Impact of Corporate Social Responsibility Activities over ...ibtjbs.ilmauniversity.edu.pk/journal/jbs/8.2/2.pdf · Rizwana Bashir, Atif Hassan, Farooq-E-Azam Cheema. Riordan et. al,

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ABSTRACT

Journal of Management and Social SciencesVol. 8, No. 2, (Fall 2012) 11-21

The material presented by the author does not necessarily portray the viewpoint of the editorsand the management of the Institute of Business & Technology (IBT) or Bahria University and Ifugao StateUniversity, Philippines.

JMSS is published by the Institute of Business and Technology (IBT).Main Ibrahim Hydri Road, Korangi Creek, Karachi-75190, Pakistan.

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Impact of Corporate Social Responsibility Activities overthe Employees of the Organizations: An exploratory study

Purpose- This study is aimed at identifying internal impact of the corporatesocial responsibility activities - an impact on the employees of the organizationsengaged in these activities. It explores as how the organizations' engagementin these activities positively affects the employees' feelings towards theorganizations reshaping their level of motivation, performance and intention ofremaining with the organizations for longer time.Methodology/sample- Philosophy we used in this research is interpretivism.Because we interpreted meaning out of the activities and data collected. Samplesize for the study was 30 employees working for different business organizationsof Karachi comprising 14 female and 16 male employees. The participants werebetween 24 and 50 years of ageFindings- The study concluded that organizations' indulgence in corporatesocial responsibility activities positively impacts employees' attitude towardsthe organization resulting into better level of organizational belongingness andjob satisfaction among them that, in turn, is likely to improve organizationalproductivity.Practical Implications- This study suggests that employees' positive perceptiontowards an organizations' social ethics and social services may influence theirattitudes and performance, which in turn may affect the organizational productivity.In this sense, this study hints at another benefit of the CSR activities to theorganizations suggesting lucrative rate of return on their investment.

Rizwana BashirBahria University, Pakistan.

Atif HassanIfugao State University, Philippines.

Farooq-E-Azam CheemaInstitute of Business & Technology (IBT), Karachi.

Keywords : Corporate Social Responsibility, Employee Perception, Employee Attitude,Organizational Productivity

Rizwana Bashir : [email protected] Hassan : [email protected] Cheema : [email protected]

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Jel classification : M140

1. INTRODUCTION & AIM OF STUDY

Focus of this study is to identify internal impact of corporate social responsibility (CSR)activities over the employees of the organizations engaged in such activities. In recenttimes, CSR initiatives have become a priority of the business organizations worldwide inthe wake of increasing competition among the organizations to win customers throughestablishing their goodwill in the societ by the way of undertaking social service activitiesincluding donations to charities, community outreach programs, efforts to improve employeediversity, and reducing environmental impact etc. Recent research has shown that thebusiness organizations benefit from CSR activities as well since they enhance their imageamong their customers and increase their attractiveness to potential and existing employees.As a result, CSR initiatives have become an integral part of business practice, regardlessof the organization's type of markets, and the businesses now allocate hefty amounts intheir annual budgets to make what they call it as 'investment' in the social service areas.

As a part of natural course following developments in the area of CSR, researchbegane to more closely examine impact of CSR initiatives on various organizationalstakeholders. Particulalry, the research has examined how CSR activities help organizationsdevelop positive ethical identities/images in the minds of the public and customers whovalue this social service on part of the businesses. But, unfortunately, very little empiricalresearch has directly examined CSR from an internal or employee perspective. Despitewide range impact of CSR activities over employee effectiveness in the organizations,organizational ehavior (OB) and Human Resource Management researchers have under-investigated CSR in that regard either in terms of how employees perceive the socialperformance of their employer or how CSR perceptions impact their day-to-day attitudesand behaviors. Any concrete model explaining the CSR activities-employees' attitudes andbehaviours nexues has yet to be provided.

Likewise, how these activities can bring a positive outcome to the organizationsthrough improving attitude of their employees, has been yet to be elaborated throughresearch. Accordingly, through this research, we hope to fulfil this gap by introducingimpact of CSR activities over the employees' behaviours and attitudes as variables mediatingthe influence of CSR on business productivity. More specifically, the focus of this researchwill be on employees as an internal stakeholder that can evaluate and react to CSR policiesand programs. Through this reaction to the CSR activities, employees determine level oftheir contributors towards of the organizations. Accordingly, any activity or measure thatbrings about improvement in their attitude towards the organization is known to be veryuseful for the organizations.

