Effect of Corporate Scandals on Employee Morale

Cite this

3M has developed a sustainability strategy and a corporate social responsibility (CSR) plan that it fails to follow. The scandals and lawsuits can have a damaging impact on the company, yet the management refuses corporate responsibility. The effects of such behavior on employee morale can be detrimental. According to (Groysberg, et al., 2016), employees working for scandal-tainted companies can tarnish their resumes, especially for the executives. Such staff attract less compensation in their future jobs, which can severely damage their morale for work.

To fully understand the consequences of scandals on morale, different theoretical perspectives can be explored. 3M can be deemed as having fake CSR and sustainability policies, plans, and strategies. Therefore, the company values and value propositions can be viewed in the same way, which negatively affect employee morale and organizational culture (Lee, Hannah, and McCarthy, 2019, p. 19).

A key point to note is that even though Lee, Hannah, and McCarthy (2019, p. 19) focus on the corporate slogans, the same idea applies to other statements made by firms regarding their actions. The failure of 3M to live up to its decrees regarding environmental and societal concerns depict it as an entity that lies to the stakeholders. The concerns by the scientists are genuine, and the fact that the management refuses to act responsibly and bars anyone from communicating such issues could leave the workers frustrated. The effects of frustration could include job dissatisfaction and declining morale.

Scandals are often major news among the media companies, where consequences include a damaged reputation. According to Garcia-Lorenzo (2020, p. 6), the coverage of scandals in the UK media has a clear impact on morale and personal identities in the workplace. The focus of these scholars is the financial frauds by UK companies. However, it is argued that the media’s representation of any serious indignity will have a lasting consequence on how corporate members feel about their employers. The scientists at 3M are visibly not happy about being associated with a company that destroys the lives of people and the environment.

Their letter to the management is evidence of the fact that they desire a change. Therefore, it can be argued that such staff will be eager to seek employment elsewhere. The morale, especially with the planned ongoing layoffs, is expected to be extremely low. The layoffs are the result of the failure of the company to become socially responsible, which has resulted in hefty costs of lawsuits.

Even without the lawsuits, it is important to acknowledge that commitment to CSR can be a motivating factor for workers. From a theoretical perspective, CSR has been associated with such job aspects as work engagement and satisfaction (Kunz, 2020, p. 159). The effect of these elements in the workplace is the motivation of employees. The CSR initiatives at 3M should have the same implications on the scientists and other staff members. However, the negative outcome can be expected because of the detrimental environmental and social implications of the companies activities and products. The lack of commitment to CSR can detrimentally influence the employees’ commitment to the company.

Lastly, the effects of scandals on employee morale can be explored from the perspective of ethical leadership. Scholars such as (Malik, et al., 2016, p. 591) explain that the concept of ethical leadership is not well understood but it focuses on the personal and professional lives. Additionally, the concern for the society in such activities as decision making and leadership style call be part of ethical leadership.

Ethical leadership shapes the organizational values, which is reflected in the value of the workers and their job performance. The corporate system of beliefs affects worker behaviors, which in effect reflect in their job performance. At 3M, the management is unethical because of the attempts to hide from the public the environmental and health hazards of the company’s products. The impacts of all these issues include declining morale and consequently dwindling corporate performance.

Recruitment and Retention Issues

Recruitment plays a vital role in strategic decision-making within a company. At 3M, the main human resource (HR) issues involve the recruitment and retention of employees, especially at a time when the firm faces multiple scandals. The crises with CSR present a similar situation to that labelled by Miao and Zhou (2020) as corporate hypocrisy. The term corporate hypocrisy has been used to refer to the claims by firms to be what they are not. CSR publicity has been linked with employees’ corporate citizenship behavior. Therefore, it can be argued that HR is affected by the entity’s CSR initiatives and reputation. The HR manager will find it hard to attract workers because of negative publicity. The concerns raised by scientist also reflect the fact that the retention of workers is difficult when the employer has a bad reputation regarding CSR matters.

CSR is particularly critical for the millennials, which means that firms with extensive CSR initiatives have a higher likelihood of retaining them. Research by Zainee and Puteh (2020, p. 369) indicates that Generation Y is influential, demanding, and possesses strong bargaining power. The generation comprises individuals who are fully aware of the effects of business activities on both society and the environment. The pressure exerted on corporations is high, which can also be observed within the workforce.

