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Law Shao Feng, Howard 52573280 Sze Kin Fai, Steven 52320496 MKT4676: Case Report on Foxconn Technology Group Limited

Foxconn Case Report

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Page 1: Foxconn Case Report

Law Shao Feng, Howard 52573280Sze Kin Fai, Steven 52320496

MKT4676: Case Report on Foxconn Technology Group Limited

Page 2: Foxconn Case Report

Case Report: Foxconn Technology GroupLaw Shao Feng, Sze Kin Fai

Course code : MKT4676Student name (SID) : Law, Shao Feng (52573280), Sze, Kin Fai (52320496)_____________________________________________________________________

Foxconn Technology Group: The Strong Militant Organizational Culture and the Serial SuicidesStarting from January of 2010, a series of suicides of Foxconn frontline workers happened in Foxconn’s plants and dormitories. When media was investigating in the story behind the wall of Foxconn’s giant factories, Terry Gou, the Chairman of Foxconn, disclaimed blames relating the suicide events to the company’s administration. Various course of actions are taken to solve the problem, yet, suicide still happens and rumors continue to bring adverse effect to Foxconn’s reputation.

Company Background

Foxconn Technology Group (Foxconn) is a subsidiary of Hon Hai Precision Industry Company. Having contracted production, assembly and distribution of consumer electronic products, such as smartphones and computers for big brands such as Apple, Dell and Intel (OEMs) as the group’s major area of business, Foxconn received a profit of 2.4 billion and was ranked #189 in Global 2000 in April 2011. The group now has its plants in four major production areas in Mainland China including Pearl River Delta, Chang Jiang Delta, Bohai Rim Region, and Middle and Western China. Most of the plants are very massive, and are often regarded as Foxconn cities.

Management Style and Organizational Culture

The wealth of Terry Gou today was self-made. He started his business with hardships, and worked extremely hard to get through the time. This background fostered Gou’s faith in harsh management. Gou also believes in centralization. He mentioned more than once the maintenance of a clear hierarchy and the use of top-down strategy within the organization is essential to achieve high efficiency. The two convictions have strong influence to Foxconn as a whole and were eventually developed into Foxconn’s unique and distinctive militant organizational culture that can be easily observed in Foxconn’s artifacts.

Mottos Once a worker enters Foxconn, they are required to study and memorize Chairman Gou’s mottos. Examples of his mottos are: ‘real heroes are those who bravely fought to death in a battlefield, not those who could come forward receiving medals (真正的英雄,早就死在沙場上,而不是回來拿獎章的人)’, ‘out of the laboratories, there is no high-technology, only execution of disciplines (走出實驗室沒有高科技,只有執行的紀律)’, ‘hungry people’s minds are especially clear (餓的人腦筋特別清楚)’, etc. Many of these mottos emphasize the importance of discipline and tight control.

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Case Report: Foxconn Technology GroupLaw Shao Feng, Sze Kin Fai

UniformIn Foxconn’s plant in Chengdu, female basic workers and male basic workers wear red and navy blue T-shirt respectively, technicians are dressed in white T-shirt, and most supervisors have brown or light green vests on top of white T-shirts (Pun et al., 2011). Employees in different levels can easily be distinguished by the colors of their uniforms. The concept of ranks and strict hierarchy is hence strengthened.

WorkloadFrontline workers in Foxconn experience long shifts and demanding workload. A worker in Foxconn’s Computer Assembling Department said that each of the members in his team is required to finish a step within seven seconds, and the whole team would have to finish 4,000 Dell computers in a shift of ten hours. The situation is even worse in some other production lines, where workers are expected to stick a label, or fasten a screw to a product in about two seconds. Before the happening of the suicide events, only one day-leave will be arranged for a worker in every 13 days.

