CORPORATE SOCIAL RESPONSIBILITY AS AN INTERNAL MARKETING STRATEGY

C.B. Bhattacharya Sankar Sen Daniel Korschun July 2007

Forthcoming: Sloan Management Review, Fall 2007

Abstract

In todays economy, companies must work harder than ever to attract, retain and motivate talented employees. Our research shows that corporate social initiatives (CSR) can serve as a highly effective component of internal marketing programs by fulfilling employee needs and drawing them to identify strongly with the company. Thus, CSR activity is capable of yielding substantial returns to both the employee and the company. This paper highlights some of the challenges companies face in the effective deployment of their CSR strategy internally, among employees. The paper ends with some suggested solutions to these challenges Specifically, we recommend that managers (1) bring their employees closer to the companys CSR initiatives, (2) use a contingent input-output approach to formulate, evaluate and manage CSR-related outcomes, (3) understand and fulfill employee needs related to CSR, (4) focus on strengthening employee identification with the company, and (5) engage employees in co-creating CSR value.

CORPORATE SOCIAL RESPONSIBILITY AS AN INTERNAL MARKETING STRATEGY

In todays employment market, competition for employees who are talented, creative, and driven to satisfy customers is fierce, amounting to what McKinsey & Company has characterized as a war for talent.1 Thus, a companys success hinges on their ability to attract, motivate and retain a talented pool of employees. Evidence is mounting that a companys corporate social responsibility (CSR) activities is a legitimate, compelling and increasingly important way to attract and retain good employees. For example, in a bid to burnish images as socially responsible companies and thereby attract and retain talent, CEOs of high profile companies such as Home Depot, Delta Airlines and SAP have pledged to deploy 6.4 million employee volunteers to work on various community projects by 2007.2 Such a move seems to be sensible as increasingly, employees also seek out socially responsible companies: In the words of former Deloitte CEO Jim Copeland: The best professionals in the world want to work in organizations in which they can thrive, and they want to work for companies that exhibit good corporate citizenship.3 But despite this injection of enthusiasm and resources into CSR, our research in this domain suggests that very few companies are able to optimally leverage their CSR efforts in winning the war for talent. In this article, we identify the key barriers to effective deployment and suggest steps that companies can take to increase CSR effectiveness in the employee realm. Practitioners and theorists are increasingly turning to internal marketing as the rubric under which CSR can be used to acquire and retain employees. 4 Such a perspective holds that just as companies succeed in the market by fulfilling the needs of their customers, they can manage their employees best by viewing them as internal customers, fulfilling their needs through a compelling menu of job-products. The features of such job-products include salary, health benefits packages, and job responsibilities and when designed properly, can contribute

dramatically to job satisfaction, employee retention, and productivity. A key task for managers then is to identify and understand the needs of the different employee segments, configuring jobproducts that include CSR to address the needs of a diverse workforce. While definitions of CSR abound, they all allude essentially to a companys commitment to improving societal well-being through discretionary business practices and contributions of corporate resources.5 Companies can have CSR initiatives in diverse arenas. For example, KLD Research & Analytics, Inc., a major provider of company-specific CSR information, rates companies on three broad dimensions: environment (e.g., clean energy uses, recycling efforts), social issues (e.g., women and minority benefits, health and safety), and governance (e.g., transparency, compensation practices). Note that while top management is often content with CSR engagement at a broad level (e.g., we support recycling), come implementation time, a key driver of the effectiveness of CSR among stakeholders (e.g., employees, consumers) pertains to the specificity or focus with which a company supports or engages in a social initiative.6 These corporate social initiatives, typically centered around a specific social issue (e.g., dental health), can be implemented in many forms, ranging from corporate philanthropy (e.g., donating money to the American dental Association) to cause marketing (e.g., a percentage of each toothpaste purchase goes to the American Dental Association) to corporate social marketing programs, which promote actual behavior change (e.g., clinics in inner cities to train children in better dental health practices; see Kotler and Lee 2004 for more detailed examples of corporate social initiatives). In general, CSR initiatives, particularly those that are specific (and that we primarily focus on in our research), can be effective in building and sustaining a talented employee base because they reveal the values of a company and thus can be part of the Employee Value Proposition or

