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Strategic planning for social and political change
ic Planning for Social and Political Change* Professor Bernard Taylor, Editor
Formalized planning is currently applied to planning for operations and capital investment, planning for products and markets, and occasionally for manpower. However, there is little evidence that companies are producing formal plans and programmes to deal with social and political change. Unfortunately, public opinion is moving against business, action groups inside and outside companies are challenging the authority of management, and public officials and politicians are already framing new and regulations. Unless laws managers begin to get more involved in the framing of these controls they are likely to find laws enacted and enforced by people who have little knowledge or sympathy with business. In this article the author points up the necessity to assess the social and political challenge to their business, and formulate and implement social and political strategies and plans aimed at ensuring the survival and prosperity of their organisations.
F
ORMALIZED
PLANNING
IS
CURRENTLY
applied to planning for operations and capital investment, planning for products and markets, and occasionally for manpower. However, there is little evidence that companies are producing formal plans and programmes to deal with social and political change. Unfortunately, public opinion is moving against business, action groups inside and outside companies are challenging the authority of management, and public officials and
*Presented at the Third International Conference on Corporate Planning : Challenges in Corporate Planning, 17-I 9 September, 1973, Brussels, organised by the European Society of Corporate and Strategic Planners on behalf of the Interlational Affiliation of Planning Societites. Q Copyright B. Taylor.
FEBRUARY,
1974
politicians are already framing new laws and regulations. Unless managers begin to get more involved in the framing of these controls they are likely to find laws enacted and enforced by people who have little knowledge or sympathy with business. In this paper I am suggesting that senior managers and their staff advisors should assess the social and political challenge to their business, and formulate and implement social and political strategies and plans aimed at ensuring the survival and prosperity of their organisations. THE SIZE OF THE PROBLEM
To put the strength of the social and political challenge to business in perspective, it is only necessary to recall some well-known examples of companies which have recently faced major crises because of social and political pressures (see Table 1). For example, the General Table 1. The Social
and Political
shareholders to pay &20million in compensation to Thalidomide victims. Albright & Wilson, a large British chemical company, had to close down a plant in Newfoundland to avoid damaging the fisheries. The workers at Upper Clyde Shipbuilders refused to have their shipyard closed down, organized a ‘sit-in’and helped to arrange a merger with an American company. Automobile workers in the U.S.A. and in various parts of Europe appear to be rebelling against the mass production system-by strikes, noncooperation and even sabotage, and are demanding a say in the re-design of their working environment. Also, let me point to the impressive list of legal measures which are currently threatening business in many parts of the Western world (‘see Table 2). There is Table
2. Legislation
Affecting
Business.
Challenge.
-Price fixing General Electric -Ralph Nader General Motors -Chile ITT -Alaskan oil BP -Thalidomide Distillers Co -Newfoundland Albright Et Wilson Upper Clyde Shipbuilders-Right to work -Mass production Automobile Workers
Electric Company was fined by the U.S. federal government and was sued by customers for a total of $250 million for price-fixing. General Motors’ management have had to revise completely their product designs, largely through the efforts of Nader’s Raiders. ITT management are involved in federal investigations for their political activities at home and in Chile. BP and some other oil companies have for many years been barred from extracting oil from Alaska because of the likely destruction of the tundra. The Distillers Company has been forced by public demand and by pressure from institutional
Public Interest Monopoly and Takeover Consumer Protection Prices Pollution and Environment Employee Interests Working Conditions Industrial Relations Retirement and Sickness Benefits Industrial Training Equal Opportunity for Women and Minorities Ownership and Participation Industrial Democracy Public Ownership
legislation concerned with the public interest in terms of monopoly and takeover, consumer protection, price control, pollution control and environmental protection. There are laws to protect the employee, to ensure safety and good working conditions, laws establishing new systems of industrial relations, retirement and sickness benefits, industrial training, and equal job opportunities for women, ethnic and national minorities. Finally,
33
Table
3. Public
Opinion
in Britain
(out of 12 Professionals).
Source: Opinion Research Centre (June 1973).
“Which
two
of these
people Least Trustworthy? (%)
Businessmen City Financiers Doctors Judges Lawyers
Table
4. Plenty
of Reasons
do you feel are:Most Trustworthy?” (%)
29 23 1 2 8
to Sue
(Number
2 2 75 55 23
of lawsuits
filed
in Federal
District
Court).
Source: Fortune Magazine, April 1972.
Environmental Issues Fair-Employment Practices Antitrust Securities Regulations Patents, Copyrights, and Trademarks Labor Law
1961
1966
1968
1970
1972
n.a. n.a. 420 267 1585 2484
n.a. n.a. 480 419 1832 3336
42 n.a. 707 689 1829 3518
140 n.a. 929 1211 2150 3999
268 1015 1379 1919 2194 4987
there are laws concerning Industrial Democracy (already in force in Norway and elsewhere) and various forms of public ownership. The Libyan government is not the only one which is now threatening the nationalization of major companies. The British Labour Party is seriously debating a proposal to nationalise 25 of the top 100 public companies, including the major banks and insurance companies. And in Sweden the government is considering using the national pension funds to take a sizeable minority interest in certain Swedish companies. Recent public opinion polls in the U.S.A. and Britain emphasise that business and businessmen have never been lower in the public esteem (see Table 3). Also, the opinion polls suggest that a majority of the public (and a majority of workers in major companies) believe that private companies have a responsibility to help solve important social problems and should do more than is legally required to improve the quality of the envir0nment.l Additional proof of the current attack on business is provided by the American figures for lawsuits filed against private companies in the Federal District Court (see Table 4).2 During the 1960’s, for example, product liability suits increased IO-fold (Table 5).3 Table
5.
Product
Liability
Suits
DEFINING OBJECTIVES AND SOCIAL RESPONSIBILITIES
In response to this challenge from society, leading businessmen in Europe and in the U.S.A. are re-examining and redefining their social responsibilities. In the U.S.A., for example, the Committee for Econimic Development has outlined 10 areas where business can help in solving social problems (Table 6)4 and in Britain the Confederation Table
Social
Responsibilities.
