Donating to earthquake victims, hosting employee volunteer days, and buying more local products — a new Harvard Business Review article says many corporate philanthropic efforts, while well intended, don’t always provide real societal returns, and could end up hurting businesses in the long run.
The authors, Harvard professors Michael Porter and Mark Kramer, introduce a different solution. They advocate a move away from corporate social responsibility towards created shared value, where companies invent new ways of operating to address societal issues that do-good and also are integral to a company’s profitability and competitive position.
When put into practice, created shared value helps companies find new and better ways to develop products, serve new markets, and be more productive enterprises. “Shared value is not social responsibility, philanthropy, or even sustainability, but a new way to achieve economic success,” the authors say.
Such an approach is greatly needed today. For too long, business and society have been pitted against each other, with competing missions. Any transformational societal requirement is seen to impose a large financial constraint, and is usually rejected. What companies fail to acknowledge is how they can create tremendous economic value from initiatives that directly address society’s most pressing needs and challenges.
Hiring people with disabilities is a perfect example. In an interview with BBC, Porter says that economic theories have tended to view that there is a trade-off for hiring this group. “If we want to hire the disabled, [companies say] that is going to cost more money… and [that] we have got to force businesses to spend that money. This economic theory is deeply flawed. We have had a very narrow view of how you can make profit,” he says.
What he means is we already have a pool of 22 million working-age Americans who are underemployed and willing to work, but can’t get hired because of a disability. For too long, disability hiring has been a feel-good initiative, or tied to workplace diversity, which is helpful, but hard to assign a monetary value to each quarter.
Smart companies know it’s not just about having a more diverse pool of workers. On the financial side, hiring the disabled, a group that has proven to have low rates of absenteeism and turnover, reduces a company’s recruitment and retention costs. Hiring the disabled helps companies develop new products and services, expanding their customer base, which is increasingly filled with older Americans starting to encounter disability, veterans with disabilities and children with special needs.
Thanks to federal government initiatives, hiring the disabled lets companies leverage tax incentives of up to $10,000 per employee per year, and more for hiring a veteran with a disability. Also, state-led employment agencies will source and interview candidates with disabilities for free, and help on-board them, including training and assistive technology, at no extra cost to a company, which brings even more cost savings.
On the societal side, hiring a person with a disability lessens his or her reliance on public payroll benefits and reduces the overall unemployment rate. Only around 20% of the disabled population is in the labor force today, compared to 70% of people without disabilities. November’s unemployment rate for those with disabilities was 14.5%, vs. 9.1% for persons with no disability, not seasonally adjusted.
Hiring a person with a disability affords him or her access to private-employer healthcare and amenities, like wellness programs. It trims the number of people receiving public health benefits, so programs like Medicaid can work harder to give people with severe disabilities who cannot work the long-term care support they wouldn’t be able to get in the private market. It gives individuals more income to pay for goods and services like power wheelchairs and hearing aids, to help them live more independently and stay gainfully employed.
Rich Donovan, the Chief Investment Officer at IPS Capital, a consulting firm that created the Return on Disability Index, says he thinks Porter and Kramer’s approach serves as a tipping point. “Mining candidates in non-traditional, customer-centered markets will have a tremendous business impact,” Donovan says. “They’re moving the conversation away from non-core efforts based in philanthropy to real value creation.”
Created shared value doesn’t come easy. It requires a mind-shift for an entire company, including its leaders and managers, who must develop new skills and knowledge, including a deeper appreciation of societal needs. Yet companies that practice shared value creation are poised to show the most growth over the next five years, and will drive innovation over the next 10 years, the authors say. As companies ring in 2011 they should consider a created shared value approach that includes hiring more people with disabilities. An improved bottom line tied to real social progress – that’s a New Year’s resolution with real staying power.