Dell's reputation crisis: prisoner labor and offshore outsourcing

Dell Computer Organization Problems

Dell Computer Organizational Problems

There are a few big names in computing everyone seems to know: Apple, IBM, Dell. And many people are also aware that all of them have had problems from time to time, in one area of their business or another. Apple had trouble in virtually all of its business functions for a while after one of the founders left. In fact, the introduction of the iMac is arguably the thing that saved the company. IBM is a behemoth, and much of its income is derived from corporate business, not selling to consumers. Dell, on the other hand, serves primarily consumers. According to the Financial Times, desktop computer systems accounted for 53% of revenues in 2003, with notebook computers accounting for 27% and enterprise systems for 20%. While corporations may certainly be supplying their personnel with desktops and laptops bought from Dell, the use of those items might still be said to be consumer-oriented. Its well-known products include Dimension™, OptiPlex™, and SmartStep ™ desktops, and Latitude™, and Inspiron ™ notebook computers. A vertically integrated company, it offers not only the boxes themselves, but support and even financing for consumers; it offers consulting, custom hardware and software integration for it corporate customers. Dell also employed a unique marketing plan; unlike most brands of computer that can be easily purchased through such mega-retailers as CompacUSA or Best Buys, as well as smaller computer shops, Dell products must be purchased online. Support services are online, or by shipping. So, minus a sales staff to help convince consumers that Dell is the product to buy, Dell could rely only on its advertising and its reputation. On the latter of those two, it has suffered some serious challenges in recent years. First, there were a number of articles about problems with consumer support. But more recently, two problems that would be unseen by many consumers, but which are apparently highly important to many others, arose. Worst of all, they are central to the reputation of the company, and in one case, they were central to the way in which the company produced its products. These two issues were farming out reconditioning chores to prisoners, and farming out customer service chores to India.

While these issues might at first not seem to be sociological problems, viewing them in light of today's consumer climate reveals that they are. Many people are aware that, at some point in recent history, people changed from being "human beings" to "human doings." In other words, people identified with and were identified by what they did -- their job, their volunteer works and so on. It would be fair to contend that these days, people have become "human buyings," identified with their collection of 'stuff.' But in a relatively environmentally and humanistically aware age (this might bear support, but would be another paper, so we will just claim it for argument's sake), many "human buyings" and what they buy are greatly affected by the conduct of a company regarding how it produces its product. In light of the recent and some say continuing labor problem in this country -- that is, too few jobs -- many are also sensitive to the issue of sending white-collar jobs to foreign nations where English is spoken well and where the pay rates are dismal.

In July, 2003, Dell Computer announced that it would "no longer rely on prisons to supply workers for its computer recycling program," according to a report in The New York Times on the Web. (Flynn, July 2003) The world's largest seller of PCs, according to the report, had canceled its contract with Unicor, a branch of the Federal Bureau of Prisons that uses those prisoners for electronics recycling and other similar industrial contract jobs.

Dell took this decision a scant week after a California environmental group criticized Dell's reliance on prison labor, citing the fat that prisoners are not covered by the Fair Labor Standards Act, and therefore were paid far less than the minimum wage, as little as 20 cent sot $1.26 an hour. (Flynn, July 2002) (This, too, suggests an additional investigation; while the prisoners are getting paid so little, the fact that doing computer work must beat other forms of 'forced labor' they could be forced to do as prisoners by a country mile.) But that wasn't the only problem; the report also noted that Unicor was not properly disposing of its toxic wastes. (Flynn, July 2003)

While that wasn't Dell itself doing the dumping, it was getting splashed with the results. And in fact, a Dell spokesman said it wasn't the report that Dell's action, and he did argue that the prisoners benefited from the work. He admitted, though, that they had heard from a number of customers. (Flynn, July 2003)

The same writer took on Dell's decision to bring some call center back to the U.S. from India. Flynn wrote:

Dell's recent decision to direct some customer service calls to help desks in the United States, rather than to its call center in Bangalore, India, shows how companies with customer support operations overseas are having to tread a fine line with their clients, some of whom are still surprised to talk to technicians on a different continent.

Business customers were the impetus to this change: some of the company's most coveted business customers complained that Indian technical support was unable to handle complex problems. Most technical questions from home computer users are much simpler and more straightforward, and no great expertise is needed to answer them. Still, although the corporate business makes up a smaller percentage of Dell's business, if it leaves, it doesn't leave one computer at a time, but in banks of them. And, while the Dell spokesman didn't mention it, "Analysts say that along with skill considerations, some companies may be worried about criticism from labor groups and some customers who object to sending jobs overseas," (Flynn, December 2003) which brings this home to the consumer, also.

II. Literature Review

Good eggs?

