chapter 1-organizing for sustainability (mirvis and worley) 9-24-13

8/13/2019 Chapter 1-Organizing for Sustainability (Mirvis and Worley) 9-24-13

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CHAPTER 1

ORGANIZING FOR SUSTAINABILITY:

WHY NETWORKS & PARTNERSHIPS?

Philip H. MirvisResearch Fellow

Global Network on Corporate Citizenship28 Water Street

Ipswich, MA [email protected](978) 356-8742

&

Christopher G. WorleySenior Research Scientist

Center for Effective OrganizationsMarshall School of Business

University of Southern California3415 S. Figueroa Street, #200

Los Angeles, CA [email protected]

(213) 740-9814
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


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ABSTRACT

Purpose

This chapter introduces the volumes theme by considering how the forces of globalization

and complexity are leading organizations to reshape and redesign themselves, how meeting

the challenges of sustainable effectiveness and shared value require multi-organization

networks and partnerships, and how networks and partnerships develop, function, and can

produce both private benefits and public goods.

Design/methodology/approach

We apply findings from social and political evolution frameworks, partnership and

collaboration research, and design for sustainability concepts to induce the likely conditions

required for sustainable effectiveness from a network perspective.

Findings

Successful partnerships and collaborations in service of sustainable effectiveness will require

individual organizations to change their objective function and build new and varied internal

and external capabilities.

Originality/value

The chapter sets the stage for the volumes contributions

Paper category: General Review

Keywords:Sustainability; corporate social responsibility (CSR); multiparty networks;

multisector partnerships, transorganizational development


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Where globalization means, as it so often does, that the rich and powerful now have

new means to further enrich and empower themselves at the cost of the poorer and

weaker, we have a responsibility to protest in the name of universal freedom. NelsonMandela

Several technological and political forces have converged, and that has produced a

global, web-enabled playing field that allows for multiple forms of collaboration

without regard to geography or distance - or soon, even language.Thomas Friedman

Exercising leadership in cross-sector or multi-stakeholder contexts requires a higher

level of both inner and interpersonal skills to deal effectively with the diversity of

worldviews, values, assumptions, languages and experiences. Alain Gauthier

It is the long history of humankind (and animal kind, too) those who learned to

collaborate and improvise most effectively have prevailed.Charles Darwin1

A headline in a January 16, 2013Irish Times(Healy, 2013) articlereads, Food

Watchdog Uncovers Contamination. Investigations by the Food Safety Authority of Ireland

found horse DNA and horse meat in supplies of beef from a processing plant that made

burgers, lasagna, and other products. One report described a typical multiplayer scenario (see

Exhibit 1). A French food producer, in response to a customer order or in anticipation of

demand, orders a variety of beef products from one of its subsidiaries in Luxembourg. The

Luxembourg factory orders the meat from a French processor who then sources it through a

subcontractor in Cyprus. The Cyprus subcontractor uses a trader in the Netherlands to order

the meat from an abattoir (slaughterhouse) in Romania. The meat is delivered to the French

food producer who then manufactures the products and distributes them to retailers.

[Insert Exhibit 1]

Somewhere along this network chain, horsemeat was mixed in with beef. Over the

next month, businesses, government agencies, and the media began their own investigations.

By late February, the horse meat scandal involved EU regulators and national governments,

1Mandela speech at National Civil Rights Museum, November 2000.

http://db.nelsonmandela.org/speeches/pub_view.asp?pg=item&ItemID=NMS919&txtstr=22%20November;Daniel Pink interview with Thomas Friedman.http://www.wired.com/wired/archive/13.05/friedman.html;Gauthier, A. (2008). Developing Generative Change Leaders Across Sectors: An Exploration of IntegralApproaches. Integral Leadership Review.http://integralleadershipreview.com/5061-feature-article-developing-

generative-change-leaders-across-sectors-an-exploration-of-integral-approaches;and attributed to Darwin, C.R. The Origin of Species (Vol. XI, pp. 190914).The Harvard Classics. New York: P.F. Collier & Son;Bartleby.com, 2001.www.bartleby.com/11/
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supermarkets, food producers, retailers, and other businesses along the supply chain, and was

making its way into other parts of the world. Plants were closed, government agencies reeled

under accusations of negligence, executives explained how their already rigorous standards

were being strengthened, criminal investigations were started, the media was having a field

day, and the public was outraged.

Some of the blame was laid at the feet of EU lawmakers for a 2012 regulatory change

that forbid the use of cheaper "de-sinewed meat" (from cows and other cud-chewing animals)

in beef processing which raised cost pressures along the supply chain. Others faulted a 2006

rule change that no longer required daily plant inspections and provided advanced notice of

inspectors visits. Businesses in the supply chain also took a beating. Rayner (2013), author

of the upcoming book,A Greedy Man in a Hungry World, notes that The price pressures on

the supermarkets, desperate not to lose market share, are huge. Along the same lines,

Prescott (2013) opines that the almighty dominance of supermarkets and their relentless

obsession to drive down the cost of goods has provided motivation to cut corners.

And finally, there is the most interesting culprit: all of us. While the public supports

the idea of sustainable agriculture, we all-too-eagerly respond to marketing messages that

promise us greater variety, higher quality, andlower prices in goods-and-services. But at

what costs and for whom? Of course we rue the exploitation of cheap labor, environmental

degradation, and social disruption wrought by global supply chains that lead businesses on a

race to the bottom when it comes to ethical conduct. And when we learn of swollen profit

margins, outsized executive bonuses, and evidence of cheating or corruption, we shake our

fingers at business and say shame on you for being so greedy. But seldom do we frame this

as a systemic matter and locate consumers (ourselves!) at the nexus of social, ecological, and

human waste.


