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Why Corporations With a Social Purpose Perform Better

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“The companies that perform best over time build a social purpose into their operations that is as important as their economic purpose." —Harvard Business Review, November 2011.

PepsiCo is gradually shifting its resources from “fun for you” to “better for you” to “good for you”. IBM celebrated its 100th anniversary in June 2011 by offering service to the world that involved over 300,000 employees performing 2.6 million hours of service in one day. Cemex is addressing social gaps with innovative products such as antibacterial concrete for use in hospitals and farms.

These examples are drawn from an important new article by Rosabeth Moss Kanter in the current issue of Harvard Business Review, titled "How Great Companies Think Differently".

This article is required reading. It substantiates the emerging thinking that corporate social responsibility (CSR) as it has become known has hit a wall. The people, processes, and programs are in place, but the results aren’t good enough. Why? CSR is neither informed by, nor contributing to, the social purpose of business.

Moss Kanter’s piece is based on a concept called institutional logic “that holds that companies are more than instruments for making money; they are also vehicles for accomplishing societal purposes and for providing meaningful livelihoods for those who work in them.”  According to Moss Kanter, there are six interrelated ways that great companies use institutional logic: A Common Purpose, A Long Term Focus, Emotional Engagement, Partnering with the Public, Innovation, and Self-Organization. Here are a few big ideas from her article that I found remarkable:

A Common Purpose: “Purpose and values—not the widgets made—are at the core of an organization’s identity, and they can guide people in their efforts to find new widgets that serve society.”

Institutional Grounding: “An investment in activities and relationships that may not immediately create a direct road to business results but that reflect that values the institution stands for and how it will endure.”

Emotional Integration: A process used by the Shinhan Bank after its acquisition of Chohung Bank that involved holding a series of retreats and conferences intended to spread strategic and operational information and also to foster social bonding and a feeling of being “one bank”.

Emotional Engagement: Great companies go beyond ubiquitous statements of corporate values to nurture a dialogue to keep “social purpose at the forefront of everyone’s mind and ensure that employees use the organizational values as a guide for business decisions”.

Innovation: “Companies claims that they serve society become credible when leaders allocated time, talent, and resources to national or community projects without seeking immediate returns and when they encourage people from one country to serve another.”

Self-Organization: “Self-organizing communities can be a potent force for change, propelling companies in directions they might not have taken otherwise. People with no formal orders serve as explorers and entrepreneurs.”

Qualitative, longer-term outcomes are the common denominators of the corporate social purpose movement.  Moving forward the challenge will be to encourage executives to blend quantitative, short-term assessments of business performance—what Dominic Barton of McKinsey has called quarterly capitalism—with the “soft” indicators of social performance illustrated by Moss Kanter.

(At Impakt, we are conducting new academically affiliated research to document best practice examples of corporations that are moving from CSR to corporate social purpose. I encourage anyone with a great example of corporate social purpose to write a comment or contact me directly.)

Thanks so much to Professor Moss Kanter for her new thinking and to the Harvard Business Review for putting the spotlight this month on “The Good Company."