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The Case Against Cases

Enron's popularity as a business-school ''success story'' raises tough questions about how case studies are prepared.

1Apr

When an accounting scandal felled Enron Corp., it turned many MBA cases featuring the erstwhile high-flier into scrap paper. "For the most part," says accounting professor John Shank, who is affiliated with both Babson College and Dartmouth College's Amos Tuck School, "you can't use those cases now, because you'd get laughed out of the classroom."


The very popularity of the Enron case material in past years, though, casts a curious light on the use of case studies in business schools, and especially on the way schools, led by Harvard Business School and the University of Virginia's Darden, prepare the roughly 1,000 formal case exercises produced each year.


Cases have been core to the curriculum since the first ones evolved at Harvard in 1919 as an extension of the law school's case-based teaching method. But unlike the law-school cases, which draw on the filings in an already adjudicated trial, business cases often rest on information garnered through close relationships between the companies being studied and the professors doing the research.


Sometimes those relationships are financial, with professors engaging in work for the companies they are researching. Harvard's Pankaj Ghemawat, for example, was making a reported $50,000 annually as a member of an Enron international advisory council when he wrote the case "Enron: Entrepreneurial Energy," published in 2000. (Ghemawat responds that his interest in writing on Enron predated his joining the council, a post that gave him no access to confidential information. He did use the connection "to get Ken Lay to agree to let me interview him and other top managers for my case," he says.)


Even when money isn't changing hands, the typical case-study agreements grant professors extensive access to a company, while allowing its executives to review and sign off on the cases before publication. (Although most cases are developed this way, some are drawn from public documents and other sources. These tend to be more critical.)


There's little embarrassment about the practice at the big case-writing schools. Indeed, in a recent article in the Chronicle of Higher Education, Harvard Business School dean Kim B. Clark laid out the argument for close relations between case writer and subject: it is "extraordinarily useful for faculty to have firsthand experience" at companies in the process of collecting case-related material, he said, even if that includes earning money from companies for consulting work, or serving on boards.


But there are some critics of the case system, including at the Sloan School at the Massachusetts Institute of Technology, where cases are used in only about 25 percent of the teaching, compared with more than 80 percent at Harvard.


During his own case-writing days at Harvard in the 1960s, Sloan professor Michael Scott Morton says that on occasion, when he took his cases to a company, it "suggested changes that would take away the guts of why you wrote those cases in the first place." In fact, he recalls twice withdrawing the entire case rather than revising it. For the most part, though, he says sign-offs usually required nothing more than changing a few names, if any revision was sought at all.



Boilerplate Disclaimer

There are almost no ethical rules governing how cases are prepared. Instead, the case system relies on peer review of proposed cases to catch any biases, although it's unlikely that reviewers will have any idea of the connections between the professors and their subjects.


Harvard's and Darden's cases and teaching notes are generally reviewed only within those universities. For professors at other schools to get their cases published by the North American Case Research Association, an independent organization, the work undergoes "rigorous competition," where professors from other schools pass judgment on the relative merits of the cases, says David Rosenthal, editor of NACRA's Case Research Journal.


But while the organization has a list of rules to be followed in case writing, ethical standards mainly involve assurances of authenticity, says Rosenthal, who is also a professor at Miami University's School of Business Administration.


Cases generally contain a boilerplate disclaimer; Harvard's states that the work is "the basis for class discussion, rather than to illustrate either effective or ineffective handling of an administrative situation." In practice, this seems to mean that cases are intended to describe a company activity, not to endorse the company engaged in the activity. Hogwash, says Professor Shank. "Cases are either about what the author believes to be good business practice or what he believes to be bad business practice," he claims.


"When we write a case [at Harvard], the idea is that it will illustrate some important concept," says Robert Kennedy, who co-authored a 2001 case on Tyco International Ltd. "The idea is not to say that this is a great company or an evil company. When the Tyco case was written, it was because there was this lore that conglomerates don't work. We wrote it to let Tyco make its case about why they felt it worked for them," he says.


"By telling [company executives] they can review the case, it encourages them to be much more open," says Kennedy. And it ensures that no confidential company information is inadvertently revealed. "Of course," he adds, "it's also important for them to understand that we're not writing a hagiography."


In retrospect, of course, letting an Enron or a Tyco make its own case — or even sign off on it — illustrates a major weakness in the case approach: it's all too easy for a company to hide its flaws from the case writers. If a case writer implicitly agrees to let the company control the information, the case may well miss the true story.



Just Trust Us

Perhaps the most obvious flaw in the current case-writing system, points out former Securities and Exchange Commission chief accountant Lynn Turner, now a professor at Colorado State University, is the absence of disclosure. "Academia in the business community has to become much more transparent about its research," he says, noting that in medical journals, for example, "it has now become practice to disclose where you got your data."


Some case writers say that disclosing ties to a company isn't a bad idea. They argue, though, that they aren't investigative reporters, and instead are gathering the most-extensive data possible in order to expose students to real-world scenarios. These days, in fact, many cases grow out of executive-education courses, where high-level employees in attendance and their professors may plan a future study using material that emerges from the back-and-forth of the class.


The professors contend that, since their own reputations are at stake, they can be trusted to write their cases without bias. Trained in the case method at Harvard in the 1970s, John Shank believes that professors generally — but not always — use their corporate relationships primarily to get better information for their cases, and not for personal motives.


But conflicts can intrude in subtle ways when relationships get too friendly. "To the extent that a company is well known to professors through consulting, inevitably they will feel some sympathy that, perhaps unrecognized by the case writers, results in a biased view," says Sloan's Scott Morton. Although he understands the defense that it is important for professors to get close to a company when they write a case, "the question is, do you believe an individual is able to resist the pressures that are there?"


Just ask any of the accounting firms, analysts, and boards that are still reeling from the ramifications of the Enron case.



Learning from Enron


Darden professors Samuel Bodily and Robert Bruner first prepared their flashy CD-based examination of the Houston energy company, "The Transformation of Enron: 1986-2000," by granting Enron's executives the typical agreement to preview the case. The professors weren't receiving any money from the company, but "in fairness, [Enron management] saw what we had before anybody else did," says Bodily. "It was a story that they wanted out," he says of then-CEO Kenneth Lay, president Jeffrey Skilling, and CFO Andrew Fastow, all of whom participated in 15 hours of videotaped interviews in 2000. They did not make any changes in the original material, he adds.


Last year, with Enron bankrupt and in disgrace, and with Fastow and some other executives indicted, Darden made some changes of its own. It pulled the old case and issued a new one, entitled "Enron, 1986-2001: Critical Thinking about the Enron Story."


In Darden's new case, the executive interviews are left intact, but an analysis is added at the end, based largely on subsequent press accounts. "I think it was very important for us to produce a version that allows students to think about it all," says Bodily. "If students can't learn from the failing of a company, then what can they learn from?" Business schools apparently agree. The Enron case is one of the school's biggest sellers ever, with 6,919 cases in distribution, at a list price of $7.50 a pop. —R.H.

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