Case Study 2 – Does This Milkshake Taste Funny?
Clinton E Harris
Texas A&M University – Commerce
February 15, 2014

Introduction George Stein is a college student hired by Eastern Diary. Without any training, George was immediately assigned to the night shift who operated without supervision. The night shift was led by another laborer named Paul Burnham who was given the production orders by the plant supervisor as he was leaving for the day. The night crew was given two objectives, to complete the assigned production runs and clean the machinery before the night shift was over. Stein’s dilemma began when contaminated milkshake mix was clogging the filtration system of the equipment. Burnham instructed Stein, after several attempts to clear the clogging, to remove the filters altogether to ensure the batch completed before the end of the shift. Removal of the filters meant that the maggots that were contaminating the mix would be allowed to flow into the customer’s end product. There are several key management deficiencies that led to the dilemma faced by Stein and the night crew. First, Burnham’s decision making process and the lack of quality standards are indications that the company’s cultural climate is not focused on producing a quality dairy product. Second, the absence of a formal leadership structure allowed a young crew of unsupervised workers to waste company time and resources which resulted in a poor decision to meet the expectation of completing the production run before the end of the shift. Lastly, the organization’s minimal controls on production to limit waste of resources allowed the night shift to misallocate their production time in lieu of horseplay which resulted in a rush to finish the batch before the end of the shift.

