The concept of corporate social responsibility (CSR) refers to the refers to commitment of organizations towards contributing in the social and economic development of the communities, employees, societies and families in which they operate with the intention of improving the quality of life (Holme and Watts, 1999). The literature around CSR indicates that it is a very wide topic and phenomenon comprising different interrelated dimensions that are understood differently by the various stakeholders within the firm’s operating internal and external environment (Matten and Moon, 2005).
Focused Explanation of Research Problem
According to Moon (2004) the complexity of CSR arises from the fact that different components are combined together including issues of sustaining the business, promoting the environment, adhering to ethical and legal considerations, being socially responsible, among others. Professionals in organizations, especially the banking sector need to engage in significant policy and structural changes to prioritize and implement CSR considerations as the pressure keeps growing for banks to give more to the society and uphold better work ethics for their internal employees (Holme and Watts, 1999).
In the contemporary business environment, CSR continues to influence the performance of businesses and continues to represent opportunities for the banking industry as it influences productivity, performance and ultimately determines the ability of banks to attain sustainable competitive advantage (Matten and Moon, 2005).
Today, organizations tend to give value and share their wealth through optimizing the triple bottom line concept that emphasis on satisfaction of a firm’s profitability, stakeholders and the environment (Matten and Moon, 2005). The role of CSR in banking entities appears to have massive potential across the world. According to Mullerat (2010), banks that implement CSR enjoy goodwill, good reputation and brand visibility, which are important in shaping perceptions concerning the organization and its performance. According to Mullerat (2010), CSR enables banks to improve market share and turnover, create reputation and competitive advantage, improve corporate image and reputation, attract skilled and professional workforce and optimize operational costs. This paper sought to investigate the role and impact of CSR investments on the performance of employees in banks in Australia.
Unit of investigation
The investigation entailed the implication for CSR on employee performance in Banks in Australia and its costs and benefits. This study investigated the impact of CSR investments on the performance of employees at the Bank of Melbourne, which formed the main case study for the investigation. The study participants were recruited from the Bank of Melbourne for collection of primary data.
What is the impact and role of CSR on the performance of employees from Banks in Australia
This study has six chapters starting from the introduction to the conclusion. The introduction explores the background to the study, the various meaning and understanding of CSR, the place of CSR in the banking sector, the research question and rationale of the study. Chapter two examines the literature related to the role and importance of CSR in the performance of employees in the banking sector. Chapter three examines the methodology employed in the study, including the population and sample size, the research variables, data collection and analysis methods. Chapter four details a descriptive analysis and provision of the findings from the study. Chapter five presents the recommendations from the study and future research consideration. The sixth chapter provides the limitation and conclusions from the study.
Literature Review and Theoretical Framework
Critical Discussion of relevant theories and concepts
This section examines key theories and concepts that are used in this paper, namely, corporate social responsibility and stakeholder theory.
Corporate Social Responsibility
CSR is about making good business sense from an organization’s operations. Although it is difficult to establish a single definition for the concept of CSR , researchers agree that CSR is a voluntary activity, where organizations make deliberate decisions to invest in bettering the society, environment and share value with the stakeholders (Van Marrewijk, 2003).
Today, there is an increase in the factors driving the adoption of CSR in organizations. Back (2011) highlights five factors increasing the interests of organization to pursue CSR initiatives, including globalization, increased wealth, performance in domestic markets, power of brands and ecological sustainability. Research shows that investment in CSR is an important factor in attracting and retaining qualified, talented and diverse workforce (Earle, 2003). Hence, organizations that invest in welfare of employees through good working conditions achieve better performance resulting into improved productivity and profitability (Van Marrewijk, 2003).
Several models exist for investigating the role of CSR in the performance of organizations. The dimensions of CSR are viewed through the triple bottom line lenses, where organizations seek to invest in the people, the planet or environment and the profits (O’riordan and Fairbrass, 2008). CSR a multidimensional construct comprising interrelations between corporate philanthropy, ethical, legal and economic dimensions (O’riordan and Fairbrass, 2008). There is need to balance the economic gains with the corporate philanthropy, and observing the legal and ethical requirements while conducting business.
Carroll (1991) identified four dimensions of CSR namely legal, economic, philanthropic and ethical dimensions. The four dimensions are tested in the current study. The legal dimension relates to the requirements of firms to act in accordance to the standards and laws regulating the market, environment and the societies in which they operate (Carroll, 1991). The economic dimension relates to the responsibility of the organization to create goods and services, and provide them at a price that maximizes the profits and stakeholder value (Carroll, 1991).
The ethical dimension relates to the unwritten regulations, rules, codes and values that guide the organization in its operations with the society that extend beyond the legal requirements (Carroll, 1991). The philanthropic dimension is the expectation the society has that firms will operate good citizenship initiatives and commit to the improvement of the wellbeing of the society members.
