You never know who your summer intern will turn out to be. In 1980, Ursula Burns was a summer intern in mechanical engineering at Xerox (XRX). Last month, she became CEO there. In 1985, Sallie Krawcheck was a summer intern at Fortune. She later climbed to the top tier of Citigroup (C), where she served as CFO and ran a $13 billion wealth management unit. Last week, Krawcheck moved to Bank of America (BAC) to head its global wealth and investment management business.

So, treat your intern well. He or she could be your boss someday. As we mention in the current Fortune, smart bosses employ interns to learn how the world is changing. Morgan Stanley (MS) recently published a report on digital media that was written by a 15-year-old summer intern. Hewlett-Packard (HPQ) CTO Phillip McKinney has interns live with him–to help him understand young consumers.

Another company that manages interns well is Siemens Hearing Instruments, a unit of German-based Siemens AG (SI). Here’s Christi Pedra, president and CEO of Siemens Hearing, with some advice for giving interns the best summer experience and getting value in return:

When I attended college (could it really be 30 years ago?), we picked majors that were suitable to a lifetime career in one field. With one position in mind. You could be an accountant or a nurse or a teacher. If you graduated with a general business degree, you hoped for a long career at IBM (IBM), Xerox or some financial institution.

Steadfast and secure. That was then.

This is now. It’s acceptable to change jobs frequently, or pursue a totally new career. With life expectancy approaching 80, you could easily have three or four successful and distinct careers.

As CEO of Siemens Hearing, how can I help young people navigate the bridge from college to career?

When I joined Siemens Hearing in 2007, I launched a summer intern program–and in designing it, I took input from my nieces and my son who were in the midst of internships (good and bad). One of my nieces had a great experience at a PR firm in New York City. The CEO invited all the interns to a reception in his home midway through the summer. In contrast, my other niece complained about getting an assignment that her supervisor assumed would take several days. When she finished the project early, there was no one to ask for the next assignment–because her manager went on vacation for three days. The better part of her week was spent browsing the Internet, trying to look busy!

We used these lessons, along with ideas from our employees, to shape our program, which has turned out to be really successful. A few ideas I’ll share:

First of all, we make a big deal for our managers to get interns. Department managers submit a proposal for a project that can be completed in 10 weeks. It must have a measurable outcome and benefit to the business. The best proposals are granted interns. HR helps in the sourcing and selection process. For the last three summers, we’ve hired 12 to 16 interns in their third or fourth year of college, and we pay them attractive wages–on average $18 an hour.

Second, we make it challenging. We give interns assignments that matter to them and to us.  This is not a shadow experience. The interns report to a department manager and are assigned a mentor. They’re assigned tasks as part of a cross-functional project team and manage assignments against a time line. I’ve had interns co-author a research paper, redesign a manufacturing line that resulted in a 24% productivity improvement, conduct and publish interviews for on-line media, and create video marketing segments.

Third, we make it real. Each year, we have our interns present their assignments. It used to be that the audience consisted of intern supervisors and me. But over the past couple of years, interest grew so much that we opened it up to all managers and department colleagues. Last year, intern presentation day was standing room only; this year, we reconfigured our training room to accommodate more than 30 attendees. Once again, the intern projects far exceeded expectations. For example, our interns simplified manufacturing tool kits, audited and redefined work instructions, developed internal communication campaigns and validated software. Ten weeks ago, they entered Siemens Hearing Instruments as students, and now they will be leaving us as professionals.

The results have been truly rewarding. We’ve offered permanent employment to at least one intern from each summer program. We’ve hired these interns in sales support, web marketing and finance. A win-win for all. And this year, we expect to extend two intern assignments into the fall and hire another two interns into permanent positions.

I kind of wish I were 22 again.

Unlike the job-hopping young people she writes about, Pedra has been with Siemens for more than 20 years. She graduated from Montclair State University and earned her MBA at Rutgers.

“Right now, nothing is more important than a nimble, agile leader, who is comfortable with ambiguity and figuring it out as they go along.”

