The Making of a Good Business School: Distinguishing Purpose from Profit

Busiess Education: Distinguishing purpose from profit

Business education is a game that is in dire need of a reboot, assert Profs. Tanusree Jain of Trinity Business School and Julian Friedland of Metropolitan State University of Denver, as they show the way forward for those in business and academia alike.

By CoBS Editors Guragam Singh and Tom Gamble with the kind input of Tanusree Jain and Julian Friedland. Related research: Reframing the Purpose of Business Education: Crowding-in a Culture of Moral Self-Awareness, Julian Friedland and Tanusree Jain, Journal of Management Inquiry, online first 2020. From Homo-Economicus to Homo-Virtus: A System-Theoretic Model for Raising Moral Self-Awareness, Julian Friedland and Benjamin M. Cole, Journal of Business Ethics, 2019.

Fair is foul and foul is fair

The 2013 movie, The Wolf of Wall Street, provides a good look into a life focused only on the mass-scale accumulation of wealth. No matter how that money was made. Or spent. Even the famous British economist, John Maynard Keynes, who in 1930 wrote, ‘… Avarice and usury and precaution must be our gods for a little longer still. For only they can lead us out of the tunnel of economic necessity into daylight.’, would have possibly cringed at the extent of such greed – with caution thrown to the wind.

Almost a century has passed since then. When will the planet see that daylight? Hopefully, in the not so distant future for numbers and studies show how corporate executives, B-school students, and thought leaders are all looking at business through a new lens—of CSR, sustainability, and spirituality—signalling that the winds of change have already started blowing, ending the rein of the pay check as the sole measure of success.

About time too, for all is not good and holy. Inequalities are sharply rising, and the front pages of leading business and national dailies are time and again rife with ethics scandals. Not to mention the impact of climate change and the current COVID-19 pandemic that continues to change life—and business—as we know it.

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Onward and upward

One such change has been the acceptance of the stakeholder model as opposed to the previous that worshipped shareholders and their value. Leading firms such as Blackrock and Unilever are redefining the purpose of business by considering the larger community as a part of their commercial activity. The UN’s Principles for Responsible Management Education (PRME) is another step in that direction. The PRME aims to equip students today—the leaders of tomorrow—with tools to strike a balance between monetary and sustainability goals. As such, it is providing food for thought on what is being taught in school as well as the basis of such teaching.

Tempering this movement is the question whether higher education—particularly at business schools—is still relevant. The availability of online courses by such top tier universities and consulting and training programmes by other players, are indicating a shift in the perception of the need of college education which is becoming exorbitantly expensive. Especially in the United States, which has seen a decline in the number of applicants.

Such a money-minded setup—reinforcing a belief that people are motivated by selfish interests alone—is increasing pressure on students and institutions alike. The latter are perceived as a shortcut to success, measured more in terms of money than by the quality of education, even by influential ranking lists. This belief has been shown to be false, given increasing student interest in achieving a higher purpose as well. For this universities are being called upon to instil and fulfil social purpose.

Pride and prejudice

Business education is a game that is in dire need of a reboot, assert Profs. Tanusree Jain of Trinity Business School and Julian Friedland of Metropolitan State University of Denver, as they show the way forward for those in business and academia alike.

Business schools popularised shareholder value supremacy far and wide starting in the 1970s up until the 1990s. This caused moral incentives to disappear from the radar. It is now for the business schools to take the bull by the horns and reframe their conception of business purpose beyond mere financial success. This can be accomplished by emphasizing moral self-awareness (MSA), a motivational system comprising 4 developmental levels, driven by pride and potential shame avoidance—useful in developing civic-minded behavior in humans.

The first level of MSA—social reflection—involves people altering their behavior after they get to know something that shames them or makes them feel guilty. Such as when Nike adopted an ethical code to avoid facing negative supply chain behaviors. The next level—self-reflection—is about doing the right thing after seeing the positive example of others doing so.

The third and fourth levels of MSA involve future-oriented and proactive levels of self-reflection. As such, people think about the possible harmful effects of their actions, and as a result consciously strive to do good—creating a positive impact. McDonald’s and Walmart demonstrated level 3 MSA by using their monopolies to adopt more responsible sourcing across their supply chains. Patagonia, as part of its strategy, encourages consumers to avoid buying more than required and has repair guides for its products shown on its website. It is also pioneering a new line of worn-wear stores. This is proactive and strategic—stuff level 4 MSA is all about.  

