What’s Your Mission? The Paradox Between Profitability and Corporate Social Responsibility

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The Purpose of Corporations is to meet the needs of stakeholders (Freeman, 2007) and create value (Koller et al, 2010). ‘Stakeholders are individuals or groups that affect or are affected by the achievement of an organization’s objectives’ (Freeman, 2007). Stakeholders can include employees, shareholders, suppliers, government and customers.

Missioning and visioning work together to identify the stakeholders and what the organization will do in order to create value: this is very intentional and it recasts your purpose as the impetus for strategy activities . Regarding Vision vs Mission: This can be personal, professional, or organizational.

Organizations are exposed to change throughout their lifecycle, and a leader needs to be effective at each stage. Nadler and Tushman (1990) cite 4 organizational changes : tuning, re-creation, adaptation and re-orientation. Leaders need to navigate their way through these cycles, and charisma is often cited as a way of making things happen.

Mission without vision is a company without management or leadership, essentially.  Vision is conceptual, and it is created by leaders in order to be applied in the organization by managers, so it is translated into goals, objectives and actions within a defined strategy. The strategic vision outlines the desired future at which the company hopes to arrive. The vision is your statement of what you are going to achieve. As Wilkinson puts it, “Having a clear vision enables you to work on your “why power” instead of just your willpower” (Wilkinson, 2014). It is the reason that you do what you do. It is your starting point, and your end goal. It should give you daily focus and long-term focus.

The corporate mission outlines the fundamental principles guiding strategic choices . There is a paradox between profitability and responsibility. According to McKinsey, the objective of the organization is to create long-term value. This means create profit in the longer term. The organization has a responsibility to earn a higher return on the shareholders’ equity than could be realized at a bank. This could be paradoxically related to CSR, ethics and responsibility, which involves acting in the interest of others, even when there is no legal imperative. These two constraints could be paradox, since an action which leads you to drive profit may be at odds with a choice which the organization has made to act ethically.

The leader can be a person or a pattern of people. Is charismatic leadership enough?Nadler and Tushman (1990) argue that the charismatic leader is not enough to drive, lead and change organizations. They provide examples where charismatic leadership is a good start to getting large scale change off the ground. However, it is not sustainable. Indicators of charisma do not effectively generate good predictors of leadership. The lack of prediction means that it’s not possible to know who will lead and who will fail.

There can also be a disconnect between the individual themselves, and the narrative that is constructed about that individual (Edwards, 2012). As people’s experience of the charismatic leader changes over time, this can introduce the risk of limiting success.

Therefore, the vision and the mission can help find the balance between the profitability and responsibility paradox, when a choice has to be made. This is a role of the leader, to navigate the course.

References

Edwards, E.R., 2012. Charisma and the fictions of Black leadership, Minneapolis, Minn.: University of Minnesota Press.

Freeman, R.E., 2007. Managing for Stakeholders. SSRN Electronic Journal. doi:10.2139/ssrn.1186402

Koller, T., Dobbs, R. and Huyett, B., 2010. Value: The four cornerstones of corporate finance. John Wiley & Sons.

Nadler, D.A. and Tushman, M.L., 1990. Beyond the charismatic leader: Leadership and organizational change. California management review, 32(2), pp.77-97.

Wilkinson, P., 2014. Unstoppable: Using the Power of Focus to Take Action and Achieve Your Goals. John Wiley & Sons.

 

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One Response

  1. Jen, this is a great topic to have people think about — especially as there are moves afoot to reduce the ability of activist shareholders to propose motions at annual meetings. Corporations need to be very clear-sighted about who their stakeholders are, and what are stakeholder needs. Although it is more honored in the breach than the observance, I like “first do no harm” as a starting point. And then be firm in drawing lines classifying stakeholder so that “everyone in the world” has carefully limited expectations!

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