Chapter 10 – Page 3 – The OM Blog by Heizer, Render, & Munson

OM in the News: The NBA’s “Dirty Little Secret”

“There’s not a factory on the planet,” says one scientist, “that would move shift workers the way we move NBA players.”

IT’S THE AFTERNOON of Feb. 26, during a 3-games-in-4-nights stretch, and Miami Heat center Hassan Whiteside is on a roll. Tomorrow night, his Heat will host the Golden State Warriors, then fly to Houston to face the Rockets on Feb. 28. But now he’s rattling off what time the Warriors game will end (10 p.m.), when they’ll board their flight (after 11:30), when they’ll land in Houston (2 a.m.) and arrive at the hotel (3 a.m.) before playing the Rockets later that day.

Sleep matters, Whiteside says — it matters a lot. It “could be the difference between you having a career game or playing terrible.” Is it possible within the current NBA schedule to obtain consistent, quality sleep? “Nah,” Whiteside says. “It’s impossible. It’s impossible.”

Fatigue has long been a reality of life in the NBA, a league with teams that play 82 games in under 6 months and fly up to 50,000 miles per season — enough to circle the globe twice, reports ESPN.com (Oct. 14, 2019). Over the 2018-19 season, the average NBA team played every 2.07 days, had 13.3 back-to-back sets and flew the equivalent of 250 miles a day for 25 straight weeks.

Despite the league’s best efforts — lengthening its schedule in recent years, reducing back-to-backs for 5 straight seasons (down to an average of 12.4 per team in the coming season), eliminating 4-in-5 stretches, reducing the nationally televised games that tip off at 10:30 p.m., creating more rest days — sleep deprivation remains “our biggest issue without a solution. It’s the dirty little secret that everybody knows about,” says an NBA exec.

“I think in a couple years,” Tobias Harris says, “sleep deprivation will be an issue that’s talked about, like the NFL with concussions.” During the season, its estimated that players get 5 hours sleep per night. Chronic sleep loss has been associated with higher risk for cancer, diabetes, obesity, heart disease, heart attacks, Alzheimer’s, dementia, depression, stroke, psychosis and suicide.

Classroom discussion questions:

How is this an OM issue?
What can be done to alleviate the problem, and what dangers are possible if it isn’t addressed?

OM in the News: The Rise of the Exoskeleton

In the weld shop of Toyota’s huge Ontario plant, workers inspect the steel frame of a RAV4. The men raise their arms overhead as they move ultrasonic wands over metal to test the integrity of dozens of welds. Until a few months ago, this task was performed by seated workers wielding hammers and chisels. But the latest RAV4 uses a lighter, stronger steel that requires ultrasonic testing. A new frame arrives every 60 seconds. The prolonged reaching is shoulder-breaking work, the kind that can lead to debilitating injuries and decreased productivity.

But these workers are assisted by exoskeletons, wearable devices made by Levitate Technologies. The upper-body frames use a system of springs, cables and pulleys to transfer weight from the arms to the outside of the hips, easing the strain of overhead work. When a worker raises his arms, the exoskeleton provides a counterweight that makes the arms feel buoyant, as if the upper body is suspended in water. The system gradually releases as the limbs are lowered, allowing the arms to hang unassisted.

Exoskeletons may one day become commonplace on factory floors, construction sites and film sets. Toyota is the first large manufacturer to require the use of exoskeletons, but Ford uses about 100 exoskeletons across 16 plants in 8 countries. BMW has 66 in use at its Spartanburg, S.C., plant, while Boeing will use a couple hundred by mid-year.

There are upper-body, lower-body and full-body models. Most range in price from $4,000-$6,000, weigh 5-10 pounds and require a one-time adjustment to a user’s frame. Factory workers who’ve tried exoskeletons report less back and shoulder pain, and go home at night more active and relaxed. “Ultimately,” writes The Wall Street Journal (Jan. 19-20, 2019), “the hope is that the devices will reduce work-related musculoskeletal disorders, which cost employers about $50 billion annually.”

