Why Making CSR Outcomes Part of Performance Appraisals Helps Organizations

Corporates are under Pressure to Meet their CSR Commitments

It is often the case that corporates struggle to meet their Corporate Social Responsibility or CSR commitments and responsibilities due to a variety of reasons. Indeed, the fact that corporates often sideline CSR in the pursuit of profits means that they often pay lip service to the concept without actualizing any tangible outcomes in practice.

However, the fact that civil society and other stakeholders including regulators and activists put pressure on corporates to show tangible and real CSR outcomes mean that corporates are often under scrutiny by the media and the wider society as far as their CSR outcomes are concerned. Indeed, with regulators such as SEBI (Stock Exchange Board of India) and the Indian Government making it mandatory for corporates to spend a certain amount of their revenues and profits on CSR, there is more than ever a push to make corporates accountable and responsible.

Thus, it is the case that many corporates in India and world over are taking their CSR commitments more seriously in the wake of these developments and are experimenting with ways and means to make their CSR commitments count.

Making Each Employee a Stakeholder in the CSR Process

A sure way to ensure that the rhetoric of CSR meets the reality of tangible results is by making each employee a stakeholder in the overall process. What this means is that instead of CSR initiatives being driven from the top, there can be a combination of top-down and bottom up approaches wherein all employees are encouraged to take the CSR commitments as part of their individual responsibilities, and at the same time, the entire organization works as a unit to achieving CSR goals.

In this context, it is important for corporates to incentivize the employees to take CSR seriously. This can take the form of mandating employees to spend time with the wider society as part of their KRAs or Key Result Areas in the Performance Appraisals wherein they are awarded and rewarded through the regular appraisal process for meeting CSR commitments.

Making CSR Commitments Part of Performance Appraisal Process

Indeed, this is something that multinationals such as Goldman Sachs follow wherein they mandate that each employee must spend time for a week or so during each appraisal period with the wider communities and in rural areas as part of the identified CSR outreaches programs and is rewarded for their time and efforts in the performance appraisals.

In this manner, multinationals such as Goldman believe that the theoretical and ideological aspects of CSR are actualized in practical and realistic ways to ensure that each employee becomes a stakeholder in the wider organizational outreach and contributes individually wherein synergies are actualized.

In other words, by making CSR outcomes as part of performance appraisals, these organizations believe that the sum substance of the total effort from the entire organization is greater than the contributions of each employee thereby creating synergies for the entire organization in the process.

Further, by incentivizing the employees by rewarding them for their CSR deliverables during performance appraisals, the combination or the melding together of ideology with practical steps ensures that employee goes beyond the mandate and are encouraged and motivated to do more which again creates value in the ultimate meaning of the word.

Why Making CSR Outcomes Part of Performance Appraisals is not an End in Itself

It is also not the case that making CSR commitments as part of performance appraisals would be an end in itself. Instead, it is a means to an end and hence, must be viewed in that perspective.

In other words, if employees feel that spending time in the CSR outreach programs is something that they do reluctantly, and then the whole purpose of the process is lost. Further, if employees do this only for meeting their performance appraisal parameters, then again the purpose is defeated.

Moreover, the fact that there are logistical difficulties in measuring the success or otherwise of the CSR deliverables means that such methods might sound good on paper but lack the needed effectiveness to succeed in practice.

Apart from this, the fact that many employees view such commitments as a burden and a chore is another reason why such initiatives must be monitored and appropriately regulated. Also, the fact that most employees get into what is known as a “solutions mindset” in corporate jargon when they take up their CSR commitments is another reason why such initiatives might fail to achieve the desired outcomes.

To explain, if employees start thinking in terms of the corporate methods when they approach real-world social and economic problems, then the situation would turn problematic as what works in the corporates might not exactly work in the real world. Indeed, often the activists who are engaged in the wider communities are engaged with these initiatives mainly because while the rhetoric is ok, the reality is something altogether different.

A Good Start that can Lead to Better CSR Outcomes

Thus, what is needed is a mindset change that can only happen over time. At the same time, it is our view that making CSR commitments part of the performance appraisals is a good first step that can lead to better outcomes.

In other words, we have to start somewhere and hence, in this respect, ensuring that CSR and incentives for the same can go together is a sure way to making the entire CSR outreach that much more effective.

Lastly, by making the entire organization geared towards actualizing CSR commitments, corporates can engage with the wider communities in a systemic and systematic manner.