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Notable Books
In each issue, we identify and briefly describe a small number of books that are insightful about consequential matters and offer new ways of thinking strategically about the nonprofit world.
The Innovative University:
Changing the DNA of Higher Education from the Inside Out
By Clayton Christensen and Henry Eyring
Jossey-Bass: 2011, 512 pp.
When Derek Bok was president of Harvard University, he used to talk about what makes an institution great. In higher education, he said, it was not necessarily endowment balances, publication rates or other numerical data that rankers like to collect. There were many schools that he considered exemplary successes that would never become well-known based on such statistical criteria. Rather, Bok said, what makes an institution great is a shared sense of identity and purpose.
In their new book, The Innovative University, Clayton Christensen and Henry Eyring devote most of their attention to two great institutions: Harvard University and Brigham Young University-Idaho (BYUI), formerly known as Ricks College. Eighteen of their twenty-four chapters compare and contrast these schools. They eventually draw general conclusions about “the Innovative University” that are thoroughly grounded in what they have to say about their two case studies.
You may not think Harvard and BYUI have so much to do with one another, but this book will convince you otherwise. Their stories are actually intertwined in all sorts of ways, both important and unimportant. Author Henry J. Eyring, an administrator at BYUI, is the son of BYUI’s former president, Henry B. Eyring, who earned both his Masters and Ph.D. in Business Administration at Harvard. Clayton Christensen, now a professor at the Harvard Business School, was an undergraduate at BYU, though at the main campus in Utah rather than in Idaho. And Christensen’s former dean at Harvard, Kim Clark, left the Business School in 2005 to become president of BYUI. Clark also brought two other Harvard Business School faculty with him there, Steve Wainwright and Clark Gilbert.
The point is that, through many connections, the two authors are very familiar with both BYUI and Harvard – or at least with the Harvard Business School. It is less obvious that they have much intimate knowledge of Harvard College, or, indeed of trends and research concerning undergraduate education worldwide other than at BYUI. There are some sidebars that reference other schools, mainly in Utah, as well as other studies, mainly by McKinsey, Milken or Innosight. But the book concentrates almost entirely on what many people know about Harvard and what not so many people have known about BYUI.
This strategy is sometimes enlightening. The authors emphasize, for example, that Harvard began as a Puritan college and that BYUI began as a school, then became a junior college and is now a four-year university sponsored by the Church of Jesus Christ of Latter Day Saints. But sometimes the parallels really seem like a stretch. The long and selective histories they recount are laced with too many transitions of the form, “Meanwhile, back at Harvard, similar developments were taking place…” One almost gets the impression that these were the only two schools on earth and that, for more than a century, they were constantly thinking of little besides one another.
But the authors’ descriptions of each school seem accurate enough. In fact, most chapters helpfully provide tables that highlight certain defining characteristics of each institution at various points in their development. They refer to these contrasting traits – such as open admissions versus selective admissions or moral educational priorities versus liberal educational priorities – as the institution’s “DNA.” This metaphor runs throughout the book, including double-stranded graphics that grace both covers, the title page and every sidebar.
Indeed, the very subtitle of the book is “Changing the DNA of Higher Education from the Inside Out.” The problem with this metaphor is that no one knows how to change his or her DNA. The book goes to great lengths to draw out two strands in the history of higher education to illustrate how one shows the way forward and the other is in trouble. But even the most sophisticated chart of our genetic makeup does not and cannot tell us what to do about it. The implicit diagnosis is, of course, that Harvard is threatened but BYUI has a bright future. And that is because Harvard’s DNA makes it vulnerable to what Christensen has become famous for calling “disruptive innovation.”
The process of “disruptive innovation,” as developed in Christensen’s other books, unfolds when old established firms selling traditional products cannot cope with how upstarts provide new and initially inferior substitutes to new and ultimately larger sets of consumers. Think of how cell phones have moved up-market to displace landlines, or how discount stores have moved up-market to displace full service retailers. The underlying message of this book is that profit-minded online educators are going to eat Harvard’s lunch, while BYUI and its ilk will not only survive but thrive.
