VOL. 49. NO. J

INCAE: Success StoryIn Central AmericaBy David C. Kort~nl

The Central American business school, started

with Harvard's help along HBS lines,

is now on its feet and running independently.

HARVARD BUSINESS SCHOOL

BULLETINMAY/JUNEI97J

IThis article was prepared and sub­milled pcior to the disastrous earthquakeof December 23. 1972. which destroyedmore than 80% of Managua. Nicaragua'scapital city. Professor Korten has sincereported that the INCAE faculty andstaff survived the disaster without seriousinjury, and that the INCAE campus,localed several miles from the center ofthe quake, suffe~donly superficial dam­age. INCAE resumed normal operationson January 23. 1973. - Ed. I

"WHETHER or not the Harvardname is on our diploma is not

the important issue. I find INCAE is aplace to learn and to develop my man­agement ability. We will prove our·selves and our school by our perform.ance as managers - not by the nameon the diploma."

lbese words came from a member ofthe INCAE MBA Class of 1973. Theyput to rest an issue which had come uprepeatedly since INCAE's founding. Tome, they signaled more clearly than any'

, Dr. Karten is Visitina Associate Professorof Buaineu MnUnistration in the HBS Faeulty.He 'I"U on assia:nment from Huvard to INCAEas Academi<; Director of lhe MBA Prop;undurina the yeu$I97Q-11 and 1911-n, tile final1....0 years af tile Harvard ooatract. Curn:ndy,lie is on leave af absence from the B\1SineuSchool ta !lerve as INCAE'$ Director of Plan­ninl and Institutional Development. ProfeuorKarten also heads the INCAE Prqje<:t an IheManalement of Nalional Family PlanninlPrQlrams.

JIBS BULLETIN MA YIIJUN J97J

thing else the coming to maturity of aninstitution which has b«n one of Har­vard's most challenging overseas de­velopment projects.

The idea for- the institution whichhas come to be known as INCAE (fromits name in Spanish, Instituto Centro­americano de Administraci6n de Em'presas) was bom in early 1963 during am~ting allended by President John F.Kennedy and the Presidents of the Cen­tral American Republics. Upon return­ing from that visit, President Kennedywrote to George P. Baker, then Dean of

DA VII> C. KQKTENThree years on lNCAE's faculty.

the Business SchoOl. asking that Har­vard undertake a study of the feasibilityof establishing a management educationprogram for the region. The final sur­vey, carried oul by a nine-man Harvardresearch team under the direction ofProfessor George C. Lodge, eventuallyled to a commitment by the BusinessSchool to start a high-quality graduateschool of management in CentralAmerica.

Nine-Year Contract

The contract relationship betweenHarvard and INCAE. financed over anine-year period by the U.S. Agency forInternational Development (USAID),formally came to an end on June 30,1972. The ceremonial conclusion hadcome two ~eeks earlier at the gradua­tion of INCAE's fourth MBA class.

It seemed especially appropriate thatthe closing ceremonies were attended byFormer Dean Baker, whose vision ofthe School's capability and of the p0­

tential of Central America were orig­inally iostrumental in the founding ofINCAE, and by Professor Robert W.Merry, who served as the senior Har­vard Faculty advisor to INCAE duringthe final two years of the USAID con4tract. The phase-out of the contract wassmooth, uneventful, and indeed almostimperceptible - a fitting testimony tothe success of Harvard's role in develop­ing what is now widely recognized asone of the leading educational institu-

7

."....~ VI ....... U, '"'""" ,"'<I.The Business School's decision to help

establish a management school in Cen­tral America was not made easily. Evenwith its prior experience in overseasmanagement development in Turkeyand India, it was clear that this would beone of the School's most difficult over­seas ventures.

Difficult Beginnings

Several well-informed members of theFaculty questioned tlte wisdom of under­taking a project that seemed to have sofew prospects for success. Among themwas Professor Abraham Zaleznik, whomade an independent visit to CentralAmerica and in a highly accurate andinsightful memorandum outlined theconditions which could be expected toimpede the success of the proposedproject.

