Business schools and CSR

IE Focus - Business Schools and CSRJanuary 2009 | By Max Oliva, Professor at IE Business School

Business schools are playing a crucial role in the evolution of social responsibility. Having proved how important it is, they now face the challenge of how to develop it further.

CSR has evolved considerably in recent years. It has gone from being a stand-alone concept to being more and more aligned with business, with clear added value. Now that the “CSR, yes or no” debate has finally been won, we are in the “how” phase, rather than still talking about Friedmanâ??s theories (1.)

Business schools play a key role, from the dissemination and evolution of the concept, to involvement in the various conversations, how it should be integrated in the business strategy, how it should be gauged and managed, which parameters should be used, etc.

All this without losing sight of the role they play in putting talent in contact with the business world. On the one hand, business is interested in CSR as a strategy; 70% of businesses consider it a way to stand out from their competitors (2.). As far as talent is concerned, the increase in the number of people searching for work that not only satisfies economic and professional career requirements but that also offers the potential for contributing to society has increased by more than 70% over the last five years (3.)


Digital Advertising, an anti-cyclical sector?

IE Focus - Digital Advertising, an anti-cyclical sector?January 2009 | By Manuel Alonso Coto, Program Director of the Master in Digital Marketing

Publicity and marketing is going through its worst crisis since the Great Depression. But not every aspect is suffering, given that online publicity is seeing enormous growth, driven in part by needs emerging from the economic crisis.

If we analyse the figures used by specialist agencies, the crisis that is heavily affecting almost every business sector could become an opportunity for digital advertising. In fact, it is already happening; it is the only sector that has grown (almost 20% so far this year) as everything else is shrinking. The cuts in marketing budgets mean that agencies are seeking channels with lower investment requirements than traditional GRPs, which are very expensive for the current budget. Thus, many firms that had not previously tried the digital medium as an advertising channel are taking their first steps and, in most cases, with good results. Hence digital advertising is growing. The crisis means that budgets that are far from negligible are moving online, and it is money that will not easily return to traditional media.

However, investments in the traditional advertising market in Spain could be reduced by 9.2% this year, the biggest fall of the last 30 years. Certain things occur with the arrival of a bearish economic cycle: individuals fist start saving by not buying long-lasting products, while businesses cut back on training and advertising. This reduction in investment in advertising brings the challenge of obtaining the same leads (or, if possible more leads, since the crisis will lower the sales-conversion ratio) with less impact; so they have to be of higher quality, more in line with the target. And that is where the great capacity for segmentation of digital advertising can be very helpful. Online segmentation techniques, such as behavioural targeting, should be given more consideration than ever.


The time has come for an arsenal

IE Focus - The time has come for an arsenalJanuary 2009 | By Gayle Allard, Professor at IE Business School

Exceptional times require exceptional measures, such as deploying an arsenal of fiscal measures. Itâ??s the only way to combat the current economic crisis.

The tax incentive of 1.1% of the GDP approved today by the Cabinet of Ministers might be considered irresponsible at any other time; however, in the unsettled waters of today´s global economy, it is an appropriate move. What are missing are measures for correcting the structural problems that will make this crisis such a serious one for Spain.

The government is facing domestic recession and the almost certain first global recession since 1982. The monetary policy has made its move and the response has not been encouraging. Given this scenario, the European Commission has requested tax incentive packages and Zapateroâ??s government has responded by announcing new expenditure totalling â?¬11,000 million in 2009: â?¬8000 on public works through local authorities and smaller amounts for the car industry, the environment, R&D, the Dependence Act, the refurbishment of buildings and tourism. According to the president, the move will create around 300,000 jobs.

First of all, this package is necessary. At the present time, we should not waste time discussing its effect on the deficit before we proceed. The recession looks to be worse than any known by most of us and normal solutions would be particularly shy.


English and Spanish

IE Focus - English and SpanishJanuary 2009 | By Rafael Puyol, Professor at IE Business School and President of IE University

Pride in a language is not compromised by using English or Spanish, the worldâ??s two most important languages. Holland shows Galicia, Catalonia and the Basque Country how itâ??s done.

