CASE 8-B Changes In The New Economy

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CASE 8-BChanges In The New Economy

• Cory Wilder
• Joel Carrasco
• Jane Nghiem

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Case Introduction

• Precision Bearing Co. makes line of products used
  in aircraft
• Registered several new patents that will
  eventually revolutionize the industry but several
  years of testing and engineering must be
  completed
• Contemplating to outsource 80 of their
  manufacturing overseas which will be 75 less
  expensive
• Concern over impacts of dislocated and remaining
  workers
• Reaction
• Affect productivity

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Responding to the case

• 1. Describe the possible behaviors of the
  remaining employees.
• Mistrust of company
• Anger toward company.
• Lower employee morale.
• Fear of being susceptible to being fired.
• Decreased work effort of employees leading to
  lower productivity.

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Responding to the case

• 2. What do employees expect from their
  employers?
• Job Security
• Equity in salary (outcomes inputs)
• Challenging Goals
• Some kind of Participation
• Correct Job Design

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Responding to the case

• How has this changed in the last few years?
• Increased Globalization leading to outsourcing,
  since companies want to increase labor while
  decreasing costs, causing downsizing because of
  cheaper labor overseas.
• Other changes include
• Unstable Market Segments (online companies)
• Automated Means of Production

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Responding to the case

• 3. How will the employee stock ownership plan
  affect the plans of the company?
• The ESOP can be used to enhance performance for
  the remaining employees.
• It gives employees partial ownership of the
  company.

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Summary

• Precision Bearing Co. is planning to outsource
  their manufacturing in order to lower labor
  costs. This will lead to significant rewards for
  the company, but it has a major impact on their
  workers.
• The reaction of the remaining employees will
  include mistrust and anger. The lower morale
  will lead to lowered productivity.

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Summary cont.

• Employees expect job security, fair pay,
  participation and reasonable goals.
• Today, outsourcing has become a favorable choice
  as globalization increases.
• ESOP can increase positive production and
  employee satisfaction.

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What We Learned

• Outsourcing can lead to downsizing of the present
  employees which can lead to their mistrust.
• Employees expect the right outcomes for their
  inputs.
• ESOPs gives employees the incentive to work
  harder.