Annotated Bibliography Needed

Making Management Matter:

An Interview With John Reed MIE AUGIER Stanford University John S. Reed, born February 7, 1939 is well known as the former chairman of CitiCorp and for his role as interim chairman and CEO of the New York Stock Exchange. Reed is also known for his scientific interests, for “thinking outside the box,” and for his commitment to technology and management.

Raised in Argentina and Brazil, where his father was an executive with Armour and Co., Reed studied at Washington & Jefferson College and the Massachusetts Institute of Technology under a joint-degree program earning both the Bachelor of Arts and Bachelor of Science degrees in 1961. After a year as a trainee with The Goodyear Tire & Rubber Co., in Akron, Ohio, and two years as an officer in the U.S. Army Corps of Engineers, he returned to MIT to earn a Master of Science degree from the Sloan School in 1965.

In April 2000, Mr. Reed retired after a 35-year career with Citibank, Citicorp, and Citigroup. He was elected chairman and CEO of Citicorp and Citibank in September 1984.

Citicorp merged with Travelers Company in October 1998; subsequently, Reed served as chairman and co-CEO of the new company: Citigroup. In September, 2003, John Reed was appointed interim chairman and CEO of the New York Stock Exchange. Since the appointment of John A. Thain as CEO (from January, 2004), Mr. Reed continued as chairman of NYSE until April, 2005.

Mr. Reed is on the boards of the Spencer Foundation in Chicago, The Manpower Demonstration Research Corporation, National Writing Project and the Rand Corporation, and was, until 2003, on the Board of Philip Morris/Altria. He also serves on the board of MIT. He is a Fellow of the American Academy of Arts and Sciences and of the American Philosophical Society.

Although he is known as a businessman and a leader, Reed is strikingly academic in his approach to problems; talking with him is not much different than talking with a university professor, and he is very well read and keeps in close touch with recent developments in business economics, leadership, and management education. He has a broad range of interests and a deep sense of vision; and in conversation, one cannot help being struck by his ability to link problems of management (and the real world in general) to the world of ideas.

As an introduction, I will introduce the context and some key issues about business education and leadership—issues central to Reed’s current interests, as well as to his background and professional experience. ........................................................................................................................................................................

I am grateful to James March for comments and invaluable suggestions, and to Allen Bluedorn and two anonymous referees for excellent comments on earlier versions of this interview; and, in particular, to John S. Reed for his time and patience with my (many) questions. Much of the writing for this interview was done during visits to the RAND Corporation and I am grateful for their hospitality and support. The RAND archives provided valuable information on the background for the behavioral science and I am indebted to Vivian Arterbery and Ann Horn for their help and insights. The support from the Sloan Foundation, the Spencer Foundation and the Copenhagen Business School is gratefully acknowledged.

Academy of Management Learning & Education, 2006, Vol. 5, No. 1, 84 –100.

........................................................................................................................................................................ 84 BACKGROUND: BUSINESS EDUCATION IN THE UNITED STATES Described by his friend, James G. March, as “one of us” (in Huff, 2000) and characterized by him as having a deep commitment to knowledge, interest in basic research, and the pursuit of academic ideas, John Reed’s interest in business education, in the practice of management, and in integrating theory and practice reflects some of the deep ten- sions in our field. For decades, American business education has, implicitly or explicitly, been domi- nated by two seemingly contradictory objectives:

the quest for academic knowledge and basic re- search on the one hand, and the search for rele- vance on the other. As Reed notes in the interview, interaction between the academic community and management practice is important— but he argues that scholars in management theory should be less concerned about achieving immediate relevance and more concerned about providing a basic framework for understanding managerial prob- lems. In that spirit, Reed calls for some major changes in business education; in much the same spirit as Herb Simon (1967) and the Gordon Howell report (Gordon & Howell, 1959) recommended a “revolution” in business.

We may summarize the challenges relating to some of the central issues discussed below in terms of the following two paradoxes confronting the future of management education:

Being Interdisciplinary, But Being Disciplined A fundamental requirement for management edu- cation is to maintain a balance between doing interdisciplinary research and drawing from the disciplines. To provide insight into the complex problems that businesses face, we need to cross disciplines because the problems themselves are interdisciplinary. But, sometimes interdisciplinary work becomes multidisciplinary, and sometimes multidisciplinary work seems to have no disci- pline, rather than many. This can lead to pluralism and fragmentation, rather than progress (Kuhn, 1970; March, 1991). To develop and sustain a bal- ance between discipline and interdisciplinary work is essential.

Being Scholarly, But Being Relevant Management research needs to be grounded in practical problems, but we still need good basic research. In order to foster managerial competen- cies, we need basic research that can help us tothink through and frame—not necessarily solve— management problems. Framing fundamental is- sues and finding good but “messy” research prob- lems is often more valuable than tight solutions to narrow well-defined problems.

Reed’s own interests and active engagement in improving the conditions of management educa- tion are manifested, for instance, in his creation of the Citicorp Behavioral Sciences Research Coun- cil, which was an interdisciplinary group of man- agement scholars and practitioners that Reed got together to discuss (and fund) projects and prob- lems. Before it was discontinued by his successors, the CBSRC funded several million dollars in re- search studies using Citicorp and Citigroup as a site. Another example is his interest and recent efforts to help recreate American business educa- tion (as discussed in the interview below).

Reed advocates broadening the scope of ques- tions asked and methods used by modern business school researchers. But he wants to do much more than that. In Reed’s conception, basic (abstract) knowledge is necessary for dealing with a rapidly changing world, and one of the potential contribu- tions of management research is to shape mana- gerial thinking through fundamental research on the processes of business. The failure of business schools and business education to focus on the long-term, evolutionary, development of funda- mental ideas is at the heart of Reed’s critique of contemporary business schools.

LEADERSHIP Another element of Reed’s interest is reflected in his experience as a leader— which also goes to the core of the academic community and its theories of leadership. The field of leadership, like other fields in management, must struggle to be both rigorous yet relevant, interdisciplinary yet disciplined. Pro- fessor James March has discussed these issues on several occasions, and his filmPassion and Disci- pline: Don Quixote’s Lessons for Leadership 1is an extension of his examination of the problems of achieving a balance between “exploration” and “exploitation” (see, in particular, March, 1991, 1996). Exploiting existing capabilities is full of re- wards in the short run, but doesn’t prepare people for changes in technologies, capabilities, desires, 1The movie,Passion and Discipline, can be purchased through “Films for the Humanities and Sciences,” www.films.com. A flavor of some of the main ideas in the movie and the back- ground is also discussed in the interview with March in the recent issue ofAcademy of Management Learning & Education, 3(2):169-177. 200685 Augier and Reed tastes and identities. For such preparation, explo- ration is necessary. Exploration involves search- ing for things that might come to be known, exper- imenting with doing things that are not warranted by experience or expectations. In all areas (in re- search as well as in life) we need both sides, as discussed by Reed below.

The field of leadership, like other fields in management, must struggle to be both rigorous yet relevant, interdisciplinary yet disciplined. But what, on a practical side, makes great lead- ers in a business context? Although Plato estab- lished a school for leadership, the Paidea, in early Greece, most of our current understanding of lead- ers comes not from philosophers, but from an ex- amination of political and military leaders: Henry V’s victory at Agincourt against overwhelming odds; George Washington who defeated better equipped Hessian forces; and Winston Churchill who kept up British spirits and capabilities during the Battle of Britain. But Hitler and Mussolini were leaders too, which immediately suggests a possi- ble macabre side of leadership. The complexities and possible sinister side of leadership highlight the importance to leadership of values, personal integrity, and systems of institutional governance (as Reed points out below). To assure such mech- anisms, leaders in business organizations at all levels and functions must view leadership as part of the company’s capability. They must also, as emphasized by March and Reed, have a strong “sense of self,” of identity.