He noted thaI: (I) the major cconomicactivity of the region was agriculture,whereas the major expertise of theSchool was in industry; (2) the popula­tion was small, largely illiterate, livingoutside the money economy, and suffer­ing from disease and malnutrition to a

oegree mal senously reduced potentialwork output; (3) the social systems wererigid and hierarchical with little oppor­tunity for mobility and with a suspicionbetween the major ruling groups whichseriously limited possibilities for coop­erative effort; (4) enlrepreneurial risk­taking was limited to projects with nomore than two-year payoutS, and tltewealthy kept their savings in foreignbank accounts; (5) standards of educa­tion in local universities were low andprovided little of the relevant academictradition or preparatory training; (6)tight family control of enterprise andthe distrust of non family members seri­ously limited opportunities -Cor trainedoutsiders; (7) cnlerprises were small withlittle need for the sophisticated organi­zational methods in which the Schoolwas expert; (8) with limited exceptionsthe supporl for management educationin Central America camc from youngand relatively noninflucntial membersof the community; and (9) there was noexisting multiplier institution whichcould be used to form a bridge betwcenthe Harvard Business School and CentralAmerica.

Two additional obstaclcs which his

memorandum did not mention were noless formidable. The project would necdIhe cooperation of the six highly diverseCentral American countries, all withlong histories of conflict and poor com­munication. Also the new institutionwould eventually be heavily dependenton private contributions in a region withno tradition of giving to nonreligiousprivate education.

In reflecting on the decision to moveahead in spite of the many obstacles,Dean Baker observed:

"It was the time of thc Cuban missilecrisis. There was concern in the StateDepartment Ihat the only real hope forstability in Central America was to forman effective middle class through theformation of a cadre of professionalmanagers. We felt that the job needed tobe done and knew that Harvard hadmore experience in advanced manage­ment education than any other school inIhe world. We were obviously in a betterposition than anyone else to do the job.

.,Also we were just phasing out of theTurkish program and wanted to main­tain our level of overseas involvement.Many of us felt that developing in-depthFaculty overseas experience was im-

THE MAIN CLASSROOM BUILDINGServing 126 students from 19 countries in tbe two-yeu MBA program.

8 HBS BULLETIN MA Y/JUN 1973

AERlAL VIEWQFTHEINCA,ECAMPUSTM main In<llilul~ rxilily is In the center; residence buildings are behind ."d to lhe lert.

poTlan! to the enrichment of the pro­grams on the campos. The team whichdid the official survey believed that wecould do it - so we decided to go aheadin spite of the obvious obsracles."

As it turned out, the project was atleast as difficult as had becn anticipated,and at times it was only barely keptalive by the individuals who believed sostrongly that it could work. Amongthe many important figures in INCAE'searry history, in addition to those al­ready mcntioned, were Senior AssociateDean George F. F. Lombard, who spentcountless hours on INCAE problemsand who, in the words of Dean Baker,on several occasions polled the projectthrough with "mouth·to-mouth resus­citation"; Don Francisco de Sola, theChairman of the INCAE Board andmember of the Business School VisitingCommittee, whose broad vision and de­votion to the project were critical inmobilizing and 5Uslaining the support ofthe Central American business com­munity; Professor Clark Wilson, whoserved as the first Rector of INCAE andpersonally persuaded the first enteringclass of MBA! to risk their future in anunLried school; the late Professor CharlesSavage. who as INCAE's first AcademicAdvisor created the vision that INCAEcould be an academic institution of first­rate quality; and 0.-. Ernesto Cruz, theHarvard-trained Nicaraguan lawyer-

HBS BULLETIN lolA Y /JUN 1971

economist who followed Oark Wilsonas Rector and helped to build the stronginstitution INCAE is today. Two othermembers of the HBS Faculty also mademajor contributions in the developmentof INCAE: Professors Wickham Skinnerand Robert Merry, who served as ad­visors during critical stages, laughl invarious of its programs, and coordinatedINCAE matters on the Soldiers Fieldcampus.

Crowing Strength Today

Today. ten years since the idea wasborn, INCAE is a recognized regionalcenler for management education inLatin America. It is also an importantand highly successful experiment inmultinationalism-- the world's onlyLruly multinational graduate manage­ment school located outside the Europeancontinent.

INCAE is housed in modem facilitieslocated on 170 acres of land in the coolfOOlhills of Managua, with a spectacularview of Nicaragua's beautiful lakes andvolcanoes.. In the four years since thecampus was built, growth has been sorapid that a major expansion program isalready under way, financed with a loanof$3.9 million from USAID.

