Tag Archives: Harvard

Harvard Professor Identifies Factors for Meaningful CSR and Supply Chain Audits

Well known Harvard Business School Professor Michael W. Toffel recently published the results of three studies into CSR/social auditing, including what makes an audit valuable and how to help plants actually learn from the audit results.  Prof. Toffel narrates the key insights in this 4-minute video.

Our main takeaways were:

  1. Toffel states that “We assume that most clients want the auditors to tell them the unvarnished truth.  Obtaining accurate information from these auditors is critical to enable brands to manage this risk.”  We are not sure this is universally so and impacts how plants respond to audit findings.
  2. They found a relationship between three aspects of audit team makeup and the number of audit findings reported:
    • Returning auditors tend to have fewer findings than an auditor who has not audited the site previously.
    • More years of auditing experience and training means a higher number of findings than auditors with less experience/training.
    • Female audit team members tend to identify more findings than male auditor team members.
  3. The biggest improvements came when a highly-trained team performed an announced audit.
  4. Audits are a critical method for knowledge transfer “and for knowledge to be transferred effectively, you have to have a knowledgeable auditor, but you also have to have a receptive factory manager.”  The receptiveness of a plant manager is linked to Point #1 above.
  5. Factories in countries with greater press freedom were substantially likelier to improve.
  6. Audit teams seem to have fewer findings where the factory pays rather than the brand. While Toffel suggests this may be a result of conflict of interest, we believe there is another side that is more prevalent.  Factories are subject to enormous cost pressures and tend to select the lowest cost providers, which translates to less experienced/trained auditors not fully prepared to identify complex situations and findings.

The direct linkage between qualified auditors and the quality of audit results is a drum have been beating for years, but in the current environmental of increased supply chain transparency – and  liability – companies should rethink the value, make-up and execution of supplier audits.  Call us to discuss our views on this further

We Aren’t McKinsey or Harvard Business School, But We Saw This Coming for Conflict Minerals

We have long been devotees of renowned Harvard Business School professors Clayton Christensen and Michael Porter, which leads us to think differently in our market.  Now a study published in the August 2013 Harvard Business Review (HBR) validates our strategy in our conflict minerals services, and specifically CMCheckPoint as a potentially disruptive consulting offering.

Granted, we didn’t devise our conflict minerals solutions through the complex strategic analyses discussed in the article.  We simply overlaid our understanding of the subject matter with what we heard from the market.   A distinct trend developed on the buy-side.  The fact that some of us have been on the client side of the table and lived that perspective was also valuable in truly internalizing that as an opportunity rather than an obstacle.  Moreover, our structure allows us to nimbly adapt to client needs and rapidly innovate (such as our very early adoption of the iPad for HSE auditing).

As Christensen suggests, we focused on smaller companies expected to be ignored by bigger consulting firms driving our development of lower cost solutions.  While “name brand” consultancies may not value lower revenue opportunities/client, we embrace them.  Unexpectedly, we have also completed successful engagements with Fortune 500 companies.  Our clients appreciate our pragmatic, efficient and lower cost approaches to conflict minerals programs that support their self-sufficiency, rather than perpetual reliance on outside resources.

Recent conversations with clients and others further validate our methods.  As an example, we have heard multiple times that some of the Big 4 are declining to bid on stand alone CMR audit engagements as that revenue is below their thresholds.  Conversely, in situations where they do choose to bid, they frequently present six-figure costs – indicating they don’t understand the nature of this specific audit, are attempting to take advantage of the client’s own lack of understanding, or simply are relying on (using Christensen’s words) the “…purported impermeability of their brands and reputations” combined with a lack of transparency into their consulting business models.  Certainly such large costs are warranted in certain situations, but not in some we are specifically aware of.

In this case, we are proud to be a disruptive influence.