Many Companies Fail to Prioritize Employee Well-Being

Many Execs Talk a Good Social Responsibility Game but Fail to Walk the Walk

By Daniel Butcher

Whether it was the board, the CEO, or others in the C-suite who decided to put a corporate social responsibility (CSR) plan in place, it’s instructive to examine their motivations. Do their ideologies and values cause them to legitimately prioritize business ethics, sustainability, and CSR? Do they want the company to look good in the eyes of consumers and convince shareholders they’re doing the right thing? Was it a self-serving or cost-saving decision to implement a CSR program? The answers are keys to understanding whether organizations’ CSR initiatives will be perceived as genuine or contrived.

That’s according to Academy of Management Scholar Herman Aguinis of the George Washington University School of Business, who has conducted research for more than 20 years looking at how individuals decide to be involved in organizations’ CSR mission and who actually participates in CSR initiatives, from the C-suite to rank-and-file employees.

“In some cases, there are external stakeholders who see the organization’s CSR initiatives as genuine, while others complain that it’s just ‘CSR-washing,’ an attempt at PR on the part of a company to burnish its reputation,” Aguinis said. “We recently wrote a paper on how to avoid being labeled as a CSR-washer, which is important because it can take a lot of money and time and effort to overcome an incorrect perception, so we describe things that companies can do to minimize that risk and avoid being unfairly labeled as a CSR-washer.

“One is to involve employees: You should not have a top-down process, but rather a bottom-up process to encourage employees to participate actively, not just enacting the CSR process and intervention, but also in strategizing and creating it, because then they will be the best supporters of the CSR initiatives,” he said.

“They will talk to their families and friends about how good the company is, and that will help attract employees to the company, and its CSR efforts will be seen as more genuine and not just a PR [public-relations] plot.”

Translating CSR strategics plans and goals into action

As crucial as it is for leaders to make strategic plans and set objectives informed by CSR, it’s challenging to translate policies or missions into practice.

“Usually these nice, big strategic goals don’t cascade down, because, in many cases, frankly, it is a statement on their website or some memo or email about a strategic plan that employees don’t read, aren’t aware of, or don’t really care about,” Aguinis said. “In fact, if you ask employees about their companies’ strategic goals, not just about CSR, but in general, they typically don’t know them.”

One way to raise awareness about CSR objectives throughout an organization is through performance management. Leaders need to ask themselves, what are the specific goals regarding CSR for each of the organization’s units? And what are the specific CSR goals for individuals in terms of behaviors and results? Then leaders can start measuring key performance indicators (KPIs)and rewarding employees who perform well on those specific criteria.

“A lot of companies need to do two critical things to improve: number one, involving employees bottom-up in the design of CSR initiatives, and number two, embedding CSR goals within the performance-management system,” Aguinis said. “If you do just those two things alone, you will go a long way in ensuring that CSR is taken seriously and embedded, not just peripheral.”

How Sustainability and Corporate Social Responsibility Became Intertwined

By Daniel Butcher

As scientists’ warnings about climate change have become increasingly urgent, environmental issues and sustainable business practices have become more central to corporate social responsibility (CSR). Now, there is much more pressure on companies to track environmental, social, and governance (ESG) metrics, including their carbon footprint, and consider other environmental factors affecting the climate and ecosystems as part of their CSR commitment.

That’s according to Academy of Management Scholar Herman Aguinis of the George Washington University School of Business, who noted that 99% of companies in the S&P 500 report ESG information to some degree, most annually, including:

• 452 that align with the Sustainability Accounting Standards Board (SASB);
• 395 with the Taskforce for Climate-related Financial Disclosures (TCFD); and
• 346 with the Global Reporting Initiative (GRI), with some following more than one set of standards.

“That dimension has become so, so critical that CSR-ESG and sustainability are key aspects of it,” Aguinis said. “In the 1980s, there was a big emphasis on making the business case for CSR, and now, things have changed a little bit, because many companies are saying, ‘This is the right thing to do—if we make money, great, but if we don’t, that’s not that critical—we need to do the right thing.’

