Annex 2: A Study of Corporate Relationships in the UK Timber Trade

Draft proposal for funding
(1st version, 5th November 2002)

1 Objective
Determine from quantitative and qualitative analysis the links between company behaviour and stakeholder behaviour for the UK timber trade and develop action plans to improve relationships

2 Outputs
1. Reports on each stakeholder group
2. Action plan for the industry (to feed into the Wood.for Good campaign and other industry wide activities)

3 Background and Argument
Timber industry leaders and progressive traders are increasingly aware of the importance of their relationships with customers, civil society, government and their own employees and shareholders. Recent research (Schneitz and Epstein, 2002) found that, after the failed WTO Summit in Seattle, the portfolios of Fortune 500 companies with a reputation for social responsibility declined by about 1% whilst those without such a reputation declined by 2.6%. More directly, predictive behavioural research on Sears (Harvard Business Review, ’97 and ’98 reference to come…) showed that a 5% increase in staff satisfaction leads to a 2% increase in customer satisfaction, which in turn leads to a 0.5% increase in store revenue.

In the future shareholder value is likely to be based more on the quality of the relationship between company and its stakeholders than the quality of the products themselves (MacMillan and Money, 2000). Once products fulfil their basic performance criteria customers will start to make buying decisions based on the emotional value he/she attaches to the product (MacMillan and Money, 2002, Pers. Communication). Other stakeholder groups (e.g. employees, NGO’s, and government) will similarly decide how to behave towards a company or industry based on it’s record on corporate social responsibility. The “narratives” or “stories” told about companies are critical to how companies are perceived by its stakeholders. Henley Management College has undertaken some cutting edge behavioural research and developed some validated predictive research tools using psychometric tests. This research will enable industry to learn more of these perceptions and how it might manage these relationships and adapt business practice and so increase shareholder value in the future.

4 Methodology
1. Interviews with the companies to determine how they want stakeholders to behave in the future.
2. Interviews and focus groups with representatives of each stakeholder group (e.g. customers, NGO’s, government, etc.)
3. From the interviews develop a questionnaire that links together company behaviour to stakeholder behaviour
4. Collect and analyse the results of the questionnaire
5. Develop action plans for industry to improve its relationships

5 Costs
1. £15,000 - £20,000 per stakeholder group
2. The companies involved will cover expense of the project (e.g. co-ordinating participants and hiring rooms for focus groups)
3. The companies involved will also identify and send questionnaires to stakeholders (cover postage, etc)

6 Management and Implementation
1. This work will form an important part of the Corporate Social Responsibility study that the TTF and DFID are going to co-fund, coordinated by TTF’s Corporate Responsibility Adviser (Andy Roby).
2. Henley Management will be contracted by TTF to undertake the surveys using their business tools (e.g. psychometric tests, corporate relationships) to generate the action plans.
3. The participating companies will provide facilities and contacts to form the focus groups and interviewees.
4. The research will be monitored by the overall CSR study steering group.
5. There will be a workshop organised by Henley Management College at the end of the CSR study involving the Chief Executives of each participating company

7 Issues to be resolved
1. The size of contributions from each company (suggested range of £3,000 - £10,000 each depending on size) will determine how many stakeholder groups can be studied.
2. How to move from company specific to industry wide.
3. How to research the SME’s in the timber trade.
4. etc.

8 References (partial)
K.E. Schneitz and M.J.Epstein, Does a Reputation for Corporate Social Responsibility Pay Off? The Strategic Management Journal, April 2002.
Research on Sears published in Harvard Business Review, 1997/98
K MacMillan and S Downing, Governance and Performance: Goodwill Hunting. Journal of General Management, Vol 24, No.3, Spring 1999.
K MacMillan, K Money and S Downing, Successful Business Relationships. Journal of General Management, Vol 26, No. 1, Autumn 2000.