Corporate Social Responsibility

This month Paul Borawski (CEO of ASQ) has asked the ASQ Influential Voices to share their thoughts on the Intersection of Quality and Social Responsibility.

An understanding of system thinking allows people to see the relationships of connected elements in a system. As you gain the insight provided by such knowledge, the ignorance of connections seems odd. It is hard to have an appreciation for systems thinking and not appreciate the fundamental interconnection between people, corporations and society.

Respect for people is another management principle that extends to social responsibility. Some companies may see respect for people as only respect for workers but a wiser approach is to view it as respect for all people (as Deming, Toyota, Patagonia and many others do).

Society makes the rules for how we live together. Corporations are allowed because society decided there was a benefit to society to allow them. One can argue the benefit to society is entirely independent of social responsibility. The argument that by ignoring the reason they are allowed to exist will result in that aim being met effectively isn’t what any quality management flavor I know of would suggest.

In the time of the robber barons in the 19th century those leading corporations tried to make the claim that the business world was amoral (morality didn’t apply in that realm). As a society we rejected that assertion. Society has decided morality and ethics do apply to business leaders. Even if so many business leaders themselves show a shocking failure to act ethically in practice (see the endless line of banking executive failures, etc.). The attitude of so many current CEO’s (that you deserve whatever you can take and if you are not caught and stopped it was fine) is passed onto those they work closely with. It is no wonder those people, that are suppose to be leading the organization, instead are just bleeding the organization for whatever they can get away with. That result is very likely when you fail to encourage systems thinking and respect for people (inside and outside the company).

There are many reasons for a corporation to be moral and practice social responsibility but the most important is that is it the ethical thing to do. In addition to that it will be effective. When you create a culture that treats the system as it doesn’t matter that is damaging. We currently do a bad job of systems thinking in general. Building an appreciation for systems thinking will provide great benefits. Ignoring the system impacts so you can justify unethical behavior is damaging.

Failing to address the health care crisis for decades because your next quarterly bonus won’t be increased by any efforts you make on that score has not helped us. The focus on going after easy payoffs from politicians may well help short term profit of corporations. But it leaves the world a worse place. That isn’t an acceptable way to behave. We have some CEO’s that are finally trying to push back against the broken health care system but far far too late. It has been obvious for decades the current USA health care system is a huge social and economic drain on society. But instead of dealing with it companies ignored the problem.

It is the same things as ignoring a broken machine that is costing you money in delayed production, using extra resources, customer complaints about defective products, having to replace defective products. Systems thinking also provides more focus on the long term. It is easy to ignore the health care crisis each quarter. The issue can be coped with for the quarter. When you look at the long term it is obviously a hugely critical, hugely costly area. It is complex and many aspects are outside the sphere of control of a corporation. That doesn’t mean it is outside the sphere of influence. It has been a huge problem and the continued failure of leaders to deal with it for decades has made the problem much more difficult to address – as often happens with problems you let grow instead of dealing with them early on.

When you understand systems thinking you know that the impacts of weak systems cost you – even if the direct costs are not obvious. Some times the direct costs become obvious (such as the massive costs today due to decades of failure with the health care system) but others are less so. What is the cost of the current educational system compared to what it could be? What is the cost of having over 2 million people locked up in prison? There are direct costs that can be calculated, but what about the other costs?

I agree completely with Dr. Deming word on page 51 of the New Economics:

The aim proposed here for any organization is for everybody to gain – stockholders, employees, suppliers, customers, community, the environment – over the long term.

Related: Purpose of an OrganizationSamuel Adams Acts Like a Good Neighbor (founder says New Economics is his favorite book, by the way) – Why Pay Taxes or be Honest

Toyota, Enrich Society:

The Toyota family, very strongly, still has their name on the building and [have] a big influence in the company. The original founding [principal] of the company was to enrich society.

One thought on “Corporate Social Responsibility

  1. Hi John

    The simple reality of life is that everything is connected in some way to everything else. A company is the sum total of the relationships it builds, when they are all short-term and only based on greed, than it will go up and down constantly. The organizations which stand for a higher purpose and pursue the long-term goals always fair better over the long-term. You can look throughout history at the most successful companies at any point in time.

    Carnegie steel as long as it practised respect for people and social responsibility grew and dominated the steel industry, when it shifted to greed as the motivator its decline began, and it fell into US Steel, which under JP Morgan grew steadily, because Morgan respected his workers, and their ability to drive production and maintain quality. Morgan backed many companies including what became GE in their early days because he saw how they would benefit society, and by benefiting society he knew he could earn a profit eventually. But more than earning a profit he knew if you benefit society, you are rewarded with growth greater than your profit, because you increased the economic pie, and your share of it.

    The attitude of companies do not need to respect people or society, is all based on economic, sociologic, philosophic, and psychological vacuum theories that try to explain parts of life without relating it to other existing factors. Like the law of supply and demand, far more than two variables decide what demand is in the real world, yet somehow people feel that only volume and price matter, which is a load of manure.

    In a system and all of life is system of some type, you have to grasp relationships in order to understand the system and how it operates. It is the total lack of understanding the real economic system that dooms most organizations to constantly repeat their failures at meeting the systems needs and thus being rewarded by it. If you cannot grasp what the basic relationships are in a system, how will you ever be able to define what the needs of any group in the system are, And without knowing what the key groups needs are you cannot realistically supply the need so any success is blind luck and sooner or later luck will run out.

    If we look at how certain newer companies are managing to take larger and larger shares of the marketplace every year, we will see that these companies understand the relationships they have with society, and because of that they understand society’s needs, and are rewarded with steady growth, and customer loyalty. Two great examples are Samsung and LG, both have moved into and captured dominate positions against stronger established competition, but because they focus on their relationship with the consumer more than the competition does they have grown, by simply doing a better job of meeting the consumers needs, they spend less on advertising any product, and generally command a better price, yet they grew their share of both the consumer electronics and appliance markets; which were already filled with products and producers.


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