Good Honest Dollar $$

The idea of corporate volunteering – companies encouraging staff to perform volunteer work – has long gained acceptance as a form of corporate social responsibility.

But IBM takes this concept to a whole new level.

Rather than work on local projects, participants in Big Blue’s Corporate Service Corps. (CSC) initiative are posted to places like Ghana, Vietnam, Kenya and other emerging economies. And they work with colleagues not from their own office but rather in multi-ethnic teams comprised of eight-fifteen IBMers chosen from different parts of the world.

Bold in nature, CSC represents a groundbreaking initiative in combining corporate social responsibility with global leadership training. It is well worthy of commendation.

Background – about the program
Modeled on the US Peace Corps., IBM’s Corporate Service Corps. initiative represents part of the company’s efforts to develop leaders who can think and act on a global scale.

Chosen from around the world, groups of eight to fifteen high performance IBM staff spend four weeks working on a pro-bono basis with governments and private enterprise in developing nations to design and plan infrastructure projects or generate ideas for process improvements.

(The make-up of each group is specifically chosen to ensure a breath of cultural diversity within each team.)

Kate Robertson, for example, an IT consultant in the UK, helped the provincial government of Bohol in the Philippines to develop practices and structure relating to human relations management. In Romania, engineer Al Shakria and his team reengineered the manufacturing process at a furniture manufacturing plant which doubled productivity by recommending a device which allowed machines to be positioned in such a way that the operator could drill and spray at the same time (refer IBM corporate video). And in Kenya, the team of eleven IBM staff from seven different countries worked alongside the Kenya Information, Communications and Technology Board, the Ministry of Information and Communication and the Digital Opportunity Trust to develop strategies to narrow the digital divide between rural and urban areas and accelerate the growth of communications in technology across the country (Kenyan CIO Magazine, Oct 13). 

The program has been enormously popular with IBM staff. According to The Economist (Oct 28), the company has received more than 10,000 applications since the program’s inception in 2007. Around 500 participants are chosen each year.

Win-win-win thinking
The delivers significant benefits to three key stakeholder groups:

• Recipient communities.

Obviously, individual communities in which the program operates derive immediate benefits as a result of the service provided.

Just as importantly, however, they also benefit through empowerment. IBM provides ideas and a plan, but local communities themselves do the implementation and achieve the outcome – with IBM having enabled them to do so.

• Individual participants.

Individual project participants benefit through experiencing a different country and culture and working alongside people from different parts of the world.

Project participants also benefit through a sense of accomplishment associated with having achieved something meaningful, contacts and friendships with other IBMers beyond their immediate office or location, and an expanded and more globalised outlook and perspective on life.

• The company itself.

Arguably the biggest beneficiary in all this is IBM itself.

From Big Blue’s perspective, the program delivers enormous benefits in terms of profile and corporate image in countries where a large portion of growth prospects lie. And though locals do most of the actual work associated with the individual projects which IBM helps plan, the company does on some occasions receive paid contracts for follow up work in areas of the implementation which are especially pertinent to its areas of expertise. Piotr Uszok, the mayor of Katowice, Poland, for example, who is extremely happy with the smarter-city advice he received this year, hopes that IBM will take part in the tendering process regarding projects which follow on from this (The Economist, October 28).

(IBM stresses its CSC services are offered without any strings attached, and that recipient communities face no obligation whatsoever to reward the company with any follow on contracts which arise out of CSC work.)

More broadly, projects like this go a long way toward retaining top performers, breaking down internal cultural barriers within global operations and maintaining the company’s reputation as a global leader.

But the most important benefit for IBM relates to the development of global leaders. Organisations which aspire to global industry leadership (or, in IBM’s case, maintaining global leadership) need leaders who understand how the world works. And the best way to develop these leaders? Exactly as IBM is doing: send up-and-comers out into the world.

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Recently, one of the major supermarket chains down here in Australia ran a promotional campaign whereby shoppers earned vouchers which were able to be used by their local schools to purchase sporting equipment.

Cleverly designed on a number of levels, the program delivered real benefits to the company itself as well as local communities.

Background
The Sports for Schools program was a recent initiative of Coles Supermarkets, the second largest supermarket chain in my home country of Australia.

Under the program, which ran from early September until the end of October, shoppers were able to earn vouchers (worth one ‘point’) for every ten dollars which they spent. These vouchers were then able be taken to local schools, who were able to use them to purchase new sporting equipment.

