Abstract
Global Communications (GC) was facing a major decline in revenue, profits and stock values and had to make serious upgrades in its business practices. GC had to determine a cost-effective way to ensure their company would survive. The solutions involved outsourcing jobs, laying off workers and offering new services as well as teaming up with a satellite provider. Although stakeholders realized without these changes, GC would not survive, it is found to be difficult for some long-term stakeholders. GC’s approach appeared to have personal and ethical conflicts as they failed to communicate with employees.
GC has identified the problem, strategized with its stakeholders, implemented a plan and has set the process for reevaluation and changes, if necessary. GC has found other companies, in and outside its industry, to benchmark and has taken the best practices for issues similar to theirs and have used them to increase revenue, and forego any immediate outsourcing of call center jobs.
However, GC has a communication problem, in that the union was never consulted or included in the decision to outsource positions. Whey they learn of the idea, the union is very upset as they worked very hard to have employees agree to a decrease in benefits previously. The union is outraged and states they will fight the newly devised plan for its members.
Implementation of these changes would allow GC to lead the communications industry globally, while providing their small business and consumer customers with modern technology services, appropriately giving employees increased wages and benefits and providing future employment opportunities to local residents. Ultimately, their mission to become the leader in global services would be met. They continually search for the processes to make their company better for their employees, stakeholders, small business and consumer customers.
Problem Solution: Global Communications
In the scenario Global Communications (GC) had identified a major crisis: declining stock values, lack of ability to compete in their market and employees who stand to lose more than they are aware of. GC had identified their need to cut back on costs previously and had worked with the Technologies Worker’s Union (TWU) to receive the support of employees in accepting a decrease in educational and medical benefits by 20 percent. After defining the problem and finding a possible solution, GC decided to provide more services to its small businesses and consumer customers. In addition, they have created alliances with a company to offer video services. Within their identification process, they have also determined ways to cut cost and increase revenue. However, some of these changes will affect their employees dramatically, as the plan to reduce costs, leads to the outsourcing of technical jobs to India and Ireland. Implementing the change and its approach is the process GC stakeholders differ, especially when dealing with the communication process to the employees. Although the stakeholders agree that this change must come, they are not comfortable with how to communicate these new changes for the company. Sy Rodriguez, the executive vice president of Consumer Marketing and Sales maintains a good relationship with all stakeholders and appears to be considerate of the employees. His major concern is making sure the reorganization does not negatively affect the philosophy of Global Communications.
Sy maintains that the organization must inform the employees as soon as possible. Sy believes the company has a responsibility to their employees and also points out that GC’s competitors may proceed to offer their good employees positions with their company. Sy realizes the importance of the employees and wants to maintain a trusting environment. Sy suggested a “media rich” approach, immediately. He desires the employees to hear it from the company first, as the change is not routine and a face-to-face meeting would minimize the risk of misunderstanding and confusion within the company (McShane & Von Glinow, 2005). Katrina Heinz the Chief Executive Officer for Global Communications believes the company can increase revenue and profits by globalization. Unlike Sy, who has been with the company for over 20 years, Katrina was hired by GC six months ago. Katrina expresses her excitement about the Board approving the globalization outsourcing plan The company has the opportunity to reduce call cost by almost 40% by outsourcing technical call center positions to India and Ireland. Katrina does not have a relationship with the union and her main objective comes at the expense of many employees. Her strategic decision to outsource technical positions gave her a window of three years to see results. Katrina may not consider organizational change as a social process (Hutton, 2000); therefore, she has no interest in how this will affect the employees. She believes the results will justify the change. Maria Antez, the vice president of the TWU has been acting as a liaison between the union employees and the company. She was instrumental in convincing the employees to agree to a 20% reduction in education and medical benefits. Her boss, Andre Mustov, president of TWU was not happy with that agreement and is livid when he is informed of the new plan to outsource jobs. Andre threatens GC in an e-mail, indicating he will seek remedies through the government and other resources.
