Leadership Management - Foxconn Group - Case Study Example

HRM Case Study: Foxconn Group HRM Case Study: Foxconn Group Executive Summary During January and August 2010, seventeen young workers at Foxconn Technology Group committed suicide in the production facilities of China. The event gained attention of the organization all around the world. The suicide of employees at Foxconn was identified as one of the major reason of inappropriate Human Resource Management practices at the organization. The main objective of this document is to analyze the case of Foxconn Technology Group using Human Resource Management theories and model. In addition, the document discusses the internal and external factors that affected work culture at Foxconn Technology. 1. Introduction to the Case Terry Goua as one of the largest multinational companies, operating in the Electronics Manufacturing Services industry in China, established Foxconn Technology Group. In the beginning, the company grew rapidly and by the end of 2009, the company’s revenue increased up to $60 billion but as the years passed, the growth rate became slower and strategic decisions taken by the management faced criticism due to the upheaval in the business. As the result of the losses that were incurring in the company, management and other social issues occurring in China, it was seen that employees went through a great deal of stress due to which many of them attempted suicide and died (Eccles et al., 2013). In order to have understanding of the issues of the company that led to the downfall, it would be appropriate to carry out examination of the management and leadership traits. Moreover, an understanding of the strategic options would provide answers to the issues raised in the case. 2. Case Analysis Initially, when Terry Gou was leading the company, he focused on building a corporate culture that focused on building loyalty and discipline amongst staff members. However, there were long hours, workers were yelled at quiet frequently and wages were minimum that included an overtime pay. Another drawback in the company was that there were low skilled labor and workers were as young as 15-year-old, which made their practice illegal and unethical (Eccles et al., 2013). Most of these workers were young, they were not educated and only the college graduates were paid a bit more than the rest. Even though, these issues within the company were well recognized but still many workers wanted to work in the company because the company made payments on time, and it was considered the best place for people who were low skilled. Moreover, workers were given insurance, housing but as the wages were less it were still difficult to save or accumulate wealth for long term benefits (Eccles et al., 2013). One of the major issues was that the company’s operations were being affected by the country’s inflation and growth of population. Financial crises in 2008 caused the loss of jobs. There was also the issue of unfair labor practices. In order to reduce their adverse effects at the time of recession, labor laws were passed in the year 2008. There were other social problems that led the company towards failure like increased number of migrated workers who were low paid. These immigrants were subjected to discriminatory behaviors and were present in the company in big numbers. Racist behaviors led the constant fear and sense of insecurity among these immigrants who were the part of the company. As a result, there were sporadic suicides seen in the year 2010 (Eccles et al., 2013). Organizational Culture As stated by Edger H. Schein (2010) organizational culture plays an important role in strengthening business practices as they relate to the beliefs, values and perceptions of the employees working in an organization. Management plays an integral role in defining organizational culture. An effective culture is based on communication, training and development and incentives. In Foxconn’s case, the company lacked a good work environment as employees were yelled at constantly, and the company demanded loyalty. The management gave importance to organizational goals and neglected personal interests of its employees. The wages of low-skilled workers were very less as well. Moreover, there was no concept of training and development through the company required advanced technology and innovation in their scope of work (Eccles et al., 2013). Leadership Management Leadership Management instills work policies, ethics, defines roles and practices of employees. It is noticed that issues of leadership management affect Foxconn as the company’s policies were strict and not practiced fairly. It can be said that the company was operating through authoritative leadership. According to Max Weber authoritative or bureaucratic leadership is one where the focus is on attaining organizational goal with strict rules, and there is no communication with employees (Armstrong, 2012). In short, employees are not given any importance, and no feedback or autonomy of power is bestowed on them. Thus, with respect to leadership it would have been appropriate if the management was democratic and employees were treated as human beings, where they would have the right to give their opinion and feedback. It has been proposed by Sperry (2013), that an effective leadership management manifests a vision inside the employees that gives root to a strong sense of purpose, serving to inspire subordinates and accomplish goals in an effective way. Therefore, it can be said that though the societal influences had an impact on the employees’ behaviors, but the management failed to create an environment that nurtured relationship building (Coplan et al., 2010). Incentives As mentioned before the company was giving low wages so it can be said that there were little or no incentives. According to Snell (2012), incentives and effective compensation packages