Wednesday, March 16, 2011

Japan's Earthquake: What's the role of business?

By Dr. Suhaib Riaz.

As the Japanese earthquake tragedy unfolds, much focus has inevitably been on the business side of the disaster. The nature of this focus raises several questions.

As early reports of the tragedy started pouring in, many in business media and even in regular mainstream media started focusing on the impact on business, revealing something about the nature of the world we live in: impact is increasingly measured in financial and business terms, and only peripherally or indirectly in other terms, such as human life and wellbeing. A counter argument would certainly be that business and finance do ultimately matter in human wellbeing – but the timing of concerns reveals our priorities in today’s world.
Financial and business pundits have been busy analyzing details of the impact on Japan’s economy, on the world economy, on specific industries (e.g. energy industry) and countries, etc.
Amidst these details, one question seems to have received hardly any attention: What is the role of business in this situation – in Japan’s earthquake in particular and natural disasters in general?

So far, the role of business can be summed up in one word: flee. All initial indications are that investors and businesses pulled the plug on Japan as fast as they could. But did they have any other responsibility, apart from avoiding uncertainty for investors/shareholders. What about other stakeholders, including those in Japan?

Perhaps it is instructive to look at a timely debate unfolding in the pages of the California Management Review (subscription required) on corporate social responsibility (CSR). Aneel Karnani of the Ross School of Business, University of Michigan, summarizes his views, some of which I’ve heard before at conferences and seen in other papers: CSR is a “grand illusion” and the role of business is to make profits. Period.

He claims that in an efficient market, a business fulfils its social responsibility simply by being profitable:
"In an efficient market, every profitable firm is doing good." 

However, what about market failures? Also, would one place natural disasters in ‘market failures’ – it seems the research on this topic is thin. Karnani argues that social roles in market failure conditions are to be fulfilled solely by the government or by individuals. He separates the roles of business and civil society when it comes to “doing well” (making profits) versus “doing good” (fulfilling social responsibility):
"People play multiple roles and behave differently in the context of each role…The point is that managers should do good in their capacity as citizens using their own money, not that of the shareholders. Berkshire Hathaway does well; Warren Buffet does good. Again, Microsoft does well; [Bill] Gates does good." 

Certainly, in the wake of natural disasters like Japan, individuals and governments are contributing in their own ways. However, in a time where corporate scandals at all levels reveal that some questioning of the roles of business in society is warranted, I wonder if some social responsibility by business in a natural disaster would be out of place.

Pietra Rivoli and Sandra Waddock argue back in favour of social responsibility, while recognizing the “grand misapprehension” against it:
"CR advocates would argue that “good” goes beyond economics to encompass wellbeing, health, equity, and sustainability, to name a few “goods.” That is, the societal perspective argues that things beyond (but including) economics are important goods for a wide variety of stakeholders, many of whom contribute to the wealth creation potential of firms (e.g., employees, customers, suppliers, and communities—in addition to investors)." 

It is perhaps too much to expect social responsibility from business in the context of a natural disaster. Yet, at least the question needs to be asked and the debate started. I wonder if other commentators will turn to this question at some point.

Saturday, March 5, 2011

Convergence - Next Practice in Management Research

By Dr. Suhaib Riaz.

There is an interesting problem increasingly visible across the real business world, if only we can find time to look beyond the closed world of traditional academic journals focused on specific academic disciplines and fields: most real business issues can only be tackled through multi-disciplinary approaches. Sustainability research is incomplete without considering International Business issues. International Business cannot ignore Sustainability issues. Strategic Management cannot ignore International Business and Sustainability. And all these are incomplete if Entrepreneurship is not part of the picture...and so on.

Weak signals of this convergence are already here. Strategic Management Society, publishers of the mainstream Strategic Management Journal (SMJ) since 1980, started to publish Strategic Entrepreneurship Journal (SEJ) just a few years ago in 2007, and are now launching Global Strategy Journal (GSJ) in 2011. Even in the traditional management journals, there have been works on fields such as “international entrepreneurship” for a few years now. Recently, there have been increasing calls for papers and attention to new areas such as, say, social entrepreneurship, which often involves entrepreneurship, sustainability, international issues and more. In fact, there are conversations even amongst the disciplinary roots of management, such as between sociology and economics leading to the Society for the Advancement of Socio-Economics (SASE), founded not too long ago in 1989. 

From these weak signals, at least one Next Practice can be clearly identified: Convergence. Those journals, departments, faculties and schools that break down silos or at least create bridges across silos, will have something important and meaningful to say to the practice unfolding in a very cross-disciplinary manner. Some that already follow this principle might have an advantage that they should leverage. Those that stick to the silos with the goal of promoting narrow academic disciplines will become increasingly irrelevant to practice, thus widening the gap between relevance and academia in management that is already a major concern.

I wonder how many of us will have the courage to embrace the cross-disciplinary world and how many of us will stay confined to, and defend, our narrow turfs...