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Jeff LeBlanc
Malden Mills- Case Study

Malden Mills is a business that produces textile and employed thousands of people in the same communities in which they manufactured their product. The company was founded in 1906 and over the years, developed a reputation of social responsibility in the community and a great concerned of its employers. The CEO was at a very crucial time Aeron Feuerstein.
In late 1995, a fire at Malden Mills put 3,000 union jobs at risk. The timing could not have been any worse. The 90-year-old manufacturer in Lawrence, Massachusetts, has seen its revenues triple and employment double since emerging from bankruptcy in 1982. It’s popular Polartec and Polarfleece fabrics were one reason. A loyal and productive workforce was the other. In a time when offshore manufacturing became standard procedure in American business, Malden Mills’ CEO Aaron Feuerstein opted to stay put and to rebuild his factory on the very site where his family had made textiles for 90 years.
Naturally when the fire occurred the entire company was at risk. Yet perhaps the biggest shareholder at risk here was the employees. The fire came just two weeks before Christmas, affecting employees both financially and emotionally. Just 2 days after the blaze, Feuerstein announced plans to pay his employees their full wages for 30 days. He would eventually extend that offer to 90 days for the paychecks, 180 days for benefits. Bringing a total cost to Malden Mills of $25 million dollars. Likewise a major shareholder affected here is Feuerstein himself. He was taking a huge risk spending this money on the employee, however at the same time he was likely doing something for the greater good which could impact the business in the long haul for the better. Many insiders though what he was doing was sheer madness. But in an interview with CBS News/60 Minutes, Feuerstein disagreed: “I think it was a wise business decision, but that isn’t why I did it. I did it because it was the right thing to do.”
Target Groups I believe a major target group in this situation is the community that Malden Mills is based in. A lot was at stake with the decisions that needed to be made regarding the fire. If the community did not respond well the company could have been facing a major backlash. I am sure a lot of community people had relatives and friends that worked for Malden Mills and how the company treated these employees was sure to get their attention.
Feuerstein had a tough decision to make. He needed to not only decide what to do with the company but also how he was going to address and help the employees. This was clearly something that needed some serious thought. As someone in charge of such a large organization he must have had some rough plans in case this had ever happened. The management needed to respond and do so quickly to assure that the company would survive the crisis.
Regarding the company Feuerstein decided that he was going to rebuild, from scratch. He was going to start all over and go from there. It took years, but Malden rebuilt in Lawrence and eventually hired back all the displaced workers. The workforce repaid Fueurstein with cooperation and productivity. According to the report in the Center & Jackson text, commitment to employees drove significant bottom-line outcomes.

-Business grew 40% from pre-fire levels.
-Customer and employee retention reached 95%.
-Off-quality products dropped from 6-7% pre-fire to just 2%.
-Production increased from 130,000 to 200,000 yds. per week.
As far as the employees go he had to make a very hard decision. In the end he gave them pay and very likely saved a lot of them much pain. Some would argue that he put his morals over his business. Perhaps his morals are his business? A lot of companies would have shut down and moved, possibly taking their operations overseas to save money on the rebuilding process. That is precisely what makes Malden Mills so different, they stayed, rebuilt and reopened in the same place as before plus returned their displaced employees back to work. All in all, Feuerstein handled the crisis but he may have failed to see the long-term consequences which should have been taken into account. (Miller)
Pro’s and Con’s Clearly the pros are very obvious. Rebuild the company and potentially start over again and save the entire organization. Likewise pay the employees and make a lot of people happy. However the cons are very much there and worth examining. For example the entire situation landed Feuerstein back in bankruptcy court, saddled with $140 million in debt, much of it tied to the rebuild. The company hired a new president in 2004 as part of the Chapter 11 reorganization. However it seemed it wasn’t enough. In 2007, Malden Mills made its 3rd trip to bankruptcy court, this time emerging as a company named for its flagship brand, “Polartec.” The company is still in Lawrence, but employs around 1,000 people worldwide, versus the 3,000 who once worked at the New England mill. (Miller)
The question now remains did Feuerstein do the right thing? Or did he let his high moral principles cloud his business judgment? Putting people before profits certainly seems the ethical thing to do, but is it the practical business minded thing to do?After his decision, Feuerstein became a legend in both business and PR circles. But in the end, he leveraged the business into bankruptcy. No one will question Feuerstein’s good intentions, but there’s no line on the balance sheet for “ethics” unfortunately. I think it is safe that this is a classic example of management doing what may be morally correct. However in the end I do not think it was the wisest business decision. Looking down the road it should of seemed clear that the company may not survive this type of recuperation. Sometimes the road to hell is paved with the best intentions.
In conclusion Feuerstein made a very noble decision. One that likely helped many people and gained him a lot of respect in the community. Sadly, it is unlike that it earned him the same amount of respect in the business world and among his peers. His decision helped in the short term but in the long term it sent the company to bankruptcy. It seemed that the fire had much more of an effect on Malden Mills in the long haul that you might have initially noticed.

Reference Page
Corporate Responsible Leadership: Southern New Hampshire University, Dr. James Freiburger Putting people before profits: Classic PR case study; Daniel Miller, Public Relations…...

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