Patterson's Operation

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Management 201
Organization and Management
Case on Motivation and Leadership

THE PATTERSON OPERATION[1]

Background

Carrington, Inc. is an international company engaged in the production and distribution of pharmaceuticals, proprietary drugs, and cosmetics and toiletries. In its worldwide operations, Carrington employs over 15,000 people and has sales of over 15,000 people and has sales of over $500 annually.

At the midsouth plant of Carrington, Inc. management was faced with problems of low productivity, low employee morale, and high unit costs in the section responsible for the assembly of various kinds of packages containing assortments of different products made by the company. These “prepaks,” or “deals,” as they are referred to within the organization, are specially prepared to the specifications of the individual customer. Each package may contain from 24 to 480 items, and the total number of packages for a customer may range from 10 to 1500 units. Most of these packages are prepared in such a way that the retailer can set them up as freestanding, point-of-sale promotional displays. From Carrington’s standpoint, the objective of using these product displays could be placed in aisles or used as shelf extenders. Assembling the deals is essentially a job-shop type process and prior to last year, the “assembly room” was located in a part of the main plant known as Section 10.

The employees in Carrington’s manufacturing and assembly operations are unionized, and the firm uses a Halsey 50-50 Incentive Plan, a time-saved bonus plan. Under the Halsey Plan, a worker who can do her or his job in less than the standard time receives a bonus of 50 percent of the hourly wage rate multiplied by the time saved. For example, an employee who completed 10 standard hours of work in 8 hours would be paid 8 hours plus 1 of the 2 hours saved. Thus, if the hourly pay rate is $8.50, the worker would earn $76.50 for the day.

PROBLEMS WITH SECTION 10

The assembly of prepaks in Section 10 used roller-type conveyor belts which supplied each worker with the products to be included in a particular package. The working conditions were outstanding; the work area very clean, well lighted, and air-conditioned. An attractive cafeteria for employee use was available in the same large building.

In spite of good working conditions and the chance to earn extra pay through the company’s incentive system, the operation in Section 10 had encountered a market trend of increases in unit costs and decreased in output per labor hour. In fact, during the last three years cost figures revealed that the section was below the break-even point. Contributing to this deteriorating situation was low productivity and failure of employees to meet the work standard. This latter problem was made particularly evident by the fact that no employees were able to earn a bonus under the incentive plan.

Discipline in Section 10 was poor and supervisors were constantly having problems. A number of grievances had been generated. Morale was not helped by the fact that any employee quite often was moved from one assembly line to another. This action tended to increase production costs because the employees had little chance of moving down a particular learning curve before being moved to another operation. Another factor indicative of low morale was the employee’s attitudes. There was not spirit of mutual cooperation and the attitude of “that’s not my job” was prevalent.

All in all, working in Section 10 was considered an unpopular work assignment. The work required manual labor and was perceived as relatively hard work compared with work on the automated lines in the other work areas. Also, word had spread that no one could “make bonus” working there. Eventually, through the bidding system used by the organization, the workforce in Section 10 came to consist, in large part, of young inexperienced employees, problem workers...
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