Ten areas where business can help.
Source: Social Responsibility of Business Corporations (CED, 1972).
1.
Economic Growth and Efficiency Employment, Innovation, Price Control etc.
2.
Education Management
3.
Employment and Training Helping disadvantaged groups, women, aged and sick
4.
Civil
5.
Urban Renewal and Development Low-cost housing, shopping centres, transportation
6.
Pollution Abatement Improving facilities, recycling materials, cooperating locally
7.
Conservation and Recreation Preserving recreation areas, trees and animals
8.
Culture and The Arts Giving support and advice
9.
Medical Care Improvement of community health services
10.
(U.S.A.)
6. Defining
politicians and businessmen are expressing a wide spectrum of opinions. At one extreme there are traditionalists who agree with Milton Friedman that “the one and only social responsibility of business is to increase its profits”6 and at the other extreme there are the liberals who say, like Michel Crozier, that “profit has become a measure . . . but it is no more the end.“7 in fact, of course, to survive and prosper a business needs to make a profit and it must be acceptable in the eyes of society. There is in addition, however, a moral issue and that is how far businessmen should become involved in trying to solve the problems of society. Businessmen in every firm need to face this issue and to define for their own organization what they believe are their moral and social obligations to the local community in which they operate, to society at large, to their workers, their customers, their shareholders, and to distributors and suppliers, many of whom depend on them for their livelihoods.* The implications of this debate are well illustrated by the view currently being propagated in General Electric, who were pioneers of the Marketing concept. The management of General Electric still see their business as a process for converting resources such as labour, money and raw materials into profits through providing efficient customer service. Now, however, they see the whole process wrapped round by pressures from society and government
and financing of colleges and schools
Rights and Equal Opportunity Help to ethnic and racial groups
Government Support reform and help to improve management
Source: Forbes Magazine I
1 of British Industry is currently preparing a Code of Behaviour for business.5 In the public debate about the social responsibilities of business, economists,
34
(see Figure l).g The original marketing idea that a business exists to satisfy a customer need is being challenged just as strongly as the financial or legal view that
LONG
RANGE
PLANNING
Figure 2 shows how, in the face of growing inflation, the public in the U.S.A. has become more and more convinced of the need for government control of prices. It was possible for businessmen to monitor this trend and to foresee the present price control regulations. Figure 3 shows the way that, first in the U.S.A. then in Britain, the public has become increasingly worried about water and air pollution. The graph shows how management in the United Kingdom might have forecast the trend in Britain by examining the results for the United States. In these days of instant communications, public opinion in Europe often follows a movement in the U.S.A.
OUTPUT Society
INPUT (Resources)
(Profit
via
Customer
The Business
Service)
Entity
2. The Social Responsibility Audit
THE BUSINESS ENVIRONMENT
General
Figure
1. The
Business
Electric,
U.S.A.,
Management may also wish to carry out a Corporate Appraisal-what John Humble and others have called a Social Responsibility Audit-asking, for a whole range of topics concerned with the internal and external environment of the firm: “In my organization what are the strengths? Weaknesses? Opportunities? Threats? And what action should we take?” (see Table 7).”
1973
Process.
3. The Social Priority Analysis
Price
Control
I
I
I
1946
Figure
1953
1948
Source
: Opinion
2. Monitoring Need for
I 1955
Research
I 1962
I 1972
DEVELOPING POLITICAL POLICIES AND PROGRAMMES
Corporation
Public Opinion About Price Control (U.S.A.)
Business
Source: Opinion Research Corporation. management
maximum
should aim to make the return to the shareholders.
DEVELOPING SOCIAL POLICIES AND PROGRAMMES I want to draw attention to three approaches which businessmen may find useful in assessing the social priorities for their businesses :
FEBRUARY,
1974
Managers may also find useful a technique which has been used at General Electric for the analysis of social priorities. First they listed the major demands of various pressure groups in society. Next they rated these according to ‘intensity’, i.e. the emphasis which they were given by each pressure group (see Table 8(a)). Finally, they listed what they regarded as the most important long-term social trends, asked whether these changes would be likely to strengthen or reduce the demands of the pressure groups, and weighted each demand accordingly for ‘convergence’ (see Table 8(b)). The results of the General Electric analysis are given in Table 9.12
1. Attitude Studies It is clearly important to monitor and, if possible, forecast changes in the attitudes of the firm’s employees, customers, shareholders, government officials and various opinion leaders in society. Figures 2 and 3 show how attitude studies were used to monitor the demand for government control of prices and public concern about pollution.1°
Now let me break a social taboo and suggest that, in the face of the current social and political attack on business, businessmen must become more involved in local and national politics. Business pressure groups do exist and they compete with others for political influence (see Figure 4). A recent study by the Conference Board suggests that in America businessmen tend to be passive or negative in their approach. In their survey (see Table lo), 63 per cent of respondents said that they review legislative issues continuously or frequently and 50 per cent said that they
35
make frequent presentations to government, mostly protesting against legislation, U.S.
IOO-
But only 5 per cent of managements said they were involved in making positive proposals for introducing new legislation.13
U.K. Water,/ /
90 -
,’
Here, I think, managers in the Western countries might learn from businessmen in developing countries who have had long experience in influencing government legislation regarding business. In the developing world managers are forced to make their policies and plans in collaboration with government officials who make the national 5-year Plan and who grant production licences and permission to use scarce local currency for the import of know-how, machinery and raw materials. Liaison with government officials and with politicians is a professional job requiring the recruitment of senior civil servants and other specialists to act as company representatives to government. The process of positive involves the preparation proposals for legislation and the mustering of social and political support for the measures proposed.14 Detailed consideration of the formulation of Corporate Political Strategy in the West is provided in Epstein’s The Corporation in American Politics (see Table 1I).‘”
80 ,’ ,’
70 Water 60 +J s o b n
,’ /0
50-
,’ ,/
/’ /’
/ d ///Air
/ 40 / ’ 30 -,/ /
A,? ,+ ,’
20 10 0 1965
1967
1966
I 1968
1969
1970
1971
1972
Figure 3. Public Opinion Survey (U.S. and U.K.) “The Problem of Water/Air Pollution is Serious”. Source: Opinion Research Corporation. Market 8 Opionon Research International.
