Reference no: EM13788538

Your opportunity at Delectables

You are a recent MBA graduate who just received a great opportunity with Delectables Corp., a giant food company known for its sweet snacks and peanut products like peanut brittle, peanut butter, and peanut butter chocolate bars. The new position is an excellent opportunity for you to get hands-on experience in a major company in the food industry. You will be starting as a low-level manager in one of the Georgia-based peanut plants, with the idea that, if you do well, you could be quickly promoted in the company. Delectables has an excellent career ladder. The company likes to promote from within. In fact, almost all of the executives started working in one of Delectables' factories. Most started in the peanut plants, the company's most important facilities.

The economic pressures

You know that you are incredibly fortunate to get the job. It is well paid. Many of your classmates have not been so lucky finding such high-paying jobs during the recession.

However, you are also aware that the company is facing difficulties. Delectables, which commands 35% of the market in the U.S., is facing unprecedented competition from it major competitor Prince's Fare, which used to command 27% of the U.S. market. Both companies also do significant business abroad. Prince's Fare moved most of its peanut and candy plants to less developed countries like Mexico, Brazil, and Paraguay, where labor and raw materials cost a fraction of what they cost in the U.S. Prince's Fare has thus been able to slash prices, while making a profit. Delectables, on the other hand, has stayed in the U.S. The company thus had to choose between keeping its product prices steady -- or potentially losing market share to Prince's Way, with its lower prices. Delectables chose to slash prices, as research showed that customers were becoming increasingly price-sensitive and less loyal to brand as the recession continued.

Earnings from the last two quarters showed a decline in profits. This was reflected in the stock price: while Prince's Fare's stock price shot up 5%, Delectables' fell 6%. Analysts are predicting further declines unless the company does something quickly.

Delectables has also had a minor history of food safety problems. In 2005, two people got salmonella poisoning allegedly from Delectable Peanut Butter. However, it was never confirmed that Delectables' products were the source of the food poisoning.

A few months later, problems emerged in a Georgia plant when a manager blew the whistle and reported that he had found salmonella in peanut butter there. Delectables refused to release its laboratory tests. The Food and Drug Administration (FDA) did not pursue the matter and was unable to confirm the salmonella report. The whistle-blowing manager was fired for what he claims was a pretext. (He had lied on his resume about a masters degree that he never actually received). His lawsuit against Delectables is pending.

Recently, another salmonella food poisoning allegation emerged over Delectables' peanut butter chocolate bars. However, the evidence linking the company to this case is not clear. Delectables' experience with food safety has so far been in contrast to that of some other food companies, whose salmonella outbreaks have been confirmed and cost them millions of dollars in litigation and a loss of market share.

Your hopes as you start your job

Your job is to improve plant operations, increase efficiency, and save costs. You feel very excited about starting your new job. You've already met with the marketing and production teams in your Georgia-based plant. They seem enthusiastic about having you onboard. You hope that, in your new role, you will make a mark in the company.

What you see and learn at work

Quality Control Director's status and process

On your first few days at work, you learn that Delectables had hired a Quality Control (QC) director one month earlier. You are curious about him because you never met him during your many rounds of interviews with the top brass and never heard anyone ever mention him or his position. The factory people never uttered a word about the QC Director either. So, after considerable searching, you eventually find the QC Director's cubicle, which is tucked behind a pile of boxes filled with old papers behind the men's bathroom on the first floor. Peering behind piles of folders, is a very sleep-deprived-looking man who introduces himself as the guy "hired to do quality control." You introduce yourself (standing - since there are no chairs in the cubicle). You ask about the QC program. He explains that since he started he has been suggesting to upper management that there be more statistical inspections of different products. He suggested sampling one jar of peanut butter per production line every ½ hour, as some of the best plants do. His superiors, however, said that was too expensive. They said that their plant could only afford to have one jar per production line sampled every week.

The QC Director explains the process he has established: factory supervisors are to label the boxes with red or yellow stickers. Red signifies certain contamination. If an item is tagged with a red sticker, the entire batch of products that come off that production run must be discarded. Yellow means that the box could be mildly contaminated but that the test results are not dispositive. If one jar has a yellow sticker, all the products that come off the production run should be set aside for further testing. If a box has no sticker, that means that the results did not show contamination.

