Operations Management and Ethics

Operations Management and Ethics

Zeivier Reyes

Operations Management and Ethics

Operations Management is a competitive strategy that optimizes design, operation, and improvement of decisions made about facilities, inventories, capacity, performance, quality control, purchasing, and so forth(Russell, & Taylor, 2003). Operations management is about the way organizations produce goods and services. The function itself can engage up to 80 per cent of an organization’s resources, including labor, equipment and capital needs. In an era where the success of an organization is dependent upon the efficient and effective use of its resources, one can appreciate the need for everyone within an organization to have a sound understanding of the principles of operations management and the manner in which competitive advantage can be sustained through the superior application of them. This definition reflects the essential nature of Operations Management: it is a central activity in organizing things. Another way of looking is to consider Operations are a transformation process: they convert a set of resources (INPUTS) into services and goods. (Davis, Markland, & Vickery, 1995).

Effective operations management is a critical, competitive, strategic force in any organization as it has the capacity to reduce operational cost significantly and to improve efficiency. Operations make wide-ranging decisions about such things as purchasing goods and services, leasing or buying facilities, quality control, and so forth that directly affect operational efficiency. One might say that good operations managers are those who get the job done for their organizations in the most efficient manner. Operations managers typically avoid normative decision making (“we ought to do this to achieve social equity”). Yet ethics often draws on a set of values agreed upon by a given society, an organization, or an individual (Fitzsimmons, & Fitzsimmons, 2004).

Operations managers have traditionally been predominantly analytical and concerned with cause and effect as a means of achieving operational efficiency, such as knowing how to maximize profits. In the postmodern organization, however, a pure analytical focus is no longer sufficient for ensuring organizational success. Corporate social responsibility must also be of concern in decision-making about operations. These managers find themselves also confronted with ethical questions such as, “Is this the right thing to do for the broad collection of stakeholders?” One must understand the analytical value of economic tools while at the same time, respect the values and goals of societies, organizations, and individuals. Inevitably, decisions cannot be made from a purely analytical approach, but must also be congruent with social values.( Aquilano, Chase, & Jacobs, 2004)

One particular operations management ethical issue I can think of is the ethics of the "Biggest Check First" policy of the Bank of America. Operations management was confronted with an ethical and legal issue. For example, in 1999, a class action lawsuit was filed against Bank of America for engaging in the practice of "Biggest Check First" check clearing. Put simply, the bank clears checks in order from biggest to smallest for transactions presented on the same business day, with less regard to what time they come in during that business day. Customers allege that this is purposely done, to cause more checks to bounce, triggering more overdraft fees for the bank to collect(Wikipedia.org).

Here's an example: A customer has $1,000 in his checking account. Check numbers 101 through 104 come in for processing for $60, $10, $30 and $950, in that order. If the checks are processed by the check number or in ascending order (smallest to largest), the first three checks will clear and the fourth will bounce, meaning the customer will be charged one fee for insufficient funds. Nations Bank (now Bank of America) charged $29 for each bounced check. If the checks are processed largest to smallest, however, the $950 check will clear first, and the checks for $60, $30 and $10 will bounce, resulting in $87 in fees.

The bank employs the same practice for ATM and debit card transactions. Another example: A customer has $100 in her account. On Saturday she withdraws $80 from an ATM. On Sunday she buys a coffee using her debit card for $3