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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 Conformity3

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

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 CEO’s 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 environmental objectives,

and this also contributed to the 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 environmental policies. The decision-making process changed

to become one of consensus. From a sociological perspective, this was

more positive as it resulted 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 decision-making, 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 .

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 decision-making 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 CEO’s 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

Greenheart’s 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 CEO’s 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 prioritised productivity to environmental

sustainability, since the main objective of normal production enterprises

is to produce. The lack of commitment from Greenheart’s 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 CEO’s 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 “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 sociological perspective to identify

issues. In the former company, Greenheart, the decision-making 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 Worley’s 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 commitment of group members. The model not only addresses the

obvious problems of individual decision-making at Greenheart, but would

also enhance the consensus decision-making 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.

(1700 words)

REFERENCE LIST

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Fitzgerald, M. & Ayson, S. (Eds.) (2011). Managing under uncertainty: a qualitative

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Nemiroff, P. M., & King, D. C. (1975). Group Decision-Making Performance as Influenced by Consensus and Self-Orientation. Human Relations, 28(1), 1-21.

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Taleb, N. (2008). Prologue. In M. Fitzgerald & S. Ayson, (Eds.), Managing under uncertainty: a qualitative approach to decision making(pp. 163-175). Frenchs Forest, Sydney, NSW: Pearson.

Teale, M., Dispenza,V., Flynn, J. & Currie, D. (2003). Management decision-making in context. In M. Fitzgerald & S.Ayson, (Eds.), Managing under uncertainty: a qualitative approach to decision making (pp. 7-25). Frenchs Forest, Sydney, NSW: Pearson.

Tolbert, P. & Hall, R. (2008).Decision making. In M. Fitzgerald & S. Ayson, (Eds.), Managing under uncertainty: a qualitative approach to decision making(pp. 28-38). Frenchs Forest, Sydney, NSW: Pearson.

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