Chapter Three

The Collaborative Value Mindset

Equipped with our new understanding of sources and types of collaborative value, we now examine the important issue of how business and nonprofit partners think about creating value through collaboration. The partners’ mental frameworks fundamentally shape the collaborative co-creation of value. An underlying primary conditioning factor for co-creating value is the mindset that the business and the nonprofit hold regarding value and collaboration. Because mindsets emerge from the evolution of theory and practice, this chapter fosters understanding of mental frameworks by examining the second component of the Collaborative Value Creation Framework: the evolution of the business’s and the nonprofit’s thinking about and management of value and collaboration with respect to three basic questions:

The journeys of the business and nonprofit sectors toward co-generation of value have been distinct and converging. An important ingredient of achieving a collaborative value mindset is comprehension of your own and your partner’s evolving thinking, practices, and trajectory regarding value creation and collaboration. In addressing the three questions just listed, we will identify various key dimensions that characterize weaker versus stronger collaborative value thinking. We will specify a series of mindsets that correspond to these dimensions. Together, these are the building blocks for the collaborative value mindset. While reading the following sections, readers should reflect on where their own mindsets, their organizations’ mindsets, and their partners’ mindsets are located on these evolutionary paths.

Business Mindsets: Five Central Themes

In recent decades, the question of what value is has been newly framed in the business world in terms of corporate social responsibility (CSR), which has been defined as a business’s discretionary actions aimed at increasing social well-being. CSR has been in a state of continuing conceptual evolution,1 as reflected by the variety of additional labels that have emerged, such as corporate social performance, corporate citizenship, triple bottom line, and sustainability.2 Bibliometric analysis of three decades of CSR research has provided a comprehensive view of the evolving theoretical, prescriptive, and descriptive work in this field.3 CSR theories and approaches have been categorized as instrumental, political, integrative, and ethical4 and have also been depicted in terms of evolutionary stages.5 Many recent reviewers have concluded that CSR, although deeply established as a field of study and practice, still suffers from a lack of definitional and theoretical consensus.6 The 2012 review by Aguinis and Glavas7 moves toward greater systemization through their multilevel, multidisciplinary model, which includes mediating processes, moderating conditions, and predictors of outcomes. The field continues to evolve in terms of both conceptualization and implementation. In our focused review of how the CSR literature deals with economic, social, and environmental value creation and collaboration, we have identified five central themes and a number of mindsets:

These five themes reveal how the business community’s collective mental framework has evolved. For each theme, we will identify the emerging key mindsets regarding value and collaboration. Readers particularly interested in collaborative self-diagnosis should ponder the extent to which each of the mindsets discussed in this chapter represents their own and their partners’ mental frameworks.

Theme 1: Value for Shareholders or Stakeholders?

The most frequently referenced anchor argument against CSR is the one first set forth by Milton Friedman in 1962 and reprised in 1970, which holds that social actions (and their moral justification by managers) are contrary to the primary function of generating profits and returns to shareholders. According to Friedman, there is “one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”8 In this conception, the value mindset is focused on economic returns to a single group. This highly and narrowly focused conception is what we identify with the shareholder mindset. From this perspective, there is no perception of linked interests between economic performance, on the one hand, and social actions and actors, on the other.

In the years since Friedman offered this formulation, academic thinking and management practice have broadened the conceptualization of a company’s relevant stakeholders beyond investors. The group of stakeholders is now considered to include consumers, employees, communities, governments, the environment, and nonprofit organizations.9 As the management pioneer Peter Drucker is reported to have said, “Every organization must assume full responsibility for its impact on employees, environment, customers, and whomever and whatever it touches. That is social responsibility. But we also know that society will increasingly look to major organizations, for-profit and nonprofit alike, to tackle major social ills.”10 Thus this mindset has shifted from exclusivity toward inclusivity (that is, it has become the inclusionary mindset). For some, this development has positioned stakeholders as alternative claimants on a company’s value (by way of wealth redistribution). Nevertheless, also embedded in an approach that takes account of stakeholders other than investors is the argument that attending to these stakeholders is not incompatible with profitability and even contributes to profitability in many ways. Various researchers11 have stressed the instrumental and practical value of engaging stakeholders. In effect, creating social value—that is, benefits for these other stakeholders—has been seen as producing various kinds of business value. These have included, for example, associational value (enhanced reputation, legitimacy, and license to operate; improved employee recruitment, motivation, retention, skill development, and productivity; consumer preference and loyalty) and synergistic value (product innovation and market development as well as preferential regulatory treatment).12 Thus the value mindset has shifted from one of incompatibility between economic value, on the one hand, and social or environmental value, on the other, to a mindset focused on synergistic relationships (the synergy mindset).

Aguinis and Glavas, after reviewing 508 journal articles and 110 books and chapters, conclude that “the actions and influence of stakeholders serve as an important predictor of CSR actions and policies.”13 In practice, there has been a clear shift from the shareholder mindset to the stakeholder mindset, which opens the door to collaborative interaction and value creation. Bill George, former CEO of Medtronics, has stressed the importance of seeing stakeholders in terms of an interdependent “virtuous circle.”14 The shift in mindsets that has propelled the evolution of thinking about the nature and scope of corporate social responsibility has often been a result of distinctive leadership.15

According to Michael Jensen, a pioneering thinker on agency theory, “We cannot maximize the long-term market value of an organization if we ignore or mistreat any important constituency,” but Jensen also specifies that under

enlightened value maximization . . . managers can choose among competing stakeholder demands [with] an additional dollar [spent] on any constituency to the extent that the long-term value added to the firm from such expenditure is a dollar or more . . . Enlightened stakeholder theorists can see that although stockholders are not some special constituency that ranks above all others, long-term stock value is an important determinant . . . of total long-term firm value. They would see that value creation gives management a way to assess the tradeoffs that must be made among competing constituencies, and that it allows for principled decision making independent of the personal preferences of managers and directors . . . None of the above arguments depend on value being easily observable. Nor do they depend on perfect knowledge of the effects on value of decisions regarding any of a firm’s constituencies.16

