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BUSM Organizational AnalysisGroup 7 Tuesday 15:GROUPREPORTSEM C 2020TABLE OF CONTENTS Introduction_________________________________________________________ Problem statement__________________________________________________ Current performance and situation of CSR in mining irm _____________________...

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BUSM2301 Organizational

Group 7

Analysis

Tuesday 15:00

GROUP REPORT SEM C 2020

TABLE OF CONTENTS Introduction_________________________________________________________4 Problem statement__________________________________________________5 Current performance and situation of CSR in mining firm_______________________5 The belief of firm_______________________________________________________________5 Company structure problem____________________________________________________5 Flow problem:__________________________________________________________________6 Literature review____________________________________________________8 Concept of CSR________________________________________________________________8 CSR in mining and its drivers___________________________________________________8 Methodology___________________________________________________________________9 Solution development and proposal_________________________________14 Discussion and conclusion__________________________________________16 Appendix___________________________________________________________19 References List_____________________________________________________22 Group Reflection and CONTRIBUTION_______________________________27

Assignment information: Assignment name: Assignment 2 - Group Report

RMIT UNIVERSITY VIETNAM SAIGON SOUTH CAMPUS SCHOOL OF BUSINESS AND MANAGEMENT

Word count: 3345 words (Cover page, Table of Contents, Headings, Appendix, Diagrams, Charts, Tables, Group Reflection, References and References List are not included)

Submission date: 03/01/2020

INTRODUCTION Increasing pressures from shareholders and community are heavily placed on the mining company as it attempts to excellently perform Corporate Social Responsibility (CSR), leading to the need for better organizational structures, especially CSR. This paper displays the new structure to address this problem as well as analyzing the strengths and weaknesses of the proposal on how CSR affects the mining company and the society from the subjectivist perspective. Better control over various functions is also an urgent need of the mining company since their acquisition of numerous companies leads to a lack of connection between operations and sites. It is required to develop common approaches to the management of the sites, the company's purposes and objectives, and its appropriate reactions to environmental and community pressures.

PROBLEM STATEMENT Current performance and situation of CSR in mining firm Because the government forces them to guarantee corporate responsibility to the community, applying CSR becomes meaningless when they do not really consider environmental responsibility. Therefore, the approach that the mining company is taking to voluntary sustainability has no consensus of purpose (Cho et al., 2015). It caused controversy among stakeholders as the company focused primarily on making profits and enhancing company’s brand identity. Therefore, the established CSR system must be based on real observations from society. According to Larsen (2010), CSR cannot be built in a conventional way, it must have social interaction of attitudes, beliefs and purposes. In the current situation, the company cannot avoid the punishment of the government and criticism from the society. This has a great impact on the operation of the mining company, they have to trade a large amount of money and time to recover (Powell 2015). On the other hand, according to Holme & Watts (1999), marketing can contribute to a sustainable social enterprise. The company faces a huge communication problem, creating many barriers. Specifically, the company will have a bad reputation forever, it is difficult to recover to its original state. They need to prove more to gain trust from the community as well as their concern about the environment. (Sushmita 2013) Through this, the treatment system needs more time to identify and respond. Furthermore, companies should not always focus on maximizing profits, forgetting about social interaction and their views on the proper use of the CSR system (Kolstad, 2007). The situation is caused by three root problems.

The belief of firm The mining company accepts the nature that profit cannot go along with CSR (Jasmine & Sameer, 2015). Because it is difficult to generate benefits and is costly, therefore, CSR is unnecessary. Moreover, they are facing pressure about the company to behave in socially responsible ways. Hence, they noticed the use of CSR as a method to deal with pressure from the government, company shareholders and society. These can also be seen as defensive CSR (Sushmita 2013).

Company structure problem In general, the company does not have a general approach to how to manage the different organizational functions, namely that they operate separately resulting in a looser corporate structure (Cho et al, 2015) (Muhamad 2008). In addition, the reason for the inability to promote economies of scale comes from the problem of trust that the company is facing (ibid). Since they were not really

interested in adopting CSR, the firm decided to let the CSR department operate on its own, leaving it inconsistent in purpose (Spitzer 2010).

Figure 1. Company structure – divisional strcuture

Flow problem: First and foremost, company obtain and review those of the negative mainstream that need to be settle and as to protect the company images. The next step is to take a hold of social media and restrict the media from publishing negative news since bad reputation spreads harm to the company's brand identity. The company then script a plan that will be proposed as we approach the shareholders for approval of the budget required. As if matters violate the law, the company must approach the government for granted permission, if not strategy will proceed to execution for matter to be settle and recover the company images.

Figure 2. Company flowchart, CSR department working process

In short, the process starts too late when a communication problem occurs resulting in reduced efficiency. In particular, the company has to spend too much time and money to face the problem, while the social problems persist. Furthermore, the slow operation makes the flow too rigid. Because there is no strong bonding, the flow becomes cumbersome and it takes a lot of money for the flow to connect with each other (Cho et al 2015). Even there is a few connections between departments inside CSR agency, as a characteristic of Organized Hypocrisy and Organizational Façades, it is not enough to show the CSR effect on the company and local area. Hence, company would face an increase in cost due to CSR process without gaining any profit (Piercy 2009).