Last week, an academic commitment took me to Amsterdam, an attractive city with a human face and an excellent selection of cultural options. I had not been there for several years and as soon as I landed in Schipol, I was pleasantly surprised by two things.

The first was that, besides their own language, all the Dutch speak excellent English. It doesn´t matter whom you speak to, where you speak to them or why you speak to them. Most educated people speak English, but in a taxi, a restaurant, a museum or in the street, it is spoken by drivers, waiters, porters or the police, and that defines Holland as a modern, international country.

The second pleasant surprise was the large number of people who can or try to speak Spanish. They do not feel uncomfortable when they speak it. They like to speak to Spanish-speakers in Spanish, whether to talk about the place they know or the fact that Real Madrid has five Dutch players or to comment on the way the Spanish national side play and even how they are capable of beating the Dutch.


Financial and economic crisis and crisis of values

1652.jpgDecember 2009 | By Manuel Bermejo, Professor at IE Business School

The explanations offered by economists for the financial crisis only serve to understand how the whole house of cards fell down… but the earthquake that caused the collapse is a crisis of values that affects us all.

In the last quarter and for the first time in 15 years, Spainâ??s GDP has fallen. Numbers are never wrong. Political debates more concerned with words and appearance than the actual situation have come to an end.

We have reached this situation thanks to a chain of different factors. A financial crisis that arises from the appearance on the market of the so-called ´toxic assets´, which generates a loss in confidence, deterioration of bank balances (to the point of bankruptcy in some cases) and a loss in liquidity.

This situation permeates the real economy. Even with business models of proven success, many companies are asphyxiated by the lack of credit they need to balance their cash flows and, in the best of cases, they decide to adapt their costs or even close down, leading to more unemployment and less business activity, which affects suppliers. On the other hand, we have individuals with less purchasing power due to a lack of confidence or the effect of the increase in the price of money or less capacity for generating revenue. A vicious circle. The Spanish economic model, so dependent on construction, which has fallen to the deepest depths, domestic demand and tourism, both affected by the consumer crisis, has inevitably fallen into a recession.


Driving on dipped headlines

1656.jpgDecember 2009 | By Rafael Puyol, Professor at IE Business School and president of IE University

Immigration and an ageing population are both issues that need to placed under the spotlight, but switching on that light is proving difficult in the current economic situation.

In times of crisis people find it difficult to drive on full beam, to analyse things calmly and in perspective, with the attention to detail required for important matters. Take the two things that will have the greatest impact on our future: ageing and immigration, currently being tackled using dipped headlights, providing a view of only short-term effects rather than mid and long term results.

The short-term considers the matter of immigration as if it involved only two opposite standpoints, namely whether it should be permitted or not. And, as things are not going well for anyone, the balance of the dilemma leans towards those who are against, those who uphold the need for strict controls and the return of foreigners to their countries of origin. However, the approach to immigration cannot be based exclusively on the present situation. It is important to look at the future evolution of population and the labour market to realise that more immigrants will be necessary in the future. Hence, the question is not whether or not we should have immigration, but rather, since it is very necessary, in knowing how many immigrants we are going to need and what type.


USA-Europe, a new beginning

1657.jpgDecember 2009 | Jose Maria de Areilza, Dean IE Law School

Obamaâ??s success opens a window of opportunities for Europe, but it also brings challenges as we find out how capable the old continent is of performing alongside its US partner.

Barack Obama´s election to the presidency of the USA may be a defining moment not only for his country but also for the international projection of the European Union and its member states. The transformational figure of the President-elect, to use a term coined by Colin Powell, will have two immediate effects on the watered-down relations between Europe and the USA. On the one hand, eight difficult years of tension and division, especially in the area of politics and the military, are now wiped off the board; on the other, the economic interdependence of the transatlantic community has not stopped growing, as shown by the financial crisis itself. The new White House will no longer classify Europeans into new and old and certain Europeans will have no reason at all for defining themselves as anti-Americans. Those who spread the word of anti-Americanism have suddenly been left behind and, for a few months at least, we will not have to listen to a choir of European politicians preaching to the USA on how to do things better from a the moral high ground, but incapable of practising what they preach.

