Introduction To Business: Midterm Assignment
During the first week of lectures we looked at the 7 factor challenge which looks at a specific environment and general environment within an organization. Most businesses fall under the general environment category which typically include the forces; economic, labour market, technological, global, political, societal, and sustainability factors. Each of theses forces may have had an impact on the company Goodwill, below I will comment on each factor and the possible repercussion it may have had impacting Goodwill.
Economic Factor: An economic factor plays a big role in an organization, “acting as a strong influence on the present and future prospects” (Karakowsky & Guriel, 2018, p. 3). In the article 16 Ontario Goodwill stores shut down posted in the Toronto Star it states that “Goodwill Industries of Toronto, Central and Northern Ontario reported total revenue in 2014 of just over $28 million and expenses of $29,218,954, according to the registered charity’s tax filings” (Brazao, 2016). This is clearly a loss in the financial state of the business, however the article also states that a couple employees were being reported as earning hundreds of thousands of dollars a year while others made between $11 and $27 dollars an hour with most making about $14 (Brazao, 2016). This has potential to be a big factor in the companies economic struggle, they are spending way more then they are bringing in, because of this they have closed their doors until further notice and over 450 people are out of the job until the cash-flow crisis can be resolved.
Labour Market: One thing that is unique to goodwill is that they are a charitable organization who try and hire people who struggle to find employment (Mojtehedzadeh & Sachgau, 2016). A labour market is described as “the ability to attract qualified workers and to extract maximum effort from them” (Karakowsky & Guriel, 2018, p. 5). We can look at a labour market as a factor that has impacted Goodwill because of the employees who are hired through the organizations charitable efforts. For these employees work has given them a purpose, identity, and a passion (Mojtehedzadeh & Sachgau, 2016) to do something and with that they are more then likely keen to put maximum effort towards the work in order to support their families or themselves. Another thing that could potentially have an impacting factor is Goodwill Toronto, Eastern, Central and Northern Ontario are all not unionized, “Toronto's is also the only Goodwill chapter in the country, aside from Hamilton's, that is unionized, he said. The Canadian Airport Workers Union was certified to represent Toronto Goodwill employees in 2012, according to documents from the Ontario Labour Relations Board. ” (Ross, 2016). Though they have a union representing them they don’t have anyone within their organization.
Technological Factor: For a business to effectively grow and ultimately succeed new technologies must be introduced. Based on the articles provided there is nothing that discusses the technological advancements that goodwill may or may not have implemented in order to move them into the next phase for the charitable organization. This lack of technological advances is perhaps a factor that contributed to the downfall of the company.
Global Factor: Prior to the shutdown of Goodwill Toronto, Eastern, Central and Northern Ontario, the Ottawa outlet had closed after management had said it had become unprofitable (CBC, 2016). This could be looked at as a foreshadowing of what was to come for the goodwill company, perhaps if they looked at the issues with that stores profitability and applied what they found to the other stores struggling they might of found a way to remain profitable and stay open.
Political Factor: Goodwill’s sudden financial crisis came as a shock to many employees who claimed they had no idea it was coming and that there was lots of merchandise on shelves and were confused as to why they needed to close (Mojtehedzadeh & Sachgau, 2016). In another article it talks about how the “The organization receives an annual subsidy from the federal and provincial governments totaling $4 million” (CBC, 2016) so therefore it was shocking that they went into such financial struggle. The money provided from the government were supposed to go towards sponsored programs but instead was found in the pockets of handsomely paid employees, leaving people who are vulnerable or struggle with disabilities terminated (Brazao, 2016).
Societal Factor: The societal influence that could have been impacting Goodwill is the fact they rely on donations to stock their stores. They don’t know the condition of the items they are putting on their shelves because of this they may be forced to lower the value of the products in order to move the merchandise at a reasonable rate. Even after the stores were closed donations were piling up outside of stores, almost as if people were throwing away their unwanted items, they knew the stores were closed but instead of bringing the items back at a later time they just left them to clutter the streets even after employees informed them they were closed.
Sustainability Factor: “Sustainability in business is the relationship between the three p’s: people, profits and the planet” (Karakowsky & Guriel, 2018, p. 6). People, it needs to meet the needs of people, because Goodwill is donation base there is no guarantee that they are going to have what you are looking for so as a consumer you may consider going to other retail establishments such as wal-mart which are going to provide various sizes and products of new value. Planet, in a way it can be looked at as protecting the environment because it’s repurposing items people don’t want instead of them ending up in landfills. Finally we need to look at profits, theoretically Goodwill should be in the green since they unlike other retailers they don’t have to worry about buying producing and only need to worry about operational costs and their charitable efforts. Explain what management philosophy (classical or behavioural) would be most suitable for Goodwill and why? Explain in detail with examples. (20 marks)
When reviewing the two types of management philosophies and looking at goodwill as a company, I can see components of both philosophies that have potential to be a suitable choice for Goodwill, below I will discuss in detail why I believe each could have the potential to be suitable for Goodwill. Classical: In a classical management philosophy consists of three approaches: scientific, administrative and bureaucratic, “All share a basic philosophy regarding what is required to manage effectively” (Karakowsky & Guriel, 2017, p. 24). I don’t believe that scientific management is relevant to a company such as goodwill because its more suitable towards a labour intensive job, ie. construction or a commercial kitchen or factory. However I think that there are things in both administrative and bureaucratic management that should be considered.