Therefore, to Reed, the pressures and tensions between relevance and academic integrity are not inherent in our fields. Good basic research leads to good practice. Thus, Reed has supported perspec- tives on leadership that emphasize the link be- tween leadership and theories of organizational choice, learning, and evolution, and particularly the trade-off between exploration and exploita- tion. 2As a result, he sees creativity and imagina- tion as vital, and creative leadership as requiring a framework that can support and assist creativity.

Such a framework is provided by mechanisms of corporate governance.

Reed’s latest experience as an interim chair and CEO of the New York Stock Exchange demon- strates this relationship between creativity andgovernance in leadership. He emphasizes the im- portance of a well-functioning system of corporate governance in its ability to provide a framework for the creativity of the daily leadership.

Such views of leadership, and perhaps espe- cially of management education, may be thought somewhat unusual for a man of business. But, as is evident below, Reed is much more than a busi- nessman and a leader. His ideas raise fundamen- tal questions about how contemporary and future business school education must be restructured to accommodate the need for business research and practice to work together and to develop manage- rial competences.

The following interview is drawn from conversa- tions that took place between John Reed and my- self in John Reed’s office at Citigroup, New York, between February 25, 2003 and August 25, 2004.

First, Mr. Reed, I want to go back in time and hear about your education and early interests; can you tell a bit about your background and how you became interested in the field of management and leadership?

Sure, my story is really simple. I was born in Chi- cago in a very traditional, Midwestern American family which had been in the United States for a long time. Both my parents were from Toledo, Ohio, and very traditional families. My father went to MIT and was an electrical engineer; he and my mother wanted to get married, and in those days when you got out of school you didn’t have enough money to get married, so interestingly, somebody offered my father a job in Argentina. The only char- acteristic of the job that was interesting was that it would pay him enough so he could afford to get married. So he said “why not,” and my mother said ”why not,” and they went down there to Argentina and got married. And then they came back to the States and I was born in Chicago. Because of that, when I was five years old we went back down to Argentina. So I was born in Chicago in 1939, and in early 1945 or late 1944, while the war was still going on, we went down to Argentina. I started first grade in Buenos Aires and I lived in Argentina for about 4 years, and then I went to San Paulo, Bra- zil—this was 1948 —and I lived in Brazil for about 2 1/2 years and then I went back to Argentina and finished my high school there. So that all my edu- cation was in South America: first in Argentina in Spanish, then in Brazil in Portuguese.

Then I went up to the United States for college. I took what was called in those days a 3-2 plan, where I had 3 years of liberal arts and then 2 years 2See March (1991) for details on the exploration and exploita- tion framework. 86March Academy of Management Learning & Education of engineering and at the end of 5 years received a degree in liberal arts and a degree in engineering.

I studied liberal arts in a small school outside of Pittsburgh called Washington and Jefferson Col- lege. When I was there it was for men only. And then 2 years at MIT. And I graduated in 1961 and then I went to work for Goodyear in Ohio on the production line, making tires. Then I went to the army for 2 years—I was a lieutenant in an engi- neering group and spent most of the time in Korea.

I came back from the army and immediately went back to MIT and got my master’s at the Sloan School. And then I joined Citi [Citibank].

Why did you choose to go to MIT?

Very simple— because my father had gone there!

And when you have been raised outside the United States and don’t know much of the places here and your father had been to a place that sounds good . . . you go there! My father very much felt that I should do the 3-2 plan because he said that cultur- ally, it is going to be very hard to go from Argen- tina to the United States. Of course, this was in the late fifties and early sixties, and there was this feeling that engineering was too restricted and that you should combine liberal arts and engineer- ing. And I think that turned out to be very useful.

He was correct, culturally—and you would appre- ciate this too I think—arriving in the United States was a shock— even though an American by back- ground, I had spent all my life in Latin America, so I wasn’t “really” an American. I appeared to be, but I wasn’t. And it turned out to be a wonderful thing that I did. So anyway, the selection of MIT was because my father had gone there and that was all I knew; my father had always said that an engi- neering education was good. Even if you have no interest in engineering it teaches you how to think, which I think is true; whether that is agoodthing is more debatable because it teaches you how to think in a very different and narrow way. MIT’s three-two plan partnered with about ten different small schools. I knew nothing of Pittsburgh and didn’t know where it was, but I went there.

When did you become interested in management:

was that during your student years?

I always was interested in management. It is funny, when I was very young when all my friends said “I want to be a chemist” or “I want to be this or that,” I always said “when I’m big, I want to run things.” I always did. When we were kids talking to each other about what we wanted to do, I alwayssaid I was interested in running things.

How did you become interested in management theory, not just the practice of running things?

Well, I think I was always interested in under- standing what I was doing, even today. Regardless of what I am doing, I always try to step back and have a theory of what it is I am trying to do. I am not one of these people who just does things. I may be doing stupid things, but at least I have a theory of what I am trying to do. And I very much need a context. That just happens to be how I think. I need a context within which I can situate myself, so whenever I encounter a problem I work on the problem but I also try to stand back and have some idea of how it all comes together.

Many business people have little interest in management theory, and many business school researchers have little interest in practice. How do you see the theory and the practice of management as coming together in your own thinking?

My view is that if you have an understanding of the underlying ideas and underlying theory, it allows you to focus your practice more intelligently and more effectively. So I always like to have some theoretical framework. Even in retirement. Retire- ment for someone like me is very different than retirement for someone like Jim [March]. Because for Jim, he just does the same thing he has been doing. When you run a company and retire, you are finished, you no longer run the company. You can’t just do a little of it. So all of the sudden you sit there, you have nothing but time. And the question is, “what do you do?” And even there you should try to have a theory. I said, “okay, I have this time . . .

how do I want to use it and what am I trying to do?”. And some people spend all their time with their family and grandchildren and so on. That doesn’t happen to be what I do—it is amazing how much time some people spend with their families all of a sudden when they retire. That is socially very useful, but that is not what I do. Some people can’t retire, so they go back to work. I am trying to do different things and experience different things just because I think it will be fun to do that, trying to explore different ways to spend your time and energy. But anyway, I have always felt the need of a theory; I have always felt that what was powerful about business education wasn’t teaching business- men how to solve their problems, but to stand back and have some idea of what the overall theory is like 200687 Augier and Reed so that you could fit the specifics into that framework.

This is very much what the framework of behavioral social science did in the fifties and sixties.

There was virtually a revolution in the study of business and of decision making in organizations at that time. That started I believe at Carnegie Tech at the time in the late fifties and the early sixties when people like [Herbert] Simon, [Jim] March, and [Franco] Modigliani and others were engaged in bringing deep intellectual understand- ing to both the organizations and the processes of making decisions. This changed business prac- tice—just as I think it has changed military and policy practice in this country. Starting at this time, it became necessary to have an analytically strong context in order to make decisions. I was a bene- ficiary in some ways of this development, of that revolution. I went to the Sloan school at MIT in the early sixties and I graduated as many others did at that time with a deeply quantitative and analytic framework within which to pursue my own busi- ness career. My generation arrived in business with a set of tools and a set of understandings that did not typically exist in the organizations that we joined. We brought new capabilities, new insights to the organizations from our education. As a by- product of that, we tended to rise more quickly in the organization than normal because we had ca- pabilities that were important. We also changed the practice of management. There is no question in my mind about that. The way in which decisions were made and were understood, and our under- standing of decision making and behavior was changed in a revolutionary way after the late fif- ties. You can see it in business practice and you can see it in descriptions of how decisions are made and so forth and so on. The same is true in the policy field and the same is true in the military field.

