Robert F. Bruner, Dean

“…To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money. Goldman Sachs is one of the world’s largest and most important investment banks and it is too integral to global finance to continue to act this way. The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for…. I am sad to say that I look around today and see virtually no trace of the culture that made me love working for this firm for many years. I no longer have the pride, or the belief…I knew it was time to leave when I realized I could no longer look students in the eye and tell them what a great place this was to work.”

–Greg Smith, New York Times, March 14, 2012

“It wasn’t an easy decision to leave Google. During my time there I became fairly passionate about the company… The Google I was passionate about was a technology company that empowered its employees to innovate. The Google I left was an advertising company with a single corporate-mandated focus… From this innovation machine came strategically important products like Gmail and Chrome, products that were the result of entrepreneurship at the lowest levels of the company. Of course, such runaway innovative spirit creates some duds, and Google has had their share of those, but Google has always known how to fail fast and learn from it. In such an environment you don’t have to be part of some executive’s inner circle to succeed. You don’t have to get lucky and land on a sexy project to have a great career. Anyone with ideas or the skills to contribute could get involved. I had any number of opportunities to leave Google during this period, but it was hard to imagine a better place to work. But that was then, as the saying goes, and this is now… Truth is I’ve never been much on advertising. I don’t click on ads. When Gmail displays ads based on things I type into my email message it creeps me out….The old Google was a great place to work. The new one?”

–James Whittaker, blog, March 13, 2012

“I am writing to say goodbye. Recently…a hedge fund manager who was also closing up shop…was quoted as saying, “What I have learned about the hedge fund business is that I hate it.” I could not agree more with that statement. I was in this game for the money. The low hanging fruit, i.e. idiots whose parents paid for prep school, Yale, and then the Harvard MBA, was there for the taking. These people who were (often) truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government. All of this behavior supporting the Aristocracy only ended up making it easier for me to find people stupid enough to take the other side of my trades. God bless America.”

–Andrew Lahde, Financial Times, October 17, 2008

What meaning shall we make of these letters? One of my great teachers, C. Roland Christenson, once remarked, “Professional schools are good at teaching you how to do a job, but give little attention to how to enter or exit.” Nor is there any guidebook to letting folks know what you think as you stride out the door for the last time. It’s no wonder then that the rare publication of a “parting shot” letter creates a certain frisson in the media. Such occurred last week when the first two messages went public; the third created a stir in 2008. There was much discussion on the merits of the writers’ views (the comments on the letters are at least as entertaining as the letters themselves). But no one paused to reflect on what it takes to exit well under adverse circumstances. To what extent are dignity, grace, justice, and self-respect served by a “parting shot”?

In the interest of brevity, I‘ll leave it to the interested reader to read the full text of the three letters. From this small sample, you might conclude that if you want to write a “parting shot” that will gain attention, it should contain at least three elements:

· Grief. All three letters state how unhappy the authors are that things have changed. Greg Smith alleges that Goldman Sachs has become morally bankrupt. James Whittaker grieves that Google has lost its entrepreneurial flair and intrudes into personal privacy, and that Google+ doesn’t challenge Facebook. Andrew Lahde is unwinding his firm, having profited from a massive short position against subprime debt—that play won’t be profitable any longer.

· Loathing. The three letters brim with contempt—and as the publishers of the lurid supermarket tabloids show, contempt sells. Andrew Lahde despises the “idiots,” the “people stupid enough to take the other side of my trades,” and the Ivy League Aristocracy. Greg Smith despises traders (the Andrew Lahdes, perhaps) who disrespect their clients. And James Whittaker has issues with Larry Page and the advertisers.

· Exhortation. Every parting shot needs a “so what?” Once the author has seized the attention of a reader with grief and loathing, one has a bully pulpit. Greg Smith urges a “wake-up call to the board of directors. Make the client the focal point of your business again.” Whittaker avoids the soap-box, though his message is clear: dial back the new commercial focus of Google. And Andrew Lahde proposes the legalization of marijuana, a non sequitur so jarring as to turn grief and loathing into farce.

If all of this appeals to you and you are contemplating sending such a “parting shot,” consider some questions first.

1. What problem are you trying to solve? James Whittaker and Greg Smith espouse causes: the redirection of a firm back to successful origins. Andrew Lahde’s letter, on the other hand, is about ‘me’—the problem he is solving is letting people know about his retirement from active hedge fund management. The “parting shot” that says “look at me” is eminently forgettable.