Table
7. The Social
Source: John Humble,
Responsibility
In my organization what are the Strengths? What Action could we take? Social
Environment Social responsibilities and new opportunities Community relations Consumer relations Pollution Packaging Investment relations Shareholder relations
Internal Environment Physical environment 1. 2. Working conditions Minority groups 3. 4. Organization structure/management 5. Communications 6. Industrial relations Education and training 7.
36
Weaknesses?
Responsibility Stewardship (objectives) Policy and organization
External 1. 2. 3. 4. 5. 6. 7.
Audit
Social ResponsibilityAudit.
style
Opportunities?
Threats?
ORGANIZATION AND IMPLEMENTATION Regarding the organization of political programmes, I wish to make four main points: (1) In most large companies there appears to be a need for a central policy or co-ordinating department. Currently 12 per cent of major U.S. companies have departments of Urban or Community Affairs. General Motors has a committee of external directors called the Public Policy Committee; General Electric has a Business Environment Department. In Europe too, large companies are now forming Departments of Public & Social Affairs: The British Steel Corporation has a Social & Regional Policy Department and IBM (U.K.) has a Public Affairs Department.16 (2) Secondly, there is the problem of motivating operating managers to give priority to social programmes. Managers typically concentrate on matters for which they are criticised or rewarded. The manager is likely to ask himself who is likely to get A who promotion : Manager develops social programmes and builds social acceptance for the company, or Manager B who gets
LONG
RANGE
PLANNING
Managers must be made aware that they have two sets of obligations : ‘operational’, i.e. achieving productivity or profitability for their particular department or division in the short term, and ‘strategic’, i.e. looking after the
10 per cent over his annual profit or productivity target? A related question for management is how will these social policies affect profits? Are line managers liable to over-react or to embrace social responsibility as an alibi for poor performance? Table
8(a).
Analysis
of Social
Priorities.
Source: Virgil B. Day, General Electric.
6%
Pressure
Groups
Marketing Production Personnel International Etc. Rank Intensity 1-4
Table
8(b).
Analysis
of Social
Priorities.
Sowce: Virgil B. Day, General Electric.
Marketing Production Personnel International Etc. Rank Convergence l-10
Table
9. Key Public
Issues for
Source: Virgil B. Day, Vice-President,
Business.
survival and profitability of the total enterprise in the long term. This strategic responsibility (which includes a duty to promote the acceptance of the firm in society) needs to be emphasised by management and it also should be reinforced by the management system. In General Electric headquarters there is a specialist employed at the moment to review their management training, system (i.e. selection, payment, appraisal, promotion and other procedures) to ensure that they achieve the right balance between these two sets of priorities. The new social challenge to business (3) also has important implications for project planning. Managers who have long been working in socially sensitive areas-for example, in open-cast mining and the siting of electric power stations-find it necessary to plan well in advance, to have a variety of possible sites available and to include social and political aspects as important considerations in their project plans. Increasingly, for most projects, social and political considerations must appear as a matter of routine on project plans. (4) Finally, we must look at risk. It must be remembered that planning can only reduce uncertainty. It cannot eliminate risk entirely. In the current challenging social and political climate the political risk to business is substantially increased. The planner therefore needs to make his contingency plans-so that the company will not suffer serious losses if a particular project fails because of social or political opposition. This argues for diversifying the business interest geographically and in terms of types of business, and keeping fixed, inflexible investments at a minimum. It also suggests the need for government participation in risky ventures.
General Electric, 1972.
THE 1.
Constraints on Company Growth Control of mergers, diversification, prices, taxation
2.
Public Control Control of pollution, product safety, advertising, ownership
3.
Constraints on Industrial Relations Legislation on benefits, etc., stronger unions
4.
Managing the ‘New Work Force’ Participation, job enrichment, minorities, women
5.
Power within the Company Wider board representation, disclosure
8.
Partnership with Public Bodies Pollution, urban development, social problems
FEBRUARY,
1974
ROLE
OF THE
PLANNER
What, then, should the corporate planner do to initiate and co-ordinate this process of strategic planning for social and political change? (I) From past experience with strategic problems we know that the planner’s first task will usually be to convince top management that there is a problem--that the company is,facing, or ma), in the ,future meet, an important .social and political challenge.
37
Business
Conservation
Intellectuals
Politicians
Farmers
and
Consumers
Professions
Trade Figure Table
10. Corporate
4.
Unions
Political
Political
Pressure
Activities.
Groups.
U.S. Survey
Source. The Role of Business in Public Affairs (Conference
(1033 firms). Board 1968).
% Review legislative issues Continuous or frequent review Frequent presentations to government Proposals for new legislation
Table
(mostly
negative)
11. Corporate
Source: Epstein,
98 63 50 5
Political
Strategy.
The Corporation in American Politics.
Organization/Expertise Finance Access to government and media Patronage-employment, regional development Government dependence Influence over media Record of political success Status of business and management
Constraints A. Internal-political B. External-political
ability and contracts of management resources of other interests with power to influence
Activities 1. Trade associations 2. Legislative and administrative contacts 3. Public relations 4. Government Service by business leaders 5. Liaison with government departments 6. Drafting legislative proposals 7. Challenging legislation in courts 8. Contributions to electoral campaigns
38
(2) The second problem of the planner in the social and political area is to help top managers to define their attitudes to social responsibilities.
Resources 1. 2. 3. 4. 5. 6. 7. 8.
