Melrose Products

Jim Hartough was not in a good mood. He worked his way through the ranks when supervisors did supervision and workers did what they were told. He was now faced with the fact

that the new president of Melrose products was one of these "ouchy-feely" types that was

pushing for self-directed work teams. As the manufacturing manager, Jim was ultimately

responsible to not only meet production needs, but also to do so in the most efficient and

cost-effective manner possible. To him, that meant specific allocation of work. It had al- ways worked that way and he saw nothing new to tell him it shouldn't continue to do so Part of the problem. Jim realized, was that the business environment was changing. Changes in the product design were becoming more frequent and the customers were expecting more service. While they were still sensitive to price (the competition had not disappeared), they wanted quick delivery, high quality, and the product designed more specifically to their need. To Jim, that meant putting more pressure on those "lazy, pampered engineers" to make better designs as well as additional pressure on those "bums on the factory floor" to meet production needs. With better designs, he could more easily allocate the work to his workforce to meet the customer demands. He felt he had truly kept up with the timesthe customer was king. The fact that the customer expected more meant little more than how to get them what they wanted from production. It was merely a case of making sure everyone delivered on the job the way they were supposed to. While Mr. Melrose had avoided the need to become a public company and had managed to keep unions out, he had still apparently gone soft, at least according to Jim. He had recently appointed Cindy Lopez as the new president, passing over Jim. She not only had an MBA (Jim had always thought the real business learning was done "on the firing line"), but also had never even been a supervisor. She had come from, of all places, the human resources department! That department had never done anything for him other than send him a bunch of worthless people. Some of those people had, in his mind, no chance of ever becoming useful. As far as he was concerned, the only real value of a human resources department was to keep the government idiotic bureaucrats off their backs. So, now Jim was in the position to try to "change with the times," as Cindy had said. She wanted to gradually move the company toward flexible self-directed work teams. Jim, of course, felt that all the workers really wanted was to get their paycheck and party on Friday and Saturday nights, and could care less about having any say in the product or the customer. How was he ever going to get anything done with someone so naive in charge? The Current Situation Cindy had suggested that Jim start the process of changing to teams by looking at the K-line. The K-line of product was a fairly standard product that had recently undergone heavy competitive pressure in the form of delivery speed and design enhancements. Melrose had been gradually losing market share in the K-line. Jim had responded, before the naming of Cindy as president, by putting additional pressure on workers to be more efficient and reducing their task times. As Jim said, "there's always some slack time we can squeeze out of any process if we really put our minds to it." They are using carefully developed time standards, much as Jim learned in his Industrial Engineering courses. He feels they are quite good, including a liberal 10% allowance. Since the K-line is a fairly standard product, Jim not only uses the time standard to develop cost figures for labor, but also uses those cost figures to allocate overhead. There are currently seven labor tasks to make one of the K-line products. Task Standard Time (Min.) Estimated Labor Cost/Minute 1 7.5 $0.24 2 2.3 $0.22 3 4.7 $0.28 4 5.1 $0.29 5 17.8 $0.26 6 19.1 $0.18 7 8.4 $0.25 The overhead allocation is currently at 230% of direct labor. Material costs are $9.35 per unit. They currently have enough labor to produce 20 of the K-line per shift. Each shift has one supervisor costing about $24 per hour, accounted for in the overhead account. From this information, Jim was being asked to develop teams, and without direct supervision. From his standpoint, the effort was doomed to failure. Jim, however, always considered himself a "company man" and would do what he could to make it happen.

Questions

1. What is the standard cost of the K-line product? 2. What specific steps would you undertake to make the self-directed teams? How, specifically, would you deal with the cost and time standard issues? 3. Do you agree with Cindy? Do you agree with Jim? Is there some other alternative approach that might be better in this situation? Explain. 4. What do you do with the supervisor in this situation? Be specific in your approach. 5. How do you deal with Jim? Develop a specific plan to deal with a situation such as the one described. 6. Are self-directed work teams the answer? Where should or shouldn't they be used. Discuss the pros and cons of such teams and where, or where not, they should be used, and how they would be used in this situation, if appropriate.