PART II: Empirical study
7. Findings
7.3. Interviews
7.3.1. Implementation
This chapter analyzes the implementation process at headquarters and at the subsidiary.
It includes the development process of the code, the strategy, project team, the formulation of the content, and the communication of the code.
At the beginning the participants were asked to elaborate on the COC. It was soon found out that the COC was developed at headquarters. This means that the strategy and the content of the code were formulated in Austria. The idea came in 2008 when suppliers asked additional questions during the audit, and the company did not have any other legal basis than the general business terms. Furthermore, fair topics, taxation as well as environmental topics had increased over the years and had led the sustainability department to develop a tool that addresses these issues. Besides, it was mentioned that PALFINGER is a stock exchange company, and it is important to avoid child labor and corruption and to check whether the environmental conditions are in the right state.
Additionally, there were no internal guidelines about gift-giving and accepting, and scandals of other companies came up in the media. PALFINGER wanted to introduce a tool to reduce the risk of potential scandals and provide clear guidelines. The sustainability department took the lead of the COC implementation as HQ3 stated:
“…PALFINGER is basically on a strategic level very decentralized organized, and we did not have a department or any kind of central person that combined different topics like the 4 fields, except the sustainability management…”
These four fields are: sustainable products, eco-efficiency in production, responsible employer, and fair business. The sustainability department got in contact with other departments and the aim was to formulate one code that builds up on these four fields.
The project team consisted of several departments. HQ1 was doubtful whether the finance department was part of the team and listed sustainability and communications department, legal department, human resources, and risk management as the project team. HQ2 did not list any departments but generally mentioned that various departments were involved. Furthermore, the topic was discussed with the executive team and board members. HQ3 mentioned that the project team consisted of supplier management, the legal department, product management of the main products, sales department, and bigger production plant managers. The expatriates only mentioned that the COC came from headquarters and thus, did not elaborate on specific departments. Here it can be
seen that the perspectives are different depending on managers at headquarters and the expatriates. HQ1-3 focused on different departments that were involved in the development process whereas the expatriates only focused on the headquarters/subsidiary perspective.
One question was about the nationalities of the project team, which only managers at headquarters were asked about. HQ2 mentioned that there were only Austrians and HQ1 stated:
“For sure most of the people were Austrians, at least Europeans…”
HQ3 also confirmed that mostly Austrians and some Germans were part of the team. This shows that the team was culturally quite homogeneous since the majority was Austrians.
The original strategy was to introduce the code centrally from headquarters top-down to all entities of the group. HQ1 states:
“…and we asked those managers in those countries if they can live with those rules or if they have some problems with how to live with those rules. Then we collected this feedback and discussed again, if we want to stick to something or have a different wording…”
Here, HQ1 points out that the code formulation was done at headquarters, but they included the opinions of the expatriates by involving their feedback in the development process. This shows that although the project team was based at headquarters, managers of subsidiaries had the opportunity to participate in the development process and share their knowledge of the business behavior in the respective entity abroad. PALFINGER operates in a decentralized manner. Therefore, the COC should provide a central basis.
The project team thinks that the only way to introduce and manage a COC is a central approach as HQ3 mentioned:
“If you come along with a framework on a decentralized basis you get area versions, even country versions, that does not make sense…”
There is only one document. However, additional COCs can be implemented if they are built on the original COC. It has already been mentioned that the code introduction started at HQ, and the code was quickly sent out to other areas. These managers abroad were asked to use it in daily business. This was mentioned by managers of headquarters and confirmed by Expat1:
“The standard comes from Austria, from HQ and goes into the subsidiaries and we simply follow pretty much the processes enforced or put there from the HQ. From this aspect, purchasing was pretty much under control, but sales not so much…”
The COC is discussed before a relationship with a new supplier is formed. Some supplier contracts have already lasted for several years. In this case the contracts are continuously adapted to the COC. The suppliers have to assure that they do everything to fulfill the requirements of the COC. Part of the strategy is to receive the signatures from the suppliers. The entire procedure is done top-down as the following statement reveals:
“…we are also not discussing with the supplier, whether it [COC] is necessary or not. This is a fact, otherwise he cannot be a supplier from PALFINGER…”
This statement clearly shows a direct and straight forward approach. The signature and the compliance of the COC are mandatory when doing business with PALFINGER. The COC is communicated clearly and presents an ultimatum for the company’s stakeholder to either comply or end the relationship.
