Promoting A Green Business ImageIn recent years, many Canadian businesses have begun actively promoting themselves as “green” enterprises. They are doing this because the market for green products has increased rapidly as consumers have become more concerned about the environment. For example, the image of Canada’s oil sands producers is that of environmental “bad boys,” so the companies have banded together to get out the word that they are investing in new technology that will reduce the impact of oil sands activity on the air, land, and water. The campaign includes a new website and a national advertising campaign which is designed to provide information and correct misperceptions that consumers may have about oil sands development. Even companies that have a good reputation for being green are stepping up their efforts. Body Shop unveiled a major advertising campaign in 2008 that aggressively touted its commitment to having a corporate culture of concern for the environment. The company is advertising because its competitors are touting their commitment to the environment, and Body Shop wants to stand out from the crowd. But convincing customers that a business is green is becoming increasingly difficult because consumers have become quite cynical, and because watchdog groups carefully scrutinize green claims that are made by companies. A Gandalf Group survey of 1500 Canadians found that the majority of consumers think that (a) environmental claims by businesses are just a marketing ploy, and (b) labeling regulations are needed so buyers can understand what terms like “eco-friendly” mean. These consumer attitudes have developed partly because some companies have tried to claim that their products are more eco-friendly than they really are. The term greenwashing has been coined to describe the practice of making false or exaggerated claims about the environmentally-friendly features of a product or service. It is a modern variation of the older term whitewashing, which means making things look better than they actually are. EnviroMedia publishes a Greenwashing Index that ranks the eco-friendly advertising claims of various companies. In 2010, the environmental marketing firm TerraChoice conducted a study of 5,296 different products and found that 95.6 percent of them made at least one false or misleading environmental claim. Children’s toys and baby products were the worst, with almost all of them making at least one misleading claim. TerraChoice also found that green claims are getting more frequent. Between 2009 and 2010, for example, the claim of “BPA-free” increased by 577 percent, and the claim of “phthalate-free” increased by 2,250 percent. The use of fake labels (which purport to show that a recognized third party has certified a product as environmentally-friendly) is also on the increase (up from 23.3 percent in 2009 to 30.9 percent in 2010). These fake logos are available for a fee on the internet TerraChoice identified several basic greenwashing sins; these include (a) hidden tradeoffs (a company plays up an environmental issue where they do well, but ignores other potentially more serious issues where they don’t do well), (b) vagueness (an environmental claim is made, but it is so vague that it is meaningless), (c) lack of proof (no proof is provided for a green claim), (d) false labels (the use of fake certification logos to impress consumers), and (e) irrelevance (a company plays up an environmental issue that is not addressed by the company’s product). The news is not all bad, however. TerraChoice found that labels with accurate green claims were increasingly evident, and that greenwashing was less evident for products that were certified by a legitimate third party. Charges of greenwashing can create problems for companies. For example, the World Wildlife Fund (WWF) accused Shell Oil of greenwashing after Shell advertised that its Albert oil sands operations were “sustainable.” The WWF filed a complaint with the U.K.’s Advertising Standards Authority, which ruled that the advertisement was misleading and confusing to consumers. The WWF publicized the ruling (and made critical comments about Shell) on a large digital billboard in central London. Another oil company that has had difficulties is BP. Its slogan “Beyond Petroleum” promotes its green image, and the company has been praised by the Natural Resource Defense Council in the U.S. as a leader in the industry’s move toward renewable energy. BP has made a concerted effort to market itself as being environmentally friendly, and consumers seemed to have had a positive view of the company. But all that changed as a result of the oil spill disaster in the Gulf of Mexico in the summer of 2010. Intense media coverage of the disaster, as well as allegations that the company did not put enough emphasis on safety (for both workers and for the environment) damaged BP’s green image. BP is also involved in extracting oil from the Alberta oil sands, which Greenpeace has called “the greatest climate crime in history.” Some green advertising campaigns may strike consumers as downright outrageous. Much to the dismay of animal rights activists, the Fur Council of Canada (which emphasizes its ties with Native Canadians and its made-in-Canada attributes) has promoted itself as a green industry. Its billboard and print advertisements stress the sustainability of the fur industry, and point out that trappers are the first to sound the alarm when wildlife habitats are threatened. The trapping industry has endured much negative publicity during the last couple of decades, so the advertising campaign was controversial. In response to concerns about greenwashing, the Canadian Competition Bureau, in cooperation with the Canadian Standards Association, has drafted industry guidelines that will require companies to back up their environmental claims with scientific evidence. Laws prohibiting misleading advertising already exist (for example, Lululemon Athletics Inc. was required to remove unsubstantiated claims about the health benefits of seaweed from one of its clothing lines), but environmental claims are difficult to assess since there are no consistent definitions and standards that can be used to judge whether a product is really eco-friendly. The new guidelines will create national definitions for terms like “recyclable” and will also prohibit vague claims about products (for example, “our product is non-toxic”). Questions for Discussion
Sources: Sara Schmidt, “Public ‘Greenwashed’ by Eco-Friendly Claims: Study,”//Winnipeg Free Press//, October 26, 2010, p. A2; Hollie Shaw, “Making the Case that Wearing Fur Can Be Eco-Friendly,” Winnipeg Free Press, December 5, 2008, p. B6; Daryl-Lynn Carlson, “Advertising Guidelines Target ‘Greenwashing’,” Winnipeg Free Press, November 21, 2008, p. B6; Marina Strauss, “Standing Out in a Sea of Green,” The Globe and Mail, August 16, 2008, p. B3; Randy Boswell, “Oilsands Ad ‘Greenwash’ Environment Group Crows,” The Globe and Mail, August 14, 2008, p. C8; Richard Blackwell, “Eco-Friendly? Canadians Want to See the Proof,” The Globe and Mail, July 28, 2008, pp. B1, B3; Shawn McCarthy, “Oil Sands Tries Image Makeover,” The Globe and Mail, June 24, 2008, pp. B1, B7; Sharon Epperson, “BP’s Fundamental But Obscured Energy Contradiction,” cnbc.com, May 21, 2008, www.cnbc.com/id/24758394; Carly Weeks, “New Scrutiny for Green Claims,” The Globe and Mail, March 11, 2008, pp. B1, B6; “Oil Company BP Pleads Guilty to Environmental Crime,” International Herald Tribune, November 29, 2007, www.iht.com/articles/ap/2007/11/30/business/NA-FIN-US-BP-Settlement-Alaska.php?page=1; Terry Macalister, “Greenpeace Calls BP’s Oil Sands Plan An Environmental Crime,” Guardian.co.uk, December 7, 2007, www.guardian.co.uk/business/2007/dec/07/bp. Answers to Questions for Discussion Most students will probably agree that the advertising campaign of the Fur Council is controversial, and they will not accept the claim that the industry is eco-friendly. This is largely because the claim that the fur industry is “green” flies in the face of the large amount of negative publicity the fur industry has received during the past couple of decades. High visibility events (such as publicly challenging people who wear fur coats) have probably caused most Canadians to be at least somewhat uncomfortable with the idea of killing animals in order to produce fur products for consumers. So, the willingness to accept a claim that the fur industry is “green” may be quite low. Thus, many people may think that the advertising campaign is actually an example of greenwashing. On the other hand, some students will note that the Fur Council’s advertising campaign contains two elements that appeal to Canadian consumers. First, the campaign advertises the made-in-Canada attributes of the industry, as well as the industry’s ties with native Canadians. There has been much publicity about foreign ownership in Canada over the years, and the made-in-Canada theme may strike a respondent chord with Canadians (the current high-profile potash takeover debate is a case in point). Second, the advertisements stress the sustainability of the fur industry, and “sustainability” is a word that is increasingly used in the vocabulary of environmentalists. What a person might say about the advertising campaign when talking to an animal rights activist depends on the position of the person doing the talking. If you support the fur industry and are trying to convince an animal rights activist that the campaign has some merit, the two arguments noted in the preceding paragraph will not likely be well-received by the animal rights activist. If you are opposed to the fur industry, you will likely take note of the arguments and reject them (and your position will be well received by the animal rights activist). In either case, it is unlikely that an animal rights activist will see any merit in the advertising campaign because the person will see the fur industry as lacking any fundamental legitimacy. Student views about the role of government will influence their answers to this question. Students who disagree with the statement will say that bad behaviour by business firms must be controlled, and the way to do that is through tough legislation. They will point to the fact that this is the way Canada’s economic system has been operating for many decades. They will likely concede that legislation varies in its effectiveness, but without the threat of government intervention, some businesses will not behave in ways that benefit the average consumer. Students who agree with the statement will likely argue that government legislation is simply going to be ineffective in controlling unwarranted green claims. They may also be somewhat cynical about the motives of businesspeople and point out that history shows that a certain percentage of businesses will be very creative in finding ways around any government legislation that is passed. They may point to the proliferation of “green” labels on products as evidence that businesses are trying to promote themselves as being green simply because they think that will help them sell their products to consumers. There is some evidence supporting this view. For example, The Boston Consulting Group in Toronto found that consumers are confused about the green options that are available because there is such a wide array of eco-labels on products. Ecolabelling.org is a Vancouver-based company that has identified 274 eco-labels, 23 of them originating in Canada. There are labels touting compostable products, fair trade products, energy efficient products, forest stewardship products, lake-friendly products, and organic products. These eco-labels are supposed to help consumers sift through environmental claims, but what do these labels actually mean? How can consumers know which products are really eco-friendly and which ones are simply hype? Whatever position students take, the statement provides the opportunity to discuss the responsibility of companies in a democracy to follow both the letter and the spirit of laws that are passed by the elected representatives of the people. There are people who are trying to help consumers sort through the maze of conflicting claims. Dara O'Rourke is a university professor who has developed a website called GoodGuide that allows consumers to identify the ingredients found in the products they buy. The website reports on both the environmental impact of products as well as their health effects. Website visitors can enter a product name and then get a score. The higher the score, the safer and more environmentally-friendly the product is. O'Rourke’s goal is to help consumers get past the green claims of companies, and get to the actual facts. The goal is to really change the system. Instead of having companies telling consumers what to believe about their products, the idea is to have consumers tell companies what is important to them in the products they buy. Crisis Management at BPOn April 20, 2010 a drilling pipe snapped in two during deep water drilling by BP in the Gulf of Mexico. A blowout preventer (BOP) was supposed to shear off the broken pipe and seal the well to prevent oil leakage or an explosion, but the BOP failed. An explosion then rocked the Deepwater Horizon drilling rig, and in the ensuing fire, 11 workers were killed and large volumes of crude oil began spewing into the Gulf of Mexico from 1,600 metres below the surface. BP suddenly had a major crisis on its hands. Managing the Crisis In the days immediately following the accident, Tony Hayward, the CEO of BP was calm and relaxed as he dealt with reporters' questions about the oil spill. He assured them that BP had great technical expertise in this area and large financial resources to fix the problem. He set up a special headquarters in a Ramada Inn in Louisiana to manage the crisis, he took full responsibility for the spill, and he brought in technicians and engineers to work on the problem. He also kept the U.S. government informed about progress. But after several failed attempts to stop the flow of oil, things started to go downhill for Hayward. The major television networks gave the spill prominent coverage night after night on their evening news programs. Viewers regularly saw dramatic images of animals and birds covered with oil, and