2. Is a “parting shot” really necessary? One has a range of channels to air one’s concern about the direction of a company: management, an ombudsman, a meeting with the CEO, a private letter to the board of directors, and a meeting with an influential shareholder. One writes a public letter if one has a very important point and thinks no one is listening. For instance, a public letter might be an outlet for a whistleblower who discovered widespread corruption. Some of the comments on Greg Smith’s letter refer to him as a “whistleblower”—but his letter openly acknowledges that, “I don’t know of any illegal behavior.” He mainly reaffirms sentiments that by now have emerged in earlier articles, litigation, and regulatory inquiries. Similarly, the failure of Google+ and the shift in business focus at Google are old news. And Lahde’s letter is made redundant by the return of original capital and profits to his clients. If your letter doesn’t say anything new, then why write it?

3. What is the opportunity for servant leadership? As I have said in earlier postings (see this and this) you must be clear about whom or what you serve—is your missive directed to them or in favor of them? Greg Smith’s letter is clearest in advocating the interests of clients and the future of Goldman. But his letter casts wide condemnation on the employees of the firm: “I am sad to say that I look around today and see virtually no trace of the culture that made me love working for this firm for many years” (my italics). Goldman has about 33,000 employees. Do none of them espouse any commitment to clients or to the future of the enterprise? Is this broad condemnation the best way to serve them and their clients, or to serve the redirection of the firm?

4. Where are you going with this? Genuine change follows sustained advocacy and action. Andrew Lahde has dropped from sight, as has Greg Smith. James Whittaker has moved to Microsoft, which several commenters mocked as inconsistent with his appeal for entrepreneurship. If your public letter is more than self-indulgent venting, will you follow through on your advocacy by shaping a vision and strategy, enlisting others, and taking positive actions?

5. Are you ready for the backlash? The commentariat on the Internet can be brutal. You should expect the attacked firm to reply vigorously. Some co-workers who may have been friendly will dump you. Your letter may well foreshorten your job prospects. You may be motivated with the self-righteousness of a saint, but as Mark Twain wrote, “Be good and you will be lonely.” If you’re not sure whether you are ready to bear the cost, return to question #1.

The “parting shot” is an art form. Like “kiss and tell” memoires, they offer a public glimpse into a private sphere. But unless one has strongly affirmative answers to the five questions, the “parting shot” letter will likely be a costly, vacant, and ephemeral gesture.

How to exit well in a mood of protest? Focus very carefully on the essence of a real business problem deserving attention. Consider how justice is best served, from all points of view. Offer constructive suggestions. Avoid the temptations of celebrity and ego. Carry your message to those in a position to act positively on it. Frame your advocacy around serving some one and some cause.

If getting even is in your heart, then living well may be the best revenge. Steve Jobs was fired from Apple in 1985. He redoubled his dedication to design-friendly information technology, founded two companies, and returned to Apple as CEO in 1997 to lead the spectacular introductions of a stream of new products. He was a volatile personality, but sent no “parting shot.” Most observers would say his subsequent success well avenged his firing in 1985.

The decline in trust in business institutions has plummeted in the recent financial crisis and recession. One survey finds that trust is rising again, but that in the latest U.S. results, only about half of the respondents trust business to do the right thing. “Parting shots” are a symptom of this social and institutional stress. Writers of such letters must consider their frame of mind (are they stressed?) and motives. Do they want to be part of the problem (amplifying the stress) or part of a solution?

Readers of such letters should view them critically as part of the narrative of stress. Let us study them for insights on the ever-moving changes in corporate culture and strategy and on changing the things that need to be changed. And let us acknowledge that any “parting shot” is one imperfect observation of a complex and dynamic social system.

A significant part of my job is to engage others in projects that matter to the practice of business and to the University. This may entail asking for one’s time, one’s talent, one’s connections, and/or one’s money. Often what I’m really asking for is one’s leadership: asking someone to step forward and set an example, become an advocate, create some momentum, or frame a vision that others can rally around. The basic question is, “Would you consider the possibility of leading…?”