I
Typically, senior managers see their critics inside and outside the company as a vociferous and untypical minority. It often takes a major crisis for them to realise that social values have changed and the criticisms which are being raised may be widely felt to be valid. When a company management is out of step with its workers and with society generally, tien we may expect that the last group of people to realise this will be the present top management. The recent history of General Motors, General Electric, Distillers and other leading companies amply illustrates this point. Occasionally, the times throw up a leader with unusual breadth of vision who is able to perceive the social trends even when they imply criticism of his own organisation, but this is not a typical situation. This has caused a number of academics and researchers to see an important role for the planner as a ‘licenced revolutionary’, one of Shakespeare’s fools who ‘speaks the unspeakable’ and tells top management what they are doing wrong.” To some extent planners and consultants are always holding a mirror up to management so that they can appraise themselves and their organizations with more objectivity. However, there are precise limits to the criticism which top management will accept even from a respected member of senior staff and the history of planning is filled with stories of planners who left their organizations because they gave advice which was honest but unacceptable.
votes
This is another difficult area. These attitudes will be a function of the top managers’ personal values, and the research which has been done into the setting of objectives and policies among Boards of Directors suggests that there is a great deal of conflict and confusion inthisarea.lsHowever, the corporate planner needs to know what is the position of the chief executive or the ruling caucus in relation to social issues, e.g. whether they wish to take a lead in the business community and so achieve more social acceptance and visibility for their firm; whether they would prefer to wait for others to take
LONG
RANGE
PLANNING
the lead; or whether they would like to fight new legislation and pay the cost, e.g. of pollution control, only when they are legally forced to do so. (3) The third task is to formulate
a strategy, e.g. guidelines jar divisions, and to set up programmes designed to ensure that theJirm achieves social acceptance, with profitability in the long
term.
In developing a strategy it is worthwhile examining three approaches which are currently being used and which were discussed earlier: The first is the use of attitude research on employees, the public, shareholders and government officials. The second is John Humble’s suggestion that we need a corporate appraisal-a kind of check-list approach which he calls a Social Responsibility Audit. The third is a system for analysing social and political priorities by listing the demands being made, ranking them according to the emphasis they are given by powerful pressure groups, and forecasting whether they are likely to become more or less important in the future in the light of identifiable social trends. (4) Just as war may he seen as an
and the development political programmes.
of positive
(5) Next, the planner faces the long-term
problem of how to het$ management to become more socially and politically sensitive. 0
This will involve selling the social policies and programmes inside and outside the organization, training management in implementing these programmes at various levels and in different contexts 0 It will also probably mean establishing a group of specialist staff at headquarters to monitor social trends and keep management informed, and help to develop new policies and programmes as they are required 0 It will be necessary too to reflect these new management priorities in the appraisal and reward system, so that staff will know that if they do not implement the new social programmes this may affect their salary level and their promotion prospects. 0 The company should also review its systems and procedures for planning and controlling the development of major projects. Product plans and plans for new facilities need to take account of social and political aspects, as a matter of routine. It is also likely that project plans will have to build in longer lead times and a larger number of alternatives to provide for delays and failures resulting from social and political protests.
extension oj political action, so politics can be viewed as a development of social action. And corporate strategies for coping with social and political change should logically include political policies and programmes.
(6) Finally, the planner must ask in
The pattern of corporation politics is already established in areas where government influence is strongly felt, e.g. in developing countries and in quasi-public enterprises such as electric utilities and telephone companies. Once the political arena has been identified as a major area for competition, political strategies and programmes tend to be evolved in familiar ways -by the analysis of resources (finance, organization, regional influence, etc.) the assessment of competition, the formation of alliances (e.g. in trade associations)
It may be necessary to reduce the company’s investment in areas of the world which are politically unstable, to withdraw from sociallysensitive projects or to enter joint ventures where government or other companies will share the risk. It will also be sensible to make contingency plans to try to ensure that the company’s personnel and assets can be transferred quickly to another location in a time of emergency. I understand that there is an electronics plant in the south of France which is particularly subject to labour troubles and the
FEBRUARY,
1974
management have invested in buildings and equipment which can be dismantled in a matter of days if serious trouble develops. w
what other ways he might minimise the social and political risk to the company.
REFERENCES
(1)
See R. Worcester, Monitoring and Forecasting Public Opinion about Business, Journal of General Management, Vol. 1, No. 1 (Autumn 1973).
(2) Eleanore Carruth, The Legal Explosion has Left Business April 1973.
Shell-Shocked,
Fortune,
(3)
Forbes, date ?
(4)
Research and Policy Committee of the Committee for Economic Development, Social Responsibility of Business Corporations, p. 37. Committee for Economic Development, New York, (1971).
(5)
Bernard Taylor interviews Lord Watkinson, Journal of General Management, Vol. 1, No. 1 (Autumn 1973).
(6)
Milton Friedman, Capitalism and Freedom, p. 133. University of Chicago Press (1962).
(7)
Michel Crozier, A New Rationale for American Business, in The American Business Corporation by Eli Goldstein et al. MIT Press (1973).
(8)
See Kenneth Adams, The Impact of Business on Changing Social Values, Journal of Business Policy, Vol. 3, No. 4 (Summer 1973).
(9)
Kenneth 0. Michel, “Design of an lntrafirm Management Development Programme for Strategic Management”, International Conference on Strategic Management, Vanderbilt University (May 1973).
(10)
R. Worcester, ibid.
(11)
See John Humble, Social Responsibility Audit: A Management Tool foi Survival, DR. 23-57. Foundation for Business Responsibility, London (1973).
(12)
See Virgil Day, Business Priorities in a Changing Environment, Journal of Genera/ Management, Vol. 1, No. 1 (Autumn 1973).
(13)
National Industrial Conference Board, The Role of Business in Public Affairs. Studies in Public Affairs No. 2. pp. 8-10. New York (1968).
(14)
A. Moddie, Corporate Planning and Public Policy in India, Journal of Business Policy, Vol. 3, No. 1 (Autumn 1972).
(15)
Edwin M. Epstein, American Politics, Jersey (1969).
(16)
John Humble, ibid., p. 26.
(17)
See James Robertson “The Future of the City”, Interview by Bernard Taylor in Journalof Genera/Management, Vol. 1, No. 2 (Winter 1973/l 974.
(18)
See David Norburn. “Company Financial Performance, Primary Objective-Setting and Decision-Making” (Ph.D thesis). City University, London (1972).
