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This is an explanation and further exploration of Rosabeth Moss Kanter’s article: How Great Companies Think Differently, as published in the Harvard Business Review. This elaborates on the concept of institutional logic and its six facets, with examples of companies such as GE, Unilever, Heinz, P&G and more.
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How Great CompaniesThinkDifferentlyDia Lao and Nicole Lingham
Friedman, M. (1970, September 13). The Social Responsibility of Business Is to Increase Its Profits. New York Times Magazine.
Social/Institutional Logic
Focus on generating money and on their choices of how to do so, they consider people and society as core to their purpose
Invest in them in building enduring institutions
Accompanied with economic and financial logic it is used as a guiding principle behind the practices of many widely admired and high-performing companies
They are also vehicles for accomplishing societal purposes and for providing meaningful livelihoods for those who work in them
Six facets to Institutional Logic
1. A common purpose
2. A long-term view
3. Emotiona
l Engagem
ent
4. Building Communi
ties
5. Innovatio
n
6. Self-organisat
ion
A Common Purpose
A buffer against uncertainty and change by providing corporations with a coherent identity
Purpose and values enforced by management at the core of an organization’s identity
Clear institutional values when established can help with challenges of globalisation
A Long-Term Focus
Willing to sacrifice short-term financial opportunities if incompatible with institutional values.
E.g. HEINZ
Developed guidelines for sustainable tomato production and processing in California
Member of the Business Coalition of Sustainable Food Lab, whose key objective is to promote sustainability throughout the supply chain
Expanded the market through community development and improving quality of life
Heinz Micronutrient Campaign (HMC)-2001-present
Waste reduction through packaging innovation and recycling
Well-understood values and principles can increase employee engagement, as it can be a source of emotional appeal.
Adhering to institutional logic makes the regular articulation of values core to the company’s work.
Investing resources and time in communicating values keeps social purpose at the forefront of everyone’s mind. Work is made emotionally compelling.
This ensures that employees use the organizational values as a guide for business decisions.
Emotional Engagement
Emotional Engagement
The transmission of institutional values can evoke:
positive emotions
stimulate motivation
propel self-regulation or peer regulation
Emotion is one of the forces governing corporate performance and behavior inside organisations.
Moods are contagious and can affect such issues as absenteeism, health, and levels of effort and energy.
P&G’s Best Job Commercial
www.youtube.com/watch?v=8ywO8DR-5NY
Partnering with the Public
Bring business and societal interests together
Formation of public-private partnerships
Partnerships can take many forms: International activities, large domestic projects, product or service development to address unmet societal needs or short term volunteer efforts
It’s NOT sales or marketing; it’s a high-level conversation to demonstrate commitment to furthering the development of countries it is operating in
Hindustan Unilever – transformed village life in India
Raised the incomes and living standards of the 45000 female micro-entrepreneurs
Reduced the spread of a contagious disease by increasing access to hygiene products
Centered on partnerships with the government-supported and microcredit-financed village self-help groups
Project Shakti
InnovationBecome credible when leaders allocate time, talent and resources to national or community projects without seeking immediate returns
Encourage people from one country to serve another
Institution building helps connect partners across an ecosystem, producing business model innovation
Creating opportunities for individuals to use company resources to serve society furthers institution building goals
Aligning purpose to societal interests
Product offerings include health care, water treatment, lighting, energy and more
Market positioning is in a large intersection with societal interests
Its core values is on the notion of using imagination and innovation “to solve the world’s biggest problems”
$80 million workshop facility and training centre at Jandakot in West Australia to will address one of Australia’s big challenges, its engineering skills shortage
Supports many local organisations whose goals it aligns with through its Ecomagination and Healthymagination initiatives (ex. McGrath Foundation, Lupus Association for medical research, and Engineers Australia)
Self-OrganisationInstitutional logic assumes that people can be trusted to care about the fate of the whole enterprise
Employees make their own choices
Managers in great companies understand that formal structures can be too rigid to accommodate multidirectional pathways for resource and idea flow
E.g. EDS – came together outside formal structures to transform their business model
Kanter (2011) argues that great companies:
Are more than money-generating machines
Operate on “institutional logic”
Are vehicles for accomplishing societal purposes
Create frameworks using social value and human values as decision making criteria
Build enduring institutions by aligning a company’s purpose with her six facets of institutional logic
Urip (2010): Companies should consider profit, people and planet as values of creation to ensure sustainable growth opportunities.
Porter & Kramer (2006) adds that business and society are interdependent.
Companies act as vehicles for accomplishing societal purposes ---in a way that’s most appropriate to each firm’s strategy to optimise these investments in people and society.
Conclusion
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Czinkota, M. R., & Ronkainen, I. A. (2013). International marketing 10th Edition. Cengage Learning.
Firms who drive for a better world. (2012). Strategic Direction, 28(5), 26-29. doi:http://dx.doi.org.ezproxy.bond.edu.au/10.1108/02580541211222988
Friedman, M. (1970, September 13). The Social Responsibility of Business Is to Increase Its Profits. New York Times Magazine. Retrieved from: http://www.nytimes.com
General Electric Company (2014). GE Australia: Our Company Citizenship. Retrieved January 27, 2014, from http://www.ge.com/au/company/citizenship/index.html
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Heinz Company (2013). Heinz Micronutrient Campaign. Retrieved January 29, 2014, from http://www.heinz.com/sustainability/heinz-micronutrient-campaign.aspx
Kanter, R. M. (2011). How great companies think differently. Harvard Business Review, 89(11), 66-78.
Leavy, B. (2012). Getting back to what matters - creating long-term economic and social value. Strategy & Leadership, 40(4), 12-20. doi:http://dx.doi.org.ezproxy.bond.edu.au/10.1108/10878571211242902
Porter, M. E. K.,Mark R. (2006). Strategy & society: The link between competitive advantage and corporate social responsibility. Harvard Business Review, 84(12), 78-92.
Procter & Gamble. [hepimordkaTV]. (2013, February 17). Cool Ads - Best of 2012 - (P&G) Procter & Gamble - Best Job - HD. Retrieved January 29, 2014, from http://www.youtube.com/watch?v=8ywO8DR-5NY
Urip, S., & EBL Ebook Library. (2010). CSR strategies: Corporate social responsibility for a competitive edge in emerging markets. Hoboken: John Wiley & Sons, Inc.