A new study is out that shows that companies that engage in socially responsible behavior are also more likely to engage in socially irresponsible behavior. And the research found this to be fairly common among Fortune 500 company CEOs who work hard at setting a highly moral image and identity. How could that be? The paper, “License to Ill: The Effects of Corporate Social Responsibility and CEO Moral Identity on Corporate Irresponsibility,” was co-written by professors at London Business School and University of California, Riverside School of Business Administration. The author-researchers found that for approximately every five positive actions that a firm takes, it gives them license to commit one negative action. As one of the co-authors says, “These findings show that CEOs should be aware of this tendency so that they can prevent their companies from slipping into this pattern. Additionally, corporate boards can’t allow CEOs to rest on their laurels. They need to be vigilant in monitoring CEOs.” Good advice. They held up BP and Enron as examples of companies that proclaimed high corporate social responsibility (i.e., beyond petroleum and all the philanthropy engaged in by Enron’s Ken Lay) and yet transgressed.
You might be scratching your head. It is hard to understand how this could be. The research which is pretty impressive found that leaders who direct their company’s CSR strategy end up with “moral credits.” These moral credits blind them to irresponsible behavior and being less vigilant about how they manage stakeholder needs. And this goes for employees too who also tend to internalize the prior ethical CSR image of their employers and feel that they too are untouchable when committing unethical behavior.
The best part of the article or at least one of the many best parts is how they use the term CSiR for corporate social irresponsibility. It’s a new term to me and one I will use again and again.
None of us want to ever underestimate the importance of corporate culture and the impact of employee satisfaction on performance. It is not just window dressing. A study by Professor Alex Edmans at London Business School found that when a company makes it onto the Fortune 100 Best Companies to Work For list, it generates 3.5% higher stock returns per year compared to its peers. To be exact, it found that companies listed in the “100 Best Companies to Work For in America” generated 2.3% to 3.8% higher stock returns per year than their peers from 1984 through 2011. Management journal, strategy + business says this about this effect of employee satisfaction,”There is money to be made from employee satisfaction. Let’s all get rich and happy, but not necessarily in that order.” I might have to argue with that but anyhow…here are the facts from the research. A great stat for demonstrating that it pays to build a terrific culture:
The results clearly point out that job satisfaction is beneficial for firm value and ultimately, reputation.
Read about it here.
I was very pleased when I saw that the WSJ covered our thought leadership survey Civility in America yesterday (mid day it was the 4th most popular on the site!). In their article on incivility at work, they mentioned our stat that one in four Americans (26%) have quit their job due to the unpleasantry and rudeness they have encountered at work.The rate of Americans who have quit a job because it was an uncivil workplace decreases with age. Interesting, right? This could be that younger people are less tolerant to incivility at work or that it is more acceptable in today’s society to quit a job.
There is no doubt about the fact that incivility is seeping into all aspects of our lives. According to our research with Powell Tate and KRC Research, the rise in uncivil workplaces has risen over the past 12 months, from 34% to 37%. This might be part of the reason that 75% of Americans think we should have civility training in schools today. What could be a better place to start. You might say a good place to start would be at home. Maybe so but the survey found that 30% of Americans say they experience incivility at home and 55% see it in their neighbors’ homes. Nothing like fingerpointing.
One of the questions we asked this year still intrigues me when it comes to this timely topic. We asked people in late Spring when we did the survey whether they would take a national civility pledge on July 4th. Well, a whopping 87% said they would. There was no disagreement here — men, women, all age and income groups and regions of the country were willing to spend an entire day being just plain civil. My sense is that the same high percentage would apply to this upcoming Labor Day. I am going to do my best as a party of one to be as civil as I can be, even if it surprises someone. All of our reputations in this country depend on it.
Reputation matters and has grown in importance to companies and their leaders. In a recent article in ABA Banking Journal on the banking industry’s reputation, the topic of intangibles came up that I thought was worth emphasizing.
Years ago, investors only cared about financial performance but it is now clear from some research that 80% of the value of S&P companies is attributable to intangibles like reputation. This estimate is similar to what I have been using for years since I first learned about intangibles vs tangible assets and the enormous influence of reputation on market value. Social media has now made those intangibles easier to access and therefore opened up to most of us how companies treat their employees, build leaders and brands, follow codes of conduct, treat intellectual property, disclose information, care about communities, etc. The article pointed out that Bloomberg terminals provide information on more than 120 environmental, social and governance measures that help investors value the intangibles that drive reputation. This is an important point because whereas financial performance is based on looking backwards, intangibles now available on these types of data aggregators are more forward-looking and give a clearer picture of what might lay ahead for particular companies. The article points to another data aggregator called CSRHub which looks at companies through the lens of metrics including “best of” and “worst of” awards and rankings. As the article says, “Since the market calculates the value of businesses based on anticipated future earnings, poor reputation can be an indicator of systemic problems, which can have an adverse effect on revenues.” It is hard for me to remember a company whose reputation failed and where when the digging began, there weren’t any warning signs ready for the asking. Sometimes I go to Glassdoor.com to just read about where those early warning signs might be for particular companies and wonder why no one has investigated further what employees are only to quick to tell the world. Apparently there’s a banking industry site with reviews called MyBankTracker which was new to me.
