Sustainability Professor: Business Education Is Broken
In an interview with Harvard Business School’s Institute for Business in Global Society, a professor of sustainability contends that much of today’s business education is not preparing students for the practice of capitalism in the 21st century.What’s Wrong With the Current Business School Curriculum
A Need to Break Down the Siloed Approach to Management Education
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Why is shareholder capitalism faltering? Andrew (Andy) Hoffman believes he has an answer. He is the Holcim (US) Professor of Sustainable Enterprise at the University of Michigan, a position that holds joint appointments in the Stephen M. Ross School of Business and the School for Environment & Sustainability.
Commenting in an article for Harvard Business School, he says, “Today’s environmental and social problems are systemic breakdowns caused by capitalism and capitalism doesn't seem to be able to solve them. The bottom line is we have a system that is not serving the needs of the 21st century and it is time to amend it. Business schools need to play a role in that process and help students learn how to be stewards of the market and fix it.”
Asked what evidence he sees of a systematic breakdown, he answers, “Beyond growing inequality and climate change, some economic metrics show that shareholder capitalism is faltering. For example, the whole idea behind shareholder capitalism was to align the incentives of the CEO with the interests of the corporation. And yet, over the past 20 years, CEO pay has gone up 1,460%, eight times more than corporate profits. Total factor productivity has gone down compared to the era of capitalism that preceded shareholder capitalism. I could go on. The bottom line is we have a system that is not serving the needs of the 21st century and it is time to amend it.”
What’s Wrong With the Current Business School Curriculum
“Today, we teach that the shareholder is the purpose of the firm. That is not the whole truth, and it leads to short-term problems and misaligned incentives. We teach that the government has a limited role in the market. That's not true, either. We teach that nature has no value other than as a resource to feed our supply chains. These are all leading us in the wrong direction. The idea of dropping an elective into a curriculum that teaches these kinds of ideas just won't work. We have to think about the curriculum as a whole if we're really going to deal with the systemic issues of climate change and income inequality.”
How would he change the MBA curriculum?
“We need to teach people how to run successful businesses. But we also need to teach them to run businesses that serve a broader purpose to help us live our lives. We want to have a society that serves everybody and not just the elite few, which is presently what we have. How do we encourage those students to become stewards of the market, to learn more about the role of government in the market, and to start to think about what their purpose in business is? I recently began teaching a course on management as a calling and I'm finding students resonate with this.”
A Need to Break Down the Siloed Approach to Management Education
He continues, “We need to break down the siloed approach to various disciplines like marketing, finance, accounting, and strategy and start to think systematically about the business as a whole. We need to teach students how to manage the power that they will one day possess wisely to serve society and protect the environment...We also need to start to rethink the role of government in the market, the role of business in policymaking, and the true purpose of the firm. These questions have been engaged by numerous groups, such as the World Economic Forum and the Business Roundtable, but business schools now need to step into the debate.”
He believes a fresh discussion of the role of business in society is critical today. “The questions right now go to a fundamental level. How does business serve society? What is the next variant of capitalism that will replace shareholder capitalism? These are the deeper questions we need to be asking in business schools because the answers to those questions will guide us into the kind of capitalism that will serve society in the 21st century. Students are way ahead of us. Numerous opinion polls with Gen Z responders show they are quite concerned about issues like climate change and income inequality, and they want business schools that respond. They see the flaws in capitalism, and they want to roll up their sleeves and solve them. We need to provide them with the tools to do that. They are starting to agitate, they're a little frustrated and they want faculty to guide them.”
He notes: “I see the opportunity right now. I have not seen this much attention on sustainability among students and businesses. I have never seen so many jobs with the word ‘sustainability’ in them. Companies are scrambling to try to figure this out and young people are coming to them saying, ‘We want to help you figure it out.’ Business schools need to give them the tools to do it.”
Obstacles to change are enormous, he says: School ranking systems that encourage conformity instead of innovation; a focus on academic research that diminishes interest in teaching, and finally the institutional challenges related to the way schools are run, journal articles selected, money is raised, students are recruited, and rankings devised.
“I am hopeful because I see a growing number of students who want to focus on these issues. But we need to provide the tools to do it.”
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