Effect of the Practice of Social Responsibility on the Performance of Small and Medium Enterprises
Chapter One
OBJECTIVE OF THE STUDY
The main objective of the study is to examine the positive impact of Corporate Social Responsibility practices on Small businesses’ performance in Nigeria. Specifically, this study attempts to:
- To establish a relationship between corporate social responsibility and corporate financial performance of small businesses.
- To establish a line of relationship between CSR performance and Corporate Financial Performance i.e. growth, continuity and survival of the Business Corporation.
- To establish a relationship between corporate social responsibility and the standard of living of the people
CHAPTER TWO
LITERATURE REVIEW
HISTORICAL BACKGROUND AND DEVELOPMENT OF CORPORATE SOCIAL RESPONSIBILITY
Ali et al (2010) expressed that the inception point of corporate social responsibility (CSR) can be traced to 1953 when New Jersey Supreme court allowed standard oil company to donate money to Princeton University as a philanthropic action. This decision was given against the suit filed by one of the shareholders of standard oil, believing that it would reduce shareholder’s wealth. CSR notion was initially advocated by Beyer (1972) and Drucker (1974) while stating that corporations should do social activities for the welfare of the community and feel the sense of self-ownership. It was argued that corporations are earning huge amount of profits from community and deteriorating the natural resources. Therefore, they should contribute for the sustainability of the environment and other natural resources and work for the uplifting of the society. Freeman (1970) opposed the idea of CSR by stating that, “corporations are neither meant for social activities nor have they expertise in the regime”. Therefore, it is better that they produce quality products for consumers, obey legal rules and regulations and contribute to the economic development of the country. Many researchers, including Kashyap Mir and Iyer (2006) supported the concept of CSR by corporations when they endorsed the fact that such actions of corporations should also be reported as information to the owners, consumers, community, competitors and the government.
Small and Medium Enterprises
SMEs have been seen as an interesting concept which has drawn much interest from the academic and economic circles (Sen, 2011:45). Research studies reveal that CSR studies in SMEs is under-researched in Nigeria (Seeletse and Ladzani, 2012:11458; Zeka, 2012:19). According to DTI (2008:02), clarity on certain aspects regarding definition, characterist ics, ownership, management, and size of entities remain unsolved. According to Zeka (2011:21), SMEs are viewed as enterprises that are “independently owned, operated and financed”. SMEs are also identified by their unique structure where entrepreneurs are the managers who run the business.
However, according to Sen (2011:48; Turyakira et al., 2012:20), defining SMEs has proved to be difficult since there is no acknowledged common definition for it. The criteria used to define SMEs differ from country to country and region to region (Turyakira et al., 2012:107; Neuman, 2007:10). While SMEs definitions vary, they include both qualitative and quantitative aspects (Bosch et al., 2011:578; Neuman, 2007:10). Quantitative aspects include al elements that can be measured such as capital contribution by members, profits and value of assets. Qualitat ive aspects of the definition include elements that cannot be measured such as type of business activities, company formation and ownership (Bosch et al., 2011:578).
USA and China use the number of employees (usually less than 500), year turnover, and the total asset to define SMEs. However, defining SMEs in China is difficult because it depends on the industry (United States International Trade Commission, 2010:3; Liu, 2008:40). What is considered as SME in these countries may be viewed as a large corporation in Africa.
According to the European Commission (2009:3), SMEs are defined according to the number of employees that an organisation employs and the turnover produced. The definition includes micro-entities, small businesses and medium-sized businesses and is abbreviated as SMEs. The same report illustrates that a company is regarded as small when it employs less than 50 employees and yearly revenue of 10 million euros or yearly balance sheet not exceeding 10 million. A company is recognized as a medium enterprise when it employs less than 250 people and has an annual turnover not exceeding 50 mil ion euros or a balance sheet of less than 43 million euros.
CHAPTER THREE
RESEARCH METHODOLOGY
Research Design
Research survey is believed to be the most appropriate design to get a critical analysis of the issue of CSR of these sample companies upon which the research have been conducted. The design is also seen as a complimentary effect to the primary data which the researcher has obtained.
POPULATION OF THE STUDY
The population of this study comprises of all 6770 staffs of from 2000 small businesses in Lagos as obtained from the research survey.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
ANALYSIS OF DEMOGRAPHIC DATA
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
SUMMARY OF FINDINGS
The data obtained from the field indicated that all responses were given by married category of staff working in this study’s four small scale businesses under consideration. Most of the respondents who majorly constituted the owners fall between the age distribution of thirty-five (35) and fifty (50) years.
It was also observed that most of the respondents have spent more than three (3) years in the industry. This it is believed would have made them gained experience and understanding of the companies’ policy relating to the key issue being investigated – Corporate Social Responsibility impact on their performances.
As earlier pointed out, the data gathered were majorly directed and gotten from both top level and middle level management constituting ninety-seven percent (97%) of the entire respondents by managerial level distribution. The harvest of the instrument after administered resulted in an almost even distribution from the four sample industries.
Furthermore, the educational qualification criterion for distribution showed that a high percentage of the respondents have had their highest qualification within HND/B.Sc. and M.Sc. / MBA, making the level of validity and reliability placed on the data so high.
