Question

PIK Manufacturing rewards its plant managers for their ability to meet budgeted quality cost reductions. The bonus is increased if the productivity goal is met or exceeded. The productivity goal is computed by multiplying the units produced by the prevailing market price and dividing this measure of output by the total cost of the inputs used. Additionally, if the plant as a whole meets the budgeted targets, the production supervisors and workers receive salary and wage increases. Jim Smith, the manager of a plant in Alberta, felt obligated to do everything he could to provide this increase to his employees. Accordingly, he has decided to take the following actions during the last quarter of the year to meet the plant’s budgeted targets and increase the productivity ratio: a. Decrease inspections of the process and final product by 50 percent and transfer inspectors temporarily to quality training programs. Jim believes this move will increase the inspectors’ awareness of the importance of quality; also, decreasing inspection will produce significantly less downtime and less rework. By increasing the output and decreasing the costs of internal failure, the plant can meet the budgeted reductions for internal failure costs and, simultaneously, increase its productivity measure. Also, by showing an increase in the costs of quality training, the budgeted level for prevention costs can be met. b. Delay replacing and repairing defective products until the beginning of the following year. While this may increase customer dissatisfaction somewhat, Jim believes that most customers expect some inconvenience. Besides, the policy of promptly dealing with dissatisfied customers could be reinstated in three months. In the meantime, the action would significantly reduce the costs of external failure, allowing the plant to meet its budgeted target. Required: a. Evaluate Jim’s ethical behaviour. In this evaluation, consider his concern for his employees. Was he justified in taking the actions described in the problem? If not, what should he have done?

Answer 1

Answer)

Here, Jim behaviour cannot be treated ethical as he is trying to decrease costs and produce Additional output through reducing the cost of internal rework.Moreover,he is trying to cover his additional cost of external repairs through providing delayed service to the consumer.

Here,Jim's concern for his employees are very good but the actions he take are not ethical.it is mentioned in the question that Jim obligated to this for his employees but there is chances that he is doing them for his personal rewards also as mentioned in the question as the opening point.

I don't think that the actions taken by the Jim is justified. This is because in a name of decreasing the costs he is providing low quality goods and services for the persons who spent money for obtaining the goods.

Here, instead of doing these kinds of cost reduction, it will be better he find some ways for cost control like reduction of wastage and so. Here,he is providing training to his quality inspectors which may increase their speed and accuracy which may help in decreasing down time and also cost of exteral repairs in subsequent years but for this year he must have provide best of repairing and replacing services for the customers which may be considered to be somewhat ethical.