Using Corporate Social Responsibility to Win the War for Talent

It is by now an article of faith that employees who are skilled, creative and driven to satisfy customers are essential for differentiating a company from its competitors. Increasingly, success comes from being able to attract, motivate and retain a talented pool of workers. However, with a finite number of extraordinary employees to go around, the competition for them is fierce.1

There is growing evidence that a company’s corporate social responsibility activities comprise a legitimate, compelling and increasingly important way to attract and retain good employees. For example, in a bid to burnish their images as socially responsible companies and thereby attract and retain talent, CEOs of high-profile companies such as Home Depot, Delta Air Lines and SAP recently pledged to deploy millions of employee volunteers to work on various community projects.2 Their efforts appear to make sense: Jim Copeland, Jr., former CEO of Deloitte Touche Tohmatsu, puts it this way: “The best professionals in the world want to work in organizations in which they can thrive, and they want to work for companies that exhibit good corporate citizenship.”3

In general, CSR initiatives reveal the values of a company and thus can be part of the “employee value proposition” that recent studies indicate is the lens through which managers must view talent management today. CSR also humanizes the company in ways that other facets of the job cannot; it depicts the company as a contributor to society rather than as an entity concerned solely with maximizing profits. As other researchers explain it, “a paycheck may keep a person on the job physically, but it alone will not keep a person on the job emotionally.”4 Moreover, because of the many forms that it can take, CSR often serves as a genuine point of differentiation for the company.

It is not surprising, then, that so many companies engage in so many CSR initiatives. Indeed, many companies big and small, including blue-chip names such as Cisco Systems, General Electric and IBM, view employee engagement in CSR as a “strategic imperative.”5 Yet few if any companies have figured out how best to reap the returns of such CSR engagement. We consider “internal marketing” to be the most apt rubric under which CSR can be used to acquire and retain employees. Such a perspective holds that just as companies succeed by fulfilling the needs of their customers, they can manage their employees best by viewing them as internal customers, fulfilling their needs through a compelling menu of “job-products” whose features include salary, benefits packages and job responsibilities.6 Designed properly, the job-products can contribute dramatically to job satisfaction, employee retention and productivity.

A key task for managers, then, is to incorporate CSR into jobproducts that are tailored to the often diverse needs of employees. However, few managers are clear about how to identify and understand the needs of different employee segments and subsequently configure their CSR efforts to address the unique needs of each segment. Researchers Michael Porter and Mark Kramer observed that “[m]ost companies feel compelled to give to charity. Few have figured out how to do it well.”7 That is not to suggest that companies do not engage in any strategic CSR thinking. But it is evident that much of the thinking has been restricted thus far to approaches intended to engage external stakeholders such as consumers, regulators and watchdog groups.8

There are further challenges with the range of ways in which businesses approach CSR. Although there is convergence on the concept that CSR refers essentially to a company’s commitment to improving societal well-being through discretionary business practices and contributions of corporate resources, there is great divergence in how it is executed and therefore in how effective CSR can be for managing talent.9

As a rule, senior executives are content with CSR engagement at broad levels (“We support recycling”). However, most have not yet grasped that the specificity with which a company supports or engages in a social initiative makes a big difference to how it is perceived by employees.10 For instance, a company that supports dental health can engage in corporate philanthropy — donating money to the American Dental Association, say — or in cause marketing (a percentage of toothpaste purchases goes to the American Dental Association) or to corporate social marketing programs that promote actual behavior change, such as clinics in inner cities to train children to have better dental health practices. Different groups of employees will view those approaches in very different ways — and value them quite differently.

With that in mind, we sought to understand the barriers that managers face in using their CSR initiatives to attract and retain the best employees and the ways in which these barriers might be overcome. The research grew out of a larger program examining the impact of CSR on company stakeholders. (See “About the Research.”) Our prior work suggests that stakeholders’ responses to CSR are generally favorable, yet highly dependent upon the perceptions and characteristics of the individual, the company and, to some extent, the broader industry and macro-environmental context.

