Most successful quality-oriented firms today recognize the importance of their employees when developing a competitive strategy. Quality management is an integral part of most companies' strategic design, and the role of employees is an important aspect of quality management. To change management's traditional control-oriented relationship with employees to one of cooperation, mutual trust, teamwork, and goal orientation necessary in a quality-focused company generally requires a long-term commitment as a key part of a company's strategic plan.

In the traditional management–employee relationship, employees are given precise directions to achieve narrowly defined individual objectives. They are rewarded with merit pay based on individual performance in competition with their coworkers. Often individual excellence is rewarded while other employees look on in envy. In a successful quality management program, employees are given broad latitude in their jobs, they are encouraged to improvise, and they have the power to use their own initiative to correct and prevent problems. Strategic goals are for quality and customer service instead of maximizing profit or minimizing cost, and rewards are based on group achievement. Instead of limited training for specific, narrowly defined jobs, employees are trained in a broad range of skills so they know more about the entire productive process, making them flexible in where they can work.

To manage human resources from this perspective, a company must focus on employees as a key, even central, component in their strategic design. All of the Malcolm Baldrige National Quality Award winners have a pervasive human resource focus. Sears's "employee-customer-profit chain" model for long-term company success has "employees" as the model's driving force. Federal Express's strategic philosophy, "People, Service, Profit," starts with people, reflecting its belief that its employees are its most important resource.

Companies that successfully integrate this kind of "employees first" philosophy into their strategic design share several common characteristics. Employee training and education are recognized as necessary long-term investments. Strategic planning for product and technological innovation is tied to the development of employees' skills, not only to help in the product development process but also to carry out innovations as they come to fruition. Motorola provides employees with 160 hours of training annually to keep up with technological changes and to learn how to understand and compete in newly emerging global markets.

Another characteristic of companies with a strategic design that focuses on quality is that employees have the power to make decisions that will improve quality and customer service. At AT&T employees can stop a production line if they detect a quality problem, and an employee at Ritz-Carlton can spend several thousand dollars to satisfy a guest, on his or her own initiative.

To make sure their strategic design for human resources is working, companies regularly monitor employee satisfaction using surveys and make changes when problems are identified. All Baldrige Quality Award-winning companies conduct annual employee surveys, to assess employee satisfaction and make improvements.

A safe, healthy working environment is a basic necessity to keep employees satisfied. Successful companies provide special services like recreational activities, day care, flexible work hours, cultural events, picnics, and fitness centers. Notice that these are services that treat employees like customers, an acknowledgment that there is a direct and powerful link between employee satisfaction and customer satisfaction.

Strategic goals for quality and customer satisfaction require teamwork and group participation. Quality-oriented companies want all employees to be team members to identify and solve quality-related problems. Team members and individuals are encouraged to make suggestions to improve processes. The motivation for employee suggestions is viewed as that of a concerned family member, not as a complainant or as "sticking one's nose in."

It is important that employees understand what the strategic goals of the company are and that they feel like they can participate in achieving these goals. Employees need to believe they make a difference, to be committed to goals and have pride in their work. Employee commitment and participation in the strategic plan can be enhanced if employees are involved in the planning process, especially at the local level. As the strategic plan passes down through the organization to the employee level, employees can participate in the development of local plans to achieve overall corporate goals.

The principles of scientific management developed by F. W. Taylor in the 1880s and 1890s dominated operations management during the first part of the twentieth century. Taylor's approach was to break jobs down into their most elemental activities and to simplify job designs so that only limited skills were required to learn a job, thus minimizing the time required for learning. This approach divided the jobs requiring less skill from the work required to set up machinery and maintain it, which required greater skill. In Taylor's system, a job is the set of all the tasks performed by a worker, tasks are individual activities consisting of elements, which encompass several job motions, or basic physical movements.

Scientific management involves breaking down jobs into elemental activities and simplifying job design.

• Jobs: comprise a set of tasks, elements, and job motions (basic physical movements).

Scientific management broke down a job into its simplest elements and motions, eliminated unnecessary motions, and then divided the tasks among several workers so that each would require only minimal skill. This system enabled companies to hire large numbers of cheap, unskilled laborers, who were basically interchangeable and easily replaced. If a worker was fired or quit, another could easily be placed on the job with virtually no training expense. In this system, the timing of job elements (by stopwatch) enabled management to develop standard times for producing one unit of output. Workers were paid according to their total output in a piece-rate system. A worker was paid "extra" wages according to the amount he or she exceeded the "standard" daily output. Such a wage system is based on the premise that the single motivating factor for a worker to increase output is monetary reward.

• Tasks: individual, defined job activities that consist of one or more elements.

Traditionally, time has been a measure of job efficiency.

In a piece-rate wage system, pay is based on output.

F. W. Taylor's work was not immediately accepted or implemented. This system required high volumes of output to make the large number of workers needed for the expanded number of jobs cost effective. The principles of scientific management and mass production were brought together by Henry Ford and the assembly-line production of automobiles.

EMPLOYEE MOTIVATION

Modern psychologists and behaviorists in the 1950s and 1960s eschewed the principles of scientific management, and they developed theories (as summarized in Table 8.1), that proposed that in order to get employees to work productively and efficiently they must be motivated. Motivation is a willingness by an employee to work hard to achieve the company's goals because that effort satisfies some employees' need or objective. Thus, employee motivation is a key factor in achieving company goals such as product quality and creating a quality workplace. However, different things motivate employees. Obviously, financial compensation is a major motivating factor, but it is not the only one and may not be the most important. Other factors that motivate employees include self-actualization (such as integrity, responsibility, and naturalness), achievement and accomplishment, recognition, relationships with coworkers and supervisors, the type and degree of work supervision, job interest, trust and responsibility, and the opportunity for growth and advancement.

• Motivation: a willingness to work hard because that effort satisfies an employee need.

In general, job performance is a function of motivation combined with ability. Ability depends on education, experience, and training, and its improvement can follow a slow but clearly defined process. On the other hand, motivation can be improved more quickly, but there is no clear-cut process for motivating people. However, certain basic elements in job design and management have been shown to improve motivation, including

• positive reinforcement and feedback

• effective organization and discipline

• fair treatment of people

• satisfaction of employee needs

• setting of work-related goals

• design of jobs to fit the employee

• work responsibility

• empowerment

• restructuring of jobs when necessary

• rewards based on company as well as individual performance

• achievement of company goals

Table 8.1. Evolution of Theories of Employee Motivation

ALONG THE SUPPLY CHAIN

Human Resources Management at Baldrige National Quality Award-Winning Companies

The Malcom Baldrige National Quality Award includes a set of basic principles for quality management; prominent among them is employee satisfaction and the "human resource focus" of a company is an important award criteria. As a result, a common attribute among Baldrige Quality Award winners is their commitment to their employees and the resulting high level of employee satisfaction, which these companies monitor on a regular and continuing basis.

