Corporate Social Responsibility: Good Management Practice Analysis

This report presents an empirical study on Corporate Social Responsibility (CSR) as a beneficial management practice. It investigates the impact of CSR activities on employee turnover and customer satisfaction, highlighting the positive effects on organizational performance. The study delves into the theoretical underpinnings of CSR, exploring its various responsibilities, including economic, legal, ethical, and discretionary aspects. It examines how CSR initiatives contribute to employee retention by fostering fairness and a sense of belonging, while also enhancing customer satisfaction through equity and expectancy disconfirmation paradigms. The report concludes that CSR is crucial for maintaining employee retention and delivering customer satisfaction, ultimately improving the overall health of an organization.

Corporate Social Responsibility
Corporate Social responsibility a good management practice:- An Empirical
Study
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Introduction
There has been a considerable amount of research study conducted in the past few years to
show that how CSR activity affects the structure and the financial performance of a firm
(Aguilera etal, 2007 Margolis and Walsh 2003).In a research study conducted by Hilman and
keim in the year 2001 easily proved that how CSR activity improves the Financial
performance of a firm. It also helps to improve the image of a firm as it portrays a firm’s
positive picture towards its audience so parallely it contributes to improve the financial
position of the company. There is certain evidence presented by the experts which proves that
CSR activity has the ability to improve the overall position of the company. Employee
turnover plays a very significant impact on the competitiveness of the firm. That is the reason
behind the promotion of CSR activity is very important. It improves the morale of an
organization due to social awareness programs. The Corporate social responsibility has found
to have a positive impact on the financial as well as organizational health of the organization.
In this research study it will be proved how the CSR activity can contribute to the
sustainable success of the organization. The main purpose of the study is that to understand
that how CSR activity can lead to long term benefits of an organization which can be beyond
any traditional financial outcomes. Specifically there has been a considerable amount of link
between employee turnovers, and customer satisfaction. This data provides hypothesized
relationships. In this study it will be outlined how CSR activity diminishes employee
turnover and increases customer satisfaction. This study offers empirical evidence that CSR
can provide benefit to an organization beyond financial benefits.
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Theoretical Development and Hypothesis
CSR
Now let’s go deep in to the insight of what CSR actually means and what are the
management determinants to give it a proper shape. As per the opinion of (Etzioni, 1988,
Fomburn, 1997, Sen & Bhattacharya 2001, Wood, 1991) CSR actually refers to those
activities to maintain the perceived societal or stakeholders obligations the CSR activity is
performed by the firms. There has been considerable amount of conceptualization and
responsibilities which the firms undertakes to take a consistent approach towards its empirical
study (Sagebien & Lindsay, 2011). As per the opinion of Caroll, in the year 1979 he clearly
stated that there are four basic responsibilities of which this activity involves in it for a firm’s
betterment. So let’s see what those responsibilities are as follows:-
Economic Responsibility:- This includes creating new products, as per the needs of the
consumers ,generate profits and provide jobs.
Legal Responsibility:-
It involves complying with the rules and regulation of the state, central and federal
government of the country.
Ethical responsibility:-
This actually means meeting other social expectations which are not written in the law but
plays a very vital role in creating a better image of a company like respecting peoples moral
right, avoiding any harm or social injury, and doing what is just and right.
Discretionary responsibilities:-
It helps in meeting additional behaviour of the society which contributes to the cultural and
social behaviour which involves providing training to the employees, salaries as per industry
standard and providing employee benefits. It has been seen that firms which demonstrate a
proactive CSR activity approach gets a dual benefit. As,it helps to enhance social welfare and
to improve its own performance in the long run perspective.
For the particular interest of the study it is very essential to understand the relationship of the
CSR activity with two most important diamention of Organizational performance.
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1) Employee Turnover.
2) Customer satisfaction.