Workplace RegulationsEvery basic labor on the production line is required to follow a set of strict rules when working. Some of the basic rules include no talking, no walking, no sleeping and even no laughing. Chairs must lie within areas distinguished by yellow lines on the floor. Going to toilet is prohibited unless the worker make a request for a permit, the maximum time allowed is restricted to ten minutes. Workers are required to surrender their working pass all the time for security reason, as declared by Foxconn. The effort of avoiding offence to the rules adds pressure to workers who are already busy.

Accommodation ArrangementsMore than half of Foxconn’s labor lives in Foxconn’s dormitory. Although the dormitories of frontline workers are equipped with enough facilities, the company did not arrange to recruit people for cleaning service. Residents are forced to clean their dormitories, including the public areas, in the name of ‘voluntary work’ after their routine work. The militant culture is extended to the residence in a way that residents are only allowed to walk in authorized zones. No visits can be made without permission. To discourage interactions between workers living in the dormitories, nighttime and daytime workers who work in the same production lines are arranged to live in separate rooms [Exhibit 1], and forced room changings are frequent.

PunishmentsWorkers are severely punished if they fail to meet individual production quota, have assembly errors, overlong their restroom breaks, or infringing any of the rules. Most of the punishments are to deduct employee’s wage or charging them by fines. Even worse, the wrongdoing workers may be asked to make a public “confession” in front of the whole production line. Also, the internal supervisors verbally intimidate the workers regularly. The use of a total of 127 formal punishments is allowed, in which a list of these punishments are posted on the wall [Exhibit 2].

Gou has great confidence in his methodology in managing the massive enterprise perceiving the satisfying financial performance of Foxconn and continue to encompass the abovementioned elements in Foxconn’s company policies to date.

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Occupational Health and Safety

Spending ten to twelve hours a day, at least six days a week for production, the environment of workshops plays a significant role in workers’ physical and mental health. Although in Foxconn’s corporate social responsibility report there are statements stressed on operational safety, including day-to-day basis safety checks and air particulate tests in workshops, some bottom workers claimed that they had to work in noisy environments, had eyes blurred with dusts, and felt ill after staying in workshops with strong odor of chemicals. A worker who previously worked in the SuperPrecision Mechanical Business Group (SHZBG) in Foxconn’s plant in Guanlan, Shenzhen, said that the temperature in the workshop often exceeds 40 degree Celsius. Another worker who worked in the same group told a reporter that he is exposed to highly volatile cleansing oil that makes him feel dizzy. Workers in Chengdu were asked to start working even the constructions of the factory was half finished and had not gone through any safety tests [Exhibit 3].

Frontline Worker’s Satisfaction

Under huge workload and exploitation of freedom, together with poor working conditions, the low salary just higher than minimum wage and scarce promotion opportunities are unable to generate job satisfaction to Foxconn’s bottom workers. In various researches and investigations, many current workers and ex-staff members have negative comments on Foxconn’s management. Some voices of Foxconn’s workers as follow:

‘Women work as hard as men, men work as hard as machines.’ ‘We wake up before the roosters, go to sleep after the dog, eat worse than the pigs.’ ‘You have to forget the taste of your meal. You have to remember that you’re eating

to allay your hunger.’ ‘It’s so boring. I can’t bear it anymore. Everyday is like: I get off from work and I

go to bed, I get up in the morning and I go to work. It is my daily routine and I almost feel like an animal.’

There are lots of people in here, but no one to talk to; there are sports and recreational facilities in here, but no time to go to.’

‘I remember when I was being interviewed, the inspectors did not ask any questions but checked on our palms, fingers and shoulders to see if they are alright. They also checked whether there is any scar on my body. Also, I was requested to shout out my name to show that I’m neither deaf nor mute. It felt like I was a product to be sold.’

The low satisfactory level towards the job can be explained using Karasek’s Demand-Control model [Appendix]. As the high job demand is out of balance with workers’ authority in the company, workers can easily get stressed.

