Goodwill: Internal and External Analysis
1. Explain how the seven external environment forces may have impacted Goodwill? Explain in detail with examples.
Starting in 2013, 16 of Ontario Goodwill store locations were facing a shortage in operation funds which made it difficult for management to keep them open for business and eventually lead to filing for bankruptcy. The company chief executive officer Keiko Nakamura commented on the matter stating, “Due to a number of factors affecting the retail environment, Goodwill is facing a cash flow crisis” (CBC News, Jan.17.2016, par.4). However, branches from the southern regions of Ontario such as Hamilton, and Niagara Falls were not financially affected. These financial losses might have been caused by cost inflations in the Canadian economy and from the recent provincial regulations that increased the minimum wage salary for employees. According to the Toronto Star, “the salary range for workers is $11 to $27 an hour, most earn an average of $14” (The Star, Jan.17.2016, par.16). This means that many entry-level staff were given a pay raise of at least $3 per hour.
The Ontario Goodwill employees are represented by the Canadian Airport Workers Union (CAWU) which means that they are obligated to receive fair workers rights. The financial crisis in Ontario has caused retail staff and managers in Toronto, Eastern, Central, and Northern locations around the province to lose their jobs without advanced notice or appropriate compensations. CAWU lawyer Dennis Ellickson stated, “the company is required to give employees 30 to 60 days’ notice before closing any stores” (The Star, Jan.20.2016, par.17) implying that there has been unfair treatment in the workplace.
Goodwill seems to not be using manufacturing equipment because most of their products have already been produced and donated. They seem to focus on brick and mortar stores rather than online shopping. It is noted that the company uses telecommunications to communicate internally with employees but there is not much evidence of electronics or technological work approaches.
Goodwill receives some funding from the Canadian government because they are a not for profit organization that supports citizens with jobs. Toronto Star journalist Dale Brazao mentions that the company “received more than $4 million in government funding” (The Star, Jan.17, 2016) in 2014. Even though they are subsidized, the Ontario law requires employers to raise the minimum wage and this played a role in their financing issues. Since Goodwill is an international company, they are also affected by trade relationships and require cooperation between different countries to ship donated products around the world.
As a not for profit company, it is essential for Goodwill to have good charitable ethics and corporate social responsibility. Their mission is to offer donation services and products that customers can purchase to help people in poverty. With this goal in mind, Goodwill can connect with the social values of consumers who want to make a difference in society. They also emphasise their priority of hiring employees who need financial support through government funding programs.
Out of the three measures of sustainability, Goodwill maintains good society equity and environmental practices, but they are having issues with economic viability in Ontario. Helping people around the world through charity donations and not producing any waste or by-products (since they do not produce goods) are some of their best qualities as an organization.
Goodwill has so many locations on a global scale that have independent management operations, so it could be difficult to focus on problem-solving for the Ontario branches. For example, the NAFTA trade agreement issues which were recently resolved could have affected the shipping and receiving of donated items that crossed over to the American and Mexican borders. There are also other not for profit companies that Goodwill is competing with locally and internationally such as Red Cross, UNICEF, The Salvation Army, etc. Instead, consumers might be choosing to make contributions to these competitors.
2. Explain what management philosophy (classical or behavioural) would be most suitable for Goodwill and why? Explain in detail with examples
The more suitable management philosophy for Goodwill is a behavioural approach that follows the theories of Chester Barnard. First, this approach would improve their strategies for managing two contingencies, organization size, and environmental uncertainties.
Organizations must be managed in relation to the quantity of people working for them. There is a significant number of local and international stakeholders that need to have more involvement in the objectives of Goodwill.
Organizations must be prepared to make necessary adjustments in the work environment. Goodwill needs to improve their ability to adapt to changes in the charity industry to limit funding and employment setbacks.
Behavioural management is also more relevant to the factors that were affecting most of the Ontario Goodwill branches. This district had a lack of communication and collaboration to resolve financial problems. The Toronto Star emphasized this point in their article when referring to Goodwill union disputes, “they need to cooperate with stakeholders, Moe Rutherford union’s business agent, added Wednesday that union had asked for “transparency” from the company and it had not complied” (The Star, Jan.20.2016, par.18). Having a better social management system based on Barnard’s theory would help this company with problem-solving in the near future. It is also important for Goodwill to boost employee morale by ensuring that management will deal with issues in a more organized manner and without impacting job security.
3. What business-level strategy would you recommend for Goodwill and why? Explain in detail with examples
I would recommend that Goodwill considers using the cost leadership business-level strategy because it has several concepts that are relevant to their recent challenges. They should especially incorporate access to low-cost factors of productions and learning curve economies. A focus or product differentiation strategy would be unsuitable for receiving and reselling donated products because there are no unique product values or target markets for used items.