The Challenges of Using CSR As An Internal Marketing Lever

Our research indicates that CSR’s opportunity to serve as an effective internal marketing lever is limited by four related issues. First, companies often keep their employees at arm’s length, not communicating the extent and details of their CSR efforts in a clear and consistent manner. Second, companies formulate their CSR programs without explicitly considering the diverse set of employee needs that can be fulfilled by such programs. Third, companies do not fully understand the psychological mechanisms that link their CSR programs to anticipated positive returns from their employees (for example, pro-company behaviors, higher productivity, longer tenures and so on). Finally, we find that companies take a decidedly top-down approach in the formulation, execution and maintenance of their CSR programs, often mandating participation rather than involving employees on their own terms. We discuss each of these barriers in more detail next.

About the Research >>

1. Employees’ Lack of Awareness and Involvement in CSR An employee’s proximity to CSR spans a continuum: from a complete lack of awareness to direct involvement. Our research suggests that most employees are not close to their employers’ CSR efforts; while many have a vague notion that their employer is socially responsible, they know little to nothing about the specific activities the company engages in. Proximity is also program-specific: An employee can be highly engaged with one initiative yet completely unaware of the company’s other CSR activities. Moreover, while many employees are eager to know more about such initiatives, they frequently find it difficult to discover more about them. Companies often miss prime opportunities to connect with employees by tucking away news about CSR on remote pages of the intranet.

We find that even companies that are spending millions of dollars to support compelling social initiatives fail to seize opportunities to inform employees fully about their good works, let alone involve them in such initiatives. Consider this suggestion from one of our retail sector interviewees:

There is maybe one [announcement] at the end of the year — ‘By the way, [the company] donated $12 million last year to nonprofit educational organizations’ — but it’s a small blurb. I think you could increase the impact on associates if they were to publicize it more throughout the year. Just bring it to the attention of the associates more.
— Male, Headquarters Office of Specialty Retailer

The quantitative studies confirmed our hypotheses. In the follow-up global survey conducted by the U.S. consumer goods company — an organization that works hard to articulate and communicate its CSR internally — 90% of respondents agreed it was important for the company to be engaged in CSR, but only about 50% agreed that they had a clear understanding of the nature of this engagement. Moreover, in the two online surveys conducted later, only 37% of the employees were aware of their respective companies’ CSR. Clearly, a major challenge for managers is to increase their employees’ proximity to their CSR initiatives, taking them from unawareness to active involvement.

2. Limited Understanding of Employee Needs Fulfilled By CSR The internal marketing literature shows that, not surprisingly, the success of a specific job-product stems largely from the extent to which it fulfills key employee needs. As with the basic facets of job-product such as pay, benefits, advancement opportunities and job role, a company’s CSR programs can satisfy one or more higher-order psychosocial needs. In fact, it could be argued that CSR’s power as an internal marketing lever rests largely on its ability to satisfy those needs meaningfully.

However, companies are mostly oblivious to such issues. That is not entirely surprising, given that the task of unearthing employees’ needs is anything but straightforward. The task is further complicated by our finding that one size does not necessarily fit all: The needs vary in their relative importance across employee segments. The primary research uncovered at least four fundamental needs that employees seek to fulfill through their proximity to their employers’ CSR activities. These are detailed next.

Creating opportunities for self-enhancement. We found that some employees like to work for socially responsible companies because it gives them opportunities for personal growth. The results can be emotionally rewarding when employees use such opportunities to express their own sense of responsibility to their immediate or even larger community.

The research also reveals that when employees work on CSR projects that involve tasks outside of their daily routine, they learn specific skills that can help them advance in their careers. For example, Green Mountain Coffee Roasters Inc. of Waterbury, Vermont, has sent more than 20% of its full-time employees to coffee farms in an effort to educate them about sourcing issues. The employees subsequently use this knowledge in their daily work. Similarly, organizational or marketing skills developed in a community outreach program may give employees the tools necessary for greater job effectiveness.

Improving work-personal life integration. Employees’ work and personal lives are inextricably intertwined, and they often look to integrate these two spheres so they can transition more smoothly between them.11 Interestingly, the research shows that CSR can help employees feel less stressed when they feel they are effectively balancing the needs of work and family. Integration between the two parts of employees’ lives is enhanced when they interpret their employers’ socially responsible behavior as an indication that the company places the same importance on personal values that they do themselves. More concretely, the CSR initiatives that achieve this integration often involve the employees’ own social communities (for instance, schools that their children attend).

