What will it take to be a successful leader in the future? That question is top of mind these days, given the turbulence of the past few years, and Ann Harrison is in a unique position to address it. She’s the dean of the University of California, Berkeley, Haas School of Business—the second woman to lead that top-ranked business school. She’s also the former director of development policy at the World Bank and a renowned economist whose research has focused on international trade and global labor markets.
In the four years since Harrison started leading Haas, she’s made big changes. She has led a major diversity, equity, and inclusion (DEI) effort, diversifying the profile of the Haas faculty and the student body: 49 percent of the school’s most recent class were students of color. She has woven sustainability content deep into the curriculum while maintaining the school’s historical focus on entrepreneurship and innovation. And she even introduced the school’s first virtual MBA program.
Given all this, Harrison offers a unique perspective on the future of leadership at a moment when change and disruption increasingly seem like the norms for doing business. She recently joined McKinsey chief marketing officer Tracy Francis and McKinsey Quarterly editorial director Rick Tetzeli for a wide-ranging discussion on this and other timely issues. An edited version of their conversation follows.
Rick Tetzeli: We are excited to talk with you; it seems like a great time to talk about leadership of the future. With all the instability in the air, there’s talk that we may be at the beginning of some sort of new era that requires new leaders. So why don’t you start off by telling us what kind of leader you are hoping to develop at Haas?
Ann Harrison: When you log on to our website, it says “the heart of what’s next.” Our students become leaders who are strong in both analytical and technical skills and who really anticipate the challenges of the future. That could be in everything from real estate, where we’re talking about the new designs for a built environment with shifting climate risk, to the healthcare marketplace, which increasingly incorporates technology to accommodate rising costs in aging populations.
So we’re at the heart of what’s next in terms of the kind of transformations that we’re all seeing happen. But I would say that what really characterizes Berkeley leaders, and what has always been true, is that they also lead with their hearts. They’re very empathetic. And I think that’s what makes a Berkeley leader really unique. They’re blending this amazingly rigorous education that you can get at Berkeley and at Haas with this enormous commitment to social mobility and the problems of the future.
Rick Tetzeli: Is the effort to create empathetic leaders a distraction from the core mission of learning how to succeed in business?
Ann Harrison: Not at all. In our case, we have always had this dual focus on educational rigor and important social obligation. That’s part of our mission as a public school: to promote social mobility, sustainability, inclusion.
For example, we’ve now added a core required course on being effective at leading diverse teams. Another thing that we’re doing now, very systematically, is weaving content about how climate change is affecting business into all our required courses. So if you take an accounting course, you will learn about how disclosure risk is shifting. If you take a finance course, you will talk about constructing different kinds of portfolios.
In our case, we have always had this dual focus on educational rigor and important social obligation. That’s part of our mission as a public school: to promote social mobility, sustainability, inclusion.
Tracy Francis: Ann, something we think about a lot is leadership that can drive what we call “sustainable, inclusive growth.” Financial growth alone won’t cut it anymore. For long-term success, leaders need to create growth that is also sustainable and inclusive. How does that fit with how Haas thinks about and teaches business strategy?
Ann Harrison: I think that there are certain key building blocks of going to business school that don’t change. A great business education is rigorous and quantitative. It still means learning finance, accounting, management of people, economics, strategy, marketing operations. All those key building blocks are still there.
However, I do think there have been some big changes. And one is that there are now specific key subject areas that map to your question and really do require a change in what you teach. In innovation—with a focus on new technology and data analytics—sustainability, and inclusion, there is a need for new ways of teaching and new materials.
There’s another big change that I also want to note, and that’s in how a business education is delivered. If you look at the growth in demand for business education globally, all the growth is in virtual offerings. The COVID-19 pandemic drove that. So in the space of the past couple of years, Haas has gone from no virtual education to being the first of the top ten business schools to offer a virtual MBA.
Tracy Francis: You have a lot of expertise as a researcher on globalization and trade flows. I recently heard an important business leader say, “I don’t consider a single investment anymore without a geopolitical analysis.”
Have geopolitics become more important at the business school level? How do you incorporate this into the building blocks of that education? And how have geopolitics affected enrollment?
Ann Harrison: Let me talk about what’s changing globally, and then I’ll talk about how much this has trickled down into the way we teach and what we teach. My very first role was at the World Bank. And the World Bank and International Monetary Fund are part of these institutions that created a new system of world trade back in 1944. And since then, all the way up to 2008, global trade basically only went up.
Now we’re seeing a backlash. Since the last big recession, there’s been no increase in globalization as measured by exports plus imports over GDP, which is the standard measure used by most trade economists. Trade slowed down because of the financial crisis, but it never truly recovered. And part of that is because the politics changed.
So now international strategy really needs to consider the risk to global supply chains created by national security concerns. And that’s a big change. Because before, the focus of international global strategy was always on efficiency: “Where can we locate operations for the greatest efficiency?”
