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The corporate social responsibility was traditionally given a little room in corporate policies a few decades ago. Nonetheless, many companies have already become conscious of the benefits from CSR and now aim to integrate this into business strategies. Even the CSR expenses are considered as an investment rather than expenses. Corporations employ CSR to build up strong relationships with stakeholders, including government agencies, lenders, personnel, suppliers and customers. Such relationships foster loyalty from those stakeholders in the long run (Ali I. et al, 2010).
Most of researches in this area focus on financial performance and the CSR policies of the company. To date, a few researches have been conducted in order to study the impact of CSR on staff performance and behavior (Ali I. et al, 2010). The topic is important as it presents management with the information on how CSR will affect the staff.
This paper analyzes how employees perceive and react to the CSR. However, the employee perception of the CSR cannot be discussed without examining how certain CSR activities affect the performance of the staff. In order to fully answer question we will answer what kind of impact CSR policies have on employee commitment, as well as the performance of the latter.
In order to address these questions we will first discuss the theoretical background, the ideas about the role of CSR in academic literature and then proceed with cases.
The origins of the CSR can be found in New Jersey Supreme Court's decision which permitted Standard Oil to donate to Princeton University. The verdict was result of the case in which one of Standard Oil shareholders opposed to that donation, arguing that it contradicted profit maximization (Ali et al, 2010).
According to Mohr et al. (2001), CSR is a company's commitment to minimizing or eliminating any harmful effects and maximizing its long-run beneficial impact on society. Mohr suggests that CSR incorporates four types of responsibilities: economic, legal, ethical, and philanthropic. In his model, each responsibility can be traced to the various stakeholders.
There are different approaches toward CSR in academic literature. Beyer and Drucker argue that companies make large amount of wealth by utilizing the resources and contaminating the environment. While these scientists are supportive of corporate CSR policies, Freeman goes up against this idea by uttering that companies' responsibility has to be confined with high quality products (Ali I. et al, 2010). CSR can be defined as corporate behavior which aims to affect stakeholders positively and go beyond its economic interest (Turker, 2008).
The Impact of CSR on Employees
The employees who have devoted themselves to the company play a major role in the successes of organization. Most of researchers (Brammer, Dawkins and etc.) share the idea that CSR strengthens the employee commitment to the company, especially if the activities also address the wellbeing of the personnel, their families and relatives (Ali I. et al, 2010). According to the Dawkins (2004), CSR also helps to create a good image for the organization and attract highly motivated and professional candidates. Besides, the activities carried out by the company are often spread by the employees among friends with a proud of working for that organization.
When the staff members uphold the idea that the company's aim is not only to maximize the profit, but also to assume social responsibilities, CSR policy of the company will affect their mind to a great extent. In other words, organizational commitment depends on the employee's beliefs in the significance of CSR as well (Turker 2009).
The internal environment within the company also affects the organizational commitment. The working conditions, promotion opportunities, fair treatment and evaluation will certainly have an impact on organizational commitment. Thus, the employees are affected by the CSR activities which directly target the physical and psychological working conditions (Turker 2009).
CSR is often used as a tool to shape the customers' mind, feelings, thoughts, finally the purchasing decision process. Such policies don't only enhance the company's image, but also influence the whole staff. The employees are considered as agents of the employers. For that reason, if the company gives the wrong impression about itself or sells low quality products, the staff members also experience the shame for deeds of the organization. In contrast, if the company makes a good image among consumers by rendering first-class goods and services, the staff also gets proud of working for that organization. Therefore, customer-oriented CSR affects not only consumers, but also the organizational commitment (Turker 2009).
The scope of the CSR is disputed in academic literature. According to Sims (2003), CSR is an act which goes beyond the law. Complying with regulations is not part of CSR. The company must already meet the legal requirements. However, according to Turker (2003), CSR cannot be limited to voluntary activities. The concept should be studied from a broader viewpoint and the employee perception of the legal compliance has to be taken into account. The CSR incorporates the legal dimension too. If a company deceives the public authorities, it will affect the staff mood in a way that they are part of the fraud. Conversely, if the company strictly complies with regulations, the employees may boast for working such disciplined company. Hence, the compliance with regulations is part of CSR and has an impact on organizational commitment (Turker 2009).
However, CSR is not strong as job satisfaction to breed loyalty. However, employee involvement in shaping the CSR actions such as participation in charitable activities may augment the gains from CSR (Stawiski et al., 2010). On the other hand, Brammer et al. (2007) argues that CSR contributes to the employee commitment at the same level with job satisfaction. Turker (2008) uttered that CSR is the strongest determinant of organizational commitment.