In general, I believe it is very important for busi- ness practice to be shaped by basic research and basic knowledge. Research that draws from the academic disciplines (but in an interdisciplinary way) serves the important function of creating a framework that allows managers and manage- ment practitioners to understand the context and content of the specific problems they are dealing with. So, clearly, the interaction between the aca- demic community and management practice is im- portant—and management theory need to not worry so much about immediate relevance (in terms of solving quick problems) as to providing the basic framework forunderstandingmanage- rial problems. Research that draws from the academic disciplines (but in an interdisciplinary way) serves the important function of creating a framework that allows managers and management practitioners to understand the context and content of the specific problems they are dealing with.

In practice, for example, when the Latin Ameri- can debt crises started, I didn’t know an awful lot about international financial crises and capital flows and so on. And yet I had an important re- sponsibility: Citibank was the principal bank in much of the cross-border lending. Because I was ignorant but had to deal with the issue, I hired a professor at Harvard to give me a tutorial on finan- cial crises. I would go up every Friday at noon and talk with him, and I did a lot of reading particularly on the financial crises following the depression and the early thirties. So even as I was working on a day-to-day basis with the problems, at the same time I was reading the history and trying to get an understanding of the underlying logic of what was going on and what we were doing. I can remember I once saw Paul Volker [former Federal Reserve Chairman] and we were talking about Mexico and the IMF. Volker’s whole approach to the crises was to work with Jacque de la Rossier who was running the IMF at the time and get the IMF to design programs in conjunction with the countries and then get the banks to join in financing the IMF programs. Basically, it was Volker, de la Rossier, the IMF and the countries who worked together.

The banks provided the bulk of the funding. We were the principal bank, so I spent a lot of time with Jacque and Volker. But I can remember saying to Volker once, “Paul, do we know anything about IMF conditionality and does it work?” Because the key to this whole thing was that the IMF programs had to work. I was willing to go along because these guys were smarter than I was and presum- ably knew, but I also sat down and said “Hey, if this IMF conditionality doesn’t work, then we are backing the wrong thing and that isn’t going to produce the desired results.” So I spent a lot of time reading about IMF conditionality. And I can re- member asking Paul, I said “Paul, are you sure that there is reason to believe that this kind of program is going to produce the desired results?” And he was shocked! Because no one had asked him that.

They would always argue about details but they 88March Academy of Management Learning & Education never sat back and said, “Hey, does the theory work? Were we on solid ground?” The point is, I always wanted to have an under- standing of what the theory was, and it is my firm belief that for evolutionary success of running a business, staying closely connected to academic research and the basic ideas is very important.

Were you influenced by any particular books or ideas?

Oh, yes, many, tons of them. Particularly during those years I can remember—and I must have it down in my apartment, I keep different books at different places—there was a biography of White who was the president of the Federal Reserve dur- ing the Depression, and that influenced me a lot!

And just reading the history of prior economic cri- ses, financial crises, had a tremendous impact on me. So yes, these things made a big difference. It was very useful to be, and it gives me the context in which I can operate. I like to have a context so I can function well.

ON BUSINESS EDUCATION: THEORY AND PRACTICE What are your current visions for business educa- tion? How do we bring behavioral (social) science back in without losing relevance?

My idea is that management education and the intellectual foundations for the practice of busi- ness have more or less been on a plateau since the early days of Carnegie and behavioral science; with the exception of the areas of mathematics or finance there really have been no changes or ad- vances since the sixties. We probably need an interdisciplinary approach more today than we did before because if you look at the problems in the practiceof management, they all relate to the fact that none of us know how to get human organiza- tions to function well. All of the mathematics and economics, we all understand, and all of the ideas about being able to measure things we under- stand. But what wedon’tunderstand is how human organizations work. And if you look at the prob- lems we have in business today it is because hu- man organizations turn out to be much more vari- able than you would imagine. And they make mistakes. And they can’t get things done.

So, my idea is, could we bring together for maybe 10 years, an appropriate set of scholars who could once again attack some of these problems?

To recreate the engagement of the social behav- ioral sciences, in a way. And the real question is toget the right leader and the right set of people.

That’s hard to do! I’ve been talking up at MIT be- cause that is where I know a lot of people; without a lot of success so far—you have to find the right people if you want to do this.

I have come to believe that managerial compe- tence has become a natural resource much like scientific or technological competence. The macro- and institutional environments have become so much the same around the world that differences in management capabilities are visible in eco- nomic outcomes. This makes the challenge of re- newing management capability and management competencies truly important.

The idea of recreating business education sounds wonderful!

Yes it is very exciting. We are just talking right now. I’ve said to MIT that “You should host this.

You should serve as the institutional structure.” MIT has a tradition of doing research, and there is need to do research that can impact managerial practice. The trouble with most of the research in business schools now is that it is all professional within silos and it is designed for individual aca- demics to further their careers. It doesn’t really attack the problems of business. There are many problems of business, and we need to redo the research program from the fifties and sixties—if you can get the right leader—you need a person, and that person can find the young scholars and so on. I don’t know who that person is. We need a new Herbert Simon. The question is, “Who can you find who understands the issues and has the capac- ity?” I haven’t found the person yet. But first you have to ask, “Is it worthwhile?” And if it is worth- while, the question is, can we get the money to do it—probably yes. And then the third is, who, where, and how . . . The real question is, “Can you do it?” This is related to the broader history of organization theory, of business schools and of management theory as a field. And how the vision of a behavioral science emerged in the context of early graduate business education.

They had some of the same problems of finding an optimal balance between being disciplined, and being interdisciplinary, as we do now (some of these tensions are discussed nicely in Simon, 1967).

Yes. The other thing is that the social and behav- ioral sciences have not done a good job of focusing 200689 Augier and Reed on practice, and that is the other (and possibly related) balance that we need to keep in mind.

They like to focus on policy, which is very different, and they like to focus on theory. But if you say, “Hey, we are a school of practice,” just like a med- ical school is a school of practice, or a law school is a school of practice . . . there are theories of law but if you go to a law school they will say they are going to train people who are going todolaw. If you go to a business school they will say they are going to train people who are going todobusiness.

But the intellectual disciplines there in the busi- ness school don’t really keep track of the advances in practice; they keep track of what’s going on in the narrow disciplines and what is being pub- lished in various journals.

But the intellectual disciplines there in the business school don’t really keep track of the advances in practice; they keep track of what’s going on in the narrow disciplines and what is being published in various journals. And the same is true in schools of education. I don’t think that teachers are trained any differently today than they were trained 30 years ago and yet, clearly, there has been increase in the knowledge about learning and cognitive psychology and so on, which would suggest that you should teach differently. But forget it—it is not in the schools of education. Why? Because they have not gotten the social and behavioral sciences, including cogni- tive psychology, to focus on practice. The place where the social and behavioral sciences I think have fallen down is this absence of focusing on practice. Economicsdoesfocus on practice, be- cause all of your economics is ultimately designed to influence government and economic policy. So to that extent, it has focused on practice. Yes, money matters, interest rates matter, and bla bla bla. That is all very practical. But business, educa- tion, health services (beyond just medicine), etcet- era, are all areas of practice that could be helped a lot by the social and behavioral sciences, with providing insights, underlying theories, and so forth, that would change how they operate. But the disciplines have not come together with this in mind. And it is a lost opportunity in both cases.

