Nearly two weeks ago, an 8-story building that held five garment factories collapsed in Savar, Bangladesh. The death toll continues to climb as the numbers of confirmed deaths have surpassed 500, with hundreds still missing.
It is difficult to write about such an event. Who wants to have a tragedy serve as a teacher? As this is a tragedy in the classical sense, learning from such is often challenging and disheartening. If early reports are to be believed, the building owner allegedly added three stories to a five-story building under illegal pretenses. When cracks appeared, the owner allegedly told people the building was safe to enter. Where do the lessons begin?
And yet, people with an MBA need to do exactly that — learn a lesson — because too many companies are dealing with the situation badly, to their detriment and that of their customers and suppliers.
Companies are already pulling out of using factories in Bangladesh. Walt Disney is already going elsewhere and there is fear that other companies will follow suit. At this point, only two of almost 30 companies that had products manufactured in the building have publicly addressed the situation.
But, in a sense, companies get what they ask for. For example, tell employees to do one thing but base compensation on a contrary principle and guess what will happen? Whatever provides employee remuneration. Try to hold down the cost of goods by pressuring for low cost products no matter what the price and you will find factory operators doing whatever it takes to give you what you say you want.
Companies cannot claim that there were no signs of problems. A similar building collapse in the same town happened in 2006, and last year 100 died in a factory fire near the city of Dhaka, the capital of Bangladesh. In the 1990s, Nike and other apparel companies were criticized for using child labor. Foxconn, contractor to Apple and other major tech companies, has recently seen riots and suicides.
To point the finger at suppliers is passing blame. At this point, all managers should know that if you’re outsourcing manufacturing to lower costs, there is a price to pay and workers in other countries may be the ones paying it. There have certainly been enough examples.
Correcting such problems means that managers have to begin to stand their ground with everyone, whether pushing back on upper management when it comes to adding in the cost of supervising facilities (which has the additional benefits of checking on product quality and overseeing valuable corporate intellectual property) or telling customers, yes, it really does cost more to make products and you can’t get something for nothing.
Maybe this will open the market to require ethical manufacturing – a selling-point to conscious customers who may be willing to pay a little bit more for these products. Time will tell what lessons surface from this. Ultimately, those that do will gain great PR value, build higher margins, and maybe be able to sleep soundly at night.