The Role of Business Schools: Criticism and Legitimacy
Introduction
Over the last two decades, business schools have been exposed to a lot of criticism supporting mainstream economic and business model even when things got out of hand. But some have claimed that this is only understandable since business schools are also businesses that belong to the same business model as the rest of the global economy. They have become big business with a surprisingly little evaluation of the impact of business schools on either their graduates or the profession of management (Pfeffer and Fong 2002) with two immediate consequences. First, the criticism that possessing an MBA degree or the grade earned in the courses does not correlate with career success, and second, about the little evidence that business school research is influential on management practice, which calls into question the professional relevance of management scholarship. Authors like Hambrick (1994) and Pettigrew (2001) find business school research seldom relevant and actionable. Likewise, Khurana (2007) and Adler and Harzing (2009) have emphasized that business schools have sold out to the tyranny of rankings.
Martin pointed out that focus in business schools was on narrow functional knowledge acquisition instead of a broad issue-centered approach embracing business and society as embedded in a plurality of context. Others criticized business schools’ focus on disciplinary knowledge acquisition instead of the development of an interdisciplinary and integrated perspective (Khurana 2007). Such discussion all came at the expense of development of critical thinking of business students. In many situations, they do not develop their capability to ask essential questions and understand severe conditions or learn that organizations are rational and logical and then discover later about complexities of the same (Datar et al. 2010). Such dilemma for students results in a persistent knowing-doing gap (Colby et al. 2011) whereby students must acquire knowledge while there are a little room and possibility for them to practice what they have learned. Knowledge and technical skills must guide their professional judgments. But it also needs to be based on ethical sensitivity concerning public expectations and values related to the issues and decisions.
As such, they would miss and have a distorted focus on the importance of values and ethics in business (Ghoshal 2005; Khurana 2007), causing them to be reduced to managers, or agents of shareholders, dedicating their careers to the sole purpose of creating private wealth. Such a role, in effect, tends to strip them from any professional identity, self-respect, and personal responsibility, also leaving them unprepared to cope with challenges of roles, responsibilities, and purpose of business in society (Gentile 2010; Swaen et al. 2011, Bieger 2011). This educational attitude and profile are also connected with the legitimacy of business school research, which rarely addresses societal issues. It also seldom informs on important policy questions relating to the issues like public education, poverty, or sustainability (Dyllick and Muff 2016. Likewise it reveals its inability or no willingness to inform society and policy and contribute to the common good, not just to do good for the few private actors as recent financial crisis revealed (Rynes and Shapiro 2005).
A Lack of Legitimacy
A lack of legitimacy of business schools, for the aforementioned reasons (and more!), has been developed as one of the leading issues and core of the research on the potential of their future development. The legality of business schools came under renewed scrutiny following the corporate scandals at the start of the millennium and ensuing financial crisis
(Hommel and Thomas 2014). One layer of legitimate criticism is related to the allegedly instrumental, amoral, and selfish vision of human behavior that lies behind much of the modern managerial theory and training (Ghoshal 2005; Mintzberg 2004; Mitroff 2004; Pfeffer and Fong 2004). The other is related to the fact that humanity-based training has been largely squeezed out of business schools’ curriculums (Bennis and
O Toole 2005; Duncan 2004; Starkey and Tempest 2009; Wright 2010).
A lot is at stake here. The birth of the new business model is apparently not a matter of minor importance. Henisz (2011) proposes a somewhat central thesis to reform related to the reinstitution of business school’s legitimacy stating that such reforms are stuck because they threaten relationships with existing stakeholders while being ignored in current measures of business school’s performance. He stresses the fact that change is possible but only if enlightened internal leadership and pressures and resources from civil society, government, students, and employers successfully frame their calls for reform. Also, it is essential that such improvements tap into deep-seated concerns about neoliberalism in economic policy making more broadly and form an unlikely alliance to triumph over entrenched faculty, disciplinary paradigms, and short-term financial constraints.
Potential for Substantial Changes
Authors and scholars have also assessed potential for substantial changes in what business schools research and teach (Willson and Thomas 2012) and focusing the need for the new business model by addressing various themes, including but not limited to the broadening of the traditional focus of research and teaching to look more broadly to broader society; embracing multidisciplinary perspectives; turning its theoretical perspectives and research focus toward big questions; engaging in public and policy debates; reclaiming the terrain of work, employment, and society; placing greater emphasis on the ethical and moral questions endemic in modern capitalism; critically examining the role of business and managers in society; asking big questions about development; becoming less insular and nationally oriented and understanding language; comparative social cultures and impact of religion on global economic activity.
In that context, business schools would be able to respond to societal issues related to sustainability agenda also as belonging to these big questions of current state economics and business (Boyle 2004;
Schoemaker 2008). So far business schools’ research has basically excluded contributions to some of the most significant problems societies are facing, the decarbonization of the economic system, and bringing the resource consumption within the constraints of the planet, which needs an interdisciplinary and transdisciplinary approach.