Baldrige Award winner DynMcDermott Petroleum Operations, a private New Orleans Company that holds the maintenance and operations contract for the Department of Energy's strategic petroleum reserve (the U.S. emergency oil stockpile), has an employee satisfaction rate of 83% and a 97% retention rate. Employees can stop any practice they deem unsafe and are encouraged and rewarded for improvement ideas. An annual company-wide workplace assessment survey looks at the company's performance from the employees' perspective.

At Jenks (Oklahoma) Public School District the teaching staff turnover rate is 6% compared to the national average of 20%, the staff retention rate is 91%, and on a satisfaction scale of one to five, staff enthusiasm for work is 4.62.

The U.S. Army Armament Research, Development and Engineering Center (ARDEC), another Baldrige Award winner, is responsible for developing 90% of the Army's armaments and munitions, as well as weaponry for U.S. Special Operations and Homeland Security. It has a skilled workforce requiring specialized training and experience that ARDEC provides through its internal Armament University. Employee surveys show a job satisfaction rate of 90%, levels of empowerment, communication, motivation, and training above 80%, and attrition rates below best-in-class industry benchmarks.

Poudre Valley (Colorado) Health System, with an engaged workforce of 4,200 staff and 550 physicians, uses an interdisciplinary team approach including physicians, nurses, therapists and technicians to meet patient needs. The system's annual staff turnover rate of 8% is well below its competitors, its employee satisfaction rate ranks in the 97th percentile nationally, and it has been selected as one of "America's 100 Best Places to Work in Healthcare."

Coral Springs, Florida, the first state or local government agency to win the Baldrige Award, has a workforce of 770 full-time and 300 part-time employees. "Empowered employees," one of the city's four core values, are encouraged to be innovative in addressing customer concerns and make on-the-spot improvements. Employees are recognized with "Applause Cards" given by an employee to a co-worker for exemplary customer service, restaurant certificates and movie tickets to employees who display outstanding initiative, and bonuses for employees who have gone above the normal call of duty. For the past decade the employee job satisfaction rate has been above 90% and the turnover rate is only 4.5%.

Sharp Healthcare in San Diego County employs a workforce of over 14,000 staff members and 2,600 physicians. Employee satisfaction rates are best-in-class by national standards and physician satisfaction surveys consistently show Sharp to be the best place to practice. Sharp collects views and attitudes from its workforce through surveys, turnover reports, suggestions boxes, and employee forums, and it uses "Action" teams to encourage worker participation in quality improvement projects. Sharp's training expenditure per employee exceeds best-in-class benchmarks, it operates an in-house university with a curriculum aimed at process improvement, it sponsors a Nursing Leadership Academy, and it provides each employee with $1,000 annually for external educational opportunities.

At two-time Baldrige Award winner Ritz-Carlton Hotel, 85% of the company's 17,000 employees are front-line hotel workers. First-year managers and employees receive from 250 to 310 hours of training. Their "Pride and Joy" program gives employees a role in job design, and turnover rates have steadily declined over a 10-year period as employee satisfaction ratings have increased.

At Sunny Fresh Foods, a manufacturer of egg-based food products and another two-time Baldrige Award winner, production employees rotate workstations every 20 minutes to prevent boredom and repetitive stress injuries and to reinforce quality processes. Their employees' rising level of job satisfaction as measured by annual surveys correlated directly with increased customer satisfaction, which resulted in a 25% increase in sales over a five-year period.

These Baldrige Award-winning companies provide a benchmark for human resources management among companies committed to quality improvement and quality management. They exhibit common human resource characteristics including extensive job training, employee empowerment, incentive plans, rewards for good performance, teamwork, job flexibility, and close monitoring of employee satisfaction via annual surveys.

Go to the Baldrige Award Web site at www.quality.nist.gov and identify and discuss the different ways Baldrige Award-winning companies assess employee satisfaction.

Source: Malcolm Baldrige National Quality Award Web site, http://www.quality.nist.gov.

During the last two decades of the twentieth century the competitive advantage gained by many Japanese companies in international markets, and especially in the automobile industry, caused U.S. firms to reevaluate their management practices vis-à-vis those of the Japanese. Human resources management is one area where there was a striking difference between Japanese and U.S. approaches and results. For example, in the 1980s one Japanese automobile company was able to assemble a car with half the blue-collar labor of a comparable U.S. auto company—about 14 hours in Japan, compared with 25 hours in the United States. Japan had not adopted the traditional Western approaches to work. Instead Japanese work allowed for more individual worker responsibility and less supervision, group work and interaction, higher worker skill levels, and training across a variety of tasks and jobs. There was initially a tendency among Americans to think that these characteristics were unique to the Japanese culture. However, the successes of U.S. companies such as Ford and Motorola in implementing quality-management programs as well as successful Japanese companies operating in the United States, such as Nissan and Honda, showed that cultural factors were less important than management practices. As a result certain contemporary trends in human resource management became the norm for successful companies in the United States and abroad.

Japanese successes are due less to cultural factors than to management practices.

CROSS TRAINING

In cross training an employee learns more than one job in the company. Cross training has a number of attractive features that make it beneficial to the company and the employee. For the company it provides a safety measure with more job coverage in the event of employee resignations and absenteeism, and sudden increases in a particular job activity. Employees are given more knowledge and variety so that they won't get as easily bored, they will find more value in what they do, and their interest level in the company will increase. Because of their increased knowledge, they will have the opportunity to move to other jobs within the company without leaving. Employees will respect each other because they will be more familiar with each other's jobs. However, cross training requires a significant investment in time and money, so the company should be committed to its implementation and sure of the benefits it hopes to realize from cross training.

• Cross training: an employee learns more than one job.

Job rotation is not exactly the same as cross training. Cross training gives an employee the ability to move between jobs if needed. Job rotation requires cross training, but it also includes the horizontal movement between two or more jobs according to a plan or schedule. This not only creates a flexible employee, but it also reduces boredom and increases employee interest.

• Job rotation: the horizontal movement between two or more jobs according to a plan.

ALONG THE SUPPLY CHAIN

Employee Training at Kyphon, Inc., and Triage Consulting Group

Kyphon, Inc., located in Sunnyvale, California, is a relatively new company that sells its own patented devices for correcting painful spinal conditions. Employee training in a variety of skills, including operations and accounting, as well as the specialized medical knowledge necessary to sell its products, is critical for the company to grow. Triage Consulting Group, a new company located in San Francisco that helps hospitals identify and recover outstanding medical insurance payments, faces a similar challenge for hiring and training new employees. Both companies are very successful and have unique, specialized products that new employees don't walk in the door with knowledge and expertise about. As such, hiring and training are critical to both companies' continued success and growth; however, the two companies address hiring and training much differently.

