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September 22, 2010 press release of the U.S. Equal Employment Opportunity Commission (EEOC) revealed it was suing Abbott Labs for Age Discrimination. On September 28, 2010, the EEOC press release revealed it was suing Hawaii Healthcare Professionals and RadioShack for the Age Discrimination and Retaliation. As it turned out, the presses releases such as the ones mentioned above are very common on the Commission's website. The U.S. Equal Employment Opportunity Commission alleges that many of the companies are replacing their very qualified workers with younger members. Finally, the EEOC recent press release summarizes the fact that the "age discrimination" at work place is on rise (Russ Banham, 2009).
Not only the government web sites reporting the age discrimination issue, but also the popular news media reporting the age discriminations incidences on their front pages. For example, the San Jose Mercury News(Mike Cassidy,2010) recently, September 26,2010, ran an investigative report that clearly indicates that the age discrimination is on rise in the Silicon Valley high technology companies, albeit the employees are high performing and loyal to their companies. Nevertheless, I have undergone similar experience at my work place. I have seen the members of my team who were discriminated on the age and were forced to take voluntary retirement as a strategic means to achieve the overall cost reduction to the business. I have undergone such a stressful incidence and would like to present my ethical and moral quandary that I have faced.
We, HeartMedico, Inc., are Class III medical devices manufacturers. As per Federal Drug and Administration (FDA)'s guidelines, the Class III device manufacturer has the most stringent regulatory guidelines. The FDA assigns the Class III category to the devices that support or sustain human life, are of substantial importance in preventing impairment of human health, or which present a potential, unreasonable risk of illness or injury. Some of the examples of the devices that fall into this category are: replacement heart valve, implanted cerebella simulation devices, implantable pacemakers, and implantable defibrillators.
My current role at HeartMedico, Inc is a software development manager. My day to day activities include the management of team of twenty engineers who were with the company for a long time; my team consists of some of the most enthusiastic and technically savvy engineers in our division. Some of the members of the team were with the company since 1980s, when our division existed as a separate startup, Ventx, and eventually taken over by the current management in 1997.I joined the team in 2004 and have grown within the team and have became a lead engineer and then manager.
My development team is a very diverse, representing the members from various countries, ethnicities, technological experiences, and age profiles. Team's skill set ranges from successful handing of the most notoriously technically challenging job to handling of the simplest procedures for an effective customer service. The team is recognized by the executive management for its contribution to the business. On individual level, each and every member of the team was awarded special performance award in recognition of pillar contributions in the area of personal commitment in recent years. For the executive management, the team has served as an effective engineering role model within our company.
Our, HeartMedico, Inc, primary customer is the Federal government. We derive eighty percent (Tom Sullivan, September 2004, Barrons Website) our business in the Unites States by selling the devices to the patients of the Medicare program. The Medicare is social insurance program administered by the United States Government. The Medicare program provides the health insurance coverage to the senior citizens, or who meet other conditions. The Medicare programs are administered by participating state and federal hospitals.
Healthcare reforms and price pressure on the device makers
The Obama administration introduced the Healthcare reforms bill in 2010. The main aim of the bill is to reduce the U.S. national debt by reducing the expenses incurred as part of the Medicare program. In line with this goal, the U.S government proposed to cut the Medicare program expenses by $200 billion over a decade (Susan Kelly and Debra Sherman, November 2009, Reuters Website link). For the medical devices manufacturers what this reduction in overall budget means a stringent Medicare approval process for determining who gets the devices. That is, prior approving the medical devices to cure the patient health aliment, the Medicare program insists the low-cost curable alternatives such as therapeutically means or using the medicine (Mike Wokasch, PharmareForm.com, 2010). The net-net effect of this new approval process is a constrained business environment, intensified cost management (Wokasch, 2010), and, as a result, the medical device manufacturers resort to pricing wars to win the Medicare business.
As a result of the latest development in the healthcare reforms, most of the device manufacturers, including HeartMedico, Inc., are cutting operating and other costs on an unprecedented level. The cost cuttings are primarily to cover future business losses, and to counter uncertain economic conditions (MassDevice Staff, 2010). Richard Packer, CEO of Chelmsford, Massachusetts based defibrillators company, noted "we would be losing money because of new healthcare reforms and require to cut jobs to counter losses (Associated Press, medicaldevices.org, September 2010)." Similarly, the executive management at the HeartMedico, Inc also took some of the un-conventional cost cutting policies. But, my only concern was a recent development in my department and, especially, the layoff guidelines proposed by my senior management.
As the manager of the team, I can understand the pressure on my immediate senor management and sympathize with them. But I had my "defining moment" (L.Badaracco , 1997) when I had recent emergency status meeting with the immediate senior management, that is, my senor manager.
