The limits of strategic community programs

In Asia businesses are starting to focus their community programs, make them 'strategic', leverage their limited resources as much as possible, instigate lasting and large-scale change, increase their community investments as the region's importance to their business grows and explore ways of distinguishing their programs from the rest as well as a number of other trends. This article aims to identify the limits of such trends in order to guide businesses as they develop their programs.

Best practise for an NGO: Identify the problem, identify the best solution, get the resources required to implement solution, use resources when needed (i.e. may vary depending on implementation progress).

Best practise for a business: Identify a problem related to the business (i.e. in the business's local community, related to business's line of work etc), identify what the benefit is to the business to adressing the problem, identify what resources the business has that can be used to address the problem (and that bring the desired benefits), provide said resources. Attach strings to ensure resources are used as benefits the business (i.e. location of implementation), as convenient for the business (i.e. volunteers) and to ensure appropriate use of resources.

Though the above statements are very brief, they describe the dilemna that exists whereby the way an NGO and the way a business addresses problems are very different, and can even be come incompatible in some cases.

Businesses should benefit from their community programs and they should seek to utilise their specific resources as best they can, but this may only be part of the solution. It is rare a business has all the resources to meet the NGO's needs -or the willingness to provide all of those resources.

The result is an imperfect provision of resources to the NGO, restricting an NGO's ability to tackle the problem as it would wish -but this is accepted as a sacrifice in order to get neccesary resources. In some cases NGOs can seek multiple resource providers and combine them, but in many cases this does not work due to business's requirements for 'exclusivity', location specificity, different financial and impact reporting requirements and so on.

Now this situation might only occur for so-called 'strategic' community programs, and not every program need be strategic as every program will vary by business type, location, sector, size etc.

Additionally it musy be recognised that though business can be the solution to many social and environmental problems (as well as economic ones), they cannot solve all of them. Though strategic community engagement is a good thing, as are other programs engaging with the environment and other issues, it must be recognised that there are other limits as to what business should or is willing to support.

There are other resource providers out there -each with different roles to play, resources that can be provided and interests including governmental funding, aid funding, individual charitable donations, foundation funding and so on. Some issues business will not touch, either becuase the link to the business is too weak, the issue is too sensitive or business does not have the required resources.

One benfit of a corporate foundation, especially for US companies, is that the foundation can have a wider remit and address issues the business might not want to. In fact the more strategic businesses become with their community programs, the more there seems to be the need, in Asia especially, to keep some money and other resources aside for non-strategic purposes.

Increasingly businesses are recognising the importance of actually engaging the community through employees as volunteers and this is a welcome move to adding value to communities and educating employees, providing them extra skills and so on. Unfortunately the side effect of this is that, in Asia, most businesses are therefore more willing to support programs in major cities close to where their customers, employees and target markets are. Indeed, in this case, a strategic community program can be crafted, and this should be encouraged.

The problem with this is that most of the social and environmental problems, in China, and other parts of Asia (though not all), are not in the major cities but in rural areas, away from the major cities. In these circumstances resources are not going where they are most needed and instead are going where is most suitable for businesses. Again, this is just good CSR, but is not good for development and this is the conflict.

In fact, in 1 example, businesses are falling over themselves to support migrant children because, as an issue, it is a hot issue, it is no longer politically sensitive, it is an urban issue and it is a ‘children’ and an ‘education’ issue. This is not a criticism for businesses who are supporting this issue and it is still worthy (though, increasingly less so as the government policy changes and government allocates more resources towards it, such as in Shanghai). It is especially a large issue in the smaller cities, though these are often places businesses are only just starting to touch with their community programs.

At the end of the day a little money can make a big difference and any difference a business can make is good for society and good for the business -inspiring employees, generating good PR and generating goodwill. So as businesses grapple with this issue of focussing their community programs but at the same time wanting to do what is best for development, they need to:

• Recognise the limits of what they can do
• Recognise the NGO perspective and needs
• Be flexible and explore different options and partners
• Recognise how important small grants (or volunteers, in-kind product etc) can be, especially in stimulating smaller NGOs' development (even if these small grants are not ‘strategic’)
• Explore partnerships with other businesses with complementary resources and aligned interests (i.e. pool resources)
• Explore supporting joint initiatives (e.g. Chambers of commerce, World Bank etc) in order to reduce transaction costs in developing suitable programs and to contribute to programs that otherwise are too big to do alone
• Continue to support employee driven local initiatives, even if not strategically aligned with the business
• Develop a coherent plan within different business units and within corporate foundations, so that where foundations are more separate from businesses, there is less overlap and foundations can focus on those areas business units might not be interested in
• Explore ways to support programs and projects that might not be such an obvious strategic fit, but can still be a good fit with a bit of thought making the partnership mutually beneficial.

