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WIDER RESPONSIBILITIES OF A BUSINESS
MAY 24, 1998 -
THE STAR
THE responsibilities of a business and its management are
often-discussed topics, which in some ways have become more
important in current-day situations.
To whom is the company responsible during these difficult
times? Some people say that a company should only think of
its survival and not bother with other things, especially
issues like the environment, transparency and cronyism.
While these may be an issue of exigency, one cannot throw the
responsibilities of a business or management overboard.
Companies have to pay attention to its shareholders followed
by other stakeholders such as customers suppliers, its
workforce and society.
Nobel Prize winner Milton Friedman feels that the business of
a business is to make profits. Peter Drucker thinks that
business also has a broader role to play, like being a good
corporate citizen.
Good profits would mean that the shareholders would get a good
dividend. This should make most companies put the interest of
the share-holders ahead. However, a study by John Kotter and
Heskett of Harvard University says that companies that did not
put shareholders first did better that those that did.
This means that successful companies (in terms of profits,
market share, value added, quality of work life, being good
corporate citizens, for example) put equal attention on
shareholders as that of staff, suppliers, customers and
society. Examples of companies that fall into this category
are Johnson & Johnson, Levi-Strauss, Hewlett Packard, Motorola
and Matsushita.
Customers, according to some management gurus, are the most
important people for a business. Surprisingly, customers
assumed this importance only after the World War II, when
Peter Drucker started propagating that the customers were very
important and that companies should take all efforts to make
the customers happy.
In the days before that, it was more like what Henry Ford had
said (when talking about the colours of the Model T), that the
publics could have any colour they wanted so long as it was
black.
Nowadays companies, both "large" and small, pay attention to
the customer. Some companies have gone a step further by
"delighting the customer," by giving him or her more than he
or she expects. Procter & Gamble, IBM Sony, Toyota, Motorola,
IBM, Johnson & Johnson belong to this category.
Huge conglomerates like Motorola talk of "Total Customer
Satisfaction," while Federal Express talks of "Quality
Relationship" with customers.
Du Pont says that "Serving the customer better than anyone
else not just beating their competition" is what matters.
Procter 8l Gamble also talks of being price competitive with
the aim of passing production gains to its customers.
About three months ago, when I had a problem with this battery
cover of my cameras I was told by a Japanese company's
representative here that the part was not available.
My numerous telephone calls yielded ambiguous replies. A fax
was sent to the chairman of the company in Japan. Within a few
days, the Singapore office sent a letter, and this was
followed by the local office hand-delivering a letter to my
home.
Of course, the camera was repaired almost immediately. What
was noteworthy was the fact that the company thanked me for
good customer feedback.
This fact brings forth a point that is, the customer should
also from time to time insist on his rights."
About a year ago, Malaysian Airlines won an International
Award for its service in the first-class cabin. I would like
to believe that they are making efforts to do the same in the
other classes too.
As a hallmark of customer satisfaction, there is this famous
story at Nordstrom's, an American department store, where a
customer was looking for a particular type of perfume for his
wife.
The Store where he was a had run out of stock of that typed
perfume. Seeing that the maid look dejected, the check-out
clerk asked if he had half an hour to spare within which time
she could go to the next Nordstrom store and collect the item
for him.
Of course, he agreed. In half an hour's time, she was back
with the perfume, gift-wrapped for his spouse. This man had
told this story to many people, which indeed is a good thing
for the organisation and a practice worth keeping up.
Suppliers would be another group to which companies have to
pay attention. Traditionally, they worked in different
spheres- there was no talk of "partnership," sharing and such
like.
In the last decade or so, companies have begun to have a
closer link with its suppliers, simply because any shadiness
on their suppliers' part is going to affect the image of the
"mother" company which cannot point a finger at the supplier.
Xerox eliminated about 90% of its suppliers between 1982 and
1988 because they could not meet the strict standards of the
company. As a result, their defect-free component parts from
the suppliers have risen from 92% to 99.97%.
Another case in point is that of Motorola, which dropped more
than 200 of its suppliers from a list of over 3,000 because of
their inability
to meet the stringent quality needs of the company. The
company soon went on to win the Baldridge Award for quality.