the the holistic sum of everything people experience and receive while they are a part of a company that the aforementioned McKinsey & Company study emphasizes is necessary in todays environment. CSR also humanizes the company in ways that other facets of the jobproduct cannot; it renders the company as a contributing member of the society rather than an entity obsessed with maximizing profits often at all costs. As Berry & Parasuraman put it, a paycheck may keep a person on the job physically, but it alone will not keep a person on the job emotionally.7 Moreover, because of its diverse and idiosyncratic bases, CSR, unlike the more traditional features of the job-product, often serves as a genuine point of differentiation for the company. In light of its multi-faceted appeal therefore, it is not surprising that both the number of CSR initiatives in the marketplace and the number of companies engaging in such programs are legion. Indeed, many companies big and small, including names such as Cisco, GE and IBM, view employee engagement in CSR as a strategic imperative.8 Yet, in line with Porter and Kramers general observation that, Most companies feel compelled to give to charity. Few have figured out how to do it well; we find that managers of companies engaging in CSR do not seem to know how to use it as an effective internal marketing lever.9 Given this, we sought to understand both the barriers managers face in using their CSR initiatives to attract and retain the best employees and the ways in which these barriers might be overcome. This research grew out of a larger program examining the impact of CSR on company stakeholders. Our prior work suggests that stakeholder responses to CSR are generally favorable, yet highly dependent upon the perceptions and characteristics of the individual, the company and to some extent, the broader industry and macro-environmental context. To better understand when, how and why employees react to CSR, we also conducted (1) a series of in-depth

interviews and 8 focus groups (of roughly 5-8 participants at various locations including the companys headquarters, two regional sites (a manufacturing plant and a regional sales office), and in an overseas location) with employees of a major US-based household and personal products company followed by a global employee survey (10,000+ responses) that was administered by the company itself, and (2) a series of interviews followed by two online surveys of employees (481 responses) from over 10 companies in the manufacturing, retail and service sectors. Details of the methodology of these studies are available from the authors on request. The insights from these primary research studies, viewed through the clarifying lens of our more general research program, provided valuable insights into the challenges and opportunities facing companies looking to strategically deploy their CSR efforts in the war for talent.

CSR AS AN INTERNAL MARKETING LEVER: CHALLENGES

While virtually all Fortune 500 companies engage in a multitude of CSR activities, these efforts are typically deployed based on normative rather than business motives, at the behest of the head of the company or those close to him/her (i.e., senior management). Not surprisingly then, these programs are usually managed by the community relations department or what Ward and Smith (2006) call the ghetto of the public affairs department rather than departments or business units with bottom line responsibilities, thereby often depriving the CSR from being well integrated with business strategy10. However, this is not to suggest that companies do not engage in any strategic thinking in deploying their CSR initiatives. But, perhaps because of the extant research and trade press attention paid both to the link between social responsibility and consumers purchase intentions (see, e.g., the studies by Cone Communication) as well as the

spate of corporate scandals, much of this thinking has been restricted thus far to external stakeholders such as consumers, regulators and social activist (i.e., watchdog) groups.11 More specifically, our research suggests that in the case of the internal stakeholder group of employees, the ability of CSR to serve as an effective internal marketing lever is limited by four related issues. We find that when it comes to CSR, companies often keep their employees at an arms length, not communicating the extent and details of their CSR to this stakeholder group in a clear and consistent manner. Second, we find that companies formulate their CSR programs without explicitly considering the diverse set of employee needs potentially fulfilled by such programs. Third, we find that companies do not fully understand the psychological mechanisms linking their CSR programs to anticipated positive returns from their employees (e.g., procompany behaviors, higher productivity, longer tenure, etc.). Finally, we find that companies take a decidedly top-down approach in the formulation, execution and maintenance of their CSR programs, often mandating employee participation rather than soliciting them to get involved on their own terms. We discuss each of these barriers in more detail next.

