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Case Study Report

The Delicate Quest for Corporate Environmental Sustainability

Learning Development 2012 Adapted from original student work by permission

CONTENTS
EXECUTIVE SUMMARY.......................................................................................................iii

1. INTRODUCTION........................................................................................................ 1

2. THE DECISION-MAKING FRAMEWORK AT GREENHEART ....................... 1 2a. A Sociological Perspective ..................................................................................... 2 2b. The Phenomenon of Conformity .......................................................................... 3

3. THE DECISION-MAKING FRAMEWORK AT GREENHEART PLUS............ 3 3a. A Sociological Perspective ..................................................................................... 4 3b. The Phenomenon of Paradox ................................................................................ 5

4. CONCLUSION ............................................................................................................ 5

5. RECOMMENDATIONS............................................................................................. 6

REFERENCE LIST ................................................................................................................. 8

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Executive Summary
This report employs a sociological perspective to analyse the decision-making framework of the food company Greenheart, and its subsequent entity, Greenheart Plus. At Greenheart, decisions were made essentially by one individual, whose rationality was, naturally, bounded. His decision to create an environmental investment fund and to initiate other environmentally responsible production methods ultimately threatened the economic viability of the company. From a sociological perspective, the CEOs authoritative decision-making meant that the employees were not committed to the decisions, and therefore the decisions were not implemented successfully. The subsidiaries of the company did not share the environment objectives, and this also resulted in ineffective implementation of the objectives. A lack of conformity among employees meant a lack of co-operation in achieving the objectives. This changed with the takeover in 2001 and the creation of a new company, Greenheart Plus, which focused on increasing sales rather than pursuing environment policies. The decision-making process changed to become one of consensus. From a sociological perspective, this is more positive as it results in a greater commitment by employees to the decision, and more effective implementation. The problem of contradictory objectives was resolved as environmental production methods were introduced slowly and systematically. However, there is a possible paradox in homogeneity in that the lack of constructive conflict, which is necessary for innovation and creativity, could become a weakness. It is therefore recommended that to address the problems of individual decisionmaking, as in Greenheart, and to enhance the consensus decision-making process of Greenheart Plus, a descriptive action-research model of decision-making be adopted. It is further recommended that Greenheart Plus recognize the phenomenon of paradox, and create an environment that nurtures a heterogenous consensus approach to decision-making

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1. INTRODUCTION The purpose of this report is to analyse the decision-making frameworks of the multinational food company Greenheart, which was subject to a takeover in 2001 and subsequently became known as Greenheart Plus. Greenheart rated the pursuit of environmental sustainability as the most important corporate objective, which threatened the economic stability of the company. After the takeover, Greenheart Plus paid less attention to environmental sustainability and more to economic sustainability. The decision-making framework also changed with the advent of the new company. This report utilizes a sociological perspective to identify two significant issues of the company, and makes two recommendations to ensure effective decision-making of the company in future.

2. THE DECISION MAKING FRAMEWORK AT GREENHEART The framework of decision making may have a profound effect on the quality of decisions. According to Cooke and Slack (as cited in Teale et al, 2003) the decision body can be either individuals or groups. However, when decisions are made in organizations, it is assumed that managers are the dominant decision makers (Teale et al, 2003). In the Greenheart case, the corporate top management team (TMT) was the nominal decisionmaking body, but it was a group dominated by the CEO, who had administered the company for 25 years. In reality, then, the decision body was an individual. When one person controls decision-making in this way, the quality of the decision is limited by what Simon (as cited in Tolbert & Hall, 2008) identified as the bounded rationality of that individual. In other words, the information and options available to any individual is limited.

In the Greenheart case, the CEOs decision to create a fund for environmentally benign investments and to initiate environmentally responsible production methods was based on his limited personal convictions and knowledge. As a bounded rationality decision maker, he failed to consider the potential risk to the profit of the company and the interest of its subsidiaries, and was thereby conforming to what Simon (as cited in Tolbert & Hall, 2008) called satisficing rather than maximizing the economic interests of the company. Therefore, the decision making process of Greenheart was a threat to the sustainable development of the company.

2a. A sociological perspective From a sociological perspective, the decision-making process of Greenhearts CEO led to conflicts within the organization, which adversely affected the quality and the implementation of decisions. The CEO made decisions after discussing issues with other members of the TMT; in other words, it was a process of decision-making by authority after group discussion (Johnson & Johnson, 2009). Although group members may have participated in discussions, they were not involved in the decision making. The disadvantage of this method is that members may not feel committed to implementing the decision. The commitment of group members is important because, as Guth and MacMillan (as cited in Amason, 1996) indicate, it makes a significant contribution to the successful implementation of decisions. At Greenheart, this potential lack of commitment was also exacerbated by a conflict between objectives. The CEOs decision to initiate environmentally responsible practices meant that the objectives of the company became different to those of the subsidiaries. When the subsidiaries faced to the choice between productivity and environmental sustainability, they
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prioritised productivity to environmental sustainability, since the main objective of normal production enterprises is to produce. The lack of commitment from Greenhearts subsidiaries caused the implementation of decisions to be ineffective.

