The role of Human Resources management in Corporate Social Responsibility

Экономические науки/ 5. Управление трудовыми ресурсами

Д.э.н., профессор Анафияева Ж.А.,

Докторант PhD, 2 курс Байырбекова Р.Т.

Евразийский государственный университет имени Л.Н. Гумилева, г. Астана, Республика Казахстан

The role of Human Resources management in Corporate Social Responsibility

Business community, from the very beginning of the human race, were seen as a constructive partner in a society in which they operate. Although they play an important role in creating jobs, wealth, products and services they under pressure on themselves don’t stop, as they should participate in solving social problems, with the participation of employees, stakeholders, society, environment, government, etc. Society casts doubt on the existence of the business community, especially in light of the scandals and scams carried out by the business communities such as UTI, Enron and World Com. In response, organizations worldwide are forced to comply with all the necessities in relation to corporate social responsibility. Over the years, this concept of corporate social responsibility has acquired an unprecedented momentum in the discussion of business and the public and has become a strategic issue crossing departmental boundaries and affects how the company is doing business. It became so important that many organizations are re-branding of its core values, including social responsibility. Almost all corporate websites / policy / reports speak about their efforts to CSR which has become a way of ensuring that the organization complies with all obligations to society and, therefore, is entitled to receive a license to operate.

According to The Academy of Management Review Corporate social responsibility (CSR, also called corporate conscience, corporate citizenship, social performance, or sustainable responsible business) is a form of corporate self-regulation integrated into a business model. CSR policy functions as a built-in, self-regulating mechanism whereby business monitors and ensures its active compliance with the spirit of the law, ethical standards, and international norms. The goal of CSR is to embrace responsibility for the company's actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere. Furthermore, CSR-focused businesses would proactively promote the public interest by encouraging community growth and development, and voluntarily eliminating practices that harm the public sphere, regardless of legality. CSR is the deliberate inclusion of public interest into corporate decision-making, that is the core business of the company or firm, and the honoring of a triple bottom line: people, planet, profit. [1] Historically the term "corporate social responsibility" came in to common use in the late 1960s and early 1970s, after many multinational corporations formed. The term stakeholder, meaning those on whom an organization's activities have an impact, was used to describe corporate owners beyond shareholders as a result of an influential book by R. Edward Freeman, Strategic management: a stakeholder approach in 1984. [2] One more interesting definition given by The World Business Council for Sustainable Development in its publication "Making Good Business Sense" by Lord Holme and Richard Watts, used the following definition. "Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large". [3] So finally we can define that CSR is the balanced integration of social and environmental considerations into business decisions and operations.

On the other hand we have Human Resources Managers(HRM) whose are well positioned to play an instrumental role in helping their organization achieve its goals of becoming a socially and environmentally responsible firm – one which reduces its negative and enhances its positive impacts on society and environment. The process of defining HRM leads us to two different definitions. The first definition of HRM is that it is the process of managing people in organizations in a structured and thorough manner. This covers the fields of staffing (hiring people), retention of people, pay and perks setting and management, performance management, change management and taking care of exits from the company to round off the activities. This is the traditional definition of HRM which leads some experts to define it as a modern version of the Personnel Management function that was used earlier. The second definition of HRM encompasses the management of people in organizations from a macro perspective i.e. managing people in the form of a collective relationship between management and employees. This approach focuses on the objectives and outcomes of the HRM function. What this means is that the HR function in contemporary organizations is concerned with the notions of people enabling, people development and a focus on making the “employment relationship” fulfilling for both the management and employees. [4]

Further HR professionals in organization that perceive successful CSR as a key driver of their financial performance, can be influential in realizing on that objective. As HR influences many of the key systems and business processes underpinning effective delivery, it is well positioned to foster a CSR ethic and achieve a high performance CSR culture. HRM can play a significant role so that CSR can become “the way we do things around here”. HR can be the key organizational partner to ensure that what the organization is saying publicly aligns how people treated within the organizations. HR is in the enviable position of being able to provide the tools and framework for the executive team and CEO to embed CSR ethic and culture into the brand and the strategic framework of the organization. HR is poised for this role as it is adept at working horizontally and vertically across and within the organization, so important for successful CSR delivery.