According to the Ali et al. (2010), 'The more employees are influenced by CSR actions, the higher will be their organizational commitment, and consequently it will enhance their productivity'. When most of employee are devoted to the company and do their best, it will sensibly have a positive impact on the organizational performance. CSR helps out to build a positive reputation for the company among stakeholders such as customers, investors, suppliers, government agencies. It might push stakeholders to adopt decisions favorable with regard to organization. The relationship between CSR, employee commitment and organizational performance has been researched by several scientists.
In academic literature social identity theory is referred the most in order to explain the employee perception of the CSR and reactions to the CSR. This theory puts forward the idea that people try to affiliate themselves with organizations, groups, companies that is positively associated in the society. It can be translated into CSR policies as affiliation with the company which is known for its social engagement and active CSR (Gond, 2010).
Another idea about the impact of CSR on employees is that socially responsible companies create a good image not only among customers, but also employees. CSR makes employees believe in the goodwill of the company when they become aware of the company's generosity. Some even feel sympathy to their company (Stawiski, 2010). The employees who don't get fair wages explain their situation 'if the company had resources, I'd be given a higher wage'. According to the study (World Leadership Study, 2010) carried out by the faculty members from Center for Creative Leadership (CCL), organizational commitment is vastly interrelated with the company's CSR policy. Socially responsible policy fosters the corporate citizenship which in turn makes the employees more committed to their organization. When the employees believe that 'my organization behaves as a good corporate citizen', it raises job satisfaction and a small number of employee turnover. Most findings of this research are similar to the study done by Rodrigo P., Arenas D. (2008). For example, according to the CCL's faculty members, top managers are likely to have highly positive attitude toward CSR activities as they are in most cases the policy makers. Top managers are also considered to be the most committed employees in companies. The higher position an employee has in the company, the more positive he or she is about the company's CSR initiatives.
The global financial crisis has not affected employee perception of the CSR. In spite of economic recession and layoffs, the employees don't doubt about the social responsibility of their organizations. On the contrary, the crisis has grown the proponents of the idea that companies must be active in community issues and uphold socially responsible behavior.
There are also several discussions in academic literature about the role of CSR in employee retention. According to Frank et al. (2004), employee retention is 'the effort by an employer to keep desirable workers in order to meet business objectives'. Although the CSR strengthens organizational commitment, it has little impact on employee retention. The main factor that affects employee retention is job satisfaction. In other words, if the personnel are not overall satisfied with their companies, there will be higher employee turnover irrespective of the active CSR. While job satisfaction is considered part of CSR, we will not discuss it as it is not the main subject matter of this paper.
One of the most important aspects that is disregarded by top managers is the communication about the company's CSR activities. In many cases employees remain unaware of the works done by the organization because 'high level managers forget that not everyone knows what they know'. Especially the information does not often reach the lower level employees. Lack of official information sometimes leads to the rumors and misunderstandings. Therefore it is very important to disseminate timely information about the activities not only to inform the community but also the staff. When the information is publicized, the employees will realize and appreciate the actions.
Employee involvement in shaping the policy and also taking part in the actions will bring many benefits to the company. First of all, the staff members can come up with very constructive ideas. Such involvement, in other words, participative management makes employees feel themselves an important element in the organization, which consequently raises their commitment to the company. Besides, they automatically become aware of the company's activities and also spread the news proudly (Stawiski, 2010).
The following two companies from Chilean construction sector can be a good example how employees react to the different CSRs and perceive it.
In order to facilitate the study two diverse companies from the same industry were examined. The CSR policies in these companies are significantly dissimilar, and are in interest of specific stakeholders.
Company A engages in construction business which enjoys high market share and targets middle income groups in community. The work done by this company is labor intensive despite the application of high-tech in order to augment the quality of the products offered. The A launched a scheme to raise the welfare of the staff. The company expanded its business and increased the revenues during 1990s. However, Asian crisis hit Chilean /economy in 1998. The A decided to cut the costs and layoff the employees, especially the employees and activities and run by HR department. In spite of cost cuttings, the company faced decline in revenues, due to the loss of staff effectiveness, confidence and many other reasons. The management made its mind up to address the factors that affected the performance of the personnel, especially the ones which were crucial for productivity, explicitly their welfare. HR department was reestablished and empowered to carry out certain measures that aimed to improve the welfare of the employees and surpass the level specified by regulations. The A carried out several activities such as 'solidarity fund' to help the employees who had health problems. The event namely 'Happiness Month' brought employees from different departments and levels together and was very useful to feed the teamwork spirit. The A also celebrated its anniversary with contests, parties and other activities that were implemented during working hours. Although employees worked less hours, the productivity of the staff increased 3.8% compared to the previous month. As a result, internal communication, relations with management improved, the staff paid more attention to their job responsibilities. However, the privileges were not applied to the employees contracted for specific projects.
