Cost calculations Essay
The responsibility for the abrupt closure of the plant demonstrates mismanagement and lack of communication on the part of Company Management. In principle, if the company follows and implements sound business practices such as management by objectives and develops measurable processes, the need for closure of the plant would be evident well in advance. This knowledge can be communicated to all stakeholders to enable everyone to take appropriate action.
Today’s business environment is dynamic and to remain competitive and avoid undue losses, companies are sometimes forced to take quick action – in this case, closure of the assembly plant. Federal laws governing this practice would place undue burden on businesses and would become one more variable that would increase costs as companies would have to ‘factor in’ the duration of the legal process into their cost calculations.
The argument that the primary responsibility of corporate managers is towards its shareholders and as such they have a duty to minimize losses ignores the fact that any business conducted and revenue generated comes from the resources that communities provides, as such, corporations have a moral obligation to ensure that any decisions taken do not adversely affect the well being of these communities. In case
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Closure should result only after all attempts to keep the plant open have failed, these attempts should include rehabilitation of the plant to be used for a different purpose. The alternatives having been discussed with all stakeholders and no apparent solution being found, the plant will be closed. Terms of Closure The notice period provided to employees would be according to their employment contracts. Communication would be key and ideally employees would be aware of the impending closure long before they are notified.
If the financial situation of the corporation permits, employees should be offered incentives that would minimize the negative impact of plant closure. Some of the incentives could be: a- Early retirement for employees with a long working history with the company b- Retraining for staff that wish to explore new career opportunities c- Redeployment of workers to other factories d- Organize job fair for employees to ease the burden of finding employment in their related areas of expertise.
Affected Stakeholders The stakeholders affected by the decision are: Owners Employees and their immediate families Businesses that operate as a result of the plant being in operation such as diners and cafes The local communities that may be build around the plant and the closure of which would require the community to relocate. Suppliers The interests of the employee and communities are of primary concern and are addressed in the terms of closure to the best extent possible. The owners are served by closing an unsustainable operation thereby minimizing losses. All credit lines and inventory purchased from suppliers will be paid in full and if the financial strength of the company permits their contracts will be honored to the full extent.
The primary responsibility of those laid off as a result of the plant closing rests with government institutions through offices that are created and trained to handle the task. The responsibility of the corporation is to ensure that the negative impact is minimized; this could partly be achieved by offering to bear the cost of training laid off staff in areas of their choice. The primary role of managers if to ensure that the business is run efficiently and owner’s investments generate an adequate return. If businesses are run as social institutions, they will not be able to compete in the long run.
The workers will be informed by holding an all staff meeting at the plant where reasons and business realities will be explained. All available options will be put forward and all attempts to ward off closure will be explained. The Local Community administration will be informed prior to notifying the press in the form of a press release that would explain the circumstances that forced the company to close the assembly plant. Inability to effectively manage the closure will result in the company gaining a bad reputation and would affect relationships with its stakeholder as is seen in the case of Danone’s factory closures (Smith, 2004).
Beauchamp, T., & Bowie, N. (2005). Ethical theory and business. 7th ed. Upper Saddle River, NJ: Prentice Hall.
Smith, C. (2004). Virtue in marketing. Retrieved Jul. 23, 2005, from London Business School Web site: online.glos.ac.uk/am2004/N_Craig_Smith0704.pdf
Orlando, J. (1999). The fourth wave: the ethics of corporate downsizing. Retrieved Jul. 23, 2005, from Business Ethics Quarterly Web site: http://www.facstaff.bucknell.edu/pagana/mg312/orlando.html.