Retrench Workers and Outsource Services - Coursework Example

Decision Analysis: Retrench Workers and Outsource Services Students Name Students Number Institution Retrench Workers and Outsource Services Modern corporate decision-making is a complicated task given the numerous decision variables that need to be put into consideration. The complexity revolves around determining whose interests among the many stakeholders should be met first. The interests of the entity aside, other stakeholder interests have to be incorporated in any course of action chosen. Equally explosive is the debate as to which principles should be applied in taking organizational decisions. A decision to lay off workers and outsource their services has been a subject of debate in the recent past. This paper follows the study of the Pepsi-cola Bottling Company of New York. This company manufactures soft drinks using its two plants. Initially, the Company distributed its own products to its customers through its transportation wing. It did this through its six major warehouses located in different strategic regions. Today a multinational company rival Coca-cola in the soft drink industry (Biswas & Sen, 1999). Over the time, as noted above the company had differentiated itself by distributing its own products. However, this was not to be the plan all along. In the year 1984, the company sold off its transportation and sporting cargo businesses (Kahn, Kalwani, & Morrison 1998). This was by extension to imply that the products of the company would now be supplied through independent distributors. This paper will to attempt to analyze the consequences of Pepsi-cola Company laying off its workers in the transportation department and outsource those services. This decision will be analyzed based on the three decision approaches covered in this course. The Modernist Approach The theory develops from a scientific founding. It advocates that decisions ought to be made rationally and be based on some verifiable phenomena. In analyzing this organizational decision, specific reference will be made to the consequences it carries on the culture of the Company. The first proposition of this theory is the general systems theory that holds that decisions can be best evaluated upon considerations of the existing laws, principles, and regulations. The theory views interrelationship under which workers and their organizations conduct their duties as a system that is subject to some firm regulations. Decision analysis under this approach simply requires an examination of the rules and laws that govern this entity and determination of whether this move was provided for. The theory views the society as a collection of the atoms who formulate the ideologies of what is right or wrong. The actions of the individuals guided by the created ideologies have an impact of one kind or the other to an individual or the community at large (Hayek 1944). According to Hayek, this position holds in the entire field of science even among the inanimate objects. Under this approach, we investigate whether or not the decision respected the rules and regulations that were in force at the time and if yes then we can only make a conclusion that the move was valid and justified. The theory advocates that the decision was to be made in light of laws governing the land and the company’s internal policies. As noted earlier, Pepsi-cola had been known to transport its products to its customers in various destinations. The decision to do away with the transport wing, lay off workers in that department and outsource transport services can be viewed as a move that significantly changes the Company’s organizational culture. The idea of Pepsi-cola handling all its marketing activities was long viewed as the differentiating factor from rival firms (Kahn, Kalwani, & Morrison 1998). It had built a culture of its kind in this dimension. On this perspective this Company deviated significantly from its cultural identity. On the other hand, another argument can be developed that the Company extended its redefining agenda. By undertaking, the move to do away with the transport and sporting cargo business then more attention was to be paid to its food and soft drink production (Biswas, & Sen 1999). This way the company sent a clear signal of creating a new culture of being the icon of strategic redefinition and change. The next theory under the modernist approach is the social-technical systems theory. The theory primarily tries to incorporate both the social and technical dimensions in the work place. How well it has achieved in this regard is a subject of debate. This proposition requires that we incorporate human behavior even as we follow laws and principles. It tries to explain how a people working together inter-relate for their mutual benefits while incorporating the feelings of others in their behavior patterns (Klein & Eason 1991). According to Klein and Eason, social technical systems explain the behavior of people interrelated to the work they do and the manner in which they go about doing it. In other words it makes an attempt to explain the interdependence that subsists between the people and the process in the work process. The theory holds that people working together ought to account not only for their relationship patterns but also for any