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Saturday, November 14, 2009

The Wider Implications for Business Leaders of Corporate Social Responsibility

'At last – a distinguished Harvard Business School professor gets to grips with the slippery topic of corporate social responsibility and lives to write the book on it: Supercorp: How Vanguard Companies Create Innovation, Profits, Growth, and Social Good

In fact, the book’s scope and ambition are greater than that description would suggest. All the same, this is the moment CSR campaigners have been waiting for. Their cause has been given high-powered, if qualified, academic approval. Rosabeth Moss Kanter’s credentials are not in doubt. For the past three years she has been researching this, her 18th book, which is substantial and carefully argued.

Kanter might reject an association with the CSR tag, which does not in fact appear anywhere in her text. She is writing about what she calls “vanguard companies”, which are “ahead of the pack and potentially the wave of the future”.

What qualifies them for vanguard status? These are companies that aspire to be “big but human, efficient but innovative, global but concerned about local communities”, she writes. “The best have business prowess and clout with partners and governments, but try to use their power and influence to develop solutions to problems the public cares about . . . The leaders of a vanguard company espouse positive values and encourage their employees to embrace and act on them.”

This is a savvy summary. It is CSR-plus, or successful business with a moral purpose. Which companies in particular is Kanter taking about? They are the global powerhouses IBM, Procter and Gamble, Publicis, Cemex and Diageo, among others.

What are they getting right? Vanguard companies understand that the early 21st century is characterised by uncertainty, volatility and complexity, Kanter says. They have grasped the need for diversity in their organisations. They err on the side of transparency, and take a responsible approach.

Virtue wins its own reward. “Humanistic values and attention to societal needs are a starting point for smart strategy in the global information age,” Kanter says.

This idea is not always an easy sell internally. At IBM, where Kanter clearly enjoys wonderful access, the chief executive, Sam Palmisano, tells her that one board director asked him not so long ago if this approach was not really a bit too much like socialism.

Teamwork is certainly crucial. And a values-based approach is important. “What is the value of values?” Kanter asks. “It is the engagement, the dialogue, the conversation.”

A social purpose is helpful strategically, she argues, because it gives you several advantages. You generate a bigger “ideas pool” as more people get involved. You create better motivation to serve customers. There is more prospect of “open innovation” taking place. You see less internal politics and greater co-operation. And employees are inspired to get on with the job.

“When you bring society inside the organisation, the possibilities increase for success at every point in the innovation process,” Kanter says. “The quest is more meaningful than seeking financial returns alone.”

The developing world offers particularly fertile ground for these ideas to germinate. “The least advantaged places can become the best beta sites for innovation,” she writes.

What this is not, however, is old-style CSR. That is about offering “spare change”, in Kanter’s words. “Corporate social innovation and entrepreneurship combined with corporate diplomacy [represent] a shift from ‘spare change’ to ‘real change’,” she says. It is a mistake, for example, to make “social commitments that do not have an economic logic that sustains the enterprise by attracting resources”.

Nor are vanguard companies interested in mere “charity”. “Their leaders are not soft-hearted do-gooders,” Kanter says. “The companies mount and defend lawsuits, push the limits of their market dominance and pricing power, compete aggressively, and lobby governments for favourable treatment.”

Global business leadership is tough and getting tougher, Kanter argues. It calls for a lot of MBFA – management by flying around. But this serious work provides a handbook for business leaders who are equally serious about making their companies both successful and sustainable.'

Copyright The Financial Times Limited 2009.

As one reviewer, Ram Charan, coauthor of Execution: The Discipline of Getting Things Done said of Moss Kanter's work: “Unless your business is also serving a social purpose you miss an opportunity for innovations that bring profits. Rosabeth Moss Kanter, one of our most outstanding scholars, excels in her characteristic manner by taking the lead and developing practical ideas for the leaders of the future.”

Here is what the author herself has to say: