Riaz Rafat & Elham Afnan: Principally Tackling the Global Financial Crisis, at Work and at Home
- Riaz Rafat and Elham Afnan
Riaz Rafat and Elham Afnan recently wrote an article titled “An EBBF Perspective on the Global Economic and Financial Crisis”, in which they tackle the causes of the present financial crisis, and explore long-term solutions from a perspective grounded in values and spiritual principle—distributing global income more fairly, sharing profits, promoting gender equality, and reducing military spending, are some of the solutions they mention. An economist and an English expert, the couple together provide an incisive and eloquent look at one of the great exigencies of our times.
What follows is a written interchange between EBBF and Riaz and Elham (whose biographical notes appear at the end of the interview), in which we ask them to elaborate on a few points in their essay, and to reflect on what some of these ideas mean to them in their own work and lives.
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EBBF: In your article you quote an article by Augusto Lopez Claros saying that the danger associated with the present crisis is that ... we may come out of it towards the end of 2009 and go back to 'business as usual', missing this opportunity of a lifetime. Do you think this is what is happening?
Riaz and Elham: Yes, if the current crisis had hit even harder and for a time period equal to the Great Depression, we believe governments and other major institutions around the world would be more motivated to implement radical and long-term solutions, some of which we have mentioned in the article. Unfortunately, most of the medium- to long-term solutions discussed so far, for example, by the G-20, have not been supported by most governments.
Nevertheless, a positive outcome of the current crisis is that discussions on the long-term solutions have started—for example, the need for a world (reserve) currency and a “Tobin tax” on international monetary transactions. Furthermore, attitudes to previous, harmful practices in the financial industry are changing, referring to the statistics provided in our paper on the economic crisis. A number of short-term measures (e.g. lower interest rates, and increased public spending), as well as a few mid-term measures (e.g. more sober compensation systems and other regulations in the financial industry) have been introduced.
However, some of the short-term solutions will in the long run increase the risk of another global economic crisis, for example due to rising private, public and national debts. Many economists are these days warning against the risk of a second economic crisis. One of them is Dr. Nouriel Roubini, professor of economics at New York University's Stern School of Business and chairman of the RGE Monitor. Best known for his accurate predictions of the current financial crisis back in 2005, Dr. Roubini now argues that the world has set itself up for another bubble in risky assets, like commodities, and he put forward the following warning in Financial Times on 1 November 2009: “The Fed and other policymakers seem unaware of the monster bubble they are creating. The longer they remain blind, the harder the markets will fall.”
- Riaz addressed AIESEC Serbia’s national conference, May 2008
EBBF: The short-term solutions you mention (e.g. changing pay structures at corporations) are apparently not being heard. What about the long-term solutions mentioned: is there a chance that people will listen to ideas about redistributing global income, profit-sharing, reductions in military expenses, gender equality, or creating a service-based culture of work?
Riaz and Elham: Yes, we believe that people will listen to such ideas, but it will take time. Just the fact that several of these measures are being discussed by politicians, academia, the educational system, the media and others is a step in the right direction. For example, the issues of global income redistribution and a service-based culture are being taught at our children’s school in Belgrade, as part of the official curriculum. Thousands of NGOs are promoting one or more of these initiatives. EBBF and AIESEC are examples of such NGOs, promoting the right insights and values to current and future leaders of society. That is why we spent time writing this EBBF paper on the global economic crisis for AIESEC International. Furthermore, there has been some positive development in certain areas during the past decades, for example in gender equality. Nevertheless, experience shows that major changes have only happened after periods of crisis and severe tests, such as the Great Depression, or the First and Second World Wars. Thus, some changes will happen organically and incrementally, while the more radical solutions may be adopted as a result of a future crisis, whether it will be economic, environmental, military or otherwise.
EBBF: The solutions you propose--international taxes, lowering trade barriers, profit-sharing, reducing military expenditures--seem to be in the domain of government and company owners or directors. So while they all sound sensible, what does this mean to me or to you or to someone who is not a politician or in a place of authority in a company?
Riaz and Elham: Each person can make some effort within his or her area to promote these solutions, or even to put them into practice. Some of our friends have promoted profit-sharing in their companies with success, initiated activities within the domain of corporate social responsibility, moved to developing countries to work for aid agencies, initiated social and economic projects on a voluntary basis, and so forth. Others help by promoting such ideas through the media and their social and professional networks, teaching their children about these solutions and values, at home or at school, or doing research and publishing their recommendations for long-term solutions. The “micro” activities of the individuals have a profound effect at the “macro” level, when the effects of thousands of individuals are aggregated. Nevertheless, in order to fully succeed, governments, business executives, and other major institutions should take their part of the responsibility, as reduction in trade barriers, for instance, cannot be done without government intervention.