changes in their social conduct. It calls for a concern for the welfare of others. In other words, laws should not be applied to harm others or worsen their situation. In this regard, retrenching workers will be questioned as lacking moral justification. Human beings in any society will never take it kindly from an entity that undertakes such a move and the case can never be different for Pepsi-cola. A concern for the livelihood of these workers should come into play. It is until this is addressed that the decision will be validated as having a human dimension in it. The company would have been expected to go out of their way to deploy the workers in other departments or undertake a reasonable compensation plan. Pepsi-cola’s strategy hence went against the social norms as defined by the society. Though the idea could have been economically prudent, it did not uphold the social justification or rather failed to incorporate the implications of the many workers who became jobless. The message henceforth sent to the masses was not any good for business. The good name that the entity carried and the goodwill of the stakeholders became damaged a great deal. This situation could have been avoided had the decision been taken more inclusively. Consumers could not be certain that the company could uphold its corporate social responsibilities (Kahn, Kalwani & Morrison 1998). Under the contingency approach, the circumstances have the greatest dimension in evaluating decisions. In this regard, a decision will be ranked as appropriate if going by the prevailing conditions; it is the best course of action. The circumstances can either call for an action to capitalize on an opportunity or to fix a stringent problem as it was the case then. A move is therefore justified if it adds value to the company considering all factors (Holloway 1979). According to Holloway, decisions ought to be based on the perspectives of the decision maker and the extent to which he/she is able to take risk. The guiding principle, however, should be the most likely outcomes of those decisions and the attaching value they will bring. Having put all the matters into consideration, the management had reached a consideration to discontinue the transportation services. Two important propositions can be devised here. One is that the company wanted to specialize on areas of food and soft drink manufacture. By selling off these two business units, it was to obtain the much needed funds to sponsor expansion. It is general knowledge among many quarters that specialization reduces costs due to the learning curve effects associated. Going by this argument then the move on retrenchment has a sound foundation. The decision was viewed by company management to strengthen the company’s grip in the market. And given the extent of competition that existed in the soft drink industry such a move was almost unavoidable. Paying for outsourced services meant that expenditure could be incurred only when the services are hired as opposed to the prior case where the employees would have a fixed salary regardless of the time they were actively engaged. The second major aim of taking the decision was to curb against the diseconomies of scale. In a scenario where the size of a company is a detriment to its performance, a survival tactic must be devised. However much the move could adversely affect the welfare of the affected workers or even change the company’s organizational culture, the circumstances just necessitated the move. The rationale is that a company such as Pepsi-cola is maintained in operations by its performance in terms of revenues, and any factor that threatens revenue creation, such as rising operational costs is an enemy to its success. From a profit maximizing perspective, it is not prudent to continue funding a business unit or a business line that cannot guarantee proportionate returns at least any time in the near future. Based on this understanding the decision to sell out the two departments was in line to the general call business. In addition, looking at the soft drink industry, the decision can be observed as one that was taken as a differential strategy. The major players in the soft drink market and by extension the immediate competitors of Pepsi-cola used franchised system of operation. By specializing on production of all its products and using independent distributors, the company was venturing on a unique strategy that it could extend to be a competitive advantage in the competitive advantage (Kahn, Kalwani & Morrison 1998). Symbolic Interpretive Approach Evaluated based on symbolic interpretive approach, the social systems and interactions developed between the company and its workers has dimension on corporate decisions. The economic aspects aside, an organization has a set of ideas and values that define it over time and consequently guide its decision patterns (Hatch & Cunliffe, 2006). According to the sense making theory, the ongoing experiences within an organization create some shared values within the employees and between the workers and the entity. These experiences develop just like a story, gain validity, and consequently become the basis on which interrelationships are arranged within the entity. This reality unfolds over time, gains acceptance by various parties and finally has significant