Final Exam Macro - MGMT

Ethics - Boost

1. Ethical Behavior and Societal Norms

• Health Claims and Product Criticism: Boost Juice markets its products as healthy, but some drinks were found to contain high sugar content, comparable to fast food. This raises ethical questions about transparency and honesty in marketing. While the company defended its products by emphasizing natural ingredients and dietary choices, the criticism highlights the tension between business interests and societal health norms.

  • Unethical Behavior: Promoting values that clash with societal standards (e.g., misleading health claims).

  • Consequence: Loss of trust among health-conscious consumers and negative media attention.

2. Ethical Leadership and Culture

• "Love Life" Philosophy: Boost Juice’s culture emphasizes positivity, energy, and ethical recruitment (e.g., hiring for cultural fit, firing quickly if mismatched). This aligns with ethical leadership and fostering an ethical culture.

  • Ethical Behavior: Promoting values like honesty, integrity, and passion.

  • Challenge: Some employees reported dissatisfaction with pay and management, suggesting potential gaps in fairness and transparency.

• Janine Allis’s Hands-On Approach: Allis’s emphasis on understanding the business and financials reflects ethical leadership by ensuring accountability and reducing unethical financial practices.

  • Ethical Behavior: Avoiding corruption and nepotism by hiring competent professionals.

3. Unethical Behavior and Consequences

• Marketing Fails:

  • The "Summer Warrior" campaign was accused of cultural appropriation, and the peanut butter smoothie post mocked anaphylaxis. Both cases show a lack of sensitivity to societal norms.

    • Unethical Behavior: Discrimination (indirectly through insensitivity), tolerating an unethical culture in marketing.

    • Consequence: Public backlash, reputational damage, and apologies issued.

  • Cause: Lack of moral awareness or perspective-taking in marketing decisions.

• Failed Franchises and Expansion: Some international expansions failed due to poor execution (e.g., China), which could reflect unethical practices like misrepresentation or lack of due diligence.

  • Unethical Behavior: Putting personal/organizational interests ahead of stakeholders (e.g., franchisees).

  • Consequence: Financial losses and reputational harm.

4. Structural Factors Contributing to Unethical Behavior

• Franchise Model: The rapid expansion and franchising strategy may pressure franchisees to prioritize growth over ethical considerations (e.g., quality control, employee treatment).

  • Cause: Rewards linked to growth (unethical if corners are cut).

  • Example: High staff turnover and complaints about management in some stores.

• Private Equity Ownership: The involvement of private equity firms (e.g., Bain Capital) may prioritize profit over ethical considerations, such as fair wages or sustainable practices.

  • Cause: Shareholder orientation and complexity in governance.

5. Ethical Mitigation Strategies

• Formal Elements:

  • Boost Juice has policies like the "Boost Guarantee" (promising quality and service) and CSR initiatives (e.g., switching to paper cups).

  • Digital transparency (e.g., app customization, allergen warnings for peanut butter smoothies).

• Informal Elements:

  • Ethical leadership by Janine Allis (e.g., hands-on oversight, cultural fit hiring).

  • The "Love Life" philosophy promotes positive values, though its execution may need refinement (e.g., addressing employee pay concerns).

6. Whistle-Blowing and Accountability

• While not explicitly mentioned in the case, the public outcry over marketing campaigns and product healthiness acts as a form of external whistle-blowing.

  • Ethical Behavior: Media and consumers held Boost accountable for unethical actions.

  • Challenge: The company’s response (apologies, campaign removals) shows corrective action but also reactive rather than proactive ethics.

Recommendations for Boost Juice

• Strengthen ethical training for marketing teams to avoid cultural insensitivity.

• Address employee grievances (e.g., pay, management) to uphold internal ethics.

• Proactively monitor franchisee operations to ensure alignment with ethical standards.

• Enhance transparency in product health claims to rebuild consumer trust.

Ethics - CBA

1. Ethics in the CBA Case

Key Ethical Issues Identified:

• Misleading and Deceptive Practices: CBA sold Consumer Credit Insurance (CCI) to customers who were unlikely to qualify for claims, using aggressive sales tactics and false representations.