Employees Lack of Awareness and Involvement in CSR A key barrier to the effective deployment of CSR as an internal marketing lever is the lack of closeness between such activities and a companys employees. An employees proximity to CSR is program-specific and spans a continuum: from complete unawareness, at one end, to direct involvement at the other. Our research suggests that most employees, including those who want to be actively involved in such activities, are not close to their employers CSR; while many have a vague notion that their employer is socially responsible, they know little to nothing about the specific activities the company engages in. Moreover, while many employees are eager

to know more about such initiatives, they frequently find themselves at a loss for ways to learn about these. This is because such information is often tucked away in some remote pages of the company intranet. In the words of one of our focus group respondents: We actually do have a volunteer web site that gives you the organizations you could go to, but its obviously not well-publicized. Its just sitting there on the drive. Female, Household and Personal Products, Manufacturing Plant We find that even companies spending millions of dollars to support compelling social initiatives fail to seize opportunities to inform employees about their good works, let alone involve them in such initiatives. Consider this quote from one of our retail sector interviewees: There is maybe one [announcement] at the end of the year by the way, [the company] donated 12 million last year to non-profit educational organizations, but its a small blurb. I think you could increase the impact on associates if they were to publicize it more throughout the year. Just bring it to the attention of the associates more. - Male, Specialty Retailer, Headquarters The quantitative studies confirmed our hypotheses. For example, in the follow up global survey conducted by the household and personal products company, while 90% of the respondents agreed that it was important for the company to be engaged in CSR, only about 50% agreed that they had a good understanding of the nature of this engagement. Moreover, in the two online surveys we conducted, only 37% of the employees were aware of their respective companies CSR. Clearly, the effectiveness of CSR as a marketing lever hinges on the target groups awareness of it. Thus a major challenge for managers, particularly in large, multinational companies, is to increase their employees proximity to their CSR initiatives, taking them from unawareness to active involvement.

Limited Understanding of Employee Needs Fulfilled by CSR The internal marketing literature shows that, not surprisingly, the success of a specific jobproduct stems largely from the extent to which it fulfills key employee needs.12 Our research shows that as with the basic facets of job-product such as pay, benefits, advancement opportunities and job role, a companys CSR programs can also satisfy one or more important higher-order psycho-social needs that employees look to satisfy in their work life. In fact, it could be argued that the power of CSR as an internal marketing lever rests largely on its ability to satisfy meaningfully these employee needs. We find, however, that in the formulation and implementation of their CSR programs, companies are mostly oblivious to the extent to which these tap into employee needs. This is not entirely surprising, given that unearthing these needs, as in the case of consumers, is not an entirely straightforward task. This is further complicated by our finding that one size does not necessarily fit all: these needs are not only numerous but also vary in their relative importance across employee segments. For instance, our primary research uncovered at least four fundamental needs employees look to fulfill through their proximity to their employers CSR. These are detailed next, with the usual caveat that this need-set uncovered by our research may not be fully exhaustive. Self-enhancement. We found that some employees like to work for socially responsible companies because it provides opportunities both for personal growth and to learn new skills that are applicable to their work. Thus, when outlets are made available to employees, through CSR programs, to express their own sense of responsibility to their immediate or even larger community, the result can be highly rewarding emotionally. In the words of one of our focus group participants:

For me personally, it encourages me to do more, and volunteer more and participate more. You take on that personal obligation that the company has taken on. Female, Household and Personal Products, Headquarters In addition, our research reveals that when employees work on CSR projects that involve tasks outside of their daily routine, they also learn specific skills that can help them advance in their career. For example, Green Mountain Coffee has sent over 20% of their full-time employees to coffee farms in an effort to educate employees about sourcing issues; employees subsequently use this knowledge in their daily work Similarly, organizational or marketing skills developed in a community outreach program may give employees the tools necessary for greater job effectiveness, hastening the desired career advancement. In sum, CSR can fulfill the basic need to be a better employee and a better person. Work-Life Integration. While most companies target their job-products to the needs of their employees as expressed in the workplace, we discovered that employees view their work life, and the needs therein, quite broadly and holistically, encompassing key dimensions of their nonwork or personal lives. In other words, peoples work and personal lives are inextricably intertwined, and employees often look to integrate these two spheres so that they may transition more smoothly between them as a fulfillingly integrated whole. 13 Interestingly, our research suggests that CSR can help employees feel less stressed and more harmonious by balancing the often competing needs of their work and personal lives. As one respondent put it: I dont want to leave here for them to say I have been selling soap. It is probably not quite what Im after. So the better I can actually meet the personal purpose and pair it with my professional work, the more satisfied I am because then I see I