Maria is livid and voices her opinion about the recent decision by GCs management. During a meeting with Katrina and Joel Thompson, the executive vice president of human resources and public relations, she expresses her outrage and feelings of betrayal. Katrina accepted responsibility for the lack of communication and explained that the business plan had to be approved by the board prior to releasing the information to any outside sources.
Global Communication’s failure to advise their employees may have caused serious implications of mistrust, dishonesty, lack of respect and betrayal. Employees were not timely advised and agreed to a previous reduction in benefits, but are not aware of an additional 10% cut. This may cause the morale of the employees to decrease and ultimately effect production. GC failed to include employees in the decision-making process of this new plan.
Additionally, GC has also managed to destroy a vital link in a business relationship by side-stepping the union with the new plan to outsource jobs. Had GC spoke with the union first, they may have been able to come to another agreement with the fact that people would lose their jobs. However, they allowed the plan to be approved by the Board prior to considering the Union’s thoughts. GC is not only changing the way they provide services, they are changing the culture of their business, by not considering the welfare of their employees.
GC has maintained their company philosophy for two decades “Our Edge is People” and with the recent hiring of the CEO, the philosophy has lost its veracity. GC will lose the support of their employees if they do not consider the affect these changes will have on them. The news media is mocking the company’s philosophy, by noting that a significant layoff will take place because of the company outsourcing the technical support jobs.
Global Communications has faced challenges over the last few years with declining stock prices, reduction in sales, and loss of its competitive edge. Global Communications found itself reevaluating its business practices. Global Communications believed offering plans with additional services would globalize their company. They secured an alliance with a satellite company to assist in providing broadband services. Additionally, Global Communications believed they had to outsource jobs to Ireland and India, which caused a major layoff and seriously affected their relationship with their employees’ union.
Numerous companies have been faced with challenges like GC. In my team paper, we analyzed numerous companies that suffered severe loss of sales and their competitive edge. Xerox and Chrysler were companies that faced those issues. These companies used benchmarking processes to find an alternative solution to their problem. Xerox needed to scale down on manufacturing costs and realized their need to improve their parts distribution process (Finance, 2010). Xerox implemented functional benchmarking with the study of the warehousing and inventory management system of L.L. Bean (Bean), a company outside its industry. By mimicking Bean’s order filling process Xerox increased their speed and accuracy in their parts distribution process while maintaining their position as a forerunner in their industry. Chrysler realized their product developmental process was inadequate and needed a new platform for the newly designed cars. Through benchmarking with competitors, meeting with suppliers and experimenting with new ideas and programs, they found the “traditional sequential design approach was flawed” (Allpar, 2001-2010). Chrysler implemented a strategy to build a quality product, under the newly designed plan pegged the “LH project”. Chrysler’s new plan found “For the first time, quality goals were present from the very beginning of the project, and through all stages of development” (Allpar, 2001-2010). The LH project was a success. To evaluate and test the newly implemented approach on supply chain managers Chrysler created the SCORE (Supplier Cost Reduction Effort) program. This program would ensure Chrysler’s management encourage, review, and implement supplier ideas quickly and fairly. SCORE resulted in lower costs to the consumer and an increase in profitability for the company. Chrysler benchmarked, implemented a plan, and evaluated the plan through the SCORE program to the company’s success.
Also in our research of companies that have faced financial losses and found in their analysis of the problem that new services needed to be provided, several companies formed alliances with other companies to provide these services. Zain Group (formerly named MTC), and Apple Computer Company obtained services from these other companies to ensure their company could provide the necessary services and quality needed to retain their current customers and grow.
Zain Group found themselves looking for solutions in their technology and network industry, and entered into an agreement for Motorola to “lend its proven network optimization services expertise as well as its first hand knowledge of networking technologies…” (Newswire, 2006). Two years later, the Chairman of the board of directors of Zain Group said “The 15.7% increase in consolidated revenue … reflects the efficient operational performance of the Group’s mobile operations, despite the global financial crisis” (AME info FZ LLC, 1996-2010).
Apple Computer Company measured its computer performance against another competitor and found that although Apple outperformed its benchmarking company, the other company compared had a faster processor (2003 Fried). Apple entered into an agreement with IBM to use their computer chips in future machines to match their competitors’ speed and give the company the ability to market their machine successfully as a high speed product.