The program was well received. According to the company’s web site, more than 7,400 schools chose to participate

Why the program was so good
Coles’ approach is hardly revolutionary, and I would imagine that programs along similar lines would be reasonably common in retail outlets throughout many parts of the world.

Still, the program was extremely well designed. There were a number of aspects about it which stand out:

 
• Making customers notice by getting them involved.

By involving customers in the process, Coles generated a high level of interest and awareness in what it was doing – far more than would have been the case had the company chosen to simply donate the equipment directly.

 
• Making customers feel empowered.

By having customers ‘earn’ their vouchers (and then by having customers go themselves to their local school to donate the vouchers), Coles made it seem almost as if it was the customers themselves who were achieving something for their schools – with the company merely empowering them to do so. 

This is important. The desire for empowerment is a natural human craving. By empowering shoppers to achieve something worthwhile, the company has strengthened customer relationships far more than would have been possible had customers not been involved in the process.

 
• Direct link to customer purchases.

By awarding one voucher for every ten dollars spent, Coles created a direct incentive for customers to make additional purchases.

A customer whose bill added to say, $78.50, for example, might well have been tempted to buy something extra in order to get the bill up above $80 and thereby earn eight vouchers rather than seven.

 
• Giving an incentive to shop at Coles.

Moreover, the program gave customers an incentive to shop at Coles rather than rival supermarkets.

At Coles, shoppers could earn vouchers for their children’s schools. At rival supermarkets, they could not.

 
• Local benefits for local children.

CSR programs which provide tangible benefits to local children will always have a strong impact on customer relations.

For parents, it is natural to feel particularly strongly about immediate issues affecting their own children. And even for many who do not have their own kids, children within the local community represent something special.

Also, tangible items (like sporting equipment) distributed locally are more easily noticed by consumers than the provision of any benefits which are less tangible or which are provided outside of local areas.

 
• Physical education – an increasing area of importance.

Another area in which Coles have done well relates to their choice of cause to support.

With children spending more and more time on computers and watching television, parents are becoming increasingly anxious about their children getting sufficient levels of exercise and physical activity.

(There may be good reason to worry. A recent study by the World Health Organization, which analysed 72,845 children across North and South America, Asia, Europe and the Middle East, found that only one quarter of boys and 15% of girls were getting ‘sufficient’ levels of exercise – more than one hour per day, five days per week. The study also found that a quarter of boys and 30% of girls were ‘sedentary’ – spending three or more hours per day on the computer, watching television or chatting with friends.) (Reuters, Mar 10, 2010)

For this reason, any efforts supermarkets make to promote or encourage participation in sport or physical education will be increasingly well received by consumers.

More broadly, given the desire on the part of parents to see their children get the best possible start in life possible, efforts to promote education of any kind will always be popular.

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One of the hotly debated topics in the field of business ethics at the moment seems to be the question of the type of impact which the current challenging economic environment will have upon Corporate Social Responsibility (CSR) – efforts on the part of companies to conduct themselves in a manner which is responsible from a social, economic and environmental perspective as well as a business perspective.

My thoughts – overall, I would not be surprised if many companies seek to pare back their level of CSR related effort, particularly as firms are, as The Economist puts it:

“.. a long hard look at the resources they devote to everything from supporting charities to making their activities carbon neutral.”  (refer article)

However, CSR encompasses a very broad range of activities, and I would think that the impact of the challenges associated with the current economic environment will vary according to the nature of each particular activity.

 
Observations about the impact of the downturn from a CSR perspective
A thorough examination of the likely impact of the downturn with respect to each type of CSR related activity is well beyond the scope of this discussion.

Nevertheless, I would like to make a few observations:

 
• Corporate philanthropy.

Probably one of the hardest hit areas, not least because this form of CSR: (a) involves the direct outlay of scarce financial resources, as well as benefits which can be difficult to quantify and are often expected to accrue over a lengthy time period; (b) expenditure in this area can be curtailed without a great degree of direct or immediate impact upon a firm’s business operations.

Regardless of how moved one may be by Ford’s assertions that it remains ‘committed to the concept of giving,’ the fact that the automaker expects it’s corporate donations to be down forty per-cent next year (refer article linked to above) speaks a great deal about the prospects of any areas of corporate philanthropy which are not very closely related to an organization’s operations or direct branding strategy. 

