MKT4676: Case Report on Foxconn Technology Group Limited

Law Shao Feng, Howard Sze Kin Fai, Steven 52573280 52320496

Case Report: Foxconn Technology Group

Law Shao Feng, Sze Kin Fai

Course code : MKT4676 Student name (SID) : Law, Shao Feng (52573280), Sze, Kin Fai (52320496) _____________________________________________________________________

Foxconn Technology Group: The Strong Militant Organizational Culture and the Serial Suicides
Starting from January of 2010, a series of suicides of Foxconn frontline workers happened in Foxconns plants and dormitories. When media was investigating in the story behind the wall of Foxconns giant factories, Terry Gou, the Chairman of Foxconn, disclaimed blames relating the suicide events to the companys administration. Various course of actions are taken to solve the problem, yet, suicide still happens and rumors continue to bring adverse effect to Foxconns reputation.

Company Background
Foxconn Technology Group (Foxconn) is a subsidiary of Hon Hai Precision Industry Company. Having contracted production, assembly and distribution of consumer electronic products, such as smartphones and computers for big brands such as Apple, Dell and Intel (OEMs) as the groups major area of business, Foxconn received a profit of 2.4 billion and was ranked #189 in Global 2000 in April 2011. The group now has its plants in four major production areas in Mainland China including Pearl River Delta, Chang Jiang Delta, Bohai Rim Region, and Middle and Western China. Most of the plants are very massive, and are often regarded as Foxconn cities.

Management Style and Organizational Culture

The wealth of Terry Gou today was self-made. He started his business with hardships, and worked extremely hard to get through the time. This background fostered Gous faith in harsh management. Gou also believes in centralization. He mentioned more than once the maintenance of a clear hierarchy and the use of top-down strategy within the organization is essential to achieve high efficiency. The two convictions have strong influence to Foxconn as a whole and were eventually developed into Foxconns unique and distinctive militant organizational culture that can be easily observed in Foxconns artifacts. Mottos Once a worker enters Foxconn, they are required to study and memorize Chairman Gous mottos. Examples of his mottos are: real heroes are those who bravely fought to death in a battlefield, not those who could come forward receiving medals ( ), out of the laboratories, there is no high-technology, only execution of disciplines ( ), hungry peoples minds are especially clear (), etc. Many of these mottos emphasize the importance of discipline and tight control.

Case Report: Foxconn Technology Group

Law Shao Feng, Sze Kin Fai

Uniform In Foxconns plant in Chengdu, female basic workers and male basic workers wear red and navy blue T-shirt respectively, technicians are dressed in white T-shirt, and most supervisors have brown or light green vests on top of white T-shirts (Pun et al., 2011). Employees in different levels can easily be distinguished by the colors of their uniforms. The concept of ranks and strict hierarchy is hence strengthened. Workload Frontline workers in Foxconn experience long shifts and demanding workload. A worker in Foxconns Computer Assembling Department said that each of the members in his team is required to finish a step within seven seconds, and the whole team would have to finish 4,000 Dell computers in a shift of ten hours. The situation is even worse in some other production lines, where workers are expected to stick a label, or fasten a screw to a product in about two seconds. Before the happening of the suicide events, only one day-leave will be arranged for a worker in every 13 days. Workplace Regulations Every basic labor on the production line is required to follow a set of strict rules when working. Some of the basic rules include no talking, no walking, no sleeping and even no laughing. Chairs must lie within areas distinguished by yellow lines on the floor. Going to toilet is prohibited unless the worker make a request for a permit, the maximum time allowed is restricted to ten minutes. Workers are required to surrender their working pass all the time for security reason, as declared by Foxconn. The effort of avoiding offence to the rules adds pressure to workers who are already busy. Accommodation Arrangements More than half of Foxconns labor lives in Foxconns dormitory. Although the dormitories of frontline workers are equipped with enough facilities, the company did not arrange to recruit people for cleaning service. Residents are forced to clean their dormitories, including the public areas, in the name of voluntary work after their routine work. The militant culture is extended to the residence in a way that residents are only allowed to walk in authorized zones. No visits can be made without permission. To discourage interactions between workers living in the dormitories, nighttime and daytime workers who work in the same production lines are arranged to live in separate rooms [Exhibit 1], and forced room changings are frequent. Punishments Workers are severely punished if they fail to meet individual production quota, have assembly errors, overlong their restroom breaks, or infringing any of the rules. Most of the punishments are to deduct employees wage or charging them by fines. Even worse, the wrongdoing workers may be asked to make a public confession in front of the whole production line. Also, the internal supervisors verbally intimidate the workers regularly. The use of a total of 127 formal punishments is allowed, in which a list of these punishments are posted on the wall [Exhibit 2]. Gou has great confidence in his methodology in managing the massive enterprise perceiving the satisfying financial performance of Foxconn and continue to encompass the abovementioned elements in Foxconns company policies to date.