• Profit Over People: The bank prioritized revenue ($5 billion in CCI sales, only $1 billion paid out) over customer welfare, reflecting a culture of greed and self-interest.

• Failure to Act on Concerns: Despite internal audits (e.g., 64,000 ineligible customers sold CCI) and warnings from executives like Matt Comyn, CEO Ian Narev dismissed ethical objections with the remark, “Temper your sense of justice.”

• Unethical Incentives: Staff were rewarded with bonuses, iPads, and prizes for meeting sales targets, encouraging misconduct (e.g., falsifying credit applications).

• Lack of Accountability: No executives lost bonuses despite scandals, and the board approved inflated payouts (e.g., Narev’s $2.86M bonus atop a $12M salary).

Causes of Unethical Behavior:

• Structural Factors:

  • Rewards linked to misconduct: Sales-driven KPIs and bonuses.

  • Shareholder primacy: Focus on short-term profits over long-term ethics.

  • Complexity and silos: Poor communication between compliance and sales teams.

• Personal Factors:

  • Greed/Ego: Executives ignored risks to protect revenue and personal gains.

  • Moral disengagement: Justified misconduct as "standard practice."

Consequences:

• Reputational Damage: CBA became a symbol of corporate misconduct, dubbed “public enemy number one.”

• Regulatory Penalties: Largest civil penalty in Australian history for money laundering via ATMs.

• Erosion of Trust: 54% of consumers reported issues with financial providers (2019 Melbourne Uni study).

Recommendations for Ethical Reform:

• Formal Measures:

  • Overhaul remuneration to prioritize ethical behavior over sales metrics.

  • Strengthen whistleblower protections and internal audits.

• Cultural Measures:

  • Leadership must model ethical behavior (e.g., Comyn’s focus on hiring “the right people”).

  • Foster open dissent and challenge (APRA noted CBA’s culture discouraged questioning authority).

Ethics - Uber

Ethics - Tesla

Key Ethical Issues Identified:

• Employee Exploitation:

  • Workplace Conditions: Employees reported 12-hour workdays, 6-day weeks, and pressure to sleep at the factory (e.g., Musk’s email: "We’re changing history—you either commit or you don’t").

  • Retaliation: Whistleblowers faced termination or surveillance (e.g., SEC lawsuit over Musk’s tweets).

  • Public Health Risks: Musk defied COVID-19 lockdowns, risking worker safety ("fascist" comment).

• Leadership Misconduct:

  • Musk’s Behavior: Publicly berated employees (e.g., calling a female executive "incompetent"), fired loyal assistant Mary-Beth Brown after she requested fair pay.

  • SEC Violations: Fraudulent "funding secured" tweet (2018) and unapproved production forecasts (2019) misled investors.

• Transparency Failures:

  • Misleading Claims: Overpromising production targets (e.g., Model 3 delays) and downplaying safety concerns (e.g., COVID-19 denial).

  • Corporate Governance: Musk’s dual role as CEO/Chairman (until SEC forced separation) concentrated power.

Causes of Unethical Behavior:

• Structural Factors:

  • "Mission Over People" Culture: Employees were expected to sacrifice personal lives for Musk’s vision ("Nobody changed the world on 40 hours a week").

  • Lack of Checks and Balances: Board failed to rein in Musk (e.g., SEC settlement required oversight of his tweets).

• Personal Factors:

  • Musk’s Leadership Style: Narcissistic traits (e.g., claiming credit for designs, dismissing dissent as "idiot" behavior).

  • Moral Disengagement: Framed exploitation as necessary for "saving humanity."

Consequences:

• Legal Penalties: $40M SEC fines, Musk barred as Chairman for 3 years.

• Reputational Damage: #DeleteTesla trends, worker protests, and investor distrust.

• High Turnover: 36 VPs resigned during Model 3 production ("production hell").

Recommendations for Ethical Reform:

• Formal Measures:

  • Independent board oversight and ethics training.

  • Whistleblower protections and transparent labor policies.