.....For example, this could involve supporting programs in rural areas and sending volunteers there (and covering these costs and time off) for a number of days. Such volunteering activities can be used as team building activities as well as providing real eye opening experiences to employees and fully immersing them in communities for a longer time.
.....For example, looking at longer term secondments that can bring tangible benefits to the secondee, as well as the NGO.

This article is not a criticism of strategic community programs; it is an attempt to help explain the limits of such programs and to explore options for overcoming some of these limits. It is, though, intended to sow some ideas for readers to contemplate how businesses can be a part of the solution for those issues that many businesses are not yet part of –but that definitely still need solutions to come from somewhere. There are other resource providers for many of these solutions, but as we all recognise, there are some resources foundations, government etc just cannot provide that businesses can: be it brand awareness, staff expertise, technological expertise or a multitude of other useful resources businesses can apply to make the World a better place –for those in habiting it, and for the businesses that depend on it.

How can a corporation make a difference?

If a corporation takes a broad aim of 'to improve the environment, to support education, to increase transparency' or anything else, for various reasons -selfish and altruistic, what are its best options?

Well, ultimately the biggest difference occurs from systemic changes and behaviour changes -none of which are easy, but which a corporation can support by working with government, with business associations and with initiatives (i.e. research, pilots, advocacy).

The next step would be to support others that are helping make systemic change; they are often doing this by raising awareness or improving accountability (naming and shaming, for example) and this could be the media or civil society or initiatives to build participation in decision making. This, again, often requires supporting existing initiatives and helping scale them up -or it could be to seed something new (but that will be sustainable or will have a defined end date).

Next could be to improve the ability for enforcement of laws and to improve the ability to meet legal requirements or implement legal reforms which may mean supporting NGOs, training government officials, training teachers, supporting training institutes, organising skills sharing etc. Supporting Universities can be a good way to support promising research, build capacity in teaching institutions etc.

Next, is the difference the corporation can make itself through its operations and its products. Making its operations more sustainable (Reducing waste, improving safety etc) and by developing products that are more sustainable.

Finally, once the corporation has got itself to a decent level it needs to start helping others reach this level, it needs to raise the bar. Not only does this provide massive benefit for the company in terms of PR, but it also raises the standard and forces its competitors to meet it. Best practise needs to be shared and others inspired to achieve. Influence should be used, especially on business partners and suppliers.

Ultimately it is the market that affects businesses and if the market mechanism is used to force others to improve, whilst the corporation stays ahead of the market, the corporation will always be first to market (since it is creating the market!). It is thus in its best interest to effect legal change that influences the market and to support the implementation of that legal change.

6 practices of high impact nonprofits

From an excellent article in the Stanford Social Innovation Review Fall 07 edition:

1. Serve and Advocate in order to achieve large-scale social change. It does not matter which angle you start with but to have a high impact you need both [my note: agree, but advocacy is much harder, costlier, unmeasurable etc than serving as well as less attractive to funders -unfortunately]
2. Make markets work: tap into the power of self-interest and laws of economics. Understand how to influence the market through working with different partners e.g. changing business behaviours, earning income.
3. Inspire supporters to help in whatever ways they can and nurture supporters' groups to maximum benefit.
4. Nurture networks; share ideas and information and harness the power of partnerships.
5. Be adaptive by responding to external changes; make sure you listen to others and understand the changes as well as evaluating activities and incorporating learnings.
6. Share leadership within the organisation and with other organisations by building strong leaders internally, building strong executive teams and powerful boards. This is crucial for sustainability.

Other important management principles:
-diversified, sustainable, financial support
-invest in HR and build reliable infrastructure (even if this means higher admin costs)

One area the article touches upon but I believe is the most crucial practice of all, is the use and leverage of other organsiations and other resources through the use of mutually beneficial (or 'strategic') partnerships. Finally an excellent point is made about the need to focus less on process and more on impact!

CSR’s challenge in China

As Rich and others well know, business in China is moving rather fast. For most Multinationals they are under pressure to make profits in China, gain market share, open new branches or R & D Centres, recruit more (quality) staff and so on. The Olympics are around the corner which is adding extra pressure along with increasing numbers of high profile CEO and political visits because of China's growing importance in the World -environmentally, socially and economically.