Furthermore, from a legal standpoint, managers are not prohibited from taking actions to benefit the company’s broader constituencies.17

A collaborative value mindset thinks of resources allocated not as expenses but as investments that will generate returns in multiple forms of value over a longer time frame. Business and academic leaders have increasingly emphasized the need for business to escape the narrow-sightedness caused by fixation on short-term financial results and shift to a longer-term orientation within which to build mutually reinforcing social and economic value. Dominic Barton, McKinsey & Company’s global managing director, has called for a “shift from what I call quarterly capitalism to long-term capitalism . . . thinking and acting with a next-generation view . . . rewiring the fundamental ways we govern, manage, and lead corporations . . . changing how we view business’s value and its role in society.”18 Rosabeth Moss Kanter observes, “Thinking of the firm as a social institution generates a long-term perspective that can justify any short-term financial sacrifices required to achieve the corporate purpose and to endure over time.”19 Generating multiple kinds of value, particularly collaboratively, requires a mindset with a longer time frame (that is, the long-term mindset), even though some benefits can start accruing quickly.

Although there has been this broadening view of the business value derived from benefiting other stakeholders, many see it as primarily instrumental or self-serving,20 with Halal asserting that “corporations still favour financial interests rather than the balanced treatment of current stakeholder theory.”21 Margolis and Walsh express concern that “if corporate responses to social misery are evaluated only in terms of their instrumental benefits for the firm and its shareholders, we never learn about their impact on society, most notably on the intended beneficiaries of these initiatives.”22 Shamir expresses concern that the “moralization of markets” also brings with it the risk of the “economization of morality.”23 That there are benefits accruing to the firm is good. The concern is that the mindset’s benefit scope is only internal rather than also encompassing external effects and beneficiaries (that is, by way of the external-benefits mindset).

Theme 2: Empiricism in Assessing Social and Financial Performance

As some researchers began postulating the “business case” for CSR,24 others began empirically testing whether, in the aggregate, corporate social performance (CSP) contributes positively or negatively to corporate financial performance (CFP).25 The results of these analyses of social and economic value links have often been ambiguous or contradictory. Some researchers contend that multiple bottom lines cannot be meaningfully measured.26 Nevertheless, a comprehensive meta-analysis of fifty-two studies found a positive association.27 A recent matched-sample analysis of two sets of 180 very similar firms, one set characterized by high-sustainability practices and stakeholder engagement and the other set by low sustainability and engagement, revealed that the high-sustainability set had significantly superior performance in terms of the stock market and financial returns.28 This finding is also supported by the analysis of another study of 400 firms that found “a positive relationship between sustainability and financial performance, as measured by stock returns.”29

Various researchers have posited explanations for ambiguous results, as they depend on the specific historical relationship pathways between companies and their stakeholders and thus will vary across firms and time. Barnett asserts that results depend on the special capabilities of a firm “to identify, act on, and profit from opportunities to improve stakeholder relationships through CSR.”30 Other researchers point to the importance of picking appropriate key stakeholders.31 Stakeholders, including consumers, have perceptions of and responses to new CSR actions, and these perceptions and responses produce unique value outcomes.32 A Goldman Sachs analysis has concluded that “it takes some time for superior performance on [economic, social, and governance] metrics to feed through into financial performance and stock market recognition.”33 It may also be that the four sources of value—resource directionality, resource complementarity, resource nature, and linked interests—were not fully tapped or optimally managed. Barnett, looking at the macrolevel of value creation, raises the issue of whether CSR improves social welfare and notes that “oddly enough, this question is seldom asked or answered,”34 an observation that exposes the absence of the external-benefits mindset (we address this void in Chapter Six).

The empirical analyses of CSR did not disaggregate and identify the value contributed from collaborative activities in particular, but these analyses were important in moving the debate from the perspective of Should we? to those of How? and So what? And this is where collaborations enter the socioeconomic value equation. According to Margolis and Walsh, “The work leaves unexplored questions about what it is firms are actually doing in response to social misery and what effects corporate actions have, not only on the bottom line but also on society,” but they also state that examples of partnering with nonprofits abound, are increasing, and “may be the option of choice when the firm has something to give and gain from others when it makes its social investments,”35 and here we see the collaborative and investment mindsets.

Theme 3: Multiple Motivations

Even in advance of researchers’ empirical validation, practitioners perceived value in CSR and broadly and increasingly have been taking actions to implement it, although the degree and form vary across firms and over time. Recent surveys of more than 100,000 executives by Boston College’s Center for Corporate Community Relations revealed that over 60 percent saw “as very important that their company treat workers fairly and well, protect consumers and the environment, improve conditions in communities, and, in larger companies, attend to ethical operation of their supply chain.”36 In a McKinsey & Company survey of over 4,000 managers in 116 countries, 84 percent agreed that companies should “generate high returns to investors but balance that with contributing to the broader public good.”37

Research exploring the motivations behind this increased practice suggests that it is not entirely instrumental but rather is a varying mix of altruism (“doing the right thing” to benefit others) and utility to the company.38 Aguilera, Rupp, Williams, and Ganapathi, presenting an integrative theoretical model, contend that “organizations are pressured to engage in CSR by many different actors, each driven by instrumental, relational, and moral motives.”39 Among these actors are nonprofit organizations acting as societal watchdogs to counter adverse business practices and agitate for positive corporate social actions. Others point to institutional pressures at the community level40 and to economic and competitive conditions41as key shapers of the nature and level of corporations’ social actions. The growing societal expectation42 for business to assume more significant responsibility for solving social problems has created, according to Lynn Paine, a “new standard of corporate performance—one that encompasses both moral and financial dimensions.”43 The contention is that personal and corporate values have intrinsic social worth but also business value.44 It has also been asserted that the potential for value creation is greater when motivation is intrinsic (coming from internalized values) rather than instrumental.45 The motivational mindset broadens from unidimensional to multidimensional.