Would we have known about Enron’s demise if Glassdoor.com or some other similar site had existed when Enron imploded? I sometimes wonder about that.
I found this interesting example of how reputation can be managed simply by building a strong and prideful culture for employees. It is a lesson to us all. The article was written by the editor of American Banker and reveals her interesting perspective:
“In terms of how employee experience influences media coverage, I offer the example of two prominent retail brands that I used to cover for a major metro newspaper. One had a disgruntled employee base that was great for leaks that led to juicy stories. From the other, I never got anything aside from the official company line. Even when the second company hit a rough patch, no one called the local paper to complain. Here, a healthy culture offset the impact of an unhealthy stock price: these employees were rallying around their CEO. They cared about their brand and were motivated to contribute to its revival.”
Employees in the second company rallied behind the company and kept its reputational equity stable. They were not roaming the Internet spreading discontent and doubt and catching the eye of some journalist covering the beat. This is how it should work.
A few weeks ago, I read the new Gallup report, The State of the American Workplace: Employee Engagement Insights for U.S. Business Leaders. It is really worth a read because it holds incredibly valuable and meaningful information on employee engagement. One of the findings that leapt out at me was this — only 41% of employees felt that they know what their company stands for and what makes its brand different from its competitors’ brands. No surprise that 60% of executives say they know what their company stands for compared with only 40% of managers who can say the same. The startling fact is that only slightly more than one-third of “other employees” – those nonexecutives and nonmanagers – report that they can explain what their sets their company apart. If you flip this on its head, this finding is telling us that nearly two-thirds of lower level employees are unable and incapable of telling their friends, neighbors and family members – and even worse, customers – what the company’s greater goals and strategies for success are. Just imagine how difficult it is to come to work every day and not have that touch point to drive engagement and meaningfulness. When you next realize that most of these unprepared employees are likely dealing with customers, the urge is to sound the alarm bell. It is practically impossible for an employee to be a positive brand ambassador or brand advocate if he or she cannot articulate why a consumer should choose the company’s product or service over another and furthermore, why they themselves should even go the extra mile to make a difference to the customer. It is also practically impossible to expect your company to have an enduring reputation if it does not have employees who are engaged enough to know why they are there.
Gallup wisely recommends that all new employees should be trained so that they can recite the company’s brand promise and positioning within their first 30 days. I would recommend that management communicate communicate communicate until every employee understands their company’s higher purpose from day one. It needs to be drilled into the employee experience ad nauseum.
The news story about the CEO held hostage in China by employees has me thinking about the potential next new uprising — employees. We’ve seen leaderless revolutions spring up everywhere around the world recently but we have not really seen employees take matters into their own hands like this. Of course we have labor unions that strike and protest but they usually have contracts with employers and have set rules for negotiations. Employee preceptions are such an important driver of reputation that any mishandling or media attention (offline and online) related to dissatisfaction can seriously damage a company’s reputation.
Going back to the hostage American CEO, Chip Starnes, of the specialty medical supply company based in Florida — he was held hostage in his office for several days because employees were worried he would not pay severance as the company laid off some workers to move their functions to India where labor is less expensive. The CEO bought the factory 10 years ago so this was not a new relationship although it is hard to tell what the relationship between employer and employee actually was. As hostage, Starnes spent some time being kept awake and hungry, all under less than ideal conditions. Starnes sent an alarming cellphone video of the situation to his brother showing employees gathered around an executive-like chair in the middle of a hand-drawn circle on the pavement outside his office cell. Once compensation for employees was properly negotiated, he was set free although he has not left China as employees await a check clearing for their employment packages.
On one hand, the CEO and his company’s reputation for doing business in China was damaged (perhaps not damaged but certainly placed in doubt) but I’d add that the reputation of the business environment in China was also placed in harm’s way. And all of this was inflicted by employees who rose up and took matters in their own hands. We’ve seen other employee-instigated anger at employers such as confidential leaks, badmouthing online and boycotts but rarely something this drastic. Employee as activist could unfortunately be the next reputation-damaging trend.
