Assignment writers in Sri Lanka

Analysis of Business Ethics in Winterquilts Private Limited, Sri Lanka

Executive Summary

Winterquilts is recognized as the pioneer in Sri Lankan apparel industry, which has created the foundation for leading apparel manufacturers such as MAS Holdings, Paradigm Clothing, Veera Fashions etc. Winterquilts operates with more than 3000 employees in three main production facilities located in Hingurakgoda, Lankapura and Kalutara and all the service operations and secondary operations are handled by the Corporate Head Office situated in Dehiwala.

Even though current Sri Lankan apparel manufacturing industry consists with several market leaders such as MAS, Brandix, Hirdaramani, Hela Clothing, Timex Garments, Jay Jay Mills, Star Garments etc. Its product portfolio composes with women’s fashions, women’s nightwear, men’s fashions, men’s nightwear, children’s wear and school wear focusing on the apparel export markets in United Kingdom, Europe and Australia, where the world renowned brands are served by Winterquilts including Maggy London, Marks & Spencer, Bonmarch, Calvin Klein, C&A, etc.

However, due to some critical ethical dilemmas towards customers, suppliers and employees, its market status was lost while making the condition of the company at a risk. Thus, subsequent to several exigent years of operations, it is now emerging with a novel passion for apparel manufacturing.

The focus of this report is to analyze the company status in consistence with the ethical dilemma and its link with leadership and business decisions.

Contents

Executive Summary 2

1. Introduction to the Organization 4

2. Ethical Dilemma faced by Winterquilts 5

3. Critical Review on Dilemma with Theoretical Aspects 8

3.1. Theories on Ethics and Ethical Dilemma 8

3.2. Analyzing Ethical Dilemma in Winterquilts 10

4. Relationship between Ethics, Leadership and Decision Making 11

5. Leaders Role in Ensuing Ethical Decision Making 13

6. Conclusion 14

References 15

Introduction to the Organization

wqlogo

Winterquilts is recognized as the pioneer in Sri Lankan apparel industry, which has played the role of industry giant in 1980’s. Over the years, it has created the foundation for leading apparel manufacturers such as MAS Holdings, Paradigm Clothing, Veera Fashions etc.

However, subsequent to several exigent years of operations, it is now emerging with a novel passion for apparel manufacturing. Existing product portfolio of Winterquilts is composed with women’s fashions, women’s nightwear, men’s fashions, men’s nightwear, children’s wear and school wear focusing on the apparel export markets in United Kingdom, Europe and Australia, where the world renowned brands are served by Winterquilts including Maggy London, Marks & Spencer, Bonmarch, Calvin Klein, C&A, etc.

The vision of the company is “To be a preferred supplier to world class brands adapting sustainable production methods and maintaining high standards of integrity and business ethics” (Winterquilts Official Website) and the mission is “To manufacture high quality garments to client specifications of competitive prices whilst being responsible to all other stakeholders including employees” (Winterquilts Official Website).

Winterquilts operates with more than 3000 employees in three main production facilities located in Hingurakgoda, Lankapura and Kalutara and all the service operations and secondary operations are handled by the Corporate Head Office situated in Dehiwala. Even though current Sri Lankan apparel manufacturing industry consists with several market leaders such as MAS, Brandix, Hirdaramani, Hela Clothing, Timex Garments, Jay Jay Mills, Star Garments etc, Winterquilts still holds a strong market share due to its unique competitive operational style with high quality value added services such as;

  • Fully fledged centralized planning unit
  • Internal Quality Manual etc.
  • Strong fabric and accessory sourcing capability
  • LECTRA system for pattern making and marker making
  • Fully equipped sample room with specialized machinery which is capable of quick turnarounds for buyers’ specifications

Ethical Dilemma Faced by Winterquilts

Lightfoot (2013) refers to ethical dilemma as the disagreement of two or more ethical standards or principles. Basically two types of dilemmas can be identified as absolute or pure ethical dilemmas (which occurs due to the clash between different ethics applied at a same instance) and approximate dilemmas (which occurs due to the clash between values, policies and laws) (Hommadi, n.d).

