The Role Of Importance Of Corporate Social Responsibilities On Crisis Management

Project and Seminar material for Public Administration

Abstract

Corporate Social Responsibility (CSR) involves giving back to the community where a business organisation operates. This study assessed the role of corporate social responsibilities on crisis management. Triangulation research design that combined survey and indepth interview was adopted in this study. The population of the study comprised 148,341 members of communities in Asaba, Delta state, Nigeria. Multi-stage sampling technique was adopted to select a sample of 345 respondents for the survey. The composite Crobach’s Alpha score for the questionnaire indicated an internal consistency score of 0.797 meaning it had a high internal consistency. Representatives of the communities and Grand Hotel were purposively chosen for the indepth interviews. Data were collected using validated questionnaire and interview guide. Quantitative data were analysed using frequency count, simple percentages, charts and linear regression analysis. Qualitative data were analysed using content analysis to report responses to the interviews. Findings of the study indicated that CSR had not improved the relationship between Grand Hotel and the communities (Average Weighted Mean=1.98; SD=0.94) and that CSR projects provided to the host community were partially adequate (Mean=1.89, SD=1.21). Respondents also indicated that CSR was a moderately significant strategy for managing crisis in the communities of Asaba, Delta state (Mean=2.15, SD=1.24), rating the management of crisis by Grand Hotel in Delta Sate as moderately effective (Mean=1.70, SD=1.00). Results also showed that the effectiveness of CSR as a crisis management strategy in communities was low (Mean=1.85, SD=0.72) because respondents believed mostly that CSR projects were provided by Grand Hotel after crisis had started in the area (n=215, 63.6%). CSR was observed to have a significant effect on crisis management in communities, indicating a strong positive correlation coefficient and positive slope, which are statistically significant (β=0.744; B=0.358; p<0.05) as assessed by a t-test (T=20432). The study concluded that there was no cordial relationship between the companies and their host community, and CSR was not effectively handled as a crisis management strategy. The study recommended that Grand Hotel should consult stakeholders widely and be proactive in implementing CSR projects in their host community. The Federal government should also monitor the activities of Grand Hotel and directly intervene in the development of the area.

Chapter One

Introduction

1.1 The Background of the Study

The growing complexity of modern society and a growing insight into what motivates individuals and groups gave birth to corporate social responsibility being incorporated into organisations .The current business environment is now a much more dynamic, challenging and demanding environment. The consciousness of social responsibility in managing crisis is growing by the day in the people, governments, and organisations as well. All over the world, business organisations both private and public thrive to be socially responsible both to their employees and their host community, to be able to effectively manage crisis. Bearing in mind that the responsibility of any organisation or establishment determines to a great extent the corporate image and opinion created in the minds of the public. Effective social responsibility no doubt, helps to create a conducive working or industrial atmosphere, attract investment, stop or reduce opposition against a company and dispose domestic decisions favourably to the company.

Corporate trends in the 1990s in the areas of social responsibility and corporate governance in the U.S.A include changing models of corporate governance from the traditional model that is dominant in the U.S.A which is based on property rights. According to this model, shareholders control the corporation and the major factors in the governance process. They supply the capital and the corporation needs and therefore own the property, legitimizes the shareholders theoretical control over the use of corporate resources. (Bucholz 1994).

1.2 Crisis Management

Crisis management is the process by which an organisation deals with a major event that threatens to harm the organisation,, its stakeholders or the general public. The study of management crisis originated with the large scale industrial and environmental disaster in the 1980, it is considered to be the most important process in public relations and corporate social responsibilities.

Three elements are common to a crisis:

A threat to the organisation.
The element of surprise.
A short decision time (Wikipedia).

Venette S.J(2013) argues that “crisis is a process of transformation where the old system can no longer be maintained”.

Therefore the forth defining quality is the need for change. If change is not needed, the event could more accurately be described as a failure or an incident.

1.3 Corporate Social Responsibility (C.S.R)

C.S.R focuses on what an organisation does that affects the society in which it exists. More recently, managers and theorists have broadened their concerns to include basic ethical questions such as “How should we live in relation to each other”? James A.F Stoner, R. Edward Freeman, Daniel R. Gilbert, J.R.

The business dictionary says corporate social responsibility is a company’s sense of responsibility towards the community and environment (both ecological and social) in which it operates.

