would take action before a student or class moves onward and upward, diag- nosing problems through scientific assessment, and solving them through hypothesis testing and experimentation.
As Barney and Kirby readily admit, however, schools are hardly paragons of alignment. Teachers, parents, principals, superintendents, and political leaders often disagree sharply about the quality of the final prod- uct, and often punish schools for daring to experiment. The problem is not a lack of standardization, especially in the new testing requirements, but great risk in the kind of experimentation and problem-solving that might honor jidoka but close the “plant.”
that it just wasn’t prudent to count on that as a recipe or a design for the future. It was time to reexamine our assumptions.” To mix metaphors, RAND had put all of its eggs in a single basket, but could hear the water- fall just around the bend.
It was R AND’s president, James Thomson, who began to use the waterfall imagery to portray the risks of standing firm. “There’s a point where you can hear the danger, but you cannot see it,” Rich says. “The chal- lenge is to turn the boat before you get into the white-water that you can see. Once you see the danger, it’s too late.”
Like any organization facing a volatile future, RAND’s challenge was to identify a new course and follow it. The problem was that RAND’s rev- enues had risen dramatically from the early 1980s, when its budget was roughly $70 million in 2003 dollars, to $105 million by 1995. “We decided not to wait for full recognition by everyone because we realized by the time everybody in the institution would see the danger, it would be too late. We committed to the change ourselves, and then dedicated ourselves to bring along the rest of the institution.”
Revenue was not RAND’s only concern, however. In a very real sense, RAND had become becalmed. Its attrition rate had fallen to less than 5 per- cent per year, which meant the median tenure at RAND of the research staff was growing quickly. By 1994 half of the research staff had worked at RAND for nine years or more. “That, to me, was a danger sign for an orga- nization like R AND that is so dependent on creativity, innovation, new ideas, and so on,” Rich remembers. “Now, you can compensate for that with outsiders involved as visitors and reviewers and speakers and so on. We were doing a lot of that stuff, but we thought we ought to be concerned about this weak flow of analytical talent in and out.”
Given its tradition, RAND did what it thought any good organization should do. It created a scenario spaceof possible futures.
One family involved a return to R AND’s original core business in defense. “We would be smaller, profitable, and thus able to sustain our exis- tence,” Rich says, “but we would have had to divest a lot of the work that we had developed on social and economic policy.” By circling its wagons around its defense research business, RAND would continue at roughly $80 million a year far into the future.
A second family involved diversification. “The idea here would have been to diversity into new areas that would be financially lucrative, which would generate funds for reinvestment and also enable us to expand our cov- erage of important policy problems.” Diversification required new capac- ity, however, including an expansion of staff expertise well beyond the hard
sciences that had given RAND its strength in the 1950s and 1960s, as well as the social sciences and humanities that had enabled RAND’s diversification into social and economic policy research in the 1960s and 1970s.
A third family involved the eventual end of RAND. “We were seri- ous about creating and studying dissolution options, motivated by one of our ‘devil’s advocates’ who argued that RAND was a creation of the Cold War, and should reexamine whether it still needed to exist or whether there should be other organizations to take its place in and for the new era.”
The scenarios formed the basis of a two-and-a-half-day board meet- ing in November 1995 that ended with a consensus to pursue the second set of options. “We felt that losing the work we would have had to divest would be harmful to the performance of our mission,” Rich said of the first family of options. “The divested research was within the scope of our mis- sion of helping improve policy and decision-making through research and analysis. It was high quality work and objective, and therefore met both of our core values. Shedding it would damage the reason that we existed.”
RAND also saw the social and economic work as essential to its core business with the Defense Department, in part because it helped the orga- nization recruit top-flight labor economists who knew nothing about the military, but who were attracted by RAND’s research on social and eco- nomic issues. “Once they got here, they realized that some of the most com- plex and challenging analytical problems, and some of the best clients and most sophisticated databases, were actually in the defense work.”
Equally important, R AND’s own internal labor market allowed researchers to move across boundaries to work on any project that inter- ested them, provided that the project was interested in them. Unlike most professional service firms, R AND does not have a system for assigning researchers to projects. Instead, researchers put together their commitments by marketing themselves to project leaders. As a result, RAND could not eliminate any one stream without risking harm to all the others.
Finally, RAND already had considerable expertise in diversifying. It had expanded its agenda in the 1960s with research on education, crime, health, energy, and the environment, and again in the 1970s with civil jus- tice and research for other nations. “Diversifying further was plausible,” Rich says. “We felt we would be able to cover more policy areas, broaden our client base, reinforce the financial health of the institution, and, in the process, increase the stream of earnings that we could reinvest in self-initiated research.” By the end of the meeting, the board had hammered out a new business strategy designed to grow the organization, but not too fast. (Rich’s briefing chart shows the basic thrust of the final decision.)