Earth preserving, people-centered, and deleveraging of economic value creation are only some of the features of newly sustainable capitalism in the making where efficiency and effectiveness as core values of business making are complemented by the principle of sustainable with wide-ranging implications from local to international level. The United Nations started three decades ago to develop this new bold vision of a sustainable economic model. Should business schools champion this process in responding structurally to the global need for the creation of unique or adapted business and economic value?
That is the reason our research seeks to re-energize the discourse around sustainable capitalism. We believe it is necessary to refine our arguments and thus make a stronger and even more persuasive economic case. We seek to do our best to reach and win over the you-will-need-to-convince-me group, which consists of those open to persuasion on the business rationale for sustainability.
Recently business school education researchers started to emphasize the importance of the systemic introduction of sustainability agenda into business school’s curricula as part of management education (Hommel et al. 2012). But the situation is far from ideal since there are still many real barriers to integration of sustainability to core management disciplines in the format of the proposed new global business model (Rasche et al. 2013). Sterling (2004) outlines three possible levels of response regarding adoption of sustainability agenda or education about sustainable capitalism in the system of higher education. He distinguishes educating about sustainability (and classifies it as an accommodative response), educating for sustainability (listing it as a reformative response), and finally education in the format of capacity building (as a transformative response).
Sustainable Capitalism Education
During research for this book, we were inclined to propose all three approaches discussed here in the matter of challenging the sustainable capitalism agenda and in introducing the new business model: from education about it till building capacity for it. Presently most of the sustainability relevant education in business schools is of an incrementalism kind and uses an incrementalism reform approach addressing critical global sustainability issues, and yet, there is demand for more transformative sustainability results in management education (Starik et al. 2010).
Another avenue of modern business school education on sustainability is done in a piggybacking form of integration of sustainability within existing structures (Lamsa et al. 2008). Piggybacking means that sustainability agenda is added to individual sessions of courses or modules inviting guest lecturers to speak of corporate social responsibility (CSR) and sustainability, but some have criticized this approach for integrating sustainability into the curriculum in a no uniform manner (Rusinko 2010).
There are different forms of an introduction of a sustainability agenda into management education. When teaching sustainability as soft skills (Truscheit and Otte 2007) teamwork and conceptualizing an argument are addressed as the sustainability principle. Developing sustainability literacy (Stibbe 2009), on the other hand means indicating the skills, attitudes, competencies, dispositions, and values that are necessary for surviving and thriving in the declining condition of the world in ways that slowdown the decline as far as possible. Sustainability in business schools can be included across the whole curriculum, adding interdisciplinary perspectives (Roome 2005) but also as systems thinking, which is one of the major blocks in sustainability thinking (Clayton and Radcliff 1996; Stibbe 2009). When educating about sustainable economics and sustainable capitalism besides systemic approach, authors emphasize the need for a holistic, systemic understanding of the new business model (Baets and Oldenboom 2009, Werhane and Painter-Morland 2011). A holistic, systemic understanding is thus critical to responding to sustainability agenda. In a complex system, the interaction between cause and effect is dynamic and nonlinear; multiple factors work together complexly to trigger change.
Henceforth, a business school as an open system theory of education about sustainability agenda has been proposed (Painter-Morland 2011). These education modules influence those within it and the knowledge they generate and deliver but are also affected by other external dynamics. The curriculum does not develop independently from the business school system or business, environment, and society. It is the cause and effect of systemic change and stakeholders’ involvement, meaning a significant systemic institutional integration of sustainability in business school’s missions (Painter-Morland 2015), which builds on a systemic capability toward sustainability and elaboration of the new business model. The aforementioned is distributed and nurtured more throughout organizations which create impetus toward change in students, faculty, administrators, institutions, as well as the organization that hire its alumni. This then requires a higher emphasis on connectedness (Leroy et al. 2001, Courtice and Van der Kamp 2013), namely on the need to connect education to business, society, and natural environment. Finally, it addresses sustainability in a manner of capacity building for sustainable economies and business models (Burchell et al. 2015; Akrivou and Bradbury-Hung 2015), empowering institution members to effect change and ensure a transformative social context.
The neoliberal model does not appear on track to form the basis of the extended 21st century or even as is the case with the regulatory state half a century (Henisz 2011). New business models must adjust to that fact. Some of the neoliberal models most notably generated crisis including the financial crises of the mid and late 1990s in Latin America, East Asia, and Russia accelerating through the collapse of the dotcom bubble; accounting scandals of Enron, World Com, Parmalat; and finally, the global financial crisis of 2008–2011.