The year of establishment of the industries that have been considered also characterized the benchmark for measuring the relevancy of the data to the research work.
Finally, responses to items in the operational section of the questionnaire was presented and interpreted and the three formulated research hypothesis were tested. The use Rank Order Correlation Coefficient were adopted for the test of these hypotheses.
CONCLUSION
There is no doubt given the findings of this study, that corporate social responsibility performance plays significant role in improving the performance of small businesses as a whole. After subjecting the data collected to thorough test, the results showed that corporate social responsibility performance should be incorporated into every organization’s long-term goal/plan which invariably helps in ensuring growth, survival and continuity.
Also, from the findings of the study, conclusion can be reached that corporate financial performance, in greater dimension, will rest on a company’s perspective and attitude towards social responsibility programmes it intended and have been embarking upon. Data gathered suggested that Small businesses will enjoy good and healthy relationship with financial institutions and creditors given that they prioritize and implement, in the environment, worth-while social responsibility projects. Consequently, investment portfolio of manufacturing corporations will witness an upward movement as a result of the benefit that would be accruable to them when corporate social responsibility is observed. Growth and development would seem inevitable as constituting the long-term impact of the phenomenon studied. Summarily here, corporate social responsibility expenditure impact positively on the performance of Small businesses.
The small scale businesses / companies, through their voluntary performance of social responsibility over the years, has proved that investment in social responsibility activities do not cause the demise of the business since it would make it to establish that social responsibility may not conflict with other business operations, neither does it impoverish the provider of fund. Instead, it is found to be supportive to business interest.
It should however be noted that for the company to be more responsive in assisting the society in the provision of viable social services, management must step up its more basic mission of maximizing profits. With social responsibility obligation in view, management team will step up their drive towards making better profit day-in-day-out with which other objectives can be met conveniently.
Finally, it can be concluded that since the greater portion of the populace, together with the government, places more importance and expectation on businesses to be responsible towards their immediate environment, corporations have no choice than to incorporate its exercise as a core programme of theirs in order to keep on existing; ensure customers’ retention; improve the industry image; create goodwill; and to attract potential investors.
RECOMMENDATIONS
Despite all efforts that may have been given by small scale businesses in the performance or discharge of social responsible activities, certain steps still need to be taken to improve socially responsibility programmes and improving the operational performance of the manufacturing corporations indirectly. Some suggestions are therefore offered which, if followed, would improve the implementation of the programmes and enhance both the status and profitability of the company.
- Since small scale businesses considers investment in social responsibility as beneficial to the society and its own business operation, it will be necessary for the company/industry to earmark more funds as social responsibility investment fund so as to meet the increasing demands from members of the public for its social assistance. To meet these increasing public demands, the company should maintain a fixed percentage of its after tax profit which would be spent each year. For instance, the company should invest more in Education and Training centre in order to ensure a qualitative manpower base from which it can recruit its qualified employees.
- To effectively and efficiently meet the companies’ social responsibility objectives, the determination of social needs should not be concentrated exclusively in the hands of management staff. Rather, this study suggests the inclusion of other employee in planning process of the company’s social responsibility programmes with probably an outside consultant.
- The outside consultant, who should be an expert in social relations, will introduce valuable and workable ideas which together would help ensure a more objective analysis of social needs of its environment and at the same time, benefiting the industry.
- Small scale businesses all across the nation should be compelled to include among their long-term objectives, if not in the short-term, corporate social responsibility programmes. This will go a long way in guiding their decisions almost every time their objectives are examined. It should be documented with proper control put in place to ensure their attainment.
- Government can and should also help at making social responsibility exercise competitive. This will be achieved by public commendation spelt out in recognition of any project executed by any manufacturing corporation. This will invariably improve the image of the organization and indirectly promote its product, metamorphosizing into increased productivity and improved profitability.
Additionally, other firm would be moved to discharge social responsive programme, hence ensuring continued growth and development of the community at large.
- In term of embarking on project that requires huge capital investment and of which the funds earmarked are inadequate. The researcher recommends here that the company should collaborate with allied organizations, which engage in voluntary social responsibility activities. This will enable the company and one or two related organizations, to pool their capital and manpower resources together to embark on, say a Dam construction project which is highly capital intensive. When the dam is built, energy may be generated to solve part of acute energy shortage problem experienced by some communities in Nigeria, aside from using it for irrigation purposes.
- In a bid to also create an enabling and secured environment for the industries to operate, so that they can carryout the social responsibility, financial institution, headed by the Central Bank of Nigeria, should initiate financial support to the small scale businesses in form of soft loans with low interest. This will enable small businesses to be able to carry out some social responsibility projects in their host communities.
- Finally, business organizations should make periodic assessment of their performance in social responsibility functions. This entails the conduct of regular social audits. Some audit will help the company to know what it needs to do to help the society, and also to appraise performance in selected social responsibility areas. This will also help the organization to set its priorities right, to enable it to concentrate efforts and scarce resources on worthwhile projects that are of benefit to society and consequently beneficial to it.
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