History matters

Three months ago I took up a post as a research assistant in a business school. Nothing unusual—despite the fact of my uncommon academic background in this field of research. I am a historian who specialised in medieval times by writing my thesis about sociocultural dimensions of eating in and out in late medieval towns. As my new job was repeatedly subject to discussions among friends with academic or non-academic background, I carry out in this blog how a historian could contribute to the business research.

First of all, business is all but a main subject of today's historiography. The already ten year old lamentation of the German business historian Hartmut Berghoff who stated a de-economisation of the recent historiography was met with almost no responses. As an illustration you can look at the recent list of the 24 (!) introductory seminars at the history department of my home university: Neither attracts the freshmen with a catchphrase which is in any relation to "economy". Topics like the history of human bodies appear to be more in vogue—is it surprising that nobody apart of us historians is knowing what we are actually doing?

Instead of regretting the loss of any influence of a historian's voice on public debates, I demand that historiography should inquire the past with questions relevant to today's problems. From my point of view, I am convinced that no topic has such a demand of reflections as e.g. the apparently irresistible marketization of all spheres of our lives. But what could a historian contribute to such a discussion?

Ironically, straight the specific culture-based perspective which can be trained by studying such topics like the history of the transformation of the perception of human bodies. As long as the mainstream economics are regarding the economy as a separated "realm" in which rules and dynamics are considered like physical principles that tries to make our actions ex ante predictable like the falling of an apple from a tree due to the force of gravity; that long voices other than economists' are needed on the topic of economy.

In contrast to a purely economic approach, a historian's perspective embeds the economy in its sociocultural environment. Institutions as e.g. markets can be deciphered as social constructions and are persistently subject to change; their rules are characterised by mostly unrecognized norms and conventions. Regarding the behaviour of human beings on markets, you can go so far that a postulated rationality of human behaviour itself is a socially constructed concept which was invented by scholars during the times of Enlightenment.

That even mainstream economists turn away from the axiom of rational behaviour by reason of its limited empirical explanatory power is no surprise from a culturalistic point of view: The rational mode of thinking is only one empowering concept among others which all influence the behaviour of business men.

In this respect, however, I understand the work of scholars as contributors to the design of the concepts and institutions of our lives. The question in the middle for business researcher has to be: What is a “good” firm? As a historian I have not only some knowledge about the path dependencies of all conditions but also the consciousness about its alterability. I am happy to help working on it.

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

Long-term care in Thailand: A Swiss Perspective

In Thailand, private investors from Switzerland are funding a resort for older people in need of long-term care. This pilot Project offers 50 places in a nursing home focused exclusively on Swiss patients and their spouses. According to the investors, the resort’s services include twenty-four-seven assistance, comparable to the standards applied in Switzerland. Due to an overwhelming public and private demand for the limited number of places, follow-on resorts are planned not only for persons in need of long-term care, but also for patients suffering from burnout or addiction.

In Switzerland, more than one hundred thousand older people are in need of permanent medical assistance and experts estimate that this number will triple until 2050. Research revealed that there would be an additional demand of one hundred thousand places in nursing homes in the next 15 years. The problem is that the average monthly costs related to long-term care is about CHF 11’000 (USD 10’000) per person, what cannot be funded sustainably neither by the current Swiss health-care system nor by private contributions. From this perspective, the resort in Thailand is both an attempt to approach the demographic problems of modern societies, but also a profitable business model. Because the monthly costs for long-term care in Thailand are less than half of those in Switzerland, the private investors are calculating with a financial return of more than five percent for their resort.

I have a somewhat uneasy feeling regarding long-term care resorts for Swiss older people in Thailand due to two reasons. First, I dislike the imagination of living in one of the richest countries in the world, which society is not able or willing to find sustainable approaches or solutions for its demographic issues. In my opinion, purely economic considerations fall short of taking into account the complex problem of increasing health-care costs in most of modern societies. In short, sending persons in need of long-term care to Thailand because of economic reasons is the failure of a whole society to take over responsibility and to show solidarity with its older people.

Second, sending older people to Thailand because of the financial costs related to long-term care is a striking example of the economic primacy in many of today’s social-political considerations. For example, a leading Swiss expert in the field of gerontology recently stated that if a dement person does not recognize the own apartment anymore, it would not make any difference if he or she lives in Switzerland or Thailand. This statement completely neglects an older person as being embedded in a family or a broader social context. To find sustainable and integrative solutions for the complex problem of the rising health-care costs, economic considerations have to serve the needs of a society and the people it is made of.