• Cultural Measures:

  • Replace "hustle culture" with work-life balance norms.

  • Leadership accountability (e.g., Musk’s public communications vetted by legal team)

Change - Theranos

Forces Initiating Change External Forces

• Technological: Aimed to disrupt traditional blood diagnostics using microfluidics and digital health solutions.

• Socio-cultural: Promised easier, less painful blood testing, aligning with public concerns around healthcare accessibility.

• Legal & political: FDA regulations and CMS investigations eventually forced Theranos to respond and pivot—though too late.

Internal Forces

• Performance failures: Device errors, fake data, and lack of valid results.

• Compliance pushback: Mid-level employees flagged legal and scientific issues.

• Investor pressure: Questions emerged as expected financial returns never materialised.

• Reputational risk: Media scrutiny escalated once Theranos went public in 2013.

The Role of the Change Agent

• Holmes was the change agent in vision but lacked the ethical grounding and openness to feedback.

• She refused to “unfreeze” the organisational culture to accommodate learning or correction.

• Dismissed internal critics, faked results to external stakeholders, and championed a vision based on deception.

What Needed to Change

• Power: Needed more distributed leadership, oversight, and an empowered board.

• Communication: Internal communication was locked down; departments were siloed and secrecy was enforced.

• Culture: Needed a shift from authoritarianism and sycophancy to transparency and inquiry.

• Strategy: Should have realigned to a more realistic R&D path rather than aggressive public scaling.

Types of Intervention

• Revolutionary & unplanned: Whistleblowers, media exposé (Carreyrou), and federal investigations forced a sudden collapse.

• Failed planned change: Internal issues flagged early (Pfizer rejection, Novartis doubts, CFO concerns), but ignored.

Applying Lewin’s Change Model Unfreeze (Did not occur effectively)

• No meaningful challenge to the dominant internal culture.

• Dissenters were punished, not supported.

Change (Attempted superficially)

• Rebranded, added high-profile board members, and shifted PR—but without fixing core technology issues.

Refreeze (Never achieved)

• No sustained new norms or practices took hold; change was undermined by continued lies and cover-ups.

Six Silent Killers (Beer & Eisenstat, 2000)

1. Top-down leadership: Holmes and Balwani dominated all decision-making.

2. Unclear/conflicting priorities: Public claims versus technical realities.

3. Ineffective senior team: Board lacked medical/technical expertise.

4. Poor vertical communication: Staff silenced or isolated.

5. Poor horizontal coordination: Siloed teams and competitive internal structures.

6. Inadequate skills at lower levels: Staff lacked the power or freedom to act on concerns.

Overcoming Resistance to Change (What Could Have Helped)

• Championing change: Needed ethical leadership beyond charisma.

• Learning and communication: Open peer review, transparent FDA engagement.

• Participation: Inclusion of lab staff and engineers in decision-making.

• Support: Mental health and whistleblower protection for high-pressure roles.

• Diffusion and legitimacy: True functionality tested in incremental, evolutionary steps.

Change - CBA

Forces Driving Change:

• External:

  • Political/Legal: Hayne Royal Commission (2017–2019) exposed systemic misconduct, leading to 76 recommendations.

  • Social License: Public outrage over scandals (e.g., CCI, money laundering) forced accountability.

• Internal:

  • Performance Failures: APRA’s 2018 report cited complacency and poor risk culture.

  • Leadership Shifts: CEO change from Narev to Comyn (2018) signaled cultural reset.

Change Agents & Interventions:

• APRA and Hayne Commission: Diagnosed issues (e.g., “complacent culture”) and mandated reforms.

• Matt Comyn: As new CEO, emphasized hiring ethical leaders and dismantling sales-centric incentives.

Lewin’s Change Model Applied:

1. Unfreeze:

   • Royal Commission hearings exposed misconduct, creating urgency.

   • APRA report criticized CBA’s “lack of collective ownership of risk.”

2. Change:

   • Withdrew CCI products (2018) and refunded $16M to customers.

   • Revised remuneration policies to align with ethical outcomes.

