Business
Porter: CSR Is Dead End
In an interview on HBR.org, management expert, author, and Harvard professor Michael Porter said that CSR (corporate social responsibility) is a dead end. “For folks in the CSR world,” he added, “the real impact isn’t on charitable giving but mobilizing the business itself.” (video and article available here)
Porter and partner Mark Kramer argue for a principle they label “shared value, which involves creating economic value in a way that also creates value for society by addressing its needs and challenges. Businesses must reconnect company success with social progress.” As they see it, “shared value is not social responsibility, philanthropy, or even sustainability, but a new way to achieve economic success.”
It’s not exactly a catchy name, nor is it a new concept, but if Porter and Kramer can get more companies to focus on the needs and challenges of society—rather than creating a demand for something we don’t really need—they will help CSR move to the next phase.
I would call that next phase corporate social profitability (CSP), since both companies and society benefit.
If you want to know what CSP looks like, consider the case of Dannon yogurt in Bangladesh, which I wrote about here. Danone teamed up with Grameen Bank to develop a low-cost yogurt that provides 30% of a Bangladeshi child’s recommended daily nutrients. It created economic value by creating value for society.
Or how about Procter & Gamble, which now has nine manufacturing plants that are beneficially using 100% of their waste? As a result, P&G has recovered tens of millions…
24Mar2011 | Steve George | 0 comments | ContinuedFour Brutal Truths
Milliken & Co. won a Baldrige Award in 1989, the second year the Award was given. A multinational group of textile and chemical companies, Milliken has continued to improve over the last two decades, using its Baldrige experience as a springboard for industry leadership and role model best practices.
It customized the Toyota Production System to its own culture and operations and applied the scientific method to new initiatives, using PDCA to experiment, test, and improve. It succeeds “in the face of four brutal truths that often derail organization improvements, preventing innovation and sustainable excellence,” according to Laurie Haughey, Milliken’s director of education services and marketing (article here):
- The majority of performance-improvement programs fail. Milliken looked to Japan and the process controls taught by W. Edwards Deming to develop a sustainable management system. “More than 100 management employees made four exploratory trips to visit leaders of Japan’s best companies…to learn and adopt performance systems,” writes Haughey.
- Organizations will founder unless they cultivate the trusting environment needed to perform honest self-analysis. First, Milliken adopted zero-based thinking: Its objective is zero, not some acceptable level of failure. Second, it uses value-stream mapping to identify the eight forms of manufacturing waste. Third, it encourages workers to expose problems and search for root causes.
- Organizations often count the wrong things. “Rather than focusing solely on bottom-line numbers,” Haughey writes, “organizations should consider a more holistic approach in measuring corporate success.” In Milliken’s case, the foundation of its performance system is safety. Every meeting starts with a safety review. Hourly employees own…
Strategic Value of Corporate Social Responsibility
The evolution of corporate social responsibility from charity to strategy is one of the great business stories of the past decade. The leaders in CSR are finding ways to enter new markets that seemed undesirable and impenetrable. It takes longer, the profit margins are smaller, and the challenges are greater, but the payoff, both for the company and its customers, is huge.
Pamela Hawley describes these benefits in her article on Fast Company about Danone and Grameen Bank in Bangladesh (“Corporate Social Responsibility: How You Can Profit – and Kick Poverty Out,” March 4, 2011). Grameen Bank pretty much invented microfinancing as a way of lending small amounts of money to those who had little, primarily women. Danone makes yogurt.
Danone wanted to enter the Bangladesh market so it partnered with Grameen to create a unique, community-based model. “Those of us who are involved in CSR know we need to have experts on the ground,” Hawley writes. “It’s important to establish local buy-in, which can take years of relationship building. And we need to have experience, or rely on those who do.”
The annual income of a Bangladeshi is $497. The country has one of the highest child and maternal malnutrition rates in the world. One cup of Danone yogurt would provide 30% of a child’s recommended daily nutrients.
Grameen Danone Foods Ltd. built a production plant near Bogra, Bangladesh. It branded the yogurt as “shokti,” which means strength in Bengali. It marketed the yogurt at a price even the poorest could afford. It bought milk…
7Mar2011 | Steve George | 0 comments | ContinuedThe Local Impact of Global Markets
The biggest and fastest-growing markets for almost everything lie in China, India, Brazil, and other emerging markets. It doesn’t matter whether you or your organization sells to these markets: They directly affect your business.
An obvious impact has been on jobs. It’s not just that American manufacturers have been moving production out of the country, but the jobs that have been lost often paid more than what displaced workers are left with. People in other countries who work for a fraction of what American workers make directly affect what American workers make.
