Lecture review: A sustainable economy demands business commitment

With my focus on finance and quantitative economics, I have rarely thought about business and economics from a socio-cultural perspective.

In the hope to gain new insights, I joined the large audience of students and visitors at the School of Business and Economics on 28 October, for a lecture by Professor Geert Hofstede on the relationship between sustainability and business.

Professor Mark Peterson, holder of the Geert Hofstede chair on Cultural Diversity at Maastricht University, introduced Professor Hofstede’s work as “a compass that can guide us to understand foreign societies”. He added however that it is our responsibility “to try to learn as much as possible about their cultures in order to understand them.”

There is no such thing as business goals

Professor Hofstede started off his lecture by pointing out people’s common misconception of business goals. “It is business leaders who have goals, not business itself,” he said. He explained that it is important to make this distinction, because our goals, both personal and professional, are merely a reflection of our culture.

Hofstede shared the results of a survey he conducted with MBA students in Hong Kong back in the 1990s. He asked his students, who were working for the largest companies in the city, to make a list of the goals that these companies were pursuing. He distinguished between business, social and “special” interests of companies. Later, he gathered similar data from MBA students in 17 different countries around the world to study how business goals varied across cultures.

By analysing and ranking the data, Hofstede observed that the US obtained one of the highest scores on short-term growth and personal wealth. This, Hofstede argued, could have been recognised at the time as an early sign for the financial crisis of 2008. He confessed that he, as well as many other socio-economists, had failed to do so. On the other extreme was Germany, which stood out with its strong emphasis on long-term growth and social responsibility.

Professor Mark Peterson, holder of the Geert Hofstede chair on Cultural Diversity at Maastricht University

Different cultures have different answers to social problems

Looking at the countries’ rankings according to business goals, a few interesting points stood out.

First, there was a remarkable overlap between two of the largest-scale economies – China and India. Both countries put a strong emphasis on family and patriotism, but differ in their business ethics due to their distinct historical backgrounds and religions. In Europe, business goals also vary from country to country. Employers in the UK and Denmark, where labour unions have always been part of the business, are very socially aware and responsible to their employees, but while Denmark is driven by innovation, the UK is rather conservative. Both France and the Netherlands strive to maximise value in the long run, with France putting family interests first, and the Netherlands, reputation. These observations supported Hofstede’s cultural dimensions theory that national cultural differences can provide a helpful framework to explain the variation of business goals across countries and continents.

Hofstede’s theory distinguishes six dimensions of national culture: power distance, individualism vs. collectivism, uncertainty avoidance, masculinity vs. femininity, Long term orientation vs. short term orientation and Indulgence versus restraint.

Sustainability implies social responsibility

How are business goals related to sustainability? Referring to his cultural dimensions theory Hofstede explained that business goals and social responsibility are essentially determined by the short or long-term orientation of a country. Hence, growth-driven countries concerned with short-run performance such as Brazil and the US show lower social engagement, unlike Asian cultures which care more about continuity. The pursuit of wealth, another frequent business goal, and the relative weight some societies assign to it as opposed to social responsibility, can also reveal a lot about these societies’ history. Hofstede explained that younger, “colonial” cultures are more wealth-driven than civil cultures which, on the basis of their traditions, are more concerned with the well-being of the society as a whole.

Dispersing the power

Hofstede shared his view on how a more sustainable society can be built. The first and most important step is to decentralise the power that has been accumulated by a very limited number of countries around the world. Considering that the people holding the power are also the ones who determine the rules and select the values that should matter, a new, more sustainable setup will be based on variable culture values, where the choice of values will be a key determinant of the model. In that train of thought, Hofstede argued that societies must choose continuity as a key business and economic goal over growth which, in his opinion, is an overestimated solution with only a short-term wealth-maximising effect.

However, he added, next to business practitioners, academia plays an equally important role in making the social mindset more sustainable. Hofstede underpinned the value of academic research utilising various resources from around the world, because every culture can contribute to a better understanding of the global economy. Moreover, as universities are becoming increasingly international, it is their responsibility to foster a new generation of business leaders who are aware of the impact of cultural differences.

Being part of this new generation and impatiently waiting to step into the world of business and test my abilities, I left the hall both inspired and relieved. Hofstede addressed an important issue that has not been receiving the attention it deserves. At the end of the day, economics is a social science, and we can only improve our current economic challenges if we learn from previous mistakes not only as national economies, but also as societies.

By Darina Bacheva

Darina Bacheva is a Project Team Member at the Service Science Factory and a master’s student in Financial economics at Maastricht University.

Further reading:

Beyond growth and greed, by Alex Mundt

“Shareholder value – if you deeply reflect on it, it doesn’t mean anything at all”, The Diplomat 

“I don’t give a damn about rankings!”, The Diplomat

The American era is over, Observant

Goals and strategy, Bob Wilkinson blog

Business Goals For A Sustainable World Economy – Beyond Growth, Greed and Quarterly Results, a lecture by Prof. Emeritus Geert Hofstede

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