In 2016, a leading Indian manufacturer of home textiles was hit by a scandal. The company had captured the market share in the USA by partnering with its customers on solutions, and not just commodity textile products.
This manufacturer had supplied premium-quality bed sheets to retailers such as Target and Walmart — except that sheets were actually made of low-grade cotton blends, not the Egyptian kind as promised.
The company not only acknowledged the issues but the correction was led by the chairman himself.
The top management took it upon itself to communicate with all stakeholders on actions taken to ensure such an incident does not repeat. The company roped in management and media consultants on addressing the issue.
The chairman’s wife, who is also a part of the top management, travelled around the USA to meet every client and asked them if they needed to indemnify them from any potential liability to ensure that their interest is not jeopardised.
A slew of measures were put in place, beefing up processes and technology. New products were also introduced. The outcomes of the efforts were positive, and the company was out of the woods within a year’s time.
This incident brings to fore the necessity for businesses to introspect and see if there are issues which could lead to reputation-damaging problems. Towards this, there is a need to find answers to the following questions.
Are strategic objectives creating behavioural dissonance?
Strategic objectives help an organisation steer their course and provide clarity on the prize ahead for organisational teams. They unite the organisation under a common purpose, challenge individuals and aid in planning for success.
But these objectives when not carved well — especially when their impact is not thought through — can drive undesirable behaviours.
Here are two examples that illustrate this
Contradictory objectives
The first goal should be to avoid such contradictory goals. But when that is not possible, take care to see how they are being communicated to employees.
The focus should be on ascertaining if the contradictory goals trigger behaviours which could negatively impact the larger interest of the organisation.
One of the reasons for the Volkswagen emissions scandal was that the CEO had set three contradictory goals — energy efficiency, price competitiveness and environmental safety. The company had to pass the tough emission standards while making sure that the prices did not go up or impact fuel efficiency.
The result was that engineers came up with a software that made cars emit less toxic fumes during test conditions.
Sharp targets
Has the CEO set sharp targets without really thinking through the consequences?
The famous example is the Ford Pinto scandal of the 1970s. At the time, Ford president Lee Iacocca wanted his team to build a car weighing less than 2,000 pounds and costing not more than US$2,000 within 25 months.
Given the pressure, the product was sent to the market with design faults. The engineers were aware of the defect yet decided to send it to the market as the cost–benefit analysis found that it was cheaper to pay customers than correct the problem.
It was a commercial success until Mother Jones exposed how this car could cause a fire at the rear end and lead to deaths.
Businesses in both the manufacturing and service sectors have to be careful about not falling into a similar trap. While there is no harm in the target per se, organisations need to ensure that a proper structure is followed to design a new product and no shortcuts are taken.
How often are corporate values reinforced?
Most progressive manufacturing companies have values that take pride of place along with their vision and mission.
The questions to ask are: When were the values decided? And are they sufficient for allowing the organisation to wade through current challenges?
The values cannot just be communicated once and forgotten. It has to be ensured that systems, policies and practices align with these values.
Remember that values, if not reinforced, decay over a period of time and hence need to be regularly brought to life.
(Excerpted from ‘Little Big Things’ published by SAGE Publications India)