Corporate Social Responsibility in an Age of Recession - Case Study Example

Corporate Social Responsibility in an Age of Recession Introduction Most for-profit businesses, today, are developing new strategies to link business goals with the needs of stakeholders that support the business. Rather than the traditional approach to business that was driven by revenues alone and through marketing, companies are shifting their approach to include more elements of community, societal improvements and overall philanthropic business functions. This is referred to a corporate social responsibility, having more than just a product or service offering but instead focusing on the role of leadership in the employee and society context. Depending on the goals of a specific CSR initiative, there can be high costs at the financial level to coordinate such events as volunteer programmes or even charitable donations to different causes to express a more society-focused business model. At a time when there is a recession occurring, cost issues become a considerable concern. This paper describes the ability to still maintain positive CSR activities even in the face of difficulties posed by the recessionary environment. What is CSR? Corporate social responsibility can best be defined as the method by which companies incorporate social, environmental or economic activities into a total business value system and operational models in a way that is transparent and meaningful at the internal and community levels (international.gc.ca 2010). Such efforts are vital to business success where these activities are being demanded by all different stakeholders in society for companies to act more ethically and provide more long-term value to the local or international communities in which they operate. Common CSR activities include volunteerism programmes, charitable donations, environmental sustainability processes, or even improving the labour pool with skills development programmes for a variety of underprivileged or unemployed workers. CSR represents the whole of value-added activities that return a positive result to the broader society, with many of these activities requiring considerable labour and cost investment. In most businesses, corporate social responsibility provides some form of economic or tangible good to society through the efforts of business leaders and internal staff members or through the development of social policy. For example, a volunteer programme designed to improve the aesthetics of a community might involve volunteers from within the business devoting their personal time into tree planting, construction projects, or sustainable housing for disadvantaged citizens. In most instances, these programmes cost a considerable budget allowance, however the long-term gains from community and stakeholder satisfaction can lead to higher customer loyalty and better revenues. It is a practice that is worth the effort, despite the costs associated if the programme or goal related to CSR has long-term marketing and public relations advantages. These programmes can also strengthen relationships with governmental leadership at the local and international level, making it easier if the business decides to expand with foreign direct investment since the foundation of trust is already established with this leadership. Corporate social responsibility, then, is the ability of a company to provide added value, more than just products and services, in a way that is meaningful to broader society. There is no universal definition of corporate social responsibility, therefore possibilities are unlimited. It can be felt in recruitment efforts with a stronger focus on human resources related to employee satisfaction or be completely externalized in the form of donations or direct business involvement with various sustainability or improvement projects. It is any effort in which a business extends assistance with an ethical and moral focus where the needs of society are considered and human value a primary goal in the effort. A recent survey discovered that nine out of 10 business leaders in Europe believe that companies should ensure that they remain socially responsible even in recession environments (Neef 2004). This is because society has become accustomed to ongoing activities from companies related to corporate social responsibility and it is now considered to be a stakeholder expectation that directly impacts brand reputation and business image at multiple levels. Firms that do not engage in social programs, volunteerism, donations or other CSR functions are considered to be modestly unethical and it could impact revenue and customer loyalty as well as shareholder disapproval. Essentially, there is a social shift toward demand for CSR activities with profitable companies and there is a large stakeholder group watching and judging businesses based on their principles toward ethics and value-added community mindedness. One common theme in today’s society is the need for businesses to do their part to help the environment, another concept being demanded by customers, business partners, government and general society. Usually referred to as environmental sustainability practices, environmental CSR involves reduction of the carbon footprint, changing the operational model to reduce pollution, or through marketing function by reducing packaging size and waste related to landfills. It is common for products to have many packaging elements that are used in marketing as a form of advertising in order to outperform competition. However, such packaging creates long-term environmental problems that are becoming more visible to the consumer audience and a major concern to some markets as to whether they support or reject a certain company’s