Back in the factory - what you observe

Walking around the factory floor, you notice that most workers seem indifferent to the new quality control system. Paid by the hour, they don't seem to care or want to understand why some boxes are tagged with stickers. However, the foremen, who are evaluated and rewarded on the basis of the number of finished product boxes they can move out of the factory per day, look highly annoyed. Some laugh at the process; others shake their heads in disbelief.

Yellow and Red tags

You often see the foremen looking through yellow-tagged piles of boxes. They appear to be holding the jars of peanut butter up to the light and then, a few seconds later, rip the yellow stickers off, clearing them for market. When you asked one foreman, Tom, what he was doing, he bruskly replies - "What does it look like I'm doing? Inspecting. Nothing wrong with these jars. I bring them home to eat all the time. We don't need this nonsense with these stickers. . . . Well, you are curious."

One day you hear Tom tell the trash delivery crew not to remove a large pile of boxes of peanut butter with red tags. Tom explains that the jars need to be "inspected" before they can be thrown out. Later in the day, after hours, he returns and rapidly pulls the red stickers off the jars, thus clearing them for sale.

Several other details catch your eye as possible food safety issues. Open crates of raw peanuts are stored right next to open vats of peanut butter. The peanut roaster looks old and rusty. When you ask the foreman if it is calibrated to maintain a temperature adequate to kill deadly germs, he gives you an angry look and does not bother to answer. The workers put on their uniforms at home, which could potentially drag contaminants into the factory.

Also, the roof of the factory and one of the windows leaks after every rainstorm. They were initially damaged in a hurricane. Although Delectables had the initial damage repaired and has workmen clean up after every storm, puddles can sometimes be found when people return to work on Monday after a rainy weekend. Water is a breeding ground for contaminants, including salmonella.

You are wondering what to do.

You are wondering what to do. You are asked to sign a form every month saying that the quality control process is running smoothly. The foremen obviously resent your apparent interest in quality control to begin with. They ignore you and a few of them even temporarily block your way when you walk down the aisle to the machinery. If they speak to you, they keep it short and don't give you any more information than you absolutely need. You know that you need their cooperation to succeed in your job. You believe that, the more you probe about food safety, the less cooperative they become.

Most of the factory workers seem to be following their supervisors' lead. They prefer not to talk to you. Paid minimum wage, most look demoralized. Almost all of them are minorities. A large number do not speak a word of English. You hear rumors that many of them are illegal immigrants.

You also understand that safety is very expensive and the company is hurting financially. You know that, if expenses rise too much, the value of Delectables's stock will go down. The company will lose market share to Prince's Fare. If they have to close factories, thousands of people will be laid off. Given their poor skills, they may not be able to find other jobs easily. And the illegal immigrants will fare ever worse.

You also wonder if higher expenses might not eventually push Delectables to move its plants overseas, as many of its competitors have done.

As for your own prospects in the company, you want to do well and be promoted. But you also don't want to be associated with Salmonella deaths. Your boss has told you that she wishes to cash her stock options next quarter.

Questions:

1. What would you do? Would you blow the whistle?

As you write your mini-essay, please address the following questions. You may weave them into your essay.

• what questions would you ask yourself?
• What theories of business ethics would you use to justify your decisions? What models (e.g. stakeholder or stockholder) would you use? Explain.
• In your discussion of whether you would blow the whistle, please explain how you would think through your decision about whether to do so. Address whether there are any risks in blowing the whistle. If so, what are they? What are the benefits of blowing the whistle?

How do you weigh the risks and benefits to make a decision? What factors would you consider? Would you sign the quality control form?

2. Upper management asks you for advice on how to improve the food safety and quality control situation at Delectables. What would you advise?

As you answer this question, please address the following: what do you think is the root of the food safety and quality control problem at Delectables? Can the Quality Control Director realistically be effective? Explain why or why not. Do you see any problems with upper management? Do you see any issues with the workers and foremen on the factory floor? What are the pressures and challenges that you face in ameliorating quality control at Delectables?