Week 6 Strategic Integration of Positive Social Change Discussion

Description

Within the world of strategic business planning, positive social change can often be lost or diminished to the point of minimal effectiveness. However, it is possible to achieve a solid balance of effective and responsible business planning if given the right tools and opportunities. Professionals who consider the importance of business ethics alongside positive social change can create a successful and accountable organization.

This week, you will analyze the risks and benefits of incorporating positive social change into an organization’s strategic planning process. You will also evaluate business ethics from a perspective focused on promoting positive social change.

Learning Objectives

Independent scholars will:
  • Analyze risks and benefits of integrating positive social change into organizational strategic planning
  • Evaluate business ethics within the context of positive social change
  • Learning Resources


    Note:

    To access this week’s required library resources, please click on the link to the Course Readings List, found in the Course Materials section of your Syllabus.

    Required Readings

    Dyer, J. H., Godfrey, P., Jensen, R., & Bryce, D. (2016).

    Strategic management: Concepts and tools for creating real world strategy.

    Hoboken, NJ: John Wiley & Sons.

    • Review Chapter 13: “Corporate Governance and Ethics” (pp. 256–273)
    • Case 13: “Corporate Governance and Ethics: A Series of Decisions” (pp. C-119–C-120)

      Discussion: Strategic Impact of Positive Social Change Initiatives

      Not all initiatives for promoting positive social change are successful, but these represent an opportunity to not only learn from one specific context, but also to shed light on a wider understanding of strategic planning. When larger corporations such as Starbucks have an initiative that fails, they can treat it like a learning opportunity for both the next initiative and their overall business strategies. Smaller companies, on the other hand, may be impacted in a more significant way.

      To prepare


      for this Discussion

      , review the video case study featuring Walden alumnus Eric Barton and his organization, Business Owners Benefits Association (BOBA), and consider the potential benefits and risks of incorporating a social change mission into business strategy. Be sure to utilize the Walden Library to identify scholarly examples of both successful and unsuccessful instances of social change integration.

      By Day 3


      Post

      an analysis of the risks and benefits of integrating a positive social change mission into organizational strategic planning. Your analysis should include the following:

      • What are the benefits for organizations considering integrating positive social change into their business strategy?
      • What are the potential risks for organizations considering integrating business strategies with an emphasis on positive social change?
      • Provide a real-world example of an organization that experienced an unsuccessful implementation of a positive social change initiative. As an independent scholar and global change agent, explain what the organization might have done differently, including planning or executing strategies to improve marketplace or cultural impacts.

      Be sure to support your work with

      a minimum of two

      specific citations from this week’s Learning Resources and at least one additional scholarly source.Refer to the Week 6 Discussion Rubric for specific grading elements and criteria. Your Instructor will use this rubric to assess your work.

