Harvard Case - Cognizant: Recovering from a Bribery Scandal in India
"Cognizant: Recovering from a Bribery Scandal in India" Harvard business case study is written by Wolfgang Messner, Jeremy P. Martinez. It deals with the challenges in the field of Organizational Behavior. The case study is 9 page(s) long and it was first published on : Aug 14, 2020
At Fern Fort University, we recommend a comprehensive and multi-pronged approach to help Cognizant recover from the bribery scandal in India. This strategy focuses on rebuilding trust, restoring reputation, and fostering a culture of ethical behavior within the organization. It emphasizes a holistic approach encompassing organizational change, leadership development, and employee engagement.
2. Background
The case study focuses on Cognizant, a global IT services company, facing a major ethical crisis following a bribery scandal in India. The scandal involved Cognizant employees bribing government officials to expedite visa applications for employees, leading to a significant financial penalty and reputational damage. This incident exposed weaknesses in the company's internal controls, ethical culture, and leadership practices. The case study highlights the challenges Cognizant faces in regaining trust with stakeholders, including clients, employees, and investors.
The main protagonists of the case study are:
- Gordon Coburn: CEO of Cognizant, tasked with leading the company through the crisis and restoring its reputation.
- The Board of Directors: Responsible for overseeing the company's response to the scandal and implementing necessary changes.
- Employees: Facing the fallout of the scandal, including potential job losses and reputational damage.
- Clients: Concerned about the implications of the scandal on the quality of services and the company's future.
3. Analysis of the Case Study
The case study highlights a series of interconnected issues within Cognizant, which can be analyzed through the lens of organizational behavior, leadership, and change management:
Organizational Culture: The scandal revealed a culture that tolerated unethical behavior and lacked strong ethical guidelines. This culture was likely influenced by factors such as:
- High-pressure environment: The company's rapid growth and focus on meeting revenue targets may have created a culture where unethical shortcuts were seen as acceptable.
- Lack of ethical awareness: The company's ethical training programs may have been insufficient, failing to adequately address cultural nuances and real-world scenarios.
- Weak internal controls: The absence of robust internal controls allowed unethical behavior to flourish, creating a perception of impunity.
Leadership: The scandal exposed a lack of strong ethical leadership within Cognizant. This was evident in:
- Leadership by example: Leaders may have inadvertently condoned unethical behavior by failing to set clear ethical standards and hold employees accountable.
- Communication and transparency: The company's initial response to the scandal lacked transparency and communication, further eroding trust.
- Decision-making processes: The decision-making processes may have prioritized short-term gains over long-term ethical considerations.
Change Management: The company faces a significant challenge in implementing meaningful change to address the underlying issues. This requires:
- Effective communication: Open and transparent communication with all stakeholders is crucial to rebuilding trust and fostering buy-in for change.
- Leadership commitment: Strong and visible leadership commitment to ethical behavior is essential to drive change and demonstrate the company's commitment to doing things differently.
- Empowerment and engagement: Empowering employees to participate in the change process and providing them with a voice will foster ownership and commitment.
4. Recommendations
To address the challenges and recover from the bribery scandal, Cognizant needs to implement a comprehensive strategy encompassing the following key areas:
1. Ethical Culture Transformation:
- Develop a robust code of ethics: This should be clear, concise, and easily accessible to all employees, outlining expected ethical behavior and consequences for violations.
- Implement comprehensive ethics training: This training should be mandatory for all employees, incorporating real-life scenarios, cultural nuances, and ethical decision-making frameworks.
- Establish an independent ethics hotline: This hotline should provide a confidential platform for employees to report unethical behavior without fear of retaliation.
- Promote ethical leadership: Develop leadership programs that emphasize ethical decision-making, accountability, and creating a culture of integrity.
2. Strengthen Internal Controls:
- Implement a risk management framework: This framework should identify and assess potential ethical risks, develop mitigation strategies, and monitor compliance.
- Enhance financial controls: Strengthen internal controls over financial transactions, including processes for approving payments and managing vendor relationships.
- Conduct regular audits: Conduct regular internal and external audits to ensure compliance with ethical standards and identify areas for improvement.
