Business has an impact on society that is beyond what it does
Nitin Nohria
In the 16th century in Amer, Rajasthan, there was a Prime Minister who was a very worried man. His King, the Raja of Amer had married a new and beautiful young Queen and for a whole year had forgotten the affairs of the state. The minister called the poet Bihari who knew Urdu and Persian, the beautiful language of the court.
Bihari was famous for his diptychs, two-lined dohas. People said that the Bihari’s dohas are small but have great power. The Bihari’s doha was mixed with rose petals – left on the royal couch. The petals withered but the
doha remained.
Curious, the King picked it up. The words were so powerful that the King learnt his lesson.
Our chief guest today is a man of such thoughts, such power and words that excel in refinement and grace. His dohas can move mountains. In this poem I will tell you
his tale.
Once we said, “We want to make sure that our employees live values.” Nitin’s doha — if you want people to remember and live your values, use the creative arts. We used storytelling to tell our values. Stories that were as old as time. Or those which were new
and real.
In return our employees wrote 6000 stories co-written with their children and families. So values are now a living vital creative force, strongly engrained.
One day Nitin told us to write everything we know — the strategy, the highlights of our business on three pages. Most people take hours in PowerPoint to elucidate their business. So we tried and tried. We now know that three pages were worth billions when we made big decisions. Nitin’s dohas have the power to re-imagine, rethink
and revolutionalise.
The poet Bihari wrote to Krishna that he just has the green stick but when he speaks it is like the colours of a rainbow. Nitin uses his black stick, his kalam as a non-existent flute, the sound of Soloman. His huge body of work in human motivation, leadership, corporate transformation and accountability, sustainable economic and human performance maybe in the form of a doha – 4+2 a formula for sustained business success.
As a member of the Harvard Board of Overseers, I have seen how his co-Deans from other Harvard Schools respect him. How he is the leader, how his ideas of students taking the Oath of Ethics created change. How his commitment to get diversity, more women in business, people with diverse backgrounds created unimagined new ideas.
The Havard I-lab. How his idea of sending 900 students every year to emerging economies to get the lessons of life and become leaders instead of worrying about only money. How his ideas are impacting rural education in his homeland. I have seen him as a father of two amazing young women. I have seen him as a friend, a mentor and a guide for my son, Anand, his student. I have seen how he treats all his students. How a teacher who while presenting the finite gives a glimpse of the infinite. The poet Bihari in my story was given a gold mohur for every doha that he wrote, 700 of them. Drew Faust the President of Harvard made Nitin the 10th Dean of HBS. Instead of a gold mohur for his doha she gave him 700 students. Nitin showered them with powerful dohas. Each student with a proud name of HBS not only created gold but did good as well by becoming the beacon of hope. Ladies and Gentlemen, I give you the foremost intellectual of our time. Management Guru, author, teacher, Dean
Nitin Nohria.
– Dr. Swati Piramal
Thank you, Swati and Nirav. I am truly humbled and privileged to be here. My father was a Rotarian and I remember being in Rotary Clubs when I was a child. I used to be in the audience, listening to other speakers and never imagined that some day I would have the opportunity to speak to a Rotary Club.
When I think about the role of business in society, I am reminded of an incident when I was 10 years old. My father was then the CEO of Crompton Greaves and I had accompanied him for the Bhoomi Pujan of a factory in Nashik. The factory was to be built on an MIDC plot and the only way to get there was a dirt road. I thought that my father was crazy to be building a factory in the middle of nowhere. Six years later, I had the privilege of going there again and I remember that I could not recognise the place. The area had become a vibrant industrial district.
Instead of one plant, there were many factories. A hospital had been built and several major schools had come up. I sat down to lunch in the workers’ canteen. I was sitting with someone who told me, “This factory has changed my life. I never had the opportunity to do anything for my own family. Now, I can send my son to college. He is going to be the first person from our family who will finish college.”
I could feel the extraordinary sense of self-worth and dignity that this worker felt. That day, in a visual sense, I came to realise what a powerful role business has in creating prosperity
for society.
At a time when people are so suspicious of the role of business in society, I always go back to that moment to remind myself of why I joined this profession. Why I am the Dean of a business school and why I say that the mission of our business school is to educate leaders who make a difference in the world.