Classroom discussion questions:
1. What is ergonomics and how is this an ergonomic device?

2. What other issues in the work environment can impact performance, safety, and quality of life?

OM in the News: China, High-Tech, and the 996 Schedule

“Crazy Work Hours and Lots of Cameras: Silicon Valley Goes to China,” is the title of the New York Times article (Nov. 6, 2018), describing the visit by US high tech execs to China.

A Chinese voice-controlled A.I.-powered family robot

The Silicon Valley natives were introduced to the Chinese concept of 996: Work from 9 a.m. to 9 p.m., 6 days a week. One Chinese technology executive said he worked 14-15 hours a day at least 6 days a week. Another said he worked every waking hour. The reaction from a group of Silicon Valley executives: Wow! “We’re so lazy in the U.S.!” blurted a venture capital investor.

Chinese technology executives, they found, were even more driven and more willing to do whatever it takes to win. But punishing work schedules are only the beginning. They found Chinese tech executives to be less reflective about the social impact and potential misuse of their technologies, a worrisome quality in a country with loosely enforced privacy laws, strict government censorship and a powerful domestic surveillance.

The Americans got upfront lessons on how quickly China embraced mobile phones, electronic payments and video streaming, and how intensely it has pursued artificial intelligence. (For example, mobile payments are almost ubiquitous in the biggest Chinese cities, but setting up an account requires a local mobile number and a Chinese bank account). In addition, everything seemed to be moving at an extraordinary speed. While Silicon Valley start-ups raise funding every 18 to 24 months on average, the most successful Chinese companies do it every 6 months. They also found that everybody working in the firms visited is Chinese. Even in its early days, Google had employees from 39 nationalities speaking 40-plus languages.

Classroom discussion questions:

Compare the U.S. to Chinese high-tech work styles.
Would the 996 concept work in the U.S or Europe?

OM in the News: Time & Motion Studies and Knee Surgery

“Competitive forces are out of whack in health care,” writes The Wall Street Journal (Aug. 22, 2018). Hospitals are often ignorant about their actual costs. Instead, they often increase prices to meet profit targets. For nearly a decade, Gundersen Health System’s hospital in Wisconsin boosted the price of knee-replacement surgery 3% a year till the list price was more than $50,000, including the doctors. Yet administrators admitted they had no idea what it cost to perform the surgery—the most common for hospitals outside of childbirth.

So during an 18-month review, a Time & Motion expert trailed doctors and nurses to record every minute of activity and note instruments, resources and medicines used. The hospital tallied the time nurses spent wheeling around VCR carts, a mismatch of available postsurgery beds, unnecessarily costly bone cement, and delays dispatching physical therapists to get patients moving. The actual cost? $10,550–everything included. On average, a nurse assistant needed 10 minutes to collect personal items from patients before surgery. A technician took another 20 minutes to insert an IV into patients. Time spent in Gundersen’s operating room—the most expensive minutes of a patient’s hospital visit—averaged 95 to 105 minutes.

On busy days, the hospital had no available beds for knee-replacement patients after surgery. Patients with nowhere to go remained in temporary postsurgical units for as long as 24 hours, prolonging their recovery. Also, the hospital had been exclusively using brand-name cement, premixed with antibiotics. It slashed its cement costs by 57% by switching to a generic, which can be used with the same results. Changes to this series of processes means the knee surgery now costs the hospital an average of $8,700 to perform, an 18% savings. The more Gundersen wrings from its costs, the more profit it earns.

It turns out that on knee-replacement surgery, higher-cost U.S. hospitals spent almost twice the amount lower-cost hospitals spent, despite similar quality and comparable patients.

Classroom discussion questions:

What tools in Chapter 10 were likely used in this study?
What might be the hospital’s next step to improve operational efficiency?

OM in the News: An Airplane Seat that’s Ergonomic?

A coach seat designed for a Singapore Airlines premium economy cabin under construction at the Zodiac Aerospace factory in Gainesville, Texas

Do you ache all over after flying in a coach seat? That could be by design. Airlines have lots of choices when they order seats for their airplanes. Those selections go a long way to determining how comfortable—or uncomfortable—their customers will be. (See The Wall Street Journal (July 19, 2018) and (July 25, 2018).)

The seat bottom is one of the most crucial elements in seat comfort, and one of the most carefully studied. Longer is better: You get more support under your thighs. Most U.S. airlines go with an average of about 18 inches. Singapore Airlines designed a Zodiac brand seat for its premium economy cabins on long-range Airbus A350s that has a 19-inch seat bottom. Those seats also have leg rests, which can take strain off muscles and increase blood flow.

Another airline choice that affects your comfort: how high the seat is off the floor. About 18 inches is standard, but some European airlines with generally tall clientele want seats constructed higher, so long legs rest more naturally. Some Asian airlines order seats at 17 inches cushion height. Airlines have their long-held prejudices on seats. Some prefer a firm cushion. Others want softer. Even when manufacturers suggest one particular firmness that they think provides ideal support and comfort for most passengers, some airlines insist on modifications.

Manufacturers say they can achieve greater comfort when the support materials and padding distribute weight so that as little as possible falls on a pair of bones on the bottom of the pelvis. To test designs, manufacturers typically recruit lots of volunteers to sit in seats for hours, recording both data and comments on how uncomfortable they are. Zodiac offers a 2-hour seat, a 2-to-6 hour seat and a seat for flights 8 hours or longer.

Classroom discussion questions:

Why is an ergonomic chair an OM issue?
Compare the seats at various airlines. How do they relate to corporate strategies?

OM in the News: Life and Death on the Third Shift

Every day at Tyson Foods’ cavernous meatpacking plant in Holcomb, Kansas, 6,000 cows clamber off waiting 18-wheelers. They’re watered, then ushered into the kill box. After the heads, hides, and hooves are removed, the carcasses are sawed in half, checked by U.S.D.A. inspectors, and sent down conveyor belts to be butchered, boxed, and bar-coded by 3,800 workers in 2 shifts. The journey takes 40 minutes.

After 11 p.m. the procession halts, and the sanitation crews move in. The only slaughterhouse job worse than eviscerating animals is cleaning up afterward. These “third-shift workers” wade through blood and grease and chunks of bone and flesh, racing all night to hose down the plant with disinfectants and scalding water. The stench is unbearable.

The cleaning crew is not employed by Tyson, however. Packers Sanitation Services, the nation’s largest cleaning contractor to the food industry, staffs the hard-to-fill night shift jobs. Packers pays their workforce $11.86/hour, 1/3 less than what production employees earn.

“Such is the genius of outsourcing,” writes Businessweek (Jan.8, 2018). In an era of heightened concern about food safety, meat and poultry producers are happy to pay sanitation companies for their expertise. The sanitation companies also assume the risk of staffing positions that only the desperate will take—largely undocumented immigrants. And they relieve the big producers, such as Tyson and Pilgrim’s Pride, of responsibility for one of the most dangerous factory jobs in America.

No one knows exactly how many sanitation workers get injured on the job, as OSHA doesn’t require plants to report contractors’ injuries. Judging from Packer Sanitation’s record, the nightly storm of high-pressure hoses, chemical vapors, blood, grease, and frantic deadlines, all swirling around pulsing belts, blades, and blenders, can be treacherous. Packers has the 14th-highest number of severe injuries—defined as an amputation, hospitalization, or the loss of an eye—among the 14,000 companies tracked by OSHA. Adjusting for size, Packers tops the danger list by a wide margin, with a rate of 14 severe injuries for every 10,000 workers. Its amputation rate of 9.4 dismemberments per 10,000 workers is 5 times higher than for U.S. manufacturing workers as a whole.

Classroom discussion questions:

As the boom for cheap protein creates yet more demand, how can operations managers deal with the 3rd shift issue?
Who is most responsible? OSHA? Tyson? Packers?

OM in the News: Ergonomics and the “Incredible Shrinking Airline Seat”

Many carriers have been finding ways to put more, smaller seats in cabins.

