New leaders for the business world 4

Stakeholders and sustainability

Programs that address the perspective of stakeholders and sustainability

In the fourth and last part of this serial, we will be able to address the final reflections that the reply to Mary Gentile has generated for us.

The difference between climbing positions in organizations and rising quickly thanks to the education and training provided by business schools

She argues that for as long as she has been involved in management education, critics have criticized the “isolation” of managerial knowledge; that is, the artificial and counterproductive separation of accounting, operations, marketing and finance.

Likewise, she believes that for decades, greater attention has been called for the diverse perspectives of stakeholders, both internal and external, in making business decisions.

Together with her, we wonder if this has changed and taken shape so that the various programs serve these interest groups.

In addition, the data that we have before us, regarding the increase in the will to incorporate sustainability into the life of organizations, which together with it is simultaneously recognizing this concern of the sustainable economy, a constant appearance of companies of short useful life due to not understanding the way forward, as well as the damaging impacts on social and ecological systems as a consequence.

Gentile says “but these concerns have had little influence, until now, on the overall structure of the typical MBA curriculum.”

However, every few decades, a wave of curricular revision and reform spreads through business schools, and that seems to be happening now, an issue that at the local level of Spain and more widely in our European environment, we can say from the AEEN that yes there is a race in this sense.

We should ask ourselves if efforts are being made in this regard. And the experience that we are gathering at the local level in Spain and in our European environment, is that if some efforts are being made to address concerns about isolation, the lack of broader perspectives and, in particular, unsustainability.

And this issue runs through what various schools internationally are developing systematic ways of incorporating the views and interests of multiple stakeholders, including investors, employees, and the wider community, into the decision-making processes and frameworks they teach to their students.

The scope of sustainability

When Gentile addresses the issue of sustainability, she is warning about the scope of it.

It says that “the idea of ​​sustainability, which was originally associated with the natural environment, is now linked to broader social impacts and covers issues such as microcredit in developing regions, maintaining respectful relationships with the communities in which a company locates its businesses facilities and take care of the handling of personal information of the clients of a company”.

From now on we share this breadth of vision, because it is the way in which sustainability becomes an instrument for the search for a commitment (to meet a specific objective) of productive and business processes in general that are sustainable.

As Gentile puts it, “it allows for further discussion of the risks associated with the now predominant short-term managerial emphasis, quarter by quarter.”

When she introduces the issue of shareholder interest and his logical pursuit of profit maximization, Gentile believes that discussions of sustainability also offer an explicit opportunity to talk about a corporate purpose that goes beyond maximizing profits for shareholders.

For this reason, it is interesting to see some specific cases with Gentile’s eyes, such as the Yale School of Management, which has redesigned its basic curriculum around eight “Organizational Perspectives” courses.

Four of these courses take the external point of view: Investor, Client, State and Society and Competitor. And four take the internal perspective: Innovators, Operations Engine, Employee, and Fund Sourcing and Management.

By organizing the curriculum in this way, Yale has challenged its faculty to cross the barriers of their fields of study.

“We are not going to eliminate disciplines completely. We are putting them in a new context”, explained Dean Joel Podolny.

“If you talk to investors, they will tell you that to be an investor you have to know finance. But they will also tell you that investing is about being able to figure out where future earnings are coming from. Well, to understand future earnings, you need to understand strategy and organizations, and have the ability to analyze leadership. The moment you take an investor perspective, as we have it in the new curriculum, you start thinking about questions like, “What are the different classes of investors? What are they optimizing for? What information do they need? Which ones do they need? Are the things a manager would need to know to involve those different components?”.

One point of view that we find interesting is when Gentile states that “when you anchor the course in the functional discipline of finance, you might eventually cover some of those questions, but they don’t come out of the discipline”.

But they do arise from the context of a manager and / or leader trying to involve the investor.

Adopting the investor perspective in this nuanced way allows addressing issues about maximizing shareholder value that can get lost in the typical curriculum: questions about the diversity of shareholder goals; the market’s demand for transparent and accurate information; the problems of asymmetric information, externalities and conflicting time frames; and so on.

These questions have important implications for business, and schools now have a context, a language, and a lens to ask them in the core curriculum.

Integrating fields of knowledge

We have always defended from the AEEN the importance of integrating the various fields of knowledge through a coordinated communication and action of teachers, programs and students.

Gentile believes that one of the most beneficial aspects of this new structure is that it forces teachers to communicate between disciplines when framing a problem in the classroom, which requires the integration of ideas and translation in all fields.

Stretching to find common ground helps teachers frame their research so that students see the practical implications.

For example, a study of the holding patterns of different classes of investors may seem “clumsy” to a finance student assigned a peer-reviewed paper; however, when linked to strategy, it suddenly becomes relevant to the case of a CEO taking a company public.

Another question that arises in Gentile’s analysis, and that we make effective in our environment, is how can that CEO structure the investor road show to attract the types of shareholders who will accept a long-term business strategy?

And this is key when students acquire effective communication skills in a variety of roles, positions, and perspectives. Because they have to learn to convincingly express the need for patient capital, which creates sustainability in the medium term.

Gentile shows us that for the Washington State University (WSU) MBA program, “Stakeholder-Centered Leadership for Sustained Business Success,” launched in the fall of 2007, the curriculum designers spent three years talking to alumni, business leaders, students, and faculty to collect data, test hypotheses, and assess your progress.

What made you different from Yale?

It seems like a very simple thing: unlike Yale, the Washington school has retained most of its traditional MBA courses, but has revised the curriculum for each course to incorporate the views of an organization’s stakeholders and build on the idea that the core of any company’s purpose is long-term sustainability, which the school describes as “the process of balancing stakeholder expectations with the strategic plan to achieve the optimal mix of resources for long-term performance term”.

WSU faculty determined that any effort to integrate stakeholder guidance into business practice required a rigorous, relevant, and accountable methodology to manage the inevitable compensation decisions that arise once a company goes beyond the single goal of maximize shareholder value.

Learning objectives

And this point seems to us of great interest, so that we take into account in the updates of programs in our European environment.

We refer to how Wahsington State University developed stakeholder-centered learning objectives for each of the required courses in their curriculum.

Clearly these objectives included identifying an organization’s resource needs and the stakeholders who provide or control those resources.

But they also cared to see what the potential impacts of the organization were on those stakeholders.

Still, the most important part of that inclusion was a model to understand how the organization’s strategy would influence relationships with stakeholders and, therefore, the availability of resources.

In each course, students explicitly discuss the ways in which a corporate strategy can be successful in the marketplace and still meet the needs of a variety of critical individuals, including investors, employees, and customers, precisely because it recognizes these groups as resources.

For example, the accounting course now focuses on the design of organizational control measurement systems, emphasizing that what a company chooses to measure, in this case, stakeholder contributions and the requirements it tracks, determines its ability to accurately forecast performance.

And a new course, Value Chain Partnership Management, emphasizes building and managing long-term, mutually beneficial relationships with alliance partners, suppliers, and distributors.

The school has also created a required introductory course, spanning stakeholders, resources, and competitive advantage, which establishes its resource-based theoretical framework, and a required course called Business Ethics and Public Stakeholders which serves as the cornerstone of the entire business plan studies.

Finally, as an example of the evolving emphasis on implementation and principles, WSU is creating a course on negotiations and stakeholder engagement that focuses on how managers communicate and implement a sustainable stakeholder strategy once they they have built it.

Antonio Alonso, president of the AEEN (Spanish Business School Association) and general secretary of EUPHE (European Union of Private Higher Education)