What this means is that things like risk management tend to get pushed down the agenda (which is a big, big mistake), volunteering gets sidelined unless HQ orders everyone to do something on 'company's volunteering day' (as employees are too busy to take time off of work and companies unwilling to spend too much time organising anything) and community partnerships or other elements of CSR (like HR diversity programs or governance) tends to be dealt with rather hurriedly.

This is a missed opportunity for all concerned. Working on CSR is by necessity a long-term strategy. There is now a slow trend of companies in China to start to engage in more meaningful community partnerships, but only a slow trend. Most companies still lack the time, the ability, the people or the will to really engage meaningfully, even though the more meaningful the engagement the greater the benefits. Yes, more and more organisations are offering consultancy related to CSR in China, more and more are also providing outsourcing services (such as PR or legal companies, let alone those in supply chain areas); but the major issue is still there. Consultants or other agencies rarely train staff. They make suggestions that are accepted or otherwise or they implement directly and what is really needed is training (not just conferences) of staff dealing with these issues accompanied with high level support providing the time and will power to make something meaningful happen.

I expect that, for Foreign companies, their 'Global CSR people' will start playing a more important role in the future, as they recognise the limitations their China staff have and the environment these local staff operate in. It also means we will see more high level Global CSR meetings in China, attended by Global staff. By this i do not just mean the UN GC or those events, i mean meetings by WBCSD or BSR as well as smaller meetings. I also expect companies to start having their internal Global /Asia CSR meetings here more often. Unfortunately those people will still struggle to find a 'green' venue for their meetings too!

Speaking Different Languages

In all the literature about cross-sector partnerships there is always two key problems that are identified. The first is the lack of communication and poor expectation setting between different partners, and indeed different people within each organization. The second is the different perspectives the different organizations are coming from. I’d like to focus somewhat on the second problem for a moment.

What do companies think of NGOs? There are some good terms that come to mind, such as ‘dedicated’ and ‘worthwhile’ but more often there are rather less-favorable terms used such as ‘unprofessional’, ‘a nuisance’, ‘money hungry’ and ‘unreasonable’. In return, what would NGOs think of companies? Thinking of the whole range of NGOs here, though in public most are very positive if it helps them get money (except for the combative anti-corporate NGOs), in truth most NGOs do not look too highly upon companies either.

This misunderstanding between both groups leads to a lack of trust and without that no partnership can be a success. 1 way of avoiding a lack of trust developing is to try to bridge the gap between companies and NGOs. If NGOs knew what it was like to have to reach ambitious targets or get fired, what it is like to deal with internal politics, what it is like to deal with finance departments or sales departments, they might understand companies better. Similarly if companies understood the lack of trained staff in NGOs, the lack of consistent funding and how that affects an NGO’s operations; and what an NGO is actually doing, they could recognize the different pressures NGOs come under.

In addition to all this, there is often a real language barrier. Companies talk about sales, profits, margins, adding value, supply chains, distribution, brands and franchises. NGOs tend to talk about communities, vulnerable groups, sustainability, empowerment, IEC (Information, Education and Communication) and more. If it happens to be an International NGO and a Multinational company then there will also be all kinds of internal words and acronyms that add even more to the confusion.

Despite all the literature and examples of how these issues affect partnerships, there are very few proposed solutions. The best solution is for an NGO to recruit staff from a business background and for a business to recruit staff from an NGO background. The former can be tough though, since not too many staff are willing to move to the countryside or take massive salary/benefit cuts (which is often the case in Asia) whilst the latter is just as hard since not too many NGO staff have the relevant experience or skills to cut their teeth in the business world.

Thankfully some certification schemes are being developed (such as that by the IBLF), some masters, MBA or short-term programs exist that can bridge some of these gaps (such as those provided by Ashridge), providing relevant training to either party; yet neither of these solutions are likely to have a massive impact. Hence both parties continue to be communicating and getting increasingly frustrated.

Companies are looking for quick results, but NGOs realize that reducing poverty or solving massive environmental problems will not happen quickly. Companies expect a measurable outcome, yet many development programs require sophisticated assessments or evaluations in order to understand what impact the program had, if any, and these impacts are often spread over a wide group of beneficiaries over a long period of time with other forces playing a part. There is definitely still a need for greater understanding between the NGO and corporate sectors.

Partly this can be solved through recognition and acceptance of this language and experience barrier and then both parties can be more patience, explain themselves and their concepts better. For those involved in partnerships it really helps to try to meet as many staff as possible in the other organisation to find out what they do and how the organization works as well as talking to friends in the same sector and researching the company or NGO endlessly (NGO folk, try going online and downloading a presentation the company gave to investors and trying to understand it!).