Various researchers in different time emphasized the critical importance of HR for the proper implementation of CSR and the role HR can play in developing a process in which business objectives are assessed and the values of re-aligned to match them with things out. Greening and Turban (2000) found that the applicant work and employee perceptions of CSR firms determine their attractiveness to the company. Moving along the same path Cropanzano et al (2001) shows that employee attitudes and behavior largely depends on the validity of the arrangements in relation to them. The poll, conducted with the Cherenson Group, New Jersey based public relations and recruitment agency ads in 2002 showed that the most important factors affecting the organization's reputation as a place to work in the way employees are treated and the quality of goods and services (http : / / www .....). Further, a good relationship with employees and allows the company to receive additional benefits, including improving their image, improve staff morale and support from the community (Zappala and Cronin, 2001). Nancy (2004) In discussing the role of HR in the development of CSR culture in the organization stressed that the growing importance of human capital as a success factor for today's organizations, the role of leadership has become more critical in leading and educating organizations on the importance of CSR and how best to strategically implement CSR strategies and programs within the country and abroad. In this regard, HR should be aware that effective CSR development and respect for cultural differences and sensitivity to the imposition of values, ideas and beliefs in creating a global human resources policies and programs. [12]

Redington (2005) with the help of twelve case studies, while underlining the HR professionals key role in managing the changes required for CSR activities to succeed, stated that employees are the most neglected though most important stakeholder of the organization for conducting CSR activities. While accentuating on this issue he said that having good reputation socially implies that a company’s behavior towards its people consistent and is of a particular standards in which they are valued in as much as the external stakeholders. Rupp et a l(2006) accentuated that CSR plays a role about fostering positive social relationship between organization and communities. They highlighted that employees will turn to CSR to assess the extent to which their organization values such relationships and so high levels of CSR can meet employees need for belongingness with the organization and the society. A survey by Sirota Survey Intelligence (2007) affirmed that employees who are satisfied with their organization’s commitment to social and environmental responsibilities are likely to be more positive, more engaged and more productive than those working for less responsible employers and when employees are positive about their organizations CSR commitment, their engagement rises to 86 percent. On the other hand, when employees are negative about their employers CSR activities, only 37 percent are highly engaged. Similarly, Murray (2008) on the basis of survey stated that more than one-third of responded pointed that working for a caring and responsible employer was more important than the salary they earned and nearly half would turn away from an employer that lacked good corporate social responsibility policies.

In the structural “war for talent”, employer differentiation will become more and more important. People increasingly want to work for an organization that has a “conscience”, and values are key to building conscience. Thus, more and more companies will be defining their organizational values in ways that are aligned with organizational goals and outcomes.

One of the top factor driving CSR take-up is the need for businesses to attract and retain high quality staff to meet current and future demands, identified by 65% of respondents an a global study of privately held businesses conducted by Grant Thornton . A strong employer brand aligned with employee values and concerns is becoming recognized as one of the best ways of retaining talent with employees proud to work for a business that is highly regarded. Further, staff attrition is disruptive, putting pressure on the remaining employees and absorbing management time. Staff turnover can result in increased operating costs, loss of business to competitors and reduced costumer service standards’ [11]. A well developed performance and talent management strategy with embedded CSR components can reduce likelihood and impact of losing employees.

1. Generally, there is a growing desire among employees to derive a sense of greater purpose from their work; happier employees with increased job satisfaction can unleash innovation in a firm. The following list provides an overview of the key business benefits and economic value from employee CSR engagement [5]: Increased retention and reduced recruitment and training costs. A survey conducted for the Conference Board of Canada in 2000 found that 71% of employees want to work for companies that commit to social and community concerns. In a similar Corporate Citizenship study by Cone Inc. in the USA, 77% of respondents indicate that “a company commitment to social issues is important when I decide where to work”. A Scotiabank 2007 study concluded that 70% employees would consider changing job if their employers didn’t operate in CSR manner. With the replacement costs for the average worker about 50 000$ including lost output, recruitment, training and other elements, it pays for companies to manage their CSR as well as their financial performance. Further evidence of the importance of social and environmental performance management comes from a World Business Council for sustainable graduates and potential employees surveyed by Accenture in 2004 rated ethical management as an important factor in their job search. Similarly over 2/3 of the students (68%) in a global survey by globe scan in 2003 disagreed that salary is more important than company’s social or ethical considerations into account when changing employment, while over half of graduates will not work for companies they believe to be unethical. [6]