2b. The phenomenon of conformity At Greenheart, there was social pressure from a minority of employees to force others to support the environmental sustainability decision. This is the phenomenon of conformity which refers to the tendency for individuals to behave in ways presented by other group members (Gerrig et al, 2012). The lack of support for environmental issues was most apparent in the operational personnel, since their values were different to those of the corporation. The absence of social conformity among employees meant that there was no active cooperation of group members, a factor which is necessary to guarantee the effective implementation of a decision (Amason, 1996). Therefore, the CEOs decision could not be implemented effectively.

3. THE DECISION MAKING FRAMEWORK AT GREENHEART PLUS In 2001, Greenheart was bought by another company and renamed Greenheart Plus. However, the new owner did not possess the same value of environmental sustainability as the former company, and more attention was paid to the profit and financial performance of the company. One reason for this new focus was the onset of economic difficulties caused by an unexpected external crisis. The crisis led the company to change its product composition and this, in turn, caused significant production problems. This event could be explained by the
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Black Swan theory (Taleb, 2008), which refers to an event that is totally unpredictable and has an extreme impact. The resulting uncertainty may influence the quality of decisions, since it is difficult to find decisions that perform well relative to other decisions in the uncertain situation (Sniedovich, 2010). As a consequence, the economic difficulties led the corporate TMT of Greenheart Plus to mainly focus on the improvement of output and profit. Nevertheless, Greenheart Plus maintained some environmental sustainability activities. This decision could be interpreted as incrementalism (Teale, et al, 2003), a concept which refers to the process of making decisions based on an existing course of action. This was acceptable to external stakeholders, since the environmental activities implemented by Greenheart Plus tended to fit within the existing business framework and were only implemented to meet the requirement of legal and regulatory compliance. A significant change, however, was the initiation of a new decision making framework. Greenheart Plus created Operational Teams (OTs) which comprised the production manager, the heads of different functional areas and so on. Therefore, the decisions related to environmental issues were made by OTs after discussion within the team members. In this way, the company was able to enhance the quality of decisions and guarantee the effective implementation of decisions.

3a. A sociological perspective From the sociological perspective, the implementation of decision-making at Greenheart Plus was more effective than that of Greenheart. An important characteristic of an effective group decision is that all the group members fully implement the decision (Johnson & Johnson, 2009). At Greenheart Plus, the environmental practices were systematically adapted to

production methods, and this was well accepted by the operational personnel. This was an essential achievement because full acceptance of a decision by members can have positive affect on the attitudes of group members toward group work (Nemiroff & King, 1975). In this way, the method of making decisions of Greenheart Plus became one of consensus, which is the most effective method of group decision making process, because it allows group members to share resources and to produce innovative, creative and high-quality decisions (Johnson & Johnson, 2009). As a result of consensus decision-making at Greenheart Plus, the previous internal conflict was resolved, since the administrative and production personnel in the OTs possessed the same objectives. Additionally, the commitment of group members to implement the decision was enhanced.

3b. The phenomenon of paradox However, the phenomenon of paradox (Gerrig, et al, 2012) is a possible weakness at Greenheart Plus, and may negatively affect the decision making process. In the new company, the downplaying of environmental values was not objected to by most employees, as those who advocated environmental sustainability were excluded by the majority. As a consequence, the group could become homogenous, and diversity may disappear. This may lead to a lack of constructive conflict, and may impair the ability of the group to be innovative and creative (Johnson & Johnson, 2009).

4. CONCLUSION This report has analysed the changes in decision-making processes when the company Greenheart was taken over and became Greenheart Plus, and has particularly considered a
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sociological perspective to identify issues. In the former company, Greenheart, the decisionmaking process was limited by the bounded rationality and authoritarianism of the CEO. Ultimately, this threatened the economic survival of the company. A sociological perspective highlights the issue of group members not being involved in the decision-making process, and therefore not being committed to the implementation of the decision. In Greenheart Plus, the second iteration of the company, the focus changed from environmental to economic sustainability. Decision-making also changed to a consensus approach with the formation of Operational Teams to replace Top Management Teams. Consequently the objectives of the company and its subsidiaries were more aligned. As a result of both these changes, the implementation of decisions became more effective. Yet, there is a risk that excessive homogeneity in the new company may lead to a lack of creativity and innovation.

5. RECOMMENDATIONS In light of the analysis above, two decision-making actions are recommended in order to improve the quality of decisions and enhance the effectiveness of the implementation of decisions: Firstly, with regard to the decision making framework of both Greenheart and Greenheart Plus, the effectiveness of decisions could be enhanced by adopting a descriptive approach to decision-making, such as Cumming and Worleys action research model (as cited in Akdere Altman, 2009). This model accommodates the limitations of bounded rationality because it involves a group process of gathering available data to clarify an issue, acting on that data, and then reviewing the action in order to continually update data and improve the consequent action. In this way, available data is continually maximised, and, since this is achieved by a collective process, it is more likely to produce high-quality decisions and enhance the
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commitment of group members. The model not only addresses the obvious problems of individual decision-making at Greenheart, but would also enhance the consensus decisionmaking of Greenheart Plus. Secondly, the phenomenon of paradox should be recognized by Greenheart Plus, since it could negatively affect the quality of decisions through minimizing constructive conflict and then impairing the creativity and innovation of decisions. Constructive conflict could make a contribution to the quality of decisions because a synthesis of diverse perspectives tends to be more productive than a single homogenous perspective (Amason, 1996). Greenheart Plus should therefore create an environment that allows its employees to express their true feelings and opinions, and thereby nurture a heterogenous consensus approach to decision-making.

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