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4 Questions Indian Manufacturing Should Ask After The US Bedsheet Scandal

23/11/2016 3:25 PM IST | Updated 01/12/2016 8:37 AM IST
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Monica Rodriguez

As the India media got engrossed in demonetisation, the Tata boardroom battle and the US elections, a certain rather scandalous bit of news about a leading Indian textile company, against which class action suits are being filed in the US, seemed to have been largely ignored. This manufacturer had apparently supplied premium quality bedsheets to retailers such as Target and Wal-Mart—except that said sheets were actually made of low-grade cotton blends, not the Egyptian kind as promised. Earlier this year, investigators from Target probed the fibres of the bedsheets under a microscope and then tracked the global supply chain touching Minnesota, Cairo and Mumbai.

This incident shows brand India in a poor light at a time when the PM is pushing his "Make in India" campaign.

As reported in the media the company has agreed that the error has happened in their side and has hired Ernst & Young to re-examine its supply chain. This incident has clearly become a public relations challenge for the country's textile industry and shows brand India in a poor light at a time when Prime Minister Narendra Modi is pushing his "Make in India" campaign.

The objective of this piece is also to not delve into the root causes that led to this specific scandal. However, I think it is an opportunity for Indian manufacturing to introspect and see if there are issues which could lead to this type of reputation-damaging problem.

1. Are strategic objectives creating behavioural dissonance?

Strategic objectives help an organisation to steer their course. They provide clarity on the prize ahead for organisational teams. They unite the organisation in a common purpose, challenge individuals and aid in planning for success. But these objectives when not carved well—especially when their impact is not thought through—can drive undesirable behaviours. Let me give you two examples:

The perils of contradictory objectives: Have a look at your strategic objectives and see if they are contradictory in nature. The first goal should be to avoid such contradictory goals. But when it is not possible to avoid, take care to see how they are being communicated to employees. The focus should be to ascertain if the contradictory goals could trigger behaviours that could negatively impact the larger interest of the organisation. Here's an example: One of the reasons for the Volkswagen emissions scandal was that the CEO had set three contradictory goals: demonstrate energy efficiency, price competitiveness and environmental safety. The company had to pass the tough emission standards while making sure the prices did not go up or impact fuel efficiency. The result was that engineers came up with software that made cars emit less toxic fumes during test conditions.

Sharp targets which have to be achieved at all cost: Has the CEO set sharp targets without really thinking through the consequences? The famous example of this is the Ford Pinto scandal of 1970s. At the time, Ford president Lee Iacocca wanted his team to build a car weighing less than 2000 pounds and costing not more than US $2000 within 25 months. Given the pressure, the product was sent to the market with design faults. The engineers were aware of the defect which could be hazardous to human life yet decided to send it to the market as the cost-benefit analysis found it was cheaper to pay customers than correct the problem. It was a commercial success until Mother Jones magazine exposed how this car could cause a fire at the rear end and lead to human deaths.

Remember, values if not reinforced, decay over a period of time and hence need to be regularly brought to life.

Indian manufacturers have to be careful about not falling into a similar trap. Given the pressure to remain competitive, sometimes companies set targets to meet requirements of customers. For example, let's say there is a demand from an international retailer to deliver a certain product at a certain price. While there is no harm in the target per-se, organisations need to ensure that a proper structure is followed to design a new product and no shortcuts are taken.

2. How often are the corporate values reinforced?

Most progressive manufacturing companies have values which they mention in their website, company brochures and even on their premises—these values take pride of place along with their vision and mission. There are two issues here. The question to ask is when the values were decided, and are they sufficient for allowing the organisation to wade through current challenges? For example, if the company competes in a market where customers expect an ecologically friendly product, then does it have "going green" as a corporate value?

The other issue is making sure that the values remain central to everything that the organisation does. Are they being lived by the leaders and the employees on a daily basis and do they guide all decisions and actions taken by them? This is easier said than done. The values cannot just be communicated once and forgotten. Their overarching importance has to be repeatedly communicated by leaders across various forums. It has to be ensured that systems, policies and practices align with these values. Remember, values if not reinforced, decay over a period of time and hence need to be regularly brought to life.

3. Is there a culture of silence in your company?

By culture of silence I mean instances when things are not right, yet people don't speak up. There could be many reasons why employees do this. One reason could be because employees don't find it safe to raise a flag if things are not as they should be. This could be because the organisation does not have a culture of openness and trust.

What pervades in the organisation is a "this is not my responsibility" mindset. Why bother about something that does not pertain to my area of work?

Employees find it too risky to bring out issues that could put them under the spotlight. They don't want to get rebuked or challenged for something they are not responsible for. There could also be a fear of losing their job. What pervades in the organisation is a "this is not my responsibility" mindset. Why bother about something that does not pertain to my area of work? It could also be because when employees reported a problem, the bosses said things like, "Don't come with problems but with solutions." Don't we remember the recalls of small cars made by General Motors in 2014 due to a faulty ignition, which shut off the engine during driving and prevented the airbags from inflating? Though the employees of GM knew about the problem for many years, the company decided to recall the cars only when GM was sued by a family for a death caused by the fault.

This is why it's imperative for manufacturing companies to build a culture of trust and openness and drive an environment of accountability. If things are amiss, employees should not shy away from holding people accountable irrespective of their hierarchy or organisational standing.

4. Are "not acceptable" practices becoming "acceptable?"

Are practices which are normally not acceptable in your company becoming acceptable? This is something leaders need to be always careful of. This is called normalisation of deviance. This is a term coined by sociologist Diane Vaughan which refers to the practice where "deviance" from the norm or standards slowly gets institutionalised in the company. This happens when teams find it difficult to adhere to standards due to factors such as time pressure, resource constraint, limited budget etc. As a result, they accept the current sub-par standard as a benchmark. There may be a belief that the slip in standards is temporary, but often it becomes permanent. Your normal behaviour becomes what you have got accustomed to and not what the original standard was. The psychology behind this is that we humans have a naturally tendency to take short-cuts and deviate from established standards. If nothing bad happens we don't mind repeating such behaviour and before we know it, it's a new norm.

This is something that the CEO and top management should have zero tolerance of. They should come down heavily on actions and behaviours that may not lead to the best outcomes for the organisation. Remember, when there is a quality drop in the marketplace, it does not suddenly happen. It happens because someone someday compromised some standard somewhere which later became a norm. Hence, business leaders need to not only be on the watch-out but also identify potential deviances that may occur in the organisation and take proactive steps to arrest them.

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