It is an enduring wonder to me that most of the time, the response is ‘no’—there are many excuses; and most of them tend to be situation-specific: health, family circumstances, or other commitments at work. Some will admit that they don’t value the cause in which they are being enlisted. A few will say that they just don’t have the energy or relish possible conflict.

Saying ‘yes’ is rarer. This capacity to say ‘yes’ is one of the most important distinctions between the attributes of leaders and followers. As I have listened to successful leaders as they recount their own development, I’ve discerned some recurring themes:

· An impulse to serve prompted by a sense of purpose. For some, the service occurs through a wonderful opportunity; for others, a crisis motivates leadership. In both kinds of cases, the circumstances were energizing to the leader and perhaps paralyzing to people in the group. The one who stepped forward had a special vision for possibilities that others did not see. Good service as a leader starts with a vision. As a Proverb says, “without a vision, the people wander.”

· Encouragement by others. Peers may see qualities that the individual does not. The network knows. The “many are smarter than the few,” as James Surowiecki argued in his book, The Wisdom of Crowds. Ask people to size you up as a prospective leader—what matters is to tap diverse and independent opinions.

· Growth into the idea of leading; a readiness to spread one’s wings after a time of preparation; a desire to break out of a habit of following. For some people, this tipping point is motivated by a sense of mastery and fulfillment with what one has been doing, followed by an eagerness to get on to the next Act in the play. When Winston Churchill was appointed Prime Minister in 1940, at the nadir of Britain’s fortunes, he wrote, “As I went to bed at about 3 A.M., I was conscious of a profound sense of relief. At last I had the authority to give directions over the whole scene. I felt as if I were walking with Destiny and that all my past life had been but a preparation for this hour and for this trial.”

· Ambition: appetite for personal acknowledgement and power. History offers many examples of this (Julius Caesar, Napoleon, Stalin, etc.) You have to want to lead; but among the most successful enterprise leaders I’ve encountered, this motive is notable by its understatement. I think that ambition explains a rather small part of stepping forward. In his book, Good to Great, Batten Fellow, Jim Collins, suggests that truly high-performance leaders display notable attributes of humility. Such leaders, “build a company that can tick along without them, rather than feeding their egos by becoming indispensable…are ambitious for the company and what it stands for; they have a sense of purpose beyond their own success” (p. 198).

Of most interest to me is that those few who say ‘yes,’ have tended to do so repeatedly. The top performing professionals I’ve known–CEOs, government officials, top university administrators, technologists–got to where they are not by mulishly resisting new responsibilities, but by saying ‘yes’ to an invitation to lead when everyone else said ‘no.’ Usually, saying ‘yes’ began at an early age: leading a class in reading aloud; accepting a role in a play; organizing an athletic team or a band; corralling some friends to raise money for a charity. These plant the seed of leadership and build confidence. Then maybe there was the election to office of a club during school years. In the military and business, one’s willingness to accept assignments helps to broaden one’s scope of awareness and familiarity with the varieties of challenges with which leaders must deal. By then, saying ‘yes’ has become a habit.

The big idea is that people step forward as leaders because of a learned habit. The ancient Greek philosopher, Aristotle, wrote, “Excellence is an art won by training and habituation. We do not act rightly because we have virtue or excellence, but we rather have those because we have acted rightly. We are what we repeatedly do. Excellence, then, is not an act but a habit.” The habit in the case of excellent leaders is the willingness to say ‘yes’ when the call for leadership occurs.

Seeing leadership as a learned habit has important implications for our efforts to develop future generations of leaders. First, it is vitally important to give children opportunities and encouragement to lead at an early age. This may not be easy, since in some cultures the norm is that children are to remain silent and must learn to follow. This risks breeding a generation of silent followers. In other settings, considerations such as gender, race, and caste determine which children get tapped. But if leadership is a habit learned through repeated exercise, then the strength of society depends on conscious development of leadership traits starting early across a broad segment of children.

Second, we should promote the ethic of service through leadership. Serving is always about others, a crucial value of great leaders. Mahatma Gandhi stands in modern memory as an exemplar of servant leadership.

Third, we should simply ask candidates for leadership to lead. Some members of your community, club, or business will show up on your doorstep to request a new assignment. These are the go-getters, perhaps five or ten percent of the group. What matters are the others: you must ask them.