Spirit Airlines, at least, is honest about the tight quarters on its planes. “We’re a cozy airline,” it says on its website. “We add extra seats to our planes so we can fly with more people. This lowers ticket prices for everyone, just like a car pool.” It’s not news that airlines have been squeezing more — and smaller — seats into the backs of their planes. The people who run revenue departments — want more seats on planes. They’re up against the marketing people, who are trying to act as their passengers’ advocates.

“To accommodate the airlines, seat manufacturers have been skimming and trimming from just about every dimension, relocating the seatback pocket, replacing padding with elastic mesh and whittling down the armrests,” writes The New York Times (Nov. 7, 2017). While low-cost airlines like Spirit have narrowed the distance between rows of seats to as little as 28 inches, most of the big carriers have kept the distance (seat pitch) at 30 inches. Anything less pushes already travelers to their limits.

“We’ve been using a lot of advanced materials, a lot of composite materials, to allow the actual physical structure to get smaller,” said the VP of a seat manufacturer. “We’ve also removed a lot of the hard points in the seat and gone to fabric suspension systems, leading to seats more akin to ergonomic desk chairs. The less size that the seat structure itself takes up, the more space that’s left over for the passenger.” Or, as the case may be, for more passengers.

Airlines contend that improved ergonomics and, in some cases, slightly wider seats make up for a tighter pitch. But passengers have been getting taller and wider, and regulations still stipulate that planes have to be able to be evacuated in just 1.5 minutes. The seats were originally designed for men who averaged 5′ 10″ and 170 pounds. Right now, the average man is just under 200 pounds.

Classroom discussion questions:
1. How is ergonomics an OM issue?

2. Make the case for more space–then for tighter seats.

OM in the News: IBM Says No to Home Work

“IBM is giving thousands of its remote workers in the U.S. a choice this week: Abandon your home workspaces and relocate to a regional office—or leave the company,” reports The Wall Street Journal (May 19, 2017). The 105-year-old giant is dismantling its popular decades-old remote work program to bring employees back into offices, a move it says “will improve collaboration and accelerate the pace of work.” IBM’s decision is a useful resource when you discuss work schedules in Chapter 10.

The shift is particularly surprising since IBM has been among the business world’s staunchest boosters of remote work, both for itself and its customers. It markets software and services for what it calls “the anytime, anywhere workforce,” and has published numerous studies on the merits of remote work. IBM has boasted that more than 40% of employees worked outside traditional company offices, and just posted a May 4th blog that “telework works.”

IBM may be part of a broader rethink of remote work under way at large companies, as CEOs argue that putting workers in the same physical space hastens the speed of work and sparks innovation. Employers tread a fine line, however, since workers rate flexible-work programs highly, and research has found telecommuters often work more effectively than their cubicle-bound counterparts. (Companies began offering generous remote work policies because they expected large savings in office and real-estate costs, but those savings haven’t always materialized).

IBM workers have been given 30 days to decide whether to move to company-maintained office space that can be hundreds of miles away from their homes. Those unwilling to move were also given 90 days to seek another role within IBM.

Classroom discussion questions:

What are your personal experiences with remote work?
What are the advantages and disadvantages of teleworking?

OM in the News: Ethical Dilemmas in U.S. Auto Parts Plants

Alabama has been trying on the nickname “New Detroit.” Its burgeoning auto parts industry employs 26,000 workers, who last year earned $1.3 billion in wages. Georgia and Mississippi have similar, though smaller, auto parts sectors. This factory growth, after the long, painful demise of the region’s textile industry, would seem to be just the kind of manufacturing renaissance the U.S. needs.

“Except that it also epitomizes the global economy’s race to the bottom,” writes Businessweek’s cover story (March 27-April 2, 2017). Parts suppliers in the American South compete for low-margin orders against suppliers in Mexico and Asia. They promise delivery schedules they can’t possibly meet and face ruinous penalties if they fall short. Employees work ungodly hours, 6-7 days a week, for months on end. Pay is low, turnover is high, training is scant, and safety is an afterthought, usually after someone is badly hurt. Many of the same woes that typify work conditions at contract manufacturers across Asia now bedevil parts plants in the South. In 2015, the chances of losing a finger or limb in an Alabama parts factory was double the amputation risk nationally for the industry, 65% higher than in Michigan and 33% above the rate in Ohio–both union states.