We’ve been teaching about the gains from specialization since David Ricardo’s time. And now, suddenly, the risks can offset the gains. We saw that so dramatically during the pandemic. A cutoff in your global supply chain was worse than whatever gains you were getting from offshoring. We’re seeing a lot of rethinking of the economics of global strategy. We’re hearing talk about reshoring and “friendshoring.”
The message has shifted. I think CEOs need to think about this a lot. And our students are very much aware of how uncertain the environment is. The job market for our students has changed because of geopolitics. Under the prior US governmental administration, it became more difficult to hire international students because of changes in legislation. And while larger companies are more willing to sponsor international students, smaller start-ups are less willing to do that.
Schools are having to rethink the importance of the international curriculum and the importance of dealing with global risk. I’m constantly talking to my faculty about this need to think globally.
Rick Tetzeli: In light of this global uncertainty, along with a mix of short-term events, like the pandemic, and long-term shifts, like climate change, how do you prepare students for a future of managing constant disruption?
Ann Harrison: In part, through a focus on innovation and entrepreneurship. Entrepreneurs are constantly failing and picking themselves up and starting all over again—refocusing their products, constantly shifting. That culture of living with uncertainty—of the need to continue to innovate until you find the right market fit, until you can scale—is something inherent to entrepreneurship culture.
Having said that, I really do believe that there are certain universal truths that business schools are very good at and that we’re very keen on continuing to teach. Demand curves still slope downward. It’s still the case that more diversified strategy makes a lot of sense. There’s still a risk–return trade-off. You still need to be able to lead teams. So I would say we teach elements of preparing for a very flexible and uncertain world, but there are also universal elements.
There are certain universal truths that business schools are very good at and that we’re very keen on continuing to teach.... So I would say we teach elements of preparing for a very flexible and uncertain world, but there are also universal elements.
Tracy Francis: Data literacy and analytics are increasingly central to business leadership. How do you weave them into the curriculum?
Ann Harrison: We’re in the midst of another major Industrial Revolution. It was happening before the pandemic, but the pandemic really accelerated the digital transformation. We see it in the markets, which increasingly are dominated by players that really understand how to harness the power of data and how to harness the power of technology.
We are weaving that into our curriculum’s core requirements. We’ve added requirements on mastering and strategically using data tools, like AI and machine learning. Students are learning everything from how to program to how to use and present big data. They’re also learning the ethics and pitfalls of machine learning and AI, where discrimination can be built into algorithms without your even realizing it.
Tracy Francis: Speaking of AI and ethical considerations, ChatGPT is such a big topic right now. What’s the buzz about it on campus?
Ann Harrison: I haven’t spent a lot of time talking to students about this. However, I have been spending a lot of time talking to faculty and our leadership about it. The way we evaluate proficiency in material is changing. I think this is a general conversation across all universities, probably. And while I don’t know what the future looks like, my guess is that there will likely be more old-fashioned evaluations ahead.
Rick Tetzeli: You have made a big push on diversity and inclusion. Yet we know that a lot of leaders say that it’s been very difficult to make their inclusion efforts work. Do your students feel a big commitment to diversity? Are they discouraged, or do they feel like they can really have an impact?
Ann Harrison: I wish you could walk around the Haas campus and see for yourselves. I would say there is 100 percent commitment to the goals of diversity and inclusion at Haas.
Interesting facts: Haas is the second oldest business school in the United States, and it was founded by a woman, Cora Jane Flood, in 1898. As a state school, we have always prioritized the importance of inclusion and social mobility.
One of the things that honestly surprised me as a leader was that if you are truly intentional about this being a commitment, you can really make significant changes. When I arrived four years ago, I prioritized diversity and inclusion from the top, and we have seen a lot of changes in our business school. We’ve instituted a diversity leadership class that’s part of the core curriculum. The demographics of our Haas board, for example, have changed, as have our senior team, our faculty, the rest of our community.
People often say that it might be hard to change the demographics of a university’s faculty quickly because of tenure, but we have made some significant changes. I grew the faculty a lot. You can diversify through growth. So the percentage of women in our research faculty went to 30 percent, from 20 percent, in just four years.
We also built an amazing DEI team under the direction of Dr. Élida Bautista. That team has helped us recruit students, faculty, and staff. They do a lot of hands-on work with faculty on course content, on how you teach and lead discussions on what are very difficult issues. It’s really important to have the support for that.
One of the things that I’ve learned is that it’s not enough to be intentional. You need two things in addition to that. First, you need resources to make these changes. That’s a challenge for us as a public university. Second, you really need to focus on the pipeline. And that, of course, is a broader issue for the US as a whole.
Rick Tetzeli: Isn’t there a gender equity issue, as well, for business schools? Don’t women with MBAs earn significantly less than men with MBAs?
Ann Harrison: Past studies have shown that, at graduation, wages are equal. But over time, there’s a divergence of wages. So if you survey your alumni 15 to 20 years out, which is what these studies have done, the women are indeed earning something like half of what the men are earning. That’s what the data tells us. Now the real questions are why is that happening, and what can we do about it? I think there are several factors at work here.