can better combine the two. Its not a choice, do one or the other. - Male, Household and Personal Products, Overseas Office This occurs because employees interpret the companys socially responsible behaviors as an indication that its values, and the importance it places on these, coincides with their own sense of the kind of lives, both work and personal, they want to lead. More concretely, the CSR programs that fulfill this need often involve the employees own social communities (e.g., schools in which the employees children study), thereby helping to integrate their professional and personal lives. Bridge to Company. Our research shows that employees, particularly those who work in remote locations often feel isolated from what they perceive to be the literal as well as psychosocial center of the company (e.g., headquarters). Naturally, these employees have a need to feel more connected or plugged-in to the social/professional network that is the company and, consequently, look for opportunities to connect with others around the company. Consider the words of an employee who works in a regional office far away from headquarters: The power of [the company] supporting what we want to do here in this communitywow, that makes me feel more connected to the company. - Female, Household and Personal Products, Regional Office For such employees, a companys CSR provides a bridge to fellow employees who are scattered across multiple locations because involvement in such programs helps them interact with colleagues in other corporate functions with whom they would not normally work. At a more abstract level, such employees feel a sense of oneness with the company through their involvement in the collective effort to make a difference in the world. One such instance is the efforts of one of the companies we studied to aid the victims of the 2004 Tsunami; banding 10

together to help those in need made employees all across the company feel more connected to others even though their designations and job types may have differed significantly. Reputational Shield. Employees often find themselves in situations where they have to defend their companys reputation to hostile external stakeholders. One example is that of global companies that sometimes have offices in locations where the local population and media have negative or even hostile feelings towards the company. These pockets of ill will can obviously be harmful to the company, but they can also hurt the self-esteem of individual employees. As one focus group respondent stated: You get outsideand it is either no knowledge or a lot of negative knowledge, and it is a very painful thing, because we all know better inside the company. Male, Household and Personal Products, Overseas Office Our research suggests that a companys CSR activity helps employees combat such negative external images by educating external audiences, and sometimes even themselves, about the companys core values and ethics. In this way, CSR provides a reputational shield that deflects negative sentiment found in their local communities. Overall, a lack of understanding of these psycho-social needs hinders companies from fulfilling them via appropriate social initiatives and thereby leveraging the benefits.

Limited Understanding of Employee Returns to CSR For companies to truly leverage their CSR as a strategic weapon in the war for talent, they need to have a clear understanding of the key pro-company outcomes produced by CSR, the underlying psychological drivers of these outcomes, and the multifarious contingencies that moderate these CSR-outcomes relationships. Such a need is underscored by a recent

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PricewaterhouseCoopers study that implicates employee motivation as one of the top two factors helping CEOs make the business case for CSR activities (58%; second only to reputation/brand at 79%).14 However, it may come as no surprise that most companies devote little if any resources to gain insights into the employee-specific processes and outcomes stemming from their CSR inputs. What is the nature of this CSR inputs-outcomes pathway? Our research reveals that a critical psychological mechanism underlying employees positive responses to their employers CSR actions is identification. To be specific, employee-company identification refers to the extent to which employees feel that their sense of self overlaps with their sense of the company. Employees who identify strongly with their employer view the companys successes as their own, and incorporate characteristics of the company into their own self-concept (i.e., how they see themselves).15 Notably, CSR has widely been implicated as a key determinant of such identification among consumers and job-applicants across numerous contexts.16 Our specific research with employees corroborates this notion: employees identify with a company based on its CSR actions. If the company does good things as a corporate citizen, and you intertwine your sense of identity with your work and that company, then I think you do feel better about yourself. Its kind of a daisy chain - Female, Household and Personal Products, Headquarters The importance of such CSR-induced identification stems from the slew of pro-company outcomes it engenders. These outcomes can be thought of as being of two basic and related kinds: internal and external. Internal to the employee (i.e., residing in the mind of the employee or primarily psychological) are outcomes such as high level of commitment, greater morale and a

