BUS6110: Organizational Strategy

Module 1: 4-Way Test

Course Title: BUS 6110

Module 1: ORGANIZATIONAL STRATEGY

Submitted By:

OLALERE TAWAKALIT MOTUNRAYO

Learners ID: 018457

7th December 2023

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 BUS6110: Organizational Strategy
Module 1: 4-Way Test

DECISION DESCRIPTION
The management decision involves outsourcing a significant portion of the company's
production to a third-party supplier in another country. The decision may be driven by cost-
saving opportunities, access to specialized skills, or the desire to focus on core competencies.
However, it also raises concerns about the impact on the company's employees and the
ethical considerations of working with suppliers in different labor and regulatory
environments.

MANAGEMENT DECISION OR ACTION THAT FIT

THE FOUR-WAY TEST
Let's analyze the decision to outsource production using the Four-Way Test:
 Is it the truth? The decision to outsource should involve transparent communication
with employees and stakeholders about the rationale behind the decision, the potential
impact on the workforce, and the company's commitment to ethical business practices
in the outsourcing process.
 Is it fair to all concerned? Fairness in this context involves considering the impact on
employees whose jobs may be affected by the outsourcing decision. The company
should ensure that employees are treated fairly, potentially offering retraining or
alternative employment opportunities. Additionally, the company should assess the
fairness of the labor practices and working conditions of the third-party supplier to
ensure they align with the company's ethical standards.
 Will it build goodwill and better friendships? The decision to outsource should be
made in a way that builds goodwill with all stakeholders, including employees,
customers, and the community. This may involve communicating the long-term
benefits of the decision, maintaining strong relationships with affected employees,
and ensuring that the third-party supplier shares the company's commitment to ethical
and sustainable business practices.
 Will it be beneficial to all concerned? The decision to outsource should ultimately
create value for all stakeholders, including customers, employees, shareholders, and
the community. This may involve cost savings that can be reinvested in innovation
and growth, as well as opportunities for the company to contribute positively to the
economic development of the country where the third-party supplier is located.
In conclusion, the decision to outsource production should align with the principles of the
Four-Way Test by being based on truth, fairness, goodwill, and mutual benefit. By carefully
considering these ethical guidelines, management can make decisions that are not only
financially prudent but also socially responsible and sustainable.

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Module 1: 4-Way Test

CHANGES THAT AFFECT MANAGEMENT DECISION

To make the management decision or action fit the Four-Way Test better, the following
changes could be implemented:
Transparency and Communication: The company should prioritize transparent
communication with employees and stakeholders about the decision to outsource. This
includes providing clear explanations of the rationale behind the decision, potential impacts
on the workforce, and the company's commitment to ethical business practices in the
outsourcing process. Transparent communication can help build trust and mitigate concerns
among employees and other stakeholders. Reference: Crane, A., & Matten, D. (2016).
Business Ethics: Managing Corporate Citizenship and Sustainability in the Age of
Globalization. Oxford University Press.
Fairness and Employee Well-being: The company should prioritize fairness and the well-
being of its employees affected by the outsourcing decision. This may involve offering
retraining programs, career transition support, or assistance in finding alternative employment
opportunities. Ensuring that employees are treated fairly and respectfully during the transition
process is crucial for upholding ethical standards. Reference: Shaw, W. H., & Barry, V.
(2016). Moral Issues in Business. Cengage Learning. Provide fair compensation and support
for employees affected by the outsourcing decision, including retraining opportunities or
assistance in finding new employment. Reference: "Corporate Social Responsibility and
Human Resource Management: A Systematic Review and Conceptual Analysis" by Ren, X.,
et al., which highlights the importance of fair treatment of employees as a key aspect of
corporate social responsibility.
Ethical Supply Chain Management: The company should conduct thorough due diligence
on the third-party supplier to ensure that their labor practices and working conditions align
with the company's ethical standards. This may involve implementing supplier assessment
processes, conducting on-site audits, and establishing clear expectations regarding labor
rights, environmental sustainability, and ethical business conduct within the supply chain.
Reference: Ferrell, O. C., Fraedrich, J., & Ferrell, L. (2018). Business Ethics: Ethical
Decision Making & Cases. Cengage Learning.
Community Engagement and Social Responsibility: The company should actively engage
with the community in which the third-party supplier is located and contribute to local
development initiatives. This could involve supporting education, healthcare, or
environmental programs that benefit the community. By demonstrating a commitment to
social responsibility, the company can build goodwill and positive relationships with the local
community. Reference: Carroll, A. B., & Buchholtz, A. K. (2014). Business and Society:
Ethics, Sustainability, and Stakeholder Management. Cengage Learning.
Long-term Value Creation: The company should emphasize the long-term benefits and
value creation associated with the outsourcing decision. This includes reinvesting cost
savings in innovation, employee development, and sustainable business practices. By