Case Report: Foxconn Technology Group

Law Shao Feng, Sze Kin Fai

Occupational Health and Safety

Spending ten to twelve hours a day, at least six days a week for production, the environment of workshops plays a significant role in workers physical and mental health. Although in Foxconns corporate social responsibility report there are statements stressed on operational safety, including day-to-day basis safety checks and air particulate tests in workshops, some bottom workers claimed that they had to work in noisy environments, had eyes blurred with dusts, and felt ill after staying in workshops with strong odor of chemicals. A worker who previously worked in the SuperPrecision Mechanical Business Group (SHZBG) in Foxconns plant in Guanlan, Shenzhen, said that the temperature in the workshop often exceeds 40 degree Celsius. Another worker who worked in the same group told a reporter that he is exposed to highly volatile cleansing oil that makes him feel dizzy. Workers in Chengdu were asked to start working even the constructions of the factory was half finished and had not gone through any safety tests [Exhibit 3].

Frontline Workers Satisfaction

Under huge workload and exploitation of freedom, together with poor working conditions, the low salary just higher than minimum wage and scarce promotion opportunities are unable to generate job satisfaction to Foxconns bottom workers. In various researches and investigations, many current workers and ex-staff members have negative comments on Foxconns management. Some voices of Foxconns workers as follow: Women work as hard as men, men work as hard as machines. We wake up before the roosters, go to sleep after the dog, eat worse than the pigs. You have to forget the taste of your meal. You have to remember that youre eating to allay your hunger. Its so boring. I cant bear it anymore. Everyday is like: I get off from work and I go to bed, I get up in the morning and I go to work. It is my daily routine and I almost feel like an animal. There are lots of people in here, but no one to talk to; there are sports and recreational facilities in here, but no time to go to. I remember when I was being interviewed, the inspectors did not ask any questions but checked on our palms, fingers and shoulders to see if they are alright. They also checked whether there is any scar on my body. Also, I was requested to shout out my name to show that Im neither deaf nor mute. It felt like I was a product to be sold. The low satisfactory level towards the job can be explained using Karaseks DemandControl model [Appendix]. As the high job demand is out of balance with workers authority in the company, workers can easily get stressed. Besides the job nature, work satisfaction can also be influenced by employees expectation. If expectation is higher than perception to the outcome, the perceived value of the job is likely to be low. According to a research conducted by N.Dynamic, Chinas generation Y, which are youngsters born from 1980 to 1989, are less satisfied working for all kinds of job when compared to their elders [Exhibit 4]. These people 3

Case Report: Foxconn Technology Group

Law Shao Feng, Sze Kin Fai

who composed the frontline labor force in Foxconn, are more communicationoriented, more demanding, and less respectful to hierarchical structure. The traits are in conflict with Foxconns strong militant organizational culture. Since Foxconn is unable to satisfy their needs, they may get frustrated working for just a short period of time.

Processes Involved in Resignation

Feeling highly dissatisfied with the job, many of the staff members, including a suicide survivor, have ever planned and tried to resign from their jobs. Lamentably, Foxconns set of resignation procedures are complicated and time consuming. In Foxconn, application for resignation must be submitted a month before. After the submission of application, the worker will have to wait for his direct supervisors approval. Then, the application has to be further approved by at most 15 superiors before it is regarded as officially accepted. Finally, the applicant can lift his contract in the Personnel Department, passes a detail inspection by security guards, and leave Foxconn. Many discouraged workers chose to give up the salaries and left the company, some others have no way out but to stay.

Strike of Suicides
Desperate in their future, myriads of Foxconn bottom workers contemplated suicide for extrication. On 8 January 2008, Rong Bo, a Foxconn worker, committed suicide in the plant in Langfang. The event was recognized as an ordinary suicide that has little relations with Foxconn. It was not until 14 days later, on 23 January, the suicide of another Foxconn worker who worked in the plant in Guanlan, Ma Xiangqian, raised the medias concern. Since then, from March to August, another 15 Foxconn workers committed suicide. Many social organizations and the media started to investigate about Foxconn and relate the frontline job with the death of the workers. [Exhibit 5] is an organized table listing the workers committed suicide during the period.

