Dr. Rick Franza, Professor of Management at the Hull College of Business, discusses a different, timely business topic each Monday in this column. This week, he examines the risks of businesses becoming involved in national social issues. The interview has been edited for clarity and impact.
ABD: In the past few months, we’ve seen a backlash against some companies, most notably Bud Light and Target, for their stand on controversial social issues. Is it a good idea for a company to take such a stand?
Rick: My answer is, it depends. It can be tricky to get involved, and it can be tricky to not get involved. There’s a pretty broad definition of what are social and cultural issues. If you’re a local business, your main concern is about the local market, but if you’re a larger company doing business nationally or internationally, it gets trickier.
If you’re in the local market, you can better judge the tenor of the impact in that market. But even in the local market national issues have varied impacts.
ABD: What kind of evaluation should a company do before deciding to take a stand on an issue?
Rick: You have to look at what your customers, your employees, and your shareholders might feel about that particular issue. If it’s a serious issue, you may want to take a stand that’s not consistent with one of those constituents. Taking a stand – or not taking a stand – could turn off your customers, reduce your employee pool, or reduce the number of investors in your company. There’s risk involved.
I’m teaching a marketing class on strategy and one of the first things we’ll cover is external influences on your strategy. We talk about your customers and what they value, what your competitors are doing, and other external influences to see how that could affect your strategy and how it could affect all your constituents. You’re trying to be as profitable for the shareholders as possible, but you have more constituents than just the shareholders.
ABD: Do you think the lack of understanding of the effect on their constituents was the reason Bud Light made the decision to celebrate the transgender community?
Rick: Certainly, the evidence is they didn’t understand what the reaction would be from the broader part of their market. They weren’t ignorant in thinking the heart of their market was the trans community. My guess is they thought they could expand that market without it negatively impacting the rest of their market. They didn’t think a big swath of their market, which is definitely not transgender, would react the way they did. Obviously, they totally miscalculated.
ABD: It seems much of the pushback against companies who make a stand on a social issue comes through social media.
Rick: Social media is a double-edged sword. Social media is like a bullhorn that more immediately allows individuals to have a powerful platform. The media can play it one way, but individuals now have a forum to say, Hey, look at this. That’s why companies really have to understand their markets.
Be very careful that you don’t just follow who’s louder – often the bigger part of your market isn’t that. Most people won’t say anything, but will vote with their feet. They’re the silent majority.
ABD: So this silent majority are the people between the ends of the spectrum?
Rick: What you have to take into account is what all the people in the middle do. What happened to Bud Light is that their market is more socially conservative and they underestimated their reaction. With Target, when you start involving children, the main center of the market is turned off. Target saw their market as more socially liberal, but they went too far.
ABD: You mentioned that businesses shouldn’t just follow the loudest voices, so where should they focus?
Rick: Business people should be listening to different types of media to get a sense of what different parts of the market are thinking. I read a lot of Wall Street Journal, but I also listen to NPR. It’s also important to understand both ends of the spectrum because they’re having an influence on your market. But you can’t be doing all your listening to one side. That may be what happened to Bud Light.
ABD: What if the social issue is something more local, like supporting first responders or a school activity?
Rick: When you get into things like that, there’s much more agreement. Like supporting something for veterans, there are more people behind it, not just one side or the other. It’s more motherhood and apple pie issues that won’t get you in trouble because a broader base supports it.
ABD: So the bottom line in taking a stand on social issues is…?
Rick: Do your due diligence. What’s really important is understanding all of your constituents. Sometimes, we think that our target market is ourselves, and that’s not usually the case. Evaluate the issue and see if it is the right thing for you as a company to support. You need to look at the big issues and how a stand would affect your company.