Financial profitability and social mission: how can you find the right balance?

Bertrand Moingeon, Professor of Strategy and Business Policy - December 17th, 2015
Financial profitability and social mission: how can you find the right balance? by Bertrand Moingeon ©Fotolia

Socially responsible companies do not see profitability as an end in itself but as a way of supporting their long-term viability. It is essential for so-called "B corporation " to understand and integrate this way of thinking in order to preserve their identity and value, especially following a takeover. This was the experience Unilever had after acquiring Ben & Jerry's, the ice cream manufacturer, in 2000.

Bertrand Moingeon ©HEC Paris

Bertrand Moingeon is professor of strategic management at HEC Paris since 1992. Moingeon is a former visiting professor at Harvard Business School and served as deputy dean of HEC (...)

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A company’s identity cannot be reduced to its image, logo or culture, even though it may incorporate these different concepts. Moingeon suggests a five-facet model for understanding identity (see box), in which the facets must be aligned if a strategy is to have a chance of succeeding. It is an exercise that creates particular tensions for socially responsible companies, but it is crucial for their credibility and key to their performance. We explain why below. 

Aligning the various identity facets to ensure success

Since they created the company in 1984, the founders of Ben & Jerry's have insisted that their business should generate social wellbeing as well as offering quality products and being economically viable. They attracted employees who shared this ethical and social vision. As a result, the company’s projected identity and experienced identity were in tune. When growth slowed down in 1993, however, the founders sought out a CEO they could rely on to restore profitability. For the three subsequent CEOs, the social dimension was no longer a goal in itself but a tool in support of the quest for profitability. When Unilever subsequently bought Ben & Jerry's in a hostile takeover in 2000, priority was given to cost reduction and productivity gains. It was an unfortunate strategy, however, as Moingeon explains: "It is true that special emphasis may, at times, be given to the financial aspect (by improving processes, for example, or cutting costs). But it is vital to maintain consistency and not to forget what made the company a success.” And indeed, these periods that saw a "decoupling" between the social and economic models sparked a "conflict" in the identity assigned by customers and suppliers, and even more so in the identity experienced by employees. Some of the latter experienced a genuine identity crisis, fueled by a sense of nostalgia for the days of the founders or an idealization of those bygone times. This situation persisted until the arrival of a new CEO in 2005. His stated ambition was to reconnect with the pursuit of the triple bottom line (economic, qualitative and social) that had been so important to the founders. This enabled the projected identity to re-couple with the experienced identity. 


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 The key factor is the authentic alignment of words and practice



The five facets of organizational identity:
- Professed identity: as expressed by leaders in the form of statements about the company’s mission, vision and corporate values
- Projected identity: as presented in the form of communications, such as annual reports
- Experienced identity: as experienced by employees, such as articulated via the collective response to the question: "Who are we?”
- Manifested identity: refers to a form of communication that is not created deliberately but rather as expressed in the organization’s rituals, operating modes, taboos, and so on
- Attributed identity: as ascribed to the organization by its various stakeholders, similar to the company's reputation

Source: adapted from the book Corporate and Organizational Identities: Integrating Strategy, Marketing, Communication, and Organizational Perspectives, published in 2002 by Moingeon B. and G. Soenen (Routlege).

Reconciling the economic and social models

It is difficult, however, to follow a parallel economic, qualitative and social logic without provoking tensions between the different perspectives. In their search for constant balance, socially responsible businesses are more susceptible than other companies to sudden reversals in discourse and actions. Firms can only implement this type of strategy if their directors and shareholders are convinced of the merits of the approach. The key factor is the authentic alignment of words and practice. In his earlier research project carried out with Yunus** and Lehmann-Ortega, Moingeon developed the concept of the "social business model": this defines a corporate strategy in which investors are looking for social performance but self-sustainability is based on economic profitability. In short, profit is only a means of delivering the social mission. These organizations can be hugely destabilized when they experience radical changes – such as a merger or acquisition – that accentuate the economic dimension at the expense of the social and environmental mission. Nevertheless, even if tensions are raised, it can be especially advantageous to focus the corporate agenda on the social dimension. This skill, in fact, is a decisive determinant for a strong organization, as Moingeon demonstrates in his work with Amy Edmondson:*** the constant concern about human capital and its development makes organizations more agile and more capable of learning and innovating.

Acquiring a socially responsible company

Unilever’s acquisition of Ben & Jerry's was clearly motivated by the ice cream manufacturer’s socially responsible identity. Yet the group took some time to realize that its hunt for profitability was in danger of destroying Ben & Jerry's value by eliminating the intangible asset (its socially responsible identity) that had driven the acquisition. If Ben & Jerry's had been given greater autonomy, it is highly likely that the effects of the identity "conflicts" and all the associated costs (including a form of cynicism that grew among employees) could have been avoided. This is one of the lessons to be drawn from the study by Moingeon, Bayle-Cordier and Mirvis; when a group acquires a company with a marked socially responsible identity, it is essential that the group strives to preserve the identity by granting a high degree of autonomy. If the social or environmental perspective is restricted to words and not reflected in actions, the business is likely to be accused of "social washing" by employees and other stakeholders (customers, partners, and so on), and its leaders may well be perceived as being manipulative.

* M. Yunus, B. Moingeon and L. Lehmann-Ortega (2010): “Building Social Business Models: Lessons from the Grameen Experience”, April-June, Vol. 43, No. 2-3, Long Range Planning, pp. 308-325.
** Muhammad Yunus, winner of the Nobel Peace Prize, is the inventor of micro-credit and founder of the Grameen group.
*** This theme is connected to another topic that is central to Moingeon’s research: organizational learning. In 1996 Moingeon co-published one of the first works to link the two ideas, Organizational Learning and Competitive Advantage  (Sage , 1996), with Amy Edmondson (professor at Harvard Business School).


Based on an interview with Bertrand Moingeon and his article "Projecting Different Identities: A Longitudinal Study of the ‘Whipsaw’ Effects of Changing Leadership Discourse About the Triple Bottom Line" (with Julie Bayle-Cordier and Philip Mirvis, The Journal of Applied Behavioral Science  2015, Vol. 51 (3) pp. 336-374).

Business Applications
Business Applications

Identity management is a pivotal issue for effective organizations, Bertrand Moingeon argues. For socially responsible businesses, ensuring consistency between discourse and action is even more crucial for two reasons: "social washing" is increasingly penalized by employees, customers and partners; and focusing on the human factor can help cultivate a type of ambidexterity that combines operational excellence with an ability to introduce strategic innovations.

Methodology
Methodology

Moingeon, Bayle-Cordier and Mirvis conducted a longitudinal study of Ben & Jerry's, the US ice cream manufacturer, and one of the pioneers of socially responsible development. The researchers examined the company’s projected identity in the specific context of an organizational crisis following Ben & Jerry's acquisition by Unilever, using the CEO’s letters from the annual reports of 1989 to 2007. They also studied the impact on experienced identity, based on interviews with managers and employees.