Toyota Motor Corporation is said to possess excellent
relationships with its parts suppliers who could meet its
needs "just-in-time," even adjusting their locations to-
fulfil these needs. The Canon Camera co had fine its R&D so
well that it even helped its suppliers develop their product
to a superior quality.
The fourth important point is the company's responsibility to
its workforce. There have been tremendous changes from the
time of Frederick Taylor, when managers were just interested
in hiring "hand and legs."
The workforce has become an integral part of a company's
growth and prosperity. Konusuke Matsushita said that "making
people before making products" is an important mission of an
organisation.
Successful companies have given elements of flexibility, the
possibility to make mistakes, the opportunity to innovate,
seek self-satisfaction, have challenging tasks and the like.
The Ritz Carlton Hotels empower their employees to spend as
much as US$2,000 if there was a need to satisfy or put right
the needs of a customer. An "employee who wants to do is
better than an employee who has to do," says Horst Sledge of
the Ritz Carlton, reflecting the company's people development.
It is important to keep communication lines open with the
workforce, especially during times of economic downturns when
staff could be worried about being retrenched or sacked.
Sadly, many Malaysian companies seem to be doing the opposite
by not communicating with their workforce. Two examples of
good communication come to the writer's mind.
One is that of MIM. During a briefing to the staff a couple of
months ago, the CEO mentioned that there would not be any
retrenchment at MIM; however, any staff resigning would not be
replaced for the time being.
The staff were also told that there was a need to cut costs
all round, from telephone bills to travelling.
This assurance certainly gave the staff greater opportunity to
pay attention to the work at hand.
Studies show that managers spend a great part of their time
worrying about security of their jobs rather than "rolling up
their sleeves" and take efforts to pull the company out of
difficulties.
The other example is that of Cycle & Carriage Bintang, which
recently gave its staff three months' leave and 75% of their
wages due to low production and customer demand.
That was indeed a good move, which won the praise of our for
Human Resources Minister. As to whether they will continue
with the measure would be known come July 1.
If the staff are going to be let god the writer's proposal is
that they be retrained in some skills which would be useful to
them. Levi- Strauss opines that the company should have a
"soul" - a feeling for its people.
Many companies like Texas Instruments Malaysia and Procter &
Gamble have benefitted greatly by being "enlightened" to their
workforce. By encouraging self- directed teams, Procter &
Gamble at Lima improved its productivity by more than 30%.
Texas Instruments Malaysia has teams with no "permanent"
leaders but with leadership rotating within a group.
Productivity at one time went up by more than 100%, with
Malaysia becoming a showcase and training avenue for other IT
companies.
People who are happy will have better productivity than people
who are not. Likewise, people who feel that they have some
control over their future will do better and feel healthier.
The fifth component of a company's responsibility is society.
Back in 1945, Robert Wood Johnson of J&J said: "The day has
passed when business was a private matter. Every act of
business has social consequences and many arouse public
interest. Every time a business hires, builds, sells or buys,
it is - acting for the people as well as for itself and it
must accept full responsibility for its acts."
In Malaysia, this is an area that needs improvement in, even
during good times, and companies should not aggravate the
situation just because of the economic downturn.
Across the world, we know of the misery caused by the Bhopal
incident where thousands of people died. We also know about
the Exxon Voldez incident where 1,400km of shoreline was
affected by the oil spill.
Nearer home, we have had the dumping of chemical waste in the
Straits of Malacca, and the slash- and-burn technique of some
of our plantations, which was one of the contributing factors
to the haze problem.
Taguchi Genichi, a quality expert, says that "Quality" means
that it is good for society. Local companies should not get
into thinking that society, ethics and the environment are for
developed countries.
Although some local companies have adopted animals at the zoo,
built overhead bridges for pedestrians and planted trees,
generally they have much more to do.
Says William Miller: "Contrary to the skeptical view of many
in the business Community, ethical and spiritual
considerations can be intrinsic to running a successful
business."
Companies have to pay attention to their stakeholders all the
time. In modern days, the interests of various stakeholders
are related and interwoven, and none can be overemphasised at
the expense of the other.
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