Finally, the world’s great religions often have a power to move people in the right direction. Just as a piece of iron that aligns its atoms in a certain way will start to exert a magnetic attraction, so too when people align themselves with values that are moral and ethical and in essence divine, then they attract strength and ideas that open doors.
- With friends at their Belgrade home
EBBF: One of the main points in the suggestions for long-term change is that there needs to be a change in the culture of individuals, companies and countries. You write: "The prevalent disunity, conflict, greed, dishonesty, prejudice and corruption need to be replaced with unity, justice, moderation, honesty, trustworthiness, humility and service". You also quote Marjo Lips-Wiersma as saying that the real purpose of the corporation is to provide products and services that meet the real needs of people. Could you elaborate more on what this shift entails, and what it might look like? Are there examples of this today?
Riaz and Elham: There are many signs of this shift. For example, during the past few years, corporate social responsibility has been raised to a more strategic level by thousands of corporations around the world – some driven by a real change of values and culture, and others motivated by a desire to increase company value through improved reputation and/or customer satisfaction. For example, in the past, most pharmaceutical companies focused on developing and marketing drugs that would generate the highest profit margin, targeted usually at the rich elite, while the needs of millions of poor people might be neglected. However, during the past few years, we have seen examples of pharmaceutical companies offering lower prices for patented drugs (e.g. against HIV) in markets with low purchasing power and great need for the drugs.
More companies are now moving towards a more balanced set of company objectives (e.g. through a “balanced scorecard”), where traditional key performance indicators such as stock price, market share and profit are balanced by other indicators, such as customer satisfaction, company reputation, employee satisfaction, etc. You could argue that long-term company profit and valuation is the primary driver for these changes, but at least an understanding is growing that it is profitable to be honest, socially responsible, and focused on improving the satisfaction of all stakeholders, not only the owners. Still, there is no doubt that there is an ongoing struggle of interests in business and elsewhere, where the pressure for short-term profit often overrules more “ethical” choices, even when they provide the best long-term results.
The consequences of greed have been highlighted with the last financial crisis—for instance in the real estate industry, where some were lending money to consumers who they knew would be at high risk of not being able to honour their debts. On the other hand, examples of correct behaviour have appeared more frequently in the media, e.g. articles on a Bahá’í real estate agent in the USA who was praised, even as far away as in Norway (in a two-page article in the Norwegian business daily Dagens Næringsliv on 17 April 2009) for his ethical behaviour. He had avoided the common practice of offering loans to customers who might not have been able to pay back their debts, based on a moral conviction that he should only give recommendations to his customers that were in their best interest. His guiding principle was: “You should treat your customers as if they were yourself”. Of course, he lost some business opportunities to his competitors as a result of this more ethical practice, but when the financial crisis struck, he had a portfolio of good and loyal customers, while his competitors suffered heavy losses and had to fire many employees.
We have no illusions about a rapid change of culture and values, though. This will take decades and even centuries – but we are optimistic about the direction in which the world is going.
- Riaz, Elham & Co.
EBBF: I know you, Riaz, work as a program director for a large telecommunications company. What do these ideas about a new culture and long-term solutions to the crisis look like in your day-to-day work?
Riaz: During the past 12 years of work for the Telenor Group, I have tried to promote new business practices (mentioned in our paper as “long-term solutions”) in different ways in my work. It has not been easy to change business practices, but I was several times in the fortunate position of being responsible for large change/transformation programs, where major organisational and behavioural change was an expected outcome. In other instances, as line manager, I struggled more, trying to change day-to-day business priorities in a more “ethical” manner, like meeting customer needs and expectations, rather than only short-term sales and profit objectives.
I am particularly satisfied with activities in the mobile company “VimpelCom” in Russia, where we introduced many changes, for example profit-sharing, a relatively “flat” organisation, and corporate training program for young professionals and managers that focused on the right values and behaviour. What was special about the profit-sharing concept was that all received an equally large part of the profit, that is, around 10%, regardless of position. The training program provided excellent opportunities for talented, young employees in what was termed Russia’s first corporate university, the “BeeLine University”. Employees going through this program were really thankful for the opportunity to talk about ethics, corporate governance, and other areas that were new in the Russian business environment. The climate for change was favourable at that time (1999-2001), since Russia had just experienced a financial crisis, and the company was close to bankruptcy. In such a situation, employees and managers were much more motivated for change.
