Strategic CSR - Business schools

Over the winter break, I started reading the book From Higher Aims to Hired Hands by Rakesh Khurana. The main message is that business schools have not lived up to the intentions behind their creation. That, rather than build a platform to train managers as professionals (in the true meaning of that term), they have instead morphed into money machines for universities, where revenue generation trumps their educational mission. This message was reinforced by the article in the url below, which is a review of the book The Golden Passport published last year by Duff McDonald. The critique offered by the book (and summarized in the review) is damning:

 

"Anthropologists in the distant future will make their careers investigating the extraordinary rituals of American business education. As they sift through the wreckage of a civilization that bestowed its highest rewards on individuals trained to ignore its deepest problems, they will be lucky to have as their guidebook Duff McDonald's deliciously iconoclastic history of the Harvard Business School, 'The Golden Passport.'"

 

The overall message is that business schools have played a large part in producing the managers who have shaped the economy into something that serves the interests of the minority at the expense of the majority. Although HBS is not the only problem, the institution is singled out for particular disdain. Michael Jensen earns particular criticism for his role in propagating the diffusion of agency theory throughout business schools. Michael Porter is also heavily criticized for creating a problem that he then magnanimously offered to help solve (for a price, of course):

 

"The Monitor Group, the consulting company Mr. porter co-founded, raked in over $100 million from AT&T in the early 1990s—just as the old phone company, flailing around in search of new sources of monopolistic advantage, launched a series of strategic acquisitions that landed it in a ditch. Starting in 2006, Monitor put its expertise in the service of a certain terrorist-sponsoring dictator in Libya. … The strategic foray into the tin-pot sector—which included contracts with the Assads in Syria, as well as the Russians and Saudis—did not keep the consulting firm from bankruptcy. Now, according to the author, Mr. Porter seems convinced his management magic will solve the problems of health care and education. Apparently all we need to get our schools and insurance companies back on track is a little 'strategy.'"

 

While the critique is good, there is not much offered by the book in terms of possible alternatives. The absence in the review of plausible ways forward is palpable. This applies to the general direction of business school education. I agree with the criticism, but haven't seen an accurate description of why previous models were 'wrong' (e.g., shareholders do not own the firm), or what should be taught in its place (e.g., sustainable value creation). In other words, the discussion around the book (and I read several reviews of it) is not very enlightening and further entrenches an 'unhelpful' view of the role of the firm in society.

 

I think the principles advocated in Strategic CSR are an important part of that discussion. Complementing these ideas is the work that all of you are doing in your classrooms every day to build a 'better' alternative. How to get HBS (or any other influential actor) to pay attention, though? That is the essential question.

 

Take care

David

 

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (4e)

© Sage Publications, 2017

 

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

 

 

Schools of Mismanagement

By Matthew Stewart

April 22-23, 2017

The Wall Street Journal

Late Edition – Final

C5

https://www.wsj.com/articles/the-business-school-boondoggle-1492809680

 

Strategic CSR - Shared value

One of the main obstacles to generating change in corporations' understanding of CSR is the media's narrow reporting on the issue. Time and time again, I see plenty of evidence that business reporters in respected media outlets have only a rudimentary understanding of the complexity of a subject like CSR, not to mention some of the more basic tenets of capitalism (such as what profit represents and the legal relationship businesses have with their shareholders). The article in the url below is a good example of the danger of possessing insufficient knowledge:

 

"There is something appealing about the concept of 'shared value.' The strategy, first articulated by Michael E. Porter of Harvard Business School and the management consultant Mark R. Kramer, is based on the belief that companies can increase profits and enhance their businesses even as they address pressing social problems."

 

To suggest that Porter and Kramer "first articulated … the belief that companies can increase profits and enhance their businesses even as they address pressing social problems" demonstrates an ignorance of the debate that is astounding. I have detailed my criticism of Porter and Kramer's article elsewhere (see Strategic CSR – Porter & Kramer). Suffice it to say, I am not a fan. While they may have come up with the term "shared value" (primarily to serve their own consulting purposes), there is nothing in the article that is new to anyone who has spent any time thinking about CSR.

 

What I find particularly annoying about the fawning attitude a journalist like Eduardo Porter has towards Michael Porter, however, is that it impedes the prospect of meaningful change. In the case of the article below, the author concludes that companies that "have no time for 'shared value' … [instead are] making an entirely different case: Addressing social problems will have to take a back seat to the bottom line." He makes this assertion as if "addressing social problems" and "the bottom line" are completely unrelated. The result of this flawed logic, which is directly influenced by Porter and Kramer's work, is to suggest that CSR "has its limits" instead of the more important conclusion the author could have arrived at (that CSR is all-encompassing and central to every business) if he had a more sophisticated understanding of the subject about which he was writing.

