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A Conscious Capitalist’s Vision For Business School

Babson professor and "Conscious Capitalism" co-founder Raj Sisodia

Babson professor and “conscious capitalism” co-founder Raj Sisodia

In business schools across the U.S., students are increasingly demanding education in social enterprise. And institutions are responding with an ever-broadening array of courses, contests, and programs designed to allow students to put their desire to do good into action.

The trend represents a major shift, a swing away from profit-centered leadership and management.

But for Babson College professor Raj Sisodia, the pendulum may be swinging past the sweet spot, all the way over to pure idealism, and past the point where those ideals can actually drive sustainable enterprises.

At the same time as young people are getting smarter – Sisodia cites the Flynn Effect that holds IQ to be rising three to four per cent every decade – many are extremely well-informed about society, the economy, and the environment.

A ‘PURPOSE-DRIVEN’ GENERATION

“They have grown up with the internet – their level of awareness about what’s going on in the world is also generally very high. They have grown up with a sense of imminent crisis on multiple fronts. There’s a sense of urgency. This is the most purpose-driven generation we’ve seen.

They are coming into this with a sense that there’s something that we need to do.”

Sisodia, co-founder of the “conscious capitalism” movement, fully agrees something needs to be done about the world, and the way business operates in it. But in rejecting the ills they see arising from capitalism, many idealistic young people have adopted a black-and-white view that traditional capitalism is based on greed, and that non-profits are noble, Sisodia says. “They think that there’s a tradeoff – that you can either be good to the world, or you can be profitable,” he says.

“Even in this country, which is kind of the home of global capitalism, there are generally negative attitudes about capitalism.”

While the Millennial generation pushes an ideals-based shift onto business schools, leading to more impact-related programming, the academic core remains mired in the business philosophies that have helped create the world the younger generation is reacting against, Sisodia says.

CASE STUDY SUCCESSES DEFINED ONLY BY THE MONEY

“We teach a lot using case studies. We define success as financial performance, and therefore we look at companies that are succeeding in that one parameter,” he says. “That becomes the basis for much of the curriculum.”

A core focus among business schools on maximizing profit and shareholder returns contributed to the financial crisis, Sisodia asserts. “A lot of people in that industry come from the top business schools, where they learn this one-dimensional view. We are almost hardwiring some of those practices that are out there that are showing themselves (to be) not what we need. When it’s all about maximizing profit, you lose sight of the higher purpose.”

Because “every business is an interdependent, interconnected system,” the favoring of shareholders over customers, employees, suppliers, communities and society results in “doing harm even to the shareholders” by creating “weak links,” Sisodia says.

Having a purpose beyond profit forms one of the four pillars of conscious capitalism. Another pillar, “stakeholder orientation,” extols a need for companies to focus on their entire ecosystems: employees, customers, suppliers, funders, and communities. A third promotes “conscious leadership,” in which leaders serve their organization’s purpose, support its people, create value for all stakeholders, and cultivate the fourth pillar, “conscious culture,” which describes a company environment and societal interface based on love, caring, and trust among members of the organization and stakeholders.

SOCIAL ENTERPRISE AS A PATH TO FAILURE

Because Sisodia’s Conscious Capitalism course at Babson is an elective, it tends to attract students with an existing affinity to his ideas, he says. And though the non-profits beloved by many of his students are typically focused on a higher purpose, the non-profit sector’s intrinsic bias against money-making inhibits growth and sustainability, Sisodia says. The business school trend toward social enterprise derives in part from an ideological overcorrection, a throw-the-baby-out-with-the-bathwater response to the collateral damage of traditional capitalism, Sisodia suggests.