Just read Gallup’s new State of the American Workplace study which is about employee engagement. Several findings jumped out at me in terms of reputation. Gallup found that approximately 30% of employees are engaged while the remainder (70%) is actively disengaged or just not engaged. When you think about getting your employees to “live the brand or reputation,” companies are limited as to what they can do when the majority of their workforce is basically not present. Another revealing finding focused on how well employees really understand their brand’s being. Only 41% felt that they know what their company stands for and what makes it different from competitors. Thus, 59% are fairly clueless despite all the communications directed at them on vision, mission and values. Fairly disturbing when you think about how harnessing that knowledge could boost reputation. And imagine what happens when an employee who does not understand what the company is about collides with a customer. Not a good picture. Not good for reputation-building. The solution is for leaders to do a better job of making sense of what employees are doing from 9 to 5.
Each year Fortune publishes the 100 Best Companies to Work For in the U.S. While the bulk of the company evaluation rests on a comprehensive employee survey, Fortune publishes a wealth of employer statistics about benefits, diversity and jobs. Weber Shandwick has been cataloguing this data since 2006, enabling us to look at how each factor is changing over time and how reputations can be shaped by being a best company to work for.
Most Best Company statistics for jobs, diversity and benefits were unchanged between 2012 and 2013. However, this leveling off could be taken as a sign of good news. 2010 and 2011 were mediocre years for jobs and the improvement in job and diversity statistics in 2012 suggested that the market was starting to strengthen and reputations are stabilitzing. Similar numbers in 2013 may signify that improvement is still underway.
Below are insights into these jobs, diversity and benefits trends:
Jobs: The Best Companies reported virtually the same job statistics in 2012 and 2013, including median job growth (6%) and median voluntary turnover (7%). In fact, with the exception of 2010 and 2011 which were poor years for jobs statistics, median job growth has maintained a steady rate since 2006, only fluctuating between 5% and 7%. Perhaps this job growth range is a Best Company standard.
Improvement in negative growth may be a sign of recovering job market. After hitting a low last year (11%), the number of companies experiencing negative job growth remained steady in 2013 (12%). This is a drastic improvement from 2011 when 45% of Best Companies reported negative job growth.
The rate of Americans quitting is on the rise, suggesting that people across the country are becoming more confident in leaving their jobs to find work elsewhere. Best Companies, however, maintained the same voluntary turnover rate between 2012 and 2013 (8%). The difference between these two trends may reflect the impact that a good reputation can have on retaining a company’s workforce.
Diversity: Diversity initiatives at Best Companies have also remained mostly unchanged. The average percentage of women and minorities working at Best Companies has been consistent since 2008. But with women already comprising, on average, nearly half the Best Companies’ workforces, it is very possible that we will see this trend continue into the coming years. 2013 was another solid year for gay-friendly policies and benefits. Nearly all Best Companies this year have gay-friendly policies (99%) and the number of those offering gay-friendly benefits has hit a record-high (93%).
Benefits: The most noticeable change in employee benefits offered by Best Companies since last year is the decrease in number of companies extending compressed workweeks (down from 80% in 2012 to 73% in 2013). Also taking a small hit is on-site childcare, which fell below 30% for the first time since 2008. The Fortune evaluation, however, does not look at companies that offer flexible workweeks, which could be taking the place of these two benefits. Best Companies could be giving employees the opportunity to better balance their work lives outside of a formal perk. We may be starting to see this trend happening at companies not on the best-of list too. For example, while Yahoo CEO Marissa Mayer was recently in the media spotlight for banning working from home, it is possible that Yahoo employees have other options for work flexibility aside from telecommuting. The benefit with the greatest improvement is on-site gym, which hit a high this year (73%). All other perks remained largely unchanged from 2012.
On my travels, I met with the CEO of Ocean Park (disclosure: a client) in Hong Kong. Ocean Park is a theme park that promises to connect people with nature and provide memorable experiences for all. Although I had several memorable experiences seeing my first Panda and getting a personal behind the scenes tour of how Pandas are taken care of, I also had an unplanned memorable experience that had simply to do with people. After my presentation on Social CEOs to the executive team, Ocean Park’s CEO Tom Merhrmann joined us outside as we started our tour. Tom is a very social CEO as you can see in his discussion of the Halloween bash with Marketing Magazine or impersonating Elvis, let alone his presence on Facebook and LinkedIn.
When we were outside the meeting room, we quickly ran into two Ocean Park visitors who were enjoying the park. Within seconds, I saw Tom offering to take their picture with one of the girl’s cameras. I had no doubt that the visitors had no idea who he was but were only glad to have their picture taken together to create their own memories of the day. It was nice to see that how observant he was of his customers’ concerns. A few seconds later, I turned around to see him picking up some litter that had fallen to the ground. Between watching a CEO connecting with customers and picking up a speck of garbage to keep a park pristine as it could be, he reminded me that being socially-media savvy is just one element of leadership.