Employees at a Specialty Steel Company Are Divided into the 'Hot

question 91

Essay

Employees at a specialty steel company are divided into the 'hot end' and the 'cold end' of the production process. The hot end forms the steel rods that make their way down the line to the cold end, where they are packed for shipment to clients. Employees at the cold end are primarily responsible for quality control because they are the last ones to see the product before it leaves the plant. Their performance is measured by an index of customer complaints and returns, so they are motivated to reject any rods that don't meet quality standards. But employees at the hot end of the production line earn bonuses based on their output and rejection rate. The fewer rods rejected by employees at the cold end, the fatter the bonuses of employees at the hot end. This creates conflict between the hot-end and cold-end employees. Hot-end employees complain that their cold-end colleagues are too fussy about product quality. Cold-end employees don't like the hot-end employees questioning their quality control decisions. Discuss the source(s) of conflict in this situation and recommend a solution to this conflict.

---

Definitions:

Price Controls

Government-imposed limits on the prices that can be charged for goods and services, often aimed at curbing inflation or protecting consumers.

Market Efficiency

A condition in which market prices fully reflect all available information, allowing for optimal allocation of resources without waste.

Non-price Factors

Elements that influence consumer decision making and market trends, such as product quality, brand loyalty, and consumer preferences, aside from the price.

Rent Control

Government-imposed limits on the amount landlords can charge for leasing property, intended to keep housing affordable.