Rio Cosmetics has chosen to concentrate its effort on what it regards as the most lucrative section of the market. As its marketing manager says, 'We've gone for short-term profit maximisation - rather than for diversification.' Its production is therefore concentrated on a single tube of deodorant marketed under the brand name 'Freche'. The product is heavily advertised on TV and Rio has made considerable profits over the past 5 years. However, a substantial competitor has now entered the market, and Rio's share of the market has dropped to 18 per cent, its lowest level in three years.
The board is now looking for explanations. They have asked for reports from the Sales and Production Departments. They have also asked the Personnel Department to report on some disturbing statistics regarding the workforce. In particular:
1. There has been a dramatic increase in absenteeism over the last year.
2. Although the number of line workers has remained fairly stable (at around 2115 during the last four or five years), weekly average output has fallen from 312 000 to 287 000 units.
3. During the last year 21 per cent of the line workers have been late at least once a week, in spite of the fact that they lose a quarter of an hour's pay when this happens. (Before this year the figure was fairly constant at around 10 per cent.) In addition, within the past four months, the number of consumers complaining direct to the company has doubled according to the information supplied by the Quality Control Department, who keep a record of the number of letters received each week. They advise that the majority of these complaints have been traced back to what they describe as 'human errors' on the production line. Furthermore, three serious cases of pilfering have been notified by the Security Section within the past week.
Other information available
The rate of pay is approximately 10 per cent higher than could be obtained by the line workers elsewhere.
Older workers are not discouraged, but the average age of the workforce is only 19 years. It is increasingly difficult to find acceptable line supervisors.
Production starts at 8 am and finishes at 5 pm - 5 days a week - with an hour lunch break and two 20-minute tea breaks.
The graphs shown have been prepared covering labour turnover and absenteeism over the past five years.

Questions

What explanations and recommendations would you offer the Board of Directors?