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Shifting the balance in this arena requires more transparency, accountability, and

responsibility by all concerned, including and especially consumers. This could lead to

higher food costs, smaller profit margins, and tougher penalties for bad behavior. But it

could also motivate innovation, promote a sense of shared responsibility among network

players, and stimulate a race to the top in terms of food safety, security, and value-for-

money. That is what sustainability calls for: seeing the big picture, engaging complex

webs connecting institutions, interests, and actors (including ourselves), and devising new

and more effective ways of organizing for a better future (Ehrenfeld, 2008; Elkington, 2013)

On Networks & Partnerships

The horsemeat scandal is not some isolated incident. It is emblematic of what can go wrong

when multiple organizations interactwhether in a supply chain, service delivery network,

or distribution system, or as part of an industry coalition, private-public partnership, or

business-NGO alliance. Witness charges that Anheuser-Busch began diluting its beer after

its merger with InBev, continued finger-pointing among oil rig operators BP, Halliburton,

and Transocean over who was most-at-fault in the Gulf oil spill, the lingering effects of

cronyism between the Wall Street banks, credit agencies (e.g., the Pimps of Wall Street),

and regulators (e.g., the SEC and See No Evil, Hear No Evil Department of Justice), as

well as various scandals involving the United Way, the Bishops Estate, and China Charities

Aid Foundation for Children.

At the same time, there is a growing body of evidence on what can go right when

multiple organizations interact effectively: Consider health care networks that improve

services and reduce costs, innovation clusters that give new dynamism to cities and regions,

and the widespread adoption of collaborative practices like open sourcing, user-driven

design, stakeholder consultation, and the like. Partnering across organizations is increasing


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in areas of social-and-environmental sustainability. There are, for example, multibusiness and

multisector initiatives regarding climate change (alliances for carbon trading and energy

conservation), natural resources (partnerships around sustainable fish, water, agriculture, and

food), human rights (codes for supply-chain management and fair labor practices), and access

to medicines, health care, and education.

Looking at sustainability through the lens of networks and partnerships is the theme

of this third volume in the series on Organizing for Sustainable Effectiveness. We introduce

this theme by considering in this introduction: 1) how globalization and complexity lead

organizations to reshape and redesign themselves and extend beyond their fence-lines to

connect to other organizations; 2) how meeting challenges of sustainable effectiveness and

shared value require multi-organization networks and partnerships; and 3) how networks and

partnerships develop, function, and can produce both private benefits and public goods.

Consider each of these themes in brief:

Globalization and Complexity. Applying a network lens means looking at a system as

a whole and the global context within which individuals and organizations are making

decisions and taking action. The horsemeat story is not just a business, industry,

government, or consumer problem; it involves a complex network of interests driven by

consumers looking for bargains, investors looking to maximize their returns, managers

facing daunting competition, and regulators diminished in their authority, funding, and

reach. The feed to farm to food processing supply chain is global today and operators

large and small compete intensively and sometimes, as this case shows, by cheating.

Where are the strong, reciprocal ties in this network versus the weak, anything-goes

links? Where are governance and regulation built in and where are they missing? Mark

Price, the chief executive of Waitrose, one of the UKs leading food retailers, said this

about the horsemeat scandal, If the question is 'Who can sell the cheapest stuff? Im


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afraid it is inevitable that there will be a slackening of product specifications He then

adds that that if consumers want to know that their food is safe and genuine, they cannot

view it as a cheap commodity (Quinn, Lewis, & Sawer, 2013). This systemic look is

central to the case studies and analyses in this volume.

Sustainable Effectiveness. Sustainable effectiveness represents top performance in

economic, social, and environmental terms (Lawler & Worley, 2011). Shifting from an

organizational to network framing means examining the interests of each of the parties,

their purposes for working together, and the specific ends sought and attained. When, as

in this case, any part of a system attempts to maximize its own gains at the expense of

others, a vicious cycle of self-dealing can be triggered and, in the end, everyone can lose.

On a larger tableau, this raises questions about whether aggressive economic growth, a

single-minded devotion to efficiency, and the pursuit of profit maximization can co-exist

with sustainability in our social and ecological conditions.

Examples of systems gone awry because of exploitation, profiteering, and collusion are

all too common. But there are many examples, too, of companies enlisting their

suppliers, business partners, customers, and end consumers to activate a virtuous cycle of

responsible and profitable conduct (Googins, Mirvis, & Rochlin, 2007). The business

case for doing so is indisputable: Surveys by Cone Inc. (2012) show that the publicas

consumers, investors, and employeestakes a punitive view of bad corporate behavior

and great majorities want to do their business with companies with a good reputation for

sustainability and corporate social responsibility (CSR). In addition, there is a growing

worldwide move toward healthy and sustainable consumption; the size of the LOHAS

(Lifestyles of Health and Sustainability) market will grow to $845 billion by 2015.


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Working Together Better. Finally, the network perspective invites us to inquire into

what it takes for organizations to work together to contribute to both economic progress

and a more sustainable world. Self-interest, competition, profit-maximizing, and the like

are facts of life in commerce today and can, under the right conditions, contribute to

innovation, sensible cost-cutting, and wealth creation. But collective interests,

cooperation, and profit-optimization may be better means to more sustainable ends when

it comes to the successful operation of multi-organization networks and partnerships.

Each organization in the warped beef product supply chain was trying to do what was

best for itself, then someone decided what was best for me should come at the expense of

what was good for all of us. The cases in this volume provide insight and instruction

about what it takes to develop capabilities of partnership and collaboration to pursue a

common good.

Globalization and Complexity

Globalization creates economic policies where the transnationals lord over us, and

the result is misery and unemployment.Evo Morales

Technology causes problems as well as solves problems. Nobody has figured out a

way to ensure that, as of tomorrow, technology won't create problems. Technology

simply means increased power, which is why we have the global problems we face

today. Jared Diamond

We must ensure that the global market is embedded in broadly shared values and

practices that reflect global social needs, and that all the world's people share the

benefits of globalization. Kofi AnnanGlobalization is forcing companies to do things in new ways. Bill Gates2

The globalization of modern commerceduring a period of time that has seen the growth of

the internet and cellular phones, the collapse of communism in Eastern Europe and rise of

2Tim Padgett interview with Evo Morales

http://www.time.com/time/magazine/article/0,9171,1198906,00.html#ixzz2NRl7jS9e

Pat Joseph interview with Jared Diamondhttp://www.sierraclub.org/sierra/200505/interview.aspKofi Annanhttp://thinkexist.com/quotes/kofi_annan/Bill Gateshttp://thinkexist.com/quotation/this_is_a_very_exciting_time_in_the_world_of/147293.html
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Sub-Saharan Africa, plus the emergence of the BRIC countries (Brazil, Russia, India, China)

as economic powerhouses has unleashed the mobility of technology, capital,

communication, ideas, and people. Today, almost any product or service can be designed,

made, transported, and bought anywhere in the world. Information crosses borders quickly--

distributed by multi-media channels and amplified by social media chatterand people can

connect effortlessly to networks of friends, co-workers, colleagues and customers spanning

the globe. All of this has led to the unprecedented expanse of knowledge and relationships

and to unparalleled economic growth.