product offerings. Environmental sustainability is a current trend in businesses. However, according to McPeak, Devirian & Seaman (2010), environmental sustainability practices similar to those outlined are huge costs to companies at the financial level. “Prior studies and research have showed historically that being green does not contribute to the profitability of a firm” (McPeak, et al. 2010, p.62). This means that environmental sustainability is more of a PR function that requires a sizeable budget allocation, with efforts such as packaging reduction being done as a means to reduce societal pressures about ethical and sustainable business practices. Since it does not necessarily produce a long-term profit, it is simply a costly effort to satisfy stakeholder demands on these issues. Therefore, cost is a major consideration with most corporate social responsibility policies, depending on their scope and processes. If these efforts involve sustainability through environmental policies, there is likely going to be no long-term recovery of these funds to recapture lost revenues allocated to the effort. It would seem that only a business with ample resources could afford ongoing environmental sustainability efforts. CSR policies such as packaging reduction would require changes to the marketing and operational model, such as production line improvements, again representing high costs simply to satisfy stakeholder needs in many different external markets. If the CSR effort involves volunteerism and donations toward reconstruction projects or a greening of disadvantaged neighbourhoods, there is still a high cost involved in terms of labour payouts, donations and equipment. For the most part, costs are one of the major considerations of corporate social responsibility efforts. CSR in a recession environment Because of the high costs of CSR investment, the recessionary environment being felt at the local and global levels must be considered. Drops in consumer discretionary incomes, those that dictate purchase behaviour, impacts revenue creation and the ability to gain higher customer loyalty when new product are developed and launched. Investments are reduced in a recession environment and businesses must consider cost-cutting as part of regular activities. In the UK, employees have even been accepting different levels of pay reductions simply to keep their jobs and avoid layoffs (Kirby, Barrell & Pillonca 2009). This is a product of the UK economy experiencing a drop in GDP of 1.9 percent in the 2009 and growth in unemployment (Kirby et al.). In this type of environment, economic impacts are felt not only at the company portfolio and revenue level, but at the employee level as well. However, Neef (2004) identified that 95 percent of society and business leaders believed that companies should still engage in CSR functions during a time of recession because of the gains it brings and also because it is highly demanded by many different stakeholders. Therefore, the main question becomes how to engage in corporate social responsibility and still keep track of costs during a period where revenues are down and growth in the local economy does not look favourable at least in the short-term. Goodkind (2010) offers “the recession has steered us (businesses) away from traditional siloed thinking. Clients, in their desire to get maximum value for minimum budget, have turned to PR more and seen its value” (11). PR is public relations, efforts to improve company and brand reputation using a variety of media sources or public relations firms that specialize in helping businesses to regain ground with lost customers or improve loyalty with shareholders and clients. Public relations firms represent low cost activities in improving transparency of social responsibility without the company necessarily having to invest considerable financial resources into social and community programmes. Using professional public relations experts to assist in improving communications without the costs of direct investment in social programmes allows for internal CSR efforts to be exposed to the broader stakeholder audience. For example, some CSR efforts can be internal but still aimed at acting socially responsible. Companies have been steering away from some of their centralized, authoritarian hierarchies where control is maintained at the highest levels and trickles downward through the organisation. Instead, they adopt a more transformational leadership design where managers are charismatic, encourage change, develop employees and their competency through skills training or job rotation and dealing with moral issues of relationship-building between clients and customers (Benn, Todd & Pendleton 2010). These are low-cost efforts at building a more productive workforce and represents a strategic change where labour and human value needs are the consideration of management process and style. Though it does not necessarily involve tangible receipt by the community, it improves long-term problems with unemployed persons in need of skills or produces a better knowledge-based workforce in the labour pool. Hiring PR executives to handle communications and dealings with the media can spotlight these internal CSR efforts and build a better reputation and, perhaps, even improve share value by satisfied shareholders. PR teams are inexpensive compared to direct donations and philanthropy and should be considered as a quality tool in a recession environment. The grocery store chain Morrisons, a leader in the UK marketplace, has taken advantage of low-cost public relations by changing its partnership model in view of relationships between suppliers. The goal of this supermarket chain is to provide affordable prices and fresh food offerings as part of its