978-0470639948 Chapter 12 Solution Manual Part 2

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STAKEHOLDER DIALOGUES

oCompanies can pursue three different strategies for managing stakeholders: reactive,

proactive, or interactive. Managers can:

owait for problems to arise (reactive)

oanticipate problems and implement plans before the problems arise (proactive), or

oengage with key stakeholders and jointly determine the appropriate course of

action (interactive)

oThe most difficult, yet possibly the most meaningful, approach is interactive dialogue

with stakeholder groups.

oTo begin this process, managers must reach an understanding that unilateral decision

making, which excludes stakeholder input and dialogue, can generate more intense

conflict and create both short-term and long-term organizational problems.

o Julia Roloff highlights six phases of issues-driven multi-stakeholder dialogues.

oInitiation Phase: Begin the dialogue process by having an independent third party

with expert facilitation skills moderate the meeting. Invite leaders from all

stakeholder groups involved with the issue. Make sure representatives from the

most prominent stakeholder groups participate. Excluding particular stakeholders

from the initial discussion will raise questions about the business’s sincerity and

intentions.

oAcquaintance Phase: Representatives of each stakeholder group, including the

business itself, presents their unique perspectives. Stakeholder groups can invite

“experts” who may have a better understanding of factual details and

implications. In an uninterrupted round-robin format, each stakeholder group

presents facts, and its interpretation of the facts, to the other stakeholders. The

business and other stakeholders will likely learn new knowledge about capacity

limitations and impacts. Listening and being able to paraphrase the various

stakeholder perspectives begins to establish a foundation for trust. Business

managers must take the lead in demonstrating empathy toward the other

stakeholders to ensure continued dialogue.

oFirst Agreement Phase: Based on the articulated perspectives, participants, guided

by the facilitator, reach agreement on the problem definition. Do not progress to

other issues until after consent is first achieved on the problem definition.

oSecond Agreement Phase: After understanding the competing viewpoints,

stakeholder group representatives propose potential solutions to the defined

problem. For this phase to succeed, representatives must be willing to entertain

potential win-win scenarios. Dialogue process credibility is damaged if

participants are not open to exploring alternative solutions. At this point, some

stakeholders may disengage from further deliberations because important

demands are not being addressed.

oImplementation Phase: Begin this phase by recognizing that every stakeholder,

including the business, may have sacrificed something in reaching the agreement.

The channels of communication must remain open to ensure commitments are

upheld. Any broken promises by the business, whether intentional or

unintentional, can ignite protests, negative publicity, or lawsuits if not rectified

immediately. Be transparent about new and unexpected developments and

disclose the information to the stakeholder group as soon as possible.

oConsolidation Phase: Next, institutionalize successful dialogue formats and

procedures until the issue is resolved. Establish weekly meetings or list-serve

communications where contentious issues that arise can be addressed. Stakeholder

leaders benefitting from this process may inform others about the sincerity of the

process, which could attract other stakeholders to become dialogue participants.

oInstitutionalization or Extinction Phase: As the initial issue reaches the end of its

life cycle, participants in the stakeholder dialogue can either end their

participation or institutionalize the dialogue process to address other issues on

their potentially conflicting agendas. The end goal is not “winning,” it is

understanding different expectations and perspectives and improving processes

and policies for addressing social issues.

oBusiness representatives must be transparent, engage in two-way communication, be fair,

and be held accountable for ensuring that the dialogue succeeds.

CHAPTER QUESTION 5: DISCUSS THE FOUR WAYS THAT BUSINESSES GIVE TO

THE COMMUNITY AND THE THREE STRATEGIC APPROACHES THEY CAN

TAKE.