provide job satisfaction and commitment to employees. Hence, incentives in the form of praise, promotion or recognition (intrinsic or extrinsic awards) are essential to motivate staff to work effectively in the organization. Human Relations theory and Neo-Human Relations Theory provide an understanding of the relationship of motivation and leadership management. According to Human Relations Theory, emphasis on human behaviors within an organization motivates employees towards productivity. Likewise, Neo-Human Relations emphasizes leaders to consider needs and wants of the employees, which can provide job satisfaction to the employees. This particular theory focused on three main aspects namely, satisfaction, incentive and intrinsic awards. These needs and wants of the employees can be fulfilled if they are given good incentives, are praised (intrinsic award) and in return it increases job satisfaction (McKenna, 2005). Unfair Treatment In China, it has been reported that with respect to social trends, there is a lot of the racism against immigrants’ workers, which have an impact on productivity. Reports indicate that it was seen within the company as well. Employees were treated unfairly, and they were subjected to abuse and harassment. Thus, this is a management issue. As indicated by (Ivancevich, 2008)every employee should be subject to equal employment opportunity. The legal and ethical trends and framework have an impact on the working of the organization. Foxconn faces legal issues as the country has a haphazard labor law practice, and majority of the workers in the company are young adolescents with ages as low as 15 years who are made to work hard with less pay. It was also seen that even if the employees wanted to resign their wages were withdrawn. In this respect, it is important that ethical and legal framework within the company should be followed that should aim at reducing unfair practice at work (Eccles et al., 2013). Lack of communication From the beginning, Foxconn Technology did not focus on communication amongst the senior management and the subordinates. This lack of communication increased stress among the workers. Dransfield (2010) has the view that lack of communication results in loss of trust between the management and the co-worker and, as a result, there is unethical code of conduct. In other words, this communication barrier increases conflicts amongst the staff. Thus, a communication from top managerial level to the bottom level provides effective flow of information. Moreover, communication and employee engagement makes employees feel more motivated or devoted towards their work. As the company has an autocratic set-up they did not make an effort to listen to employee grievances, but instead demanded loyalty. Thus, this led the company towards turmoil. 3. Implementing Theories and Model In the case of Foxconn there are several management issues that have been associated to the suicidal events of its employees. The issues can be dealt using Human Resource Management Theories and Model 3.1 Maslow Hierarchy of Needs – Motivation Theory Foxconn’s work culture was extremely strict due to which the emotional, moral and materialistic needs of its employees were neglected (Eccles et al., 2013). It greatly affected the psychology of its employees due to which they committed suicide. The company was unable to fulfill basic psychological needs of the employees that included their working times, resting times and hygienic factors. Maslow’s Hierarchy Theory can be implemented to the case of Foxconn, as focuses on the basic needs of the human to motivate people that could have allowed Foxconn’s employee to overcome emotional dilemma and remain dedicated to working (Simms, 2010). The model is based on the five stages: 1- Biological and Physiological Needs Foxconn had strict disciplinary rules and was greatly inclined on execution and efficiency, due to which most of the necessary needs of the employees were neglected. The employee did not have appropriate sleeping time, resting or activities at Foxconn that could fulfill their needs. 2- Safety needs In addition, there was the lack of protection elements due to which the employees were often worried to work in the production units. 3- Love and belongingness One of the major issues at Foxconn was the lack of bonding and relationship between employees and employers that lead to communication gaps. Most of the workforce belonged from rural areas due to which were emotionally down (Eccles et al., 2013). The employees were not given times to talk to other employees as the company only focused to work. The workers were often abused and humiliated at work for their mistakes. 4- Esteem needs The esteem needs are important to encourage employees to work. The employees at Foxconn were not appreciated for their extra efforts and overtime due to which they were discouraged. 5- Self Actualization need The employees were not appreciated at work due to which they felt themselves inferior (Dransfield, 2010). It never let them develop self-actualization, that is, to develop self-potential to grow in the field. It can be seen that the company has discriminatory behavior for the employees belong from rural areas and less education. Foxconn did not focus to initiate training programs to overcome the gap, but it rather discriminated its employees. 