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Practices in Corporate America
In her research, Bartel examined how four community
outreach projects affected 250 Pillsbury Co.
employee volunteers. What she discovered was that
the act of volunteering regularly led employees to
make favorable comparisons between their own company
and the practices and policies of other
organizations—in other words, Pillsbury shined.
Allowing people to work outside their normal environment and experience “boundary-spanning roles,”—such as volunteering for a nonprofit organization or being encouraged to participate in a corporate-sponsored community event—not only enhanced public perception; it was a powerful way for companies to help strengthen their status or image in the minds of their employees.
“People identify more strongly with socially desirable organizations,” Bartel says. “This is most likely driven by a basic need all individuals have for self-esteem.” For example, if the company is doing a good deed or has a positive public image, some employees see that as a reflection on themselves.
Bartel adds that employees also noticed the positive attributes of their coworkers as they volunteered together. As it turns out, teaching second graders the concept of teamwork helped the employees build teamwork skills within the organization.
In addition to improving relationships with customers and employees, participating in CSR efforts can also improve a company’s relationship with suppliers, directors and partners. Management Professor Pamela Haunschild’s research found that ethical companies are more likely to attract high-quality network partners, whereas a firm that commits unethical acts will see a decline in the quality of its network.
“The network changes in the sense that directors of good- reputation, high-profitability firms will tend to leave the board,” explains Haunschild. “The firm has to replace them with directors from poorer-reputation and lower-profitability firms.”
She adds that, on average, a firm that engages in an unethical act will see its board’s reputation ranking fall 10 points (out of 300) on Fortune’s “Most Admired” scale.
“The networks of the firms that engage in these acts also tend to lose connections,” she says. “This can have important consequences, as firms get benefits from being well connected to other firms in their networks. Networks have been shown to affect important firm consequences, including innovation, learning, and even profitability and survival.”
Taking a Penalty for Progressiveness
In another recent research study, however, Haunschild discovered that companies sometimes pay a price for good behavior. For example, a company with a good reputation may be penalized more than one with a poor reputation when it recalls a product—just as a valedictorian who brings home a C would disappoint her parents more than her sibling who rarely makes good grades.
“We find they are penalized in terms of market share,” Haunschild says. “While all firms experience somewhat reduced market share after a recall, better-reputation firms suffer greater reductions than poorer-reputation firms.”
Haunschild says these companies cannot rely on their positive reputations for protection. They must stay in touch with the customer and learn from the examples of other firms and their recall experiences.
“Since they get a bigger market penalty, they need to be even more vigilant about preventing recalls than relatively poor-reputation firms do,” says Haunschild. “In other work, we find that good- reputation firms do seem to be advantaged in other ways—for example, they do seem to learn more from a given recall and turn this into fewer future recalls.”
Moving Beyond the Expected
These days, corporate responsibility involves more than contributing community service hours and avoiding recalls.
“Usually companies are recycling and contributing the standard 2 percent of profits to philanthropic efforts. This is considered a starting point for CSR,” Ivey says.
Organizations now look at their CSR plans from a holistic perspective—considering their effect on all stakeholders and ensuring the practices behind today’s profits don’t have a negative impact on the quality of life for tomorrow’s generations.
Companies are also beginning to work directly on hot issues, including HIV/AIDS workplace programs, supply chain responsibility and environmental threats like carbon dioxide and greenhouse gas emissions.
Allowing people to work outside their normal environment and experience “boundary-spanning roles,”—such as volunteering for a nonprofit organization or being encouraged to participate in a corporate-sponsored community event—not only enhanced public perception; it was a powerful way for companies to help strengthen their status or image in the minds of their employees.
“People identify more strongly with socially desirable organizations,” Bartel says. “This is most likely driven by a basic need all individuals have for self-esteem.” For example, if the company is doing a good deed or has a positive public image, some employees see that as a reflection on themselves.
Bartel adds that employees also noticed the positive attributes of their coworkers as they volunteered together. As it turns out, teaching second graders the concept of teamwork helped the employees build teamwork skills within the organization.
In addition to improving relationships with customers and employees, participating in CSR efforts can also improve a company’s relationship with suppliers, directors and partners. Management Professor Pamela Haunschild’s research found that ethical companies are more likely to attract high-quality network partners, whereas a firm that commits unethical acts will see a decline in the quality of its network.
“The network changes in the sense that directors of good- reputation, high-profitability firms will tend to leave the board,” explains Haunschild. “The firm has to replace them with directors from poorer-reputation and lower-profitability firms.”
She adds that, on average, a firm that engages in an unethical act will see its board’s reputation ranking fall 10 points (out of 300) on Fortune’s “Most Admired” scale.
“The networks of the firms that engage in these acts also tend to lose connections,” she says. “This can have important consequences, as firms get benefits from being well connected to other firms in their networks. Networks have been shown to affect important firm consequences, including innovation, learning, and even profitability and survival.”
Taking a Penalty for Progressiveness
In another recent research study, however, Haunschild discovered that companies sometimes pay a price for good behavior. For example, a company with a good reputation may be penalized more than one with a poor reputation when it recalls a product—just as a valedictorian who brings home a C would disappoint her parents more than her sibling who rarely makes good grades.
“We find they are penalized in terms of market share,” Haunschild says. “While all firms experience somewhat reduced market share after a recall, better-reputation firms suffer greater reductions than poorer-reputation firms.”
Haunschild says these companies cannot rely on their positive reputations for protection. They must stay in touch with the customer and learn from the examples of other firms and their recall experiences.
“Since they get a bigger market penalty, they need to be even more vigilant about preventing recalls than relatively poor-reputation firms do,” says Haunschild. “In other work, we find that good- reputation firms do seem to be advantaged in other ways—for example, they do seem to learn more from a given recall and turn this into fewer future recalls.”
Moving Beyond the Expected
These days, corporate responsibility involves more than contributing community service hours and avoiding recalls.
“Usually companies are recycling and contributing the standard 2 percent of profits to philanthropic efforts. This is considered a starting point for CSR,” Ivey says.
Organizations now look at their CSR plans from a holistic perspective—considering their effect on all stakeholders and ensuring the practices behind today’s profits don’t have a negative impact on the quality of life for tomorrow’s generations.
Companies are also beginning to work directly on hot issues, including HIV/AIDS workplace programs, supply chain responsibility and environmental threats like carbon dioxide and greenhouse gas emissions.
Last Updated
Friday, February 13, 2009
