Julian Collins is the Director of Operations of Fresh Taste Inc. (FTI), a world leader in meat-based packaged products. He is facing the situation thattheir biggest plant located in Omaha, Nebraska has equipment that are starting to become obsolete, and because their profits have gone down, due to the increasingly enter of new competingproducts, it has affected the company’s ability to make investments in order to modernize the plant.
Julian knows that their labor expenses are a problem so he is willing to find a way toincrease productivity levels in order to return Omaha’s profitability to positive numbers. FTI’s labor costs are higher than industry averages because over the last years some of FTI’scompetitors went into bankruptcy, allowing them to renegotiate lower salaries with workers. So Julian has two options, either approach the FTI Labor Union (FTU), which is unlikely to accept his offerbecause they are still upset for a wage cut suffered in 2008, or rely on the company’s Hawthorne plant that ran some experiments suggesting improving lighting conditions that would increaseproductivity. He believed that that if lighting did increase Hawthorne’s productivity, it could improve in other FTI’s plants.
The Hawthorne Experiments were a series of lighting experimentsthat the FTI’s Hawthorne ran in 2007. The plant foreman said that the workers cannot see what they are doing so if the lighting system was improved they could work faster and do more.Management knew that installing a whole new permanent system was too costly, so they decided to bring portable generators and free-standing halogen light systems and install them in three differentdepartments. The comparison between the current results and the experiments would be used to decide whether or not to raise the necessary capital to install a new permanent lighting system.