The Watchdog Era

These days companies have to be serious about their social responsibility if they want to keep their customers' trust and loyalty, says ROSABETH MOSS KANTER

AT SOME POINT in the late 1970s, the future became more valuable than the present and business became less about accounting procedures and more about ideas. Change was all around, and those who offered a route through the chaos saw their value rise exponentially. It was an era when US competitiveness was first called into question and the UK was undergoing a series of very high-profile privatisations, turning its state-run leviathans into private monopolies. Across the world, new markets were opening up just as the phenomenon of new technology began to extend beyond the reach of a small group of American-based companies.

Rosabeth Moss Kanter has been charting the ups and downs of corporate life ever since. Her books, such as The Change Mastersand When Giants Learnt to Dance, tackled the big stuff: organisational behaviour and innovation. "I was interested in the contrast between the new breed of start-ups and the established businesses," she says. "It was clear that it was about what type of culture and leadership could encourage or stifle innovation."

The most innovative companies share a characteristic, she says, of being able to look beyond their particular field of endeavour into the wider world. They are close to life on the outside of the organisation and seek answers to questions beyond the needs of today’s customer.

Her latest book, SuperCorp, takes this further and posits a counter-intuitive conclusion: that behaving well and doing good lead directly to innovation and profits. SuperCorplists a number of "vanguard companies" which demonstrate that "societal initiatives undertaken largely without direct profit motives are part of the culture that builds high performance and thus results, ironically, in profits".

The book tells the story of IBM’s response to the 2004 Asian tsunami, in which it deployed considerable resources, both human and technological, to the problem of saving lives quickly. A conversation at the company’s Bangalore office in the hours after the disaster struck captures the issue. Sunil Raghavan, a long-time IBMer, went to his boss’s office insisting the company do something to help. But how?

“I have done this in the Bhurj earthquake,” said Raghavan. “IBM has capabilities.”

The company’s chief executive contacted senior government figures directly, and the IBM technology was directed toward the job of rescuing and rebuilding shattered lives.

“In vanguard companies, volunteering is almost a way of life, inside and outside the company,” says Kanter, citing IBM’s rapid response to other disasters, including Hurricane Katrina. What’s more, the intelligence gathered from the experience and the need to find new applications to existing technology are cornerstones of innovation. To this end, the company has created a disaster response kit, which has become a tool used to find missing and displaced people.

SuperCorpcomes at an interesting moment. The word corporate is a term of abuse and there's cynicism toward the very notion of corporate social responsibility (CSR). "I'm pretty cynical about many corporations myself," she says during an interview with Innovation. "My entire career has been about moving from the word 'corporate', meaning control and authority, to a place where people are empowered and have a say over what they do and create new things using their values, which the book has found works very well.

“I agree with those who are cynical, and in particular towards the financial sector, many of whom behaved very, very badly. Many companies have lost the sense that they have any obligation towards society. My book is not about CSR or about philanthropy or giveaways – although philanthropy on its own is not a bad thing. It’s not about cosmetic change that says we give money to this great charity so we must be a great company. That’s not what I’m writing about. Ultimately the public sees through that, particularly in this age of transparency.”

In the Twitter era, companies had better behave well or they will be found out. “I feel very sorry for Toyota,” says Kanter on the Japanese car maker’s current problems. “It’s a great example of confidence and the nature of winning streaks [a theme of a previous book]. Winning streaks end when they become so successful that they start to take for granted some fundamental disciplines and routines that used to be part of the culture of what made them great. You can’t forget it for a moment. You can’t say we’re so great that we don’t have to double-check everything or that our innovation is so good that people really want this hybrid car so let’s get it to the market fast and forget the very careful quality control that made Toyota such a great company.

“I have seen this time and time again. Toyota has been a model and so much better than the US car companies. They had a long-term view that was attuned to developing innovation for the future and a short-term view which was all about very careful quality control. Something happened to the quality-control process. You can’t just attribute it to growth. Somehow managers were not being held accountable at every detail and checking and double-checking and testing. That’s what happens when a winning streak ends,” she says, referencing the defence put forward by Toyota’s chief executive Akio Toyoda. The grandson of the car maker’s founder recently told the US House of Representatives: “Quite frankly, I fear the pace at which we have grown may have been too quick,” adding that the priorities of “First: Safety, Second: Quality and Third: Volume” had buckled under the pressure of growth. “These priorities became confused, and we were not able to stop, think, and make improvements as much as we were able to before, and our basic stance to listen to customers’ voices to make better products has weakened somewhat. We pursued growth over the speed at which we were able to develop our people and our organisation, and we should sincerely be mindful of that. I regret that this has resulted in the safety issues described in the recalls we face today, and I am deeply sorry for any accidents that Toyota drivers have experienced.”

The company’s previous record will stand them in good stead in their hour of need, says Kanter, quoting a press report: “In Japan, loyalty to Toyota is redoubling because there is a great deal of pride in the company and this has much to do with what Toyota has contributed to Japan.”

The speed at which bad news travels today leaves even great companies vulnerable. “When I was at the World Economic Forum in Davos, I participated in a session about social media and its ability to spread rumour, which is sometimes unfair and unfounded. And frankly, good conduct is the best defence against unfair attacks – but you also need to check out whether there’s a little bit of truth in the rumour and fix it straight away.”

Her SuperCorpthesis holds good in this situation, she says, because "good conduct over a long period of time is really very helpful in this respect. There have always been recalls in the automobile industry; we wish things could be better guaranteed at the start but these things happen. It depends on how you handle it, if you immediately start to change something and the public sees that you've taken remedial action.

“Toyota are not the only company to have this problem. Ford have had problems with their own hybrid and there’s always a little bit of politics about attacking the foreign company. This won’t destroy Toyota but it does have to prove again that it has extremely high quality control. It takes so much longer to get back what you’ve lost.”