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CSR as a way of employee satisfaction and profit maximization

Abstract

The Corporate Social Responsibility (CSR) practices and standards are being implemented in Bangladesh Readymade Garment sector, because of global competitiveness and demand. Most of the companies  practice CSR acttivities to enhance the image of the organization.  But many of these companies yet ignore some or many of the employees right. However, very little is known about whether or how corporate social responsibility affects employees statisfiction and this links with profit. Because employees are primary stakeholders who directly contribute to the success of the company, understanding CSR activities with this study attempted to provide an analysis of the correlation between an organization’s CSR activities,employee satisfiction and profit maximization.

Introduction

The primary interest of a business is to earn profit, which emphasizes one’s own interests at others’ expense. To be profitable it is necessary to be maximally productive and efficiently allocate its resources through the benefit of the customers, employees and other stakeholders. Facing intense pressure from stakeholders and realizing that CSR enhances the reputation of an organization, brings in new business and improves stakeholder return (Kabir,2003 cited Azim 2011), awareness about CSR is rapidly increasing among Bangladeshi corporate culture.

Though the government has no explicit policy on CSR, Bangladesh Bank has made it mandatory for Banks to practice CSR, and some of the ministries, are encouraging private industry to engage in CSR activities, which are also tax deductible. Some companies for instance, Grameenphone, IDLC Finance, BRAC Bank and Nestle Bangladesh Ltd have a separate unit for CSR activities. The Bangladesh Enterprise Institute (BEI) and CSR Bangladesh provide a good contact point for companies seeking to become involved in CSR activities in Bangladesh.   There are a numbers of private consultants and NGOs offering advice on certifications related to CSR for example: SA8000, ISO26000, GRI ma.

Most of the businesses in Bangladesh involved in community development work in the form of charity without having any definite knowledge regarding CSR guideline, policy or unwilling to get advice from CSR consultation centre of Bangladesh.  Even Some of CSR practicing companies do not follow the labour acts properly. Profit is the main focus of most of the companies even in exchange of the life of their employees.

To address the above mentioned scenerio, this study focuses on how employees satisfaction can be achieved through CSR activities for not only improving corporate governance, labour rights, work place safety, fair treatment of workers, community development and environment management, industrialization and ensuring global market access but also for profit maximization. For these reasons we can define ‘CSR is a sustainable development process with the cooperation of stakeholders to use its resources effectively by improving the working condition, the quality of life of the workforce and their families in ways to benefit of the local community, society and environment as well as maximizing profit to  keep pace with the process of globalization.’

Research design

Through employee satisfaction a company gains its pride and reputation, increased productivity, greater market share, highly motivated employees, loyal customers, skilled as well as committed worker. “Employees and prospective employees may then infer from CSR that their company is moral and conclude that it is safe to invest their time and effort into the success of the company, or put differently, CSR may serve as the basis of presumptive trust.” (Bauman, C. W., & Skitka, L. J.,2012).

Company can gain employee satisfaction through different kinds of CSR activities, for instance, recycling, waste management, quality and productivity improvement, ergonomic working conditions, education facilities to the worker family, training to increase public awareness, reduce early marriage, child labor, health and safety issues like sanitation from the society. Other activities like tree plantation provide employee satisfaction and also contribute in reduction of global warming. “With the rapid increase of corporate social responsibility (CSR) practices in many firms, a question about the way in which CSR affects employees’ attitudes and behaviors has become crucial. We regard employees as primary stakeholders, who execute CSR strategies, and are directly involved in CSR programs. It is of interest to investigate how changing organizational realities affect them. A few studies have attempted to answer such question, examining the effects of perceived CSR on organizational Commitment.” (Farooq, M., Farooq, O., & Jasimuddin, S. M., 2014).

Valentine and Fleischman (2008) consider the effect of CSR on employees’ job satisfaction. On the basis of this statement it reveals that satisfied primary stakeholders contribute to optimize profitability. Employee satisfaction is a contributor to overall firm reputation. (Fombrun & Shanley, 1990) prospective employees are more attracted to companies with a stronger reputation for CSR (Albinger & Freeman, 2000; Backhaus et al., 2002; Greening & Turban, 2000; Turban & Greening, 1997; cf. Luce, Barber & Hillman, 2001).