At Kyphon there is a broad, flexible approach to employee development; almost any type of learning is considered valuable. Employees are encouraged to pursue knowledge in any format that suits them, inside or out, formal or informal. The company spends over $4,000 per year per employee on training, and support for learning extends to employees' families. Employees are responsible for seeking out opportunities for learning, and the company helps the employee find learning opportunities. This approach to training and the company's opportunities for quick advancement are important recruiting and retention tools, which are critical at Kyphon. Loyalty and long-term employee commitment are important goals at Kyphon because their product is so specialized requiring both medical and technical knowledge to sell.

In contrast to Kyphon, Triage's employee lifecycle is much shorter and their model is to hire a large number of entry-level employees and replace them three or four years later when they leave. Triage is perceived by new employees as a good place to learn about the field, and many move on to graduate school or medical school. This is a similar hiring model to many types of consulting firms. Triage must get new employees up to speed quickly and retain them long enough to justify the development investment before they move on. Most new employees come in with a blank slate about the health care field, medical jargon, and interpersonal skills necessary to work with clients, who may be resentful that Triage is trying to correct their mistakes (i.e., failure to collect insurance payments). Triage employees receive approximately 12 hours of orientation, and over 21 months they complete 15 formal training modules. However, unlike Kyphon, which values learning in general, Triage training is job specific, requiring employees to focus on what they need to know to come up to speed quickly and generate immediate revenue. Outside training is not generally supported at Triage; school is perceived as an outside diversion from the task at hand, and if an employee wants to pursue an outside degree, the employee must do it on their own, if they have time. Thus, although hiring and training at Kyphon and Triage are dramatically different, the success of both companies belies the fact that their individual approaches work for them.

Discuss which approach to hiring and training described above you think is best, and would be more generally applicable to other companies.

Source: Robert J Grossman, "Developing Talent," HR Magazine 51 (1: January 2006), pp. 41–46.

ALTERNATIVE WORKPLACES AND TELECOMMUTING

An alternative workplace is a combination of nontraditional work locations, settings, and practices that supplements or replaces the traditional office. An alternative workplace can be a home office, a satellite office, a shared office, a shared desk or an open workspace where many employees work side-by-side. Another form of alternative workplace is telecommuting, performing work electronically wherever the worker chooses.

• Alternative workplace: a nontraditional work location.

The motivation for companies to create alternative workplaces is primarily financial. Eliminating physical office space—that is, real estate—and reducing related overhead costs can result in significant cost reductions. In one five-year period, IBM realized $1 billion in real estate savings alone by equipping and training 17% of its worldwide workforce to work in alternative workplaces. Alternative workplaces can increase productivity by relieving employees of typical time-consuming office routines, allowing them more time to devote to customers. They can also help companies recruit and retain talented, motivated employees who find the flexibility of telecommuting or a home office very attractive. Eliminating commuting time to a remote office can save employees substantial work time. Customer satisfaction can also increase as customers find it easier to contact employees and receive more personalized attention.

In general, companies that use alternative workplaces employ a mix of different formats and tailor the workplace to fit specific company needs. There are also costs associated with establishing alternative workplace formats, including training, hardware and software, networks, phone charges, technical support, and equipment, although these costs are usually less than real estate costs, which are ever-increasing. Of course, alternative workplaces are not feasible for some companies, such as manufacturing companies, which require employees to be located at specific workstations, facilities, or stationary equipment or which require direct management supervision. Employees who work on an assembly line or in a hotel are not candidates for an alternative workplace. Alternative workplaces are more appropriate for companies that are informational—that is, they operate through voice and data communication between their employees and their customers.

Telecommuting, where employees work from home or some other alternative location is becoming increasingly popular. It has been shown to increase productivity and job satisfaction and reduce facility costs.

One of the more increasingly common new alternative workplace formats is telecommuting, also referred to as "telework," in which employees work electronically from whatever location they choose, either exclusively or some of the time. It is estimated that about 40% of U.S. companies offer some form of telecommuting to employees. Companies that use telecommuting sites experience such benefits as lower real estate costs, reduced turnover, decreased absenteeism and leave usage, increased productivity, and increased ability to comply with federal workplace laws such as the Americans with Disabilities Act. At PeopleSoft, telecommuting is the predominant form of work for the whole company. At IBM 25% of their 320,000 employees telecommute, which results in an estimated annual savings of $700 million in real estate costs alone. AT&T estimates it saves $550 million annually as a results of telecommunity.

• Telecommuting: employees work electronically from a location they choose.

It has been estimated that through telecommuting absenteeism can be reduced by as much as 25%. For employees, telecommuting eliminates commuting time and travel costs, allows for a more flexible work schedule, and allows them to blend work with family and personal responsibilities. Companies that offer telecommuting indicate productivity increases 10 to 20 percent and job satisfaction also increases.

Telecommuting also has negative aspects. It may negatively affect the relationship between employees and their immediate supervisors. Supervisors and middle managers may feel uncomfortable not having employees under direct visual surveillance. Furthermore, they may feel that they do not have control and authority over their employees if they are not physically present. In fact, some employees may not be well suited for telecommuting; they may not be self-motivated and may require more direct supervision and external motivation. The technology that allows employees to work anywhere, anytime, can also lead to employees who cannot "disconnect" from their jobs.

Good human resource management practices or motivation factors cannot compensate for insufficient monetary rewards. If the reward is perceived as good, other things will motivate employees to give their best performance. Self-motivation can go only so far—it must be reinforced by financial rewards. Merit must be measured and rewarded regularly; otherwise performance levels will not be sustained.

Diversity in U.S. companies has been a critical management issue for several decades. However, as more and more companies move into the global marketplace, diversity has become an even more pervasive factor in human resource management around the world. The spread of global business combined with the geographic mobility of employees has resulted in companies with a more diverse workforce than ever before. U.S. companies outsource business activities and operate facilities and businesses overseas with a mix of foreign and U.S. management teams and employees, and foreign companies operate plants and businesses in the United States with similar mixes. According to the U.S. Bureau of Labor Statistics, 4 out of every 10 people entering the workforce during the decade from 1998 to 2008 were members of minority groups. In 2005 14% of the working age population was Hispanic and by 2050 it is projected to be 31%.

In order to be successful with a diverse workforce, companies must provide a climate in which all employees feel comfortable, can do their job, feel like they are valued by the organization, and perceive that they are treated fairly. However, inequalities too often exist for employees because of race, gender, religion, cultural origin, age, and physical or mental limitations. The elimination of racism, sexism, cultural indifference, and religious intolerance cannot be mandated by higher management or managed by financial incentives. Companies as a whole, starting with top management, must develop a strategic approach to managing diversity in order to meet the challenges posed by a diverse workforce.

