This column first appeared in Forbes
Who is the greatest business mind of the past 50 years? Walt Disney (DIS)? Warren Buffett (BRK.A)? Perhaps Sergey Brin or Larry Page of Google (GOOG)? Steve Jobs, the founder of Apple, (AAPL) gets my vote. Every line of business he goes into he revolutionizes, from computers to music players to phones. He has an uncanny ability to give customers what they want before they even know they want it. He is the Mozart of business. If you are anything like me, your house and office are filled with Apple products. I'm not sure how I lived before he retook the helm at Apple.
But is Jobs a great leader? In my recent column "What Sets Great Leaders Apart," I defined true leadership as measured by bettering the lives of the people around you. Does Jobs do that? No, by that measure he has a long way to go. Apple employees tend to be very satisfied with their jobs but not the Chinese workers who labor in the factories that actually produce Apple's products.
In the drive for ever fatter margins and lower product prices, Steve Jobs and Apple have forgotten to protect the quality of life of workers at Foxconn (OTCPK:FXCNY), the Taiwanese company that manufactures products for them and other companies like Hewlett-Packard and Dell. This year alone, five Foxconn workers in China have committed suicide. Last year a worker killed himself after security officers accused him of stealing a prototype of an Apple iPhone and beat him. When a Reuters journalist tried, legally, to take photos of a Foxconn factory a few months ago, security guards ran out and beat him.
Every month, it seems, more horror stories emerge from Foxconn's factories. Although it is Foxconn and not Apple itself whose behavior is troubling, Steve Jobs and Apple have a moral imperative to address these concerns. Not only as a true leader should Jobs do so but also as a smart businessman. Although Apple's stock continues to soar, the public relations black eye the company gets whenever a Foxconn employee dies under tragic circumstances or someone is bludgeoned is serious. Online chat rooms in China are abuzz with these problems.
Just in terms of recruiting and retaining employees in China, something has to change. Fewer and fewer young Chinese are willing to labor for low wages in subhuman conditions far from their families. (See my article "China's Growing Labor Shortage.") Job opportunities for young Chinese continue to improve as the country's economy shifts toward services and consumption. Apple runs a huge supply chain risk if Foxconn's reputation grows so bad it can no longer recruit and retain assembly workers. Just 10 years ago there were few employment choices for uneducated and low-skilled workers in China; today they have many opportunities. Even people willing to work in factories may not want to take the risks of employment at Foxconn. Why should they, when other manufacturers offer better conditions? Apple needs to make sure it doesn't lose its ability to keep supplying the world with its products.
We all can learn a lot from Apple's Foxconn problems. Executives in charge of supply chain management can no longer concern themselves with low prices and high quality alone. They absolutely must make sure their partners take care of their employees and protect the environment.
Doing so will not hurt the bottom line. It will most likely increase it, since more ethical companies tend to be better able to retain good workers. Nike figured that out. It came under heavy criticism in the 1990s for conditions at the sweatshops that made Air Jordans. In response, the company made moves to improve those conditions. The result? It still makes a ton of money, and now it's considered one of the world's best-behaved companies. (See Helen Coster's "The World's Most Ethical Companies.")
How can companies ensure that the factories that make their products are acceptable? First, they need to keep people on the ground in those partners' work areas, regularly or even daily, overseeing the situation. Prescheduled visits are not enough, as they let things be hidden. Second, they need to help formulate regulations for their partners and even for their partners' partners, since things like security are often outsourced, and they need to enforce those regulations. Third, they have to offer better incentives for meeting employee satisfaction and retention goals, not just production and pricing goals. Wal-Mart (WMT) has been forcing its suppliers to become more green, and Wal-Mart's purchasing leverage means its fight to become more environmentally friendly is having a huge effect on recycling and energy conservation efforts.
Finally, although it is always easier to work with fewer partners and suppliers, no company should be too beholden to any single partner. If one company controls your entire production, you won't have the influence you need to make them improve when necessary.
Steve Jobs is one of the world's great business minds, but he should spend some time becoming a great leader, too. Here is my personal challenge to him: I challenge you to revolutionize the quality of life of the factory workers who put together your products as much as you've revolutionized anything else. Workers at Foxconn will benefit greatly and, ultimately, so will Apple's bottom line.
Disclosure: No positions