As the best observers explain, we are witnessing the greatest public relations coup in the history of the USA and the best example of a hegemonic countryâ??s instant recovery of legitimacy or ´soft power´ ever seen. Barack Obama symbolises a new generation, a new way of doing politics based more on stories and emotions than on ideologies and parties; he also embodies an aspiration to global citizenship. His election not only breaks down racial barriers, but also makes his country and the American dream attractive again all over the world, something that is the opposite of what the Bush administration achieved during its eight years in power. It is true that the new president awakens such expectations on our continent that he will undoubtedly be unable to fulfil them, first of all because in many areas of security and foreign policy, the USA policy that has been in place since the fall of the Berlin Wall will continue. Indeed, the USA will continue to look towards the Pacific and pay less attention to a Europe that is less relevant in the current reconfiguration of world power. However, with the election of Barack Obama, the notion of the West begins to be more appealing, not only on both sides of the Atlantic.


Talent-development, the driving force behind economic growth

1649.jpgDecember 2009 | By Cristina Simon, Professor at IE Business School

Attracting and leveraging talent is the challenge now facing Peru if it wants to keep up the sustained economic growth of the last decade.

There is no doubt that a country´s economic development is linked closely to the evolution of its labour market. The problem that so often arises is the difference in speed of both concepts. At the present time, Peru is a magnificent example of this lack of synchronisation between the economy and the human capital that is there to keep it in place. As a result, a ´talent voidâ?? alert has recently appeared and could slow down the so far unstoppable force that has driven the country down a road of sustained growth for almost a decade.

The continuous progress of an economy generates an often very brusque change in the type of human capital that is required. This need for more intellectual work has become more evident in Peru in detriment of unskilled labour: in 1993, the EAP (economically active population) comprised 50% unskilled workers (with no academic qualifications or with primary education only), but the proportion fell to 26.2% in 2007. This figure clearly shows the shift in employers´ requirements and the need for trained, employable personnel, a concept that was christened with the name of ´talent´ in the United States at the end of the 1990s.


The crisis and the future

1654.jpgDecember 2009 | By Manuel Romero, Professor at IE Business School

The subprime mortgages unexpectedly sparked the financial crisis, but the resulting raging fire took hold because there was so much more fuel lying around to add to it. How can we rise from the ashes?

The first thing to be considered is the background to the crisis and the essential causes of it. Perhaps the best example has been the strong sensation of liquidity experienced by all the players on the market, which has led to excessive leverage and a significant undervaluation of the risk associated with excess debt and a significant overvaluation of assets that has given rise to clear consequences that include a lack of coherence and macroeconomic consequences such as negative saving rates in the USA and investment records in China in excess of the GDP. All the market analysts expected the system to break down as a result of macrospeculators such as the hedge funds and the CDS (Credit Default Swaps), but neither of the two originated the crisis.

The origin of the crisis actually came from an unexpected trigger, more specifically, the heavy default produced by ´sub-prime´ mortgages, which were none other than loans awarded to the so-called ´NINJAs´, i.e. people in the USA with no income, no job, and no assets, that had been securitised, which means that those who awarded the loans just sold them on the market, in many cases leaving nothing showing in their balances. One of the surprising aspects is that a market as small as the sub-prime mortgage market was the detonator of this entire situation.


The chaos of internal bank controls

IE Focus Newsletter November 2008November 2008 | By Jose Estevez, Professor at IE Business School

The collapse of Lehman Brothers or the fraudulent activities of a broker at Société Génerale reveal the chaos that reigns in banksâ?? internal control systems. The world economic recession and, in particular, that of the banking and financial sector is giving rise to serious problems. Lehman Brothers was considered as one of the financial institutions with the best contingency plans and yet it was not enough to save it from collapse. Another clear example is that of Societe Generale, where internal controls were incapable of detecting the fraudulent activities of one of its brokers.