GLOBAL DIVERSITY ISSUES

Trends toward the globalization of companies, the use of global teams within and across companies, and global outsourcing have resulted in unique diversity issues. Cultural and language differences and geography are significant barriers to managing a globally diverse workforce. E-mails, faxes, the Internet, phones, and air travel make managing a global workforce possible but not necessarily effective.

In the case of culturally diverse groups, differences may be more subtle, and defined diversity programs may be less effective in dealing with them. Some nationalities and cultures have a more relaxed view of time than, say, Americans or Europeans; deadlines are less important. In some cultures, religious and national holidays have more significance than in others. Americans will frequently work at home in the evening, stay late at work, or work over the weekend or on vacations, and on the average take less vacation time than employees in most European countries; in many foreign countries such behavior is unheard of. Some cultures seem to have their own rules of communication. An employee in a foreign country, for example, may politely nod yes in response to a question from a U.S. manager as a polite face-saving gesture, when in fact it's not an indication of agreement at all.

Such cultural differences require unique forms of diversity management. Managers cannot interpret their employees' behavior through their own cultural background. It is important to identify critical cultural elements such as important holidays and a culturally acceptable work schedule, and to learn the informal rules of communication that may exist in a foreign culture among a diverse group of employees. It is often helpful to use a third party who is better able to bridge the cultural gap as a go-between. A manager who is culturally aware, and most importantly, speaks the language, is less likely to incorrectly interpret the behavior of diverse employees. Similarly, it is beneficial to teach employees the cultural norm for the organization so that they understand all the rules.

ALONG THE SUPPLY CHAIN

Developing a Skilled Workforce in China

China is one of the world's fastest-growing global economies, and one reason many multinational companies located in China was because of a large, cheap workforce. When U.S. companies began operating in China they only needed workers with basic skills for straightforward parts manufacturing processes. However, in the past decade (since China joined the World Trade Organization in 2001), the economy has shifted from basic manufacturing to higher end and high-tech manufacturing, research and development, product innovation, and services. In addition the number of Western-style multinational companies operating in China has exploded. This rapid economic evolution has resulted in a severe shortage of experienced and skilled employees in China. Despite a workforce of 800 million only a small percentage are skilled enough with the necessary experience to work in global multinational companies. Out of 4.9 million college graduates in 2006 only about 10% had the necessary skills in such things as language proficiency, basic education, business and interpersonal skills, and positive attitudes toward teamwork and flexible working hours, to work in multinational companies.

For example, when Tyson Foods began operating in Shanghai in 2001 it needed employees with basic technical skills, however now its greatest need is for employees with management skills. This has created a very competitive labor market among multinational firms which has fueled an annual wage growth rate of almost 14%. However, multinational firms have learned that importing skilled workers is not looked upon favorably in China; the Chinese expect companies to invest in developing a skilled workforce within China. This has led many U.S. and other multinational firms to invest heavily in training and development programs, and this, combined with rapid advancement initiatives within companies, helps attract and retain Chinese workers. For example, Cisco Systems, which employs over 1,000 employees in nine Chinese cities, operates 220 "Cisco Network Academies" in all Chinese provinces, with more than 22,000 students. This not only creates a source of skilled labor for Cisco, but it also elevates the Cisco brand name with the Chinese government and workforce.

Discuss any possible cultural differences between China and western nations that you think might make it difficult for Chinese workers to work for multinational companies in China.

Source: A. Fox, "China: Land of Opportunity and Challenge," HR Magazine, 52 (9: September 2007), pp. 38-44.

These Chinese workers are sewing jeans in a garment factory in Shenzhen, one of mainland China's "Special Economic Zones," which provide more .exible government economic policies including tax incentives for foreign investments, emphasis on joint sino-foreign ventures, greater independence for international trade activities, and export-oriented products.

In the preceding sections we have discussed how to motivate employees to perform well in their jobs. A key element in employee motivation and job performance is to make sure the employee is well suited for a job and vice versa. If a job is not designed properly and it is not a good fit for the employee, then it will not be performed well. Frederick Herzberg identified several attributes of good job design, as follows:

In this section we will focus on the factors that must be considered in job design—the things that must be considered to create jobs with the attributes listed above.

ERGONOMICS

Put simply, ergonomics as it is applied to work is fitting the task to the person. It deals with the interaction of work, technology, and humans. Ergonomics applies human sciences like anatomy, physiology, and psychology to the design of the work environment and jobs, and objects and equipment used in work. The objective of ergonomics is to make the best use of employees' capabilities while maintaining the employees' health and well-being. The job should never limit the employee or compromise an employee's capabilities or physical and mental health because of poor job design. Good ergonomics shortens learning times; makes the job easier with less fatigue; improves equipment maintenance; reduces absenteeism, labor turnover, and job stress and injury; and meets legislative requirements for health and safety. In order to achieve these objectives, the job activity must be carefully analyzed, and the demands placed on the employee must be understood.

• Ergonomics: fitting the task to the person in a work environment.

Technology has broadened the scope of job design in the United States and overseas.

The contribution of anatomy in ergonomics is the improvement of the physical aspect of the job: achieving a good physical fit between the employee and the things the employee uses on the job whether it's a hand tool, a computer, a video camera, a forklift, or a lathe. Physiology is concerned with how the body functions. It addresses the energy required from the employee to do the job as well as the acceptable workload and work rate, and the physical working conditions—heat, cold, light, noise, vibration, and space. Psychology is concerned with the human mind. Its objective is to create a good psychological fit between the employee and the job.

Robots do not necessarily perform a job faster than humans, but they can tolerate hostile environments, work longer hours, and do a job more consistently. Robots are used for a wide range of manufacturing jobs, including material handling, machining, assembly, and inspection.

Part of job design is to study the methods used in the work included in the job to see how it should be done. This has traditionally been referred to as methods analysis, or simply work methods.

Work methods: studying how a job is done

Methods analysis is used to redesign or improve existing jobs. An analyst will study an existing job to determine if the work is being done in the most efficient manner possible; if all the present tasks are necessary; or if new tasks should be added. The analyst might also want to see how the job fits in with other jobs—that is, how well a job is integrated into the overall production process or a sequence of jobs. The development and installation of new machinery or equipment, new products or product changes, and changes in quality standards can all require that a job be analyzed for redesign.

Methods analysis is also used to develop new jobs. In this case, the analyst must work with a description or outline of a proposed job and attempt to develop a mental picture of how the job will be performed.

The primary tools of methods analysis are a variety of charts that illustrate in different ways how a job or a work process is done. These charts allow supervisors, managers, and workers to see how a job is accomplished and to get their input and feedback on the design or redesign process. Two of the more popular charts are the process flowchart and the worker–machine chart.