This was a defining moment as it revealed more about who I am than what was my role as a manager. This was a defining moment as it confirmed my bed rock principles more than ever before. This was defining moment as it tested my personality and principles. As Joseph L. Badaracco (1997) noted:
A defining moment, however, challenges us in a deeper way by asking us to choose between two or more ideals in which we deeply believe. We form our character in defining moments because we commit to irreversible courses of action that shape our personal and professional identities. And we test ourselves because we discover whether we will live up to our personal ideals or only pay them lip service.
The status meetings, generally, were held on the Friday evening before the end of the business week. In these meetings, I discuss how the team performed in the current week and bring any major bottlenecks or achievements we had in the week to the management preview. Next, I layout the team's next week's agenda and how our plans will corroborate the vision of the management, that is., winning customers through engineering excellence. Given the team's credibility and given the team's proven exceptional performance records, the status meetings, lately, became more of a social gathering with my manager than a high-intense cutthroat business meeting.
However, the emergency status meeting settings were completely different from what I ever experienced in the current role. Last Monday, as I entered the office, I saw a red sticky note posted on my office door. The note had a written directive "please see me immediately" with my manager's signature. The directive was unconventional as my manager and I seldom meet on the Monday mornings since we will be busy with planning the schedule for the upcoming week. Without going through the routine Monday's chores, I went directly to the manager's office, which was located in the next building from my office.
When I entered the office, my manager immediately looked at me and asked me to close the door. As I did, he continued we have very bad sales and the sales forecasts are pointing a worst quarter ahead. What this means is, the executive management wanted an immediate workforce reduction in the department. Failing to reduce the workforce means insolvency for the company in couple of quarter.
Next, without taking a sigh, he demanded me to provide a list of engineers that management can either entice to take a voluntary retirement or can force them to layoff. For a moment, I was astonished for his sheer directness to ask such a list. My immediate response was, the team is one of the best productive teams in the company and the recent performance reviews suggest that every member of the team met and exceeded performance levels set by the management. And I reminded him the performance summary meeting, which took two weeks ago, where he, my manager, personally thanked all the engineers for their exceptional performance. What my response implied was no team member can be fired on performance reason.
Without having much to say, next, my manager said, your team has one of the most senior engineers with more than twenty plus years of work experience with the company. Their accrued salaries and benefits were the most financial stress points to the department's budget. I would like to shave at least fifty percent of the head count. Then, he continued, can you provide the list with age demographics for the engineers who fall above the fifty years so that I can provide the list to the CFO's office. From his point of view, it was clear that my manager wanted to make the decision based on economic values. He was emphasizing economic values, measuring progress in terms of numbers, and, thus, assigning the highest priority to numbers in his decision making. Then, to counter, I reiterated, are you demanding me to prepare the list with the age factor, benefits and others in mind? Isn't it unethical and morally wrong? But my manager insisted the list by the end of the day and, then, the conversation ended there.
Emergency meeting Aftermath:
For sure, it's clear from my emergency meeting that I am dealing with a moral and an ethical issue. I know whatever my manager demanding is not morally correct. My manager is following directive from CFO's office and the CFO and other C-level executives are only interested in the reduction of the work force so that they can impress the shareholders (MassDevice Staff, 2010). Form their insistence it was clear that my management suffer from a kind of "ethical myopia, believing their entire work group views a situation through the same lens that they do (Badaracco Jr, 1997)." Moreover, as Schminke (2005) noted "managers have substantial power to create a particular kind of ethical climate." Sadly, they, my executive management teams, were not realizing the ethical precedence that they're setting with their actions. Finally, more importantly, my executive management was not evaluating the other options that can resolve the issue and protect the employees, stakeholders, and shareholders. As you have mentioned in our Ford Pinto class, "good managers tend to look at business on a long term basis", but in my case my managers' wanted a short term fix.
Moreover, from the emergency meeting, I can clearly see I am caught between shareholders profit maximization versus protecting my team members, stakeholders. As industry trends clearly points out, many of the investors are no longer interested in the medical devices stocks as these stocks have exposure to FDA regulations (MassDevice, 2010). MassDevice Staff (2010) ran poll and the conclusion of it was "medical device companies were biggest losers in the healthcare reform act". Such industry sentiments and uncertainty was putting huge performance pressure on the medical devices management and hence the management just cutting costs to impress shareholders. However, the management is completely turning blind eye on the stakeholders. As noted by Robert Phillips (2004) in the stakeholder fairness theory that "organizations become obligated to their contributors when they accept the benefit of mutual co-operation, although only the small portion of this obligation is codified in laws." And Philips continued, "there is no special obligation (e.g., fiduciary) due to shareholders that supersedes the firm's obligations to lesser (e.g., non-fiduciary) stakeholders." On the contrary, my management wants to maximize "shareholders" benefit at the expense of main "stakeholders". Ironically, my management is making decisions on economic outcomes (DeLuque et al., 2008, 620) and negating the side effects of it. Finally, as Ghoshal (2005) explicitly argued that "the stakeholders must be given higher importance than the shareholders. For one, most shareholders can sell their stocks far more easily than most employees can find another job. Also, employees' contributions of knowledge, skills, and entrepreneurship are typically more important than the contributions of capital by shareholders, a pure commodity that is perhaps in excess supply."
