Contributions to society’s well-being

I recently spent some time in the US to attend a conference. I was reading the daily newspaper and an article caught my attention. It reported on a representative study by the Pew Research Center asking adults about which profession they thought was the one contributing the most to society’s well being and the least respectively.

 

On the top of the list were the military (78%), teachers (72%) and then medical doctors (66%). This makes sense due to the fact that since 9/11 the Americans have a higher need for security and hold the importance of the military very high. Also, the average citizen can experience the positive impact of education and health firsthand. As a lecturer on strategic management I found the low ranking of business executives (24%) who made it second to last on the list, just behind journalists (28%) and above lawyers (18%) quite worrisome. Therefore teachers were rated three times higher than managers. But they are not paid three times as much as managers, but rather 30 times less! Once again, this study shows that the reputation of business leaders has dropped to a very low level. The survey confirms the outcome of a plebiscite in Switzerland (a sample survey of a special kind). It was a proposal that translates into “the fat cat initiative” which was widely accepted, showing that many managers were in fact not.

 

Many causes for this negative sentiment toward managers can be discussed. For example the double reward for strategic misperformance of top managers: Before 2007 managers of major Swiss banks were rewarded with big bonuses for risky growth (investment banking) and acquisitions of financial institutions of all kinds. Today these bankers are rewarded even more for reversing the strategy of their predecessors, selling supposedly unprofitable and risky parts of business. Despite the fact that either the one or the other strategy must be wrong, high “performance” bonuses where paid in both cases. It could also be discussed that citizens increasingly tend to disapprove of valuating firms on the grounds of their short-term success. It doesn’t seem to impress them that speculators at the stock market think otherwise.

 

As a lecturer of strategic management I think about what I could do to improve the standing of leaders in business. I think that on the one hand educators should regularly draw attention to the issue (e.g. in case studies) that when decisions in business are made not to solely consider monetary results but to also assess the effects the decision has on society. Value creation for all stakeholders is the issue! Further, in my opinion educators in management studies should apply this socially responsible strategy to their research projects and particularly to the evaluation of research results.

 

It should be noted that the renowned Academy of Management aspires “to inspire and enable a better world” in their vision statement (and not a higher income for managers!). This undoubtedly means not to propagate the short-term shareholder value thinking in research and teaching but to rise to the challenge to “contribute to society’s well-being”. If business leaders perform convincingly in this aspect their reputation in society ought to improve in the future.

Edwin Rühli

 Capitalism in Question

The Academy of Management (AOM) is a professional organization that strives to further the scholarship of management. It comprises twenty-five professional divisions and interest groups focussing on management problems. Examples of these divisions are „Business Policy and Strategy“, “Entrepreneurship“, “Human Resources“, or „Social Issues in Management“. Every year, the AOM carries out an Annual Meeting. Last year, more than 10,000 participants – primarily university professors – took part from all over the world. In numerous events, such as the Professional Development Workshops, Paper-Sessions, Panels and All Academy Symposia, the newest research and teaching methods were discussed. Also Switzerland was well represented, coming in at 10^th place with respect to the number of participants.

For each of the AOM annual meetings a theme is selected. For this year’s meeting that takes place between the 9^th and 13^th August in Orlando, Florida, the theme will be “Capitalism in Question”.  Indeed, following the financial crisis of 2008, the business schools are challenged to review the foundations and assumptions upon which their research and teaching are based on. Currently, this is the neo-liberal economic theory and the corresponding theory of the firm. Questions and problems that the organizers have put in the center are for example:

·        While it is recognized that the market competition during the last decades brought great benefits, material prosperity and much innovation, it has also become clear that there are serious down sides: economic, social and ecological “costs”.

 

·        Research questions are called for that deal with the question if and how the capitalistic economic system can and should be further developed.

·        In need are also contributions that elucidate what alternatives there are to the current system and what would subsequently change in a social, economic and ecological context.

·        Connected with the above is also the question of by what social and ecological components the objective of shareholder value maximization by firms need be complemented and what this means for the role and self-conception of managers and leaders.

·        Also the question how true innovation can be upheld in firms – as for example via a shift of focus from rivalry to cooperation with stakeholders – has been included in the call for papers.

It will be interesting to see what an event of this size and scientific reputation will bring forth in terms of insights and impulses for the academic research and teaching in the area of management. I hope to be able to report some of these interesting news in a later blog post.

Edwin Rühli

Value Creation with the Humanistic Mission of ‘People for People’

During the last several years both business and society are undergoing substantial change. A few key examples illustrate this change: the oil spill in the Gulf of Mexico; the nuclear catastrophe in Japan; the ongoing European debt crisis and social movements such as “Occupy Wall Street” that have spread around the globe. All these changes show that it is not simply single actors who are salient, but rather networks of actors. This interconnectedness is the critical feature of today’s reality. Value creation takes place between firms and stakeholders in networks to achieve greater service to society. Such networks of value creation encompass the boundary of sectors (economic, political, and societal) as well as the degree of institutionalization (formal and informal).

Business schools are responsible for preparing new generations of leaders for a networked globalized society in which intra- and inter-network cooperation is key. The responsibility of business schools was also the topic at the caucus session we conducted at the annual meeting 2011 of the Academy of Management (AoM) (http://www.fh-hwz.ch/g3.cfm/s_page/63780/s_name/socialmovementinitiativeteaching). The focus was to assess whether there is sufficient interest in the core challenge of nurturing humanism in management education by creating a network of interested scholars. The shared understanding of participants was that it matters what business schools do in educating future leaders and managers. The participants came to the conclusion that as educators of future leaders and as world citizens we have to foster teaching and research that contributes to the humanistic mission of ‘People for People’. "People for People" describes the humanistic mission of all management: human beings helping others.

If you are interested to advance the humanistic mission in management education please join us for our Professional Development Workshop at the annual meeting 2012 of the Academy of Management (AoM) in Boston. Joseph Mahoney (University of Illinois) and I organized this workshop for the following divisions of AoM: Business Policy and Strategy (BPS), Human Resources (HR) and the Social Issues in Management (SIM). Panelists include Sandra Waddock (Boston College), Robert Phillips (University of Richmond), James Post (Boston University), Tom Donaldson (University of Pennsylvania), Ed Freeman, (University of Virginia). The workshop takes place on 03. August 2012, 2:45pm, pm Boston Hynes Convention Center, Room 301 (http://program.aomonline.org/2012/subMenu.asp?mode=setmenu&menuid=14).

I am looking forward to see you there.

Sybille Sachs