Murray and Vogel (1997) defines a stakeholder as an entity, mainly outside the organization, that the firm seeks to influence through its various CSR initiatives and that has a significant impact on the performance of the organization. The firm must meet its responsibility and obligations towards the stakeholders, including owners and investors, employees, customers, among others. Here is a list of the various stakeholders and the responsibility of the firm towards them:
- High profits for owners and investors
- Equal and fair employment opportunity and compensation for employees
- High quality products at a fair price for customers
- Fair and ethical treatment for business partners
- Fair competition for the rival
- Stable employment and sustainability of the society
- Adherence to the regulations and rules of the government
Until recently, firms existed for the sole responsibility of maximizing profits and satisfying shareholder expectations (Friedman, 2007). However, the focus on profit has since changed as firms realize that profitability is not their sole responsibility. It is also becoming evident that that profitability depends significantly on its relationships with the various stakeholders. It is increasingly important for the firms to focus on the stakeholder interests, especially the environmental and social issues (Oruc and Sarikaya, 2011). How organizations are viewed and evaluated depend significantly on their relationship and treatment of the other stakeholders. The performance and success of the organization depend significantly on its treatment of other stakeholders, especially in addressing its social and ethical obligations.
CSR and Employee Performance
This paper focuses on the employees who are considered to be important stakeholders in the operations and activities of any given organization. Companies with healthy environments tend to attract and retain brilliant employees, who have high commitment and ultimately lead to organization performance (Maignan and Ferrell, 2004). Organizations across the world are investing significantly in corporate social responsibility in an effort to enhance and improve their financial performance through striving to retain employees, attracting brilliant one’s engaging and involving employees, and attracting shareholders (Ali, Rehman, Ali, Yousaf and Zia, 2010). Unfortunately, in most organizations, the introduction of employees as a key stakeholder remains a theoretical concept (Aguilera, Rupp, Williams and Ganapathi, 2007; Maignan and Ferrell, 2004).
The literature on the contribution of CSR on employee commitment is expansive. Allen and Meyer (1993) assert that affective, normative and continuance factors represent the various ways that employees are committed to the organization. organization commitment is the attachment that employees develop towards their company comprising elements such as loyalty, fulfillment with job description, willingness to adapt to organizational goals and values and high satisfaction level, leading to pursuance of organization objectives and improved employee productivity (O'Reilly, 1989).
Normative commitment is the desire that employees have that keeps them working within the same company, while continuance relates to perceived social and economic costs arising when an employee leaves one firm for another (Allen and Meyer, 1993). Commitment influences and determines the behaviors of employees , thus shaping their intentions within the organization, and are expected in employees working in commercial banks in Australia.
The link and relationship between employee commitment and CSR is based on the principal of social exchange and reciprocity (Gond, El-Akremi, Igalens and Swaen, 2010). Good CSR initiatives make employees feel that they have a responsibility and obligation to reciprocate, while employees who feel unrewarded tend to be dissatisfied, are non-committed and have poor achievement of organization tasks and goals (Gond, El-Akremi, Igalens and Swaen, 2010). Available research evidence suggests a positive correlation between CSR initiatives designed for employees and commitment (Santoso, 2014; Madison, Ward and Royalty, 2012). A conclusion drawn from these findings is that internal CSR initiatives have significant implications for employee commitment, resulting into improved organization performance.
CSR and Financial Performance
Researchers have been interested in the relationship between implementation of corporate social initiatives and performance of the organization, especially regarding finance and profitability. Alexander and Buchholz (1978) argued that organizations that successfully implement social initiatives are able to manage their affairs to drive financial results and that the cost of social investment creates a competitive advantage for the firms. Previous researchers have determined reputation as the sole measure of the performance of CSR in these firms (Alexander & Buchholz, 1978).
Nevertheless, Cochran and Wood (1984) criticized this method citing it as being too subjective to provide an objective and actual evaluation of the performance of CSR. Although there have been subsequent investigations, little has been achieved in establishing an effective measure and evaluation of CSR and financial performance hindering the possibility of deriving results that can be generalized to the entire population (Martínez?Ferrero and Frías?Aceituno, 2015). The biggest challenge relates to the existence of vary many variables and the subjective choice of the variables to include in a researcher’s investigation has a significant implications for the findings collected (McWilliams, Siegel and Wright, 2006).
This study used a subjective measure to ascertain organization performance. Khandwalla (1977) developed a subjective measurement scale contains 8 items to evaluate performance and other stakeholders involved in the CSR initiatives. The items selected included, employee job satisfaction, public image and good will, growth rate of revenues, employee loyalty or commitment to the firm, product quality, financial strength and employee productivity.