Winterquilts although was the pioneer in apparel industry in 1980’s, due to some critical ethical dilemmas its market status was lost while making the condition of the company at risk. It can be explained as lying to the stakeholders in the supply chain. Accordingly, in 2015, one agent (who was representing the Board of Directors) of the company has provided false information to one of its major buyer regarding the manufacturing capabilities, while stressing that they have the capacity to complete 900,000 garments per month and an outsized manufacturing order has obtained for the company for a period of six months. However, according to the factual company statistics, the capacity of the company was to produce 450,000 garments per month by 3,000 employees in three manufacturing facilities.

Under general circumstances, garment manufacturing companies obtain (reasonable) larger amount of orders compared to the production capacity with the intention of competing the manufacturing targets by subcontracting. But, according to the Winterquilts scenario, it was required to seek another 300,000 garments manufacturing capacity through subcontracts or through any other source with approximately 2,500 additional employees.

Ultimately it was proved that the manufacturing capabilities of the company and the manufacturing capabilities of its subcontractors cannot meet the expected manufacturing targets and manufacturing deadlines according to the customer requirements. A number of negative impacts were cropped up with this massive failure, where they affected the market conditions of its customers, customers of customers (i.e. the retailers), suppliers, distributors, employees and Winterquilts Group as a whole.

The first burden was made to the employees of the group to work more number of additional (overtime) hours in order to increase the daily manufacturing volume, which later resulted in health issues of the employees, family and social problems, work place conflicts etc. On the other side, company had to bear additional costs on overtime payments, employee welfare benefits, transportation, medical and other security benefits etc. Furthermore, the company followed an immediate recruitment strategy, through which a large number of skilled and unskilled employees (sewing machine operators) were hired for each manufacturing facility, beyond the formal factory structure, which engendered a huge cost for the company and future cadre managing problems.

The approach of Winterquilts towards its subcontractors was also can be identified as another ethical dilemma, since they lied to the subcontractors for completing and obtaining high amount of completed garments as much as possible. Even though the immense manufacturing order lasted for only six months, they inspired the subcontractors mentioning that it was an ongoing order and attracted many number of subcontractors. Due to the higher expected capacity by Winterquilts, the subcontractors expanded their manufacturing facilities by employing more employees and more machines and equipments, incurring a large amount of additional expenses. However, at the end of the six months, it was revealed to the subcontractors that the actual order rate relies far below in ordinary working periods.

In order to complete the instant giant order, all the supply chain processes were required to be swift and larger in quantity. For instance, Winterquilts needed more quantity of fabrics, trims (i.e. buttons, threads, zippers etc) as raw materials. But the communication channel along the supply chain was not speedy as expected and some of the raw materials were not available to be obtained for the production. As a result, the input process of the operational process faced severe tribulations which sometimes caused to pause the whole production process temporarily. Moreover, it was required to purchase several raw materials at shorter notice period incurring higher sourcing costs.

When the production process got delayed, Winterquilts had to seek for additional faster distribution channels in order deliver the products to the customers by meeting the deadlines. Under general circumstances most cost effective distribution channel for apparel manufacturers is shipping but it speed the comparatively lower. Since Winterquilts was unable to meet the shipping deadlines, they had to use relatively expensive but faster distribution channel, i.e. the airfreight mode.

Even after several expensive efforts of sourcing, recruiting and delivering, the expected level of production was not sent to the customer, and some of the products had serious quality issues. It caused for high customer dissatisfaction and lower revenues and profits for Winterquilts. On the other hand, it was a major hindrance for customer’s revenue and profit generation and the brand name of the customer. The predesigned retail costs (for racks, for displays etc) were unable to settle for the customer which in contrast added as the chargeback to Winterquilts. In addition, the consumers’ expectations for the particular season were unable to match for the customer, which negatively impacted on the goodwill and customer brand.

The ultimate result of all the negative impacts was the lost of the confidence of the customers, employees, subcontractors, suppliers and other stakeholders with the company. In addition, the expenses and liability amount for the company had increased after the six months of period, due to the higher number of bank loans, creditors and other claims. Moreover, the company faced critical challenges in maintaining higher number of employees during a financial loss period and some has to dismiss in order to protect the financial condition of the company.

As the final tactic of the company, the top management decided to terminate the person who caused for all the crumples of the company by recruiting separate set of managerial representation to handle and mitigate the consequences. But, the overall outcome was a long term censure to the Winterquilts brand, which a strong negative experience for the customers, employees, suppliers and many others that still result negatively in company market presence.