As compared with the economic liberalism of the 19th century, neoliberalism enjoys a similar hegemonic status supported by numerous coercive intermediary actors (Henisz 2011). It diffuses globally because the academic theory was available and backed by powerful national and international actors, but also because public policy makers have confronted inflation, unemployment, debt crisis, and other systemic failures often linked to politically motivated intervention in their economic systems in the 1980s of the last century. Henisz stresses the fact that the rise of neoliberal economics came as a response to a systemic crisis of regulatory economics. Namely, the postwar gold standard collapsed under the strain of war on poverty and war in Vietnam, exchange rate volatility. Monetary policy responses further complicated government regulations, price pressures from labor, and commodity suppliers toward inflation. Financial markets and corporations have responded to new uncertainty and tension by globalizing production and seeking to hedge national exposures. This combination of events contributed to an investment boom in emerging markets, increasing international capital flows, which in turn increased the leverage of global forces. Opinions regarding the appropriate policies on national economic policy making and fiscal policy couldn’t any longer be focused on maintenance of aggregate demand at a level consisting of full employment and price stability. Exchange rate stability and financial system stability were at various points in time, and in many markets, the prime focus of government policy makers eager to maintain credit or investment.
Today many assume that the current model will be replaced by the surge of the protectionist regulatory system of the second part of the last century, as being witnessed by the current administration in the United States. It is easy to see why historical pendulum could swing in that direction. The focus of governmental policy in centrally planned or regulatory-based economics (Johnson 1971) has changed from the center of the liberal finance of the 19th and first quarter of the 20th centuries which targeted the enhancement of the efficiency of markets. In emerging economies, and especially frontier markets, the goal was industrialization, which it was argued would free the peripheral countries from their dependence on the core. The role of government in the market economy was no longer indirect, setting the foundation in which economic activity could take place, but rather a direct action, undertaking the pursuits that would attain and maintain full employment, instead of ensuring the invisible hand could operate, policy makers optimized against constraints.
Development economics evolved around the enlightened leadership of economists who first calculated the investment gap needed to regain the convergent growth path and subsequently, the human capital and policy gaps. The presumption has always been that well-intentioned economists, guided by theory, could engineer progress better than at an unregulated market (Henisz 2011). It is reasonably natural to assume why, from this point on, there was a call to return to governing economics, which to many can be very appealing. It addresses some of the main features of the crisis of the present model, inequalities in economic growth, technology, and wealth, as well as low level of utilization of national economic factors, expressly high level of unemployment.
But managing state economics is not equal to sustainable capitalism since this model could also create, as it has historically done, a separate set of pressures on human, environmental, and financial resources of all economic, social, and environmental agents included. Likewise, one of the reactions toward the current neoliberal model is what one could name “greening business as usual,” which is also not a sustainable version of capitalism, but the current model with some of the greening language and outlays.
Some authors have analyzed the differences between the mainstream economic model, so-called green growth, and sustainable well-being
(Constanza et al. 2012), to emphasize its crucial differences. As for the primary principle of production or creation of economic value, the mainstream neoliberal model is focused on producing more, with minimal involvement of government and with no influence of external costs of prices of its products and services measuring success only regarding marketed financial values created and with emphasis on private properties. The misallocation of capital in the past two decades has contributed to the manifestation of several concurrent crises: climate, biodiversity, energy, food, and water, as well as the global financial and economic crisis. In response to these systemic crises, the UN has stressed the need for a shift to a more sustainable and inclusive economy, reached by adequately incorporating social and environmental policies in development planning.
This green model presents a kind of transition mode toward sustainable capitalism, also called sustainability well-being. The principal purpose of green economy policies and investments is, therefore, dual: first, to create new and more sustainable physical capital, human capital, and social capital; and second, to maintain, enhance, and rebuild natural capital as a critical economic asset and source of public benefits. Protecting natural resources, from clean freshwater to forests and air, is especially important for poor people who depend on these resources for their livelihoods and are especially vulnerable to environmental contamination and degradation. Unlike the current mainstream economic model, sustainable capitalism recognizes poverty as an essential phenomenon and is focused on reducing it through a variety of involvement with green sectors.
Regarding the preservation of natural capital, the green growth model recognizes its importance in any model of valuation and allocation of resources and the course of regulatory instruments and government intervention aimed at the preservation of such capital. Finally, sustainable well-being model is centered on the principle of the better in the economy, society, and nature. Besides financial indicators of success, a variety of human welfare indicators related to environmental and social dimensions have gained prominence.
Fighting poverty becomes the prominent role of sustainable capitalism, where the government plays a significant role in facilitating and brokering new strategies. Besides natural and social capital, the principle of public property institution becomes a prominent mean to secure the overall functioning of this system. The challenge is how business schools embedded in their current trends, practices, and values can interact with the business establishment in a more sustainable model of capitalism.