PHILANTHROPY AND VOLUNTEERISM

oCompanies exhibit good citizenship through philanthropy and volunteerism.

oPhilanthropy is the donation of money or property to assist a nonprofit organization or

people in need.

oVolunteerism is the donation of time for similar purposes.

oWhen well-managed, corporate philanthropy and volunteerism provide employees an

opportunity to fulfill their altruistic needs, which deepens employee identification with

both the company and community.

oFrame philanthropic efforts as part of the organization’s public relations strategy and link

the reputational benefits to improving organizational performance.

oPhilanthropy and volunteerism have been around since the arrival of European settlers.

oA belief that the wealthy had a social obligation to care for the poor was a prominent

belief among the Puritans.

oNoblesse oblige, the belief that the wealthy are obligated to exercise the virtue of

generosity, was common among wealthy Americans by the mid-1800s.

oIndustrialist Andrew Carnegie, in an 1889 essay titled “The Gospel of Wealth,” argued

that wealthy individuals, particularly the self-made rich, had a moral responsibility to

invest their fortunes for the well-being of society.

oCarnegie proposed community-based philanthropy as an ethical way to assist

laborers and their families.

oBusiness fortunes, Carnegie maintained, should be administered during a person’s

lifetime to harmonize relationships between the rich and poor. Poverty was a scar

on capitalist society that could be offset through strategic philanthropic

contributions.

oGod, he insisted, would reward those who pursued this path in the afterlife.

oIn 1901, Carnegie sold his U.S. Steel stock for $300 million ($12 billion in 2009

dollars adjusted for inflation) and disbursed it over the last twenty years of his

life, including $5 million for an employee pension and benefit fund and the

building of 2,507 free public libraries.

DISCUSSION ACTIVITY

Do you agree with industrialist and philanthropist Andrew Carnegie that:

1. Wealthy individuals, particularly the self-made rich, have a moral responsibility to invest their

fortunes for the well-being of society

2. Business fortunes should be administered during a person’s lifetime to harmonize relationships

between the rich and poor.

3. God will reward philanthropists in the afterlife.

Why? Have students discuss their answers in small groups and with the entire class.

FOUR WAYS TO GIVE

oWhat do nonprofit organizations and the community need from businesses? Four things:

1. Money

2. Products or services

3. Skills

4. Job opportunities

oA systematic giving program would cover all four areas.

oGiving money and products or services are very meaningful ways to contribute that

require minimal time and effort.

oGiving skills and job opportunities require significantly more time and effort.

GIVING MONEY

oInitial efforts to coordinate business giving in a community began in 1887 when a priest,

two ministers, and a rabbi joined forces to address social welfare problems in Denver.

oOther cities formed Community Chests and these merged into the United Way, which

raises money from local businesses and distributes the donations to nonprofit

organizations.

oThe amount of giving can be quite staggering.

oIn 2009, total philanthropy amounted to $303.7 billion.

Individual giving accounted for seventy-five percent, $227.4 billion, of

this total.

 Corporate giving totaled $14.1 billion.

oIn 2007, the United Way raised $4 billion.

o In 2010, the Bill & Melinda Gates Foundation had $33 billion in assets and, in

2009, distributed funds totaling $3 billion.

oThe financier Warren Buffett pledged 10 million shares of Berkshire Hathaway

Inc. stock worth $31 billion to the Bill & Melinda Gates Foundation, beginning

with $1.6 billion in 2006.

GIVING PRODUCTS AND SERVICES

oMany community organizations can benefit from receiving company products or

supplies.

oLow-income community centers, for instance, welcome school supplies from retail

stores, food from grocery stores, books from publishers, and so on.

oTimberland, which makes boots, shoes, clothes, and gear for the outdoors, has an

extensive product donation program.

oReview TIPS AND TECHNIQUES “A Highly Integrated Win-Win Donation”

GIVING SKILLS

oIn 2009, 63.4 million Americans over the age of 16 volunteered a total of 8.1 billion

hours of service with an estimated dollar value of nearly $169 billion.

oCompanies can tap into an employee’s desire to help others by supporting volunteer

activities and offering sabbaticals.

oSome companies set aside one day a year for all employees to serve the community.

o The United Way sponsors a “Day of Caring” in many communities where it coordinates

a host of projects with nonprofit organizations that make it easy for company employees

to participate.

oIn addition, the United Way provides individualized opportunities; its computerized

system collects data about an employee’s skill set and then matches the potential

volunteer to the needs of nonprofits.

oInvoke the three “Cs” – compatibility, commitment, and communication – when forming

long-term volunteer partnerships, such as delivering food weekly for “Meals-on-Wheels”

or serving food monthly at a homeless shelter.

oEmployee volunteers must be compatible with the nonprofit’s culture, committed

to the project, and maintain ongoing communication with the organization to

minimize misunderstandings.

oA growing number of companies offer employees short- or long-term sabbaticals, or

leave programs, for community involvement activities.