shorelines, beaches, and marshes fouled with oil. Reporters also interviewed politicians, ecologists, commercial fishermen, and tourists, all of whom expressed poignant concerns about lost jobs, the damage to the tourist industry along the Gulf Coast, and BP's inability to stop the flow of oil. As the negative publicity about the spill increased, Hayward began to realize that BP was facing not only a technical problem in stopping the flow of oil, but a huge public relations problem as well. In fact, BP was facing the biggest public relations crisis ever faced by an oil company. The situation was worsened because Hayward made several major gaffes and strategic communication errors during the next few months. For example, he said the spill wasn't BP's fault; instead, he blamed Transocean, the company that operated the drilling rig. He also said the dangers of the spill were being exaggerated, and that there was no underwater slick of oil. In its press releases, BP consistently underestimated the amount of oil that was leaking. A figure of 5,000 barrels per day was initially cited, but independent sources later put the amount closer to 60,000 barrels per day. Hayward also said that the environmental impact of the spill was actually quite small. His most unfortunate (and widely quoted) remark was that the spill had caused him a lot of stress and that "he wanted his life back." Someone then observed that the wives of the men who were killed in the blast wanted their husbands back. It also didn't help when U.S. President Barack Obama said that he wouldn't want Hayward working for him. Michael Gordon, of Group Gordon Strategic Communications, a crisis public relations firm, says that BP's public relations communication is a great example of how to make a bad situation worse. He says the company lacked transparency in its communication, didn't talk straight, and wasn't sensitive to those who were negatively affected by the spill. As the public relations problems worsened for BP, day-to-day control of the crisis was given to Bob Dudley on June 23, 2010. He was previously head of BP's joint venture with a Russian oil company. In late July 2010, BP fired Hayward as its CEO and Dudley, the first non-Briton to head BP, was announced as Hayward's replacement. BP also promised to become a company that was much more focused on safety. Dudley's job is to restore BP's credibility and reputation, and one of his top priorities will be safety. But critics said an outsider should have been appointed if the company really wanted to change its culture. In commenting on his dismissal, Hayward said that he had been demonized by the media, and he realized that BP could not move forward until a new CEO was appointed. As days and weeks passed and the oil continued to escape into the Gulf of Mexico, more unfavourable information came out about the spill. A Wall Street Journal investigation found that several questionable decisions had been made that contributed to the blowout of the well: (1) BP cut short a procedure that was designed to detect gas in the well and remove it; (2) a quality test was skipped that would have shown whether cement that had been placed around the drilling pipe was properly poured to prevent a blowout; (3) workers prematurely removed heavy drilling fluid (called "mud"), which keeps volatile gas from escaping from the well; (4) the BP manager overseeing the well didn't have much experience in deep water drilling; and (5) in an attempt to reduce drilling costs, BP installed only 6 centering devices instead of the 21 that had been recommended (centering devices reduce the risk of gas escaping from the well and exploding). One employee of Transocean also claimed that an alarm system that would have warned workers of impending danger had been disabled before the blowout. Transocean denied the allegation, and there has been some inconsistency in witness testimony about this claim. More negative information about BP's environmental and safety record also came to light as oil continued to spew into the Gulf of Mexico. In 2005, for example, an explosion at BP's Texas City refinery killed several workers. And in 2006, BP had an oil spill in Alaska. All of this negative publicity caused BP's share price to drop by one-third, and its market capitalization to drop by $100 billion as investors began to realize that BP would likely face many class action lawsuits over the spill. These lawsuits and other fines may total $40 billion or more. BP's credit rating was cut to just above "junk" level by Fitch Ratings because of the possibility of long-term liabilities associated with the cleanup. By the end of June 2010, BP's stock price had dropped to a 14-year low. Its second quarter loss was $17.1 billion. In August 2010, BP finally succeeded in capping the well and stopping the flow of oil. The BP spill triggered congressional hearings in the U.S., and executives from BP, Exxon, ConocoPhillips Ltd., Chevron Corp., and Royal Dutch Shell PLC were grilled by U.S. legislators about their safety plans for deep water drilling. Legislators expressed concerns that oil companies have shoddy safety practices, and that they don't spend enough on new technologies for cleanup when a disaster occurs. President Obama imposed a six-month moratorium on drilling, but Gulf Coast politicians and residents didn't like that because it meant even more lost jobs in an area that has already been devastated by the oil spill. As part of the negotiations with the U.S. government, BP agreed to set up a $20 billion dollar cleanup fund. It also suspended dividend payments to shareholders. But Gulf Coast residents complained that BP's process for paying damage claims was too long and complicated, and argued that the company was paying out too little. BP is not the only company facing a crisis because of an oil spill. Near the end of July 2010, Canadian pipeline company Enbridge experienced a pipeline break that eventually released 3.8 million litres of oil into a Michigan river. To date, Enbridge's response to the spill has been much more positive than BP's. On the same afternoon that the spill occurred, Enbridge CEO Pat Daniel arrived at the site to spearhead the cleanup effort. He conducted daily news conferences, brought in 560 workers to clean up the oil, and met with many affected residents to ensure them that they would be compensated for damages. The company set up a web site to keep local residents informed about the cleanup activity, and also engaged the services of a public relations firm to provide communications advice. The governor of Michigan praised the company's cleanup efforts. Other less well-publicized incidents involving oil have also occurred in 2010. For example, a well failure at Devon Energy Corp. in mid-July 2010 caused bitumen-laced steam to escape into the atmosphere for more than a day. Devon shut down its Jackfish site as a result of the well failure. This incident was just one of several that have occurred in the Alberta oil sands during the past five years. Also in July 2010, a vessel carrying wheat ran aground in the St. Lawrence Seaway. The grounding punctured the vessel's fuel tank and more than 50 tonnes of bunker fuel spilled into the water, causing the closure of a section of the Seaway. The State of Deep Water Drilling for Oil Many oil companies are now drilling for oil in very deep water (up to 4,000 metres), and they are pushing the boundaries of worker and environmental safety. There have been many problems: fires, equipment failures, oil spills, wells that collapsed, drilling platforms that sank, and serious gas leaks. Deepwater drilling is also more expensive than drilling on land; BP, for example, was paying $500,000 per day to lease the Deepwater Horizon from Transocean. Serious accidents are rare, but in 2001 a drilling rig exploded off the coast of Brazil; it also killed 11 workers. In 2003, BP had another accident where a drilling pipe broke. Some BP managers at that time warned that the company wasn't prepared to deal with a deep-sea oil spill. One U.S. government study found that less than half of the blowout preventers in use by oil companies were strong enough to shear off the drilling pipe if it broke. Deep water drilling is subject to government regulation, but critics claim that regulatory agencies haven't held the oil companies accountable. The Minerals Management Service (MMS) is the U.S. government agency that oversees offshore drilling. It has been criticized for moving away from specific safety requirements to more general ones, and for giving the oil industry too much leeway in meeting the standards. And most regulations are designed for shallow-water drilling, not deep water drilling. The BP oil spill is likely to mean much closer regulation of deep water drilling for oil. The safety record of Transocean (the largest deep-water driller) has come under scrutiny as a result of the oil spill. Overall, Transocean's record is better than the industry average (0.77 injuries per 200,000 man hours, vs. 0.81 for all offshore rigs worldwide). But nearly 75 percent of incidents that triggered federal investigations into safety and other problems on deepwater drilling rigs have occurred on rigs operated by Transocean. Since its merger with GlobalSantaFe in 2007, Transocean has been involved in 24 of 33 incidents investigated by the MMS, even though the company operates less than half the rigs in the Gulf. Ironically, on the day the well blew out, BP and Transocean officials were on the rig to celebrate 7 years without a lost-time accident. Chevron is currently drilling for oil in deep water off Newfoundland. Concern has also been expressed about this well, but Chevron says it is developing a new, more effective blowout preventer which will avoid a repeat of the BP spill in the Gulf of Mexico. Implications for the Canadian Oil Industry When the drilling rig Ocean Ranger sank in 1984 off the coast of Newfoundland during a major storm, 84 people died. Mark Turner has the job of reviewing oil drilling off Newfoundland's coast to determine if a blowout like BP's in the Gulf of Mexico can occur in Canada, but it is difficult to know how much risk should be accepted in offshore drilling. The Canada-Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB) has two priorities: to monitor the safety and environmental impact of the offshore oil industry, and to ensure that the maximum benefit will accrue from such drilling. But these two priorities can obviously be in conflict. The C-NLOPB has also been accused of moving too slowly on safety and environmental concerns. In the U.S., the MMS is being split into three separate divisions to avoid future conflicts of interest. Alberta oil sands companies may benefit from the BP spill because land-based oil wells are seen as safer than deep water wells. MEG Energy Corp., for example, did a $1.25 billion initial public offering (IPO) of stock in the summer of 2010, and Athabasca Oil Sands Corp. had a $1.35 billion IPO in the spring of 2010. Global energy companies are also acquiring Canadian oil sands properties. Questions for Discussion
Sources: Monica Langley, "U.S., BP Near Deal on Fund; Gulf of Mexico Oil Production Would Secure $20 Billion Damage-Claims Plan," The Wall Street Journal, August 10, 2010, p. A1; Shawn McCarthy, Kevin Van Paassen, and Cigdem Iltan, "Enbridge Shifts PR Campaign into High Gear," The Globe and Mail, July 31, 2010, p. B3; David Runk and Tim Martin, "Pipeline Oil Spill Firm's Latest, Winnipeg Free Press, July 30, 2010, p. A17; Lauren Krugel, "Response to Latest U.S. Oil Spill 'Inadequate'," Winnipeg Free Press, July 29, 2010, p. A9; Paul Vieira, "Gulf Oil Spill 'Wake-Up Call' for Industry: New BP CEO; Safety a Priority," National Post, July 28, 2010, p. FP1; Guy Chazan, "BP Reveals Comeback Plan; Oil Giant Takes $32 Billion Charge on Spill, Taps New CEO; Investors Skeptical," Wall Street Journal, July 28, 2010, p. A1; Russell Gold and Ben Casselman, "Alarm Was Disabled Before BP Blast," The Wall Street Journal, July 24, 2010, p. A1; Shawn McCarthy, "Gulf Residents Decry Drilling Ban," The Globe and Mail, July 14, 2010, p. B8; "Oil Leak From Grounded Cargo Ship Closes Section of St. Lawrence Seaway," National Post, July 14, 2010, p. FP4; Nathan VankerKlippe, "Devon Energy Blowout One of Several in Recent Years," The Globe and Mail, July 14, 2010, p. B7; "BP’s Colossal PR Blunder," National Post, June 30, 2010, p. FP3; Carrie Tait, "BP Stock at 14-Year Low as Cleanup Costs Soar; Storm Worries," National Post, June 26, 2010, p. FP5; Shawn McCarthy and Paul Waldie, "In Deep Water Drilling, a Delicate Dance," The Globe and Mail, June 26, 2010, p. B1; "BP’s Diplomat Unlikely to Repeat Gaffes; Changing of Guard; Bob Dudley Takes Control of Oil-Spill Daily Operation," National Post, June 23, 2010, p. FP3; David Ebner, "For BP’s Lawyers, a High-Stakes Chess Match Begins," The Globe and Mail, June17, 2010, p. B1; "Big Oil Blasted Over Safety; Hearing Heaps Scorn on Spending on Preparedness for Offshore Oil Spills," National Post, June 16, 2010, p. FP1; Peter Shawn Taylor, "BP’s Credit Rating is Slashed Six Levels to Two Above Junk Over Clean-Up Costs," National Post, June16, 2010, p. FP16; Andrew Willis, "As Slick Spreads, Oil Sands Beckon," The Globe and Mail, June 16, 2010, p. B1; "BP to Set up $20B Fund; Scraps Dividend," Business News Network, June 16, 2010, www.bnn.ca/newes/18322.html; Shawn McCarthy and Nathan Vanderklippe, "Spill Puts New Oil Frontiers at Risk," The Globe and Mail, June11, 2010, p. B1; David Ebner, "BP Spill Causes Transatlantic Tensions," The Globe and Mail, June 11, 2010, p. B5; Nathan Vanderklippe, "Investors Flee BP as Spill Woes Mount," The Globe and Mail, June 10, 2010, p. B1; Eric Reguly, "Why BP Chief's Days are Numbered," The Globe and Mail, June 3, 2010, p. B2; Ben Casselman and Russell Gold, "Unusual Decisions Set Stage for BP Disaster,"//The Wall Street Journal//, May 27, 2010, p. A1; Fabrice Taylor, "A Bullish Case for BP," The Globe and Mail, May 21, 2010, p. B12; Ben Casselman and Guy Chazan, "Disaster Plans Lacking at Deep Rigs," The Wall Street Journal, May 18, 2010, p. A1; Ben Casselman, "Rig Owner Had Rising Tally of Accidents," The Wall Street Journal, May 10, 2010, p. A1. Answers to Questions for Discussion