Some experts suggest that the internal controls of many institutions are nothing more than “mere plans on paper”, that they are not operational, that they have never been tested and that employees “ignore them”, with no monitoring process in place as far as the institution is concerned. This is paradoxical, since a control system is characterised by the presence of elements that make it possible to influence the way in which the system works. A control system must guarantee stability and, in particular, be impenetrable as far as model errors and interference are concerned. Furthermore, it must be as efficient as possible and comply with a preset criterion. Normally, this criterion consists of control over input variables being possible, thus preventing sharp practices.

We are all familiar with the theory, but why has it not worked in financial institutions? The real situation is that, in some cases, it has worked, but while they were earning succulent profits, many consultants and managers ignored breaches of their internal controls. There is also another reason why it has not worked: the lack of good institutional information management.


Article in Chinese by Oswaldo Lorenzo on the consequences of downsizing in company workforces, published on Chinese portal海外裁员风波中的新老问题

先说供应链管理,简称SCM,最早是在大约二十年前出现,西班牙IE商学院教授Oswaldo Lorenzo在采访时指出,当时的背景是许多公司通过组建自己的后勤部门,独力完成供应链上从原料采购到成品发送的各个环节,认为这样做的效率最高,成本最低。但是,随着全球化成为趋势,潜在的市场越来越大,顾客的要求也越来越多,这时,怎样高效满足这些要求就成为一个新问题。厂商不得不把眼光放到自身以外,“外包”由此兴起,发展到厂商合作,在供应链各个环节形成各司其职的关系。

International View of Corporate Social Responsibility

IE Focus Newsletter November 2008November 2008 | By Joaquin Garralda, Professor at IE Business School

Corporate Social Responsibility now forms an integral part of the corporate DNA, but like humans, CSR comprises different ethnic groups. Around the year 2000, large multinational firms began to understand that if there was political instability, corruption and social malaise in less developed countries and they did not have minimum levels of health and education, poverty would become structural and the effects of the situation would not be limited to the said countries, but would also affect developed markets in various ways.

In addition, supranational political bodies began to recognise the need to support the business community in order to reach the “Millennium Development Goals”, a United Nations initiative created to eradicate world poverty. One example of this recognition is the United Nations Global Compact initiative, presented to large international enterprises by Kofi Annan in a meeting at the Davos World Economic Summit (Switzerland) in 1999. For the enterprise, signing this initiative means trying to include the 10 principles (respect for human rights, labour rights, the environment and anti-corruption processes) in all their transactions, regardless of the country in which they operate. The ultimate goal is for businesses to set voluntary limits to their procedures in environments where institutional fragility or the lack of control over resources could lead to behaviour not in keeping with a more human and sustainable world.


One step further towards technological innovation

1630.jpgNovember 2008 | By Yanire Braña, Professor at IE Business School

Itâ??s true that science and technology are the future, but some still face too many obstacles when it comes to accessing todayâ??s knowledge. The development of technological innovation is one of the main factors for guaranteeing long-term economic growth and minimising associated risks and entry barriers.

The responsible use of science and technology requires first of all solving or at least minimising the associated risks and problems. By the same token, the promotion of technological innovation also requires that the current tension among the players involved in the production of science and technology be solved, and that common ground for understanding among social, scientific and political interests be found. However, with a view to approaching innovation from other standpoints, it is our responsibility to reconcile science with society. In this particular case, the Minister of Innovation, Cristina Garmendia, has recently highlighted the need to combat the new forms of social and economic exclusion generated by unequal access to the knowledge society in which we live.

Indeed, unequal access to knowledge, which is largely due to the lack of technological know-how or resources, should be the first barrier to be overcome. The current gender gap regarding the use and adoption of technologies in Spain reveals an urgent need for measures and initiatives aimed at supporting women´s progress in the world of science and technology.