Investing in Your Organization
by Investing in Your Community

It used to be that all an employer had to do to attract the best talent was offer a respectable salary and decent benefits. However, people entering the workforce today are evaluating potential employers by considering the type of corporate citizen the employer may be. As people of all ages begin to place more emphasis on fuel-efficient vehicles, recycling, taking mass transit, and investigating "green issues" in their personal lives, they are looking for companies that exhibit similar corporate behaviors with which to share their professional lives. At a minimum, some people are looking for employers to reward these behaviors.

Business schools are now providing ethics and corporate citizenship courses to undergraduate and MBA programs in increasing numbers. This is due to business schools' attempts to raise societal awareness of their students; to the number of students seeking knowledge about how they can be the next generation of business leaders of exceptional corporate citizens; and to the criticism that many business schools faced in the past decade of failing to "financially educate" students on ethical and societal issues that they would face in the workplace.

Employers are beginning to appreciate that their investors and stockholders are not the only stakeholders. Many employers realize that there is room for increased profitability and increased community investment. By investing their resources and energy into communities, they are getting returns that impact their businesses long-term. This investment may be in the form of philanthropy, volunteerism, investment with the expectation of a return, or investment because it is "the right thing to do." Investment in philanthropy and volunteerism will have lasting impact on customers, existing employees and future employees. Some organizations have leveraged these investments and created reputations as good corporate citizens to attract consumers and employees.

Four Dimensions of
Corporate Social Responsibility

Corporate social responsibility (CSR) has been a topic of interest for decades. Most recently, employers have acknowledged that their corporate behaviors impact various stakeholders including employees, future employees, special interest groups, education systems, competitors and customers.

In Corporate Social Responsibility: Making Good Business Sense, Holme and Watts (2000) defined CSR as the continuing commitment by businesses to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families, as well as of the local communities and society at large. In other words, firms plan for and implement policies that keep them "in the black" as well as give them the opportunity to "make a difference." Some call this pro-social capitalism. Organizations do good in the board room as well as in the neighborhood. The most common description of CSR comes from University of Georgia professor A.B. Carroll who defines it as an organization meeting its economic, legal, ethical and discretionary responsibilities to society (Carroll, 1979). These four responsibilities are described in more detail below.

• Economic Responsibility. Meeting economic needs are foremost in most CSR models. If a firm cannot return value to investors and owners, then it will not likely be around to impact the other components of CSR and other stakeholders. If organizations operate in a manner that is ineffective, inefficient, unproductive, or reckless, they will certainly be considered poor economic performers, but are also likely to be considered poor social performers (Aupperle, 1982). The "bottom line" is that the bottom line has to be profitable or at least successful enough to continue as a business.
• Legal Responsibility. Just as society expects organizations to operate in an economically responsible manner, society also expects them to obey the law. Organizations that operate profitably but with no regard for established laws are not responsible organizations. There are some well-known illegal enterprises that operate with a "profit," but they do so much harm to society that they cannot be considered socially responsible.
• Ethical Responsibility. The ethical standards by which individuals live and organizations operate are based on values, personal history, and cultural and societal norms. Wise companies are revisiting their ethical codes of standards and using ethics as a way to select leaders. In the aftermath of Enron, WorldCom, Health South and others, organizations have extended ethical guidelines to address inappropriate relationships and the perception of improprieties in other aspects of life. Organizations can be profitable and obey the law, but if they engage in activities that contradict society values and community norms, they may not be considered socially responsible. This becomes the trickiest part of corporate citizenship, especially in a global marketplace.
• Discretionary Responsibility. Discretionary responsibilities represent the voluntary roles that organizations assume in the community (however you define community). Another way to think about these responsibilities is to review how organizations engage in or encourage philanthropy and volunteerism. Organizations can gain great returns on financial investments, meet legal standards, and uphold the highest ethical standards; however, if they do not invest in their community, they will not be considered good corporate citizens.

A New Paradigm
for Corporate Citizenship

How do firms begin thinking about becoming better corporate citizens? It begins with a vision and organizational planning that includes not only economic and operational factors, but also the human factors such as the organization's impact on employees, community and greater society. When leaders develop and invest in corporate strategies and objectives, they should be evaluating other long-term criteria of success rather than just depending on immediate financial indicators. Organizations need to be profitable, productive and effective. They can do this without sacrificing employee, customer and societal needs by first creating a trusted and effective environment for business.