In this sense, this study hints at another benefit of the CSR activities to theorganizations - improved employees' attitudes and behaviours towards organization. Itmeans investment on CSR initiatives offer a lucrative rate of return on their investmentthrough positvely affecting the organizational productivity. To elaborate our point we drawan employee CSR perception-employee attitidue linkage below:

12Vol. 8, No. 2, (Fall 2012)

Impact of Corporate Social Responsibility Activities over the Employees of the Organizations: Anexploratory study

Employees'perceived

satisfaction withCSR activities ofthe organization

Organizationaltrust and

belongingnessdeveloped among

the employees

Employee job satisfaction andenhanced performance

Employee commitmenttowards organization

Employee intention to remainwith the organization for

longer time

So, this study is among the rare studies conducted in the field of CSR that havefocused on internal impact of the CSR activities. Particularly in Pakistan, this could befirst one of its own kind. So through this study, we suggest shifting of focus of the businessmanagers from tradtionally built CSR-Financial perfromance nexus through customerattitude towards newly prosed CSR-finacial performance through improvement in employeeattitude and behaviours.

Research Question:

How the employees respond when the organizations they work for are engaged in corporatesocial responsibility (CSR) activities?

2.LITERATURE REVIEW

Pivato et al. 2008 says that despite the considerable research in the area of CSR, literaturearising out of it is limited in an important respect i.e. impact of CSR initiatives on theinternal stakeholders - the employees. Balmer and Greyser (2002) are of the view thatemployees' perceptions and attitudes about an organization's ethics and service to communityplay an important role in shaping their behavior with regard to the organization and themanagement, but this significant aspect of CSR has callously been ignored by the researchersof this area. Aguilera et al., (2007) endorsed this view saying that employees as a unit ofanalysis have received limited attention in past CSR literature. They further say that despitewide potential relevance of the CSR initiatives for employees' attitudes and behaviours ,OB and HRM researchers have under-investigated CSR in this area.

Wood & Jones (1995) had said earlier that although some theoretical models ofCorporate Social Performance explicitly included employees as a factor of for analysis ofthe outcomes, only few studies have investigated CSR's influence on employees'attitudesand behavior. The question of whether CSR driven attitudes and behaviors can affectemployees' organizational performance, and ultimately corporate financial performance,has rarely been investigated.

Supporting this view, Cropanzano et al. (2001) say that OB research hasdemonstrated that employees not only react to how they are treated by their organization,but also to how others, besides themselves and outside the organization, are treated. Becker-Olsen et al, (2006) expressed similar views and say that employees' attitudes aboutorganizations depend in part on those organizations' actually engaged in CSR initiatives.Findings of Rupp et al. (2006) are intersting in this connection. They say if an employeeperceives that his or her organization behaves in an obviously socially irresponsible way(e.g., has damaged the environment, has victimized a protected group, or has taken advantageof the general public); he or she will be likely to exhibit negative work attitudes andbehavior.

Conversely, if an employee perceives that his or her organization behaves in ahighly socially responsible manner even toward those outside and apart from the organization,he or she will likely have positive attitudes about the company and work more productivelyon its behalf. The authors further say that when employees, like other stakeholders, regardtheir organizations as responsible, compassionate, and benevolent citizens of their community(a goal of CSR activity), they will be more likely to be content with their employmentrelationships with such organizations. Likewise, Ellis, A. D. (2008) refres to a term PersonalSocial Actions (PSA) PSA - the activities that do not include CSR initiatives undertakenby the firm that have no employee involvement such as community grants, donations,corporate-wide sustainability programs, and in-kind donations - and say that employeeswho have the opportunity to personally and directly engage in personal social actions(prosocial behavior to the outside community, not to those in organization) will experiencestronger positive outcomes than those employees in organizations who do not have theopportunity to act directly or those who choose not to.