Key issues to consider when creating a sabbatical program include:

oWho qualifies: Will the employee be chosen based on years of employment,

performance achievements, or some other criterion?

oFor how long: Will the sabbatical be for one week, three weeks, two months,

or a year?

oWhere: Will the activity be performed locally, nationally, or internationally?

oType of Activity: Will the activity be community service, small-business

assistance, travel immersion, writing a book, or anything?

oCompensation: Will the employee receive full pay, reduced pay, or no pay?

oPost-Sabbatical Obligation: Does the employee have to remain with the

company for a certain period of time after the sabbatical?

GIVING JOB OPPORTUNITIES

oBusinesses can give back to the community by providing jobs to people in need.

oSoon after Hurricane Katrina hit the Gulf Coast in 2005, Wal-Mart promised a job for

every one of its displaced workers.

oSome companies also create special job positions for people with disabilities, the elderly,

and returning war veterans.

oA group of people most in need of job opportunities are ex-convicts. Many prisons offer

vocational training and prisoners can earn technical and advanced degrees while serving

time.

oOne reason for high recidivism rates is that ex-cons have difficulty obtaining

employment.

oThe government encourages the employment of former prisoners. Companies can

receive a federal tax credit of up to $2,400 the first year employing a formerly

incarcerated person.

oCompanies can also apply for government-provided insurance to protect against

theft by a recently hired ex-convict.

DISCUSSION ACTIVITY

Have students describe how the college, Business School, or their employer donates money,

products or services, or employee skills to nonprofit organizations, or provides job opportunities

for hard-to-employ segments of the population. What are the organization’s giving strengths and

weaknesses? How can the organization transform a weakness into a strength? Discuss the

answers in small groups.

SOCIAL ENTREPRENEURSHIP

oSocial entrepreneurship – entrepreneurs with a social mission – is another way that

business people can contribute their skills.

oSocial entrepreneurship refers to using business principles to directly meet basic human

needs.

oMany social entrepreneurs participate in nonprofit organizations, although some develop

for-profit ventures.

oExamples include:

oSave the Children, a nonprofit that helps disadvantage children, developed a line

of clothing as a source of revenue.

oOne Laptop Per Child Association, which has a goal to supply a laptop to two

billion children.

oTrek Bicycles “Earn-A-Bike” program, which provides job training for at-risk

youth who recycle bikes and bike parts.

THREE STRATEGIC APPROACHES

oWho should an organization give to and how should an organization give? Managers can:

(1) reactively give on a first-come first-serve basis,

(2) outsource giving to the United Way and other intermediary organizations that

select recipients, or

(3) proactively develop a few key strategic partnerships with nonprofit

organizations.

oAn integrative approach that involves all three approaches situates a company as a

community leader and enhances employee satisfaction.

REACTIVE GIVING

oSet aside some community giving resources to support local nonprofit organizations and

causes that are meaningful to employees and community members.

oThese organizations may have unforeseen emergencies that companies can help address.

oSupporting community organizations that directly impact employees generates company

pride.

oOther times, a national emergency, such as Hurricane Katrina, may create a need for

immediate assistance. Involving employees in developing a company response to these

emergencies unites them on a high profile cause. The goodwill can spill over into

everyday work relationships.

oCompanies must ensure that their charitable donations do the most good and actually

benefit the intended recipients.

oThe American Institute of Philanthropy (AIP) Charity Rating Guide & Watchdog Report

grades more than 500 national charities based on how nonprofits spend donations.

oA list of the top-rated charities organized based on their cause – e.g., cancer, human

services, youth development – is available on AIP’s website. Attributes of the top-rated

charities are:

oSpends more than 75 percent or more of its budget on programs

oSpends no more than $25 to raise $100 in public support

oDoes not hold excessive assets in reserve

oDiscloses financial information and documents to AIP

oCharity Navigator, an independent nonprofit organization, rates the financial health of

more than 5,500 of the largest charities for daily operations and program sustainability.

