Case Study Report

‘The Delicate Quest for Corporate Environmental Sustainability’

Learning Development © 2012 Adapted from original student work by permission

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CONTENTS

EXECUTIVE SUMMARY iii

1. INTRODUCTION 1

2. THE DECISION-MAKING FRAMEWORK AT GREENHEART 1

2a. A Sociological Perspective 2

2b. The Phenomenon of Conformity 3

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

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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 environment

objectives, and this also resulted in 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 environment

policies. The decision-making process changed to become one of consensus. From a

sociological perspective, this is more positive as it results 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

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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.

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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

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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

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“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

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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

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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

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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)

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REFERENCE LIST

Akdere, M., & Altman, B. A. (2009). An Organization Development Framework in Decision Making: Implications for Practice. Organization Development Journal, 27(4), 47-56.

Amason, A. C. (1996). Distinguishing the effects of functional and dysfunctional conflict on strategic decision making: resolving a paradox for top management teams. Academy Of Management Journal, 39(1), 123-148.

Fitzgerald, M. & Ayson, S. (Eds.) (2011). Managing under uncertainty: a qualitativeapproach to decision making. Frenchs Forest, Sydney, NSW: Pearson.

Gerring, R., Zimbardo, P., Campbell, A., Cumming S. & Wilkes, F. (2012). Social Psychology. In M. Fitzgerald & S. Ayson, (Eds.), Managing under uncertainty: a qualitative approach to decision making (pp. 449-496). Frenchs Forest, Sydney, NSW: Pearson.

Johnson, D & Johnson, F. (2009). Decision Making. In M. Fitzgerald & S. Ayson, (Eds.), Managing under uncertainty: a qualitative approach to decision making (pp. 498-551). Frenchs Forest, Sydney, NSW: Pearson.

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

Sniedovich, M. (2012). Black Swans, New Nostradamuses, Voodoo decision theories, and the science of decision making in the face of severe uncertainty. International Transactions In Operational Research, 19(1/2), 253-281. doi:10.1111/j.1475-3995.2011.00790.x

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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