PROCESS FLOWCHART

A process flowchart is used to analyze how the steps of a job or how a set of jobs fit together into the overall flow of the production process. Examples might include the flow of a product through a manufacturing assembly process, the making of a pizza, the activities of a surgical team in an operating room, or the processing of a catalogue mail or telephone order.

• Process flowchart: a graph of the steps of a job.

A process flowchart uses some basic symbols shown in Figure 8.1 to describe the tasks or steps in a job or a series of jobs. The symbols are connected by lines on the chart to show the flow of the process.

Figure 8.1. Symbols for a Process Flowchart

Developing a Job Process Flowchart

The QuikCopy Store does copying jobs for walk-in customers. When a customer comes in with a copy job, a desk operator fills out a work order (name, number of copies, quality of paper, and so on) and places it in a box. An operator subsequently picks up the job, makes the copies, and returns the completed job to the cashier, where the job transaction is completed. The store would like a job process flowchart that describes this sequence of tasks.

Solution

The process flowchart for the steps in this copying job are shown in Figure 8.2. Although the process encompasses several operators and jobs, it focuses primarily on the tasks of the copy machine operator, who actually makes the copies.

Figure 8.2. Process Flowchart of Copying Job

Often a process flowchart is used in combination with other types of methods analysis charts and a written job description to form a comprehensive and detailed picture of a job. Essentially, the methods analyst is a "job detective," who wants to get as much evidence as possible about a job from as many perspectives as possible in order to improve the job.

WORKER-MACHINE CHART

A worker-machine chart illustrates the amount of time a worker and a machine are working or idle in a job. This type of chart is occasionally used in conjunction with a process flowchart when the job process includes equipment or machinery. The worker-machine chart shows if the worker's time and the machine time are being used efficiently—that is, if the worker or machine is idle an excessive amount of time.

• Worker-machine chart: determines if worker and machine time are used efficiently.

Another type of worker-machine chart is the gang process chart, which illustrates a job in which a team of workers are interacting with a piece of equipment or a machine. Examples include workers at a coal furnace in a steel mill or a military gunnery team on a battleship. A gang chart is constructed the same way as the chart in Figure 8.3, except there are columns for each of the different operators. The purpose of a gang process chart is to determine if the interaction between the workers is efficient and coordinated.

Developing a Worker-Machine Chart

The QuikCopy Store described in Example 8.1 also makes photo ID cards. An operator types in data about the customer on a card, submits this to the photo machine, positions the customer for the photo, and takes the photograph. The machine processes the photo ID card. The store would like to develop a worker-machine chart for this job.

Solution

Figure 8.3 shows the worker-machine chart for the job of making photo ID cards.

The time scale along the left side of the chart provides a visual perspective of the amount of work and idle time in the job process. For this job, the summary at the bottom of Figure 8.3 indicates that the operator and machine were both working and idle approximately the same amount of time.

Figure 8.3. Worker-Machine Chart

A learning curve, or improvement curve, is a graph that reflects the fact that as workers repeat their tasks, they will improve performance. The learning curve effect was introduced in 1936 in an article in the Journal of Aeronautical Sciences by T. P. Wright, who described how the direct labor cost for producing airplanes decreased as the number of planes produced increased. This observation and the rate of improvement were found to be strikingly consistent across a number of airplane manufacturers. The premise of the learning curve is that improvement occurs because workers learn how to do a job better as they produce more and more units. However, it is generally recognized that other production-related factors also improve performance over time, such as methods analysis and improvement, job redesign, retooling, and worker motivation.

• Learning curve: illustrates the improvement rate of workers as a job is repeated.

Figure 8.4. Learning Curve

As workers produce more items, they become better at their jobs.

Figure 8.4 illustrates the general relationship defined by the learning curve; as the number of cumulative units produced increases, the labor time per unit decreases. Specifically, the learning curve reflects the fact that each time the number of units produced doubles, the processing time per unit decreases by a constant percentage.

The decrease in processing time per unit as production doubles will normally range from 10 to 20%. The convention is to describe a learning curve in terms of 1, or 100%, minus the percentage rate of improvement. For example, an 80% learning curve describes an improvement rate of 20% each time production doubles, a 90% learning curve indicates a 10% improvement rate, and so forth.

The learning curve in Figure 8.4 is similar to an exponential distribution. The corresponding learning curve formula for computing the time required for the nth unit produced is

where

Learning curves are useful for measuring work improvement for nonrepetitive, complex jobs requiring a long time to complete, such as building airplanes. For short, repetitive, and routine jobs, there may be little relative improvement, and it may occur in a brief time span during the first (of many) job repetitions. For that reason, learning curves can have limited use for mass production and assembly-line-type jobs. A learning curve for this type of operation sometimes achieves any improvement early in the process and then flattens out and shows virtually no improvement, as reflected in Figure 8.5.

Learning curves are not effective for mass production jobs.

Learning curves help managers project labor and budgeting requirements in order to develop production scheduling plans. Knowing how many production labor hours will be required over time can enable managers to determine the number of workers to hire. Also, knowing how many labor hours will eventually be required for a product can help managers make overall product cost estimates to use in bidding for jobs and later for determining the product selling price. However, product or other changes during the production process can negate the learning curve effect.

Figure 8.5. Learning Curve for Mass Production Job

Determining the Learning Curve Effect

Paulette Taylor and Maureen Becker, two undergraduates at State University, produce customized personal computer systems at night in their apartment (hence the name of their enterprise, PM Computer Services). They shop around and purchase cheap components and then put together generic personal computers, which have various special features, for faculty, students, and local businesses. Each time they get an order, it takes them a while to assemble the first unit, but they learn as they go, and they reduce the assembly time as they produce more units. They have recently received their biggest order to date from the statistics department at State for 36 customized personal computers. It is near the end of the university's fiscal year, and the computers are needed quickly to charge them on this year's budget. Paulette and Maureen assembled the first unit as a trial and found that it took them 18 hours of direct labor. To determine if they can fill the order in the time allotted, they want to apply the learning curve effect to determine how much time the 9th, 18th, and 36th units will require to assemble. Based on past experience, they believe their learning curve is 80%.

Solution

The time required for the 9th unit is computed using the learning curve formula:

The times required for the 18th and 36th units are computed similarly:

and

Advantages of learning curves: planning labor, budget, and scheduling requirements.

Although learning curves can be applied to many different businesses, its impact is most pronounced in businesses and industries that include complex, repetitive operations where the work pace is determined mostly by people, not machines. Examples of industries where the learning curve is used extensively include aerospace, electronics, shipbuilding, construction, and defense. The learning curve in the aerospace and shipbuilding industries is estimated to be 85%, while it is estimated to be 90% to 95% in the electronics industry. NASA, for example, uses the learning curve to estimate costs of space shuttle production and the times to complete tasks in space.