Globalization: Blessing or Curse? There are, however, different stories about the

fruits of globalization and who benefits from it (Korten, 1995; Friedman, 2006). New

manufacturing and technology workers in China or India mostly say globalization is good. It

has brought them capital, access to lucrative international markets, and a wireless connection

to the world. Their nations are more prosperous as a result. Multinational corporations

(MNCs), their shareholders, and many who work for them have made dramatic gains. Access

to new markets and cheaper inputs create impressive profit margins and greater returns on

capital and knowledge. Globalization has driven real price decreases for many consumer

products and made branded goods more available around the world. And talent markets in

Bangalore, Beijing, and Sao Paulo are just as heated up as in New York, London, and Tokyo.

Yet the same benefits have not accrued to everyone and there is increasing concern

over globalizations social and ecological consequences (Cooperrider & Dutton, 1999; Chua,

2003; Perkins, 2004; Stiglitz, 2012). Many developing countries lack sufficient governance,

infrastructure, and human capital to find a niche in the competitive global system. Poor

farmers have been pitted against one another in export markets and must compete with

cheaper (often subsidized) imports from richer nations. Small-scale manufacturers have been

driven out of business. Meanwhile, the prospects for youth the world over have fallen behind


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the rapid pace of change, creating an atmosphere of instability and discontent that affects

everyone. Consider a sampling of issues that globalization raises:

The inequality gap is widening.In the last decades, the gap between the average per-

capita GDP in the twenty richest and poorest countries has doubled; and, despite some

recent improvement, over 3.6 billion people still live on less than $2 per day (World

Bank, 2013). In the U.S., the top one-percent accounts for 25% of the nations income

and 40% of the wealth, up from 12% and 33% a quarter century ago (Stiglitz, 2011).

Eco-productivity and natural systems are in serious decline. One in four mammal species

are at risk, mainly due to human activity; fish stocks are eroding; the worlds wetlands

and forest cover are declining markedly; and desertification puts some 135 million people

worldwide at risk of being driven from their lands (World Business Council for

Sustainable Development, 2006). Costs of mitigating the effects of climate change are

estimated to be $140 to $175 billion a year over the next 20 years (with associated

financing needs of $265 to $565 billion).

Outsourcing and offshoring have displaced workers in developed nations.According to

the Bureau of Economic Analysis, 10 million U.S. jobs have been sent overseas since

2001. And while this creates jobs in poorer countries, it is estimated that 150 million

internal migrants in China work in sweatshops, absent state benefits or protection, and

that 250 million children, ages 14 or younger, work in factories, many in deplorable

conditions.

Health threats reach across the spectrum. Close to half of all people in developing

countries suffer at any given time from health problems caused by water and sanitation

deficits. Two million die annually from infectious diarrhea, 90% of them children.

Europeans and Americans, who constitute just 28% of world population, account for 42%

of deaths from cardiovascular diseases and cancersdiseases often triggered by smoking,


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sedentary lifestyles, and eating foods rich in salt, sugar, and fat. Obesity is growing into a

pandemic in the U.S. as well as in China and India.

Western monoculture is spreading throughout the world. Some argue that globalization

is good for countries and cultures, citing examples of how music, art, political thought,

technology, and other artifacts of culture have crossed boundaries and enriched peoples

experiences (Cowen, 2002; Bhagwati, 2004). Meanwhile, the Chinese government is

trying diligently to preserve its cultural and political underpinnings amidst a rapid influx

of western goods and services, and many other developing nations face pressures to move

to a Western capitalism model despite questions as to whether it is appropriate for their

cultures (International Forum on Globalization, 2002). Moreover, businesses implement

global strategies based on an economic logic of standardization and efficiency that offers

little practical incentive to account for cultural or governmental differences.

Insecurity in the world is intensifying and widespread. The Arab Spring, bailouts of

organizations too big to fail, an extended drug war in Mexico, and the Occupy

movement remind us of the instability and dangers of an interconnected world. On the

economic front, the spread of global capitalism has yielded many benefits, but contributes

to short-term thinking and unintended consequences. The financial markets fixation on

rapid returns (along with the motivations and incentives of executives that work in them)

were proximate causes of the 2009-2010 recession (Chan, 2011). Toyotas errant drive to

become the biggest automaker and BPs aggressive profit pursuits resulted in loss of life,

property, and reputations. And, as the rich get richer, Stiglitz (2011) warns, The more

divided a society becomes in terms of wealth, the more reluctant the wealthy become to

spend money on common needs.

Business Challenges. Significant movements of goods, services, technology, human

resources, and capital across international borders have changed the business environment as


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we know it. This has largely been a boon for MNCs and the private sector overall. Increases

in productivity due to innovation and specialization have improved competitiveness and

efficiency; greater market opportunities worldwide have raised revenues and expanded the

scope of business activity; and access to cheaper sources of labor and raw materials lowers

costs. These advantages have raised the power position of business, often beyond national

governments. The private sector is now the power leader of today, but it has a role that is not

without complexity and challenge.