Since business is everywhere and generally goes along similar lines it can often be easier for an NGO to understand a business, even if there are still communication problems. In my experience though, the more significant issue is for business to understand development. The ‘base of the pyramid’ area is really just smart marketing –but marketing that requires some understanding of a new market segment and it is clear that business currently lacks any understanding of the ‘poor’ or ‘disadvantaged’ market. Well, apart from needing this to succeed in the BoP world, they need this to develop successful community partnerships.

Companies need to understand how development works, what terms like ‘training of trainers’ or ‘peer education’ might mean and how they fit into program designs. Granted they cannot become experts over night, but an openness to trying to learn this, to visit NGOs, spend some time with them, at their work and taking some time to actually read some of their (often lengthy) reports can work wonders. Of course, for those who do not understand the 3^rd sector, they are just happy to give away some cash based on some simple criteria and get some PR out of it. An actual partnership though can be so much more. Companies can really help NGOs, giving them advice to improve their programs, helping them develop their brand and raise awareness of issues, helping them develop professional budget or accounting procedures and so on.

Yes, true partnerships require much more work than just giving out money and more often than not neither companies nor NGOs have the time, skills or genuine interest in such a partnership. But, it is clear that when these kinds of partnerships develop they really make a difference and often in many unexpected ways. There is no need to go through the ‘benefits to a company from engaging with the community’ here, but this is the time for both sectors to spend more time trying to understand the other and trying to work with the other, rather than against them.

In recognition of these kinds of language problems that exist, Plan China (some shameless self-promotion here) is organizing a study trip for corporate staff involved in working with the community to some of our program areas to understand the bigger picture and rather than just talk about the problems, the focus will be on solutions. The idea being that afterwards, staff can return to their companies better able to understand NGOs, poverty and how their company could play a role.

Corporations helping community or vice versa?

I fully believe that business can be the solution to poverty. The process is simple:
1. Identify the problem
2. Identify the solution (technological, training etc)
3. Innovate to provide the solution to the problem.

Point 2 is actually quite easy, and there are already solutions to almost every development challenge, be it finding water, preventing HIV/AIDs etc. Point number 3 is where the challenge lies. So far government has failed to provide the solution in most developing countries for various reasons (money, ability etc). Can business do better? Well they also need to overcome problems, such as providing the solution cheap enough, ensuring there are qualified people to distribute and provide the solution, ensuring the solution is suitable to local needs and so on.

If a company can do that, great. Companies can profit from helping the community. If they do that, then there is a clear motive for business to invest money in helping raise awareness of the problem, the need for their solution and their proposed solution (possibly through NGO partners).

This is the issue: when does this become unethical? Health companies already understand this uneasy balance when they go to doctors to tell them about their solution to a health problem. This means the doctor will use that product to solve the problem, but is it actually the right or best product -or just the only product the doctor knows about? How to stop the doctor accepting bribes for distributing that product and not another one? Will the patient lose the trust of the doctor knowing how closely associated the doctor is to the company (and companies often havea lack of trust)?

For me, working in an NGO, where we have the trust of the community, we would gladly like to (and already do, to some extent) promote certain products (and sometimes subsidize them) -in fact we are keen to help companies understand the problems and help them develop a solution, but where is the line between promoting something that will help solve a problem and becoming (in effect) a distributor for the company? How does this affect the trust the community has in us, if they link us so closely to a company?

Has Development failed?

This article questions whether the theory of 'development' as proposed by the UN, World Bank and IMF mostly, has failed. The article makes sense but has a ridiculous notion of development, only focusing on those 3 organisations who though shoot above their weight in some developing countries regarding their influence on policies, really have very little impact at all because they only worked at the governmental level until recently.

Development in its modern sense is about government -yes, in theory good governments lead to their citizens creating their own development by operating in a peaceful society which respects rights and gives the freedom to make the most of the market. Unfortunately most governments in impoverished countries are not like this, and trying to change those governments has (as history has shown) only made things worse. Stability and peace is the most important requirement for development. It would be nice to have functioning education, healthcare etc.. or even a functioning market, but without these, it is necessary to help create them.

If governments cannot create them, then other actors must and this is whether civil society comes in: NGOs, trade unions, co-operatives and of course, individuals. Of course there is a role for business/entrepreneurship too. Development is about all of these actors, and it is not failing; it is struggling to be efficient in overcoming the government deficiencies, the market deficiencies and the instability most developing countries are in.