Theme 4: Focus on Value Integration

This movement toward a merged value construct requires a mindset that moves value relationships from a segregated to an integrated position (the integrative mindset). This has recently been extended into a repositioning of the very purpose of corporations and capitalism. Porter and Kramer’s concept of “shared value,”46 while setting forth the same premise of producing economic and social value previously discussed extensively in the literature47 and referred to in our CVC Framework as synergistic value creation, emphasizes this as central to corporate purpose, strategy, and operations. It is asserted that such an approach will stimulate and expand business and social innovation and value in addition to restoring credibility in business and, in effect, reversing Milton Friedman’s “thou shalt not” to “thou must.” Social value is seen as essential rather than antithetical to achieving profitability in business. Kanter’s study of highly successful companies led her to observe, “The need to cross borders and sectors to tap new business opportunities must be accompanied by concern for public issues beyond the boundaries of the firm, requiring the formation of public-private partnerships in which executives consider societal interests along with their business interests.”48 According to Lee Scott, CEO of Wal-Mart, “Environmental problems are our problems . . . being a good steward of the environment and in our communities, and being an efficient and profitable business, are not mutually exclusive. In fact, they are one and the same.”49

Walsh, Weber, and Margolis have also signaled the growing importance of double value: “Attending to social welfare may soon match economic performance as a condition for securing resources and legitimacy.”50 Zadek conceptualizes corporations’ learning about CSR as reaching a “strategic stage” at which they integrate the societal issue into their core business strategies.51 Quelch and Jocz argue that CSR programs “are more relevant than ever in the face of economic recession.”52 A recent U.S. survey reported that 31 percent of the respondents had even higher expectations of company assistance during an economic downturn.53 An earlier U.S. survey revealed that only 5 percent of respondents thought that companies were doing an excellent job of acting responsibly, whereas over 75 percent rated U.S. companies’ social responsibility (defined as commitment to communities, employees, and environment) as either fair or poor, with 52 percent actively seeking information on corporate CSR primarily through the Internet.54 And a McKinsey & Company survey of 391 companies revealed that over 90 percent of CEOs believed that public expectations were higher than ever and rising, with many of the CEOs emphasizing that not fulfilling their CSR obligations would lead to declining market share and loss of talent; the likely effect on employees had the greatest influence on how they managed CSR, and consumers’ reactions were a close second.55

Investors’ growing interest in social and environmental benefits in addition to economic returns is indicated by the emergence of several social-responsibility rating indicators, such as the Dow Jones Sustainability Indexes, the FTSE4Good Index Series, the Calvert Social Index, and the Social Investment Index. More than 180 institutions representing $8 billion have signed up for such initiatives as the United Nations Environment Programme Finance Initiative and the United Nations Principles for Responsible Investment, whereas the Enhanced Analytics Initiative for responsible investing research recently reported the participation of twenty-seven institutions representing $2.4 billion in assets.56 In 2013, the World Federation of Exchanges was considering a standard for integrated sustainability reporting by listed companies.57 This integrative, multivalue mindset is increasingly found in companies around the world, as in FEMSA, a Mexican-headquartered multinational whose acronym stands for Fomento Económico Mexicano, Sociedad Anónima (Mexican Economic Advancement, Inc.), and whose website58 includes a pledge to preserve the planet for future generations by honoring the commitment to social responsibility as an integral part of the corporate culture and by recognizing the importance of operating the corporation’s businesses in such a way as to create economic and social value for its employees as well as for the communities where the corporation does business. The chairman of the DeBeers Group has commented on the search for the “new normal,” which will stem from exploiting the synergies that exist between “running a sustainable and responsible business, and a profitable one,” an endeavor that, in some cases, will admittedly represent a departure from past practices.59 McKinsey & Company’s 2007 CEO survey found that 90 percent of CEOs were incorporating more environmental, social, and governance elements into corporate strategy than had been the case five years earlier, and that 72 percent thought these elements should be fully embedded, whereas only 51 percent saw their firms as having achieved this goal, partially because of a failure to recognize the links to value drivers.60 Kanter’s research on highly successful companies led her to conclude, “Service to society, guided by well-articulated values, is not just ‘nice to do’ but an integral part of the business models of companies that I call the vanguard. They use their unique strengths to provide innovative new solutions to societal challenges . . . Societal initiatives undertaken largely without direct profit motives are part of the culture that builds high performance and thus results, ironically, in profits.”61

Porter and Kramer see this happening through (1) development of new and profitable products, services, and markets that meet societal needs in superior ways; (2) improvements in processes related to such elements as workers’ welfare, the environment, and resource use in the value chain, improvements that simultaneously enhance productivity and social well-being; and (3) strengthening of the surrounding community’s physical and service infrastructure, a strengthening that is essential to the competitiveness of clusters and companies. According to Porter and Kramer, “Not all profit is equal. Profits involving social purpose represent a higher form of capitalism, one that creates a positive cycle of company and community prosperity.”62 Although this point of view represents an integrative mindset, there remains the question of prioritization—that is, does profit take precedence over community welfare?

