Corporate Responsibility Audits: Doing Well by Doing Good
Many companies spend significant time and effort developing a mission statement — complete with vision, values, goals, and strategies. Ask managers whether their firm’s mission statement lives in the company day-to-day or whether it lies neglected in someone’s desk drawer. In too many instances, the truthful answer is: “The vision is more rhetoric than real.”
This is not because the company’s managers are neglectful or “bad people.” Indeed, most managers would say they are doing their best to exemplify the values in these documents and achieve the vision. However, in-depth investigations of company practices, even in the best of firms, frequently reveal large gaps between stated values and daily practices.
We propose that auditing a company’s core operating practices by using a responsibility audit may help to bridge this rhetoric-reality gap. Such an audit assesses a company’s overall performance against its core values, ethics policy, internal operating practices, management systems, and, most importantly, the expectations of key stakeholders — owners, employees, suppliers, customers, and local communities. Such audits alert companies to responsible business practices that will help them simultaneously “do well (financially) and do good (socially).”
Vision versus Practice
As part of a recent beta test of a responsibility audit process, eight companies assessed those operating practices that related to implementing their stated vision, values, and mission. All eight had award-winning environmental, health, and safety (EHS); human resources; or corporate giving practices. However, they all discovered significant gaps in four operating areas: employee relations, quality systems, community relations, and environmental practices. When comparing their corporate core values with employees’ core values, they uncovered organizational cultures that inadvertently contributed to the rhetoric-reality disconnect.
The eight audits consistently revealed that when a company adopted proactive, responsible practices, it reaped measurable improvements in efficiency and productivity, lowered legal exposure and risks to the company reputation, and reduced direct and overhead costs.
Responsibility auditing, also called social auditing, can help corporations uncover these gaps and proactively improve their management practices. Consider the following:
- A leading regional insurer had a higher-than-industry-average employee turnover in competitively paid, highly demanding, and stressful customer service positions. An assessment and cost-benefit analysis of employee policies, practices, and the quality management system estimated that recovering just half of the turnover costs of employee overtime, temporary help, and outsourcing due to turnover would increase the insurer’s annual profit by 7 percent.
References (42)
1. R. Edward Freeman popularized the stakeholder concept in his 1984 book. See:
R.E. Freeman, Strategic Management: A Stakeholder Approach (New York: Basic Books, 1984).
