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Internal CSR: How to measure employee engagement to improve corporate social responsibility

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Jun 09, 2022

Rebecca is the type of computer science graduate that any firm would love to recruit: a highly driven team-player that has the technical know-how to hit the ground running. Firms recognized this, and she’d obtained a coveted position as a software engineer intern with a tech company you’re likely familiar with. She intended to make the most of the opportunity in order to secure a permanent position with the firm following her graduation.

When I caught up with Rebecca in October, she mentioned that she wouldn’t be staying with the company post-graduation. Before I could offer my commiserations, she stated that it was her choice to leave. “It’s not because they didn’t want me to stay, but because I didn’t really feel like myself while working there, _____ didn’t really represent who I see myself as.” I was certainly caught off-guard by her sentiment, and maybe the firm she worked at was too. However, stories like Rebecca’s are more common than ever in today’s recruitment environment.

The question that firms are left with is why can’t employees like Rebecca see themselves in their former dream jobs, and what can firms do to address that?

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The asymmetrical growth of CSR

  • Fortune 500 firms now spend $20B per year (~2% of gross profits) on CSR activities.
  • More than 90% of the 250 largest companies in the world now produce an annual CSR report, up from 13% in 1993.1,2 

With this increased investment, it might be fair to assume that firms have been more successful at developing sunnier, authentic, endearing personalities. And to some extent, they have, but that effect hasn’t been universal across all audiences.

Firms’ CSR activities often leave out the people that should be the focus of their targets: current and prospective employees.

What happened to Ethical CSR?

CSR has enormously flexible definitions and applications; however, despite recent increased investment, corporations have largely stuck to tried and true avenues of CSR: philanthropic, economic, and environmental initiatives. These domains get a disproportionate amount of attention, mainly because they are thought to accomplish the traditional goal of CSR - building a positive brand image for the firm.3,4

However, CSR activities focused on donating X number of dollars to Y cause, or sourcing X% of a firms’ energy from renewable sources don’t have a significant, tangible impact on how connected employees feel to their firm. The often-overlooked ‘ethical’ branch of CSR has the potential to be far more effective in addressing gaps in retaining exceptional talent.

Internal CSR can increase business ethics and reduce burnout

Ethical CSR ensures that an organization is operating in a fair and ethical manner - for example, your business might set a higher minimum wage than the legal requirement, particularly if the latter isn’t a livable wage. Because it looks internally first, this mode of CSR is best positioned to address the $500 billion/year in productivity American companies lose out on because of disengagement, or lower the proportion (58%) of Gen Z employees who reportedly moved jobs because of burnout-related concerns.5

CSR and mental health chart

Young workers are less likely to wait-out burnout (Limeade, 2020).

How we perceive CSR limits its internal impact 

Consumers and employees alike tend to associate good behavior with good culture. We view CSR as a good thing, therefore we associate positive attributes with the goods and services sold by that company. This is referred to as the Noble Edge Effect: where our impression of companies is influenced predominantly by the CSR activities they engage in.

However, we tend to only rely on cognitive biases, like the Noble Edge Effect, when we lack familiarity with the subject matter at hand.

While this might not be a significant problem with external CSR initiatives, employees of a firm know the firms’ intentions, culture and goals quite well. Any internal CSR efforts must be genuine and appropriately targeted to have a positive effect. This creates a natural dilemma when planning ethical CSR initiatives with the goal of improving employee buy-in and retention.

The IKEA effect and the importance of employee engagement 

Solving the ‘authenticity’ problem with internal CSR incentives can’t be done in one fell swoop, but engaging employees in the process helps. Why? The IKEA Effect - we tend to place higher value on items that we helped create. Actively incorporating employee perspectives in the development of internal mental health policies, whether it be a self-assessment tool or otherwise, both increases the employees uptake of those tools, and further demonstrates the firms’ commitment to employee well-being. 

