How Business Schools are Reimagining Profit and Value
Colin Mayer became the first professor at the Oxford Saïd Business School in 1994 and served as the first Director of the Oxford Financial Research Centre between 1998 and 2005. He was Director and Chairman of Oxera between 1986 and 2010, one of the largest independent economic consultancies in Europe, and academic lead on the Future of the Corporation programme at the British Academy, a major research and engagement programme examining the purpose of business and its role in society.
We spoke to him about how business schools are introducing more purpose into what they teach – and the way they teach it.
Tell us about why you wanted to educate a new generation of business leaders.
When I finished studying economics, I realised that there was something wrong with the conventional paradigm we were teaching students. Economists’ notion of business seemed at odds with what it was actually doing – and what it should be doing.
While helping to set up Oxera, now one of the largest economic consultancies in Europe, I gained a great deal of insight into both what economics could do and what economics was failing to do – as well as what business was failing to do. The experience of building a company showed me that success is not gained simply by encouraging people to make as much money as possible for the business.
“When the financial crisis hit, I felt a responsibility to train people who didn’t care about their impact – especially those who were blindly following the recommendations of their organisations, firms and banks without considering the ethical problems of lending money to people who can’t pay it back.”
The 2008 financial crisis revealed that there was something fundamentally wrong with the way in which we were educating the leaders of today and tomorrow about business. Finance had become the central pillar of how we taught business but that needed to be balanced with business’ broader functions and role in society.
What is unique about Saïd Business School?
Setting up the business school at Oxford allowed us to do something that was distinctive: create a curriculum that embraced different subjects. Instead of conventionally grounding business education just in economics, we recognised that it should embrace everything taught in universities – from history, philosophy and religious studies, right through to the sciences.
I wanted to create a business school that was going to make a difference to British and global business education, and provide an environment in which new questions could be asked: why does a business exist? Why was it created? What is it there to do? I think that Oxford has gone a long way in realising that ambition.
How have students changed in your years of teaching?
There is no question that the nature of the objectives and priorities of students have shifted immensely in the last few years and they will continue to do so. Before the financial crisis, there were only two jobs that people wanted to go into: finance and consultancy.
Today, many of the best students look to build their own businesses. They want to create something that is going to be commercially successful while also being socially and environmentally useful. Students now have different priorities around what they are going to be contributing. Why should they want to get up in the morning to work for a particular business?
On the other side of the coin, business is crying out for talent and asking what it takes to attract talent. Businesses must think of ways to supplement the financial incentives of a job with something that satisfies peoples’ need for meaning.
Have you noticed the appetite for purposeful business growing in business and academic communities?
Embedding purpose at the core of business schools has not yet been done everywhere. But it is happening; businesses are increasingly recognising the need to adopt a purpose-driven approach. As a consequence, they’re progressively recruiting more people with the skills required to deliver on purpose, as well as educating themselves about how they can embed purpose within their companies. Once business begins to apply pressure to business schools, the schools will move fast.
“Before the financial crisis, there were only two jobs that people wanted to go into: finance and consultancy.”
How is the role of the corporation changing in modern society?
There’s something fundamentally wrong with how we think about what a profit is. Is a company really earning a profit if it employs people below a living wage or is polluting the environment? The way that we think about profit should be aligned with the creation of value: not just in a financial sense for shareholders and investors, but value to everyone in society, in every walk of life.
If I’m profiting by making your life worse, I’m profiting at your expense. And that isn’t how we should conceive of what a profit is. A business should deliver profits through achieving benefits for others. That’s real wealth creation.
The UK is pretty well advanced on the purposeful agenda – in particular, it was the first country to adopt a Corporate Governance Code in 2018, which aligns clear purpose and strategy with a healthy corporate culture. It has many companies that are very focused on adopting business purposes – and it’s not just small startups who are adhering to the Governance Code, so too are big corporations.
Who inspires you?
The Dutch businessman, author and former CEO of Unilever Paul Polman is always cited as being a leader in the field of purposeful business – and for very good reason. We’ve been lucky enough to work closely with him at the business school in Oxford and it has been an extremely inspiring experience.
“If I’m profiting by making your life worse, I’m profiting at your expense. And that isn’t how we should conceive of what a profit is.”
I have also spoken to Satya Nadella, the CEO of Microsoft, who is at the forefront of some of the most advanced ideas in the purpose sphere. He helped to recreate a remarkable business by reviving Microsoft and demonstrating how technology can provide innovative solutions to a variety of problems in the world. He’s an encouraging and imaginative leader in this era.