How being socially responsible can keep a firm thriving for – no joke – 1,500 years.
Six Sigma experts Holly A. Duckworth and Andrea Hoffmeier outline a continual-improvement program for long-term sustainability. Their model is Japan’s 1,500-year-old firm, Kongo Gumi, founded in 578 AD. They find that most current continual-improvement programs can address social responsibility with a few small changes and little complexity.
The authors apply the Six Sigma method to transparency, fair labor practices, community involvement and environmental impact. They offer managers many actionable ideas.
Six Sigma experts Holly A. Duckworth and Andrea Hoffmeier outline a continual-improvement program for long-term sustainability. Their model is Japan’s 1,500-year-old firm, Kongo Gumi, founded in 578 AD. They report that most current continual improvement programs can address social responsibility with a few small changes and little complexity. The authors apply the Six Sigma method to transparency, fair labor practices, community involvement and environmental impact. Their dry writing style and jargon don’t undermine the value to managers of their many actionable ideas.
- Corporate social responsibility matters more now than ever.
- Form a “Continual Improvement for Social Responsibility” (CISR) program with resources you already have.
- Use the “SOFAIR” tool in your CISR program.
- First, initiate SOFAIR by talking with stakeholders.
- Second, identify objectives that support both social responsibility and business strategy.
- Third, prioritize potential areas of focus.
- Fourth, analyze your current system holistically.
- Fifth, propose improvements to processes or invent new processes.
- Finally, report progress to your stakeholders, and start the next project.
Corporate social responsibility matters more now than ever. Boosting a company’s social-responsibility profile can ensure its longevity. Social responsibility means adopting institutional behavior that will sustain a pool of customers and employees – plus access to suppliers and resources – for centuries.
With the rise of social media, customers and investors gained more power in influencing corporate behavior and more ways to respond to corporate activities. Public perception of a firm’s behavior can attract and keep customers, employees and investors – or it can have the opposite effect. A community can be welcoming or hostile toward a company that wants to set up shop locally, depending on the business’s social-responsibility profile.
“The goal of social responsibility is the sustainment of productive suppliers, employees, customers and communities…for at least 1,500 years.”
Strive for a level of sustainability measured not in decades, but in centuries. Consider the Japanese construction company Kongo Gumi, which began in 578 AD and stayed in business for the next 1,500 years. When you evaluate potential sustainability initiatives, ask if they’re sufficiently robust enough to keep you in business for 15 centuries.
“Two fundamental principles of social responsibility are accountability and transparency.”
In the past, industry lacked an agreed-on definition of social responsibility. In 2010, the International Organization for Standards reduced the ambiguity by releasing ISO 26000:2010, which defines social responsibility as “the responsibility of an organization for the impacts of its decisions and activities on society and the environment, through transparent and ethical behavior.” ISO 26000 set standards in:
- “Organizational governance”: This addresses the principles under which management runs a business. These include accountability for its actions, transparency, ethics, attention to stakeholder interests and compliance with the law.
- Human rights: The organization treats everyone with respect and fairness. Human rights issues include whether the firm uses discriminatory hiring processes or buys from suppliers in countries that violate political rights or enable the labor of children or compulsory workers.
- “Labor practices”: The company treats all employees and subcontractors fairly. This covers disciplinary procedures, safety issues, collective bargaining, and hiring and promotion practices.
- The environment: This encompasses the organization’s impact on pollution, climate change and sustainable resources.
- “Fair operating practices”: This focuses on issues related to competing honestly, including corruption, political activities, lobbying practices and property rights.
- “Consumer issues”: This involves product quality, safety and consumer rights.
- “Community involvement and development”: These standards govern how the company supports its local community through investment and employment and by promoting health and education.
Form a “Continual Improvement for Social Responsibility” (CISR) program with resources you already have. A CISR program may propel a total makeover of your organizational culture, but you don’t need to build your CISR program from scratch. You can adapt an existing continual-improvement program to boost your social-responsibility performance.
Six Sigma is one of the best-known continual-improvement methodologies. It seeks to effect unending improvement through a series of “projects,” each addressing a specific problem. You define a problem by drawing on data you collect from customers, measuring the current state of operations, analyzing all factors contributing to the current state and formulating solutions to foster improvement. When your new process is in place, assess its effectiveness with rigorous measurements of compliance and results. At the conclusion of each improvement project, start a new one. As the organization completes more of these projects, the culture will change, and employees will adopt the Six Sigma perspective on all activities.
Use the “SOFAIR” tool in your CISR program. CISR pursues ongoing betterment through a series of projects. It uses a technique called SOFAIR, a variation on a Six Sigma tool. SOFAIR is an acronym for “stakeholders and subjects,” “objectives,” “function and focus,” “analyze,” “innovate and improve” and “report and repeat.” An organization with a Six Sigma process in place can add SOFAIR to its existing program. Take these steps:
First, initiate SOFAIR by talking with stakeholders. Gather information from your stakeholders by holding in-person dialogues, such as in town-hall type meetings. Focus sessions solely on gathering information – steer away from blaming, defending or attempting to solve problems. Supplement these meetings with less-personal forms of data gathering, such as surveys. Consider the stakeholder information in light of the seven standards in ISO 26000.
“Since its invention in the 1980s, the Six Sigma methodology has been used by many organizations to improve performance on many different performance criteria.”
