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Analysis of Foxconn’s Questionable Management Practices
Analysis of Foxconn’s Questionable Management Practices
This paper uses the frameworks of agency theory and organizational culture to analyze Foxconn’s management practices. Foxconn Technology Group is a Taiwanese contract manufacturing company. The corporation manufactures different types of electronic equipment and systems for various information technology companies such as Google, Cisco, Dell, Blackberry, Nokia, Apple, Toshiba and Sony. Foxconn operates more than forty research and development as well as manufacturing centers in Asia, Europe and the Americas. The corporation employs more than 1.3 million workers in China and commands more than 50% of the global revenue in the electronics manufacturing industry.
Background to Foxconn’s questionable management practices
Despite being the largest player in the global electronics manufacturing industry, Foxconn has been receiving negative media coverage since 2010. Media and public concerns over the poor living and working conditions of its employees became rampant owing to the frequent number of suicides reported at the company’s factories in China. In 2010, a total of 18 employees committed suicide, mainly by jumping from the top floors of the company’s factory premises. Pratap, Radhakrishnan and Dutta (2012) reported that Foxconn workers from different factories and research centers complained of poor working conditions and refusal by the corporation’s management to take drastic action.
It was further revealed that the factory used an ineffective management system and employed underage workers besides subjecting the workers to unsafe working conditions such as forcing them to work longer than is legally required. In some cases, employees worked seven days a week and lived in overcrowded, tiny rooms. In addition, Foxconn’s suppliers disregarded safety laws by disposing hazardous wastes improperly and falsifying records to avoid legal responsibility. Sometimes, employees were not allowed to be visited by their relatives or to take time off to relax. All these poor working conditions and questionable management practices led to mass incidents of suicides and attempted suicides as well as the subsequent negative coverage from the media and other stakeholders.
In response to these unexpected tragedies, Foxconn’s chief executive officer, Terry Gou Tai Min, issued a statement claiming that the suicides were not as a result of poor working conditions. He alleged that the workers committed suicide so that their families could receive the hefty compensations offered by the company. Terry also attributed the suicides to personal problems on the side of the workers such as debts and relationship issues. In order to evade further responsibility, the company compelled workers to sign documents pledging not to commit suicide at its premises. These pledges included a clause that the workers’ beneficiaries would not seek extra compensation above that required by the law. The employees were also required to pledge that they would not take further extreme actions to ruin the company’s reputation. Despite these efforts, it was largely felt that Foxconn mistreated its employees (Pratap, Radhakrishnan & Dutta 2012).
Analysis of Foxconn’s Management Practices
This part uses the stakeholder theory and organizational culture theory to determine whether it was right for Foxconn to focus on profit objectives at the expense of the rights and welfare of its employees. The stakeholder theory states that the purpose of an organization is to maximize value for its stakeholders. In order to succeed, grow and be sustained, management must ensure that the interests of their stakeholders are aligned to the business strategy, objectives and management practices (Cummings & Worley 2004, p. 26). A typical organization has many stakeholders such as customers, suppliers, shareholder, creditors, employees and regulators. Each of these stakeholder groups have different interests and expectations to be fulfilled by an organization.
Employees are the most important stakeholder group in any organization. For Foxconn, the large workforce was a strategic source of its competitive advantages in the electronic manufacturing industry. It was therefore necessary for Foxconn to provide good working conditions for the employees by implementing good management practices and by observing applicable labor laws. Under Chinese laws, Foxconn had an obligation to provide good working and living conditions to its employees, and to desist from employing underage workers (Lee 2011). Foxconn contravened these laws, which caused the unfortunate tragedies. It appears that Foxconn’s management was focused on making profits to satisfy the needs of other stakeholders (shareholders and customers) but disregarded its employees, which was against the principles of the stakeholder theory.
The theory of organizational culture states that organizations are governed by a system of shared values, beliefs and assumption that dictate how people act and behave. According to Adkins and Caldwell (2004, p. 972), organizational culture has a strong influence on how employees perform their duties and relate to others in organizations. Thus, organizations develop and maintain unique cultures to provide leadership and guidelines to employees on the acceptable boundaries of behavior and performance expectations. Whereas organizational culture emphasizes several elements, focus on employees is the most important principle. Companies that attach appropriate levels of importance on employees are said to have a high culture. Such organizations treat employees with dignity and respect, and provide them with a supportive environment for optimal performance.
A review of Foxconn’s organizational culture in light of the suicide scandals reveals that the corporation developed a retrogressive organizational culture. The company did not treat its employees with respect because it forced them to work for long hours and to sleep in tiny houses. Besides employees, Foxconn’s management failed to consider the interests of other stakeholders such as local communities and customers. By forcing employees to work like machines, the management failed to consider that such a working environment could not be sustained in a fast-paced industry. Had the management taken proactive measures to address the needs of its employees, it could have averted the costly scandals (Adkins & Caldwell 2004, p. 970).
High-level recommendations for improving Foxconn’s management practices
Based on the stakeholder theory and a review of Foxconn’s management practices, it is recommended that:
The corporation focuses on bringing is current business practices, human resource management policies and management philosophy into alignment with applicable labor laws and standards. In particular, the company’s management should build a strong culture that focuses on addressing issues pertaining to employee welfare such as compensations, housing and working conditions (Lee 2011).
The corporation should allow employees to form trade unions to fight for their rights. The unions can play an integral role in addressing the treatment of employees, which can in turn reduce likelihood of employees resorting to suicide and other adverse measures (Adkins & Caldwell 2004, p. 969-971).
The corporation should stop employing underage workers. Under Chinese laws, it is illegal for companies to hire minors as these are more likely to be exploited or exposed to hazardous working conditions.
The corporation should implement long-term strategies for managing stress among employees. Stress is common even in workplaces where employees are not mistreated. By fundamentally changing the machine-like work culture, Foxconn can improve positive outcomes for its employees (Lee 2011).
Analysis of Foxconn’s management practices shows that poor organizational culture can result in costly negative outcomes even for large and well-established companies. Prior to the suicide scandals at Foxconn, the corporation’s management practices were characterized by blatant violation of labor laws. In addition, the company’s human resources practices were retrogressive and unsupportive of employees’ welfare and interests. All these led to deaths of tens of the company’s employees, which ruined Foxconn’s reputation as the global leader in the electronics manufacturing industry. That notwithstanding, the corporation’s management has an opportunity to review its practices in a manner that can result in win-win outcomes for all stakeholders.
Adkins, B & Caldwell, D 2004, ‘Firm or subgroup culture: Where does fitting in matter most?’ Journal of Organizational Behavior, vol. 25, no.8, pp. 969–978.
Cummings, T. & Worley, C. 2004, Organization Development and Change, Adelaide: South-Western College Pub.
http://www.huffingtonpost.com/2011/05/06/apple-foxconn-suicide-pact_n_858504.html, viewd 10 September, 2016, The Huffington PostLee, A 2011, Apple Manufacturer Foxconn Makes Employees Sign “No Suicide” Pact”,
78, pp. 32-36.Asian Labour Update, Pratap S, RadhakrishnanV & Dutta M 2012, ‘Foxconn Workers Speak: We Are Treated Worse Than Machines’,