At the present time 126 studentsfrom 19 different countries are enrolledin INCAE's two-year MBA program,

studying under standards, intensiveschedules, and educational methodslong familiar to HBS students. However,at INCAE there is an important differ­ence: the classes and materials are all inSpanish. Extensive use of local casesincreases the relevance of the curriculumto local conditions. And specially de·signed courses - such as the one Ihave been leaching which deals withsocial change intervention strategies forLatin American managers - help pre­pare the students for leadership roles intheir own societies.

Most of the students who enroll inINCAE's MBA program have had oneor more years of work experience inaddition to their undergraduate degrees.They are an unusually mature groupwith an average age of 27 years. Whilea large majority of INCAE's students aregraduates of Latin American universi­ties, the fact that nearly 25 % have grad­uated from leading universities in theUnited States suggests that many stu­dents who clearly have the option ofU.S. study have chosen INCAE becauseof its direct relevance to their futureprofessional needs.

A majority of INCAE's MBA grad­uates have moved almost immediatelyinto positions of top-levd management.The title of general manager dominatesthe INCAE alumni roster. Indeed, agraduate of the Class of 1970 was re-

•

FRANCISCO de SOLA. GEORGE BAKER. AND ERNESTO CRUZAt dcgne-graDting ceremonies.

cently appointed Minister of Educationin El Salvador.

INCAE has also had substantial suc­cess with its executive development pro­grams. During the summer of 1972,115 top-level managers from 10 LalinAmerican countries graduattd from six­week programs in Managua, Nicaragua,and Medellin, Colombia_ Those sessionswere Iaught largely by members ofINCAE's own faculty supplemented byrepresentatives of the HBS Facuhy. Thisbrings the lotal 10 524 latin Americanexecutives from IS countries who havebeen trained in INCAE's executive pro­grams since the first session, staffed en­tirely by Harvard Facu!ly, was offeredin 1964. Plans are currently being im­plemented to establish a regional exceu­ti\'c program based in Quito. Ecuador,to serve top-level executives from theAndean bloc countries ofSouth America.

INCAE is also generating an impres­sive research output and is allr:tctingsignificant project funding from interna­tional institutions such as The FordFoundation, USAID, and the Intcr­American Development Bank. Morelhan 50 new field cases from some 9Latin American countries were pro­duced by INCAE faculty and case writ­ers during the past year alone.

A specially funded program in agri­business management is generating newcourse materials and a variety of projeclresearch efforts; among lhe latter is astudy being carried out jointly with HBSProfessor Ray A_ Goldberg on the ex­port of non-lraditional agricultural pred­ucts from Central America. Three Har­vard doctoral candidates have com­pleted theses at INCAE on Latin Ameri­can topics during the past two years:Assistant Professor Nicolas MarL' whonow heads INCAE's finance area; As­sistant Professor Harry Strachan, whowas recently appoinled Academic Oi-

10

rector at INCAE; and Assistant Profes­sor James Austin, who recently leftINCAE to accept an HBS appointmenl.Two other Business School doctoraltheses are in process at INCAE.

Recently The Ford Foundalion fundeda new INCAE project to study the man­agement needs of the national familyplanning programs of Central America.Olher imponant projecLS being initialedinclude a regional program in the man­agement of deVelopment banking fundedby the InterAmerican DevelopmentBank.

INCAE·s growing role of leadershipin the improvement of management ed­ucation throughout Latin America isreflected in ils establishment of a LatinAmerican case clearing house for Span­ish-language management training ma­terials. This center, established at the re­quest of the latin American Council ofSchools of Administration, will be runas an affiliate of the Intercollegiate CaseClearing House located 0.1 Soldiers Field.

With the exception of occasional pri­vate contracts with Harvard professorsto assist in the teaching of weekendseminars and 10 supplement the INCAEfaculty in the executive developmentprograms. all these activities are nowcarried out entirely by INCAE's ownprofeMional and highly qualified multi­national staff'. A total of six nationalitiesare represented on the full-time rolls,which include a twelve-member MBAleaching faculty, four full-time research­ers. and five professional administrators.

