An increasing number of large firms are taking action on big social issues—from education, to gun control, to climate change, even impeachment. This follows, in part, consumers’ growing desire to shop with and support companies that reflect their own values and beliefs. But Corporate Social Responsibility (CSR) isn’t limited to big corporations. Small businesses do this, too, and have for a long time.
Small business leaders often build tight bonds with the communities they serve and because of that, their civic engagement is driven by the customers and clients they see every day, not Madison Avenue marketing firms, focus groups, or message testing. In a recent study, 72% of people believe locally-owned businesses were more likely than large companies to be involved in improving their communities.
CSR can be a risky undertaking. Approach the wrong cause, and you risk alienating customers and even employees. Devote too many of your resources, and you risk missing your financial goals. So how are small businesses so successfully navigating these waters? Below are my top three takeaways from my time spent with small business owners through the International Franchise Association.
Focus on Needs Close to Home
Small businesses’ clear advantage is that owners see every day what issues matter to their communities. Consider Jimmy Jamshed, the owner of Dallas-area Captain D’s restaurants. After encountering several individuals desperately rummaging through trash cans in search of food, Jamshed began a casual effort to donate some of his restaurant’s food to deliver to impoverished areas of his community. Soon community members and customers joined in, transforming Jamshed’s efforts into a full-fledged charitable program called Food for Homeless. Jamshed remains deeply involved, paying out-of-pocket for meals and visiting a local park almost daily to deliver meals and clothing.
Similarly, Premium Service Brands in Charlottesville, Virginia identified a problem in their community—children with school-provided lunches didn’t have access to healthy meals over the weekend. To change that, the office staff began spending Friday mornings grocery shopping for underserved students at the elementary school down the road. Now, students enrolled in their meal program receive a backpack filled with a weekend’s worth of food for easy-to-make meals containing high nutritional value. The program provides year-round stability to local families, removing a source of stress from students’ lives.
While the small business advantage in identifying challenges is clear, larger corporations can create a more organic, bottom-up strategy for engaging their consumers to know what issues matter to them most. This approach of directing focus to community needs will undoubtedly help companies stay on-brand and authentic.
Local Leadership is Authentic
Local business owners understand that listening to constituents needs before acting is essential to achieving the highest results. For example, when Norm Robertson, the owner of Express Employment in Indiana, organized veterans to speak out for legislation that could help, it didn’t happen in a vacuum. Robertson himself was a veteran, but he also heard regularly from veterans who used his company’s employment services that they needed a better way to move from public service into the private sector. After listening to them, Robertson became an advocate for the Veteran Entrepreneurs Act, which aims to lower up-front costs for veterans wishing to open local businesses and creating a tax credit to cover 25 percent of initial fees.
In some cases, though, engagement goes beyond legislation alone. When Hurricane Michael closed in on Florida last October, Just Between Friends franchisee Karen Miner partnered with city officials to gather and deliver supplies to families affected by the storm. Miner realized the most effective way to distribute items was by collaborating with her locally elected officials to determine which areas were most affected. By working with her local police departments, Minor successfully influenced public efforts and significantly increased the effectiveness of relief for those in need. She utilized her political voice to ensure that those affected by the natural disaster were given the supplies and support essential to recovery.
There are many ways for corporations to engage in their communities, but these examples show that the most successful efforts have a common thread. They require listening, understanding and action, carefully focused on what matters to the communities they serve. These initiatives show consumers that the welfare of your community is part of your business’ value proposition.
Putting People Ahead of Politics
While it’s important for businesses to exercise their influence in the community, the best strategy for most brands is to remain out of politics. Most businesses are not pushing their political views, rather they are raising awareness on the issues that matter to their communities – where the rubber meets the road—and their customers appreciate that.
Catherine Chuck is an owner of several Applebee’s locations across ideologically diverse states. In order to be effective in her philanthropic efforts, Chuck has successfully navigated the varying political leanings of her locations by supporting initiatives that bridge party lines and bring people together rather than divide them. And she has excelled at this, raising over $14.5 million in funds and in-kind support to community nonprofits and organizations including local schools, veterans’ organizations, and for childhood cancer research. By supporting non divisive causes such as these, Chuck has successfully exercised her influence in bringing communities together for the common good.
Even education, which can be a contentious issue, can be made non-political. For example, Sonic Drive-In’s Limeades for Learning” campaign works with the brand’s franchisees and the community’s teachers to support educational programs and products for students. Through Limeades for Learning,” customers at local Sonic locations are encouraged to vote online in support of teacher-nominated supplies and educational materials, which Sonic then delivers to the classrooms. This unique partnership combines the community’s priorities with both locally owned and operated stores, as well as corporate engagement.
