Tag: business

The theaters of CSR

February 8, 2020

Corporate Social Responsibility CSR can be better understood through the innovative model developed by Harvard Business School Professor Kash Rangan, who talks about a platform of three theatres of CSR for evaluating and classifying CSR practices. These three theaters include the wide range of activities that can be described as CSR, and they constitute a comprehensive CSR strategy.

The core competencies, institutional capacity, and ability to excel in either philanthropic, value chain, or transformative ecosystem CSR efforts determine the type of CSR program a company might adopt.

Why trends of business

The first CSR theater focuses on philanthropy, either in the form of direct funding to nonprofits, community service organizations, and employee community service projects on the one hand, or in-kind donations of products and services to nonprofits and underserved populations on the other. Corporate philanthropy may be characterized as the “soul” of a company, expressing the social and environmental priorities of its founders, executive management, and employees, exclusive of any profit or direct benefit to the company. Coca-Cola sets a perfect example of this theater through its $88.1 million annual contribution to a variety of environmental, educational, and humanitarian organizations through The Coca-Cola Company and The Coca-Cola Foundation.

Other examples of inkind giving include IBM’s computer donations through its global KidSmart Early Learning Program 16, and Microsoft’s donation of almost $300 million in software products to nongovernmental organizations (NGOs) across the globe. Similar to corporate cash funding, in-kind donations provide important, and often critical, goods and services to nonprofit organizations and needy populations.

As corporate philanthropy evolves, it may become more strategic and more closely correlated with a company’s business priorities. In strategic corporate philanthropy initiatives, funding for social or environmental programs reflects a corporation’s philanthropic priorities as an extension of its business interests. Examples include PNC’s Bank “Grow Up Great” early childhood education program and Goldman Sachs’“10,000 Women” initiative to train and support women entrepreneurs in developing countries. Both CSR efforts are a direct expression of both companies’ respective business strategies. With $100 million in funding over a five-year period, “Grow Up Great” provides critical school readiness resources to underserved populations where PNC operates, in turn creating stronger communities, potential future employees, and PNC brand loyalty.

The “10,000 Women” initiative was a culmination of Goldman Sachs’ senior management’s effort to consolidate its diverse “philanthropic efforts behind a big idea.”

The company devotes significant CSR resources to its“10,000 Women” program to provide business and management skills to underserved women entrepreneurs throughout the world.

Under the second CSR theater, initiatives aim at increasing business opportunities and profitability, while also creating social and environmental benefits by improving operational effectiveness throughout the value chain, be it upstream in the supply chain or downstream in the distribution chain.

Nike has established a Code of Conduct governing its entire production supply chain, including the factories with which it contracts to manufacture its products. Gap Inc. launched a comprehensive “stakeholder engagement” campaign in 1999 to address the highly publicized exploitative labor practices in its manufacturing facilities, some of which also produced goods for Nike. Like the Nike program, Gap’s aggressive supply chain initiative was a response to intense negative publicity and protests.

If a company can promote the enhanced social or environmental value of its products through its CSR initiatives, it can increase its profits. Examples include ethically or socially responsibly-sourced products such as fair trade coffee, conflict-free precious stones, and sustainable farming and fishing.

The third CSR theater,(i.e. transforming the ecosystem),according to Harvard Business School’s study, represents a wide scale and disruptive change to a corporation’s business model that shifts the priority first to crafting a solution to a societal problem, which would then lead to financial returns in the longer run.

In this third theater, the company attempts to create societal value by significantly addressing a critical social or environmental need that is within its business reach, but that may not return immediate business profits. The initiative might not emerge from the company’s core competencies but may require the corporation to fundamentally change its business model and develop new skills and strategies.

Within this third domain, the corporation creates a radically new ecosystem solution that may be outside its core business interests, and that is fundamentally disruptive to the existing value chain. CSR efforts in this domain are not incremental or cautious, but require strategic risk-taking and a focus on long-term rather than short-term economic gains.

General Electric (GE) is leading a comprehensive initiative to address global warming and climate change by transforming the United States’ automobile transportation system to reduce CO2 emissions and petroleum-based fuel consumption from passenger automobiles. The GE transportation solution includes electric vehicle (EV) charging stations, electrical grid improvements, investments in component technologies, and a robust EV production system.

GE’s endeavor, if successful, has the potential to reduce CO2 emissions and petroleum-based fuel consumption by fundamentally changing the U.S. automobile transportation ecosystem. It will potentially also increase GE’s long-term profitability, given its engagement in many aspects of renewable energy production, energy delivery, EV production, and EV charging supply chains. As yet, the company has not profited from its EV solution, demonstrating that in this third CSR domain, corporations need to be willing to defer short-term profits to produce environmental and social benefits.

Another case would be the one of Philip Morris International (PMI) which decided to use technology and innovation to solve the problem of cigarette smoking, choosing to use their own new technologies to replace cigarettes altogether. Over the past three years, approximately 7.3 million adult smokers around the world have stopped smoking and switched to PMI’s heated tobacco product, which is currently available for sale in 48 markets in key cities or nationwide under the IQOS brand. PMI developed Business Transformation Metrics, on which the company reports periodically in its Sustainability Report. In 2018, smoke-free products represented more than 5 percent of PMI’s shipment volume and more than 13 percent of its net revenues, but they already represented 60 percent of its global commercial expenditure and 92 percent of its global R&D expenditure. You can read the full PMI article here .