Of the teaching faculty, nine alreadyhold the doctoral degree (five from Har­vard) and two others are completingDHAs at the Business School. All the re­search and administrative staff mem­bers hold MBA degrees - most fromINCAE.

The development of INCAE as an in­stitution began during the course of the

initial survey with the establishment of

nalional committees and the appoint_menl of a board of directors for INCAEin the summer of 1963. This actionclearly established the commitment oflhe Central American business com­munity to the new instilution.

The Harvard Business School thencommilled itself to a one-year contractto prepare some Central American casematerials and conduct the first six-weekCentral American program for seniorexeculives in Antigua. Guatemala, in tbesummer of 1964. This program was totest the concept of modern managementeducation in Central America to deter­mine whether there could be real ac­ceptance.

Many of the leaders of Central Ameri­can business allended - thus confirm­ing their commitment to managerialimprovement and modernization. Con­currently, a number of young CentralAmericans were sent to Harvard fortraining in the International TeachersProgram as a first slep in developing p0­

tential future teachers for the new insti-'tution.

1lJe success of lhe Antigua program,and the reaffirmation of the support ofthe Central American business leaderswho attended il. led to a decision to con­tinue a three+p3Ct strategy aimed at pre­paring Central America for the creationof a permanent institution with its ownstaff. First, there was continuation ofcase-writing efforts to create relevantindigenous teaching malerials and toacquaint Business School Faculty withCentral American management prob­lems. Second. there was continuationof the six-week executive program on anannual basis. Third, additional con,tingents of Central Americans were sen!to the HBS Internalional Teachers Pro­gram each year to develop potentialteachers.

By late 1965, the decision had alreadybeen made to establish a permanentcampus for INCAE in Nicaragua. Thedecision to situate the new school inManagua recognized Ihe aggressiveefforts of the Nicaraguan business com­munity to bring 10 Nicaragua its firstregional institution. 1bese business lead­ers donated the large and attractive par­cel of land on which INCAE presentlystands.

The initial plans for INCAE weremuch more modest than the eventualreality. At first it was planned thatINCAE should offer only a nine- or ten·month Master's degree 0.- certificateprogram. These plans called for a stu­dent body of 50, a faculty of 6 drawn

IlBS BULLETIN MA Y/JUN J97J

A nRST-YEAR CLASSROO:\1Professor EN-jque Ah'arado (stand ina) teachu Control,

IU:'I':'~ of (he one-year ITP.11' ~r'"

-'" • ,nu:.1 operating budget of about, .....11

•;:".11110•. Ii)' July I. 1967, however, when Dun~kcr allended ground-breaking cere­moni~ for INCAE, the decision hadbeen made that INCAE. ralher thancompromising on the quality of irs pro­gram, should raise its sights and offer afull two-year MBA program equivalentin standards to the Harvard program.This decision had many implications.II doubled the cost of the student's edu,calion and crcated the need for moreassistance from the HBS Faculty thanhad originally been anticipated while aLatin faculty was being Irained to a levelappropriale for Iuching in lhis moreadvanced program.

FreqUl.'nl Criws

On January 8, 1968, when INCAEenrolled its first class of 42 MBA Stu­dents, its campus facilities were not yetcompleted and makeshift classroomswere created in the Nicaraguan CentralBank building. It was, nonetheless, thereal birth of INCAE as a permanent in­stitution which could begin 10 developils own slaff.

These were INCAE's masl difficultyears as the faculty sought to implementan entire MBA curriculum and develop

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t-...-, ,-. ­", '

a functioning administrative structurewhile completing the construction ofits new campus. Students had to bebegged to enroll in this new school, en­ticed with a combinalion of the Harvardname and a number of scholarships andloans. Continuing doubl:S of students re­garding this unlesled institution led tofrequent requests thai Harvard's nameappear on the INCAE diploma.

Crises were frequent. It was the limeof frequenl "mouth·to-mouth resuscita­tion" as referred to by former DeanBaker. Numerous requests were receivedby Dean lombard and others for te~m­

porary teaching assistance or materialson an emergency basis. Life was ortenuncertain.

When I was assigned to INCAEby theBusiness School in 1970, it was readyfor transition to a major new phase inits grO'Nth to maturilY. Its program wasestablished. Its graduates had obtainedgood jobs and the basic INCAE conceptwas accepted within the local commu­nity. INCAE was ready to seek its ownidentity and reduce its reliance on Har­vard.