Limitations of learning curves: product modifications negate lc effect, improvement can derive from sources besides learning, industry-derived lc rates may be inappropriate.

Aircraft manufacturers have long relied on learning curves for production planning. Learning curves were .rst recognized in the aircraft industry in 1936 by T. P. Wright. Aircraft production at that time required a large amount of direct labor for assembly work; thus any marked increases in productivity were clearly recognizable. Based on empirical analysis, Wright discovered that on average when output doubled in the aircraft industry, labor requirements decreased by approximately 20%; that is, an 80% learning curve. During World War II when aircraft manufacturing proliferated, the learning curve became a tool for planning and an integral part of military aircraft contracts. Studies during these years demonstrated the existence of the learning curve in other industries as well. For example, studies of historical production .gures at Ford Motor Company from 1909 to 1926 showed productivity improved for the Model T according to an 86% learning curve. The learning curve effect was subsequently shown to exist not only in labor-intensive manufacturing but also in capital-intensive manufacturing industries such as petroleum re.ning, steel, paper, construction, electronics and apparel, as well as in clerical operations.

DETERMINING LEARNING CURVES WITH EXCEL

The Excel spreadsheet for Example 8.3 is shown in Exhibit 8.1. Notice that cell C8 is high-lighted and the learning curve formula for computing the time required for the 9th unit is shown on the toolbar at the top of the screen. This formula includes the learning curve coefficient in cell D4, the time required for the first unit produced in cell D3, and the target unit in B8.

Figure E8.1. Exhibit 8.1

LEARNING CURVES WITH OM TOOLS

Exhibit 8.2 shows the OM Tools spreadsheet for the learning curve in Example 8.3. Note that to determine the time required for a specific unit the unit number must first be input in cells B11 to B13.

Figure E8.2. Exhibit 8.2

As with many other areas in production and operations management, the quality movement and increased international competition have had a dramatic impact on human resources. Traditional approaches to work in the United States that once focused on task specialization, simplification, and repetition are being supplanted by approaches that promote higher job skill levels, broader task responsibility, more worker involvement, and, most importantly, worker responsibility for quality. A number of U.S. manufacturing and service firms have attempted to adopt new approaches to human resources management.

Learning Curve Formula

alternative workplace a combination of nontraditional work locations, settings and practices that supplements or replaces the traditional office.

cross training an employee learns more than one job in the organization.

empowerment the authority and responsibility of the workers to alert management about job-related problems.

ergonomics the application of human sciences like anatomy, physiology, and psychology to the design of the work environment and jobs, and objects and equipment used in work; fitting the task to the person.

flextime a work schedule in which fixed times of arrival and departure are replaced by a combination of fixed and variable times.

gainsharing an incentive plan that includes employees in a common effort to achieve a company's objectives in which they share in the gains.

horizontal job enlargement the scope of a job that includes all tasks necessary to complete a product or process.

job a defined set of tasks that comprise the work performed by employees that contributes to the production of a product or delivery of a service.

job rotation the horizontal movement between two or more jobs according to a plan or schedule.

learning curve a graph that reflects the improvement rate of workers as a job is repeated and more units are produced.

managing diversity includes education, awareness, communication, fairness, and commitment.

motion study the study of the individual human motions used in a task.

motivation a willingness to work hard because that effort satisfies an employee need.

process flowchart a flowchart that illustrates, with symbols, the steps for a job or how several jobs fit together within the flow of the production process.

profit sharing the company sets aside a portion of profits and distributes it among employees usually at the end of the fiscal year.

tasks individual, defined job activities that consist of one or more elements.

telecommuting employees work electronically from whatever location they choose, either exclusively or some of the time.

vertical job enlargement the degree of self-determination and control allowed workers over their own work; also referred to as job enrichment.

worker-machine chart a chart that illustrates on a time scale the amount of time an operator and a machine are working or are idle in a job.

1. LEARNING CURVE

A military contractor is manufacturing an electronic component for a weapons system. It is estimated from the production of a prototype unit that 176 hours of direct labor will be required to produce the first unit. The industrial standard learning curve for this type of component is 90%. The contractor wants to know the labor hours that will be required for the 144th (and last) unit produced.

SOLUTION

Determine the time for the 144th unit.

8-1. Discuss how human resources might affect a company's strategic planning process.

8-2. Why has "human resources" become popular in recent years?

8-3. Describe the characteristics of job design according to the scientific management approach.

8-4. Describe the contributions of F. W. Taylor and the Gilbreths' to job design and analysis, and work measurement.

8-5. Explain the difference between horizontal and vertical job enlargement and how these concepts might work at a business like McDonalds or Starbucks.

8-6. What is the difference between tasks, elements, and motions in a basic job structure?

8-7. How did the development of the assembly-line production process at Ford Motor Company popularize the scientific management approach to job design?

8-8. The principles of scientific management were not adopted in Japan during the first half of the twentieth century as they were in the United States and other Western nations. Speculate as to why this occurred.

8-9. Contrast the traditional U.S. approaches to job design with current trends.

8-10. What are the advantages of the scientific management approach to job design (specifically, task specialization, simplicity, and repetition) to both management and the worker?

8-11. Describe the primary characteristics of the behavioral approach to job design.

8-12. How has the increased emphasis on quality improvement affected human resources management in the United States?

8-13. How successful have companies in the United States been in adapting new trends in job design that mostly have originated in Japan?

8-14. Describe the three major categories of the elements of job design.

8-15. Describe the differences between a process flowchart and a worker-machine chart and what they are designed to achieve.

8-16. Pick an activity you are familiar with in your daily life such as washing a car, cutting grass, or taking a shower and develop a process flowchart for it.

8-17. Describe some of the advantages and disadvantages of telecommuting from both the employee and manager's perspective.

8-18. Why is empowerment a critical element in total quality management? What are the disadvantages of empowerment?

8-19. Select an article (or articles) from HR Magazine and write a report on a human resource management application in a company similar to the Along the Supply Chain boxes in this chapter.

8-20. Go to the Malcolm Baldrige Web site at http://www.quality.nist.gov and write a brief report on the role of human resource management at a Baldrige award-winning company or organization.

8-21. Select a workplace at your university such as an academic department office, the athletic department, the bookstore and the cafeteria, and describe the compensation program for rank-and-file employees and any additional programs used to create job satisfaction and motivate employees. Also indicate the amount and type of job training and the involvement of employees in quality management. Identify any problems you see in the workplace environment and how it might be approved.

8-22. Describe a job you have had in the past or a job you are very familiar with and indicate the negative aspects of the job and how it could be improved with current human resource management techniques.

8-23. For what type of jobs are learning curves most useful?

8-24. What does a learning curve specifically measure?