Secondly development as seen by grass-roots organsiations, individuals themselves, and now even by the UN/IMF/WB is now seen as the opposite of what the article describes: it is about bottom-up, empowerment, skill provision, access to markets and so on. It is about partnership between different societal actors and it is about, eventually, reforming those limiting factors -especially government, through a gradual process. It takes time to educate citizens, train teachers or health workers, or create distribution channels for medicines, credit etc.

Once countries have skilled empowered citizens, they will inevitably be able to enter government or create new (capable) governments. If the WB/UN/IMF model has failed, that is really of little significance to development now, as those actors are now so minor. Much more important are civil society actors, entrepreneurs and 'foundations'. Development has barely even started yet... but in the last decade or more, it is sure that there are enough cases of it working in different ways in different countries to prove it can work. Just give all those actors the chance to do their bit and it will work, from the bottom-up.

Unfortunately development takes a long-time. That must be accepted. Unfortunately there are bad people doing bad things which is continually restricting development's potential. That must be accepted and worked around. There are many exciting examples of development taking off -explore the nextbillion.net, ashoka.org and hundreds more organisations that are connecting technology, people and organisations to create more success and scale-up successes to create greater impact.

What is the role of NGOs?

NGOs (Non Governmental Organisations) is a very loose term covering all kinds of organisations: normally anything that is not a government or for-profit enterprise. It could include churches, chambers of commerce, business association, lobby groups, trade unions, charities and more.. However the way it is generally used is to describe an organisation that is organised like a business in order to serve a social purpose and without focusing on profits.

Thus typically there are 'grass-roots' NGOs often formed from a few volunteers campaigning for a local issue or providing care for some disadvantaged section of society; there are larger charities that provide welfare to those in need and there are the bigger Development NGOs that aim to influence government and business and effectively use resources to e.g. reduce poverty on a large scale.

Moving quickly past such a brief summary, in recent times there has been a blurring between business and NGOs into the so-called world of 'social enterprises' whose primary goal is to serve society but who wish to make profits at the same time. Many think that these are more effective at solving societal problems as it is more sustainable, more competitive and more efficient. It is noted that the best way to solve problems requires large-scale solutions and these kinds of scales or innovations are often only achieved through a profit incentive and a functioning market to make organisations more effective.

NGOs are often profitable in some sense: selling a service to make money (e.g. running a home for disabled people) or providing benefits to a corporate partner (e.g. advise on reducing their environmental footprint or training their suppliers) -they just pay less tax and promise to spend any profit on further programs. They do not have owners as such, and this is normally seen as their advantage: no money to stock-holders or to rich private owners. However it is also seen as a disadvantage: who are they accountable to?

Interestingly NGOs and businesses alike seem to be converging on a model that governments ar supposed to use -but often fail to do so. The model of being accountable to various stakeholders locally and otherwise. Governments are notoriously slow to change, and rarely due if changes negatively impact those in power, or those who might get in power. Now that many companies engage with local groups; NGOs engage with local governments and communities it seems like both sectors are listening.

It's pretty clear that NGOs are not changing the World; neither are ineffective governments (which are still too frequent around); and neither are aid agencies. Business, it seems, could be the answer; but it requires a stable environment and infrastructure and this is often lacking. Thus the current trend for NGOs to work with governments and businesses (using Aid) to try to focus on this issue 'sustainable livelihoods'. Is this the future role for NGOs?

As the most trusted type of organisation in the World, will NGOs be able to bring partners and stakeholders together to find solutions to allow business to flourish -to create meaningful jobs? Jobs, is the ultimate issue here -and this is really only something that a business (whether it is for-profit or not; including collaboratives) can provide. This week the good news is that more people have jobs now than ever before, but more people do not have jobs too (as the population constantly grows).

I am excited by some of the work that Plan is doing in China: trialling new methods and schemes that government (especially in developing countries) is unable to try (too slow, too corrupt, too cumbersome, too political, too hierarchical, too poorly trained); raising issues that otherwise have no-one to raise them and so on. The end result should be either government, business, or individuals doing something different that is better than what they were doing before.

The problem is so much that NGOs do is not sustainable, not an efficient use of resources -and often fails. Not that it is always their fault: after all most businesses fail too. Interestingly NGOs tend to try much much harder than businesses to make their projects a success. I am still looking for the balance between time/money spent researching, measuring etc vs. actually doing, subsidising, training etc.