competitive marketing strategy. As part of this focus, it has involved a new support for British farmers in order to provide this fresh, low-cost food strategy (Bayley 2010). Support for local farmers is a CSR effort that can be easily publicized using PR agents or even social media, such as Facebook or YouTube (to name a few), that do not represent very high costs for exposure and as a means to satisfy stakeholders demanding ethical and fair business practices. Smith (2009) offers that there has been a societal shift toward using social media on a regular basis, making it less recreational and more mainstream. Therefore, social media such as YouTube provides considerable public exposure in an inexpensive and easy to develop system so that CSR efforts are well-known to stakeholder groups. In a recession environment, less expensive public relations are key to cost reduction and also guaranteeing that demanding stakeholders understand that the business has not sacrificed its moral and ethical focus. The use of different PR tools or PR firms has, for firms adopting this low cost method, produced positive gains such as improved share prices, a better national standing, reduced stakeholder conflicts and improved employee productivity because of the positive press it creates (Daugherty 2001). In a recession environment, businesses need to be looking to maximize their brand value and public image without having to take on the burden of higher budget allocation toward more direct involvement in social programmes or charitable donations. Simply because the environment in which the business operates is currently in a state of recession, there are always methods to stay in focus with corporate social responsibility and still manage to avoid losses at the financial level. Some businesses have even made use of basic repositioning strategies in relation to marketing and advertising not only as a competitive tool, but to express their CSR values with low cost. It is about differentiation from competition without necessarily being forced to invest heavily at the financial level in concentrated advertising in a recession environment. Bayley (2010) identifies that such differentiation tactics change the public view of the product or corporate brand by campaigning for humanity and values propositions rather than simply promoting a product or service. An example is the NatWest Customer Charter campaign, a banking marketing campaign that simply reinforces that “good service is at the heart of customer desires”, thus letting customers perceive more control over their finances (Bayley 2010, p.15). Differentiation through marketing allows for a re-emphasis on positive social responsibility policies in an advertising format that is already well-developed within the company, therefore not requiring considerable investment to build such a marketing and advertising plan from the ground up. In a recession environment, this is important in areas of cost yet it still manages to get the message to key stakeholders that the company takes its social and community values seriously. Conclusion Corporate social responsibility is vital to a business’ image when it is being demanded by key shareholders and stakeholders locally and even internationally. Some investment must be made, and promoted, that shows the business is moving toward social sustainability or community improvements. These can be accomplished in a recessionary environment using public relations tools, low cost marketing tactics with differentiation in mind, or simply realigning internal values related to leadership principles and employee development and then promoted over low-cost media or social media channels. References Bayley, N. (2010). Power to the people, Marketing London. October 13, p.15. Benn, S., Todd, L. & Pendleton, J. (2010). Public relations leadership in corporate social responsibility, Journal of Business Ethics. Vol. 96. pp.403-423. Daugherty, E. (2001). Public relations and social responsibility, in R.L. Heath (ed) Handbook of Public Relations. Thousand Oaks: Sage Publications, pp.389-402. Goodkind, G. (2010). PR creates good buzz, Marketing London. October 13, p.11. Kirby, S., Barrell, R. & Pillonca, V. (2009). Prospects for the UK economy, National Institute Economic Review London. Iss. 208, p.44. McPeak, C., Devirian, J. & Seaman, S. (2010). Do environmentally friendly companies outperform the market?, Journal of Global Business Issues. 4, 1, pp.61-69. Neef, D. (2004). The Supply Chain Imperative. NewYork: AMACOM Books. Smith, T. (2009). The social media revolution, International Journal of Market Research. 51, 4, p.559. Motivation and Demotivation Today’s workplace is diverse with more and more demands being placed on employees to be better productive employees with a well-rounded set of skills necessary to help the business compete. This is why businesses have taken a much more dedicated approach to building solid and supportive human resources systems, so that employees can be developed, coached and mentored as needed and given more autonomy in their job roles for satisfaction. Human capital development is considered one of the most important elements for business success in highly competitive marketplaces and when change is constant with a need for flexible and adaptive workforces. This can be found in technology special project teams as well as making ongoing operational changes in marketing or production. Motivation in these types of environment is difficult to produce when employees are stressed over job diversity issues and when change is constant. There is a tendency at the psychological level for workers to resist change if the principle does not meet with their personal goals. In order to be better motivated in a difficult job environment, leaders