Also C.S.R refers to business practise that involves participating in initiatives that benefit the society. Liz Maw, C.E.O of non-profit organisation (net impact), noted that C.S.R is becoming more mainstream as forward thinking companies embed sustainability into the core of their of their business operations to create shared value for business operations and society.

1.4 Grand Hotel Convention Centre and Resort Asaba:

Grand hotel is nestled between the beautiful Niger coast of the Niger and the impressive town of Asaba, capital of Delta state. Grand Hotel Convention Centre and Resort, Asaba is one of the most luxurious hotels in Asaba.
The hotel offers various social services to the community, it find itself, which have led to it been rated as the number one hotel in Asaba. It offers various services to customers, which include the following:

Guest relations: including car hire services.
24 hours valet parking
Fully equipped business centre.
Doctor on call, etc.

1.5 The Statement of the Problem

In a third world country like Nigeria where development is beginning to crawl, one factor that has been seriously neglected in organisational structures is the role and importance corporate social responsibility can play in crisis management.

Obviously, when an organisation and it’s host community is at loggerheads, the bone of contention is usually the failure of been socially responsible. More often than not, the parties involved do not understand what corporate social responsibility is, they often mistake it for governmental responsibility. Corporate social responsibility is an old idea with American roots in the writings of the steel magnate Andrew Carnegie. Carnegie believed that, “the goal of businessmen should be to do well in other to do good”. He also said for the success at prodding companies operating in today’s high risks environmental roles, the corporate social responsibility movement suffers from the two fundamentals problems. One relates to lack of standard defining what counts as corporate social responsibility, leaving it to business managers to decide. The second one relates to the over- reliance on citizens oversight, sometimes referred to as civil regulation. To make corporate social responsibility work, these two problems are closely linked because there are no clear standard for corporate social responsibility.

It begs the question, why should an organisation bother itself with corporate social responsibility? When a company’s image is strong and commands respect, is corporate social responsibility needed? How corporate social responsibility graded and what is does an organisation gain from being socially responsible? How effective and important is corporate social responsibility in crisis management.

1.6 Objectives of the Study

Generally, this work is the role and importance corporate social responsibilities play in crisis management. The research seizes to highlight the place of effective corporate social responsibility in organisations with a view of bridging the gap between an organisation and its public. As a result, specific objectives of this research include the following:

Carefully analyze the role and importance of corporate social responsibility and it role in crisis management.
Analyze the challenges of organisations that operate without corporate social responsibility.
Examine the risks involved in crisis management without adequate corporate social responsibility.
To carefully examine the benefits that is involved in corporate social responsibility
To know why companies involve in corporate social responsibility and still succeeds as a business firm.

1.7 The Research Questions

For this research, the following research questions have been put to guide the study.

Could lack of corporate social responsibility lead to crisis in an organisation?
Can corporate image be boosted with effective corporate social responsibility?
How effective is corporate social responsibility in GRAND HOTEL, Asaba?
To what extent should an organisation be socially responsible to avoid crisis?

1.8 The Research Hypotheses:

For this research, the following hypotheses have been used to guide the project.

Ho: There is no significant relationship between corporate social responsibility and crisis management.
Hi: There is a significant relationship between corporate social responsibility and crisis management.
Ho: There is no significant relationship between a Grand Hotel’s corporate image and corporate social responsibility.
Hi: There is a significant relationship between a Grand Hotel’s corporate image and corporate social responsibility.

1.9 Scope of the Study

This work is limited to Asaba relative to corporate social responsibility of Grand Hotel Asaba. It evaluates and considers the management techniques adopted by the management of Grand Hotel to meet the needs of the community as a means of aiding the development of the environment it operate in. It also looks at how effective the management of Grand Hotel handles and manages crisis from it employees.

Chapter Five

Conclusion and Recommendations

5.0 Introduction

This chapter is the concluding part of this study. It provides a summary of the entire dissertation. It also concludes the study and offers recommendations based on the findings of the study.