W13420
ABERCROMBIE & #FITCHTHEHOMELESS
Karen Robson, Colin Campbell and Justin Cohen wrote this case solely to provide material for class discussion. The authors do not
intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names
and other identifying information to protect confidentiality.
This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the
permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights
organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western
University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com.
Copyright © 2013, Richard Ivey School of Business Foundation
Version: 2013-10-03
“In every school there are the cool and popular kids, and then there are the not-so-cool kids;
candidly, we go after the cool kids. We go after the attractive all-American kid with a great
attitude and a lot of friends. A lot of people don’t belong [in our clothes], and they can’t belong.
Are we exclusionary? Absolutely.”1
Abercrombie & Fitch CEO Mike Jeffries, 2006
In May 2013, nearly three weeks had passed since a quote made by Abercrombie & Fitch CEO Mike
Jeffries in 2006 — that some people simply didn’t belong in his company’s clothes — had resurfaced,
and the backlash against the company showed no signs of waning. Increased social media usage and the
proliferation of user-generated content had amplified the situation, and the #FitchTheHomeless campaign
had gone viral. Celebrities who normally represented brands took on a campaign of dis-endorsement of
the Abercrombie & Fitch label.
In the face of this crisis, a team of Abercrombie & Fitch executives — excluding Jeffries — was set to
meet with the president and CEO of the National Eating Disorder Association and members of America
the Beautiful Teen Empowerment Series to discuss the situation. Moving forward, Abercrombie & Fitch
had some decisions to make about how to appease angry consumers and restore its brand image.2
BACKGROUND
Abercrombie & Fitch
David T. Abercrombie and Ezra H. Fitch created Abercrombie & Fitch in New York City in 1892 to serve
the needs of wealthy outdoor sportsmen and hunters.3 The company existed for nearly 80 years before
1
www.salon.com/2006/01/24/jeffries/, accessed August 23, 2013.
www.washingtonpost.com/blogs/on-leadership/wp/2013/05/22/abercrombie-fitchs-big-bad-brand-mistake/, accessed
August 23, 2013.
3
www.nytimes.com/2004/07/13/business/abercrombie-fitch-may-be-cool-but-cool-only-goes-so-far.html?Pagewanted
=all&src=pm, accessed August 23, 2013.
2
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going bankrupt in the late 1970s.4 The brand was then acquired by a Texas-based sporting goods
company and reborn as a mainly mail-order specialty retailer. In 1988, the Ohio-based clothing company,
The Limited, purchased the brand for $47 million.5
By 1992, Abercrombie & Fitch had evolved from supplying safari clothes and supplies to the U.S. elite at
the end of the nineteenth century to pleasing twenty-first-century teens with a particular “All-American”
style of clothing.6 Jeffries, hired to lead the business in 1992, could take credit for this transformation —
the development and success of the Abercrombie & Fitch label was the result of his vision for the
company. When he assumed the role of CEO, Abercrombie & Fitch operated only 36 stores with annual
revenue of roughly $50 million; by 2013, under his leadership, the company had grown to operate more
than 1,000 stores with annual revenue exceeding $4.5 billion.7 Jeffries had overseen the launch of flagship
stores in high value markets in Europe and Asia; he also developed complementary brands to reach other
youth segments. The Abercrombie & Fitch brand had an undeniable global reach.
REPEATED LAWSUITS TELL A DIFFERENT STORY
Controversy was not uncommon at Abercrombie & Fitch. Typically, controversies fell into two
categories: lawsuits regarding improper hiring and dismissal practices and lawsuits from consumer groups
who believed that Abercrombie & Fitch had offensive product lines.
Numerous former employees had made accusations of racial and religious prejudice. Abercrombie &
Fitch responded to the accusations by claiming to have hired an above industry average number of
minorities and denied having improper hiring or management practices. Yet, accusations ranged from
claims of wrongful dismissal for wearing a head scarf8 to job applicants who claimed they were told that
they could not have a position due to quotas of their particular ethnicity already being filled.9 In 2004,
Abercrombie & Fitch paid $40 million to settle a class action lawsuit in which minority employees
claimed that they were forced to work in the storeroom rather than on the shop floor so that they would
not be seen by customers. Although Jeffries denied wrongdoing, some alleged that these issues were the
result of systemic dysfunction linked to strict style guides that specified the classic “All-American” look
that Jeffries prescribed.
A lawsuit filed by a former company pilot highlighted Jeffries’s bizarre attention for detail. Cabin staff on
the company’s jet were required to adhere to a strict uniform and style guide and were instructed exactly
how reading materials should be prepared, what snacks were to be served and even how beds were to be
made and carpets vacuumed. In addition, there were specific instructions as to where Jeffries’s beloved
dogs were to sit.10 Jeffries’s vigilance and precise requests carried over to his vision for his brand
ambassadors, the people who wore his clothes, and his employees, whom he viewed as in-store models.
The numerous controversies and lawsuits that Abercrombie & Fitch had faced had result in financial
settlements and legal fees, but they had not resonated strongly with its target market. Indeed, these
4
www.fundinguniverse.com/company-histories/abercrombie-fitch-co-history/, accessed August 23, 2013.
www.nytimes.com/2004/07/13/business/abercrombie-fitch-may-be-cool-but-cool-only-goes-so-far.html?pagewanted
=all&src=pm, accessed August 23, 2013.
6
Ibid.
7
www.businessinsider.com/abercrombie-ceo-at-a-crossroads-2013-8#ixzz2bia9UFuF, accessed August 23, 2013.
8
http://jezebel.com/5479980/american-beauty-a-brief-history-of-abercrombies-hiring-practices, accessed August 23, 2013.
9
www.cbsnews.com/8301-18560_162-657604.html, accessed August 23, 2013.
10
www.nytimes.com/2012/10/20/business/suit-exposes-strict-manual-for-abercrombie-flight-crew.html?_r=0, accessed
August 23, 2013.
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controversies had little impact on brand equity, and many branding pundits had been quick to compliment
Jeffries for his focus on and vision of his brand’s personality.11
SOCIAL MEDIA: NOT A “GOOD LOOK” FOR ABERCROMBIE & FITCH
On May 3, 2013, Business Insider posted an article mentioning that while Abercrombie & Fitch
manufactured XL and XXL sizes for men, the company refused to manufacture clothes for plus size
women. The article made reference to a 2006 interview with Jeffries in which the CEO covered a number
of controversial topics about the company’s perceived brand direction, image and strategy.12 In this 2006
Salon.com interview (a quote from which prefaces this case), Jeffries stated that the company featured
certain types of people “because good-looking people attract other good-looking people, and we want to
market to cool, good-looking people. We don’t market to anyone other than that.”
The response from consumers and the general public was swift. By May 9, his remarks had sparked
outrage across the Internet. Social news and entertainment website Reddit posted multiple consumer
responses to these resurfaced quotes.13 The commentary on Reddit was aggressive and insulting towards
Jeffries, with numerous postings of photos mocking his appearance and ironically suggesting that he was
not attractive enough to wear the brand himself. For instance, an unflattering picture depicting the CEO
wearing an Abercrombie & Fitch garment was overlaid with the phrase: “If the CEO of Abercrombie and
Fitch only wants attractive people wearing his brand . . . then he’s going to have to go ahead and take off
that sweater.” Another less kind version stated: “Wants only attractive people to shop in his stores. Looks
hideous.” Similar photo creations poked fun at his looks by comparing him to Old Bif Tannen, a movie
character who did not age well, and Rocky Dennis, a boy disfigured due to a rare genetic bone disorder.14
Abercrombie & Fitch did not respond.
Following the Reddit posts, an open letter entitled “Sizing Up Abercrombie — A Letter to Mike Jeffries”
from Andrea Neuser, a mother of three, was published on The Huffington Post website. In her letter,
Neuser wrote:
Your customer is an “attractive, all-American kid with a great attitude and lots of friends.” I am a
mom of three daughters, ages 17, 13, and 10. They are all thin, attractive, all-American kids with
great attitudes and lots of friends. They shop at Abercrombie. I believe they are your target
audience . . . . Please find the enclosed clothing, purchased at our local
Abercrombie/Abercrombie and Fitch stores. My thin, popular, cool kids will not need them
anymore.15
On the same day, Change.org released a petition entitled “Abercrombie & Fitch CEO Mike Jeffries: Stop
telling teens they aren’t beautiful; make clothes for teens of all sizes!”16 Major news organizations began
to take notice.17
11
www.stealingshare.com/blog/index.php/the-temporary-slide-of-abercrombie-fitch/, accessed August 23, 2013.
