The Future of Management Education:
Contribution to a Just and Sustainable Society
Millard W. Arnold
South African Business Schools Association
Rhodes University Business School
23 May 2015
To judge by business schools and the courses they offer, you would be forgiven for believing that nothing has changed, and indeed, it is business as usual. Nothing could be further from the truth.
We continue to churn out brash, ambitious MBAs carved out of the mold that has stood the test of time for over a century. Our schools are caught in a highly successful paradigm that almost regardless of course design or structure, continues to produce graduates steeped in the traditions of the corporate leaders of the past.
Yet even as we do so, around us the world is changing in a wild, and almost dizzying way. I look out upon a global environment undergoing transition, transformation and turmoil, which will radically change the notion of what business schools, will be required to teach.
We are looking at a world characterised by major shifts in power and focus.
Global tensions in Syria, Iraq, Yemen, Nigeria and Kenya threatens to engulf us in a rapidly expanding Muslim insurrection of heighten terrorism and frightening disruptions.
Russia’s aggressive expansion in the Arctic Circle and claims by the US, Canada, and China for oil stakes and transportation routes will inevitably lead to conflict. And of course there still are the issues of the South China Sea, the Ukraine to keep us worried, and least we forget, the uncertainty of North Korea.
Perhaps as troubling or more so, is the environmental degradation we face. It is almost too late to do much about global warming; our only recourse may well be how best to manage the fallout.
By 2030 food prices will be twice as high as they are now and much of the world will face severe drought and water shortages.
Urbanisation, population aging and demographics will all impact on how and what we teach. It is worth noting that for the first time in human history, we have an inverted age pyramid where Western Europe and Japan have more people over 60 than under 20 and globally, more people are living in cities than in rural areas.
What does it all mean?
Well, more people, declining fertility, changes in consumer behavior, greater urban challenges, and substantial variations in prices and productivity.
Then we have the global shift in power. It is not only that China is destined to be the world’s biggest economy by as early as 2025, the record deficit in the US shows no appreciable sign of declining, while China continues to amass trade surpluses and currency reserves.
Indeed, the emerging markets are now the depository of two thirds of the world’s foreign exchange reserves and more significantly, those reserves accumulate an additional two billion dollars every day.
That, taken together with the current brinksmanship between Greece and the EU, suggests that there is a global rebalancing taking place that is likely to result a financial and economic crisis of unimaginable consequences.
It also signals the rise of power of the emerging markets. By all estimates, over the next few decades, the emerging markets will account for the majority of the world’s economic output and market growth.
It is almost a reality now: collectively, the seven largest emerging markets contribute more to global output than do the G7 countries combined.
Twenty five percent of the largest companies in the world come from the emerging markets.
If that is not proof enough, annual consumption in the emerging markets is projected to be worth $30 trillion by 2025.
But against this backdrop is another reality: we are living in an increasingly inequitable and poverty stricken world. In 2011, the World Economic Forum identified economic disparity and failure in global governance as the two most significant global risks.
Thomas Pickitty in his book Capitalism in the 21 Century has noted that wealth inequality is greater than income inequality, whilst other commentators have argued that the increasingly unequal income distribution is not only socially undesirable but also a potential brake on economic growth and a factor that can fuel financial crises.
In what the United Nations Conference on Trade and Development (“UNCTAD”) has labelled the Base of the Pyramid countries, only those which have an export orientation focus or who are recipients of foreign direct investments tend to benefit from trade and globalisation.
However, by and large, the impact of globalisation in the poorest countries has more to do with the lack of free trade than anything else.
This may well be because marketing classes in traditional business schools teach the skills necessary to sell to the more creditworthy 1 billion in the developed world rather than the desperately needed 6 billion other peoples at the bottom of the pyramid.
This brief overview of poverty and inequity is a natural segue-way to the subject Owen wanted me to address tonight which is the issue of whether Management Education contributes to a sustainable and just society.
I suspect his request was meant to be general rather than specific to South Africa, so I have sought to focus more on the broader theme of which he has outlined.
I suppose my starting point is the concentration on the term, “management education”. It clearly is fashionable and certainly used as the defining term in our sector by the major players to describe what it is that we do.
But in so many ways, it epitomizes the very issue that is at the heart of the issue of sustainability and justice.
Management of business is understandably the focus of business schools in developed countries. Industry is highly sophisticated and reflects the kind of maturation and complexity that warrants close attention to the nuances of what is required to ensure that businesses maintain continuity and function effectively.
While the need for sustainability is equally important in many of the emerging markets, far more critical is the need to establish business models that transfers skills and allows for the incubation of indigenous enterprises. It is only in this way that social justice can be achieved.
With that said, it is a different skill set that is required in the least developed countries, a skill set that concentrates on entrepreneurship and less on management.
It means an increased urgency for business schools to design courses that strategically invest in business innovations that have as their expressed purpose, the inclusiveness of the disadvantaged populations. More about innovation and less about management.
Indeed, whenever I think about management, I am reminded of one of the early lessons I learnt in distinguishing managers from leaders, and that is, managers do things right; leaders do the right thing.