influence on how decisions should be made (Weick, 1995). In such a circumstance, it seems completely out of order to take actions in disregard of these experiences. The concept of sense making has been voted by many scholars as being the only viable tool capable of explaining the many fundamentals that other organizational theories leave hanging. Distinctive features of sense making dictate the scheme of intra-organizational evolution. This evolution is what gives identity to an organization distinct from all others in the same locality, industry, or serving the same customer needs. It advises that whenever people or groups of people are faced with ambiguity then the best way out is to look for plausibility and carry on with business. It further holds that people should be resilient and should stand firm even in trying and difficult situations (Weick, 1995). As exemplified by the above explanation, the symbolic interpretive approach is critical to the modernist theory. This is underlined by the fact that while the modernists view is concerned on the strict observance of the laws and principles no matter their validity, symbolic interpretive theory advocates for respect of the interrelationships, understanding, and the tone of work ethics in taking decisions. The theory provides a more rational approach as explained in the sense-making concept. The decision to lay off workers by Pepsi-cola Company can be weighed based on this approach as well. First, is the consideration for the interrelationship that existed between the workers of transport department and the company. To understand best the situation we evaluate the performance of this department over the time. The company was the only key player in the soft drink industry to engage in distributing its products. In addition, it was able to rival much older multinationals like the Coca-cola in market coverage yet it had entered the industry comparatively much later (Kahn, Kalwani & Morrison 1998). These two facts just highlight some of the major advancements that Pepsi-cola had made with the help of its transport department. Going by the symbolic interpretive theory the grounds on which the retrenchment decision was made is questionable. The modernist approach holds that the decision is right if it is in line with the laws and principles in force as noted earlier. However, going by the concept of sense making actions need not be taken simply because there exists some legal justification. It would have been worth considering the long-standing relationship between the company and its workers. This could have been justifiably fair given the commitment and success shown by members of the transport department. On the assertion by the modernist theory that, decisions be qualified by circumstances, serious flaws are still existent according to the symbolic interpretive theory. It is not the circumstances of the superior party that should matter and not of the weaker one as well. Sense making requires a good account of conduct. It is worth noting the inherent circumstances and the identity on which two or more parties complement one another. Having enjoyed great market success, largely to the contribution of the transport department and by extension the workers in the same wing, it was worth respecting the plausible relationship created and developed for all that long. The short-term increase in expenses of running the wing could not add up for the time and effort that had gone into establishing the healthy relations that had guaranteed all that success. The argument on diseconomies of scale cannot find refuge under the symbolic interpretive either. This is because the theory holds that constraints are more of our own making than circumstances and hence should not form the sole factors upon which reaction should follow. In contrast, they should form the experience upon which learning should be effected. Indeed according to this theory, during times of constraints, it is better to continue than to halt because even if we opt to stop, the flow of experience will just continue and the reality will remain for us to face (Weick, 1995). In the case of Pepsi-cola, the best course of action would have been to make efforts to sustain the wing and bring it back to the days of glory. Post Modernist Theory Postmodern theorists require that the perceptions and fundamental beliefs of other parties be assessed appropriately. Factors like the effect on customer reaction, motivation on unaffected workers and competitor reaction must be given due consideration. In this view, the cultural and social conditions dictate the conduct of behavior that should be upheld. The norms that apply to a particular society should form the basis of action patterns (Hassard & Parker 1993). The theory also pays attention to language and its usages. It, however, contends that the meaning portrayed by language cannot be interpreted in absolute terms. This is because language and particularly the implied meaning changes with the context in which it has been applied. This theory subjects the modernist theory to much critique. It purports that the operational pattern of an organization should align to the requirements of present situations rather that strict adherence to written or expressed laws and regulations. In any case such laws or policies may not have been