This approach and mindset of integrating social, environmental, and economic value generation into business strategy and operations is also a central premise of the Base of the Pyramid (BoP) movement that has emerged over the last decade. BoP strategies aim to incorporate the low-income sector into the value chain as consumers, suppliers, producers, distributors, and entrepreneurs.63 The fundamental socioeconomic value being sought is poverty alleviation through market-based initiatives. Recent research has shifted the focus from “finding a fortune” in the business opportunities of the mass low-income markets to “creating a fortune” with low-income actors.64 This involves combining complementary key assets to leverage linked interests through an interdependence mindset. As London and Anupindi put it, “This perspective relies on the proposition that the [more] the enterprise is able to meet the needs of the poor, the greater the return to the partners involved. This relationship clearly suggests that the ability to understand and create [the] value desired by different stakeholders is critical to successful venture performance.”65 In a survey of fifty-six Australian businesses, 93 percent of the respondents expressed the belief that business can play a role in poverty alleviation; factors reported to have driven these companies to engage in poverty-alleviating actions were brand, trust, and reputation (66 percent), employee engagement and recruitment (38 percent), personal motivation (30 percent), the governmental regulatory environment (21 percent), and demand and revenue growth (20 percent), and half of the respondents also indicated that they would partner with nonprofits and communities.66

Theme 5: Focus on Cross-Sector Collaboration

As companies have entered more deeply into an integrative value approach, the imperative of collaborating with the nonprofit and governmental sectors has become increasingly clear. According to Salamon, “Few corporations acting on their own can get real traction on the kind of social and economic problems that confront their societies. To go beyond symbolic public-relations efforts and make meaningful inroads on significant societal problems, corporations must join forces with other corporations, and with other social actors—in government and civil society.”67 And according to the statement of the CEO Task Force on Global Corporate Citizenship, “We believe we have an important role to play, in partnership with others in the public and private sectors and civil society, to help spread the benefits of development more widely by the manner in which we pursue our business activities. A commitment on our part to listen to and work with these other groups makes sound business sense and will enable us to better serve the interests of our shareholders and other key stakeholders, especially over the longer term.”68 This statement reflects the interdependence mindset and the long-term mindset. Some problems, such as climate change, inherently elicit more interconnected and longer-term perspectives.69

Over 90 percent of the CEOs just cited judged that such cross-sector partnerships would play a significant role in addressing development challenges.70 Andrioff and Waddock stress mutual dependency in defining engagement and partnerships with stakeholders, characterizing such relationships as “trust-based collaborations between individuals and/or social institutions with different objectives that can only be achieved together.”71 Others emphasize how stakeholder strategies can create collaborative advantage.72 In effect, the mindset shifts from independence to interdependence and to an attitude of openness to participative interaction.73 A survey of the top 500 companies in the Netherlands found that collaboration with nonprofits was influenced by the firms’ commitment to CSR, by strategic resource fit, and by contact and experience with and pressure from NGOs.74

Success in BoP terms most often requires critical inputs and collaboration from community organizations and sometimes from the public sector.75 One example is the joint venture in Bangladesh created in 1997 between GrameenPhone and the Norwegian firm Telenor, as documented by Seelos and Mair.76 The partners formed two separate but linked organizations. GrameenPhone was staffed by Telenor managers with technical and management expertise. Grameen-Telecom was the administrative interface to the existing Grameen Bank, founded by the Nobel Peace Prize winner Mohammed Yunnus. It provided microfinance and ran microenterprises to create jobs for millions of poor people through its network in 60,000 villages. As Tormod Hermansen, then CEO of Telenor, noted, “GrameenPhone and GrameenTelecom have a very neat form of collaboration. [Grameen-Telecom] recruit[s] the [village microentrepreneurs], . . . organize[s] the telephone shops, the debt collection, and buy[s] discounted air time in bulk. GrameenPhone extends the network, base station after base station, to increase the capacity to allow taking on new customers.”77 By 2006, the joint venture had generated more than 250,000 jobs for village microentrepreneurs.

Companies are realizing that the ability to anticipate, manage, and mitigate long-term risks in turbulent times78 will be achieved through deepening their collaboration with stakeholders, including employees, customers, governments, local communities, and nonprofits.79 Nonprofit organizations are key actors with deep expertise in social fields, and they are embedded in local communities80 as well as in global networks.81 Therefore, engagement with nonprofits represents substantial opportunities for corporations to co-create local and potentially global value by providing solutions to social problems82 or by designing social innovations that will deliver social betterment.83

Although businesses and nonprofits may have different approaches to value creation, the research of Le Ber and Branzei reveals that “frequency, intensity, breadth, and depth of interactions may afford frame alignment.”84 Bob Thust, head of corporate responsibility at Deloitte, sums it up this way: “The bottom line is that there is considerable opportunity for longer-term and more strategic partnerships between corporate and third sector organizations which deliver significant impact and benefit on both sides of the relationship.”85 These benefits can accrue not only to the partnering institutions but also to society and to other individuals and organizations that are affected by a collaboration.

Porter and Kramer emphasize that the “ability to collaborate across profit/nonprofit boundaries” is a critical element of producing shared value.86 Roger Polman, CEO of Unilever, has called for a shift to “collaborative capitalism.”87 Earlier, Halal urged “viewing stakeholders as partners who create economic and social value through collaborative problem solving.”88 Similarly, Zadek called for collaboration with the increasingly important nonprofit sector as the way to move beyond traditional corporate philanthropy.89 Ryuzaburo Kaku, former chairman of Canon, has stated that the way for companies to reconcile economic and social obligations is kyosei, or the “spirit of cooperation,” whereby “individuals and organizations live and work together for the common good.”90 Recent research on inclusive business development from the BoP perspective has also highlighted the critical roles that not-for-profit organizations frequently play in building these ventures and co-creating value.91 Social partnerships with informal agreements and donations have been cited as more appropriate governance mechanisms for subsistence markets than formal contracts and equity investments.92

Googins, Mirvis, and Rochlin assert that for the emerging generation of partnerships between businesses and nonprofits, “the next big challenge is to co-create value for business and society.”93 According to a recent survey of members of Business in the Community, 72 percent of the respondents saw collaboration as the most effective way to address sustainability issues.94 In effect, at higher levels of CSR, collaboration becomes more important in the value-creation process. As creating synergistic value becomes integrated and institutionalized into a company’s mission, values, strategy, and operations, engaging in the co-generation of value with nonprofits and other stakeholders becomes an imperative. If a company’s CSR platform is weak, its collaborative capacity will also be weak. Hence, co-creating value indicates and requires a higher degree of CSR development and institutionalization. Thus the collaborative mindset becomes an essential ingredient of CSR implementation.95

