THE BUSINESS VALUE OF CORPORATE CITIZENSHIP

Transcription

1 THE BUSINESS VALUE OF CORPORATE CITIZENSHIP Anna E. ROOSEVELT Global Corporate Citizenship The Boeing Company, Chicago (États-Unis) Deborah A. PAGEL The Boeing Company, Chicago (États-Unis) INTRODUCTION For one leading aerospace company, the 2006 challenge of building a new Corporate Global Citizenship organization (e.g., function) from the ground up after closing down a vision-limiting, tactical Community and Education Relations group was like a phoenix rising from the ashes. The Community and Education Relations group s mission was historical and traditional. The company has a long history of corporate philanthropy, with the high-minded if simplistic goal to improve the quality of life in communities by dispensing company resources. In addition to disbursement of cash and in-kind goods, they arranged for limited employee volunteer activities, and the development of external community relationships. They thought of themselves as leaders in the field of corporate philanthropy because their processes for grant making were high quality automated and cognizant of current legal priorities governing use of U.S. based company funds. The goals and objectives, however, remained very vague and unchallenging, and the corporate leadership struggled to connect with the site-based network. The measurable goals were limited to the complete spending of the budget. In spite of this, the function called Community and Education Relations did manage to communicate that the company values communities, and that the concept of community is important largely because of the on-the-ground dedication of the function s site-based network brought a new opportunity to introduce a bigger vision for corporate engagement in social issues for this leading aerospace company in the world. A new Global Corporate Citizenship organization arose from the dissolution of the old Community and Education Relations group, embracing a new management model and a new set of leadership imperatives with a bold willingness to create goals, models, viewpoints, strategies and functions that not only align to the corporation, but also enables profitable growth and increase productivity in today's challenging business environment. CONTEXT The 2003 World Economic Forum defines global corporate citizenship as, The contribution a company makes to society through its core business activities, its social investment and philanthropy programs, and its engagement in public policy; the manner in which a company manages its economic, social and environmental relationships, as well as those with different stakeholders. The role of this company's Global Corporate Citizenship function has internal and external elements. Internally it is to lead the conversation helping

2 the company and its employees realize their collective potential as a positive influence on the world, working in partnership with diverse communities toward solutions to problems that affect everyone. Externally it is to align and integrate the interests, motivations and resources of the company s stakeholders, sharing what they know and who they are, in order to convene, collaborate and lead in making the world better for everyone at all levels local, state, regional, national and global. Consequently, this function defines global corporate citizenship as the following: Global: a network of connected communities around the world made possible by technology (in which this corporation is a known leader). Corporate: a unique personality because of the business context the company s core competencies and Leadership Attributes are unique resources to share with society. Citizenship: working together and doing their part to create quality living situations not only for the company, but also for everyone with whom they share this planet. In this role, the function aims to be a facilitator of corporate and community change, not simply a source of community funding. In keeping with the company s character, the energy and creativity they inspire in their employees and their community partners to solve problems collectively are more important than the size of the cheque they might be able to write. All company employees can demonstrate global corporate citizenship, no matter what the job or level, both inside the company, and especially outside the company, as interactions with suppliers, customers and community members take place around the globe. PHILOSOPHY AND STRATEGY The vision for the Global Corporate Citizenship function is to be a global corporate leader, working in concert with others to shape a world where individuals can thrive and every community is a vibrant place to live. Carrying out this vision is by strategically investing the portfolio of resources to inspire, motivate, educate and assist community partners in creating positive change that has lasting community impact (i.e., sustainability). This strategic sharing of resources requires an educated and engaged leadership and employee population. Ultimately, the goal of the Global Corporate Citizenship organization is to enable the development of vibrant communities with citizens who are educated, creative, civic minded, environmentally conscious, healthy and economically self-sustained. The interaction of the products the company produces, the way the company carries out its corporate operations and it s intelligent engagement with social and environmental issues elevates corporate citizenship to a logical business priority. This goal is complex rather than simplistic, which reflects who the company is as a corporate entity. A complex goal like this one means that the partnerships in the community need to be robust by necessity, as well as more imaginative. Drawing on the best problem-solving capabilities in the world, the company is capable of this goal.