Valuable employees are considered key resources and assets, which means the HR function faces a tougher task or recruiting and retaining workers. Even though the study by Zainee and Puteh (2020, p. 369) could not be generalized for other generations, it is important to emphasize that most employees positively associate with positive CSR activities. The theory of emotion is used by Ng, Yam, and Aguinis (2018, p. 107) to express that perceived CSR by workers related to their emotions, for example, organizational pride, which then positively affects their attitudes towards the job. Additionally, such attitudes as organizational embeddedness influence job behavior and turnover intentions among the employees.

Therefore, the HR function at 3M will face a major challenge in convincing new talent to join the company or the current workers to stay. The scandals depict 3M as an unsafe and unsuitable place in which to work. The competition for top talent is high across all industries and, therefore, 3M will not have the necessary advantage in the labor market.

The best approach for 3M to attract and retain new millennial talent is to find better ways to communicate its organizational values. The millennial generation is sensitive to business activities that negatively affect both the environment and future generations. Therefore, many candidates would like to align themselves with firms that have a clear plan for the protection of the environment and society. Hiring millennials who are aligned with a company’s corporate values has been suggested by Petrucelli (2017, p. 43).

However, the values have to be appealing and not tarnished by scandals and crises. Therefore, the first step for 3M to align the value of the company with those of the millennials is to develop and communicate new CSR and sustainability commitment. The most important point to note is that such an effort requires the cooperation of all departments, especially the top management. 33 has to clean its reputation by engaging in better CSR initiatives as opposed to having a plan that it does not follow.

The second step of this approach is to match other expectations of the millennial workers. Researchers have established that this generation prefers professional growth opportunities, flexible work arrangements, and purposeful work (Zaharee et al., 2018, pp. 52-53). May millennials are motivated when their jobs are seen as serving a purpose. Therefore, the new talent being hired can be given the duty to change the face of the company. For example, new management personnel can be tasked with the development of a real CSR plan to help escape the current scandals.

Porter’s three types of business unit strategies Versus Miles and Snow’s defender or prospector strategy

Business strategy is critical for establishing lasting corporate success and creating and maintaining competitive advantages. Several strategy models have been developed to explain how businesses can develop and pursue an edge in the markets. Porter’s business unit strategies, also known as Porter’s generic competitive strategies, are a perfect example. The three generic strategies proposed by Michael Porter are cost leadership, differentiation, and focus (Dombrowski, Krenkel, and Wullbrandt, 2018, p. 1196). A simple model for these generic strategies is illustrated using Figure 1:

Porter’s generic competitive strategies
Figure 1: Porter’s generic competitive strategies (IFM, n.d.).

Porter’s generic strategies focus on how businesses decide which activities to undertake. success for a company is realized when it generates sustainable profitability above the industry average. Cost leadership is based on produces products and services at lower costs (Dombrowski, Krenkel, and Wullbrandt, 2018, p. 1196). 3M has not positioned itself as a cost leader, majorly because much of the profits are sustained through the commercialization of new products.

Differentiation strategy entails a firm seeking to be unique in several dimensions that are deemed valuable by the consumers. The only aspect that differentiates 3M is the fact the company is highly innovative as explained by the observation that 25% of the company’s annual sales are derived from products introduced in the previous five years. Lastly, focus is a generic strategy that entails the choice of a narrow competitive scope in a market. Again, 3M does not exhibit this strategy because it generalizes its products across markets and countries.

Another framework for strategy the Miles and Snow’s defender or prospector strategy. As compared to Porter’s generic strategies, this model is based on the notion that firms’ success depends on the external and internal environment. The internal environment comprises such elements as structure, strategy, ideology, and processes (Hawrysz, 2020, p. 2). This model can describe the case of 3M better because of its comprehensiveness and wider scope. The framework comprises two broad categories: defenders and prospector (Ingram et al., 2016, p. 27). The former category seeks to pioneer products and market development through frequently changing products.

Businesses pursuing this strategy tend to compete mainly through stimulating and serving new markets. Resources are devoted to entrepreneurial tasks and the assessment of the changing trends in new market development. 3M is pursuing this strategy because it allows employees to keep innovating. The HR department has created a special fund intended to help employees start new products.

The defenders tend to engage in little or no new product or market development. The priority for such businesses is the development of efficiencies and engineering tasks (Ingram et al., 2016, p. 27; Youssef and Ionannis, 2017, p. 69). 3M is the opposite of a defender because of the continuous innovation and new product and market development. The best strategy between Porter’s business unit and Miles and Snow’s typology in the case of 3M is the latter.

