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Business at the Crossroads

Marketing Professor Elliot Maltz remembers an old Chinese proverb -- or curse -- that says, "May you live in interesting times." The times, he says, could not be more interesting.

The economy is experiencing meltdown, says the Atkinson Graduate School of Management professor, but there's another current at work as well. "Our way of doing business has come to a crossroads.

"A few years ago I got to thinking about how corporations, government and nonprofits can jointly add value," says Maltz, who was attracted to Willamette because of the business school's emphasis on nonprofit and government sectors. "How do you maximize the value to society? How do you achieve corporate social responsibility?

"Traditionally," Maltz says, "the focus has been for corporations to enhance value for shareholders, but times have changed. Since 2003 more than 400 books and 900 articles have been written about corporate social responsibility. The idea has gone mainstream."

Unfortunately, Maltz says, few companies do it well. "Companies find themselves caught between public demands for more corporate social responsibility and shareholder demands to maximize short-term profits, but I believe there is a way for both companies and societies to prosper.

"A lot of literature about sustainability and corporate social responsibility has been focused on pushing corporations to do 'good things.' However, much of the literature has a hole in it. It assumes that if corporations do good things for society, it is the best use of their resources. This is a pretty big assumption. What if an organization does what society wants but goes out of business? What happens to the workers? Their jobs are lost. Is that good for society? What happens to the tax revenues? They're gone. Is that good for society? What about the value of goods delivered to customers?"

Maltz's aim is to help managers understand how to be market driven while adding value for their employees, customers and communities. "Many companies already contribute services and products that enhance life both directly and indirectly. I try to help determine what customers really value and what companies have that can give value. Corporate responsibility can be market driven."

Maltz cites Wal-Mart as an example. A corporate giant, its superior purchasing power and operational efficiency allowed it to reduce prices on generic prescription drugs. Lower prices brought in new customers and increased market penetration. It was good for business, but it was also good for people on fixed incomes with limited or no health insurance, and the move forced other retailers to lower drug prices, spreading the benefits further and helping society lower healthcare costs.

"Wal-Mart is also moving toward sustainable practices and green marketing in their supply chain," Maltz says. "They envision themselves as creators of change, and they are big enough to effect change. But they wouldn't go this direction if it were not good for the bottom line.

"A lot of companies are figuring out that sustainability makes good financial sense. They won't grow because corporations are necessarily interested in saving the world, but because reducing waste is cost efficient for the firm and the broader community. They find that creating sustainable supply chains actually reduces costs.

"As the market for green products grows, economies of scale kick in, costs go down, and markets grow even more. In five years you won't be able to buy a traditional light bulb in this country; they'll all be energy efficient. Green buildings are still a high-end market, but they're going to show more and more payback.

"In short, things we took for granted until two or three years ago, won't be taken for granted anymore. And there will be a need for change agents to help managers implement this new philosophy of business efficiently and effectively."

The Atkinson school plans to offer an area of interest in sustainability management in the near future. "We want to bring in all perspectives -- politics, environment, economics, the private sector, government and science," Maltz says. "Many of our students are socially conscious and interested in a societal perspective. If I'm right and firms are going to look for change agents to help them rethink the way they do business, this area of interest is likely to be very popular."



02-12-2009