The Corporation in Prentice-Hall, New
39
Formalized planning is currently applied to planning for operations and capital investment, planning for products and markets, and occasionally for manpower. However, there is little evidence that companies are producing formal plans and programmes to deal with social and political change. Unfortunately, public opinion is moving against business, action groups inside and outside companies are challenging the authority of management, and public officials and politicians are already framing new and regulations. Unless laws managers begin to get more involved in the framing of these controls they are likely to find laws enacted and enforced by people who have little knowledge or sympathy with business. In this article the author points up the necessity to assess the social and political challenge to their business, and formulate and implement social and political strategies and plans aimed at ensuring the survival and prosperity of their organisations.
F
ORMALIZED
PLANNING
IS
CURRENTLY
applied to planning for operations and capital investment, planning for products and markets, and occasionally for manpower. However, there is little evidence that companies are producing formal plans and programmes to deal with social and political change. Unfortunately, public opinion is moving against business, action groups inside and outside companies are challenging the authority of management, and public officials and
*Presented at the Third International Conference on Corporate Planning : Challenges in Corporate Planning, 17-I 9 September, 1973, Brussels, organised by the European Society of Corporate and Strategic Planners on behalf of the Interlational Affiliation of Planning Societites. Q Copyright B. Taylor.
FEBRUARY,
1974
politicians are already framing new laws and regulations. Unless managers begin to get more involved in the framing of these controls they are likely to find laws enacted and enforced by people who have little knowledge or sympathy with business. In this paper I am suggesting that senior managers and their staff advisors should assess the social and political challenge to their business, and formulate and implement social and political strategies and plans aimed at ensuring the survival and prosperity of their organisations. THE SIZE OF THE PROBLEM
To put the strength of the social and political challenge to business in perspective, it is only necessary to recall some well-known examples of companies which have recently faced major crises because of social and political pressures (see Table 1). For example, the General Table 1. The Social
and Political
shareholders to pay &20million in compensation to Thalidomide victims. Albright & Wilson, a large British chemical company, had to close down a plant in Newfoundland to avoid damaging the fisheries. The workers at Upper Clyde Shipbuilders refused to have their shipyard closed down, organized a ‘sit-in’and helped to arrange a merger with an American company. Automobile workers in the U.S.A. and in various parts of Europe appear to be rebelling against the mass production system-by strikes, noncooperation and even sabotage, and are demanding a say in the re-design of their working environment. Also, let me point to the impressive list of legal measures which are currently threatening business in many parts of the Western world (‘see Table 2). There is Table
2. Legislation
Affecting
Business.
Challenge.
-Price fixing General Electric -Ralph Nader General Motors -Chile ITT -Alaskan oil BP -Thalidomide Distillers Co -Newfoundland Albright Et Wilson Upper Clyde Shipbuilders-Right to work -Mass production Automobile Workers
Electric Company was fined by the U.S. federal government and was sued by customers for a total of $250 million for price-fixing. General Motors’ management have had to revise completely their product designs, largely through the efforts of Nader’s Raiders. ITT management are involved in federal investigations for their political activities at home and in Chile. BP and some other oil companies have for many years been barred from extracting oil from Alaska because of the likely destruction of the tundra. The Distillers Company has been forced by public demand and by pressure from institutional
Public Interest Monopoly and Takeover Consumer Protection Prices Pollution and Environment Employee Interests Working Conditions Industrial Relations Retirement and Sickness Benefits Industrial Training Equal Opportunity for Women and Minorities Ownership and Participation Industrial Democracy Public Ownership
legislation concerned with the public interest in terms of monopoly and takeover, consumer protection, price control, pollution control and environmental protection. There are laws to protect the employee, to ensure safety and good working conditions, laws establishing new systems of industrial relations, retirement and sickness benefits, industrial training, and equal job opportunities for women, ethnic and national minorities. Finally,
33
Table
3. Public
Opinion
in Britain
(out of 12 Professionals).
Source: Opinion Research Centre (June 1973).
“Which
two
of these
people Least Trustworthy? (%)
Businessmen City Financiers Doctors Judges Lawyers
Table
4. Plenty
of Reasons
do you feel are:Most Trustworthy?” (%)
29 23 1 2 8
to Sue
(Number
2 2 75 55 23
of lawsuits
filed
in Federal
District
Court).
Source: Fortune Magazine, April 1972.
Environmental Issues Fair-Employment Practices Antitrust Securities Regulations Patents, Copyrights, and Trademarks Labor Law
1961
1966
1968
1970
1972
n.a. n.a. 420 267 1585 2484
n.a. n.a. 480 419 1832 3336
42 n.a. 707 689 1829 3518
140 n.a. 929 1211 2150 3999
268 1015 1379 1919 2194 4987
there are laws concerning Industrial Democracy (already in force in Norway and elsewhere) and various forms of public ownership. The Libyan government is not the only one which is now threatening the nationalization of major companies. The British Labour Party is seriously debating a proposal to nationalise 25 of the top 100 public companies, including the major banks and insurance companies. And in Sweden the government is considering using the national pension funds to take a sizeable minority interest in certain Swedish companies. Recent public opinion polls in the U.S.A. and Britain emphasise that business and businessmen have never been lower in the public esteem (see Table 3). Also, the opinion polls suggest that a majority of the public (and a majority of workers in major companies) believe that private companies have a responsibility to help solve important social problems and should do more than is legally required to improve the quality of the envir0nment.l Additional proof of the current attack on business is provided by the American figures for lawsuits filed against private companies in the Federal District Court (see Table 4).2 During the 1960’s, for example, product liability suits increased IO-fold (Table 5).3 Table
5.
Product
Liability
Suits
DEFINING OBJECTIVES AND SOCIAL RESPONSIBILITIES
In response to this challenge from society, leading businessmen in Europe and in the U.S.A. are re-examining and redefining their social responsibilities. In the U.S.A., for example, the Committee for Econimic Development has outlined 10 areas where business can help in solving social problems (Table 6)4 and in Britain the Confederation Table
Social
Responsibilities.