2. Better able to attract the best and the brightest, especially amongst graduates. The Aspen Institute’s study of MBA students found them to be expressing more interest in finding work that offers the potential of making a contribution to society, in 2007 27 % respondents said that this is important factor in their job, compared to 2002 it was 15%. Further, in the study of young employees, they point out that money was less important to them than personal fulfillment. They went on to the work for companies that promote equality, a green environment and social responsibility. [7]

3. Cost saving and income produced through improved morale and productivity. It has long been known that a more motivated, engaged and inspired workforce generates higher long-term productivity. A Globe Scan International survey showed that eight in ten people who worked for a large company felt greater motivation and loyalty towards their jobs and companies the more social responsible their employers become. Another study, reported on in WBCS publication revealed that 70% of staff who were committed to the values of the company said that their productivity had increased in the past year while of those staff not committed to the company only 1% had productivity improvement. It is well understood that boosted employee satisfaction and performance leads to increased costumer satisfaction, generating a further win-win for CSR oriented companies. Research shows that every unsatisfied costumer tells at least eight people about their experience [8]. Engaged employees are the company’s best defense against this virus. Employees working for organizations aligned with their values are more likely to foster costumer satisfaction and loyalty, providing, of course their expectation are met. If an organization promotes itself as being environmentally and socially responsible, and recruits employees based on these claims, they need to demonstrate this is, in fact, true. Employees will expect to see CSR in action, otherwise engagement drops immediately, they will feel they were sold a “ faulty” experience.

To well understanding of the HR managers role as business partner to the organization, let us analyze 10 steps HR practitioners can follow to support the integration of CSR throughout the business strategy and operations. Their effort will be successful to the degree they are supported by a strong Board and CEO commitment to CSR integration. The HR department cannot act outside of its authority, most of which lies in its ability to influence as opposed to direct organizational activity. As a business partner to the organization, it can and should provide facilitation, coordination and expertise, but it cannot dictate a CSR direction. The Board and CEO set the tone at the top and need to walk the talk of CSR in order to provide effective leadership and contain cynicism. CSR needs to be a built to organization’s business strategy and the CEO’s performance goals, along with measurable objectives and regular performance reporting. CSR also need to be a component across all senior manager performance plans, in order for it to flow to other levels of the organization. All this, with the encouragement, facilitation and expert support offered by the HR department.

Steps:

1. Vision, mission, values and CSR strategy development. Successful CSR requires a clearly articulated vision, mission and values. The HR practitioner could initiate or support the development, or upgrade, of a vision, mission and values foundation if one doesn’t exist or doesn’t explicitly address CSR. The foundation needs to incorporate elements of corporate social responsibility or sustainability in order for it to foster alignment. Where CSR ethic has not yet taken hold, the HR manager could champion the need and opportunity for a vision, mission and set of value. Once the vision, mission and values framework is defined, the firm is ready to undertake the development of its CSR strategy. The role of the HR manager at this stage is central to all other steps.

2. Employee codes of conduct. The HR function is typically responsible for drafting and implementing employee codes of conduct. As such, HR manager hold a pen on the principles contained in the employee codes. Since a number of recent high profile corporate frauds, boards of directors have become very concerned about the ethical culture within their organizations, looking for 100% sign-off on and compliance with codes of conduct which articulate their ethical values. This is an ideal home for the expression of an organization’s commitment to socially and environmentally-based decision-making as it is one of the rare documents which all employees are bound by and come into contact.

3. Workforce planning and recruitment. Workforce planning consists of analyzing present workforce competencies; identification of competencies needed in the future; comparison of the present workforce to future needs to identify competency gaps and surpluses; the preparation of plans to building the workforce needed in the future; and an evolution process to assure that the workforce competency model remains valid and that objectives are being met. Companies need to identify their key CSR competencies and gaps in the context of these structural changes. Referred to by many as the “Green economy”, regardless of its title, the marketplace is undergoing a systemic transformation that will require new competencies and skills.