www.businessinsider.com/abercrombie-wants-thin-customers-2013-5, accessed August 23, 2013.
13
http://knowyourmeme.com/memes/events/abercrombie-anti-plus-size-controversy, accessed August 23, 2013.
14
www.uproxx.com/webculture/2013/05/abercrombie-and-fitch-ceo-mike-jeffries-vs-the-internet/, accessed August 23, 2013.
15
www.huffingtonpost.com/andrea-neusner/abercrombie-sizes-mike-jeffries_b_3247213.html, accessed August 23, 2013.
16
www.change.org/petitions/abercrombie-fitch-ceo-mike-jeffries-stop-telling-teens-they-aren-t-beautiful-make-clothes-forteens-of-all-sizes, accessed August 23, 2013.
17
http://abcnews.go.com/blogs/entertainment/2013/05/small-sizes-an-overweight-distraction-for-abercrombie-fitch/,
accessed August 23, 2013.
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By May 13, 2013, there was still no response from Abercrombie & Fitch, and the momentum against the
brand was still gaining. Greg Karber, James DeLorean and Daniel Lisi released a video entitled
#FitchTheHomeless on YouTube.18 Karber conceived of the video as a means to protest Abercrombie &
Fitch’s refusal to make plus size women’s clothing, determination to market to attractive people and
alleged practice of burning damaged clothing rather than donating it to shelters. The video featured
Karber searching for Abercrombie & Fitch clothes at a thrift shop, ridiculing the brand and its customer
base, and then trying, in some cases with difficulty, to give Abercrombie & Fitch clothes away to the
homeless. The message and purpose of the video were clear: Abercrombie & Fitch needed a brand image
readjustment.
The video was an immediate hit, accumulating 4.3 million views in its first three days.19 In addition,
mainstream media picked up the #FitchTheHomeless campaign; a morning show, “The Talk,” featured a
panel of women reflecting ethnic, racial, physical and age diversity, who debated the Abercrombie &
Fitch controversy. Prominent African American comedian and actress Aisha Tyler pointed out the
prejudice that exists in the United States against weight:
Weightism is the last bastion of discrimination in America. . . It is the last group of people that it
is OK to discriminate against. . . Imagine if he said we don’t want gay people to wear our clothes
or we don’t want black people to wear our clothes. We made our jeans so they don’t fit big
booties so black girls won’t wear them.20
The next day, actress Kirstie Alley, known for her engagement with the media and entertainment industry
about her weight struggles, commented on “Entertainment Tonight”:
This dude from Abercrombie & Fitch — he’s the CEO — what a [expletive]! . . . He says . . .
Abercrombie clothes are for people that are cool and who look a certain way and are beautiful
and who are thin and blah, blah, blah. He goes on and on and on. That would make me never buy
anything from Abercrombie even if I was cool and thin. I got two kids in that age bracket that will
never walk in those doors because of his view of people.21
THE ABERCROMBIE & FITCH RESPONSE
The brand finally addressed the controversy on May 15. In a Facebook post, Jeffries stated:
I want to address some of my comments that have been circulating from a 2006 interview. While
I believe this seven-year-old resurrected quote has been taken out of context, I sincerely regret
that my choice of words was interpreted in a manner that has caused offense. A&F is an
aspirational brand that, like most specialty apparel brands, targets its marketing at a particular
segment of customers. However, we care about the broader communities in which we operate and
are strongly committed to diversity and inclusion. We hire good people who share these values.
We are completely opposed to any discrimination, bullying, derogatory characterizations or other
anti-social behavior based on race, gender, body type or other individual characteristics.22
18
www.youtube.com/watch?v=O95DBxnXiSo, accessed August 23, 2013.
http://tech.fortune.cnn.com/2013/05/16/harsh-anti-abercrombie-video-goes-viral/, accessed August 23, 2013.
20
www.youtube.com/watch?v=YmWmhzTQLLQ, accessed August 23, 2013.
21
www.etonline.com/news/134051_Kirstie_Alley_Blasts_Abercrombie_and_Fitch_CEO_Mike_Jeffries/index.html, accessed
August 23, 2013; www.youtube.com/watch?v=ZkMLkOk2j3I, accessed August 23, 2013.
22
www.facebook.com/abercrombie/posts/10151345201895378, accessed August 23, 2013.
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The response from Jeffries did little to assuage consumers or the media. Two days later, comedians Ellen
DeGeneres and Jimmy Kimmel both addressed the controversy on their shows. DeGeneres’s approach
involved absorbing the Abercrombie & Fitch controversy into the larger issue of female body image. She
reached out to her global audience by saying: “There is a size zero, which I don’t understand. Zero is
nothing. Now they have a double zero. There’s a double zero! What are we aspiring to? ‘Honey, do these
jeans make my butt look invisible?’ — Beauty isn’t between a size zero and a size eight. It is not a
number at all. It is not physical.”23
Kimmel released a spoof video with a strong, yet comedic, message. Mimicking the #FitchTheHomeless
video and starring actor Jim O’Heir, the video depicts the plus-sized actor purchasing multiple
Abercrombie & Fitch shirts and stapling them together to make a shirt that would fit him.24
Angered by Abercrombie & Fitch’s refusal to cater to plus size women, on May 19 the self-described
“fat” blogger Jes “The Militant Baker” recreated print ads for the brand that featured herself and a hired
male model with the tagline “Attractive & Fat.” Both were topless in the spoof ads, which also mimicked
the black-and-white style common to Abercrombie & Fitch.25 In an open letter to Jeffries, she explained
her motivation in making the video:
I’m sure you didn’t intend for this to be the outcome, but in many ways you’re kind of brilliant.
Not only are you a marketing genius (brand exclusivity really is a profitable move), but you also
accidentally created an opportunity to challenge our current social construct. My hope is that the
combination of these contrasting bodies will someday be as ubiquitous as the socially accepted
ideal.26
Her response was emotive enough that she was later invited to speak about this issue on the “Today”
show on NBC and was interviewed by CNN. She also challenged Jeffries to pose shirtless with a “fat
chick.”
ABERCROMBIE & FITCH: THE NEXT SEASON
Despite the humour injected by entertainers during their discussion of this controversy, this episode was
no laughing matter for Abercrombie & Fitch. Sales at their stores plummeted due to the negative publicity
and backlash.27 The Forbes BrandIndex impression scores showed that Abercrombie & Fitch closed at an
annual low, almost 40 points below its previous low that year (see Exhibit 1).28
Almost three weeks after #FitchTheHomeless was released on YouTube, a team of executives and
Abercrombie & Fitch critics gathered at company headquarters to discuss the crisis. Jeffries was
noticeably absent from these meetings. At their conclusion, Abercrombie & Fitch released the following
statement:
We look forward to continuing this dialogue and taking concrete steps to demonstrate our
commitment to anti-bullying in addition to our ongoing support of diversity and inclusion. We
23
www.youtube.com/watch?feature=player_embedded&v=5VRJRy9rnfE, accessed August 23, 2013.
https://www.youtube.com/watch?v=DZxw1vydvwI, accessed August 23, 2013.
25
www.themilitantbaker.com/2013/05/to-mike-jeffries-co-abercrombie-fitch.html, accessed August 23, 2013.
26
Ibid.
27
www.huffingtonpost.com/2013/05/24/abercrombie-sales-ceo-controversy_n_3332601.html, accessed August 23, 2013.
28
www.forbes.com/sites/brandindex/2013/06/06/abercrombie-impression-with-young-adults-continues-to-fall-following-coolkid-comments/, accessed August 23, 2013.
24
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want to reiterate that we sincerely regret and apologize for any offense caused by comments we
have made in the past which are contrary to these values.29
Moving forward, Abercrombie & Fitch had a lot of decisions to make. What was the best way to
demonstrate commitment to anti-bullying, to support inclusion and to hold true to their latest apology?
How could the company restore its brand image without diluting its “All-American” heritage? Had
Abercrombie & Fitch become a poster child for hatred towards unattainable beauty? Should they sell
larger sized clothing? What would the “next season” bring?
Karen Robson is a PhD candidate at Segal Graduate School of Business, Simon Fraser University. Colin Campbell is
an assistant professor in the Department of Marketing and Entrepreneurship at Kent State University. Justin Cohen is
a research fellow at Ehrenberg-Bass Institute for Marketing Science, School of Marketing, University of South
Australia.
29
www.huffingtonpost.com/2013/05/23/abercrombie-and-fitch-apology_n_3323668.html, accessed August 23, 2013.
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EXHIBIT 1: FINANCIAL INFORMATION FOR ABERCROMBIE & FITCH (‘000)
2012
2011
2010
2009
2008
Net Sales
$4,510,805
$4,158,058
$3,468,777
$2,928,626
$3,484,058
Gross Profit
$2,816,709
$2,550,224
$2,217,429
$1,883,598
$2,331,095
Operating Income
$374,233
$221,384
$237,180
$117,912
$498,262
Net Income from Continuing Operations
Income (Loss) from Discontinued Operations, Net of
Tax
$237,011
$143,138
$155,709
$78,953
$308,169