Consider just a sampling of the sort of operating challenges a business faces today:

Increasing competitive pressures on a global scale are forcing companies to continuously

cut costs;

Globally integrated production requires complex management and monitoring of supply

chains;

Operating around the world increases the number and variety of stakeholders to manage;

Increased competition and consumption are depleting stocks of natural resources;

Public services in health, education, and welfare are strapped for funds and require more

cost-sharing and engagement of the private sector;

Heightened expectations from consumers, employees, regulators, and the public at large

means that businesses must not only operate more responsibly but also take responsibility

for addressing social, economic, and environmental issues in society.

On a macro scale, the integration of the global marketplace has intensified economic

interdependence among organizations andnations. While this opens up trade, it also means

that economic problems in one part of the world spread rapidly to others. The United States

2007-2008 fiscal crisis evolved quickly into a global recession sending the EU into a

financial tail spin and impacting the economies of almost every region of the globe.

Differences between countries cultural, political, and religious practices have rendered


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global markets uncertain and sometimes conflictive. Persistent tensions in the Middle East

have made nations and their businesses more vulnerable to terrorist attacks, diplomatic and

military conflicts, and disruptions in energy supply. And while globalization expands access

to natural resources, it also makes the planet more susceptible to abuse by organizations with

shoddy environmental practices and by governments with loose environmental regulations.

Capitalizing on Complexity. It is clear that the world is becoming smaller and more

tightly interconnected economically, socially, and ecologically. What does this mean for

leaders in business and in society? The great majority of some 1500 top executives surveyed

by IBM (2010) find their operating environments to be more volatile and uncertain than ever

before. IBMs report about the challenges of global integration comes to two conclusions:

1) The worlds private and public sector leaders believe that a rapid escalation of complexity

is the biggest challenge confronting them. They expect it to continue indeed, to

accelerate in the coming years.

2) They are equally clear that their enterprises today are not equipped to cope effectively

with this complexity in the global environment (pg. 3).

So how are leaders responding to a competitive and economic environment unlike

anything that has come before? The IBM study finds that those who are capitalizing on

complexity are redesigning their organizations to make them more flexible and fluid and

reconfiguring themselves through new relationships with other businesses, NGOs, and

governments.

For the past two decades, scholars have been mapping a landscape where companies

routinely reshape and resize themselves, regularly buy and sell off businesses, outsource

nonstrategic functions, and partner with other institutions to do their work (Tushman &

OReilly, 1996; Galbraith, 2001; Saltz & Mirvis, 2002). Handy (1989), as one early example,

described a federalist organization design featuring three layers of activity from core to non-


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core tasks. These layers would be populated, respectively, by core full-time personnel,

independent contractors and partners, and contingent workers. The underlying logic is that

this enables an organization to reconfigure its human systems quickly and efficiently in

response to environmental demands, such as new market openings, competitors responses,

and supply chain costs and reach, while preserving its core competencies. Many firms have

since adopted the extended enterprise concept where they work with partners throughout

their global supply chain and contract with other firms to handle transportation, warehousing,

procurement, public relations, and even information technology while focusing their capital

investments and attentions of the valued-added components of their business.

More generally, what has come to be called the post-bureaucratic structurewhether

depicted as a boundaryless organization, flexible firm, or virtual corporationfeatures less

vertical hierarchy, more lateral interaction, and constant exchange between the firm and its

environment at every level and in every part of the organization (Volberda, 1999; Galbraith,

2005). Specialists in organization design contend that these features give a firm sufficient

variety in structure and skill to better sense and react flexibly to complexity in its markets and

operating environments (Trist, 1983; Cohen & March, 1986).

Globalization has expanded the scale and scope of these new designs. Intel, as one

example, developed the global factory concept with a worldwide supply chain of plants,

transportation and distribution systems, R&D facilities, and sales organizations that depends

on tight integration. And while each of the facilities is required to meet strict operational

requirements that facilitate integration, they are also encouraged to take advantage of local

cultural customs. IBM, in turn, has developed an enterprise model where it reconfigures

businesses to deliver greater value by rethinking what is done in house versus through

collaboration. This has led the company to undertake hundreds of acquisitions the past

decade, develop a global supply chain network involving thousands of business partners,


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establish corporate centers of excellence in different regions of the world, and devise new

business models where it sells to and services an ecosystem of diverse customers to create

smarter cities and a smarter planet.

In the face of increasing complexity, these organizations and others that thrive on the

global stage have been built to change (Lawler & Worley, 2006). Their rapid redesign

capabilities give them agility and adaptability (Brown & Eisenhardt, 1998; Haeckel, 1999)

and their networks and partnerships yield what Huxham (1996) and others call a

collaborative advantage. The case studies in this volume show how a variety of

organizations--large and small, public and private, commercial and communalhave

redesigned themselves and forged partnerships for this purpose.

We wonder, however, whether these new designs and collaborations will lead to

sustainable effectiveness. No responsible leader or citizen can take comfort in the idea that

the horsemeat scandal and beggar-thy-neighbor stratagems employed are inevitable in our

competitive capitalist system. In other times, a national government or coalition of nations

were able to take control of these kinds of situations and respond with new policies and

remedies. But no such force exists today to regulate and remedy the undesirable social,

economic, and environmental consequences of global capitalism. There are, however, some

animating ideas, market forces, and developments in the political-economy that point the way

to a more sustainable version of competitive capitalism. There are some forward thinking

business leaders, too, that have a more inclusive and longer-term view of effectiveness where,

as one CEO puts it: commercial success is no longer a matter of company-to-customer

relationships; it also involves the success of relationships with governments, NGOs,

academic institutions, and other companies.


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reward systems that promote the irrational use of natural capital (Hawken, Lovins, & Lovins,

2008).

Responsible Capitalism? The ideals of capitalism are that free markets make free

men (Friedman, 1974, pg. 3) and that human well-being is best advanced by liberating

individual entrepreneurial freedoms and skills within an institutional framework

characterized by strong private property rights, free markets, and free trade (Harvey, 2005,

pg. 3). In theory, the Anglo-American model is not only concerned with maximizing a firms

economic performance, it contains the logic for upholding and even enhancing the quality of

social and environmental conditions in which a firm exists. For example, sustainability

should enter into market decisions through either resource scarcity or consumer demands.

