New Balance & Community Social Responsibility

Case Study: New Balance & Community Social Responsibility Matthew Mrnak Southern New Hampshire University

New Balance & Community Social Responsibility

An American footwear manufacturer, New Balance, was founded in Boston, Massachusetts in 1906 by a 33-year old British emigrant William J. Riley. He started to design and build arch supports to ease the pain for consumers who spent a majority of their day on their feet. "It is believed that Riley came up with the name "New Balance" by observing chickens in his yard and demonstrated the way his arch supports worked by keeping a chicken foot on his office desk. He explained to customers that the chicken's three-clawed foot resulted in perfect balance" (New Balance, para. 3). To this day New Balance shoes tend to be on the more expensive side than other manufacturers, but much like its history it differentiates themselves with features such as heel counters, gel inserts, and a wider selection of sizes that will cater to a variety of sizes, for example wide or narrow feet. After being convinced of the high potential and trying the New Balance shoes himself James Davis purchased the company together with his wife Anne. Sports shoes remained to be the main focus for New Balance. The company continued to grow and experience a significant addition in the late 1990's with the aquisitions of branch such as Dunham, Warrior and Brine, as well as others. Although the company was mainly known to be American made, operations for apparel and other accessories lead the company to other countries like China and Taiwan. Despite abstaining from expensive advertising campaigns and professional athletic sponsorships, unlike its' competitors, New Balance has grown to become one of the largest makers of sports footwear in the world. In fact, the company was ranked fourth worldwide in the athletic footwear department below leading competitors such as Nike, Adidas, and Sketchers (Dr. Vesela Veleva, New Balance: Developing An Integrated CSR Strategy, pg. 18).

New Balance & Community Social Responsibility

A lean production system was enabled in all domestic factors in 2009 to improve and reduce waist, workers costs, and productivity. In a four year span productivity as improved by 49 percent in reducing wasted materials. New Balance continued to encourage employees to make suggestions to improve the company. Then in 2007, Rob DeMartini, was hired as CEO in hopes to lead the company into a more recognized global brand. Over the past several decades, the corporate world has experienced a pronounced increase in focus on organizations ethical behaviors and responsibilities towards their environments. This is evident in the shift from focusing on profits to where companies are aspire at find a balance between people, "green", and profit. This new outlook demonstrates that stakeholders are demanding organizational communication and expect companies to recognize their impact on their surroundings. These societal expectations pressure companies to act responsible in regards to not only their external but also their internal environments. The terminology for this organizational shift is Corporate Social Responsibility (CSR), broadly define as a commitment to improve [societal] well-being through discretionary business practices and contributions of corporate resources (Korschun, D.) Since its introduction in the 1950s, CSR has increasingly gained importance and influence within the corporate world and has evolved from revolving mainly around philanthropy of powerful individuals to incorporating corporate social, ethical and environmental responsibility. The Corporate Citizenship Management Framework (CCMF) was used to help assist and analyze New Balance's understanding and ability to implement corporate social responsibility within the organization. The CCMF assisted organizations to manage corporate citizenship as well as create a better understanding. It consists of determining and managing corporate practices in four key

New Balance & Community Social Responsibility

areas which consist of overall governance, products and services, operations, and community support. Overall governance can be described as how a "company's core values, mission, vision and governance structures support or prevent the company from understanding and managing corporate citizenship as an integrated part of business strategy" (Veleva, pg. 7). A research team conducted a 29 surveys from internal and external stakeholders in Lawrence, Massachusetts ranging from senior executives to supervisors and factory workers. Amongst those surveys is was uncovered that New Balance's top strengths were its history, values and integrity. For over 30 years the company was dedicated to not only its employees but also its communities in which it was located. Employee's were proud to say they worked for New Balance and felt valued largely due to management's quick response and taking situations seriously. Employees felt a sense of pride in not only their own work but the company's as well. Out of the Lawrence factory one supervisor summed it up with "This is an exceptional company; there is no other company like New Balance, with focus on people and domestic manufacturing" (Veleva, pg. 8). During the interviews it was discovered that although senior management supported the idea for a CSR due to the company commitment to corporate responsibility that was in line with its' values and mission there is not a clear understanding of what it entails. For example, some understood RL priorities and goals while others thought is consisted of philanthropy and volunteering, and others it was about compliance. Executives thought of CSR a cost instead of a driver that measured relationships. Although RL consisted of key elements of CSR it often lacked in urgent areas like accountability, transparency, employee support, and fell short of giving guidance to managers