Critical Review on Dilemma with Theoretical Aspects

3.1. Theories on Ethics and Ethical Dilemma

According to Fountain (2012), ethics can be observed in almost all the kind of disciplines including management, medical, legal, banking and many more; in which individual codes of conducts are created to guide the individual behaviour whether good & evil, virtue & vice, right & wrong and justice & crime. “Ethics is the code of values and moral principles that guides individual or group behaviour with respect to what is right or wrong” (Mihelič, Lipičnik & Tekavčič, 2010, page 32).

Fountain (2012) categorizes ethics into several elements as,

  • Everyone is responsible
  • Tone at the top is essential
  • Honesty is still the best policy
  • Integrity can be a measure of ethics
  • Corporate responsibility & communication must be prevalent
  • Silence is not acceptable

“The ethic of an organization refers to an organization’s attempt to define its mission and values, recognize values that could cause tension, seek best solutions to these tensions and manage the operations to maintain its values” (Butts, n.d, page 125).

E:\Team Member\Academic Reports\219 Academic Writers\ACW-02- Ethics, Leadersip & Decision Making\20.2.jpg Albrecht (2014) suggests an ethics development model which is demonstrated in figure 3.1. According to the model, the initial step of ethics development is personal understanding on ethics which then leads to apply the ethics in business by individuals. The third step of the model refers stresses that, it is important to act ethically in all kind of critical situations. The final level of ethical development demonstrates the leadership, by which ethics are inculcated in others.

Figure 3.1: Ethics Development Model

According to Flp, Hirsrich and Szegedi (2000, p.1), “..ethical behaviour is becoming more important as communities begin to realize its significance”. Ethics in organizational decision making is now identified as a critical factor of organizational growth and profitability (Kay & Popkin, 1998); and Lloyd and Mey (2010) stress that it is vital to establish integrative ethical practices in an organization with the involvement of all the stakeholders in order to achieve success.

Five approaches for ethical standards can be identified which include The Utilitarian Approach (focus on performing great amount of good and little or no harm to the stakeholders), The Rights Approach (focuses on performing the best thing that protects and respects the ethical rights of others), The Fairness or Justice Approach (focuses on ensuring that all ethical actions are equal or fair), The Common Good Approach (focuses on the importance of ethical reasoning when interacting with the community) and The Virtue Approach (focuses on determining the best action according to the virtues) (Uys & Harty, n.d.). Organizational ethics can be managed through code of conduct for ethics, top management involvement & support, appointing ethics officer, conducting trainings on ethics, ethics rewarding system, unethical behaviour managing system and ethical behaviour auditing system (Emiliani, 2000).

In contrast, Ethical Dilemma refers to the disagreement of two or more ethical standards or principles (Lightfoot, 2013). Butts (n.d.) lists down a wide range of ethical dilemmas in business which include corporate fraud, health care fraud, greediness, engage in covert operations, producing misleading services, reneging or cheating on negotiated terms, disloyalty, lying for the sake of business, showing over confidence in self judgment, creating unclear and inappropriate policies and lying others to get the job done, dithering, inefficiency, corrupting the public process through legal means, showing favoritism, stepping on others to climb the promotion ladder, failing to corporate with others etc.

However, three main conditions are considered when identifying an ethical dilemma in organizational context, for which,

  • First, an agent for the organization have had make a decision on one particular action
  • Secondly, several alternative actions should have being there to make a selection
  • Finally, some ethical principles should be compromised (Hommadi, n.d.)

3.2. Analyzing Ethical Dilemma in Winterquilts

The ethical dilemma in Winterquilts can be included in under several categories as,

  • showing over confidence in self judgment
  • lying for the sake of business
  • creating unclear and inappropriate policies

Showing Over Confidence in Self Judgment

The management of Winterquilts pretended to the customer that they have the capacity to achieve the target of 900,000 garments per month; while actually having only 450,000 internal capacity. Thus, it is apparent that the company was in over confidence in self judgment. Finally the dilemma affected negatively for the customers’ income, profits and brand name; and on the other hand, it affected the revenues, profits, customer’s confidence, company goodwill etc.