Finally, if you are asked, look for every reason to step forward. Don’t be satisfied with the usual reasons to decline. Ask yourself, “why not?” University of Connecticut President Michael Hogan told young people, “Say yes. In fact, say yes as often as you can. Saying yes begins things. Saying yes is how things grow. Saying yes leads to new experiences, and new experiences will lead to knowledge and wisdom. Yes is for young people, and an attitude of yes is how you will be able to go forward in these uncertain times.”

Repeatedly saying ‘yes’ to leadership opportunities turns challenges into an option on the future: a chance to take a look around; a chance to learn by doing something new; a chance to launch your career. As we know, options are more valuable in times of heightened uncertainty, times like the present. And saying ‘yes’ today helps to build a habit of stepping forward.

Clowns to the left of me,
Jokers to the right, here I am,
Stuck in the middle with you.
– “Stuck in the Middle with You” a song by Stealers Wheel

The “middle” seems to be what every executive wants to avoid these days. There is ample research on business strategy that suggests the middle is to be avoided for fear of being stuck in it. The conventional view is to see the “middle” as the problem. I see things slightly differently: the problem is not the middle; it is allowing your firm to get stuck at all. How you see the problem has big implications for taking action.

Closer to home, a recent article, “Trouble in the Middle,” which appeared recently in The Economist, suggested that time may be running out for business schools that “aren’t quite elite.” The Economist uses its rankings to segment the market (readers of this blog will be familiar with my reservations about rankings.) The author argued that the value proposition of mid-ranked schools has worsened and presages a “shakeout…which could be nasty.” Thus, the problem of the middle is relevant beyond the boundaries of the for-profit sector.

Michael Porter of Harvard Business School originally discussed the problem of “stuck in the middle.” He said that the profitability of firms depends not only on the typical rates of return in an industry. It depends more importantly on the firm’s position and competitive advantage in that industry. And he argued that competitive advantage derives from one of two strategies: cost leadership or differentiation of products or services. Across most industries you can find firms and products that aim for advantage based on either cost or differentiation.

The problem, Porter said, was in trying to do both and thus doing neither very well. He seemed to be saying, “find what you are good at and stick to it.” This focus on competencies is very sound. Porter wrote, “The firm stuck in the middle is almost guaranteed low profitability. It either loses the high-volume customers who demand low prices or must bid away its profits to get this business away from low-cost firms. Yet it also loses high-margin businesses — the cream — to the firms who are focused on high-margin targets or have achieved differentiation overall. The firm stuck in the middle also probably suffers from a blurred corporate culture and a conflicting set of organizational arrangements and motivation system.” (Competitive Strategy, p. 41-42)

The following table gives some examples from various industries. The firms in “the middle” have felt or are feeling a severe contraction.

American Airlines recently filed for bankruptcy. Chrysler and GM required a government bailout in 2009. Piaggio acquired its way into the differentiated end of the market by buying Aprilia. Dr. Pepper was acquired by Cadbury Schweppes. As these examples seem to suggest, the middle is not a place to become stuck.

Porter’s characterization eventually spawned opposition, arguing that the middle may not be all that bad or that it may be entirely sensible for managers to test the middle for the sake of discovering possible new segments of demand. After all, demand can be defined on numerous dimensions, well beyond cost and difference, such as convenience, style, and location. Then too, there is the pesky problem that consumer demand keeps changing over time, which necessitates constant experimentation by firms to discover where the new demand is. Today’s single-minded focus on cost or difference may be tomorrow’s business graveyard.

I was a student of Porter’s in the 1970’s when his iconic treatise, Competitive Strategy, hit the business world. I recall that his readers quickly absorbed his thinking about competitive positioning and generic strategies. But it struck me that they often ignored another aspect of Porter’s work, the dynamic “jockeying for position” among firms. Firms and markets are not static. They continually change as firms try to best one another. And periodically, new technologies come along that completely upset the competitive field. Another great economist, Joseph Schumpeter, described the competitive turbulence of capitalism as the “gale of creative destruction.”

