Wednesday, July 23, 2014

E pluribus unum

In our interconnected society, the behavior of public, private and non-profit organizations affects an increasing number of actors. Especially when it comes to complex socio-economic issues, organizational decision-makers face a large number of stakeholders with different norms, values and interests. The vision of consumer goods manufacturer Unilever is a good example for the efforts organizations make to reconcile these stakeholder interests: “[...] to double the size of the business while reducing our environmental footprint and increasing our positive social impact“ (Unilever, Annual Report 2013), which takes into account the impact of business on different actors.
The Soccer world cup is behind us, the aftertaste remains. Take a look at the article in the Economist, „Beautiful game, ugly business”:

Wednesday, July 16, 2014

The human as a high performance product

Just in time (or precisely not, depending on your perspective) for the soccer world cup, the Franco-German television channel ARTE broadcasted a documentary with the title “Pressure, doping, depressions – top athletes come clean” about top-class sport. Although I thought I already knew quite a bit, this nevertheless opened my eyes for the absolute shocking reality of professional sport today. Athletes are deliberately and strategically trimmed and manipulated since childhood. In order to advance the profitability of the clubs, sponsors and multinationals , tricks such as dubious engagement contracts, performance enhancing drugs, doctors who purposely tell only half the truth and lawyers adept at eschewing lawsuits are commonly made use of. This has increasingly little to do with honest performance and sportsmanship. One wins – and earns in real – only if one is number one, and this necessitates that one is ready to cheat as also ruin one’s body in the long-run. When mere milliseconds decide between the first and second place and only the first place counts for the sponsors, than one can readily comprehend that athletes are willing to turn to any means so as to become and remain number one. The tragic part of all this is that athletes often don’t even have a choice but to serve this relentless pursuit of profit, lest they quit, which for a number of reasons is decidedly difficult.

Thursday, June 19, 2014

The multi-generational company

The impending demographic changes in society and economy have raised our awareness of the importance of intergenerational structural changes. In 2000, only 15,1% of the population of Switzerland were over 64 years old, in 2012 it was already 17,4%, and in the year 2030 it will be 24,2%, according to the Federal Statistical Office.

These demographic developments presumably also exacerbate the current shortage of skilled workforce. The Federal Council has approved financial support measures to mitigate this development for 2013-2016, which primarily focus on education, research and the promotion of Switzerland’s innovative power. In addition to the financial measures, the Federal Council has also addressed crosscutting issues such as equal opportunities and sustainable development as important aspects.

Friday, June 13, 2014

Applied Shared Value Creation: What Nestlé’s Botox-Strategy tells us

“Nestlé rejuvenates itself with Botox”. The Sunday papers were downright euphoric about the strategic reorientation of Nestlé. With the Nespresso model in mind, Nestlé is moving away from mass-produced consumer goods such as Maggi soup cubes and going towards more exclusive products. With targeted acquisitions, the gigantic enterprise, which many regard as cumbersome, is establishing a lucrative new foothold with its newly founded division Nestlé Skin Health. The journal also took away my suspicion that the nerve poison Botox might just get a euphemistic covering by calling the division Skin Health – at least half of the Botox applications are reportedly being used for medical reasons. The strategic move is thus convincing at first glance: Together with Skin Health, Nestlé is strengthening its Health Science sector, which produces food for lifestyle disease prevention.

The strategy follows the credo of “Shared Value Creation” that Nestlé has developed and internalized in collaboration with the strategy guru Michael Porter. The concept aims at no less than reorienting capitalism: Companies should search and find solutions to pressing social issues. The panacea Botox might indeed relief some of our everyday problems and thus create social value. It is supposed to not only flatten wrinkles temporarily, but also to be effective in the treatment of e.g. urinary incontinence, arthritis or premature ejaculation.

Nevertheless, Nestlé’s reorientation also reveals the pronounced symptoms of the strategic concept of “Shared Value Creation”: It is cherry picking the problems. On the strategic level, attention is only paid to the problems whose solution can be transformed into high-margin products. In addition, as one commentator in the same paper argued, Nestlé is fostering its connection to a specific stakeholder group: the baby boomers. When they were born, Nestlé was fighting for supremacy in the baby food market. As they now got wrinkles and lines, Nestlé is again caring about the worries of the strongest financial force in society. Nestlé is not rejuvenating but aging together with its preferred stakeholder group.