oCharity Navigator recommends that company executives address the following six

questions before donating money to a particular charity:

1. Can the charity clearly communicate who it is and what it does?

2. Can the charity define its short-term and long-term goals?

3. Does the charity report progress made toward its goals?

4. Are the charity’s programs rational and productive?

5. Can the charity be trusted?

6. Is the company willing to make a long-term commitment to the charity?

OUTSOURCE GIVING

oSet aside some community giving resources to support the local United Way or other

highly credible intermediary organizations that select and monitor donation recipients.

oThe United Way performs community needs assessments and ensures that nonprofit

recipients appropriately manage donations.

o Be careful, though, not to force employees to give to the United Way. Doing so

damages employee morale.

oCompanies can donate money to international social projects (GlobalGiving), individual

microloan recipients (Kiva), and scholarship recipients (Vittana).

oGlobalGiving, created in 2002 by former World Bank executives, links donors to

specific projects.

oKiva, founded in 2005, is a person-to-person microloan lending website that links

donors/lenders to entrepreneurs in underdeveloped or developing nations who are

unable to obtain loans from regular banking institutions.

Technically, this is not a donation because the money is being loaned to

the recipient with the intent of repayment.

oVittana also works with local microfinance organizations, but the beneficiaries are

college scholarship recipients.

oAnother option is to allocate money to an investment fund that lends it to businesses

operating in disadvantaged communities, such as the Calvert Social Investment

Foundation.

STRATEGIC PHILANTHROPY

oAlso set aside some community giving resources for strategic partnerships with

nonprofits aligned with the company’s mission.

oStrategic philanthropy is the partnering of a company and nonprofit organization to

achieve a communal good that also benefits the company.

oMichael Porter and Mark Kramer differentiate three social issue categories that may

impact business operations:

Generic social issues that do not significantly affect a company’s operations or

long-term competiveness,

Value chain social impacts that significantly affect a company’s activities in the

ordinary course of business, and

Competitive context social dimensions that significantly affect the underlying

drivers of a company’s competitiveness in the locations where it operates.

oAlso value chain social impacts and competitive context social dimensions are usually

ranked higher than generic social issues.

oBut don’t underestimate the strategic importance of generic social issues.

oFacebook CEO Mark Zuckerberg, at the age of 26, donated $100 million to

improve the Newark, New Jersey public school system.

oExamine how the company can leverage its assets and expertise to:

oselect the most effective recipient

osignal to other funders that they should also assist the recipient

oimprove the recipient’s performance

oadvance knowledge and practice related to the recipient’s activities

othen rigorously monitor and evaluate results.

DISCUSSION ACTIVITY

Tell students that they are responsible for managing a $500 donation to one, and only one,

recipient. Have students browse websites for the local United Way, Charity Navigator

(www.charitynavigator.org), GlobalGiving (www.globalgiving.com), Kiva

(www.kiva.org), and Vittana (www.vittana.org) for a potential recipient. Who was the chosen

recipient? Why? Have students discuss their answers in small groups and with the entire class.

CHAPTER QUESTION 6: HOW CAN MANAGERS DETERMINE AN OPTIMAL

WIN-WIN COMMUNIY PARTNER?

The ideal strategic partnership is a “win-win” situation where the recipient nonprofit

To achieve optimal benefits for both the company and the recipient there needs to be

Review EXHIBIT 12.5 “Community Organizations that Benefit the Most for a Strategic

An optimal partner is a community organization with a similar mission that can benefit

from the company’s product, service and employee skills

DISCUSSION ACTIVITY

Tell students that they must determine the optimal community organization recipient for the

college, Business School, or their employer’s annual donation of money, products/services, and

employee skills. Answer the questions in Exhibit 12.5 “Community Organizations that Benefit

the Most for a Strategic Partnership”. What community organization would be the optimal

recipient? Why? Discuss in small groups.

Also determine what community organizations can supply inputs to the company or

purchase the company’s products or services.