“But CSR and sustainability work best when you do good and do well simultaneously,” he said. “For example, by embracing sustainable practices, you can actually save money and make money, and at the same time, you can look good in the eyes of the community, consumers, and very importantly, your own employees, who are your best ambassadors.

“In fact, if you do CSR and sustainability right, you can use that as a recruitment and retention tool.”

Leaders who want to embrace CSR and sustainability as an honest, genuine, strategic core aspect of the business need to embed them throughout the organization, Aguinis stressed.

“If you do not measure these things at all, and if you don’t reward them, then all employees are not likely to take them seriously,” Aguinis said. “They can’t be evaluated as something you do on this side, as a nice-to-have, so it is critical to embed CSR and ESG within the strategic goals and the organization’s operations.”

CSR, ESG, and sustainability becoming intertwined strategically also relates to reimagining the purpose of the corporation. For example, in 2019, Business Roundtable issued a Statement on the Purpose of a Corporation signed by 181 CEOs who committed to leading their companies to benefit all stakeholders, including customers, employees, suppliers, communities, and shareholders.

“The goal of the business in a publicly traded company is to make money and create value for shareholders, but even if you’re not publicly traded, you have a responsibility to serve your customers,” Aguinis said.

“We have expanded the concept from shareholders to stakeholders more generally—not only the customers you serve but also the communities within which you’re embedded. So, to what extent are you adding value—both financial and otherwise—to all of these stakeholders?”

How CSR Became Table Stakes for Good Leadership

By Daniel Butcher

Corporate social responsibility (CSR) has evolved significantly since 1953 when economist Howard Bowen published Social Responsibilities of the Businessman, in which he wrote that companies should focus on business ethics, contribute positively to their community, and do good things for society, not just make money. Urging business leaders to consider stakeholders other than shareholders and look at outcomes beyond profits was out of step with the post-World War II era. However, fast-forward 70 years, and there’s been an explosion of interest in—and research on—CSR as it has influenced many organizations’ mission, strategic planning, and investments.

That’s according to Academy of Management Scholar Herman Aguinis of the George Washington University School of Business, who said that CSR is affected by society’s expectations. Aguinis stressed the need to define it so that the effectiveness of organizations’ CSR initiatives can be measured.

“In the ’70s and ’80s, there was a trend toward first asking, ‘What is CSR, and how do we define it specifically?’” Aguinis said.

Overall, there’s consensus that CSR is about the three Ps—profit, the planet, and people—and that businesses should take care of those different dimensions affecting all stakeholders, not just profitability.

“The concept of CSR has evolved over time as society has evolved—the processes, the measures of success,” he said. “The concept of CSR has become clearer, but also more complex.”

Profits and Social Responsibility Can Go Hand in Hand

By Daniel Butcher

Current business leaders aren’t only tasked with maximizing shareholder value; they must balance competing priorities, including setting and meeting environmental, social, and governance objectives. Long-term organizational sustainability requires maintaining profitability while maximizing the organization’s positive social and environmental impact and minimizing negative effects. Navigating these tensions entails overcoming various leadership challenges.

For example, Academy of Management Scholar Wendy Smith of the University of Delaware said that Paul Polman, the former CEO of British-Dutch consumer packaged goods company Unilever, is remembered for establishing the company’s Sustainable Living Plan, which had a set of goals committed to health and well-being, enhanced livelihoods, the environment, social value.

“Polman pulled Unilever out of a death spiral and set it on the path of being the top packaged goods company,” Smith said. “Importantly, he doubled profits and ensured success not in spite of, but rather because of a commitment to addressing environmental and societal demands.

“In an interview we conducted with Polman, he noted that tensions between profits and social missions emerged all the time,” she said.

Unilever’s leadership grappled with questions such as whether to create consumer packaged goods products that were in bigger containers to minimize plastic and waste or smaller containers to increase the margins on each item sold. For Unilever, that question introduced an innovation opportunity: Could they rethink packaging to enable them to sell goods with less environmental impact?

“These kinds of tensions come up all the time,” Smith said. “Effective leadership depends on evaluating these tensions and applying a more holistic both/and approach to come up with more effective solutions.

“Doing so depends on building leadership competencies for both/and thinking, where teams can have difficult conversations that value and engage opposing perspectives and seek new insights,” she said.