3 Fundamentally, the GCC function strives to influence leadership and employee mindsets to the new philosophy that global corporate citizenship is more than just philanthropy. Having the sponsorship from top level senior leadership, the new Global Corporate Citizenship organization focuses on thinking like a business. The corporate team has been restructured in a servant leadership model, managing both up and down relationships. It aligns to the company s goals and strategies, and measures its overall contribution to the bottom line and to demonstrate impact. As it has evolved and developed from the beginning to the present, the organization uses a strategic planning process to create and enhance its major strategies. As illustrated in Diagrams 1 (Strategy and Focus) and 2 (Enterprise Integration) below, the organization aligns to the overall corporation s strategic initiatives: One Boeing Approach Lead in Impact Mobilize the Workforce Functional Excellence. The belief is that alignment to the above items provides for the development of global leadership in corporate citizenship. In terms of the One Boeing Approach, the Global Corporate Citizenship organization s goal is twofold. The first goal is to encourage the recognition and demonstration of citizenship as an inherent part of decision-making and work processes in the corporation; and the second goal is to enable the company to be recognizable by external parties as having an integrated citizenship practice. Demonstration requires expanded partnerships with internal company organizations such as Legal, Public Policy, Communications, Ethics, Human Resources, Global Diversity and Employee Rights, and Environment, Health, and Safety. In addition, demonstration also requires partnerships with external industry partners and associations. Integral to this One Boeing Approach, the organization seeks to integrate strategically across the enterprise, leverage Boeing s strengths, and focus on the global nature of the business. The focus of Lead in Impact explores the organization s growth through the impact it has internally within the enterprise and externally with communities. Managing expectations and prioritizing Boeing s engagement with all stakeholder groups is critical. Included in this focus is the development of new programs, replication of best practices, and leveraging of company dollars as well as convening and collaborating with stakeholders.

4 Diagram 1, Strategy and Focus One Boeing Approach to Global Corporate Citizenship Integrate strategically across the company Leverage Boeing strengths Lead in Impact Develop new programs Replicate best practice and leverage Boeing dollars Mobilize the Workforce Inspire engagement Drive relevant impact Functional Excellence Standard global systems and control Lean+ processes

5 Diagram 2, Enterprise Integration Enterprise Integration Business GCC Business Focus Business Deliverables GCC Strategy & Focus GCC Deliverables Improve - Competitive Functional Excellence - Efficient GCC Function (Resources, Productivity Infrastructure (Best Practice Processes, Optimized Assets) Assets, Processes) - Fewer, Larger More Impactful Grants - Lean Processes Standard global systems and control Grow and Shape Markets Increase Shareholder Value - Understand Customers and Markets - Establish Business Presence Lean+ processes Transparency One Boeing approach to GCC Integrate strategically across the company - Enable local presence in key markets through community relationships - Deepen community relationships with customers, industry and government that enable Boeing business success - Chart the Course Leverage Boeing strengths - Lead (or deliver on) the external aspects of sustainability - Leverage Technology (R & D) - Margins, Earnings and Cash Focus on global nature of business Lead in Impact - Enhance Reputation/Brand - Boeing Brand, as Viewed by Shareholders, Customers, Communities Develop new programs - Address International Expectations of Corporate Citizenship - Address Market Expectations and Concerns Replicate best practice and leverage Boeing dollars Convene and collaborate with stakeholders Improve Current Workforce and Future Pipeline - Attract, Develop and Retain the People and Skills Needed for Business Success Mobilize the Workforce - Investment in future workforce - Life Long Learning Culture Inspire engagement - Address Generational Expectations of Preferred Employers as Corporate Citizens Drive relevant impact - Develop Current Workforce Recognize success For Mobilize the Workforce, the organization aligns to the company s strategies to attract, develop and retain the best and brightest workforce. In order to help support that initiative, the Global Corporate Citizenship function is focusing on leveraging not only the current workforce but also the retirees through employee engagement actions and activities. The ultimate desired outcome is best-in-class volunteerism. To achieve the above, the organization is developing skills-based volunteerism to inspire engagement, drive relevant impact and recognize success in how employees impact change in communities. Finally, Functional Excellence focuses on continuous improvement in everything the organization does as a function. This aspect includes, but is not limited to, LEANing out the community engagement structure for greater impact

