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Surprise! Biz professors make good executives, study suggests

October 1, 2007

For more information, contact: Benjamin Haimowitz, HHaimowitz@aol.com

"Those who can, do; those who can't, teach," is a long-lived adage. And probably no group has come to be more sensitive about it than the faculties of schools of business. Lately they have heard it a lot.

In recent years the relevance of these academic institutions to the real world of business has been called into question repeatedly, not only by business people but by some of the world's most respected business professors. Most telling, perhaps, has been criticism that business faculties are so intent on scholarly rigor that they have lost touch with what is important to the performance of actual companies. As a study in the current issue of Academy of Management Perspectives puts it, a "familiar stereotype" has gained currency "that business professors cannot make it make it in the real world," a stereotype that raises profound doubts about "the practical relevance of [the professors'] expertise."

Yet, when this new study's co-authors put that stereotype to the test in a way never done before, it turned out to have to have little validity. Their unprecedented research on more than 200 business academics who became executive managers revealed that their companies did quite well -- significantly better, in fact, than nearly identical firms with no former academics in their top ranks.

"Companies managed by former business school professors generated greater revenues per employee than companies managed by non-former business school professors," report the study's authors, Bin Jiang and Patrick J. Murphy of DePaul University. They add that "professors make especially valuable contributions as vice presidents in company top-management teams because their domain expertise corresponds to common functional business areas."

What the new research suggests, in other words, is that the reputed gap between business academics and the world of real business is not nearly as big as it has widely been supposed to be -- if it is, in fact, big at all. "We are hopeful," Jiang and Murphy conclude, "that our findings reduce some doubt about the practical legitimacy of business-school professors based on notions reflected in business publications and popular culture."

The findings derive from an analysis of data drawn from Dun & Bradstreet's Million Dollar Database, a vast compilation of information on North American public and private companies that have more than 20 employees or more than $1 million in annual revenues. To identify companies with former business-school professors in top management, Murphy and Jiang had their team search executive biographies for such words as "professor" or "economics" or "management," and then examined each search result individually to ascertain that the individual had the title "Dr." and was from a business school and not another part of a university. They then created a control group that matched the sample in terms of industry, size, and location but had no former professors in executive ranks. The final sample consisted of 215 matched pairs of companies.

The professors assessed company performance by dividing annual revenues by total workforce, a common way of measuring productivity. They found that firms with former business-school professors in executive positions had a mean productivity index (revenues divided by employees) of about 217,000, compared to about 178,000 for firms without professors, a statistically significant difference. They also found that the result was more reliable for small companies than big ones, further evidence of individual professors' effectiveness, since it is in small companies that a single person is likely to have the greatest impact.

When the researchers compared the performance of companies based on the position occupied by former professors (chief executive versus vice president versus board member), they discovered significantly better performance when professors were vice presidents than when they were CEOs or board members. In addition, when academics made the career change early in their career, company performance was significantly better than when they made it later, leading Jiang and Murphy to surmise that "recency of expertise and greater knowledge of current scholarship make for better performance as an executive in a specific business area."

A further finding of note is that former professors from highly ranked business schools had no apparent edge as executives over those from schools of less repute. In other words, the companies of the first group performed no better than the companies of the second.

What accounts for the superior performance of companies that have former professors in their top management? Murphy and Jiang concede the possibility that professors who migrate to the business world might be a special breed, to be distinguished as a group from the great majority that remains in academe. Yet, the two groups have much in common, they believe. "Almost all doctorate-holding business-school professors go through similar hiring processes based on academic selection criteria," they observe. "It is reasonable that [the former professors] would then share some of those criteria with current business-school professors."

Jiang and Murphy also allow for the possibility that "the better-performing companies in our sample preferred to hire professors to be executives." Yet, the widespread stereotyping of academics as a breed remote from the realities of the business world leads them to doubt this is the case.

In addition to carrying out extensive statistical analysis, the DePaul professors solicited the views of executives in the sample about the study's findings, and several of their comments suggest that "apart from expertise in a content area, business-school professors seem to have a unique sort of communication competence." As one of the participants put it, a female vice president of finance at a middle-sized company:

"It's challenging to be a business school professor.  I was nervous when I started teaching because when I was younger I was introverted.  So I prepared a lot for my classes... When I became a manager in the finance organization I had already learned how to effectively communicate finance and accounting concepts in understandable ways in MBA classrooms.  So I was a natural at making presentations to large groups and communicating with clients, the executive team, employees, and staff.  It's not just finance expertise from my academic experience that made me an executive.  It's communication skill - the ability to make complex concepts understandable."

The study, entitled "Do Business School Professors Make Good Executive Managers?" is in the current (August-October) issue of Academy of Management Perspectives, a peer-reviewed quarterly journal. With about 18,000 members in over 100 countries, the Academy of Management is the largest organization in the world devoted to management research and teaching. The academy's other publications are the Academy of Management Journal, Academy of Management Review, and Academy of Management Learning and Education.

Media Coverage:
Chronicle.com. A Glance at the August Issue of The Academy of Management Perspectives: The Management Skills of Business Professors. (Wednesday, October 24, 2007).
FinancialTimes.com. Professors Make Great Executives. (Monday, October 29, 2007).
The Globe & Mail. Professors Quite Comfy in Corner Offices. (Friday, October 19, 2007).

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