Company B is also involved in construction sector and focuses on large-scale construction projects such as factories, hospitals, buildings, and malls throughout South America. Similar to the A, the B possesses high market share and employs over 5200 people. The CSR of the B was oriented toward community development and environmental issues. In the framework of community development the company allocated funds for surgery operation for people who couldn't afford it and also provided successful but poor students with scholarships to carry on their studies. The activities of B directly affected the environment and even could be damaging. However, the company preferred to incur more costs rather than polluting environment and also damaging it. The B set out strict environmental policy and voluntarily implemented Environmental Management System. A new division - Environmental Management Department was set up in order to monitor the compliance with environmental procedures. The big projects in construction sector are given to the companies by tender. The costs of the B's proposals increased between 0.3%-0.8%. A proposal can be rejected by a margin of 0.1% in the expenses. Therefore, the management argues that the company could win more projects in the absence of voluntary environmental measures.
In order to study the employee attitude to the various CSR activities, researchers carried out interviews with staff members from different levels and surveys and then analyzed results.
The researchers observed the changes in employee behavior and cognitions: the traditional role of company, in other words, delivering high quality products and services is now not considered the sole reason for the existence of the company. The employees who had never paid attention for social problems were influenced by the changes in the companies' priorities. A middle-level manager stated the following in interview with researchers: 'Companies are a fundamental part of society because they are the basis of economic growth. In today's world, companies are even more powerful than some states and the influence of their operations can determine the progress of an entire community. Maybe in the past it was the same, I don't know... but as a difference I can say that in the past only some companies took these kinds of actions, but right now almost every company -even the smallest ones- know that they have to improve community standards, the environment and be economically profitable as well.'
Another middle-level manager who was interviewed expressed his views as following:
'I think the CSR actions undertaken by the company could bring benefits to people, but let me be clear: I think a company is not in business to satisfy social needs and these kinds of things. I don't know the owners' thoughts, but from my point of view the only reason to do this is due to a market trend or a market opportunity. I still believe in the old business is business.'
The researchers were also surprised by the thoughts of the recently recruited employee, who had an entry-level position in the company:
'One of the reasons that I applied for this job was the company's reputation in the market. Since the first day when I saw the commitment that both managers and owners show every day in order to improve standards and the quality of the final work, I realized that my decision was adequate. All the CSR actions performed by the company respond to this commitment, even if this sometimes leads to an increase in the operational costs. But the managerial team prefers to earn less money than compromise this commitment, because they are convinced that honesty, quality, and responsibility to society and the environment are company trademarks and they manage it in such way to let all the organization know that this is - and will be - our way to do business.'
The attitude of lower level personnel toward the company was different. Unlike top and middle level employees they didn't want to identify themselves with the company in spite of strong CSR programs. A quote from 32 years old employee who has been hired only for certain projects proves this:
'How do I feel about it? Look, it takes me an hour and a half to arrive to work, I get up everyday at 05:30 in the morning and I don't earn too much money and I have two kids. Do you think I'm happy here? No, but I have to work. At least in this company there is real concern about our security, about a nice place to eat and in general about good facilities for the workers in the workplace, but the main problem is the labor insecurity: I don't know if I'll be hired for the next project.'
Based on the interviews and surveys, the Rodrigo P. and Arenas D. (2008) classified the personnel into three categories in accordance with their approach toward the CSR. The first category is Committed Employees, who welcomes active CSR policies and considers social welfare and social justice very important aspect in community. They show strong loyalty to their company, adhere to the organization's common goals and play an important role in company's successes. Such people are represented not only in management and middle level managers, but also among bottom level employees. The most important factor with regards to these employees is that their average age ranges from 40 to 65, mostly married and possesses technical training or graduated from higher education institution. Second category of employees is called Indifferent Employees. They have set their career growth main goal and don't care much about common social problems. They regard social justice as an important issue but are reluctant to do anything practically. Such people are mostly pragmatic and focus on their jobs only. They don't oppose to active CSR policies but don't support in deeds. This type of employees is the most efficient as they attach great importance to their job responsibilities, with the hope that they will be later promoted. They identify themselves with their job, position or utmost the area they work, but not with the company. CSR policies don't affect second category of employees much. It doesn't increase their organizational commitment or performance. Such employees are usually found in middle level staff members. Their average age is lower than first type of employees, between 25 and 35. The third category of employees is Dissident Employees. They oppose to the active CSR policies and often question why a certain amount is spent for the issues which are external to company but not for raising the salaries or the welfare of staff members. They consider their jobs as a mean to earn money and make their daily lives. Such people don't feel loyalty to the company in which they are working. They are usually represented in the bottom of the staff members. This category is not interested in the social role of the company. They often talk about social welfare, criticize the management and other people, and explain social justice from their standpoint as they receive the lowest salaries in the company and feel disadvantaged. They don't consider themselves part of the organization and don't strive to increase their effectiveness or to get promoted. Since they don't reap direct benefit from CSR, some activities sometimes depress them. This category consists of bottom level, temporary employees or contracted for certain project. The age of the group ranges from 18 to 65. Most of these people don't are not university graduates and even don't have even vocational qualifications.