McLaughlin Young's Paradigm for Profitability© is often used in the context of developing leaders to create more trusted and effective organizations. In addition, it can assist organizations in becoming better corporate citizens. When applied to corporate social responsibility, the paradigm begins with making sure that the organization is taking actions to be profitable. For example, when an organization is developing a strategic plan, one of its initial considerations should be the impact of its strategies on the profitability and productivity of each of its stakeholders. The key here is that if organizations are attempting to be more productive and making a more targeted investment in the community, greater profits and, later, even better investments can be made.

As illustrated in the Paradigm for Profitability©, the immediate precursor to productivity is effectiveness - on an individual and organizational level. In terms of corporate social responsibility, organizations must ensure the efforts they make within society have the desired effect. Profitability, productivity and effectiveness are built on the foundation of relationships. Organizations attempting to be better corporate citizens have to consider stakeholder needs and then determine how they will co-exist optimally. In turn, healthy relationships require communication. Communication presumes that organizations have the apparatus to listen to the other investors, owners and society stakeholders alike. Listening presumes that organizations respect other stakeholders that they are listening to. Respect presumes that organizational leaders, in fact, know stakeholders and are aware of their needs. This sequence ... Relationships-Communication- Listening-Respect-Knowing ... is trust.

"Trust develops when successful behavior interactions are accompanied by positive moods and emotions," says R. John Young, Ph.D., founder and chairman of the McLaughlin Young Group and creator of the Paradigm for Profitability©. "These affects create a feeling of trust and engender continuing positive exchanges and greater trust."

As Dr. Young further explains in his book, The Five Essential Leadership Questions: Living with Passion, Leading through Trust, "When employees perceive the organization and its leaders to be competent, open, honest, concerned and reliable while sharing values, goals, norms and beliefs, the result is likely to be positive emotions and behavioral exchanges." Therefore, being a trusted organization is key to trusted and effective leadership as well as good corporate citizenship.

Examples and Key Questions

Crowder Construction develops its own employees, but also supports a construction institute at Central Piedmont Community College. The leaders of Crowder Construction understand that through their short-term investment they are contributing to the long-term impact of increasing the quality of the construction workforce. Bill Crowder, chief operating officer of Crowder Construction says, "We work with CPCC because we want students to have the knowledge and skills they need to make a better way for themselves and make a contribution to the community."

So what can an organization do to begin doing good in the neighborhood? Regardless of size, organizations can begin looking more strategically at how they plan and by thinking about their contributions in the context of what is important to their employees, customers and other stakeholders. Listed below are some questions that may help guide your organization:

• Do your corporate values reflect on how you want to exist in your community?
• When you plan, do you incorporate multiple stakeholders in your process?
• Who are your stakeholders? What are your stakeholders' needs?
• If you were to link strategy and philanthropy/volunteerism, what would it look like?
• What percent of your budget do you invest in philanthropy? What percent do you donate? 
• What would you like for your societal stakeholders to say about you in five years? Ten?
• What do your societal stakeholders say about you now? Is it important?

It is up to organization leadership to determine how to invest their capital and profits. In this decision making process, priorities will be made. Will an organization take a traditional approach, or will it be focused on a more comprehensive investment that is long-term and takes into consideration greater stakeholder needs?

Today's successful leaders recognize that all organizations, whether public, private, government or not-for-profit, operate locally. Local communities depend on local businesses to provide employment and contribute taxes just as much as the businesses depend on local communities to provide workforces, economic structures and processes, and societal support to these institutions. People like to live in a neighborhood where they know their neighbor, and everyone pitches in to make that neighborhood a better place. It works the same way with organizations investing in their local communities. Organizations will attract the top talent, retain the best employees and impress their stockholders when they are known for "doing good in the neighborhood."

Dr. Richard Ray is a recognized leader in the field of corporate social responsibility and its impact on workforce development, leadership development and organization development. He is an adjunct professor at the George Washington University and lectures on corporate citizenship and organization development in the U.S., Hong Kong, and Singapore. Dr. Ray is a vice president with the McLaughlin Young Group where he heads up the consulting practice. McLaughlin Young, a member of the Charlotte Chamber, is a human factors and leadership development firm headquartered in Charlotte since 1987. Dr. Ray can be reached by contacting info@mygroup.com or www.mygroup.com.