3. Refreeze:

   • Embedded “should we?” questioning in decision-making (APRA recommendation).

   • Launched internal dialogues (e.g., 500 executives reflecting on APRA findings).

Resistance to Change:

• Cultural Inertia: Collegiality had bred overconfidence and reluctance to challenge peers.

• Structural Barriers: Sales targets remained entrenched until regulatory pressure forced reform.

Lessons from Failed/Successful Change:

• Failure: Narev’s era ignored early warnings (e.g., 2013 risk “deep dive”) due to profit focus.

• Success: Comyn’s focus on accountability and ethical leadership aligned with societal expectations post-Royal Commission.

Recommendations for Effective Change:

• Evolutionary Interventions: Gradual cultural shifts (e.g., training, ethical KPIs).

• Revolutionary Interventions: Immediate removal of harmful products (e.g., CCI).

• Monitor Progress: Regular audits and transparent reporting to rebuild trust.

Change - Uber

Forces Driving Change:

• External:

  • Public Outrage: Viral scandals (Kamel video, Fowler’s blog).

  • Regulatory Pressure: Greyball exposé, Waymo lawsuit.

• Internal:

  • Investor Revolt: Syndicate ousted Kalanick to protect Uber’s valuation.

  • Employee Activism: Fowler’s whistleblowing triggered Holder investigation.

Change Agents & Interventions:

• Eric Holder Investigation: Recommended firing 20 employees (e.g., Josh Mohrer) and cultural reforms.

• Dara Khosrowshahi: Hired as CEO to lead "Uber 2.0" with:

  • New cultural norms (e.g., "Celebrate differences").

  • Governance fixes (e.g., hiring CFO, Chief Diversity Officer).

Lewin’s Change Model Applied:

1. Unfreeze:

   • Scandals created urgency (e.g., Kamel video, Fowler’s blog).

   • Board forced Kalanick’s resignation.

2. Change:

   • Replaced leadership (Khosrowshahi).

   • Budgeted $500M for rebranding and driver relations.

3. Refreeze:

   • New HR policies (e.g., earlier dinner times, renamed "War Room").

   • Public commitments to ethics (e.g., "We act like owners").

Resistance to Change:

• Kalanick’s Shadow: Tried to retain control post-resignation.

• Cultural Inertia: Employees accustomed to "hustle" values resisted softer norms.

Lessons from Failed/Successful Change:

• Failure: Kalanick’s denial of problems (e.g., ignoring Comyn’s CCI warnings) exacerbated crises.

• Success: Khosrowshahi’s transparency (e.g., public apologies) rebuilt trust.

Recommendations for Effective Change:

• Evolutionary: Gradual culture shifts (e.g., diversity training).

• Revolutionary: Immediate removal of toxic leaders (e.g., Mohrer).

Change - Tesla

Forces Driving Change:

• External:

  • Regulatory Pressure: SEC lawsuits, COVID-19 lockdown mandates.

  • Market Competition: Rivals (Ford, Porsche) accelerating EV production.

• Internal:

  • Production Failures: Model 3 delays ("production hell") forced process overhauls.

  • Employee Activism: Whistleblowers (e.g., safety complaints) and high-profile resignations.

Change Agents & Interventions:

• SEC Mandates: Forced governance changes (e.g., Musk’s tweet oversight, new Chairman).

• Operational Shifts: Musk slept at factories to troubleshoot production bottlenecks.

• Cultural Rebranding: Post-2018, Tesla emphasized sustainability over "burnout" rhetoric.

Lewin’s Change Model Applied:

1. Unfreeze:

   • SEC lawsuits and Model 3 failures exposed systemic issues.

   • Investor pressure mounted after Musk’s erratic tweets.

2. Change:

   • Hired legal/compliance officers (e.g., post-SEC settlement).

   • Adjusted production targets and automation strategies.

3. Refreeze:

   • New governance structures (e.g., independent board members).

   • Public commitments to transparency (e.g., quarterly reports vetted by lawyers).