Vignette 1: Burnout leads to recruitment costs and negative image

Take a moment to re-consider the opening scenario: Rebecca feels burnt-out and disengaged at work, but she doesn’t fully recognize her symptoms. Her productivity and happiness decline and the company, being unaware, does nothing to address it. She inadvertently transfers her negative feelings associated with burnout onto the company and starts looking for new positions. Rebecca, being the qualified and driven employee that she is, finds a new position fairly quickly and leaves the company. The company is forced to spend time and money recruiting again.

This inefficient situation is avoidable, potentially through the implementation of self-assessment interfaces as a matter of company mental health policy.

Vignette 2: Ethical CSR can intervene in the effects of burnout

Consider a second scenario: Rebecca feels burnt out but doesn’t fully recognize it, and the company delivers quarterly self-assessments to identify potential mental health concerns their employees are facing.

Rebecca completes the interface anonymously, realizes her symptoms of burnout and more importantly, that the company cares about how she feels. The survey directs her to the appropriate resources within and outside the company. Rebecca is happier and stays in her position, the company doesn’t have to recruit a replacement or lose a valuable, promising team member. 

An ethical CSR initiative, like a self-assessment survey, can not only help Rebecca with her pain point, but demonstrate to her that the company is invested in her well-being. The development of such a self-assessment survey is a part of a clearly communicated internal policy for productively addressing burnout, disengagement and mental health concerns.

CSR as a tool for employee engagement

Almost half of all employees that disclose a mental health issue report a negative reaction/consequence. This isn’t a viable trend for firms looking to recruit and retain top tier talent. In an age where 94% of GenZ and 88% of Millennial employees have sought a job change due to burnout, disengagement and mental health concerns, developing a CSR strategy to directly address these causes is worthwhile for a firm that would like to retain and attract talent.

The Decision Lab is an evidence-based consultancy that uses behavioral science to promote social good. We work with some of the largest organizations in the world to spark change and tackle tough societal problems. If you'd like to improve your organization’s corporate social responsibility together, contact us.

References

  1. Meier, S., & Cassar, L. (2018, January 31). Stop talking about how CSR helps your bottom line. Harvard Business Review. Retrieved May 19, 2022, from https://hbr.org/2018/01/stop-talking-about-how-csr-helps-your-bottom-line 
  2. King, A., & Threlfall, R. (2020, December). The time has come. KPMG. Retrieved May 19, 2022, from https://home.kpmg/xx/en/home/insights/2020/11/the-time-has-come-survey-of-sustainability-reporting.html 
  3. Stobierski, T. (2021, April 8). Types of corporate social responsibility to be aware of. Business Insights Blog. Retrieved May 19, 2022, from https://online.hbs.edu/blog/post/types-of-corporate-social-responsibility 
  4. Briscese, G., Feltovich, N., & Slonim, R. (2021, April 3). The hidden costs of corporate social responsibility. VOX, CEPR Policy Portal. Retrieved May 19, 2022, from https://voxeu.org/article/hidden-costs-corporate-social-responsibility#:~:text=2020) 
  5. Limeade. (2020). 2020 Employee Care Report. Retrieved May 19, 2022, from https://www.limeade.com/wp-content/uploads/2020/02/2020-Employee-Care-Report.pdf

About the Authors

Nima Toussi

Nima Toussi

Nima is a student at the University of British Columbia studying behavioral neuroscience and physiology. He's interested in how behavioral neuroeconomics concepts influence health-centered decision-making and relationships. He hopes to apply these concepts to change how decision-makers in health-related areas perceive and implement solutions. Nima can usually be found in one of the several cafes he's adopted as his office.

Sekoul Krastev's portrait

Sekoul Krastev

Sekoul is a Co-Founder and Managing Director at The Decision Lab. A decision scientist with an MSc in Decision Neuroscience from McGill University, Sekoul’s work has been featured in peer-reviewed journals and has been presented at conferences around the world. Sekoul previously advised management on innovation and engagement strategy at The Boston Consulting Group as well as on online media strategy at Google. He has a deep interest in the applications of behavioral science to new technology and has published on these topics in places such as the Huffington Post and Strategy & Business.

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