In the benchmarking process of Caterpillar Financial Services Corporation, (CFSC) it was determined that the company was capable of providing other services in other markets consistent with its industry, but failed to peruse those possibilities. CFSC believed their market strategies were lacking in areas to support CFSC’s aggressive growth goals. CFSC found compact construction equipment could allow them to expand into an industry of landscaping as well as create a market for rental equipment. CFSC didn’t believe the move was weak even though and the sales projections would remain flat. CFSC projected the performance would eventually exceed historical levels. GC’s action towards the union is not a new situation. In the article, HP drops outsourcing bids to avoid IT unions, it notes that “unions are usually an important part of the negotiating process for proposed outsourcing deals in both the private and the public sector” (Huber, N, 2003). GC and numerous companies make it a point to include unions in the negotiation process when they feel there may be serious implications for the company. Many companies consider saving the business; not the people. The union should have been advised and involved in all stages of the plan and asked to make suggestions. When a company blatantly goes against what they stand for questions the ethics and culture of the company. During the merger of the federal agencies, United States Immigration and Naturalization Service, U.S. Department of Agriculture (Field Operations) and United States Customs Service, the American Federal government Employee union and National Treasury Employee Union was involved from inception. Once the departments merged to United States Customs and Border Protection, NTEU became the union for all of the federal employees under the Office of Field Operations. To date, if there are any changes in the work schedule, roles and responsibilities, pay scales, time off and investigations, the union is involved throughout the change. This ensure labor laws are not violated and employees’ best interests are protected. In the benchmark cases of Disney Corporation and Boeing we learned of the effect the decisions of outsourcing had on the companies’ rapport with the union. Walt Disney, owner, founder and operator of Disney Corporation, didn’t agree with the union in the 1930s when they held the position that the employees were underpaid, overworked and underappreciated. Disney tried to combat the union but eventually gave in and agreed with the union which led to the workers ending their strike.
Boeing believed, to compete, they had to lower the cost of manufacturing aircraft components. Ignoring the threat of its’ powerful union members, Boeing started outsourcing the manufacturing of 787 Dreamliner’s wings to Japan and its doors to France (Murphy, 2008). For Boeing, their main concern was their ability to remain globally competitive. For the employees their main concern was the fear of losing the high-paying union jobs that had excellent retirement packages. The move was seen by the local union leader Tom Wroblewski as a “betrayal of their loyalty” (Hedpeth, 2009). Eventually, Boeing and the union came to an agreement that would save some jobs. Both of these situations would forever harm the companies’ rapport with the unions.
The article Outsourcing Production and Jobs: Costs and benefits found that “the decision to outsource [jobs] is based upon the following factors: the demand of the customer; the type of local talent available; cost; productivity’ political risk’ and infrastructure delivery.” The article continued by stating the “majority of the jobs shipped elsewhere were either high-wage, (frequently unionized) blue-collar jobs in manufacturing that generated abundant envy and little public understanding or sympathy…”(Gnuschke, J., et. al., 2004)
Time Warner and Canon is very similar to the GC situation as it relates to the company’s motto “Its edge is people”. Both of these companies recognized their success through their employees, however, they believe outsourcing positions were the only way to save the companies. Time Warner found themselves financially incapable of maintaining their staff and anticipated eliminating 800 jobs in its workforce, Time Warner had to outsource to cut costs citing the reason as “the global economic situation and current business forecast” (Schuker, 2009). They had to find a way to continue to provide the same services but at a cost they could afford.
The Canon Corporation faced similar profit losses and was heading toward serious cutbacks and the need to outsource. They decided to outsource their reception/switchboard services. They found a company that offered superior customer service, inexpensively, and could improve efficiency, and that is who they chose to perform those duties. Both companies employed problem-solving skills by outsourcing positions, cutting costs, and providing the same services. In all of the above companies as well as GC the alternative solutions should have focused on the ability to retain the current employees and the future possibility of hiring more employees, with company growth. However, these companies believed “outsourcing was a necessary evil for the betterment of consumerism and capitalism” (Gnuschke, J., et. al., 2004). The companies should have exhausted all potential “money holes” prior to outsourcing.