The Evolving Nonprofit Mindset

Just as businesses have increasingly turned to nonprofits as collaborators to implement CSR and produce social value, several factors have also been moving nonprofits toward a mindset shift favoring greater engagement with companies. Grant and Crutchfield found that “becoming a high-impact nonprofit is not just about building a great organization and then expanding it to reach more people. Rather, high-impact nonprofits work with and through organizations and individuals outside themselves to create more impact than they ever could have achieved alone.”96 In other words, this is a shift toward the interdependence mindset. In the 1990s there was growing recognition that corporations might be part of the solution for nonprofits. In the words of one representative from an international environmental nonprofit, the World Wildlife Fund, “While industry represents perhaps the biggest single threat to society and the natural world, it can also represent one of our greatest allies in our mission to safeguard it and to provide for its sustainable development.”97

Parallel to the increasing integration of social value into business strategy, there has emerged a growing and analogous emphasis in nonprofits on incorporating business disciplines and economic value into their orientation—that is, an integrative mindset. In the same vein, the field of social marketing has emerged as the application of marketing concepts and techniques for changing behavior so as to achieve social betterment.98 It is a set of tools that can be used independently by either businesses or nonprofits as part of their strategies, but researchers have highlighted the importance of cross-sector collaboration in its application.99 Social enterprise and social entrepreneurship arose as an organizational concept. Some conceptualizations have referred to the application of business expertise and market-based skills to the social sector, such as when nonprofit organizations operate revenue-generating enterprises.100 Conceptualizations of social entrepreneurship point to innovative activity with a social purpose in either the business or the nonprofit sector or as hybrid structural forms that mix for-profit and nonprofit activities.101 Social entrepreneurship has also been applied to corporations and can include cross-sector collaborations.102 Emerson has emphasized the generation of “blended” social and economic value,103 as a consequence of which nonprofits have broadened their views of value and value creation, a broadening that is fostered by the innovation mindset.104

Many academics and practitioners have commented on the blurring of boundaries between the sectors,105 and some researchers have empirically documented this convergence.106 Although this overlap of purposes reflects an increasingly common appreciation and pursuit of social and economic value creation and fosters collaboration across the sectors, this is an uncomfortable direction for some nonprofits. Many advocacy nonprofits oppose business practices that they consider socially harmful, and they fear being co-opted by collaborating with companies.107 Cloaking corporate malfeasance is no longer a feasible option. Global connectivity through the Internet has accelerated transparency and communications. Businesses and nonprofits alike have engaged in information warfare, as Exxon Mobil and Greenpeace have done in their dispute over climate change.108 Negative practices are soon revealed and broadly and instantaneously communicated. Such checks and balances and accountability mechanisms are integral elements of a healthy society. At any rate, increasing numbers of advocacy nonprofits and opposing companies have discovered linked interests and complementary resources, and these discoveries have led to mutually beneficial partnerships.109

Conflict management represents an intangible form of interaction value. For example, activist NGOs, labor unions, and management at Chiquita Brands overcame historic conflicts and learned to work together to bring about significant transformations that produced benefits for all the parties.110 The CEO of a consumer packaged-goods company put it this way: “I think we are entering a new era here. The NGOs and businesses know that the confrontational ways of the past that were used to bring attention to the issues are behind us. The issues are out there. Now it’s about solutions. Now we’re saying we can do more by working together than by not working together.”111 The mindset has been shifting from confrontation to collaboration.

Many business leaders have adjusted their conflictive posture toward activist nonprofits and now view them as important stakeholders with whom constructive interaction is possible and desirable.112 For example, John Mackey, founder and CEO of Whole Foods Market, says he “perceived them as . . . enemies” but now believes that “the best way to argue with your opponents is to completely understand their point of view” and that “to extend our love and care beyond our narrow self-interest is antithetical to neither our human nature nor our financial success. Rather, it leads to the further fulfillment of both.”113 In his most recent thinking, Mackey and his co-author Raj Sisodia put forth the case for “conscious capitalism,” whereby companies can “reinvent themselves as agents of creation and collaboration, magnificent entities capable of cross-pollinating human potential in ways nothing else can, creating multiple value for everyone they touch.”114

Porter and Kramer contend that “leaders in both business and civil society have focused too much on the friction between them and not enough on the points of intersection,” and they further assert, “The mutual dependence of corporations and society implies that both business decisions and social policies must follow the principle of shared value. That is, choices must benefit both sides. If either a business or a society pursues policies that benefit its interests at the expense of the other, it will find itself on a dangerous path. A temporary gain to one will undermine the long-term prosperity of both.”115 In effect, the mindset needs to be one of being a value adder rather than just a value extractor. Seelos and Mair’s analyses of BoP partnerships in Bangladesh led them to conclude that “organizations with primarily social strategic objectives can constitute a source for economically undervalued resources and capabilities. The cases show that providing scale to these organizations creates more social value from their resources and at the same time may enable company partners to leverage economic value.”116

A recent illustration of this interface is Greenpeace’s attack on the outdoor-apparel maker Timberland with the accusation that leather for the company’s boots came from Brazilian cattle ranchers who were deforesting the Amazon. Jeff Swartz, Timberland’s former CEO, received 65,000 e-mails from Greenpeace supporters, engaged with the nonprofit, and worked with Timberland’s suppliers to ensure that none of the company’s leather would be sourced from the Amazon area. Reflecting on Timberland’s experience with the activist NGO, Swartz observed, “You may not agree with their tactics, but they may be asking legitimate questions you should have been asking yourself. And if you can find at least one common goal—in this case, a solution to deforestation—you’ve also found at least one reason for working with each other, not against.”117 Eccles, Newquist, and Schatz’s advice on managing reputational risk echoes Swartz’s perspective: “Many executives are skeptical about whether such organizations are genuinely interested in working collaboratively with companies to achieve change for the public good. But NGOs are a fact of life and must be engaged. Interviews with them can also be a good way of identifying issues that may not yet have appeared on the company’s radar screen.”118