objectively formulated and may imply different meaning from the one that they held at the time of their creation. This theory has faced considerable critics as being confusing and outrageous. It has also been challenged due to its proposition that decisions should never be made in reference to theory. Instead it advocates for the study of how knowledge itself is created. On these grounds critics have argued that it lacks practical foundation (Parker 1995). This position will not, hinder our analysis of the organizational decision of our interest. Considering the theory’s assertion that behavior patterns should not follow written theories and principles, the first proposition held by general systems theory under modernist approach is watered down. The use of language to dictate policies and principles cannot pass the test of circumstances. In this regard, a policy that was appropriate previously will not necessarily be viable today simply because it is almost impossible to have exactly two identical situations. A decision cannot therefore be justified by laws and regulations only. The decision by Pepsi-cola to retrench workers on basis of permission by provisions of company laws and policies lacks moral justification under this approach. The reason social conditions ought to be upheld. Moreover, is as noted earlier circumstances change and consequently language and meaning. A decision needs to be objective and in adherence to the interpretations of language and must fit in the context prevailing presently as opposed to the past circumstances. Rather than basing the decision on laws and principles, the evaluation of the validity of the decision should be looked at from the point of view of social and cultural perspectives. When the post modernist approach is compared to the social technical theory, the issue of theorizing comes in again. While it would be viable to be considerate of the human behavior, the actual founding of that behavior is to be treated at suspect by this theory. This is because the human behavior so referred to is simply the work of theory that has been subjectively devised, applied over time, and hence gained acceptance in the society. Before we gauge the decision on such basis we must pay attention to the manner in which the practices came about being incorporated into the societal norms. The contingency theory on it part holds that a decision draws justification from the value that it is likely to bring forth. Post modernist theory is multidisciplinary and will definitely question the definition of the value as implied. Even if it were to obtain a reasonable explanation, then the beneficiary of the value becomes the next concern. As argued by the contingency theory the decision to outsource external services proved more economically viable than having the transport wing internally. However, the economic value so purported is only to the benefit of the company and the detriment of the workers who suffered the lay off. In other words, the approach is not sensitive to the social and cultural interests. In post-modernist approach it is out of order to disregard these conditions as they are fundamental in defining the very context upon which people relate with their environment. In this respect, we need to appreciate the fact that benefit of one party alone cannot form basis upon which decisions should be justified. In contrast, we ought to apply knowledge and examine objectively the sum total of all the conditions that revolve around the decision at hand. This is done to uphold respect of the social structures withstanding as opposed to theories that are formulated to guide action pattern. In conclusion, it is safe to state that making a decision is a complex case. Furthermore, evaluating its validity is even more cumbersome. Much appreciation, however, has to be made to the contributions of the theories devised. To be on the safe side calls for involvement of the various factors and circumstances and being as objective as possible. The interests of other parties who are likely to be victims of the consequences of the decision must not be ignored. Finally, the importance of the prevailing social structures and cultural dimensions cannot be slighted in making decisions but rather need to be respected if we are to identify ourselves with the post modernist theory. References Biswas, A & Sen, A 1999 ‘Coke vs Pepsi: Local & Global Strategy’, Economic & political weakly, Vol. 34, no. 26, pp.1701-1708. Hassard, J & Parker, M (Eds.) 1993, Postmodernism and organizations, CA: Sage. Newbury Park Hatch MJ & Cunliffe 2006, Organization Theory: 2nd edition, Oxford University Press, Oxford. Hayek, FA 1944, The Road to Serfdom, Chicago. Holloway, CA 1979, Decision Making Under Uncertainty: Models and Choices, Englewood Cliffs, NJ, Prentice-Hall. Kahn, BE, Kalwani, MU & Morrison, DG 1998, Niching Versus Change-of-Pace Br&s: Using Purchase Frequencies & Penetration Rates to infer Br & Positioning. J Journal of Marketing Research, Vol.25, no.4, pp.384-390. Klein, L & Eason, KD 1991, ‘Putting Social Science to Work’ Cambridge University Press, Cambridge. Parker, M 1995, Critique in the name of what? Postmodernism and critical approaches to organization. Organization Studies, Vol.16, pp. 553–564 Weick, KE 1995, Sense making in Organizations, CA: Sage Thousand Oaks Read More