must have the skills necessary to be supportive and create a team philosophy where people are committed to meeting changing goals and strategies. Leaders are successful in motivation only when they have a strong vision, work toward building commitment to meeting goals, decentralizing decision-making and responsibility, and encouraging others (DeVries 1996). At the personal level, in the job environment, the manager is the key element to driving motivation. They need to model their behaviours in a way that makes others want to follow, rather than following typical, centralized command structures where heavy controls are placed. There is a theory known as Theory Y and Theory X proposed by McGregor that describes a more liberal manager (Theory Y) and the manager who looks at workers primarily as resources to achieve long-term strategic goals (Theory X). A theory X manager is a controlling manager that only rewards on contingency, based on specific productive goals. In this type of environment, concentrated management does not motivate workers. Employees need to have autonomy in their job functions and feel like they are not only valued, but they can be decision-makers. This requires managers to create a more horizontal communications system where information and decisions are made throughout the entire organisation instead of being directed from the top layers of management. Theory X leadership and heavy controls might lead to better productivity, but it can lead to large problems in cost with turnover as employees leave the business in favour of a more progressive job environment. There are different styles of human resources known as the soft and hard approaches to people leadership. Hard HRM focuses on matching workforce with skills profiles and puts control in management hands (Allen 2007). Soft HRM is different and focuses on the human factors of leading people such as communications improvements, motivation and leads people rather than managing them using numbers and headcounts (Allen). At the personal level, soft HRM policies work toward developing better skills profiles, job rotations, and any other activity that works toward satisfying their needs. Abraham Maslow identified a hierarchy of needs that most people experience toward finding self-fulfilment in the job environment. One of these layers includes establishing a sense of self-esteem in order to become better achievers. Companies need to work toward building self-esteem through soft HRM policies that are supportive and give workers more flexibility in their job roles and the ability to create suggestions and be perceived as valuable contributors to the organisation. These are basic human needs that rely on a strong focus on human resources to properly motivate workers to perform and meet corporate goals. There is another theory in business based on Hofstede’s Cultural Dimensions Inventory regarding collectivist values versus individualistic values in a society or workplace. Collectivist values consider group welfare issues, loyalty and generally place group needs ahead of individual needs (Blodgett, Bakir & Rose 2008). Individualistic people tend to value independence and want to be self-expressive over the group. In certain project environments, managers often fail to recognize that these are inherent cultural values and needs values in employees that are different and diverse. Managers often create group incentives, such as bonuses, when working toward meeting a specific project goal effectively or within a budget allocated for the effort. What this does, personally, is de-motivate since I am a more individualistic person that appreciates being recognized for unique accomplishments instead of being compared to the group norm. I find that this is a narrow vision and does not fit the profile of a more progressive and transformational manager. A quality leader needs to understand the cultural dimensions that group members in teams demand or are a part of their personality profile and then set rewards and recognition systems for the individual. Managers in this type of environment tend to group everyone together as a single unit, forgetting basic needs for self-esteem and self-expression. What also motivates is a strong communications system so that there is no confusion about job role obligations or possibilities for promotion. Many managers or executives fail to recognize the importance of giving employees development opportunities, such as the typical fast track programme, that promises advancement if they achieve certain goals. I have always found value when reading about the balanced scorecard and the performance appraisal as tools to accurately measure whether performance goals have been met. Showing employees that they are valued, and building motivation, starts with setting up an appraisal system with a training package so that certain skills and knowledge can be gained and job competence improved. It is very de-motivating when businesses do not consider that employees want more than just their job role title but would like to become part of management. Businesses should devote more time to training and the use of assessment and ratings systems so that employees are motivated to perform in exchange for guarantees of advancement for meeting training and development criteria. References Blodgett, J., Bakir, A. & Rose, G. (2008). A test of the validity of Hofstede’s cultural framework, The Journal of Consumer Marketing. 25, 6, p.339. DeVries, M. (1996). Leaders who make a difference, European Management Journal. 14, 5, pp.486-493. Price, A. (2007). [internet] Human Resource Management in a Business Context. 3rd ed. Thomson Learning. [accessed 11.11.2010] [available at http://www.hr-topics.com/introduction-to-hrm/defining-hrm.htm] Read More