A social role for business in the post-COVID-19 era; Implications for business strategy and management education

(First of two parts)

The widespread economic and social suffering resulting from major shifts in the global economic and political landscapes, global warming, coronavirus pandemic and other global crises has brought into sharp focus the social responsibility of business.

Business is increasingly being called upon to address the major problems faced by Philippine society today. Foremost among these is the marginalization of a large segment of society that is mired in abject poverty, and the increasing concentration of wealth and income in a small number of individuals. This observation is supported by the most recent report of Social Weather Stations, which shows that as of the end of 2022, half of all Filipino families consider themselves poor and only one-fifth regard themselves as not poor. SWS emeritus CEO Mahar Mangahas laments that despite substantial increases in our gross domestic product and a doubling of per capita income in recent years, “so little of it is shared.” At the recently-held World Economic Forum, Oxfam reported that the seven richest families in the Philippines had accumulated more wealth in 2022 than the poorest 55 percent of the population.

While economic inequality is largely the outcome of the failure of the state to serve the material needs of the economically disadvantaged members of the community and to provide equal access to economic opportunities to all, business too has been equally culpable.

By long-standing tradition, business firms seek to maximize profits for their owners. The single-minded pursuit of profits was often carried out at the expense of the economic interests of customers, workers, business partners and the community.

A contrary view holds that business enterprises can best achieve their profit objectives by creating economic value for —rather than by appropriating value from—their stakeholders.

This idea has the following strategy implications:

• Create value for consumers by enhancing product quality, selling products and services at reasonably low prices and providing adequate customer care;
• Create value for workers by offering comfortable wages and other financial benefits, and providing a healthy work environment;
• Create value for suppliers and distributors by engaging them in a mutually beneficial, trusting and collaborative relationship;
• Create value for the rest of the community, primarily by developing the untapped productive potential of those at the bottom of the social pyramid—the poorest and the least productive members of society; and
• Devote resources to maintain a healthy and sustainable ecosystem.

To do so, however, business must change the way it does business. It goes without saying that management educators must change the way they teach future business managers.

Rethinking management education

By and large, existing programs and courses in management are business-friendly and they emphasize measures by which business firms can enhance profits or shareholder wealth.

We propose instead that business education should be rethought to make it more focused on the material interests of the firm’s stakeholders, notably the economically disadvantaged members of society.

Most existing graduate programs in business offer a number of courses in common. Typically, introductory courses include economic analysis and the fundamentals of management. In addition, the Master of Business Administration program of the University of the Philippines Cesar E.A. Virata School of Business also requires corporate financial planning and managerial accounting, and control at the beginning of the program.

The introductory management course typically includes the long-standing concepts and principles, which consist of (1) the traditional sub-classifications of management into planning, organizing, staffing, leading and controlling; and (2) usual textbook principles of management (division of work, unity of command, unity of direction, subordination of individual interests, chain of command, etc).

Progressive management thinkers and practitioners regard these concepts and principles as hackneyed and of little relevance in today’s world of business.

Basic or core subjects typically consist of the so-called four functional areas of management; namely, marketing, production, financial management and human resources management.

We should note, however, that in the real world of business, management problems and concerns, such as the launching of a new product, or scaling up operations, seldom fall exclusively within a particular management function, and should therefore be treated holistically.

Interspersed among the required subjects are elective courses, such as quantitative methods (a.k.a management science), management information systems, managerial economics and courses that cover specialized sub-areas of the four functional fields, such as financial markets, management of innovation and managing organizational culture.

In our thinking, statistical and mathematical models of choice, such as linear programming and other quantitative tools, are inappropriate for dealing with situations that are in a continuous state of flux. Today’s managers face complex and ill-defined problems that are said to be “out of equilibrium” and are best “solved” with the help of sophisticated computer algorithms and applications, such as high-performance computing, cloud computing and big data analytics.

As a rule, the capstone strategic management course is offered at the tail end of the program. Also known as strategic planning and control, this course typically covers long-standing concepts and procedures, such as environmental scanning, preparing the organization’s vision and mission statements and specifying the organization’s goals and objectives.

In a world characterized by rapid, unpredictable change, strategic decisions are made in real time. In such dynamic settings, visioning, missioning, goal setting and planning are inappropriate. INQ

(To be concluded)

The article reflects the personal opinion of the author and not the official stand of the Management Association of the Philippines or MAP. The author is a retired professor of economics and management at UP Diliman. Feedback at [email protected] and [email protected].