I can say this without any self-consciousness because I believe in it. I have seen the power of business. It is worth thinking about what business does. Business creates products and services. In this case, my father’s company was enabling electrification of homes. The company was making profit but in the process it was also bringing light into people’s lives. I remember my father telling me that when he was growing up in his village, there was no electricity and that two-thirds of the children in his village never completed school because the process of studying without electricity would
be impossible.
So, when you introduce things like electricity or even toothpaste into people’s lives, you develop business. In olden times, the vast majority of people lost 80 per cent of their teeth before they reached 30 years of age. We do not think of toothpaste as doing any social good but in its absence, people did not have teeth!
The first and most powerful thing that business accomplishes is improving people’s lives by delivering goods and services.
In 1900, in the United States of America, which you now think of as a very advanced economy, a woman spent more than 14 hours a day in gathering water and doing all the household work. Just think about the labour that went into doing house work!
Business has transformed the lives of people in remarkable ways. It is worth remembering that nobody forces a consumer to buy anything. A consumer buys something because he or she is actually willing to pay for it as it makes life better. U.S.A. is one of the few places in the world where people voluntarily engage in an exchange that makes them feel better. That is the first thing business does.
The second thing that business does is even more profound and powerful. We all think about improving people’s lives by doing charity. I am all for charity but there is nothing more powerful than giving someone a job. The single most powerful instrument of self-worth is a job.
When business fails, as it did in Europe, we create problems not just for those in business but also for a generation who lose the opportunity to find dignity and self-worth. So, now you see riots on the streets of Spain! We should not be surprised when we see a rise in criminal activities and in terrorism since people often feel hopeless when they are excluded from the economic circle that business can create.
Business creates value by producing goods and services that consumers want. Business creates value for society by providing the most important source of dignity and self-worth — jobs. All of this works in the end because business creates profit. Often people say that the goal of business is to maximise profits and, in doing so, business people become selfish. My own view is that profit, in some way, is a signal from society that says that what you are doing is worthwhile. The minute you stop making a profit you stop doing something that is worthwhile.
Hence, the better way of thinking about profit is to regard it as a reward that society gives you for creating value. There is nothing wrong in creating profit because it is a natural way for business to reproduce itself and grow in the service of society. It is sad that people doing business fall at the bottom of the “trust list”. Politicians are the only people who do worse. People say doctors create health and lawyers, at least some of them, create justice. Business creates only profit. I always feel that this is a wrong characterisation.Business people create prosperity and we should care about prosperity. Business has an impact on society that is beyond what it does.
The original mission statement of our business school was to educate leaders who could create decent profits. I think the reason why people have lost confidence in our business leaders is the lack of commitment when it comes to making decent profits. When business loses trust it is bad for business and worse for the society because there is no other instrument that can create prosperity for society.
It is worth remembering that governments do not create wealth. They distribute wealth. Business is the only thing that can sustainably create wealth. Business has to function in a sensible way and we should care deeply about doing business decently.
More and more businesses are beginning to understand the broader role that they have in society. People are now conscious about environment and business has to be very cognizant about the degree to which it consumes natural resources and the degree to which it pollutes. This is a fabulous development in terms of business regaining public trust. I remember working in Hindustan Lever’s Sewri plant and the amount of affluents that used to be discharged then into the Sewri creek. Today, the company has declared it will double its revenues but reduce resource utilisation. In fact, the water utilisation of Unilever globally has already declined by 50 per cent.
Every company in the FMCG sector has now begun to think. If business is seen as destroying the environment, it is hard for it to enjoy
public trust.
What is less talked about is ethics. When businesses are less ethical, they are likely to destroy the moral environment that we collectively inhabit. If your company teaches you to be ethical, you are more likely to become an ethical citizen. If the values of a company do not fully respect the values of society, then society itself becomes corrupt. Business should be ethical because its responsibility is to think about the moral environment. If the moral environment is strong, Society’s respect and belief in business will become stronger. Companies like Enron that commit unethical acts not only destroy their own companies but also destroy the larger trust in business.
I am simultaneously delighted and terrified by the new bill that will mandate corporate social responsibility. I am delighted because it creates an opportunity for businesses to do remarkable good in society and I am terrified because it creates an opportunity for society to become extraordinarily cynical of the people who will abuse this policy. It is in the hands of business people now to decide whether we should generate trust or cynicism in society.
The final thing that business should do is to think hard about how to create shared value for society. A bank can try and sell people financial services or can encourage people to be financially responsible. If people are encouraged to be financially responsible, in the long run they will become better customers for the bank and better citizens of their
own society.