Resistance to Change:

• Musk’s Reluctance: Defied SEC rules (e.g., 2019 tweet), resisted lockdowns.

• Cultural Inertia: Employees accustomed to "hardcore" culture resisted softer policies.

Lessons from Failed/Successful Change:

• Failure: Musk’s unilateral decisions (e.g., "funding secured" tweet) worsened crises.

• Success: Hands-on crisis management (e.g., factory floor interventions) resolved production delays.

Recommendations for Effective Change:

• Evolutionary: Gradual cultural shifts (e.g., pilot programs for work-life balance).

• Revolutionary: Immediate governance reforms (e.g., separating CEO/Chair roles permanently).

Power - Theranos

Why Power Matters

• Elizabeth Holmes and Sunny Balwani held near-total control over strategic, operational, and interpersonal aspects of Theranos.

• Power was used not just to manage resources, but to suppress dissent, centralise control, and protect Theranos’s public image—regardless of internal realities.

Dimensions of Power First Dimension (Managing Resources)

• Holmes had reward power through her control of funding and decision-making. She also had referent power, using charisma and the “Steve Jobs-like” persona to win trust.

• Balwani exerted coercive power through intimidation, firing, and surveillance (e.g., firing CFO Mosley for raising doubts; tight control of emails, browser history, and surveillance of Glassdoor reviews).

• Power was clearly visible in public image and access to capital. Theranos secured ~$900 million in funding and access to a high-profile board despite its technology never functioning as claimed.

Second Dimension (Managing Process)

• Dissenters were excluded: key decisions were made in secret, and departments were siloed, limiting cross-functional dialogue.

• Employees were encouraged not to question leadership; whistleblowers like Erika Cheung and Tyler Schultz were ignored internally before going public.

Third Dimension (Managing Meaning)

• Holmes shaped the narrative of transformation: she was changing healthcare, saving lives, democratising diagnostics.

• Messaging (e.g., “most important thing humanity has ever built”) redefined employee purpose and discouraged resistance.

• Manipulated perceptions of legitimacy by listing military associations and prominent board members with no medical expertise.

Fourth Dimension (Socialised Power)

• Holmes framed her identity using historical family legacy, entrepreneurship, and idealistic ambition.

• Employees and board members bought into the mythology—internal hierarchies and culture reinforced obedience, secrecy, and blind loyalty.

• Silicon Valley culture (“fake it till you make it”) enabled this dynamic to flourish unquestioned for years.

Power - Boost

Why Power Matters

• Understanding how Janine Allis and leadership used and maintained power helps explain Boost’s growth and some of its ethical challenges.

• Her “very hands-on” approach reveals deliberate control over operations, branding, and hiring, even after stepping down as CEO.

First Dimension of Power – Resource Control

• Janine and Jeff Allis controlled valuable resources early: startup capital, prime lease agreements with Westfield, and exclusive airport locations (via the Viva acquisition).

• Power was exerted visibly through control over store expansion, hiring, and capital decisions.

Second Dimension of Power – Process Control

• Franchise model reflects control over who gets to represent the brand, how they are onboarded, and what gets sold.

• Strategic planning retreats, careful acquisition of compatible brands, and selective hiring (e.g. “Hire slowly, fire quickly”) show process power in managing internal alignment.

Third Dimension of Power – Meaning Control

• Boost’s “Love Life” culture is a key example:

  • Shapes how employees see themselves ("Boosties", “SOAR” vs “VERB”).

  • Promotes an internal identity aligned with energetic, optimistic, and high-performance behaviours.

  • Through slogans, mascots, store design, and jargon, Boost constructs a reality that aligns team behaviour with company goals—even influencing how success is perceived.

Fourth Dimension of Power – Cultural Norms and Roles

• Power is embedded in the cultural fabric:

  • Work culture favours triathletes and high achievers—promoting a specific ideal worker identity.

  • “Staying late isn’t a badge of honour, but results are expected”—implies performance pressure shaped by cultural norms.

• The perception that Boost is a “fun, happy” brand may discourage internal critique or whistle-blowing, reflecting ideological power.