All interviewees who were part of the project team mentioned the role of top management prior the implementation of the COC. The interviewer did not explicitly ask about the involvement of top management but requested information concerning the constellation of the project team, and the motivation about introducing a COC. HQ1 stated:
“…our CEO back then, was very much convinced that this measure makes sense and he also pushed it and helped us to set it up…”
This statement confirms the commitment of the top management to the implementation of the COC. Furthermore, it was stated that any sustainability topic is approved by the top management to ensure their support. This shows a collaboration of middle and top management and presents a centralized approach since the top management approves certain topics that are spread globally.
Content of COC
The opinions of the participants at headquarters and the expatriates did not differ substantially regarding the content of the COC. The majority mentioned that there were
never discussions about or issues with child labor. This is clearly communicated in this statement:
“…the human rights part – there is no discussion about it. It is very clearly stated what we can do and what we can’t do…”
HQ3 further mentioned human rights, including child labor, discrimination, and FoA.
There had never been a problem with child labor. HQ1 outlines this fact as follows:
“…Perhaps it is a big difference when you are in a machine building industry compared with the clothes or food industry…”
HQ2 mentioned that child labor was not accepted within the company, but HQ2 stated that it probably depends on the industry the company is operating in. It was further mentioned that e. g. within the textile industry it might be more difficult to avoid child labor than in the machine building industry. Apart from child labor, corruption, and accepting and giving gifts was indicated by the majority of participants. HQ1 stated:
“…anti-corruption is one topic and environmental standards is one topic, where we always say we want to be ahead of others and really take care of it…”
HQ1 outlines this issue with the following quote:
“So, to have no discrimination, we have a very high, high standard here in Austria, but we also have other sites in China, Dubai and Russia and so on, where people do not have such a life as we have. And it is our big responsibility to also improve their situation beyond the local standards.”
This statement clearly shows the importance of the topics covered in the COC. It also underlines the responsibility of the company to address the issues addressed in the COC.
Furthermore, Expat2 mentioned that accepting gifts or giving gifts is the topic that causes the most discussions and the most challenges. The reasons for this are cultural differences and distinct business practices. These two factors will be further analyzed in Chapter 7.3.2.
These statements about corruption and child labor show that the managers are in line with the prohibition of child labor. Firstly, child labor is not an issue in the entire machine building industry. Secondly, it is a fact that child labor is not allowed, as it is stated in the COC. Furthermore, it can be measured more easily than e. g corruption. To clarify, child labor is obvious as soon as a child would work for the company. Especially during audits,
managers would see children in the production halls or would get suspicious if they saw lower workbenches. However, corruption is not that obvious and thus, leads to more issues since it cannot be measured as easily. Furthermore, corruption is never transparent, which complicates revealing or identifying it.
Communication of COC
Once the content had been fixed, the next step was to focus on the communication of the code. It was immediately published on the website, and emails were sent out to all employees with the respective link. At the same time the integrity line was published. The announcement of the COC and the integrity line was combined in one email. The integrity line will be further explained in Chapter 7.3.3. The code has been displayed at info points.
One of the biggest challenges was to make sure that everyone understood the existence of the code including its content, so they would use it in daily business, as the following quote reveals:
“…first to the internal people that it makes sense to have such a COC, because all people say: ‘Yes it is clear what is in there, why should we have it as an additional document and why do we need to discuss it with our external partners.’ This for sure explains why it took two years from the set up until the communication…”
One part was to publish the code online and at info points, as mentioned above. To make sure that people actually understood the code trainings were provided as the following quote of HQ2 reveals:
“…a session with all our purchasers, because very important for me was that these people understand exactly what we like to have or what is the meaning of this topic, to be personally convinced that this is the right way. Only in this form they can tell or translate this topic to our partners, to explain and get at least also the signature for that.”
This statement clearly shows the importance of the code and the way it is used. It is not just a document to protect the company. The managers want to ensure the code’s effectiveness by actively training their subordinates so that they can communicate the code to suppliers, customers, etc. Regular meetings are held every two months and one of these meetings was reserved only for training a small team for knowing about the code.
All contracts are examined by the headquarters in Austria. Therefore, it was easy to train the local people. However, HQ2 shared the following statement:
“…and we have also some regular meetings in China, in Russia. We train them directly with all points of the contract, not only with this COC.”
This means that trainings are not held at headquarters only but also at the subsidiaries abroad. Furthermore, these trainings are not solely for communicating the COC. They are combined with the standard trainings for the employees working in the global sourcing and supplier management.
