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Eastern International Food Service Corporation Stanley Strayhorn, general manager of Eastern International Food Service Corporation's Ocean Point Division, has a problem. For the past week, labor turnover has been increase ing. employee morale has been dropping, and food cost percentage is climbing, while profit mmargins on sales are declining. Mr. Strayhorn is deeply concerned, for there are still two weeks left in the summer season, Not only is it too late to train new workers, but it is diffi- cult even to find replacements. A shortage of labor will drastically affect potential sales for the next two weeks, a period noted for heavy sales BACKGROUND INFORMATION Eastern International Food Service Corporation (Ely was a food service corporation in the eastern area of the United States. Its services were offered in many amusement parks. Ocean Point Amusement Park was one of its biggest branches, in sales as well as in number of employees-300. Eastern International had a contract with Ocean Point to operate all its food service concessions on the park's premises. Fifteen El concession stands were distrib uled throughout the 500-acre park. Food sales included hotdogs, hamburgers, French fries. popcorn, ice cream, beverages, and so on. Each concession stand had a manager and an assistant manager, as well as between 5 and 20 workers, depending on the size of the stand. Jobs ranged from cleaning grills and fryers to waiting on the customers over the counter. In addition to the concession stands, the company also operated six different restaurants on the premises, including fast-food services, cafeterias, and a sit-down dining room. Each had its own manager and two or three assistant managers, as well as a full complement of line servers, dishwashers, kitchen helpers, cooks, waiters, and waitresses Since the park was open only in the summer, student employees fit perfectly into the schedule. With room and board provided, and a work season that coincided with summer vacation, high school and college students found employment with El both convenient and well-paying. Besides, there were hundreds of other students of the same age with whom to associate, both on and off the job. Almost all the positions-managers and workers were held by student employees. All stand and restaurant managers reported to one of several supervisors, each of whom was a full-time, nonstudent Eastern International employee. The functions of the supervi- sors were to check on all stands and restaurants to make sure everything was running prop- erly, no employee was loafing, and food cost and profit margin targets were met. Above the supervisors was the general manager of this division- Mr. Strayhorn himself-and the assistant manager, Mr. Edwards Summer employment was regarded as part-time employment, so there was no union established. In other words, there was nothing to guarantee full-term employment. Never- theless, El tried to keep its employees as long as possible. Most employees hired were in- experienced, fresh out of high school. They often needed a few days to be trained; several weeks on the job were needed to become a fast worker. The secret behind working in a con- cession stand was that the faster a person worked, the more sales he or she could make, an important consideration for being reemployed by EI the next season. Usually a returning employee would get a 20 to 25 percent increase in pay or perhaps a promotion, if initiative and managerial abilities were demonstrated. In essence, the company tried to maintain reg- ular and well experienced employees. a difficult task considering the long work hours and the nature of its student labor force. PROBLEM SITUATION Everyone who worked at Ocean Point knew that Eastern International Food Service was a lessee. The contract was to terminate on Labor Day. Only two weeks remained in the con- tract period and the season, but the question of whether Occan Point would choose to renew the contract for next year remained unanswered. Complicating the issue was the fact that, starting three years ago, Ocean Point had estab- lished specialty-food concession stands of its own. Such was its contractual right, to set up and administer food concessions not directly competitive with the foods offered by El. Ocean Point now had four stands in operation serving pizza, tacos, and frozen bananas. Ocean Point used its own employees, currently employed in the park, to run the stands. The amusement park manager had found he could relieve sweepers in the morning hours (before litter had a chance to accumulate) and put them on the early shift in the concession stands. Sweepers would be relieved, in turn, by ticket sellers in the afternoon hours when few tickets were sold and when litter cleaning was a full-time proposition. Such a clever arrangement allowed the addition of selling functions with no increase in labor costs. Rumors flew, fueled by the concession operations of the park. Some said that the stands were set up to allow the park to develop the skills needed to administer concessions. Once the skills were developed, the contract with El would be allowed to lapse, and park employ- ces would run the former EI stands next season. An elaborate seniority and promotion sys- tem used by the park would effectively preclude EI employees from transferring to park employment. If the contract was renewed, then everything would remain unchanged; nobody would be disturbed. If, however, the contract was not renewed, Eastern International would have no operation in Ocean Point next year and between 200 and 300 college students would not be returning to summer jobs. Rumors spread among the EI employees. Some said EI would be back next year, and others said it would not. Neither rumor was verified by El management. Even when con- fronted with the question point-blank, all the supervisors could, or would, say was that EI might not be back. (Several Ocean Point stand managers were spotted wandering around in front of El stands. They were believed to be spying.) The season was approaching its end, and the management had maintained silence. By now, the accepted rumors were that Eastern International would not return next summer and that Ocean Point did not wish to hire any person who had worked for EI. The attitude of the El employees had gotten steadily worse. Morale had declined, Man- agers of stands had become irresponsible and were losing control of their subordinates. Food costs were rising as a result of the amount of theft and waste. Workers slowed their pace and thereby failed to serve numerous customers, who were quite vocal in their dis- pleasure. Some students had quit, "knowing" they would not be rehired anyhow. While the potential sales of the season were reaching their peak, actual sales and profits had declined. Never in the history of the company was there such a tremendous decline in sales and profit of the season