Contingency planning involves (1) identification of events that might occur in the future that would affect a company's ability to achieve the financial and other goals it has set, and (2) deciding how the company would respond if those events actually occurred. Crisis management involves actually taking action to deal with a crisis that needs immediate attention. Thus, contingency planning focuses more on planning, while crisis management focuses more on action. Contingency planning is also a more general approach to deal with possible future outcomes (good or bad), while crisis management focuses on coping with an immediate problem that is harmful for the company. Students must do a bit of research to answer these questions. It is not difficult for them to find the current stock price, but they should also trace BP's stock price from mid-April 2010 to the present time. The company's quarterly financial reports should also be analyzed over the same time frame. (You might remind students that some analysts were predicting that BP would end up in bankruptcy because of the oil spill. Has that happened?) Students will also need to look in the business press (//Canadian Business//, The Globe and Mail, National Post, etc.) to determine what is being written about BP's reputation and its future. The results that students uncover will provide an interesting insight into how much long-term attention the public actually pays to a disaster like the oil spill. While media coverage of the spill was intense during the summer of 2010, the students may find that coverage has become very slight in the months following the capping of the well. This question can serve as the basis for an in-class debate on the nature and extent of authority and responsibility in organizations. In the most fundamental sense, the CEO is responsible for what a company does (or fails to do), so yes, he was responsible. But there are two complications that must be considered. First, it may be difficult to decide how bad an outcome must be in order to rationalize firing the CEO. The oil spill was indeed very bad (and media coverage was dramatic), but was it sufficient to rationalize firing Hayward? It would be useful to ask students to develop criteria that could help boards of directors of companies to decide whether a given negative outcome is sufficient to cause the CEO to be fired. These criteria should include both financial issues (the effect of the outcome on the company's stock price and its overall financial condition) and other issues (for example, the impact of bad public relations on the company's reputation with customers and the general public). Second, there will be debate about how realistic it is in a company the size of BP to hold the CEO responsible for the vast number of specific decisions that are made at various levels in the organization. Some students will say it is not realistic, and they may also point out that sometimes a CEO is simply the victim of bad luck. They may argue that other oil companies have probably taken the same general approach to deep water oil wells that BP took, and they didn't happen to experience a blowout. They will conclude that firing Hayward just because BP happened to have an accident is not reasonable. Other students (even those who accept that a CEO can't know everything that is going on, and that Hayward may have just had bad luck) will say it is necessary to fire the CEO to show the public that the company views the negative outcome as serious and is taking action to ensure that it doesn't happen again. Students will likely fall into one of two basic groups when responding to this statement. The first group will agree with the statement and point out its rather compelling logic: without consumer demand for specific products, profit-oriented companies have no incentive to produce them. To then place the blame solely on companies when problems like oil spills occurs ignores the fact that consumers have responsibilities too. Those who disagree with the statement will make two arguments. First, they will say that that while it is true that consumer demand motivates companies to produce certain products, that fact does not relieve companies of the responsibility of providing a safe workplace and taking care to avoid damage to the environment. They will point out that BP failed on both counts (11 workers died, and the oil spill was an environmental disaster). Second, they will argue that companies actively influence consumers to use certain products, and this fact increases the responsibility that companies have when problems arise. If the instructor is so inclined, the statement may be used as a springboard for a much broader discussion about the much bigger issue of society's continued heavy reliance on oil and the potential for problems that such reliance brings. Discussion of the feasibility of other sources of power (coal, natural gas, solar, wind, tidal, nuclear) would also be useful and interesting. An objective analysis of the advantages and disadvantages of all these sources of power would demonstrate that there is no easy or short-term solution available. Culture ClashIntroductory textbooks in management, introduction to business, and organizational behaviour introduce the concept of organizational culture and note its importance for both organizations and the people who work in them. Culture is usually defined something like this: the shared assumptions, experiences, stories, beliefs, norms, and ethical stance that characterize an organization and collectively influence the organization's style and how employees act. A brief summary definition might be this: "It's the way we do things around here." There are many interesting questions that arise regarding organizational culture, three of which are as follows: (1) What happens if two companies with widely differing cultures merge? (2) Do mergers get called off because of concerns about differences in organizational cultures? (3) What if the top management of a given company disagrees with lower-level employees about the kind of culture the organization should have? These three situations are analyzed below. Vale and Inco: A Culture Clash When two companies with different cultures merge, a culture clash may result. Consider the case of Vale, the Brazilian mining company that bought the Canadian iron ore giant Inco for $17.6 billion. Shortly after the purchase, there was a meeting of executives of both companies, but the meeting ended suddenly when one of the Brazilian managers lost his temper. That was the first sign that the cultures of the two companies were different enough that problems were going to be evident. Over the next few months, many Canadian managers, engineers, and operating staff left the company. For example, of 29 managers who were involved in a strategy session shortly after the merger, only 6 were still there a few months later. In retrospect, it is clear that the cultures of the two companies were quite different prior to the takeover. At Inco, there was a constant exchange of ideas, and decentralized decision making was encouraged by top management. But at Vale, top managers gave orders and expected them to be followed. Not surprisingly, Vale experienced resistance from Inco executives who did not agree with that approach. Some observers think that since Canadian companies were used to taking over Brazilian companies, not the other way around, that Canadian executives had trouble doing what their new bosses wanted. But even beyond that possible explanation, there might have been difficulties because of differences in the products the two companies focused on before Vale bought Inco. Vale's focus was on iron ore, a basic commodity that is mined using a relatively simple technology. But the underground mining of nickel, which is a key ingredient in stainless steel, is a more complex undertaking. One Inco manager likened nickel mining to having a Ph.D., while iron ore mining was like having a high school diploma. Canadian managers obviously felt some disdain for their new Brazilian bosses. The cultural differences between the two companies were not limited to the top level of management. In the 1980s, the miners union had given up annual wage increases in return for a bonus based on the price of nickel. When the price of nickel soared, workers received large bonuses. Vale now wants to raise the threshold at which the bonus kicks in, and also wants to convert the defined benefit pension plan to a defined contribution plan. The union is strongly resisting. Vale is seen as a company with an "attitude," and Vale's management has been very aggressive in dealing with the Canadian workers it inherited from Inco. One of the most visible signs of the culture difference is the lengthy strike by the United Steelworkers union which began in July 2009. In March 2010, workers rejected an offer to settle by a wide margin, saying that Vale's offer was far short of what the union members expected. Vale then took legal action against the union, accusing it of vandalism, assaults, and death threats. It also laid off many employees and shut down various projects because of the uncertain economic environment. In mid-April 2010, Vale announced that it was going to bring in replacement workers in order to get two of the nickel mines back up to full production. On July 13, 2010, the Ontario Labour Board heard presentations from the steelworkers union that Vale was bargaining in bad faith. That was one year to the day that the strike began. The federal government has not gotten involved in the dispute in spite of claims by the union that Vale is a foreign company that is trying to change the culture of Canadian union-management relations. Roger Agnelli, Vale's CEO, says that the cultures of the two companies will simply have to adjust. But Vale also indicated that it is removing the name "Inco" from its nickel business. (Note: The Vale takeover of Inco has not gone nearly as smoothly as the Xstrata takeover of Falconbridge, the other large Canadian nickel miner. Xstrata gave Canadian managers a lot more say in changes that were made after the takeover.) The Role of Organizational Culture in Thwarting Mergers Some planned mergers never happen because concerns about a culture clash inhibit negotiations. For example, in 2009 two Japanese companies (Kirin Holdings Co. and Suntory Holdings Ltd.) announced plans to merge in order to create one of the world's largest beverage companies. It was thought that a merger would create a company that could break out of the domestic Japanese market and become a major player on the international scene. But the merger never took place, partly because of differences in the management styles of the two companies. Kirin (a member of the Mitsubishi group) has solid, traditional management, but Suntory has a unique management style which is influenced by the fact that families own about 90 percent of the company's shares. During negotiations, the two companies simply could not reconcile the differences in their two corporate cultures and the merger was called off. A planned acquisition of Sun Microsystems by IBM also failed to occur. When rumours of the takeover started circulating, James Gosling, Sun's executive vice-president, warned that there would be a culture clash if the acquisition occurred. He said that the developer staff at Sun were "weirder" than those at IBM. In fact, Sun does have a somewhat radical corporate culture because it has been pushing open systems like Unix. This contrasts with IBM's more proprietary approach. In April 2010, the merger talks broke off because the two companies could not agree on terms. A similar-looking situation was evident when Kraft Foods tried to acquire Cadbury in 2009. Andrew Bonfield, the finance director at Cadbury (the maker of such well-known brands as Caramilk candy bars and Bubblicious gum), warned that Cadbury's unique corporate culture would be lost if Kraft acquired it. He said that the Cadbury "magic" was important for the brands it markets. The company's CEO, Todd Stitzer, also weighed in, saying that Cadbury's culture of "principled capitalism" is what makes Cadbury great. The British public was concerned about losing one of its icons, and Warren Buffett sold off almost one-quarter of his Kraft stock when he heard about the plan. The two companies do, in fact, have quite different histories and cultures. Cadbury has tried to build a socially benign business and recently launched a fair trade initiative with its Dairy Milk brand. By contrast, Kraft has been a much more traditional multinational business firm. In spite of these concerns about differing cultures, Kraft did acquire Cadbury early in 2010 after protracted negotiations. Any problems that might arise as a result of combining two different cultures have yet to be determined. Culture Clashes Within Organizations Culture clashes don't just happen when two independent companies try to merge. They can also occur when a top manager's vision for a culture comes into conflict with the culture that lower-level employees prefer. Consider the situation that has arisen at the DeGroote School of Business at McMaster University. In 2004, Paul Bates, a Bay Street brokerage executive who was one of the pioneers of the discount brokerage business, was hired as dean of the business school. When he sought reappointment for a second term as dean in 2008, he was opposed by 80 percent of the faculty, but the views of faculty members were overruled by the board of governors and Bates was reappointed for another term. Many professors are unhappy with Bates' corporate management style; they accuse him of bullying and intimidation, and of not understanding the academic culture of the school. Those who support the dean say that he has done good things for the school, and that the faculty members are biased against anyone who isn't "academic" enough. A report issued by the McMaster Office of Human Rights and Equity Services concluded that the business school has a dysfunctional work environment, and that immediate action should be taken to resolve the problem. The report also noted that the school has a history of conflict between deans and faculty members. Sometimes a new top executive is brought in to change the corporate culture in response to a crisis the company is facing. Edward Whitacre, the CEO of General Motors, is one such person. He was recruited in 2009 and given the mandate to turn the company around and change GM's plodding culture. But Whitacre does not have an easy job because GM is going to have to introduce massive changes in order to dig itself out of the financial hole it is in. He wants to reduce bureaucracy and push decision-making authority down into GM's many management layers so that decisions are made more quickly and the company becomes more responsive to changes in the marketplace. And he realizes that the culture needs to change quickly or the company may not survive. Prior to Whitacre's arrival, decisions were not made until they were approved by many different committees. A few years ago, the company introduced a program to stamp out bureaucracy, but the committee that was guiding the effort had trouble deciding how many committee meetings were necessary to achieve the goal. That kind of dithering is not what Whitacre has in mind. One of the things Whitacre has done to change the culture of the company is to be more hands-on and accessible than his predecessors (who spent most of their time in the executive suite). He may be succeeding with that strategy because GM employees talk about "Ed sightings" in the hallways and cafeteria. He also visits GM manufacturing plants to talk to workers. At the Lansing, Michigan plant, Whitacre (dressed in jeans and a t-shirt) talked directly to workers, and at a GM plant in Fairfax, Kansas, Whitacre told workers he had taken the CEO's job because he thought that GM was an American institution that the country couldn't afford to lose. Whether Whitacre can change GM's culture enough to make it a success remains to be seen. Questions for Discussion
