Total Responsibility Management

The Manual

Sandra Waddock, Charles Bodwell

• Publisher: Routledge
• Year: 2017
• Print ISBN: 9781874719984
• eBook ISBN: 9781351280389
• Topic: Negocios y empresa
• Subtopic: Negocios en general

Almost every manager today knows that satisfying customers by meeting their quality demands is a critical component of business success. Quality management is a given in modern companies – a competitive imperative. Yet it was not always so. Back when the quality movement was getting started, few managers really understood either the importance of quality to customers or how to manage for quality. Much the same could be said today about managing responsibility. Why and how should responsibility be managed? What is responsibility management? Total Responsibility Management answers these questions while at the same time providing a systemic framework for managing a company's responsibilities to stakeholders and the natural environment that can be applied in a wide range of contexts.  This framework uses managerial familiarity with quality management to illustrate the drivers for responsibility management. Companies know that product or service quality affects their customer relationships and the trust customers have in the company's products and services. So, too, a company's management of its responsibilities to other constituencies affects its relationships with those other stakeholders and the natural environment. But why bother? The answer is quite simple. Never has it been easier for employees, reporters, activists, investors, community members, the media and other critical observers to find fault with companies and their subsidiaries. A problem identified, even in a remote region or within a remote supplier, can instantaneously be transmitted around the world at the click of a mouse. Ask footwear, toy, clothing and other highly visible branded companies what their recent experience with corporate critics has been and they will tell you about the need to manage their stakeholder responsibilities (human rights, labour relations, environmental, integrity-related) or face significant consequences in the limelight of public opinion.  Managers will discover that whether they do it consciously or not, they are already managing responsibility, just as companies were already managing quality when the quality movement hit. This manual makes the process of managing responsibilities to and relationships with stakeholders and nature explicit. Making the process explicit is important because too few of today's decisions-makers yet understand how they are managing stakeholder responsibilities as well as they understand how to manage quality.  Managing responsibilities goes well beyond traditional 'do good' or discretionary activities associated with philanthropy and volunteerism, which are frequently termed 'corporate social responsibility'. In its broadest sense, responsibility management means taking corporate citizenship seriously as a core part of the way the company develops and implements its business model. The specifics of responsibility management are unique to each company, its industry, its products and its stakeholders, yet, as this manual illustrates, a general approach to managing responsibility is feasible – indeed, is increasingly necessary.  Based on work undertaken by Boston College and the International Labour Office, Total Responsibility Management is the first CSR manual. Its original case studies add value to a range of tools and exercises that will make it required reading for all managers in need of a practical guide to managing responsibility and to students and researchers looking for an overarching framework to contextualise the changing responsibilities of global business.

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What is responsibility management? And why bother?

Almost every manager today knows that satisfying customers by meeting their quality demands is a critical component of business success. Quality management is a given in modern companies, a competitive imperative. Yet it was not always so. Back when the quality movement was getting started, few managers really understood either the importance of quality to customers or how to manage for quality. Much the same could be said today about managing responsibility as was said about the early days of quality management. Why should responsibility be managed? What is responsibility management? Who cares? And, importantly, how can responsibility be managed? This manual will attempt to answer these questions and provide a framework for managing a company’s responsibilities to stakeholders and the natural environment that can be applied in a wide range of contexts.

Perhaps the analogy to the quality movement will help. Companies know that product or service quality affects their customer relationships and the trust customers have in the company’s products and services. So too a company’s management of its responsibilities to other constituencies affects its relationships with those other stakeholders and the natural environment. But why bother? The answer is quite simple. Never has it been easier for employees, reporters, activists, non-governmental organisations (NGOs), community members, the media and other critical observers to find fault with companies and their subsidiaries. A problem identified, even in a remote region or within a remote supplier, can virtually instantaneously be transmitted around the world at the click of a mouse. Ask footwear, toy and clothing and other highly visible branded companies what their recent experience with corporate critics has been and they will tell you about the need to manage their stakeholder (i.e. human rights, labour relations, environmental, integrity-related) responsibilities or face significant consequences in the limelight of public opinion.

Even companies without brand names experience increasing pressures to manage responsibility from social investors, employees and their customers in the supply chains they serve. Stakeholders, those who are affected by or can affect the company’s activities,¹ care about how a company treats them, about impacts companies have on others, on society, on themselves. Increasingly, employees, customers, investors, environmental activists, the media, suppliers, communities and governments and others are making their concerns known in visible ways. Complicating matters further, many companies today find that outsiders seldom make distinctions between the company doing the sourcing and members of its supply and distribution chains. Critics of companies seem to believe that the sourcing company can and should be held responsible for whatever happens throughout their supply and distribution chains. Companies doing the sourcing are forced to respond to these concerns because otherwise their reputation—and business—suffers.