Six new faculty members were hireddirectly on long-term contracts to reducethe dependence on Harvard for emer­gency inputs. Sleps were taken tostrengthen the MBA curriculum. to de­velop more effective communication

' ..

with stucienLS, to increase the emphasison research. to increase the general levelof institutional discipline. to stfCOgrheninfernal administration, and to developa long-range plan for INCAE's growthas a basis for a loan request to the U.s.Agency for International Development.

A special program was established togive emphasis to course developmentand research in agribusiness manage­ment - reftecting the dominanl charac­ter of the Central American economy.When the USAID contract expired in1972. INCAE was ready to move aheadon ilS own as a strong independent in­stitution.

As INCAE has reached a slagI.' of in­dependent malurity, it is now in a posi­tion to provide Harvard with an effec­tive colleague in Latin America in carry­ing out future research and training ac­tivities. INCAE has tak.en steps to main­lain lies with the Business School in anumber of ways. For example, ProfessorsRay A. Goldberg, Roben W. Merry.and Wickham Skinner have agreed, ona private basis, to serve as an academicadvisory group. Professor Skinncr willchair that committee. Former DcanGeorge Baker has agreed to assist in theformation of a high-level advisory coun­cil. on which he will serve as chairman.Usc will be made of Harvard programsfor advan«d training for INCAE- fac­ulty, and occasionally Harvard Facultymembers may serve at INCAE on leaveof absence - as I am doing this year.

Return Benefits

Harvard has made an important com­mitment to INCA E over the years sinceilS establishment. A question may, quiteproperly, be raised as to whether Har­vard benefiled in return. While it is dif­ficuh 10 measure the fuJI extent of thebenefits. the.tJasic answer must be a posi­tive one. The relurns extend substan·tially beyond the institutional pride andsatisfachon for Harvard in having faceda major challenge and successfully met it.

Over the entire period of the project,nearly 50 members of the HBS Facultyand research slaff have come into con­tact wilh Central America as a directresult of INCAE. All that has added tothe Business Schoors experience in andexposure to Latin America. The currentwork of Professor Lodge on nalionalideology grew OUI of the research onchange which he originally carried outin Central .America under the INCA£contract.

A number of cases produced underthe INCAE contract are used regularly

1I8S BUl.LF:TIN MA r IJUN /97J 11

at the Business School, and several havefound their way into collections pub­lished by HBS Faculty members. INCAEhas also provided a valuable source offinancial support for Harvard DBAcandidates with an interest in LatinAmerica, some of whom have com­pleted their thesis research while servingon the INCAE faculty. A research grantof $180,000 received by the School'sAgribusi ness Program was a direct reosuIt of Harvard's relationship to INCAEand the existence at INCAE of the capa­bility to carry out the Central Americancomponent of the proposed research.

Looking to the Future

What does the future hold for INCAEitself? At this point, the Institute is ex.­perimenting and exploring to find theappropriate role for itself in Latin Ameri­can developmenl. It is seek.ing to retainthe strength of its Harvard heritage,while simultaneously creating its ownidentity as a significant institutional en­gine of change for Latin Americansocial and economic development.

As we see it now, this will involvemajor efforts to bring INCAE's ex.per­tise in management education. research,and consulting to bear on this region'smost critical problems - population,nutrition, employment, income genera­tion, and regional economic integration.Undoubtedly this will bring about moredirect involvement in the communitythan has been characteristic of moretraditional management schools. It willalso mean a sharper focus in the appli­cation of the institution's resources anda concern for pUblic- as well as private­sector management issues.

For the near future, INCAE's great­est problem will be to expand its facultyrapidly enough to respond to new op­portunities, while maintaining the qual­ity and case method focus' which arecentral to its institutional strength. Thepresent problems are, however, minisculecompared with those faced ten years agowhen the first (earn of Harvard research­ers returned from Cenlral America totell their colleagues of the need for theirassistance in creating a new school ofmanagement.

The results of the work of the earlyproject are now a matter of record - aproud record of successful internationalcooperation. How far-reaching they wi\]be In their eventual contribution to LatinAmerican development only time willtell. But INCAE has come of age, andthe prospects for ils continued successare high.•

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