$796

($78,699)
($35,914)
Net Income
$237,011
$143,934
$155,709
$254
$272,255
$0.70
$0.70
$0.70
$0.70
$0.70
Basic
$2.89
$1.65
$1.77
$0.90
$3.55
Diluted
Net Income (Loss) Per Share from Discontinued
Operations
$2.85
$1.60
$1.73
$0.89
$3.45
Dividends Declared Per Share
Net Income Per Share from Continuing Operations
Basic

$0.01

($0.90)
($0.41)
Diluted

$0.01

($0.89)
($0.40)
$2.89
$1.66
$1.77
$0.00
$3.14
Net Income Per Share
Basic
Diluted
$2.85
$1.61
$1.73
$0.00
$3.05
Basic Weighted-Average Shares Outstanding
$81,940
$86,848
$88,061
$87,874
$86,816
Diluted Weighted-Average Shares Outstanding
$83,175
$89,537
$89,851
$88,609
$89,291
$2,987,401
$3,117,032
$2,994,022
$2,821,866
$2,848,181
$617,023
$858,248
$927,024
$776,311
$622,213
$1.89
$2.23
$2.68
$2.73
$2.38
Net Cash Provided by Operating Activities
$684,171
$365,219
$391,789
$395,487
$491,031
Capital Expenditures
$339,862
$318,598
$160,935
$175,472
$367,602
Free Cash Flow
$344,309
$46,621
$230,854
$220,015
$123,429


