that their Bulgarian associates that the Russians provided them were going to be helpful. But it turned out that those Bulgarians were more of a problem than they were a solution for them. . . .

The ironies, yes, you'd see. And even more ironical, here the Reagan administration was supporting the Contras against the Sandinistas. Our school was training the Sandinistas to run the enterprise, but at that time, we still needed U.S. government money, INCAE did. So how could you get US government money to support INCAE, doing what it was doing? Hardly anybody knows this, but what INCAE did was go to the regional AID agency, and so we channeled the money around US AID Nicaragua. So another aspect of the irony.

Of course, the U.S. government's policy, with respect to the Contras in the Iran-Contra affair, was a total disaster. And anybody who knew anything about Central America could have predicted that it was a total disaster. But the record of U.S. government disasters in Central America is a pretty long one.