Recommendation:

• Balance cultural power with space for employee dissent and feedback, to avoid groupthink.

• Review how meaning is shaped—e.g., ensure the “Love Life” culture doesn’t inadvertently silence valid concerns.

• Involve more stakeholders in major campaign decisions, not just top-down directives from leadership

Power - CBA

Key Observations on Power:

• First Dimension (Visible Power – Control Over Resources):

  • Reward Power: CBA used bonuses, iPads, and promotions to incentivize sales staff, driving unethical behavior (e.g., pressuring customers into CCI).

  • Coercive Power: Employees who failed to meet targets were publicly shamed (e.g., daily meetings where underperformers were "called out").

  • Authority Power: Senior executives (e.g., CEO Ian Narev) dismissed ethical concerns (e.g., telling Matt Comyn to “temper your sense of justice”).

• Second Dimension (Hidden Power – Controlling Processes):

  • Gatekeeping Decision-Making: Concerns raised by mid-level managers (e.g., Comyn’s 2015 warning about CCI) were sidelined in favor of profit-driven priorities.

  • Selective Transparency: The board approved massive executive bonuses despite scandals, avoiding shareholder scrutiny until the 2016 "strike."

• Third Dimension (Invisible Power – Shaping Beliefs):

  • Normalizing Misconduct: Sales culture framed exploitation as "customer service" (e.g., Cohen Brown’s OneTeam program encouraged cross-selling without ethical checks).

  • Moral Neutralization: Staff justified unethical sales tactics as "just doing their job" due to systemic pressure.

• Fourth Dimension (Structural Power – Societal Conditioning):

  • "Too Big to Fail" Mentality: CBA leveraged its status as Australia’s largest bank to resist regulation until the Royal Commission forced accountability.

  • Cultural Privilege: Banks were historically viewed as "pillars of the community," delaying public backlash despite misconduct.

How Power Enabled Misconduct:

1. Top-Down Pressure: Executives set aggressive sales targets, creating a trickle-down culture of ethical compromises.

2. Silencing Dissent: Compliance teams were seen as "blockers" (per APRA report), discouraging internal whistleblowing.

3. Ideological Control: The OneTeam program framed sales as "collaboration," masking exploitation.

Power Shifts Post-Royal Commission:

• Loss of Legitimacy: Public and regulatory scrutiny stripped CBA of its "untouchable" image.

• New Leadership: Matt Comyn’s appointment signaled a shift from sales-driven power to ethical accountability.

• External Intervention: APRA and Hayne Commission dismantled CBA’s autonomy, imposing enforceable reforms.

Recommendations to Balance Power:

• Flatten Hierarchies: Encourage open dissent (e.g., anonymous reporting channels).

• Redefine Incentives: Replace sales-based rewards with ethical KPIs.

• Independent Oversight: Strengthen board independence to check executive power

Power - Uber

Key Observations on Power:

• First Dimension (Visible Power):

  • Reward/Coercive Power: Bonuses for drivers who met targets; public shaming of underperformers.

  • Authority Power: Kalanick’s unilateral decisions (e.g., fare cuts, Greyball use).

• Second Dimension (Hidden Power):

  • Gatekeeping: HR ignored complaints to protect high performers (e.g., Rio manager).

  • Information Control: Greyball hid operations from regulators.

• Third Dimension (Invisible Power):

  • Ideological Control: "Super pumped" culture normalized overwork and aggression.

  • Framing Exploitation: Drivers labeled "partners" to mask inequities.

• Fourth Dimension (Structural Power):

  • "Disruption" Narrative: Used to justify breaking laws (e.g., illegal city launches).

  • Gig Economy Model: Reinforced precarity by design (no employee benefits).

Power Shifts Post-Crisis:

• Investors vs. Kalanick: Benchmark Capital led coup to remove him.

• Drivers’ Collective Power: Strikes and unions (e.g., Ride Share Drivers United) pushed for AB5.

Recommendations to Balance Power:

• Driver Representation: Include drivers in decision-making (e.g., fare policies).

• Board Reform: Independent directors to check executive power.