Foxconns Immediate Reaction

Ever since the string of worker suicidal incidents, Gou together with his management team keeps denying this controversy as a result of poor work condition and high working pressure. This is perhaps the fact, but not what the public and the workers think. Instead of satisfying workers needs and enhance their self-motivation for work, the management defend themselves by adopting a series of measures which are strongly criticized by the public. [Exhibit 6] is a related caricature widely spread on the Internet. Wage Increase As reported by the China Daily, Foxconn Technology Group decides to increase pay for frontline workers at all its factories in Mainland China. The wage increase can be as high as 30 percent. The group claims that the pay hike may help their employees to have a more comfortable and stable income due to rising living costs and its company performance, but the public perceived this immediate pay rise comes right after the

Case Report: Foxconn Technology Group

Law Shao Feng, Sze Kin Fai

string of worker suicidal incidents as Foxconns attempt to put a stop to the social outcry for the suicides. Employee Care Centre and Counseling Clinic Foxconn emphasis its effort in establishing an well-equipped Employee Care Centre and a Counseling Clinic to give solutions to staff members who are in need. According to Foxconns company report, mental health assessment service, trainings and group counseling are provided in the centre. However, plentiful workers are not familiar with the exact location of the centre as Foxconns area is very big. The centre also provides telephone consultation hotline 78585 (sounds like please help me help me in mandarin) and encouraged workers to utilize it, but making complaints would required the name of the claimant and in most of time the call centre will just divert the case to the respondent and ask him or her to make improvements. In such case, complainants are in risks of punishment in reporting their superiors. Safety Nets Gou in the media tour proposed a plan of putting up a 1.5 million square meter safety net around the dormitories to prevent workers from jumping. From the day on, fences and safety nets can be found all over Foxconns dormitories and workshops [Exhibit 7]. Not to mention there are still workers died after landing on the nets, the course of action is clearly not solving the suicidal problem from its root. No Suicide Agreement Instead of taking the blames, Foxconn asked their workers to sign an anti-suicide pledge, with a pledge section of I promise never to hurt myself or others in an extreme manner. Aiming to protect its corporate image and benefits, the contract includes a promise that the families of workers who do commit suicide would not sue the company for higher compensation other than the minimum legal demands.

Current Situation
With an increasing demand for consumer electronic products worldwide, Foxconn is going to extend its production scale. More factories were built to maximize its output. Meanwhile, Chinese government and social groups, and even foreign media, exert pressures on Foxconns administration and the management board is becoming more aware on workplace ethics. Suicidal events still occurred in 2011, but the number of suicide is already far lower than in 2010. Gou, on behalf of Foxconn, promised to take actions to improve Foxconns working environment, to pay workers fair wages, and announced his plan of developing a million robots in three years, specialized for dangerous, or boring repetitive tasks to lower workers stress level. He also promised not to fire his workers in reason of mechanization. The production of Foxbots has now began, it is hoped that the plan will bring hopes to Foxconns frontline worker, and bring Chinese manufacturing and assembling industry to a new era.

Case Report: Foxconn Technology Group

Law Shao Feng, Sze Kin Fai

Bibliography:
Web articles retrieved from February to March 2012 Foxconn Technology Group Company Website. http://www.foxconn.com/ Forbes: The Worlds Biggest Public Companies http://www.forbes.com/global2000/ Foxconn Staff Needs Love, Not Nest, (2010). http://www.thestandard.com.hk/news_detail.asp?we_cat=4&art_id=98743&sid=2840 1963&con_type=1&d_str=20100528&fc=8 Karasek Demand-Control Model on Job Stress, (2008). http://paei.wikidot.com/karasek-demand-control-model-of-job-stress Robots Could Soon Replace People in the Factories Building Your iPhone. (2011). http://www.forbes.com/sites/briancaulfield/2011/08/01/robots-could-soon-replacepeople-in-the-factories-building-your-iphone/ We Are Extremely Tired, with Tremendous Pressure A Follow-up Investigation of Foxconn (2010). http://www.worldlabour.org/eng/node/343 Barrera, (2008). Whos to Blame for Job Strain?. http://ohsonline.com/Articles/2008/06/Whos-to-Blame-for-Job-Strain.aspx?Page=1 Culpan, (2011). Apple Says Foxconns Actions on Suicide Saved Further Lifes. http://www.businessweek.com/news/2011-02-14/apple-says-foxconn-s-actions-onsuicides-saved-further-lives.html Lynton, Thgersen (2010). Working with Chinas Generation Y. http://www.businessweek.com/globalbiz/content/feb2010/gb20100216_566561.htm Tang, (2010). Foxconn Raise Workers Pay by 30% after Suicide http://www.chinadaily.com.cn/china/2010-06/03/content_9925820.htm Zhang. (2011). Foxconn Says Latest Death was Drunk Accident. http://www.forbes.com/2011/07/21/china-foxconn-death-opinions-contributors-goushenzhen.html Hardcopy References Pun, et al. (2011) The Serial Jumping Behind Foxconns Success <In Chinese>. Commercial Press, Hong Kong. Xu, (2007). Terry Gou and Foxconn <In Chinese>. Beijing. Citic Press.

Xu, (2011). Terry Gous Management Diary <In Chinese>. Zhejiang University Press.