First, the disciplines could have more influence than they currently do. We need to recreate the disciplinary-based behavioral social science that was present in the fifties and sixties. And the sec- ond thing is that we could actually improve prac-tice. I mean, it would be very nice if every teacher in the United States were just 10% better. It would make a difference. But people don’t care about practice, beyond just politics and policy.

The real question is about the training of the teachers, the interaction in the classrooms, and the curriculum. How can that interaction be informed about what we know about how humans learn and think, and what we know about why humans pay attention and don’t pay attention—about how or- ganizations work? Those are central questions, and that whole interaction we need to understand.

Which by the way in the business community is the same thing—why are the Japanese so good at manufacturing? Because they have spent a lot of time understanding how workers interact with the production process on the assembly line. It is the organization of the workers and the thinking of the workers as they do work—and they’ve spent a lot of time thinking about this and organizing this and causing the environment within which work takes place on the assembly line to be different than it is in Germany or the United States for instance. And they are very good at it. And the same is true in schools. It is the same interaction. What happens with the teachers in a classroom with a curriculum, with a set of students, and how does learning take place?

Those are the central issues. And one of the problems with American education right now is that it is sort of like mass production in the auto- mobile industry; we came up with a way of teach- ing students in the 1920s that worked very well.

And the students learned and they became good Americans, which were part of the objectives, and everybody was very happy. When you start getting students who are less well prepared and for whom maybe English isn’t a first language, they are less well prepared and they come from an environment with less interest in learning and so forth. All of a sudden that same way of teaching doesn’t produce the results. You would think that what we are in- terested in is outcomes. And we would try to have the same outcomes regardless of the preparation of the students. And that we could adjust the train- ing of the teachers, we could change the curricu- lum, we could adjust what goes on the classroom so as to assure that you get the right outcome. But we haven’t. We use the old way of teaching and we just have bad outcomes because students don’t learn in that particular way. It would be as if Mer- cedes Benz insisted on producing cars the same way in Mexico as they do in Stuttgart. Well, Mex- ican workers are very different, and the environ- ment is very different. But they want a car, which is the same. So they change what happens in the 90March Academy of Management Learning & Education factory because they want the car to be the same.

The Americans haven’t changed what happens in the classroom. But many students turn out not to learn. And it is crazy. Business is the same. If you look at some of the major problems we’ve had in business over the last 10 years, you can see that we are having great difficulty getting things (agenda setting) done in large organizations. And we’re having great difficulty understanding what to do.

All of which is informed by cognitive psychology, decision making, organization theory. What is the environment of big organizations we would like?

The social sciences have had some insight into all of this. But it is not brought to practice. You go to business school and the people who graduate to- day from the Stanford Business School don’t know anymore about these issues than the people who graduated 30 years ago. Because the curriculum hasn’t changed.

It is not just that business schools haven’t kept up with the broad social science vision that was present in the 1950s and 1960s. It is also that the disciplines themselves have grown apart, so it is more difficult being this sort of “interdisciplinarian” you are searching for, who feels at home in the social and behavioral sciences and who has an eye for practice.

That is correct, and the disciplines stay in their silos. That’s because the rewards for the individual professors is professional statuswithinthe silos.

And they don’t pay any attention to whether the practice has improved. But if you want to be a psychologist doing pure psychology—stay in the department of psychology. Don’t go to a business school. Because in theory, people who are associ- ated with business schools are there because they are going to bring their disciplinary skills to bear on business problems, interdisciplinary problems.

And they do, but they have not produced changes in performance. In other words, if you look at the practiceof management, I think Jim’s generation substantially changed the practice of manage- ment. Because decision theory became part of our thinking, quantitative studies became important to our thinking; we understood that there were orga- nizations and that those organizations had behav- ioral characteristics and so on and so forth. But there hasn’t been much (if any) change since then—with the only exception being the mathe- matics of finance; thathaschanged, but it is a very narrow area and it is important, but very narrow. The disciplines stay in their silos. That’s because the rewards for the individual professors is professional statuswithin the silos. And they don’t pay any attention to whether the practice has improved.

Other than that . . . when I look at the young people who come from business schools to work in the bank, they don’t know anything that is any different from people 30 years ago. They haven’t learned anything new. They are young, and they have energy, but they don’t bring new insights.

And there has been no real motivation for chang- ing business education or linking the learning to problems of practice. I do think that what will hap- pen is that the demand for business school gradu- ates will gradually go down. That will force some business schools to close. And maybe then they will stop up and think “Gee, are we not doing something relevant?” Business education has to change and get back to the success of the fifties and sixties (actually I’m not quite sure what the MBA as an education is worth). I wonder if—and I haven’t thought this through— I’m beginning to think that we should teach some fundamentals of management as parts of the undergraduate work. It should be sort of the core capabilities like the study of biology and the study of physics. So I think that one first thought is to push some key issues in business down to the undergraduate level. Not as a major, but just as part of whatever you are studying. So, if you are studying civil engineering, you would also take some management; if you were studying biology, you would take some management, and so on. So that when you graduate as a civil engineer or a biologist or whatever, you have some fundamental understanding of accounting, of leadership, of or- ganization theory, of the workings of business and of organizations and the major theories in busi- ness. Just the basic notions and terms, so that you don’t go into shock if you later happen to be in a real business organization later in your career.

One of the hardest things for people to learn is how to ask others to work with them, and work in teams, because most of education is personal and individual. You take tests alone, you write papers alone, but you don’t have much collaborative work.

The trouble is that when you get into the real world, you suddenly have to get things done with other people, through other people, and you have to work in teams. And then there are certain lan- guages that you have to be able to speak. 200691 Augier and Reed So, I think the fundamental thing is to bring in some core ideas of business into undergraduate American education. Then maybe more serious management education would come later on the graduate level.

ON LEADERSHIP You have a lot of experience as a leader— both from Citi and most recently from running the New York Stock Exchange—so I’d like to talk a bit about some issues in the field and practice of leadership.

Leadership as a field is one of many areas in management education, and we’re still trying to find a good theory of leadership. In textbooks the topic is often treated as a linear and fairly rational issue. One of Jim’s [March] points is that some degree of foolishness can be good for leadership. 3 We need both reason or “discipline” and passion in good management. Maybe even a little crazi- ness.

Yes, I think that is true. Let’s face it—we define ascrazysomeone who behaves differently than the average, and I don’t know how many standard deviations you have to be away from the average to be crazy. But let’s face it—behavioris a defined concept and we define behavior that is not predict- able as crazy. If it is totally unpredictable it can be very scary—people who are schizophrenic have almost random behavior— but yes, I do think that a leader, a good leader, has to operate away from the norm. Because otherwise you’re just an admin- istrator, you are just giving voice to what is the norm. And leadership is more than just giving voice to the norm. So, I agree. You have to have behavior and insights that are off the norm . . .

behavior may be personal, you may be able to focus on some things that others suppress. That’s why you often find that business leaders have big egos. The ego gives them permission to act on things that other people would suppress. And it also allows them to see things differently. And I think Jim [March] is correct.

My sense is that as you get down to the basics, leadership is aboutcapturing attentionandmoti- vatingpeople to follow your way—your vision and your dreams. You can capture attention because you’re in a position where people listen— but sometimes you have to capture attention in other ways—as that young French woman did in themovie by attacking the editor who turned down her boyfriend’s novel. 4 I always ask people who are talking about lead- ership: “Imagine that tomorrow you were put in charge of the Chicago school system. How do you capture the attention of the people who are busy, trying to run the schools, trying to teach the stu- dents? You are the new superintendent— how do you capture everyone’s attention? And, if you can capture their attention, how do you motivate them to pay attention?” It could be through inspiration: Martin Luther King, Jr. had the gift of imagination that he could verbalize. That motivated our society—not just us as followers, but our whole society, to try to convert the dream into reality. But as a leader this issue of capturing attention and motivating performance is central.