Most of employees contracted for a project belong to Dissidents. The reasons are clear: they don't have job security, as they are fired when the project is over. Their salaries are lower than permanent staff members. They don't receive any benefits in addition to their wages. Thus, lack of job security, stable life and benefits in comparison with permanent staff make them disappointed. That's why they don't respond to CSR policies of the company positively. The management of the companies would like to make changes to these conditions but it would result in higher costs.
The results of the study are in line with the Maslow's hierarchy of needs. Temporary employees are not able to satisfy the needs which stand in the first (physiological) and second layer (safety) of the pyramid. Therefore they are not actively involved or positively concerned with CSR actions, which stand at the higher layers (esteem, self-actualization) of the pyramid.
This study is directly related to the question how employees perceive CSR and also whether the staff care about CSR. The findings of the research answer this question clearly. Similar to human psychology, employee attitude toward to CSR is very complex and they don't perceive the CSR activities in the same way. It depends on many factors such as their qualification, position in the company, affiliation with company, salary, social conditions and etc. Their approach is also affected by society, social justice and social welfare (if any) in the country where they live. Based on the data obtained during the study, the researchers divided the employees into three categories: committed employee, indifferent employee, and dissenting employee. The researchers also came to the conclusion that in many cases highly qualified professionals who are at the beginning of their career perceive CSR activities positively but also are reluctant while asked to get involved in the process. However, the professionals who have been working for the company a long time and shown loyalty to that company react to CSR policies positively and participate in CSR activities with enthusiasm. By doing this they feel proud in community as they consider themselves part of company. Committed employees are affected by CSR activities the most. It inspires them to improve their performance and value the company (Rodrigo et al, 2008).
According to the survey which was carried out among more than thousand top managers by Economist Intelligence Unit, CEOs believe that CSR benefits the businesses while improving the image of the organization (Economist 2008, p. 13). The employees should be considered the most important stakeholder and CSR has to target this group as a priority (Humière & Chauveau, 2001: p. 183-193, as cited in Gond, 2010).
An empirical research has been done in order to study the impact of CSR on employee commitment and performance in Pakistan. The employees working in different sectors in various organizations were sampled. 500 workers were surveyed and 63% response rate was achieved. The sampling took the gender, age, industry and professions into account.
There were two dependent variables in this study: employee commitment and organizational performance. Employee commitment was measured by the instrument which contains 9 items addressing various aspect of organizational commitment and is quantified on 5 point scale (Likert scale: 1 for Strongly Disagree and 5 for Strongly Agree). The organizational performance was measured by another instrument but by the same scale. The instrument consists of 3 items: first item is related to increase/decrease of market share compared to preceding year, second is concerned with positive/negative changes in overall performance of the organization in comparison with its competitors. The third item covers other issues such as the increase/decrease in ROI, return on assets, sales growth, and growth in profit.
There was also an independent variable in this research: CSR. The instrument to measure the level of CSR includes 17 items and covers almost every aspect of CSR including responsibility to difference stakeholders. This instrument was also based on 5 point Likert scale.
The correlation analysis was carried out between two dependent and one independent variable. The study found a great correlation between CSR and organizational commitment: the better CSR, the more committed employees and performance. Organizations can boost the employee commitment and performance by stronger CSR: social activities, addressing the problems of society, environmental action, improving employee welfare, complying with regulations and etc. All these activities will directly or indirectly have an impact on the employee commitment and performance (Ali I. et al, 2010).
The positive link between CSR and employee commitment was affirmed by the research done among Pakistani employees. The research concludes that 'CSR actions are having positive influence on organizational performance. There is positive relationship among employee organizational commitment and organizational performance'.
CSR is not panacea. The implementation of active CSR policies will not always guarantee optimal results. Especially society oriented CSR activities are not perceived likewise by staff members. Therefore the company must be very careful while preparing and implementing CSR policy as it may even be upsetting for 'discontented employees' (Rodrigo et al, 2008).
However, employee oriented CSR policies will be more motivating for the staff. Obviously a good salary, working conditions and benefits will affect the personnel to a large extent. It will also foster a good reputation for the company and attract highly qualified professionals.
Future researches can be done by linking the employee turnover and considerable change in CSR policy. For example, the employee turnover of a company that has mostly disregarded CSR will eventually be affected by shifting to active CSR policy.
It is very likely that the role of CSR will rise in the future and it will constitute one of the most important components of corporate governance.