Page 178 - Performance Leadership

Chapter 10 The Social Role of Organizations • 167

of social responsibility is introduced into all this? . . . Not much. The
system is too tight.” 9
This typical style of vertically aligned organization uses the corpo-
rate hierarchy to implement strategy and to provide feedback. It is a
top-down and bottom-up approach. However, if we apply the princi-
ples of horizontal alignment, the tension between business and society
that Porter describes disappears. Horizontal alignment uses the value
chain to create an efficient and an effective business, also called the
extended enterprise or the performance network. On the strategic level
it tries to reconcile different (even conflicting) objectives of the differ-
ent stakeholders. Horizontal alignment looks like the market principle,
where supply and demand regulate a price. However, within the per-
formance network of stakeholders, relationships last longer than a sin-
gle transaction. In order to run lasting relationships with different
stakeholders, their trust is needed. Our actions need to be reliable, and
our operations need to be transparent. We can only expect to receive
stakeholder contributions, such as capital, labor, materials, infrastruc-
ture, business, and regulations, when we are prepared to meet stake-
holder requirements, such as financial returns, a place to work,
business, and being a responsible citizen. In this way, corporate social
responsibility simply becomes just good management, as The Econo-
mist commented.
In order to understand how CSR affects performance management,
it is important to distinguish different styles of CSR, ranked by their
degree of integration with the business itself:

• Corporate philanthropy, sponsoring and contributing to good
causes
• Risk management, making sure the organization’s behaviors do
not cause damage to the business
• CSR as an integral part of the business strategy itself

The Limited Impact of Corporate Philanthropy

Most companies have some kind of charity program. Many companies
sponsor certain not-for-profit organizations, which fund research on
serious illnesses, fight illiteracy, provide shirts for the local soccer team,