Final Research Paper
OL-500 Human Behavior in Organization
Kesha Jaramillo
Southern New Hampshire University

Abstract This paper will discuss Malden Mills and the decision that CEO Aaron Feuerstein’s actions following the 1995 fire. The organization is associated with both business and basic human values which makes it a brand with which anyone can relate. After the factory burned down in a fire in 1995, Aaron Feuerstein chose to value his employees over what could have been a huge monetary gain for the business (Leung, 2003). This went against typical business practices of the time. Because of this, Aaron Feuerstein eventually became the example of business ethics. The tenants of organizational behavior will through the actions of the Malden Mills CEO, Aaron Feuerstein, and its employees by answering the following questions: * What does Malden Mills’ commitment to its employees prove or disprove about the impact of values in action within the company? * Did the business model for Malden Mills and level of engagement with its employees cloud decision maker’s business judgment and lead to the failure of the organization? If so, to what extent? * Did Malden Mills’ CEO Aaron Feuerstein fail his organization by demonstrating compassion for his employees? If so, what does this show about balancing the needs of the employees with the needs of the business?

Introduction
When Aaron Feurestein chose to value his employees over monetary gain, he went against the grain of typical business practices of the time (Leung, 2003). This displayed the company’s values in action, which had a strong impact on the attitudes of the employees and the community. Because Feuerstein stood by his employees and the community, the employees and the community stood by the organization (Leung, 2003). Feuerstein soon became the go to example of business ethics. In the end, Malden Mills was unable to recover the losses it suffered from both the fire and the decisions following the fire during the company’s rebuilding process. Malden Mills, unfortunately, had to file for chapter 11 bankruptcy. This paper focuses on whether or not Malden Mills relationship with and commitment to their employees was the right thing to do from a business perspective. The Malden Mills scenario displays the good consequences that can come from a company doing “the right thing for the right reasons”.

Major Points & Arguments

Because the insurance pay off was $300 million, Aaron Feuerstein would have been justified in walking away from the town following the destruction of the company’s factory in the 1995 fire. Instead of walking away, Feuerstein not only chose to rebuild the factory but to build a safer, better, and more environmentally friendly factory to which all of the employees returned. He also continued to pay the employees their full salaries while the factory was under construction. These decisions were labeled “ethical idealism” are considered to blame for the business failure (Gill, 2011).
While taking the needs of the employees and the town into consideration, Feuerstein did not adequetly meet the needs of the business. Feuerstein did not patent the process used to make the Polartec products and other companies took that process and made less expensive versions of the product (Leung, 2003). Although Malden Mills’ product was of a higher quality and was the first to hit the market, Malden Mills could not compete with the other companies offering a similar product for a lesser price. Feuerstein underestimated the loyalty the company had from their customers and with the economy going through a downturn Feuerstein decisions regarding the day-to-day operations of the company is what caused the business to fail.
This raises some questions about how business ethics and organizational behavior affect the business’ success. Business ethics build a strong and positive brand that can stand up to a lot of hardships and promote employee loyalty, trust, and engagement. In the case of Malden Mills, putting the employee needs above the needs of the business was costly to the success of the business in both the long term and short term.
The ability to understand and use knowledge of emotions is very important for organizations because understanding can lead to positive change in the workplace (Robbins & Judge, 2015, p. 114). Feuerstein was being guided by his emotions when he made the decision to rebuild the factory; however leaders must be mindful of how far they let their emotions guide their business decisions. Feuerstein and his wife decided to save the town while trying to save their business. They valued the success of the community over their own monetary gain (Leung, 2003). From a personal perspective this was a great demonstration of compassion along with a great business move. Because emotions make many people uncomfortable, most try to shy away from them, especially in the workplace. Allowing emotions to flow as a natural consequence of human interaction with each other and the environment as a whole. Emotional discord can have a negative effect on productivity even though it is what is usually encouraged in today’s workplace.
In this situation Aaron Feuerstein risked his personal assets to save a business that he could have rebuilt somewhere else, but he stayed because he had a strong sense of loyalty to the company’s employees as well as the town that supported the company. He was able to build a safer, better, and more environmentally friendly factory to which all of the employees returned but the business still failed. This brings to light a serious consideration, the relationship between Aaron Feuerstein demonstrating compassion for his employees and making decisions that are in the best interest of the organization. Business ethics are key to the success of any company; however, putting the needs of employees before the needs of the organization may do more harm to the organization than good in both the short and long term. When rebuilding the factory, Feuerstein took suggestions from the employees and implemented of his employees ideas. He ended up spending much more money than was practical on the building, because he wanted to make sure that the building was aesthetically pleasing by using bright colors and assuring the windows engaged the sunlight to complement the textiles. The building also had perks like a childcare center and a picnic area (McKenna, 2013). All of the employees returned to their jobs and the town stood to benefit from the new factory; however, the business still failed. This leads one to consider the relationship between the failure of the organization and the way that Feuerstein handled the rebuilding of the business following the fire.

