"We want our suppliers to value their employees as people." The shortcomings Antonio Veloso discovers among suppliers and how he resolves them
W e had exactly 12 seconds to complete one work cycle," a student remembers. He had to fully concentrate on the work steps; otherwise he wouldn't be able to complete them in such a short period of time. Hour by hour. With one 30-minute break. Sixty hours a week - and sometimes more. If he faltered, the line would stop, the entire production would come to a standstill and he'd be deducted pay. And most employees can't even pay for their basic needs with their full wages.
CEOs shouldn't see the employees as a number in their company, but appreciate them as human beings
This happened to a certain employee one time too many. And for this he was brutally beaten after work by three coworkers. They became aggressive because their pay was also cut due to the employee's problems concentrating. What happened then made headlines worldwide. The employee committed suicide out of despair.
Permanent, inclusive and sustainable economic growth, productive full employment and humane work conditions for everyone - that's the eigth sustainable development goal of the United Nations.
The Supplier Development Program is a true win-win situation: It creates better work conditions at suppliers, which improves the bond and motivation of the employees, which in turn improves the product quality and productivity.
The spate of suicides at Foxconn made it abundantly clear that a human catastrophe like this is entirely unacceptable but unfortunately not an exception – especially in developing and low-wage countries. In these countries, adequate work security, reasonable working hours and fair wages are generally not priorities. Deutsche Telekom also purchases products and accessories in Asia and places a lot of value on improving working conditions and environmental protection among its suppliers. But how does one convert a sinner into a savior? By coaxing?
Mr. Veloso had a better idea. He developed a program for Deutsche Telekom that actually managed to promote good working conditions in developing countries. This Supplier Development Program costs Deutsche Telekom a lot of money. Nevertheless, it is so successful that it is now turned into an industry standard by the Global e-Sustainability Initiative (GeSI). Leading ICT companies are joining in as well. "There is no comparable program," says Veloso.
I believe the secret lies in the fact that we approach our suppliers as strategic partners instead of using the "carrot and stick" method. The idea behind this is that we don't think it's a good idea to force a good relationship with our suppliers. That would be presumptuous and not sustainable. What's more, it would only scratch the surface. Rather, our strategy is to change our suppliers' attitudes toward sustainability topics in the long term. We want to motivate them to establish - of their own volition - sustainability and corporate responsibility as fixed components in their corporate culture and DNA.
Let's take the example of "What wage does an employee earn?." For us it's important not to mandate suppliers to pay higher wages. This would likely work in the short term but certainly wouldn't be sustainable. Instead, we want to convince managers that they themselves can benefit from paying and treating their employees well. We communicate strategic knowledge that helps our suppliers kill two birds with one stone: increase revenues and improve working conditions. The two are not mutually exclusive and in fact complement each other. That's because when employees earn fair wages, have enough breaks during their work day and even have a voice at their company, they feel much more valued. This, in turn, leads to an entirely different corporate culture. Of course, the companies do have to make an initial financial investment, but it all pays off in the long run. Multiple pilot projects have proven as much. We believe it's important to cultivate a dialog of equals during the process instead of coming across as "the strict schoolmaster."
There are many ways to effectively reduce working hours. Allow me to explain using an example case. A certain supplier decreased working hours from 66 hours (which far exceeds the legal framework conditions and EICC guidelines) to about 44 hours, gradually over the course of two years. This was initially achieved by combining a "top-down" and "bottom-up" approach in which potential improvements were identified for the companies with regard to work processes as well as sleeping accommodations and the cafeteria (e.g., improvements in both working conditions as well as exterior conditions).
The "bottom-up" part consisted of organizing the factory workers into teams that would identify potential improvements. Prior to this the teams were given basic knowledge of lean production. Based on this, regular competitions were held for the most successful optimizations and the winners were given awards.
The "top-down" part consisted of management experts and industrial engineers examining the processes and formulating suggestions on how work processes could be made more effective. Management then examined the suggestions for improvement for their feasibility and implemented them correspondingly. This resulted in an increase of about 30 percent in efficiency at the factory over the course of two years. We then combined this with higher wages so that the decreased working hours would not negatively impact wages. Fingu thus decreased working hours and also reduced employee turnover. The employees were happier and more satisfied and had a lot more free time without having to give up money.
The above story was a good example of a positive experience when working together with suppliers. Here's one more:
Another supplier had extreme working hours averaging 88 overtime hours per month. And the breaks prescribed by EICC and ILO standards were often not granted to employees. The supplier really welcomed our program and formulated an aggressive improvement plan with respect to corporate social responsibility. He trained upper management in CSR and achieved significant economic savings thanks to less employee turnover and a decrease in quality problems.
After the monthly overtime hours had been reduced from 88 to 69, employee turnover decreased from 12% to 5% and the percentage of employees who returned to work after Chinese New Year increased from 80% to 90%, which had the added benefit of considerably decreasing employee recruiting costs. The measures also created ecological benefits, such as through better recycling processes, which in turn resulted in improved materials management, which in turn lead to significant cost savings.
All in all, the supplier was able to holistically examine his CSR performance and his company's strengths and weaknesses and formulate an improvement plan that not only included social and ecological improvements but also economic benefits for the supplier himself. In the end, the supplier was quite happy and extremely thankful to Deutsche Telekom for the opportunity to take part in the Supplier Development Program.
Simply imposing better working conditions was never a sustainable answer for him. "We want to get into the DNA of companies," says Veloso. "We want a dialog of equals. We want to convince CEOs that they themselves will benefit from treating their employees well, from not only thinking of them as a number at the company but rather valuing them as people." It's a noble goal. Veloso shares the secret to his success in an interview.
We want to get at the companies' DNA. We want a dialogue at eye level.
The Supplier Development Program is making an important contribution to promoting humane working conditions and enabling sustainable economic growth – the UN's eighth sustainable development goal.