Building a bridge to the company. Employees who work in remote locations often feel isolated from (and to some extent underappreciated by) what they perceive to be the literal as well as psychosocial center of the company — the headquarters or a major regional office hub. Naturally, these employees have a need to feel more connected or “plugged in” to the company’s social and professional networks, so they often look for opportunities to connect with others around the company. The far-flung employees viewed CSR initiatives as a means for the company to demonstrate a commitment to them and as a potential bond between employees regardless of location. Listen to this woman who works in a regional sales office far from HQ:

The power of [the company] supporting what we want to do here in this community … wow, that makes me feel more connected to the company.
— Female, Regional Office of Consumer-Goods Company

CSR often provides a bridge to colleagues scattered across multiple locations — programs where employees work closely with others whom they may not have met or with whom they would not normally work. It also provides a benefit on a more abstract level, where individuals feel that they are part of a collective effort to make a difference in the world. A pertinent example:

Satellite office employees of one company that helped the victims of the 2004 Asian tsunami said they felt more connected to distant colleagues regardless of their jobs and assignments.

Creating a “reputation shield.” Employees often find themselves having to defend their companies’ reputations to hostile external stakeholders. This is particularly germane for global companies that have operations in locations where the local population and media have negative or even hostile feelings toward the company. For example, Wal-Mart Stores Inc. has received considerable criticism from many communities because they view the retailing giant as a threat to small-business owners. These pockets of ill will obviously can be harmful to the company, but they also can hurt employees’ self-esteem. As one focus group individual stated:

You get outside … and it is either no knowledge or a lot of negative knowledge, and it is a very painful thing, because we all know better inside the company.
— Male, Overseas Office of Consumer-Goods Company

The research indicates that a company’s CSR activity helps employees combat such negative external images by educating external audiences, and sometimes even themselves, about the company’s core values and ethics. In this way, CSR provides a “reputation shield” that deflects negative sentiment.

3. Poor Understanding of Employee Returns to CSR For companies truly to leverage their CSR in the quest for talent, it’s crucial to understand the key outcomes that CSR produces for the company, the psychological drivers of those outcomes and the many contingencies that moderate the links between CSR initiatives and outcomes. The need is underscored by a recent PricewaterhouseCoopers LLP study that points to employee motivation as one of the top two factors helping chief executive officers make the business case for CSR activities (58% of respondents rated CSR so, second only to reputation/brand at 79%).12 However, most companies devote few if any resources to gaining insights into the employee-specific processes and outcomes that stem from their CSR inputs.

When personal needs are fulfilled at work, employees are likely to identify with the company. Identification is a psychological concept that reflects the extent to which employees feel that their sense of self overlaps with their sense of their employer. Employees who identify strongly with the company view its successes as their own, and they incorporate its characteristics into their own self-concepts.13 For example, employees at The Timberland Co. are known to have a near cultlike sense of belonging due, in part, to the company’s CSR efforts.

CSR has already been pinpointed as a key factor in such identification among consumers and job applicants in a variety of contexts.14 Our research adds considerable evidence to support the idea that employees identify with a company when they believe it is socially responsible.

The importance of such CSR-induced identification stems from the slew of pro-company outcomes it engenders. These outcomes can be thought of in terms of two basic and related categories: internal and external. Internal to the employee (residing in his or her mind) are outcomes such as high level of commitment, greater morale and a dedication to excellence in work tasks. CSR-based identification by employees can cause them to feel satisfaction in their job, a sense of pride and a feeling of well-being. Said one focus group participant:

It makes you feel good that [the company] is out there helping others and helping the environment. We do a lot of things for volunteer work outside that represent [the company] and I’m proud of that.
— Male, Manufacturing Plant of Consumer-Goods Company

These primarily psychological outcomes lead to external (behavioral) outcomes: They cause employees to contribute resources toward the achievement of their employers’ goals.15 External outcomes, evident in both the focus group findings and interviews with executives, include a reduction in absenteeism and employee retention, as described by this employee:

One of the things that keeps me here is some of the positive things that we do in the community and being able to be part of that as a result.
— Female, Headquarters Office of Consumer-Goods Company

Employees also noted that their employer’s commitment to socially responsible behavior inspires them to work harder, be more productive and focus more on quality.

