The call for sustainable organisations
An academic journey into the nature of leadership and sustainable businesses
Sustainability is a modern ‘catch-phrase’ with great variability in meaning. This is evidenced through the diversity of organizational values and practices. For the purpose of analysis Dyllick and Hockert’s (2002)description of corporate sustainability will be used as the ‘‘meeting the needs of the firm’s direct and indirect stakeholders (such as shareholders, employees, clients, pressure groups, communities, etc.), without compromising its ability to meet future stakeholder needs as well.’’ This paper will discuss and design a sustainable organization through the use of analogy and metaphor supported by corresponding research, journal articles, data and news articles. The organizational theories of Modernism and Symbolic Interpretivism will facilitate the examination and design of a sustainable organization. Such organisations maintain long-term profitability through the implementation of sustainable culture and work practices to produce products with minimal impact to externalities.
Organisations have demonstrated a history of growth and collapse that has since been dubbed as the ‘economic cycle’. However, this capitalist approach can be “too restrictive and may even be dangerous if, in order to maximize shareholders’ wealth, firms end up harming their other stakeholders (by polluting, exploiting the environment or discriminating amongst employees, etc.)”(Lioui and Sharma, 2012). These patterns of behavior have resulted in organizational collapses such as “the global financial crisis and have shown that unsustainable activities do not only spread through the economic system but also endanger it.”(Catalyst, 2015). These phenomena have piqued the public’s interest and highlighted the need for a shift in business operational paradigms toward sustainable practice.
McClelland’s theory of needs assists in discerning what sustainable practice should incorporate. Organizations naturally fulfill the need for affiliation, achievement and power, which means that sustainable organizational practices provide the continued fulfillment of their members’ needs. Needs theory is intertwined with the organization’s reality through input to output transformation, culture, systematic processes, language sets, artifacts and other semantic indicators.
Modernism focuses on McClelland’s need for achievement and is deeply routed in traditional science methodology and theory. Modernism comes from the meta-theoretical assumption that reality is objective and independent of our knowledge of it. The objectivism and focus on empiricism provides us with models and frameworks for measuring and accounting for sustainability that typically results in “each activity being a commercial opportunity, as long as it achieves an optimal return on capital employed, and adjusted for the risks of the project.” (Searcy, 2012) Science has used modernist techniques to examine phenomena like climate change and create irrefutable proof of its existence. This great example of Modernism at work removes ambiguity and focuses the phenomena of interest to essential data sets to explain reality; however the evidence of climate change leaves us questioning modernist business principles. When examining the Modernist design of an organization we must understand that Modernist perspective “organisations are rational profit maximization entities that control their input conversion to outputs”(Chia, 1995). Organisations exist to achieve goals with “traditional capitalist structures hardly enhancing sustainable development, but will be essential in — eventually — moving into a worldwide transition towards structures which support a sustainable way of living, working, producing and consuming.” (Ledewitz, 2002)In a simple way you may be able to think of the Modernist relationship to organizations as S.M.A.R.T goal focused. Essentially, a group of people comes together to form an organization “in order to complete; specific, measurable, attainable, relevant and time bound goals.”(Bowman et al., 2015)
These S.M.A.R.T focused organisations reinforce objectivity through constant re-measurement. Modernist’s organisations such as BASF Chemicals are implementing modernist tools and language sets such as S.M.A.R.T. goals to drive sustainability. “BASF, for example, views sustainability from a scientific and holistic perspective as it seeks to create innovative and sustainable chemistry solutions in such wide-ranging areas as food and agriculture, energy, transportation, and housing”(Wirtenberg, 2014). A modernist approach to innovative sustainability is typically supported by language sets and solutions that are communicated through organisations by the use of artifacts such as “tailored policies, plans, and programs linked to clear sustainability goals and targets.” (Muhammad et al., 2014)Sustainability can also be molded to fit within Modernist norms through a variety of practices such as carbon pricing, analysis of spending on corporate social responsibility programs, cultural and gender diversity ratios and the practice of cost benefit analysis. If corporate social responsibility (CSR) increases brand equity or staff performance by more than the amount spent, then upper management will deem it a worthwhile venture. In the goal driven environment of Modernism, externalities are typically unaccounted for unless regulation requires it, or measurement and reporting systems like CSR are introduced. Hall & Lobina (2007) believe that “what we need beyond engineering are new approaches to governance” in order to achieve sustainable practice. As “continued energy cost increases require adaptation from organizations”(Boersma, 2015) we may see regulators or organisations opt for externality taxes, carbon prices, or investment in staff based programs. These measures are often seen as inefficient and in light of rising cost of inputs and production, externality costing may prove to be the optimal empirical model for sustainable profits. These methods enable business to “integrate social and environmental issues into their core profit-seeking strategy because “connection with society is the new frontier of competitive advantage.”(Nickless, 2016)
To make a Modernist designed organization simple to understand it is easiest to picture industrial America. John. D. Rockefeller or Andrew Carnegie was building their vertically integrated empires. These modernists bought competitors, fought rioting workers, and built new gas and train lines in order to maximize their profitability, achieve economies of scale and be as efficient as possible. Everything was measured and the final result was the amount of profit. Eventually though, this unchecked growth eventuated in price manipulation and the Sherman Anti-Trust Act.