Korean-owned plants, which make up roughly a quarter of parts suppliers in Alabama, have the most safety violations in the state, accounting for 36% of all infractions and 52% of total fines, from 2012-2016. According to OSHA, one of them, Matsu Alabama, had provided no hands-on training, routinely ordered untrained temps to operate machines, sped up presses beyond manufacturers’ specifications, and allowed oil to leak onto the floor. “Upper management knew all that. They just looked the other way,” said a staffing specialist. “They treated people like interchangeable parts.”

Classroom discussion questions:

The Ethical Dilemma exercise in Chapter 10 describes Johnson Foundry. Have your students read this Businessweek article and compare the two stories.
What does the article mean by “race to the bottom?”

OM in the News: AI and Human Resource Strategy

The growing use of AI in the workplace raises many ethical questions.

“Artificial intelligence (AI) is changing the way managers do their job–from those who get hired to how they are evaluated to who gets promoted,” writes The Wall Street Journal (March 13, 2017). Here are 4 examples:

Companies use AI to help them find the best candidates for jobs. Such software often spots the most promising resumes among what may be an unmanageable deluge, or it widens the net so employers can find a more diverse pool of candidates. SAP’s Resume Matcher software reads Wikipedia entries to understand job descriptions, related skills and so on. Then it correlates what it learned with resumes along with notes on whether a given applicant was shortlisted, interviewed, hired and the like.

Once managers have hired ideal candidates, AI can help keep them productive by tracking how they handle various aspects of their jobs—starting with how they use their computers all day. Veriato makes software that logs virtually everything done on a computer—web browsing, email, chat, keystrokes, document and app use—and takes periodic screenshots.

Companies can also track employees’ whereabouts in the office. Bluvision makes radio badges that track movement of people in a building, and display it in an app and send an alert if a badge wearer violates a company policy—say, when a person without proper credentials enters a sensitive area. The system can also be used to track time employees spend at their desks, in the cafeteria or in a restroom.

AI can also help managers peer into personal aspects of job performance that used to be left up to observations—for instance, attitudes toward the job. Veriato analyzes email and other messages, looking at words and phrases employees use. Then it scores those expressions for positive or negative sentiment. The system can set a sentiment baseline over time.

Classroom discussion questions:

Discuss the ethical issues here.
How else might AI help a company’s human resource strategy?

Video Tip: Using Our Five Alaska Airlines Video Case Studies

Barry and Jay filming in an Alaska Airlines cockpit — Barry and Jay filming the videos in an Alaska Airlines cockpit

The Wall Street Journal‘s annual scorecard of U.S. airline performance (Jan. 12, 2017), which ranks major carriers on 7 different measures important to travelers, has just been released. We note that the company we prominently feature in our latest edition, Alaska Airlines, topped the scorecard as the best overall performer for the 4th-straight year, edging out Delta. Alaska also scored 1st in: on-time arrivals, least extreme delays, least 2-hour tarmac delays, and in least number of complaints. It was 3rd in cancelled flights and involuntary bumping, and 4th in mishandled bags.

The Seattle-based airline says its poor baggage showing in the 2016 scorecard drove a deep study of which flights were causing the most mishandled bags. Alaska began bar-code scanning of every bag going on and off planes. It also figured out which cities, which shifts and which flights had the most problems and found delays with bags transferring from other airlines. So instead of waiting for bags to come through an airport sorting system, Alaska now takes carts to other airlines in Seattle and waits for connecting bags at the tails of arriving airplanes.

Here are the 5 short videos we provide free to adopters:

Quality Counts at Alaska Airlines (Ch.6): “If it is not measured, it is not managed,” says one Alaska exec in this case that provides explicit performance metrics.