Jim’s [March] contribution, by reaching back to Don Quixote and talking about “knowing who you are” and most important, not only knowing, but behavingin a way that isconsistentwith who you are, is very important for us as leaders (and as human beings). There are many who know who they are, but they enter into a situation which they call “work” and they try to check who they are at the door, and they try to assume a role that they perceive to be appropriate in the situation. But it doesn’t in fact reflect who they are. And over a period of time, my guess is that their ability to persist in a leadership role that is fundamentally artificial, gets pulled away.

If you’re going to be in a leadership role you have to reach into yourself for some form of self- assurance that gives you the ability to take on difficult responsibilities. I think that if you look around in the business world, you’ll see a lot of people with big egos, and you often wonder how could people with egos of that sort be in a position of responsibility?

Frankly, my observation, having witnessed this over the years is that sometimes, the egos are necessary for the individual—to give him or her the self-confidence to do what they are doing. And they need that—they rely on that false sense of themselves that we call an ego in order to be able 3See “James March on Education, Leadership, and Don Quixote:

Introduction and Interview,” inAcademy of Management Learn- ing & Education, 3(2), 2004. 4Author’s note: This refers to a scene in the movie fromBetty Blue,where Betty, committed to the novel of her boyfriend, confronts (and attacks) the editor who has just turned down the manuscript for publication. March’s inclusion of theBetty Blue theme in the movie indicates the sometimes-irrational aspects of devotion and commitment; Betty sees genius in the novel rejected and turns to irrational, but very committed, behavior, to prove it. 92March Academy of Management Learning & Education to persist in playing their role and meeting their responsibilities.

Others have a sense that what they are doing is right and that they have the duty to do it. I suspect Martin Luther King, Jr., Gandhi, and others weren’t drawing on their egos—they were drawing on a sense that came from within— on a sense that the struggles they were leading were ”right” in some deep form. Obviously if you can draw on deep moral strength, as they did, it gives you tremen- dous self-assurance. As was pointed out in the film, many leadership situations do not quite end up as intended, and we must persevere and be patient with our ideas. If you can draw on a deep moral sense, it clearly helps.

Some of us draw on a sense that is fundamen- tallyanalytic—you go to a business school and you learn how to make rational decisions and you work in business for a number of years and you get to know the details of the business and you draw on what you consider to be the deep knowledge of the situation. That gives you the self-assurance to persist in playing the leadership role. But it’s a sense of analytical strength that you have and knowledge of what you are doing that tends to run out if you have moved into a field that is not di- rectly related to that for which you were trained or in which you’ve had experience. If the world changes around you, and you find you have to deal with discontinuities, your leadership skills can be severely tested because the source of your self- assurance is no longer there. You begin to fall back to some of Don Quixote’s “irrational” beliefs (in himself) in order to persist in the leadership role.

What do you think makes you a good leader/manager?

This idea of Jim’s about being yourself, having your own identity, is very important. I clearly was very much myself; I was expressing my own de- sires and making things happen that way—it was an expression of “who I was.” I suppose I had a sense of where we wanted to go—you have to have a dream. Then I guess the second thing is that I’ve always been able to get people enthusiastic about working with me; that’s the motivation issue I mentioned earlier. Obvi- ously not everybody . . . but there are enough who wanted to work with me and who liked the excite- ment, so I was able to attract people who shared these ideas. I had the discipline and persistence to stick with it. Sometimes people who dream can’t do the hard work. In some ways I probably didn’t have enough discipline; when you look back.... I’m not ruthless, and it can be helpful to be ruthless whenyou are a leader. Of course, I have failures too . . .

but the successes are that I am pretty good in having a sense of what to do, I’m pretty good in attracting people to work with me, and good peo- ple, who enjoy the activities—and I’m pretty disci- plined in terms of doing the hard work and making it happen. You dream, but you also have to be disciplined.

And I worked very hard on this. I wasn’t born understanding how careers and organizations function. I learned it; in part from other people, but I observed it as well. That learning process is pow- erful because it allows you identify places where people need help— because they won’t necessarily have the right skills. We created training for peo- ple who were making transitions in the organiza- tion to help them understand which skills they were going to need for their new activities. So those kinds of little tools aren’t just things you can write in a book and use that knowledge and im- plement changes . . . how you get a conceptual tool and identify which people need which training program and so on.

Your most recent experience as a leader is from running the NYSE.

Yes. You know, I came in as interim chairman and CEO of the Exchange and I now have a new CEO [John Thain], so now I’m just the chairman and I am looking to replace myself in that job. [Reed was chairman until April, 2005.] So when I can get that done I am retired. But I’ve done most of the work. I found a new board and new structure.

I know you must have repeated this a lot recently, but could you just tell how did you get asked to lead the NYSE? At one place I read that you were working on your boat in France when you got a call?

Yes, that is correct. What happened was simple: I think [Richard] Grasso must have been fired Thurs- day the 17th of September. Friday morning, New York time, I got a call from Hank Paulson, the head of Goldman Sachs. I was out cleaning the boat and Cindy [John Reed’s wife] told me that Paulson called and left a message, and she gave me the number and I said I would give them a call. I stopped cleaning the boat for a minute and then called. He said they had fired Grasso, and that they had this problem that the Exchange was in trouble and they needed a transitional person to work on the governance and help fixing the prob- lem. I said to him, “Hank, how long do you think it will take?” and he said, “Oh, nothing more than a 200693 Augier and Reed couple of months.” And I said, “Do you want me to run the Exchange or just solve the governance problem?” And he said, “Just the governance prob- lem.” “Let me talk to Cindy and I’ll call you back.” So I finished cleaning the boat and went back home which is about 17 kilometers on my bike— and I got home and I told Cindy about the call and I told her that I really felt that I had in a sense a responsibility to do this. I called Paulson back and said I had talked with my wife and that I would do it. The next day I got a call from Laurence Fink who was the chairman of the search committee for the NYSE chair. We talked about salary and that’s when I suggested one dollar would be appropriate pay. He then organized a telephone board meeting and then a press conference on Sunday, the 21th of September.

It was quite a surprise to me. I had vaguely heard that Grasso was in trouble over compensa- tion, but I didn’t pay attention to it. So it was quite a shock! I obviously knew the New York Stock Ex- change. I sort of felt that I was having a lot of fun in retirement but I thought it would be selfish to say no....Here I was just riding my bike . . . this seemed like something I could do. So I came in— and it turned out to be a bigger mess than I had imagined!

The Stock Exchange is an important institution and they clearly had a problem—and I have a lot of experience running companies and with corporate governance, so it was something that I had the background to do. I think it has been useful; the Exchange has found a new course, we have a new board, a new governance structure, we have a new CEO. That’s a good foundation.

I will get back to the issue of governance in leadership in a minute. But I’m curious about the 1-dollar salary. Why one dollar?

Obviously, the reason Grasso was fired was that he was taking too much money from the Exchange.

When they first called me they suggested that they would pay me an enormous amount in salary. I said, “This is crazy. The problem with the Ex- change is that it has paid too much money to its leader. I don’t want money—I am comfortably re- tired.” It seems to be foolish to announce to the world that we fired one person and brought in another one on a big salary. . . . So I said, “Why don’t we just agree on one dollar?“ But I think psychologically this is very important; no one will think I’m there because I’m being paid well and, if anything, it has actually cost me a lot!