In the future I see NGOs having to better define their 'ownership' in order to work out where they fit in society; since their roles overlap with all other sectors (including the media). I see them struggling to keep their 'independence' whilst being involved in so many 'partnerships' (including revenue generating activities). I think accountability will be come a bigger issue: NGOs will have to carefully balance how they spend their money on staff (pay more to get better?) and on research and evaluation. But I hope that NGOs will be given more slack to fail more, learn lessons and so on. International NGOs will need to start incubating ideas, being more innovative, spinning off from themselves to remain flexible and innovative and better define their relationships and purpose to other (grass-roots) NGOs.

In many areas NGOs are in competition with each other for resources: a good thing no doubt; but more partnerships are likely to form to prevent competition ruining funding streams or affecting transparency. NGOs have undoubtedly become more professional; and the next step is to move into the relm of M&A, spin-offs and so on. It excites me to end this post with the concept of taking the real world to NGOs: could venture capitalism have a role with development? How can you define the worth of an NGO? There already exists 'tables' of NGOs which are most effective with their money. It would be great if these very basic methodologies could develop -and who knows what might happen?

Business is having its time turning into an NGO through social enterprises; now NGOs need to do their bit to come towards business by tackling the challenges outlined above. And, who knows maybe a time will come when NGOs and Business will be one and the same -all serving to create jobs and services that society needs, whilst being accountable (and responsible) to society.

partnerships

Reflecting back on a 'Strategic Marketing' course at University reminds me that I did learn something.. and indeed, still remember something of use from University. Namely that though partnerships tend to be seen as a end in themselves, and a very popular concept nowadays, partnerships to really be a mean to an end.. and once the end is achieved (or as close as can be), the partnership should be dissolved (therefore when it is created, such a dissolution point should be planned for).

I also remember that the professor's definition of strategic partnership made for interesting thinking: combining different strengths of organisations together for example, or that a partner often enters a partnership hoping to actually beat its partner -partnerships are rarely equal and partner's unstated goals rarely the same. Of course there was much more to the course, such as the difficulties of creating and integrating joint activities, managing them and so on.

In my work I look at strategic benefits in a philanthropy way: between organisations of different sectors, which explicitly have different objectives from partnerships: a company might hope to improve its reputation whereas a charity might want to help poor people. However these partnerships are often fairly successful.

What about partnerships where all partners' over-riding goal is a philanthropic one? This strikes me as interesting because everything in 'business' is about motivation: if the motivation is so strong and commitment so great, might success be achieved? So the recent trend for all kinds of people to start joining coalitions or partnerships to fight some aspect of poverty. Many are not real partnerships; indeed a coalition is often just a membership of a club where you contribute something and a central secretariat actually does something with it. But for actual partnerships; with each partner contributing something, doing something, having a direct stake in the outcome etc -then are these partnerships more successful (the typical MBA textbook will state how often mergers fail to add value, or how often partnerships do not bring much benefit to either partner!) than traditional business partnerships (which my professor was talking about)?

I hope to find out more over the course of my career; one thing is sure, is that these new partnerships (Cross Sector Partnerships, Corporate Community Engagement and so on) are rarely assessed adequately in the context of how successful the partnership is (if it is actually a partnership, rather than just a 'sponsorship'); and only the outcome of the partnership is assessed (and often badly).

Supply Chain and Development

After a recent conference on Supply Chain Management I came to realise a few things. The most important is how great a lot of the stuff Brands are doing: they are (for various reasons) demonstrating fantastic leadership and I believe had made a big difference in the last 10+ years. There are of course multiple problems still to contend with; especially considering what they are doing is not driven my much local pressure; and most of what they are doing should, to some extent, be done by the government (enforcing Health and Safety laws, working hours laws etc).

There are some fantastic pilots taking place that really bring 'CSR' to local managers in factories and engage with all stakeholders in such programs (including, crucially, the workers) -so that the managers themselves see the business benefits of CSR -and are actually able to understand CSR as a holistic concept, rather than what they see at the moment (compliance, training etc). There is further to go, not least in addressing the scale-up challenges involved.

Scaling-up is the buzz word in the development world (where I work) and it is clear that the CSR world needs to take a leaf from the development world's book -or at least learn the lessons the development world has gained from many years of failures, and some successes attempting such grand initiatives. The Business world may be great at scaling up marketing, but scaling up CSR/development programs is different. For too long pilots have occurred in the supply chain and not expanded, there has been a lack of involvement of government, policy makers and academics, there has been limited attempts at partnership with other sectors (or with competitors) and not enough capacity building.

Maybe Supply Chain Staff should meet Marketing staff and realise that distributing products requires partnerships and adequate distribution channels, as well as effective communications, effective research and so on.