When responsible for customer relationship management (CRM) best practices in the Telenor Group, I tried to strengthen focus on customer needs through introducing Group standards, processes and KPIs for follow-up and service of customers, customer loyalty activities, etc. In some countries, new approaches and methods were welcome, while Telenor companies in certain countries resisted major changes.
In particular, I struggled as line manager in Telenor Norway during processes to prioritise the proposed campaigns to be launched. Some product owners wanted to utilise our marketing and sales resources to promote their “products” to the entire customer base, like promoting Wireless PBX to even small business customers with less than 3 employees, customers who seldom needed this solution. I argued we should only target smaller segments that really needed the product, and thus free up human resources for activities that really met their needs. Example of the latter activities could be to guide them to proactively change to more cost-effective solutions, based on analysis of customer behaviour, needs, etc. We could, for example, in the short term lose money by advising our customers to switch from the more costly ISDN technology to the regular telephone network (PSTN) when purchasing ADSL, at a time when most of them did not really need ISDN. However, I was certain that improved customer satisfaction, loyalty and a positive perception of Telenor would in the long run offset the “loss” of guiding them to the right product, service or price plan.
Thus, in my small Telenor world, I was facing the same challenges as bankers, real-estate agents, brokers, and others who were accused of contributing to the current financial crisis by focusing on their short-term, personal or corporate interests, rather than on what they believed would be best for their customers and the community at large. What makes me optimistic is that even in Telenor, where other voices often were stronger than mine on this issue, there is now a strong drive towards more ethical values and objectives – supported by a company-wide program to change our culture in the right direction.
EBBF: And you, Elham, are any of these ideas relevant to your day-to-day activities?
Elham: I am not involved professionally in business or economics, but like most people, I am concerned about the effects of the economic crisis on the lives of my loved ones. Working on this paper was an educational experience for me. One of the things I tried to contribute was to make the paper accessible to laymen as well as to economists. I believe it is important for everyone – not just economists – to understand the processes at work in the world economy so that they can find ways of making necessary changes. For instance, I have translated the paper into Persian, and it will be published by a Persian-language journal and will reach another segment of the population in this way.
I am also involved in Bahá'í study classes, which very strongly support and propagate many of the ideas mentioned in our paper. Our aim is to develop the spiritual and moral capacities of individuals and communities so that they can serve those around them and make fundamental changes in society, which can ultimately solve the economic and social problems of the world.
Of course, Riaz and I also teach our children the values that we believe are essential to the transformation of society. Our 11-year-old is very interested in business and for a while his bedtime discussions with his dad revolved around economics! We teach them to think of the earth as one country and see themselves as citizens of the world. We teach them not to strive for material welfare alone, but to combine that with spiritual values and moral behaviour. We teach them about the equality of women and men and try to practice it within the family. I think that when they later on have to make choices about their studies and their professions, these fundamental concepts will help them make just and principled choices. On a more down-to-earth level, I try to teach them not to waste resources (turn off the light, recycle), to be moderate in their desires (you don’t have to buy every new game that comes along), to spend money prudently, and to take responsibility for their own actions.
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Riaz Rafat is a business economist from the Norwegian School of Economics and Business Administration. He has spent the major part of his professional life working for the Telenor Group, the world’s 5th largest mobile operator, leading a number of major change programs and projects in several countries where Telenor is represented in Scandinavia, Eastern Europe and Asia. During his career, he has focused particularly on customer development and loyalty strategy and programs, service-quality improvements, market research, competitive intelligence, as well as development of systems and processes for customer relationship management (CRM) and business intelligence (BI). He also worked for several years as Strategy and Business Development Director for a major Russian telecommunications company, and as consultant for Accenture. During the past 18 months, he has worked as CRM & BI Program Director for Telenor in Serbia, where he is living with his wife, Dr. Elham Afnan, and their two children.
Elham Afnan has a Ph.D. in English literature from McMaster University in Canada. She spent three years working at the Archives Office at the Baha’i World Centre, and later taught English literature and writing at the universities of Oslo and Bergen in Norway. Elham lectured several summers at the Landegg Academy in Switzerland, for the World Order Studies Program. She has published a number of articles in scientific journals related to English literature, and has also worked a period for the Norwegian School of Economics and Business Administration in Norway, reviewing research papers in the areas of macroeconomics and marketing. She has collaborated with her husband, Riaz Rafat, on the paper titled “The Global Economic Crisis: An EBBF Perspective on Possible Causes and Solutions”.