5.1 Conclusion

From the quantitative data analysed and the interviews reported, the study hereby concluded that there does not exist a cordial relationship between the organization and the communities in Asaba, Delta state, Nigeria. The main reason for this was the gap that existed between the strategies the companies thought the host community preferred for crisis management and what the communities actually preferred. Lack of consultations with the host community created a gap between their needs and projects carried out in the communities. This seemed to have made the efforts of Grand Hotel not appreciated. More importantly, most of the companies have not really done enough to justify their operations in the host community. Their failure to meet their commitments even after signing documented agreements indicated that Grand Hotel were not socially responsible. Where the companies executed CSR projects, they did so in response to crisis situation, making their approach retroactive rather than proactive. More worrisome was the fact that the Federal Government who are joint operators in these Grand Hotel failed to compel them to meet their Corporate Social Responsibility (CSR) obligations. The development of acceptable models of CSR in all communities, as presently being carried out in Kokori, will go a long way to reduce crisis in these areas.

5.2 Recommendations

Findings from this study have clearly shown that well planned, executed and monitored Corporate Social Responsibility (CSR) programmes are indispensable tools for crisis management between companies and their host community.

Based on the findings of this study the following recommendations are hereby made:

Companies operating in Asaba, Delta state and other communities in Nigeria should be proactive in finding out the needs of the people and acting before situations degenerate to crisis. They should not just assume that because a community is peaceful that they should not be given attention. The outdated CSR model where a community is only attended to when crisis arise should be discarded. There should be regular consultations and strategic planning to identify areas of needs of the communities for CSR to be effective as a crisis management strategy in the companies’ host community. Companies operating in Asaba, Delta state and other communities in the country should also stop patronizing few Chiefs and opinion Leaders. They should come out with CSR models that are all embracing after proper consultations with all strata of the communities where they operate. Such CSR models must have the confidence of the entire community and must be reviewed on a regular basis, either quarterly or annually. There should be adequate budgeting for such CSR projects identified and the amount to be spent must be specified and known to all stakeholders. There should be an agreement between the organization and the community and the agreement must have a penalty clause, in case the organization fails to perform.
The companies should devise means like regular consultation and participation in community activities to ensure cordial relationship with their host community. They should not use the divide and rule tactics where problems are deliberately created within the leadership of the community. Such divide and rule strategies do not last long and they cannot yield positive results for Grand Hotel. Grand Hotel that have MOUs or GMOUs with the communities should always endeavor to honour them. An organization that fails to honour such agreements cannot be said to be a good corporate citizen. Where there is a need for signing of agreements, there must be broad consultations to see that all parties are represented. If this is not done, factions may spring up and it will result to the company dealing with multiple groups, which can further lead to crisis.
The companies should try as much as possible to avoid intimidating their host community with the presence of heavy security personnel such as soldiers. It is more beneficial to build and sustain goodwill and long lasting relationship with the people than intimidating them and treating them as enemies. In situations where it is inevitable, invitation of military forces should not go beyond protecting the companies’ facilities and their staff where there are cases of security threats such as kidnapping and vandalisation of equipment. Where there is a good relationship between Grand Hotel and their host community, local vigilante groups are enough to offer security services.
The issue of unemployment should be seriously tackled. Finding from the study, Table 4.1, showed that 260 respondents, 76.9 percent were unemployed. Apart from employment of community members, skill acquisition centres should be established where members of the communities can be trained in different skills and they should be given some grants to establish themselves after graduation from such centres. The federal government should regulate the activities of the companies through policy formulation. They should compel them to meet their obligations to their host community. The federal government on its part should intervene directly in the development of the areas. Unfortunately, the 13 percent derivation fund is not well utilized in some states. Those in public offices end up using the money to develop their own areas, even if they are not communities.
Considering the fact that majority of the respondents and those interviewed in the three communities were not quite satisfied with the CSR strategies adopted by Grand Hotel, more concrete efforts should be made by the companies to improve on their CSR or if possible, change their strategies to more acceptable ones. As long as the communities are recipients of those CSR programmes, it would be unreasonable to ignore their feelings. There is also the need for the government to plan and carry out some enlightenment programmes for the communities so that they can improve their relationship with Grand Hotel operating in their areas.
Companies should from time to time assess how the host community where they operate perceive their CSR programmes in meeting with their needs. Research into this will enable them to appraise themselves and see whether they are doing well or not, and whether they are also accepted by the people or not. The companies should have developmental capital projects as their focus because these are more enduring. People can easily point out that these are what they have done for the host community. Things that are not tangible, such as monetary incentives to community leaders, do not last long hence they should not be used in CSR programmes.

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