Review EXHIBIT 12.6 “Community Organizations that Benefit the Company the Most,”

which provides questions that can help managers determine which community

organizations would contribute the most to the company achieving its strategic goals.

DISCUSSION ACTIVITY

Tell students that they must determine the optimal community organization that would benefit

the college, Business School, or their employer the most. Answer the questions in Exhibit 12.6

“Community Organizations that Benefit the Company the Most”. What community organization

would be the optimal recipient? Why? Discuss in small groups.

A community organization that rises to the top after applying the questions in Exhibit

The ideal partnership is also an equal partnership.

Strategic partnership objectives must be transparent, fair, and realistic, with two-way

communication between community organization and business.

 Cause-related marketing is a win-win strategic partnership where nonprofits benefit by

revenue generated through the sales of the donor’s product or service.

CHAPTER QUESTION 7: DESCRIBE THE STEPS A MANAGER SHOULD TAKE TO

DEVELOP A HIGHLY EFFECTIVE COMMUNITY INVOLVMENT PROGRAM.

COMMUNITY INVOLVEMENT MANAGEMENT PROCESS

Similar to ethics, integrate corporate citizenship endeavors as part of the company’s

vision and mission rather than as an after-thought done to please local politicians and

activist groups.

Philip Mirvis and Bradley Googins describe a five-stage corporate citizenship

developmental process: elementary, engaged, innovative, integrative, and transforming.

oMost companies begin at the elementary level, occasionally helping out the

community when requested by local governments and powerful community

constituents.

oTo gain greater credibility, companies become more engaged by monitoring

community needs and developing policies clearly articulating its intentions to be a

good citizen. Engagement in the community raises the issue of organizational

capacity to follow-through on its commitments.

oCompanies become innovative by brainstorming solutions, planning programs,

and developing metrics that measure impacts.

oNext, organizations create coherence among their initiatives by integrating them

under a common theme which enables the company to brand its efforts.

oBy fully committing to being a good citizen, some organizations undergo a

transformative experience where core business products and services are

modified, or new products and services created, to meet community needs.

Corporate citizenship becomes a central aspect of the organization’s

identity, such as what has happened at Ben & Jerry’s, the Body Shop, and

Patagonia.

oDetermining what to give which organization could be determined by the human

resources office, a philanthropic foundation, or a team of employees.

oEven if a company is large enough to support its own foundation, involve

employees in the outreach decision-making process.

oReview EXHIBIT 11.7 “Community Involvement Management Process,” which

describes how to manage the community involvement process.

DISCUSSION ACTIVITY

Have students assess the college, Business School, or their employer’s community involvement

management process based on each of the 13 steps in Exhibit 12.7 “Community Involvement

Management Process.” What are the organization’s strengths and weaknesses? How can the

organization transform a weakness into a strength? Discuss answers in small groups.

COMMUNITY INVOLVEMENT AS EMPLOYEE TRAINING

Community involvement provides an opportunity for team building, leadership training,

and teaching project management, all of which directly impact a company’s daily

operations.

Go-getters, in particular, need diverse opportunities to use their creativity, develop

talents, and hone managerial skills, and can meet these needs through community

involvement options.

Volunteering on a common cause benefitting the community enhances employee morale.

Timberland uses community service projects to teach employees project management

skills. Review “BEST PRACTICE IN USE” exhibit “Timberland’s Service Toolkit,”

which provides the team leader with tools and worksheets to enable successful

completion of the project.

NETWORKING

Community involvement provides many opportunities for networking with other

businesses and community leaders.

Managers can join the Rotary, Chamber of Commerce, Better Business Bureau, and other

business associations including Businesses for Social Responsibility, the Lions Club,

Kiwanis Club, and the Optimist Club.

Some business networking organizations fund public policy lobbying efforts. Carefully

choose which lobbying activities to support. Lobbying groups tend to be dominated by

social group relativism, which sometimes results in proposing rules and regulations that

benefit businesses to the detriment of community well-being.

DISCUSSION ACTIVITY

Have students independently explore the Internet to determine and find 5 business networking

opportunities that exist in the local community. Share the list of networking organizations in

small groups and with the entire class.