Tom Schneider

Mindsets

A few days ago I watched a news contribution on a manipulated scientific medical study about a pill. It turns out that several employees of a pharmaceutical company where involved in the construction and completion of this study without disclosing this fact. The manipulation of the data led to positive outcomes of the study, helping to make this pill very popular and thus very lucrative. In this particular study some criminal intention was clearly at play. But many of these medical studies are financed by pharmaceutical companies, says the expert on the news report. This got me thinking about the influence of conflict of interest on the outcome of studies.

In a documentary on fracking I recently watched, I found a similar pattern. The people involved in making money or allowing this technique of oil production, conducted studies showing that this way of flowing oil is harmless to humans and nature. The NGOs concerned with the destruction of the environment found converse results. How can this be? Both parties have a big motivation to prove their arguments. Both parties have a specific mindset when constructing their study. This leads to a frame of thinking and a way of perceiving the world. I think every scientist should have a look at their basic motivation of research and their underlying assumptions of how the world works or ought to work in their eyes. It is very hard to fight one’s own frame of thinking, but by making these implicit assumptions explicit and communicating them, others can better understand your where you are coming from. If obvious conflict of interest is given as is the case in the example of the manipulated study and in my opinion also in the case of financing, I think it will prevent a scientist from performing rigorous research and should be excluded from the carrying out the study.

This is my mind frame and my motivation for this article: I am a psychologist and stakeholder theory enthusiast and think that explicating and communicating thoughts and assumptions helps to find common grounds. Further, I think the world is not black or white but should be looked at nuanced. Further we are working on a paper on mindsets and basic assumptions of different theories, which got me to pay more attention on this issue. So in this sense: Q.E.D.
 

Vanessa McSorley

 

 

Purpose matters

This weekend I was visiting my father who is spending four weeks in a little village in the Swiss mountains for recovery. When I entered the hotel I was pleased with the warmth of the receptionist. She gave me the feeling that I was really welcome and that she cares for me. It was not the usual customer orientation we experience in many hotels from employees who are trained to be customer oriented. It was an encounter between human beings. During the entire stay in this hotel I met various people who love their work because they like caring for others.

The hotel belongs to a foundation, which aims at providing services to human beings in all phases of life. Besides hotels they are engaged in child and elderly care.

In doing business we often have a weak connection to why we are doing this work. Rendering a good service is much easier when we know why we are doing it and what we stand for when providing these services.

This hotel stands for doing good to people. Whether we base this on Christian values or on a humanistic commitment in a philosophical sense does not matter that much. What matters is that we know with which purpose we are serving whom. Customer orientation in this perspective is not a mere technical term but a humanistic commitment in the broader sense.

Sybille Sachs

Changing from economic to political primacy: Why this is necessary

Recently many publications of economists and philosophers were released which question and want to contain the dominant role of the economy and the market in our societies of today (e.g. R. and E. Skidelsky, T. Sedlacek, L. Herzog, M. Sandel). They demand that the role of the economy has to be debated publicly. This corresponds basically to the demand for a primacy of politics over economy. But why is it important to contrast the primacy of politics with the one of economy?

 

First of all it is decisive to see that among all political views of a society also such exist according to which the economy and its material fruits indeed are not seen as an end in itself. In a society living the primacy of real democratic politics institutional conditions are in place which enable to include all (non-radical) political views and matters of a society. Of course, and this is fully clear, also in such case economy will play an important role simply because people want sustenance and wealth.

 

In a society in which the primacy of economy rules economic issues are basically considered as the most important ones. Principles like the market, growth or profit maximization become to end purposes of all existence. All forces which potentially constrain the forces of the pure market as the only regulative force will be fought. Factually (and although democratic institutions may still exist) this model of society shows fundamental and even totalitarian traits: everybody has to subjugate herself to the primacy of economy and its principles, if she wants or not.

 

Once established, to depart from this model is difficult: each concept of economy other than the one of a neoliberal economy acknowledges also other matters than pure economic ones to have a meaning or value on their own (e.g. stakeholders, society, environment). This of course endangers the economic primacy. But a society with e.g. a primacy of religion has similar problems: all its members have to subordinate themselves to religious principles if they want or not.

 

Only the primacy of politics which is committed to a democratic order can provide remedy: only in this way the full colourfulness of views of a society can be integrated. Despite this also caution has to be exercised: material power asymmetries between political actors e.g. can influence the formation of majorities. Moreover, it has to be acknowledged that politicians like R. Reagan or M. Thatcher which have contributed significantly to the primacy of economy were democratically elected.

 

Because today we know to what such primacy is able to do critic at it has become good form even in economic circles. But the voyage has not ended yet: the actual requirement is the return to the primacy of politics and also to stay there. To stay there it is also necessary to debate in Aristotelian manner what is good and hence moral. To think about the good helps preserving before leaving the primacy of politics: nobody will then voluntarily leave this primacy for a fundamental-totalitarian system, be it of religious, economic or of other character.