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Module 1: 4-Way Test

articulating a clear vision for how the outsourcing decision will contribute to the company's
long-term success and the well-being of all stakeholders, the decision can be framed as
mutually beneficial. (Crane, A., & Matten, D. (2016). Business Ethics: Managing Corporate
Citizenship and Sustainability in the Age of Globalization. Oxford University Press.)
Transparency and Truthfulness: Implement clear and open communication regarding the
reasons for the decision to outsource production, including the potential impact on
employees, stakeholders, and the community. Reference: "The Importance of Transparency
in Business" by Forbes, discusses the benefits of transparent communication in building trust
and credibility with stakeholders.
Building Goodwill and Positive Relationships: Engage in proactive dialogue with the local
community and stakeholders to address concerns and demonstrate a commitment to ethical
and socially responsible business practices. Reference: "Corporate Social Responsibility and
Corporate Reputation: A Cross-Cultural Perspective" by Sen, S., and Bhattacharya, C. B.,
which emphasizes the link between corporate social responsibility and building positive
relationships with stakeholders.
Maximizing Benefits for All Concerned: Explore alternative options, such as partnering
with local suppliers or investing in employee training and development, to create a win-win
situation for the company, employees, and the community. Reference: "Creating Shared
Value" by Porter, M. E., and Kramer, M. R., which introduces the concept of creating shared
value by aligning business goals with societal needs.
By implementing these changes, the management's decision to outsource production can
better align with the principles of the Four-Way Test, emphasizing truth, fairness, goodwill,
and mutual benefit.
\

IMPACT THAT CHANGES THE ENVIRONMENT IN OUR

ORGANIZATION
Implementing the suggested changes to align the management decision with the Four-Way
Test would have a significant impact on both the internal and external environment in which
the organization operates.

INTERNAL IMPACT:
1. Employee Morale and Engagement: By providing transparent communication, fair
treatment, and support for work-life balance, the changes would likely lead to
improved employee morale and engagement. Employees who feel valued and
respected are more likely to be motivated and committed to their work, leading to
higher productivity and lower turnover rates.
2. Organizational Culture: Fostering a culture of fairness, empathy, and open
communication can contribute to a positive work environment. This can lead to
stronger relationships among employees, increased collaboration, and a shared sense
of purpose, ultimately shaping a more cohesive and supportive organizational culture.

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Module 1: 4-Way Test

3. Employee Well-being: Addressing concerns and providing support for work-life

balance can have a positive impact on employee well-being. This, in turn, can lead to
reduced stress, improved mental health, and better overall job satisfaction among
employees.

EXTERNAL IMPACT:
1. Customer Satisfaction: A positive internal environment, where employees feel
valued and supported, can translate into better customer service and higher customer
satisfaction. Satisfied and engaged employees are more likely to deliver exceptional
service, positively impacting the organization's reputation and customer loyalty.
2. Public Image: Organizations that prioritize fairness, transparency, and employee
well-being are often viewed more favourably by the public. This can enhance the
organization's reputation and contribute to a positive public image, potentially
attracting more customers and top talent.
3. Stakeholder Relationships: Demonstrating a commitment to ethical and fair
practices can strengthen relationships with stakeholders, including suppliers, partners,
and the community. This can lead to increased trust and collaboration, creating a more
favourable external environment for the organization.
Overall, aligning the management decision with the Four-Way Test and implementing
changes to promote truthfulness, fairness, goodwill, and benefits to all concerned can lead to
a more positive internal environment, improved employee well-being, and a stronger
reputation in the external environment.
In summary, these changes can lead to a more positive and sustainable internal and external
environment for the organization, characterized by higher levels of trust, loyalty, and
engagement among employees and stakeholders.

