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NA0100

The New Year’s Eve Crisis
William Naumes Margaret J. Naumes University of New Hampshire

It was Monday morning, New Year’s Eve day, 2001. On a day that many people were enjoying at home, Mike Valenti was in his office at Michael’s Homestyle Pasta. Since he had acquired the Southern Pasta Company on December 10, he had been learning the business, trying to get his arms around it, as he described it. Distance was a factor: Michael’s headquarters and plant were in Connecticut; Southern was located in Florida. Mike would have liked to be in Tampa, working directly with his new employees and trying to integrate the two companies’ cultures, but his wife was expecting their third child in early January and he needed to stay near home. In the due diligence period leading up to the purchase, it had seemed as though a new problem had developed every week. Finally, 3 weeks after closing, things seemed to be under control. The telephone rang. When Mike answered, he was not surprised to hear Ted Brewer on the other end of the line. Ted, Michael’s vice president for administration and operations, spent part of every week at the Florida plant. Ted began, “I hope you’re sitting down.” He went on to tell Mike that Southern’s quality assurance manager, Fred Jones, was in his office, and “You need to hear what he has to say!” He put Fred on the phone. Mike listened as Fred told him that the seafood-stuffed pasta shells that Southern had just shipped to its biggest customer were tainted with salmonella. “That can’t be true,” Mike responded. “We have the lab results that show it’s fine!” “I know,” replied Fred, “but those results were falsified.” In tears, the quality assurance manager explained that he had taken the samples of stuffed pasta that were to be sent to an independent lab for testing and baked them to make sure that any bacteria were killed; then he had frozen them and repackaged them to look like packages just off the production line. Southern’s president, Hans Schmidt, had threatened his job if the stuffed shells didn’t test clean. Mike was stunned. New Year’s Eve was one of the biggest nights in the year for restaurants. The shells stuffed with chunks of lobster, crab, and shrimp were custommade for a chain of over 200 restaurants and were one of its featured menu items. The names in this case have been disguised. This case study was prepared as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. An earlier version of the case was presented at the 2003 annual meeting of the North American Case Research Association in Tampa, Florida, and received the Emerson Award for Best Case in Business Ethics as presented at that meeting. Copyright © 2005 by the Case Research Journal and William Naumes and Margaret J. Naumes.

This document is authorized for use only in OB by Dr. Anamika Sinha from May 2012 to September 2012.

  ’  

The chain accounted for almost half of the revenues of Southern Pasta, and was one of the most important reasons why Michael’s had acquired Southern. Salmonella contamination was a serious problem. Salmonella was a bacterium that thrived in undercooked food containing eggs, poultry, or meat, and was responsible for about 600 deaths a year. Small children, the elderly, and people with weakened immune systems were particularly at risk.1 “Ted, we need to talk about this,” Mike said. “I’m going to set up a conference call and call you back.”

MICHAEL’S HOMESTYLE PASTA
Mike Valenti had written a business plan for a homemade-style pasta company in 1991, while he was a college undergraduate. His goal, in the plan, was to reach $3 million in sales. After graduation, he started the company, making stuffed pasta by hand upstairs from his father’s bakery. By 2001, the company had moved twice as it expanded, first to the corner of an old textile mill building, then to its own new plant. It had over 100...
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