The advantages of equality, keeping it in the family and how to quantify social value

Opportunity in discrimination

King Wu of Zhou, as Confucius notes in his seminal work Analects, counted only one woman among his ten advisers. The Chinese philosopher used the ratio to argue that men are better equipped than women for leadership. Such thinking might be antithetical to western-minded companies, but not to their east Asian peers. From Tianjin to Yokohama, gender discrimination is rife.

So what should foreign investors do? Organisational theory presents “foreignness” as a liability. International companies, the theorists argue, need to take up local norms and culture when abroad. In sum: when in Chengdu, do as the Chengduans do.

The literature on labour market discrimination offers an opposite view. Rather than see their foreignness as a hurdle, international companies should consider it a plus. “Exploiting the bigotry of others can be a source of competitive advantage,” the authors maintain.

The facts match the theory. At least, they do in the case of South Korea. Taking two distinct data sets, this paper provides empirical evidence to show how foreign multinationals have profited from aggressively hiring members of an excluded group (in this case, women). The correlation between performance and inclusive hiring practices are particularly strong in companies with above-average levels of women in senior management.

The theory will not hold true for ever. Domestic legislation is catching up with international norms. More companies are also seizing the strategic opportunities inherent within discriminated labour markets, even those from discriminatory countries. But the changes are “relatively slow”. For the moment, therefore, the opportunity lies with foreign companies that are “free from bias” to fill their ranks with underutilised talent.

“Multinational Firms, Labour Market Discrimination, and the Capture of Competitive Advantage by Exploiting the Social Divide”, by Jordan Siegal et al, Working Paper 11-011, Harvard Business School, August 2010.

Responsible family firms

Are family-owned firms more concerned about corporate responsibility than public companies? The question ignites considerable academic debate. Managerial ethics is clearly a major factor. But the authors of this paper choose to focus on a second factor: length of perspective.

Family-owned businesses are generally reckoned to take a “generational” perspective. As a result, they will look to avoid actions that threaten reputational damage. Emotional connection with the firm, a more balanced goal set and long-term involvement in the local community reinforce this stance.

Dissenting voices exist, however. Family-owned firms, some argue, prioritise a steady cash flow to owners. The implication would be a shorter-term perspective, and consequently less concern about corporate responsibility.

This paper adds to a rich debate by distinguishing between ownership and management dimensions of family firms (eg founder-led firms versus family-led firms). For each category, an analysis of their position with respect to corporate responsibility is provided.

Family managers, for instance, are shown to identify more strongly with the firm as a social entity than non-family managers. This, in turn, should make them more likely to be concerned about corporate reputation and, consequently, corporate responsibility.

Differences exist between types of family firms, but family-owned companies as a group are generally more responsible than public companies, the paper concludes. This owes largely to the connection of the former with local stakeholders.

Shareholders are seen as anonymous. Take investment funds. Representing several thousand individuals at a time, it is difficult to know who to point the finger at if a listed firm does not fulfil its stakeholder obligations. Owners of family businesses are, in contrast, easily identified by the public. That makes bad press personal.

“Corporate Social Responsibility in Large Family and Founder Firms”, by Joern Block and Marcus Wagner, ERIM Report Series, August 2010

Measuring social value

No one ever said measuring social value was easy. Funders of all kinds have fretted for decades on how to put metrics on programmes that defy traditional numeric calculations.

An obsession with quantifiable data lies at the heart of the problem. Despite blaming business methodologies for much of the mess, Geoff Mulgan (who was an adviser to Tony Blair when he was UK prime minister) looks to economic theory for an alternative. The only meaningful concept of value, he argues, is one that arises from the interaction of demand and supply in markets. Put simply: something is only ever as valuable as what someone is willing to pay for it.

Those in the social field should take note, Mulgan maintains. Effective demand means that someone is willing to pay for a service or an outcome. Supply means that the service or outcome works, is affordable, and is implementable. Such a mindset leads to “markets, conversations and negotiations” that link those with needs and resources to those with solutions and services.

When it comes to a measurement tool, Mulgan does not proffer a computer programme or calculator. Instead, he suggests a framework for “thinking about social value” based on a series of judgments. These judgments include questions of strategic fit, potential social outcomes, economic effects and implementation risks. The net result is a tool that above all manages to help managers manage. That insight in itself makes this short paper a valuable contribution to the field.

“Measuring Social Value”, by Geoff Mulgan, Social Innovation Review, Summer 2010.

Campus news

UK supermarket Waitrose is sponsoring a new chair of sustainable agriculture at Aberystwyth University, Wales.

The Social Sector Collaborative, a hub of graduate students at the University of Michigan, has won Net Impact’s Force for Change Award. The campus initiative aims to connect socially progressive students for the purposes of joint research and other collaborative actions.

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