Unsafe working environment, child labor, sexual harassment as well as the impact of Tazreen Fashions fire and collapse of Rana Plaza in Bangladesh is likely to be felt with most of the international buyers taking a cautious strategy of placing orders. Consequently, employee based CSR helps to create a competitive advantage by developing a workforce that effectively carries out the firm’s business strategy, leading to improved business performance including pride, quality, profit etc.  (Branco & Rodrigues, 2006).

Literature review

CSR in general terms is defined as the obligation of the firm to use its resources in ways to benefit society, through committed participation as a member of the community, taking into account the society at large and improving the welfare of society at large independent of direct gains of the company.

According to the Carroll (1979, p. 500) Philanthropic dimension addresses the corporation’s responsibility to engage in activities that promote human welfare or goodwill. Tuker (2009) proposes a CSR model which incorporates the stakeholder framework, classifying CSR actions into four main categories: (i) CSR to social and non social stakeholder, (ii) CSR to consumers, (iii) CSR to employees, and (iv) CSR to government.

Drawing on the definition of Waldman et al. (2006), we rely on the following dimensions of the Turker’s (2009) model: CSR to employees represents a firm’s actions that ensure the well-being and support of its employees through good working condition, including career opportunities, organizational justice, family-friendly policies and training and development.  CSR also works on natural environment that helps to reduce global warming and it also improve working environment as well as workers skill development.

Albinger and Freeman (2000) have found that corporate social performance is positively related to employer attractiveness among job seekers. Riordan, Gatewood, and Bill (1997) show that a positive corporate image is associated with the increased job satisfaction and decreased turnover intentions among a sample of non-managerial employees.  Other scholars (e.g., Stites & Michael, 2011, Brammer, Millington, & Rayton, 2007; Peterson, 2004; Turker, 2009) have shown that the employee perceptions of CSR are positively related to affective organizational commitment. Pratt (1998) suggests that organizational identification is a cognitive perceptual construct which may cause attitudes such as organizational commitment.  From these theories we conclude that CSR activities on employees and CSR activities through employees increase job satisfaction.

Similarly, Carmeli, Gilat, and Waldman (2007) argue that perceived social responsibility, in terms of the organization’s focus on the development and quality of product and services, enhances the relationship between management and employees, and employee retention that lead to higher levels of job performance in an Israeli sample. According to these theories CSR activities with involvement of employees improves product quality, productivity and thus maximizes profit.

Holme and Watts 2000) used a definition of CSR that viewed CSR as the third pillar of sustainable development, along with economic growth and ecological balance (Boeger 2008). The definition of the WBCSD is as follows:  “Corporate social responsibility is the commitment of business to contribute to sustainable economic development, working with employees, their families, the local community and society at large to improve their quality of life.”

Correspondingly, the previous theories focus on communities’ life style, environment, customers, sustainable business success and all other stakeholders as well as profit.  According to these theories it can be concise that employee satisfaction has great contribution to other stakeholders’ satisfaction of a company to optimize profit and enhance CSR activities.

Discussion

Employee related to CSR activities have significant implication for CSR strategies of a company.  Consequently, CSR strongly influence employees’ organizational identification and knowledge sharing behaviors emphasize the instrumental value of CSR. Business goodwill significantly affects job-related variables, such as commitment, motivation, turnover intentions, absenteeism, and knowledge-sharing behaviors, which previously have been considered important for competitive advantages (Datta, Guthrie, & Wright, 2005). Consequently, CSR helps create a competitive advantage by developing a workforce that effectively carries out the firm’s business strategy, leading to improved business performance (Branco & Rodrigues, 2006). Because of the motivation and knowledge sharing among their employees, along with reduced absenteeism, greater extra-role behavior, and lowered turnover costs (e.g., recruitment and training of new employees), firms with high CSR practices attain high productivity.