Sources: Gordon Pitts, "Kraft CEO Still Digesting Cadbury Takeover," The Globe and Mail, June 7, 2010, p. B8; "Vale Resumes Negotiations with Striking Sudbury Nickel Workers," National Post, June 5, 2010, p. FP4; Heidi Ulrichsen, "Vale Inco Plans to Bring in a 'Couple Hundred' Replacement Workers," Sudbury Northern Life, April 19, 2010, www.northernlife.ca/news/localNews/2010/04/replacementworkers-190410.aspx; Stacey Lavaillie, "Date Set for USW, Vale Inco Bad Faith Bargaining Hearing," Sudbury Northern Life, April 9, 2010, www.northernlife.ca/newes/localNews/2010/04/olrb-090410.aspex; Sharon Terlap, "GM’s Plodding Culture Vexes Its Impatient CEO," The Wall Street Journal, April 7, 2010, p. B1; Kristine Owram, "Sudbury Strike Becomes Longest in Inco's History; Little Hope for Resolution," The Canadian Press, April 6, 2010, www.google.com/hostednews/canadianpress/article/ALeqM5j90NJ-uvH5ZhfZy08T; Steve Hamm, "IBM-Sun Merger Talks Off," Bloomberg Businessweek, April 5, 2009, www.businessweek.com/technology/content/apr2009/tc2009045_914072.htm; Paul Waldie, "Culture Clash Pits Business School Dean Against Faculty," April 1, 2010, www.globecampus.ca/in-the-news/aritcle/culture-clash; Bernard Simon and Jonathan Wheatley, "Heading in Opposite Directions," Financial Times, March 11, 2010, p. 10; "Corporate Culture Clash Took Fizz Out Of Merger," Asia News Network, www.asianewsnet.net/print.php?id=10019; Michael de la Merced and Chris Nicholson, "Kraft to Acquire Cadbury in Deal Worth $19 Billion," The New York Times, January 20, 2010, www.mytimes.com/2010/01/20/business/global/20kraft.html?pagewanted=print; Simon Bowers, "Cadbury Warns of Culture Clash Under Kraft," www.guardian.co.uk/business/2009/oct/21/cadbury-kraft-sales-profits-job-losses; "James Gosling Warns of 'Culture Clash' if IBM Buys Sun," Computer Business Review, March 23, 2009, www.businessreviewonline.com/blog/archives/2009/03/james_gosling_w.html. Answers to Questions for Discussion
Some students will conclude that while organizational culture is an interesting concept, it is not really very important in practical terms. They may reach this conclusion because it may not be easy to define exactly what a specific organization's culture really is. Because of that, the conclusion is then reached that culture probably doesn't have much of a practical impact on people in the organization. This conclusion may have some merit for companies with weak cultures (i.e., those where core values are not strongly held and are not widely shared among employees). But for companies with strong cultures (i.e., those where core values are strongly held and widely shared among employees), the conclusion that organizational culture is not important is difficult to defend because various studies have shown that a strong culture is associated with good company performance (see, for example, J.B. Sorensen, "The Strength of Corporate Culture and the Reliability of Firm Performance," Administrative Science Quarterly, 47, 2002, pp. 70-91). But strong cultures may also experience problems. For example, in a strongly entrenched culture, employees may not see the need for new and more effective ways of doing things; they may therefore have difficulty changing their behavior in order to adapt to changes that are occurring in the organization's external environment. A failure to introduce needed changes obviously is a threat to the company's future performance. A second potential problem is that a strong culture stresses conformity, but that may discourage diversity, both in terms of the kinds of people who are hired and the kinds of thought processes employees use to make decisions. A lack of diversity in an organization may mean that diverse strategies for dealing with change are not considered. A third problem with strong cultures concerns the workability of mergers, as the information presented above shows. Finally, a strong culture may encourage unethical or illegal behavior. At WorldCom, for example, the culture induced employees to follow orders and to hide information from auditors. The concept of organizational culture is important because it directly or indirectly influences everyone in an organization. Some individuals may try to ignore the culture of their organization (or perhaps actively resist it if they think it is causing bad behavior), but the organization's culture will have an influence on them in any case. The CEO and other top managers have a significant influence on an organization's culture. As a negative example, at Enron, top managers like Ken Lay and Jeffrey Skilling promoted a hard-charging culture which motivated some managers to behave in an unethical fashion as they tried to achieve high performance financial goals that had been set. On a more positive note, Frank Stronach, the founder of Magna International, a successful Canadian auto parts manufacturing company, has very strong views on a variety of subjects, and those views have strongly influenced the culture of the company he started. CEO's can influence their organization's culture because subordinates pay attention to the attitudes, words, and behavior of top managers. As well, subordinates may emulate the behavior of top managers because they think it is a good way to increase their chance for a promotion. Both these factors mean that the CEO of an organization can strongly influence the culture of the organization. Some students will agree with this statement because it sounds intuitively plausible. It is true that most people are concerned primarily about their own job, so it might seem that a general concept like organizational culture wouldn't have much impact on them. They might even say that they have no idea what their organization's culture is. Students who take this position will likely do so based on thinking about their current job, which they don't think is much influenced by the culture of the organization they work for. Other students with a practical bent will think more broadly and will disagree with the statement because of the evidence presented above regarding the cultural difficulties that were evident in the mergers of Vale/Inco, Kraft/Cadbury, and Kirin/Suntory. They may also have had experiences (positive or negative) in their own work that showed how culture can influence individual employees. Organizational culture is a subtle, but powerful, idea. The socialization process in organizations means that newly hired individuals are told about "the way things are done around here" so they can fit in to the culture. Socialization therefore influences the attitudes and behaviors of new employees. On an ongoing basis, culture influences the way that employees interpret what is happening, both inside the company and outside it. It also influences their ideas of what is the right way to do things and the wrong way. Students will gain additional insights into the impact of culture by reading other accounts of mergers, some of which went fairly smoothly, and others which did not. As an example of the former, see John Gray and Raizel Robin, "The Brothers in Law," Canadian Business, September 29, 2003, p. 75. As an example of the latter, see Thomas Watson, "In the Clutches of a Slowdown: Plant Closures Might Loom in DaimlerChrysler's Future as the Carmaker Tries to Correct Past Management Errors, a Misread of What Consumers Wanted to Drive Off the Lot and a Clash of Cultures From Its Recent Merger," National Post, December 23, 2000, p. D7. The Toyota RecallMost introductory textbooks in introduction to business, management, and organizational behaviour describe the philosophy of continuous improvement and emphasize the importance of quality management. Continuous improvement means that everyone in an organization is thinking about ways to improve operations, even if the company is already doing well. Quality management means producing products that are fit for consumer use and reliably do what they are supposed to do. If these two ideas are implemented, so the argument goes, the result will be the production of reliable, high-quality goods for consumers. During the last decade, many companies have adopted the continuous improvement philosophy. One of the most highly publicized companies is Toyota, which recently overtook General Motors as the largest car manufacturer in the world. Toyota has received a lot of positive publicity about "The Toyota Way," which emphasizes efficient production methods, continuous improvement, and the production of high quality products. Toyota’s production system is so impressive that executives from other automobile companies regularly tour Toyota’s manufacturing plants in an attempt to discover Toyota's secret. But some big problems have arisen for Toyota during the last few months. The trouble started in November 2009, when Toyota announced that it was recalling more than five million cars because some accelerator pedals were getting jammed in the driver’s side car mat and causing cars to surge forward uncontrollably. That was bad enough, but on January 21, 2010 Toyota announced another recall, this one involving 2.3 million vehicles (270,000 in Canada). This second recall was also precipitated by problems with accelerator pedals, not because they were getting jammed in floor mats, but because there was something wrong with the pedal itself. Toyota was forced to take the dramatic step of halting production and sales on eight of its most popular vehicles: Corolla, RAV4, Camry, Avalon, Matrix, Highlander, Tundra, and Sequoia. These models account for 60 percent of Toyota sales in Canada. On February 4, 2010 Toyota was hit with a third public relations problem when safety regulators in the U.S. opened a formal investigation into consumer complaints about braking problems on the Toyota Prius, the top-selling hybrid automobile. The National Highway Traffic Safety Administration (NHTSA) said it had received over 100 complaints about braking problems after the Prius hit bumps or potholes. It was alleged that four crashes had resulted from the braking problem, but it was not immediately known whether this latest problem would result in yet another recall. A government committee has asked Toyota to provide data on the complaints the company received regarding braking problems. These three problems have created anger and concern among Toyota owners, who are suddenly scared to drive their cars. Toyota worked frantically with its supplier, CTS Corp., to figure out a way to solve the accelerator pedal problem. On February 1, 2010 Toyota announced that the problem would be fixed by inserting a steel reinforcement bar into the accelerator pedal assembly to reduce the tension that was causing the pedal to stick. CTS began producing the redesigned pedal a few days later. Toyota admitted that the accelerator had a design flaw and that CTS was not at fault (CTS also produces accelerator pedals for Honda and Nissan and no problems have been found in those cars). CTS began shipping the new accelerator pedals to automobile dealers, along with parts and technical manuals to guide the work of technicians. Dealerships also geared up for the massive job of fixing millions of accelerator pedals. Many dealers said they would extend their hours in order to accommodate customers. Toyota also gave instructions to consumers about what to do if their car suddenly accelerated: step on the brake with both feet, shift the car into neutral, then steer the car to the side of the road and turn off the ignition. In an effort to reassure the public, senior executives from the company went on TV to tell customers that they were going to quickly fix the problem and get the redesigned accelerator pedals on the recalled cars. A letter signed by Jim Lentz, the CEO of Toyota's U.S. operations, also appeared as a full-page advertisement in newspapers. In the letter, Lentz apologized for the error and explained how hard Toyota was working to get its automobiles refitted with new accelerator pedals. Lentz also appeared on NBC's “Today” show to explain how the company was going to fix the problem. The president of Toyota admitted that the company was in crisis, and also made a very public apology for the quality problems that were causing consumers so much concern. The value of Toyota's stock declined about 20 percent in the immediate aftermath of the recall announcement. These quality problems have created a public relations nightmare for Toyota because the company has always emphasized its reputation for producing reliable, high-quality automobiles. Many consumers in Canada and the U.S. do, in fact, have the perception that Toyota produces higher quality cars than those produced by Ford, Chrysler, and GM. But these three incidents may change those perceptions. A survey conducted by HCD Research found that 56 percent of respondents said they were less likely to buy a Toyota after watching Jim Lentz on the “Today” show. Toyota's competitors now sense an opportunity to gain back customers. For example, Ford and GM have introduced a $1,000 rebate program for Toyota car owners who want to trade in their Toyota and buy a Ford or GM product. Toyota is probably going to have to spend considerable time and money trying to deal with the fallout from these problems. A Canadian class-action lawsuit against Toyota and CTS Corp. claims that Toyota knew (or should have known) that there were design defects in the electronic throttle control system. A typical case is that of John James, who was driving on the Trans-Canada highway in B.C. when his 2009 Toyota Corolla suddenly surged out of control. Shortly thereafter he rammed into the back of a pickup truck at 125 kilometres an hour. Surprisingly, no one in his car was injured. James is now part of the class action lawsuit against Toyota. One Toyota owner in Toronto is suing, not because his vehicle was involved in a crash, but because he feels that his Toyota RAV4, which cost him $40,000 is now worthless because of all the publicity about Toyota's quality problems. Toyota also faces several class-action lawsuits in the U.S. because of 19 deaths allegedly caused by jammed accelerators that caused cars to crash. In the U.S. lawsuit, the plaintiffs are claiming that Toyota knew about the accelerator defect, but didn't do anything about it. Questions for Discussion