CSR and Employee turnover:-
Various management experts and the great Executives of the world are of the opinion that
employees are considered to be the most valuable asset and so the retention of quality
employees is the hallmark of a sustainable organization performance. This concept has been
proved in the report that employee retention not only resembles that a given firm is valued
place to work (which can show positive corporate association from the end of the public) but
also several scholars opined that it also enhances a firms financial health and productivity.
(e.g. Becker and Gerhart, 1996; Guthrie, 2001; Huselid, 1995; Koch and McGrath, 1996).Of
a particular organization’s mechanisms which helps them to lower the employee turnover. So
CSR is one of such activity.
As per the theory of Employees justice perception it states that employees derive
general justice perception of firms on the basis level of fairness demonstrated by these firms.
Research on this fact has clearly demonstrated that companies which have work
environments that are perceived to be fair by the employees of the organization have
positively affected organizational culture like higher job satisfaction and lowering the stress
of the employees (Korschun, 2008). On the counterpart of the organizational outcomes also it
has demonstrated positive result like lowering absenteeism, and higher levels of employee
commitment. On the other side of the coin if the fairness of the organization is compromised
then it exhibits the chances of lower employee performance and vengeful behaviour on the
part of the employees. CSR is the main indicator about the fairness of the firm to its
employees.
As per the instrumental model every individual has a requirement of psychological
need to control. This need is based on the self serving issues for maintaining justice from the
perspective of an employee. This behaviour which is demonstrated by the firm foretells the
employees about the organizations actions in future. As per Aguilera (2007) it is been clearly
stated by him that a firm which show CSR activity exhibits their concerns about the internal
and external attitude of the organizations towards its stake holders. This actually exhibits
fairness (Haerens & Zott, 2014). Thus, when CSR is demonstrated by the firm it clearly gives
information that weather it is the best organization to work on for a long term basis and the
fairness of the firm towards its employees in their future endeveaor. Shifting from
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instrumental to the moral and relational needs, Lind and Tyler argued from the perspective of
relational model where justice is demonstrated by the firm. This is actually signals the quality
of relationships which will be going to be established between the management and the
employees of the organization in the long run perspective; such relationships impacts on the
sense of identity and self-worth of an employee in the organization (Truscott & Rachael,
2017).
As in CSR entails building a strong relationship between the employees and the
management of the organizations as strong bonding is essential with multiple stake holders so
the relationship with the employees and the management plays a very crucial role as
employees derive a value and sense of belongingness to the organization through
demonstrated CSR activities. Lastly it is a very true picture that every employee have an
ethical dignity and if it is being compromised on any situation on the basis of value and
morality factors then it may lead to serious consequences from the counter part of the firm’s
wellbeing (Truscott & Rachael, 2017). A consistent ethical norm an organization is required
to maintain which depends on moral values and justice framework of a firm.
From the above analysis it has been clear that CSR activity is expected to meet the
relational, instrumental and moral needs of the employees on a consistent basis (Truscott &
Rachael, 2017). This will clearly impact the employee turnover level in the organization.
--------CSR will diminish employee turnover
CSR and Customer satisfaction:-
Customer satisfaction is considered to be the global cumulative evolution based on
experiences of firms over time and is one of the most fundamental indicators of firm’s
performances on present, past and on future basis. In the 21st century customers are
considered to be the most valuable asset of the firm. So customer satisfaction is the prime
focus of every organization depending on which business strategy are framed. As per the
opinion of this eminent business practitioners and scholars (Anderson et al., 1997; Dahlsten,
2003; Fornell et al., 2006; Morgan et al., 2005; Taylor,) they have opined that CSR activity to
a great extent a helpful tool in the hands of the management to build confidence in the mind
of its customers (Anderson & Landao, 2006). To understand the customer satisfaction on the
basis of CSR activities two theoretical orientations are used.
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The first is Equity theory and the second one is the expectancy disconfirmation
paradigm. On the basis of given expectations of the social exchange the equity theory and
expectancy disconfirmation paradigm theory are considered to be the best options to ground
the hypothesis that CSR activity affects the customer satisfaction level for an organization.