Dwindling supplies or more costly extraction of fossil fuels should shift input costs up and

drive the search for alternative fuels; and consumer demand for more ecologically friendly or

socially relevant outputs should incent organizations to shift their products/services.

But it does not always work that way in practice. Various market conditions (e.g.,

asymmetric information flows, mobility barriers, government tax policies), market failures

(e.g., decreasing marginal costs, unaccounted for environmental and social externalities,

sticky assets), and consumer contradictions (e.g., we say we want sustainability but are not

willing to pay more for it) can warp free markets and produce unsustainable consumption.

Organization balance sheets account for the costs of acquiring resources (e.g., oil, gas,

minerals) provided by the ecology but do not fully account for services provided to maintain

ecosystems (e.g., cleaning the air, water, and habitat or keeping the peace in the Mideast).

And excessive CEO pay and executive bonuses and growing gaps between the haves-and-

have-nots resist market corrections.

Sustainable Effectiveness. These issues are fueling a movement to reform the

orthodoxies of Anglo-American capitalism and redefine profit, efficiency, and growth in the


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logic and language of sustainable effectiveness. Proponents of a new order do not argue

about whether businesses should make a profit but are concerned rather about how they make

their profits, how much profit they make, and at what costs to the commonweal. They

contend that the concentration of wealth, environmental damage, and social injustices that

have been incurred in the name of maximizing shareholder return warrant a rethinking of

value creation in the economy.

Three developments in the political-economy add impetus and direction to calls for a

new definition of value creation. First is the growing acceptance of stakeholder theory which

proposes that corporations bear responsibilities not only to their financial shareholders, but

also to employees, customers, suppliers, business partners, communities, and others who are

touched by corporate behavior (Freeman, 1984; Parmar et al., 2013). These are people,

groups, and interests that have a stake in a company, may care about its success or how a

company treats them, or be concerned about the impact a company has on others, society, and

nature. The great majority of business leaders today acknowledge responsibilities to multiple

stakeholders (Economist Intelligence Unit, 2008).

Second, growing social movements concerning consumer protection, investor rights,

employee well-being, and the health of the planet embody economic power and carry with

them the possibility of regulation and legal remedy for harms. In the most societies, the

interests of the public and private sector are not fully aligned and businesses are wary of and

opposed to regulation and oversight over their affairs in these domains. Accordingly, there is

a strong preference in business to make adaptations to these social movements voluntary

rather than regulatory. In this respect, there is a strong business case for companies to adopt

more socially responsible and sustainable practices (Bonini, Koller, & Mirvis, 2009).

Finally, growing legions of NGOs that represent varied stakeholders are operating at

the nexus of business and society (Hawken, 2007). Over two hundred thousand new citizen


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groups have been formed around the world since the mid-1980s and global NGOs have been

rising in numbers, scale, and scope. Amnesty International, for example, has nearly two

million members in every country where multinational corporations do business and the

World Wildlife Fund has over five million. Both of these groups, as well as Oxfam,

Greenpeace, and thousands more, have forced companies to account for their economic,

social, and environmental inaction or misdeeds.

Shared Prosperity. Proposals for new variants of capitalism and new models of

responsible conduct are many and varied including, for instance, calls for a more conscious

capitalism (Mackey & Sisodia, 2013) that transcends profit maximization and calls for deeper

engagement of employees, customers, and communities, for natural capitalism (Hawken et

al., 2008) that emphasizes the economic value of nature and speaks to its restoration and

renewal, and for a more community-based capitalism which is based in local living

economies and emphasizes social sustainability (Hess, 2009). While there are those who call

for reduced economic growth and restraints on consumption, the unifying feature of most

calls for reform is their focus on shared prosperity. Consider three examples of shared

prosperity ideas already making their way into practice.

Albert (1993) describesRhine capitalismas a highly successful synthesis of Anglo-

American capitalism and social democracy. In contrast to the traditional model, Rhine

capitalism proposes that the interests of shareholders and management should be

reconciled with the interests of labor and other stakeholders, that markets should be

guided to balance the rights of private capital vs. the longer-term, social needs of a

functioning economy, and that information sharing and consensus building among

stakeholder allows coordinated action in pursuit of long-term economic and social goals.

Furthermore, by relying on banks to fuel and guide investment rather than stock market

capital, the model seeks to smooth out the volatility of market forces.


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Worley and Lawler (2010) propose a policy framework of responsible progress that is

more rooted in traditional economic criteria of efficiency, risk-and-return, innovation, and

full employment (Scherer, 1980). Grounding responsible progress in this traditional

economic logic, they contend that creating social and ecological value should have equal

standing with creating economic value. Recognizing and addressing the achievement of

economic, social, and ecological outcomes as part of the responsible progress criteria

creates a larger number of available and socially acceptable solutions to challenges of

economic development (Nattrass & Altomare, 1999). Responsible progress calls for

businesses, governments, NGOs, and other stakeholders tojointly optimize (as opposed to

maximize) economic development, technological innovation, cultural diversity, and

ecological health to achieve sustainable effectiveness.

Porter and Kramer (2011) offer the concept of shared valuewhere processes,

products, and services are key to interests of both business and society. The underlying

rationale for shared value is that the competitiveness of a company and the health of the

communities surrounding it are mutually dependent. If organizations, governments, and

civil society interests could recognize and capitalize on this dependency, the next wave of

global growth could be initiated. Shared value can be created by reconceiving products

and markets, redefining productivity in the value chain, and enabling local cluster

development. Redefining products and markets to meet social as well as economic needs

would create new opportunities for growth and innovation. Similarly, innovation in the

supply chain could radically improve efficiency and redress environmental damage.

Finally, a more local orientation could increase resiliency and lower volatility in the

system (Poire & Sabel, 1984).

How are these theories translating into practice? A number of contemporary practices

embody and build on the Rhine capitalism model. Stakeholder engagement and consultation,


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as noted, are becoming the norm for big business. In terms of market coordination, Matten &

Moon (2008) report that corporate responsibility policies and practices in Europe are

embedded in institutional frameworks and norms, are often codified, and define proper

obligations of corporate actors in collective rather than individual terms. As an example, the

EU and majority of OECD countries have adopted standards about public reporting by

businesses and the Nordic countries have legislation requiring disclosures by companies

about their performance in select environmental, social, and governance areas.