So, that has worked well, and I think that was a good decision.Remember, I wasn’t thinking of this job in terms of the money; not at all. I wanted to help them solve some problems and I hope that I did.

How would you compare the experience with running the Exchange and running Citi? What kind of different leadership or management skills are needed?

Well, hmm, they are the same but at the Exchange I was clearly a transitional figure and in Citi when I took over I was not just entering for a short time.

So, there’s a difference between entering a job where people are expecting you to be there forever and they are defining you as a long-timer, and just being there for a specific transitional job; I had a very specific assignment at the Exchange. I was very careful in saying that I wanted to beinterim chairman—so everybody knew this was a tempo- rary job. And I said to everybody right at the be- ginning—“look, first thing I’m going to do is to understand what happened; then I’m going to make proposals as to how we might change and deal with what happened.” But also, obviously, you have to position the Exchange for the future so you don’t just want to deal with the problem but you have to make sure that you have the structure necessary to deal with the future. And I said, “After I’ve done that, I’m going to find a replacement for myself and deal with whatever residual problems are left and then I will leave.” So I had a very clear idea of what I was going to do and a very clear task from the first day.

The Exchange is intellectually fascinating when you get engaged with it; it has a strange structure that I wasn’t familiar with. But . . . I’m going to go back to enjoying my retirement and enjoying the freedom of getting up in the morning and doing what I want!

There have been some descriptions of you in the press about your style, being very focused and oriented toward the details. I think that’s an important part of your success as a leader. How do you characterize your style?

I think what I try to do is to understand what is happening at all levels. I know that is very differ- ent from what others think of as good leadership, but to me it is essential. I take one step at a time and often have a list of things I want to do. Even in France—I was called on Friday afternoon French time and I was elected Sunday night French time.

Between those times I had to talk to Donaldson and others and I had talked to Fink and I started the investigation. So even on my second day I had to 94March Academy of Management Learning & Education get some idea of what had happened. I really wanted to know what had happened and not just jump into something I didn’t know much about.

You have recently made some important comments about the necessity of governance for leadership. If leadership is about encouraging the less rational (or foolish) elements, do you see a conflict between governance and leadership, or are they complementary?

Yes, I think they are very complementary. I think the role of governance is to provide a framework in which leadership takes place. There’s nothing about governance that is really restrictive; it just requires processes and you know—the reason a car has brakes is not to stop it but to allow you to drive your own way, confident that there are limits.

You can stop. So if you know you have brakes you know you can use them if you need to. Governance is sort of that way —if you have a structure and you know how it works, then within that structure you can be more creative and more experimenting than you could if you didn’t have that overall structure.

If you have good governance, it pretty much as- sures that you can do the leadership you need to and the necessary decisions. It brings you down to earth! There’s a process discipline here that pro- vides a check-point, but it is a process. Governance sort of makes sure that you don’t forget the funda- mentals and you don’t just start dreaming.

So, governance is a process. It shouldn’t restrict creativity but provide a framework for it.

I read the paper that you wrote for the Academies on values and corporate governance. 5 What is the background of that paper?

Well, they asked me, they were doing something on corporate governance, and they asked if I would write something, and so I did. It was just my reac- tion to what I saw going on in the business world.

I wrote it before the Exchange— but wouldn’t have changed the essence because of the Exchange—I wrote it sort of just reflecting on what had gone wrong in corporate America.

The issues of leadership and governance raise some thoughts about what this means for manage- ment education. Teaching such really fundamen- tal things as values and ethics and leadership isn’t easy. We see examples of bad leadership in thepress now. Is that a sign of business schools hav- ing failed to properly teach fundamental princi- ples in leadership?

Well, there’s some of that. It is interesting. I re- cently was at a board meeting [at Altria] and we were talking about pension. The company still has a defined benefit plan. And people said, “Well, why shouldn’t we change to a defined contribution plan?” where the risk shifts to the individual and it becomes dependent on individual performance. It was very clear in the discussion that a number of people looked at this from a financial point of view—and I said, “Hey, this has nothing to do with finance. This has to do with what kind of relation- ships that we want to have with our employees.

This is an employment relationship.” A number of people on the board were looking at this as just a financial obligation for the company.

This is the kind of issue business schools could have helped. If you look at something like retire- ment plans, and you just think of them from a financial point of view, from the company’s point of view, then you are going to an analysis that looks great financially and produces all the right dollar results— but it changes the nature of the relation- ship with the employees. We have to decide, the reason that you have a retirement plan, is it be- cause of the relationship with your employees, or is it a financial component of the company? I think it is very clear—to me it is a part of your relation- ship with the employee. Now, there’s reason to shift to a defined contribution plan also if you think about your relationship with your employees be- cause it makes the plan affordable. The problem with defined benefit plan is that if you’re not there at 55 years of age, you are never vested, and there- fore, you’ve lost your benefits. Therefore, when you’re dealing with a labor market when there’s a lot of turnover, many employees are better off with a defined contribution plan because they can take their contribution with them to the next company and the next company. But the point is, when you talk about business schools and ethics and values and so forth, the problem—and Jim knows this very well—is how do you embed these concepts within a matrix that captures the essence of the prob- lems? If you look only at shareholder value and the prices of stocks as a single objective but fail to understand how it relates to the relationship with your customer, you miss the essence. If you forget about customers and think only about profit, then you neglect the employees and you begin to think only about the costs of providing the benefits, the pictures gets distorted because you have a very simplistic approach.

5“Values and Corporate Responsibility: A Personal Perspec- tive,” John S. Reed, Bulletin of the American Academy of Arts and Sciences (Winter 2004). 200695 Augier and Reed We have to decide, the reason that you have a retirement plan, is it because of the relationship with your employees, or is it a financial component of the company? I think it is very clear—to me it is a part of your relationship with the employee. I believe that people don’t want to work in a company and people don’t want to deal with com- panies that aren’t seen by individuals as being sort of culturally okay . . . you have to sort of have permission from the public. When I was running Citibank, I always said that if the Brazilians didn’t think that our being in Brazil provided net value for Brazil, then they would take our license away and throw us out! So we have to ‘earn’ the permission to be there by contributing in some way to Brazil— by creating jobs, by contributing to the financial state of the country . . . but whatever reasons, theBrazil- ians have to feel that you being there is a net plus.

And if not, you’re in trouble! And, one of the prob- lems that the oil companies have is that many people don’t see them as doing any good . . . they see them as contributing to global warming, doing something bad for the environment, oil spills, and fish in Alaska and birds . . . and so forth and so on.

And, you have to overcome that—you have to be seen by the public and also in fact be contributing to society. If you are thought to behave in an un- ethical way, people don’t want to deal with you and people don’t want to work with you.

So, forget whether ethics should stand alone and have a value independent of that— even from a functional point of view, being seen as being an ethical company has value because it helps you from a marketing point of view, and from an em- ployment point of view. Think of Johnson and John- son. They are seen as a highly ethical company.

They are making products that are seen by every- body to be helpful—Bandaid, Tylenol, whatever— they are all seen to be socially useful products. The company presents itself as a socially responsible company, which I think they are, when they have problems they acknowledge them, they seem to do the right things....I’ve never heard any problems of them falling in love with shareholder value . . .

or over compensation of their senior executives....