Claudia Goldin at Harvard University has said that the reason that you’re seeing this in business is because business jobs are characterized by what she calls “greedy work.” Greedy work is work you can’t do in smaller, part-time increments. You have to work 80 hours a week. And she claims that it means that business jobs, jobs in consulting firms, and CEO-type jobs are not very compatible with family. So it’s hard to have a career and a family if you do a job that requires greedy work.
There are other very plausible explanations for this as well. Laura Kray is a professor here at Haas who’s done several studies on this. She discovered that one cause of the salary gap is that when women start their roles in companies, they’re given smaller teams from the very beginning. She found that people tend to be inherently biased towards choosing men to lead large teams.
She’s also done work to debunk stereotypes around this issue. For instance, there’s this perception that women don’t negotiate—that they don’t feel comfortable negotiating. But it turns out that, actually, women often negotiate more. But they get worse results. When you walk in there as a woman and demand higher pay, it doesn’t go over very well. There’s something of a backlash against women negotiating.
Laura and I are now doing a new study to see, first of all, whether this trend showing a growing gender wage gap over men’s and women’s careers in business still holds. Let’s hope that it’s less true today than it was 20 years ago. We also want to understand what other things might be happening. There is hope, because there are some professions, like medicine, where you don’t see this gap in pay. But there are some real issues in business, and once we understand why, then I think we can start to do something about it.
Rick Tetzeli: This may or may not be related to gender equity, but I wanted to ask you about one of Berkeley’s core principles. Of the set of six, you’ve said you particularly like one called “confidence without attitude.” Why?
Ann Harrison: I don’t believe that attitude is a positive leadership quality. We actually have research that backs that up.
One of our management professors, Cameron Anderson, did research on “selfish jerks.” He tracked people all the way from college and looked at how they succeeded in their careers. And he found that being selfishly competitive doesn’t get you ahead faster. He also found that these characteristics can really hurt your organization.
Another faculty member in the management department, Jennifer Chatman, has done a lot of research on what she calls “narcissistic leaders.” It turns out that narcissistic leaders get their organizations more involved in lawsuits and create long-term problems in company culture and outcomes—problems that last even after they leave.
So confidence without attitude is critical for today’s leaders. That’s been shown to be particularly true in the last several years, when we’ve had so many challenging things to go through. More than ever, it’s important to be a great listener and not think that you know all the answers.
More than ever, it’s important to be a great listener and not think that you know all the answers.
Tracy Francis: One thing we haven’t touched on is your own research on automation. When you look ahead at the impact of automation over the next few years, what do you see?
Ann Harrison: I’ve done research on why US manufacturing jobs declined so much over the last 40 years—to one in ten jobs today, from one in four jobs in the ’80s. Most people want to blame globalization. But if you look at the data carefully, my own research suggests that it was primarily automation that caused a lot of this. What you see is big investments in labor-saving devices, from computers to robots.
Now we’re starting to see this in other countries, like China. Manufacturing employment is starting to decline, and automation is starting to replace people. So the question becomes, what can be done about this? I would point to the importance of education before I would go to anything else.
Only a third of Americans have a college degree. That’s way too low for the future and way too low to keep people from falling behind. I think that expanding what we have here in California, this amazing system of state universities and community colleges, is absolutely critical. We need a huge investment in public education, from the very beginning.
Automation could be a force for good. It could eliminate jobs, but it could also enhance them. There are policies that could make a difference. For instance, our policies don’t actively encourage companies to invest in labor-using technology. In fact, if anything, our government policies tend to be more in the direction of labor-saving technology. If you make it hard to hire and hard to keep people, companies will try to find ways to replace people with machines. But if we did the opposite, if we systematically rewarded labor-using technologies, that might help tremendously.
Tracy Francis: One more question, Ann. It’s related to what you were just talking about. There’s a lot being written right now about the “paper ceiling,” about how businesses can create career paths for people who don’t have a good education or solid academic credentials. Is business obliged to create better stepping stones for people who don’t have good qualifications, to make up for failings in the education system?
Ann Harrison: This takes us back to the pipeline and what we can do about it. I think there are two possibilities.
One is, we completely change the US model for kindergarten through grade 12 [K–12] and invest massively in it. Right now, we see a bifurcation. Increasingly, those who can afford it send their children to private institutions, which negatively affects the public ones. Investing in K–12 in ways that are successful would be one approach.
Another thing we can do without changing the whole system is to have early-intervention programs. Businesses can do this. At Haas, we have our own: a program called “Boost.” Boost goes to local junior highs and finds candidates in disadvantaged areas who would really benefit from early help. The kids who sign up stay with the program all through high school.
Some of the help is academic, some is mentoring, and some is preparing for college. And the kids are incredible—they get into all the best universities and do amazingly well. I was recently at the 30th anniversary graduation for our Boost seniors, and I was moved to tears. You know, it’s amazing what these programs can do. So that’s another alternative, and it’s something that many businesses could do. It’s local, and it’s not huge, but it helps develop the pipeline. It’s all about the pipelines.