How A Culture Of "Doing The Right Thing" Can Be Good For Business

 Megan Hansen for Grads of LifeVoice

Savvy business leaders everywhere are focused on talent, changing demographics, and the future of work—and what it all means for their company. On June 13th, FSG and the Shared Value Initiative are hosting REWIRE: Unlocking Talent Solutions for Today & Tomorrow at Gap Inc.’s headquarters in San Francisco to explore how companies can build their capacity to better recruit, retain, support, and advance historically overlooked talent pools with an aim of improving the bottom line. Join companies like MOD Pizza, Tyson Foods, T-Mobile and others as they discuss the strategies they're using to REWIRE their HR practices.

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MOD Pizza was founded with the goal of using business to make a positive social impact. Founders Ally and Scott Svenson realized that through the fast-casual pizza segment they pioneered, MOD could create a positive effect on the lives of their fiercely loyal employees. MOD’s hiring philosophy - that talent is everywhere, but opportunity is not – continues to drive their success and gives their employees purpose.

The Challenge

When MOD learned that 5.5 million young people in the U.S., ages 18-24, are out of school and unemployed, they saw an opportunity to not only impact lives but solve a critical business need.  Like many other companies, MOD was having difficulty recruiting entry-level workers to keep up with the 2,000 MOD jobs created every year through their rapid expansion.  MOD was also challenged with high turnover; although their rate was typical of the restaurant industry, it was higher than they would like.

The Solution

Through FSG’s Innovation Lab program, MOD set out to discover whether a partnership with a community-based organization could help address their high turnover and recruitment challenges through providing them with both a pipeline of career-ready youth and the wrap-around supports these youth needed to be successful. MOD decided to focus their pilot partnership in the Bay Area where MOD restaurants were facing upwards of 67% turnover at the 90-day mark.  Next, they identified potential partners in the region and ended up forming a partnership with JUMA, a national youth-centered social enterprise that was also interested in piloting a new employer partnership model.

The Result

Less than a year into the partnership, MOD is finding that their collaboration with JUMA is having an impact on their recruitment and turnover. Of young people hired by MOD during the pilot, only 50% turned over by the 90-day mark compared to 67% for the region. When asked what they value most about the partnership, general managers shared that not only has the partnership eased their recruitment challenges, but it has also provided them with an amazing opportunity to invest in the youth.  MOD plans to scale impact hiring at a national level, building both partnerships and a database of community-based organizations that all MOD general managers can tap into as talent pipelines and for support.

Additionally, through the MOD-JUMA Pilot Study, MOD learned that 70% of their 6,000+ employee base are 18-24 years old and that the retention strategies implemented to support the youth hired through the pilot would also be beneficial for their entire employee base.  This has led to the launch of several new initiatives:

• New KPIs: MOD has begun to hold General Managers accountable for turnover rates. They have set a company goal of reducing turnover by 20% and in 2018 are already seeing a measurable reduction in turnover and cost due to this change.
• Education Benefits: Through their new Human Resource Information System, the team learned more about employees and their education levels.  With many of MOD’s youth lacking a college and sometimes high school degree, the company is hoping to add an education assistance program to their benefits package to help staff develop their skills for careers at MOD and beyond.
• Transparent Career Pathways: MOD has developed resources that easily outline the steps and requirements to become a general manager. Their employees come from various backgrounds and bring their own MODness to the team. They recognize that they shouldn’t operate on the assumption that every employee intrinsically understands the pathway to promotion but should instead support employees in helping them get there. They also recognize that MOD might not be a long-term career for everyone, but they can equip employees with meaningful professional development for job opportunities outside of MOD and create pathways for wage progression.

What’s Next

MOD continues to build on their work with FSG and the Innovation Lab to lead in the Opportunity Employment space. Using their business as a platform, MOD is exploring new ways to impact lives at the store level and beyond. By sharing their story, MOD hopes to demonstrate the business value of collaborating for talent instead of fighting for it, and how investing in the lives of employees can produce a positive ROI. The company calls this “Spreading MODness” – the ripple effect of doing the right thing. That is MOD’s purpose and for them, it’s good business.

Doing the Right Thing: When Moral Obligation Is Enough

“But what is government itself, but the greatest of all reflections on human nature? If men were angels, no government would be necessary.” James Madison, the fourth president of the United States and an architect of the U.S. Constitution, is credited with writing these words in “The Federalist Papers” as he constructed his framework for a nation guided by laws that are both enshrined and enforceable. But do laws have any less power if they cannot be enforced properly?

Robert Hughes, a professor of legal studies and business ethics at Wharton, challenges Madison’s notion in his latest research, which focuses on the moral obligations of citizens and businesses. Hughes contends that it doesn’t take long to find examples of moral and ethical behavior being practiced even in the absence of serious legal consequences. He finds that laws, even weak ones without specific sanctions, serve a definite purpose in modern society.

An edited transcript of the conversation appears below.

James Madison Was Wrong

James Madison once said that if people were angels, we would have no use for law. My work in legal philosophy and moral philosophy shows that James Madison wasn’t right about this. Of course we need law in government to address a variety of human moral failings, but even morally very good people would need law and government to get along well together.

