More News and Publications
Managing Social, Environmental and Financial Performance Simultaneously
Marc J. Epstein, Adriana Rejc Buhovac, Kristi Yuthas, Long Range Planning, 48 (2015) 35-45
The significant challenge of trying to simultaneously manage social, environmental and financial performance is one of the most critical challenges in the field of corporate sustainability. This paper explores how large, complex, for-profit organizations are actually integrating this challenge into decision-making and implementing sustainability. Based on field research with interviews at Nike, Procter & Gamble, The Home Depot and Nissan North America, the study specifically investigates how managers at various levels are making the trade-offs and simultaneously managing social, environmental and financial performance. We find that, while the companies’ informal systems strongly promote sustainability, their formal systems seemingly have a very traditional focus on financial performance. But, the managers operating under these paradoxical systems do not believe these systems to be in conflict, and they do not perceive a high level of tension.
They recognize the financial value of stakeholder reactions to social and environmental performance, and this minimizes the magnitude of the loss in a “win-lose” scenario, or, when the value of these impacts exceeds the cost of an initiative, turns it into a “win-win”
scenario.
A New Day for Sustainability - Is Your Company Ready to Take on Increased Responsibility for Its Activities throughout the Globe?
Marc J. Epstein and Adriana Rejc Buhovac
The world of sustainability is changing dramatically, and management
accountants need to be prepared.
Even though the companies rated highest in sustainability performance generally evaluate labor standards and examine environmental performance, few look at the safety standards of the buildings their suppliers lease. Yet sustainability issues have become more complex. Consumers want to know why facilities such as the Rana Plaza building are used to produce their garments. Multinational corporations that are using such suppliers but are failing to supervise and manage their
safety appropriately can experience disruption, consumer displeasure, and harm to their brand, as well as additional out-of-pocket costs related to facilities they don’t own or lease, such as mandatory repairs and renovations. The Rana Plaza catastrophe has forced companies to rethink their social and financial liabilities.
Why Nike Kicks Butt in Sustainability
Marc J. Epstein, Adriana Rejc Buhovac, Kristi Yuthas
Nike Inc. has a unique combination of capabilities and competencies that position the company as a leader in sustainability. Nike is among the world’s most prominent
sustainable corporations, and is regularly recognized by organizations that rank sustainable performance. It possesses a unique combination of strengths and capabilities that enable the company to make rapid advancements in sustainability that are ahead of other firms in its industry, and that increasingly contribute to the financial
performance of the company. Nike believes that we are at the beginning of a shift from a service- or knowledge-based economy to a sustainability-based economy, as environmental constraints increasingly influence business choices. Nike is making choices today that are intended to position the firm for effective competition in a sustainability-based economic environment.
Several features of the firm, which have been fundamental to the company’s financial strength, are also instrumental in the company’s sustainability performance.
Among the factors most important in its sustainability positioning are leadership, organizational design, market strength, market positioning and organizational culture.
FELU MBA Trainers Interview
Adriana Rejc Buhovac
Professor of Strategic Management
Your classes are full of useful tools for strategizing and developing businesses. What is the most important lesson you want to give to MBA students?
Formulating strategy is one thing, executing it throughout the entire organization, however, is the hard part. Unfortunately, most managers know far more about developing strategies than about making them happen. Most business schools around the world teach their students and executives about schools of thought that have very little to do with making strategies work. Implementing strategy is about overcoming the various organizational and ‘political’ obstacles, starting with preventing internal resistance to change, coping with existing power structures, adequately sharing information between individuals and business units responsible for strategy execution, ensuring feelings of ‘ownership’ of execution plans, etc. My first lesson to the MBA students is to think about implementing the strategy in the early phases of developing strategies—it all starts with who should participate in the strategy development process.
How would you describe your work with companies? How and where do you help them?
In my professional career, I have worked with some of the greatest minds in the strategy development process. Learning from Marc J. Epstein (Harvard Business School, Stanford Business School, Rice University) and Gavin Lawrie (2GC Active Management), I have acquired know-how on developing strategies effectively, cascading them throughout the organization, and implementing strategic and operational control. The Balanced Scorecard 3rd Generation methodology that I most commonly use when working on strategy development is efficient, logical and leads to effective execution. My role is to facilitate innovative thinking and consensus building within a carefully selected, large enough group of strategists—instead of consulting what companies should do, I enable participants to develop their own strategies. I help them properly identify key strategic issues (competitive position, relative strengths and weaknesses, key opportunities and threats), articulate a clear vision of success (Destination Statement) and develop a logical strategy to achieve it (Strategy Map). The structured and systematic process encompasses development of performance measures and targets, too, and most important, cascading strategies to lower hierarchical levels.
What is the biggest mistake companies do when they are developing their strategies?
There is so much knowledge in companies—one of the biggest mistakes is to rely on consulting services without strongly integrating internal knowledge and experiences: managers, experts, innovators, opinion leaders. Nobody understands problems and key development issues better than employees themselves do. Think carefully about who should take part in the strategy development process—the goal is to make strategy work rather than produce a document nobody will use.
How would you describe a “strategic mindset”?
Strategy is about ‘how’: how a company is going to compete, how it is going to create value and get to keep some of it, how it will achieve high levels of performance, or how it will create uncontested market space and make the competition irrelevant. A strategic mindset is exactly that: understanding and being able to articulate a logical strategic path from A to B.
What is your message to the future MBA candidates?
The focus of my FELU MBA Strategic Management course is to train you, not to teach you. To use hands-on approach to developing strategies, not to discuss theory. To challenge you with implementation issues, not with strategy development basics. You will be part of a unique experience that no other business school provides.