Besides the job nature, work satisfaction can also be influenced by employees’ expectation. If expectation is higher than perception to the outcome, the perceived value of the job is likely to be low. According to a research conducted by N.Dynamic, China’s generation Y, which are youngsters born from 1980 to 1989, are less satisfied working for all kinds of job when compared to their elders [Exhibit 4]. These people

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Case Report: Foxconn Technology GroupLaw Shao Feng, Sze Kin Fai

who composed the frontline labor force in Foxconn, are more communication-oriented, more demanding, and less respectful to hierarchical structure. The traits are in conflict with Foxconn’s strong militant organizational culture. Since Foxconn is unable to satisfy their needs, they may get frustrated working for just a short period of time.

Processes Involved in Resignation

Feeling highly dissatisfied with the job, many of the staff members, including a suicide survivor, have ever planned and tried to resign from their jobs. Lamentably, Foxconn’s set of resignation procedures are complicated and time consuming. In Foxconn, application for resignation must be submitted a month before. After the submission of application, the worker will have to wait for his direct supervisor’s approval. Then, the application has to be further approved by at most 15 superiors before it is regarded as officially accepted. Finally, the applicant can lift his contract in the Personnel Department, passes a detail inspection by security guards, and leave Foxconn. Many discouraged workers chose to give up the salaries and left the company, some others have no way out but to stay.

Strike of Suicides

Desperate in their future, myriads of Foxconn bottom workers contemplated suicide for extrication. On 8 January 2008, Rong Bo, a Foxconn worker, committed suicide in the plant in Langfang. The event was recognized as an ordinary suicide that has little relations with Foxconn. It was not until 14 days later, on 23 January, the suicide of another Foxconn worker who worked in the plant in Guanlan, Ma Xiangqian, raised the media’s concern. Since then, from March to August, another 15 Foxconn workers committed suicide. Many social organizations and the media started to investigate about Foxconn and relate the frontline job with the death of the workers. [Exhibit 5] is an organized table listing the workers committed suicide during the period.

Foxconn’s Immediate Reaction

Ever since the string of worker suicidal incidents, Gou together with his management team keeps denying this controversy as a result of poor work condition and high working pressure. This is perhaps the fact, but not what the public and the workers think. Instead of satisfying workers’ needs and enhance their self-motivation for work, the management defend themselves by adopting a series of measures which are strongly criticized by the public. [Exhibit 6] is a related caricature widely spread on the Internet.

Wage IncreaseAs reported by the China Daily, Foxconn Technology Group decides to increase pay for frontline workers at all its factories in Mainland China. The wage increase can be as high as 30 percent. The group claims that the pay hike may help their employees to have a more comfortable and stable income due to rising living costs and its company performance, but the public perceived this immediate pay rise comes right after the

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string of worker suicidal incidents as Foxconn’s attempt to put a stop to the social outcry for the suicides.

Employee Care Centre and Counseling ClinicFoxconn emphasis its effort in establishing an well-equipped Employee Care Centre and a Counseling Clinic to give solutions to staff members who are in need. According to Foxconn’s company report, mental health assessment service, trainings and group counseling are provided in the centre. However, plentiful workers are not familiar with the exact location of the centre as Foxconn’s area is very big. The centre also provides telephone consultation hotline 78585 (sounds like ‘please help me help me’ in mandarin) and encouraged workers to utilize it, but making complaints would required the name of the claimant and in most of time the call centre will just divert the case to the respondent and ask him or her to make improvements. In such case, complainants are in risks of punishment in reporting their superiors.

Safety NetsGou in the media tour proposed a plan of putting up a 1.5 million square meter safety net around the dormitories to prevent workers from jumping. From the day on, fences and safety nets can be found all over Foxconn’s dormitories and workshops [Exhibit 7]. Not to mention there are still workers died after landing on the nets, the course of action is clearly not solving the suicidal problem from its root.

‘No Suicide’ AgreementInstead of taking the blames, Foxconn asked their workers to sign an anti-suicide pledge, with a pledge section of ‘I promise never to hurt myself or others in an extreme manner.’ Aiming to protect its corporate image and benefits, the contract includes a promise that the families of workers who do commit suicide would not sue the company for higher compensation other than the minimum legal demands.

