Social Responsibility Benefits for Organization

Summary

Social responsibility is a strategy used by organizations that focuses on fulfilling the economic, legal, ethical, and philanthropic responsibilities expected by its stakeholders (DuBrin, 2009).

Social responsibility has many benefits for both the organization and its stakeholders. Some of these benefits include; enhancement of trust in the company’s stakeholders, nurturing of customer satisfaction, increasing employee commitment, creation of investor loyalty, an increase of company profits, and improvement of the national economy (Debbie, Ferrell & Linda, 2010).

Any company, regardless of its size, can adopt a social responsibility initiative and implement it in order to reap the benefits of having the initiative.

Key Learning Points

  • Social responsibility is a strategy used by organizations that focuses on fulfilling the economic, legal, ethical, and philanthropic responsibilities expected by its stakeholders (DuBrin, 2009).
  • Social responsibility has many benefits for both the organization and its stakeholders. Some of these benefits include; enhancement of trust in the company’s stakeholders, nurturing of customer satisfaction, increasing employee commitment, creation of investor loyalty, an increase of company profits, and overall improvement of the national economy (Debbie, Ferrell & Linda, 2010).

Relevant Statements

Highly ethical behaviors and socially responsible acts are not always free, but they have a great number of benefits to organizations and their stakeholders.

The relationship between profits and social responsibility works in two ways. More profitable firms can better afford to invest in social responsibility initiatives, and these initiatives, in turn, lead to more profits (DuBrin, 2009).

The research found that levels of corporate social responsibility performance are affected by financial success. The result suggested that financial success creates enough money left over to invest in corporate social performance contributes to improved financial performance as measured by return on assets and return on sales (DuBrin, 2009). The relationship between social and financial performance is a virtuous circle, which means that corporate social performance and corporate financial performance feed and reinforce each other (DuBrin, 2009).

Critical Analysis

Many researchers have demonstrated that there are several benefits that organizations can reap from implementing social responsibility programs (DuBrin, 2009). Some of these benefits include an increase in daily operations efficiency, greater worker commitment, higher product quality, improved decision-making, increased customer loyalty and improved financial performance (Debbie, Ferrell & Linda, 2010).

Trust

Through implementing corporate social responsibility initiatives, organizations can build trust in their stakeholders and their customers. Trust is the glue that holds organizations together and allows them to focus on efficiency, productivity, and profits. According to Stephen R., who is the author of the 7 Habits of Highly Effective people, “Trust lies at the very core of effective human interactions” (Debbie, Ferrell & Linda, 2010). Trust is able to bring out the very best in people so that their competency can rise to the level of trust.

Trust is essential for a company to enable it to nurture a long-term relationship with its customers. A study by Conc-Roper reported that three of four consumers say they avoid or refused to buy from certain businesses (Debbie, Ferrell & Linda, 2010). Poor services and poor business conduct are key reasons why the above behavior can arise (Debbie, Ferrell & Linda, 2010).

Customer Satisfaction

Good corporate social responsibility nurtures customer satisfaction philosophy in organizations. It is widely accepted that customer satisfaction is one of the most important factors for business success (Debbie, Ferrell & Linda, 2010). Through implementing good social responsibility initiatives, a company can nurture a long-term relationship with its customers (Debbie, Ferrell & Linda, 2010). Relationships built on mutual respect facilitates the repeat purchases that are essential for a company’s success (Debbie, Ferrell & Linda, 2010).

In the Conc-Roper national survey of customers’ attitudes, 81 percent of consumers indicated they would be likely to switch to brands associated with a good cause if price and quality were equal (Debbie, Ferrell & Linda, 2010). Irresponsible behavior in companies can trigger a lack of loyalty and refusals to buy. On the other hand, good social responsibility initiatives could draw customers to a company’s products (Debbie, Ferrell & Linda, 2010). For example, many companies use cause-related marketing programs to give part of a product’s sales revenue to a charity that is meaningful to the product’s target market (Debbie, Ferrell & Linda, 2010). This, in return, makes customers prefer buying these products.