“If you believe, as James Madison did, that the only point to law is addressing human misbehavior, then you’ll probably think that law has no point unless there are sanctions attached to legal prohibitions.”

One side of my research program is concerned with specific legal institutions that facilitate or hinder citizens having good moral relationships with each other. This includes some work on democratic theory as well as health care justice. The other side of my program concerns the relationship between law and law enforcement. If you believe, as Madison did, that the only point to law is addressing human misbehavior, then you’ll probably think that law has no point unless there are sanctions attached to legal prohibitions. On this view, there’s no point to telling people to do something — or the government telling people to do something — unless the order is backed up with the threat to lawbreakers to put them in prison, to fine them, to compel payment of damages or something of that nature.

I argue that law can serve morally important purposes, even when it’s unenforced or under enforced. Law can be morally binding on us quite apart from the effect that any sanctions have. Twitter  Consider an income tax law that’s either entirely unenforced or under enforced. Of course, under enforcement is the situation we’re in because there are some forms of income that aren’t subject to third-party withholding or reporting. In 2006, the IRS estimated that 54% of people who owe tax on amounts that are not subject to third-party reporting or withholding misrepresent the amount that they owe. That’s a lot of people cheating on their taxes. But it’s also a lot of people who are paying their taxes honestly, even though there isn’t a reliable enforcement mechanism to sanction them if they don’t.

I focus on the ethical question here. If you’re in this situation, if you have income that you could conceal from the IRS or another tax authority, and if you know that roughly half of your fellow citizens are shirking the tax and roughly half are paying it honestly, what’s your moral obligation? Tax laws serve a morally important purpose. They attempt to organize support for morally important public goods, such as public safety, and to do it in a fair way. Of course, some people aren’t paying their assigned share, and that’s unfair. But you would be compounding the unfairness or the injustice if you chose to join their number. The right thing to do is to report your income honestly and pay the tax. This is an illustration of a general principle that there is a moral obligation to obey laws that are unenforced or under enforced, and this is important partly because there are sometimes good reasons not to enforce the law. For example, there might be resource limitations on the part of law enforcement or there may be privacy considerations. It might be impossible to enforce a law effectively without an undue intrusion.

The Intersection of Morality and Law

For citizens and residents, there can be a moral obligation to follow laws that are unenforced or under enforced. Just because you could get away with breaking the law doesn’t mean you’re entitled to morally. This is going to apply when there’s no enforcement on the books at all or when there are sanctions on the books that are rarely applied. It will also apply when there are sanctions on the book that are applied, but they are too slight to affect behavior. The other major takeaway is for legislators. Legislators sometimes have reason to believe that a law being proposed couldn’t be enforced both efficiently and fairly. That alone shouldn’t take a proposal off the table. Sometimes the right thing for a legislature to do is to enact a new law, demand that citizens take that law seriously, but not back up that demand with a threat of sanctions.

“Legislators sometimes have reason to believe that a law that’s being proposed couldn’t be enforced both efficiently and fairly. That alone shouldn’t take a proposal off the table. Sometimes the right thing for a legislature to do is to enact a new law, demand that citizens take that law seriously, but not back up that demand with a threat of sanctions.”

This argument is going to be relevant to business people who are facing difficult questions about whether to follow an under-enforced law when following that law may not be narrowly in the firm’s interest. Suppose there is a labor law requiring overtime pay for certain categories of workers, and suppose that this law is under enforced because the only liability is back pay plus interest. An employer that is narrowly self-interested may choose simply not to pay the overtime because the sanctions on the books aren’t enough to effectively deter nonpayment. Nonetheless, there may be a moral obligation to provide overtime time pay given the importance of this law in a fair scheme of economic cooperation.

My arguments are going to have particular application in the international context. Sometimes a multinational business is doing business in a lower-middle-income country where law enforcement has resource limitations that prevent it from enforcing all of the socially important laws effectively. I argue that the moral obligation to follow socially important laws isn’t limited to the laws of one’s own country. One can also have a moral obligation to follow socially important laws when one is doing business as a visitor.

A Business Perspective on Morality

I have three directions that I’d like to explore in my research. First, I’d like to look more closely at the effects, if any, of competition on what obligations businesses have to obey unenforced or under-enforced laws. Are there situations in which a very tightly competitive market makes it genuinely infeasible to obey an under-enforced law? If so, could the moral obligation to support important legal institutions be fulfilled by participating in some kind of institution building instead?

Another future direction is to look at what forms of enforcement are appropriate in a business context. In particular, I plan to look at general moral principles that apply to the use of force and when imprisonment is an appropriate penalty for white collar or nonviolent property crimes.

Last, I’d like to look more closely at the international context and the question of what should a multinational business do if it has reason to believe that some of its business partners in resource-poor settings are breaking the law, perhaps because the law isn’t effectively enforced or because law enforcement has resource limitations?

Here’s a relevant example. In 2013, an eight-story building collapsed in Bangladesh, killing over 1,000 people and injuring over 2,500. The building collapsed because it wasn’t up to code. If they had followed the local building codes, which were under enforced, the people wouldn’t have died. Part of that building was being used as a garment factory that manufactured garments for export. What obligations does a multinational fashion corporation have when it has reason to believe that its business partners in low- and middle-income countries may not be following some important laws, including safety codes?