LITERATURE REVIEW This study analyzes whether there is a systematic relationship between CSR performance and the economic performance of mining company

Concept of CSR According to Carroll (1998), Corporate Social Responsibility (CSR) is the method that is implemented for the social and environmental liability of the community in a company and business. Later in 2006, Perrini stated the responsibility in CSR is for economic growth, social stability, and sustainability of the environment is recognized and a fourth factor is added: philanthropy. However, despite many undeniable benefits, some critics have been placed. Friedman (1962) asserted that CSR has financial gains only and aims to increase revenues for organizations. There is also concern that CSR is not appropriate for social functions (Carroll and Shabana, 2010). Through this idea, CSR has been acknowledged into 4 strategic stances that most organizational applied: Obstructionist, Defensive, Accommodative, and Proactive (Carroll 1979)

CSR in mining and its drivers Mining used to be just an operation to exploit a natural resources area until it dried out. The business will then be relocated to the next location to follow this process. In the early 1980s, the mining companies incorporated environmental practices into their activities under heavy demands (drivers) from the local community (Jenkins and Yakovleva 2006). Researchers have identified drivers in three categories, notably: an approach focused on value, an approach influenced by performance, and a stakeholder approach. A value-driven based on self-motivated and relies on external influences. An approach to performance depends on the competitive advantages of a business for direct income. It also includes the image and credibility of a corporation. The stakeholder approach depends fundamentally on the parties involved; with the success of the business, this approach is required to fulfill stakeholder demands (Larsen 2010)

Methodology

Figure 3. Information systems development paradigm (source: Hirschheim and Klein 1989)

The traditional understanding of CSR is appropriate and can be used as an ethical framework for business. However, its characteristic sustainability is still controversial, especially when involved in a social perspective (Carroll and Shabana, 2010). The traditional understanding has described CSR is created based on the consensus of the society, the demand for the responsibility of business. CSR is understood as its 4 factors of responsibility (economic, social, environment, philanthropy) in business are interacted in order to reach out to optimize business performance but keep sustainability. The previous knowledge about CSR has adopted the Functionalism paradigm (Hirschheim and Klein 1989). There is no denying that a corporation should perform its economic obligation. The primary aim of an organization is to create and manage sustainable business income through the production and distribution of the goods and services needed by society (Cho 2018). However, this approach is very controversial among stakeholders because it is mainly about the profit of the company, there is no social consideration in this part. The incongruence between what company talk, decision, and action toward voluntary sustainability have been highlighted in Cho et al. (2015). Another paper of Cho (2009) has claimed that organizations only do this to concrete their position and for private interest. At this point, the mining company has separated the CSR department out from the company structure, make it become ineffective, instead of integrated it into company structure as in flowchart above. Therefore, if viewing CSR in this view, as an objectivist viewer, CSR is established based on the need of company, the need of either sustainability or economically, to adapt with the demand of the society. According to Caroll (1979), organizations applied this as a defensive strategy, rejecting broad ethical responsibility by passively complying with legal requirements and remaining legally valid, they acted to protect their self-interest. This has led to an unsustainability corporate structure, there are no networking between the departments, each department having their separate function. Due to this fact,

when a CSR issues happened – which is demand various co-operate between department, the company decision and action will become ineffective.

This paper will deny the objectivist view and take a stance as a subjectivist to reduce the increasing tension of shareholder activism and community pressure being placed on the company. For this point, it is necessary to create a concept model and restructure the company's CSR department. Our conceptual model still stays in the integrationist view as before - the reason for the existence of CSR in mining companies. On the other hand, the change in the objectivist dimension is necessary. To be brief, based on Hirschheim and Klein's (1989) paradigm’s model, the social relativist perspective must be adopted – view from a subjectivist perception. After adopting this paradigm, the understanding of CSR will be changed: There's no specific reality, there are only different interpretations. Company CSR is not associated with an observable economic fact, but with a transition in traditions-social norms, conventions, societal beliefs, and ideals. Our solution – epistemological assumption, demand interaction with stakeholders to redesign a CSR system that is suitable for each mining site. The reason is that there is no empirical criterion separating good and bad systems. All depends on what the parties understand is relevant – this is the ontological assumption of this paper (Hirschheim and Klein 1989). In practical terms, it is impossible for companies to fully apply a proactive strategy - absolute consideration of their social obligation and active participation in society . However, companies can take an accommodative stance - accept some ethical responsibility toward their stakeholders. Through some configuration, companies can effectively remove operational problems and suppress stakeholders' dissatisfaction (Carroll 1979). The mining company should work out with stakeholders, accept their perspective to find out their preferred views. By then, the CSR system that meets the stakeholders’ view can be considered legitimate. From communication, the best CSR system is developed and constantly updated and legitimized through adjustment. CSR systems cannot be formulated in a normal way, not without social interaction (Larsen 2010).