Sources: Gordon Pitts, "Too Big, Too Fast, and an Apology Too Late," The Globe and Mail, February 6, 2010, p. B1; "Toyota CEO Apologizes for Recall," Business News Network, www.bnn.ca/news/15560.html, accessed February 5, 2010; Jeff Gray, "Canadian Toyota Owners Seek Their Day in Court," The Globe and Mail, February 3, 2010, p. B8; "U.S. Probes Toyota Prius Brake Problem," Business News Network, www.bnn.ca/news/15531.html, accessed February 3, 2010; Ken Bensinger and Robert Channick, "Toyota Reveals Plans to Fix Pedal Problem," The Orlando Sentinel, February 2, 2010, p. B6; Greg Keenan and Jeff Gray, "Toyota Faces Class-Action Suits," Business News Network, www.bnn.ca/news/15452.html, accessed February 1, 2010; Greg Keenan, "Toyota Executives Plan Media Blitz," The Globe and Mail, February 1, 2010, p. B1; Greg Keenan, "Toyota Scrambles for Remedy as Recall Grows," The Globe and Mail, January 30, 2010, p. B3; Paul Vieira, "Toyota Finds a Fix; Pedal Maker Speeds Up Output as Recall Grows," National Post, January 29, 2010, p. FP1; Greg Keenan, "As Toyota Stumbles, Rivals Eye Gains," The Globe and Mail, January 29, 2010, p. B1; John Greenwood, "Toyota Faces Massive Recall," National Post, January 28, 2010, p. FP1; Greg Keenan, "Toyota Suspending Sales of Models Involved in Recall," The Globe and Mail, January 27, 2010, p. B12. Answers to Questions for Discussion
There are several possible reasons why quality problems might have arisen at Toyota, even though the company had a good reputation for quality. First, the fact that a company has produced high-quality products in the past is no guarantee that it will continue to do so in the future. In recent years, several highly respected companies have experienced quality problems and the negative publicity that goes with such problems (Maple Leaf Foods, Mattel, and Firestone are companies that immediately come to mind). Second, a continuous improvement philosophy that is properly implemented will probably increase the likelihood that a company will do well in relation to its competitors, but it does not guarantee that there will be no quality problems. Put another way, continuous improvement facilitates relative improvements, but does not provide absolute guarantees. Companies are run by people, and people make mistakes. Third, continuous improvement means that managers and workers must continually question the way things are done, even if the company is successful. Many people find it difficult to focus on improving the way things are done when the company is doing well. In Toyota’s case, it is possible that managers found it difficult to maintain a continuous focus on continuous improvement. Fourth, in the late 1990's, Toyota set a goal to overtake General Motors and become the world’s largest carmaker. Perhaps the company became too fixated on this goal, and that caused an undue focus on quantity and a reduced focus on quality. In earlier years, Toyota’s culture of continuous improvement and high-quality production was tightly controlled. But as the company became larger and began operating production facilities in Canada and the U.S., it apparently did not export its culture of continuous improvement to its overseas operations. (For a more detailed analysis of the corporate culture issue, see Gordon Pitts, "Too Big, Too Fast, and an Apology Too Late," The Globe and Mail, February 6, 2010, p. B1.) Student answers will necessarily contain some speculation, but that speculation must be supplemented with some analysis. One useful approach is to look at what has happened to other companies that have received negative publicity about quality problems. Maple Leaf Foods (meat recall), Mattel (toy recall) and Firestone (tire recall) all experienced difficulties during the last. These cases are instructive since they all involved quality issues that threatened the lives of customers who used the companies' products. Reaching a conclusion about the long-term effects of the negative publicity associated with product recalls could obviously be a major research project, but students can easily do some basic research on the issue. The first question is this: Does the company survive the negative publicity? If so, what is the effect of the negative publicity on the company’s revenues and its stock price? In the Firestone case, for example, one of the outcomes was that Firestone ended its 100-year relationship with Ford after the two companies became embroiled in a dispute about who was really at fault when Ford Explorers rolled over. Firestone sales declined 20 percent in the immediate aftermath of the recall, but its stock price returned to pre-recall levels within 5 years. (An article that provides some interesting data on this issue is Marialuisa Gallozzi and Seth Tucker, "Insuring Against Disaster: Coverage for Product Recalls," The Insurance Coverage Law Bulletin, October, 2007.) Students should examine the annual reports of companies to determine the trend in company sales and profits before and after the negative publicity. This will give some idea of the impact of the negative publicity on the company’s financial performance. Students can also find a wealth of information on the Firestone recall issue by Googling "aftermath of Firestone tire recall" or similar key words. That case is instructive because it has now been 10 years since it occurred and the impact of the recall can be assessed with some clarity. Note: Firestone also was forced to recall a large number of its tires in 1978, and Bridgestone (the company that bought Firestone in 1988) said it had spent 10 years trying to rehabilitate the Firestone brand before the problems arose in 2000. While data from previous recall cases gives some insight into the long-term effect of negative publicity, other factors (that would have been at work even if the recall had never happened) must not be ignored. The most obvious factor is the general state of the economy. For example, if a company experiences problems in a boom period, it may not suffer as much as it would have if the negative publicity occurred during a recession. The Green Movement: A Progress ReportIn recent years, a consensus seems to be developing that it is important to care for the environment. This "green movement" has motivated many companies to promote what they are doing to be more eco-friendly. Coca-Cola, for example, is selling its new green image at the 2010 Winter Olympics with its "environmental call to action." The company did market research which suggested that it had a lot of work to do to polish up its green image, particularly among consumers in the 13-29 age group. In particular, critics have accused Coke of (1) wasting water (it takes 250 litres of water to make one litre of Coca-Cola), and (2) creating a lot of waste for landfills (75 percent of plastic bottles that contain Coca-Cola products end up in landfills). Coke therefore developed a new, eco-friendly container (called the PlantBottle) that is made partly from sugar cane and molasses. The new bottle produces 30 percent fewer emissions because less oil is used in making it. You might think that any attempt by a company to be more eco-friendly would be viewed positively by those who are concerned about protecting the environment. But that isn't necessarily the case. Skeptics say that the new Coke bottle really doesn't accomplish much because it is still mostly plastic. They note that even though plastic bottles are recyclable, most consumers just throw them out, so simply giving consumers access to plastic bottles is a bad idea. The sort of criticism that Coca-Cola is getting is not unusual. The fact is that almost any proposed green idea can become caught up in controversy that inhibits the progress of green practices. For example, consider the idea of green roofs (planting vegetation on the roofs of buildings). While some companies have had green roofs for years (for example, the green roof on the Manulife Centre parkade in Toronto has been there for 25 years, and the trees are now three storeys high), the idea is just now starting to really catch on. In May 2009, Toronto's city council passed a bylaw which mandates green roofs on new commercial buildings and high-rise residential buildings. Starting in 2010, such buildings must have at least part of their roof space devoted to green plantings. It is estimated that a green roof of 350 square metres with 75 percent of its area in greenery would reduce the heat-island effect by 26 percent and reduce rainwater runoff by 38 percent. This sounds promising, but critics argue that the new bylaw may actually inhibit the progress of the green movement because it will increase building development costs and limit the options developers can choose from when they are trying to make buildings more environmentally-friendly. The bylaw is seen as one more problem that developers must solve before they can build. And with the economy in a fragile state, that is a problem. Another controversy is swirling around the issue of shopping bags. Which ones are the most eco-friendly: paper bags, plastic bags, or reusable cloth bags? At first glance, it might seem obvious that plastic bags would be the worst because they have generated the most negative publicity (and they are banned in several Canadian cities). It might also seem obvious that reusable cloth or canvas bags would be the best, simply because they can be reused. But there are actually advantages and disadvantages associated with all three alternatives. To determine which alternative is best requires a consideration of many factors, including input and output costs, distribution costs, and reclamation costs. To give you an idea of the complexity of the issue, consider the following facts. Paper bags are better than plastic bags because they are made from natural materials, while plastic bags are synthetic. But research shows that paper bags generate 70 percent more emissions and 50 percent more water pollution than plastic bags. Plastic bags have problems too, since they are made from fossil fuels. And plastic will not degrade down to organic material over time like paper will. Eco-friendly reusable cotton bags also have problems because cotton production is so water-intensive and it requires the use of lots of pesticides. As well, one study showed that 30 percent of reusable bags had unsafe levels of bacterial contaminants, and 40 percent contained yeast or mold. Plastic bags do not have either of these problems. Given all these advantages and disadvantages, it is difficult for consumers to know which alternative is best. The controversy about which type of bag is best can be seen in the decision by Whole Foods to discontinue traditional plastic bags, but to continue to sell upscale plastic bags for 99 cents and canvas bags for $6.99. The company will offer paper bags for free. This might sound like a reasonable approach, but environmental groups are not happy with the decision because it suggests to consumers that paper is better than plastic when there isn’t any solid scientific evidence to back up that argument. Critics call it "feel-good environmentalism." Controversy about specific products is not the only factor limiting the progress of green practices. Another important factor is the state of the economy. The recession of 2008-2009 caused many businesses to put eco-friendly plans on hold. For example, Horizon Air, a U.S.