Fig.1 Relation between employee satisfaction and revenue growth.(HARVARD Business Review,vol,76,No.1 JANUARY 1998)

Managers can consider employees’ personal orientations when designing CSR strategy of the firm to capitalize on the benefits of CSR investments. “For collectivist regions such as Asia, the focus should be employee-related CSR, whereas for individualist regions such as North America and Europe, the CSR strategy should center on community and environmental issues.” ( Farooq, M., Farooq, O., & Jasimuddin, S. M. ,2014).

Fig.2. Relationship between employee motivation and profit.

A textile industry in developing country like Bangladesh should start their CSR activities for the welfare of their employees. Other reason behind that factor is that most of the garments companies in Bangladesh still are not conscious about the workers as a consequence they give little weight to this factor. Many companies are still working to follow the compliance law. Textile industry can contribute to the CSR activities through the motivation of their employees because of Employees certainly are key stakeholders (e.g., Donaldson & Preston, 1995; Freeman, 1984; Wood & Jones, 1995).

Company can enhance their employees’ satisfaction through CSR activities as well as performance reward, providing ergonomic workplace, training for skill development and others recreational holiday activities.

In the CSR activities company can take some initiatives for the welfare of the primary stakeholder (employees), for example,

  • Safety/security: Employee-centered CSR (e.g., competitive wages, health insurance coverage, employee development programs, positive union relations)
  • Distinctiveness :Highly visible extra-organizational CSR efforts (e.g., philanthropy, community engagement),  product and service quality,  Environmental stewardship (e.g., give food and beverage to flood starve affected people, give cloth to
  • Belongingness: Symbols of values (e.g., specific philanthropic causes, environmental impact, diversity), Values and mission statements
  • Meaning: Extra-organizational CSR efforts (e.g., volunteerism programs, philanthropic and community outreach programs)

These will enhance some psychological mediators like,

  • Trust in the company
  • Perceived general fairness
  • Firm reputation (i.e., employees’ estimation of how others perceive the firm)
  • Firm image (i.e., employees’ perception of how the firm presents itself to others)
  • Pride in organizational membership
  • Firm identity (i.e., employees conceptualization of their firm)
  • Value affirmation
  • Perceived similarity and fit
  • Psychological ownership and sense of responsibility

After accomplishing the need fulfillment the consequences are decrease counterproductive work behavior, facilitate employee recruitment  and retention,  enhance organizational Commitment, facilitate employee recruitment and retention, enhance organizational commitment, improve extra-role performance, increase organizational citizenship behavior, encourage ethical behavior and decision making, enhance organizational commitment,  increase employee life satisfaction and emotional well-being, improve task persistence and role performance, enhance organizational commitment.

From these we can conclude that there is a clear relationship between CSR, employee motivation and profit of a company.

CSR to employees and CSR activities through employees both increase employee satisfaction and thus maximize profit.

Conclusion and Recommendation

CSR activities not only include the profit maximization of company but also it enhances the lifestyles of employees, their families, and environment, thus it helps to unravel the global threaten facts.

In a Bangladesh context, several multinational companies and local companies practice CSR. Most of the business concerns in Bangladesh do not rate high in practicing CSR unless being pressured by the foreign buyers in case of export oriented business. But there is still unbelievably low compensation, high working hours, unhygienic conditions, lack of fire safety and various types of abuse are so common.

Moreover in RMG sector employees are struggling to establish their rights. CSR can also contribute a lot to community development. The corporate house can develop the community by creating employment, providing primary education, contribution to infrastructure development like road and high-ways and addressing environmental concerns. But From the perspective of Bangladesh where the government interventions in these fields being augmented by corporate alliance can go a long way in developing the economy, society and environment, initially CSR activities can be started from improved workplace condition regarding to the employees health and safety issues, and their families welfare. Subsequently, CSR activities can be promoted through the employee’s involvement thus employees may fell that they are a vital part of the company and this concept helps to become a satisfy employee and thus it contribute on productivity, quality improvement as well as profit.

Our intent is to provide a general framework that begins to identify and organize the relations between employees’ satisfaction, CSR activities involving employees’ and maximization of profit. Much more work is necessary to refine each aspect of our approach, correct inaccuracies, and incorporate additional ideas.

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