Can we fix business education to build equitable enterprises?
By Jerry Davis, IFTF Equitable Enterprise Advisor, Gilbert and Ruth Whitaker Professor of Business Administration. Stephen M. Ross School of Business, The University of Michigan (@vanishingcorp)
Business is by far the most popular college major in America. But are business schools training young people to build and lead more equitable enterprises, or churning out apparatchiks whose main function is to serve shareholders? An alarming recent study from the National Bureau of Economic Research reports that business school-educated executives do not improve corporate performance — but they do lower wages. Is business education inherently anti-labor and pro-investor? And how should business education change to meet the aspirations of Gen Z, which is more diverse, better educated, and far more progressive than prior generations?
This question has a new urgency today, as the basic structure of business is being fundamentally transformed by new technologies that have disrupted how companies raise capital, recruit and deploy labor, manage supply chains, and get products to customers.
Companies can be big in impact but tiny in employment and assets. Last year, Zoom — the near-universal platform of the work-from-home world — had 300 million daily users, yet employed just 1% as many workers as Home Depot and rented server space from Amazon and Oracle. And in a work-from-home world, “home” can be Boulder, Bangalore, or Bali. When crypto exchange Coinbase went public last year, its IPO prospectus listed no headquarters address because it was a “remote-first” company, with a tiny workforce mostly scattered to parts unknown. Even Google reportedly has more contract workers than permanent employees: not everybody at the office is chugging free Kombucha while waiting for their options to vest.
This is a big shift from the world of Big Business in the 20th century. It is perhaps no coincidence that Harvard Business School and General Motors were both born in 1908. Giant corporations were taking over the American economy, and business schools trained “organization men” to carry out this mission. But after cresting at 877,000 in 1986, GM’s workforce today is smaller than it was in 1927, at just 157,000. The Zooms and Coinbases of the world may not need many organization men climbing the corporate ladder, as algorithms increasingly take the place of managers and contract laborers take the place of full-time employees. As one CEO at Davos put it, “If you can do it in Tahoe, you can do it in India.” We are likely to see more Zooms and fewer GMs in the future.
The implications are clear: the building blocks of business have changed, and how they are being put together into new enterprises seems to come at the expense of workers. How then should business education adapt? Should today’s students learn to balance the needs of diverse stakeholders or does shareholder primacy still reign supreme? More pointedly, can business schools pivot in a more humane direction?
I am cautiously optimistic.
I recently co-taught a course at the University of Michigan’s Ross School of Business that shows how the tools of design and business can combine to create new kinds of equitable enterprise that orient toward labor and community, not just investors. “Impact Studio: Designing the equitable enterprise” trains students in the tools of equity-centered design and familiarizes them with the latest building blocks identified by faculty — new ways of raising capital, collaborating with labor, distributing to customers, and managing operations. The aim was to create viable prototypes of equitable enterprises. We jointly created standards of equity: all jobs should pay a living wage at least $20 per hour, provide stable schedules, and create opportunities for building community wealth. And we did it in a sector not well-known for equity: the restaurant industry, home to many of the worst-paid occupations in America.
We brought together graduate students from nine schools on campus, from business and law to architecture and social work. Diverse student teams learned tools for design and futures thinking adapted from Institute for the Future, our partner in design. We interviewed dozens of restaurant owners, managers, laborers, and customers, as well as faculty and other experts in finance, labor, marketing, tech, and the restaurant industry. And we engaged in speculative fiction as a way to visualize future trends and how we might help guide them.
The final product was 10 imaginative business ideas, from online training to augmented-reality menu apps to democratic pop-up facilities for visiting chefs. At least one of these enterprises is moving forward, and we think the others will inspire future innovations. Next up? Creating community-based green energy businesses in Detroit, working with community partners and prospective funders.
What have we learned from teaching this class? First, Gen Z students are bringing their values to work and expect organizations to do the same — including business schools. They demand a curriculum that reflects the challenges they will be encountering when they leave school. Second, defining criteria for equity opens up rich dialogues that range far beyond “creating shareholder value” and the blandly technical exercise of discounted cash flow analysis. Lastly, the future of business is limited only by our capacity to imagine. Designing new kinds of organizations is a form of speculative fiction that benefits from engaging a diverse set of participants.
Perhaps business education is not inherently corrupting. Maybe we’ve just been doing it wrong.
“Explore the final projects created by students of U Michigan Ross Impact Studio, Winter 2022.”
Jerry Davis is the Gilbert and Ruth Whitaker Professor of Business Administration and Professor of Sociology at the University of Michigan’s Ross School of Business. He has published widely in management, sociology, and finance. His latest book is Taming Corporate Power in the 21st Century (Cambridge University Press, 2022), part of Cambridge Elements Series on Reinventing Capitalism.