This takes me to the lesson the Supply Chain only seems to have recently learnt: the need to engage with stakeholders and more than this, provide for the stakeholders to make the decisions. In the development world the community is encouraged to make decisions -an example might be an offer of funding for a community to improve the community. Now, the funder might not actually care what the community chooses to do with the money, what they care about is the process the community went through to make the decision. Thus the community has buy-in and is accountable to itself as well as the funder, and the community will learn the lessons. At the conference people were finally talking about the need for a bottom-up approach; an engagement approach and so on.

There is of course a lack of people around who can facilitate this process, inspire the stakeholders to be involved, or trust the stakeholders enough! But, for Supply Chain Improvements to really take off, that is what must happen. The Buyers will need to reach a stage where they trust their suppliers and step back -audit less not more.

A Factory is different to a village community though, so Buyers need to empower the managers to willingly want to empower and engage with their employees and other stakeholders. Not much sustainable benefit to the buyers doing all the 'csr' on behalf of a factory they do not own! When a Factory manager spoke to us, he was not knowledgeable about CSR as a concept -and indeed most auditors are not 'csr experts' -they are auditors, and this is the problem. Most trainers (either from the company, ngos or consultancies) are training bits and pieces as required by whoever pays their services.

Development looks at comprehensive needs of a community, takes into account external factors, spends as much on research before a programme and evaluation after the programme (plus disseminating learning points) as the programme itself. Development requires spending LOTS of money, but aims to do small things well, then identify opportunities to scale-up -often involving government, business and other stakeholders.

The key to development though is that those being 'developed' want to be developed -they see the benefits, and this is not something the supply chain movement started with; and is something it has tried to create -Brands are having to go in and convince the factories of the benefits of CSR. Will this and other lessons be learnt? I suggest a dialogue between development NGOs and the Supply Chain actors; share some lessons, and then lets make sure that what is happening is sustainable. I don't believe much of the supply chain movement is sustainable. There are some fantastic examples, but these are few, and the sample a tiny proportion of all 'supliers' that exist -which is almost any company that sells something to someone!

Though the migrant workers complained at the conference about lack of training and how they wanted innovative training, career development opportunities and so on; they are much better off than in their villages -if not they would not be there. Ambition is a great thing. How about they take some of these lessons back to the factory outside their village, and take some leadership upon themselves? I think there needs to be some re-thinking about scaling-up. Let's hope that future conferences focus on that. Too much good stuff is happening to be wasted on having such low impact.

Is this great stuff bringing the whole field up? Maybe some of the factories in apparel, toys and electronics in a couple of geographical areas are getting better. Is the entire field of factories getting better, no matter where they are based or what product they are making? No, but some leaders need to start re-thinking, re-planning and being more ambitious.

The invisible line

Assumption:
-Partnership between sectors and organisations are good. eg. government and business collaborating on new laws that businesses could abide by and benefit from or companies in the same sector creating a voluntary code that they will agree to (such as not advertising chocolate to shildren)
-Corruption is bad. eg. business paying government to make, or not make, a certain law or businesses working together as cartels to create artificial price fixes

You'll see what I am leading to... where is the line between partnership and corruption? That the line can be greay and not black/white means it is harder to define the boundary, but more importantly, it is harder to interpret. So a company may quite happily have 2 principles: 1 of partnering to achieve more and 1 of refusing to be involved in corruption. It may strive to work closely with its suppliers and customers so it can better service them, it may give preferential treatment to preferred suppliers. But when does this preferential treatment become bribery?

Consider the case of treating a customer to dinner, or the case of a business partner also being a friend. When does the dinner become a bibe and when does a social conversation about their sector end up as a tacit agreement to collude or lead to sepcial favours? When recruiting someone, it is sensible to take into account personal experience or recommendations, but how valid is this, and does this not lead to discrimination against those who you did not know before?

Thinking about this more and more show that there are so many more examples -how do you draw the line? Presuming you do not intend to break the law then the line is very subjective. It is defined in reference to the 'norm' (ie. the normal circumstances that you think everyone does all of the time as part and parcel of the job). This creates a problem if there is no established 'norm' or if you do not know what the 'norm' is. In the case of China, where everything changes so fast (including the legal framework) and where most foreigners enter the market without understanding the culture or even being able to communicate effectively these issues might become especially valid.