Alaska Airlines: 20-Minute Baggage Process–Guaranteed! (Ch.7): Students can flowchart the process a bag follows from kiosk to destination carousel after watching this video.

The People Focus: Human Resources at Alaska Airlines (Ch.10): The employee “Empowerment Toolkit” reminds us of Ritz Carlton’s famous customer service philosophy.

Lean Operations at Alaska Airlines (Ch.16): The company’s aggressive implementation of Lean includes its 6-sigma Green Belt training, Kaizen events, Gemba Walks, and 5S applications.

Scheduling Challenges at Alaska Airlines (Module B and Ch.15): Good scheduling of crews and planes means optimization–the perfect fit for our coverage of LP and scheduling.

OM is indeed a centerpiece of Alaska’s success and we think your students will enjoy these videos.

OM in the News: Happiness From a Shorter Workweek Can’t Overcome Costs

A Swedish nurse says the 6-hour workday raised her efficiency

A controversial experiment with a 6-hour workday in Sweden just wrapped up with a cheerful conclusion: Shorter working hours make for happier, healthier and more productive employees. “There’s just one catch,” writes The New York Times (Jan. 7, 2017). “The practice is too expensive and unwieldy to become widespread in Sweden anytime soon.”

The 2-year trial centered on a retirement home where workers were switched to a 6-hour day, from 8 hours, with no pay cut. Seventeen new nursing positions were created to make up for the loss of time at a cost of $738,000 a year.

The experiment stoked discussion about whether investing in a better work-life balance for employees benefits the bottom line for companies. But the high price tag and political skepticism are likely to discourage widespread support for taking the concept nationwide. While a growing number of countries and companies are studying the concept of employee happiness, the idea of improving it through shorter work hours has by no means gained broad traction. A similar model in France has been controversial for more than 15 years, ever since a Socialist government made a 35-hour workweek mandatory. Companies of all sizes in France have complained repeatedly that the short workweek has damaged competitiveness and generated billions in additional costs.

In the Swedish experiment, employees reported working with greater efficiency and energy when their hours were cut. They called in sick 15% less than before and perceived their health to have improved 20%. The program increased costs by 22%, mostly to pay for new employees. However 10% was offset by reduced costs to the state from people being taken off the unemployment rolls and paying taxes into the system.

Classroom discussion questions:

Do your students believe “we should work to live, or live to work?”
What are some companies in the U.S. doing to improve working conditions?

OM in the News: Amazon Revs Up Its Warehouses

An employee at Amazon's center in Schertz, Texas — An employee at Amazon’s center in Schertz, Texas

“This year alone, Amazon has built 26 new warehouses, bringing its world-wide total to 149,” reports The Wall Street Journal (Nov. 29, 2016). And it wants its new warehouse employees to get to work—fast. To prepare for the flood of holiday orders already under way, Amazon has been using technology ranging from touch screens to scanners to robots to shrink the time it takes to train new hires to as little as 2 days, compared with up to 6 weeks for a conventional warehouse job. The shorter training period saves Amazon money as it expands its workforce by 40%, adding 120,000 U.S. temporary workers for the peak holiday sales season. These types of workers can stay on from 6 weeks to 3 months to drive forklifts or pick orders.

Amazon trainees get hands-on training as early as their first day on the job. On the warehouse floor, they learn how to pack up shipments, coached by a screen that tells them which box size to use and automatically spits out a piece of tape to fit it. In conventional warehouses, by contrast, new employees typically spend their first days in classroom training.

A typical Amazon warehouse has loading docks for trucks to pull up to on either side to keep merchandise moving through. Two shifts keep operations running nearly 24 hours a day as the holidays approach, with groups of employees keeping goods moving along an 8-mile maze of conveyor belts. Orange robots that move faster than humans carry shelves full of merchandise to stations where workers can reach them. Screens show the workers what the desired item looks like and where it is placed so they can pluck it off the shelf quickly and accurately. That’s a far cry from a conventional warehouse, where workers have to memorize—often by location number—where items are stored, and then go looking for them when needed.