Being stuck in an unattractive business without a viable exit is one of the worst situations for a firm. For instance, a diversified firm that I studied owned a coal tar refinery that had operated for over 100 years. The facility was inherited in an acquisition many years earlier. The plant was antiquated and inefficient. Furthermore, the market had turned highly competitive, making the refinery very unprofitable. The firm wanted to exit the business, but couldn’t, because doing so would trigger environmental clean-up obligations from chemical leakage over the years. Eventually, the company appointed a new manager who immediately opened negotiations with the environmental authorities, and eventually negotiated a “workout” program in which the refinery would be closed immediately and environmental remediation would be conducted over time, rather than all at once. This was an enormous success for the company and the manager, who recognized that not only was the company stuck, but so were the environmental authorities, who had been stymied by the inaction of the company.

Nuclear power plants, petrochemical plants, and many manufacturing plants face exit costs that can ruin the economics of a business as it approaches its end. Another example of being “stuck” is encountered by a minority investor in an underperforming private firm—even if a minority investor wanted to exit, his or her investment could be stranded if the securities are illiquid. Such would be the case until the majority investor decides to sell the entire firm. An airline can become stuck by virtue of an aging fleet of airplanes, uneconomic union contracts, and/or landing rights that don’t fit the more profitable segments of demand. Retailers can become stuck by virtue of stores planted in neighborhoods with the wrong demographic trends. A technology company can become stuck because of a commitment to obsolete technology.

Irreversible strategic positions entail commitments that expose the firm to risks. In contrast, flexible positions can be altered as conditions change. You can think of flexibility as a call option on an alternative strategy–it is enabled, for instance, by holding excess manufacturing capacity, excess inventory, or excess cash. Management techniques such as lean manufacturing grant strategic flexibility.

An illustration of the creation of flexibility is apparent in the trend toward “modularization” of manufacturing. Complex business processes and products can be organized into sub-units, called “modules,” that permit specialization, encourage greater innovation, and promote efficiency. The innards of any personal computer and the success of Dell Computer illustrate the fruits of modularity: architectural flexibility pays.

Too often, MBA students and executives think that “risk management” means the active avoidance of risks. But societies need business managers to take sensible risks—to seek risk—because that’s where opportunities lie. The best executives understand that the great sin has less to do with risk-taking (such as exploring the “middle” of a market) and instead has to do with failing to develop flexibility—such as a sensible “Plan B”—if the dice turn against you.

I agree with The Economist that the field of b-schools is in for some turbulence. And if other industries are any guide, the turbulence could hit the middle hardest. But The Economist says little about the possible ingenuity of leaders of those schools or of the agility those schools might show. The next few years will be very interesting. As Yogi Berra said, “It ain’t over ‘till it’s over.”

Stealers Wheel characterize “stuck in the middle” as being caught between clowns and jokers. These may be weak competitors to your firm and therefore may present a great opportunity to serve markets and create value. If so, is the middle that bad? Yes it is, if you are stuck in some important way. The inability to respond flexibly and appropriately to new competitive conditions is the grave threat.

Ethics was all over the place at Enron. When Professor Sam Bodily and I visited the company in 2000, we saw the company’s code of ethics posted in elevators, hallways, and cafeterias. The company’s CEO, Ken Lay, was the son of a Baptist preacher and annually urged the employees to be ethical. Yet all the words, signs, and exhortations couldn’t prevent Enron’s spectacular implosion in the fall of 2001 in reaction to revelations of fraudulent bookkeeping, market manipulation, conflicts of interest, and an avaricious trading culture—Enron’s trading counterparties simply deserted the firm. Of all the arresting aspects in the story of Enron, the disparity between words and deeds is one of the most astonishing. They didn’t walk the talk.

Cynics will say that we should expect nothing else: people are susceptible to all kinds of temptations; incentives, power, and pay are corrupting; and talk is cheap–it is easy to say things just to make yourself look good. Ultimately, you can’t force people to believe in a set of values. Others will point to the latest Gallup Poll, which shows that business executives rank relatively low in honesty and ethics and just ahead of telemarketers and Members of Congress. The cynics will say that imposing a culture of ethical dealing on business people is like putting lipstick on a pig.

Most people recoil from the thought of working in that kind of environment. We want to be proud of our place of work. Fortunately, the business world offers a host of counterexamples, companies that talk openly about the importance of ethical behavior and then walk the talk. You can find examples of these companies in published lists of trustworthy companies at Forbes/Audit Integrity, Ethisphere, and at Trust Across America (TAA). Smithfield Foods (which, as they say here in Virginia, is “just down the road a piece,”) ranked #1 in the 2011 TAA listing. Leaders of such companies are not shy to discuss the importance of ethical dealing: John Mackey (Whole Foods), Tom Linebarger (Cummins Inc.), and Indra Nooyi (PepsiCo). A truism in management and family life is “if you can’t talk about it, it won’t get done.” Making progress on anything important is not a matter of giving orders: one must communicate, engage, enlist, and inspire others. So it is with creating a community of integrity. The best leaders get this and use plenty of opportunities to talk about integrity in the workplace.

