These are unprecedented times, trying our resiliency and ability to adapt. As we each develop and implement contingency plans, moments of reflection are hard to come by, and leadership and expertise are needed now more than ever. What impacts will this crisis have on business and the economy, and how can business education adapt?
This month, we decided to shake up our Faculty Spotlight series highlighting award-winning business school curriculum, and take a special multi-part look at the effects of this current crisis – featuring insights, reflection and expertise from leading faculty. Each installment collects the diverse responses to a single interview question. First off:
In just a few weeks the state of globalization has changed dramatically; what lasting effects if any do you think this will have on business and the interconnectedness of our global economy?
* * *
Nicholas McGuigan and Alessandro Ghio | Monash University
We are experiencing sudden and dramatic changes that emphasize the current precarious economic and social system. Too often efficiency and short-termism shaped our socio-political choices. We are observing continuous layoffs. People and their families appear as a line cost item in the income statements to delete. This is outrageous. We must use this crisis to rethink our organizational models and place humans at the center. Entrepreneurs, managers, policymakers, voters must continuously value people’s inputs, truly care about them and support their wellbeing. This will require rethinking how we measure performance in organizations and how states aggregate their values. This is the time to push towards new multi-layered, diverse narratives.
— Nicholas McGuigan and Alessandro Ghio teach Global Issues in Accounting
Robert Sroufe | Duquesne
For those who say the business of business is business, this pandemic and other global issues prove otherwise.
The last few weeks and continued isolation for many have brought visibility to supply chains as more needed items are delivered to your home and to hospitals. Globalization and this pandemic may enable a transition to distributed manufacturing models. We need to rethink global supply chains. This could mean less offshoring to places with the only benefit being low-cost labor. We could see manufacturing jobs come back to countries from China and products made closer to populations with density in cities, and less greenhouse gas emissions from logistics as products take less time and travel shorter distances to get to customers.
— Robert Sroufe teaches Sustainability Tools & Processes for New Initiatives
Regina Abrami | The Wharton School of Business
We were already seeing the push for decoupling in some sectors, and notably at the national scale between the United States and China. This movement is not going away anytime soon, least of all in the United States during an election year. Future political leaders will also have to speak with some care when depicting economic interconnectedness as a collective good. So many have experienced its failure as national borders shut, goods ran in short supply, and no market remedy seemed possible. On a more positive note, we have learned that we can remain both connected and productive through video conferencing and messaging platforms, something which may lead companies to think twice about whether a plane ride is needed. That’s good for the bottom line and the environment. Physically distant, but socially close.
— Regina Abrami teaches Fault Lines & Foresight
Jadranka Skorin-Kapov | Stony Brook
Being an optimist, I would like to think that after the difficult time of recovering from personal and business losses, the economy will continue to be interconnected, but hopefully in a more organized way. The lesson learned from the coronavirus pandemic will necessitate bigger investments into health security of workers and safer working environments, even if that results with smaller profits. In the long run only such changes could protect the world from another pandemic similar to this COVID-19 pandemic.
— Jadranka Skorin-Kapov teaches Business Ethics: Critical Thinking Through Film
Melissa Bradley | Georgetown University
Our interconnectedness is here to stay. I believe the work-from-home phenomenon will continue for three reasons.
First, it reduces overhead for many companies. Second, it will be hard to ramp the former culture back up again if this lasts longer than 6 months. Finally, it was a trending concept before the virus. According to Gallup, 43% of U.S. employees work remotely all or some of the time. And 34% would take a pay cut of up to 5% in order to work remotely. Some of this is generational – as younger folks desire the flexibility, as do workers with young families.
With respect to businesses, I am less optimistic. While no one has disputed the need for the funding, many are scratching their heads on how to deploy the massive amount of capital now available. We know all too well that the infrastructure to invest in small businesses is, and has been, extremely fractured. There is fear that the non-functioning current system will fail or at minimum the current problems will be exacerbated. Karen Mills, former SBA administrator, noted her concern about the “pipes in the SBA system” recently on CNBC. She expressed her concern regarding the ability of the SBA and its lenders to get the available funding to small businesses – period. Her concerns are well founded for many reasons. First, lending institutions are being asked to deliver $300B in a matter of months, when the small business ecosystem only delivered $20B total last year. This more than 10x increase will definitely cause pressure on the system and lead to cracks in the “pipes.” Second, banks are verbalizing their desire to not participate in the stimulus program. Many leaders are calling the SBA dollars a grant. However, the stimulus is asking that banks underwrite and process as a guaranteed loan. The bill does not provide funds for potentially higher transaction costs, nor provide guidance on how to underwrite $0 revenue. Most importantly, it does not change the requirements for recourse if businesses fail to respond; this is very scary to banks who do not have positive precedent in this area with other SBA loans.
— Melissa Bradley teaches Peer to Peer Economies
Jerry Davis | University of Michigan
Pandemics reveal several things: (1) we are all interconnected, for better or worse, and there is no practical way to cut communities and nations off from the rest of the world. At the same time (2) the seamless globalization of trade has left countries vulnerable to supply chain disruptions. Some of these are easy to overcome – bookshelves and clothes can be made almost anywhere. But pharmaceuticals and medical devices cannot, and the fact that multinational corporations often have so little visibility into their own supply chains [e.g., whether they are using “conflict minerals” from DRC] reveals how fragile the globalized production system can be. (3) In a pandemic, nation-states turn out to be indispensable actors in coordinating a response. The wildly varied success rates in taming the pandemic in different countries provide stark evidence that competent governments are still essential to the well-being of their people. Lastly (4) sub-national responses by cities and states also vary in their effectiveness. We might want to consider the value of supporting efforts at local self-sufficiency. In my dreamworld, this would include cooperatively owned and operated fab labs in every neighborhood that allows any city to be relatively self-sufficient, along the lines of the Fab City Global Initiative: https://fab.city/.
— Jerry Davis teaches Intrapreneurship: Leading Social Innovation in Organizations
Sarah Birrell Ivory | University of Edinburgh Business School
The world has become both more and less globalized simultaneously, which is somewhat of a paradox. It is less globalized physically as borders close and international trade slows. Scenes of travelers desperate to get ‘home’ leads us to ask where ‘home’ is, questioning the saying that we are all citizens of planet earth. However, emotionally the Covid crisis contributes to a more globalized world, demonstrating that human relationships are borderless by using technology to stay in touch, as we see scenes of humans support others and recognizing the selflessness of doctors, nurses, and cleaners irrespective of nationality, and as we see countries who are overcoming the crisis themselves sending carers and supplies to those still facing the worst of it. We will emerge on the other side of this with a greater sense of what it is to be a global citizen in a fight against an enemy that doesn’t discriminate on nationality or recognize borders.
— Sarah Birrell Ivory teaches Global Challenges for Business
* * *
Check back next week for the next edition of this series, on building the leadership necessary during such times of crisis.