Research objectives and Research hypothesis
This study sought to investigate the effect of CSR on the performance of employees in the Bank of Melbourne in Australia and its costs and benefits. The study answers the following research questions:
- What factors force the business organizations to use activities of CSR?
- Does a positive relationship exist between CSR practices and performance of employees?
- Does the improvement in employee’s performance lead in the overall performance of organizations in concerning market?
This study explored the following hypothesis:
H1: A significant difference exist between economic CSR and employee performance in banks in Australia
H2: A significant difference exist between legal CSR and employee performance in bank in Australia
H3: A significant difference exist between ethical CSR and employee performance in bank in Australia
H4: There is a significant difference between philanthropic CSR and employee performance in selected commercial bank in Australia
This study is limited to the banking industry in Australia. While the area of corporate social responsibility is wide, the focus of this study was limited to the policy area of employee relations because there have been serious changes in the frameworks of employee relationships in Australia (Palmer, 1997; Jones, Marshall and Mitchell, 2007). Moreover, the commercial banking industry and sector was selected because employees play a critical role in running its day-to-day operations. The study was conducted within the Bank of Melbourne, in Australia.
Methods of Data Collection
The researcher employed survey questionnaire to collect data and measure two variables, namely the dependent and independent variables. The independent variable was the adoption of CSR as measured by the sub-variables identified by Carroll (1991) namely legal, economic, philanthropic and ethical. One dependent variable was measured, namely performance of employees which was directly associated with the performance of the commercial bank.
Sampling and Size
This study comprised 50 respondents (n= 40 employees and 10 managers) were recruited from the Bank of Melbourne, in Australia. The participants were recruited from the Bank’s corporate headquarters since most bank CSR initiatives and decisions were centralized. The study employed a convenience sampling technique to select the study participants. The employee selected must have worked in the bank for over two years to allow for adequate exposure to the organization’s CSR initiatives. The managers were selected from the top management cadre because they have a deeper and detailed understanding the concepts of CSR and their involvement in the formulation of the policies and guiding frameworks for its implementation. Out of 50 questionnaires distributed, only 47 were complete and suitable for analysis representing 94% response rate.
A questionnaire method was used to collect primary data. The instrument contained six sections, ranging from section A to F. In part A, the aim was to collect demographic information of the participants. Section B, C, D and E measured the various CSR variables, namely ethical, legal, economic and philanthropic. David and Phil (2005) developed a scale for measuring corporate social responsibility which was useful in this study.
The measure uses a Likert scare with a range of 1 to 5, representing a continuum of strongly disagree being the lowest and strongly agree being the highest number, respectively. 22 items were adapted on the Likert scale for the four CSR variables. Economic variable was measured in section B with five items, ethical variable in C with seven items, philanthropic variable in D with 5 items and legal variable in E with 5 items. Section F measured organization performance based on a six items questionnaire developed by Khandwalla (1977) which initially had 8 items with a scale from 6(high) to 1(low).
The main ethical considerations when conducting any study relates to putting measures in place to protect the rights and privacy of participants (Tharenou, Donohue and Cooper, 2007). Since participants would like to maintain privacy, it is important for the researcher to follow ethical measures and standards to uphold their right to privacy. The first step before conducting this research was to seek approval and permission from the university ethics committee to be able to conduct the study (Tharenou, Donohue and Cooper, 2007). Once the approval was granted, the researcher then sought permission from the Bank of Melbourne to conduct and collect data from the employees.
It was very important to preserve and protect the rights of the respondents in this study (Flory and Emanuel, 2004). Therefore, the researcher sought informed consent by providing a letter that informed the participants of the nature, reason and why the study was being conducted. The sample letter attached in the appendix of this report detailed the study and informed the research subjects of their rights to voluntary participation and exit from the study at their own discretion.
It was important only to collect information form participants who signed the letter and opted into the study after understanding what was expected of them, why the researcher was conducting the research and the ways the collected information would be presented and utilized after the study (Flory and Emanuel, 2004). Maintaining employee privacy and confidentiality is a legal and ethical consideration that adds to the reputation of the researcher and influences credibility and acceptance of the research findings by other researchers.
The respondents did not write names on the survey questionnaire. Instead, unique codes were used and then destroyed immediately after the data had been analyzed (Flory and Emanuel, 2004). Personal information was not presented in the final research report since the researcher only looked for generalized and collective data, which was then presented in the final report. No personal data was used for the purpose not intended for other than the understanding of the impact of CSR on the performance of employees in the banking sector, which was the purpose of this study (Flory and Emanuel, 2004).
