5 Lessons in Corporate Citizenship for CEOs

3. Strong citizenry can boost recruitment and engagement efforts. Being able to offer prospective employees that sort of pride of purpose has become a competitive advantage in the ongoing war for talent, particularly among Millennials. “We’ve led research over the past five years to basically prove that there is an ROI around purpose at work, using purpose as the primary mechanism for incentivizing people,” said Arthur Woods, cofounder of Imperative, a benefit corporation dedicated to leading research and innovation on purpose for the workforce. “There is a whole subset of our workforce that is primarily driven by purpose over a paycheck and a promotion. And we’ve learned this is the highest performing group by every measure.”

At the automotive technology company Harman International, the corporate social responsibility section of its website is the one most trafficked by potential employees. “They immediately go and see what we’re doing in the community,” said Harman’s Paula Davis. “Having a sense of purpose in their jobs and in the community is very important.” Harman Inspired strengthens music education in underserved areas by collaborating with Little Kids Rock, a national nonprofit, to develop a new music technology curriculum that teaches kids to play, compose and improvise music styles culturally relevant to them.

Davis said Harman’s biggest clients, the automakers that deploy the company’s audio technology, “are very engaged on this topic, and they increasingly want to know what we’re doing. So the business case is built-in.”

CEOs increasingly are reporting higher employee engagement and improved talent acquisition and retention as a result of their corporate citizenship programs, reported Sarah Bostwick Stromoski, manager of CEO Leadership at CECP, a CEO-led coalition that believes that a company’s social strategy determines company success. “About 68 percent of CEOs tell us that the main benefit of their corporate societal investment or engagement or whatever you want to call it, has to do with their employees. That’s a huge driver. And it’s actually up in recent years; brand reputation, while it’s still important, is down in relation to the employee driver,” says Stromoski.

Cisco’s TacOps, a first response team working to establish emergency communications in the wake of disasters to coordinate relief efforts and speed food, water and medical care to those in need, was able to retain employees during the most recent downturn by having them work for a time at some of Cisco’s nonprofit partner organizations, said Mary deWysocki, senior director, corporate affairs strategy and global problem solving initiative. “We knew we had to have a restructuring,” she said. “But we were able to leverage some of our CSR relationships to retain that talent as we went through that cycle.”

4. Despite the potential benefits, justifying costs can be challenging—especially for public companies and SMEs with fewer resources. Even when companies see a potential long-term payoff, it can still be a challenge for public companies to justify large investment in corporate citizenship, noted Whelan. “They’re managing to shareholder value and when you’re managing to short-term shareholder value, you’ve got to reduce your margins, and you’ve got to justify that the way in which you do business is going to result in short-term profits.”

Even then, the investment can be tough to justify. For example, for a company that has factories in drought-prone areas, planning for potential stranded assets and invest-ing in conservation of water in those areas makes sound business sense. Yet, “you’re not going to be rewarded for that in the shareholder-value kind of equation we have right now,” said Whelan.

Add to that the challenge of small or midsize companies, many of them B2B, that struggle to find ways to make a meaningful contribution, noted Marshall Cooper, CEO of Chief Executive Group. “The B2B manufacturer that make broom handles—how do you give that company a purpose and a social mission? And they’re not as profitable as Google. So how do you rationalize the investment in both money and time?”

5. CEO involvement is critical to overcoming hurdles and sustaining citizenship efforts. Often, programs are driven by the CEO’s own desire to give back, especially at smaller companies. “Social responsibility is just kind of who I am given my upbringing,” said Mark Shugoll, CEO of the marketing research company Shugoll Research. “What we do is driven by the fact that I want our business to be involved in our community and care about our community.”

Shugoll Research, with just 30 employees, began by offering pro-bono work to arts nonprofits that needed the kind of market research Shugoll provided to its Fortune 500 clients. “We started doing it because we cared, but as we matured we realized that if we’re going to invest corporate resources that could go in other directions, we do need to get some sort of return,” he said, noting that Shugoll negotiated to receive sponsorship recognition for its pro-bono work. “That builds awareness of our company and creates an image of an organization that cares. We talk about our social responsibility in pitches to clients to differentiate us from other organizations.”

The company’s ArtSpeak program has also helped with retention, noted Shugoll. “The people who work at Shugoll Research have tremendous pride in the fact that we’re engaged with the arts. They kind of fight each other to work on the pro bono art studies. There’s fantastic engagement and pride, even with my part-time people—and we have 100 of them—who go out in the community and talk about what the company is doing. They are incredible ambassadors for us in that way. We have a very high retention rate, and I think that pride of commitment contributes to it.”

At IBM, Tesla reported that in coaching other companies on corporate responsibility programs, “one of the strongest success factors is having that CEO involvement.” At IBM, she added, CEO support has been strong since the program was launched by former CEO Sam Palmisano in 2007. “It is amazing to me how I’ve seen [IBM CEO] Ginni [Rometty] speak so many different times about the Corporate Service Corps without a single talking point because she’s very close to the program.”

The more the program is integrated into the core business, the more likely a company’s CEO will be involved, said Leora Rajak, founder and co-owner of the South African business support service provider Enterpriseroom.

“Unfortunately, as we all know, there are many, many CSR departments, or however you want to call them, that are run by the wrong people for the wrong reasons.” But with top down support, and as corporate citizenship programs become more integrated into business, companies have the potential to impact whole communities, while winning market share and attracting top talent, said Cone, who pointed to IBM’s Corporate Service Corps as an example. “It helps the community, it helps the culture and it’s so exciting because it’s not about a silo in the HR department or the philanthropy department, or such,” she said. “It’s coming together—and it’s the CEO who gets this.”