 

Take care

David

 

David Chandler & Bill Werther

Strategic Corporate Social Responsibility: Stakeholders, Globalization, and Sustainable Value Creation (3e)

© Sage Publications, 2014

 

Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

 

 

Corporate Action on Social Problems Has Its Limits

By Eduardo Porter

September 9, 2015

The New York Times

Late Edition – Final

B1

http://www.nytimes.com/2015/09/09/business/economy/corporate-efforts-to-address-social-problems-have-limits.html

 

Strategic CSR - Porter & Kramer

By now, you will probably have read about Michael Porter and Mark Kramer’s latest foray into CSR—‘Creating Shared Value.’ If not, here is their front cover story of the first HBR issue of 2011, with accompanying video, humbly titled How to fix Capitalism—The Big Idea:

http://hbr.org/2011/01/the-big-idea-creating-shared-value/

A pdf of the full article is available from HBR at:

https://archive.harvardbusiness.org/cla/web/pl/product.seam?c=8062&i=8064&cs=1b64dfac8e4d2ef4da5976b5665c5540

Ultimately, the argument that Porter and Kramer are building (and this is now their third HBR CSR article, following on from ‘The Competitive Advantage of Corporate Philanthropy’ in 2002 and ‘Strategy & Society: The Link Between Competitive Advantage and Corporate Social Responsibility’ in 2006) is that firms should identify issues containing both economic and social goals, and then utilize their expertise to generate market-based solutions. In this way, both economic value and social value are maximized.

The reaction of the CSR community has been to point out that, while they are very welcome to join the party and can do much to push CSR up the agenda of many unpersuaded CEOs, they are late and somewhat behind the times:

http://tobiaswebb.blogspot.com/2011/01/does-michael-porter-understand.html

The idea Porter and Kramer present, as I understand it, is similar to Bill Gates and Muhammad Yunus’ work on “caring capitalism”—essentially a re-branding of the ideas behind social entrepreneurship (Issues: Social Entrepreneurship, p189). My criticism of the idea, therefore, is the same—that, while the idea sounds good in theory, in reality, the potential reach of this business model is limited. A good example is Product (RED) (Case-studies: Product (RED), p352), which is very successful as a cause-related business, but has fallen well short of the game-changing solution its founders were hoping for.

What I find funny about the new Porter/Kramer article is where they lay the blame for the current myopic view of business, without the slightest hint of irony:

“In understanding the business environment, managers have focused most of their attention on the industry, or the particular business in which the firm competes. … Companies have failed to grasp the importance of the broader business environment surrounding their major operations.”

Now, I wonder whose ideas and models taught widely in business schools would have encouraged managers to focus “most of their attention on the industry, or the particular business in which the firm competes”……..???

What we argue in Strategic CSR is that firms should focus on identifying problems for which there is a clear market-based solution and then deliver that solution in an efficient and socially responsible manner. The idea of CSR as an integrated component of strategy focuses on firms’ areas of expertise throughout all aspects of operations, but de-emphasizes actions that stray outside a firm’s areas of expertise for which there either may not be a market solution, or the firm is not well-suited to deliver. That is how long term shareholder value is maximized—by operating in a way that seeks to meet the needs and demands of the firm’s stakeholders, broadly defined. In other words, the focus of business remains the same; it is the way you go about it that is different with a CSR perspective.

Porter and Kramer, however, want to change the focus. As they put it in their introduction:

“The purpose of the corporation must be redefined as creating shared value, not just profit per se.”

In some instances, these two perspectives (caring capitalism and strategic CSR) will produce the same behavior, but the motivating force is different and this is important because it will ultimately lead to different outcomes in terms of the success or failure of the venture. For example, Starbucks should not form partnerships with shade-grown coffee farmers in Guatemala because they recognize those farmers face an uncertain future and there is an insufficient welfare net in place to support them if they go out of business (a social goal), but because Starbucks needs to secure a stable supply of high quality coffee beans and supporting these farmers in a sustainable manner is the best way to guarantee that supply (an economic goal). In other words, Starbucks should form stable and lasting partnerships with these key suppliers not because they are seeking to fill a social need, they should do it because these farmers produce a raw material that is essential to their business. As such, Starbucks is incentivized to protect that raw material in a sustainable way, rather than ruthlessly exploit it. If those Guatemalan farmers are not producing a product that is in demand (i.e., if the business logic is not there), the argument that Starbucks should get involved is difficult to make.

Ultimately, although for-profit firms can help with the first perspective (caring capitalism), they are much better suited to the second perspective (market capitalism). Ideally, it is the role of effective governmental and nonprofit sectors to focus on those areas that the market ignores or cannot solve. In contrast, Porter and Kramer argue that social goals should be considered equally with economic goals and firms should then utilize their market-based skills and expertise to solve that problem—In other words, that they should become less like for-profit firms and more like social entrepreneurs, government agencies, or nonprofit organizations. While well-intentioned, I believe that this is not an effective plan for “how to fix capitalism” and, instead, is a misunderstanding of the value of for-profit firms in our society (and of the role that a CSR perspective brings in maximizing that value). As argued in the article in the url below:

“In her 2009 book SuperCorp, … Rosabeth Moss Kanter warned of the pitfalls for companies that make "social commitments that do not have an economic logic that sustains the enterprise by attracting resources". More companies are learning to reap commercial benefits from strategies that have a wider social value. That's great. But the basic job of coaxing capitalism in the right direction is the same as it always has been: find ways to harness society's needs to companies' self-interest and hope the two stay together.”

Take care

David

Bill Werther & David Chandler

Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)

© Sage Publications, 2011

http://www.sagepub.com/strategiccsr2e/

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

Society and the right kind of capitalism

Hill, Andrew

724 words

22 February 2011

Financial Times

London Ed1

14

http://finance.ninemsn.com.au/executivesuite/insight/8214520/society-and-the-right-kind-of-capitalism

or

http://www.ft.com/cms/s/0/7fb25830-3de9-11e0-99ac-00144feabdc0.html