Classroom discussion questions:

Is it difficult to recruit workers for these short seasonal jobs?
Who are the typical recruits?

OM in the News: Walmart’s New Approach to Increasing Productivity–Pay Employees More

A Walmart trainee perfecting a cereal display in Fayetteville, Ark. — A Walmart trainee perfecting a cereal display.

“WalMart is discovering that, sometimes it is in an employer’s best interest to pay more than necessary to get a worker into a job,” reports The New York Times (Oct.16, 2016). The 18th-century economist, Adam Smith, described the need to pay a goldsmith particularly well to dissuade him from stealing from you. More recently, economists have found evidence that people are more productive when they are paid above the market rate. An employee making more than the market rate, after all, is likely to work harder and show greater loyalty. Workers who see opportunities to get promoted have an incentive not to mess up.

There is evidence of this in practice. Higher pay at New Jersey police departments, for example, led to better rates of clearing cases. At the San Francisco airport, higher pay led to shorter lines for passengers. Among British home care providers, higher pay meant less oversight was needed.

Why a change of heart at Walmart? Because just a few years ago, shoppers were fed up. They complained of dirty bathrooms, empty shelves, endless checkout lines and impossible-to-find employees. Only 16% of stores were meeting the company’s customer service goals. Sales fell for 5 straight quarters, and shareholders were screaming. As an efficient, multinational selling machine, the company had a reputation for treating employee pay as a cost to be minimized. So Walmart turned to the idea of “efficiency wages,” namely, pay workers more than the going rate will get more loyal, harder-working, more productive employees in return.

First Walmart planned 200 training centers to offer a clearer path for hourly employees who want to get on the higher-paying management track. Then it raised its hourly pay to a minimum of $10 for workers, and to $15 an hour (from $12) for department managers. Third, it offered more flexible and predictable schedules to workers. Average pay for a nonmanagerial employee is now $13.69 an hour, up 16% since 2014. The results: this year, the proportion of stores hitting their targeted customer-service ratings has rebounded to 75%. Sales are rising again.

Classroom discussion questions:

Discuss the pros and cons of efficiency wages.
What impact will Walmart’s changes have on the entire retail industry?

OM in the News: How Much Should Employees Be Monitored?

Harvard Professor Ethan Bernstein asks the question: How well do workers perform when they are being monitored (Chicago Tribune -April 4, 2016). “Unrehearsed, experimental behaviors sometimes cease altogether,” says Bernstein. “Wide-open workspaces and copious real-time data on how individuals spend their time can leave employees feeling exposed and vulnerable.”

To conduct his research, Bernstein embedded 5 Chinese-born Harvard undergrads into the lines of the world’s second largest mobile phone factory, located in China. The 5 worked, ate, and lived alongside their coworkers, who were not privy to the experiment. Here’s what they observed: Even seemingly unremarkable behavior–such as wearing rubber gloves when assembling or handling components–changed immensely, because the employees knew they were being watched. Factory rules stated that line workers were supposed to wear gloves. But students noticed that when the workers were unobserved: “People either wear a glove on only one hand or they cut their gloves so their fingertips stick out, giving them a bare hand or bare fingertips so when they are doing little things it goes a lot faster.” On the macro level, this reveals employees obey glove procedures only when they’re watched. On another level, it suggests that the gloves are poorly designed; that employees will break rules (and endure safety risks) to meet productivity goals; and that management has possibly overstressed productivity at the expense of safety.

Bernstein also noticed that factory teams worked faster–that is, they were more productive–when they were unobserved. Bernstein set up curtains around 4 of the factory’s 32 lines, shielding the workers on those lines from observation. “Over the next 5 months, to my surprise, the lines with curtains were 10-15% more productive than the rest,” he says. By contrast, the employees on regularly observed lines routinely hid process improvements from managers. The reason? One worker said that it was “most efficient to hide it now and discuss it later. Everyone is happy: They see what they expect to see, and we meet our targets.”

Classroom discussion questions:

Describe the 4 measures for measuring work (see Chapter 10).
Do you think Bernstein’s conclusions relate to all fields?