Key Takeaways
We so often talk about CSR as if it were a new concept, but in reality, small enterprises have toiled in their communities and acted upon local needs for a long time. Small businesses’ CSR and community engagement efforts may never receive the splashy coverage that large corporate donations garner, but they play an instrumental role in the success of communities and, from their local vantage point, have an ability to impact their cities and towns in ways that go beyond just jobs or service creation. Estimates by the Franchising Gives Back program, founded by Roark Capital’s Steve Romaniello to quantify charitable giving from franchises, show that locally owned and operated franchised small businesses have given more than 2.6 million volunteer hours to charitable causes in recent years. With their ability to listen to and understand local needs that matter most to the people they serve, they highlight how businesses across the country can develop relevant and authentic approaches to CSR.
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All organizations have the ability to be smarter than the sum of their members’ intelligence and talent. Unfortunately, most are actually dumber. The good news is there are a handful of practical steps to boost collective intelligence.
Create tools that allow everyone to communicate strategically about innovation. Good ideas can come from all corners of a company, but would-be innovators may need help developing a strong strategic argument. The Defense Advanced Research Projects Agency (DARPA), the innovative government agency focused on transformational breakthroughs in national security, uses a set of simple questions called the Heilmeier Catechism (named after a former director), to think through and evaluate proposed research programs:
Materials science company W.L. Gore puts its key innovation criteria in the form of a one-page Product Concept Worksheet,” which contains: a concise statement of the product concept, the technology to be utilized, the form of the product, and the customer needs that the product will address.
Either approach can easily be adjusted for use in most organizations; they provide common language that allows anyone to propose a new idea — and everyone to judge its merit.
Vet and refine ideas collectively and continuously. In nimble organizations, innovation ideas aren’t reviewed once or twice a year by a senior committee. Instead they undergo a constant process of review, refinement, and — if necessary — death. The goal is for only the best ideas to survive. In our research, we found that successful collective vetting depends on at least two things.
The first is clear, commonly understood guidelines (also known as simple rules) by which to judge proposed innovations. In an effort to rejuvenate its innovation pipeline, Corning created a set of simple rules, derived from successful past innovations:
Second, diverse stakeholders are invited in early and often to help judge and refine the idea. At Gore, passionate champions” for new innovations use the company’s tools to frame the strategic case for their idea, vetting it with customers and colleagues in the process. If the idea gains support, the champion schedules regular peer review sessions with people from manufacturing, R&D, sales & marketing, and other areas of expertise who are in a good position to judge and refine the idea. The company’s culture of frank talk drives these review sessions. People understand that their collective job is to kill bad projects as quickly as possible and accelerate those that show the most promise.
Guidelines make it easier for everyone to judge the value of new innovations and avoid large, bad bets on relatively untested ideas. Senior leaders periodically review the portfolio of project ideas that are bubbling up and knit them together, using their knowledge of organizational capabilities and market/technology trends to create organizational strategy.
Bust through barriers that block innovation. Most organizations have regular procedures for leaders to determine which new projects should get funded and who will be assigned to these initiatives. But at nimble organizations, leadership is flipped upside down. The job of top leaders is to serve people who are close to the market. They do whatever they can to clear the way for promising new projects and get innovation teams the resources they need.
NASA’s leaders are undertaking an intensive effort to understand and transform several major barriers to innovation. They asked their employees to help; people responded with nearly 300 recommendations. Some of these aimed to encourage more idea generation by giving people more time, money, recognition, and dedicated physical space for innovation. Others focused on reducing process requirements for innovations, for instance, fast-tracking low-cost missions and giving special treatment to high-potential technologies. One proposal would require new flight programs and projects to include an element of innovation to encourage informed, appropriate R&D risk, as a means to counter the agency’s risk-averse culture. The outcome of this effort remains to be seen, but NASA’s leaders are certainly making a concerted effort to tackle the blocks to innovation.
Using these three practices, companies can harness the insights and energy of all of their people through a collective prediction market,” in which innovation ideas are examined, improved, and pushed forward by the many, not the few. An innovation prediction market makes many small bets on new ideas at early stages, only a few of which will pan out after intensive collective vetting. In so doing, nimble companies aggregate the intelligence of their workers to better predict future success, and act to make that future real.
From: https://hbr.org
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About 10% of S&P 500 companies change CEOs annually. Behind these appointments are often years of intricate preparation grooming successors. We regularly get approached by CEOs and boards who find it challenging to groom the right candidates and look for effective approaches to develop the next CEO.