13 Journal of Management and Social Sciences

Rizwana Bashir, Atif Hassan, Farooq-E-Azam Cheema

Riordan et. al, (1997) found that employee's perceptions of corporate image canpositively influence job satisfaction, and negatively influence turnover and turnoverintentions through strengthening their identification with the organization. Pratt (1998)defined organizational identification as the degree to which organizational members perceivethat an organization shares their defining attributes. Ashforth & Mael (1989) had earliersuggested the way the CSR initiatives develop employees' identification with theorganizations, through making reference to their social identity theory. Social identitytheory suggests that individuals tend to reinforce their self-esteem and bolster their self-image by identifying with groups and organizations recognized for their social engagementand responsibility.

Flynn (2005) says that individuals' identification with an organization may bealigned with specific forms of social exchange. While refering to the social exchangetheory of Blau (1964), she suggests that individual levels of organizational identificationmay influence social exchange, and subsequent processes, triggered by CSR, may affectsocial exchange dynamics within organizations. In this way, Flynn's model combinestheories of social exchange and social identity to explain how employees may develop asense of obligation and engage in productive or counterproductive work behaviors, rewardingor punishing CSR practices, especially those directed at employees and work conditions.

Work of Ehsan and Ahmed (2012) is relevant to the Pakistan perspective. Theyfound that the organization's social responsibility healthy conduct builds belief of employeesin the organization and gives them inspiration and shapes their self-confidence. They alsoexplore the nature of association between employees and corporate social responsibilityin the circumstances of Pakistan using data of almost one hundred firms from themanufacturing sector for the time period of 2006-2009. For the analysis of the data theresearcher has used Correlation and Generalized Least Square Random Effect Regressionbased applied Statistical tools and techniques. Results of the study has diagnosed that thenature of affiliation between employee and CSR is positive in case of manufacturing sectorof Pakistan. Therefore, the positive affiliation highlights on the optimistic social behaviorof organizations in Pakistan in manufacturing sector.

Ellis, A. D. (2009) touches a subtle point and says that employee awareness ofsocial responsibility policies may be as or more important than organizations' actual CSRpolicies themselves because employees might have misperceptions of their firm's policiesor be unaware of its CSR activities. If employees are unaware of their firm's CSR activities,the initiatives will have no impact on employees' attitudes or behaviors. The author saysthat when employees are aware of a firm's CSR activities, an expectation in the form ofa psychological contract is created, and conversely, misperceptions of CSR activities couldlead to unintended effects, such as frustration that the firm is using resources ineffectively.However, Sen & Bhattacharya (2001) are of the view that simple awareness is not likelysufficient to provoke positive outcomes. Rather, employees must also perceive the CSRactivities to be effective and consonant with the firm's activities or values. Bhattacharya& Sen, (2004) go one step further and say that employees try to judge intents of theorganizations behind spending on CSR activities and make attributions regarding its CSRinitiatives to try to understand why the company is engaging in the particular activity.

Earlier studies like that of Ashforth & Mael (1989) found that CSR activities didnot affect the attitude of the existing employees only but also the influence the choice ofthe prospective employees. They said people tend to identify with organizations when theyperceive organization has salient attributes high prestige and an attractive image so thatorganizational identity could enhance members' self-esteem if they join it. The authors(ibid) suggest that a business's socially responsible practices send a positive signal topotential workers. The workers, in turn, are likely to get identified with a responsibleorganization, especially if their values correspond with promoted practices. These studiesshow how a socially responsible reputation influences corporate attractiveness for prospectiveemployees such as undergraduates, or MBA students (Blackhaus et al, 2002).

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In this regard, Albinger & Freeman (2000) say that CSR's effect on organizationalattractiveness is stronger for job seekers who have many job choices and when they haveprior knowledge of CSR and/or are directly concerned with the issues addressed by CSR. CSR can, therefore, be seen as a useful marketing tool for attracting the most qualifiedemployees and is an important component of corporate reputation (Fombrun & Shanley,1990). This research has demonstrated that, by enhancing corporate image and reputation,CSR is an appropriate tool for marketing to prospective employees.

3.RESEARCH METHODOLOGY

Sample size for the study was 30 employees working for different business organizationsof Karachi comprising 14 female and 16 male employees. The participants were between24 and 50 years of age - 17% were between the age of 20-25 years, 35% between the ageof 25-30 years, 22% between the age of 30-35 years and 26% aged 40 and above.