As the name implies, however, Rhine-style capitalism features far more in Europe

than in the U.S. and rest of the world where notions of responsible progress in a market mode

have more traction. John Elkingtons (1997) idea that business performance be directed

toward a triple bottom lineeconomic, social, and environmentalfits this ethos. Its logic

has been embraced by many companies globally and is evident in their strategizing, planning,

and reporting. In China, by comparison, market-based commerce operates under the

dominion and direction of a state that must balance aspirations for economic growth against

environmental degradation and social cleavages. The former Premier of China summed the

Chinese version of joint optimization in this way: Companies should be responsible to

society and consciously accept supervision by society. (Gefei, Weiyang, & Fushun, 2009).

Finally, there is no doubt that a turn to shared value opens up new avenues for value

creation. At once it can join a companys interest in creating new markets at the base-of-the-

pyramid with expanding its offerings for green and ethical consumers. When these threads

are joined into business models, it can unleash employees energy and turbo-charge

innovation in a company. And, it can also create real value for society. However, as Mirvis

and Googins (2012) note, shared value as such does not do very much to reconnect business

to society, reduce mistrust, or redress the rich-poor gap and other social divides. The

corporation remains at the center of this Copernican universe, and the other planets


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(governments, NGOs, other stakeholders) merely align around its gravitational profit-

maximizing pull.

Beyond producing shared value, Mirvis and Googins recommend that companies

work toward shared values(adding an 's' to value) with their stakeholders.This speaks not

only to joint-optimization but also to power-equalization. A framework of shared values

requires that corporate aspirations for profits and efficiency be considered alongside social

progress and equityThis takes business out of the center of the universe and produces a

solar system of interdependent and interacting sectors where cooperation is the mode of

working and social harmony and sustainability are the measures of success.

Shared Responsibility. To close this discussion of political economy, consider the

question of who creates the value that produces shared prosperity. In the U.S. and many

market-driven societies, there has historically been a clear division of responsibility among

the public, private, and civil society sectors. The job of business has been to produce

products and services for markets, to create jobs, to earn and distribute profits, and to pay

taxes. Governments role has been to establish and enforce regulations, set tax policy, and

provide a safety net for those whose needs are not served by the market. And the roles of

non-governmental organizations (NGOs) have been to fill-in-the-gaps and address other

social and cultural needs.4

There are today, however, signs of sector bending or blurring (Dees & Anderson,

2003) such that traditional divisions of responsibility between the business, government, and

NGOs are being reconfigured. The wealth and power of business has increased dramatically

over the past decades. Meanwhile, government in the U.S., UK, and other OECD nations has

retracted through privatization of its services and reductions in expenditures in social welfare

4In its neo-classic economic formulation, the market is the preferred form of organization and governmental

intervention emerges from a market failure whenever a sufficiently large segment of the polity demandsresponsiveness from the state. NGO activity, in turn, arises from both market and government failurewhereby private interests organize to address the unmet needs of smaller segments of the public.


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as a percentage of GDP. This combination of increasing business power and shrinking

government largesse has led to calls for corporations to take on greater responsibilities for the

commonwealdomestically and in their overseas operationsand to use their capabilities to

also serve the public interest (Visser, 2011).

In turn, NGOs have taken on three overlapping and sometimes contradictory functions

versus business and government: 1) as an advocate for those disadvantaged by the market

and disenfranchised by government; 2) as a watchdog over the behavior of the other two

sectors; and, increasingly, 3) as their partner in policy making and service delivery.

Thus what was once a reasonably clear division of responsibilities between the sectors

with regard to societys economic progress, social welfare, and environmental protection now

features overlap and interdependencies (see Figures 2 and 3). While this can create sectoral

ambiguity and conflict, it also opens up possibilities for actors and interests in government,

business and civil society to assume shared responsibility (Mirvis, Googins, DeJongh,

Quinn, & van Velsor, 2010) and work together for the benefit of each party and the common

good.

[Insert Figures 2 and 3 here]

Working Together Better

Being responsible does not mean doing it all ourselves. Responsibility is a form of

sharing, a way of recognising that were all in this together. Sole responsibility is an

oxymoron. Wayne Visser.

A company cannot execute its strategy alone. Adam Werbach.

Any business that wants to profoundly alter its operating environment, any

government that seeks to undertake fundamental reform, and any people who want to

improve the world must partner with others from outside their sector. Steve Waddell.


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Multi-stakeholder and cross-sector approaches to problem-solving offer one of our

greatesthopes for meeting, together, the challenges of the twenty first century. JaneNelson.5

Multi-organization networks and partnerships enable organizations to perform tasks and

achieve goals that are too costly or complicated for a single organization to do on its own.

There is a vast multidisciplinary literature on why organizations participate in multi-party

networks and partnerships that draws from organizational economics, theories about agency,

stakeholders, and resource dependence-and-exchange, as well as social network,

communication, and institutional theories (see reviews by Gulati & Gargiulo, 1999; Monge &

Contractor, 2001; Zeng & Chen, 2003; Borgatti, & Foster, 2003; Brass, Galaskiewicz, Greve,

& Tsai, 2004; Provan, Fish, & Sydow, 2007; Parmigiani and Rivera-Santos, 2011; Austin, &

Seitanidi, 2012a, 2012b). While even a cursory review of these theories is beyond the intent

and scope of this volume, select chapters in this volume demonstrate how multi-organization

arrangements can:

Increase trust and reduce transaction costs between parties;

Spread the costs and risks of investment and innovation;

Increase communication flows and produce joint learning;

Combine resources and diverse expertise to address complex problems;

Help common interests to enlarge and conflicting parties to cooperate;

Open new market opportunities and produce socio-technical and cultural innovations;

Forge relationships that transcend the perspective of a single organization and addressmultiple stakeholders interests.