No company can hope to avoid criticism entirely, of course, because all companies have impacts on stakeholders and the natural environment; some of these impacts will undoubtedly create concerns among some stakeholders. However efficiently a company operates, problems can arise, particularly if the company mindlessly barges ahead with decisions that affect employees, communities, suppliers, customers and activists concerned about the natural environment—without consulting with them. What companies can do is to manage their stakeholder-related responsibilities in ways that minimise negative impacts, build trust and thereby reduce potential criticism. In short, they can manage the relationships that they build with stakeholders (and activists concerned with nature) and the practices that the company uses to produce and deliver goods and services. It is this process of managing relationships and company impacts that responsibility management is all about.

Responsibility management occurs through a systemic process that in other writing we have called ‘total responsibility management’ or TRM—to make an analogy with already-familiar processes of management quality, total quality management, TQM (see, for example, Waddock and Bodwell 2002; see also Waddock and Bodwell 2004). Further, whether you do it consciously or not, you are already managing responsibility, just as companies were already managing quality when the quality movement hit. Sometimes they were just doing it badly or mindlessly!

In reality, companies manage their responsibilities to stakeholders and the natural environment through the operating practices and strategies they evolve to accomplish their goals. They do so because responsibilities are integral when there are impacts—and few managerial decisions have no impacts on either one group of stakeholders or another or on the natural environment. Just think of the array of corporate functions with the term ‘relations’ in typical titles: employee and labour relations, supplier relations, community relations, investor relations, customer relations, government relations, and the list goes on. This manual will make that process of managing responsibilities to and relationships with stakeholders and nature more explicit. Making the process explicit is important because too few of today’s decision-makers yet understand how they are managing stakeholder responsibilities as well as they understand how to manage quality.

1.1 What is responsibility management?

Managing responsibilities goes well beyond traditional ‘do good’ or discretionary activities associated with philanthropy and volunteerism, which are frequently termed ‘corporate social responsibility’ and sometimes associated with narrow definitions of corporate citizenship. In its broadest sense, responsibility management means taking corporate citizenship seriously as a core part of the way the company develops and implements its business model. In this broad sense, responsibility management focuses on managing corporate responsibilities, which involves managing stakeholder relationships and the companies’ impacts on stakeholders. It thus focuses on the nature and impacts of company practices with respect to all important stakeholders and the natural environment.

From this perspective, managing responsibility means building trusting relationships with key stakeholders, such as employees, customers, suppliers and communities, and ensuring that, despite power differences that may exist, the company’s impacts are positive rather than negative. Managing responsibility therefore means working to reduce the negative impacts of corporate activities and developing mutually beneficial practices and ways of interacting (or engaging) with stakeholders so that long-term relationships can develop. It can mean active engagement with critics of the company as well as governments, to gain their perspectives and inputs, as well as with those primary stakeholders on whom the company’s existence depends: investors, employees, customers and suppliers/distributors. Increasingly, it also means using natural resources in ways that are sustainable over the long term, as the European Union’s white paper on corporate social responsibility makes clear. The specifics of responsibility management are unique to each company, its industry, its products and its stakeholders, yet, as this manual illustrates, a general approach to managing responsibility is feasible—indeed, is increasingly necessary.

Relationships with key stakeholders (including stakeholders such as trade unions, employee associations and NGOs, who might be critical of the company) enable companies to problem-solve with stakeholders from a basis of trust rather than a more adversarial base. With explicit responsibility management systems in place, company leaders can work problems out with stakeholders, rather than allowing those problems to fester and ultimately damage the company and its reputation, not to mention its stakeholders or the natural environment. Responsibility management can be quite complex; however, the general framework for responsibility management is very similar to other management systems with which managers are already familiar, including quality and environmental management systems. Let us focus on the comparison with quality management, as quality approaches are best known.

Managing for quality fundamentally means paying attention to what customers actually need and want, rather than assuming that the company knows best, and working to deliver on those needs and wants. Managing responsibility similarly means paying attention to the needs and interests of stakeholders in much the same way, but of a significantly broader array of increasingly vocal stakeholders. Employees, customers, suppliers and distributors, other allies and partners, communities where the company locates facilities (or where the supply chain members are located), owners and investors, creditors, and local, regional and national governments are among the stakeholders to whom it makes sense to pay attention.

Yes, paying attention to the interests and concerns of all of these stake-holders can be difficult and adds significantly to the complexity of the manager’s job. Yes, it is probably infeasible to meet the demands of all of them—and no one expects that any company will do that. But numerous companies have discovered to their chagrin the costs of ignoring serious or significant stakeholder interests and concerns and have had their reputations tarnished as a result. Think, for example, of the accusations against Nike of sweatshop labour practices in its supply chain, the reputational damage to Liz Claiborne over the same accusations, or the challenges Shell faced in its dealings with Greenpeace over the decommissioning of the Brent Spar drilling platform. More recently, consider the impact of lack of consideration of customer needs and concerns with Merck’s belated withdrawal of Vioxx after concerns about heart problems were known.

