The Concept of Social Responsibility in Organizations

This article is an excerpt from the Shortform book guide to "Servant Leadership" by Robert Greenleaf. Shortform has the world's best summaries and analyses of books you should be reading.

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What is the concept of social responsibility? What does the ideal institution look like?

Robert K. Greenleaf believes that institutions have a social responsibility to meet the needs of those they serve. In Servant Leadership, he explains how servant leaders can transform underperforming institutions into ideal institutions that fulfill their social responsibility.

Find out how ideal institutions come together through the work of leaders and trustees.

What Is an Ideal Institution?

Greenleaf believes ideal institutions are those that fulfill their social responsibility to be of service and that they constitute the basis of a healthy society. The concept of social responsibility reasons that if every institution prioritizes helping people meet their needs, then everyone will get their needs met. In contrast, if every institution prioritizes its own money, power, or fame, some people’s needs will continue to go unmet or even increase. For example, a business might sell a carcinogenic product like cigarettes because it’s profitable, without consideration for the harm it might do to consumers. Like the quintessential servant leader Leo, ideal institutions are only entrusted with power, influence, and profits because they’ve proven their benefit to those they serve.

(Shortform note: Greenleaf argues that the world would be a better place if everyone focused on serving each other (as opposed to themselves), but some research suggests that it’s best to find a happy medium between helping others and helping yourself. Helping others has some positive effects—like making you feel like a good person and enhancing your connection with others—but it can also be emotionally exhausting, especially when done repetitively. Helping yourself—say, by buying yourself something nice—soothes emotional exhaustion, so it helps safeguard against the negative effects of being overly giving.)

Any kind of institution can be an ideal institution, but Greenleaf believes that businesses are most likely to become ideal institutions because in order to be profitable, they have to respond to both internal and external influences—like the higher standard of treatment expected by employees and consumer demand for ethical business practices. If businesses’ values aren’t in line with the public’s values, they won’t succeed.

(Shortform note: Greenleaf argues that businesses will become ideal institutions because they won’t profit unless they align themselves with the public’s values, but he may not have anticipated that American values would be polarized in the 21st century. Some studies suggest that customers of all political leanings agree that companies should take a stand on social issues, but because customers are so politically divided, company stance-taking has potential pitfalls. For example, Target, Bud Light, and Disney have faced serious backlash as a consequence of appearing to side with progressive causes.)

The Role of Trustees in Ideal Institutions

Greenleaf argues that a faulty institution can only become an ideal institution if the trustees who govern it are servant leaders. Traditionally, trustees are people who are responsible for ensuring that an institution meets its financial responsibilities—for example, a bank’s board of trustees makes decisions to ensure that the bank is profitable so that account holders’ money is safe, employees are paid, and shareholders profit. In ideal institutions, though, trustees prioritize the institution’s social responsibility over its profits. For example, the trustees for an ideal search engine company would prioritize accurate search results over more profitable promoted content.

Greenleaf explains that trustees play a separate but equally important role than administrators do. While trustees’ main priority is envisioning institutional excellence and enacting the policies that make it possible, the main priority of administrators is to execute that vision based on the policies trustees have set down. Trustees’ decisions have bearing on the institution’s daily operations, and trustees collaborate with administrators to figure out how their policies are best implemented, but trustees have little to do with mundane operational matters.

Greenleaf says that trustees are essential for institutional success because they have an overhead view of the bigger picture, which makes them more likely to be open to change. Administrators and employees tend to be biased in their own favor—they see themselves as competently carrying out their duties, and they need to have faith in their competence to be motivated to work. Since trustees are removed from the day-to-day operations of the institution, they have a different perspective: They can more clearly see where the institution is failing, and that doesn’t demoralize them—it motivates them to come up with solutions.

How Trustees Can Build the Ideal Institution

Greenleaf says that to build the ideal institution, trustees must do the following:

1) Envision institutional excellence—this means seeing how their institution can improve the lives of everyone it affects and setting the bar high to give the institution something to aim for. Trustees’ vision should be clear enough for them to create concrete objectives and plans to meet those objectives.

2) Proactively seek out and hire the best executive team for the institution—this is how trustees can ensure that their vision of institutional excellence will be carried out.

3) Make financial and policy decisions that ensure the institution meets its social responsibility—this is how trustees convince the public that the institution is both trustworthy and worth engaging with.

4) Moderate the use of power within the institution—using performance reviews, trustees can ensure that the institution and its leadership aren’t abusing their power and influence, but actually contributing to the greater social good.

5) Ensure the institution’s success—by gathering data about the institution’s performance, trustees can determine how well their vision of institutional excellence is being carried out. Based on that information, they can make policy changes to help the institution meet its goals. 

The Concept of Social Responsibility in Organizations

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  • Why modern institutions fail to meet the needs of those they serve and employ
  • Why institutions must learn to prioritize the needs of their followers
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Katie Doll

Somehow, Katie was able to pull off her childhood dream of creating a career around books after graduating with a degree in English and a concentration in Creative Writing. Her preferred genre of books has changed drastically over the years, from fantasy/dystopian young-adult to moving novels and non-fiction books on the human experience. Katie especially enjoys reading and writing about all things television, good and bad.

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