I mean, you just never see that, it doesn’t exist! And that’s because the company has created its posi- tion within the society, which is extremely impor- tant . . . and by the way it is well run: It gets good results, the management is thought to be quite tough, but they somehow have an integrated viewof what they are doing. And the trouble with busi- ness schools is that they “deconstruct” this inte- grated picture. They work on the things that are most easily quantified or turned into simple phases and so forth and so on. And ethics, which surrounds everything, is hard to bring into that world, but necessary. And the trouble with business schools is that they “deconstruct” this integrated picture. They work on the things that are most easily quantified or turned into simple phases and so forth and so on.

Those are difficult things to teach in business schools and to embody into our conceptions of leadership.

Yes, and in a very fundamental sense, mothers have to teach that; it is very much like Jim’s point in leadership—it’s really about fundamental issues in life!

It relates to a theme that was in Jim’s movie and which I think is appropriate to us; namely, that many draw their own sense of leadership (and values) from the imperative of the goal. You know, “we need to earn 12 dollars and fifty cents a share,” and we come to believe that you draw your sense of yourself as a leader and your commitment as a leader from your commitment to that goal. “We’re going to have 50 billions of dollars in sales” or, “We’re going to have a market share of 15.5 %.” The problem with that kind of thinking is obvious:

Good leadership in that perspective is not grounded in anything other than the goal. And as Jim pointed out in the film, you don’t have a lot of resources to draw on if the only thing that is the basis of your assurance as a leader is your deter- mination to get to that goal. Determination helps, and having clear goals clearly makes you feel good about what you’re trying to communicate. But if there isn’t anything beneath it that touches something more fundamental, my experience— like Jim’s ideas in the film—suggests that as a leaders, without those values you can find yourself short and then you have little to draw on. That’s also the point I made in that piece on “Values and Corporate Responsibility.” Leadership is really about evolutionary success; evolution is a dynamic concept that involves continuous change and ad- aptation to change, and it incorporates changing goals as determinants of success. Share price is one element in this, but certainly not the only one.

If the business schools were teaching such fun- 96March Academy of Management Learning & Education damental issues and made it very clear to the students that success in business requires ethical behavior, it could be embodied in management education. Just like in the military, when you go for training, the military tries very hard to say “Hey, you are responsible for your behavior,” and there are some things that are simply wrong. I was in the American army, and they actually teach you that you do not have to obey an order which is morally wrong . . . now, the army operates by people obey- ing orders, and of course it is in the business of killing people, which is generally thought of to be morally wrong so it is hard . . . But the army recog- nized, after Vietnam, and even before Vietnam, that you could have aberrant behavior, and the only way to stop is to have individuals told that they do have responsibility . . . if you are told to do something which clearly is wrong, then you shouldn’t do that. You can teach some of these things, making sure that people understand that there’s an ethical element and that it matters, and that it isn’t all about things we can measure.

For example, if the airlines are allowed to get rid of their pension plans, I think that’s unethical. It may be okay legally in bankruptcy courts and may look good on the bottom line, and so on, but when you promise somebody that when you retire that are going to pay for them—my view is that that promise stands in front of any promises you’ve made to banks that you’re going to pay them loans, and to stockholders, and what have you. See, when you get rid of a retirement plan, you’re basically telling somebody who retired 10 years ago, that he didn’t really earn the check. And, you know, this guy is 75 years old, he retired 10 years ago, and he depends on the check and at age 75 he can’t go out and find a new one. And yet, we have United Air- lines announcing that they are thinking of chang- ing their pension plan. If they do, American and Delta will have to file for bankruptsy and do the same thing, because they won’t be able to compete with a company that has given up all these respon- sibilities unless they also give up theirs. And no one seems to understand that. I think cutting the payment is unethical.

It is interesting to me that the management sort of proposes it as if it was ok; unions have filed suits in courts, but I’m amazed that politicians haven’t done anything about it yet. It seems to be that if you create a pension—you don’t have to do it of course— but if you create them and if you make promises to your employees, it seems to me uneth- ical to back out, and that to me has a higher prior- ity than commitments to the banks, or to the stock- holders. I believe incorporating such issues into management education is necessary and would,ultimately, help corporate America to reaffirm a commitment to basic values.

What do you see as your greatest accomplishments so far?

Well interesting question . . . See, I’m a great be- liever that when you run a large company, which I did—I was chairman for 16 years— big company, the world’s largest financial institution . . . then you are responsible for the evolution of the com- pany at that time. And the thing that I think that I did and I feel good about is that if you look at the different possible evolutionary pathways . . . I took over in September of 1984, and my predecessor who I knew very well had run the company for 17 years and handed it off. So you sit there and have a certain potential energy, so to speak. And the question is this: “How do you use that and how do you leave it—what’s the end-point of your turn?” I think I followed a good evolutionary path during my 16 years—not perfect, I would do some things differently today. But I think I did reasonably well; you know, at the 75th percentile of potential. And I think I left the company with greater potential than I inherited. So from an evolutionary point of view, I feel good because I think I directed the company in a decent evolutionary pathway. As I say, not per- fect. But decent. And I think I consciously left the company with greater potential than I inherited.

And that would be what I consider my best accom- plishment.

Did you make a point during those years to stay in touch with management theory? You have many intellectual interests, more than most business people I think.

Yes, very much so. Not only management theory, I always tried consciously to stay in touch with the outside world. It is very easy when you have one of these crazy jobs to spend all your time just working on the job. But it wasn’t only managerial theory.

You know, I was interested in many things (I still am), and I did a lot of reading in biology, for ex- ample, when I was working. And I had no back- ground in biology; I had taken biology in high school, but I never took biology in college. So I read an awful lot of biology and history of biological thought . . . the DNA evolution and so on. . . . I read some evolutionary theory. I read a fair amount of physics—the history of the development of the ideas relating to theoretical physics. And I was on Eric Wanner’s board [of the Russell Sage Founda- tion] for 10 years I think . . . long time . . . and I learned a lot about poverty, and we argued about 200697 Augier and Reed behavioral economics. We also talked about a sub- ject, that he has not developed, which I still think is one of the very interesting subjects: risk. How do people perceive risk? How do people’s perceptions of risk affect their lives? And so forth and so on. I think risk is interesting and not a well-explored notion, which Russell Sage hasn’t (yet) been able to do anything with. And I stayed in touch with business schools; for instance Harvard did a case study of some of the stuff we did here in the 1970s, and I used to read what was going on in manage- rial schools, and I had friends like Jim [March] who I met at Russell Sage but then saw outside too. So, I kept in touch and I always thought that it was extremely important to have a broad perspective.

Here is a quote fromThe Best and The Brightest [Halberstam, 1993], which I keep around:

The Fallacy: The first step is to measure what- ever can be easily measured. This is okay as far as it goes. The second step is to disregard that which can’t be measured or give it an arbitrary quantitative value. This is artificial and misleading. The third step is to presume that what can’t be measured easily really isn’t very important. This is blindness. The fourth step is to say that what can’t be easily measured really doesn’t exist. This is suicide.

That’s the danger. You define things only that can be measured and then you believe that measure, but you’ve already defined out all the interesting things. And so you end up living with numbers. I always said that numbers are nothing but an ad- jective; you shouldn’t believe that a number is pre- cise; it is an adjective, it is not a verb. You can’t operate on numbers alone, and a lot of people think that numbers gives you competence; when you are dealing with numbers you are dealing with things that are correct. You may think the numbers represent the real world, and they may make you feel good, but that doesn’t make you correct. Every number can be replaced by a sen- tence, and you just have to understand that be- cause the numbers say something it doesn’t mean that they are correct. There’s an underlying reality, which the numbers should be describing. Within business, particularly banking, there’s a lot of this.

