How does a firm become socially responsive?
Executive leaders of the world’s largest corporations have been confronted , during the last two decades with an unprecedented increases in the social issues impinging upon their business policies and practices. Not only have a variety of social regulations been developed that apply universally to all industries, but each industry has also experienced to varying degrees of proliferation of industry-specific challenges for the corporate social environment.
In response to these pressures, businesses have increased their efforts to manage the corporate social environment. The social environment encompasses business activities influenced by various community and government groups. Many chief executives spend more time on the external affairs of the business than any other activity. Most executives allocate significant personnel, time, and budget to the creation of elaborate staff groups to help them understand and manage this environment and its challenges.
Some firms may be more vulnerable to social group pressure and social regulations than others. A firm may be more vulnerable to social forces if the firm is:
- A large-sized or well-known company thus presenting a big target.
- Located in an urban area and under increased scrutiny by the media and social groups.
- Producing consumer-oriented products.
- Providing a product or service that may cause harm or injury to the user.
- Part of a heavily regulated industry that is expected to meet high public expectations.
Top Management Philosophy
How a firm addresses its exposure to the corporate social environment heavily depends on the values and beliefs of the company manager – the philosophy they hold about the role of the corporation in the society. This is called top management philosophy.
Managers sensitive to the impact of social forces and seeking to strategically manage their stakeholders will adopt the view that the firm is a social as well as an economic institution. They embrace the view that the firm has a duty to adapt to a changing social environment. In response to emerging social issues, these managers are more likely to modify their business policies and practices than managers who understand their responsibilities to the firm only in an economic context. Managers in socially responsive firms recognize and consider not only the interests of their immediate, core stakeholders but the interest of all the firm’s stakeholders. They see corporate social performance in broad terms extending over the long-term and having an impact on their industry. Most important, these managers merge the economic and social goals of their company into the firm’s planning, measurement, and reward systems developed to guide and monitor business operations and managers’ performance.
Socially Responsive Strategy
Using a socially responsive top management philosophy as a foundation, a firm must develop a socially responsive strategy. This b strategy orientation needs to emphasize a collaborative and problem-solving approach, as opposed to one that emphasizes only the firm’s interests and is adversarial in nature.
Collaborative problem-solving strategies are distinguished by their emphasis on maintaining long-term relationships based on trust and open communication, with all of the company’s stakeholders. Managers demonstrate this collaborative characteristic by participating in regulatory advisory committees and trade associations that seek mutually beneficial compromises. However, these managers are quick to explain that their strategy is not purely altruistic. They acknowledge that maintaining on-going relationships with their stakeholders and seeking mutually beneficial problem-solving strategies will ensure the company’s long-term survival.
Socially Responsive Structure
The next step in becoming a socially responsive organization is to change the organizational structure to be more responsive to external social challenges and better able to implement socially responsive strategies. This structure evolves from the values and beliefs held by the company’s top managers and are expressed through socially responsive business strategies. There are four basic design dimensions that help to distinguish a socially responsive structure in an organization. They are breadth, depth, influence and integration.
Breadth is the number of different staff units that specialize in the socially responsive strategies undertaken by the company. The breadth of the design must be sufficient to enable the firm to adequately respond to the demands made by social forces.
Depth is the intensity of the organizational learning process in response to the potential for social challenges and is addressed by the socially responsive strategy process. Companies more vulnerable to social challenges require more developed social response functions which provide a wide range of perspectives and responses.
Influence and integration are the final two dimensions of the socially responsive organizational structure. They refer to the quality of relationships that exist among the company’s staff units. The absence of this influence and integration could undermine or bias the organization’s socially responsive strategy process since it could lead to one staff unit, or a few, dominating the process at the sake of other units. The ultimate effectiveness often is due to the degree of integration achieved among staff units.
Line Manager Involvement
The final element in becoming a socially responsible firm is the extent to which line managers are involved in the strategic process. The degree of line manager involvement depends on the sophistication of the company’s social responsive strategy process. The more elaborate the process, the more essential is involvement by line managers.
A high degree of line manager involvement is difficult to achieve. Initially the strategic process is developed by staff units, but line managers must quickly become involved and assume responsibility for the implementation of the company’s socially responsive strategies. For example, if a firm develops a strategy that involves a highly integrated philanthropic contribution and employee volunteerism programme with local charities, line managers are often at the best position to screen worthy recipients, determine appropriate levels of contributions, and assign employee volunteers.
In contrast, corporations that rely on staff personnel and do not foster line manger involvement ill tend to exhibit a narrow, defensive and protective socially responsive posture. This approach will buffer the company’s line managers and line operations from corporate social environment influences. The degree of line manger involvement is heavily influenced by top management philosophy and generally is consistent with the socially responsive strategy and structure adopted by the company.