A structured questionnaire was used for collection of primary data. It contained14 close ended questions. However some background interviews were also conducted withthe respondents. Questionnaire was administered to the respondents directly to be filledin. One trick thing that we had to deal with was an unequal response from the respondentson th questionnaire. Only a minority of the repondendtns filled the questionniare fully. Wehad to improvise with the avaialbe data coordingly. The data collected was analyzedthrough using frequency distribution and percentage of respondent's answers, and theninterpreted.

4.RESULTS & DISCUSSION

4.1 Knowledge about the CSR

Of the 30 respondents, 3 males and 3females don't have any idea about CSR and 3 malesand 4 of females have little knowledge, 3 males and 2 females are making some effort tounderstand and 7males and 5 females are thinking actively on it.

4.2 Developing knowledge on CSR

Respondents were asked how are they improving knowledge on CSR, through participationin training courses and/or seminars, participation in workshops, research in the Internet,or doing no effort at all. Following were the results.



Figure 4

Of the 30 respondents, 5 males and 5 females prefer to follow CSR through training andseminars, 3 males and 2 females prefer workshops, 7 males and 6 females prefer internetand 1 male and 1 female are having no effort on it.

4.3 Meanings of being socially responsible

Respondents were asked what they meant by the organizations being "socially responsible"- to accomplish the environmental regulations, to assume social and environmental carein organisations activities, to promote equal opportunities between women and men at alllevels within the company. Following were the findings:

Figure 5

Of the 30 respondents, 4 male and 3 female respondents prefer to follow CSR throughtraining and seminars, 7 the male and 6 female respondents prefer workshops, 3 male and4 female respondents prefer internet and 2 male and 1 female participants did not spareany effort on it.

4.4 Impact of CSR activities upon employee motivation

When the respondents were asked whether CSR activities of the firms affect employeemotivation, following was the response:

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Figure 6

Of the 100 respondents, 39% of male and 32% of female respondents think that CSRactivities affect on employee motivation and 18 % of male and 11% of female participantsthink that CSR initiatives do not affect the employee motivation.

4.5 Impact of CSR Activities

When asked the respondents what the CSR activities mainly affect among the environment,economic and social development among other aspects, following was the response.

Figure 7

Of the 30 respondents, 6 male and 5 female members prefer environmental development,5 male and 4 female respondents prefer economic development, 4 male and 4 femaleparticipants prefer social development and 1 male and 1 female had no preference.

4.6 Impact of CSR Activities on Employee Commitment

When asked whether the CSR activities affect the employee commitment towards theorganizations, following was the result.



Figure 8

Of the 30 respondents, 13 male and 12 female think that CSR activities affect employeeorganizational commitment and 3 male and 2 female respondents think that CSR activitiesdo not affect employee organizational commitment.

4.7 Impact of CSR Activities on Employee Performance

When asked whether the CSR activities affect the employee performance in the organizations,following was the result.

Figure 13

Of the 30 respondents, 14 male and 13 female members think that CSR effect organizationalperformance and 2 male and 1 female members think that CSR initiatives do not affectorganizational performance.

4.8 Impact of CSR Activities on Employee Performance

When asked whether the CSR activities affect the employee performance in the organizations,following was the response.

18Vol. 8, No. 2, (Fall 2012)


Figure 14

Of the 30 respondents, 13 male and 11 female members think that there is an impact ofCSR aprograms on employee retention and 3 male and 3 female repondents think thatthere is no impact of CSR programs on employee retention.

4.9 Providing training to the employees on CSR

When asked whether the employees were provided training by the organizations on thematters of corporate social responsibility, following was the response:

Figure 12

Of the 30 respondents, 2 male and 5 female members think CSR training has been providedin-house and 14 male and 9 female think that CSR training has been provided by an outsidespecialist organization.

5.CONCLUSION

This study shows that employees love to be engaged with those organizations which arehighly involved in CSR activities. Background interviews with the employees reflectedtheir perception about the CSR who believed that entire society, of which they are part,can perform well only when the corporate sector organizations play their role in promotingwellness of the society. all are living in this environment, in this society, we'll be able toperform our best until we are physically and mentally best. They also believed that knowing



that their organizations were doing for betterment of the society besides earning profitsfor themselves, gives them mental comfort and enhances their belongingness with theorganizations. Employees' perception also indicates that CSR activities on part of theorganizations attract more customers towards the company business and motivates theemployees and leaves positive effect over their performance and rate of retention withthose organizations.

