Alvis Corporation Case Study
Kathy McCarthy was the manager of a production department in Alvis Corporation, a firm that manufactures office equipment. The workers are not unionized. After reading an article that stressed the benefits of participative management, Kathy believed that these benefits could be realized in her department if the workers were allowed to participate in making some decisions that affect them. Kathy selected two decisions for an experiment in participative management.The first decision involved vacation schedules. Each summer the workers are given two weeks’ vacation, but no more than two workers can go on vacation at the same time. In prior years, Kathy made this decision herself. She would first ask the workers to indicate their preferred dates, then she considered how the work would be affected if different people were out at the same time. It was important to plan a vacation schedule that would ensure adequate staffing for all of the essential operations performed by the department. When more than two workers wanted the same time period, and they had similar skills, she usually gave preference to the workers with the highest productivity.
The second decision involved production standards. Sales had been increasing steadily over the past few years, and the company recently installed some new equipment to increase productivity. The new equipment would make it possible to produce more with the same number of workers. The company had a pay incentive system in which workers received a piece rate for each unit produced above a standard amount. Separate standards existed for each type of product, based on an industrial engineering study conducted a few years earlier. Top management wanted to readjust the production standards to reflect that fact that the new equipment made it possible for the workers to earn more without working any harder. The savings from higher productivity were needed to help pay for the new equipment.
Kathy called a meeting of her 15 workers an hour before the end of the work day and explained that she wanted them to discuss the two issues and make recommendations. Kathy figured that the workers might be inhibited about participating in the discussion if she were present, so she left them alone to discuss the issues. Besides, Kathy had an
appointment to meet with the quality control manager. Quality problems had increased after the new equipment was installed, and the industrial engineers were studying the problem in an attempt to determine why quality had gotten worse rather than better. When Kathy returned to her department just at quitting time, she was surprised to learn that the workers recommended keeping the standards the same. She had assumed they knew the pay incentives were no longer fair and would set a higher standard. The worker speaking for the group explained that their base pay had not kept up with inflation and the higher incentive pay restored their real income to its prior level.
On the vacation issue, the group was deadlocked. Several of the workers wanted to take their vacations during the same two week period and could not agree on who should go. Some workers argued that they should have priority because they had more seniority, while others argued that priority should be based on productivity, as in the past. Because it was quitting time, the group concluded that Kathy would have to resolve the dispute herself. After all, wasn’t that what she was being paid for?Answer all the questions (3 x 10=30marks)
1. Were the two decisions appropriate for a group decision procedure?
2. What mistakes were made in using participation, and what could have been done to avoid the difficulties the manager encountered?
3. Were these two decisions appropriate ones for introducing participation into the department?