The follow-up quantitative survey conducted by the consumergoods organization confirmed that employee engagement in CSR led to pride in the company, which in turn was positively related to employee performance and negatively to intention to quit. Similarly, our online survey results show that employee engagement in CSR is positively related to customer focus and pro-company citizenship behaviors and it runs counter to employees’ intentions to leave.

4. Top-Down Approach to CSR Finally, there is a huge chasm between executive teams and their employees regarding the appropriate sources and ownership of CSR initiatives. In a recent study of CSR ownership by the United Nations Global Compact (the world’s largest global corporate citizenship initiative) and the Wharton School of the University of Pennsylvania, 71% of the 400 companies surveyed indicated that their CSR policies and practices were developed/managed at the CEO level, 57% at the board of directors level and 56% at the senior management level. The findings of our research are no different: Most companies see CSR development, implementation and management as top-down processes. In other words, it is senior management that decides what to support — and how. As one of our interview respondents put it:

Every CEO we’ve had for the past couple of years has had a focus in the community and has made the company sort of take it on. The two CEOs and the one before that were into blood drives. So what is one of the things that we had to do on every one of our sites? Blood drives!
— Female, Headquarters Office, Toys and Sporting Goods Company

Clearly, a more strategic approach to CSR warrants greater ownership of the initiatives by employees. They yearn to play greater roles — in effect, to become co-creators of CSR value. In the words of a focus group respondent:

If we are looking to energize employees … there’s going to be a natural tendency to say, ‘We’re going to empower you through charitable giving in some capacity.’ I have half a dozen organizations that I work with, and I’d love to be able to extend that reach through [the company].
— Female, Regional Office of Consumer-Goods Company

Opportunities Through Optimal CSR Strategies

As CSR becomes more widespread, it also is changing rapidly. What was once ancillary to business practice quickly is becoming an essential element of corporate strategy. Companies now need to shift their approaches to CSR management if they are to realize fully the returns that CSR promises. (See “Recommended Shifts in CSR Management Approach.”)

Based on the barriers identified above, we recommend that managers take the following five steps:

Increase Employee Proximity to CSR The most straightforward implication of our research is that companies must bring employees closer to their CSR activities. The most specific and important aspect of this is communication; companies need to inform employees about their CSR programs in a concrete, coherent and consistent manner. Such communication has to include both the rationale behind the CSR involvement and the specifics of the programs, their operations, the company resources allocated and the challenges faced, and most importantly, the successes of the programs.

Many companies are starting to do a good job of communicating their CSR commitments to their external publics; the same lessons can be applied to internal communication. At the same time, companies need to realize that employees, like consumers, can learn about a company’s involvement in specific CSR (and the lack thereof) and its motivations for doing so from multiple sources (for example, blogs, online chat rooms and other media), many of which are external to the company and therefore cannot be controlled by its marketing department. External sources can be highly credible because they are seen to be more “objective” than corporate press releases. Thus, companies must aim for high credibility in their communications to offset employee cynicism. This can be achieved by involving credible and influential internal sources (for example, corporate online communities such as IBM’s On Demand Community) and with a bias toward objective information rather than feel-good rhetoric. While the latter is undoubtedly important in inspiring employees to get involved and to feel part of a greater cause, by itself it can come across as empty PR.

Bringing employees closer to CSR obviously does not end with communication: Companies must encourage active participation. This is not just a matter of exhorting employees to get involved; companies need to provide specific opportunities for involvement in ways that do not take away from employees’ ability to fulfill their regular responsibilities. Better yet, companies can consider making CSR participation integral to those professional responsibilities: activities such as Green Mountain Coffee’s sending full-time employees to coffee farms, for instance.

Finally, as in other aspects of their employees’ jobs, companies need to provide objective and constructive feedback about performance in CSR-related activities in ways that encourage and allow employees to make the most personally and professionally significant contributions possible. This can take the form of 360degree evaluations as well as awards.

Use a Contingent Input-Output Approach to Make CSR Decisions In general, the research suggests that if companies truly are to be strategic about their CSR deployments, they have to rely on their understanding of how their CSR inputs translate to pro-company outputs. A framework is presented. (See “Employee Reactions to CSR.”) It adopts a contingent approach to seeing how employees benefit from a company’s CSR initiatives and whether and how the benefits translate to favorable company outcomes.