6 on communities; transparently demonstrating company and employee citizenship to outsiders to achieve best-in-class status, as well as reflecting brand and reputation elements in the sincere practice of citizenship. As part of a virtuous circle, it will also leverage relationships in community that will benefit the business and demonstrate a positive impact on brand and reputation. To highlight the importance of thinking like a business within this function, the Global Corporate Citizenship organization illustrates the critical line of site (see Diagram 3, Strategy Flow Down) to the corporation s overarching focus on productivity, growth, and performance to plan (i.e., Boeing Management Model). Diagram 3, Strategy Flow Down Strategy flow down The Boeing Company Global Corporate Citizenship Productivity Growth Performance To Plan One Boeing Mobilize Workforce Lead In Impact Functional Excellence Strategic stakeholder engagement and alignment Demonstration projects with internal and external stakeholders Aligned, strategic volunteerism and giving (all sources) Enable HR, Environment & Citizenship goals Enterprise Integration NGO risk mitigation Increase grant impacts, LEAN restructure Replicate best practices Enterprise-level Citizenship reporting 5 In order to enable the above, the Global Corporate Citizenship organization uses alignment, integration, and replication (See Diagram 4, Citizenship Enablers). For corporate citizenship to become fully embedded in the way the company does its business, all company organizations need to align, integrate and replicate evidence of citizenship across the enterprise. Each of these enablers supports this function s strategies to lead this internal growth. The Alignment enabler references how the community engagement activities are aligned across sites, regions and countries. It focuses on the outputs of those activities (i.e. grants and volunteer events etc.) as well as the inputs (i.e. team structure, reporting relationships, and cross functional collaboration).

7 Integration is two pronged. It covers both internal and external elements. Internally, integration means leveraging all Boeing strengths for citizenship activities, be it the skills of the employees or the large scale integration expertise of the business units; in other words, leveraging Boeing s assets for greater impact. Externally, integration means leveraging unique Boeing strengths and relationships to engage with stakeholders in a meaningful, transparent dialogue that benefits both Boeing and the communities. Rick Stephens, Vice President, Human Resources, says What we choose to do with the resources we have reveals who we are from the inside out 1 " (Stephens and Scott, 2006). This demonstrates an enterprise standard of sincerity. Replication, by extension, includes leveraging the best practice projects, programs and activities to create greater impact with maximum efficiency for all of the internal and external citizenship stakeholders. For example, Global Corporate Citizenship worked this year with United Way to consolidate their investments across the country to address a limited number of goals that were mutually agreed upon, allowing for replication of a successful model. The function also developed two working groups, the Environment Working Group and the Diversity Working Group, both based on a similar model of engagement, to create common approaches to addressing diversity and environmental engagement across our sites and with our internal partners including State and Local Government Relations and Environment, Health and Safety. Diagram 4, Citizenship Enablers Citizenship Enablers The Boeing Company Global Corporate Citizenship One Boeing Functional Excellence Mobilize W orkforce Lead In Impact Alignment Integration Replication 7 1 Stephens, Rick, & Scott, Elane V. (2006). The System, Seeking the Soul of Commerce (1 st ed.). California: Preparation Press.

8 For corporate citizenship to become fully embedded in the way the company does business, the function seeks to align, integrate and replicate good practice of corporate citizenship across the enterprise. Some of the actions the function is taken include the following: Community Engagement (grant-making and volunteerism) is well established and yet can continue to be more strategic, flexible and useful. Next step is to extend the LEAN process and structure to reduce costs and improve performance. Also, it includes building a volunteerism infrastructure in partnership with Human Resources and other functions to positively impact employee attraction, development and retention. Enterprise Engagement started last year and feedback shows many good steps forward. In the interest of leveraging all capacity and taking advantage of opportunities, the function is focusing on ramping up this area in support of other statement of work elements. Stakeholder Engagement is a development opportunity. Relationships need to be established and strengthened in critical and logical areas. Otherwise, the enterprise is vulnerable to stakeholder attacks. Global Corporate Citizenship is building a process whereby all stakeholder relationships and engagements are monitored and leveraged through a single process, enterprise-wide. The benefit will not only be risk mitigation, but also increased community impact. Finally, the role of the Corporate Citizenship Integration Council is important in the advancement of these three elements through a One Boeing approach. THE CURRENT STATE Before moving to the business value of corporate citizenship, it is also important to understand the current state of the function (Diagram 5, Current State). Illustration of that state is summarized below: Situation: External pressures on Boeing to deliver on a complete citizenship agenda and drive for transparency in its activities are becoming more apparent. Example: A recent stakeholder inquiry from New York asked why the corporation does not publish a Sustainability Report. By not issuing a combined report, the risk is high in losing the advantage to take a leadership role in the aerospace industry on citizenship. Internal operations are in silos: Human Resources, Global Diversity and Employee Rights, Ethics, Environmental Health & Safety, and Boeing International, for instance, all have important aspects of citizenship within their work statements. However, until