Administrative management “Breaking work down into its simplest components and assigning separate task to workers” (Karakowsky & Guriel, 2017, p. 26), I think that this is crucial for organization to employ specifically a retail store like goodwill. Each employee should have a task and in a store that also deals with donations it is important to have specific people doing the same things each day that way it minimizes the training time that may take place if employees are constantly switching positions, ie. cashier to floor employee, floor employee to donation center, donation center to cashier. “Team spirit and harmony should be encouraged amongst workers to generate organizational cohesiveness and unity” (Karakowsky & Guriel, 2017, p. 26). I believe this to be a good thing that all organizations should strive for seeing as if you have a team that only works against each other it could can lead to other problems and perhaps the eventual dismissal of the company altogether. “Company goals should take precedence over individual interests” (Karakowsky & Guriel, 2017, p. 26). A CEO of a company should be focused on the companies overall success and not what they can personally gain in a situation. A problem for Goodwill was the CEO for Toronto, Eastern, Central and Northern Ontario, had previously been the former head of Toronto Community Housing who had been fired falling a spending scandal (Brazao, 2016). Employing a person with this kind of history into a situation of power should create some kind of worry but the nevertheless company took the risk and perhaps this is was the cause for their financial deficit.
Bureaucratic Management “Organizations require stable and documented rules” (Karakowsky & Guriel, 2017, p. 26), Its important that all organizations that operate in a chain situation, such as goodwill, have the same set of rules and practices in place to ensure the company runs smoothly. “Hiring will be based on ability, not friendship or family ties” (Karakowsky & Guriel, 2017, p. 26), this specifically should be looked at when discussing a charitable business like Goodwill. As previously stated in the question one as a charity Goodwill tends to hires people who struggle to find employment (Mojtehedzadeh & Sachgau, 2016), this is a great concept but it could potentially be a problem seeing as the people they hire may not be in the best mental or physical state which could potentially cause issues like not showing up to work because of a mental illness preventing them to or having issues with their physically when they wake up that day. These employees may not be the most reliable or the most qualified for the jobs.
Behavioural: Behavioural management is “a recognition of employees not simply as another resource to be managed but as individuals with certain needs that must be addressed.
The behavioural approaches focus on the nature of the employee and what factors encourage employees to maximize their effort; this approach assumes that to achieve maximum productivity requires an understanding of the human factor of organization and an ability to create an environment that permits employees to fulfill social, as opposed to simply economic, needs ” (Karakowsky & Guriel, 2017, p. 27). I believe that this philosophy is the best suited for goodwill since it is a company that works with the government and charities to employ employees who struggle to get hired. In a specific case an employee of Goodwill talks about how he could of gone on disability since from age 12 he had been suffering with scoliosis, he figured that by sitting home and watching tv probably would of gotten him more money then his 19 years at good but working provided him with purpose, identity and passion (Mojtehedzadeh & Sachgau, 2016). Unlike a classical philosophy, behavioural management works with the employees individually to suit their specific needs so since goodwill is in the business of employing people who struggle with different disabilities. This management philosophy seems to be better suited towards goodwill specifically although I also feel like there are parts of a classic philosophy that can be applied to strengthen the company overall management outlook. What business-level strategy would you recommend for Goodwill and why? Explain in detail with examples. (10 marks)
There are three business level strategies we’ve looked at in the course, cost leadership, product differentiation, and focused. A cost leadership strategy offers products at a lower cost however their profits are superior. A differentiation strategy creates products that are seen as unique in the industry. A focused strategy looks at a specific part of the market and concentrates its efforts on that. (Karakowsky & Guriel, 2017, p. 85)
When looking at Goodwill I can see specific parts of each strategy that can suit them: They are unique in the retail industry as it is unlikely you will find two of the same items at different stores, they carrie all types of products from picture frames to wedding dresses, which you wouldn’t necessarily find at other retail chains (Differentiation). They can also be looked at as they are concentrating on a specific part of the retail market by selling used clothing and goods and proving a service to those who cannot afford to buy items at full price (Focused). Lastly though they closed due to a deficit in their finances at the time they were open they could be seen offering used items at a lower cost then other second hand retail chains such as value village (Cost Leadership).
