Leading Corporate Citizens McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. C6-1 Value Added: The Impact of Vision and Values Chapter 6

Leading Corporate Citizens McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. C6-2 TO REPEAT SOMETHING OVER AND OVER WITH THE INTENT OF DEVELOPING EXPERTISE OR IMPROVING.

Leading Corporate Citizens McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. C6-3 Information, knowledge, and understanding contribute primarily to efficiency but provide little effectiveness. For effectiveness, wisdom is required.

Leading Corporate Citizens McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. C6-4 Effectiveness/Efficiency Peter Drucker Effectiveness –Doing the right thing Efficiency –Doing things right

Leading Corporate Citizens McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. C6-5 Vision, Values, Value Added Visionary companies outperform non- visionary companies Values inform practice –they tell us ‘how’ to practice –how things are done here... Profitability is a by-product of doing something well, not the end in itself –profit result from good practices

Leading Corporate Citizens McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. C6-6 Responsibility Vision and Value Added Social and Financial Stakeholder Relationships Environmental Management and Sustainability Social Capital What links to performance?

Leading Corporate Citizens McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. C6-7 Corporate responsibility and performance... Positive relationship between corporate responsibility and financial performance “Good management hypothesis” supported –Companies that are responsible are generally managed better--and produce better financial results, too

Leading Corporate Citizens McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. C6-8 Stakeholder Relationships and Performance Responsibility Investing –minimally no penalty for investing in screened funds, possibly positive –trade-off not necessary to invest responsibly –logic of ‘both/and’ not ‘either/or’

Leading Corporate Citizens McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. C6-9 Employee Relations and Performance High performance work practices –decrease in turnover –increase in sales, market value, and profitability –as much as $18,000 in stock value per employee! Constructive employee practices Increase involvement and commitment

Leading Corporate Citizens McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. C6-10 Diversity management and performance More diversity can improve performance Increased intellectual/human capital deployed Employee attitudes impact revenues and customer satisfaction Less turnover, reduced recruitment costs

Leading Corporate Citizens McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. C6-11 Customer Relationships and Performance Relationship marketing To serve customers better –improve employee involvement and total quality management Customer attitudes matter –cause-related marketing –concerns about corporate responsibility –customer boycotts

Leading Corporate Citizens McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. C6-12 Stakeholder relationships in general... Better treatment of stakeholders results in better financial performance –employees –owners –customers –communities Operating from integrity matters...

Leading Corporate Citizens McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. C6-13 3M Pollution Prevention Eliminate or reduce a pollutant Reduce energy or use manufacturing materials and resources more efficiently Demonstrate technical innovation Save money (avoidance, deferral of equipment costs, operating and material expenses, or increased sales)

Leading Corporate Citizens McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. C6-14 Social Capital Integrity builds trust and trustful relationships with stakeholders with whom the company is increasingly interdependent Firms can be understood as being webs of relationships Intellectual and social capital are core to that web –built on trust from integrity

Leading Corporate Citizens McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. C6-15 Need for social capital System of relationships and linkages Operational integrity –wholeness –honesty Build social capital –constructive stakeholder- related operating practices –transparency of action –accountability