9 recently, there has been very limited coordination between the functions. As a result, they appear fragmented and non-transparent to external stakeholders and employees. This fragmentation actually results in higher operating costs and limits our ability to achieve greater impact. As the Global Corporate Citizenship function evolves beyond philanthropy, the de-centralized relationship with the global network has limited the speed and effectiveness of these pursuits. Diagram 5, Current State Current State Opportunities Broaden scope and impact of Citizenship Globalization Increased impact on communities Brand/reputation benefits The Boeing Company Global Corporate Citizenship Challenges Role/structure Integration Alignment Support Boeing as Corporate Citizen Recommended Path Forward Drive sustainability Regionalize org structure Accelerate integration Engage Externally Aligned resources to SOW Risks Stakeholder pressure for transparency Lose Best in Class future workforce Additional $$ costs License to grow 4 Opportunities: Some recent indicators such as the introduction of a Diversity report, an initial Sustainability web page, joining the World Business Council on Sustainable Development, and growing collaboration between Global Corporate Citizenship and Environmental Health and Safety on a combined citizenship report, and the establishment of a high level Corporate Citizenship Integration Council indicate that the company is ready to move to a broader citizenship agenda (beyond philanthropy). Other indicators in support of this are the globalization of the business in a globalizing world, which surfaced increasing pressure to manage multiple stakeholder interests (governments, NGOs, customers of customers etc.). The globalization of the business provides the opportunity to affect more communities around the world, leading

10 Risks: to fulfillment of the citizenship goal as well as potential brand and reputation benefits and employee engagement and satisfaction Future workforce and other stakeholders expect the corporation to be good citizens and to demonstrate it. The longer the company takes to become transparent, stakeholders (NGOs, others inside and outside the company) the more the pressure on the company; and a loss in credibility could occur in trying to dialogue with them. This situation could affect recruitment, retention, business development and potentially our airline partners and our supply chain in short, the long-term sustainability of our business. The ability to position the company as best in class in Citizenship could be lost within the aerospace industry. Timing is of the essence. Competitors already report on their activities and, one in particular, also has a formal stance in this area. With company s current community investment structure (i.e., sitebased mix of part-time and full-time staff), the ability to deepen the skill level of community investors is challenging. Internationally, there are additional challenges due to very lean resourcing (37% of company resources devote less than 50% of their time to citizenship activities). Recommendations to the current state include the following: Align the Global Corporate Citizenship organization for maximum impact; bring the business unit networks into the central function. Regionalize the organization structure. Ensure that a complete statement of work is resourced adequately. Use the Corporate Citizenship Integration Council, a crossenterprise team, to lead the education and integration process in their areas of responsibility. Engage externally and communicate our citizenship message, work with NGOs, and create transparency. As a result, the Global Corporate Citizenship Strategy Flow-down for 2009 focuses on achieving some of the above recommendations. Its impact objectives, metrics, and tactics link its pertinent strategies in critical alignment with the growth and productivity initiatives for the company. Alignment, integration, and replication enable its course towards growth and productivity. THE BUSINESS VALUE OF CORPORATE CITIZENSHIP To help change mindsets and in order to illustrate the value of corporate citizenship, the function intentionally developed a value platform to demonstrate the business value of corporate citizenship to the bottom line. While hypothetical in nature, the platform represents the savings potential to the company based on achieving the future vision of the Global Corporate Citizenship function and the possible impacts of achieving the future state.

11 The platform examines three potential impacts. These impacts include operation margin growth, reduction in employee turnover, and lost productivity. The examination seeks to identify a potential cost savings or cost avoidance as a value for corporate citizenship In terms of operating margins, one assumption is that corporate citizenship increases employee engagement because employees who are more engaged show a high inclination to: Feel more positive about their company Stay with a company Have higher productivity Speak positively about their company to other people. The Global Corporate Citizenship function support this positive impact through providing visibility of and coordinating volunteer opportunities, leveraging skills-based opportunities, leading Employee Community Fund administrative alignment, providing recognition opportunities and engaging employees in internal teams to grow engagement impacts. Using the 2005 Employee Survey results, a 3% increase in employee engagement resulted in a 1% increase in operating margin. Betting global corporate citizenship activities will achieve a 1% improvement in employee engagement per year, and, over the next 3 years, the function projects that its enterprise wide activities can increase the operating margin by $48 M 2. With further revenue growth or expense reductions in the next 3 years, the impact on operating margin could be even greater. Assuming global corporate citizenship engagement activities and/or awareness building leads to greater employee satisfaction and retention, calculations based over a 3 year period also seem to indicate a savings of $52M. This examination considers the ratio of employees to managers leaving the corporation, the costs to the company due to the turnover, and the contribution that enterprise-wide citizenship activities would create to reduce this turnover expense. Taking into consideration the costs due to lost productivity (i.e.., the costs due to disengaged employees 3 ), some extrapolations show the potential that corporate citizenship activities may even mitigate these costs in a range from 2 to 10%. Additional financial impacts 4 (some of which are being determined) easily bring the total projected costs savings (the potential costs avoided as a result of global corporate citizenship activities) to range anywhere from $ M. There seems to be a compelling business case for the value of corporate citizenship. 2 These numbers are based on extrapolations using the 1 st 9 months of the 2008 actuals 3 Examples of lost productivity include potential strikes, labor interruption, and conflicts arising from poor or the lack of organization linkages, interfaces, or process/systems issues, as well as safety incidents, ethics or legal investigations, etc. 4 They include cost of lost reputation, cost of lost contracts, One Boeing Approach, quality of future workforce, and operating cost savings (i.e., the savings from shift in network reporting to corporate)