8-25. Discuss some of the uses and limitations of learning curves.

8-1. The United Mutual and Accident Insurance Company has a large pool of clerical employees who process insurance application forms on networked computers. When the company hires a new clerical employee, it takes that person about 48 minutes to process a form. The learning curve for this job is 88%, but no additional learning will take place after about the 100th form is processed. United Mutual has recently acquired a smaller competitor that will add 800 new forms per week to its clerical pool. If an employee works six hours per day (excluding breaks, meals, and so on) per five-day week, how many employees would be hired to absorb the extra workload?

8-2. Professor Cook teaches operations management at State University. She is scheduled to give her class of 35 students a final exam on the last day of exam week, and she is leaving town the same day. She is concerned about her ability to finish grading her exams. She estimates that with everything else she has to do she has only five hours to grade the exams. From past experience she knows the first exam will take her about 12 minutes to grade. She estimates her learning curve to be about 90%, and it will be fully realized after about 10 exams. Will she get the exams graded on time?

8-3. Nite-Site, Inc., manufactures image intensification devices used in products such as night-vision goggles and aviator's night-vision imaging systems. The primary customer for these products is the U.S. military. The military requires that learning curves be employed in the bid process for awarding military contracts. The company is planning to make a bid for 120 image intensifiers to be used in a military vehicle. The company estimates the first unit will require 80 hours of direct labor to produce. The industry learning curve for this particular type of product is 92%. Determine how many hours will be required to produce the 60th and 120th units.

8-4. Jericho Vehicles manufactures special-purpose all-terrain vehicles primarily for the military and government agencies in the United States and for foreign governments. The company is planning to bid on a new all-terrain vehicle specially equipped for desert military action. The company has experienced an 87% learning curve in the past for producing similar vehicles. Based on a prototype model, it estimates the first vehicle produced will require 1600 hours of direct labor. The order is for 60 all-terrain vehicles. Determine the time that will be required for the 30th and 60th units.

8-5. Jericho Vehicles is considering making a bid for a mobile rocket-launching system for the U.S. military. However, the company has almost no experience in producing this type of vehicle. In an effort to develop a learning curve for the production of this new mobile weapon system, management has called contacts from several former competitors who went bankrupt. Although management could not obtain direct learning curve rates, they did learn from one contact that for a system with similar features, the first unit required 2400 hours of direct labor to produce and the 30th and final unit required 1450 hours to produce. Determine the learning curve rate for this vehicle.

8-6. PM Computer Services (described in Example 8.3) has received an order for 120 custom configured personal computers for a local business. Paulette and Maureen have so many orders that they can no longer perform the work themselves, and they must hire extra labor to assemble the units for this new order. They have hired eight students from the university to work part-time, 20 hours per week, to assemble the computers. Paulette and Maureen assembled a prototype unit and it required 26 hours of direct labor; from experience they know their computer assembly operation has an 84% learning curve. Approximately when will PM Computer Services be able to deliver the completed order?

8-7. Hanna's Super Service Burgers and Fries fast-food restaurant trains its new employees (all of which are part-time) for three days to assemble its different burgers. The most time-consuming item to assemble is the Super Mega-Burger because it includes a lot of ingredients. After three days of training, an employee can assemble his or her first Mega-Burger as a regular employee in an average of 126 seconds. The learning curve for this assembly operation is estimated to be 85%, and no additional learning will take place after assembly of the eightieth Mega-Burger. Determine how many seconds will be required for an employee to assemble his or her eightieth Mega-Burger.

8-8. The housekeeping staff at the five-star Ritz Hotel has a specific, detailed list of activities for cleaning an occupied room. Each activity is completed whether or not it looks like it is necessary. When the hotel hires a new housekeeper, it takes that employee about 55 minutes to clean a room the first time. The learning curve for this job is 92%, and the average minimum time for an experienced housekeeper to clean a room is 32 minutes. How many rooms will a newly hired housekeeper have to clean before it can be done in 32 minutes? If a housekeeper has an eight-hour work day with 1.5 hours off for lunch and breaks, how many work days will be required before the housekeeper is fully proficient and able to clean a room in the minimum average time?

8-9. Prior to the invention of the printing press in the mid-1400s, the process of producing fine books, called illuminated manuscripts, was strictly manual and performed by skilled craftsmen. A scribe would copy the manuscript in ornate handwriting (or calligraphy) from an original text called an exemplar, and artists decorated (or illuminated) the books with pictures. It is estimated that an apprentice scribe could initially copy approximately 50 lines per day. This roughly translates to about 15 minutes per line for a scribe just starting out. A scribe was generally thought to have completed his apprenticeship and was considered a craftsman after completing eight books where each book consisted of about 17,000 lines. (After eight books a scribe would show little additional improvement in accurate copying speed.) Assuming a learning curve of 91%, how long would it take for an experienced scribe to copy a line, and how many lines could he copy in a day?

8-10. Dale Computer Company accepts orders from customers for computers online through its Web site and configures and builds them to order at one of its distribution centers from components it orders from its various suppliers in the United States and overseas. It is continually retaining new suppliers as its computer models change and as new computing technologies are developed. It promises its customers that when an order is placed the customer will receive it quickly, typically within a week, which in turn requires that Dale's suppliers provide component parts as quickly as they are demanded. Normally Dale sets a target of three days for a supplier to deliver parts once they are ordered, and Dale uses SPC charts to monitor a supplier's delivery performance once this target value has been achieved. Dale has learned from past experiences working with many suppliers that it takes some time for new suppliers to improve their production and delivery processes to consistently meet Dale's target delivery time. It normally takes a supplier about 15 days to deliver Dale's first order. Determine approximately how many orders it will take a new supplier that has a 70% learning curve to be able to meet Dale's orders within the specified target time.

Maury Mills

The Maury Mills Company is a producer and distributor of food products and handmade crafts located in southwest Virginia. Anne Maury and Dana Mills were roommates in college when they started selling homemade cookies, candy, apple butter, and breads at craft fairs in the region. As they attended craft fairs, they made acquaintances with a number of craftspeople, artisans, and vendors who also had booths. After Anne and Dana graduated from college with degrees in English and Theater Arts, respectively, they decided to start their own business selling crafts they would buy from the artisans they knew from craft fairs and food items they would make themselves or contract with locals to make. They leased a building previously occupied by an auto parts store to use as an office warehouse, and distribution center. Their plan was to sell their products to grocery stores, specialty food stores, and gift shops in the region.