They could have also mitigated the immediate resistance by communicating with the persons involved. The company could have considered a town hall meeting to ask for suggestions or a staff meeting to inform the employees of the situation and attempt to get a buy-in. The communication process with the employees should have taken place prior to outsiders knowing what was about to happen. In the GC example, we see that the news media mocked the company and its motto because they did not maintain that pro-employee posture. Also, in the previous cited article, regarding HP outsourcing, we found that the company when ‘outed’ rethought the idea of outsourcing and reevaluated its position.
Additionally, having a stakeholder managing a company and implementing a change where there may appear to have a personal gain, should be non-existent. Katrina Heinz the Chief Executive Officer for Global Communications was hired to turn the company around. If she doesn’t it is more than likely that she would be terminated. Having that personal interest is detrimental in her dealings with the union and its members.
The optimal solution would have been to implement a two month moratorium on spending for non-urgent items, such as office supplies, travel, magazine subscriptions, website funded access, etc. GC chief financial officer would be responsible for informing Katrina Heinz of the outcome of the moratorium. Simultaneously, Sy could have been working with the union to come up with other options and considerations for cost cutting measures. The union could have been working with employees to get them to agree with the inevitable 10% cut in costs, although the employees may have already agreed to benefit cuts. Ultimately, they may not have had to outsource jobs.
During the following two months, GC would form the alliance with the satellite provider and determine the costs involved in the new services offered. With a special rate for current customers to sign up for these services, GC would have very little marketing costs. GC could use the money from the new customers to put in other areas.
GC would need to be clear in communicating with their employees about the situation. Knowing they are losing revenue, the above mentioned cost cutting measures should be immediately implemented in an attempt to find the correct problem. During this process, the approach should include all stakeholders with an open forum to communicate what they may feel the problem may be and any possible solutions. GC would need to be clear and inform the people affected of the accurate description of the situation in order to get the end state goal. Once this plan is implemented, GC should consider alternatives, if needed. They should consider the risk of implementing the new plan as well. There will be some employees not willing to comply; those individuals should be dealt with by communication. The resisters should feel comfortable enough to speak with a team leader or manager about their thoughts on the change. Ultimately, these resisters if properly advised of the serious of the issue, they would be able to communicate their concerns.
Once the change is implemented, there must be a continuous effort to communicate with those employees who are working in the areas of change. Managers should maintain an open mind and be willing to accept the suggestions of employees who have proven themselves to be on board with the change. If readjustment is needed, it must be immediate. If the company has a workgroup they should meet frequently. The manager must keep the group focused and allow the team members to brainstorm during this process. The ultimate goal is to ensure the quality of the decision is cost effective, produces revenue and coincides with the end state goal of the company.
In the GC example, the company formed an alliance with a satellite provider and will have caused an increase in revenue by 25%, as this service would be marketed to all existing customers. GC should urge the satellite company to provide free support to customers for one year, with a two year agreement signed by GC. Chrysler found a supplier who would pass the savings on to the company. That benefit would have to be worked out with Sy who believed the extra expense would not be acceptable by the union if the employees decided to take another 10% cut.
Global Communications will continue to lead this market with innovative ideas and will maintain a proactive posture in ensuring GC will maintain the title. GC’s continual approach for betterment will ensure its employees, stakeholders, small business and consumer customers will always have the best available at all times, by making GC a world premiered company. GC will commit to ensuring stakeholders’, employees’, business partners’ and consumers’ requests are met in this ever-changing, high-demand market. The loyal and committed stakeholders, employees, business partners, and consumers will enable GC’s success. GC will continually evaluate their methods of business to ensure stability for all with interests in this company. GC will continue to represent this industry with benchmark leadership, integrity and respect for all stakeholders.
GC has committed to ensuring their company is successful in order to sustain employment opportunities in the future. In three years, they will have the competitive advantage to increase the salaries of their loyal employees (rewarding those who believed in the company), ensure stability and marketability with innovative ideas that will lead to an increase in revenue, profits and stock values.