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Corporate social responsibility: the risks

and opportunities for HR

Integrating human and social values into the strategic and operational fabric

Jonathan Ledwidge

Corporate social responsibility (CSR) has brought with it a new challenge for HR

managers and professionals one loaded with both risks and opportunities.Managing those risks and exploiting those opportunities will, however, require a

reappraisal of existing approaches to HR and the scope of its activities.

An era of public and consumer advocacy and activism

We live in an era of unprecedented public and consumer advocacy and activism, and with

the internet a constant in terms of increasing transparency and connectivity, this activism will

only intensify over time.

Organizations today are under immense scrutiny to demonstrate that their business stands

for something more than profits. More specifically, they are being required to show that their

activities add at least some value to, and at the very least do not negatively affect, the wider

community.

Organizations have, to a large extent, recognized this and have thus been busy devising

CSR programs in response. There is also little doubt that there are managers and executives

who are personally motivated to ensure that their organizations are acting in the common

good.

However, there is no denying the impact that this will have on the competitiveness and

sustainability of corporate business models. How does this affect the role of HR specialists

and what should they be doing about it?

The problem of multiple organizational identities

More often than not, an organizations identity and that of its CSR program are not the same.

This is because, in most cases, CSR is seen as a necessity, but one that is complementary

rather than integral to an organizations core strategy.Unfortunately this can result in organizations having multiple public identities one for the

core business and the other(s) for the CSR program(s). This corporate schizophrenia, a

disconnect or discontinuity in the core values, can in the worst cases result in tragedy, bad

publicity, and the destruction of corporate value.

There have been some notable examples.

BP had a great CSR program in Texas but apparently did not pay sufficient attention to the

maintenance of its refinery. When that refinery exploded, lives were lost, many people were

DOI 10.1108/09670730710820190 VOL. 15 NO. 6 2007, pp. 27-30,Q Emerald Group Publishing Limited, ISSN 0967-0734 j HUMAN RESOURCE MANAGEMENT INTERNATIONAL DIGEST j PAGE 27

Jonathan Ledwidge is the

managing partner of

THAPartners, London, UK.

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injured, plant and equipment were destroyed, and an independent report on the incident

was a public-relations disaster for the company.

In another classic example, Bristol Myers Squibb found itself under federal investigation in

the US for blocking access to generic drugs something that clearly cannot be reconciled

with its stated mission to extend and enhance human life.

How does this affect the work of HR managers and what can they do about it?

If you believe that HR has a significant responsibility in respect of developing the core values

and belief systems within and throughout organizations, this corporate schizophrenia must

surely represent a major twenty-first century challenge for all HR managers.

One might argue that not every organization is like BP or Bristol Myers Squibb. However,

even for the average organization, any disconnect in the core values be it strategic,

operational or geographic is likely to cause problems.

Focusing on the core values

Perhaps the most important manifestation of any disconnect in the core values is in the

customer experience.

Most polls show that people are, by nature, distrustful of organizations, and believe that,

while many organizations profess to be good corporate citizens, much of what they do is

motivated by PR and the desire to make more profits. Obviously, the examples cited above

merely reinforce that negative sentiment.

It thus follows that employee-development programs must be geared towards ensuring that

the customer experience reflects the organizations values with respect to the community.

Sometimes the discontinuity in values can be political and geographic in nature. For

example, Google and Microsoft have been much criticized for bowing to Chinese authorities

by censoring their search-engine results in that country.

Incidents such as these, while having a relatively limited operational impact, can

nevertheless influence how others view the entire organization. In some cases they can also

have a negative impact on employees, managers and ultimately organizational

performance.

HR professionals should be concerned with how their organizations determine the limits,

ethical or otherwise, of core values and beliefs. They should especially consider how or

when such limits, irrespective of where they might be applied, will affect employees, the

organization, its clients, and the wider community.

The primary issue, of course, is that many of todays CSR programs are just that, programs

they are not part of the core belief system of people operating within an organization. Until

such time that the human and social values that CSR programs profess to hold dear are fully

integrated into the strategic and operational fabric of an organization, HR must work with

CSR managers and other departments to resolve the conflicts that might arise, and that

might ultimately impair the value of the organization.

Further, if and when an organization does integrate its CSR and core beliefs, HR specialists

must play a key role in embedding those beliefs throughout the organization.

