How Great CompaniesThinkDifferentlyDia Lao and Nicole Lingham

Friedman, M. (1970, September 13). The Social Responsibility of Business Is to Increase Its Profits. New York Times Magazine.

Social/Institutional Logic

Focus on generating money and on their choices of how to do so, they consider people and society as core to their purpose

Invest in them in building enduring institutions

Accompanied with economic and financial logic it is used as a guiding principle behind the practices of many widely admired and high-performing companies

They are also vehicles for accomplishing societal purposes and for providing meaningful livelihoods for those who work in them

Six facets to Institutional Logic

1. A common purpose

2. A long-term view

3. Emotiona

l Engagem

ent

4. Building Communi

ties

5. Innovatio

n

6. Self-organisat

ion

A Common Purpose

A buffer against uncertainty and change by providing corporations with a coherent identity

Purpose and values enforced by management at the core of an organization’s identity

Clear institutional values when established can help with challenges of globalisation

A Long-Term Focus

Willing to sacrifice short-term financial opportunities if incompatible with institutional values.

E.g. HEINZ

Developed guidelines for sustainable tomato production and processing in California

Member of the Business Coalition of Sustainable Food Lab, whose key objective is to promote sustainability throughout the supply chain

Expanded the market through community development and improving quality of life

Heinz Micronutrient Campaign (HMC)-2001-present

Waste reduction through packaging innovation and recycling

Well-understood values and principles can increase employee engagement, as it can be a source of emotional appeal.

Adhering to institutional logic makes the regular articulation of values core to the company’s work.

Investing resources and time in communicating values keeps social purpose at the forefront of everyone’s mind. Work is made emotionally compelling.

This ensures that employees use the organizational values as a guide for business decisions.

Emotional Engagement

Emotional Engagement

The transmission of institutional values can evoke:

positive emotions

stimulate motivation

propel self-regulation or peer regulation

Emotion is one of the forces governing corporate performance and behavior inside organisations.

Moods are contagious and can affect such issues as absenteeism, health, and levels of effort and energy.

P&G’s Best Job Commercial

www.youtube.com/watch?v=8ywO8DR-5NY

Partnering with the Public

Bring business and societal interests together

Formation of public-private partnerships

Partnerships can take many forms: International activities, large domestic projects, product or service development to address unmet societal needs or short term volunteer efforts

It’s NOT sales or marketing; it’s a high-level conversation to demonstrate commitment to furthering the development of countries it is operating in

Hindustan Unilever – transformed village life in India

Raised the incomes and living standards of the 45000 female micro-entrepreneurs

Reduced the spread of a contagious disease by increasing access to hygiene products

Centered on partnerships with the government-supported and microcredit-financed village self-help groups

Project Shakti

InnovationBecome credible when leaders allocate time, talent and resources to national or community projects without seeking immediate returns

Encourage people from one country to serve another

Institution building helps connect partners across an ecosystem, producing business model innovation

Creating opportunities for individuals to use company resources to serve society furthers institution building goals

Aligning purpose to societal interests

Product offerings include health care, water treatment, lighting, energy and more

Market positioning is in a large intersection with societal interests

Its core values is on the notion of using imagination and innovation “to solve the world’s biggest problems”

$80 million workshop facility and training centre at Jandakot in West Australia to will address one of Australia’s big challenges, its engineering skills shortage

Supports many local organisations whose goals it aligns with through its Ecomagination and Healthymagination initiatives (ex. McGrath Foundation, Lupus Association for medical research, and Engineers Australia)

Self-OrganisationInstitutional logic assumes that people can be trusted to care about the fate of the whole enterprise

Employees make their own choices

Managers in great companies understand that formal structures can be too rigid to accommodate multidirectional pathways for resource and idea flow

E.g. EDS – came together outside formal structures to transform their business model

Kanter (2011) argues that great companies:

Are more than money-generating machines

Operate on “institutional logic”

Are vehicles for accomplishing societal purposes

Create frameworks using social value and human values as decision making criteria

Build enduring institutions by aligning a company’s purpose with her six facets of institutional logic

Urip (2010): Companies should consider profit, people and planet as values of creation to ensure sustainable growth opportunities.

Porter & Kramer (2006) adds that business and society are interdependent.

Companies act as vehicles for accomplishing societal purposes ---in a way that’s most appropriate to each firm’s strategy to optimise these investments in people and society.

Conclusion

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Friedman, M. (1970, September 13). The Social Responsibility of Business Is to Increase Its Profits. New York Times Magazine. Retrieved from: http://www.nytimes.com

General Electric Company (2014). GE Australia: Our Company Citizenship. Retrieved January 27, 2014, from http://www.ge.com/au/company/citizenship/index.html

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Heinz Company (2013). Heinz Micronutrient Campaign. Retrieved January 29, 2014, from http://www.heinz.com/sustainability/heinz-micronutrient-campaign.aspx

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Porter, M. E. K.,Mark R. (2006). Strategy & society: The link between competitive advantage and corporate social responsibility. Harvard Business Review, 84(12), 78-92.

Procter & Gamble. [hepimordkaTV]. (2013, February 17). Cool Ads - Best of 2012 - (P&G) Procter & Gamble - Best Job - HD. Retrieved January 29, 2014, from http://www.youtube.com/watch?v=8ywO8DR-5NY

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