4. Orientation, training and competency development. During the orientation process employees should be given a thorough overview of the clear line of sight between the company’s vision, mission and core CSR values and goals. To ensure maximum alignment and early employee “buy-in” to the strategic CSR direction of the organization, this general orientation should be deemed mandatory for all levels of new employees. New employees need to be provided information about CSR policies and commitments, the key CSR issues the company faces and the key stakeholders with which the firm engages.HR managers understand the win-win in employee career pathing and succession planning, particularly for the high performance individual. Employees included in efforts to advance their career within the firm are more motivated, more loyal and therefore more productive employees.

5. Compensation and performance management. Next to recruitment and competency development, compensation and performance management are central to the HR function. HR is involved in setting performance standards and expectations and monitoring results to performance objectives. At Vancity Credit Union their Statement of Values and Commitments which articulate their CSR principles is incorporated as a key area of accountability in all executive role descriptions rather than as an added attachment at the end of each role description. Going forward they are expanded beyond their three stated values of innovation, integrity and responsibility, translating them to goals in the annual performance plans of all executives to be cascaded down to each of their managers and employees [9]. The most critical HR tool of all is the compensation and incentive program. Human resource practitioners understand very well that “you get what you pay for”. Typically companies reward on the basis of financial performance, which will singularly foster profit-maximizing behavior, overlooking the need to also consider sustainability factors. The total reward and recognition program, including base salary, incentive pay, long term incentives and other non-monetary recognition benefits (such as award programs, employee of the month, promotions, career pathing, etc.), needs to be aligned with the company’s CSR values and strategy. To do less is to guarantee under-achievement of a company’s CSR objectives. The strategic direction of an organization is set by the CEO and Executive team, however, the HR department can help business units establish CSR targets and develop performance evaluation systems that foster CSR behavior by providing the right tools and counsel. In addition to focusing on executives and senior managers, the personal objectives set by each employee could incorporate one CSR objective aligned with the corporate CSR strategy. CSR should be recognized in both the base job responsibilities as well as the annual performance objectives at the individual and team levels. Performance reviews could consider how the employee has advanced their personal and the organization’s CSR goals over the period. If CSR is built into incentive systems – salary packages and targets that determine whether the manager receives a pay rise, promotion, etc. – the firm is likelier to motivate greater CSR alignment. Certainly the opposite is true. Some examples of non-financial measures include: customer satisfaction, reputation, employee engagement, health and safety, etc.

6. Change management and corporate culture. Human resource practitioners are the keepers of the flame when it comes to corporate culture, team building and change management processes. Growing and adapting to the changing marketplace necessitates that firms pursue significant behavioral shifts from time to time. Sometimes organizations require the outside assistance of change management professionals to help them identify an appropriate strategy when they are attempting to create significant behavioral change, but in the end, culture shift can only be achieved and sustained if it is driven and sponsored effectively internally. Mindsets and behavioral change come about through role modeling, building awareness and generating desire (what is in it for me?) and conviction, developing knowledge and ability and reinforcement through incentive programs. Culture change requires setting the tone at the top – where executives and management demonstrate and model the organization’s values – and than creating alignment throughout the organization with the values you espouse to live. The values need to be reflected in all processes starting with how you attract and recruit employees, to decision – making and rewards and incentive programs, etc. It is important to advance a CSR ethic and program with these perspectives in mind. The organizational culture , or “how work gets done around here”, is a key dimension of any strong CSR agenda. Pople need to be rewarded for the way the leaders want work done on the shop floor and in the C-suite. The foregoing steps are building blocks to the development of a strong CSR ethic and corporate culture, the likes of which will attract and retain the best and the brightest employees.

7. Employee involvement and participation. As mentioned earlier, employees are among the key stakeholders for the development of any CSR strategy or program. A critical first step in mission, vision, values and strategy development is to understand the key concerns, priorities and perspectives of all key stakeholders, particularly employees. It is a truism that employees consulted and engaged in the development of new programs and approaches are likelier to follow through with their implementation. Often companies consult and engage their employees in the development and delivery of their community involvement and charitable donations programs; however what is called for here is more substantive than this. Employee engagement has been acknowledged as a key driver of shareholder value in a firm and in becoming a key metric for monitoring corporate performance by Board and management. Melcrum Publishing has conceived of an employee engagement pyramid (see diagram 1 below). From “I’m aware of the message”, in which employees are familiar with the CSR stategy and how it helps the company meet its objectives; To “I understand the message” where in employees learn the reasons behind the company’s CSR objectives and begin to understand their role in making the company successful. The next stage is “I believe”, where employee feel conviction towards the company’s CSR values and objectives, and finally, “I’m committed to act”, at the pinnacle of the pyramid.