The authors convincingly suggest that BYUI has done a remarkable job meeting its goals, and will continue to do so as it adapts technologies and sensibilities from for-profit and online educational providers. But just what are the goals of BYUI? The book never explicitly says, nor do the authors ever seriously consider how these may be different from Harvard’s. In other words, Christensen and Eyring never really talk about what Derek Bok talked about, namely, the sense of shared identity and purpose that can make an institution great.
The contrast between Harvard and BYUI is most strikingly illustrated by the authors’ account of how and why Ricks College changed from a two-year institution to a four-year university named Brigham Young University-Idaho in 2000. The President of the Church of Jesus Christ of Latter Day Saints, Gordon Hinckley, held a teleconference from Salt Lake City on less than 24-hour notice during which, to the surprise of all but one or two people on campus, he simply announced the change in the institution’s name and status within the Church Educational System. That kind of governance is hardly consistent with Harvard’s sense of identity and purpose (or most other universities in the United States).
In fact, for a book that purports to be about change and innovation in higher education, The Innovative University strangely omits much discussion of academic governance, leadership, or decision-making, beyond potted portraits of particular presidents that put Charles Eliot and Abbott Lawrence Lowell of Harvard on a par with David Bednar and Henry Bennion Eyring of Ricks College.
The underlying message of
this book is that
profit-minded
online educators are going
to eat Harvard’s lunch.
Key management issues always concern how certain tradeoffs get made. Howard Raiffa, the Harvard Business School professor with whom I taught, impressed upon me not only that leaders have to make tough tradeoffs but also that this can be done well only relative to explicit objectives. Is the mission of BYUI to prepare as many students as possible to go on Church missions around the world? Is the mission of Harvard to prepare elite students to go on secular missions in government, consulting firms and other research institutions? Are the objectives of either institution really so similar to those of communication service providers, retailers, and other commercial firms? These are caricatures, of course. But this otherwise insightful and intriguing book finally falls short of greatness because of the authors’ unwillingness to address how great institutions can differ in their sense of identity and purpose.
The Upside of Irrationality: The Unexpected Benefits of Defying Logic at Work and at Home
By Dan Ariely
HarperCollins Publishers: 2010, 334pp.
If we offered nonprofit CEOs and public policy officials the incentive of banker-sized bonuses, would it lead to a more vibrant, high-performing social sector? Wouldn’t it be nice if one could easily mobilize organizations’ constituencies behind the mission? Why is it that an appeal on behalf of an individual can garner nationwide support, while the more dire suffering of masses often elicits little action?
Questions of this sort confound social entrepreneurs, nonprofit leaders and business executives alike. Some surprising answers can be found through the exploration of human irrationality – which may have an upside, according to Dan Ariely’s new book, a sequel to his earlier work, Predictably Irrational.
In The Upside of Irrationality, Dan Ariely, a professor at Duke, explores the puzzling question of why we consistently “overpay, underestimate, procrastinate and overvalue what we create,” through the lens of behavioral economics, the vibrant new science bridging psychology and business. Presented with these human flaws, Ariely attempts to “figure out how we can get the most good and least bad out of ourselves” when making choices about money, work, relationships and, ultimately, happiness.
Why does an appeal on
behalf of an individual
garner nationwide support,
while the suffering of masses
often elicits little action?
Ariely’s research is lodged in a sub-sector of economics that, until as recently as 15 years ago, was considered a marginal, exotic endeavor. Now behavioral economics can claim a Nobel Prize, a critical mass of empirical research and a history of upending the classical and neoclassical theories (based on the premise that people make rational, self-interested decisions that weigh costs against benefits and maximize value and profit for themselves). The new approach allows practitioners and theorists to depict how actual human beings operate at an intersection of Adam Smith’s “invisible hand” and the irrational, self-sabotaging mind. It’s little wonder that books like Ariely’s Predictably Irrational and its bestselling sequel, along with Malcolm Gladwell’s Outliers and Steven Levitt’s Freakonomics, are flying off the shelves.