Factoring in Sustainability. In research as to why actors and interests participate in

networks and partnerships, main motivations compress to 1) increased revenue and/or growth

5Quotes from Wayne Visserhttp://3blmedia.com/blog/Wayne-Visser/Meaning-Responsibility;Werbach

http://hbr.org/product/the-network-of-sustainability-partners-a-company-c/an/3426BC-PDF-ENG;SteveWaddellhttp://www.pegasuscom.com/levpoints/bigsyschange.html;Nelson, J. (2002).Building Partnerships:

Cooperation between the United Nations system and the private sector. (Monograph). New York: UnitedNations Publications.
http://3blmedia.com/blog/Wayne-Visser/Meaning-Responsibilityhttp://hbr.org/product/the-network-of-sustainability-partners-a-company-c/an/3426BC-PDF-ENGhttp://www.pegasuscom.com/levpoints/bigsyschange.htmlhttp://www.pegasuscom.com/levpoints/bigsyschange.htmlhttp://hbr.org/product/the-network-of-sustainability-partners-a-company-c/an/3426BC-PDF-ENGhttp://3blmedia.com/blog/Wayne-Visser/Meaning-Responsibility


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opportunities, 2) reduced risks and/or costs, and 3) organization-specific motives relating to

innovation, knowledge transfer and use, and gains in reputation and legitimacy, as well as

competitive positioning (Powell, 1990; Oliver, 1990; Alter & Hage, 1993; Huxham, 1996).

Naturally, variants of these material motives feature in nearly every chapter.

Our interests in this volume, however, also concern motivations for sustainability

which can include the motivations listed above but introduce three other considerations in the

formation, goal setting, and operation of multi-organizational arrangements. First,

stakeholder theory, as articulated by Freeman (1984) and extended by Freeman et al., (2010),

proposes that an organization has fiduciary andnormative responsibilities to stakeholders,

including those who can affect or are affected by an organizations activities. This more

expansive view of responsibilities and inclusive view of stakeholders raises questions about

stakeholder democracy (Matten & Crane, 2005) and how multiple stakeholders interests

and voices are best represented in organizational arrangements. Networks and partnerships

can be prime vehicles for incorporating multiple stakeholders, directly or indirectly, in a

cooperative ventures goals, decisions, and results. Several of the case studies here address

how stakeholders are selected and enlisted into a multi-organizational network or partnership

or, if not directly engaged, how their interests are represented by proxies.

Second, incorporating criteria of sustainable effectiveness and shared value turns

attention to how the mission of a network or partnership is defined, and to how multiple and

sometimes conflicting goals are adjudicated and managed. On the conceptual aspects,

Freeman (1994) proposes that organizations are bound by the doctrine of fair contracts and

serve the interests of allstakeholders who, in turn, have the right to participate in the

governance of a firm. On the side of reciprocity, he then argues that this creates a collective

interest whereby stakeholders individually and collectively have a stake in the continued

existence and prosperity of other members including a firm. On the practical side, various


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chapters herein consider how power relations and governance can be embedded in different

multi-organization forms (e.g., hierarchical, heterarchical, or shared governance); how trust is

developed and reinforced (e.g, contracts, co-investment, or norms of reciprocity); and how

work gets done (e.g., coordination, cooperation, or integration).

Third, several of the chapters here examine networks and partnerships aimed at the

sustainability of societies and the planet. Here we find the worlds biggest problems and

both common and competing interests across sectors and industries over how to address

them. Complex and interdependent economic, social, and environmental problems call for

complex solutions. Organizations from different industries and sectors bring unique and

essential assets to the work of social change (Waddell, 2005). Yet the literatures on

organization design, capabilities, and management practices are primarily addressed to

competitiveness and to the economic effectiveness of a single firm (Porter, 1980; Teece,

Pisano, & Shuen, 1997). What organization designs, capabilities, and practices are most

germane to cooperative ventures and to their success in terms of the triple bottom line (Gray,

1985; Huxham & Vangen, 2000; Worley, Feyerherm, & Knudsen, 2010; Gulati, Puranam, &

Tushman, 2012)?

Types of Collaboration and Partnership. Multi-organization networks and

partnerships come in different shapes and sizes. Consider, first, horizontalnetworks and

collaborations that link organizations side-by-side. In the commercial space, this includes

mergers, strategic alliances, and joint ventures of firms in the same industry, and intramarket

networks of interests involved in, say, buying groups, selling groups or as users of a class of

products or services. An intermarket networkrepresents a horizontal alliance among

organizations in different sectors and markets. This is best exemplified by Japanese keiretsu,

Korean chaebols, and Mexican grupos where businesses and governments collaborate to

coordinate economic relations and policy and by the Rhine models of capitalism practiced in


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northern Europe. By their composition and comparatively equal power relations, intermarket

networks are more disposed to spread the wealth among participants and pursue ends of

sustainable effectiveness and shared value.

There are examples, too, of industry groups formed to produce private benefits for

their members and public goods. For instance, the Extractive Industries Transparency

Initiative (EITI) is a collaborative effort that includes BP, Chevron Texaco, Exxon Mobil,

Shell, Rio Tinto, Total, and other major oil and gas providers. EITI specifically aims to

reduce the embezzlement of oil and natural resource revenues and allow others to monitor

and influence governmental spending priorities by promoting the transparent reporting of

payments.

Several of the cases in this volume cover private-public collaborations contained

within a single industry (e.g., healthcare, education). Here, too, conditions are prime for

joint-optimization although very much contingent on the success of the parties in working

together (Gray & Hay, 1986; Huxham & Vangen, 2004; 2005). On this point, Savage et al.

(2010) write, collaborative advantage can be offset by collaborative inertia, the lack of

progress among partners. Collaborative inertia presumably is generated by numerous

obstacles to collaboration that range from the lack of trust to multiple and divergent aims to

different organizational cultures among the partners, to the inability to effectively handle the

conflicts associated with these issues, power differences, and other factors. (p. 24).

A vertical networkis composed of multiple organizations--both within and across

sectors--that coordinate or cooperate to move resources from raw materials to end consumer.