How to Make Hybrid Models Work Well

By Daniel Butcher

Should organizations be flexible and enable work from home or demand that employees come into the office? Post-pandemic, some organizations gave their employees the option to continue working remotely, but most moved to a hybrid model of two or three days per week in the office and two or three days per week working remotely.

That said, more CEOs have decided to mandate that their organization’s personnel come into the office five days a week again, especially in industries such as financial services and technology, with Amazon, X, AT&T, Boeing, Dell Technologies, Goldman Sachs, Morgan Stanley, Citigroup, and J.P. Morgan Chase being the latest Fortune 500 companies to do so. However, that may hurt morale and increase turnover, not to mention impede innovation.

Each of the three options has positives and negatives, complicating leaders’ choices.

Academy of Management Scholar Wendy Smith of the University of Delaware said that leaders need a different way to think about this issue. She noted that most organizations are trying to split the time—some time at home and some time in an office. Yet that approach occasionally ends up with the worst of both worlds.

“Key tensions between autonomy and collaboration, independence and interdependence, well-being and productivity underlie this decision,” Smith said.

Rather than frame these tensions as an either/or, Smith argued that effective leaders see these as a both/and. They explore how to create an approach that values the benefits of both at-home and in-office time and understand how they can benefit one another.

For example, rather than split the number of work days into some sort of a hybrid schedule, leaders can strive to create valuable in-office experiences that contribute to a positive, cohesive organizational culture while being willing to be flexible when it makes sense or is necessary.

“If you expect your employees to be in the office, then make sure that they come for a reason—staff meetings, in-person events, networking opportunities,” Smith said. “Moreover, if they are home, give them the skills, technology, and opportunity to truly have autonomy over their time to the best extent possible so that they can navigate when and how they get their work done.

“The main insight from our research is: If you shift from thinking you’ve got to pick one or the other—an either/or approach—and instead you value and hold these competing demands in your mind simultaneously—a paradoxical both/and approach—that’s when you get to a better solution,” she said.

Prioritizing Social Missions Can Boost Profits

By Daniel Butcher

Social enterprises, companies started to achieve profits through social and environmental goals, offer companies an incubator in complex decision-making.

Corporate leaders experience ongoing tensions between the financial and social/environmental goals, framing these opposing pressures as an ongoing trade off. But Academy of Management Scholar Wendy Smith of the University of Delaware noted that such tradeoffs are “limited at best and detrimental at worst.” Her research on social enterprises offers an alternative. Leaders can draw on these tensions to enable strategic novelty, complexity, and creativity.

For example, Smith studied Digital Divide Data (DDD), a high-tech digitization company that seeks to stop the cycle of poverty through jobs and training. With offices in Cambodia, Laos, and Kenya, as well as across the United States, this successful 25-year-old company has improved the lives of more than 7,000 people.

“DDD continues to be a model social enterprise achieving a social mission through business means. They hire people from the most disadvantaged backgrounds, train them, provide them with jobs and enable them to earn multiple times the national average,” Smith said. “When DDD started, they were so committed to their social mission that they almost went financially bankrupt.

“Their board of directors helped to bring them back; directors included people who had a real financial background as well as people with a development-aid background, so that they could lean into both and make sure they weren’t going too far out of bounds,” she said. “Some organizations err in saying, ‘We’re so committed to the social mission that we have no money,’ while others say, ‘We’re so committed to the financial bottom line that we’re not achieving our mission or we’re not helping enough people and making the positive social impact that we want to.’ Over time DDD learned to avoid that either/or trap.

“[Cofounder and CEO] Jeremy Hockenstein reframed their core strategic questions. Instead of asking whether they should focus on the social mission or the bottom line, they asked how they could achieve both goals.”

Doing so did require making difficult decisions. However, Smith notes that these decisions are micro-oscillations or what she calls being consistently inconsistent. Leaders make a commitment to achieve multiple, competing goals over time, yet make small tweaks to how they allocate their resources and organize their team.

For example, as Smith described, DDD leadership team would sometimes make decisions that were benefit their social mission, and sometimes making decisions that would benefit their financial bottom line, but they weren’t overextending to one extreme to the point that they would completely lose sight of the other.