Regarding problem of company’s core beliefs about the nature that CSR systems could Figure 4. The stakeholder map (Source: Freeman, 1984, p.55)

cost more its advantage, building up, a model that qualify the positive relationship between CSR and

CFP is utterly possible, in fact. The solution for CSR in mining industry would be a model that could

balance both profitability and stakeholders’ perspective. The table in appendix 1 presents the data for the four dimensions of the CSR. Overall, all dimensions are strongly connected to the CFP. These findings confirm the hypotheses for CSR dimensions. Hence, there is an important positive relationship between the CSR and the CFP. The findings agree with the argument put forward by Yoon et al (2006) which indicates that these practices build a brand image for a business that can establish positive public relations with stakeholders, such as consumer satisfaction and investor interest, resulting in increased profitability and market valuation. This study suggests that, on average, investors also make money from their investment in business shares. (Muhammad et al 2008) (appendix 1) Even so, Muhammad also claimed that for generating a productive partnership between CSR and CFP, the company need to be engaged fully in CSR environment in which all the stakeholders and the company’s operation benefit each other after the stakeholder and company perspectives are captured and desired. In contrast, different stakeholder communities have diverse requirements that businesses cannot fulfill all these standards at the same time (Harrison & Freeman, 1999) due to conflicts of interest (Rainey, 2006). Thus, businesses frequently pick and pay more attention to some of them, which strongly related to the business (ibid). This decision would be conducted carefully through the measurement methods and metrics below (Ruf et al 2001). At a result, when a whole company as well as the local area share a common viewpoint of this positive relationship, CSR system would be able to illustrate positive effect on a big social network included company itself and the community, as the characteristic of social relativism (Hirschheim and Klein 1989). In addition, there is a monitoring road to be balance between profits and social benefit for a mining business. Which is the key for the question is whether profitable businesses are wealthy enough to splash out on CSR as a luxury branding game, or whether CSR and activities itself offer

Figure 5. The relationship among CSR, mediating process and the profitability

revenues. With the current issues that the mining company is facing, the transformation in belief and cultural inside the company is not enough, a method to balance the profitability and CSR is necessary. The measurement should be conducted along the project according to 4 stage (Peloza 2009):

Figure 6. Stages of Financial Impact from CSR (Source: Peloza, 2009, p.1523)



In the CSP (Corporate Social Performance) metrics, which is a means to make CSR

practical and implementing it into business (Van & Gössling, 2008), the key CSR initiatives or policies regarding to environmental and social perspectives, such as recycling, and philanthropy are displayed in this stage, based on the demands of local stakeholders as well as the monitoring of variance between the firm’s damage and its advantages. 

Mediating metric is essential for determining the relationship between corporate social

responsibility and profitability, since they are the mediating variables that indicate the causality between value for stakeholder and value for shareholder. (Appendix 2) 

Intermediate outcome metrics, which mainly compare the cost-based approach result and

revenue-based approach result by figure such as how far that CSR help in reduced energy expense or Changes in risk portfolio management, are much less frequently used than end state metrics. In this stage, cash flow and net profit are also monitoring to offer a clear comparison. (Appendix 3)



End-State metrics, including an accounting-based (ROA, ROS, ROE) approach, a market-

based (share price) approach and a perceptual approach (management survey), are perhaps the most standard techniques for researchers to assess CSP and CFP (Peloza, 2009). (Appendix 4)

SOLUTION DEVELOPMENT AND PROPOSAL Regarding the problem above, the lack of integration, unity and stability of the organization. Amburgey et. Al (1990) stated that corporate restructuring could be risky, but once it is overcome and works, it improves the wellness of the company. In other words, operations did not operate smoothly throughout agencies; and It is therefore essential that the paper aims to restructure the organization of this mining business as a more suitable working network. According to above analysis, opening the close functionality working process of CSR by spreading the CSR conduct to other related departments, is necessary. In this case, to develop belief and cultural of the company, the CSR system should combine Business Communication and Branding, and Human Resource departments, while to monitoring a whole process as well as balance the CSR process itself with the profitability, there is an essential collaboration between CSR departments and Administration, included Finance, Commercials and Process. Within administration, the mentioned four metrics would be applied as the backbone of the process, while other additional departments such as Human Resource would be used as the subfunction framework.

Figure 7. Company CSR flowchart, CSR across the company

We propose a solution in which for any project launch must follow through the orders. First and foremost, apply and execute CSR into business is essential, company practices the task by engage stakeholders for their viewpoint, propose new strategy to shareholder for budget approval or as if their legal matters we must plan approaches to government to settle matters by the law, company also settle incidents in an ethical way not just for the good of the corporation but also for the benefit of the local stakeholders. Firm damages to the ecosystems must always on monitor, because environmental surroundings are the priorities demand of local stakeholders, as if the waste is recyclable then the waste should be put in laboratory for research of ways to utilize the resources, however if not recyclable should be planned for elimination for if keep existing will create pollution but more importantly there must be planning to avoid the waste from ever be produce. In fact, mine waste storage is mentioned in several resear...