Although he started out as a physics and mathematics major and later became a professor of marketing with no formal training in economics, Ariely is considered one of the leading behavioral economists. Drawing on the social research methods that made Predictably Irrational one of the most talked-about books of the past few years, Ariely’s experiments reveal such idiosyncrasies as the “IKEA effect” (if you put effort into building something, pride and sentimental attachment are likely to make you overvalue your creation) and the “identifiable victim effect” (why we respond to one person’s plight but not to the suffering of the masses). We also learn how identity and labor are intrinsically connected and how devaluation saps the meaning out of work (people are hard-wired to seek meaningful ways to earn a living and spend their time). And insights on why outsized bonuses may actually reduce the quality of an executive’s performance will allow to insert the helpful phrase “studies have shown” into arguments with one’s banker friends.
The Upside of Irrationality is particularly relevant for the nonprofit sector. When scarce resources are allocated to serve the interest of critical social change, it is worthwhile knowing what drives people to choose long-term gain over instant gratification, break bad habits and feel ownership and pride for their actions.
Some specific lessons from the book:
1. Work performance and motivation
Consistent with the findings about market vs. social norms, salary alone will not motivate people to work, let alone risk their lives, for a cause; social norms, such as pride in one’s profession and a sense of purpose, motivate people to do their best. In fact, money is very often the most expensive way to motivate people. “Social norms are not only cheaper, but often more effective as well.” And while big CEO bonuses may not be an inherently nonprofit problem, the lessons are particularly applicable for the sector where monetary incentives are hardly the primary motivators.
2. Work climate and change
The tendency to fall in love with our creations (the “IKEA effect”) can be applied to building ownership of change, planning processes and new policies.
3. Fundraising
The “identifiable victim effect” has direct implications for donor support and crafting effective fundraising campaigns, a well-illustrated point in the book.
Ariely’s key concepts – adverse effects of over-motivation, decisions under the influence of emotions, innate desire for revenge, to cite a few – shed light on events as recent and dumbfounding as the debt crisis; the financial crisis of 2008 and the subsequent rage over the bail-out and CEO compensation; and the fear-induced dips in the stock market in 2011. (Somehow, the traditional economic notion that the market is self-correcting just doesn’t seem to cut it.)
We learn how identity and labor
are intrinsically connected
and how devaluation saps the
meaning out of work.
Ariely does raise questions about the validity and reliability of experiments carried out, for the most part, in a university lab. Can we safely extrapolate his findings to the larger population? How would his theories apply to different personality types and other cultures with different collective psyches and social norms? There is also an ironic possibility that Ariely, the researcher, could be susceptible to the fallacy he describes: “We think we see with our eyes, but the reality is that we largely see with our brains. Our brain is a master at giving us what we expect to see.” The jury is still out on this question, but putting it on the agenda through this book is of value in and of itself.
In the end, Ariely’s new chronicle of human irrationality may seem simplistic to some, and replete with sometimes superfluous details of his autobiography. The upside? A front-row view into one’s own irrational mind and a more nuanced understanding of the universality of the human experience linger long after the book is finished. And while some of the conclusions are obvious, Ariely’s elegant synthesis and his thought-provoking, engaging style (sans academic jargon and bafflegab) make for a pleasurable read.
The Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics
By Eric D. Beinhocker
Harvard Business Press: 2006, 527pp.
In The Origin of Wealth, Eric D. Beinhocker discredits neoclassical economic theory, calling it inadequate to explain the most important characteristics of the development and workings of the economy.
Beinhocker, the Executive Director of a new center supported by the Institute for New Economic Thinking at the London School of Economics and Political Science, believes that “traditional economics” attempts to describe an orderly, rational and predictive system which, save for periodic disruptions, tends to maintain a state of equilibrium. Thus “traditional economics” oversimplifies what Beinhocker posits is really an ever-evolving, highly dynamic, adaptive system which he calls “complexity economics.” The key to Beinhocker’s thesis is that the theory of evolution is applicable not just to our biological development, but to our economic, technological and social development as well. And, he explains, all of these evolutionary processes continuously interact as they each operate according to the principles of differentiation, selection, amplification and repetition.
In today’s world no nonprofit can be successful unless it thinks of itself as a business.