It reflects the firm’s social responsibility towards its stake holders namely the customers
(Crowther & Aras, 2008). On the basis of social exchange theory which is the root of equity
theory demonstrates that rightness, fairness, and deservedness judgements individual makes if
individuals are equitably treated that is balance of inputs with the balance of outputs then it
results in overall satisfaction from the counter part of both the parties.
Hence, individuals incurs certain costs inputs and in exchange of certain level of
outputs from the firms perspective. According to the opinion of Bolton and Lennon
distributive equity is the individual’s reactions to those ratios of inputs and outputs on the
basis of its fairness. Equity on the other hand affects the individual’s reaction on the overall
picture of any firm. On the other hand Expectation disconfirmation paradigm leads to
comparison expectation of an individual with their prior expectation to make a suitable
comparison that whether the perceived notion is worse than expected or better than expected
or just the same as expected ("Corporate Social Responsibility", 2005). This will drive the
satisfaction evaluation of the employees and as well as the customers of the organization. In
the individual level it confirms the perceived performances which confirms or disconfirms
the level of satisfaction which an individual will receive from the product or services of any
organization.
In the normal case scenario when performances exceeds expectations then satisfaction
level increases. On the contrary when expectation increases then performance delivered
satisfaction decreases. Thus according to the theory of expectancy disconfirmation paradigm
predicts that performance delivered is directly proportional to the satisfaction level of an
individual. That is the reason why Maignan clearly points out in his statement that CSR
includes providing Discretionary training to the employees is not the legal requirement of the
organization but gives the discretionary signals to the organization about its steps towards its
CSR activity ("Corporate Social Responsibility Activities", 2015). That is the reason why an
Australian company Sears Auto has implemented this technique to improve its profitability
status of its firm in the year 1997. When they have incurred losses of $4billion in 1992 then
they have invested entirely on their employees after that they have posted a profit margin of
$1.5 billion.
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So, these theory leads to employee satisfaction and ultimately it leads to customer
satisfaction.
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Conclusion
From the above discussion it has been proved that CSR activity is not only beneficial for
promoting the goodwill of the organization but also to improve the financial and overall
health of a concern. Motivated employees can give their best for the development of the
company’s on the other hand demotivated employees cannot deliver productivity for the
organization. That is reason why most of the companies now a day’s practices this method to
improve the overall functioning of the firm.
Thus, for maintaining Employee retention and Delivering the customer satisfaction
this activity plays a very vital role for the organization.
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References
Anderson, H., & Landao, I. (2006). Corporate Social Responsibility in Australia: A Review.
http://dx.doi.org/10.2139/ssrn.1027845
Corporate Social Responsibility. (2005). Retrieved from http://www.cebcglobal.org/wp-
content/uploads/2015/02/CSR-The_Shape_of_a_History.pdf
Corporate Social Responsibility Activities. (2015). Retrieved from
http://www.7andi.com/dbps_data/_template_/_user_/_SITE_/localhost/_res/ir/
library/ar/pdf/p36_37.pdf
Crowther, D., & Aras, G. (2008). Corporate Social Responsibility. Retrieved from
http://mdos.si/Files/defining-corporate-social-responsibility.pdf
Haerens, M., & Zott, L. (2014). Corporate social responsibility. Detroit: Greenhaven Press.
Korschun, D. (2008). When and how corporate social responsibility makes a company's
frontline employees customer oriented.
Sagebien, J., & Lindsay, N. (2011). Governance ecosystems. Houndmills, Basingstoke,
Hampshire: Palgrave Macmillan.
Truscott, & Rachael, A. (2017). Corporate Social Responsibility in Australia: Constructing
Reputation. In Proceedings 2007 Australia And New Zealand Marketing Academy
Conference (ANZMAC). Retrieved from https://eprints.qut.edu.au/14396/1/14396.pdf
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