To be a community of integrity is not a once-and-done decision. It is an every day choice that we must make. Here, at the start of 2012, I am writing to ask you to reaffirm our vision and our commitment to walk the talk.

Surely we can agree on the values that will shape Darden to be the community of our aspirations. UVA and the Darden Mission Statement call us to do so. We share expectations that create a community of trust. Three years ago, the faculty reaffirmed the Darden Mission Statement. It commits us to graduate “principled leaders.” The Board of Visitors of the University endorsed the University Code of Ethics. It states that, “We do not condone dishonesty in any form by anyone.” Why should we rally behind the values embedded in the Mission and Code? I can think of at least three reasons:

· We want to create a sustainable legacy for Darden. To incorporate ethics into our workplace mindset is to think about the kind of community that we would like to live in, and that succeeding generations will inherit.

· Ethical behavior builds trust and dividends of trust are valuable. The foremost dividend is an unimpeachable reputation. Equally important, ethics and trust build strong teams and strong leadership. Stronger teams and leaders result in more agile and creative responses to problems. Ethical behavior contributes to the strength of teams and leadership by aligning employees around shared values, and building confidence and loyalty.

· Darden can’t afford the costs of doing otherwise. We cannot afford to lose one shred of our reputation; we cannot afford to lose one talented member of our community, applicant, or corporate partner over an ethical lapse; and we cannot afford to lose our self-confidence and self-respect.

Here’s the bottom line: we expect each other to manage, study, lead, and work with integrity. To animate this expectation, (and to address the cynics) I ask two commitments of you in 2012.

First, encourage others around you to do what’s right. We are not an “anything goes” community. We have mutual expectations for exemplary behavior. No number of messages from the Dean can top the impact of peer expectations. A community is only as strong as its most vulnerable link. Help those who may be headed in the wrong direction. Speak up for our values.

Second, if you see something, say something. The UVA Honor System provides representatives with whom students and professors can share their concerns on a confidential basis. Similarly, faculty and staff members can share concerns with senior leaders, me, Brad Holland, University Ombudsman (434- 924-7819, ombuds@virginia.edu), and/or Barbara Deily, Chief Audit Executive of the University (434-924-4110, deily@virginia.edu). The mark of a good organization is not that it never has ethical lapses, but rather what it does about them. At Darden we must get the facts and take appropriate action as fast as possible.

High-performance organizations take integrity seriously—they talk about it regularly, often starting with the CEO. It is never too early or late to talk about integrity. People get distracted, confused, or forgetful. We can all use conversational reminders about what is important. Darden is, and aspires to remain, a high-performance organization; for us, striving to be a community of integrity is not an afterthought; it is where that high performance starts from.

The handshake is a sign of trust. Let us grasp hands with one another in a commitment to integrity in all we do at Darden in 2012.

And Happy New Year!

Sincerely,

Bob

Darden and UVA’s Curry School of Education announced recently the launch of a new joint degree program, the MBA/M.Ed. in Innovation in Education Reform. I support this enthusiastically, which veteran readers of this blog will find unsurprising (see this and this.) You might ask why a business school should get involved with education reform. Here’s my reply.

In 2009, after the nadir of the Global Financial Crisis, I was invited to participate in a panel discussion before a large audience about the causes and remedies of the crisis. The very last question was from a woman in the back row of the large auditorium who asked, “You’ve talked a lot about the global economic system, but what can WE in this room do to respond to the crisis?” My colleagues on the panel responded in lofty and rather patronizing tones about tax policy, federal regulations, and the Fed’s discount rate—their tone was that “this problem is bigger than you, so just let the experts worry about it.”

When it finally came to my turn to speak, I urged the gathering to fix the public kindergarten-through-12^th-grade (K-12) education system in their community and generally in the U.S.

This brought an ovation from the audience. Whether or not the experts get it, certainly the people understand the gravity and urgency of the crisis in public education.