Solutions

Cultivating positive emotions has been proven to both improve problem solving abilities and health. The more authentic the emotions are in the workplace, the happier and more effective the employees will become (Kreamer, 2013). Feuerstein was able to quickly identify issues within the company by allowing the employees to freely give their thoughts and input (Toffler, 2001). This was also a way to resolve conflicts or prevent potential conflicts (Robbins & Judge, 2015, p. 461). Because the Feuerstein’s actions towards the town and the employees created a strong sense of trust and loyalty along with community and employee engagement, both the community and the employees were committed to the success of the business. The employees were loyal and committed to the organization’s success. Feuerstein’s emotions toward his employees fostered trust, loyalty, and engagement within the company. Not only did Feuerstein’s actions gain him the reputation of being the example of business ethics, but it also gained him recognition in the form of an award presented by the National Trust for Historic Preservation (McKenna, 2013).
Feuerstein kept a positive attitude regarding his company even after Malden Mills was forced to file for bankruptcy. He maintained an optimistic view and hoped he would regain control of the company. Even after filing for bankruptcy Feuerstein is seen as an example in business ethics and the Feuerstein’s were proud of their actions because they stood by their personal ethics.
Ethically, Feuerstein did everything right; however, he did not protect his business interests and consequently did not protect his employees. Feuerstein’s actions towards his employees and the resources he used to rebuild the factory did not cause the business to fail. The business failed because of the failure to paten the Polertec production processes. This gave competitors the opportunity to use the Malden Mills process to produce a cheaper version of the Polertec. From a business perspective, Feuerstein failed the business, the employees, and the community by not patenting the Polertec production process.
Feuerstein should have taken advantage of employee engagement by taking suggestions from the employees for ways in which the company could streamline operational costs. Employees would have seem that if they did not do something in terms of giving up some of the perks, they would lose the company. The town could have included the new factory in the truism trade. Feuerstein could have increased sales by investing in more marketing efforts and protecting future interests and patenting any processes that had not yet been released. Malden Mills could have given the community and employees the opportunity to buy into the company as one way to prevent bankruptcy. Employees who feel they have ownership in the organization are more likely to make sacrifices to assure the success of the business (Robbins & Judge, 2015, p. 211).
One option for Feuerstein was to sell Malden Mills. Malden Mills could have been sold the factory after the business started to fail. This would have benefited the business, the employees, and the town because the factory would have remained in business. The sale would have allowed the employees to continue working at the factory under the new owner and would have allowed Malden Mills to recoup some of its losses. The Feuerstein was very generous to the community, in that he considered both the employees and the community when rebuilding the factory. Though the new owners may not have included the employees in the decision making process the way that Feuerstein did, at least the factory would have remained open and the employees would keep their jobs. This was something that the Malden Mills Board of Directors would have considered in 2007. The Malden Mills Board of Directors approved the sale of Malden Mills to the Gordon Brothers Group for $44 million. Because the organization’s operational and manufacturing processes and quality were improved the organization would have been able to become more profitable as it came out of bankruptcy and the cost of the sale of the factory would have increased (PR Newswire 2007). The purpose of researching this topic was to discuss the importance of business ethics to the success of an organization and the effect of putting employees needs before the needs of the business. In this example, though Feuerstein’s loyalty towards employees was to blame for the failure of the business to some, there were other actions that were more costly to the business. Had Feuerstein patented the Polertec production process not only would he be the example for business ethics but Malden Mills would still be a successful business. The loyalty to the employees would have fostered a strong sense of pride and commitment to the organization. Feuerstein did not use good judgment when it came to the day to day operations in running Malden Mills; however, if he had used sound organizational business principles and solicited feedback from the employees during the operational decision making process and had negotiated with the debtors to create a better resolution to the monetary issues, Malden Mills would have been successful under Aaron Feuerstein.

References
Gill, D. W. (2011, June 25). Was Aaron Feuerstein Wrong? | ethix. Retrieved from http://ethix.org/2011/06/25/was-aaron-feuerstein-wrong
Kreamer, A. (2013). It's Always Personal — Anne Kreamer. Retrieved from http://www.annekreamer.com/its-always-personal
Leung, R. (2003, July 3). Retrieved from http://www.cbsnews.com/news/the-mensch-of-malden-mills
McKenna, K. (2013, September 26). Louise Feuerstein, 76; worked with husband to rebuild Malden Mills after fire. Retrieved from http://www.bostonglobe.com/metro/2013/09/25/louise-feuerstein-worked-with-husband-rebuild-malden-mills-after-fire/y6QUSbWcsE7FAXIOuXjBYJ/story.html
PR News Wire. (2007, January 10). Malden Mills Board of Directors Approves Sale of Company to Gordon Brothers... -- re> LAWRENCE, Mass., Jan. 10 /PRNewswire/ --. Retrieved from http://www.prnewswire.com/news-releases/malden-mills-board-of-directors-approves-sale-of-company-to-gordon-brothers-group-for-44-m-53369057.html
Robbins, S. P., & Judge, T. (2015). Organizational behavior.
Toffler, B. L. (2001, December 20). Finding A Balance Between People And Profits - tribunedigital-sunsentinel. Retrieved from http://articles.sun-sentinel.com/2001-12-20/news/0112190731_1_aaron-feuerstein-malden-mills-employees
Malden Mills