Diagram 1 - Employee engagement pyramid

Those employees who are and feel their basic job needs are being met and who achieve this level, will be inspired to act in ways that help the company reach it’s goals [10].In addition to ensuring employees are included in key decisions, an employee CSR involvement and participation program can help develop the employee value proposition that can foster retention and enhance recruitment. It is important not to miss this step as organizations that fail to engage their employees in key decisions and in their CSR embedment will generate low employee engagement resulting in employees that either quit and leave or quit and stay.

8. CSR Policy and Program development. HR is also in a position to drive policy development and program implementation in HR areas that directly support CSR values. Wellness, diversity, work-life balance and flex-time policies are CSR programs directly within the HR manager’s purview. In organizations committed to reducing their carbon footprint HR practitioners can develop programs enabling employees to use alternative transportation to get to work. Wellness programs can become a platform for engaging employees in discussions about “personal sustainability” and provide support for employees in the are of stress management, spirituality at work, health and fitness, healthy lifestyles, etc. Employee volunteering programs are also within the HR mandate, and can help build out the employee value proposition and employer brand while concurrently delivering on the firm’s CSR goals for community engagement and investment. All this programs require management support, role – modeling and ongoing communications – which, if in place become further vehicles to fostering employee awareness of and engagement in, the firm’s CSR approach. Some HR departments also have responsibility for procurement. HR practitioners have a number of direct pressure points they can activate to leverage sustainable practices throughout the workforce and economy more generally.

9. Employee Communications. Every CSR strategy requires the development and implementation of an employee communication program to convey the corporate direction, objectives, innovation and performance on its CSR efforts. Internets, websites, blogs, social networking sites, forums, regular team briefing, webcasts, voicemails, print and electronic newsletters and other forms of social media need to be deployed to bring the CSR message to the workforce – in ways that are attuned to the communication channels of the employee, which are changing rapidly. The ultimate goal of communications should be to engage employees in the CSR mission of the firm, to help build out the firm’s CSR DNA. It is important to note that employee engagement is dependent on communication of board, CEO and senior management commitment, in the absence of which employees will become cynical and unmotivated. Lack of CSR commitment at senior levels could lead to disgruntled and frustrated employees finding unmonitored, anonymous social networking sites to express their dissatisfaction. Staff responses can help the organization identify miscommunications and the need for course corrections along the way. Through employee communications, HR can find and profile success stories of CSR leadership within departments. HR managers are well postponed to share and bring to life the organizational stories that can become guideposts for CSR values in action within the company. Whatever you approach it is important to keep your CSR commitments alive in your corporate communications on a regular basis.

10. Measurement, Reporting – and celebrating successes along the way! As what gets measured gets managed, it is vital that both CSR performance and employee engagement be actively measured and reported to executive, the board of directors and publicly. Many of this reports are disclosing employee engagement scores, including employee response to such questions as: “Our CSR strategy makes me feel proud to be working at the firm”, “I feel comfortable raising CSR issues in the workplace”, “I am aware of and understand our CSR Strategy” etc. No less importantly, don’t forget to celebrate the successes large and small along the way. From pats on the back to profile articles on the company website, to celebratory events, ensure people are congratulated and achievements celebrated on an informal and formal basis. To fully realize your CSR objectives, including the integration of CSR into “the way business is done around here”, it is important to honor the small wins and major milestones achieved on the journey [13].

Concluding this abstract, we can say that organizations are coming to realize the bottom-line benefits of incorporating sustainability into their development strategy. It is beneficial for attraction and retention. HR is a key organizational leader and can take the lead or partner with other executives to work cross-functionally to integrate CSR objectives into how business gets conducted. HR practitioners can act as translators of the organization’s CSR commitment vertically and horizontally across departments. Most will agree that effective HR leadership on CSR integration requires Board, CEO and executive commitment to be successful.

bibliography

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11. Grant Thornton, 2008. Corporate Social Responsibility: A necessity not a choice.

12. Lee, Nancy 2008. Switched on the energy: A Guide to sparking behavioral change. Retrieved 23/02/2009.

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