Seitanidi, in keeping with Covey and Brown,119 asserts that such “overt functional conflict,” although often lacking in partnerships, can play an important role in enabling changes of “perceptions, policies and actions.”120 Koschmann, Kuhn, and Pfarrer concur, stating that “a simultaneous ethic of inclusiveness and confrontation is more likely to generate the meaningful participation needed for the creative, integrative, and legitimate solutions participants seek.”121 In a similar vein, other research documents the valuable types of resources that nonprofits can bring, such as legitimacy, awareness of social forces, distinct networks, and specialized technical expertise that can head off trouble for the business, accelerate innovation, spot future shifts in demand, shape legislation, and set industry standards.122 One study of 214 business managers revealed that cross-sector partnerships with environmental NGOs increased companies’ perceived legitimacy and enabled the development of a more proactive and deeper commitment to environmental betterment.123

One of the bridging areas between nonprofit advocacy and collaboration with businesses has been corporate codes of conduct. Nonprofits have often compelled the adoption of such codes, but they have also helped corporations by providing knowledge that enables compliance.124 Conroy labels this phenomenon the “certification revolution,” whereby nonprofits and companies establish standards and external verification systems across a wide array of socially desirable business practices and sectors (for example, forestry, fishing, mining, textiles, and apparel).125 The resultant fair trade movement has experienced rapid and significant growth, generating improved economic and social benefits for producers and workers. Simultaneously, it has given companies a vehicle for differentiating and enriching their brands in terms of the social value they are co-creating. Providing consumers with more information about a company’s social practices (such as those involving labor conditions in the production of apparel) can positively affect consumers’ willingness to pay for those products.126 Various other, more general standards and social reporting systems have emerged from consultative dialogue among multiple stakeholders.127 These collaborative certification arrangements produce associational value that enhances company credibility, and they lead to socially beneficial changes in business practices. The collaborative mindset, the integrative mindset, and the interdependency mindset enable the creation and operation of these certification systems and codes.

Even when the relationship is more adversarial, the advocacy NGOs can trigger a process of reflection and adjustment of business practices that, in the end, can be beneficial to the company and to society. For example, several advocacy NGOs targeted the project-financing practices of various leading banks, which responded by promulgating the Equator Principles, a new set of lending standards aimed at eliminating adverse societal impacts of development projects. Over a decade, the NGOs continued to monitor the banks and to pressure them to walk their talk. Researchers have found that the decoupling of companies’ stated policies from their actual implementation is not generally a “calculated deception” but rather “can be the outcome of organizational learning efforts that are fraught with complexity under conditions of inconsistent, and rapidly changing, stakeholder pressures.”128 The ongoing advocacy process of the NGOs led the banks to a gradual deepening of their commitment and to institutionalization of new and significant process changes that led one group of researchers to conclude that “it might pay off to tolerate their gradual transformation and encourage experimentation informed by mutual learning and dialogue.”129 Heugens found that even from adversarial relationships with NGOs a company could develop “integrative and communication skills.”130 Consequently, one can even consider that what may seem to be a conflictive relationship between antagonists may actually be a form of what we call adversarial collaboration. The benefits accruing to the businesses, to the NGOs, and to society would not have been achieved without the communicative interaction.131

Reviewing the Collaborative Value Mindset

From the foregoing examination of evolving thinking and practice with respect to value and collaboration among businesses and nonprofits, we have identified a constellation of mindsets that, in effect, constitute thirteen dimensions of the mental framework for collaborative value creation. How these thirteen mindsets manifest themselves—weakly or strongly, as depicted in Table 3.1—can make a difference in how they contribute to the collaborative creation of value.

Table 3.1. Thirteen Dimensions of the Collaborative Value Mindset

Dimension	Weak Manifestation	Strong Manifestation
1. Value concept	Concept is narrow	Concept is broad
2. Value compatibility	Compatibility requires trade-offs	Compatibility promotes synergy
3. Value relationships	Relationships are segregated	Relationships are integrated
4. Value role	Focus is on extracting value	Focus is on adding value
5. Participation	Participation is exclusive	Participation is inclusive
6. Benefit scope	Scope is limited to internal benefits	Scope includes external benefits
7. Outlays	Outlays are seen as expenses	Outlays are seen as investments
8. Time frame	Time frame is for the short term	Time frame is for the long term
9. Dependency	There is independence	There is interdependence
10. Motivations	Motivations are unidimensional	Motivations are multidimensional
11. Attitude	Attitude is conflictive	Attitude is cooperative
12. Compatibility	Multiple core organizational elements diverge	Multiple core organizational elements converge
13. Change	Change is minimal	Change is characterized by innovation

Let us conclude by reexamining the thirteen dimensions of the Collaborative Value Mindset listed in Table 3.1. Throughout the chapter, we have identified the constellation of component mindsets that together constitute the overall Collaborative Value Mindset. In effect, how one thinks about each of these dimensions can make the collaboration weaker or stronger. Here, we highlight each of these dimensions and the characteristics of the corresponding mindsets as each is associated with strength rather than weakness. Readers can assess where their own and their partners’ mindsets fall more on the side of strength or on the side of weakness. This exercise can identify areas of difference as well as opportunities for strengthening the partners’ individual and collective mindsets.

1. Value concept. The starting point is to conceive of value broadly as economic, social, and environmental rather than narrowly focusing on just one category. Drawing on the more refined value types delineated in the Collaborative Value Creation Spectrum (see Chapter Two) would mean including associational value, transferred-asset value, interaction value, and synergistic value.

