Risk and Insurance: Aramark Risk Term Paper

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They were just so intense, so focused, so transaction-driven, there literally wasn't time for people to put ideas out and discuss and debate them."

These constraints to effective management oversight and innovation were further exacerbated when the company went private in 2001. According to Stopper, "ARAMARK went from a leveraged buyout situation in 1984, with only some 50 people having equity in the company, to an initial public offering (IPO) in 2001 with 97% ownership by employees. It was a huge cultural shift. Many employees incurred debt in order to have ownership in the company. In his view, HR's power and influence came from performance and creating value, not from advancing or acceding to personal agendas."

To their credit, though, Hayes reports that the company finally took action to remedy this situation by creating an action project team to assess the potential threats involved in retaining the status quo and what opportunities for improvement were available to overcome the communication problems noted above and implemented them to good effect. In this regard, Stopper reports that:

Overall, the CEO likes the idea of an independent, operationally diverse board, one that questions, challenges, and does not rubber stamp management proposals. The CEO has traditionally tested issues with the board. In the current climate, ARAMARK thought it prudent to survey its board on how governance is going: the composition of the board, the structure, content, and time of meetings, the visibility of management, how decisions are made, the roles of the HR executive and the corporate secretary. HR is in the thick of these discussions.

Despite these initiatives, it is reasonable to assume that any substantive organizational transformation such as those experienced at the company during this leveraged buyout will continue to require fine-tuning in the coming years, a task made all the more difficult by virtue of the issues discussed further below.

The company also remains at risk of encroachment by unions seeking to gain control of the bargaining rights of the ARAMARK line employees and is subject to fallout by affiliation with some of the large companies for which it operates cafeterias and other institutional services. For instance, according to Manheim (2001), the National Organization of Women (NOW) objected to a sexual harassment lawsuit settlement because the investment firm of Smith Barney had also been identified as a secondary target in a union's campaign to organize food service employees at ARAMARK, which merely operated the cafeteria at Smith Barney's headquarters.

Such initiatives may well meet with some success in the venues in which the company competes based on observations by Vannoy and Dubeck, who point out that, "Corporations such as Marriot, McDonald's, J.C. Penny, and ARAMARK make up part of the new 'low-wage vanguard' of the new economy, a breed of employers who prosper by hiring younger, less educated, minority, or immigrant workers who are willing to work at jobs with low wages that offer little potential for advancement." Notwithstanding the ethical considerations involved in these practices, the "low-wage vanguard" has been carefully studied and manipulated by the company to ensure that recruiting costs are kept at a minimum and the on-the-job learning curve severe.

In this regard, Steelman notes that even the company chief executive officer admits that, "At ARAMARK, the key to successfully training and keeping employees in entry-level jobs has been decentralization.

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'What works in Baton Rouge won't necessarily work in Boston,' says Neubauer. With more than 6,000 different 'profit-centers' around the country, ARAMARK has hundreds of front-line managers who act, in effect, as the CEOs of their units. For example, while ARAMARK has no company-wide transportation subsidy program, units in areas with low unemployment rates have set up their own, as a way of attracting new employees."

It is hard to argue with success, and the company has parlayed this approach to human resources management into something of a win-win situation for itself as well as its new hires: "Each new ARAMARK employee becomes part of a small, tight-knit group, where everyone depends on each other and where a slip-up can be very costly to everybody. In such a setting, co-workers have an incentive to make sure that new employees are properly trained and ready for the job, and newly hired welfare recipients, seeking the approval and praise that is so crucial to boosting their self-images, have an incentive to be responsible workers." Given the wide ranging nature of the company's enterprises abroad, it is also reasonable to assume that it uses comparable practices in developing nations to help keep employment costs at an absolute minimum and reduce the costs associated with recruitment and retention in the process. These are all fairly nebulous aspects of risk management, though, and assuming that the company is able to withstand any criticisms or legal challenges in the process, it will probably continue to use the "low-age vanguard" to its advantage.

Not surprisingly, formulating appropriate insurance reserves for these and other unknowns that may result from "guilt by association" as well as the impact of the unionization of the company's line employees is a complicated endeavor at present, particularly as they apply to the potential for disruption of services due to terrorist attacks against Western interests in which the company may be involved, and the company is highly visible. For example, according to Goldberg, the company has been providing food service at every Olympics competition since they catered the 1980 Winter Games in Lake Placid. Therefore, given the company's high visibility and global operations, ARAMARK could be a target for those seeking to harm the United States or its interests abroad.

Conclusion.

They may not be the most glamorous enterprises in the world, but they have been highly profitable for ARAMARK Corporation. The research showed that the company's diversified holdings include a wide range facilities and services that are routinely used by millions of consumers around the world, and the ARAMARK name has become associated with high quality and customer service. This achievement did not take place overnight, nor have all the kinks been worked out, but the literature was consistent in showing that ARAMARK's commitment to customer service and innovations have paid big dividends over the years. If it can continue its successful path to reorganization and withstand the potential impact of the adversities described above, this company will likely continue to grow well into the 21st century.

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