On a slight tangent, this question leads me to think of the separate role of government and business. Is there a separate role? In every country the role is different. In some cases governments provide training, healthcare, utilities, salaries (pensions, unemployment benefit) etc etc. In others it is different. On a micro level in China you will find the British Embassy offering some free advice to British companies wishing to set up here, since the government wants to encourage business success, yet the company could also pay a special consultant for more in-depth advice. In fact often the government might subsidise this kind of advice directly.


What do companies do? Provide services in return for money? well governments do the same: you pay in your taxes and receive benefits. Governments tend to then themselves pay another company to do some of those services (outsourcing) and then it can all get complicated and confusing. I think the concept of CSR is struggling somewhat since it is trying to establish the rold of business in society: in reducing poverty, in creating a successful, sustainable society and so on. But this is also the role of national, local or international governments. Then there are NGOs: many bigger and with more influence than business or governments. Many performing services that are effectively government services outsourced.. but to an NGO not to a company. No difference, except in name.

All types of organisations have the ability to accrue debt or make profit. It could be possible to argue that governments are elected, other organisations are not: but this has nothing related to role of the organisation itself: maybe in the future, since stakeholders are becoming so important in business, that business will not just hold itself accountable to its stakeholders, but will go even further and hold itself electable to stakeholders. It will certainly gain legitimacy and trust! Though this may seem pointless since many countries struggle to have high turn-out in their governmental elections anyway!

So, the invisible line: macro and micro level discussions. Impact on individual level? How the individual defines their own lines, in the context of how the individual believes others see the line, and how the individual thinks others expect the individual to draw the line. Its all to subjective... no wonder corruption is a problem!

ethical dilemnas

Drinking games are taking off in the USA leading to drinks companies, retailers, distributors and so on to cash in through innovative new ways of getting young people to drink more alcohol, more often.

Is this right? Diageo, the global beverage company (owners of Smirnoff, Guiness and more) recently announced a 5 year plan to put warning labels (and nutritional information) on all of its products -as did the rest of the UK drinks' industry. This on one hand is a good thing. The way this is happening (as with the banning of cigarettes) seems to be a balance between government legislation/threat and voluntary/market opportunity means.

I think most people will agree with these steps despite the interesting discussions about free will that this leads to. For example, banning advertising of cigarettes might seem to make sense (especially since they are so effective in attracting new, young smokers) but who will ban smoking in films (by the way, pressure groups publish a list each year of those films that most endorse the iconic image of smoking)? Who has the right to set an age for buying products or refusing you access to them? Well I think the discussion is really interesting (especially when leading onto drugs or prostitution -regulate or drive underground?)

In the area of CSR one big issue is about partnering or accepting sponsorship from a bad company -are you using 'blood money' for example? Is it ok to use money these companies make in order to put them for a good cause? But, is your use of the money strengthening their brand and therefore supporting the company? This is never easy -policies and clear statements would be great, but when push comes to shove, will you take the money? Hopefully there is a solution -you can take their money and spend it without giving them any credit for it, for example (although you may still decide this is not good enough). Maybe through engaging with the (bad) company you can make a bigger difference than by tackling them?

Another big issue on this topic is about working for (or purchasing from) a company that makes bad products -cigarettes, arms etc. But then it gets complicated.... you might make innocent little buttons for car handles, and realise they are also used on airplane, or microchips for radios that are also used in missiles..! And when you look at the case of CISCO who make filtering technology for the internet, are they responsible for how their technology is used (by the Chinese government for censorship), or in fact, should they care how it is used? How can they even control their product's use?

All of this makes for tough, complicated, choices. What should a responsible person do? Well it all depends on your priorities and what the options are. At the least an analysis of the options should be done, and if possible the ethical choice should be made (in terms of the last example). For the responsible leader, running a company (like the first example) there is not much of an excuse for looking for such a quick-win if it leads to harm. Of course, its hard to define harm, and hard to work out the difference these drinking games are having -but paying for some research to be done would be a good start. And for a global company (such as Anheuser-Busch who are behind Bud-pong -but claim the instructions say to use water) they might consider whether the profits they will make will make up for the potential loss in brand value (from supporting this product, although of course they value this as adding in brand value through greater sales and marketing) or law suits or negative media etc. I would be interested in seeing if they did such an analysis.

In any of these situations, the best thing to do is to undertake the relevant research on the issues, see what the options are, see what your priorities are and then proceed. The key aspect of ethical dilemmas is that once you make one mistake, it could cost you -big. So be careful and don't make that mistake. If you are really comfortable working for a cigarette company then so be in. Personally I wouldn't -but ethics is a personal thing. What are your ethics, and how far would you go to support them?