Great companies embrace social media

While many are wary of employees spending too much time on social media, some great businesses are showing us how social media can enhance business. This video features Erin Lieberman-Moran from the Great Place to Work Institute.

Note that Erin recognises a high level of trust as the enabler for businesses to use social media effectively.

Social media and crisis communication

Ethical Corporation’s July 2012 report researches how companies respond to consumers and activists in a crisis. While the full report, with a price tag of £695 targets corporate customers, the Ethical Corporation provides some great information along with this excellent infographic.

Social media crisis Infographic

Engagement and community building – the White Dog Café

In 1983 Judy Wicks started the White Dog Café in Philadelphia. It has become an exemplar for a community-based enterprise.

Where I live, community enterprise is slowly but surely being eroded as an increasing number of national or international chain stores supplant local stores. While this typically provides benefits such as cheaper goods the longer-term impacts are not beneficial for the local community (more about this in a later blog).

The White Dog Café started off as a restaurant, and remains a restaurant, but it has become the centre of a local network of suppliers, customers, employees and community interests. In the early years of the restaurant, Judy became increasingly troubled that the meat on her menu came from industrial farms. She changed to free range pork and then other meat and chicken and free range eggs. If produce is available locally, and is preferably organic, the White Dog Café purchases it in preference to imported food.

Initially Judy regarded locally sourced production as a point of difference for her restaurant, but her thinking evolved to consider the greater good and she went about engaging other restaurateurs in the concept. Her engagement with local farmers and growers created momentum for the establishment of the Fair Food initiative. Farmers and growers benefit from having a larger market for their produce locally. This animal welfare aspect of the White Dog Café remains one of her strongest motivators.

Networks of services

A restaurant depends on a web of services to operate. As Judy sorted out the produce for her menu, she became aware of a series of expanding possibilities to make the restaurant more sustainable and support the local community. She sourced renewable electricity and created a solar-heated water supply. Organic waste is composted and other waste recycled where possible. Local products are used whenever possible – for example locally produced soap is purchased for hand washing. For those products not available locally, such as tea, sugar and coffee, Fair Trade sources are used.

The invisible had works when we live in the same community.[1]

Staff also benefit from the sustainability philosophy – Judy pays a “living wage”. The Restaurant also supports a number of local community service projects such as Crime Victim Services and many others.

Business philosophy and selling the business

The mission statement of the White Dog Café is “Serving our customers, serving each other, serving our community and serving the earth”. Business decisions are based on serving the greater good, growing consciousness and increasing happiness.

After 30 years in the restaurant business Judy decided to sell the restaurant to help her focus on the promotion of sustainability. She wanted to keep the mission of the White Dog Café alive, so she found a local purchaser and retained the rights to the name of the business. To perpetuate the sustainability agenda she set up a Social Contract that keeps the White Dog Café on the same trajectory. The purchaser is able to set up other branches as long as they have 51% local ownership. This video outlines Judy’s perspectives, the restaurant’s operations and the Social Contract.

Above all, Judy has show how one business can generate social good by building rich networks in its local community. Do you know of other examples?

image credit: Real People Eat Local

Book review – We: How to Increase Performance and Profits Through Full Engagement

Rudy Karsan and Kevin Kruse’s book is pragmatic and of use to anyone looking to improve employee engagement. The book is organised into four parts. The first two deal with the individual and I will get my objections to them out of the way before discussing the gems to be found in parts three and four.

In parts one and two the focus on the individual is understandable – as engagement happens from heart to heart. We know that globally, the rates of disengagement are too high and too many people are disconnected from their work. I also accept that people will feel more fulfilled if they find meaning and purpose in their work – but after reading the first few chapters I was left with an impression that we are Homo economicus – we are one dimensional and our primary function is our work. Through our work we will find fulfilment and happiness. But it feels like a rationale to get people to work harder.

As a New Zealander one bad habit my fellow Kiwis share with the people of the United States (the home of the authors) is that we work long hours – we work too hard. Work-life balance is seriously out of balance. In this context I get concerned when I encounter an evangelistic approach towards the virtue and necessity of hard work.

The positives

Having got that out of the way, this book has many gems. The authors have obviously rolled their sleeves up and got involved with engagement processes. They share the three questions they use to gauge engagement (you will find them in the book). I am a fan of short and open survey questions and intend to incorporate these into my work.

The authors make a beautiful distinction: harmonisation = engagement + alignment.

Engagement is the catalyst to get you to that extra edge in performance, while alignment ensures everyone is heading in the same direction. (page 145)

They raise the bar for us here. Some organisations struggle to get to the point of surveying staff about engagement. They may or may not do anything with the information gleaned. To ensure the material issues blocking greater engagement are addressed, and then to go on to align people across the various structural and ideological barriers in an organisation is a worthy aspiration.

Another concept that resonates with me is their management prescription, embodied in chapter eight – “great managers focus on growth, recognition and trust”. This chapter atones for the issues outlined earlier. The authors prefer valuing employees to recognising employees. To survey your employees, survey them to see to what extent they agree with the statement “I feel valued as an employee of this company.” They prefer it to “I receive recognition when I do good work”.