I am recommending that the most effect business-level strategy for Goodwill would be a focused strategy. In a focused strategy a company needs to target a specific buyers group and be able to compete efficiently and effectively by targeting on a particularly narrow market (Karakowsky & Guriel, 2017, p. 88). As previously stated above Goodwill offers both used clothing and household items, many of Goodwill’s customers are specifically shopping for deals, looking for brand named clothes at a great discounted rate. Goodwill is in a narrow market of second hand retail stores, competing with Value Village and local mom and pop thrift stores, however the benefit Goodwill has is that it is slightly cheaper then Value Village and it has a more recognizable name then a local thrift store, therefore giving it an edge against its competitor. Explain in detail using the 5 elements of structure the kind of structure Goodwill likely had: traditional or modern? (10 marks)
The Five elements of structure are work specialization, decision-making source, levels of administration, formalization, and departmentation. Work specializations: function and social. Functional refers to the division of jobs into simple receptive tasks, where social refers to the specialization of individuals rather than the specialization of jobs (Karakowsky & Guriel, 2017, p. 49). Decision-making source: looks at where the authority lies within an organization it can either be centralized or decentralized (Karakowsky & Guriel, 2017, p. 50). Levels of administration: how many levels does an organization have of people in charge (Karakowsky & Guriel, 2017, p. 50).
Formalization: What degree are rules and procedures going to be administrated to guide members of the organization (Karakowsky & Guriel, 2017, p. 51).
Departmentation: “Dividing or grouping major functions or work activities into separate units” (Karakowsky & Guriel, 2017, p. 51). “A tradition bureaucracy organizational structure emphasizes job specialization, a formal hierarchy of authority, a clear system of control and rule and regulations to guide behavior” (Karakowsky & Guriel, 2017, p. 40). A modern structure is flat, fluid, integrated and global. I believe that Goodwill followed a traditional organizational structure, I believe this because in one of the articles it talks about how workers were locked out from the stores without any explanation from management (CBC, 2016). This shows that the organization clearly has a hierarchy of authority in which the high up can give a task and the lower you are the less you need to know. In a modern organizational structure employees have more of a say and would perhaps have learned in advance that the stores would be closing. Was there “good governance” at Goodwill (south Ontario branch)? Explain why or why not. (20 marks)
“Good governance emphasizes the importance for five features in the operations of the corporation: accountability, fairness, transparency, reliable leadership and stakeholder engagement” (Karakowsky & Guriel, 2017, p. 110). Below I will look at each of the five features and will discuss with examples whether Goodwill’s south Ontario branch displayed ‘good governance’.
Accountability: “Management takes responsibility for what they do and can be held accountable for their actions” (Karakowsky & Guriel, 2017, p. 110). When Goodwill shut down the stores they left hundreds of workers without answers. The CEO of the south Ontario chapter gave only a generic excuse blaming a number of factors affecting the retail environment, however neighboring Goodwill chapters in Niagara and Hamilton regions stated that whatever retail industry problems effecting south Ontario had no effect on their stores (Ross, 2016). Clearly the issue was in the specific brach and yet the CEO of the brach chose to put her blame somewhere else.
Fairness: “Consideration is given to all pertinent stakeholders and each will be treated equitably” (Karakowsky & Guriel, 2017, p. 111). According to bankruptcy documents one employee who worked for the company for more then 29 years, was owed $21,088. 00 by Goodwill when it closed, she said she doesn’t expect to get that back, currently this employee is still unable to find a job and has to live off of her $334. 00 biweekly employee insurance payments, (Honderich). This is just one employees situation there is probably many stories that are very similar, these employees worked hard for the company and its not fair what they have been put through since this situation has come up. They were never warned it was going to happen and now because of this many are put in some tough situations that are making life tough.
Transparency: Management does not hide information but rather allows its processes and transactions to be observable by other stallholders (Karakowsky & Guriel, 2017, p. 111). On top of the sudden shutdown which the employees weren’t told about they were informed suddenly that they would not be receiving their paycheck that week but would updated January 25th, over a week after the shutdown, about the date of payroll and other information (Mojtehedzadeh & Sachgau, 2016). Goodwill’s management team kept so many important things from its employees, not only the fact they were closing the stores but what was more concerning was the company couldn’t tell people when they were going to be paid next.
Reliable Leadership: Leaders are competent and trusted to carry out the vision and mission of the business in the best interests of all pertinent stakeholders (Karakowsky & Guriel, 2017, p. 111). On the Friday preceding the closing of the stores the entire board of directors with the exception of the CEO had resigned precipitating the announcement that would be made only two days later (Brazao, 2016). This shows that as a board they didn’t stand together in hard times, leaders are people you trust and who you should look to in times of crisis but for Goodwill everyone who the employees and stakeholders should have turned left before the news was even released.
Stakeholder Engagement: “Pertinent stakeholders are identified and engaged to ensure that management is fully knowledgable regarding the expectations and requirements of other stakeholders” (Karakowsky & Guriel, 2017, p. 111). Management clearly didn’t identify to the employees what was going on and because of this they showed up to work to find a closed building. Based on the reasons stated above it is clear to see that Goodwill’s south ontario brach lacked ‘good governance’ and hid so many things from their most curtail stakeholders, their employees.