Ten areas where business can help.
Source: Social Responsibility of Business Corporations (CED, 1972).
1.
Economic Growth and Efficiency Employment, Innovation, Price Control etc.
2.
Education Management
3.
Employment and Training Helping disadvantaged groups, women, aged and sick
4.
Civil
5.
Urban Renewal and Development Low-cost housing, shopping centres, transportation
6.
Pollution Abatement Improving facilities, recycling materials, cooperating locally
7.
Conservation and Recreation Preserving recreation areas, trees and animals
8.
Culture and The Arts Giving support and advice
9.
Medical Care Improvement of community health services
10.
(U.S.A.)
6. Defining
politicians and businessmen are expressing a wide spectrum of opinions. At one extreme there are traditionalists who agree with Milton Friedman that “the one and only social responsibility of business is to increase its profits”6 and at the other extreme there are the liberals who say, like Michel Crozier, that “profit has become a measure . . . but it is no more the end.“7 in fact, of course, to survive and prosper a business needs to make a profit and it must be acceptable in the eyes of society. There is in addition, however, a moral issue and that is how far businessmen should become involved in trying to solve the problems of society. Businessmen in every firm need to face this issue and to define for their own organization what they believe are their moral and social obligations to the local community in which they operate, to society at large, to their workers, their customers, their shareholders, and to distributors and suppliers, many of whom depend on them for their livelihoods.* The implications of this debate are well illustrated by the view currently being propagated in General Electric, who were pioneers of the Marketing concept. The management of General Electric still see their business as a process for converting resources such as labour, money and raw materials into profits through providing efficient customer service. Now, however, they see the whole process wrapped round by pressures from society and government
and financing of colleges and schools
Rights and Equal Opportunity Help to ethnic and racial groups
Government Support reform and help to improve management
Source: Forbes Magazine I
1 of British Industry is currently preparing a Code of Behaviour for business.5 In the public debate about the social responsibilities of business, economists,
34
(see Figure l).g The original marketing idea that a business exists to satisfy a customer need is being challenged just as strongly as the financial or legal view that
LONG
RANGE
PLANNING
Figure 2 shows how, in the face of growing inflation, the public in the U.S.A. has become more and more convinced of the need for government control of prices. It was possible for businessmen to monitor this trend and to foresee the present price control regulations. Figure 3 shows the way that, first in the U.S.A. then in Britain, the public has become increasingly worried about water and air pollution. The graph shows how management in the United Kingdom might have forecast the trend in Britain by examining the results for the United States. In these days of instant communications, public opinion in Europe often follows a movement in the U.S.A.
OUTPUT Society
INPUT (Resources)
(Profit
via
Customer
The Business
Service)
Entity
2. The Social Responsibility Audit
THE BUSINESS ENVIRONMENT
General
Figure
1. The
Business
Electric,
U.S.A.,
Management may also wish to carry out a Corporate Appraisal-what John Humble and others have called a Social Responsibility Audit-asking, for a whole range of topics concerned with the internal and external environment of the firm: “In my organization what are the strengths? Weaknesses? Opportunities? Threats? And what action should we take?” (see Table 7).”
1973
Process.
3. The Social Priority Analysis
Price
Control
I
I
I
1946
Figure
1953
1948
Source
: Opinion
2. Monitoring Need for
I 1955
Research
I 1962
I 1972
DEVELOPING POLITICAL POLICIES AND PROGRAMMES
Corporation
Public Opinion About Price Control (U.S.A.)
Business
Source: Opinion Research Corporation. management
maximum
should aim to make the return to the shareholders.
DEVELOPING SOCIAL POLICIES AND PROGRAMMES I want to draw attention to three approaches which businessmen may find useful in assessing the social priorities for their businesses :
FEBRUARY,
1974
Managers may also find useful a technique which has been used at General Electric for the analysis of social priorities. First they listed the major demands of various pressure groups in society. Next they rated these according to ‘intensity’, i.e. the emphasis which they were given by each pressure group (see Table 8(a)). Finally, they listed what they regarded as the most important long-term social trends, asked whether these changes would be likely to strengthen or reduce the demands of the pressure groups, and weighted each demand accordingly for ‘convergence’ (see Table 8(b)). The results of the General Electric analysis are given in Table 9.12
1. Attitude Studies It is clearly important to monitor and, if possible, forecast changes in the attitudes of the firm’s employees, customers, shareholders, government officials and various opinion leaders in society. Figures 2 and 3 show how attitude studies were used to monitor the demand for government control of prices and public concern about pollution.1°
Now let me break a social taboo and suggest that, in the face of the current social and political attack on business, businessmen must become more involved in local and national politics. Business pressure groups do exist and they compete with others for political influence (see Figure 4). A recent study by the Conference Board suggests that in America businessmen tend to be passive or negative in their approach. In their survey (see Table lo), 63 per cent of respondents said that they review legislative issues continuously or frequently and 50 per cent said that they
35
make frequent presentations to government, mostly protesting against legislation, U.S.
IOO-
But only 5 per cent of managements said they were involved in making positive proposals for introducing new legislation.13
U.K. Water,/ /
90 -
,’
Here, I think, managers in the Western countries might learn from businessmen in developing countries who have had long experience in influencing government legislation regarding business. In the developing world managers are forced to make their policies and plans in collaboration with government officials who make the national 5-year Plan and who grant production licences and permission to use scarce local currency for the import of know-how, machinery and raw materials. Liaison with government officials and with politicians is a professional job requiring the recruitment of senior civil servants and other specialists to act as company representatives to government. The process of positive involves the preparation proposals for legislation and the mustering of social and political support for the measures proposed.14 Detailed consideration of the formulation of Corporate Political Strategy in the West is provided in Epstein’s The Corporation in American Politics (see Table 1I).‘”
80 ,’ ,’
70 Water 60 +J s o b n
,’ /0
50-
,’ ,/
/’ /’
/ d ///Air
/ 40 / ’ 30 -,/ /
A,? ,+ ,’
20 10 0 1965
1967
1966
I 1968
1969
1970
1971
1972
Figure 3. Public Opinion Survey (U.S. and U.K.) “The Problem of Water/Air Pollution is Serious”. Source: Opinion Research Corporation. Market 8 Opionon Research International.
