Johnsonville Sausage Company Case Study

Johnsonville Sausage – Quality Improvement through Change Situation Post 1980, Ralph Stayer began to observe decline in quality due to inattention of the workers as well as ill-maintenance of the equipment in the production unit. With the help of Mr. Lee Thayer, Stayer has planned to implement a major change in the company’s philosophy. Transition from old philosophy purged Stayer’s responsibilities of decision making by decentralizing the power of decision making. The new philosophy was implemented to bring out changes in various departments of the company viz.

management structure, personnel, compensation, manufacturing and also systems and controls. According to Thayer’s new philosophy, performance of the personnel and requirement of guidance to personnel to achieve their objectives were the key elements. Management structure was broken down by hiring experienced personnel for the new superior level management to oversee finance, marketing and operations functions. Stayer emphasized people development as the core element of the new philosophy. Changes in personnel include development of list of responsibilities by the workers themselves and eliminating the performance review process.

These changes in personnel function led changes in compensation with the implementation of “company performance share” program which increased individual responsibility of workers. However this transition was not in agreement among workers while some are excited about it. In terms of manufacturing changes, lead persons were installed at various departments, eliminating supervisors, to seek information and provide necessary measures to train and improve capacities of workers under designated group. Responsibilities of lead person also include development of budget planning and production requirement planning.

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Job switching and alternating works were practiced to enrich workers’ capabilities and enhance performance and also job satisfaction. System and controls changes included individuals to develop and be accountable for their own budgets and forecasts and also allow them to analyze performance data. In addition, subordinates were needed to self-evaluate their performance to respective managers. Problem The main issue of the case is the resistance shown by the personnel towards the company’s philosophy transition. According to Stayer, upon implementation of new philosophy, workers at all level were expected to embrace the change.

Johnsonville Sausage Revenue

Instead, the company faced issues related to the final goal of the implementation, unsuccessful organization structural changes, clash of responsibilities among the workers, participation of less number of employees in the company decision making process and finally lack of high job satisfaction. However, these issues were expected to expire once the transition is complete. Palmer Sausage offered its consolidated business to Johnsonville but the issue here was whether Stayer could handle an expanded Palmer contract.

Stayer examined the situation by understanding that in order to run the contract the company would require to recruit and train a big set of people along with existing people acquiring new skills and retain high quality on both the in-house and Palmer products. In order to achieve this, Johnsonville needs to run the production six or seven days a week for more than a year until its new plant was ready. On the other hand, the company may need to run the business at risk i. e. , if Palmer canceled the contract with 30-day prior notice leaves Johnsonville not only with massive layoffs and but also huge inventory with no market for it.

Analysis As the year 1980 folded, Stayer recognizes to restructure his management structure for the growing company. Stayer also realized that there was decline in the quality of the products and employees were also demotivated to work. Later on, in collaboration with Thayer Lee, Stayer has planned to implement new philosophy which is focused on performance and helps people accomplish their objectives through well-defined job descriptions, clear understanding on performance standards, and providing the required resources. Johnsonville’s new values are based on deep moral commitment to the individual.

The main aim of the transition is to augment people capacities, rather than the business. Stayer changed view of his autocratic leadership to a role as a leader delegating his subordinates rather than directing them. Furthermore, the new philosophy also motivated each worker to commit to the company’s betterment. Upon full transition, Stayer expects to create an atmosphere of constant learning and development. The transition also supports creativity, encourages responsibility, and empowers employees to develop solutions rather than simply follow orders.

Over the period of time, the company’s organizational structure was transformed in support to the new culture of worker empowerment. Autocratic management was decentralized in order to become more democratic. Conventional management position were replaced by lead persons and their teams who controlled their own compensation, hiring, firing, quality control, and near-and long-term company goals. Several ground-breaking solutions were instigated and evaluated and each member of the company was involved for the company’s success.

Moreover, a rewarding compensation system was implemented to retain employees and hone their skills and performance. Over-the-time, Stayer had achieved a complete organizational transformation successfully. In terms of Palmer’s offer, Stayer has two recommendations – either he can accept or decline to take over the Palmer’s business. If Stayer had taken over the business, they might have the advantages of the opportunity for growth and additional revenue. On this regard, private label business offers a 25% return on assets.

Contrariwise, the deal clashes with Johnsonville’s recent business strategy which prevents the company to push private label business over 15%. The company could compete for capital with the rest of the business once it crosses 15%. In addition to this, the company, while in contract with Palmer, is producing at huge capacity utilization. If the deal is on then the company might need to execute two long shifts for six or seven days a week in order to process the new business. Recommendation At this stand-off point, Johnsonville could be advised to accept Palmer’s deal which help the former to tap the revenue and growth opportunities.

Stayer’s Johnsonville should continue to implement its new philosophy in a way that it does not affect the previous work-culture. During the agreement, Stayer should continue to involve employees in the decision making process to accept the private label business and planning to handle the additional workload as well. Apart from this, Stayer is required to motivate his teams to meet for evaluating staffing requirements, production and quality goals. With the involvement of workers and assigning responsibility for the important decisions, Stayer will help secure their buy-in for tackling the challenges ahead.