3. Rebuild Trust and Reputation:
- Be transparent and accountable: Acknowledge the scandal, apologize for the wrongdoing, and provide clear and concise information about the steps being taken to address the issues.
- Engage with stakeholders: Actively engage with clients, employees, investors, and the public to address their concerns and rebuild trust.
- Demonstrate commitment to ethical behavior: Showcase the company's commitment to ethical behavior through concrete actions, such as investing in ethical training, strengthening compliance mechanisms, and proactively engaging with stakeholders.
- Focus on long-term value creation: Shift the company's focus from short-term gains to long-term value creation, demonstrating a commitment to sustainable and ethical business practices.
4. Leadership Development:
- Promote ethical leadership: Identify and develop leaders who demonstrate strong ethical values and are committed to fostering a culture of integrity.
- Provide leadership training: Develop leadership programs that focus on ethical decision-making, communication, and building trust.
- Hold leaders accountable: Clearly define ethical expectations for leaders and hold them accountable for their actions and the behavior of their teams.
5. Employee Engagement:
- Foster open communication: Create a culture of open communication where employees feel comfortable raising concerns and providing feedback.
- Empower employees: Empower employees to participate in the change process and provide input on ethical practices.
- Recognize and reward ethical behavior: Develop a system for recognizing and rewarding employees who demonstrate ethical behavior, fostering a positive culture of integrity.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: The recommendations align with Cognizant's core values and mission, emphasizing ethical behavior, integrity, and responsible business practices.
- External customers and internal clients: The recommendations address the concerns of both external customers and internal clients, aiming to rebuild trust and ensure a positive experience for all stakeholders.
- Competitors: The recommendations help Cognizant differentiate itself from competitors by demonstrating a strong commitment to ethical behavior and responsible business practices.
- Attractiveness: The recommendations are likely to improve Cognizant's attractiveness to investors, clients, and potential employees, as they demonstrate a commitment to ethical behavior and long-term value creation.
6. Conclusion
By implementing these recommendations, Cognizant can effectively address the bribery scandal, rebuild trust, and restore its reputation. The company can emerge from this crisis as a stronger and more ethical organization, committed to sustainable and responsible business practices.
7. Discussion
Alternatives:
- Ignoring the scandal: This is not a viable option, as it would likely lead to further reputational damage and legal consequences.
- Limited response: A limited response, such as minimal changes to internal controls or a superficial apology, would likely be perceived as insincere and would not address the underlying issues.
Risks:
- Resistance to change: Employees may resist change, particularly if they perceive it as unnecessary or disruptive.
- Lack of leadership commitment: If leaders are not fully committed to the change process, it is unlikely to be successful.
- Insufficient resources: Implementing a comprehensive change program requires significant resources, including financial, human, and time commitments.
Key Assumptions:
- The company is committed to ethical behavior and willing to invest the necessary resources to implement the recommendations.
- Employees are receptive to change and willing to embrace a culture of ethical behavior.
- Leaders are willing to embrace their roles as ethical champions and drive the change process.
8. Next Steps
- Immediate actions: Issue a public apology, conduct a thorough investigation, and implement immediate steps to strengthen internal controls.
- Short-term actions (within 6 months): Develop a new code of ethics, implement comprehensive ethics training, and establish an independent ethics hotline.
- Medium-term actions (within 12 months): Develop a risk management framework, enhance financial controls, and conduct regular audits.
- Long-term actions (ongoing): Continue to promote ethical leadership, foster employee engagement, and monitor the effectiveness of the change program.
This comprehensive approach will require significant effort and commitment from Cognizant's leadership and employees, but it is essential for the company to regain trust, restore its reputation, and emerge from this crisis as a stronger and more ethical organization.
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Case Description
In February 2019, Cognizant Technology Solutions (Cognizant), an American information technology (IT) outsourcing company, was ordered to pay a total of US$28 million in penalties to the U.S. Securities and Exchange Commission and the US Department of Justice. Certain payments relating to facilities in India were allegedly made improperly and in possible violation of the US Foreign Corrupt Practices Act (FCPA). In April 2019, Brian Humphries took over the role of chief executive officer at Cognizant. What could Humphries and Cognizant do to recover and to prevent future incidents of corruption?
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