I explained that no amount of government regulation or wealth transfers (taxes on the rich, social safety nets, etc.) will bring back prosperity or restore the jobs that the financial crisis destroyed. We must grow our way out of the malaise. We must create value through entrepreneurship, innovation, and new product development. The greatest barrier to growth is the development of entrepreneurial leadership, and that depends on foundational education. Growth derives from disciplined investment, hard work, and a certain amount of luck. But the odds of success are vastly influenced by training: a founder of microbiology, Louis Pasteur, famously said, “fortune favors the prepared mind.” Our ability to rejuvenate the economy depends on educating the rising generation of talent so that they can invent, renew, and reimagine.

The crisis in K-12 education in the U.S. and in many countries of the world is the demon of the hour. The roots of this crisis are numerous and predate the global financial crisis by decades. Some analysts attribute the crisis to underfunding. Others claim that the educational system is adequately funded but underperforming. Either way, the results are not pretty. The United States ranks 14^th among nations in K-12 spending as a percent of GDP, yet spends more per capita on K-12 education than all but one or two other countries. For this, we gain mediocre results (see this for an overview of recent reading and math test results for U.S. children.) Thirty percent of American students drop out before completing high school—and for minority students, the dropout rate is fifty percent. The present system performs worst for the most vulnerable segments of society, the poor and disadvantaged. The crisis in education contributes significantly to the widening income gap and worsening social mobility in the U.S. Whether you come from the right or the left of the political spectrum, if you aren’t angry yet, you aren’t paying attention—see this, this, and this, for starters.

The crisis in public education is a business problem. In my meetings with numerous CEOs and human resources executives, I hear their frustration and anxiety with the preparation that job-seekers bring to the hiring halls: usually the absence of a high school diploma; but even those with diplomas show slow reading, poor comprehension, inability to perform simple arithmetic and algebraic functions, poor mastery of digital technology, inattention, poor work ethic, and so on. Executives complain that they are being taxed twice over: once when they pay taxes to the government (in part to support public education) and again when they must pay to instill basic educational preparation for the employees they do hire. The failures of the educational system drag down the economic competitiveness of America relative to its peers. Iconic business leaders such as Andrew Grove, Jeffrey Immelt and Henry Schacht, Bill Gates, and John Akers and the Business Roundtable have bemoaned the state of K-12 education for years.

The crisis in public education is also a moral challenge. The provision of sound K-12 education is vital to our values as a society, particularly regarding equality of opportunity. Education is the cornerstone of the ability to live the American dream of creating a better life for one’s self than one’s parents or grandparents had. And education is crucial for good citizenship; it is the way we socialize our children into the responsibilities and expectations of members of a democratic society. Thomas Jefferson had this in mind when he founded the University of Virginia and advocated universal primary education. He wrote, “I know no safe depository of the ultimate powers of the society but the people themselves; and if we think them not enlightened enough to exercise their control with a wholesome discretion, the remedy is not to take it from them but to inform their discretion by education. This is the true corrective of abuses of Constitutional power.”

Business schools should rally around the K-12 education crisis because this is a business and social problem. Darden is doing so and with this new joint program, is raising its commitment. Darden and Curry already collaborate in sponsoring the Partnership for Leaders in Education (PLE). This joint venture brings teams of public school administrators and teachers to UVA where instructors from Darden and Curry team up to teach best practices in school turnarounds. PLE has served 82 school districts in 12 states. A business school has useful insights to contribute to the development of leaders in K-12 education. These range across a host of topics, such as: management acumen, the turnaround of failing enterprises, leadership development, forming high-performance work teams, measuring success and using metrics to promote investment and development, and promoting entrepreneurship and innovation within large organizations.

The mission of the Darden School is to “improve society by developing principled leaders for the world of practical affairs.” Our new joint degree program with the Curry School and our Partnership for Leaders in Education are tangible expressions of that mission.

This new joint degree program is the right program at the right time. It marries the capabilities of two prominent schools in an effort to fight one of the largest problems facing contemporary society. The fields of education and business have considerable intellectual capital to offer in response to the crisis. And each field can learn from the other. Complicated social problems tend not to come neatly packaged for easy remedy by any particular professional field. The partnership of Curry and Darden is exactly the kind of collaboration that the public should demand from professional schools within a major research university.