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Principles Of Management Service Operation

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Question:

Identify and analyze an ongoing service problem or past failure for a real Organization that can be traced back to sub-optimal use of Operations Management.
 
 

Answer:

Uber’s Management Problem

Uber is an American private technology company that develops markets and operates the Uber car transportation and food delivery mobile apps in 633 cities globally. Drivers for Uber can use their own cars or rent cars to drive with Uber. The company has been a forerunner in the sharing economy and has been a subject of several disputes and legal actions. One of these includes the suing of its chief executive, Travis Kalanick, of fraud and other transgressions.

Chief Executive Sued For Fraud.

Travis Kalanick is the one responsible for conversion of Uber into a transportation colossal company and due to his actions; the investors expelled him as the CEO of the company, (Stone, 2017). One of Uber’s largest investors, Benchmark, which is a Silicon Valley venture capital firm, filed a suit against Kalanick and accused him of fraud, breach of fiduciary and duty and a breach of contract. Benchmark, after supporting the Uber management for a very long time turned against the company’s top ranks leaving the members of the board of directors in turmoil. (Slee, 2015). This is because they remained undecided on what to do and how to face the problem that the firm was causing.  Benchmark owns a 13% stake in the company and a board seat but the influence of Benchmark on the board was eventually diminished, restricting the firm from accessing any information about the company’s legal actions after the firm’s board representative exonerated himself from the board committee, which deliberated litigation issues. The firm insisted that Kalanick should be removed from the board of directors and it went ahead to publish an open letter to employees of Uber insinuating that the company held some dark secrets from them. (Damodaran, 2017).

Questionable Management Style

 The management style of Travis was under criticism and after he lost temper in an argument with an Uber driver who had issues about his salary, he added some swearing comments that were unfortunately caught on video. Overall allegations about the corporate culture were made against the company and its board of directors met to hear about them. Among the allegations were that the workplace environment permitted harassment, bullying that was left uncontrolled and discriminations. After hearing all of these, the board decided to adopt a series of recommendations about the culture of the company from the former US attorney general Eric Holder and were undecided about what action to take concerning Kalanick’s actions. In attempt to make things right the company hired a law firm to investigate, various complaints brought forward like sexual harassment and other deep-rooted cultural problems. After a former female Uber engineer published on a blog claiming her boss in a chain of messages had propositioned her on the very first day at work and that after taking the matter to her superiors, her grievances were ignored; the company set up a hotline specifically for complains and hired the firm to inspect those complaints. After separate investigations being conducted, the company fired 20 employees for harassment-associated cases, (Damodaran, 2017).

 

Implications of the problem on customer expectations and organisational performance

In a verdict that could have some implications on thousands of firms and the gig economy, a British tribunal ruled that Uber drivers should be given minimum wage, a holiday pay and be treated as employees. This was after two drivers presented their case to an employment tribunal claiming that the app was unlawfully treating them as self-employed individuals and therefore missing to provide certain rights. Uber has faced legal actions, protests and bans across the world including most of Europe and the United States. It was ruled that the drivers should be paid the minimum wage for those that are over 21 years. This ruling could have implications for many businesses across Britain and influence judges in those countries that Uber faces legal actions. It also could have several effects on employees that work for firms that deliver services and in the gig economy that includes individuals working for several employers day to day without having permanent contracts, (Slee, 2015).

Implications of the problem on shareholder performance

Because of the big scandal caused by its action towards Uber, Benchmark is now disadvantaged leading to one of the Uber backers, Shervin Pishevar and other investors asking Benchmark to sell its shares in Uber and leave the board claiming that its lawsuit against the Chief Executive was irrational, ruthless and culpably wrongheaded.  (Ledlow, 2013) Mr Kalanick filed an opposition to the lawsuit and argued that it was founded on a personal and public attack on him. The suit included issues on how the CEO attained control of several Uber seats back in 2016. Benchmark claimed that those seats were achieved through deceitful cover-ups of information and material misstatements. The suit said that the objective of Kalanick is to fill the company’s board with trustworthy associates for the purposes of clearing the way for his ultimate return as the CEO and protecting his previous conduct from inspection all to the disadvantage of the company’s stakeholders, driver associates, employees and customers, (Meyer,2016).

How to Avoid Such Issues in Your Company

Companies in order to avoid such incidents of corporate fraud suits should adhere to the principles of operations management such as organisation, the manufacturing processes have to be interconnected with all elements being predictable and consistent. This can be achieved through conducting annual audits to ensure there is complete honesty among the staff responsible for record and bookkeeping, (Heizer, 2016).The fundamentals principle is also applicable whereby a company should strictly adhere to the maintenance of records and disciplines. Surprise check-ups, independent checks on general performance, inventory counts and audits should be conducted to make sure that policies and procedures are adhered to and for maximum accuracy. When the company executives and managers exercise humility, they can in turn acknowledge their areas of weakness and try to get help instead of applying trial and error that could result into bigger consequences for the whole organisation. An anonymous reporting mechanism such as an employee fraud hotline should be instilled so that cases such as harassment and others can be brought forward to the responsible personnel and addressed accordingly, (Galloway, 2014). New theories should be tested and new solutions sought for different situations and problems in the company, a learning organisation does not just stick to one mechanism or way of doing things but embraces change. Stable management will be achieved and employee performance improved through the causality principle application. Whenever there are signs of problems in the company among employees or even the management, they should be addressed to prevent the same problems from appearing repeatedly, (Raturi, 2015)

 

References

Damodaran, A. (2017). Narrative and numbers: The value of stories in business. New York City: Policy Press.

Galloway, L. (2014). Principles of Operations Management: Thomson Business Press

Heizer, J. H., & Render, B. (2012). Principles of operations management: Upper Saddle River, New Jersey, Pearson Prentice Hall.

Ledlow, G. R., & Coppola, M. N. (2013). Service Operations Management: Theory, skills, and applications. Sudbury, Mass: Jones and Bartlett.

Meyer, J. (2016). Uber-positive: Why Americans love the sharing economy. Bristol: Policy Press.

Raturi, A., & Evans, J. R. (2015). Principles of Operations Management: South Western College Publishing.

Slee, T. (2015). What's yours in Mine: Against the sharing economy. Malden, Mass: Wiley-Blackwell.

Stone, B. (2017). The Upstarts: How Uber, Airbnb, and the killer companies of the new Silicon Valley are changing the world. New York: Peter Lan

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