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The complexity around corporate social responsibility

By Professor Michael Yaziji and Research Associate, Karin Oppegaard - September, 2007

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Corporate social responsibility (CSR) is one of those rather irritating buzzwords that is as unclear and slippery as it is pervasive. What, after all, are the responsibilities of the corporation? Says who? CSR issues are especially challenging because firms face a great deal of internal and external uncertainty around the unstated, incomplete, continually re-negotiated, and social contract that defines expectations about their behavior.

So how should managers deal with the complexity surrounding CSR?

In the recently published book “Managing Complexity in Global Organizations,” Michael Yaziji and Karin Oppegaard explain that the complexity lies along at least two different dimensions: ethical and institutional. First, ethical complexity results from the difficulty of establishing clear ethical truths, even within a single individual. Second, across individuals, the large number of stakeholders with competing or conflicting ideological and ethical perspectives creates increasing institutional complexity. 

Ethical complexity
Anyone who has taken an introductory philosophy course knows that there is unanimity on ethical claims among ethical theorists as long as…well, never. This is not the fault of pointy-headed philosophers; the contradictions are within each one of us, if we allow ourselves to listen. Old and well-established ethical traditions are old and established because they give expression to our natural, and conflicting ethical inclinations. Consider everyday ethical challenges you face as a manager. For example, do you keep on board a 62 year old who has given his best to the company for the last 30 years but who is no longer very productive? Should you be loyal to him? Of course! But wait. What about the shareholders who are paying his salary? What about that hotshot IMD MBA who could most likely run circles around him—doesn’t she deserve the position if she is really the best person for the job?

Similarly, chances are good that your company itself is also a little ambivalent or schizophrenic regarding its mission and values. Check out your company’s website and what it says about the company’s mission or values. It most likely says something such as, “We are dedicated to responsibly providing the best quality products to our customers, the best and most rewarding environment for our valued employees, optimizing high returns to our shareholders while being good and responsible corporate citizens and community members.” It would be easy to be cynical here. But again, the fault is not in the good-intentioned people who developed the company’s values; after all, we all feel like we should do all of these things.

The complex morality of the decision-making process has four main consequences. First, individuals can be paralyzed by uncertainty and groups can disagree and thus decision-making is slowed or avoided. Second, energy, passion and commitment is dissipated because the individual and/or the team can be dogged by lingering doubts. Third, conflicting ethical considerations can lead to inconsistency in actions. Just as a firm cannot change strategies or objectives too frequently if it is to gain momentum, bouncing between different ethical goals can also undercut performance. Finally, there is a risk that managers, frustrated by this complexity and contradiction simply deny it or ignore the ethical dimensions and complexity of the situations they face. This last tactic works well for simple-minded managers who don’t work with teams involving anyone more thoughtful; for the rest, it is rarely satisfactory.

There is no easy solution to this ethical complexity, but managers and leaders are often well-served by facing up to this complexity openly and honestly.

Institutional complexity
Imagine you could sort out all of this ethical complexity within yourself and within your team. Excellent! Now all you have to do is convince all the external stakeholders to share your perspective.

Companies exist in increasingly complex institutional environments with many external stakeholders who have highly divergent views about what your firm should be doing. Do you outsource or offshore some of your activities or “rationalize” your headcount? What does the union think about this? Probably not the same as your shareholders. Do you just barely meet legal environmental requirements in your operations in Malaysia—which is more than some of the small local players do—or do you follow the same environmental standards you use in your European home country? What does Greenpeace think? And if Greenpeace doesn’t like your behavior in Malaysia, do you think they will complain about it there or in your home country…where your Malaysian wage scale and environmental practices might appear shocking?

Current societal realities, particularly globalization, are making it easier for stakeholders to more effectively voice their demands:

1. The vast anti-globalization movement is increasingly powerful and has developed strategies and tools that can seriously hurt corporations

2. Thanks to the media and internet, information is flowing increasingly freely

3. The spread of democracy has set the context for stakeholders to more effectively voice their demands

When you add this institutional complexity to the already existing ethical complexity, the quest for clear cut solutions seems doomed to fail. Is all of this bad news? No. First, from the perspective of the firm’s performance, the increasing ethical and institutional complexity surrounding firms creates new challenges and new means of differentiation and new dimensions of competition. There are now additional ways to win. Branding, differentiation, new markets, and employee identification with the firm are all opportunities waiting to be captured.

Making our lives richer
On a very personal level, we spend a good deal of our waking lives at work and we owe it to ourselves to make it matter. And, if our lives are going to have depth, richness and meaning, we must be able to give expression to our deeply held values in our work environments. By admitting to, and even embracing the ethical dimensions of our work, we have an opportunity to make our lives much richer.

And that is simply good.

Professor Yaziji teaches on the following programs: Breakthrough Program for Senior Executives (BPSE), Managing Corporate Resources (MCR), Program for Executive Development (PED), Building on Talent (BOT) and Orchestrating Winning Performance (OWP).

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