Managers work with processes, models and systems — they work with things. However, when you think about doing the right thing, your mind immediately goes toward thinking about the future, thinking about dreams, missions, strategic intent and purpose. That is the essence of leadership and it is the essence of what is required in many of the emerging nations of the world. So in an African context, I’m inclined to define our needs in the more anachronistic phraseology of “business education.”
But however you define what it is we do, the question still remains, does it contribute to a sustainable and just society? To what idea and principle should business schools devote themselves? Should it be about how to run profitable businesses or how to provide a framework for a more inclusive global society?
To some degree, the answer is driven by the expectations and realities of those who attend business schools. The vast majority of graduates from business schools seek jobs in consulting, finance and accounting, or technology.
Business courses are therefore designed to meet those needs. They focus on business and investment opportunities in mature or emerging markets where the risk-reward profile is understandable and manageable.
Moreover, and perhaps equally as important if not more so, is that given their mandate, business schools are constrained by the complications of the accreditation process both locally and internationally.
The established and largely traditional curriculum content of an accredited MBA leaves little scope to innovate. Mainstream business curricula therefore are not equipped to provide students with the tools to create a better world.
So given the needs of sustainability and justice, the question that should perhaps be asked, is whether there is a gap in the business school offerings which would allow for the emergence of institutions which seek to focus on the needs of developing businesses for the extreme poor or the subsistence segments of the global population.
A kind of new business school that seeks to align business school teachings to the challenges associated with operating in low income countries.
Whilst management education classes prepare students for large, complex organizations, there is a need to develop innovative problem solving solutions for the kinds of businesses subsistence economies require.
Much of the needs of the base of the pyramid countries are in the private sector where the scarcity of talent is often one of the key stumbling blocks for successful investment projects. According to the United Nations:
The potential for future work on development in LDCs, whether through development agencies or private sector investors is enormous. Investment targets implied by the United Nations Sustainable Development Goals in sectors such as infrastructure, energy, agriculture, water and sanitation, health and education in LDCs alone are around $250 billion per year to 2030 with targeted public and private sector growth rates of over 15 percent.
If that were not enough, it is estimated that the base of the pyramid countries represent a $5 trillion market for food, housing, clothing, personal care, energy, transport, health and education. Highly dedicated business schools which prepare leaders for this environment would be a most welcomed addition to the panoply of business school offerings.
With so many of the base of the pyramid countries located in Africa, it is perhaps most logical that Africa should be the incubator of such an approach. UNCTAD is seeking to move in this direction through its Business Schools for Impact initiative which I am pleased to say, I have committed SABSA to supporting.
Many of our member school, or certainly individuals within those schools have also taken up the challenge.
I am not at all surprised by this, because i have argued that as the world seeks to come to grips with the growing inequity and income and wealth disparity that will be define the immediate future as much as the rise of emerging markets, South Africa offers invaluable lessons to the global community.
For more than two decades, we have focused on the need to restructure, and transform our economy and the society it supports. Employment equity, empowerment codes, gender equality, diversity — all have been necessary because, as much as we have tried, the fact still remains that 50% of South Africa’s income goes to 10% of the population, whilst 50% of the population earns 10% of its income.
Yet despite our shortcomings and the enormous challenge that still confronts us, we remain in the vanguard of those nations seeking to find a more just and sustainable society.
So, in conclusion I would like to see something radically different with respect to business education, and that is, institutions dedicated to making a different in terms of sustainability and justice.
Not only is in necessary I believe there is a demand for it, and it is my fervent belief that we should pioneer this effort from here in Africa, because it is in our interest and ultimately, the world’s interest that business be seen as a champion of the notion of sustainability and justice for all.
It is the very least we should do.
Earlier I mentioned that the engine for growth for the global economy will be the enormous consumer needs of the emerging markets. However much that is true, it is important to recognize their legacy of being disadvantaged by colonialism or by economic oppression. Doing global business in the future will be fundamentally different than it was in the past and as business schools; we are going to need to address those differences. Whereas historically, business has been predicated on the notion of good governance, the rule of law, sanctity of contract, and the importance of property rights, the game of the future may well be the end justifies the means, or put another way, by any means necessary. And really, what am I speaking about? The “C” word: Corruption. The one thing that the BRICS nations have in common is corruption. On a descending order, out of 175 nations, Transparency International ranked Russia at 136; China at 100; India at 85; Brazil at 69 and South Africa at 67. How do you teach future business leaders about working in corrupt environments?
Leaving corruption aside, there are significant risk of social and political disruption that are reflected in the inequities, malfunctioning institutions, bureaucratic ineptitude and ideological hostilities towards business. To succeed in the business environment of the future will require a fundamental shift in mindset and operating tactics on the ground. It may well be that business schools will need to rethink some of the core business principles developed in a different era and which at that time, served as the basis for strategic decision making about how businesses should operate.
And this is important, particularly when we look at the question as to what is necessary to develop a just and sustainable global economy. It is perhaps time to recognize that in the emerging markets and the base of the pyramid countries, the traditional business formula not only presents a serious business risk, but could lead to outright disaster. It may well be that a more inclusive approach to business will be necessary.