Lying for the sake of Business

Not only for the customers, but Winterquilts had lied to the subcontractors and employees as well. One of the critical issues faced by the subcontractors was the unnecessary huge amount of money expenses for their capacity expanding purposes, which later became idle. Due to the trust over Winterquilts, the subcontractors accepted the orders placed by Winterquilts and expanded capacity through production facility renovation, hiring new employees, investing on new machines etc. When it was revealed that the order was temporary, the subcontractors strapped due to the high salary expenses, loan amounts etc.

Creating Unclear and Inappropriate Policies

After lying to the customers, subcontractors and employees, Winterquilts attempted to correct and mitigate ways of the critical situation, but it was further cluttered due to some unclear and inappropriate policies. For instance, it was required to deliver the products through airfreight due to the delay in shipping delivery, for which huge amount of expenses were needed and Winterquilts obtained them through high amount of bank loans, which resulted in increasing the liabilities and burdens to the company. In addition, in order to achieve production targets, more human capital recruited consisting both skilled and unskilled labour incurring higher costs for wages, training & development and other welfare matters; but later some of them were dismissed incurring some more costs due to the work idling problems.

Relationship between Ethics, Leadership and Decision Making

Ethics refers to the morale necessities of behaviour, which may take good and right features or bad and wrong features, while ethical behaviour refers to the behaviour with good and right qualities or bad and wrong qualities (Minkes, Small, & Chatterjee; Sims as cited in Mihelič, Lipičnik & Tekavčič, 2010). Above figure 3.1 indicated that ethics are initially generated within individuals and once they are applied to the organizations, organizational ethical behaviour is created which can be further explained through figure 4.1.

Figure 4.1: Organizational Ethical Behaviour

Source: Ferrell, O.C., Hirt, G and Ferrell, L. (2015). Business: A Changing World (10th ed).

 

Accordingly, different individuals in an organization make different kinds of decisions based on the ethics those are instilled in their lifestyles. In the same way that the behaviour gets changed in relation to the ethics, the decisions also get changed. However, ethical decision can be identified as “the rules and standards applied by individuals when making decisions in their business environment” (Elgood, 2014, page 2). When individuals take decisions in an organizational context, they affect to the organizational behaviour and others behaviours as well.

An organization consists of different kinds of individuals where some are managers, some are subordinates, some are leaders and some are followers. Leadership is an art of influencing and directing others to perform things in order to achieve the goals and objectives of the leader (Mihelič, Lipičnik & Tekavčič, 2010). As Northam (2005,) states,

Ethics and leadership are linked by power in the context of an organization. Ethics requires power, in that the individual must have the power to act. Leadership requires power, the power given by those led. The decisions made by an individual on how they use power determine both their ethical and leadership qualities. Just as ethics cannot exist without leadership, leadership cannot exist without ethics since the very act of leadership generates ethical dilemmas that must be resolved.

When analyzing the organizational scenario in Winterquilts, it is apparent that one individual (who represented the Board of Directors) held some unlimited power within the organization with the authoritarian leadership style. Hence his decisions which were shaped by wrong and bad ethics were resulted in generating obstacles for the company operations and company future. Moreover, those decisions impacted on its stakeholders along the supply chain, where all of them had to experience with critical business hazards.

Thus, it is vital to carefully study the ethical behaviour of the company and its leaders when making organizational decisions, since decisions are obviously contoured by the leaders and ethics. Northam (2005, page 3) states that,

Boards, leaders, and employees each have a role in developing ethical behavior within an organization. All must work together to build an environment wherein unethical behavior is not allowed. It is through this shared responsibility that boards and employees can help to prevent authoritarian leaders.

Leaders Role in Ensuing Ethical Decision Making

Ethical leaders think about long-term consequences, drawbacks and benefits of their decisions (Mihelič, Lipičnik & Tekavčič, 2010). However, a person becomes an ethical leader, only by inculcating universally accepted morals in his/her behaviour (Thomas, 2001). According to Butt (n.d., page 141), “the respect that leadership must have requires that one’s ethics be without question. A leader not only stays above the line between right and wrong, he stays well clear of the ‘grey areas’”.

