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In: Accounting

Randolph Smithfield is a cost analyst with Franklin Insurance Company. Franklin is applying standards to its...

Randolph Smithfield is a cost analyst with Franklin Insurance Company. Franklin is applying standards to its claims payment operation. Claims payment is a repetitive operation that could be evaluated with standards. Randolph used time and motion studies to identify an ideal standard of 36 claims processed per hour. The Claims Processing Department manager, Fred Jones, has rejected this standard and has argued that the standard should be 30 claims processed per hour. Fred and Randolph were unable to agree, so they decided to discuss this matter openly at a joint meeting with the vice president of operations, who would arbitrate a final decision. Prior to the meeting, Randolph wrote the following memo to the VP.

To: Linda Greene, Vice President of Operations

From: Randolph Smithfield Re: Standards in the Claims Processing Department

As you know, Fred and I are scheduled to meet with you to discuss our disagreement with respect to the appropriate standards for the Claims Processing Department. I have conducted time and motion studies and have determined that the ideal standard is 36 claims processed per hour. Fred argues that 30 claims processed per hour would be more appropriate. I believe he is trying to “pad” the budget with some slack. I’m not sure what he is trying to get away with, but I believe a tight standard will drive efficiency up in his area. I hope you will agree when we meet with you next week.

Required: Discuss the ethical and professional issues in this situation. Who is more correct, Randolph or Fred? If you were Linda Greene, how would you handle this conflict?

Solutions

Expert Solution

Ethical & Professional Issues

  • Fred is taking undue advantage of his authority as he is Claims Processing Department manager.
  • Randolph being cost analyst focusing more on cost of the company but Fred being manager focuses more upon the functionality of department.
  • Delay in decision making which affects claims processing adversely and put a dent on company's reputation among clients.
  • Ego clash between two authorities

Randolph Smithfield is more correct in this situation as he has figure out standards after time and motion studies which are scientific way to do so.

If I were the Linda Greene in this situation then I will call both Randolph Smithfield and Fred and asked them to prove their respective alternatives scientifically. Then, I measure both economic and functional benefits of each alternative and apply the best alternative for the organization. In last i will told them to discuss first before taking any final decision.

ekkarill92 answered 2 years ago
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