Employee Commitment

Employee commitment usually stems from employees who have a strong belief in their future being tied to the organization they are working for (Debbie, Ferrell & Linda, 2010). These employees are usually willing to make personal sacrifices for the organizations.

When a company does not indulge in any social responsibility initiative which directly honors and motivates its workers, employee loyalty and commitment suffer a great deal. A survey by Walker information Global Network done in many parts in the World found that there were low levels of employee loyalty and commitment in many organizations (Debbie, Ferrell & Linda, 2010). The study, which surveyed thousands of employees in 32 countries, revealed that only one in three workers are truly loyal to their organizations (Debbie, Ferrell & Linda, 2010). Employees spend many of their working hours at work; thus, an organization’s commitment to goodwill and respect of its employees usually results in increased employee loyalty and support of the company’s objectives (Debbie, Ferrell & Linda, 2010).

Improved Financial Performance

Social responsibility is positively associated with return on investments, return on assets, and sales growth. A company cannot continuously be socially responsible & nurture and develop an ethical organizational culture unless it has achieved financial performance in terms of profits (Debbie, Ferrell & Linda, 2010).

Various studies have identified a positive relationship between social responsibility and financial performance. For example, a survey of 500 largest public corporations in the United States found that those that commit to responsible behavior and emphasize compliance with codes of conduct show better financial performance (Debbie, Ferrell & Linda, 2010).

A meta-analysis of 25 years of research identified 33 studies demonstrating a positive relationship between corporate social responsibility performance and financial performance (Debbie, Ferrell & Linda, 2010).

Investor Loyalty

In order for organizations to achieve sustainable growth, the relationships with stakeholders and other investors must rest on dependability, trust, and the company’s commitment to thriving to greater heights (Debbie, Ferrell & Linda, 2010). But investors also look for potential cracks or flaws in a company’s performance.

Many shareholders or investors are usually concerned about the reputation of companies in which they wish to invest (Debbie, Ferrell & Linda, 2010). Investors have even been known to avoid buying the stock of firms they viewed as irresponsible (Debbie, Ferrell & Linda, 2010). For example, 15 mutual fund managers announced a boycott of Mitsubishi stock after the Japanese firm refused to cancel a plan to build a factory on a Mexican lagoon that is also a major breeding site for gray whales (Debbie, Ferrell & Linda, 2010).

Investors know that fines or negative publicity can lower a company’s stock price, customer loyalty, and long-term viability(Debbie, Ferrell & Linda, 2010). Consequently, many chief executives spend a great deal of time communicating with investors about their firms’ reputations and financial performance and trying to attract them to their stock (Debbie, Ferrell & Linda, 2010). It is important to note that social responsibility by organizations attracts investment in those companies.

Practical Implications

Corporate social responsibility is an important aspect that drives any organization to greater heights. Whether an enterprise is small or multinational, implementing social responsibility can create employee confidence, customer loyalty, and investor loyalty, which are key factors to the company’s attainment of huge profits and sustaining business in any given market niche (Debbie, Ferrell & Linda, 2010).

In order to have a sustainable business, a company can formulate social responsibility initiatives that promote customer confidence. A company can set aside part of its sales revenue so as to commit it to charity work and other philanthropic initiatives. A company can also give back to the community by supporting community development programs in education, health, infrastructure developments, and so on.

Learning Reflections

Corporate social responsibility is a broader concept that relates to an organization’s impact on society. It is imperative that organizations have to extend a helping hand to communities beyond their business and stockholders’ obligations (DuBrin, 2009). Social responsibility is not the traditional notion that a business is only responsible for its owners and stockholders, but a company is also responsible for the community’s welfare (Debbie, Ferrell & Linda, 2010).

References

Debbie, M.,Ferrell, C. and Linda, F. (2010). Business & Society: A Strategic Approach to Social Responsibility, 4th Edition. Mason, Ohio: Cengage Learning.

DuBrin, A. (2009). Essentials of management. Mason, Ohio: Thomson Business and Economics publication.