Vertical market networks, too, can address both business and sustainability issues. Nike, for

example, has its shoes manufactured in different supplier plants around the world and then

organizes their distribution through retail outlets. But Nike also collaborates with footwear,

apparel, and fabric companies to inspect and ensure the safety and health of workers in their


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activated by companies in the form of policies that support volunteering and corporate-

community partnerships that identify important initiatives.

Second, in this era where companies focus on their core competencies and outsource

whole functions, few firms choose to dedicate extensive resources and staff to community

relations and the fieldwork. On this count, studies find NGOs to be far more knowledgeable

about social needs and more effective at planning social action than businesses (Austin,

Leonard, Reficco, & Wei-Skillern, 2005).

Third, there is evidence that partnering with NGOs is itself a source of legitimacy for

companies in society. GlobeScan (2001-2012) surveys find that 85 percent of the public says

that a key indication that a company is socially responsible is that it works directly with a

charity group or NGO. Furthermore, a growing segment of the public reports that a key

indication that a company is socially responsible is that it works directly with a charity group

or NGO. Here are some notable business/NGO partnerships:

Community ServiceHome Depot and KaBOOM! have partnered in the creation of

play spaces for low-income and disaster-affected neighborhoods.

EducationWith its Catalyst Initiative, Hewlett Packard established a network of

leading educators, education institutions, and key stakeholders in selected countries to

develop explore innovative approaches to STEM education.

Social JusticeState Farm has teamed up with the Neighborhood Housing Service to

increase the availability of insurance services for low income communities.

Digital DivideNokia has partnered with the Grameen Foundation to bring affordable

telecommunication services to poor villages in developing countries.

Sustainable DevelopmentChiquita and the Rainforest Alliance have partnered to

certify that Chiquitas plantations promote environmental and social sustainability.


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Finally, an issue oropportunity networkis a temporary constellation of organizations,

often across sectors and markets, brought together to pursue a single purpose. If the purpose

is accomplished, the network can disband. Firms, NGOs, and governments have, for

example, worked together to combat trade in blood diamonds and to address corrupt business

practices in developing countries; multibusiness efforts build national health and legal

systems in African states, and facilitate post-conflict reconciliation among peoples in

Northern Ireland, South Africa, the Balkans, and Afghanistan; and business and civil society

partners promote peace through simple-but-difficult measures like creating jobs for youth

growing up in lands ripe for conflict and terrorism.

Other examples of issue-driven networks include Chinas Low Carbon City Initiative

which brought together business, labor, government, education, finance, community

organizations, and economic development agencies to identify exemplary efforts related to

energy efficiency, public awareness, and low carbon development; UPS sharing its carbon

calculator with the Dave Matthews Band to help reduce the carbon footprint of their tours;

and Starbucks hosting its competitors at a Cup Summit to explore ways to reduce waste

and promote recycling of coffee cups. Subsequently, initiatives were launched among these

companies with the Foodservice Packaging Association to increase the recyclability of

cups and with waste management firms to increase volume and thereby make recycling more

economically viable.

Making Collaboration Work. There are many rosters of best practices in

managing multi-organizational networks and partnershipsdrawn from practical experience

(Googins & Rochlin, 2000; Waddell, 2003; World Economic Forum, 2005; GEMI, 2008;

Werbach, 2009) and from comparative research (Gray, 1989; Zhang and Huxham, 2009;

Austin & Seitanidi, 2012b). Key findings from the literature on effective multi-party


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CONCLUSION

The most often used phrases in the many meetings I attended [were] the need to

create coalitions of the willing and a recognition that all issues are inter-

connected and cannot be viewed in silos- Jo Confino, Chair of Guardian SustainableBusiness writing at the close of the Rio +20 Conference in June 2012

6

This introductory chapter has described three themes that frame the issues to be addressed in

this volume. First, globalization and threatening political, economic, social, and

environmental conditions in the world have created significantly more complexity for leaders

in business, government, and the private, nongovernmental (NGO) sector. Second, this

complexity requires a different objective function in the production of goods and services.

Instead of the pursuit of unsustainable growth and maximization of singular goals, such as a

profits or shareholder wealth, attention is turning to shared goals and responsibilities to the

requisite interdependency of the sectors to achieve sustainable effectiveness. Finally, multi-

stakeholder and cross-sector partnerships are emerging in response to this new world order.

New forms of collaboration mark the extended enterprise--from supply chain to customers

and clientsas well as multi-business and multi-sector ventures. Understanding these

changing conditions and their impact on organizing and leadership requires a closer look at

how networks and partnerships form and evolve, and careful consideration of new leadership

responsibilities, roles, and practices. This volume on Organizing for sustainability: Building

Networks & Partnerships illustrates some of the needed models and methods.

A 2012 survey of nearly 800 sustainability professionals in business, government,

NGOs, academe, and the media in over seventy countries concluded: Post-Rio +20, experts

overwhelmingly believe companies should collaborate with multiple actors, including

governments, to advance sustainability most effectively Globescan/Sustainability (2012).

Yet the survey found a huge gap between the importanceof partnering for sustainability for

6Confinohttp://www.guardian.co.uk/sustainable-business/blog/how-to-progress-collaboration-sustainability
http://www.guardian.co.uk/sustainable-business/blog/how-to-progress-collaboration-sustainabilityhttp://www.guardian.co.uk/sustainable-business/blog/how-to-progress-collaboration-sustainability


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companies versus its likely adoption in practice(58% versus 30%). Key perceived barriers

to collaboration included the absence of shared goals, a lack of executive leadership, and

simply not having had much experience to draw upon when entering this arena.

The organizations studied in this volume are not grains in a pile of sand (Ramo,

2009) -- they have strategic intent and purpose in joining forces with others to address

economic, social, and environmental challenges. As early adopters of a new collaborative

form of organization and management, they teach us about how to work together and set an

example for other organizations in their industry, sector, nation, and worldwide. Not every

case herein is a success story and even the goods ones have to be seen as works-in-progress.

We salute these organizations and the contributors to this volume for in the American

baseball adage stepping up to the plate.


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