$43,805
$50,927
$100,000
$63,942
$57,851
$24,761
$20,286
$5,881
$1,818,268
$1,931,335
$1,943,391
$182,797
$1,845,578
Return on Average Stockholders’ Equity
13%
7%
8%
0%
16%
Comparable Sales
-1%
5%
7%
-23%
-13%
$485
$463
$390
$339
$432
Total Number of Stores Open
1,051
1,045
1,069
1,096
1,097
Gross Square Feet
7,958
7,778
7,756
7,848
7,760
95,800
91,000
83,000
83,000
96,200
Other Financial Information
Total Assets (including discontinued operations)
Working Capital
Current Ratio
Borrowings
Leasehold Financing Obligations
Stockholders’ Equity (including discontinued
operations)
Net Store Sales Per Average Gross Square Foot
Stores at End of Year and Average Associates
Average Number of Associates
Source: Abercrombie & Fitch Annual Report 2012.
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Business Strategy and Innovation: Effecting Positive Social Change
Business Strategy and Innovation: Effecting Positive Social
Change
Program Transcript
[MUSIC PLAYING]
ERIC BARTON: I incorporated a positive social change strategy into BOBA and
its mission by taking the time to research what challenges small businesses.
Also, by understanding, as a business owner myself, what it takes to run a
business successfully. As I left the Marine Corps and attended seminary,
eventually went to the Middle East to spend years developing my own business,
and moved our businesses into the United States, I understood from the
beginning– as a Marine, later as a seminarian, and as a business owner– that if
we’re not providing a positive social change in our own communities, then what’s
it worth?
We can’t make a change for everyone. But if we can make a change for that one
business owner that then can turn around and hire a new employee to make a
positive impact in our community and their community– ultimately, our world-that’s what BOBA’s about. And that’s what being part of a community and part of
a loving neighborhood really is.
As my executive team at BOBA researched the impact small businesses have to
our nation and to their communities, we found that 28 million small businesses in
the United States employ more than 99.7% of all employees. That’s a huge
financial impact in every community in the United States. And in fact, I believe it’s
the same throughout the world.
Because of this, BOBA is making a positive social change by bringing financial
balance back to the economy. Small business owners are the people in each and
every community that are working, that are contributing, and that are making a
difference in local organizations. That are putting food on the table, that are
working with churches and local nonprofits to bring back, again, that financial
balance.
[MUSIC PLAYING]
As a small business owner, creating positive social change does have costs, and
there are risks associated with it. For example, if we allow our employees, as a
small business owner, to volunteer in the community, that pays dividends. We
don’t see the financial rewards possibly on the next payroll, or the next payroll
that goes through, but what we do see is that our brand starts to be recognized
as one that adds value, and that is ingrained in the community.
Unlike large businesses that have vast resources, that have marking
departments and branding departments, the typical small business doesn’t have
© 2016 Laureate Education, Inc.
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Business Strategy and Innovation: Effecting Positive Social Change
that. But what we do have is our employees. We do have a team, we do have a
brand that’s so important.
And we don’t have the time, nor can we have afford the risk of not being a part of
our community. Therefore, things like volunteering, being active at your chamber
of commerce, wanting to make a difference in your local nonprofits, become so
critical. We don’t see dividends right away, possibly, but long-term, you’re going
to, as a small business owner, see the rewards.
Locally, we own Lex Lin Gypsy Ranch. We have a program called the Gypsy Gift
Program. And through that, we donate horses each and every year to therapy
centers throughout the country. These centers are impacting tens of thousands
of children and people with disabilities.
Other programs are Angels over America. That foundation has created
endowments to support families and children of Marines to support other
community members and employees to put their kids through college. We
believe that education is an economic driver.
Another organization that’s a sister company to BOBA is Peak Technical
Institute. We are giving financial scholarships. We’re working with manufacturers
and other businesses in our local community and beyond to bring education,
particularly as it relates to blue-collar workforces and technical trades, that are so
needed, as we bring manufacturing back into the United States.
Other organizations that we work with include the United Way. I am on the Alexis
de Tocqueville Society. We also work with Smoky Mountain Service Dogs.
Smokey Mountain Service Dogs is a great organization that provides service and
mobility canines to veterans and other wounded warriors throughout the east
Tennessee Community.
Part of the risk that we face everyday at Business Owners Benefits Association,
which includes the strategic planning over years, which includes our current
operations today, is that it’s very challenging to go to small businesses to help
them understand why it’s important that we come together in our association.
And so financially, being able to put money into the business association, as well
as being able to market to discuss with community leaders, with other business
owners, the importance of what we’re doing, takes a lot of time.
We have been blessed to have resources to put into the business, but at the
same time, we understand that you can only do that for so long. And there are
only so many available resources. So part of our risk is convincing our neighbors
and our other business owners in the community and in the nation that this is
worthwhile, this is important, and indeed, this will make a positive social change.
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2
Business Strategy and Innovation: Effecting Positive Social Change
BOBA believes that social change is so critical. It’s not just about profit in terms
of dollars, but it’s profit in terms of good, sound, healthy communities. Giving
back is something that makes a difference in my life and makes a difference in
my team’s life. And we talk about passion, and advising, and walking alongside
business owners. It’s not just about the dollar, but it’s about making a difference,
making an impact that goes well beyond the years we’re living.
For me and for the businesses that I’m a part of, for Business Owners Benefits
Association, we always incorporate social change into our mission. If it’s worth
doing, if it’s worth putting your time and effort into, and if you’re passionate about
it, then it’s going to make a difference in your community. So I believe that
making a positive social change is always important and always worthwhile in
each and every business that I am a part of.
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Business Strategy and Innovation: Effecting Positive Social
Change
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Business Strategy and Innovation: Effecting Positive Social Change
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BH 731
Business Horizons (2016) 59, 213—221
Available online at www.sciencedirect.com
ScienceDirect
www.elsevier.com/locate/bushor
Asking ‘‘What Else?’’ to identify unintended
negative consequences
Kathleen M. Wilburn *, H. Ralph Wilburn
St. Edward’s University, 3001 S. Congress Avenue, Austin, TX 78704, U.S.A.
KEYWORDS
Unintended negative
consequences;
Decision making;
Scenario thinking;
Stakeholder theory;
Corporate social
responsibility
Abstract With the advent of big data, the Internet of Things, cognitive computing,
and social media, it is becoming more difficult to argue that one could not have known
or at least have considered more alternatives, particularly negative unintended
consequences that happen in addition to the intended positive ones. Organizations
too often make a decision that will produce a positive consequence and then focus on
how to implement it, rarely stepping back to ask ‘‘What else could happen?’’ Any
decision changes the system in which it exists. The longer the time required to
implement a decision, the more systemic changes can alter the effects of the decision
on the system. Decisions to implement Corporate Social Responsibility and sustainability
initiatives usually involve many different stakeholders and may involve systems in which
organizations have little expertise or experience. A major negative unintended consequence, even for a CSR initiative, can damage the stakeholders’ trust in the organization. This article proposes a 5-step process to answer the question ‘‘What else could
happen?’’ in order to identify possible unintended negative consequences, thereby
helping organizations support their commitment to people, planet, and profit.
# 2015 Kelley School of Business, Indiana University. Published by Elsevier Inc. All rights
reserved.
1. Introduction
The idea that decisions are only bad in hindsight
highlights the fact that decisions, both personal and
business, are made based on the available information the decision maker chooses to consider. A decision’s worth must be based on what was known
when it was made versus what is known now. A bad
decision may be the result of important information
* Corresponding author
E-mail addresses: kathleew@stedwards.edu (K.M. Wilburn),
ralphw@stedwards.edu (H.R. Wilburn)
not being available or the decision maker thinking it
was not relevant. However, with the advent of big
data, cognitive computing, and social media, it is
more difficult to argue that one could not have
known or at least have considered more alternatives. Additionally, as businesses adopt corporate
social responsibility (CSR) and sustainability initiatives in the global community, they make decisions
that have not been part of their strategic thinking
and thus require more and different information. In
this article, we consider ways to reduce the amount
of unintended negative consequences–—results that
happen in addition to the intended positive ones.
0007-6813/$ — see front matter # 2015 Kelley School of Business, Indiana University. Published by Elsevier Inc. All rights reserved.
http://dx.doi.org/10.1016/j.bushor.2015.11.006
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214
Asking ‘‘What else could happen?’’ after making a
strategic decision can allow an organization a way to
pause before jumping straight to implementing the
decision.
This article proposes a 5-step What Else? process
to identify possible unintended consequences of
strategic decisions. This begins with ensuring the
intended positive consequence of a decision is
aligned with the organization’s purpose and strategic vision, which is particularly important when
considering decisions about starting social or environmental initiatives. Next, the organization must
identify the major stakeholders involved with implementing the decision, and then describe the
system in which the decision exists and how that
decision might change the system in both the short
and long term. This is especially necessary in the
global business space. In the fourth step, decision
makers should use scenarios to propose possible
consequences other than the chosen positive one.
Scenarios then identify the data to track to verify
the increasing or decreasing probability of the identified possible unintended consequences occurring.
An increasing probability of negative consequences
could lead to halting or altering the implementation
of the decision or to developing a mitigation strategy to minimize possible harm to stakeholders. If
stakeholders have identified possible negative unintended consequences, an organization can increase
stakeholder trust by considering them; in fact, it
may find that stakeholders can accept the possibility
of negative unintended consequences if the organization is committed to tracking the increasing or
decreasing probability of their occurrence. Finally,
an organization should implement a system for
tracking the trends that indicate an increased or
decreased probability of identified negative consequences; this allows space to develop strategies to
prevent them or mitigate their effects. Using such a