You sometimes fall in love with those things but I used to give everybody reading assignments, for instance, a six-volume biography of Churchill that was started by his son, Randolph, and then when he died it was continued by somebody else. But the second volume was the history of when Churchill was the first Lord of the Admiralty. And it de- scribed very much what was going on duringWorld War I.... And it was adisaster—people were running around in circles, and there was no process and no logic and so on. And then I made them readThe Best and the Brightest,which was Halbertson’s story of the Americans in Vietnam [Halbertson, 1993]. And of course that was just pre- cisely the opposite; McNamara was a very bright guy and very organized, but the only problem was that the Vietnam War was a disaster and World War I more or less worked out. I always said that numbers are nothing but an adjective; you shouldn’t believe that a number is precise; it is an adjective, it is not a verb.

I made them read the two books and I said, “don’t ever confuse process with results.”The process looked great for Vietnam, but the results were bad.

And the process that the British government fol- lowed during World War I was a disaster, but the results were much better. When I made them read these books I said “be careful, you can’t mistake process for results.” And what businesses are try- ing to do is to get results, but just because you have good processes doesn’t guarantee that you have good results. Don’t make the mistake of thinking that if someone is very neat and orderly they are necessarily the one who gets good results.

And so we did a lot of reading.... we had sem- inars—I would invite people to come and give sem- inars for managers. We had tutorials. We spent months learning computer architecture. Because we all felt we really had to understand how com- puters worked. Because they obviously were going to be very important, and there’s no sense of talk- ing about something without understanding it. . . .

it was a good time! We were all learning a lot. Of course, one of the beauties of a big institution like Citi is that you can invite anybody and they will come. And so if you wanted to have somebody come and talk and called them and sent them a plane ticket they would almost always come. So we had access to everybody. That’s the power of a big institution.

Did you feel you were destined to life in business? Did you ever consider an academic career?

No, I always thought I would try to run something; I don’t know why. I didn’t know what I wanted to run either. It didn’t have to be the private sector; I would have been equally interested in working in 98March Academy of Management Learning & Education a foundation or in the government. When I went to work I was about 25 when I had finished the mili- tary and finished graduate school. And I said to myself, “what you should do is to try to maximize your learning so that at age forty, 15 years later, you are in a position to rethink your career. Be- tween 25 and 40 you should try to learn as much as possible . . .” and it didn’t make any difference to me where. But I came to work here, and I stayed and I learned a lot. But the job I would have taken if I hadn’t landed here was in the oil business—it would have been different. But I always thought that what I wanted was to be proficient at running things. From my point of view, running and build- ing things is about improving things . . . and that is what I wanted.

It could have been the government . . . or it could have been a business school . . . I always wanted to run the CIA. [laughs]. Because the CIA has an interesting problem. It has to convert raw data into stories— you know, “is Saddam really a risk?” We obviously think so and I can understand why we think so. But you know, you take all data you read as behavior and then you write a story that says “hey, this guy is dangerous.” I’m sure there are other stories that could be written. The CIA is in the business of assembling data, but they don’t just assemble it and deliver it raw to somebody else, they also convert it into stories. And that I always felt was intellectually very demanding: to know what to look for—what piece of information might cause you to see reality differently. And to try to guess what is actually going on, I always thought of as very intellectually demanding, and you have to do that in business, and CIA has that problem also.

I always thought that in Washington, that would be a very interesting job. For two reasons: number one is that it was very intellectually demanding and it required that you had a very broad perspec- tive on the world and be very open to alternative explanations of the same facts. But, number two, it also is very private job. It is the only job in Wash- ington where you don’t talk to the press. And I don’t like talking to the press. So from that point of view I thought it would be interesting . . . you know, in any other job in Washington you are almost re- quired to have a public presence because govern- ments are supposed to be open . . . but the one place where you don’t have to be is in the CIA.

Anyway, I always wanted to run things, but it didn’t make any difference to me what I was run- ning. And if somebody had offered me a job at a university I might have done that. I think the most interesting institutions are foundations.So, are you going to run things in the future?

Probably not; I clearly will not run a business again. People have been trying to get me to do it, and some of the things they have asked me to do are very interesting. But I’ve said no, I’ve done that . . . but if somebody called tomorrow and said, “Hey, would you run the Ford Foundation,” I would think about it. Because the potential is so great. But my ambition right now is to write a book on my own experiences, which will help me clarify my ideas, and then I’m working on this general idea of whether you can get the social and behavioral sciences to have a meaningful impact on practice, and the two arenas that I am most interested in are business education and the other is education- education. And whether or not I will be able to do that we will see . . .

It is funny, after I retired from Citi, there were a whole lot of people I sort of lost contact with—as soon as I came back to the Exchange, all the friends were there again, and the reason is that they don’t know how to identify you if you don’t have a job. It doesn’t have to be an important job, but they have to be able to locate you in their minds. They know who you are when you have a job, but “Reed is retired and he bikes in France” is not something they can locate. And a lot of peo- ple— but not me— get nervous when they retire because they lose their identity; and as you know, knowing your identity is important (that was a theme in the movie too). But many people are so tied in with their jobs that when they don’t have their jobs anymore they have a hard time describ- ing who they are. These kinds of people need some kind of attachment. So if you get some recently retired chairman of a company, they are eager to get back to something. It’s part of life for them. So it is not hard to find someone who is eager to run the Exchange . . . the problem is to find the right one.

It is also a public job . . . I was invited to many meetings and public talks during these past months; it is a position that gets you invited to everything. So if you like that kind of life—which I don’t—it is an ideal job.

I am also now trying to write a book on my own experiences, which I must say is slower than I thought, but this year I am thinking I will get it done.

You see, I retired about 4 years ago. Now is a good time to write because when you first retire you are still too emotionally involved in everything you did so that you can’t think very clearly. If I wait 10 years I will forget it all. But I’m at a point where it has been long enough so I think I have some 200699 Augier and Reed perspective, but not so long that I have forgotten.

And I have a good outline and I have already started writing.

I will be looking forward to reading that. Thank you so much for your time!

REFERENCES Cyert, R., & March. J. M. 1963.A behavioral theory of the firm.

(2nd ed., 1992). Oxford, England: Blackwell.

Gordon, R., & Howell, J. 1959.Higher education for business.

Columbia University Press.Halberstam, D. 1993.The best and the brightest.New York:

Ballantine Books.

Huff, A. (Ed.). 2000. Citigroup’s John Reed and Stanford’s James March on management research and practice.Academy of Management Executive,14: (1).

March, J. G. 1991. Exploration and exploitation in organizational learning.Organization Science2: 71– 87.

March, J. G. 1996. A scholar’s quest.Stanford Business School Magazine,64(4 ): 10 –13.

March, J. G., & Simon, H. 1958.Organizations.(2nd ed., 1993).

Oxford, England: Blackwell.

Simon, H. A. 1967. The business school: A problem in organiza- tional design.Journal of Management Studies,1–17. Mie Augier,is a postdoctoral student at Stanford University.

Her research has been pub- lished in journals such asIn- dustrial andCorporate Change, Journal of Economic Behavior and Organization,Organization Science, California Management Review,andJournal of Manage- ment Inquiry. Her current re- search interests include behav- ioral science, and strategic management and organization theory, and she is currently working on research on the his- tory (and future) of management education and business schools. Mr. John Reedis retired chair- man of Citigroup, and former CEO and chairman of the New York Stock Exchange. He serves on the boards of RAND, MDRC, MIT Corporation and the Center for Advanced Studies in Behav- ioral Sciences. Mr. Reed is in- terested in management educa- tion and in the social and behavioral sciences and has been named a Fellow of the American Academy of Arts and of the American Philosophical Society. 100March Academy of Management Learning & Education