Current Situation

With an increasing demand for consumer electronic products worldwide, Foxconn is going to extend its production scale. More factories were built to maximize its output. Meanwhile, Chinese government and social groups, and even foreign media, exert pressures on Foxconn’s administration and the management board is becoming more aware on workplace ethics. Suicidal events still occurred in 2011, but the number of suicide is already far lower than in 2010. Gou, on behalf of Foxconn, promised to take actions to improve Foxconn’s working environment, to pay workers fair wages, and announced his plan of developing a million robots in three years, specialized for dangerous, or boring repetitive tasks to lower workers’ stress level. He also promised not to fire his workers in reason of mechanization. The production of ‘Foxbots’ has now began, it is hoped that the plan will bring hopes to Foxconn’s frontline worker, and bring Chinese manufacturing and assembling industry to a new era.

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Bibliography:

Web articles retrieved from February to March 2012

Foxconn Technology Group Company Website. http://www.foxconn.com/

‘Forbes: The World’s Biggest Public Companies’ http://www.forbes.com/global2000/

‘Foxconn Staff Needs Love, Not Nest’, (2010). http://www.thestandard.com.hk/news_detail.asp?we_cat=4&art_id=98743&sid=28401963&con_type=1&d_str=20100528&fc=8

‘Karasek – Demand-Control Model on Job Stress’, (2008). http://paei.wikidot.com/karasek-demand-control-model-of-job-stress

‘Robots Could Soon Replace People in the Factories Building Your iPhone. (2011).http://www.forbes.com/sites/briancaulfield/2011/08/01/robots-could-soon-replace-people-in-the-factories-building-your-iphone/

‘”We Are Extremely Tired, with Tremendous Pressure” – A Follow-up Investigation of Foxconn” (2010). http://www.worldlabour.org/eng/node/343

Barrera, (2008). ‘Who’s to Blame for Job Strain?’. http://ohsonline.com/Articles/2008/06/Whos-to-Blame-for-Job-Strain.aspx?Page=1

Culpan, (2011). ‘Apple Says Foxconn’s Actions on Suicide Saved Further Lifes. http://www.businessweek.com/news/2011-02-14/apple-says-foxconn-s-actions-on-suicides-saved-further-lives.html

Lynton, Thøgersen (2010). ‘Working with China’s Generation Y’. http://www.businessweek.com/globalbiz/content/feb2010/gb20100216_566561.htm

Tang, (2010). ‘Foxconn Raise Workers’ Pay by 30% after Suicide’ http://www.chinadaily.com.cn/china/2010-06/03/content_9925820.htm

Zhang. (2011). ‘Foxconn Says Latest Death was Drunk Accident’. http://www.forbes.com/2011/07/21/china-foxconn-death-opinions-contributors-gou-shenzhen.html

Hardcopy References

Pun, et al. (2011) ‘The Serial Jumping Behind Foxconn’s Success’ <In Chinese>. Commercial Press, Hong Kong.

Xu, (2007). ‘Terry Gou and Foxconn’ <In Chinese>. Citic Press. Beijing.

Xu, (2011). ‘Terry Gou’s Management Diary’ <In Chinese>. Zhejiang University Press.

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Dalai, (2010). ‘Collaborating with Gen-Y’. N.Dynamic Research Institute.Appendix:

Assessing Work Satisfaction of Foxconn Frontline Workers with Karasek’s Demand-Control Model

Sociologist Robert Karasek developed Demand-Control Model (DCM) of explaining occupational stress in 1979. In the model, it is suggested that job psychological strains is related to a relatively high job demand but low decision latitude.

Job demands is a representation of factors generating psychological stresses, including: interruption rate, time pressures, reaction time, conflicting demands, reaction time required pace of work, proportion of work performed under pressure, amount of work, degree of concentration required, and the slowing down of work caused by the need to wait for others. For Foxconn’s bottom workers, every task is given a time limit. They work everyday with quotas and rules, which can be very demanding. The job demand, in such case, is clearly very high.