The primary issue, of course, is that many of todays CSRprograms are just that, programs they are not part of thecore belief system of people operating within anorganization.

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Innovation still remains an imperative

Thus far we have mostly concerned ourselves with the risks that might arise from having a

disconnect or discontinuity in an organizations core values. However, while the initial focus

must be to manage those risks, this must certainly be viewed as the minimum position the

one most likely to resolve internal conflicts and diminish the possibility of negative fall-out.

Consider the environment.

The array of government authorities, consumer groups, non-governmental organizations,

the general public and consumers that increasingly defines the scope of what organizations

can and cannot do will become more rather than less activist. Therefore, organizations will

find themselves consistently challenged to adapt to new requirements and demands.

Constant change invariably means constant innovation. Thus by definition, the work of HRmust also be focused on developing behaviors that promote innovation as well as minimize

risks. Otherwise, maintaining a competitive advantage will be difficult.

This might sound like an insurmountable challenge, but in reality it is a great opportunity.

Where there is friction there is opportunity

It is years since I completed my MBA but I will always remember the words of one of my

lecturers: Where there is friction there is opportunity. Having worked in investment banking

for almost 20 years I was fortunate to witness this principle first-hand.

During the late 1980s, central banks and regulators became fearful of the risks that

international banks posed to the global financial system. Consequently, under what becameknow as the Basel accord, regulators imposed a set of capital rules that were designed

better to control the activities of banks by setting limits on the levels of risks they could incur.

The banks that became successful in this new environment were the ones that developed a

culture of managing, pricing and selling risks by introducing innovative and complex

financial products. As the Basel rules increased in complexity, these same banks responded

by increasing the diversity of their products, and with it their competitive advantage.

The challenges faced by organizations in this new era of what I would call human and social

values are certainly not dissimilar to those faced by international banks over the past 20

years.

So how might an HR specialist approach the current problem? Are there any guidelines or is

there any precedence for innovating through human and social values? The answer is yes.

Innovating through human and social values

The record shows that responding to human and social needs has been one of the greatest

catalysts for product innovation and development in the history of commerce.

The industrial revolution was driven by both the personal ambitions of ordinary people as

well as the desire to provide basic goods such as soap, previously the preserve of the rich, to

the common people.

All that is required of the HR specialist, therefore, is toengineer his or her organizational development andtransformation programs around the right human and social

values.

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Fords Model-T was similarly driven by two different but complementary sets of human and

social values. The first was his desire to grant mobility to the masses. The second was that

the wages he paid catapulted the ordinary worker into the middle classes.

In our time, the success of the mobile phone, the computer, and the internet can all be

defined in terms of their human purpose. Bill Gates triumphed not because he had the best

product, but because he had a vision of a computer on every desk and in every home, while

the internet has rapidly moved from a distinctly technical triumph to a human and social

phenomenon.

All the evidence suggests that human and social values often provide the greatestinspiration for performance and innovation. As Drucker noted:

The real development I have seen of people in organizations, especially in big ones, comes from

their being volunteers in a non-profit organization where you have responsibility, you see

results, and you quickly learn what your values are.

All that is required of the HR specialist, therefore, is to engineer his or her organizational

development and transformation programs around such values. However, to do that we

need a new organizational model one that places people and human and social values at

the core of everything the organization does.

Engineering a human and social transformation

Since human and social values are increasingly defining the scope and nature of an

organizations activities, in order to manage risks and improve innovation, organizations

should develop a human and social model of their business. I call this model the

human-asset model.

The human-asset model recognizes that todays organizations are best defined as a network

of human assets managers, employees, suppliers, customers, and the wider community.

In this model, success is determined by the extent to which these assets are motivated to

work and collaborate in pursuit of a common vision or purpose.

It is within such a framework that an organizations common vision or purpose, and thus its

core beliefs, can be defined within a human and social context. Consequently, this model

enables HR specialists to play a stellar role in determining and developing an organizationscore beliefs, and ultimately its competitive advantage.

Keywords:

Corporate social

responsibility,

Human resource strategies,Strategic alignment

Note

Jonathan Ledwidge is managing partner of THAPartners and author of the book The Human

Asset Manifesto (Morgan James Publishing). For more information, visit www.thapartners.

com or the blog at http://thamanifesto.typepad.com

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