model demonstrates a commitment to people, planet, and profit, which can counter criticism on social
media. This article will provide examples of negative unintended consequences that were the result
of decisions made to achieve positive results, and
how asking What Else? could have prevented them,
or at least mitigated their severity.
2. Unintended consequences
Any action changes the system in which it exists, and
the longer the time required to implement an action, the more those changes in the system can
alter the effects of that action on the system.
Merton (1936) defined unintended consequences
as outcomes that are not the ones intended by a
K.M. Wilburn, H.R. Wilburn
purposeful action and noted that the longer it takes
to implement an action, the greater the possibility
that unintended consequences happen by chance.
Both Merton (1936) and Dörner (1996) said that the
key reasons people do not think about unintended
consequences stem from acting out of habit and
assuming that the future will look like the present
and the past. Merton (1936) also recognized that
there can be emotional attachment to certain actions and decisions, which may prevent the decision
maker from conducting due diligence in gathering
information.
Merton (1936) suggested that consequences cannot be assigned to the realm of ignorance if knowledge could have been obtained and was not. Thus,
‘‘How was I supposed to know?’’ is only valid if there
is proof that the consequence was in no way knowable even as the implementation of the decision
unfolded. In the 21st century, this will become more
difficult to prove as access to big data and the
Internet of Things becomes commonplace. By utilizing sources of data like RFID tags and video cameras, ‘‘advanced analytics software programs find
patterns in large sets of data and extract meaning
from them’’ (Kelly & Hamm, 2013, p. 47), providing
instant information. It will become increasingly
easier to use artificial intelligence to ask ‘‘What
else could happen?’’ This narrows the bounded rationality model of Simon (1982) that proposed limited and/or unreliable information about possible
alternative consequences and a limited capacity of
humans to evaluate and process available information are constraints on decision making.
Decisions may still be made quickly and the reliability of information may still need to be verified,
but information is no longer limited and humans
have help in processing and evaluating information.
An example of the verification issue happened with
Google Flu Trends. In 2009, Google was successful in
identifying the spread of the H1N1 flu virus early.
‘‘Google’s method does not involve distributing
mouth swabs or contacting physicians’ offices. Instead, it is built on ‘big data’–—the ability of society
to harness information in novel ways to produce
useful insights or goods and services of significant
value’’ (Mayer-Schönberger & Cukier, 2014, p. 2).
However, in 2012, the algorithms did not take into
account that news outlets had predicted a severe
flu season and Web users asked questions for information when they did not have symptoms; thus,
Google’s predictions were too high. Still, as the
Internet of Things allows algorithms to make associations, it will be easier to have access to accurate
information with which to think about the future.
‘‘It’s a step up from correlation toward knowledge.
Prime examples here are computer systems that can
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Asking ‘‘What Else?’’ to identify unintended negative consequences
place words in context. IBM’s Watson is such a
technology’’ (Lohr, 2015, p. 109). To better prepare
for the inevitable unintended consequences, the
5-step What Else? process can focus users on what
short- and long-term information they need for
considering the possible outcomes of decisions.
3. The 5-step What Else? process
3.1. Step #1: Ensure the goal aligns with
the organization’s purpose
The alignment of decisions with the organization’s
mission and strategic plan is essential in order to
ensure that the resources and commitment necessary to prevent unintended negative consequences
or enact a plan to mitigate the effects will be in
place. A description of this alignment must be created. A publication by McKinsey&Company (Bonini &
Bové, 2014) points to surveys that have shown CEOs
moving away from perceiving CSR as a fad and
toward a strategic requirement to consider both
profit and planet. The report recommends that
because sustainability has an increased importance
in business strategy, companies should:
Align internally on what they stand for and what
actions they want to take on these issues,
whether it’s economic development or changing business practices. Whatever approach
companies take, they should develop a strategy
with no more than five clear, well-defined priorities–—one of the key factors for successful
sustainability programs.
The Governance and Accountability Institute
(2014), using the Global Reporting Index (GRI;
‘‘Global Reporting Initiative’s Survey,’’ 2011), reported that in 2011 the non-reporters of CSR were in
the minority and ‘‘53% of the S&P 500 and 57% of the
Fortune 500 companies are reporting on their Environmental, Social, and Governance (ESG) impacts.’’
The report also noted that asset managers had
increased the assets of those who publish CSR and
sustainability by 22%. Those reporting have moved
from just those organizations created with a CSR
mindset like Patagonia and early adopters like
PepsiCo, Unilever, and Nestlé to organizations like
Ford, Shell, Toyota, Caterpillar, and Walmart, as
well as financial services, technology hardware,
and energy companies. Since CSR and sustainability
initiatives are voluntary integration of social and
environmental concerns with business concerns of
profit and return on investment–—and in the public
sector, a return to stockholders–—it is easy for organizations to make decisions and adopt programs that
215
are outside their areas of expertise, so alignment
with the mission may be absent.
One strategy for increasing their expertise is to
create long-term partnerships with key stakeholders
as a means of focusing limited resources on areas
where CSR or sustainability initiatives can have the
greatest benefit to society and the greatest benefit
to business based on organizations’ missions. However, ‘‘smart partnering is not for the faint of heart.
It requires greater focus, work, and long-term commitment than do many standard CSR pet projects,
philanthropic activities, and propaganda campaigns, but the rewards are potentially much greater for both sides’’ (Keys, Malnight, & van der Graaff,
2009). De George’s (1986, p. 264) ethical norms for
multinational corporations (MNCs) operating in developing countries include the following: ‘‘Do no
intentional direct harm; produce more good than
bad for the host country.’’ However, intentional and
direct have new meaning in the 21st century where it
is possible to have computer programs develop
probabilities of the effects of climate change, water
scarcity, or population changes. Consequently,
there may be few instances in which an organization
can claim it had no access to data that presented
those possibilities.
For example, a company might decide to help
train workers to work in a supplier’s factory in a
developing country–—an action which aligns with its
strategic goals of producing a quality product. However, communicating with a non-governmental organization (NGO) about the initiative might uncover
political uncertainty in the country. Asking What Else?
might produce the possibility of being forced to exit
the country because of political upheaval. The political issue can be tracked and the decisions modified or
changed if the probability of upheaval increases. This
is what happened to Tata Motors in 2008: It was forced
to leave a newly built factory in Singur, West Bengal,
India, that was to produce the world’s cheapest car. It
had made the decision to build there to provide
people in a poor state with jobs in its factory and
those of the suppliers that would move there. However, political differences between the state government and the local government created a hostile
environment, and Tata decided it could not operate
the factory safely and refused to have the state
government provide soldiers for protection.
3.2. Step #2: Describe stakeholders and
their concerns
Mitroff and Linstone (1993, p. 141) said that
stakeholders are ‘‘any individual, group, organization, institution that can affect as well as be affected by an individual’s, group’s, organization’s, or
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216
institution’s policy or policies.’’ Stakeholders can be
customers, suppliers, and partners as well as social,
political, and government entities. Groups that operate in a national or international arena, such as
NGOs, religious groups, social justice groups, and
communities–—including their subgroups such as
family units, interest groups, property owners,
property users, businesses, and farmers–—can be
stakeholders in an organization’s strategy. Organizations must identify the stakeholders who will be or
could be affected by their decisions and identify
their needs and concerns. This communication will
often uncover conflicts, which must be addressed in
the process of deciding if and how to implement the
decision. These may form the basis for identifying
possible unintended positive and negative consequences when What Else? is asked. For example,
local governments many times are at odds with
communities when they try to find sources of revenue to provide community resources. Nestlé recently responded to complaints from the stakeholders in
Northern California on the McCloud River over a
50-year contract from the county for access to local
water for use in its bottled water products by
deciding to work with the community to ensure that
the river would continue to support its fish populations (Asmus, 2009).
A company focused only on profit may be able to
simply shrug off a negative consequence of a decision or action as part of doing business. However, the
current focus on CSR and the interest in social
purpose by millennials, with their access to social
media, means all organizations are held to a higher
level of accountability. When Knight and Pretty
(1995) studied the financial consequences of catastrophes such as Johnson & Johnson’s 1982 Tylenol
recall and the Heineken’s 1993 glass bottle recall,
they found that stakeholders’ perceptions affected
organizations’ shareholder value. The study revealed that if the company had a good reputation
of concern for customers before the catastrophe, it
was able to recover its stock value.
3.2.1. Stakeholder theory
However, not all stakeholders’ concerns are equal.
Freeman’s (1994) stakeholder theory assumes that
values are necessarily and explicitly a part of doing
business. As further developed by Donaldson and
Preston (1995), the theory states that stakeholders
have ethical rights and their interests have intrinsic
worth, whether or not the stakeholders add to the
financial bottom line. According to this perspective,
managerial relationships with stakeholders are
based on normative, moral commitments rather
than on a desire to use those stakeholders solely
to maximize profits. The integrative social contracts
K.M. Wilburn, H.R. Wilburn
theory of Donaldson and Dunfee (1999) looks to
relevant sociopolitical communities for determining
norms by which to establish stakeholder requirements. Recognizing that there may be conflicting
norms among stakeholder groups, ‘‘the norms of the
community having the most significant interests in
the decision should be the candidates for priority.
Otherwise, where there are conflicting norms with
no clear basis for prioritization, organizations have
substantial discretion in choosing among competing
norms’’ (Donaldson & Dunfee, 1999, p. 248). Different stakeholder groups may perceive the decisions
of the organization differently. Some may perceive a
decision as unacceptable, while others perceive it
as an acceptable trade-off. The more information an
organization can have about its stakeholders and
their requirements and desires, the better it can
find data sources to alert it to increasing probabilities of an unintended negative consequence.
Royal Dutch Shell provides examples of both situations. The company assumed that it was not
responsible for harm done by a government, and