The argument is that the typology provides two extreme categories in which a business can be classified. As explained in the generic strategies, it is not clear how 3M uses any of them. However, the use of Miles and Snow’s typology reveals that 3M is a prospector as evidenced by HR’s initiatives to encourage innovation. Additionally, Miles and Snow’s typology focus on both the internal and external environment, which makes it more appropriate in addressing all strategic considerations for a business.

Alternative Conclusion

3M needs to be prepared to handle future scandals and effectively respond to market forces. The strategies presented in the earlier section may seem adequate for the company. However, their focus is majorly on how the firm can address business concerns. In the context of the scandals, the HR department will require to adopt a strategy that can help the company proactively handle future emergencies. Therefore, the McKinsey 7S model, which comprises seven elements, is recommended for 3M. According to Marpaung, Prabawani, and Susanta (2016, p. 303), the 7S model analyses the effectiveness of an organization in the strategic implementation after a major change.

Even though no transformation is evident at 3M, it is argued that the current scandals are extremely damaging and that the survival of the entity depends on implementing critical changes. Additionally, the 7S model is based on the notion that firms need to use their abilities and resources to support their existence (Gökdeniz, Kartal, and Kömürcü, 2017, p. 342). 3M needs to pursue its survival, which makes the 7S model the perfect strategy.

The 7S comprises seven aspects: structure, systems, style, staff, skills, strategy, and shared values. The elements can also be categorised into hard and soft components as illustrated in Figure 2. Strategy involves the plan for building and maintaining competitive advantages. In 3M, CSR has been used as a plan to market the company in terms of its commitment to society and the environment. However, that strategy is not currently followed and it is recommended that 3M should develop a better plan to overcome the environmental and health scandal. Structure entails the organization of the firm, including the interrelationships between team and departments.

The relationships between scientists and senior management are the main challenge that should be resolved at 3M. Systems comprise the third under the hard category, and it is concerned with the procedures and activities to get jobs done. At 3M, new systems will be needed, which have to be designed in a manner that allows the company to avoid scandals. Such systems can include activities and initiatives for environmental protection.

Hard and Soft S
Figure 2: Hard and Soft S (Kocaoğlu and Demir, 2019).

Shared values is both a soft and hard element as illustrated in Figure 2 above. The focus of this element in on core values, including general work ethic and corporate culture. 3M currently lacks a justifiable corporate culture, which is the primary cause of the scandals. Shared values will be among the first elements for 3M to implement, and it is recommended that they should be designed to address key CSR requirements. The soft elements of the 7S model are style, staff, and skills. The style majorly focuses on leadership, for which a transformation leadership is desirable. The rationale is that major changes will have to be implemented in dealing with the scandals.

Staff comprises the employees working for the firm and their general capabilities. 3M employs innovative and creative workers as explained by the innovation strategy. However, new personnel with the ability to produce good results without harming the environment and public health will be more desirable for 3M. Lastly, skills include the competencies possessed by the workers of a company.

The actual skills of 3M’s employees will determine the future of the company and the success with which it manages the current and future scandals. The 7S strategy model is more appropriate for the company because it presents a framework on which to implement key HR requirements. A summary of the major concerns for 3M in implementing the 7S framework is presented in Table 1.

Hard/Soft Element Key Concern
Hard Strategy
  • HR strategy.
  • Competition strategy.
  • CSR strategy.
  • Crisis management strategy.
Structure
  • Functional departments.
  • Control.
  • Communication.
Systems
  • Internal systems.
  • External systems.
  • Information systems.
Hard and Soft Shared Values
  • Vision.
  • Mission.
  • Ethics.
  • Core values.
Soft Style
  • Leadership.
  • Management.
Staff
  • Motivation.
  • Performance management.
  • HR planning.
Skills
  • Core competencies.
  • Innovation.
  • Qualifies HR.

Table 1: Key concerns in the 7S implementation at 3M (developed using MS Word).

Reference List

Dombrowski, U., Krenkel, P. and Wullbrandt, J. (2018) ‘Strategic positioning of production within the generic competitive strategies’. Procedia CIRP, 72, pp. 1196-1201. Web.

Garcia-Lorenzo, L. (2020). ‘Organizational remembering as a trigger for cultural change: Exploring the episodic memories of a financial scandal’. Scandinavian Journal of Management, 36(1), pp. 1-12. Web.