–Avon (AVP) President Liz Smith, in a discussion led by Pattie Sellers at NYU today. The panel, which also included Cece Sutton, Morgan Stanley’s (MS) new retail banking president, was hosted by Forte Foundation. (To view video of the dialogue, click here.)

Smith and Sutton, both on Fortune’s Most Powerful Women list, talked about how the global recession has altered what they seek in the talent they recruit. Smith values flexibility and a certain comfort with not knowing what tomorrow will bring–because more than ever, who can predict? Management, she said, has become “less strategic planning than scenario planning: ‘If this, then what?’”

It’s also more important than ever to be “completely transparent in order to take your people along on the journey,” Smith said. Sutton agreed, adding: “People who are successful now are great operators: Know the business and be in the weeds.” –Jessica Shambora

by Jessica Shambora

We all want flexibility in our workplace. We want to choose the types of projects we take on, and where and when we do our work.

Pattie has written a lot about flexibility on Postcards. Look at all the high-powered women who recently left high-powered jobs: Suhkinder Singh Cassidy, who was president of Asia-Pacific & Latin American operations at Google (GOOG); Dawn Hudson, former chief of Pepsi-Cola (PEP) North America; and Susan Arnold, who quit the presidency at Procter & Gamble (PG). Singh Cassidy and Hudson are opting for more flexible positions. Arnold has not yet announced her next move. Neither has Julie Fasone Holder, who is leaving Dow Chemical, where she is SVP. These women admit they’re not looking for another corner office, at least for now.

Everybody’s reassessing their lives and purposes and careers. Former Microsoft (MSFT) exec John Wood wrote a guest post about the non-profit he now runs, Room to Read. He says that the current economic crisis is making us all think about our legacies sooner than we had anticipated.

Of course not all of us have the option to shift gears. But we still want flexibility. Especially women juggling two jobs–the one they get paid for and the one they don’t at home. Of course, one route to equality–in pay, opportunities and more–is to pressure employers to create more flexible workplaces.

There’s evidence that the workplace really is evolving. And technology gets some credit. “With what we’re seeing with mobility, we’re going to have a totally different concept of what it means to go to work,” says Google chief economist Hal Varian in January’s McKinsey Quarterly. “The work goes to you, and you’re able to deal with your work at any time any place, using the infrastructure that’s now become available.”

Two businesses related to this trend caught my eye. Both were started by professional women looking for flexibility for themselves and others.

Inspire Human Resources founder Jaime Klein said she was struck by the “mindshare on the playgrounds of America.” Klein assembled HR consultants with experience at firms including Goldman Sachs (GS), J.P. Morgan (JPM), and Digitas, and helped put them to work on a project basis. Apart from time spent consulting in-house, the consultants work from home. Inspire provides on-demand HR support for high-growth startups like Lawline.com and Fortune 500 companies including New York Life Insurance and American Express.

Klein told me about at least 10 other companies with the same “virtual team” model as Inspire Human Resources. These outfits offer professional services, from financial consulting to manufacturing and efficiency expertise.

Then there are staffing firms that specialize in flexible talent. OnRamps and Flex Paths are two of those.

And Urban Interns is an online job board for small businesses and individuals looking for part-time flexible help. Founders Cari Sommer, a former attorney, and Lauren Porat, previously in strategy at IAC, are both new moms who were looking for flexible help at home. The site is available only in NYC for now, but the duo have plans to expand. What sets it apart? All candidates are college students grads, and employers can filter prospective hires by hours of availability and schedule.

Businesses are looking for flexibility too. Law firm Skadden, Arps, Slate, Meagher & Flom is offering its 1,300 worldwide associates the chance to get paid one-third of their salary to take a year off. Other firms are doing the same to allow employees to take on pro bono work. But Skadden’s attorneys can choose to do whatever they want. The New York Times reported that one associate, Heather Eisenlord, is taking her $80,000 to travel the world and do good.

Of course, struggling employers are pushing part-time, project and contract work–the thrifty alternative to hiring full-time. Let’s hope that full-time work will come back for those who want it. The number of Americans who desire full-time jobs but are working part-time has increased 83% in one year to nine million, according to the U.S. Labor Department.