Findings and Analysis
Descriptive data analysis was used to analyze the demographic data collected from the participants. Table 1 provided in the appendix shows that 27 (58%) of the participants were male and 20 (43%) were female. Based on the age factor, 23 (49%), 14(30%) and 10 (21%) were between the age ranges of 18-30, 31-45 and 46- above, respectively. Concerning the marital status, 20 (43%) were single, 25 (53%) were married, 2(4%) were separated and none was divorced. We also analyzed the education background which indicated that 10 (21%) had post-graduate and 37 (79%) had graduate qualifications. Regarding the level in the organization, 4 (9%), 6(13%) and 37 (78%) were from top management, head of departments and technical staff, respectively.
Analysis of findings
H1 sought to determine whether there was any significant difference between economic CSR and employee performance in selected commercial banks in Australia. Table 2 in the appendix indicates that the study findings showed existence of a significant difference between economic CSR variable and employee performance in the Bank of Melbourne, in Australia (Crit-t= 1.96, Cal.t = 22.122, df= 48 and P < 0.05 significance level). Hence, the conclusion drawn from this is that there a significant difference existed between economic CSR and organization employee performance.
H2 sought to determine whether there was any significant difference between legal CSR and employee performance in selected commercial bank in Australia. Table 3 in the appendix indicates that the study findings showed existence of a significant relationship between legal CSR and employee performance in the Bank of Melbourne, in Australia (R= 0.922, N=47, P<0.005). Hence, the conclusion drawn from these findings suggests existence of a significant positive relationship between legal CSR and performance of employees
H3 sought to investigate whether there was any significant difference between ethical CSR and employee performance in selected commercial bank in Australia. Table 4 in the appendix indicates that the study findings showed existence of a significant relationship between ethical CSR and employee performance in the Bank of Melbourne in Australia (R= 0.8354, N= 47, P<0.005). Hence, the conclusion drawn from these findings suggests that there is a significant and positive association between ethical CSR and employee performance in the bank.
H4 sought to investigate whether there was any significant difference between philanthropic CSR and employee performance in selected commercial bank in Australia. Table 5 in the appendix indicates that the study findings showed existence of a significant correlation between philanthropic CSR and employee performance in the Bank of Melbourne in Australia (R= 0.9323, N=47, P<0.005). Hence, the conclusion drawn from these findings indicate that there is a significant and positive association between philanthropic CSR and employee performance in the bank.
Recommendations and Future Research
Suggestions based on analysis
Following the analysis of the data from the study and the findings generated, four important recommendations were reached. It is important for banking sectors in Australia to move beyond focusing on the profit motive and contribute to the wellbeing of the other stakeholders. it is also vital to focus SCR initiatives towards improving the working conditions of employees as this contributes to the positive perception concerning the role of CSR on their performance and ultimately the performance of the firm. Lastly, the bank management must develop more CSR programs that involves and engages the employees, as key stakeholders, to boost the performance of the company.
While this study sought to focus on impact of CSR on employee performance and organization performance, the researcher did not specifically examine the specific CSR initiatives that target employees. Rather, the study used the general dimensions of CSR namely ethical, legal, philanthropic and economic variables. Future research may consider the CSR initiatives designed for employees and their influence employee productivity and performance of banks. This study only investigated one organization (Bank of Melbourne) in Australia and failed to investigate more banks to collect reliable data that could be generalized. It would be important for future research to include more banks and widen the sample size to collect reliable and adequate findings that can be generalized.
The research data and findings have several applications for the implementation of CSR in the banking sector, and virtually all other organizations that have a profit-making motive. The various players in the banking industry will find the findings enumerated in this study very important when planning for the various organization activities and performance indicators.
This study involved top management, middle cadre managers and technical employees who had a common agreement on the important role and contribution of CSR in the performance and profitability of the firm. Hence, this study will guide the management in establishing CSR policy and making decisions concerning the banks role and involvement in the environment that it operates in. Banking entities will be able to increase market share and profitability through effective allocation of resources to CSR activities. Finally, increased spending on CSR will improve satisfaction of the various stakeholders, including employees and the environment.
This study sought to investigate the impact on CSR on employee performance in the Bank of Melbourne in Australia. The increased pressure on organizations to invest in CSR initiatives informed this study. This study sought to investigate how investing in CSR initiatives impacted employee performance by measuring the organization performance variables that were directly influenced by employee productivity and performance. From the data collected and analyzed in this study, it is clear that a decision to invest in the CSR component of the banking sector is critical for survival in the Australian banking market.
The findings from this study suggest existence of a significant difference between economic CSR and performance of employees in the bank. However, the findings from this study indicate existence of a significant and positive correlation between ethical, legal and philanthropic CSR and performance of employees in the organization. This means that the legal, ethical and philanthropic behaviors of the various stakeholders in the banking industry contribute significantly and positively to the performance of the organization. Nevertheless, this study concludes the ethical, legal, economic and philanthropic dimensions are significant predictors of the performance of organizations.
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