Although the company already keeps the retail price of products at a cheaper value, they still need to lower their labour expenses to stay profitable. This could be resolved by evaluating low-cost resources to manage the number of employees they hire as well as the wages being paid to them. Goodwill can use the learning curve economies approach to look back at the problems they had with budgeting funds in Ontario and gain a better understanding of what went wrong. It would also be beneficial to compare qualities of the branches that had setbacks with the successfully managed ones in Hamilton and Niagara Falls. The Chief Executive Operators of these two regions confirmed, “whatever retail industry problems are at issue, they haven’t done similar damage to neighbouring Goodwill chapters” (The Globe and Mail, Jan.17.2016, par.5).
4. Explain in detail using the 5 elements of structure the kind of structure Goodwill likely had: traditional or modern?
The evidence in the five articles suggests Goodwill likely had a traditional structure with a focus on productivity. Although they have a global market, they do not display any other traits of a modern structure. They are not flat or fluid with decision-making and have trouble with adapting to changes in the work environment.
Requirements and responsibilities of employees at Goodwill are sorted in a very traditional manner. The functional specialization consists of simple operative tasks for retail and warehouse workers like sales, packing, stocking, etc. There is limited social specialization because most of the positions at this company do not require people to be professionally trained or have speciality skills.
Centralization and Decentralization:
This case suggests that decision-making came from upper management, such as the Ontario board of directors and CEOs. Goodwill is not decentralized because their decisions come from the higher ranked executives with no input from middle management or lower level employees. This can be seen from the sudden closure of stores and donation centres. Before it happened, the stakeholders with less seniority had no awareness of the situation.
Span of Control:
The organizational hierarchy of Goodwill is narrow because it consists of several international operations managed by different people rather than running under the same leadership. For example, the province of Ontario is divided up into sectors (North, South, East, West) and run by separate managers under the supervision of a board of directors.
It is uncertain whether this organization has high or low formalization. The labour work is standardized, but upper management seems to have individual discretion on how their retail stores operate. The Goodwill locations that had to be shut down were likely run under different regulations and procedures in comparison to the branches in Southern Ontario that thrived economically.
Goodwill seems to incorporate functional departmentation (organizing workers by job description) by grouping employees into retail services, donation centre, and managerial operations. They combine this aspect with elements of geographic departmentation, so branches are able to operate independently from headquarters and meet the needs of their local customers.
5. Was there “good governance” at Goodwill (south Ontario branch)? Explain why or why not.
There was not good governance at the Northern, Central, and Eastern Ontario Goodwill branches mainly because they were unable been able to stay profitable, inform stakeholders about their funding issues, and take responsibility for their actions. They did not meet the criteria of the five factors associated with this business concept.
The managers and CEO’s in Southern Ontario have proven to be negligent at maintaining their retail and donation operations during the ongoing provincial financing crisis. Instead of owning up to their mistakes and trying to come up with a resolution, all the board members of Goodwill Ontario resigned except for chief executive officer Nakamura (who blamed it on other reasons).
Workers were not given fair treatment in accordance to union rights that demanded advanced notice of employment termination and paying overdue wages. The chief executive officer of this region and other Goodwill employees in Ontario were still receiving payments and did not have to worry about facing unemployment hardships.
The CEO’s in this district were not transparent about projected revenues, employment rates, and declining operations. For example, Paul Chapin (Hamilton chapter) said, “aside from being big, the Toronto-based Goodwill operation also stands out as it appears to have been shrinking over the last 10 or 15 years” (The Globe and Mail, Jan.17.2016, par.15).
The leadership of this branch is ineffective both economically and employment wise. The board of directors were secretive about the state of Goodwill Ontario and made decisions that resulted in negative outcomes such as lawsuits and bad publicity.
There is evidence of poor stakeholder engagement in this region because the store locations were suddenly shut down without informing any of the employees or customers in advance. Goodwill left hundreds of people unemployed for five months before reopening these shops, most of the former staff were still disgruntled did not want to return.
- “Goodwill closes stores across GTA due to ‘cash flow crisis’” CBC News. January 17, 2016. http://www.cbc.ca/news/canada/toronto/goodwill-gta-lockout-1.3407732
- “Goodwill closes stores across Southern Ontario due to cash flow crisis.” The Globe and Mail. January 17, 2016. http://www.theglobeandmail.com/news/national/goodwill-closes-stores-across-southern-ontario-due-to-cash-flow-crisis/article28235581/
- “16 Ontario Goodwill stores shut down”. The Star. January 17, 2016. https://www.thestar.com/news/gta/2016/01/17/16-ontario-goodwill-stores-shut-down.html
- “Goodwill to return to Toronto.” The Star. June 29, 2016. https://www.thestar.com/news/gta/2016/06/29/goodwill-to-return-to-toronto.html
- “Goodwill workers blast charity’s CEO over closures.” The Star. January 20, 2016. https://www.thestar.com/news/gta/2016/01/20/goodwill-workers-blast-charitys-ceo-over-store-closures.html