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Copyright 1997 AXIS Performance Advisors, Inc.
Making organizational decisions has never been more complicated. It used to be that if you strove to make a profit and didn't break any laws, you were doing well. But as the power of corporations in our society has risen, so have the expectations of them. They are being held to a higher standard, that of being socially responsible. And one highly publicized slip-up can cost big time: lost customers, time to communicate to the public and media, even law suits. In this issue, we will give you one way of tracking how well you are balancing the needs of all your stakeholder groups.
"A critical review of research on the compatibility of social responsibility and financial success has been conducted by the Center for Advancement of Public Policy. This review indicates that companies that treat customers, employees, communities, and the environment in a responsible and reciprocal manner do somewhat better on financial dimensions over the long run, with exceptions in specific circumstances."
(source: Ralph EstesTyranny of the Bottom Line)
No one likes the person who only looks out for "number one" and the same is true for organizations. People want to do business with organizations that take the high road to profitability: giving back to the community, protecting the environment, treating employees with dignity, and operating ethically. Unfortunately, the public's image of your organization can be cemented by one highly publicized event. Don't believe me? Let's do a little free association. What's the first thing that comes to mind when I say...
Answers usually involve sweatshops, disasters, or law suits. And the image endures even if the criticism was unwarranted or the response exemplary.
So what's the point? Your operations must be beyond reproach and you need to get the word out about your good deeds. Also, when a calamity does hit, act quickly to remedy the situation while communicating fully.
Your image affects your ability to recruit excellent employees, gain customer loyalty, build a new site, and maintain profitability. You absolutely can do well by doing good things... for your customers, employees, community and society at large.
Let us be the first to say that this is not easy. You have numerous stakeholders whose needs often seem mutually exclusive. A short list would include:
· Owners, shareholders, or Board of Directors
· Employees
· Unions
· Local communities
· International communities
· Customers
· Regulators
But whether you like it or not, you will be judged by how well you meet all their needs and balance their conflicting demands.
There are many facets to becoming more socially responsible. One simple tool we like is the Corporate Annual Report. Ralph Estes, author of Tyranny of the Bottom Line: Why Corporations Make Good People Do Bad Things, noted that the standard Annual Report really only reflects one stakeholder group: owners or shareholders. While it may have glossy verbiage about being a good corporate citizen, the main focus is profitability.
But this gives an imbalanced view of how well an organization is doing. What risks are they taking to get those great numbers? How satisfied are their customers? Are their key employees ready to jump ship? How hard will they have to fight to be able to build their new facility? Their future performance may have much more to do with these issues than last year's numbers.
Estes' idea is elegantly simple: publish a Corporate Annual Report that reflects what you have done for all major stakeholder groups. Sections might include:
Since you tend to get what you measure, having to write a report like this tends to encourage more action in your weak areas. Would your sections be pretty balanced or are there stakeholders for whom you would have nothing to report?
At Axis, we liked this idea so much, we decided to try it. Because in our case all employees are owners, we combined those two sections. See the enclosed document which can serve as a template for your own. We found it a fun and encouraging exercise. Try it for yourself.
No organization is perfect. Some organizations known for their community service still manage their employees autocratically. Others may have great employment practices but a sullied environmental record. The point is to keep improving on all fronts.