Motorola Company Case

Building resource capabilities and organizing the work effort; managing the internal. Organization to promote better strategy execution; corporate culture and leadership - keys to effective strategy execution.

Case assignment: “Motorolla: Ethical Challenges in a Multicultural Environment”

1. Is Motorolla an ethical company? Is the company’s top management genuinely sincere about the importance of conducting business in an ethical and honorable manner? How can you tell?

This question has to be answered with a sounding “YES”. The management is

sincere about the importance of conducting business in an ethical and honorable manner. There are several reasons, that account for this statement. The CEO; Christopher Galvin, puts a lot of effort into the ethical conduct of business, like:

- he himself exercises the leadership toward ethical behavior
- he shapes the work environment for his employees to have ethics fit into it
- he builds organizational strength in order to be able to live ethical standard in everyday business life
- allocates recourses to support these activities (ethic committees, ethic compliance officers to live up to the highest possible standards)
- he establishes strategy supportive policies (Motorola’s Intranet)
- he pushes for constant improvements
- he institutes best practice
- he installs communication, information and operating systems that enable

company personnel to better carry out their strategic roles proficiency.

Besides the ethical behavior of the CEO, who stated:” …we will never change our compromise our high principles - our superb business ethics and the dignity an respect we hold for the individual”, several things are incorporated in the business actions, that prove that Motorola is an ethical company and that they are sincere about it:

- values are incorporated into employee training and educational programs (see also their web page!)

- explicit attention to values and ethics in recruiting and hiring to screen out applicants who do not exhibit compatible character traits
- communication of values and ethics to all employees and back
- communication of values to the customers (Customer satisfaction Cards)
- management involvement and oversight
- word of mouth indoctrination
- values and ethics implemented in every organizational unit
- regulations for violations of ethical standards and values.

Ethics is part of the tradition of the company. If it was changed, Motorola was not Motorola any more, but like many other businesses around the world. This has developed for a long period of time and constantly been taken care of. Ethics is not just a matter of regional or national importance, but is considered the basis for business actions all over the world even the fact, that it might cause disadvantages in the short run.

2. Do you believe that Motorola’s management is correct in asserting that the company’s ethical approach have a positive effect on the company’s performance? Would the company be better off if management relaxed the ethical standards and ethics compliance effort a bit?

A strong corporate culture based on ethical business principles and moral values is a vital driving force behind continued strategic success. A company has to take care of how it does business; otherwise a company’s reputation, and ultimately its performance, is put at risk. Corporate ethics are undertaken to create an environment of strong held values and convictions and to make ethical conduct a way of life. Ethics nurture the corporate culture in a very positive way; they connote integrity, “doing the right thing”, and genuine concern for stakeholders. Ethics/value statements serve as a cornerstone for culture building; a code of ethics serve as a cornerstone for developing a corporate culture. If the company relaxed the standards, the business lost this reputation and lost part of their performance that is due to the ethical standards set. One has to decide between short run and long run success. As Motorola is a traditional business, that grew over decades, it maybe gained a few more contracts in the short run. However, in the long run it became a very different business, like many other in the world. It lost its uniqueness. And attractiveness to managers, who want to be sure to work for or with a corporation, that does have strong ethical regulations.

Few more things have to be taken into consideration. The human recourses do value an employee, who respects the human being and supports them in hard times. Furthermore, governmental officials also like partners, that do obey certain ethical standards. Finally, business partners value partners, who have trust and respect as one of their core values.

Yes, the company was not better of in relaxing the ethical standards and ethics compliance effort a bit. This is exactly what they are already doing. The problem is, to balance it correctly. The “never-relax-it approach” is very ethnocentric. Different countries have different cultures and a global business cannot transfer all standards unchanged to each point in the world expecting the partner to understand it and forget about century-long grown customs, like in Japan. Consequently, Motorola made adjusting efforts, which is indeed a balancing act.

3. What do you see as the key components of Motorola’s corporate culture?

The key components of corporate culture is grounded in two “key believes”:

1. constant respect for people and

2. uncompromising integrity.

Furthermore, components of corporate culture are:

- a long tradition of participative management
- decentralized business divisions and groups
- independent operations
- strong and pioneering commitment to six sigma quality
- a technology-engineering orientation and
- deep commitment to operating honestly and ethically
- honesty
- obey the law
- orientation on families and the individual employee (e.g. treating female workers with respect)
- not to deal with businesses involved in land-mine productions
- code of business conduct

The key components of Motorola’s corporate culture are written down in a document, called “For which we stand: A Statement of Purpose, Objectives and Ethics”, which is constantly updated.

4. What problems and challenges confront Motorola in getting the company’s 1200,000-plus employees to conduct company business honorably and ethically in nearly 100 different countries?

The business is highly decentralized. Strategic planning, finance, human recourses, legal, ethics, and quality were centralized at the corporate level but full authority to develop business strategies was delegated to the business units. However, this is a strength and weakness. One the one hand, getting employees selected from the headquarters might no t in any case be the right choice. On the other hand managers might not properly informed about the latest developments/strategies of the business and choose inappropriate actions in their strategic adjustments. In any case, the business policies resulted in a situation, where divisions were not cooperative or responsive to the requests and need of other divisions. Furthermore, units becoming like a business in itself, take little notice of market developments and feel save in the financial backing of the mother business. Consequently, business unit policies ended up not being in the best interest of Motorola or even contrary to their policies. This in mind, managers started giving cross-functional tasks, in order to have them building up relationships and networks all over.