In search of solution:
At personal moral values level, more importantly, I can see a direct clash between my deep rooted values and my management's demands. I can see a challenge to my "professional moral courage (PMC) (Sekerka, Bagozzi, Charnigo, 2009)." Finally, as you have mentioned in our class that "bosses - those in power - like to rule based approach (Deontology/Kantian ethics) and subordinates - those low in the power - focus more on the outcomes (Utilitarian Approach) (Nieuwenboer,2010)". I have witnessed your teachings in the emergency status meeting.
Not knowing what to do, I headed to my office. During the walk to office, I was pondering with the question - "is my manager forcing me to take the decision that help address the economic forces and not concerned about the deep rooted values I care?" As you have quoted in the class "when we do things that conflicts our values, we freak-out". The same was my condition. Moreover, I wondered I am living the scenario Edwin M. Hartman (2006, 6) noted in explaining how organizations influence ethical decisions:
There is voluminous evidence that organizations support or oppose ethical behavior. Fritzsche (1991) argues that organizational forces may drive decisions more than personal values do and (2000) that organizational climate can raise or lower the probability of ethical decisions."
After reaching my office, I setup a regular development meeting with the team, assigned tasks to the team leaders and completed next two days paper work. Recognizing, I needed to provide the chopping list to my manager in couple of hours, I was contemplating the fallout of providing such a list. My first thought was what moral values will justify such decisions. Next, how my team members perceive and interpret my decision. Finally, what attitudes and feelings my subordinates develop towards me. As Jones (2009) noted, "Individuals who perceive greater unfairness tend to engage in more counterproductive work behavior." I don't want my team to perceive such attitudes towards my decision.
For sure, if I follow the footsteps of my manager, that is, economic value decision, I will loose the respect in the eyes of my team. Even worse, instead of instilling long term hope and moral values, I will entail short-term and unattractive "gloomy vision (DeLuque et al., 2008, 633)". Given the grave economic cycle the company going through, I needed performance of my team more now than any point in my leadership. I don't want to create an environment in which my engineers perceive greater unfairness and tend to engage in more counterproductive work behavior (Jones, 2009). As DeLuque (2008, 633) noted, "Value driven decision making by leaders be perceived as a visionary leadership by followers and visionary leadership has a positive relationship with followers' extra effort. And followers' extra effort has a positive relationship with firm performance." My only recourse was to find the solution to issue and convenience my management that there were better decision alternatives to overcome economic issues than taking only the "numbers approach".
My moral intuition contends that I can resolve the issue. For one, as noted by Philips. R (2004), protecting and safe guarding the employment of my team - "stakeholder"- is my first priority and I was determined to solve the issue. As solicited by Joseph L. Badaracco, Jr. (1997), "redefining the direction of one's work group requires a thoughtful blend of personal introspection and calculated action." For me, the blend of personal introspection and calculated action is the need of the hour more now than during any point in my fifteen years career in the hi-technology industry. Thinking, I need to device a strategy that on one hand address the economic issue that management is facing and on the other hand insures the security of my team members.
Alternatives to layoffs:
Defiant to protect my moral character and determine to safeguard my team member's future, I started to employ economic and moral frameworks (Butler, 1943) in search of finding the decision alternatives so that I can convince my manager that the layoffs are not the permanent means of achieving the much needed cost cuttings. Joseph L. Badaracco, Jr. (1997) clearly mentioned when confronted by an ethical decision "managers must evaluate other strong, persuasive interpretations of the situation?"
For me, the winning scenario would be overcoming the chopping order on my team and prevent any economic hardship conditions to the company. Before returning to my manager's office, I devised a strategy that, hopefully, satisfies the interested parties in the issue. My strategy is a) reduction of work hours per employee in my team - that is, instead of five days a week, my team work for four days a week without hindering any technical support for the management and potentially save the overhead cost b) force shutdown of my team during the year end, c) and possible pay cut if needed. Then, for quantitative evaluation, I ran the numbers on these strategies and found that the cost savings were in tune with overall strategy that the management was aiming. Equipped with an alternative strategy and equipped with both quantitative and qualitative analysis on the cost issue, I headed to my senior manager's office to present the solution.
As you have mentioned in our class identification of an ethical and a moral issue is the first order duty of an employees. And once confirmed the issue, taking appropriate action is the best way to overcome the underlying issue. With the "emergency meeting" episode in my professional career, I have recognized the importance of stakeholders, ethical, and moral principles in my day-to-day job.