Valuing is about appreciating the worth of something (someone) and of esteeming something (someone) highly. When we value employees, we appreciate them for who they are and what they bring to the organization. We acknowledge them not merely for tasks, but to the deeper intrinsic worth they add to the organization by just being there. (page 177)

When authors apply concepts about qualities of character, such as trust and trustworthiness, they reveal to me a deeper understanding of the human condition than encountered in many business books. Rudy Karsan and Kevin Kruse highlight trust as an important driver of employee engagement. To understand this better they suggest questions such as: “How can our leadership team foster greater trust among employees?” The three qualities that inspire trust are competence, caring and commitment.

It is hard to find books that focus on engagement – so this one is well worth the purchase price. If you know of others you would recommend, please comment.

We: How to Increase Performance and Profits Through Full Engagement by Rudy Karsan and Kevin Kruse (2011) New Jersey: John Wiley

website: www.wethebook.com

Blue Ocean Strategy and Sustainability

You have probably heard about or read Blue Ocean Strategy by W. Chan Kim and Renée Mauborgne. It has been translated into 42 languages and sold over 2 million copies – so it fair to say it has made quite a splash. The authors came in a second spot on the Thinkers 50 for 2011. Their ocean metaphor is compelling – most businesses form strategy to compete in the red ocean. There is intense competition and there’s blood in the water. The smart ones migrate to new market spaces – the blue ocean.

It is exciting to look at this book through the lens of sustainability. A central concept is value innovation. A part of the process is driving down costs and increasing customer benefits, creating a new market space. The sustainability connection is the social good created.

The four billion people who make less than $2.00 a day are excluded from the market place. By driving down costs the poor can participate a little more in the market place and, more importantly, raise standards of living for their families.

There are some great examples coming out of the developing world – examples of innovation that we can learn from. Grameen Shakti, one of the family of Grameen companies, provides renewable power technologies to the rural poor in Bangladesh. To enable the poor to purchase biogas digesters or solar panels has required a suite of innovations creating an exemplary example of a blue ocean strategy. The panels are assembled and installed by women given appropriate technical training, also creating employment opportunities. The solar panels provide light at night, and improved fuel-efficient cooking stoves create a healthier home environment. Children are able to study in the evenings and the healthier air eliminates some health issues.

This image of a woman in a sari installing a solar panel on a Bangladeshi roof represents sea-change in the lives of rural Bangladeshi women. Opportunities for technical training and benefits generated by the new technologies transform lives. See more about Grameen Shakti in this YouTube video.

A “first world” example is the innovations created by Better Place through their radical business model for electric vehicles (EVs). Shai Aggasi has developed the concept of the “battery swap” enabling EV drivers to call into switching stations and quickly swap a battery. A core innovation is separating the cost of the battery from the cost of the car. He anticipates that economies of scale will reduce the cost of travel down to 2 cents per mile.

Shai Aggasi has integrated the value innovation concept into his business model. He recognises that mass adoption of new technologies depends on creating products and services that are cheaper than existing options. Your can learn more about his thinking at this TED talk.

This is the crux of the matter. Those introducing innovations into red ocean markets are either increasing buyer value or reducing price. Blue ocean innovators such as Muhammad Yunus and Shai Aggasi are doing both.

Unfortunately the companies that are selling EVs through conventional business models are relying on the red ocean strategy of increasing buyer value, but at significantly higher prices compared to comparable vehicle. I realise that they will want to recoup their investments, and that batteries are expensive. On the other hand electric motors and transmissions are simpler than internal combustion equivalents.

To reap the sustainability harvest, perhaps we will have to wait for developing world entrepreneurs such as Rajan Tata to deliver a blue ocean EV.

Stakeholder engagement drivers – Part 3: enlightened self-interest

The first part of this series of blogs outlined three three drivers for stakeholder engagement, self-interest, enlightened self-interest and altruism. In this blog we will look at enlightened self-interest using Walmart for illustration. Such companies want to make money and be more sustainable. They attempt to operate in ways that are not just financially sustainable, but also factor in the well-being of others and care of the environment. They look for synergy in these aspirations.

The sweet spot

The emergence of sustainability as a major driver of business decision making is now undeniable. Companies that attempt to privilege their own self-interest over broader societal and environmental concerns will become increasingly irrelevant. Smart companies pursue the “sweet spot”, of synergy between self-interest and creating value for society and the environment. In the sweet spot self-interest becomes meritorious.

 Walmart as an example of enlightened self-interest

First some disclosure: I live in New Zealand – we have no Walmart stores so I rely in the media for my knowledge of Walmart. Much has been written about former CEO Lee Scott’s crucible experience in Hurricane Katrina and the company’s work to rectify negative publicity. Given its sheer size, Walmart still attracts negative publicity, but there is an increasing amount of evidence that they are a great example of enlightened self-interest.

In part one of this series, factors that indicate enlightened self-interest are:

  • engagement focus
  • creating value chains
  • sustainability aspirations
  • values driven decision-making

And as they embed these practices evidence of altruism starts to emerge and the organisation becomes more driven by the greater-good. Here are some examples. They explicitly illustrate the creation of value chains and sustainability aspirations, and we can infer they require an engagement focus and values decision decision-making.