New Balance & Community Social Responsibility

and assisting in identifying opportunities and risks. The CSR assessment uncovered that New Balance lacked in setting clear goals and responsibilities that were aligned with core business strategy. Another challenge New Balance seemed to struggle with was its' overall communication. The company lacks in encouraging its associates with recognition of the great things they were accomplishing. Externally, stakeholders wanted to see more disclosures of factories and financials. It was also uncovered with the help of interviewing executives that the company lacked in leadership in development and implementation of a CSR strategy. The second element, products and services or market strategy, analyzes society's needs with solutions that with create a return on profit for the organization. An example would be revolutionizing an existing product or service to become more eco-friendly along with the delivery of marketing. New Balance, now a truly global business has a great opportunity to bring social an environmental responsibility through its products. Through this they can innovate their products to help create new environmentally friendly gear. However, the research team revealed that there was a complete lack of understanding on how this coincides to CSR along with the benefits of doing so. While other competitors aimed on going "green" New Balance took a different approach and started to use recycled material. The company also lacked in its performance of researching new materials that could be used ultimately preventing them from being a leader in the industry. The third element, operations, looks at the responsible business practices and engaging them to minimalizing negative outcomes on employees, the environment and society, while maximizing positive outcomes. This area proved to be the strongest in providing leadership for

New Balance & Community Social Responsibility

the entire industry and integrating the use of a CSR. Operations clearly demonstrated clear business values in reducing cost while increasing productivity in terms of impacting the bottom line. Waste reduction is also another strong area of the company. They replaced much of the lighting and even switched to "green" cleaning products. Although footwear was seeing large improvements and strides in operations the apparel and promotional items proved to have the most impactful risk. New Balance didn't have the same leverage as it did with footwear with its' suppliers. Another obstacle the operations faced was the space between CSR management in the domestically and overseas suppliers. Lastly, community support takes corporate social responsibility to a new level from just creating new jobs and paying taxes to utilizing the company's assets to support social well-being. All through the company's history it prided itself in its' involvement within its communities. Employees were very active in volunteering and empowered them to give back to its communities, which in turn created 96 percent job satisfaction amongst its employees (Veleva, pg. 13). In spite of the high community involvement, New Balance community involvement strategy did not coincide with the business strategy ultimately lacking overseas. Employees believed that the New Balance brand did not get enough recognition, the support strategy was not clearly focused, nor did it involve issues that related worldwide. Of all the opportunities or weaknesses that New Balance faces the two things that really stick out the most from preventing a CSR sound corporation is its' overall lack of understanding, buy in, leadership, and communication. A seperate CSR department or team needs to be created

New Balance & Community Social Responsibility

within the company that consists of not only executives in different departments but also even it's factory workers. The main reason for this is to give each person a sense of pride along with bringing new perspectives from various departments. The company can uses various means of internal and external communication such as bulletins and even online media. The content of its CSR messages needs to clarify the companys' activities by accentuating its' involvement, commitment, motives, and impact. This will assist New Balance in its overall communication and create a more clear understand of what a CSR truly involves. Implementing a CSR program an important aspect that New Balance needs to implement because businesses are based on trust and integrity. Establishing and maintaining trust with customers and communities is not a simple task in which can be depleted quickly. New Balance posses many key ingredients to become successful in the long run with the assistance of a well thought out and implemented CSR.

New Balance & Community Social Responsibility

References

Korschun, D. (n.d.). Using Corporate Social Responsibility to Strengthen Employee and Customer Relationships. Using Corporate Social Responsibility to Strengthen Employee and Customer Relationships. Retrieved July 7, 2013, from www.acrwebsite.org/volumes/ap08/ap_2009_vol8_12.pdf

New Balance - Wikipedia, the free encyclopedia. (n.d.). Wikipedia, the free encyclopedia. Retrieved July 7, 2013, from http://en.wikipedia.org/wiki/New_Balance

Veleva, V. (n.d.). New Balance: Developing and Integrated CSR Strategy. New Balance: Developing and Integrated CSR Strategy. Retrieved July 7, 2013, from https://cb.hbsp.harvard.edu/cbmp/content/19905934