To create a sustainable world, firms must (a) simultaneously pursue the twin purposes of economic wellbeing and societal welfare and (b) internalize two seemingly contrary values—a concern for the welfare of society and a concern for its own success/dominance over other firms.
For the leadership of existing firms, the challenge is gaining and maintaining legitimacy for the social purpose and the underlying concern for society’s welfare. The experience of SOCH is illustrative.
SOCH was a private U.S.-based software company founded by Som Banerjee in 1993 to provide niche custom software solutions to complex technological problems. As its founder-CEO and largest shareholder, Banerjee wanted SOCH to (a) deliver excellent software designs, (b) revolutionize the software industry, and (c) use technology to improve the welfare of people who experienced prejudice in society. In the first decade, SOCH concentrated on delivering excellent software solutions and revolutionizing the software industry by pioneering a new approach to software design and promoting the use of open source products.
The firm developed a culture that emphasized continuous learning. It recruited technical consultants and managers with the courage to question decisions and voice opinions along with persistence and openness to different perspectives. The orientation program and on-the-job training emphasized the importance of constructive feedback and owning up to mistakes. The firm assessed and recognized team performance while the teams recognized individual performance. SOCH’s salaries were lower than those offered by the leading firms in the industry, as high salaries were seen as a “capitalistic tactic.” Yet, the firm drew very competent consultants because it offered them opportunities to work with very smart people on challenging assignments and to learn new technologies.
In 2006, Banerjee began to communicate his idea of using technology to help create a just world. In official meetings, he spoke passionately to the consultants about the moral necessity for everyone (including business firms) to work towards making the world a more just place. He showed videos depicting inequalities in the world and provoked the consultants to think about such issues. Banerjee also nurtured a group of 50-60 senior managers to inspire others to work towards societal welfare.
Many consultants were deeply affected by the images of social injustice—they read more about it, volunteered in the social sector, visited rural areas, and met with people who addressed social injustice. Others were less affected, even cynical about the new purpose and its relevance to SOCH. There were several debates across the hierarchy on issues relating to social justice and the role of business in society—something rare in the industry.
Interested consultants worked with individuals/organizations in the social sector to identify critical problems and deliver software solutions. SOCH supported these projects through its Social Impact Program. Project costs were reduced by: (a) adopting simple software designs; (b) drawing on open source software when available; (c) only facilitating project implementation; (d) delivering most projects from its India offices.
In 2010, Banerjee invited the founders of Ben & Jerry Ice Cream to share their three-part mission statement. He proposed a similar three-pillar mission for SOCH:
- The Sustainable Business Pillar defined success not only in terms of financial viability of the business but also economic independence and the independence to do things that the company considered essential.
- The Software Excellence Pillar defined success in terms of (a) delivering software that met clients’ expectations and (b) contributing to the software industry by promoting and protecting “knowledge commons,” the free internet, and open source software.
- The Social Justice Pillar defined success in terms of the broader social impact of the company on society.
There were several debates about the new mission. Some consultants felt that dealing with social challenges was the responsibility of the social sector alone. They were worried about how this new mission would affect their career prospects. Banerjee had several discussions to address these concerns.
To achieve this mission, SOCH created a separate vertical to promote social justice within and outside (in the social sector) SOCH. Each SOCH office was expected to plan a portfolio of commercial and social sector projects and was assessed (among other things) for alignment with the planned portfolio. Social sector projects extended across several domains (e.g., education) and were largely pro bono. This reduced the net profits of the firm.
The new mission began to affect SOCH’s HR practices. During the selection process, applicants were additionally assessed for ideological alignment. Technically proficient applicants who were not aligned with the company’s ideology were not likely to be considered. The orientation program familiarized recruits to the company’s new three-pillar mission and emphasized the importance of dialoguing with others to resolve potential conflicts. The compensation policies however largely remained unchanged. There were no monetary incentives for participating in the social sector projects.
SOCH also became more selective in choosing clients, staying away from firms that created/exploited structural inequities. As a result, it lost revenue opportunities, closed some offices, and lost some good consultants. When SOCH undertook projects with gambling companies or casinos, individual consultants could choose not to work on those projects (without disrespecting the company’s choice). They were also encouraged to highlight ideas/actions that might cause social injustice and suggest ways of avoiding this.
SOCH’s commercial clients were more focussed on project outcomes and costs, and were largely non-committal about its social purpose. SOCH ensured that it delivered the desired project outcomes. SOCH’s consultants felt positive about working in SOCH. They saw SOCH as a “community” where they could be themselves and do what they thought was the right thing to do. They could ask questions of anyone and benefit from the knowledge of others. They could perform multiple roles, develop open source technologies and contribute to humanitarian projects. These experiences improved their ability to appreciate diverse viewpoints and helped them deliver value in resource constrained environments.
Over time, SOCH was therefore able to attract and retain very competent consultants even as it expanded. It attracted more commercial clients by highlighting the business benefits accruing from engagement in the social sector.
Gaining legitimacy for the social purpose was necessary partly because it was introduced a decade later and was not the norm in the industry. Many stakeholders had concerns about the relevance and impact of the social purpose. The Giving Voice to Values (GVV) approach helps make sense of how the leadership gained legitimacy for the new purpose and values.
Who are the affected constituents? What is at stake for each of them? The leadership initially focussed on two stakeholders: its consultants and clients. Consultants had high technical knowledge but limited exposure to and understanding of the social sector. While some supported the idea of corporate responsibility to society, others did not. The consultants’ active support was critical for contributing to SOCH’s social purpose through the social sector projects. Commercial clients were primarily concerned about project costs and outcomes and largely noncommittal about SOCH’s social purpose. Yet their passive support provided SOCH with the financial resources to support the social sector.
What can the leadership say or do to respond persuasively to stakeholder concerns? Banerjee framed the new purpose and values in terms of stakeholders’ interests. He appealed to their altruistic ideals and the self-interest to legitimize the social purpose. New explanations for the socioeconomic challenges facing society and new beliefs (e.g., firms are responsible not only to their shareholders but to the larger society) helped legitimize the new values.
The leadership discussed and addressed consultants’ concerns. It endorsed the new purpose through action, even when it adversely affected business. It also sought the assistance of credible others (e.g., an internal management team, reputed external activists, peers, and the top management of well-known socially conscious firms) to legitimize the new purpose.
Banerjee maintained the legitimacy of the new purpose and values by (a) institutionalizing them in SOCH’s three-pillar mission; (b) changing the HR and business policies /practices to reflect them. He encouraged the voluntary participation of consultants in social sector projects and consciously downplayed incentives. These measures could have promoted the internalization of the new purpose.
Implications for HR managers
A firm that wants to introduce a social purpose and concern for society is more likely to succeed if its investors/owners are committed to them. The leadership can gain legitimacy for the new purpose by inspiring or educating stakeholders about the need for such a purpose (rather than imposing it). This requires understanding the goals and interests of the stakeholders, framing the new purpose and values in terms of these interests and mobilizing the support of credible others. The GVV approach could help leaders plan the legitimization process.
To maintain legitimacy of the new purpose and values, these must be institutionalized in the firm’s mission. HR practitioners can help maintain legitimacy for the new mission by (a) ensuring that HR policies are internally aligned with it and (b) persuading the management to align business practices with it.