The introduction of regulation highlights the flaws in Modernism and the need for intervention to purely modernist organizational practice. The core aspect of sustainability, that organisations must be accountable to external parties, really reflects the shared beliefs and perspectives of Symbolic Interpretivism (SI) more than Modernism as “the diversity of stakeholders means that businesses rarely have the opportunity to merely ignore their responsibilities to the outside world” (Taylor, 2008)
Symbolic Interpretivists believe the truth around us is relative to the time, place and individuals involved in constructing the shared meaning. Symbolic Interpretivists see organisations as constructions made by meaningful interactions amongst members. The subjective nature of SI results in qualitative inductive reasoning and management of reality. The variance in situation and individuals can be seen even within organisations as Google’s innovation team sees sustainability as “supporting innovative technologies and entrepreneurial approaches that tackle tough human challenges and scale to help millions of people” whereas their social impact team views sustainability as “seeking to improve people’s lives by building and enabling disruptive technology that reinvents the way society addresses shared challenges”(Google, 2015).
The perceptions of the organisation are maintained through the process of developing theory from further observation and interpretation to create management strategies. This ongoing dynamic process creates inter-subjectivity, as participants of an organization will also be part of other social constructions. The design of an organization by a SI would involve an array artifacts and language sets, typically revolving around creativity, and the fluidity of values. From an SI perspective, once a belief of reality “is truly embedded within an organization, it pervades the thinking and behavior of employees who go beyond compliance with new rules and norms to participate in innovating job-related changes in work processes, setup, and product and service design”. (Taylor, 2008) With low power distance ratio and high individualism we often find SI organizations emphasize sustainability.
An example of an SI organization is Google, as it was created through social construction and perpetuates this ideology through its design of offices and CSR activities. Open plan offices with food, games, quiet spaces, open meeting rooms and various other ‘non-standard’ facilities that drive collaboration, creation and a positive shared common view of the organization. These dynamic spaces are Goolge’s answer to sustainable culture, and what an SI would examine as being a social constructed environment designed to fuel intrinsic motivation.
The intrinsic motivation of the employees fuels benefits to other strategic constituents in the form of higher productivity for managers and ultimately greater profits for shareholders. Increased productivity and positivity within the workforce has flow on effects such as improved customer experience. “The essence of stakeholder’s engagement is necessary towards the better performance and reporting of corporate sustainability.” (Muhammad et al., 2014)
An SI actor within an organization would play an important role of realizing collective values, managing stakeholders and handling critical uncertainty. The individual SI would play the role of developing a tangible company culture through their need to create a collective vision and satisfy key actors. An SI CEO would face “the central challenge… to construct a value proposition for business that enriches and aligns its relationships with shareholders and stakeholders across economic, sociopolitical, ecological, and moral spheres.”(Laszlo and Zhexembayeva, 2011) This could be produced in the form of a mission statement that focused on the team as a whole, their values and relationship to customers and society. This alignment of the collective is critical since “employees’ perceptions of work climate reflect individual value-based schemas used to interpret workplace information as well as espoused values and behavioral norms”(Thomas Norton 2014) and have flow on effects on performance.