2. Value compatibility. Instead of viewing economic, social, and environmental values as trade-offs, one recognizes them as compatible. Furthermore, it is not simply that they can coexist but rather that they are synergistic.

3. Value relationships. Rather than segregating value relationships, one integrates them. Instead of placing them in hierarchical order, one views them together as a value package. One does not say, “First I have to have this type of value, and then we’ll see about the rest.” Thinking holistically can better reveal the fullness of potential value.

4. Value role. The collaborative value process involves both creation and capture. Even though all partners should expect to harvest benefits, the collaborative mindset is not fixated on extraction but rather on how to add value to the partnership. Creating value for a partner triggers reciprocity and can lead to a virtuous value circle.

5. Participation. One needs to move from being exclusionary and internally focused to becoming inclusive. In this way, one sees the shift from a fixation on shareholders to engagement of stakeholders.

6. Benefit scope. One is externally oriented in terms of who benefits from the collaboration. It is not just what gains each partnering organization garners but how benefits are extended to outside groups and the larger society.

7. Outlays. One thinks of resource expenditures not as expenses but as investments, with the returns being multifaceted benefits accruing to multiple groups. Rather than thinking in terms of transaction costs, one recognizes interaction as a form of value.

8. Time frame. Fixation on the short term crowds out collaborative creativity and forgoes the success of sustainability. The stronger mindset thinks in terms of long-term value creation. Collaboration benefits can and do get generated in the short run, but the strategic perspective requires a longer vision.

9. Dependency. There is a recognition that organizations and individuals are inescapably interdependent rather than isolated and independent. In the words of Visser, “Being responsible . . . does not mean doing it all ourselves. Responsibility is a form of sharing, a way of recognizing that we’re all in this together. ‘Sole responsibility’ is an oxymoron.”132

10. Motivations. Collaboration motivations are multifaceted and complementary. “Doing the right thing” does not preclude “doing good and doing well.” Value-based motivations contribute to collaborative sustainability, but so do results that concretely benefit the partners.

11. Interaction attitude. The orientation is toward constructive cooperation rather than antagonistic conflict.133 There is an openness to interactions, and there is the belief that it can lead to mutual benefits. Nevertheless, there is also a recognition that disagreements will and should arise and can be beneficial. Constructive conflict emerges from and reinforces mutual respect.

12. Compatibility. Multiple core elements of the organizations (such as mission, strategy, and values) are perceived as converging rather than diverging. There is a shared perception of linked interests and mental alignment.

13. Change. There is a shift away from a perspective of minimal change and toward innovation. Collaboration is viewed as a vehicle enabling meaningful change. There is a recognition that creating value collaboratively will require internal change before external change can be achieved.

One’s mental framework molds everything else. There is a fundamental way in which the appropriate collaborative value mindset shapes the value-creation potential of a partnership. The stronger the collaborative mindset, the farther the partnership will advance across the Collaborative Value Creation Spectrum. We turn our attention in the next chapter to the nature of collaborative relationships and how their evolution affects the generation of value.

Notes

1. Bowen, 1953; Carroll, 2006; Rowley and Berman, 2000; Carroll, 1999; Gerde and Wokutch, 1998; Griffin and Mahon, 1997; Aguinis and Glavas, 2012; Matten and Crane, 2005; Elkington, 1999.

2. Elkington, 2004.

3. De Bakker, Groenewegen, and Den Hond, 2005.

4. Garriga and Melé, 2004.

5. Googins, Mirvis, and Rochlin, 2007.

6. Lockett, Moon, and Visser, 2006; Googins, Mirvis, and Rochlin, 2007; Egri and Ralston, 2008.

7. Aguinis and Glavas, 2012, p. 941.

8. Friedman, 1962; Friedman, 1970.

9. Freeman, 1984; Neville and Menguc, 2006; Green and Peloza, 2011.

10. Peter Drucker, quoted in Cohen, 2009, p. 31.

11. Donaldson and Preston, 1995; Jones and Wicks, 1999; Freeman, 1999.

12. Makower, 1994; Burke and Logsdon, 1996; Googins, Mirvis, and Rochlin, 2007.

13. Aguinis and Glavas, 2012.

14. George, 2003.

15. Waddock, 2008.

16. Jensen, 2002.

17. Cotten and Lasprogata, 2012.

18. Barton, 2011, p. 84.

19. Kanter, 2011, p. 71.

20. Jones, 1995; Hill and Jones, 1985.

21. Halal, 2001, p. 28.

22. Margolis and Walsh, 2003, p. 282.

23. Shamir, 2008.

24. Makower, 1994.

25. Wang, Choi, and Li, 2008; Margolis and Walsh, 2003; Emerson, 2003; Walsh, Weber, and Margolis, 2003.

26. Norman and MacDonald, 2004.

27. Orlitzky, Schmidt, and Rynes, 2003.

28. Eccles, Ioannou, and Serafeim, 2012a; Eccles, Ioannou, and Serafeim, 2012b.

29. SAM and PricewaterhouseCoopers, 2010, p. 12.

30. Barnett, 2007, p. 803.

31. Peloza and Papania, 2008.

32. Schuler and Cording, 2006.

33. Ling, Forrest, Fox, and Feilhauer, 2007, p. 7.

34. Barnett, 2007, p. 805.

35. Margolis and Walsh, 2003, pp. 278, 289.

36. Googins, Mirvis, and Rochlin, 2007, p. 22.

37. McKinsey & Company, 2006.

38. Galaskiewicz, 1997; Austin, Reficco, Berger, Fischer, Gutierrez, Koljatic, Lozano, Ogliastri, and the Social Enterprise Knowledge Network (SEKN) Team, 2004; Bansal and Roth, 2000; Goodpaster and Matthews, 1982.