Well, if some of these new vehicles for flexibility stick around, we could have beneficial by-products of the downturn.

P.S. Flexibility in education helps even the gender gap. Data from the Graduate Management Admission Council shows that when flexibility is offered for MBA programs, the gender gap starts to close. Women made up only 30% of the 2008-2009 applicant class for a full-time MBA. For a flexible MBA program, women comprised 37%.

I was in California this past week and I’m happy to report that the Golden State did not fall into the Pacific Ocean.

It seemed it might, as inches of rain drenched Silicon Valley and the state government fought off insolvency. What a disaster California is right now, even after the legislature yesterday approved a plan to close a $42 billion budget deficit and end the “fiscal emergency” that the action-hero governor, Arnold Schwarzenegger, declared last November.

California now boasts the highest sales and income taxes in America, plus red tape galore that drives too many businesses out of the state. Business owners told me that this new budget – which raises taxes, slashes public services, and ushers in big-time borrowing – will enhance the already ripe opportunity for states like Arizona, Colorado and Texas to lure away employers.

The unemployment rate in California is now a whopping 9.3%. This week, a new report showed that employment in Silicon Valley is falling for the first time in years. And as my colleague Jessi Hempel – who has a Fortune cover story about Facebook in the new issue – recently noted, there are no technology breakthroughs, like the microchip or the Internet, to yank the Valley out of its slump this time. While a few giants with mounds of cash – Oracle (ORCL) and Cisco (CSCO), to name two – are on the trail for acquisitions, some stalwarts are now baring their vulnerabilities. Apple’s (AAPL) computer sales at retail fell in January, for the first time in three years, reports NPD Group. On Wednesday, Hewlett-Packard (HPQ) posted a 13% decline in quarterly profits as sales in its computer and printing divisions tumbled.

I had one unexpected and uplifting encounter on my California visit: On Wednesday evening, I met Doris Drucker, the widow of Peter Drucker, the legendary management guru who died in 2005, one week shy of his 96th birthday. Doris, who was married to Peter for 58 years, is almost 98 years old. She plays tennis twice a week – from 8:30 to 10 a.m., she told me, “though I’m not as fast as I used to be.”

A short and stocky native of Germany, she stands perfectly erect. She doesn’t use a cane. She just renewed her driver’s license. She’d just been to the gym on Wednesday; light weights do her wonders. She has four children scattered about the U.S., but she does just fine living on her own in Claremont, where the graduate school of management is named after her husband. He taught at the school until he was 92. This coming November, he would have turned 100.

Peter Drucker, as you may know, coined the term “knowledge worker” and wrote about the rise of the information society and its implications for companies and workers. Lifelong learning is ever more important, he contended, and his widow is a living testament to this principle. In her long life, she’s been a grad student at the London School of Economics, a law student at the Sorbonne, a masters-degree recipient in physics from Fairleigh Dickinson University, and a scientific inventor. Her memoir, “Invent Radium or I Will Pull Your Hair,” came out when she was 93. Now, she says, she’s writing a book about information overload.

Meeting the remarkable Doris Drucker prompted me to reread a story, “Managing in Chaos,” that my colleague Geoff Colvin wrote in 2006. It’s timely. In the story, Geoff notes that Peter Drucker identified “leading change” as the key management challenge of the 21st century. To lead change, Drucker said, managers must “abandon yesterday.” In other words, get rid of what no longer works.

Now we see leaders – of corporations that he studied like General Motors (GM) and Citigroup (C), of governments, of not-for-profits, and beyond - struggling to abandon yesterday and determine what tomorrow will be. What do you think “the father of modern management,” as Drucker was known, would say if he could see all this tumult and desperation?

We’ve been talking about how the incredible shrinking job market is redirecting America’s best young talent to volunteer corps, like Teach for America, and to business schools. Demand – measured by numbers of applicants – is surging on both fronts.

So it’s an exciting time to be a business school boss. Yet, Linda Livingstone, dean of Pepperdine’s Graziadio School of Business and Management since 2002, tells me that this is her most challenging time ever.