Lois A. Mohr and Deborah J. Webb wondered whether consumers expected companies to be socially responsible, and researched the issue. Their studies have great implications for Dell, as well as for any other company trying to serve an increasingly 'green' population. In interviewing consumers, they authors developed a typology of consumers whose "purchasing behavior ranges from unresponsive to highly responsive to corporate social responsibility." This is significant for any company trying to overcome problems, both internal and external, because, as the authors point out, a Gallup poll taken in 1997 -- before the recent spate of corporate scandals -- showed that the public has less confidence in big business than in the military, police, public schools and even newspapers. The only ones ranked lower sere Congress and the criminal justice system. (Mohr and Webb 2001) The other point of their study was that although academics and business leaders have debated the social responsibilities of business, few have a handle on what the public expects. Corporations, they contend, cannot know how far to go toward helping their communities without this information. But they did note that there is a growing body of literature concerned with defining what it means for a company to be socially responsible. The paper concludes that a socially responsible company must have concerns beyond short-term profitability, and that it must have a commitment to "minimizing or eliminating any harmful effects and maximizing its long-run beneficial impact on society." (Mohr and Webb, 2001) The authors noted that they had been unable to locate any studies measuring consumer awareness of the more general social responsibility levels of companies. And the researchers themselves defined the socially responsible consumer as one who bases his or her "acquisition, usage, and disposition of products on a desire to minimize or eliminate any harmful effects and maximize the long-run beneficial impact on society." (Mohr and Webb, 2001)

Another study cited by Mohr and Webb, Roper's Green Gauge Study, contends that the "ten percent of Americans who are most committed to the environment, the True-Blue Greens, are also socially active opinion leaders." (Mohr and Webb, 2001) Thus, in cases such as Dell's, it matters less how many people may have read the California report than how many the readers of it might influence. Still, there are other levels of concern, and the authors evaluate them regarding a company's social consciousness. These are:

Precontemplators, unaware of any need to consider corporate social responsibility when choosing products to buy.

Contemplators, who made one-quarter of the research sample, seem to occasionally think about corporate social responsibility when choosing products.

Action group, a number of respondents who are more aware of issues and have used them as a guide to buy or not buy a product.

Maintainers, one-fifth of those questioned, are "committed to socially responsible consumer behavior (SRCB).... Members of this group are often willing to switch brands or stores and even willing to pay a little more to make purchases that they consider socially responsible. They were also better-educated and more politically liberal, characteristics, which may also describe many computer owners. (Mohr and Webb, 2001

All the leaves are green....and the sky is blue

Some researchers are studying the corporation as a social group in relation to their environmental behaviors. The authors of a recent study of corporations as good citizens contend that "a firm's commitment to pro-environmental values and actions is a good predictor of its long run environmental performance" and that there is "growing recognition that '...changes in corporate organization, culture and procedures can yield environmental improvement in ways that a compliance-based [regulatory] approach cannot'." (Zietsman and Vertinsky, 1999)

In the introduction, it was mentioned that most consumers would recognize the name Apple. It may also be true that those consumers would not link any negative environmental or workplace management information with Apple. IBM, on the other hand, does bring up some negative images, some predicated on their once-prevalent management style demanding a virtual uniform from sales reps and so on. If there is an industry-wide norm for social behavior, it is not apparent, except perhaps in the AOL framework of instant millionaire creation. Still, because of the speed at which Dell jumped out of the murky waters of a prisoner workforce and shook off the muddy accretions of the swim in a river of Indian teleworkers, it would appear that another contention of these authors is correct:

Sociological explanations from institutional theory also point to convergence among firms in the same industry/geographical space. Firms are expected to reflect the dominant forms, practices and interpretive frames (i.e. institutions) of the organizational field in which they are embedded (Meyer & Rowan, 1977), and these institutions are considered stable, enduring, and largely taken for granted by organizational field members (Scott, 1995). (Zietsma and Vertinsky, 1999)

Again, the speed with which Dell undertook to make changes points to value in this study. The authors noted that such changes might be either fast or slow, but that the changes always originate at the top. "This process of 'greening' is reflected in changes in the cognitive frames of the organizational leaders," they point out. (Zietsma and Vertinsky, 1999)

III. Description of field research

It was not possible to visit the prison at which the Dell contract work was completed. It was not economically feasible to visit a call center in India, Dell's or any other company's. Nor is it possible to visit Dell factories: they are averse to this, as averse as they are to having freestanding retail outlets such as Gateway maintains, or selling in stores of a more general nature. Most of anyone's information about Dell comes necessarily from its advertisement, its Web site, personal use of the computers, news reports and word-of-mouth. All of these sources of information were used in preparing this report. In fact, the work was done on a very old, very

IV. Results

It is clear that researchers have begun to see corporate social responsibility as a worthy avenue for research. Consumerism is a fact of U.S. life, and as such, is a proper area for sociological research. Assessing the findings of the researchers included above, along with the actions of Dell Computer, makes it clear that some companies -- Dell -- will perhaps only join the population of socially and environmentally conscientious companies when they are 'invited' to do so by being made to look like a worse corporate citizen than their peer group.

V. Discussion and conclusions

This study showed that Dell is sensitive to its environmental and societal (labor) responsibilities, but only after those are made public and may affect its relationship with its customer base and potential customer base. In taking swift action to correct the problems once they were made public, Dell was following, so to speak, the letter of the law. Whether it was also following the spirit of the environmentalism and corporate responsibility remains to be seen. Dell says all the right words, but it is unclear that it will do all the right things unless held up to public scrutiny. As far as current research goes, Dell was behaving exactly as the theorists might say, and the California citizen group that brought some of the issues to light was also acting as the 'green' population was predicted to do. Whether the consumer populations will follow the divisions laid down by Mohr and Webb would be a topic for a separate investigation. Indeed, it might be worthwhile to ascertain whether consumers will behave in a 'green' fashion concerning products that are not edible or wearable, and which, moreover, are generally not on display to the neighbors, for example, computers.