Another challenge is the fact, that Motorolans are at the cutting edge of advanced technologies. But, marketing plays and ever increasing role. Management is not experienced enough in dealing with this challenge. They need to hire good marketers in order to avoid this flaw.

Furthermore, Motorolans seem to be on the happy island, with high technical

standards and an impressive tradition as a bond. In 1998, 67% of all top executives served for the company fro more than 20 years! This means that Motorolans are like a big family with all their pros and cons. On the one hand, it is a strength to have projects run efficiently, because of working networks and friendships. But on the other hand, it is difficult to speak up in case of poor performance. Motorola is inbred and out of touch at the top.

The company’s standards were so deeply carved into the business, that it was transferred also in different countries. Country specific customs and habits were not properly reflected, but an ethnocentric attitude was transferred.

But, ethics is defined differently all over the world. Give-away ceremonies are quite common in Japan and are not considered unethical. And many countries have implicit and explicit standards for appropriate business practice both at home and around the world (see the Foreign Corrupt Practices Act of 1977 and the Interamerican Convention Against Corruption as an example). It is just a matter of accepting the others customs and not to believe, because they are from Motorola century old traditions are to be redundant. This is a severe problem for the management. The question is now, how to adjust the local “necessities” to the ethic code of Motorola. Black-and white interpretations place a heavy burden on business actions abroad at different degrees. Managers who decided on violating ethic standards were to feel guilty and betraying the colleagues back home and the founders of the firm, who always did support them. Consequently, increasing numbers of Motorolans began to point to conflicts in these matters.

For example, it was not allowed to pay bribes at all and to enter into procurement arrangements with family members or to be party to any such negotiations, a custom very common is Russia. Minor adjustments were gift giving in Japan, but under welldefined conditions.

Motorola also had to change its work organization according to local standards.

Individual performance was historically the only thing, which can be rewarded. But, in countries like Malaysia, performance was primarily group based and so was the rewarding system. Motorola allowed one plant in Malaysia to change to local standards. Furthermore, Motorola funded in foreign countries local institutions, in order to boost the caliber of governmental service to them.

The challenges are observable from the fact, that in 1990 about 50.000 employees are from different cultures around the world. Half of 120.000 were outside of the USA employed. Employees are base resided in hundreds of subcultures based on region, dialects, gender, class, wealth, education and so on. About 50.000 new employees in less that 10 years demands extra efforts, to bring the ethical postures across. The problem was not only new employees from other cultures, but also different businesses, with different values and beliefs.

Management became under pressure to do something to hold ethics up where it belongs. One step was to reinstitution the Total Customer Satisfaction Card. It was provided to all employees in all languages necessary. The second step was the development of the Motorola Ethics Renewal Process (MERP).

5. How well is Motorola doing in gaining employee acceptance of an compliance with the company’s code of ethics? Is Motorola’s ethics compliance working? What things does it do well? Where are improvements needed?

Motorola is doing well in gaining employee acceptance of an compliance with the company’s code of ethics. Respect and appreciation of the way done were widely shared among the employees and managers. Top management had an unwavering conviction that maintaining high ethical standards was the right thing to do and good business. Employees believed, the in the long run, to oppose bribery, extortion and “lubricating” paid off, because it reduces costs. Furthermore, it made Motorola a desirable business partner. Furthermore, there was a greater trust between Motorola and its customers and vendors. Additionally, Motorolans believed that they serve as a good example in the business world.

However, as discussed above, more and more Motorolans described the conflicts between traditional ethical expectations and what were acceptable business practices and ethical standards in the countries where they were operating. Consequently, management had to respond and adjust minor conflicts. Motorola began taking one of four stances when conflict arose. One stance was not to take adjustments in expectations. But, the other three stances included certain situations, in which some responsiveness and modifications in expectations seemed to be reasonable and appropriate.

The MERP consisted of a book providing information about ethics, along with a set of real-life cases. These were to use in training discussions and ethic workshops. The first workshops were successfully enforced in 1996. Three years later it reached Asia, Europe and Africa.

Further part of the MERP was to form local, county, and regional ethics committees to be responsible for promoting a culture according to the Motorola ethics. These committees had to handle issues, questions of interpretation, and the appropriateness of certain exceptions.

Part of the MERP was also an ethics committee, consisting of three functional departments, legal, human recourses and finance. The members had to monitor compliance, investigate complains and report problem areas.

However, the text provides a few examples that proof that the program does not work. Business reality is too far away from Motorola ethics. Further adjustments are needed. Nobody can justify, why an employee of Motorola can not do something about the fact, not getting a plane ticket at night because of ethical standards. A withdrawal from the Chinese market should have been a must after the suppression of the revolution. But, because of the importance of the Chinese market, they did not do so. However, Motorola did a good job in countries, where varying levels of corruption were every-day business. Motorolans were accepted because of their attitude and business with this company, based on trust, is attractive. Buyers of their products new about the high standards and customers knew, that the products prices do not include “extra fees”, like allowances for bribes or kickbacks. State officials did like doing business with them, because they did like their way of doing things.

6. What recommendations would you make to Chris Galvin concerning Motorola’s code of ethics and ethics compliance effort?

Top management new blood

Work harder on the realization of ethics adjsutments