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dedication to excellence in work tasks. For instance, our research suggests that CSR-based identification on the part of employees can cause them to feel satisfaction in their job, a sense of pride, and a feeling of well-being. It makes you feel good that [the company] is out there helping others and helping the environment. We do a lot of things for volunteer work outside that represent [the company] and Im proud of that. Male, Household and Personal Products, Manufacturing Plant These internal outcomes, in turn, cause employees to contribute resources towards the achievement of their employers goals.17 These behavioral, or external, outcomes, which were evident both in our focus group findings and interviews with executives, include a reduction in absenteeism, and employee retention. One of the things that keeps me here is some of the positive things that we do in the community and being able to be part of that as a result. Female, Household and Personal Products, Headquarters Employees also noted that their employers commitment to socially responsible behavior inspires them to work harder, be more productive, and focus more on quality. The responsibility of what youre doing out there, what youre making, and the pride in the product. Everything goes up, quality, your focus on not only what youre doing, but the machines youre working with. If you see something, right away you fix it. Male, Household and Personal Products, Manufacturing Plant The follow up quantitative survey conducted by the household and personal products company confirmed that employee engagement in CSR led to pride in the company, which in turn was positively related to employee performance and negatively

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to intention to quit. Similarly, our online survey results show that employee engagement in CSR is positively related to customer focus and pro-company citizenship behaviors and negatively to intentions to quit.

Top down approach to CSR Finally, our perspective on CSR in the employee domain reveals a clear chasm between the sense of the company (i.e., the senior management) and its employees regarding the appropriate source and ownership of its CSR. In a recent study of CSR ownership by the Wharton School and the UN Global Compact, 71% of the 400 companies surveyed indicated that their CSR policies and practices were developed/managed at the CEO level, 57% at the Board of Directors level and 56% at the senior management level. The findings of our research are no different: most companies view the development, implementation, and management of their CSR as a top-down process. In other words, it is senior management that decides what causes/issues to support and how. As one of our in depth interview respondents put it: As I said, every CEO weve had for the past couple of years has had a focus in the community and has made the company sort of take it on. The two CEOs and the one before that were into blood drives. So what is one of the things that we had to do on every one of our sites? Blood drives! - Female, Toys and Sporting Goods, Headquarters Clearly, a more strategic approach to CSR warrants greater if not complete ownership of these initiatives by the companys most important stakeholders: the employees. However, both anecdotal evidence and our own research reveal that more often than not, this is far from the case: employees are typically passive executors of top managements CSR decisions. But at the same time, our research shows that employees yearn to play a greater leadership role in their

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employers CSR initiatives; as co-creators of market value, they also want to be co-creators of CSR value. In the words of a focus group respondent: If we are looking to energize employeestheres going to be a natural tendency to say, were going to empower you through charitable giving in some capacity. I have half dozen organizations that I work with, and Id love to be able to extend that reach through [the company]. Products, Regional Office In sum, companies and employees dont see eye to eye on who really is making the difference through CSR. Most of the power is held by the company, leaving the employees feeling unempowered, unmotivated, and sometimes even disenchanted and disengaged. - Female, Household and Personal

OPTIMAL CSR STRATEGIES: OPPORTUNITIES

As CSR becomes more widespread it is also changing rapidly. What was once ancillary to business practice is quickly becoming an essential element of corporate strategy. Yet, our research suggests that companies need to shift their approach to CSR management if they are to fully realize the returns that CSR promises; the traditional approach is no longer sufficient as a CSR strategy in todays diversified global organizations. Based on the barriers identified above, we recommend that managers take the following steps in order to maximize their return on investment in CSR initiatives in the employee domain. First, increase employee proximity to CSR. Second, and more generally, use a contingent inputoutput approach to formulate and implement CSR initiatives, and subsequently evaluate and manage CSR outcomes. Third, understand and fulfill employee needs related to CSR, targeting strategic employee segments. Fourth, focus on strengthening employee identification with the 15

company. Finally, enable employees to be co-creators of CSR value. We discuss each of these recommendations in more detail, next.