For example, imagine a grocery retailer. Stakeholder data suggested the store’s customers would buy more tomatoes if the produce were fresher. So management defined a project: Obtain the freshest tomatoes possible. When the project’s team members evaluated the problem with traditional Six Sigma tools, they concluded that adopting an air-freight delivery process was the best solution. However, these traditional tools don’t account for social responsibility. To find a socially responsible way to obtain fresh tomatoes, the team initiated the SOFAIR process. The first step was opening a dialogue with stakeholders that focused on sourcing tomatoes through the lens of ISO 26000’s seven subject areas.
Second, identify objectives that support both social responsibility and business strategy. A program of social responsibility isn’t beneficial if it harms the company financially. To find the balance between social responsibility and corporate strategy, consider which elements you will need in place – such as customers, suppliers and employees – to ensure your organization’s success for the next 1,500 years. Examine the data you collect, and seek areas where your strategy conflicts with stakeholder interests. Identify any social-responsibility subjects that might pose a threat to your strategy.
“The idea of social responsibility, with the complexities as we know it today, formed in just the past 150 years.”
When you synthesize social-responsibility goals with business strategy, you can formally set general objectives. In successful projects, the SOFAIR team often writes a short summary of its objectives. The project’s documents should also include a charter that spells out such administrative details as the leader’s name, names of team members, the project budget and its end date. When the team prepares these documents, the company should announce the project and explain its objectives to all internal stakeholders. Hold off on announcing the project to external stakeholders until you are certain that it will affect issues that matter to them.
In the grocery example, the store composed a narrative describing its objective as increasing profits by offering the freshest tomatoes to customers in a sustainable way.
Third, prioritize potential areas of focus. Identify the area of the organization to work on first. The grocery store’s project team examined each step of the process of bringing produce to market and identified the steps that were most likely to foster socially irresponsible behavior. The team examined items such as growing methods (what is the environmental impact?), harvest laborers (what is their employment status?) and air transport (how much energy does it require?).
Fourth, analyze your current system holistically. Learn how all the inputs to the system – and the relationships between all aspects of the system – affect stakeholders. Several effective quality improvement tools also work well in CISR. For a company that is not in a crisis mode and aims to improve performance from good to outstanding, risk analysis tools are the most useful. One such tool is “failure mode and effects analysis” (FMEA). This involves first identifying all points where you face a potential risk of failing to serve your stakeholders. Next, prioritize these threats by rating the severity of their impact and their probability of occurrence.
“Sustainability isn’t about stasis; it is about continual improvement.”
If a company is undergoing a crisis – if it needs to raise performance from unacceptable to good – it should use a form of causal analysis. This comes in many formats, but asking the “five whys” often turns out to be the most effective and simplest. Describe the problem and ask why it occurred. Given that answer, ask why again. Keep asking why about each answer until your questions reveal the root cause.
“Implementing process change involves making sure that everyone affected by the change knows about the change before it happens, allocating time and resources to make the change, and then training and controlling the adoption of the change.”
The grocery store used risk analysis to determine that the air-freight process held the most potential for socially irresponsible behavior, because of its environmental impact, its contribution to air traffic congestion, and the possibility of unfair or corrupt sourcing decisions on the part of air transport suppliers.
Fifth, propose improvements to processes or invent new processes. You may be able to solve or prevent problems by improving your current system’s components. For example, you might demand changes to how your suppliers grow tomatoes or modify how you use air transport.
Sometimes, tweaking a current process is not enough to boost performance. You need to reimagine the process, using innovation tools such as “seven ways,” in which you list seven different solutions to a problem. You’ll usually run out of obvious solutions after the first few. Coming up with more stimulates innovative thinking.
“Ignoring the obligation to focus on social responsibility can be a recipe for going out of business.”
When you generate a range of possible solutions, rank them on a solution matrix. List your selection criteria, and assign each criterion a weight – a number that represents its importance. List your proposed solutions, and rate how well each solution meets each of the criteria.
When you implement your solution, announce the changes to all relevant stakeholders. Make sure you allot adequate time, funds and staff to bring the changes about, and that you are ready to institute the necessary training. Often, it’s best to start an improvement effort with a trial – apply the change to one department or location to learn if you need to modify it in action.
“Organizational support, clear roles and responsibilities, a rigorous methodology, linkage to the business strategy and measurable outcomes are critical factors in the success of the [continual-improvement] program.”
The grocery store came up with the innovative idea of growing tomatoes in greenhouses on its roof. This solution guaranteed fresh tomatoes, reduced costs and lessened the business’s environmental impact.
Finally, report progress to your stakeholders, and start the next project. In accordance with ISO 26000’s imperative for accountability and transparency, the organization should report the results of its project to internal and external stakeholders. Internal reports should include data on the health of the business, an outline of important management actions and a description of the project’s performance in terms of the seven subjects of ISO 26000. External reports should be less detailed, and offer a summary of the firm’s activities that covers how they will affect stakeholders and support sustainability.
After the grocery chain tried its greenhouse solution in one store, it made plans to reproduce the program in its other locations throughout the world. The company prepared reports for stakeholders showing the costs savings to owners and investors, the impact on employees and the environmental benefits for the community. Such a report helps farmer-suppliers plan their mix of crops.
“We are never finished; there will always be increasing stakeholder expectations and new opportunities for performance improvement.”
In accordance with continual-improvement philosophy, the end of this project signals the beginning of a new one, which will take the system to an even higher level of performance.
About the Authors
Holly A. Duckworth is a Six Sigma Master Black Belt and volunteer leader for the American Society for Quality. Andrea Hoffmeier is a Six Sigma Black Belt who focuses on marketing, product development, quality management and organizational excellence.