It means, indulging in CSR activities may benefit the organizations themselvesrather in multiple ways. That is, CSR activities may be bringing good name to theorganizations for providing services to the society, they also enhance the organizations'earnings through more and focused customers, motivated and well performing employeeswith high level of belongingness and retention rate. So instead of directly thinking aboutprofits, organizations should engage themselves CSR activities that could bring them multi-dimensional advantages.

But, murky side of the findings of this study is that a sizeable number of mediumsize organizations' employees even did not know about CSR, and those who knew werereluctant to share information over it.

REFERENCES

1. Aguilera, R. V., Rupp, D. E., Williams, C. A., & Ganapathi, J. (2007) Putting theS back in corporate social responsibility: A multi level theory of social changein organizations. Academy of Management Review, 32, 836-863.

2. Albinger, H. S., & Freeman, S. J. (2000) Corporate social performance andattractiveness as an employer to different job seeking populations, Journal ofBusiness Ethics, 28, 243-253.

3. Ashforth, B. E., & Mael, F. 1989. Social identity theory and the organization.Academy of Management Review, 14(1): 20-39.

4. Balmer, J. M. T., & Greyser, S. A. (2002) Managing the multiple identities of thecorporation. California Management Review, 44(3), 72-86.

5. Becker-Olsen, Cudmore, K. L. & Hill, R. P. (2006) The impact of perceivedcorporate social responsibility on consumer behavior, Journal of BusinessResearch, 59, 46-53.

6. Bhattacharya, C. B., & Sen, S. (2004) Doing better at doing good: When, why,and how consumers respond to corporate social initiatives, California ManagementReview, 47(1): 9-24.

7. Blackhaus, K., Stone, B. A., & Heiner, K. (2002) Exploring the relationshipbetween corporate social performance and employer attractiveness, Business andSociety, 41(3): 292-318.

8. Cropanzano, R., Byrne, Z. S., Bobocel, D. R., & Rupp, D. E. (2001) Moralvirtues, fairness heuristics, social entities, and other denizens of organizationaljustice, Journal of Vocational, Behavior, 58, 164-209.

9. Ehsan, S. & Ahmed, K. (2012) An Empirical investigation of the relationshipbetween Corporate Social Responsibility and Financial Performance, Journal ofBasic Appl. Sci. Res., 2 (3) 2909-2922.

10. Ellis, A. D. (2009) The impact of corporate social responsibility on employeeattitudes and behaviors, Academy of Management, 14

11. Flynn, F. J. 2005. Identity orientations and forms of social exchange in organizations,Academy of Management Review, 30(4): 737-750.

12. Pivato, S., Misani, N., & Tencati, A. (2008) The impact of corporate socialresponsibility on consumer trust: The case of organic food. Business Ethics: AEuropean Review, 17(1), 3-12.

13. Pratt, M. G. (1998) To be or not to be? Central questions in organizationalidentification. In D. A. Whetten & P. C. Godfrey (Eds.), Identity in Organizations:Building Theory Through Conversations: 171-207. Thousand Oaks, CA: Sage.

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14. Riordan, C. M., Gatewood, R. D., & Bill, J. B. (1997) Corporate image: Employeereactions and implications for managing corporate social performance, Journalof Business Ethics, 16(4), 401-412.

15. Rupp, D. E., Ganapathi, J., Aguilera, R. V., & Williams, C. A. (2006) Employeereactions to corporate social responsibility: An organizational justice framework,Journal of Organizational Behavior, 27, 537-543.

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17. Wood, D. J., & Jones, R. E. (1995) Stakeholder mismatching: A theoreticalproblem in empirical research in corporate social performance, International Journal of Organizational Analysis, 3: 229-267.

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Impact of Corporate Social Responsibility Activities over ...ibtjbs.ilmauniversity.edu.pk/journal/jbs/8.2/2.pdf · Rizwana Bashir, Atif Hassan, Farooq-E-Azam Cheema. Riordan et. al,