39. Aguilera, Rupp, Williams, and Ganapathi, 2007.

40. Marquis, Glynn, and Davis, 2007.

41. Campbell, 2007.

42. GlobeScan, 2002.

43. Paine, 2003.

44. Peloza, 2009; Peloza and Shang, 2010.

45. Martin, 2002.

46. Porter and Kramer, 2011.

47. Aakhus and Bzdak, 2012.

48. Kanter, 2011, p. 73.

49. Leo Scott, quoted in Schell, 2011, p. 86.

50. Walsh, Weber, and Margolis, 2003.

51. Zadek, 2004.

52. Quelch and Jocz, 2009.

53. Cone Communications, 2010.

54. Fleishman-Hillard/National Consumers League, 2007, p. 7.

55. Oppenheim, Bonini, Bielak, Kehm, and Lacy, 2007.

56. Ling, Forrest, Fox, and Feilhauer, 2007, p. 26.

57. Investor Network on Climate Risk, 2013.

58. http://www.femsa.com/es/social

59. De Beers Family of Companies, 2009, p. 2.

60. Oppenheim, Bonini, Bielak, Kehm, and Lacy, 2007, pp. 17, 21.

61. Kanter, 2009, p. 2.

62. Porter and Kramer, 2011, p. 15.

63. Prahalad, 2005; Prahalad and Hamel, 1990; Prahalad and Hart, 2002; Rangan, Quelch, Herrero, and Barton, 2007; Hammond, Kramer, Katz, Tran, and Walker, 2007.

64. London and Hart, 2011.

65. London and Anupindi, 2012.

66. Ryan, Richardson, and Voutier, 2012.

67. Salamon, 2010, p. 58.

68. World Economic Forum Global Corporate Citizenship Initiative, 2005, p. 4.

69. Slawinski and Bansal, 2012.

70. World Economic Forum Global Corporate Citizenship Initiative, 2005, p. 4.

71. Andrioff and Waddock, 2002, p. 42.

72. Porter and Kramer, 2002.

73. Gosling and Mintzberg, 2003.

74. Den Hond, De Bakker, and Doh, forthcoming.

75. Goldsmith, 2011.

76. Seelos and Mair, 2007.

77. Tormod Hermansen, quoted in Seelos and Mair, 2007, p. 56.

78. Selsky and Parker, 2010.

79. Porter and Kramer, 2011; Austin, 2000a.

80. Kolk, Van Tulder, and Westdijk, 2006.

81. Crane and Matten, 2007; Pearce and Doh, 2005; Heath, 1997; Salamon and Anheier, 1997.

82. Van Tulder and Kolk, 2007.

83. Austin and Reavis, 2002.

84. Le Ber and Branzei, 2010a, p. 163.

85. “Corporate Philanthropy More Strategic, Deloitte Report Reveals,” 2011.

86. Porter and Kramer, 2011, p. 4.

87. Polman, 2011.

88. Halal, 2001.

89. Zadek, 2001.

90. Kaku, 1997, p. 55.

91. Márquez, Reficco, and Berger, 2010.

92. Rivera-Santos, Rufin, and Kolk, 2012.

93. Googins, Mirvis, and Rochlin, 2007, p. 8.

94. Business in the Community, 2012.

95. Seitanidi and Crane, 2009.

96. Grant and Crutchfield, 2007, p. 34.

97. Marsden, 2000, p. 9.

98. Kotler and Zaltman, 1971.

99. Kotler and Lee, 2009.

100. Reis, 1999; Thompson, 2008; Boschee and McClurg, 2003.

101. Dees, 1998; Austin, Stevenson, and Wei-Skillern, 2006; Billis, 2010; Bromberger, 2011; Fruchterman, 2011.

102. Austin, Leonard, Reficco, and Wei-Skillern, 2006.

103. Emerson, 2003.

104. Levenson Keohane, 2013.

105. Dees and Anderson, 2003; Glasbergen, Biermann, and Mol, 2007; Crane, 2010; Seitanidi, 2010.

106. Social Enterprise Knowledge Network (SEKN), 2006; Austin, Gutiérrez, Ogliastri, and Reficco, 2007; Seitanidi, 2010; Bulloch, Lacy, and Jurgens, 2011.

107. Grolin, 1998; Waygood and Wehrmeyer, 2003; Rehbein, Waddock, and Graves, 2004; Hendry, 2006; Baur and Schmitz, 2012; Laasonen, Fougere, and Kourula, 2012.

108. MacKay and Munro, 2012.

109. Yaziji, 2004; Yaziji and Doh, 2009; Den Hond, 2010; Ählström and Sjöström, 2005; Stafford, Polonsky, and Hartman, 2000.

110. Taylor and Scharlin, 2004.

111. Oppenheim, Bonini, Bielak, Kehm, and Lacy, 2007, p. 24.

112. Argenti, 2004.

113. John Mackey, quoted in Koehn and Miller, 2007.

114. Mackey and Sisodia, 2013, p. 26.

115. Porter and Kramer, 2006, p. 7.

116. Seelos and Mair, 2007, p. 61.

117. Swartz, 2010, p. 43.

118. Eccles, Newquist, and Schatz, 2007, p. 113.

119. Covey and Brown, 2001.

120. Seitanidi, 2010.

121. Koschmann, Kuhn, and Pfarrer, 2012, p. 340.

122. Yaziji, 2004.

123. Hyatt and Berente, 2011.

124. Arya and Salk, 2006.

125. Conroy, 2007.

126. Hustvedt and Bernard, 2010.

127. Levy, Brown, and de Jong, 2010.

128. Crilly, Zollo, and Hansen, 2012.

129. Haack, Schoeneborn, and Wickert, 2012, p. 837.

130. Heugens, 2003.

131. Joutsenverta, 2011.

132. Visser, 2011, p. 5.

133. Seitanidi, 2010.