-based airline, had planned to replace its regional jets with new Q400 turboprops made by Bombardier. The new planes burn 30 percent less fuel and therefore produce fewer emissions. But the economic slowdown forced the company to put those plans on hold. Another example: Clear Skies Solar cancelled plans to build a one-megawatt solar plant in the Mojave Desert because it couldn’t get enough financial backing. The plans were cancelled even though government grants are available for the development of solar power. Consumer attitudes about eco-friendly behaviour can also limit the success of green products. In April 2009, a survey by the Boston Consulting Group in Toronto showed that one-third of Canadians say they often purchase environmentally-friendly products, but 78 percent are unwilling to pay the higher price that is often evident for green products. Another online survey of 1,000 Canadians showed that people are willing to do certain small things (for example, buying environmentally-friendly light bulbs), but they are skeptical about adopting bigger measures. A third study, conducted by Procter & Gamble (P & G), showed that consumers are reluctant to spend more money just because a product is eco-friendly. Only 10 percent of consumers who were surveyed said they would pay a higher price (or accept a performance decrease) for a product that would benefit the environment. What’s worse, 75 percent said they would not accept any tradeoff. So, P & G is now focusing on developing sustainable innovation products that are more eco-friendly than earlier products, but which cost about the same price and have the same quality. The level of acceptance of green products has also been influenced by individuals who argue that the green movement has gone too far, and that too many consumers are suffering from something called "eco-OCD" (eco obsessive-compulsive disorder). This term refers to the phenomenon of consumers being compulsively obsessed with being green in terms of the products they buy. Skeptics argue, for example, that the green movement negatively affects economic growth and increases unemployment. One study in Spain showed that every "green job" that was created destroyed 2.2 jobs elsewhere in the economy. The study concluded that government spending on renewable energy was only half as effective at creating new jobs as an equivalent amount of spending by the private sector. Consumers may also be reluctant to spend money on eco-friendly products because they are confused by the green claims that are being made by various companies. The Boston Consulting Group study mentioned above also found that consumers are confused about the green options that are available because there is such a wide array of eco-labels on products. Ecolabelling.org is a Vancouver-based company that has identified 274 eco-labels, 23 of them originating in Canada. There are labels touting compostable products, fair trade products, energy efficient products, forest stewardship products, lake-friendly products, and organic products. These eco-labels are supposed to help consumers sift through environmental claims, but what do these labels actually mean? How can shoppers know which products really are eco-friendly and which ones are simply hype? The only thing that seems reasonably certain is that consumers are willing to pay a price premium in the short run if it leads to obvious long-term gains (for example, an energy-efficient refrigerator costs more than a regular one, but it saves money in the long run via lower electric bills). There are people who are trying to help consumers sort through the maze of conflicting claims. Dara O'Rourke is a university professor who has developed a website called GoodGuide that allows consumers to identify the ingredients found in the products they buy. The website reports on both the environmental impact of products as well as their health effects. Website visitors enter a product name and get a score. The higher the score, the safer and more environmentally-friendly the product is. In April 2009, the website had about 110,000 visitors, and that number is growing by about 25 percent a month. O'Rourke’s goal is to help consumers get past the green claims of companies, and get to the actual facts. The goal is to really change the system. Instead of having companies telling consumers what to believe about their products, the idea is to have consumers tell companies what is important to them in the products they buy. Consumers may also become confused as they try to balance contradictory objectives about products. This problem can be clearly seen in automobile products. On the one hand, we are told we need to sharply reduce carbon emissions by discouraging the use of gas-guzzling cars. We could presumably achieve this goal by raising fuel-efficiency standards or encouraging the use of public transit. On the other hand, the governments of both the U.S. and Canada are giving billions of dollars to Chrysler and General Motors in an attempt to save jobs at two companies that have historically produced gas-guzzling cars. These billions of dollars would move us toward the goal of reduced carbon emissions if Chrysler and General Motors could start producing green cars at a price consumers could afford, but industry experts say they can't (at least not in the near term). GM's all-electric car, the Volt, is too expensive to be purchased by a lot of consumers, and GM's current financial problems mean that it cannot risk the kind of money it formerly would have on a new product. As well, GM is a generation behind foreign automakers like Toyota in the development of green cars. It is also true that when gas prices are relatively low, consumers don't seem overly interested in green cars anyway. Add in the fact that profit margins are very small on green cars and you have yet another limiting factor. To cope with all this complexity, consumers need a good measure of ecological intelligence to help them make the distinction between style and substance in ecological claims. One proposal is for consumers to use something called Life Cycle Analysis, which calculates the carbon footprint of various activities (for example, a round-trip flight from Vancouver to Hong Kong, or a bouquet of flowers flown to Toronto from Kenya). But there is no guarantee that providing such detailed information would cause consumers to change their purchasing patterns. Organic foods and so-called "fair trade" products have been around for years, yet most people ignore them. Questions for Discussion
Sources: Lindsey Wiebe, "Logo La-La Land," Winnipeg Free Press, August 23, 2009, p. A7; Lindsey Wiebe, "Will Consumers Go For True 'Green' Products?," Winnipeg Free Press, August 2, 2009, (Books section), p. 6; Diane Katz, "The Grocery-Bag Dilemma: Is Paper or Plastic Greener?," Winnipeg Free Press, July 26, 2009, p. A11; Susan Krashninsky, "The Green Gap," The Globe and Mail, July 17, 2009, p. B4; "Beyond the Green Marketing Mirage; GoodGuide Supplies Instant Information on a Host of Products," National Post, June 22, 2009, p. FP5; Terrence Belford, "Developers Blue Over Green Roofs," The Globe and Mail, June 16, 2009, p. B10; David Ebner, "Coke Will Use The Olympics to Launch Its Latest Environmental Push, But Will a Generation That’s Grown Wary of 'Greenwashing' Buy the PlantBottle?," The Globe and Mail, June 10, 2009, p. B1; William Watson, "The Uses of Eco-OCD," National Post, May 30, 2009, p. FP19; Jennifer Wells, "How Recession Changed the Green Marketplace," The Globe and Mail, April 20, 2009, p. B1; Konrad Yakabuski, "Green Dreams, Unplugged," The Globe and Mail, April 4, 2009, p. F1; Lawrence Solomon, "Green Economics: It Just Doesn’t Add Up," National Post, March 31, 2009, p. FP11; Alia McMullen, "Will Green Agenda Fade?; In Tough Times, Environmental Action May Lose Its Momentum," National Post, January 17, 2009, p. FP1; Joe Castaldo, "Green Counting," Canadian Business, October 13, 2008, p. 27. Answers to Questions for Discussion
The main factors inhibiting the progress toward greener practices are (a) controversy about whether a given product is really green or not (for example, the controversy surrounding plastic, paper, and reusable shopping bags); (b) the state of the economy (in period of economic difficulty companies and consumers may lose interest in green products and practices); (c) consumer attitudes about eco-friendly products (consumers are reluctant to pay the higher prices that are often evident on eco-friendly products); (d) individuals who argue that the green movement has gone too far (the eco-OCD argument); and (e) consumer confusion about the green claims many companies make for their products (many different eco-labels create confusion). There are three main reasons. First, the internal combustion engine has been the dominant technology used to power automobile for many decades. The technology is highly refined, it works well, and everyone is used to it. Because there is much inertia in the system, strong incentives are needed to move businesses and consumers in the direction of electric cars. These incentives to change to electric cars have actually become evident during the past decade because of the rising price of oil and the recognition that the internal combustion engine is a key contributor to air pollution. But it will take time for these incentives to result in changed behaviour on the part of businesses and consumers. Second, because the technology used to make internal combustion powered cars is deeply entrenched at companies like GM, Ford, and Chrysler, the development of a new technology for powering automobiles is simply not going to happen overnight. Over the past several decades there have been several attempts to introduce new power systems for automobiles (for example, the rotary engine), but somehow they never quite worked out. The technology for powering cars electrically is now developing rapidly, with foreign car makers leading the way. But much work remains to be done. At the moment, the technology seems more oriented toward hybrid cars, which runs partly on gasoline and partly on electricity. Time will be required for pure electric car technology to be developed and widely adopted. Third, while consumer demand for electric (or hybrid) cars is increasing, the rate of change is relatively slow. There are several reasons for this. One of the simplest and most important reasons is inertia, that is, consumers are used to cars powered by the internal combustion engine. These cars perform well, and they provide the large amount of power that consumers want in an automobile. This is particularly true for SUVs (when economic times are good). It seems that consumers actually like SUVs, even though they may feel a bit guilty for driving a vehicle that pollutes the atmosphere. So the desire to change is not strong. Another reason that consumers may be reluctant to buy electric (or hybrid) cars is that they will have to make some changes in their behaviour. While we might think that plugging in an electric car at work or home is actually be easier than going to the gas station for a fill-up, there will likely be initial resistance to changing behaviour patterns. Consumers will have to agree to adopt this new required behaviour. Another reason for consumer reluctance is the higher prices that are likely to be charged (at least initially) for electric cars. This is a common pattern in new products, where prices are initially high, and then they decline as unit sales increase. In the 1980s, for example, early adopters paid thousands of dollars for the first personal computers, but prices are now much lower. Consumers are also reluctant because they have concerns about lower performance characteristics of electric cars along the power dimension. Student answers will obviously vary. The material above provides only illustrative data in order to briefly make the point that a comprehensive analysis is required before a rational decision can be made on which alternative is best. This question provides the incentive for students to look into the obvious (and not-so-obvious) advantages and disadvantages of the three alternatives. The key point here is that students must gather data about the advantages and disadvantages of each alternative before they can make a decision. And it is quite possible that after gathering such data that none of the alternatives will stand out as clearly superior. That outcome may create some anxiety in students, but it will also increase their appreciation for the complexity of ecological controversies. It will also demonstrate the importance of critical thinking when working through controversies. Student answers will also vary for this question, so it is important to determine how they reached the conclusion they did. There are three key claims made supporting the basic contention that consumers won't use detailed product information, and each of these claims must be analyzed. The first claim is that consumers are struggling financially. This is certainly true during recessionary periods, and it is even true for many consumers when economic times are good. But this fact must be related to the willingness of consumers to gather detailed product information. Some students will argue that financially strapped consumers won’t bother to gather such information because they can’t afford the higher prices that are normally charged on eco-friendly products. Other students will argue that consumers who are concerned about the environment will seek out detailed product information simply because it is important to them (and in so doing they might find products that satisfy both their eco-friendly and price requirements). These students might also note that if companies like Procter & Gamble are successful in developing sustainable innovation products (eco-friendly products at the same price as traditional products), this will increase consumer interest in getting detailed product information. The second claim is that consumers don't have the time to spend seeking out detailed product information. There is some truth to this claim, but it is difficult to address this claim with hard facts. Some statistics are occasionally provided in the popular press regarding the number of hours the average person works each week, and how many hours of sleep the general population gets, but these facts are very broad brush, and bringing them to bear on a specific issue like this is problematic. The claim about inclinations (see next paragraph) may be more important. The third claim is that consumers don't have the inclination to use detailed product information. We know that people spend time doing what interests them, so if gathering detailed product information happens to be interesting, people will do it. But there is not much evidence suggesting that this is a preoccupation of most consumers at the moment (some consumers do, of course, seek out detailed product information). If society truly moves toward increased concern about the environment in the future, more and more consumers will likely develop the inclination to seek out detailed product information. But it will be a gradual process. For example, the majority of consumers are not suddenly going to seek out websites like GoodGuide to determine which products are really the most eco-friendly. Rather, there will be increasing interest over time among consumers in getting such information. Workplace Diversity: Things are ChangingIndividuals who work in organizations differ in many ways. They hold different jobs, have different work experiences, and have different demographic or cultural characteristics (e.g., age, race, sex, and citizenship). All of these differences create diversity in organizations. The increasing diversity of the workforce in Canada is evident in the following statistics:
Changes of this magnitude simply cannot be ignored by Canadian business firms, non-profit organizations, and government agencies. And some organizations are, in fact, doing a good job of responding to the shifting demographics of the Canadian scene. Mediacorp recognizes these organizations by publishing an annual listing of the top diversity employers in Canada. The listing assesses the extent to which companies have employment initiatives that address the needs of five groups: women, visible minorities, disabled people, aboriginals, and gays/lesbians. The 2009 list shows which organizations scored well in helping members of the five groups (the list below is illustrative, not exhaustive):
Various other organizations are also taking steps to deal with the challenges and opportunities that come with rapidly changing demographics. They include Procter & Gamble, Western Union, Bayer Canada, Sun Life Financial, and Enbridge Gas Distribution. Procter & Gamble Thirty years ago, P & G was like a lot of other Canadian companies, that is, most of its employees were white males. But that’s changing rapidly. The company organized a major social gathering to celebrate the diverse nature of the 800 people who work at P & G’s Toronto head office (employees come from 40 different countries and speak at least 30 different languages). But the event wasn’t just for fun. Like other companies, P & G has learned that employees are more productive when their differences are respected in the work environment. And that translates into increased corporate success. Since the top management ranks of P & G are still predominantly white male, the company has set a strategic goal to diversify its work force. P & G thinks that a diverse workforce also helps the company market its well-known brands such as Pampers, Crest, Tide, Mr. Clean, etc. to a diverse group of consumers. And the Statistics Canada report noted above clearly shows that Canadian consumers are becoming more diverse at a dizzying pace. As consumer demographics change, it is important to get more diverse people involved in making marketing decisions. The president of P & G Canada says that a diverse workforce enriches everyone in the company because they are exposed to other cultures. Having diversity among employees also gives P & G a better understanding of its customers. There are multiple “affinity groups” at P & G, such as the Women’s Leadership Council, the French Canadian Network, the Asian Professional Network, the Christian Network, and the Jewish Network. The goal of these networks is to help employees feel comfortable about participating in corporate life, and to act as resource groups for employees who want to learn how to reach certain specific markets. Western Union Western Union is another company that is focusing on diversity, and it may be further along than most companies given the nature of its business: moving money overseas to the families of new Canadians who are working here and want to help their families back in their home country. The potential customers of Western Union are not easily reached by traditional marketing methods, so the company hires people who speak the language of their target market and who know what it feels like to be an immigrant in Canada. When recruiting new employees, Western Union does not demand “Canadian experience” as many other companies do. Rather, the company wants employees with international experience because of the nature of the company’s business. After Western Union hires these people, they seek out local business operators to act as Western Union agents for their own ethnic community. Marketing Manager Marco Amoranto is typical of the kind of employees that are hired at Western Union. He was born in the Philippines and originally worked for Colgate-Palmolive. He wanted to work in Canada but had trouble landing a job because he didn’t have Canadian experience. At Western Union, he is responsible for marketing to Asians and Europeans. The Western Union approach has yielded some interesting benefits. In one area of Toronto, for example, customers who wanted to transfer money back to the Philippines got a free loaf of Pan de Sel bread from a local Filipino baker. Thus, the results were positive for Western Union, its customers, and the baker. Western Union also brings in entertainers from its customers’ home countries and then gives these customers free tickets to the concerts. Bayer Canada Each year, Bayer Canada has a Diversity Day which showcases the various cultures that are represented at the company. Suzanne Wan began her career with Bayer in Hong Kong and moved to the company’s Mississauga, Ontario location in 1988. She says that businesses benefit from being open to the differing opinions and ideas that are suggested by people from different cultures. Sun Life Financial Sun Life Financial Inc. sometimes hires people even before they enter Canada. It recruits them through foreign embassies where potential immigrants go to apply to enter Canada. Sonia Del Rosario, for example, was hired through the embassy in her native Philippines. She was offered the opportunity to work in financial services in her native language with Canadian customers who originally came from the Philippines. Enbridge Gas Distribution Enbridge Gas Distribution tries to put new Canadians at ease when they interview for positions by giving them interview questions an hour early so they can spend extra time preparing their answers. The company does this because new Canadians may be anxious about their verbal English skills. It’s not just companies that are trying to benefit from diversity. David Cohen is an immigration lawyer who has set up a website called Loon Lounge which helps potential immigrants to Canada connect with workers from their hometown area who are already working in Canada. So, for example, people from Nigeria can put their profiles on the site and find other people from their hometown. That may facilitate their entrance into Canada to work. Canadian cities are doing similar things. The city of Halifax launched a program to help immigrants get connected. Professionals from 40 different companies volunteer to meet with newcomers to offer advice and answer questions. Questions for Discussion
Sources: “The Top 35 Best Diversity Employers,” February 19, 2009, www.thestar.com/Business/article/589497; “Survey Reveals Global Gender Gap,” www.spiegel.de/internatonal/world/0,1518,589955,00.html, accessed February 3, 2009; Tavia Grant, “Wading Into the Talent Pool,” The Globe and Mail, January 26, 2009, p. E5; Deirdre Kelly, “New Faces, New Customers,” The Globe and Mail, January 26, 2009, p. E3; Sandra Rubin, “What Will it Take to Crack the Glass Ceiling?,” The Globe and Mail, December 17, 2008, p. B8; “World Economic forum Gender Gap Index,” November 13, 2008, www.crrc-caucasus.blogspot.com/2008/11/world-economic-forum-gender-gap-index.html; Carly Weeks, “Canada Plunges by 13 Spots in Gender Gap Index,” The Globe and Mail, November 13, 2008, p. L1; Wallace Immen, “One More Gap in Pay Between Men and Women,” The Globe and Mail, August 15, 2008, p. C1; Meagan Fitzpatrick, “Women Still Earning Less than Men: Statistics Canada,” Winnipeg Free Press, May 2, 2008, p. A5; Konrad Yakabuski, “Meet the New Leading Lady of Finance,” The Globe and Mail, March 27, 2008, pp. B1-B2; “Women Less Likely to Aspire to Top Corporate Positions,” Hudson Canada, www.hudson.com/node.asp?kwd=03-06-08-women-survey; Rudy Mezzetta, “Banks, Credit Unions Put Women in Top Spots,” Investment Executive, February, 2008; Matthew McClearn, “Mind the Gap,” Canadian Business, November 5, 2007, pp. 21-22; Margaret Wente, “It’s Manly at the Top,” The Globe and Mail, May 7, 2005, p. A21; Virginia Galt, “P & G Leverages its Cultural Diversity,” The Globe and Mail, April 7, 2005, pp. B1, B18; Jill Mahoney, “Visible Majority by 2017,” The Globe and Mail, March 23, 2005, pp. A1, A7; Virginia Galt, “Western Union Remakes ‘Canadian’ Image,” The Globe and Mail, November 23, 2004, pp. B1, B24; Valerie Marchant,” The New Face of Work, Canadian Business, March 29, 2004, p. 38; Janet McFarland, “Women Still Find Slow Rise to Power Positions,” The Globe and Mail, March 13, 2003, pp. B1, B7; Virginia Galt, “Top Women Still Finding Barriers,” The Globe and Mail, September 25, 2002, p. B7; Marie Drolet, “The Male-Female Wage Gap,” Perspectives on Labour and Income, the Online Edition, December , 2001, www.statcan.ca/english/freepub/75-001-XIE/01201/hi-fs_200112_01_a.html; Elizabeth Church, “Women Still Shut Out of Many Top Posts,” The Globe and Mail, February 10, 2000, p. B15; Belle Rose Ragins, “Gender Gap in the Executive Suite: CEO’s and Female Executives Report on Breaking the Glass Ceiling,” Academy of Management Executive, February, 1998, pp. 28-42; Greg Keenan, “Ford Canada Gets New CEO,” The Globe and Mail, April 9, 1997, p. B1; Greg Keenan and Janet McFarland, “The Boys’ Club,” The Globe and Mail, September 27, 1997, pp. B1, B5; Greg Keenan, “Woman at the Wheel,“ The Globe and Mail, July 8, 1995, pp. B1, B6. Answers to Questions for Discussion
Several suggestions for effectively managing diverse work groups are presented on p. 469 of the text. These include knowing yourself (how tolerant are you of differences in people), prepare yourself (develop skills in listening and conflict resolution), provide support (for example, support groups and mentors), and guide behaviour (provide positive reinforcement for behaviours that foster tolerance). The most fundamental issue to address is whether motivation theories that were developed during the past 50 years in North America can be used to motivate individuals who have come to North America from a much different culture. For example, individualism is a key cultural characteristic of both the U.S. and Canada. But Hofstedt’s research (see Chapter 4) shows that individualism is not nearly as important in some other cultures. Other factors like power distance and uncertainty avoidance also differ, and these factors can significantly impact the workability of motivation theories. Consider a specific example: Maslow’s hierarchy proposes that as people satisfy lower-level needs like security, higher-level needs like self-actualization emerge. That sounds intuitively plausible for North America, but in cultures where uncertainty avoidance is strong, the need for security may be continuing and dominant, not simply a lower-level need that ceases to motivate when it is largely satisfied. Student answers should demonstrate a similar analysis for the other motivation theories discussed in the chapter. For example, Herzberg found that money was not a motivator for the sample of people he studied. But will that be true for individuals from other cultures? Or will they have a different configuration of needs? It should also be pointed out that while various differences are evident across cultures, there are also similarities. For example, most people would probably like to have an interesting job, irrespective of the culture they come from. Also, during the past couple of decades, many individuals in developing economies have become (or perhaps have always been) extremely interested in increasing their standard of living, and that is evidence that materialism (the emphasis on acquiring physical goods) is also a need that is found in many cultures. Both of these needs may make it easier to apply motivation theories that have been developed in North America to people from diverse cultures. Many students will agree with this statement because it looks plausible. They will likely say that when people have a lot in common (demographics, values, cultural background, racial background) they will be more efficient in dealing with each other because they won’t have to waste a lot of time learning about each other. There will also be less conflict between people because they have similar backgrounds. Students who take such a position may give an example where, say, all the people in a work group are between 50 and 60. The people in such a group would have a lot in common and there may be much tacit agreement about how things should work and what is important. No time is taken up in debate and everyone just does their job. They might contrast that group with one that has both young and old workers in it and point out that since these two sub-groups have little in common, conflicts may break out. Other students may disagree with the statement because they have read about the benefits of a diverse workforce. They will note, for example, that diverse work groups are more likely to have multiple perspectives on problems, have differing values and ways of thinking, and have more creative insights than less diverse groups. They will also point out that the assumption that members of homogeneous work groups have fewer conflicts is not reasonable, so having a homogeneous workforce is no particular advantage when it comes to conflict potential. Still other students will say that we cannot make a simple “agree” or “disagree” decision regarding the statement. Those who take that position are essentially arguing for a contingency perspective on diversity. (For a description of some interesting research findings regarding the varying impact of diversity on performance, see Nancy Langton and Stephen Robbins, Organizational Behaviour. Toronto: Pearson Prentice Hall, 2007, pp. 222-225.) This question is designed to test students’ critical thinking abilities within the context of the workplace diversity issue. Because the issue of workplace diversity may be controversial, it is probably best to use this question as the basis for a class discussion about diversity. The instructor should act as the moderator for the discussion to keep it on track, and to ensure that unreasonable assumptions are not being used to make arguments or to reach conclusions, and that the data presented in the question are being properly interpreted. There are two key points that should be made. First, students need to analyze the facts (and assumptions) that are evident in the question. If we assume that we want exact proportional representation of the four groups in all Canadian organizations, then Don Smith has a point because visible minorities, aboriginals, and women are all