In contrast, think about the forward-looking publication of a transparent report about real problems—and what is being done about them in a similar situation by The Gap in 2004.² The result of a lack of such attention can be lost customers, difficulty recruiting talent or problems with locating in certain communities, for example. Although it is not easy identifying significant problems that exist internally, the demands on companies to be more transparent and to use their power more wisely are intensifying. Through forward-looking disclosure and active engagement with stakeholders, all elements of responsibility management, companies can avoid tarnished reputations and potentially more serious restrictions on their activities.

Awareness of the concerns and interests of stakeholders, both inside and outside the company, can only enhance company performance and decision-making processes, especially since companies cannot do business today without encountering these groups in some way. Thus, whether they do it explicitly or not, whether they do it well or not, companies are managing responsibilities. The key to making responsibility management part of the company’s business success is to make explicit and discussable in a variety of forums the stakeholders’ interests and concerns, and work jointly and collaboratively at times, and within the company at other times, to ensure that these concerns do not become significant problems.

1.2 How to manage responsibility

Using the TRM framework is not rocket science. As we pointed out above, companies are already managing their responsibilities to stakeholders. It simply needs to be done using the same management techniques, problem-solving techniques, engagement strategies and systemic strategies already in use for managing quality. Similar thought processes and techniques can be applied to the relationships with other stakeholders beyond customers and employees, who are the focus of quality. TRM is simply a systemic framework for managing responsibility for all of the companies’ stakeholder- and natural environment-related activities: that is, a system of total responsibility management. By making responsibility management explicit, TRM has the capacity to help companies develop integrity, values-driven vision, and respect for the perspectives of stake-holders affected by the company’s business activities.

Briefly, TRM starts with inspiration. Inspiration means that the company has articulated a values-driven vision to which top management is committed. This vision provides inspiration because it creates meaning for stakeholders engaged in a range of processes, partnerships and other relationships with the business. Built on generally agreed foundational standards that provide a floor of expectations about company practices and performance while incorporating the company’s own explicitly stated values, the vision guides strategy development and implementation, processes, procedures and relationships.

The next major component of TRM is integration. TRM integrates the company’s inspirational vision into its strategies, its employee relation-ships and practices, and the numerous management systems that support company strategies. Each company needs to determine how to do this in a way that satisfies its particular stakeholders, industry demands and product array.

TRM, using continual improvement tools creates feedback loops that foster innovation and improvement in management systems. Innovations and improvements in various strategies and stakeholder-related operating practices can potentially boost performance, and improve results. Key performance indicators, or a measurement system that assesses how well the company is performing along at least the triple bottom line of economic, social and environment (Elkington 1998) is an important element of the TRM framework, as are transparency and accountability for results. Box 1.1 provides an overview of the elements of the TRM framework, which is also pictured (for the more visually minded) in Figure 1.1. Each of these elements will be dealt with in greater detail in the following chapters, following a brief exploration of the ‘business case’ for responsibility management.

TRM in Brief

Inspiration: Vision Setting and Leadership Systems

• 1. Responsibility vision, values and leadership commitments. Each firm determines its own vision for responsible practice and leadership, based on a foundation of generally agreed global standards and values as articulated by international bodies. The company makes a commitment to responsibility management through the top-management team and leaders throughout the organisation. This commitment helps the company determine not only ‘What business are we in?’ and ‘How do we compete?’ but also ‘What do we stand for?’ in developing its responsibility vision, enhancing leadership commitments and implementing core values that underpin all of its activities
• 2. Stakeholder engagement processes. Stakeholder engagement means developing dialogue, communication and mutuality with important stakeholders to inform operating practices and strategies. The company determines ‘What is our impact on stakeholders?’ and ‘How do we appropriately incorporate the views of key stakeholders into our responsibility vision and leadership?’ through its stakeholder engagement processes. Stakeholders include: primary stakeholders (employees, unions, owners, supplier/allies and customers) and critical secondary stakeholders (communities and governments). Specific other stakeholders may also be included, depending on the company’s situation and industry

Integration: Strategy, Employee and Operating Practices

• 3. Strategy. Having determined its responsibility vision and stakeholder engagement strategy, a company then develops an overall strategy for achieving its vision, leadership and corporate goals in a responsible way. The company asks, ‘How do we match our vision and what we stand for with the reality of what we do and are?’ and ‘How do we achieve our corporate goals and objectives consistent with our inspirational vision and core values?’
• 4. Human resource responsibility. It is people who are organised in organisations. It is people who implement the company’s vision and leadership and particularly determine how responsibly the company operates. People involved with a company, whether directly as employees or in the supply chain for a company, deserve to be treated responsibly: that is, with dignity and respect. Responsibility for human resource practi...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Contents
• Acknowledgements
• List of boxes, figures and tables
• 1 What is responsibility management? And why bother?
• 2 The business case for responsibility management: the new business imperative
• 3 Building integrity and sustainability systemically
• 4 Inspiration: vision setting and commitment processes
• 5 Integration
• 6 Improvement and innovation systems
• 7 Indicators: measuring responsibility management
• 8 Getting started: change management and the complexity of being ‘glocal’
• References
• Index