“Such oscillating decision-making is like walking a tightrope,” Smith said. “The tightrope-walker is never fully balanced but rather constantly making small tweaks to balance over time.

“However, they are not falling too far to either side that they fall off the tightrope,” she said.

To avoid making decisions that went too far in either direction, Smith’s research found that DDD held clear guardrails. They had roles, goals, and external stakeholder relationships that ensured that they did not get too focused on either the bottom line or the social mission to the detriment of the other. DDD’s leadership practices offer insights for corporate leaders to navigate complex, competing strategies in their businesses.

“DDD leaders made strategic decisions, but with clear guardrails or boundaries so that they didn’t go too far out of bounds,” Smith said. “Having these guardrails in place help them to keep on track with both their social mission and their business goals to enable this kind of ongoing experimentation and change that they needed to be able to be paradoxical in their thinking—lean away from either/or decision making and into the both/and mindset.”

Scandals Fueled the Rise of Corporate Social Responsibility

By Daniel Butcher

The accounting malpractice and executive mismanagement of the Enron and WorldCom scandals pointed to a broader failure in the prevailing corporate culture of maximizing profits at all costs—even if that meant throwing ethics out the window.

Academy of Management Scholar Wendy Smith of the University of Delaware said that after Enron and WorldCom went under due to organization-wide ethical collapses, there was a backlash. In the wake of those scandals, some companies’ forward-thinking leaders tried to form a long-term sustainable strategic vision for brand identity centered on corporate social responsibility (CSR).

“I remember at the time more people talking about the purpose of businesses in the language of social responsibility, asking, ‘What does it mean for a company to be socially responsible?’ Many skeptics said, ‘It’s just not possible; leaders can’t focus on more than one outcome, maximizing profits for shareholders and doing right by all stakeholders,’” Smith said.

In 1970, economist Milton Friedman wrote an article titled “The Social Responsibility of Business Is to Increase Its Profits,” distilling the “Greed Is Good” ethos famously satirized in the 1987 movie Wall Street. In the early 2000s, more people in academia and business alike pushed back, instead insisting that businesses have a duty to be a power for good by improving working conditions, reducing their carbon footprint, participating in fairtrade, and other ways to improve people’s lives.

“Companies like Ben & Jerry’s and The Body Shop challenged the notion that the sole responsibility of companies is feeding more wealth to their shareholders, saying that’s not the case,” Smith said. “And in fact, what we saw when the Enron and WorldCom scandals came along is that, by being so single-mindedly focused on just profit, you actually compromise your ethics and your morals, because all you care about is the bottom line—that narrow, singular focus is so problematic.”

In addition to Ben & Jerry’s and The Body Shop, Smith cited Digital Divide Data (DDD) and King Arthur Baking Company as current role models for CSR.

“What we’ve seen over the last 20 or 25 years now is that people are increasingly challenging the assumptions that the purpose of for-profit companies was only to generate profit and the purpose of nonprofit organizations was to do good in the world and asking how leaders can accommodate competing demands within the same organization,” she said.

“Long-term decision making is so much more holistic, so bringing together these competing demands, while hard for managers to do, is really valuable for the company long-term.”

How Leaders Can Overcome Roadblocks to Creativity

By Daniel Butcher

Leaders need creativity to innovate, grow, and adapt to fast-paced changes in the business world spurred by rapidly evolving technologies such as AI. As scholars note, however, creativity embeds inherent tensions between introducing something radical and novel while also being useful and practical.

Academy of Management Scholar Wendy Smith of the University of Delaware notes that these tensions are oppositional but also interdependent. Focusing on usefulness can create constraints that inspire more novelty, while ensuring that more radical ideas can foster more divergent thinking that can ultimately result in something that will be more valuable to the organization and its stakeholders.

“Embracing the paradoxes of creativity inherently enables more creativity,” Smith said.

In the 1970s, psychiatrist Albert Rothenberg noted that geniuses such as Albert Einstein, Pablo Picasso, and Virginia Woolf all generated their greatest insights by juxtaposing oppositional ideas. For example, Einstein’s theory of relativity emerged by exploring how an object could be both in motion and at rest at the same time. Rothenberg called this process Janusian thinking after the two-faced Roman God Janus who could look forward and backward at the same time.