thus stood on the sidelines when the Nigerian government hanged nine environmental activists who
had protested Royal Dutch Shell’s gas-development
project on the grounds of environmental damage. A
global activist boycott of Royal Dutch Shell products
followed, and its stock price and profits plummeted.
The company settled out of court without admitting
guilt in 2009. Later that year, when it planned to
develop an operation to extract natural gas off the
Coast of Palawan Island in the Philippines, it developed a social license to operate (SLO) with the
community. The SLO is not a legal right to operate
a business granted by the government or other legal
entity, but a contract granted by the local community. ‘‘Without this approval, a business may not be
able to carry on its activities without incurring
serious delays and costs’’ (The Ethical Funds Company, 2009). Shell presented its plans to the community
and met with community representatives monthly to
discuss progress and issues. When a leak occurred,
Shell’s actions to clean it up were transparent. If an
environmentalist group protested, it would have the
community as an ally. In addition, when local people
asked the government to halt operations due to a
problem, the company was not stopped in its work as
it had been in the past. ‘‘By working to obtain community consent at a project in the Philippines, Shell
may have saved as much as $72 million in project
delays, which amounted to a 1,200 percent return on
its community consent’’ (Slack, 2008).
3.2.2. Types of stakeholders
Stakeholders may be divided into two groups: vested
and non-vested. Vested stakeholders are those who
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Asking ‘‘What Else?’’ to identify unintended negative consequences
have a right to something tangible or an interest in
the future of something that is a stake in the
organization’s initiative or decision–—such as owning physical property or inhabiting property with a
need for resources such as water, arable land, and
clean air. They would have a voice and a vote in
the decision once it is presented to them, especially if the organization is using an SLO. Nonvested stakeholder groups would have only a voice
and could be overridden by the vested stakeholders and the organization. Non-vested stakeholders
could be governments who want economic growth,
suppliers who want customers, or NGOs campaigning for global protection of water, forests, or
animals (Wilburn & Wilburn, 2012). Elm (2015)
comments that an organization should use its
own ‘‘‘Ethical Code of Business Conduct’ as a
touchstone for identifying legitimate stakeholders’’ and ‘‘hold ‘environmental’ groups to the
same standard as your other business relationships–—if they don’t operate within your ethical
framework, move on.’’
For example, even though the government
may grant a license to a mining company to open
a mine, the company might be concerned about the
unintended consequences of their actions in an area
inhabited by a native tribe. It would see those tribal
members as vested because they own physical property or inhabit property with a right to resources
such as water, arable land, and clean air, now and in
the future. The tribal members would have a voice
and a vote in the discussion of the plans for drilling
and transport. For example, they could vote against
mining or transporting on sacred land, or they could
limit it to certain periods during the year. They
might require that the mining company use practices that would not pollute the air or water. Similarly,
the mining company could agree to immediately
notify the stakeholders of a spill into a river and to
monitor the air quality during the drilling phase.
The company could also train local inhabitants to
work in the mines and support educational endeavors for children and adults. Thus, even if nonvested groups like environmental groups protested
against the mining activity, the community could
support the organization. This would help rebut
any online media campaigns against the company
by arguing that it is providing necessary raw materials and jobs, and it is doing so in a responsible
manner.
Ben and Jerry’s found itself in a stakeholder
conflict in 2009 when People for the Ethical Treatment of Animals (PETA) asked it to use human breast
milk in its ice cream in order to stop the unethical
mistreatment of cows, based on the announcement
that a restaurant in Switzerland was partially
217
replacing cow’s milk with human breast milk in its
sauces. The founders recognized that PETA is a nonvested stakeholder in any food product in the
United States, but did not dismiss it. Instead, it
issued a statement focused on the needs of its
vested stakeholders–—customers, stores, suppliers,
regulators–—explaining that public harm could
come from using unregulated breast milk in ice
cream and a mother’s milk was best used for her
baby. When Unilever acquired Ben & Jerry’s in
2010, it was aware that many of the ice cream
company’s stakeholders supported Ben & Jerry’s
CSR focus: using sustainable, Fair Trade certified
and organic suppliers, including milk from local
dairy farmers who did not use hormones; using
environmentally friendly packaging; and giving a
percent of its pretax revenues to charity. Unilever
decided to allow Ben & Jerry’s to continue its CSR
initiatives.
The non-vested stakeholders’ concerns must be
noted and tracked, in part because of their access to
social media, because they may effect a decision
indirectly. For example, in the spring of 2010,
Greenpeace activists targeted Nestlé because
Nestlé was buying 1.25% of its palm oil from a
supplier who was contributing to the deforestation
of rainforests and damaging orangutan habitats.
Greenpeace said this was unacceptable, even
though Nestlé had a target of buying 50% of its palm
oil from sustainable sources by 2015. Protestors
dressed in orangutan costumes took to the streets
of five major cities in different countries. The protests were not reported by the mainstream press,
but thousands of people shared photos of the protesters through Facebook and Twitter (Steel, 2010).
The CEO then pledged to use 100% sustainable
sources of palm oil by 2015, but Nestlé’s stock still
dropped from $51 a share on March 31, 2010, to $44
on May 24, 2010. Because Nestlé had identified palm
oil sourcing as a concern, it had made a decision to
increase its source from sustainable sources. Nestlé
also had a good reputation with its vested stakeholders, and it highlighted its CSR Report on its
webpages citing its 33% reduced water withdrawal
between 2000 and 2010–—even while its production
volume increased by 63%–—and its commitment to
producing products in developing countries where it
obtained its raw materials. Its stock rose to $50 on
July 15, 2010, and was $54 by October 4, 2010. Nestlé reported on its responsible sourcing website that
by September 2013, 100% of its palm oil was Roundtable on Sustainable Palm Oil (RSPO) certified
(Steel, 2010). Keeping track of an increasing global
concern for deforestation might have helped Nestlé
recognize it needed to end its contracts with noncertified suppliers earlier.
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218
3.3. Step #3: Describe possible effects on
the system
Any action changes the system in which it exists. The
longer the time required to implement a decision,
the more those changes in the system can alter the
effects of that decision on the system. Dörner (1996,
p. 198) focused on the importance of considering
systems:
Whether we want it to or not, any step we take
will affect many other things. We must learn to
cope with side effects. We must understand
that the effects of our decisions may turn up
in places we never expected to see them surface. Any action changes the system in which it
exists. The longer the time required for implementation of an action, the more those changes
in the system can alter its effects on the system.
One example of the system impact on an action is
described by Cohen (2004). During the 1930s, the
French used DDT in an isolated mountain village in
the Aurès region of Algeria to fight a high incidence
of malaria and typhoid fever. The intended positive
consequence was achieved: Typhoid and malaria
were eradicated. However, this triggered an unintended negative consequence. A demographic explosion resulted in the population doubling in one
generation. To meet the need to feed the increased
population, goat herds were enlarged and moved to
areas used for crops. However, the livestock rapidly
destroyed the soil, so the ability to continue to raise
livestock decreased. Furthermore, since there was
little new arable land for growing crops, agriculture
decreased. Within 20 years, most of the people
were in abject poverty. The stakeholders in this
case gladly accepted the use of DDT in order to
eradicate malaria and typhoid. Asking ‘‘What else
will happen to the system?’’ when typhoid and malaria were eradicated might not have been expected
40 years ago, but it would definitely be expected
today. Today, a computer program could provide
possible population growth numbers within seconds,
and a company helping to eradicate a disease could
enlist not only vested stakeholders but also nonvested ones by being prepared to develop new farming techniques plus food and water sources so that
negative unintended consequences do not happen.
By asking What Else?, a mitigation program prevented unintended negative consequences for a
medical initiative in Bangladesh in 2006. The government and NGOs built a modern operating room in
a district hospital and funded the education of local
doctors. The intended positive consequence was
that local doctors could operate on district residents
rather than requiring residents to travel to the city.
K.M. Wilburn, H.R. Wilburn
However, asking What Else? posited an answer that
the local doctors might move to the cities for better
pay and better education for their children. When
the NGOs saw the first trained doctors leave, they
had the doctors still in training develop flowcharts
for typical illnesses and diseases, and the doctors
trained local midwives to follow the flowcharts.
Thus, the women could provide everyday health
care to their neighbors, and doctors were brought
back as needed to perform operations (‘‘Millennium
Development Goals,’’ 2007). Additionally, they used
technological innovations to connect with the doctors for consultations to identify new illnesses or to
treat them earlier. As a result, the positive intended
consequence of increasing the health of the local
people still happened, even though an unintended
consequence also happened. Since better health
will cause an increase in population, the government and NGOs must track what is happening in the
area in order to ensure that the area can continue to
support an increasing population.
An evaluation of the system and the environment,
particularly in a global environment, requires a
wide-ranging investigation from both the ground
level and 10,000-foot high level. Government policies and budget may require that an organization
deal with unintended consequences on its own.
Systems changes over which the organization has
no control–—from global warming to conflict to pandemics–—still must be considered. Stakeholders may
not hold organizations accountable for such systems
changes, but in the 21st century, they do expect that
the organizations will make them aware of what the
possible negative consequences of those systems
might be. Another example of unintended consequences that could have been identified by asking
What Else? involved the 2014 Ebola outbreak. Too
late, many NGOs realized that their decisions about
treating the outbreak should have considered the
local people’s customs for handling and burying the
dead and their fear of outsiders who might take
their loved ones to a hospital from which their
bodies could not be removed in the case of death.
3.4. Step #4: Create short mini-scenarios
Short scenarios create stories that answer ‘‘What
else could happen?’’ and thus allow the organization
to consider unintended negative consequences and
their effects on different stakeholders. Scenario
thinking requires both creative and critical thinking.
Creativity is needed to imagine the future and what
the systems in which a decision is implemented
might be like. Scenarios are plausible stories that
describe ways in which the intended reality may
change or mutate in the future. Creating scenarios