Ethical Behavior Kuntz et al. (2012) argue in their study that not only age, but other occupational variables, impacts an individual’s identification of scenario as an ethical dilemma (Kuntz, Kuntz, Elenkov, & Nabirukhina, 2013). With a diversity of understanding of what constitutes an ethical decision point, a company should predefine what it considers an ethical issue. Knutz, et al. (2012) define a company’s ethical climate as the “share perception of what constitutes ethically appropriate behavior and knowledge of procedural steps to address an ethical issue” (Kuntz, Kuntz, Elenkov, & Nabirukhina, 2013). This shared perception, or code of ethical conduct, can be established through communications or by training and enforced by rewarding ethical behavior or punishing unwanted. Kuntz et al. (2012) also find that entry level employees are less likely to understand the consequences of a making an ethical vs. unethical decision (Kuntz, Kuntz, Elenkov, & Nabirukhina, 2013). This appears to be the case with Paul, as he clearly makes the unethical choice to remove the filters and complete the processes of a contaminated batch of shake mix. Verbos et al. (2007) further explains how an organization’s identify defines the way in which it handles ethical decisions. Verbos et al (2007) describe a living code of ethics as the manifestation of a company’s ethical identity by its employee’s actions and decision making (Verbose, Gerard, Forshey, Harding, & Miller, 2007). Developing a company’s ethical identity by a identifying a living code of ethics will provide cues to employees to determine what is acceptable ethical behavior. Because decisions are made at all levels of an organization, the living code becomes “ethics in use” (Verbose, Gerard, Forshey, Harding, & Miller, 2007). The company’s ethical culture becomes the driver of its employees’ decision making, teaching them how to think and take action when ethical dilemmas arise (Verbose, Gerard, Forshey, Harding, & Miller, 2007). The age of the night shift at Eastern Dairy can also be a contributor for the decision that was made to pull the filters and complete the batch on time. Smith, DeBode, and Walker (2013) look at, among other factors, age as a determinant for ethical decision making. Smith, DeBode, and Walker (2013) analyze a survey of several ethical vignettes, conducted on 275 respondents of various ages, races, and religious backgrounds. Their findings conclude that there is a significant correlation to age and ethical decision making in that younger people are more willing to make unethical decisions that older people (Smith, DeBode, & Walker, 2013).
Laissez Faire Leadership Deluga (1990) defines laissez-faire leadership as leaders who fail to influence subordinates by failing to give guidance. Because the generally abstain from decision making, their subordinates are given a large extent of freedom to make critical operating decisions (Deluga, 1990). Deluga (1990) concluded from his study that subordinates of laissez faire leaders are more likely to operate at their own discretion due to the lack of influence exerted by management (Deluga, 1990). This is congruent with the actions of the Eastern Dairy night shift’s actions. Because there was not active supervision and little accountability for their actions, Paul Burnham felt empowered to stop production activities during the night to horseplay with the other crew members. Hinkin and Schreisheim (2008) argue that the laissez faire leadership’s main characteristic is the absence of the leader’s response to stimuli. The absence of leadership response to poor subordinate performance, termed punishment omission, can have undesired effects (Hinkin & Schriesheim, 2008). Hinkin and Schershiem concluded that a laissez faire leadership that had no response to poor subordinate performance results in a declined performance over time, and that the undesired behavior will continue to be exhibited (Hinkin & Schriesheim, 2008). Hinkin an Schreisheim (2008) also points out that inactive management also creates job dissatisfaction due to lack of reward omission for good performance. (Hinkin & Schriesheim, 2008). Skogstad et al. (2007) asserts that laissez faire leadership is more than just the absence of leadership, but is a destructive behavior that can have effects other workplace stressors such as bullying and psychological distress (Skogstad, Torsheim, Aasland, & Hetland, 2007). Skostad et al (2007) suggests that lack of leadership and communication to the followers has high correlations of role ambiguity and role stress. Additionally, the lack of leadership may create frustration and tension within the work group and could lead to workplace conflict (Skogstad, Torsheim, Aasland, & Hetland, 2007). The lack of leadership in the case supports the assertions in that, the stress of completing the production orders and cleaning the machines by the end of the shift contributed to Burnham decision to remove the filters as well as the peer pressure felt by Stein to follow Burnham’s instructions.
Poor Quality It is clear from the case study that preventative controls to prevent waste of company time and resources were absent from the night operations at Eastern Dairy resulting a poor quality product. Georgis (1973) analyzes the effects of poor quality and the associated costs to the business. Besides the obvious sales impact of defective product, Georgis (1973) identifies other cost drivers such as additional transportation costs return of defective product, additional selling costs incurred to overcome customer perception of an inferior product, and manufacturing costs to sort the good product from the bad (Georgis, 1973). Additionally, Georgis (1973) explains that just as the a reputation for good reliability will positively impact sales, so too will poor quality have its effect on sales and in turn the product’s market share. With continued and pervasive defects in a company’s product, prospective customers will turn to competitors to fulfill their needs (Georgis, 1973). Freiesleben (2005) studied quality from a production cost standpoint. In his model, perfect production leads to the costs being a simple sum of production costs. However, when poor quality is introduced, the direct production costs per unit of sellable product increase with an increase in the defect rate (Freiesleben , 2005). Freiesleben (2005) also noted indirect costs are also affected as a result of poor quality controls. The need and costs for quality inspections and rework of products found defective increase costs as well as the extra time involved slows down productivity (Freiesleben , 2005).
Recommendations
In developing recommendations for this case, it is important to understand the company’s knowledge of the issue at hand. Is Eastern Dairy aware of the seemingly common practice of running removing the filters and allowing contaminated milk shake mix to be placed into production? The answer to this will factor greatly in the recommendations needed. Since the case does not specify, we will assume that the company is simply ignorant and not complicit in the activity.
Company Standards Development of comprehensive message that relates Eastern Dairy’s commitment to ethical practices should be communicated to all employees. Expectations of the minimum standards of acceptable practices would provide a clear direction to the night crew should another dilemma like the one described in the case observes. The alignment of procedures to a code of ethical conduct conveys a sense of honesty and reinforces desirable behavior in subordinates (Kuntz, Kuntz, Elenkov, & Nabirukhina, 2013). In the case, expectations were not congruent with ethical decision making. If Eastern Diary’s goal is to produce a quality milkshake mix, the expectations of the night shift should not be to finish the assigned batch orders by a certain time. If unforeseen circumstances like contaminated ingredients endanger finishing the batch before the end of the shift, operators should not feel time pressures and make decisions that will produce a quality product.
Improved Leadership The absence of supervision and accountability of the night crew stands out as a fundamental breakdown of leadership by the management of Eastern Dairy. Deluga (1990) describes the characteristics of the transactional leadership model as where leaders monitor the behaviors of subordinates and exerts corrective action when expectations are not met (Deluga, 1990). This type of leadership model seems to better fit the arrangement of the night shift. At a minimum, a supervisor should be assigned to this shift to monitor the production activities and ensure that subordinates are making the best use of company time and resources.
Increased Quality Controls The case mentions that the ingredients for the milkshake mix were stored in a warehouse and were occasionally contaminated by maggots. This piece of information casts doubt on any quality controls that may or may not exist. Considering that the product is for human consumption makes even more concerning. Management should consider a review of all methods and procedures surrounding the production of milkshake mix. Investigations into the procedures for ingredient storage, quality inspection of the ingredients prior to processing activities, and post batch testing should begin to point out deficiencies in processes that are sure to effect the quality of milk shake mix produced by Eastern Dairy.

Bibliography
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