I've had the privilege of being a consultant to a variety of companies on strategy to enhance their perceived value.
Among these have been a number of franchise companies, including Burger King, automobile dealers and hotel operators. In the QSR and Hospitality industries, in particular, I believe that three social issues are likely to dominate over the next five years: sustainability, safety of the food supply chain, and medical care issues associated with high fat diets. Companies recognize that these issues are growing, but many do not know what to do about them.
Good social responsibility efforts can meet the business objectives of the company, while at the same time building support and coalitions and staving off potential regulations. At the same time, ill conceived corporate social responsibility (CSR) programs can waste money or, in some cases, can actually backfire on the company.
Fortunately, a new book called Leveraging Corporate Responsibility: The Stakeholder Route to Maximizing Business and Social Value by Bhattacharya, Sen and Korschun, examines what has worked and failed. It shines new light on CSR and documents what I have been saying to clients about CSR for years, namely that it can be money well spent, or that it can be a waste of investment.
The book offers guidance to managers making CSR decisions. Bottom line, companies should get involved in social issues that are consistent with their business strategy and are important to stakeholders. The more important the issues are to stakeholders, the more imperative it is to act since the ability to address social issues appropriately and in a timely manner can make the difference between a license to operate the business as planned or increased regulation.
The authors already have experienced consternation and "push back" from those who advocate CSR in any and all circumstances. Many of these critics are from the communication industry, a major group that has long advocated CSR. To hear communicators talk, one would think that any CSR program would be a good thing and would be welcomed by stakeholders and the larger society. It seems reasonable to assume that companies seeking to "do good" would be looked at more positively, but the authors have found that this is not always the case.
The authors examined routes to CSR value: the "direct route" and "indirect or stakeholder route". In the direct route, the company finds programs that lead to cost savings or increased revenues. For example, companies can invest in sustainability and have a favorable bottom line impact. This is the position supported by "shared values" advocates (I blogged about this in September 2011). Shared values suggests that companies seek to maximize their own self interest so the best way to get a company to engage in CSR is to find an area that both maximizes their value and also contributes to the good of society.
The "stakeholder or indirect route" is the more traditional route advocated by the communications profession. This involves the company finding some way to contribute to society. Stakeholders then judge the program. The expectation, of course, is that stakeholders will praise the company for "doing good". This does not always occur. As a result, there are a lot of companies that have wasted a lot of money. For example, sustainability is a smart business concept. It saves money for the company. The end result is good for society as well, since it reduces waste. But, instead of looking at the business need, companies have been urged to "declare themselves green" simply because they have changed from white to brown napkins or have replaced paper towels with hand dryers in the washrooms. Such actions are greeted with cynicism by customers who see it as an example of "green washing".
(One of the authors of the book, Daniel Korschun, is a colleague of mine at the LeBow College of Business at Drexel University and a Fellow of the Center for Corporate Reputation Management that I lead)
We talk regularly about reputation management in general and CSR in particular. My view has always been that CSR success is based on two primary variables: 1) that the CSR activity is consistent with the strategy of the company; and 2) that it is meaningful to the stakeholder for whom it is intended. The authors support my view, but offer a far more refined basis for the success or lack of success of CSR programs. The findings can be summarized by three themes: Understanding, Usefulness and Unity.
Understanding: Stakeholders filter the CSR program against their understanding of the company and their expectations of the firm. If the CSR programs do not make sense to the stakeholder, i.e., the program is from a company with an already poor reputation, the reaction is likely to be suspicion rather than praise. The initiative in this case can create a negative ROI. A company with a poor reputation should begin correcting its problems and avoid trying to jump-start their reputation with a large-scale CSR program. Food safety is such an issue. President Obama actually challenged the food industry during his State of the Union address to grow and process food safely without regulation. When a president makes such statements, it indicates that a substantial portion of the public has perceived that foods are less safe than they are expected to be or used to be. The very next line of the speech was about safe drilling for oil. Putting these two issues so close together indicates a perception problem that needs to be addressed very mindfully and carefully.
Usefulness: Companies and their stakeholders should be expected to act in their own self interest. Both can be expected to first ask "what's in it for me/us". While a CSR program may benefit society at large, the program is likely to be more successful if stakeholders perceive a benefit to themselves. For example, I have publicly applauded McDonald's for offering apples with their kids meals. It was a strategic move by the company and met the needs (usefulness) of parents who wanted to get their children away from fried foods. It was a small step, but it also will lead others to follow and broaden the nutritional offerings.
Unity: When Understanding and Usefulness are in play for stakeholders, they interpret that the CSR efforts align the company's values with their own. This, the researchers found, is a "powerful predictor" of CSR success. The concept of unity is similar to relevance. That is, the belief that the organization is "like me" or is important to my life. It is more important than differentiation in a highly complex, competitive marketplace.
When one looks at CSR in this light, one sees a route to decision-making that is more logical and systematic than currently available. All potential CSR programs can be judged against the "3Us", and the program can better be aligned with the company's business strategy and the interests of stakeholders.
QSR and Hospitality executives should take head. There are many consulting firms who urge them to take action, any action, that will curry favor with the public. For example, one well known research study by a major PR firm urges companies do take on any CSR program, referencing its research that finds that the vast majority of people would rather do business with a company that is socially responsible. What a revelation! They likely also want to be friends with people who love their mothers. The issue is not what people say, but rather what they do. Businesses should be focused on their own behaviors and the behaviors of their customers and other stakeholders, not what they are their customers say they will do.
This is a book well worth reading. While it may disappoint some who want companies to do any and all social activities possible, it serves as a guide for executive decision-making. This book should be a welcome read for those who want more research, science and rigor in communication advice. It demonstrates that businesses need to assure that their actions are in line with their communications, that they link their execution to their strategy, and that they understand the interests and expectations of their customers, regulators, investors, and other stakeholders.
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This has been a guest post by Elliot S. Schreiber, Ph.D., is a professor of marketing at the LeBow College of Business, Drexel University, Philadelphia, and also leads a consulting firm the helps companies align strategy and execution, as well as identifying and managing risks. Elliot has a blog about Brand and Reputation, click here to read.