Increase employee proximity to CSR The most straightforward implication of our research is that companies need to bring employees closer to their CSR activities. The most specific and important aspect of this is communication; companies need to inform employees, both potential and current, about their CSR programs in a concrete, clear, coherent, and consistent manner. Such communication needs to include both the rationale behind the CSR involvement, if any, and the specifics of the programs, their operations, the amount of company resources devoted and the challenges faced, and most importantly, their successes. Many companies are starting to do a good job of communicating their CSR commitments to their external publics; the same lessons can be applied to internal communication about this issue. At the same time, companies need to realize that employees, like consumers, can learn about both a companys involvement in specific CSR (and the lack thereof) and their motivations for doing so from multiple sources (e.g., blogs, online chat rooms, media), many of which are external to the company and therefore, uncontrollable. As a result, the credibility of such sources can often be high as they are seen to be more objective than internal press releases. Thus, companies must aim for high credibility in their communications so as to offset employee cynicism, particularly since that is likely to increase with the volume of communication. This can be done through the involvement of credible and influential internal sources (e.g., in company online communities such as IBMs On Demand Community) and a bias towards objective information rather than feel good rhetoric.

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While the latter is undoubtedly important in inspiring employees to get involved and feel part of a greater cause, by itself it can come across as empty PR. Bringing employees closer to CSR obviously does not end with communication: companies need to encourage the active participation of employees in their CSR programs. This is not just a matter of exhorting employees to get involved. As will be discussed in more detail later in this section, companies need to enable meaningful and specific participation by providing real opportunities for involvement in ways that do not take away from employees ability to fulfill their regular professional responsibilities. Better yet, companies can consider making CSR participation an integral part of their employees professional responsibilities: activities such as the aforementioned example of Green Mountain Coffee who send their full-time employees to coffee farms in an effort to educate employees about sourcing issues increase the credibility of the companys commitment to CSR, because it is viewed as putting its money where its mouth is. Finally, as in other aspects of their job, companies need to provide objective and constructive feedback about employees performance in CSR-related activities in a way that encourages and allows employees to make the most personally and professionally significant contributions possible to this domain.18 This can take the form of not just feel-good awards but actual 360 degree evaluations as is common in many professional settings.

Use a contingent input-output approach to make CSR decisions More generally, our research suggests that for companies to be truly strategic about their CSR deployments internally, they need to take a contingent input-output approach in making CSR decisions. To do so, companies need to rely on their understanding of how and in what ways their CSR inputs translate to pro-company outputs. Such a framework, based on our own

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findings is presented in Figure 1. It adopts a contingent approach in understanding how employees benefit from a company CSR initiatives and whether and how these employee benefits translate to favorable company outcomes. The framework can be divided into three broad parts: (1) CSR inputs, (2) the processes through which CSR inputs are interpreted by employees, and (3) a set of outcomes that are exhibited as thoughts and behaviors of employees. Additionally, we identify a set of context-specific moderators or multipliers (i.e., company and employee characteristics) that likely dampen or amplify the relationships between inputs and outcomes. ----Insert Figure 1 about Here --We advise managers to begin CSR planning by adapting such an input-output model for their own unique context, identifying clearly through research the inputs in terms of the issues or causes the company ought to support, the processes and most importantly the desired employeecentric outputs of each CSR program. Once the programs are implemented, these outputs can then be monitored through internal surveys in order to determine which programs are delivering the most value to employees, and ultimately, to the company. Measures should include items for both internal (e.g., attitude towards the company, well-being, commitment to continue employment) and external (e.g., absenteeism, retention, work effort, productivity) outcomes as well as the underlying processes (e.g., identification). Through such marketing research, managers can track the effectiveness of CSR initiatives (e.g., outputs/inputs) among employees and more accurately quantify returns to the company. We recommend this sort of research as a key ingredient in any CSR audit.19 Finally, in trying to assess returns to CSR, managers should consider a full range of multipliers (i.e., contingencies) that may amplify or dampen the effects of CSR initiatives.