One challenge is meeting students’ ever-rising demands for coursework related to social responsibility. Graziadio is responding – with social enterprise programs, a value-centered leadership lab, and case competitions to deem which students generate the most value (social, not monetary!) most efficiently. “They still need to be concerned about profits,” says Livingstone, sounding a bit frustrated and wary too. Most companies, she says, aren’t recognizing how demanding their future recruits will be in terms of social do-gooding.

Another challenge, Livingstone says, is foreign competition. It used to be that students around the world, seeking a global business education, studied in the U.S. or Europe. Today, they sign up for MBA programs in China or India—or Abu Dhabi, Dubai or Qatar. “Hong Kong and Singapore are putting tremendous effort into their MBA programs,” Livingstone adds, “and hiring business faculty has become very competitive.” One professor she knows got an offer from a business school in Singapore for three times his U.S. salary.

P.S. I asked Livingstone for her best advice to students. She says, “Be clear on what your values are so that when you face really difficult circumstances – which you will – you’ll have a grounding in who you are.”

As we learn that the U.S. has lost 438,000 jobs since January, we’re also hearing about a winner in the downturn: business schools. Linda Livingstone, dean of Pepperdine’s Graziadio School of Business and Management, tells me that she’s seen a 29% increase in applications for her school’s full-time MBA program this year.

The draw is more than the Malibu surf. (Pepperdine’s campus, in the Malibu hills, overlooks the Pacific.) Interest in MBA programs typically goes up during recessions. The Graduate Management Admission Council (GMAC) reports that applications to MBA programs nationwide are rising (applications for full-time MBA programs were up 36% this year from last year) as applicants look to enhance their resumes or pursue career changes—at least until companies start hiring again.

I also checked in with Wendy Kopp, the founder of Teach for America, whom I profiled last year. Kopp says that applications to TFA have increased 36% this year. If anything, the downturn is showing today’s young talent that the best route to success may be the patient one.

P.S. Last week, I wrote about Starbucks (SBUX) hitting the wall on growth. Meanwhile, Wal-Mart (WMT) is reviving. It’s the best-performing stock in the Dow 30 in the past year. So who else is doing well these days? Dollar Tree (DLTR), the deep-discount retailer, is thriving on penny-pinchers; the shares have risen 43.9% this year.

Consider this:

• In the summer of 1860, there was a persistent, growing unease among Americans about the road the nation had traveled in recent years. All knew that the country was entering a critical moment in its history, that the stakes were somehow very high.
• In the middle of that year, a tall, lanky and pragmatic lawyer came out of Illinois to become the nominee for president of a major political party.
• A year before, virtually no one expected him to become the nominee.
• His administrative work consisted of managing a two-person law office. His total government work amounted to three terms in the Illinois state legislature and two years in Congress.
• Many observers focused on the man’s paucity of experience in the corridors of national power. Doubt about his ability to deal with a potential crisis spread quickly.

Despite all this, Abraham Lincoln’s past turned out to be a poor guide to his leadership as president. Yes, he stumbled badly on several occasions. And yes, privately, he was frequently anxious about the outcome of a war that became, he said, “fundamental and astounding.”

Moments of doubt test and shape every leader. In Abraham Lincoln’s case, several factors unrelated to his resume determined his ability to meet the challenges. The first was Lincoln’s ability to see his own significance on a larger stage. Another was his suppleness — fire generals, rehire them, teach yourself military strategy. A third factor was his commitment to framing the stakes of the larger moment — what was at issue, what were the tradeoffs, why did it matter?

A final and critical aspect was Lincoln’s thoughtfulness — not only in the public choices (and speeches) he made, but also in the late-night conversations he had with himself about the ultimate meaning and worth of what he was doing.

In all these ways, the man met the moment. And both were profoundly affected.

Nancy F. Koehn, an authority on business history, is the James E. Robison Professor of Business Administration at Harvard Business School. She is currently working on a book about the most important leadership lessons from Abraham Lincoln and another on social entrepreneurs.