Another method to communicate the COC is to present the content at supplier days. This event is held biannually, and all of PALFINGER’s suppliers, which amount to about 150, are invited. The head of sustainability management educated the suppliers about the code content and its importance. Top management and head of global sourcing and supplier management are also present at supplier days. HQ2 stated:
“So this is also when suppliers are hearing all these points from me or from the management, then it is for all of our purchasers, it is much, much easier afterwards to implement all these points, because the supplier knows exactly that there is no way to pass these points.”
This training increases the presence of the code and strengthens its importance. It facilitates the transfer process to suppliers since they personally hear the importance of the code from middle and top management and not only from the purchaser. Here again, middle and top management is used to strengthen the discussion about the COC.
Two years after the implementation two questions were included in the employee survey to check whether people know about the code’s existence. The answers were disillusioning. The majority did not know about the COC’s existence. Therefore, these answers were discussed with the management of local plants. People wanted more details. HQ3 explained as follows:
“…well if we do that, we can do that, but it means that we will have documents of 30 pages and I don’t think anybody would read them. So, we thought of how we could make it more digestive and we said, maybe we have to come up with a video to visualize it. It was the idea of how we can visualize a boring text and then the…yes, it was at that stage that videos, short videos came up, so we said maybe we can do it on a video basis. And this was basically when we introduced the video…”
The project team involved the managers’ feedback and was searching for a solution to increase the code’s presence. The video was published in English and it starts with a message delivered by the CEO. HQ3 explains:
“…CEO actually talking to the viewer why it is important and why we want you to do that. They have got the feeling okay the CEO is behind it as well. Before it was just a paper and we can sign that. And now it is the request from the CEO to follow this COC…”
Here again, the commitment of the top management comes into play. The previous quote emphasizes the importance and power of the CEO. The CEO is used to increase the importance of the topic and to request that all employees act according to the COC guidelines. The link to the video was sent out via email, and the video got integrated in the onboarding process. Every future employee will have to watch the video. Furthermore, the video was published on the website, and screens were installed at some locations where the video is played.
The knowledge of the code’s existence was checked again in the subsequent employee survey. The number of employees knowing about the code had increased significantly.
The sustainability department received positive feedback and requests for further material about the code.
Apparently, the findings presented above represents the headquarters’ view with regard to the code’s communication. The perspective of expatriates will be outlined in the following paragraphs.
In Brazil, the COC was initially posted on some walls, and people had to sign it when starting to work for the company. Expat1 criticized this method since the document would just be archived and the employees would forget about the COC. Therefore, he welcomed the video:
“They started a video, a youtube video and helped to spread it with pictures, with less text, with pictures to create the images, so the people can get the situation better in their mind. Because by the end of the day you need to be aware of, that you also have people with lower educational level, not always sure that everyone can fully read and fully understand, so delivering something with pictures is always helpful.”
Expat1 did not only focus on the general distribution of the code but also talks about the perspective of including everyone. Every person, regardless of their educational level, can understand the COC more easily by watching a video with pictures. In Brazil, the COC is
currently being updated. This means that two persons from the company in Brazil will come to Austria and receive a training on the COC and group guidelines. This underlines the efforts of implementing an effective COC within the entire company. Apart from the trainings in Austria every Brazilian employee that enters the company receives a one- or two-day training on their obligations and rights within the company, regardless of the employee’s position.
In the US, the COC is also part of the onboarding process. Expat2 explained:
“…the main rules where described in written-form, but we also had a video which was easier to watch and also a video that was followed by a short test. So the people who will watch the video will also be kind of asked a few questions to make sure that they actively watched what is in front of them… Because in the beginning there were 10 different documents that had to be signed but if somebody does not read the documents and just blindly signs the documents, the question is how much is going to be…and if you take the binder of documents home with you, are you going to read them or are they just going to sit somewhere?
I think the question of how to communicate is really important because there is so much information coming in and out every day.”
Expat2 also supported the video, since the text-version is too theoretical. In the US, the video is followed by a short test to prove the employees’ knowledge of the code’s content.
The importance of communication was emphasized during the interview with Expat2. This shows that the aim is not to simply transfer and introduce the COC but also to ensure that everyone understands its content.
In China, all employees had received the COC via email. Furthermore, meetings had been held to discuss the COC with local employees, especially with the management team. As previously mentioned, the challenge was to make sure that everyone understands the code. Expat3 explained:
“The other thing is, how much did we get them to really understand them what we mean by it. So this might be…They have a completely different point of view.”
It is a challenge to ensure that the COC is understood in the same way across cultures.
The COC is communicated and discussed once a month in China to ensure that the COC is understood. This is a continuous process.