Table
7. The Social
Source: John Humble,
Responsibility
In my organization what are the Strengths? What Action could we take? Social
Environment Social responsibilities and new opportunities Community relations Consumer relations Pollution Packaging Investment relations Shareholder relations
Internal Environment Physical environment 1. 2. Working conditions Minority groups 3. 4. Organization structure/management 5. Communications 6. Industrial relations Education and training 7.
36
Weaknesses?
Responsibility Stewardship (objectives) Policy and organization
External 1. 2. 3. 4. 5. 6. 7.
Audit
Social ResponsibilityAudit.
style
Opportunities?
Threats?
ORGANIZATION AND IMPLEMENTATION Regarding the organization of political programmes, I wish to make four main points: (1) In most large companies there appears to be a need for a central policy or co-ordinating department. Currently 12 per cent of major U.S. companies have departments of Urban or Community Affairs. General Motors has a committee of external directors called the Public Policy Committee; General Electric has a Business Environment Department. In Europe too, large companies are now forming Departments of Public & Social Affairs: The British Steel Corporation has a Social & Regional Policy Department and IBM (U.K.) has a Public Affairs Department.16 (2) Secondly, there is the problem of motivating operating managers to give priority to social programmes. Managers typically concentrate on matters for which they are criticised or rewarded. The manager is likely to ask himself who is likely to get A who promotion : Manager develops social programmes and builds social acceptance for the company, or Manager B who gets
LONG
RANGE
PLANNING
Managers must be made aware that they have two sets of obligations : ‘operational’, i.e. achieving productivity or profitability for their particular department or division in the short term, and ‘strategic’, i.e. looking after the
10 per cent over his annual profit or productivity target? A related question for management is how will these social policies affect profits? Are line managers liable to over-react or to embrace social responsibility as an alibi for poor performance? Table
8(a).
Analysis
of Social
Priorities.
Source: Virgil B. Day, General Electric.
6%
Pressure
Groups
Marketing Production Personnel International Etc. Rank Intensity 1-4
Table
8(b).
Analysis
of Social
Priorities.
Sowce: Virgil B. Day, General Electric.
Marketing Production Personnel International Etc. Rank Convergence l-10
Table
9. Key Public
Issues for
Source: Virgil B. Day, Vice-President,
Business.
survival and profitability of the total enterprise in the long term. This strategic responsibility (which includes a duty to promote the acceptance of the firm in society) needs to be emphasised by management and it also should be reinforced by the management system. In General Electric headquarters there is a specialist employed at the moment to review their management training, system (i.e. selection, payment, appraisal, promotion and other procedures) to ensure that they achieve the right balance between these two sets of priorities. The new social challenge to business (3) also has important implications for project planning. Managers who have long been working in socially sensitive areas-for example, in open-cast mining and the siting of electric power stations-find it necessary to plan well in advance, to have a variety of possible sites available and to include social and political aspects as important considerations in their project plans. Increasingly, for most projects, social and political considerations must appear as a matter of routine on project plans. (4) Finally, we must look at risk. It must be remembered that planning can only reduce uncertainty. It cannot eliminate risk entirely. In the current challenging social and political climate the political risk to business is substantially increased. The planner therefore needs to make his contingency plans-so that the company will not suffer serious losses if a particular project fails because of social or political opposition. This argues for diversifying the business interest geographically and in terms of types of business, and keeping fixed, inflexible investments at a minimum. It also suggests the need for government participation in risky ventures.
General Electric, 1972.
THE 1.
Constraints on Company Growth Control of mergers, diversification, prices, taxation
2.
Public Control Control of pollution, product safety, advertising, ownership
3.
Constraints on Industrial Relations Legislation on benefits, etc., stronger unions
4.
Managing the ‘New Work Force’ Participation, job enrichment, minorities, women
5.
Power within the Company Wider board representation, disclosure
8.
Partnership with Public Bodies Pollution, urban development, social problems
FEBRUARY,
1974
ROLE
OF THE
PLANNER
What, then, should the corporate planner do to initiate and co-ordinate this process of strategic planning for social and political change? (I) From past experience with strategic problems we know that the planner’s first task will usually be to convince top management that there is a problem--that the company is,facing, or ma), in the ,future meet, an important .social and political challenge.
37
Business
Conservation
Intellectuals
Politicians
Farmers
and
Consumers
Professions
Trade Figure Table
10. Corporate
4.
Unions
Political
Political
Pressure
Activities.
Groups.
U.S. Survey
Source. The Role of Business in Public Affairs (Conference
(1033 firms). Board 1968).
% Review legislative issues Continuous or frequent review Frequent presentations to government Proposals for new legislation
Table
(mostly
negative)
11. Corporate
Source: Epstein,
98 63 50 5
Political
Strategy.
The Corporation in American Politics.
Organization/Expertise Finance Access to government and media Patronage-employment, regional development Government dependence Influence over media Record of political success Status of business and management
Constraints A. Internal-political B. External-political
ability and contracts of management resources of other interests with power to influence
Activities 1. Trade associations 2. Legislative and administrative contacts 3. Public relations 4. Government Service by business leaders 5. Liaison with government departments 6. Drafting legislative proposals 7. Challenging legislation in courts 8. Contributions to electoral campaigns
38
(2) The second problem of the planner in the social and political area is to help top managers to define their attitudes to social responsibilities.
Resources 1. 2. 3. 4. 5. 6. 7. 8.