Venerable behemoths like GE, IBM, P&G, and McKinsey have historically been viewed as CEO factories; indeed, 20.5% of all CEOs appointed at the S&P 1500 firms from 1992 to 2010 came from 36 CEO factories such as these, with GE being the largest. The sheer brand power of these companies often helped their executives rise to the top of search lists. But today GE is run by an outsider, IBM’s performance has been mixed, and P&G had a painful do-over” on their CEO succession. Now we must look beyond the brand names to uncover repeatable practices that boards, CEOs, and HR teams can use to strengthen their leadership pipelines.
It is tempting to assume that the largest academy companies have an edge when it comes to developing talent. As part of ghSMART’s CEO Genome research, we discovered that some surprising companies produce remarkable numbers of CEOs. Moreover, the CEOs these companies produce tend to perform well, thanks in part to the leadership development practices the companies embrace. We estimate there are over a dozen stealth CEO factories” across a range of industries and geographies; these include Medtronic, Rohm and Haas, and Danaher Corporation. We’ll explore the latter two in greater detail.
Until Danaher alum Larry Culp took charge at GE, Danaher was virtually unknown to the general public despite its stellar performance in scientific innovation. Rohm and Haas (which merged with Dow Chemical in 2009) was highly respected within the chemicals industry but far from a household name. And yet both companies produced scores of successful CEOs. More important, companies led by CEOs who came out of Rohm and Haas or Danaher performed 67% better than those same companies did when other CEOs were in charge. (Our research partners at the University of Chicago, N Vera Chau and Professor Steve Kaplan, compared stock returns for companies while they were led by 35 CEOs who came out of Rohm and Haas or Danaher and compared those returns to stock market returns of the same companies during time periods when they were led by CEOs who were not Rohm and Haas or Danaher alums and adjusted for variations in industry returns.)
Three practices stand out as especially important in the success of these stealth CEO factories — and these are distinctive from the prevailing approaches we see in many large companies today. These practices are instructive for boards, CEOs, and CHROs as they groom successors. The practices also offer helpful guidance for individuals who are looking to grow.
1. Give leaders broad authority. In contrast to the complex matrix management structure prevalent among large corporations today, stealth CEO factories vest their general managers with broad roles and substantial decision authority. As Raj Gupta, former chairman, CEO, and president of Rohm and Haas reflects: Very early on in their careers, we had GMs responsible for manufacturing, selling, R&D, supply chain and asset management. These were real CEO-like jobs running a full P&L and balance sheet, making big decisions with minimal guidance by corporate.” CEOs coming out of Rohm and Haas and Danaher spent on average nearly half of their careers in P&L leadership roles prior to their first CEO jobs, arming them with valuable experience running a business. Andy Silvernail, who joined IDEX Corporation from Danaher and created over $9 billion shareholder value as CEO, says, At Danaher, I got my first P&L six months out of business school. It was a highly decentralized environment with a lot of opportunities to really run a business in your early thirties. The buck really stopped with you. You had to make real decisions from an early age.” The broader authority to make decisions is an important factor in grooming future CEOs. Our CEO Genome research showed that highly decisive CEOs were 12 times more likely to succeed.
2. Encourage them to think like CEOs. Stealth CEO factories push their leaders from very early days to think like CEOs — laser focused on metrics and stakeholders directly connected to value creation. Managers at Danaher are trained to prioritize cash, returns on working capital, and strong competitive positions in markets with growth outlook. As a result, CEOs coming out of Danaher are astute at selecting high quality businesses to run and to acquire. For example, Scott Clawson is a serially successful CEO who quadrupled the value of the first company he ran (GSI, a $800 million agricultural equipment business) and delivered more than twice the returns on the second (Culligan, a $500 million water treatment company). Scott told us that he leaned on Danaher training to complete over 35 acquisitions, helping strengthen companies’ competitive position and adding hundreds of millions of shareholder value.
Rohm and Haas ingrains in its leaders a sense of responsibility to five key stakeholders (five voices” in the company vernacular): customers, employees, investors, community, and process. In most companies this broad view doesn’t factor into daily decision making until the C-suite. At Rohm and Haas, you were taught very early to evaluate every decision from the perspective of the five voices,” says Pierre Brondeau, a Rohm and Haas alum who is now CEO of FMC Corporation. That prepares you for the CEO role – thinking about the full set of stakeholders you are accountable to. It’s not about pleasing your boss – it’s about doing the right thing by your stakeholders.” Pierre successfully applied those principles to grow value of FMC five-fold during his tenure as CEO. In our CEO Genome research leaders who effectively engage stakeholders to produce results were two times more likely to succeed as CEOs.