Decision latitude, on the other hand, is a measurement of the degree of control employees have on their jobs, it terms of planning and execution. Skill discretion and decision authority are its two basic elements. Having a huge variety of tasks, low level of repetitiveness, opportunity to learn and to create, and the chance of developing special abilities, one can be described as having a high level of skill discretion. The employees’ ability and authority to make decisions, and their influence over their team and company policies is defined as decision authority. Since Foxconn’s frontline workers are concentrating in a specific process of a production line, work is boring and repetitive. The strong hierarchy and centralized approach of the company also discourage workers to speak out or propose changes. In total, the decision latitude of Foxconn’s frontline workers tends to be low.

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Case Report: Foxconn Technology GroupLaw Shao Feng, Sze Kin Fai

With a low decision latitude and high job demand, according to DCM, the workers are likely lying on the high strain zone and are prone to psychological strains. They will also have less incentive to work. Exhibit 1 – List of residents in a room

Source: Pun et al., (2011). ‘The Serial Jumps Behind Foxconn’s Success’ (in Chinese)’. P.183

Exhibit 2 – List of official punishments on the wall of Foxconn’s plant

Source: Pun et al., (2011). ‘The Serial Jumps Behind Foxconn’s Success’ (in Chinese)’. P.107

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Exhibit 3 – Workers working in a under construction workshop in Chengdu

Source: SACOM, (2011). ‘The Truth of the Apple iPad Behind Foxconn’s Lies’ <video recording>. Retrived 18 March 2012 from http://www.youtube.com/watch?v=V3YFGixp9Jw

Exhibit 4 – Line diagram showing satisfaction at work breakdown by age

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Source: Dalai. (2010). ‘Collaborating with Gen-Y’, N.Dynamic Research Institute. P.15

Exhibit 5 – List of Foxconn workers committed suicide from January to August in 2010

Name Gender Age Origin Plant Date of suicideRong Bo Male 19 Hebei Langfang 8 JanuaryMa Xiangqian Male 19 Henan Guanlan 23 JanuaryLi (surname) Male 20 Henan Longhua 11 MarchTian Yu # Female 17 Hubei Longhua 17 MarchLi Wei Male 23 Hebei Langfang 23 MarchLiu Zhijun Male 23 Hunan Longhua 29 MarchRao Shuqin # Female 18 Jiangxi Guanlan 6 AprilNing (surname) Female 18 Yunnan Guanlan 7 AprilLu Xin Male 24 Hunan Longhua 6 MayZhu Chenming Female 24 Henan Longhua 11 MayLiang Chao Male 21 Anhui Longhua 14 MayNan Gang Male 21 Hubei Longhua 21 MayLi Hai Male 19 Hunan Guanlan 25 MayHe (surname) Male 23 Gansu Longhua 26 MayChen (surname) # Male 25 Hunan Longhua 27 MayLiu (surname) Male 18 Hebei Nanhai 20 JulyLiu Ming Female 23 Jiangsu Kunshan 23 August# Survivor

Source: Pun et al., (2011). Based on‘The Serial Jumps Behind Foxconn’s Success’ (in Chinese)’. P.209

Exhibit 6 – A caricature criticizing Foxconn’s effort in tackling suicide problem

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Case Report: Foxconn Technology GroupLaw Shao Feng, Sze Kin Fai

Source: China Labor Watch, (2010). ‘We are Extremely Tired, With Tremendous Pressure’ retrieved

15 March 2012 from http://www.worldlabour.org/eng/node/343Exhibit 7 – Safety nets surrounding Foxconn’s plants and dormitories

Source: Pun et al., (2011). ‘The Serial Jumps Behind Foxconn’s Success’ (in Chinese)’. P.107

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Source: ‘Apple Chinese Factory Nightline’, (2012). Retrived 15 March 2012 from http://www.youtube.com/watch?v=hLuPtMvvwA0

End of Report

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