“An important part of the creative Janusian process is changing the question,” Smith said. “If we point out that conflict and ask people to create something, they’ll try to maximize either the novelty or the usefulness.

“But if we say, ‘Those things are in conflict with each other, but they also reinforce each other,’ and ask the question, ‘How can you create something that is both novel and useful amid that conflict?’ people will be much more creative in what they develop and create over time by bringing them together,” she said.

“So situationally, just changing the question makes a huge difference in boosting creativity.”

As the business world becomes more complex, Smith noted that an essential leadership competency will depend on embracing the paradoxes of creativity.

“Leaders of tomorrow will need to embrace both novelty and usefulness, coming up with new approaches to respond to our greatest challenges,” she said.

Counterintuitive Aspects of Workaholism

By Daniel Butcher

Most people see workaholism as hurting emotional and physical well-being and personal relationships. Continually working long hours can affect professionals’ health and lead to all sorts of other problems. But a passion for work can mitigate the consequences of workaholism and may even give some workaholics a sense of purpose.

Academy of Management Scholar Nancy Rothbard of the University of Pennsylvania said her research with colleagues revealed that there are actually two types of workaholism. The classic type of workaholism is significantly negative due to the detrimental effects it has on workaholics’ health, wellness, and long-term on-the-job engagement. But another set of workaholics are really passionate about their work.

“For the set of passionate workaholics who are really engaged and love their work, it turns out that the negative health implications were not there, and in fact, they had a lower risk of metabolic syndrome, which essentially means risk of cardiovascular disease,” Rothbard said.

“When we unpacked those findings to try to understand what was going on there, we found that people who are engaged workaholics have more social support, they have a better handle on their recovery activities, things like going to the gym and managing their health in real time,” she said. “They are workaholics; they’re very engaged in their work; they feel obsessive about their work, but they also love their work.

“And so, they’re not being drained in the same way over time and, despite working very long hours, had better work-life balance or more social support from their managers, peers, and family than what we call non-engaged workaholics.”
Managers can help to avoid some of the negative effects of non-engaged workaholism.

“There are ways to increase the engagement of your employees through providing them with a strong set of goals and vision,” Rothbard said. “All the great leadership types of activities that we that we know work are really important for increasing engagement.”

An Overlooked Factor Increasing Health Insurance Denials

By Daniel Butcher

U.S. law governing health insurance and benefits administration has had an unintended consequence of encouraging insurers and third-party administrators (TPAs) to deny more claims and authorizations.

Academy of Management Scholar Jeffrey Pfeffer of Stanford University said that the remedies for harms caused by improper denials of doctor-recommended medical procedures or medication under the Employee Retirement Income Security Act (ERISA) are limited to recovering money.

“If an insurer denies you access to care and you die or are permanently injured by this denial, its only recourse is to recover for the actual money that it should have paid,” Pfeffer said. “Because of the limited remedies, the base case is denial, and so many prior authorizations and many claims are denied by health insurers or TPAs.

“It turns out that if you appeal, in about 60% of the cases, the appeal is actually going to be successful; the problem is, only about 10% or, depending upon the study that you look at, 20% but not very many people ever appeal,” he said. “When you get a notice that says, ‘This medicine has been denied’ or ‘This procedure has been denied,’ it’s required by law to send you a long form in several languages that tells you what you can do to appeal.

“Only about 10% of people appeal,” he said, “but if you do appeal, you will, in fact, have a good chance to be successful.”

The appeals process is complicated, discouraging many people with legitimate claims that were denied from appealing. In addition, poor and working-class people may be less likely to have the time to appeal.

“Health insurance executives say to themselves, ‘Who’s likely to appeal? ’Who’s likely to appeal are people who have time and who have the social capital and resources to appeal, so this mass denial of claims and denial of authorization adversely affects less educated, less wealthy people and underrepresented minorities,” Pfeffer said.

“This is one of the reasons why the U.S. healthcare system has such enormously unequal outcomes, because your access depends upon your social capital and your time and willingness to fight with these insurance companies,” he said.