Initially, Anne and Dana ran the business themselves. Anne did all the buying and bookkeeping while Dana handled sales. Both of them did a lot of telephoning and traveled around the region visiting their suppliers and potential customers, picking up purchased goods and making deliveries. In the evening and on weekends they made their own brand of cookies, candy, apple butter, breads, and cakes and packaged them. Their products sold well primarily because of their high quality and uniqueness, and both suppliers and customers liked the two hard-working ladies. They were able to purchase the crafts they sold at modest prices from local artisans, and because they had relatively low overhead and expenses and no employees, their profit margin was high. However, their business soon exceeded their capacity, and they began to hire additional employees. Initially, they hired high school students part time to help with strictly physical work like packaging, picking up purchased items, and making deliveries. However, they soon realized they needed more skilled, reliable, full-time employees, including people to handle phone orders and customer service. They moved their business out of the old building they were using into a new office and warehouse facility that included an on-site bakery and food processing plant.

Anne and Dana moved more into a managerial role and spent less direct hands-on time with operations, which was a new experience for them and one for which they did not feel totally prepared. Managing employees was a particularly daunting task, and they were forced to learn as they went along. They used basic common sense and a commitment to treating their employees fairly and nicely, which proved to be successful. They could not help feeling responsible for their employees' well-being, and they soon considered themselves a large family of friends who were all working together for a common goal.

Maury Mills's sales continued to grow at a rapid pace, profits were high, and the employee base expanded. With the help of an e-Business consultant, Maury Mills developed a Web site and a print catalogue and began selling to individuals, stores, and shops around the country through their catalogue and online. The two friends turned over more of the daily operation of the company to managers and stepped back to relax and take some time for their own lives. They enrolled in an executive MBA program in the Northeast. They also began to travel for business and pleasure, exploring new markets and suppliers overseas, and sometimes attending business seminars and workshops in Europe, Hong Kong, and the Caribbean to fill in some of the gaps in their business expertise.

Within a few years, the crafts and specialty products business became more competitive, and online Web sites and catalogues for craft items and food products began to proliferate. At Maury Mills this caused the cost of purchasing their products to increase, and profit margins began to decline. At the same time the economy went into recession, and sales decreased. Anne and Dana became concerned that the financial health of the business they worked so hard to establish and that had been so successful was in peril. They quickly reimmersed themselves in the daily operations of Maury Mills, but the problems seemed overwhelming. They felt that their employees had become complacent and spoiled and weren't as committed to the business as they had been when they were smaller and more of a family. Walking around their facilities, they felt they hardly knew anyone who worked for them. Despite the seminars and business courses they had attended, they decided to hire a management consulting firm to come in and advise them how to turn things around.

The consulting firm spent a month at Maury Mills analyzing the company's financial data and operations, and looking closely at its markets and customer base. Their report offered several sweeping recommendations. The consulting firm found that the market for craft and specialty products had become saturated while the market for their food products, especially in the region, was still strong. They therefore recommended Maury Mills cut back on their craft products business while expanding their food products business. Thus, their first recommendation was that the company workforce be cut by 20% in all areas except food products processing. Anne and Dana had earlier expressed their concern about employee malaise to the consulting team, and this group picked up on that. The consultants felt that the food products business could be increased without capital expansion by increasing productivity through adopting various incentive measures and compensation programs to motivate employees. They also suggested that employees in packaging and distribution be paid according to an incentive plan based on the number of packages they processed daily. Another recommendation was that all orders arriving in the distribution center by 3:00 p.m. should be processed and shipped that same day. These changes would not only increase productivity but also speed order fulfillment, which would appeal to customers. They recommended a group bonus plan tied to the percentage of incoming orders shipped the same day. The consultants also thought that phone operators currently spent too much time talking with customers and suppliers and that their calls should be cut from an average of seven minutes to less than four minutes. It was recommended that employees in the food products area should also increase their productivity. A group incentive plan was suggested for the food products area that would provide monthly bonuses for increased productivity and for process improvements that would save food processing time and result in higher production levels. The report recommended that the sales force be placed on a partial commission plan based on dollar sales and that salespeople be empowered to offer discounts to customers to gain orders especially at food stores. It was also recommended that buyers be empowered to shop for lower cost goods and be paid a percentage of cost savings as bonuses. Anne and Dana adopted the consultants' recommendations across the board and instructed their managers to implement the changes.

Within a few months, productivity increased throughout the company; the volume of phone orders increased by over 50%; and despite cutbacks, the distribution center increased the number of packages it was processing on a daily basis by 40%, and the number of orders shipped the same day as received rose to 95%. The food products area showed an increase in its production rate of 30%. Sales were up and purchasing costs had decreased.

Anne and Dana felt a great sense of relief, but this feeling was short-lived. Six months later over the course of a few days, several events stunned them. First, Anne was grocery shopping at the local Kroger's when she eavesdropped on the following conversation between two shoppers:

"I hear things aren't going so well over at M 'n' Ms"

"No, everybody seems to be at each other's throat and the whole place seems to be falling apart."

"What happened? It seemed to be such a great place to work when my sister was there back when they first started."

"Well, I don't know what it was like back then, but things aren't so nice now. We have a lot of irate customers and they're returning stuff right and left, and our supervisors are leaning on everyone to do more. Most of us are exhausted and fed up."

Anne couldn't believe what she had heard; she immediately told Dana, and they decided to investigate. Sure enough, they discovered that returns had increased substantially and were clogging the warehouse. When they asked the manager in charge why customers were returning items, he told them there were complaints of poor quality. The next day they received another jolt. Dana's secretary told her that a group of black and Hispanic employees from the warehouse and distribution center had asked for an appointment to see Anne and Dana. Upon asking what the purpose of the meeting was, Dana was told that there was a lot of built-up resentment over earlier cutbacks in the distribution center, which was made up mostly of minority employees, while at the same time there weren't any cutbacks in the food products area which was made up mostly of Caucasian employees. Dana's secretary also said that she had heard some complaining about inequities in the incentive plan that had been set up. Later that same day Anne received a phone call from Jim Barnett, the regional manager for the Market Place grocery chain. He told Anne that as a courtesy he wanted to personally let her know that they were not going to continue to carry Maury Mill's food products in their specialty foods sections at his stores. He said he regretted it, especially since they had enjoyed a long-standing positive relationship with Maury Mills and they had been providing such low prices in recent months, but they had received a lot of customer complaints about poor quality items. They had also received a lot of incomplete, late, and messed up orders; when they would call to try and resolve problems, the people they talked to were abrupt and seemed to be in a hurry to get off the phone. Immediately after this conversation ended, Anne went down to the sales office and discovered that there were a number of other old, established customers who were no longer placing orders. They also tracked several recent shipments and found that while orders were being processed on time, they often sat at the loading dock or were a long time in transit.

Anne and Dana were dazed. They were in worse shape than they had been before the changes!

Why do you think Maury Mills got in the shape it is? What are some of the mistakes you think they may have made in managing their human resources? What would you recommend that Dana and Anne do to resolve their problems? Are their problems solvable?

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