 
• Community Business Partnerships.

Interesting area.

Commitments to these types of partnerships, which typically involve social or environmental partnerships between companies and NPOs or community groups are generally of a fairly long term nature.

With respect to existing projects, I doubt there will be many cases where firms reneg on commitments which they have already made. Compared to straightforward philanthropy, I would have thought that these kinds of projects would generally tend to be more closely aligned with both operational requirements and branding strategy, reducing the likelihood to which they would be subject to curtailment. Moreover, corporations would find it difficult to pull out of their commitment to such projects without suffering considerable damage from a reputational viewpoint.

That said, I would not imagine that firms would be particularly keen right now to enter into new commitments in this area. With short term survival proving enough of a challenge for some firms, I cannot imagine that investment in new social partnerships would exactly be a top priority.

 
• Investment in energy efficiency and environmental improvements.

Probably the most risilient form of CSR at the moment, particularly given the extent to which energy efficiency helps improve not just the environment but the bottom line through cost reductions as well as government enthusiasm to direct stimulus related funding toward any areas with a ‘green’ label attached to them.

That said, I would have thought that investment in some of the more capital intensive projects may be subject to some degree of curtailment, particularly in cases whereby large portions of the anticipated cost reductions are not anticipated to be realized until the project concerned has been operating for several years.

 
Genearal comment – back to core business
Overall, whilst I would certainly have thought that some areas of CSR related effort may be subject to curtailment, I do not imagine that firms will abandon the concept altogether.

Instead, what is more likely is a refocusing of CSR effort toward projects which: (a) are more closely tied to branding strategies or business operations; (b) are anticipated to produce business benefits of a more obvious and (ideally) quantifiable nature; and (c) do not involve large outlays or long term commitments of financial resources.

Any forms of CSR efforts which do not fit the above criteria, I would imagine, will be the subject of an increasing level of scrutiny among corporate boards.

 
Over to you
What do you think the near term future holds for CSR related effort?

Today, I am delighted to have sales and marketing professional Brad Shorr as a guest writer on this blog.

Brad has many years of business experience, and in his discussion below, he talks about the need for organizations to hold discussions with their staff about the most effective ways to handle specific situations in which they may encounter potential ethical dilemmas in the course of their duties:

 
I’ve been a big fan of Andrew’s blog from the moment he told me about his theme, business ethics. It’s a topic that deserves much more attention, and I love how Andrew is able to give us a clear yet high altitude understanding of complex ethical issues.

For my guest post, I’d like to turn the tables a bit and talk about what business ethics look like from the trenches. Since that’s where I’ve spent most of my career, it seems like the logical place for me to go.

It’s been said that ethics is what you do when nobody is looking. In day to day business activities, nobody is looking pretty much all the time. I’ve worked in environments where management requires detailed call reports and looks over employee shoulders continually, but the fact is, people can get away with just about anything if they are so inclined.

Well intentioned or not, in the trenches it is difficult to tell when you’ve crossed the ethical line. Hypothetical: Supposing a customer overpays you by $10 on a $1000 invoice. Would you pocket the $10 or credit it back?

It’s quite easy to justify pocketing the $10. Processing the paperwork will cost the customer more than the $10 in question. I’ve certainly given that customer more than $10 of free service in the past, so this just evens things up. It’s the customer’s responsibility to pay properly, not mine. Ten dollars is nothing – why bother with it at all?

Even when the choice is made to refund the $10, the choice might be made for less than ethical reasons. For instance, the seller might think, I’ll show the customer how upstanding I am. Perhaps in the future I’ll be able to use it to my advantage for a greater gain.

So, even in a simple situation like this, discerning right from wrong requires a good deal of thought and reflection. But the seller could be faced with more complications still. Suppose the customer always pays 90 days beyond terms. Suppose the customer is notorious for taking unauthorized deductions or grinding suppliers’ margins into the ground? Do those considerations affect the decision of how to handle the extra $10?

And what about the big picture? In the trenches, we don’t think about that a lot. But any employee who cares about the success of his firm should. I might be able to justify keeping the $10, yet if my colleagues applied my same reasoning, my firm might overcharge customers by tens of thousands over the course of  a year. Conversely, if our firm had a policy to refund regardless of circumstances, we might forgo tens of thousands in revenue leading to a reduction in salaries and bonuses. 