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Examples of such multipliers are provided in figure 1. Programs that are highly impactful for some employees may have little effect on others depending on a variety of employee and company characteristics.20 Thus, the key to constructing effective CSR programs lies in understanding not just the extent to which these programs can satisfy key employee needs, engendering identification, but also the employee- and company-specific factors that can magnify or dampen the effects of CSR. Employee factors include their tenure at the company, the nature of their job, their age, their gender, and their perceived importance of the cause at the center of a particular CSR program.21 Each of these factors may make it more or less likely that personal needs will be fulfilled by a CSR program. For example, while most people will respond favorably to programs involving breast cancer, women employees in the high risk age bracket are likely to feel greater affinity for such a program. Analogously, positive responses to a CSR program will be strengthened when it fits closely with the companys industry, mission, and core capabilities. Both our focus groups and prior research suggest that a good fit between the company and a cause draws employees to the company and reinforces positively in their minds the image of what their employer stands for.22

Understand and fulfill employee needs The fulfillment of certain basic but somewhat idiosyncratic employee needs is a precondition for the success of CSR as an internal marketing instrument. Moreover, the importance of these needs varies across employee segments. Thus, a CSR program that satisfies the needs of one set of employees may have little impact on another. Given this, much as they segment consumers, companies need to segment their employees based on the relative importance of their CSR-related needs and design and target segment-specific CSR programs to

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optimally meet these diverse needs. To do so, managers need to implement internal marketing research programs that are analogous to those that companies use to monitor customer reactions to products and services. The first goal of such internal marketing research should be to segment employees based on the benefits that each group derives, if any, from CSR initiatives. Employee segments can be identified in the same way that companies deploy benefit segmentation in the customer realm and look for demographic or psychographic correlates for these segments so as to identify and target them more easily. In our research for example, a key segment seems to be those employees who live in regions where the company is viewed unfavorably by the local population; thus, it may be necessary to engage in CSR programs that not only have great social impact within that particular market but also high external visibility. Take the following quote from an employee located far from headquarters: Its important for me to have pride in the company I work for. That matters. When you go out and you hear the company get trashed, I think I know better and I think we know better. - Male, Household and Personal Products, Overseas Office Clearly, creating a CSR offering for each benefit segment is no mean feat. Thus, as in the case of customers, companies may be best off articulating the relative attractiveness to them of the different employee segments and targeting, at least initially, their CSR programs to those employee segments that are the most valuable. The specific formulation of these programs will obviously be based, as will be the manner in which they are communicated, on the extent to which they can meet the important needs of such segments. For instance, for those employees looking to CSR as a reputational shield, explicit communication about how a specific CSR

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program can help placate local publics would be essential. At the same time, the success of these programs can be gauged in terms of, among other things, the extent to which the targeted employee needs were actually met. In sum, the need for successful CSR strategies to fulfill the often disparate needs of different employees segments has implications for the formulation, execution, communication and evaluation of such strategies. Therefore, we urge managers to base their CSR decisions on a sound understanding of both the varied needs of employees throughout the company and the relative ability of different CSR initiatives to fulfill these needs.

Strengthen employee identification As a primary stakeholder group, employees are prone to identify very strongly with their employer, 23 displaying, consequently, an array of pro-company attitudes and behaviors including increased satisfaction, pride, stronger morale and heightened productivity. Our research indicates that CSR can dramatically strengthen identification because it reveals more unequivocally than most other corporate endeavors the values or soul of the company. 24 This is consistent with other scholarly research describing how CSR produces important employeecentric outcomes through the process of identification.25 Thus, the basic objective in devising effective CSR strategies should be to increase employee identification rather than other, more commonly monitored indicators, such as employees job satisfaction, which are but some of the numerous consequences of identification. In line with a basic theme of this article, such identification is likely to depend on a host of controllable and measurable factors such as employees proximity to the CSR programs, the ability of these programs to satisfy key employee needs and the host of company and employee-