We advise managers to begin CSR planning by adapting such an input-output model for their own unique contexts, using research to identify the inputs in terms of the issues or causes the company ought to support, the processes and, most importantly, the desired employeecentric outputs of each CSR program. Once the programs are implemented, the outputs can be monitored through internal surveys to determine which programs are delivering the most value to employees and, ultimately, to the company. There should be metrics for internal outcomes (for example, attitude toward the company, well-being and commitment to continued employment) and external outcomes (such as absenteeism, retention, work effort, productivity) as well as for the underlying processes (identification).

Finally, in trying to assess the returns from CSR initiatives, managers should consider the many multipliers (that is, the contingencies) that may amplify or dampen the initiatives’ effects. Programs that make a huge impact for some employees may have little effect on others, depending on a variety of employee and company characteristics.16 Thus, the key to constructing effective CSR programs lies in understanding not just the extent to which these programs can satisfy key employee needs, engendering identification, but also the employeeand company-specific factors that can magnify or dilute the effects of CSR. Employee factors include tenure at the company, the nature of their jobs, age, gender and their perceived importance of the cause at the center of a particular CSR program.17 For example, while most people will respond favorably to programs that support breast cancer research, female employees in the high-risk age bracket are likely to feel greater affinity for such a program.

Understand and Fulfill Employee Needs Companies need to segment their employees based on the relative importance of their CSRrelated needs and then design and target segment-specific CSR programs to meet those diverse needs. Employee segments can be identified in the same way that companies use “benefit segmentation” among customers and look for demographic or psychographic correlations for these segments to identify and target them more easily. In our research, for example, a key segment seems to be employees who live where their companies are viewed unfavorably by the local population; there, it may be necessary to run CSR programs that not only have great social impact in those particular markets but also have high external visibility.

Clearly it’s not easy to create a CSR “offering” for each benefit segment. As is typical with customer segmentation, companies may want to articulate the relative attractiveness of different employee segments and target their CSR programs to the segments with the greatest present or future value. The success of the programs can be gauged in terms of the extent to which the targeted employee needs were actually met.

Strengthen Employee Identification Our research indicates that CSR can dramatically strengthen identification because it reveals more unequivocally than most other corporate endeavors the values or “soul” of the company. Thus, the basic objective in devising effective CSR strategies should be to increase employee identification rather than other, more commonly monitored indicators such as job satisfaction.

Measures of identification range from the anecdotal to the formal. For instance, identification is easily recognizable anecdotally through “we” statements that employees use when describing the organization; employees who identify strongly will frequently make a distinction between “we insiders” and people “outside” the company. The organizational behavior and marketing literatures can be tapped for more formal measures of identification.18

Involve Employees in Co-Creating CSR Value Managers must seek to involve their employees in the planning, design and implementation of CSR programs, making them participants rather than onlookers. Since employees know their own needs best, those who co-produce CSR programs can be expected to develop programs that give them the most meaning and purpose. Involving employees in such ways can greatly assist managers in fulfilling needs that might otherwise be difficult to identify.

Another way to view this is to think of employees as the primary enactors of social responsibility programs rather than the enablers. In this view, the company and its employees essentially switch roles. Employees see themselves as closer to their communities than company executives and therefore more qualified to take the lead in designing and implementing CSR programs. For example, rather than matching employee donations at a charity of the company’s choice, employees prefer it when the company matches their donations to charities of their choice.

Importantly, shifting the primary responsibility for CSR programs to employees does not absolve the company of its responsibility to be an effective enabler. The company must maintain clear, open, continuous two-way communication about CSR, providing the requisite guidance and resources so employees can effectively implement their CSR plans. That includes going beyond merely allowing CSR involvement on company time to working, ideally, with employee groups to help them fully integrate their CSR efforts into coherent and compelling job-products.

Conclusion

Now that many global companies are investing millions of dollars in CSR initiatives, it has never been more worthwhile to assess the returns in terms of improved connections with employees. Still, plenty of challenges remain. Our research suggests that successful CSR strategies must be based on a clearly articulated and contingent input-output perspective. They must also satisfy varying employee needs, encourage employee identification and be co-created with employees. In particular, CSR is most effective when employees are the actual enactors, with the company acting as an enabler.

Corporate social responsibility is an especially complex strategic endeavor. It is clear that it now calls for considerably more attention and commitment from business leaders if it is to produce tangible results in terms of improved employee attraction, motivation and retention.