overrepresented and white males (and males in general) are underrepresented at CDI. (The reasonableness of this is addressed below.) The discussion about this issue should also focus on the fact that the data are presented in such a way that unfortunate ambiguities are created. The data do give some insights into the situation at CDI, but several important questions cannot be answered because the categories of workers are not mutually exclusive. For example, while we know that 34 percent of the staff at CDI are men, we don’t know how many of these men are white, or visible minorities, or aboriginals, or disabled. We also don’t know what percentage of the women who work at CDI are white females (we know that 66 percent of the staff at CDI are women, but we don’t know how many of these women are visible minorities, aboriginal, or disabled). We also aren’t given information about the proportion of white men and white women in the Canadian workforce. Thus, we need a more detailed breakdown of the various classifications. For both men and women, we need to know what proportion are visible minorities, aboriginal, disabled, and white. Second, beyond the numbers, several other issues need to be addressed. For example, the idea that we should try to achieve proportional representation of the various groups in Canadian organizations may be challenged by students. For the gender issue, some students may argue that it is not a bad thing that certain occupations are dominated by men or women. For example, they may argue that it is good that the majority of nurses are women because women are more nurturing than men and that makes them more effective in dealing with people who are ill. Or, they may argue that it is a good thing that most engineers are men because research shows that men have more highly developed spatial skills, and those skills are crucial for success in the field of engineering. Of course, these arguments will likely be disputed by other students who will take the position that these imbalances in various occupations are simply the result of historical biases against women and minorities. They will also note that these imbalances are leveling out and that more men are becoming nurses and more women are becoming engineers. As part of this discussion, some students will argue that people gravitate to professions that interest them, and setting standards like proportional representation that don’t recognize this reality are doomed to failure. For the issue of visible minorities, some students will point out that they are overrepresented in certain occupations. For example, visible minorities are well represented in Ph.D. programs and increasingly in the ranks of university professors. Some students will argue that this has happened because intelligent and motivated students from places like India and China have come to North America to get their Ph.D. and to develop their careers in universities here. Another point that is almost certain to be made is that overrepresentation of women, visible minorities, aboriginals, and disabled people is acceptable because we need to “balance out” past injustices that have been inflicted on these groups. posted on June 8, 2009What Do Employees Want?Every manager wants to have employees who are satisfied and highly motivated because such employees exhibit positive behaviours like persisting even in the face of difficulties, being involved in continuous learning and improvement, and constantly finding ways to improve quality and productivity. These behaviors, in turn, lead to several positive outcomes for the organization: higher customer satisfaction, greater profits, higher quality, and lower employee turnover. But how do managers achieve the goal of having highly motivated and satisfied workers? The most general answer is: Give employees what they want (within reason, of course). But what do employees want? Managers often assume that they know what employees want, but consider the results of two surveys. The Canadian Payroll Association analyzed the frequency with which 39 specific benefits were provided by companies to their employees. The top-five most common items were term life insurance, car allowances, tuition fees, disability-related employment benefits, and professional membership dues. But another survey of worker opinions found that they rated flexible working hours, casual dress, unlimited internet access, opportunities to telecommute, and nap time as the most desirable. There are obviously major differences in these two lists, so managers are having some difficulty assessing what employees want. Several other studies are consistent with this conclusion. For example, a Sirota Survey Intelligence study which assessed employee satisfaction levels at 237 different companies during the period 1994-2003 found that only 14 percent of these companies had workforces that could be classified as "enthusiastic." When the stock prices of 28 companies with enthusiastic work forces were compared to the average for publicly traded companies, it was found that they outperformed the average prices by more than two-and-a-half times, while companies with unenthusiastic work forces lagged far behind the average stock prices. Companies with enthusiastic workforces also had fewer customer complaints, lower employee turnover, and higher quality in their products. Another study of more than 3,000 Canadian employees that was conducted by Watson Wyatt Canada revealed the following:
In yet another study, the Gallup Organization focused on the attitudes of 7,200 workers in Canada, the U.S., and Great Britain. The survey revealed that on most measures of job satisfaction, Canadian workplaces ranked behind those of the U.S. For example, only 47 percent of Canadian workers were completely satisfied with their boss, while 60 percent of American workers were. Only 29 percent of Canadian workers were completely satisfied with their opportunities for promotion, while 40 percent of Americans were. And 37 percent of Canadian workers were completely satisfied with the recognition they received, while 48 percent of Americans were. Canadian workers were also less satisfied than U.S. workers on several other issues, including the flexibility of their work hours, workplace safety, relationships with co-workers, and the amount of vacation time they received (even though they usually received more than Americans). Most employees start work with considerable enthusiasm, but they often lose it. Much of the blame is laid at the feet of managers whose attitudes and behaviors depress employee enthusiasm. These include failing to express appreciation to employees for a job well done, assuming that employees are lazy and irresponsible, treating employees as disposable objects, failing to build trust with workers, and quickly laying people off when the business gets in trouble. Managerial assumptions about employee satisfaction with pay can be particularly problematic. For example, many managers assume that workers will never be satisfied with their pay. But only a minority of workers say that their pay is poor or very poor, and many rate it as good or very good. One of the simplest ways for managers to motivate workers is to praise them. Yet this occurs far less often than it should. A Globe and Mail Web poll showed that 27 percent of the 2,331 respondents had never received a compliment from their boss. Another 10 percent had not received a compliment in the last year, and 18 percent had not received a compliment in the last month. This result is disturbing, since another survey showed that 89 percent of employees rate recognition of their work as very important or extremely important. When there is a big difference between what companies provide for workers and what they really want, we should not be surprised if motivation and satisfaction levels of workers are not high. The real question is this: In the most general sense, what can be done to make worker and company needs more consistent? Part of the answer is provided in yet another survey, this one based on responses by 8,000 Canadians. That survey found that the three most important things (for employees of all ages) were (1) to be treated with respect, (2) to be dealt with fairly, and (3) to feel a sense of connection with the organization they worked for. All of these are things that managers can have a very positive influence on. Questions for Discussion
Sources: Tavia Grant, "Favourite Perk? Not a Blackberry," The Globe and Mail, September 10, 2008, p. C1; Wallace Immen, "Boomers, Gen-Yers Agree: It's All About Respect," The Globe and Mail, January 24, 2007, p. C1; Wallace Immen, "The Continuing Divide Over Stress Leave," The Globe and Mail, June 10, 2005, p. C1; also Jeff Buckstein, "In Praise of Praise in the Workplace," The Globe and Mail, June 15, 2005, pp. C1, C5; also Virginia Galt, "This Just In: Half Your Employees Ready to Jump Ship," The Globe and Mail, January 26, 2005, pp. B1, B9; also David Sirota, Louis Mischkind, and Michael Meltzer, "Nothing Beats an Enthusiastic Employee," The Globe and Mail, July 29, 2005, p. C1; also Virginia Galt, "Business's Next Challenge: Tackling Mental Health in the Workplace," The Globe and Mail, April 12, 2005, pp. B1, B20; also Virginia Galt, "Canadian Take Dour View on Jobs, Bosses, Angels," The Globe and Mail, October 18, 2004, pp. B1, B7; also Virginia Galt, "Worker Stress Costing Economy Billions, Panel Warns," The Globe and Mail, July 21, 2000, p. B9; "A Better Workplace," Time, April 17, 2000, p. 87. Answers to Questions for Discussion
It might seem logical to argue that since managers are human beings just like their subordinates are, that they would have no trouble understanding their subordinates' needs. While it is true that managers are very similar to their subordinates in some ways, they are also very different. A key difference is evident regarding the expectations that exist for managers and subordinates. Managers are expected to carry out the management functions of planning, organizing, leading, and controlling, and to motivate subordinates to achieve the organization’s goals. But subordinates vary widely in terms of their interest in achieving organizational goals. They also have goals they want to achieve in their personal lives, and those goals may be incompatible with the organization’s goals. Managers who are strongly motivated to achieve organizational goals may assume (hope?) that their subordinates also attach great significance to those goals, but subordinates may not be very interested in such goals. Another factor is simply the day-to-day busyness of the workplace. Managers who have large numbers of subordinates may find it impossible to get to know them very well as individuals. Or, managers are so involved in their own work that they don’t want to spend time getting to know subordinates. Another (simpler) explanation is that American workers are actually more satisfied with their jobs than Canadians are. Another explanation has to do with the speculation that Canadians are less dramatic, less excitable, less aggressive, and less nationalistic than Americans are. If this speculation is accurate, these tendencies could lead Canadian workers to report lower job satisfaction even though they aren't really less satisfied that American workers are. Another (less obvious) explanation is based on the fact that Americans have stronger religious beliefs than Canadians do. One Gallup survey, for example, found that 90 percent of Americans believe in God, whereas only 71 percent of Canadians do (this information is not provided above). How could this information help explain lower job satisfaction levels for Canadian workers? Guy Beaudin, an industrial psychologist, speculates that since faith is more important in the lives of Americans, they do not rely as much on work for fulfillment as Canadians do. Canadians may therefore have higher expectations about work as they attempt to give their life a sense of meaning. Because these higher expectations are more difficult to satisfy in the workplace, Canadian workers report lower job satisfaction. It is important to point out that since each motivation theory focuses on only a limited number of factors, a given theory may not address any of the three most important items to employees. Keeping that in mind, when students assess each motivation theory, they will likely mention some of the following items. Most of the theories deal with the respect issue, but only indirectly. In Maslow's hierarchy, for example, the esteem and self-actualization needs are the ones that address the respect issue. McGregor's Theory X and Theory Y idea does not explicitly mention respect either, but when Theory Y assumptions are made by managers, that would be consistent with showing respect for subordinates. In Herzberg's Two Factor Theory, respect is something that would be consistent with the motivators rather than the hygienes. Job enrichment also satisfies the desire to be treated with respect because enriched jobs include increased freedom and responsibility. As far as fairness is concerned, equity theory is the one that most directly deals with that because after employees compare their input/outcomes ratio to the input/outcome ratio of another person, they reach a conclusion about whether they are being treated fairly or not. Some students may note that it is difficult to see a direct relationship between expectancy theory and any of the three needs mentioned by employees. Of course, it might be argued that employees desire to be treated fairly, to be treated with respect, and to feel a sense of connection to the organization, and all of these are goals that at least some individual have. Motivation will be evident only if certain parts of the expectancy model (for example, the effort-performance link and the performance-reward link) fall into place properly. Of the three needs mentioned by employees, the one about connecting with the organization does not seem to be a focus of any of the motivation theories. Perhaps this is because the idea of connecting is a very general (and hard-to-measure concept). However, such a connection is very likely to exist if managers handle situations effectively (i.e., use the ideas in the theories to motivate people). posted on March 12, 2009 |
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