I
Typically, senior managers see their critics inside and outside the company as a vociferous and untypical minority. It often takes a major crisis for them to realise that social values have changed and the criticisms which are being raised may be widely felt to be valid. When a company management is out of step with its workers and with society generally, tien we may expect that the last group of people to realise this will be the present top management. The recent history of General Motors, General Electric, Distillers and other leading companies amply illustrates this point. Occasionally, the times throw up a leader with unusual breadth of vision who is able to perceive the social trends even when they imply criticism of his own organisation, but this is not a typical situation. This has caused a number of academics and researchers to see an important role for the planner as a ‘licenced revolutionary’, one of Shakespeare’s fools who ‘speaks the unspeakable’ and tells top management what they are doing wrong.” To some extent planners and consultants are always holding a mirror up to management so that they can appraise themselves and their organizations with more objectivity. However, there are precise limits to the criticism which top management will accept even from a respected member of senior staff and the history of planning is filled with stories of planners who left their organizations because they gave advice which was honest but unacceptable.
votes
This is another difficult area. These attitudes will be a function of the top managers’ personal values, and the research which has been done into the setting of objectives and policies among Boards of Directors suggests that there is a great deal of conflict and confusion inthisarea.lsHowever, the corporate planner needs to know what is the position of the chief executive or the ruling caucus in relation to social issues, e.g. whether they wish to take a lead in the business community and so achieve more social acceptance and visibility for their firm; whether they would prefer to wait for others to take
LONG
RANGE
PLANNING
the lead; or whether they would like to fight new legislation and pay the cost, e.g. of pollution control, only when they are legally forced to do so. (3) The third task is to formulate
a strategy, e.g. guidelines jar divisions, and to set up programmes designed to ensure that theJirm achieves social acceptance, with profitability in the long
term.
In developing a strategy it is worthwhile examining three approaches which are currently being used and which were discussed earlier: The first is the use of attitude research on employees, the public, shareholders and government officials. The second is John Humble’s suggestion that we need a corporate appraisal-a kind of check-list approach which he calls a Social Responsibility Audit. The third is a system for analysing social and political priorities by listing the demands being made, ranking them according to the emphasis they are given by powerful pressure groups, and forecasting whether they are likely to become more or less important in the future in the light of identifiable social trends. (4) Just as war may he seen as an
and the development political programmes.
of positive
(5) Next, the planner faces the long-term
problem of how to het$ management to become more socially and politically sensitive. 0
This will involve selling the social policies and programmes inside and outside the organization, training management in implementing these programmes at various levels and in different contexts 0 It will also probably mean establishing a group of specialist staff at headquarters to monitor social trends and keep management informed, and help to develop new policies and programmes as they are required 0 It will be necessary too to reflect these new management priorities in the appraisal and reward system, so that staff will know that if they do not implement the new social programmes this may affect their salary level and their promotion prospects. 0 The company should also review its systems and procedures for planning and controlling the development of major projects. Product plans and plans for new facilities need to take account of social and political aspects, as a matter of routine. It is also likely that project plans will have to build in longer lead times and a larger number of alternatives to provide for delays and failures resulting from social and political protests.
extension oj political action, so politics can be viewed as a development of social action. And corporate strategies for coping with social and political change should logically include political policies and programmes.
(6) Finally, the planner must ask in
The pattern of corporation politics is already established in areas where government influence is strongly felt, e.g. in developing countries and in quasi-public enterprises such as electric utilities and telephone companies. Once the political arena has been identified as a major area for competition, political strategies and programmes tend to be evolved in familiar ways -by the analysis of resources (finance, organization, regional influence, etc.) the assessment of competition, the formation of alliances (e.g. in trade associations)
It may be necessary to reduce the company’s investment in areas of the world which are politically unstable, to withdraw from sociallysensitive projects or to enter joint ventures where government or other companies will share the risk. It will also be sensible to make contingency plans to try to ensure that the company’s personnel and assets can be transferred quickly to another location in a time of emergency. I understand that there is an electronics plant in the south of France which is particularly subject to labour troubles and the
FEBRUARY,
1974
management have invested in buildings and equipment which can be dismantled in a matter of days if serious trouble develops. w
what other ways he might minimise the social and political risk to the company.
REFERENCES
(1)
See R. Worcester, Monitoring and Forecasting Public Opinion about Business, Journal of General Management, Vol. 1, No. 1 (Autumn 1973).
(2) Eleanore Carruth, The Legal Explosion has Left Business April 1973.
Shell-Shocked,
Fortune,
(3)
Forbes, date ?
(4)
Research and Policy Committee of the Committee for Economic Development, Social Responsibility of Business Corporations, p. 37. Committee for Economic Development, New York, (1971).
(5)
Bernard Taylor interviews Lord Watkinson, Journal of General Management, Vol. 1, No. 1 (Autumn 1973).
(6)
Milton Friedman, Capitalism and Freedom, p. 133. University of Chicago Press (1962).
(7)
Michel Crozier, A New Rationale for American Business, in The American Business Corporation by Eli Goldstein et al. MIT Press (1973).
(8)
See Kenneth Adams, The Impact of Business on Changing Social Values, Journal of Business Policy, Vol. 3, No. 4 (Summer 1973).
(9)
Kenneth 0. Michel, “Design of an lntrafirm Management Development Programme for Strategic Management”, International Conference on Strategic Management, Vanderbilt University (May 1973).
(10)
R. Worcester, ibid.
(11)
See John Humble, Social Responsibility Audit: A Management Tool foi Survival, DR. 23-57. Foundation for Business Responsibility, London (1973).
(12)
See Virgil Day, Business Priorities in a Changing Environment, Journal of Genera/ Management, Vol. 1, No. 1 (Autumn 1973).
(13)
National Industrial Conference Board, The Role of Business in Public Affairs. Studies in Public Affairs No. 2. pp. 8-10. New York (1968).
(14)
A. Moddie, Corporate Planning and Public Policy in India, Journal of Business Policy, Vol. 3, No. 1 (Autumn 1972).
(15)
Edwin M. Epstein, American Politics, Jersey (1969).
(16)
John Humble, ibid., p. 26.
(17)
See James Robertson “The Future of the City”, Interview by Bernard Taylor in Journalof Genera/Management, Vol. 1, No. 2 (Winter 1973/l 974.
(18)
See David Norburn. “Company Financial Performance, Primary Objective-Setting and Decision-Making” (Ph.D thesis). City University, London (1972).
The Corporation in Prentice-Hall, New
39