Focusing on Corporate Social Performance
Social Enterprise Newsletter, Spring 2002
In recent decades, as corporations became more involved in social enterprise activities, business academics have sought to link a company's social performance and its financial success. Joshua D. Margolis, an assistant professor in the Organizational Behavior unit at HBS, asserts that it's equally important to study the effectiveness of corporate social initiatives.
Margolis became interested in social enterprise when he taught leadership cases that centered on two exemplary organizations—a nonprofit and a for-profit—that had clear strategic approaches toward fulfilling their commitment to advance public welfare. With calls rising for corporations to help meet pressing societal problems, Margolis began to consider how companies could most successfully deploy their resources to address these needs.
Margolis' latest research (with James P. Walsh, a professor at the University of Michigan Business School) has focused on the social initiatives of corporations that are not specifically in the social enterprise field. These companies' efforts frequently encompass volunteer programs, charitable contributions, expert guidance, and cause-related marketing. They are engaged, for example, in addressing societal problems such as hunger, encouraging civic solutions through volunteerism, or supporting public education reform.
"Debate shouldn't center solely on whether or not companies should engage in socially responsible activity," observes Margolis. "Since many companies are already involved in social enterprise, we need to look at how best they can perform these activities."
Margolis identifies a set of issues researchers might investigate in order to help companies operate effectively when they do engage in social initiatives. "Our work," says Margolis, "provides a systematic framework of questions for identifying social initiatives and selecting social performance practices that make sense for that particular organization."
Companies, Margolis believes, need guidance in managing their social enterprise activities. "The classic management questions and practices applied to the production and delivery of goods and services should be applied to the management and evaluation of corporations' social performance," he explains. "A company's social performance should be measured by its impact on the intended beneficiaries, not only by its impact on the bottom line of the company."
To read more about Margolis and Walsh's findings and views, see "People and Profits?: The Search for a Link Between a Company's Social and Financial Performance" (Lawrence Erlbaum Associates, 2001) and "Misery Loves Companies: Whither Social Initiatives by Business?," an HBS Working Paper.