Only an acquired taste

The purpose of business education

Luckily, the shareholder oriented mindset is only a result of training, and not something wired in our genes. Just as the shareholder value model displaced the consumer-centric model largely through the influence of business school professors, a new purpose-driven vision is now being championed by academics, consumers, and thought leaders. As such, B-schools are not fighting a losing battle—for they can use MSA to strategically position ‘stakeholder and social responsibility’. And not only because it makes business sense.

Here,it is important that purpose and motive aren’t mixed up. As such, the purpose of business is to provide goods or services that increase welfare for at least some section of society. On the other hand, the motive—or ‘why someone engages in business’—could be the hunt for profits or efficiency, among others. Put more simply, profit—while necessary for a business—is only a means to an end, but not an end in itself.

A confusion between the purpose and motive of business can lead to deeper problems. At its simplest, it can often result in businesses and investors viewing rapid growth as an ideal of success. This gives an incentive to indulge in rash behaviour without giving heed to the limits of the environment, or to the social ills such as undue influence over government and that are associated with large enterprises.

As such, business schools can use MSA and educate students about the difference between motive and purpose, also helping these schools stand out in such rankings as Better World MBA and Times Higher Education that do not focus on financial success alone.

Don’t disrupt for the sake of it

This metric—as a go-to measure of success based on what is usually some new, disruptive way of doing business—also needs to be shown the door by business schools. This would pave the way for success to be known through the achievement of an intellectual challenge and the joy that one gets out of it. Another factor should be alumni life satisfaction post-graduation, and tracking alumni career choices in more responsible organizations such as B-Corps.

Resisting such changes could well mean furthering practices that foster a culture of ‘profit, power and celebrity’ both in the workplace and in society at large. Think about the consequences of Facebook CEO Mark Zuckerberg’s ‘move fast and break things’ motto on an election, and Uber founder Travis Kalanick’s words and deeds regarding sexual harassment and driver salaries. 

To this end, business schools need to impart education that motivates students to be ‘good people’ as they move forward in their careers. And, in addition, the knowledge that ethics is a key part of what success is all about.

New beginnings

Business education is a game that is in dire need of a reboot, assert Profs. Tanusree Jain of Trinity Business School and Julian Friedland of Metropolitan State University of Denver, as they show the way forward for those in business and academia alike.

This shift comes against the backdrop of a consumer culture that is making colleges—and business schools—give skill-based training to students—not education that boosts intellectual and critical capability. This is akin to the mix-up between the purpose and motive of business.

The motive may be financial reward. The purpose, on the other hand, should be more altruistic: diffusion of knowledge, enhancement of critical-thinking ability, leadership skills, and the like. This is essential for setting and accomplishing organisational and societal goals.

That means designing a syllabus that teaches ethical reasoning through extracurricular activities in different courses. Or using MSA in a course on social-media marketing strategy to encourage its adoption over traditional advertisements, which are more expensive. With the money saved going towards more responsible sourcing.

Curiouser…

However, we could ask ourselves what this all means. After all, business education should not become social service training without financial incentive or reward. As such, reward—or punishment—should only be representative of contributing—or not—to greater good.

Another way B-schools could use to achieve this goal would be to target students and hire faculty already keen in areas such as social responsibility, strengthening the school’s standing to obtain funding. Given the adoption of online learning, especially in recent times, digital tools such as those on carbon footprint and screen time productivity can be used to promote better habits.

And curiouser

There’s always room for improvement, of course. Some top programs have compulsory learning in areas such as philosophy and ethics, allowing students to refresh their value education. Case-study approaches can work as well.

Promotional events and school literature should also change tone and start celebrating those alumni who exhibit a more holistic version of success. To this end, business schools should invite these alumni to speak, for they will give first-hand knowledge on how they made it. And use these insights in the classroom. Many such alumni will be women—looking for more work-life balance than men— promoting gender equality and inclusivity too.

These are responsibilities that business schools today need to gear for, given their status both within universities and in the wider cultural context. And while no change will happen overnight, a paradigm shift is definitely needed to accelerate us towards that grander daylight Keynes envisioned for business and humanity alike.

The Making of a Good Business School: Distinguishing Purpose from Profit
Profs. Tanusree Jain and Julian Friedland

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Trinity Business School MBA and EMBA

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