Thursday, May 29, 2014

We, the customers

We, the customers, are giving us as employees a hard time. This thought crossed my mind during the closing event of our Business & Society seminar at the University of Zurich. This year, the students conducted qualitative research projects on corporate health management. Besides discussing the benefits a company can attain by keeping employees healthy (achieving a return on investment), the discussion also addressed the limits of such measures. On the one hand, employees have to take  responsibility for their own health, thus the influence of the organization on their health is limited. On the other hand, another issue was raised: The closer a department is to the customers, the more pressure there is and the smaller the possibility of reducing the workload (an often mentioned stressor). The customers, in a competitive environment, determine their expectations towards a company. These expectations can be quite high and are only rarely met with a normal volume of work. As a consequence, corporate health management faces resistance as well.

Tuesday, April 29, 2014

Social standards for companies: an effective medicine or just a placebo?

In the last decade, many social standards have been created in order to help companies to act in a socially responsible way. These standards often differ quite a lot in terms of specificity, ranging from a minimal point of orientation up to a detailed, process-oriented support for the implementation. Examples for rather general standards are the OECD guidelines, for the more specific standards e.g. the Social Accountability 8000 but also the more detailed Global Reporting Initiative (GRI).

The big question after more than ten years is, what are the benefits? What is the impact and effectiveness of social standards with regard to their own goals? I have examined these questions by conducting a study in the clothing industry regarding labor rights.

More specifically, I have examined two social standards with a lot of members also in Switzerland: The Fair Wear Foundation (FWF) and the Business Social Compliance Initiative (BSCI). My data consisted of confidential audit reports and interviews with representatives of companies and NGOs in Switzerland and in the producing country China. I have developed a system (including a comparison over time), which is able to analyze the data and provide answers to the question of effectiveness.

My analysis shows that FWF and BSCI have indeed contributed to the improved labor rights situation in China, at least in certain areas. Especially in areas that are easily measurable (e.g. minimum wage, health and safety) as well as in areas supplementary to the actual labor rights (e.g. awareness of the existence of labor rights). The results are worse in areas that are not that easily accessible by the means of factory audits (the main tool for evaluating the success of implementation), e.g. the freedom of assembly, the right to collective bargaining or the living wage, which should enable social and cultural participation. There were some improvements in those areas as well, but in absolute terms, the level has remained low.

The main problem with the living wage, which the FWF (but not BSCI) requires is the lack of a clear definition. In principle, the legal equation should probably be minimum wage = living wage.

With regard to the freedom of assembly and the right to collective bargaining, the consequent call for these rights by the FWF had at least a partially positive impact. An additional positive factor is probably the strong involvement of the member companies during the implementation, as required by the FWF.

This stronger involvement has led to more frequent interactions between factories and members, which helped reducing the problem of the snapshot nature of audits. In addition, it made the implementation seem less imposed from the outside as purely external audits would.

In general, my study suggests that different forms of cooperation and exchange between stakeholders are beneficial to an effective implementation. Thus, member companies can exchange their views among each other and with NGOs at arranged meetings. This not only increases the relevant skills for the implementation, but also their mutual acceptance (especially companies – NGOs). FWF and BSCI already have been active in this area but there still is a lot of potential.

Overall, the study has demonstrated that it is possible to create an evaluation system for the effectiveness of social standards. However, its significance strongly depends on the quality of the data, which usually wasn’t created for the purpose of such an analysis.

These insights lead us to the following conclusion: The standards FWF and BSCI are not a placebo but a medicine – an effective medicine, but still (and by far) not for all ills.

Claude Meier

Thursday, April 24, 2014

Giving Voice to Values

It’s one thing to intellectually comprehend various ethical models or to be conscious oft he diverse ethical dilemmas that await one in one’s chosen profession, and quite another to act in accordance with one’s personal values in specific situations. It is here where Mary Gentile’s book “Giving Voice to Values” makes a very innovative contribution: