Quantitative Research/Social Change and Ethics/Quantitative Business Research The business environment today is constantly changing with changing demands of employees especially the entry level position employees that are costly demanding for more salar

THE MODERATING ROLE OF TOP MANAGEMENT SUPPORT IN THE LINK BETWEEN CSR AND

EMPLOYEE ENGAGEMENT - A CONCEPTUAL FRAMEWORK

Manimegalai Santhosh* Dr. Rupashree Baral**

ABSTRACT

Purpose Corporate social responsibility (CSR) has emerged as a popular concept since two decades. In today’s dynamic work environment, organizations are finding ways to enhance the level of employee engagement. One of the ways to improve the level of employee engagement is through CSR activities to both internal and external stakeholders. The literature reveals that CSR can lead to a positive attitude and this paper attempts to study one such attitude as employee engagement. Drawing from the earlier literature, the authors propose that top management support could moderate the relationship between CSR activities and employee engagement.

Design/methodology/approach This paper is a conceptual paper with a theoretical background that supports the link between variables used in the study.

Findings This paper made an attempt to study CSR and its outcomes among employees. The theoretical contribution of this study helps the future researchers to conduct an empirical study.

Practical implications It helps the managers to understand the dire need of positive attitudes and behaviors among employees. It also motivates them to invest on CSR activities and thereby tuning their employees’ attitudes which is a key element in today’s competing work environment.

Originality/value

This paper is original in terms of variables used. Top management support is very crucial and often ignored when it comes for CSR involvement. Thus, this paper captures the significant role of top management support in linking CSR with employee attitudes.

Key words: CSR, employee engagement, social exchange theory, top management support.

© The Journal - Contemporary Management Research 2015, Vol.9, Issue No. 2, 1 - 15.

*) Research Scholar, Department of Management Studies, Indian Institute of Technology Madras, Chennai, India **) Assistant Professor, Department of Management Studies, Indian Institute of Technology Madras, Chennai, India

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1. INTRODUCTION

Human resources are the ultimate asset of any organization. The efficient workforce determines the effective functioning of the organization. Though there are many ways to generate efficient employees, the need of the hour is to find out one solution which suits for all employees. Recently, employees, along with their employers show concern for human lives. They are very sympathetic to the basic needs of the community. Many organizations are doing these community development activities as a separate function of their businesses and they termed it as corporate social responsibility (CSR). CSR is inseparable in today’s business role. Organizations cannot exist in a vacuum and they need support from various entities.

During the business process, organizations tend to affect their entities in various ways (pollution, contamination and so on). In this situation, organizations try to minimize and rectify the effects through various measures and one among them is CSR. It is the way of repaying their stakeholders through some good measures. In spite of this, there are few organizations which do CSR activities in a noble way though they have not caused any harm to the society. CSR yields many benefits to the organizations as well as to the employees. When CSR is channeled through

the proper medium it can even influence the positive attitudes among employees, which are less explored by researchers in India. The role of CSR is influenced by the top management. They are the sole authority in drafting the policies for CSR and hence their support is very crucial in bringing out the necessary outcomes among employees.

2. LITERATURE REVIEW

2.1 Varied definitions of CSR

CSR is defined as “the social responsibility of business encompassing the economic, legal, ethical and discretionary expectations that society has on organizations at a given point in time” (Carroll, 1979). One of the business associations such as the Confederation of British Industry considers CSR as beyond their financial performance (Crane, Matten and Spence, 2008). Davis (1973) defines CSR as ‘firm’s considerations of, and response to, issues beyond narrow economical, technical, and legal requirement of firm’. Though the terminologies vary, from author to author, organizations to organizations, they insist more or less focus on doing good things to the people.

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2.2 Significant features of CSR

The significance of CSR can be analyzed through its features. Some of its features are voluntary, managing externalities, broader responsibilities, not diverting from economic benefits, values and more than philanthropy. The effectiveness of legal regulation is being questioned and hence, many scholars support the voluntary action of CSR. CSR is more about managing externalities or in other words, companies are investing their 3M – Money, Material and Manpower to protect the environment by doing some activities. Corporations depend on many constituencies such as consumers, employers, suppliers and local communities. So corporation’s responsibility is wider, as it has to address all their needs. CSR has to be in line with the organizational functions such as production, HR, marketing, procurement, logistics and finance.

The organization should be in a position to fulfill their economic benefits by not exploiting their society. There should be a proper alignment between social and economic responsibilities. CSR is being implemented according to the company’s policies and strategies. But in certain cases, it goes beyond that to fulfill their value. Earlier CSR was mainly concerned with its philanthropic approach towards community. But now it goes beyond philanthropic

approach to fulfill the societal needs (Crane et al., 2008).

2.3 CSR in different sectors and NGOs

Corporate Social Responsibility, as indicated by the word “corporate” means the “business world”. In any sector, practicing CSR has its own implications. Large corporations are more exposed to the society and hence, they have to face consequences for their irresponsible behaviors. In order to approach CSR more professionally, comprehensively and coherently, these organizations should have fairly structured and formalized system. Each policy is converted into code of conduct so that, employees and suppliers will be following the same. Documentation is vital so that the same can be used for the annual report (Crane et al., 2008). SME’s on contrary to larger organizations are less exposed to the society. The owners are the management, but still, decisions pertained to CSR are taken by fewer employees. Hence, there exists a more informal kind of approach towards CSR. The major responsibilities are to build good personal relationship and trust amongst their stakeholders (Spence and Schmidtpeter, 2002).

In addition to the private sector, society’s demand has extended to public sector also.

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On par with the private sector, public sector too faces environmental demands such as equal employment opportunity, proper sourcing and so on. They do adopt similar policies, practices and tools to implement CSR (Crane et al., 2008). Some of the major NGOs such as Save the Children, or Amnesty International played a role in demanding responsible behavior from the business world, by creating awareness to the common public. Thus, the role of NGOs is a major threatening factor for the reputed companies. Now a days relationship between NGO’s and corporations are very positive (Crane et al., 2008).

2.4 Differentiating CSR from other related constructs

There are a few similar terms of CSR such as corporate social responsiveness, corporate social performance, and corporate governance and are explained below.

2.4.1 Corporate social responsiveness (CSR 2)

Corporate social responsiveness can also be termed as the “other CSR” or CSR 2.CSR 2 talks about the implementation facet (Crane et al., 2008; Keinert, 2008). It is “action oriented” (or) in other words, it is “reactive” approach (Garriga and Mele, 2004). It

protects the organizations from externalities by doing interventions (Keinert, 2008).

2.4.2 Corporate Social Performance (CSP)

CSP is an indicator to determine the success and failures of CSR strategies, policies and programs (Crane et al., 2008; Keinert, 2008). Traditional measurement of a firm’s performance is based on ROI and other factors while neglecting the social and environmental factors. This doesn’t measure the overall organizational performance.

Thus, CSP serves as an indicator (or) tool to measure firm’s overall performance that includes societal and environmental factors along with financial growth. The major difficulty in CSP is measuring the performances. It is very difficult to quantify the performance unlike for financial performance, because of its diversity in nature; it depends on time, place and also the person’s ideology. Also, decisions pertaining to “good” (or) “bad” social and environmental performance is very difficult to measure and it is subjective in nature. But to certain extent, external assessment of CSP is possible, through social (or) environmental auditing, corresponding standards and certification procedures (Keinert, 2008).

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2.4.3 Corporate Governance (CG)

CG mainly comprises of principles and mechanisms which emphasize more on giving respect to the stakeholders involved, in business entities, to do business ethically and comply with legal requirements. CG is mainly concerned on the internal stakeholders. Nowadays, CG ensures more facets of business such as the distribution of power, delegation of authority, remuneration, performance evaluation and so on. Transparency in decision making plays a crucial role in CG. The essence of CG is to deter the powers of executive to protect the interest of the stakeholders’ group, especially the owners (Snider, Hill and Martin, 2003). It helps the company a lot, whereas the CSR concentrates both on internal and external stakeholders (Keinert, 2008).

2.5 Theories under CSR

CSR theories can be broadly classified into the following (Garriga and Mele, 2004).

a) Instrumental theory: Instrumental theory suggests that corporations aim to maximize shareholder value and gain competitive advantage. These objectives can be achieved through a) enhancing social investment in a competitive context (being philanthropic), b) emphasizing on resource- based view of the firm (intertwined with the

people, organizational and physical resources) and building dynamic capabilities (managerial skills to acquire, to modify and produce products that promote values to the organization), c) institutionalizing strategies for the bottom of the economic pyramid (considering poor as their consumers through disruptive innovation) and, d) focusing on cause- related marketing (producing ethical products) (Friedman, 1970).

b) Political Theory: It emphasizes that corporations have some responsibilities towards their society. There are three approaches to carry out such responsibilities. The first one is corporate constitutionalism (utilizing their social power to benefit the society), the second one is an integrative social contract theory (implicit obligation of the business towards their society) and the third is corporate citizenship (sense of belongingness to their society) (Garriga and Mele, 2004).

c) Integrative Theory: The corporation’s existence is highly dependent on the resources that are available in the society. Business depends on society for its existence, continuity and growth. This theory has two approaches. The first one being, issue management (about the implementation of activities which benefits lots of people), the second one is

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the principle of public responsibility (including public opinion to broaden the social issues to be addressed) (Garriga and Mele, 2004).

d) Ethical Theory: Ethical theory emphasizes that the corporation has to have a sound ethical policy to fulfill their social responsibilities. This theory has three approaches. The first one being, universal rights (protecting human rights), the second one is sustainable development (social, economic and environmental considerations), and the third one is the common good approach (common good of the people) (Garriga and Mele, 2004).

2.6 CSR in India

In India, the understanding of the CSR concept differs with respect to the Industries. But organizations commonly believe that CSR means extending their hands for the development of the society by doing philanthropic activities. Recent studies conducted in top 500 companies in India also supported the same (Gautham and Singh, 2010; Mishra and Suar, 2010). Thus, organizations play major roles in addressing the societal issues and also for the firm’s performance. There is no divergent approach from the currently existing status of meeting the needs of the public. But, in developed countries, extensive research has been done on linking CSR to firm

performance. In developing countries like India, there is a dearth of research on the same. There are certainly some studies on CSR in India, which analyze the nature, characteristics, policies, practices, but fail to link it with the firm’s performance. A 20-years country public opinion survey, finds that India is the last in the level of CSR. The major reason for this is a lack of substantial proof of connection between CSR and firm’s performance in India (Mishra and Suar, 2010). Financial and non-financial performance can be clubbed together as firm’s performances. Globally, there are evidences that relate CSR with financial performance, but there is a dearth of research to analyze the same with non-financial performances such as employee’s attitudes (Peterson, 2004; Turker, 2009). This demotivates the organizations from not adopting CSR as a strategy to enhance firm’s non-financial performance. Hence, there is need to study the relationship between CSR and firm’s non-financial performance.

In India, there are many industries such as manufacturing, IT, telecom, services and so on. But, the manufacturing industry contributes more to the social development because it utilizes more resources from the society and hence they need to repay them back through CSR (Elving and Kartal, 2012; Gautham and Singh, 2010). Indian organizations, especially automobile

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industries are struggling with problems related to the skills shortage, attrition and creating an organizational identity. Probably, implementing CSR in a proper way will help these organizations to overcome these problems. The automobile industry in India is the seventh largest in the world with an annual production of over 2.6 million units in 2009. In 2009, India emerged as Asia's fourth largest exporter of automobiles, after Japan, South Korea and Thailand. By 2050, the country is expected to top the world in car volumes with approximately 611 million vehicles on the nation's roads (Shanmugam and Mohamed, 2011). CSR has become the focal point for the automotive industry as the general public has become more concerned about how corporations deal with social and environmental issues and give back to society from which they profit.

2.7 Caroll’s - pyramid model of CSR

One single most valuable model which covers all the aspects of CSR is Caroll’s model (Keinert, 2008). Caroll (1979) has given the pyramid model which covers all the perspective of the above theories in a holistic perspective. According to him, corporate should fulfill the economic needs of their firms by adhering to the law, doing business ethically and also involving in discretionary activities. These four

components can be classified as internal and external CSR as follows:

2.7.1 Internal CSR

Employees are valued as internal stakeholders of the company and they are assets of the organization. CSR practices to internal stakeholders are grouped under one umbrella such as ‘value classes’, since it creates value for them as well as satisfy their needs (Skudiene and Auruskeviciene, 2012). Employee ‘value classes’ are developments of workers’ skills, social equity, health and safety at work, well- being, satisfaction, and quality of work (Skudiene and Auruskeviciene, 2012). By doing these activities, employers fulfill their CSR obligation for their internal stakeholders.

2.7.2 External CSR

Customers, business partners and local communities are valued as external stakeholders of the company (Skudiene and Auruskeviciene, 2012).

● Customer related CSR Customers are keen on receiving the products and services in a proper way by complying with the legal legislations. They also want to maintain good and long term relationship with the organizations (Skudiene and Auruskeviciene, 2012).

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This can be categorized as fulfilling legal compliance and making the employees feel secure (Carroll, 1979). ● Business partners related CSR

A socially responsible company has to have a good relationship with its suppliers and other business partners. The company should adopt ethical practices in enhancing its fair trade transactions (Skudiene and Auruskeviciene, 2012). This can be categorized as fulfilling ethical components of Caroll’s model. Being very ethical to their business partners will enhance their employee’s perception in a positive way (Carroll, 1979). ● Local communities related CSR

Most of the companies CSR activities are to develop the standard of living in the community (Skudiene and Auruskeviciene, 2012). The main focus of CRS activities is building schools, hospitals, temples and so on (Arevalo and Aravind, 2011). The understanding of CSR in India in still concerned only with philanthropic activities and community development.

2.8 Employee Engagement

Employee engagement is a relatively new term in the human resources literature and it came into prominence since 2000 (Joshi and Sodhi, 2011). The biggest challenge today is, not just recruiting and retaining employees, but engaging their hearts and minds together (Lockwood, 2007).

Engagement represents the application of positive psychology movement, which is a much contemporary organizational research. It adopts a positive approach to understanding organizational phenomena. Engagement plays a crucial role on both individual, organizational performances (Grumans and Saks, 2011).

An organization can gain competitive advantage by adopting employee engagement as a tool (Sardar, Rehman, Yousaf and Aijaz, 2011). Engaged employees often experience positive outcomes such as happiness, enthusiasm, better health, creating their own job and personal resources (Bakker, Demerouti and Lieke, 2012). Engaged employees possess high levels of energy and they are enthusiastic about their roles and completely immersed in their jobs (Xanthopoulou, Bakker, Demerouti and Schaufeli, 2009). The major outcomes of employee engagement can be categorized as employee’s level of engagement, organizational outcomes and financial outcome (Saks, 2006).

2.8.1 Levels of engagement

The levels of engagement can be classified as engaged, not engaged and actively disengaged employees based on the attributes they display. Engaged employees are passionate towards their

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work. They have a profound connection to their company. They drive to contribute to innovation and move their organization forward. The employees, who are not engaged, are not passionate and they are checked out. They spend a lot of time, but they do not utilize their energy for a definite purpose and the actively disengaged employees are those who are busy acting out their happiness. They discourage the accomplishment of their coworkers (Smith and Markwich, 2009).

2.8.2 Varied definitions of employee engagement

Employee engagement can be defined as follows: Kahn (1990) defines employee engagement as “the harnessing of organizational employees’ selves to their work roles; in engagement, people employ and express themselves physically, cognitively and emotionally during their role performances. It can also be defined as a “positive, fulfilling, work-related state of mind that is characterized by vigor, dedication, and absorption” (Schaufeli , Salanova, Gonzalez-Roma , Bakker, 2002). Vigor is characterized by high levels of energy and mental resilience. Dedication is characterized by involvement in one’s work, enthusiasm, challenge and sense of significance. Absorption is characterized by happy engrossment into one’s work

(Schaufeli et al., 2002). One of the private sector organizations, namely, Nokia Siemens Networks considers employee engagement as, “an emotional attachment to the organization, willingness to invest discretionary effort to go above and beyond (Smith and Markwich, 2009). By consolidating these varied definitions, the essence of employee engagement is centered on a factor that, it is beyond the normal working method of the employees.

2.8.3 The benefits/outcomes of employee engagement

The outcomes of employee engagement are customer loyalty (Levinson, 2007), employee retention (Levinson, 2007), employee productivity (Kahn, 1990), manager self-efficacy (Luthans and Peterson, 2002) enhancement of personal resources (Cartwright and Holmes, 2006) health and well-being of the employees and so on (Rothbard 2001 ; Kahn, 1990).

2.8.4 Differentiating employee engagement from other related constructs

Many people wonder whether satisfaction, commitment, involvement, organizational citizenship behavior and employee engagement are related construct or unique construct. Though all the constructs sound similar, they are different constructs.

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2.8.4.1 Satisfaction

A number of researchers have tried to differentiate satisfaction from engagement. There is no relationship between satisfaction and performance. But there is a strong relationship between engagement, performance and business outcomes. Engagement also predicts satisfaction. Engagement is an active state; while satisfaction is a passive employee’s state (Smith and Markwich, 2009). Job satisfaction can be defined as “a positive feeling about one’s job resulting from an evaluation of its characteristics (Robbins, Judge and Sanghi, 2009).

2.8.4.2 Commitment

Commitment can be defined as “the degree to which an employee identifies with a particular organization and his/her goals and wishes to maintain membership in the organization (Robbins et al., 2009).

2.8.4.3 Job involvement

Job involvement is purely a cognitive act, whereas engagement is cognitive and has a physical element. Of course, job involvement is one of the outcomes of engagement (May, Gilson, Harter, 2004). It can be defined as “the degree, to which a person identifies himself/herself in a job, actively participates in it, and considers

performance important to self-worth (Robbins et al., 2009). In conclusion, we can say that engagement exhibits the characteristics of commitment and involvement, but it differs from it (Smith and Markwich, 2009).

2.8.4.4 Organizational citizenship behavior

The key characteristic of organizational citizenship behavior is exertion of discretionary effort, whereas employee engagement focuses on one’s formal roles. Also, citizenship behaviors can be explained as an act of helping others in their team, exerting extra miles in terms of time and effort, avoiding unnecessary conflicts, adhering to the rules, regulations and practices, tolerating the nuisances in the organization and respecting the spirit of the organization (Robbins et al., 2009).

3. THEORIES TO LINK CSR AND EMPLOYEE ENGAGEMENT

Social exchange theory-SET: According to SET (Blau, 1964), employers and employees or any two parties enter into an obligation only when they meet the needs of one party through economic and socio emotional needs. When an employee’s such needs are fulfilled, he /she will be obliged to repay their organizations. One

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of the ways, in which they may repay, is through active engagement. When employers fulfill their employees’ economical needs and social needs through CSR activities, employees will probably be obliged to repay them in the form of higher levels of engagement.

4. ROLE OF TOP MANAGEMENT SUPPORT IN THE LINK BETWEEN CSR AND EMPLOYEE ENGAGEMENT

The benefits of the organizational CSR activities are fulfilled with a sound leadership. Top management takes major decisions on CSR activities in Indian firms (Mishra and Suar, 2010). The major hurdles in CSR implementation is top management support (Arevalo and Aravind, 2011; Katamba, Kazooba, Mpisi, Nkiko, Nabatanzi-Muyimba and Kekaramu, 2012). Thus, top management support may influence the relationship between CSR activities and employee engagement highlighting the moderating effect of the same. Top management has to support their employees with all the necessary information about CSR and also involve employees in the formulation and implementation stage, thereby generating necessary outcomes among employees (Arevalo and Aravind, 2011).

5. CONCEPTUAL FRAMEWORK

A conceptual framework is proposed (see figure 1 in the endnotes) that explains how organizations might influence employee’s attitudes through their CSR activities and top management support as a moderator.

6. IMPLICATIONS AND CONCLUSIONS

In today’s competitive world, engaging work force is very challenging. Many companies are doing a great job on CSR but they fail to link it with an employee’s attitudes. The success of an organization lies in creating change pattern in the attitudes of employees through CSR. This paper will motivate organizations to implement CSR as it yields long term outcomes for them. In simpler words, we can say, it is an explicitly fulfilling obligation for both society and the organization. Today’s biggest challenge for practicing managers is to achieve full support of employees and make them motivated in their CSR activities to achieve an organization’s goals. This can be achieved through proper drafting and implementation of HRM practices in the organization (Crowther and Capaldi, 2008). CSR is a relatively new concept that is in practice (Carroll, 1979) and there

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still exists lots of controversy and areas which need to be explored more (Crane et al., 2008).

Acknowledgement

A portion of this paper has been discussed at ‘Institute of Public Enterprise, 2012’, International conference held in Hyderabad and the same has been published in the conference proceedings.

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Figure 1: Moderating role of top management support in the link between CSR and employee engagement

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