Thus the decisions taken by the leaders affect the organization as a whole and all the followers. Therefore it is vital to ensure ethical decision making in almost all the time in a careful manner while focusing on below mentioned aspects;

  • Analyzing every decision before making and finalizing and review them objectively.
  • Making sure the fairness at every time without being polarised (facilitate solutions instead of deciding at once)
  • Being aware of the Psychological Contract of different individuals
  • Learning from the past and earlier circumstances
  • Collecting facts from every angle including personal perspective, second alternative and third alternative
  • Checking all related laws and regulations
  • Obtaining consultations from critical people (who are beyond the circle) as well
  • Deeply analyzing and review cause and effect of all alternatives
  • Minimizing illusion and egotism which are naturally generated with the power
  • Being cautious when justifying decisions in proportion to different religions
  • Aim for solutions and harmony, objectivity and detachment.

 

Conclusion

This report studied about the business ethical dilemma in Winterquilts Private Limited, which was once recognized as the pioneer in the apparel manufacturing industry. The dilemma was regarding several business aspects including,

  • showing over confidence in self judgment
  • lying for the sake of business
  • creating unclear and inappropriate policies

The main story behind the dilemma has occurred in the year 2015 as one agent (who was representing the Board of Directors) of the company has provided false information to one of its major buyer regarding the manufacturing capabilities, while stressing that they have the capacity to complete 900,000 garments per month and an outsized manufacturing order has obtained for the company for a period of six months. However, according to the factual company statistics, the capacity of the company was to produce 450,000 garments per month by 3,000 employees in three manufacturing facilities. Thus, the false image of the company resulted in generating numerous hindrances for Winterquilts and also for its stakeholders along the supply chain including customers, customers of customers’, suppliers, employees etc.

The key solution for this kind of a dilemma in an organization can be achieved through maintaining sound balance among business ethics, leadership and decision making process. Correspondingly, Northam (2005,) states,

Ethics and leadership are linked by power in the context of an organization. Ethics requires power, in that the individual must have the power to act. Leadership requires power, the power given by those led. The decisions made by an individual on how they use power determine both their ethical and leadership qualities. Just as ethics cannot exist without leadership, leadership cannot exist without ethics since the very act of leadership generates ethical dilemmas that must be resolved.

Therefore, it is vital to be careful in appointing leaders in business organizations and allowing them to make important business decisions.

References

Albrecht, W.S. (2014). Ethics Development Model. Retrieved from The Wealthy Institution Website http://wheatley.byu.edu/fellow_notes/individual.cfm?id=20

Elgood, C. (2014). Ethics in business decision-making. Retrieved from http://www.chris-elgood.com/uploads/ethics_in_business_decision-making_august_2014.pdf

Emiliani, M.L. (2000). The oath of managementManagement Decision, 38(4), 261-262.

Ferrell, O.C., Hirt, G and Ferrell, L. (2015). Business: A Changing World (10th ed).

Flp, G., Hisrich, R.B., & Szegedi, K. (2000). Business ethics and social responsibility in transition economies. Journal of Management Development, 19(1), 1-3.

Fountain, L. (2012). The Definition of Business Ethics. Retrieved from https://www.tru.ca/__shared/assets/The_Definition_of_Business_Ethics33706.pdf

Hommadi, J. (n.d.). Medical Ethical Dilemmas. Retrieved from http://afhsr.med.sa/cqi_web/web/cqi_docs/4.Education%20&%20Training/3.Conferences/ethics%20sumposym/dr.+jamal-Medical+Ethical+dilemmas.pdf

Kay, S., & Popkin, S.J. (1998). Integrating ethics into the strategic management process: Doing well by doing good. Management Decision, 36(5), 331-338.

Lightfoot, E. (n.d.). Ethical Dilemmas and Ethical Decision Making. Retrieved from http://cascw.umn.edu/wp-content/uploads/2013/10/Dilemmas.pdf

Lloyd, H.R., & Mey, M.R. (2010). An ethics model to develop an ethical organization. SA Journal of Human Resource Management/SA Tydskrif virMenslikehulpbronbestuur8(1), Art. #218, 12 pages. DOI: 10.4102/sajhrm.v8i1.218

Northam, D. (2005). Leadership and Ethics. MBA-ITM Program – thesis, Athabasca University.

Uys, K and Harty, M. (n.d.). Ethical Decision Making. University of Pretoria. Retrieved from http://www.up.ac.za/media/shared/Legacy/sitefiles/file/46/9742/aacconference2ndregional/yellowwoodvenue/ethicaldecisionmakingaacconf.pdf

Winterquilts Official Website, Retrieved from http://www.winterquilts.com/index.php/about-us/