3.2 Stakeholder Communication Model One of the core issues prevailing in Foxconn Group was the lack of top-down flow of communication. Badenhorst-Weiss et al. (2009) in the study highlights that the developing effective communication in an organization is one of the key element that develops effective relation between employers, managers and workers. In other words, effective communication can allow the employees to express their emotions and problems effectively and is a source to relief their stress (Badenhorst-Weiss et al., 2009). Because of strict disciplinary issues and military leadership at Foxconn, the employees were not able to talk with each other. Comprehensive communication model can be one of the best models that can be applied to Foxconn to develop effective communication in the organization. The model emphasizes on the development of communication flow within the organization as following: · Formulation Formulation is the first stage that focuses on the designing of the communication plan through analyzing the necessities of the organization. It shall allow Foxconn to analyze the core communication issues pertaining in the organization and develop a communication plan that shall suit with the business operations (Monsanto, 2014). · Implementation In this stage, the organization creates a plan and introduces to its employees and workers. The organization makes use of several mediums and channel to communicate the plan. · Institutionalization The organization should evaluate the significance of the process that is required for the implementation of the communication plan. In this stage, the management should be focused that the communication plan should be implemented in the entire organization. · Dissemination Dissemination is the final stage of the model that is also the most important. It is because in this stage the organization should monitor communication plan, through analyzing strength and weakness of the plan. The organization should be dedicated for continuous development in the plan (Draft & Marcic, 2010). 3.3 Functionalist Theory Functionalist Theory can be applied to the case of Foxconn’s; it is because the organization was greatly inclined to work and did not consider human needs. The theory provides understanding about the leader’s behavior with the employees (Trevino & Nelson, 2010). Due to the financial crisis in China the moral of the employees were down, most of them belonged to poor families and rural area. The theory suggests organization should fulfill the needs of its employees; it can be attained through developing training programs and employee activities that can allow the employees to engaged in activities and learn while working. Recommendations Analyzing the case of Foxconn Group it recommended that the organization should increase the wages of its employees and reduce working hours that can allow the employees to take sufficient rest. It is because usually the workers worked overtime because of the low wages. Hence, an increase in the wages can allow them to reduce their working hours and get sufficient salaries (Coplan et al., 2010). On the basis of Maslow’s Hierarchy needs, it is essential that Foxconn should initiate communication plans, activities and training programs that shall develop affection and strengthen the relationship between employees and employer. It can be attained through developing friendly environment where the employees should be encourages to participate in the activities and make friends. Teamwork is also an effective way to share the burden of individuals. However, Foxconn has several leisure activities at its production unit. Foxconn can encourage its employees to participate in the activities. Such initiatives can develop a sense of belongingness and morale of its employees. Foxconn should be more focused to incorporate Human Resource Management strategies to stabilize worker’s emotions. The leadership style at Foxconn should be made flexible in order to overcome the work pressure and create friendly work environment. Discrimination should be effectively dealt, and strict policies should be implemented to overcome diversity issues prevailing in the organization. The managers and supervisors should encourage appropriate reward system and appreciation to the employee. It eventually shall contribute to stabilizing workers’ emotions and establish their career path for a better future. Retirement policies, provident funds, medical allowances should be provided to employees to reduce their uncertainty about their future. Conclusion It is evident from the case of Foxconn that the deficiency in the appropriate Human Resource Management led to a series of suicides. The event can be identified as one of the alarming situation for Foxconn. It is essential for an organization to consider psychological needs of its employees to attain higher productivity. These initiatives can allow the organization to boost its potential benefits, as well; it can allow the organization to develop long-term relation with its employees. List of References Armstrong, M., 2012. Armstrongs Handbook of Human Resource Management Practice. New York: Kogan Page Publishers. Badenhorst-Weiss, H., Cant, M. & Bervis, T., 2009. Business Management: A approach contemporary Approach. New York: Juta and Company. Coplan, A.M., Hikino, T. & Lincoln, J.R., 2010. The Oxford Handbook of Business GroupsOxford Handbooks in Business and ManagementOxford handbooks. New York: Oxford Handbook Online. Draft, R. & Marcic, D., 2010. Understanding Management. Mason: Cengage Learning. Dransfield, R., 2010. Human Resource Management. London: Heinemann. Eccles, R.G., Serafeim, G. & Cheng, B., 2013. Foxconn Technology Group. Harvard Business School, pp.4-15. Edger, S.H., 2010. Organizational Culture and Leadership. San Francisco: John Wiley & Sons. Ivancevich, 2008. Human Resource Management 10E. New Delhi: Tata McGraw-Hill Education. McKenna, E.F., 2005. Business Psychology and Organisational Behaviour: A Students Handbook. New York: Psychology Press. Monsanto, 2014. Busines Ethics - Monsanto. [Online] Available at: [Accessed 26 August 2014]. Simms, H., 2010. Orgnaizational Behaviour and Change management. Cambridge: Select Knowledge Limited. Snell, S. & Bohlander, G., 2012. Managing Human Resources. Mason: Cengage Learning. Sperry, L., 2013. Effective Leadership. New York: Routledge. Trevino, L.K. & Nelson, K.A., 2010. Managing Business Ethics. New York: John Wiley and Sons. Read More