Competing ideas fight for primacy in the marketplace, with the winners moving the process forward until better or more advanced ideas take their place. In Beinhocker’s terminology, these are the “fit designs,” and all evolution is a “search algorithm” for them. Successful businesses are those that have created “fit designs,” but they cannot rest on their laurels because if they do, the evolutionary process will overtake them with something better. Economic evolution is marked by ever-increasing knowledge, which drives both the technological development of new inventions and products and the organizational methodologies that enhance productivity. (For an example of the latter, think of the impact of Henry Ford’s assembly line, which revolutionized manufacturing efficiency.)
Editor’s Note:
As the world experiences yet another stage of economic turmoil, we believe it is useful to revisit a 2006 book that explores the roots of the crisis.
Thus Beinhocker views evolution as a trial-and-error process moving from simplicity to complexity, rather than large periodic disruptions that interrupt the equilibrium of traditional theory and move economies forward, only to return them to a new level of equilibrium. For Beinhocker, change is constant, and it comes in much smaller pieces from many sources. His is bottom-up, not top-down thinking: economics is not an equilibrium-bound system. While there are many forces at work (and these can be technological, social or political), no one is really in charge, and that is why the evolutionary process is always dynamic, always adapting. Economic evolution is the product of what he calls “deductive tinkering,” the work of many people, businesses and institutions contributing to economic success and to moving the economy forward.
In The Origin of Wealth, Beinhocker takes the reader back thousands of years to the hunter-gatherers to describe the beginnings of economic activity: the production of tools and weapons which began to be traded and which themselves evolved into more sophisticated implements. Evolution in its various iterations is marked by continuous increases in knowledge over time. Thus, in the field of economics, he equates knowledge with wealth, and defines the origin of wealth as evolution.
Beinhocker draws upon the work of a large number of scientists, social scientists, economists both classical and modern, game theorists and others to make his case, including the debunking of classical theory as well as to provide support for his theses. He builds his case carefully and convincingly, although his rejection of what he calls “traditional economics” is more unforgiving than it might be. After all, economic theory and thought have also evolved over time, and continue to do so.
In the last few sections of the book, Beinhocker addresses issues of “left” and “right” politics, multiculturalism in an increasingly linked global economy, the impact of poverty and inequality and other related social, political and cultural questions. He concludes that all of these affect economic evolution and are, in turn, influenced by it. In his view neither the left nor the right has the answers to the economic and social issues of today’s world, and he offers some possible solutions that draw from both philosophies. Readers can decide for themselves whether or not they agree; however, keeping in mind that this book was published in 2006, it would be hard for anyone to argue that these issues have not intensified in the years since then. We need to find common ground soon, or risk even greater problems in the years ahead.
One part of the economy hardly mentioned in The Origin of Wealth is the nonprofit sector. One could argue that this is perfectly appropriate, given that wealth creation is not the goal of this part of our economy. Nonetheless, not only are nonprofits a significant part of the economy, particularly in the United States, but also, in today’s world no nonprofit can be successful unless it thinks of itself and manages itself as a business. (There are probably exceptions in the realm of small, volunteer organizations that provide individual services of one kind or another, but these are hardly a significant portion of the sector.)
The demand for nonprofits to obtain funding makes it incumbent upon them to be adaptable.
For readers willing to apply insights into how businesses adapt to and drive changes in the economy to the world of the nonprofit sector, there is much to be gained from this book. One important lesson lies in understanding the impact of evolution on the ever-increasing complexity of the nonprofit arena, in terms of laws, rules and regulations. Thus, in addition to program delivery, nonprofits need to have sufficient infrastructure to be able to deal with these issues. In a world in which change is the order of the day, the demand for nonprofits to successfully obtain funding from whatever source – whether tuition, fees, government or philanthropy – makes it incumbent upon them to be adaptable, and in this context to be able to demonstrate the ability to generate and successfully execute viable business plans.
In developing business and strategic plans to achieve his notion of a “fit design,” Beinhocker believes that the best plans are generated when leadership focuses on learning and on creating “prepared minds,” combined with deep discussion, fact-gathering and analysis – prior to any decision making. Leaders should consider plans that make multiple bets on a variety of these options as a “portfolio of experiments” in order to minimize the risk of betting the entire plan on only one choice. While this might not work for all organizations, it surely offers food for thought for for-profit and nonprofit organizations alike.
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