12 Considering the current sign of the times of tight economic environments, most company corporate functions are busy demonstrating their value contribution. Certainly, Boeing s Global Corporate Citizenship is no exception. In order to determine value contribution, one assumption is that as the Global Corporate Citizenship organization moves to its future state, progress towards these current hypothetical targets will be measured. Likewise, other measures and metrics now in development will indicate the success or failure of various Organization Effectiveness strategy implementations. These critical strategies include: coring up the function and a transformation to a world regional structure in 2010 transforming Boeing from being a grant maker to being a truly global corporate citizenship leader; and, transitioning employee engagement from a random and fractured activity to a consistent and focused activity (i.e., engaging employees for community benefit also benefits the business). In other words, strong key relationships, built by employees, and positive business presence contributes to excellent execution, sales growth and strong supplier partnerships. This case study focuses not only on the transformative journey of the Boeing Global Corporate Citizenship organization, but also on the development of the structure, strategies, goals, measures and metrics, resulting in the shaping of the Business Value of Corporate Citizenship. The discussion explores the various impacts associated with the business value of corporate citizenship in regard to operating margin growth, reduction of employee turnover, and lost productivity. Additionally, thinking through a potential measurement strategy for a future state shaping enterprise wide activities offers large opportunities for cost avoidances. The future is the indicator in how successful Boeing s Global Corporate Citizenship organization is in leveraging the business value of corporate citizenship to drive to the bottom line, demonstrate value, and enable innovation. WORK CITED Center for Corporate Citizenship. Boston College Carroll School of Management. 16 Apr < The Committee Encouraging Corporate Philanthropy, and McKinsey & Company. Business's Social Contract: Capturing the Corporate Philanthropy Opportunity. Insights from CEOs on achieving efficient philanthropy. Rep. New Jersey: CECP, The Committee Encouraging Corporate Philanthropy. The Ceo's Challenge: Leading the Company Shaping Society. Issue brief. New Jersey: CECP, 2008.

13 Devane, T. and Holman, P. (1999). The change handbook: Group methods for shaping the future (1 st ed.). San Francisco: Berrett-Koehler Publishers. Googins, B., P. Mirvins, and S. Rochlin. Beyond Good Company. Palgrave- Macmillan, Grayson, D., and A. Hodges. Corporate Social Opportunity. Greenleaf, "Its Not Share of Wallet Anymore; Its Share of Heart." Firms of Endearment. Vol. 1. New Jersey: Wharton School, Journal of Business and Public Policy 1 (2007): Abstract. Innovation as an Argument for Corporate Social Responsibility 1 (2007): Kotler, P., and N. Lee. Corporate Social Responsibility: Doing the most good for your company and your cause. Wiley, The McKinsey Quarterly. Valuing corporate social responsibility. Survey. New Jersey. McKinsey & Company, Stephens, Rick, & Scott, Elane V. (2006). The System, Seeking the Soul of Commerce (1 st ed.). California: Preparation Press. BIOS Anna E. Roosevelt: Anna Eleanor Roosevelt (known as Anne) is the enterprise wide leader for Boeing's global corporate citizenship, providing philosophical and strategic direction to a network of U.S. and international community investors, who employ and leverage Boeing's multiple resources to address needs of communities where the company has a business presence; and for the business units as they engage as world citizens. anna.e.roosevelt@boeing.com Deborah A. Pagel: Deborah Ariel Pagel is an international Senior Organization Development Advisor for The Boeing Company. She has over 20 years of organization change experience, specializing in large-scale change interventions, partnerships, start-ups, turnarounds, mergers, strategic alignment, executive leadership development, and organization transformation. Ms. Pagel holds an MSOB from Benedictine University. Deborah can be reached at deborah.pagel@boeing.com