Page 320 - Business Principles and Management

Chapter 12 • The Manager as Leader

Focus On...

Ethics–Costs Versus Jobs

EndCore is a packaging manufacturer. The third unit produces card-
board boxes. EndCore led the industry in total box sales for 20 years.
However, during the past five years, it fell to fifth place in sales.
Competing businesses had improved the quality of their products
and were able to undercut EndCore in product prices.
EndCore employees were trained for specific production jobs that
had changed little over time. Because of the declining performance,
EndCore management decided it had to cut costs and improve sales.
They decided to involve employees in the process, hoping that would
help employees to accept any changes that needed to be made. The
company made a commitment to the new approach and the teams
were formed and trained for their new roles.
Now the unit three team had to find ways to reduce production
costs. The team developed several methods to change the way work
was done, and boxes were assembled for a cost savings of about
4 percent. This left the company’s costs just slightly higher than those
of competitors.
Then the team learned of a new automatic glue machine that was
coming on the market. EndCore always hand-glued its boxes because
the quality of the seals was much better. Gluing was a major part of
the process, involving more than 15 percent of the employees. The
new machine completely automated the gluing process and increased
the speed with which boxes could be assembled. It had a 98 percent
reliability rating—equal to that of the hand-gluing method. The cost
of the machines was just under $1 million. However, the cost would
be recovered in three years because production could be increased
by 5 percent, with a reduction in labor costs of 12 percent. Using the
gluing machines would put EndCore’s costs below the competitor’s
by more than 2 percent.
The employee team had found a way to make the company com-
petitive. But implementing it would mean at least 30 employees
would lose their jobs.
Think Critically

1. What are advantages and disadvantages of the two solutions
identified by the employee team from management’s view-
point and from employees’ viewpoint?
2. What responsibility does the employee team have to manage-
ment and to other employees in making a recommendation?
3. What recommendation do you believe the employee team
should make? Why?

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