USING OF 4-WAY TEST

The Four-Way Test, developed by Herbert J. Taylor, is a set of ethical guidelines used in
business and personal relationships. It consists of four questions:
1. Is it the truth?
2. Is it fair to all concerned?
3. Will it build goodwill and better friendships?
4. Will it be beneficial to all concerned?
To make management decisions or actions effective and applicable in a market environment
different from the current focus, the following changes may be necessary:
1. Cultural Understanding: Understand the cultural nuances, values, and norms prevalent
in the new market. This involves adapting the decision-making process to align with

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Module 1: 4-Way Test

the cultural context and ensuring that the proposed action is respectful and sensitive to
the cultural expectations of the new market (Hofstede, 2001).
2. Legal and Regulatory Compliance: Ensure that the decision or action complies with
the legal and regulatory requirements of the new market. This may involve adapting
the decision to align with local laws, regulations, and industry standards, as well as
obtaining necessary permits and certifications (Doz & Prahalad, 1986).
3. Stakeholder Engagement: Identify and engage with local stakeholders such as
community leaders, government officials, and industry experts to understand their
perspectives and gain their support for the decision or action. Building strong
relationships with local stakeholders can help in gaining acceptance and trust in the
new market (Sethi & Steidlmeier, 1993).
4. Communication and Transparency: Communicate the decision or action transparently
and effectively to all stakeholders in the new market, ensuring that the information is
clear, culturally appropriate, and accessible to everyone involved. This may involve
using local languages, adapting communication styles, and addressing potential
misunderstandings (Gudykunst & Kim, 2003).
By incorporating these changes, management decisions and actions can be made more
effective and applicable in a new international or domestic market environment.

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REFERENCE

 Cameron, K. S., & Quinn, R. E. (2011). Diagnosing and Changing Organizational

Culture: Based on the Competing Values Framework (3rd ed.). John Wiley & Sons.
 Carroll, A. B., & Buchholtz, A. K. (2014). Business and Society: Ethics,
Sustainability, and Stakeholder Management. Cengage Learning.

 Crane, A., & Matten, D. (2016). Business Ethics: Managing Corporate Citizenship
and Sustainability in the Age of Globalization. Oxford University Press
 Doz, Y. L., & Prahalad, C. K. (1986). Controlled variety: A challenge for human
resource management in the MNC. Human Resource Management, 25(1), 55-71.
 Gifford, J. (2019). The Four-Way Test: A Practical Guide. CreateSpace Independent
Publishing Platform.
 Ellen, P. S., Webb, D. J., & Mohr, L. A. (2006). Building corporate associations:
Consumer attributions for corporate socially responsible programs. Journal of the
Academy of Marketing Science, 34(2), 147-157.
 Gudykunst, W. B., & Kim, Y. Y. (2003). Communicating with strangers: An
approach to intercultural communication. McGraw-Hill.
 Hofstede, G. (2001). Culture’s consequences: Comparing values, behaviors,
institutions, and organizations across nations. Sage publications.
 Noe, R. A., Hollenbeck, J. R., Gerhart, B., & Wright, P. M. (2017). Human Resource
Management: Gaining a Competitive Advantage. McGraw-Hill Education
 Northouse, P. G. (2018). Leadership: Theory and Practice (8th ed.). SAGE
Publications.
 Rotary International. (2021). The Four-Way Test. Retrieved
from https://www.rotary.org/en/our-code-ethics-four-way-test
 Sethi, S. P., & Steidlmeier, P. (1993). Toward a theory of business. Business Ethics
Quarterly, 3(2), 201-221.
 Shaw, W. H., & Barry, V. (2016). Moral Issues in Business. Cengage Learning.
 Steers, R. M., Nardon, L., & Sanchez-Runde, C. J. (2019). Management Across
Cultures: Developing Global Competencies (3rd ed.). Cambridge University Press.
 "The Four-Way Test." Rotary International. https://www.rotary.org/en/about-
rotary/rotary-code-of-ethics

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 Tr Mishra, K. E. (2012). The impact of ethical leadership, the internal audit function,
and moral intensity on a financial reporting decision. Journal of Business Ethics,
109(3), 351-366.