Within this organization there may, however, be a Modernist manager. This modernist manager would take this mission and values statement and turn it into numerical or targeted goals that can be measured and achieved.
In recent years, there has been a change in organizational and social values as we have witnessed an array of organizations implementing customer experience based metrics into their group performance reviews. The “influence of various stakeholders are affecting the production values, marketing and best practices of businesses with regard to their impact on the environment”(Dyllick and Hockerts, 2002), one example of this is the Net Promoter Score, or NPS; which measures and ranks customer satisfaction.
The use of NPS is often coupled with a change in company mission statement such as in CBA, ING, Qantas and Optus. NPS is a perfect example of how an SI creates an overall organizational set of values but a Modernist has created a simple, measurable, attainable, relevant and time based goal. Simultaneously NPS is an example of how organisations are measuring sustainable customer satisfaction and therefore success.
In November 2011 the Australian senate passed a Carbon Tax. This first capitalist and modernist step to sustainability involved measuring and costing carbon. The legislature represented society’s overall value of sustainability and was translated into modernist language for implementation and monitoring. Sustainable practice and “robust governance, regulation and supervision should not be seen as measures that restrain innovation or entrepreneurship, but rather as instruments that can help to restore trust, and ensure that activities are conducted openly, fairly and sustainabily.”(Catalyst, 2015) Without the initial social construction of values there would be no imperative for Modernists to formulate a solution.
In order to ensure the success of sustainability, organisations must design value initiatives that can be translated into clear achievable goals. “Top management involvement/support, sustainability blended strategies, and sustainability centered culture is necessary for successful sustainability practices.”(Muhammad et al., 2014) A balance between team based collaborative work areas and individual workstations, individual performance incentives that include CSR opportunities, and utilizing an organizational vision supported by satisfaction, or value based metrics should ensure sustainable culture. The success of environmentally sustainable practices is becoming apparent through the rise of CSR, government regulation, and consumer values as “sustainable development and it has become the most important dimension for achieving better organizational performance and prestige”. (Boersma, 2015)If an organization can quantify the value of moving to environmentally sustainable production of goods or services, or CSR and see that there is adequate return on investment then these values will be reinforced and practices adapted. “Shared value is about solving social problems in a commercial way” (Gray, 2016)that is typically conceptualized by an SI and supported by Modernist analysis.
The recent economic downturn is evidence of a value shift in society and the corresponding organizational response. Consumers are demanding experience in store, environmentally friendly products and socially responsible corporations. Society’s collective value window is driving organizational change and organizational sustainability depends on its ability to adapt. Sustainable organisations will be environmentally and culturally sustainable if demand dictates those as demands. The last century has seen a shift from the ‘gilded age’ of highly profitable polluting companies to socially and environmentally conscious organisations today. The reoccurring trend is that change is generated by social upheaval, diminishing input resources for organisations and a shift in consumers’ demands. To apply basic economic theory, then, change within organisations is inevitable and supply needs adapt to demand.
A sustainable organization would have a unique design from the ground up. It would incorporate facets of all organizational perspectives and harness a dynamic language set in order to maximize effectiveness. As stakeholder management is imperative to the success of a business, open communication lines and collaborative workspaces would be utilized. The results of the creativity and communication would be supported by clearly defined goals and objectives that can be measured and recorded. Overall “corporate sustainability practices are more comprehensive, productive and effective when all of the three dimensions (environmental, social, and economic) are properly and simultaneously addressed.”(Muhammad et al., 2014) Sustainable culture would neatly couple upper managements SI vision with middle managements performance metrics and individual incentives to facilitate intrinsic and extrinsic motivation. Environmental sustainability can be factored into business through Modernist carbon costing models, return on investment for sustainable manufacturing and branding of environmental practices to reinforce the positive values. Utilizing balanced cultural and environmental sustainable practices with performance metrics, organisations are able to adapt to a changing value landscape and ensure sustainable profitability.