3. Challenge strong performers early with big opportunities. Stealth CEO factories send young managers into uncharted waters with minimal support. We made bets on people and moved them early on,” says Raj. As one Rohm and Haas executive noted, Raj was very comfortable looking beyond the obvious candidates for big jobs, often reaching or more levels down.” For example, in the late 90’s Raj bet on relatively inexperienced young manager named Carol Eicher to lead the launch of a $1 billion joint venture in Saudi Arabia, which was the first of its kind for Rohm and Haas. He didn’t hesitate to send Carol to negotiate this important and complex deal, which was larger than any of ROH existing business units at the time, because he believed she had acumen to succeed. Carol successfully launched the JV and went on to become a successful CEO of Innocor delivering fourfold returns for investors.
Our research showed that these types of bold bets (career catapults”) help accelerate leaders to the top. And CEOs coming out of stealth CEO factories have these types of career experiences more often than a typical CEO. Compared to only a third of all the CEOs we analyzed, virtually all the CEOs who emerged from stealth factories had at least one career catapult, 79% of them had two, and 37% had three or more (compared to only 6% all CEOs in our analysis).
CEO Commitment Is Critical
To benefit from these approaches, the CEO must be committed to development of the leadership pipeline as her top priority. Raj Gupta says his commitment to these practices helped him groom 16 successful CEOs during his tenure at the helm of ROH, including Ilham Kadri, who is now in her second CEO role running Solvay – an $11 billion chemical company headquartered in Brussels. Kadri says, As a young manager with just a few months at ROH under my belt I was put in charge of closing a major acquisition in Russia in the midst of 2008 financial crisis. Later on, I was appointed first ever female General Manager in the Middle East and Africa, leading the transfer of ROH technologies in UAE and executing large investments in the Kingdom of Saudi Arabia. Those opportunities challenged me very early in my career to operate with a lot of unknowns and make decisions on a wide range of issues, which was great training for becoming a CEO.”
These three practices for developing strong leaders don’t require huge scale or large training budgets. They require leadership values and corporate structures that allow for real empowerment and risk taking. Above all, they require the leader at the top to be personally invested and genuinely eager to grow other strong decisive leaders rather than obedient corporate foot soldiers.
It’s human nature to grumble a little about the boss, the boring meeting, or some seemingly clueless directive from several layers above. Strictly speaking, such grumbling doesn’t cause real harm; everyone needs to vent now and then.
But an organization is in serious trouble when most discussions on crucial issues take place in side conversations, rather than in formal meetings, where concerns can be addressed thoughtfully with people in a position to instigate a change of course.
Recent news reports on Boeing reveal what appears to be an epidemic of side conversations about the 737 Max jetliner. In private emails and instant messages, employees expressed rampant concerns about the Max during its development — and outright disdain for some of the decisions being made, technologies being put forward, and even for the company’s customers. The 117 pages of internal communications turned over to the U.S. Congress last week paint a damning portrait of Boeing’s culture — captured in persistent side conversations. Its employees derided airline customers as incompetent and idiots,” and had similarly harsh words about regulators and Boeing senior executives.
As Captain Sully” Sullenberger noted in the New York Times, We’ve all seen this movie before, in places like Enron.”
Side conversations occur because people believe it’s not acceptable to tell the truth publicly. They happen because employees have learned that meetings are places where you go along with the boss or the majority, even if you disagree with what’s being decided or planned. Because we all want to express ourselves and feel heard, we can’t stay silent forever. So we seek out our peers — the ones with whom we believe we can talk straight — and then say what we really think.
Here’s how to tell whether your organization might be plagued by an unhealthy degree of side conversations.
The way to heal a sick” culture (as Boeing’s was called by Sara Nelson, president of the Flight Attendants Union) is to help all employees recognize that side conversations about substantive issues are a source of organizational pathology. It starts with senior executives building a culture of psychological safety where employees believe that candor is expected and welcome. As I have detailed in a recent book, this culture can be carefully built through three kinds of ongoing leadership action:
Set the stage. Be explicit about the tensions and challenges that plague all new endeavors, and constantly remind people that you understand the risks, uncertainties, and complexities. Make sure everyone knows that you recognize the tension between the profits the company desires and the absolute premium placed on quality and safety. Point out that kicking the problem down the road costs more in the long run.
Insist on input. Do not accept silence by subject matter experts in meetings. Issue explicit invitations for input. Put people on the spot by asking questions to elicit their thoughts. Force yourself to be curious and ready to hear what they are seeing and thinking.
Appreciate messengers. Respond productively to bad news and concerns. You never know how much courage it might have taken someone to speak. Focus on solutions. Invite ideas and look for volunteers to team up to help solve the problems raised.
Because of escalating uncertainty and risk in many industries, building a healthy culture for candid, challenging conversations has never been more important. It’s time to drive side conversations back onto the center stage.
from:hbr
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