 

Claude Meier

Dare to be ethical?

Reading the book “Giving Voice to Values” by Mary Gentile corroborated a longstanding assumption of mine that acting out our sense of right and wrong is something that can be directly promoted by rehearsal. Her observation is that most “business ethics” courses tend to focus either on abstract ethical theory or then the analysis of specific cases, but neglect any sort of concrete training as to how, precisely, we would like to behave and what we should say in a specific situation where we intuitively feel that something is amiss. Knowing does not automatically lead to doing, much less to effective doing. And knowing without conviction can even lead to misuse and skillful self-justification. Indeed, she gives examples where managers whom she had interviewed expertly elaborated and adroitly rationalized their morally questionable behavior on the basis of ethical theories that they had previously been taught at University. Thus they simply picked and chose the ethical theory that best supported their particular behavior and prerogatives at that time and context, no matter how self-serving or cynical.

By rehearsing just how we would – in words and deeds – respond to something amiss, we simply do what any athlete does when training for the time when it really matters: flex the muscles and hone in their coordination in such a way so as to make their execution all but automatic during an athletic event. As to how to convince highly competitive individuals of the merits of revisiting their basic moral assumptions, she proposes that even they can be brought into the fold by a re-framing of their objectives as being “daring to be ethical”.

I am inspired by Ms. Gentile’s approach because I have personally witnessed with myself that I have on a good number of occasions failed to uphold my own deeper convictions when it mattered. Looking back, my failures had their root less in my believing myself to be powerless to change things on my own, than in having to decide on the spot and being unable to come up with a suitable alternative fast enough or being so caught up by my own social and cultural conditioning, that it was very difficult to change my “bad habits”. As individuals, organization and as a civilization we are all captive to some extent to the ingrained routines, traditions and culture we have been part of since childhood. Consequently, even if we rebelled on a number of occasions, we often find ourselves back in our previous, familiar path-dependent behavioral track, especially when we are intricately embedded in this social status-quo with all its rules, assumptions and subtle (or not so subtle!) peer pressure. We yearn for our place in this social context and thus we often inadvertently undermine our own best efforts at reform.

Concretely, what is to be done then? Whereas there is certainly some validity to the bromides that one can only change oneself or that all change begins with ourselves, the above analysis makes it clear that more is required. Individuals need to be supported in their efforts for change and this support includes creating concrete training grounds to hone in our abilities to deal with the wider social challenges we all face. Business Schools, as the premier forging grounds for future leaders in our economic institutions, are clearly indispensible in this respect.

Manuel Heer Dawson

Sustainability Reporting Today

Sustainability Reporting Today:

 With the advent of sustainability reporting, various indicators and standards have been developed to measure and evaluate sustainability and to anchor it in corporate reporting on value creation. A sustainable commitment to stakeholder relations on an economic, social and ecological level has a proven positive impact on value creation and ultimately also on the strategic success of a company. To make this transparent, the following principles for an integrated sustainability reporting - which are to a certain degree also part of standards such as the Global Reporting Initiative, Integrated Reporting and the European Foundation for Quality Management (EFQM) - can lead the way:

 

-         Strategic Focus: Sustainability should be embedded in a company’s purpose, in its derived vision and in its strategic objectives. This forms an essential basis for a periodic corporate sustainability reporting at a strategic level.

-         Embeddedness: Not only singular projects, but the entire strategy development and revision should be communicated comprehensively to make the company’s attractiveness visible for current and future partners. It is deliberately not about retaining information to calm down stakeholders and to secure competitive advantages over competitors, but about gaining strategic stakeholders for a mutual corporate value creation process.

-         Inclusion: When different stakeholders contribute to value creation, it is crucial to also recognize these stakeholders as owners of their contributed values. This is based on an extended understanding of ownership. Here, the concept of ownership refers not only to material goods or financial resources, but also to intangible issues such as knowledge and experience. With their knowledge and experience, stakeholders provide property for a company in a broader sense. Like the financial owners, they have therefore the right to be adequately involved in processes regarding their property and to be informed accordingly.

-         Commitment: In a purely economic view, profit distribution (residual profit) primarily targets shareholders. This is also predominantly reported on. Especially because the management has to make discretionary decisions about the shareholders’ compensations, e.g. how much of the profit is being distributed and how much is being retained (pay-out-ratio). When other stakeholders, in the sense of a broader concept of ownership, contribute significantly to the corporate value creation process, these stakeholders should also be a compulsory part of the distribution of tangible and intangible values as well as receive information accordingly.

 A sustainability reporting based on these principles suggests that companies can create more values with and for stakeholders.

 Sybille Sachs