The Recruiting Payoff of Social Responsibility

By Gretchen Weber

Jan. 25, 2005

Twenty years ago, human rights records, environmental policies and levels of community involvement wouldn’t have been on the radar screen for some job seekers when deciding which companies to target in their employment searches.

    Today, the situation is different. In light of recent corporate scandals, as well as growing global awareness, the public’s expectations for corporate responsibility have changed. Along with that, so have the standards for much of today’s top talent. Companies of all shapes and sizes are realizing that not only can a reputation for corporate social responsibility be good for branding, publicity and the bottom line, it can also be a valuable recruiting tool.

Accepting lower pay
    A study released in 2003 revealed that companies perceived as socially responsible often have a competitive edge when it comes to attracting top recruits. Researchers at Stanford University and the University of California, Santa Barbara, surveyed 800 MBA students from 11 leading North American and European business schools and found that 94 percent would accept a lower salary–an average of 14 percent lower–to work for a firm with a reputation for being environmentally friendly, caring about employees and caring about outside stakeholders such as the community.

    Stanford professor David B. Montgomery says that this 2004 study is the first empirical analysis of the influences that factors such as high ethical standards, environmental sustainability and caring about employees have on MBA job choices. The students were asked to rank 14 attributes in order of importance when choosing a job. Intellectual challenge topped the list, with financial package coming in at only 80 percent as important, and a reputation forethics and caring about employees ranked third at 77 percent.

    These results wouldn’t surprise Robert Morgan, president of employment solutions at the staffing firm Spherion. Morgan says that a reputation for social responsibility can often be the determining factor when a candidate is deciding between two or three companies.

    While opportunities forcareer growth andwork/life balance often top the list of what candidates are looking for, Morgan says, a reputation for corporate social responsibility isn’t far behind. At the same time, often the most powerful recruiting benefits from being seen as socially “good” are less direct, he says. “When you’re out doing good in the community, you get lots of PR, which raises brand awareness,” Morgan says. “These companies also have a strong employee brand, and employees are out talking about their company and feeling proud, and as awareness increases, their recruiting brand goes up.”

    This kind ofbranding can be what attracts candidates to a specific company in the first place, Morgan says. Sheri Southern, vice president of partner resources for Starbucks North America, joined the coffee giant six years ago. She says that the Starbucks reputation for strong values was a major reason she targeted the company in her job search. “I really wanted to work at a company that treats its employees with respect and as part of the solution instead of the opposite.”

It’s about recruiting
    Just as the public and job seekers are paying more attention to the ethics and missions of corporations, many companies themselves are shifting to a more values-based model of business.

    Marc Gunther, a senior writer at Fortune magazine, argues in his latest book, Faith and Fortune: The Quiet Revolution to Reform American Business, that bit by bit, a new model of business is replacing the old Industrial Age approach of maximizing short-term profit by charging consumers as much as possible and paying workers and suppliers as little as possible. The new model, he says, is being adopted in various forms not just by small, socially responsible firms, but also by such industry leaders as Ford and DuPont. It’s based on developing a network of long-term relationships that benefit multiple parties. Great companies, he argues, serve their workers, customers, owners and the common good. By contrast, he says, the companies that put their stock prices first end up being the Enrons, theTycos and the WorldComs of recent years.

    This values shift occurring in many companies is not rooted simply in an altruistic desire to do good in the world, although Gunther says the fact that the current generation of CEOs came of age in the 1960s influences their views on issues such as women in the workplace andenvironmentalism. What it comes down to, he says, is that for many companies, this new model is a good business strategy. “The primary driver of corporate social responsibility is the desire of companies to attract better employees and engage the people they already have,” Gunther says. “When I talk to companies and ask why they are investing in the environment or the local community, time and time again they say it’s all about attracting the best people.”

    David Gebler, president and founder of Working Values, a business ethics and training company in Sharon, Massachusetts, says that how a company projects its values and ethics has become a competitive differentiator in terms of recruiting, and he sees more and more companies realizing this. Gebler says his firm developed an ethics training game called the Ethics Challenge for 130,000-employeeLockheed Martin. It uses a board-game format, characters from the cartoon “Dilbert,” and a series of scenarios involving workplace ethical dilemmas to be used as touchstones for discussions. Lockheed Martin recruiters bring the game to colleges to demonstrate to prospective recruits the company’s commitment to ethical responsibility, Gebler says.

    Companies are incorporating their values into recruiting and advertising materials more and more, Gebler says, as a way to both attract the best candidates and to weed out the ones who wouldn’t be a good fit culturally. “They are telling people right upfront, ‘This is what we stand for here,’ ” he says. “People want to work for companies with articulated values. They gravitate toward those companies because they really know what they are getting into.”

“What’s the right answer?”
    Starbucks articulates its values all over the place–its Web site, its recruiting and promotional materials and the backs of employees’ business cards. Through a process called Mission Review, which encourages employees (called “partners”) to voice concerns to company leaders about whether or not company practices are consistent with Starbucks’ mission statement, the company strives to ensure that it never strays too far from its principles.

    Dave Pace, executive vice president for partner resources, recalls last fall when he received a Mission Review comment from a partner questioning why there was no paid-leave benefit for adoptive parents. “We had to think, ‘What’s the right answer for the kind of company we are?’ ” Pace says. Within three weeks, the company had instituted a two-week paid-leave benefit for adoptive parents.

    In addition to having a reputation for treating employees well, Starbucks is also known for its outreach programs into communities both where stores operate and where its coffee is grown. From donations to local, national and international charities to implementing a preferred-supplier program to encourage suppliers to be more socially responsible to its announcement that starting this year it will stock stores with 10 percent recycled paper products, Starbucks has an extensive portfolio of social responsibility initiatives.

    “We do it because it’s the right thing to do,” Pace says. “But from my perspective it’s also a terrific recruiting and retention tool. These days, people want to work for an organization that stands for something beyond profitability. Not just one that’s successful on Wall Street.”

Just too good
    Becoming more socially responsible as a company does have a potential downside, Gunther says. “It is possible to become too good a place to work,” he says. He cites the case of Hewlett Packard in the 1990s.

    The company had always been known as a good place to work, he says, but at that point, just as the technology industry was changing rapidly and innovation became more important than ever, HP’s very employee-friendly policies became a disadvantage.

    “People tell me that at some point people went to work there just because it was family-oriented and because of the camaraderie, and it lost its competitive edge,” Gunther says. “In business, your strength can become your weakness.”

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