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Copyright 2015 by Kelley School of Business, Indiana University. For reprints, call HBS Publishing at (800)545-7685.
Asking ‘‘What Else?’’ to identify unintended negative consequences
also allows the organization to analyze the unconscious assumptions that underlie the decisions it is
considering and to identify the adjustments that
may need to be made as events unfold. With increasing access to information and possibilities generated by the Internet of Things, scenarios can
help to identify specific information that may be
important to changes in the system. They also help
identify the signposts that will indicate that the
probabilities of certain possibilities noted in the
scenarios are increasing or decreasing. Using big
data to track these signposts allows the organization
to identify trends, drivers, and uncertainties that
may change the results of a decision. Chermack
(2004) says that scenarios can mitigate the tendency
of decision makers to be bounded by their current
environment and to use information and knowledge
that is in conflict.
Using the systems and environmental forces that
were identified in Step 3, it is possible to think about
those forces behaving differently than required by
the intended consequence of a decision and consider how that would affect implementation of a decision. Scenarios identify both beneficial and
detrimental consequences of changing forces and
allow consideration of different adjustments that
could be needed as events unfold. Existing global
scenarios can be used as the foundation of short,
mini-scenarios for What Else? questions. Shell International Limited (2005, 2008), the U.S. National
Intelligence Council (2012), and the World Economic
Forum (2009) have all developed global scenarios for
2030, and the Global Reporting Initiative (2014)
looks at possible future sustainability trends.
Organizations can thus benefit from the research
that has already been done by those who have been
writing global scenarios for many years. Additionally, organizations can tap research such as that of
McKinsey & Company’s (Bonini & Bové, 2014) surveys
that ask executives about forces in the global economy. In 2010, McKinsey & Company’s research team
identified five important forces. The first two were
the strength of emerging-market countries to contribute more to the global economy than developed
ones and the need to focus on efficiencies in productivity. The third force was the increasing connectivity of the global economy. The fourth was the
increased demand and decreasing supply of some
resources, along with increasing focus on the negative effects that accessing and using those resources
has on the environment. The fifth force was the
stress of governments to provide social stability
while at the same time driving economic growth
(Bisson, Stephenson, & Viguerie, 2010). The emergence of robotics and 3D printers is affecting all
five as they contribute to a changing workforce,
219
changing use of resources, and more efficiency in
productivity. Nanotechnology is providing substitutes for natural resources in construction at the
macro level and for microchips at the micro level.
The increased access to electronic communication
devices and global communication networks allows
those in developing countries to have information
and data that can form their opinions of organizations, especially foreign ones. Scenarios allow organizations to consider different realities. Those
organizations who have their own organizational
scenarios can easily plug a decision into their scenarios to answer What Else? Scenarios can be shared
with stakeholders as a way of helping them understand what an organization may not have control
over, what it is tracking, and what mitigation it
might be planning.
3.5. Step #5: Track probabilities and
communicate change
As a result of the scenarios, the organization then
asks what it would do if any of those unintended
outcomes were to happen. The organization must
create a process to track changes in the system that
might increase the probability of the unintended
negative consequences occurring. As forces that
could create unintended negative consequence
are tracked, the organization must decide at what
point it would develop a detailed plan to take
action. These plans should allow accommodation
of new changes as they happen.
Unintended consequences can, of course, be positive. A newly developed corn seed whose purpose
was to improve yields for farmers in developing
countries could be found to also require less irrigation in a particular environment. Some medications
developed to treat one ailment could be found to be
effective in treating another. However, even these
positive consequences must be tracked. For example, it is possible that less irrigation may provide an
environment for an insect to thrive that could damage the crop, or a medication may have a negative
interaction with another medication required
for the second ailment but may not appear immediately. However, it is the negative unintended consequences that are detrimental to organizations.
Tracking the probability of the consequences
becoming reality can provide organizations information about when to share it with stakeholders. For
example, pharmaceutical companies share possible
unintended consequences of their drugs with doctors who share it with those patients for whom
they are considering use–—the vested stakeholders.
However, sometimes the information is available to
all stakeholder groups through television advertising
This document is authorized for use only in Laureate Education, Inc.’s WAL DDBA 8161 Upgrade Business Strategy and Innovation for Competitive Advantage-1 at Laureate Education Baltimore from Feb 2019 to Mar 2020.
Copyright 2015 by Kelley School of Business, Indiana University. For reprints, call HBS Publishing at (800)545-7685.
220
that lists possible side effects, including those that
can lead to death.
Formal communications with vested stakeholders
should be maintained, especially if a social license
to operate exists. The organization’s credibility in
the eyes of its various stakeholders can then be a
source for collaboration rather than protest. If
stakeholders believe that the organization has included their interests as a part of their organizational strategy, they can understand the sometimes
difficult decisions when conflicts occur. If they understand that the organization has done its best to
identify possible unintended consequences, then
they will be willing to work on compromises rather
than complain to the government or mount a social
media protest.
For example, an agricultural company may be
considering providing a drought-stricken community
whose staple food is rice with free rice. Its intended
consequence may be to avoid famine. However,
asking What Else? might lead to a scenario in which
the free rice will mean rice farmers in that community will not be able to sell the small supply of rice
they have produced and will be unable to plant a
crop the next season. Therefore, an unintended
consequence may offset the good that the company
intends, and a short-term solution to the problem of
hunger, although necessary, may lead to long-term
reliance on free rice. As a result of this scenario, the
company may decide to buy the rice the farmers
have produced and add it to their supply of free rice
so the farmers can continue farming; or the company may provide seed for the next year and perhaps
help farmers develop more efficient means of irrigation. The company could share these ideas with
stakeholders to demonstrate its commitment to
stakeholder concerns.
PepsiCo, for example, understands that it cannot
use its old manufacturing blueprints for new beverage plants. Decisions to locate into areas of the
world with water scarcity that would have positive
consequences for creating jobs and industry for the
developing countries, as well as lower prices for its
products, required What Else? thinking. Few stakeholders would want their access to limited drinking
water to be used to produce product. Thus, in India,
PepsiCo has a goal of a positive water balance
because almost all of the available water is used
for agriculture. To accomplish this, it has built
rainwater-harvesting systems to avoid depleting
the aquifers, and it has taught farmers to use a
direct seeding method for planting rice that does
not require flooding seedlings with water. In 2009, it
opened its first overseas ‘green’ beverage plant that
complies with the LEED standard in China in the
western city of Chongqing. It uses 22% less water and
K.M. Wilburn, H.R. Wilburn
23% less energy than the average PepsiCo plant in
China by utilizing a high-pressure cleaning system,
a water-free conveyor belt lubricant, and watersaving fixtures. In addition, it reuses water from the
plant’s operations for cleaning and landscaping purposes. To save energy, 75% of the plant’s indoor
areas feature natural lighting, and a roof garden
insulates the office building and saves energy on
cooling and heating (PepsiCo, 2009).
Years ago, Nike and The Gap found themselves
facing social media backlash about outsourcing their
manufacturing to factories that were unsafe and
hired children. Even though both companies argued
they were providing jobs in developing countries,
social media focused on their profit motives. Answering What Else? might have uncovered the possibility that they would be held accountable for
knowing the practices and working conditions of
their supply chain factories. Since at the time companies were not held responsible for their suppliers’
actions, a scenario based on the What Else? might
have provided changes that could be tracked regarding stakeholder responses. Once evidence was
found that there was attention being focused on
working conditions, both companies might have
made changes to how they outsourced. As it was,
both were forced to break contracts with manufacturers and set up a process to monitor future suppliers
to salvage their reputations. Nestlé might have used
this process for cutting contracts with noncertified
palm oil growers before a social media protest forced
its hand and its products were boycotted.
4. Conclusion
As corporate social responsibility becomes the global norm and not something that sets an organization
apart, and as the Internet of Things and big data
allow organizations to understand possibilities and
probabilities, there is a growing expectation that
organizations will use scenario thinking and consider
not just the intended positive consequences of their
decisions but also the possible negative unintended
consequences they might produce. Understanding
the stakeholders who have an interest in an organization’s decisions is even more important as organizations work in global communities with different
cultures, norms, and needs. Social media is now
global, and it can be the platform for stakeholders
to form alliances that either support an organization’s decisions or attack them.
Following the 5-step process described in this
article can help organizations step outside the
boundaries of the present and use scenario thinking
to imagine what else could happen. Organizations
This document is authorized for use only in Laureate Education, Inc.’s WAL DDBA 8161 Upgrade Business Strategy and Innovation for Competitive Advantage-1 at Laureate Education Baltimore from Feb 2019 to Mar 2020.
Copyright 2015 by Kelley School of Business, Indiana University. For reprints, call HBS Publishing at (800)545-7685.
Asking ‘‘What Else?’’ to identify unintended negative consequences
can use their scenario teams–—if they have them–—or
convene a separate team comprised of employees
who have expert knowledge of vested stakeholders’
needs, to ask the What else? question once a decision has been approved. Organizations can also
provide training for all employees to think about
future consequences and about other stakeholders
besides the ones directly involved in the decision.
The increasing access to big data that can produce
possible future correlations and probabilities will
make such thinking easier for organizations, but also
more expected by stakeholders. By identifying what
to track to determine increasing and decreasing
probabilities and by communicating with stakeholders, organizations can be better prepared to adapt
to future system changes because they have at least
considered the possible unintended consequences.
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