Leadership in times of crisis

January 18, 2020

The 17th of October marked a new era for Lebanon. The revolution which aimed at combating the unprecedented level of corruption had a very high cost. The level of uncertainty and volatility being witnessed since then has left its repercussions on the economic and financial level in a way that Lebanon hasn’t experienced during the civil war, post the assassination of late prime minister Hariri or even after July war 2006. Businesses are catastrophically suffering and the whole economy is in crisis. Classical leadership models won’t serve well in such critical times. Being Agile is not an option. Yet not all business leaders have what is required to be agile and to adopt the trendiest leadership models. Lebanon over the past 3 months has become a unique case study which demonstrates how leadership should be exercised during times of crisis.

Around 2,500 years ago, Heraclitus, a pre-Socratic Greek philosopher, said, “The only constant in life is change.” Back then, Heraclitus was not able to refresh his Twitter or Facebook account to see that what was trending a minute ago would disappear from his timeline in few seconds.  In that era, the world was not disrupted by this many uncertainties, ambiguities, or complexities. The world was not interconnected as much, and consumers were not spoiled to the extent of updating their needs, wants, demands, desires, tastes, and preferences every so often. Despite all this, Heraclitus had the gall to talk about change!

With these new factors shaping our world, change has gained more momentum than ever before, which requires a kind of leadership responsive or adaptive to this change. Being a manager does not suffice; being a leader is indispensable. It is worth mentioning that even the leadership style that used to be trendy years ago has become obsolete in our new world of business.

Leadership in Action: Complexity

  • According to the Economist Intelligence Unit, organizations are launching more major change initiatives than ever before: three to five per year, on average.
  • The Corporate Executive Board reports that globally, half of employees expect a major change in six months.
  • IBM’s Global Chief Executive Officer Study shows that 79% of CEOs say that the level of uncertainty and complexity will get even higher; less than half say they are prepared to manage it.
  • Forum Global survey of 700 leaders shows that 72% of them report high or extremely high increases in uncertainty within their companies.
  • Forum VOC research indicates that twice as many business leaders say that “the ability to lead change” is a top business challenge as compared with 2010.

Triggers for New Forms of Leadership

  • The skills needed for leadership have changed—more complex and adaptive thinking abilities are needed.
  • The majority of managers have developed by virtue of on-the-job experiences, training, and coaching/ mentoring; while these factors are all still important, leaders are no longer developing fast enough or in the right ways to match the new uncertain environment. A global mindset is required to lead.
  • Companies are facing a development challenge, which is the process of growing “bigger” minds and developing more agility in dealing with problems.
  • The environment has changed—it is more complex, volatile, and unpredictable. In a study conducted by the Center for Creative Leadership, the environment in which leaders must work is characterized by the acronym VUCA. The letters stand for:
  • Volatile: Change happens rapidly and on a large scale
  • Uncertain: The future cannot be predicted with any precision
  • Complex: Challenges are complicated by many factors and there are a few single causes or solutions
  • Ambiguous: There is little clarity on what events mean and what effect they may have

Challenges for Future Leaders

  • Information overload due to complexity and the amount of factors that have an impact on businesses
  • The interconnectedness of systems and business communities
  • The dissolution of traditional organizational boundaries
  • New technologies that disrupt old work practices
  • The different values and expectations of new generations entering the workplace
  • Increased globalization, leading to the need for cross cultural leadership

Skills Required for Future Leaders

  • Reflecting the changes in the environment, especially since the competencies that will be most valuable to future leaders appear to be changing
  • Adaptability/agility
  • Self-awareness
  • Being culturally savvy
  • Constant learning and development
  • Collaboration 
  • Network thinking

Power and Leadership

Power is the ability to get someone to do something he or she would not do otherwise. Having an impact on the behaviors of employees to direct their efforts toward achieving a common goal or a shared vision is what leaders usually aim at. The form of power utilized defines whether the company and employees are being led or managed. In a notable study of power conducted by social psychologists John French and Bertram Raven in 1959, power has been divided into five separate and distinct forms:

  1. Coercive: uses the threat of force to gain compliance
  2. Reward: uses the right of some to offer or deny tangible, social, emotional, or spiritual rewards for others for doing what is wanted or expected of them
  3. Legitimate: uses the authority one has based on his or her position
  4. Referent: is rooted in the belonging one might have to a certain group, while sharing its values and beliefs to a certain extent
  5.  Expert: uses on one’s knowledge, experience, and special skills or talents. Expertise can be demonstrated by reputation, credentials certifying expertise, and actions

With the advent of information technology and knowledge economy, a new form of power gained momentum. Information power comes as a result of possessing knowledge that others need or want. Information can lead to a certain influence, impact decision making, establish credibility, and being in control. Providing rational arguments, using information to persuade others, and using facts and manipulating information can create a power base. The particularity of this form of power is that it is not linked to a position in the organizational chart. Any employee who possesses information that is needed to achieve the organizational goals is powerful. This leads us to a new form of leadership, which is distributed leadership.

When a person suffices oneself with coercive, reward, and legitimate power, one exercises a kind of managerial ability to run the business. However, when power evolves into the expert or informational kind, leadership starts to become more apparent.

Peter Drucker says, “The only definition of a leader is someone who has followers.” Leadership can be perceived as a process of social influence that maximizes the efforts of others toward the achievement of organizational goals.