Creating shared value with suppliers

In each trans-pacific journey from China to Walmart, the massive Emma Mersk transports 15,000 containers. With 60,000 suppliers, it must be difficult for Walmart to achieve intimate engagement with each, but the company can have a huge influence in ramping up sustainability expectations. With larger suppliers, such as Peterbilt, Walmart are working closely in pursuit of its sustainability aspirations. Peterbilt recently delivered eight hybrid trucks to help Walmart achieve its goal of 100% increased efficiency by 2015 from a 2005 baseline. In this video Hunter Lovins, of Natural Capitalism Solutions, states “Walmart may now be the centre of environmental responsibility on the planet”. By combining improved aerodynamics, auxiliary power units capturing energy from breaking, improved rolling resistance in tyres and improved load management Walmart has already achieved 60% reductions. Walmart’s aspirations reduce costs and pollution, delivering on self-interest and benefits for customers, suppliers and the environment.

Learning from criticism

If Walmart was motivated solely by self-interest, it would choose suppliers based mainly on cost. In a recently announced initiative, the company revealed plans to double what it buys from businesses owned by women by 2016. The initiative will support women’s economic development both in the U.S. and other supplier nations and promote greater gender and minority presence through the entire value chain. Earlier this year, a class-action lawsuit by some of Walmart’s female workers was dismissed by the US supreme court. Whether or not these issues are linked indicates that Walmart continues to respond to and learn from public perception.

Public health – towards altruism

Walmart’s recent initiative to require suppliers to reduce sugar and sodium in foods, and to eliminate transfats is another great example of enlightened self-interest – the company has been criticised for being part of the American obesity culture. This initiative has potential to generate huge good, as Walmart supplies 25% of the nations food. Those suppliers and others will now be rethinking their role in public health. As Walmart ventures more into this territory, is it on the cusp of altruism? I welcome your thoughts.

image credit: http://www.politicalravings.com/everything-else/677-wal-mart-ship-from-china.html

Stakeholder engagement pays!

This blog positions stakeholder engagement at the leading edge of sustainability and also, as a core process underpinning a superior business model is transforming older, extractive and exploitative models. However, it is also great to have evidence that stakeholder engagement supports financial sustainability in addition to environmental and social sustainability.

Witold Henisz led a major Wharton School research project to deliver such evidence summarised in Spinning Gold: The Financial Returns to External Stakeholder Engagement. Here is the abstract from their document:

We provide direct empirical evidence in support of instrumental stakeholder theory‘s argument that increasing cooperation and reducing conflict with stakeholders enhances the financial valuation of a firm holding constant the objective valuation of the physical assets under its control. We undertake this analysis using panel data on 26 gold mines owned by 19 publicly traded firms over the period 1993-2008. We code over 50,000 stakeholder events from media reports to develop an index of the degree of stakeholder cooperation or conflict for these mines. By incorporating this index in a market capitalization analysis, we reduce the discount placed by financial markets on the net present value of the gold controlled by these firms from 72 to between 33 and 12 percent.

My (limited) understanding is that the reduction in net present value is increased significantly when stakeholder co-operation is low and stakeholder conflict is high. Here is a video explanation of net present value.

Apart from the great result, what impresses here is the size of the study and the stunningly positive result for stakeholder engagement. Notable too, is the assertion that mining companies that were once known for a myopic short-term view, are now “global leaders in the implementation of stakeholder engagement”.  A participant in the research commented:

It used to be the case that the value of a gold mine was based on three variables: the amount of gold in the ground, the cost of extraction, and the world price of gold. Today, I can show you two mines identical on these three variables that differ in their valuation by an order of magnitude. Why? Because one has local support and the other doesn‘t. (Yani Roditis, COO Gabriel Resources, interview by authors)

The researchers position the two factors of high stakeholder co-operation and low stakeholder conflict as essential to building the implicit or explicit social license to operate. Investing in positive stakeholder relations builds both social and political capital.

The nature of the research confines analysis of the benefits of stakeholder engagement to financial factors and shareholder value. As such it removes the tension between proponents of shareholder value, such as Milton Friedman and the broader stakeholder theory such as Edward Freeman.

Broader stakeholder benefits

In addition to the financial benefits of effective stakeholder engagement, there are other less tangible and quantifiable benefits. As more businesses learn to take a less extractive stance and engage more, the benefits of greater social capital compound. Trust is built and fractured communities develop more cohesion. If the ethos of external engagement of these mining companies becomes culturally embedded throughout the organisation, local people employed in mining operations, should also benefit from a more engaging workplace. Ideally these cultural practices become more manifest and normalised in worker’s families and the wider community. How is this quantified?

This landmark research in sustainability provides much-needed hard data to demonstrate the benefits of stakeholder engagement. One disappointment is the title – associating the PR metaphor of “spin” is unfortunate, as effective stakeholder engagement is the antithesis of spin. Ideally engagement is based on authentic and transparent communication rather than the more manipulative intention of spin. But hats off to Witold Henisz and his team for a superb research contribution.