Gökdeniz, I., Kartal, C. and Kömürcü, K. (2017). ‘Strategic assessment based on 7S McKinsey model for a business using analytic network process’. International Journal of Academic Research in Business and Social Sciences, 7(6), pp. 342-353. Web.

Groysberg, B. et al. (2016). The scandal effect. Web.

Hawrysz, L. (2020) ‘Strategic orientation and effects of e-administration: findings from the Miles and Snow framework’, Administrative Sciences, 10(2), pp. 1-18. Web.

IFM, (n.d.) Porter’s generic competitive strategies (ways of competing). Web.

Ingram, T. et al. (2016). ‘Relationship between Miles and Snow strategic types and organizational performance in Polish production companies. Journal of Management and Business Administration, 24(1), pp. 17-45. Web.

Kocaoğlu, B. and Demir, E. (2019). ‘The use of McKinsey s 7S framework as a strategic planning and economic assessment tool in the process of digital transformation’. PressAcademia Procedia, 9(9), pp. 114-119. Web.

Kunz, J. (2020). ‘Corporate social responsibility and employees motivation – broadening the perspective’. Schmalenbach Business Review, 72(2), pp. 159-191. Web.

Lee, L., Hannah, D. and McCarthy, I. (2019) ‘Do your employees think your slogan is “fake news?” a framework for understanding the impact of fake company slogans on employees’, Journal of Product and Brand Management, 29(2), pp. 1-30. Web.

Malik, M. et al. (2016) ‘Impact of ethical leadership on employees’ performance: moderating role of organizational values’. International Review of Management and Marketing, 6(3), pp. 590-595. Web.

Marpaung, N., Prabawani, B. and Susanta, H. (2016). ‘Transformation analysis of Inalum Ltd. post-acquisition: a McKinsey framework’ Proceedings of the 2016 International Conference on Public Management (ICPM 2016). Web.

Miao, Q. and Zhou, J. (2020) ‘Corporate hypocrisy and counterproductive work behavior: a moderated mediation model of organizational identification and perceived importance of CSR’, Sustainability, 12(5), pp. 1-20. Web.

Ng, T., Yam, K. and Aguinis, H. (2018) ‘Employee perceptions of corporate social responsibility: effects on pride, embeddedness, and turnover’. Personnel Psychology, 72(1), pp. 107-137. Web.

Petrucelli, T. (2017) ‘Winning the “cat-and-mouse game” of retaining millennial talent’, Strategic HR Review, 16(1), pp. 42-44. Web.

Youssef, H. and Ionannis, C., 2017. Assessing Miles and Snow typology through the lens of managerial discretion: how national-level discretion impact firms strategic orientation. Management and Organizational Studies, 4(1), pp. 67-73. Web.

Zaharee, M., Lipke, T., Mehlman, S. and Neylon, S., 2018. Recruitment and retention of early-career technical talent. Research-Technology Management, 61(5), pp. 51-61. Web.

Zainee, I. and Puteh, F., 2020. Corporate social responsibility impact on talent retention among Generation Y. Management Magazine, 27(4), pp. 369-392. Web.

Cite this paper

Select style

Reference

BusinessEssay. (2022, December 2). Effect of Corporate Scandals on Employee Morale. Retrieved from https://business-essay.com/effect-of-corporate-scandals-on-employee-morale/

Reference

BusinessEssay. (2022, December 2). Effect of Corporate Scandals on Employee Morale. https://business-essay.com/effect-of-corporate-scandals-on-employee-morale/

Work Cited

"Effect of Corporate Scandals on Employee Morale." BusinessEssay, 2 Dec. 2022, business-essay.com/effect-of-corporate-scandals-on-employee-morale/.

References

BusinessEssay. (2022) 'Effect of Corporate Scandals on Employee Morale'. 2 December.

References

BusinessEssay. 2022. "Effect of Corporate Scandals on Employee Morale." December 2, 2022. https://business-essay.com/effect-of-corporate-scandals-on-employee-morale/.

1. BusinessEssay. "Effect of Corporate Scandals on Employee Morale." December 2, 2022. https://business-essay.com/effect-of-corporate-scandals-on-employee-morale/.


Bibliography


BusinessEssay. "Effect of Corporate Scandals on Employee Morale." December 2, 2022. https://business-essay.com/effect-of-corporate-scandals-on-employee-morale/.