In my experience, well intended business people will reach different conclusions about how to handle my hypothetical $10. Does that mean business ethics are situational? Is it possible to devise a rule to cover all variations of even the simple example in this post? I’ve been in business for more than thirty years and to tell the truth, I don’t know the answer to either question.

What I do know is, whether a firm has rigorous ethical guidelines or none at all, discussing ethical issues that occur in the trenches is a must. Discussion serves as a collective conscience. While some may not agree on the ultimate decision, everyone comes away with a new perspective and a deeper understanding. These things make it likely that the next time a problem crops up, it will be handled better and more swiftly.

How would you handle my $10 example? Perhaps we can put my theory to work and see if discussion brings clarity!

Andrew, thank you so much for giving me the opportunity to be a guest author on Good Honest Dollar $$!

 
About Brad Shorr 
Brad Shorr lives in the Chicago area, and is president of WordSell, Inc. He helps organizations strengthen their online business presence with business blogs and compelling web content.

Brad writes extensively on his own and many other blogs, mainly about writing, online marketing, entrepreneurship, sales and business humor.

The recent announcement by Wal-Mart of its intention to adopt a more stringent approach toward its supply chain in terms of labor and environmental standards represents a positive step in the right direction.

Now comes the hard part – verifiable and lasting improvement on the factory floor.

 
Wal-Mart’s strategy
On October 22, the company outlined a renewed strategy designed to produce significant improvement in terms of the management of its supply chain from a social and environmental perspective.

The centerpiece of this strategy is a new supplier agreement, to be phased in over a three year period beginning in January 2009. Under the new agreement, suppliers will be required to:

• Certify (a) compliance with all relevant laws and regulations in areas in which they operate and (b) adherence to strict social and environmental criteria;
 
• Conduct their own audits, as well as co-operate with (sometimes unannounced) audits from company representatives or independent auditors;
 
• Provide the name and location of every factory which they use in the manufacturing process; and
 
• By 2012, source 95% of all manufacturing inputs from suppliers which receive the highest ratings in relation to social and environmental practices.

In addition, the strategy also includes a range of targets relating to energy efficiency and product quality and safety, with particular emphasis upon its Chinese operations.

(Refer company announcement and International Herald Tribune article for more details)

 
Lessons from Nike
Associate Professor Chris McDonald, author of The Business Ethics Blog, draws a comparison with Nike. By all means, this is a valid comparison – Nike once had a poor reputation from the point of view of labor practices within its supply chain, but its reputation has improved considerably over recent years due to improvements in public transparency and accountability.

Nevertheless, the comparison with Nike raises three interesting issues:

 
• Wal-Mart’s efforts, at least in terms of public accountability and transparency, do not appear to be as extensive as those of the sporting goods manufacturer.

Nike currently provides full public disclosure in relation to (a) the location of supplier factories; and (b) the aggregate results of audits into labor conditions at supplier factories.

The announcement by Wal-Mart does not state whether or not such information will be publicly disclosed. If not, the general public will not have means by which to verify any claimed improvement in supply chain practices.

 
• Wal-Mart’s problems go beyond its suppliers.

Whilst the problems at Nike relate predominately to its external contract manufacturing practices, those at Wal-Mart extend further, and include alleged poor labor practices in the U.S.

If the company is serious about improving its reputation, it must address all of these issues, not just the issues which pertain to its supplier base.

Moreover, responsibility for improvement cannot be simply transferred to suppliers. Wal-Mart itself has a responsibility to adopt proactive supply chain management initiatives, including the training of suppliers in terms of best practice operating proceedures. Perhaps the most important action which the company could take is to cease placing unrealistic cost and time pressures upon its supply chain – suppliers must be provided with the opportunity to make improvements in operating practices without compromising the viability of their operations.

 
• Accountability is one thing, results are another.

As noted in an earlier post, whilst Nike has made significant improvements from an accountability viewpoint, its progress in terms of verifiable improvement on the factory floor has been very disappointing, with problems occurring frequently in terms of excessive overtime, poor occupational health and safety practices and failure to pay legal minimum wages.

Wal-Mart must go beyond Nike and demonstrate a substantial level of verifiable improvement at the level of the factory floor. Until this happens, no improvement in its corporate reputation will be justified.

 
Summary
Wal-Mart is to be commended on its positive initiatives, particularly its new supplier agreement.

Now comes the hard part – results on the factory floor.