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specific factors discussed earlier that magnify or diminish the impact of a specific program. Thus, managers must deduce, based on the contingent input-output approach discussed earlier, the optimal conditions for engendering identification among their most valued employee segments through CSR programs. Measures of identification range from the anecdotal to the formal. For instance, identification is easily recognizable anecdotally through we statements that employees use in describing the organization; employees that identify strongly will frequently make a distinction between we insiders and people outside the company. For more formal measurements of identification, we recommend the pictorial scale designed by Bergami & Bagozzi, 26 a simple question which reliably captures the extent to which an individual identifies with the company. Involve employees in co-creating CSR value One of the most important lessons to emerge from our research is the need for companies to put their employees at the center of their CSR efforts, empowering them as co-creators of effective CSR strategies. In other words, companies need to involve their employees in the planning, design, and implementation of CSR programs, making them active participants rather than passive onlookers in the creation of the CSR component of the job-product. Employees welcome, and indeed crave, this type of involvement because they seek to cocreate the value that their employer delivers in much the same way that consumers contribute to customer value. Co-creation of value by consumers is by now a well-established idea; consumers regularly engage in dialogue with companies, taking a leading role in shaping products and services in order to maximize the value of the customer experience.27 Our research reveals that employees, by virtue of their close connection to their employers, are even more likely than consumers to seek such experiences in the employment realm. When employees attempt to tailor

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the companys CSR efforts based on their personal needs, they are not only contributing to the companys well-being, they are also co-creating their own job-product. Since employees know their needs better than anyone, employees that co-produce CSR programs with their employer can be expected to develop programs that provide maximum value to the employee in the form of meaning and purpose. Involving and listening to employees can greatly assist companies in fulfilling needs that might otherwise be difficult to identify. CSR is a top-down rather than a co-created endeavor in most companies because the former is easier. Such an approach may provide efficiencies in terms of visibility and scope but our research suggests that it will end up disaffecting employees. How might, then, a company implement a co-created approach to CSR instead? To have their CSR be truly effective, companies need to make their employees the primary enactors in social responsibility programs. Employees see themselves as closer to their community than company executives and therefore more qualified to design and implement CSR at the ground level. For example, matching gift programs where the company matches employee charitable donations dollar-for-dollar are popular with employees because they give the individual freedom in deciding which charity to support, yet leverage the resources available through the company. Employees are very responsive to these sorts of efforts because it demonstrates in very clear terms that the companys values match those of the employee. Importantly, shifting the primary responsibility for their CSR programs to employees does not absolve the company of its responsibility to be an effective enabler. For a truly successful, co-created CSR experience, a company must support the employees efforts in several specific ways. First, the company must maintain clear, open, continuous, two-way communication with its employees in the CSR domain, facilitating the interchange of ideas both

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vertically and horizontally (across employee groups). Second, and more generally, it must provide the requisite guidance and resources to its employees so that they are able to effectively implement their CSR plans. This includes going beyond merely allowing CSR involvement on company time to, ideally, working with employee groups to help them fully integrate their CSR efforts into a coherent, complete job-product. Needless to say, such enabling presupposes the companys provision of adequate financial and material resources to allow employees to make a difference in their chosen CSR domain. Corporate social marketing initiatives (Kotler & Lee 2004) are particularly attractive from this perspective because in their synergy with the companys core competencies they allow the company to reap returns to its CSR investment not only through its employees but also the stakeholder group that is the target of the CSR effort. Finally, companies interested in a co-created CSR experience must also recognize and reward employees for their CSR successes in ways that are not extraneous to but instead fully integrated with the reward structure implicit in their job-products.

CONCLUSION With many global companies investing millions of dollars in CSR initiatives, it has never been more worthwhile to assess returns with employees and optimize the return on such investment, especially when one considers the impact of this stakeholder group on competitive advantage. Our research suggests that successful CSR strategies need to be based on a clearly articulated and contingent input-output perspective, bring employees closer to such strategies, satisfy key and varying employee needs, encourage employee identification, and be co-created in partnership with employees. Specifically, CSR is most effective when employees play the role of the actual enactor of CSR programs with the company acting as an enabler. But companies

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need to be careful that they are not viewed as disingenuous for overly marketing CSR to employees as well as maintain control and focus in the value co-creation process. In essence, CSR is a complex strategic endeavor that demands considerable attention and commitment by the company in order for it to pay back. However, if done right, it can yield rich dividends as a potent internal marketing instrument.

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Figure 1: Employee Reactions to CSR

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