Andrew Carnegie, a great philanthropist, built a great business and then devoted the rest of his life to give back to society. The institutions that Andrew Carnegie created are the libraries that you find in every part of America. Our institution itself is an example of what he thought as important for the learning of the entire country. The obligation of business is to think hard about philanthropy and what it
can do.
I am proud to see major Indian business leaders creating Foundations — Shiv Nadar, Ajay Piramal, Azim Premji, Sunil Mittal and others. Every prominent industrialist is now joining the Tatas and Birlas who set examples, a long
time ago.
The level of philanthropy in India, however, is still very low. Business leaders need to think hard about their philanthropic capacity because that is the greatest honour they can earn for business. One of the things that business teaches is that you need to use every resource to create the maximum impact.
I look at organisations like Teach from America and Robinhood that not only provide services but are also like banks, which invest in social enterprise. They have come up with sophisticated metrics to ensure that every dollar spent is used to make the greatest impact.
I was recently in London. An alumnus of our business school has created Social Impact Bonds, whereby instead of letting the money, that lies unclaimed in UK banks go waste, it is used for
social purposes.
It is important to do business the way it is supposed to be done. We should create real value for our consumers and maintain dignity by providing well-paid jobs for those consumers. Making a profit is proof that what we do is valued by society. The second job is to think broader and ask yourself — How to do business in a way that I can create shared value for the environment? Lastly, I think that business people should be philanthropic.
Today, governments all over the world are bankrupt. We cannot turn to governments to solve problems. There aren’t enough resources in the world to solve problems of the society. Business will have to play a role.
I want to leave you with one thought. Harvard Business School just completed 100 years of its existence in 2008. The school was founded in 1908. You may ask how many people were brought into the cycle of economic inclusion, which they felt would better their lives economically? How many people were included in the cycle of economic inclusion in the 20th century by virtue of capitalism and democracy together creating opportunities for people? It’s the only grand social experiment that has worked — the twin engines of capitalism and democracy working together. So how many people in the 20th century, all across the world? The answer to those questions is a billion people. How many people in the world today? Seven billion in 2008 and by 2050, the best demographers, say that there will be nine billion people in the world. So that’s eight billion people more who have to be brought into the cycle
of economic prosperity. I believe that’s the most fundamental right for any human being.
How will these eight billion people join the cycle of economic prosperity? I think it can only happen if business plays its role in the society. If business fails to play that role it would have failed these nine billion people. It’s the only real responsibility that I think business must take on. That’s what makes being the Dean of HBS such a remarkable job because each year we have the opportunity of educating 900 people who can go out in the world and provide that kind of leadership. Every year we educate 9000 Executives who can go out and try to provide that leadership. We are not alone. The problem is too large for us to tackle it alone. The problem needs to be tackled by everyone. It is important for business to regain the trust it has lost in the society. It should continue to do the important work it must do. So that everybody can have the chance to experience what I did as a child. To sit next to someone who felt that their life has been transformed by business.
A few excerpts from the Q&A session:
Q: Today, companies take a short-term view of business, where profitability is the mantra. People are changing jobs or are being laid off. Do you feel that business schools, to an extent, are also responsible for this?
Nitin Nohria: I am struck by how business schools are easily blamed for almost any evil that business leaders commit. I assure you that if you come to Harvard Business School or any business school, you will discover that we teach our students to think long term. However, it is also important to recognise that there can be no long term business if you don’t survive in the short-term. Good business leaders must be able to judge what needs to be done in the short run so that the business can prosper and be successful in the long run.
Q: What are your views on social business and do you teach this as a course at HBS?
Nitin Nohria: There are a lot of examples of social enterprise. Grameen is trying to create shoes for the poor with Adidas at a low cost. Then you have Nestle, Heinz who tried to create micro-nutrient packages that are economically sustainable. Take the Food Security Bill in India. Social enterprise is an important area and my view is that we are going to see the best years of social enterprise in the next
20 years.
Q: If a business is done morally and ethically, keeping the sustainability in mind why would there be a reaction of cynicism?
Nitin Nohria: Not many business people think about those things. When it comes to sustainability and being ethical there are too many examples of failure. The problem is that if you occupy a status of society, the society gives you by the virtue of profits you earn or the status that you enjoy; you cannot have a high status and then not expect to be severely punished when you behave badly. One act of misbehaviour by a business person is much more visible than 100 acts of misbehaviour by someone who is less visible.