Making Decisions to Do the Right Thing
It is not always easy to inluence a business organization to make the right decisions. Courageous decision making is required in order to generate successful business outcomes.
Sean is an engineer who founded a company that makes dyes for the textile industry. This is a tough business because most textiles in Sean's market are imported from developing countries. The company's R&D people have developed a much less costly product called Product X that has the potential to make the company more competitive and, more importantly, that will allow it to sell this dye to its textile customers at a much
lower price which will improve the customer's competitive situation as it relates to offshore suppliers.
There is one major problem: the new dye is hazardous to manufacture and produces a by-product that could damage the environment if it got into the air or water outside the plant. The plant manager and R&D chemists call a meeting with the company's senior leaders, including Sean. What will the company do? Will it produce the new product after inishing the last amount of R&D, potentially saving its customers from closure because of relentless offshore competition? Or will it stop the R&D on this new product, for it has no more money in the budget for the additional work required to learn how to make it safe? Other projects are progressing and are using the available funding.
At the meeting, the R&D and manufacturing people insist that this new product would generate more proits and that the shareholders would be very pleased. The customers would be pleased as well, in that the company would be materially improving its business by offering them lower prices. The company in turn would generate more volume from these customers, which in terms of proits would more than compensate for the lower prices. The company's employees would be pleased because their jobs would be protected. There would, after all, be more volume and more work, and no threat of lost jobs (which will occur if their customers lose the battle against offshore competition). Also, the employees are willing to accept and believe they are able to safely reduce the potential added risk of producing this new product. It is time for Sean, the CEO, to speak. He is an admired role model leader who has provided the company with inspirational leadership for many years. He asks the group to assess the impact on the communities around the plant and beyond. He also asks them to understand the need for the company to make right decisions for all stakeholders as well as continue to create a virtuous high-performance work system, not just one that is viable and vital. They all recognize the potential
for harm to society at large.
He asks the group to ind cost savings in the R&D budget by postponing other promising R&D projects, and to reallocate costs to further R&D on product X. And when the revitalized R&D work yields an equally good product, but one with no negative impact on the environment or on employee safety, then it will be possible to price this product somewhat higher than irst planned and direct the additional proits towards the R&D projects that have been postponed.
The customer will be pleased, even with the somewhat higher price, which is still lower than that of the legacy product. The shareholders will
be satisied because of the higher proits even if they are not as high as those of the potentially polluting product. The employees will be pleased that the company has demonstrated that it values their safety. And, inally, society will be pleased because of the potential growth of the company and also because the company will be telling the communities their products are safe and non-polluting.
Sean made a courageous decision. That is what role model leaders do in organizations that strive to develop high-performance work processes and systems. It was an innovative reconcile of opposing views (chapter 5) as well as a courageous statement that all stakeholders need to be satisied as part of the design and philosophy of the high-performance work system.
The generic measures of performance for leading a high-performance business organization to achieve sustainable growth were introduced in chapter 9. These were high productivity, high quality, and exceptional service to stakeholders. The outputs of decisions can be thought about in terms of these deining process measures.
In our example, Sean was very conscious of the need to serve all stakeholders. This formed the basis of his strategy for dealing with the issue facing the organization. He and his organization deliberately chose to protect the value-add by redirecting expensive R&D resources to preserve the proitability of the customer organizations as well as those of his company. And the quality of the decisions made was measured in terms of adherence to his organizational values as a role model leader for protecting the environment, safety, and health of the people both within and outside the organization.