Another impact, described recently in The Economist, is on the medical device market. (“Life should be cheap,” January 20, 2011) Innovators in China and India must, of necessity, develop products that are significantly cheaper than their Western equivalents to serve the “bottom of the pyramid,” the four billion people who live on less than $2 a day. As the article notes, “They create products that are stripped to their essentials: scanners that cost $10,000 rather than $100,000; portable electrocardiographs that cost $500 instead of $5,000.”
American medical device manufacturers struggle to compete in these markets, which is why many are investing in research centers and factories in China and India, “developing frugal inventions of their own, which they gleefully sell both locally and in other emerging markets.”
But not back here in the U.S.
The Economist attributes this to two factors: (1) health care is not an efficient market in the U.S., where patients demand the best of everything no matter the cost, and (2)…
25Jan2011 | Steve George | 0 comments | ContinuedSmall Business Fundamentals
Small business owners and leaders must wear many hats. With fewer employees than a big company, they are closer to the action, their days filled with pivotal moments when decisions must be made and steps taken that could alter the fortunes of their company.
In such a challenging environment, it helps to have a management system that can guide your decisions and support the steps you take. The Baldrige model provides such a framework.
Twenty-two small businesses have won the Baldrige Award, including three in 2010. While a company may have up to 500 employees to qualify for the small business category, several winners have had fewer than 100 including Stoner, the smallest company ever to win. Stoner had 43 employees when it received the Baldrige Award in 2003.
I worked with Custom Research, which had 75 employees at the time, when it won the Award in 1996. I remember the tension that the Baldrige framework created by requiring formal processes in a few key places, like strategic planning, where informal approaches had served the company well. Custom Research strengthened its processes and, to the Baldrige program’s credit, Baldrige examiners received specific training on how to better evaluate small businesses.
The small business leader who is looking for a proven approach to building a strong, sustainable, high-performing company should consider integrating the Baldrige model. It can help:
- Define the roles of senior leaders and improve communication, accountability, and performance
- Clarify what factors should be considered when planning for the near and long-term future
- Get everyone the same…
Another Warning Sign for U.S. Manufacturing
Two articles over the weekend in the local Star Tribune offered insights into a systems perspective of manufacturing in the United States. It’s common knowledge that manufacturing jobs, which tend to be well-paying jobs, have been dwindling because of productivity gains and outsourcing, shrinking from nearly 20 million jobs in 1979 to less than 12 million in 2010. While the Federal Reserve estimated that the value of U.S. manufacturing output was about $3.7 trillion in 2008, the U.S. trade deficit has grown dramatically since then to $500 billion in 2010.
A clue as to the impact of this trend can be found in a PwC study released today (“Study: U.S. med-tech industry losing edge,” Janet Moore, Star Tribune, January 17, 2011). The study showed that:
- China, India, and Brazil will make the strongest gains in developing next-generation, lifesaving products over the next decade.
- The U.S. position will erode in five areas that support med-tech innovation: (1) availability of financial incentives; (2) havens for innovation such as universities; (3) a supportive regulatory system; (4) a pool of patients demanding the best treatments; and (5) a supportive investment community.
“The key finding is that the U.S. is declining when compared with other countries across the globe. And we’re in real jeopardy of losing our lead,” said PwC’s Tracy Lefteroff.
At one time, the U.S. was the global leader in electronics manufacturing. Now very little of it is done in this country. At one time, the U.S. was the global leader in automobile manufacturing. While U.S. automakers are making a…
18Jan2011 | Steve George | 1 comment | ContinuedManaging Complexity with Baldrige
IDC Manufacturing Insights conducted a worldwide study of more than 700 small and medium-sized manufacturers across four sectors in eight countries. The white paper summarizing the study findings is available from IDC Manufacturing Insights here.
The study found that “for European and North American manufacturers, achieving operational excellence has become more complex” and “the pressure to reduce costs and improve productivity as ever top priorities.”
The concern about complexity is addressed in the newest version of the Baldrige Criteria. Some Baldrige experts have taken issue with the complexity of the Criteria. The 2011-2012 Criteria booklet states that “the Baldrige Criteria are complex because achieving organizational sustainability in a global economy is complex…While the Criteria require complex thinking, they also provide the path to clear identification of an organization’s relevant issues and strategic advantages, followed by identification of key data, and then analyses for decision making. Handling complexity requires agility and the ability to execute with a sufficient degree of simplicity.”
This defense of complexity and the issues organizations must address aligns with the findings of the IDC Manufacturing Insights study: The survey showed that discrete manufacturers “know they need skilled people resources, agile and adaptable processes, and available and relevant information.” As the company concludes, “the best way to tackle complexity is by learning from best practice and sector-specific experts and then, on this basis, investing in efficient business processes and technology.”
From a Baldrige perspective, this means learning from the best practices of small and medium-sized manufacturers that have received the Baldrige Award…
11Jan2011 | Steve George | 0 comments | Continued