Case Report: Foxconn Technology Group

Law Shao Feng, Sze Kin Fai

Dalai, (2010). Collaborating with Gen-Y. N.Dynamic Research Institute.

Appendix: Assessing Work Satisfaction of Foxconn Frontline Workers with Karaseks Demand-Control Model

Sociologist Robert Karasek developed Demand-Control Model (DCM) of explaining occupational stress in 1979. In the model, it is suggested that job psychological strains is related to a relatively high job demand but low decision latitude. Job demands is a representation of factors generating psychological stresses, including: interruption rate, time pressures, reaction time, conflicting demands, reaction time required pace of work, proportion of work performed under pressure, amount of work, degree of concentration required, and the slowing down of work caused by the need to wait for others. For Foxconns bottom workers, every task is given a time limit. They work everyday with quotas and rules, which can be very demanding. The job demand, in such case, is clearly very high. Decision latitude, on the other hand, is a measurement of the degree of control employees have on their jobs, it terms of planning and execution. Skill discretion and decision authority are its two basic elements. Having a huge variety of tasks, low level of repetitiveness, opportunity to learn and to create, and the chance of developing special abilities, one can be described as having a high level of skill discretion. The employees ability and authority to make decisions, and their influence over their team and company policies is defined as decision authority. Since Foxconns frontline workers are concentrating in a specific process of a production line, work is boring and repetitive. The strong hierarchy and centralized approach of the company also discourage workers to speak out or propose changes. In total, the decision latitude of Foxconns frontline workers tends to be low.

Case Report: Foxconn Technology Group

Law Shao Feng, Sze Kin Fai

With a low decision latitude and high job demand, according to DCM, the workers are likely lying on the high strain zone and are prone to psychological strains. They will also have less incentive to work. Exhibit 1 List of residents in a room

Source: Pun et al., (2011). The Serial Jumps Behind Foxconns Success (in Chinese). P.183

Exhibit 2 List of official punishments on the wall of Foxconns plant

Source: Pun et al., (2011). The Serial Jumps Behind Foxconns Success (in Chinese). P.107

Case Report: Foxconn Technology Group

Law Shao Feng, Sze Kin Fai

Exhibit 3 Workers working in a under construction workshop in Chengdu

Source: SACOM, (2011). The Truth of the Apple iPad Behind Foxconns Lies <video recording>. Retrived 18 March 2012 from http://www.youtube.com/watch?v=V3YFGixp9Jw

Exhibit 4 Line diagram showing satisfaction at work breakdown by age

Case Report: Foxconn Technology Group

Law Shao Feng, Sze Kin Fai

Source: Dalai. (2010). Collaborating with Gen-Y, N.Dynamic Research Institute. P.15

Exhibit 5 List of Foxconn workers committed suicide from January to August in 2010 Name Rong Bo Ma Xiangqian Li (surname) Tian Yu # Li Wei Liu Zhijun Rao Shuqin # Ning (surname) Lu Xin Zhu Chenming Liang Chao Nan Gang Li Hai He (surname) Chen (surname) # Liu (surname) Liu Ming # Survivor Gender Male Male Male Female Male Male Female Female Male Female Male Male Male Male Male Male Female Age 19 19 20 17 23 23 18 18 24 24 21 21 19 23 25 18 23 Origin Hebei Henan Henan Hubei Hebei Hunan Jiangxi Yunnan Hunan Henan Anhui Hubei Hunan Gansu Hunan Hebei Jiangsu Plant Langfang Guanlan Longhua Longhua Langfang Longhua Guanlan Guanlan Longhua Longhua Longhua Longhua Guanlan Longhua Longhua Nanhai Kunshan Date of suicide 8 January 23 January 11 March 17 March 23 March 29 March 6 April 7 April 6 May 11 May 14 May 21 May 25 May 26 May 27 May 20 July 23 August

Source: Pun et al., (2011). Based onThe Serial Jumps Behind Foxconns Success (in Chinese). P.209

Exhibit 6 A caricature criticizing Foxconns effort in tackling suicide problem

10

Case Report: Foxconn Technology Group

Law Shao Feng, Sze Kin Fai

Source: China Labor Watch, (2010). We are Extremely Tired, With Tremendous Pressure retrieved 15 March 2012 from http://www.worldlabour.org/eng/node/343

Exhibit 7 Safety nets surrounding Foxconns plants and dormitories

Source: Pun et al., (2011). The Serial Jumps Behind Foxconns Success (in Chinese). P.107

11

Case Report: Foxconn Technology Group

Law Shao Feng, Sze Kin Fai

Source: Apple Chinese Factory Nightline, (2012). Retrived 15 March 2012 from http://www.youtube.com/watch?v=hLuPtMvvwA0

End of Report

12