Jones Ironworks, Inc.

Case Teaching Package
A case teaching package is available for this case. It includes strategies for case presentation, key concepts, solutions to the assignment questions in the case, and suggestions for the most effective ways to work this case into your course.

Length
This case is 6 pages in length and its case teaching package is 6 pages.

Abstract

This case is set in Detroit, Michigan in 1973 when the minimum wage was $1.75 per hour. It is about people who do hard, dirty, dangerous work for low wages.

I believe this case should be required for all MBAs because it forces them to confront the problem of dirty, dangerous, low pay work at least once in their educational career. This is a very real phenomenon in our economy, but most MBA students have no contact with the problem and no real idea how businesses should cope with it.

The case is also a good one to emphasize the power of clear, logical thinking and to demonstrate cost analysis in a "learning curve" situation.

Linkages to Textbooks or Journal Articles/Fit Within a Course

We teach this case in one 90-minute class period near the end of the required management accounting course. The case can be used early or late in the course, depending on how the instructor wants to position it.

Used early in the term, the case is a challenging and fun to teach exercise in basic cost analysis with good reinforcement of the basic contribution margin theme. Used later in the term, the case has two other facets. First, it can be used to discuss "management philosophy" about labor as a productive asset in low value-added settings. Second, it can illustrate the learning curve concept as part of the "cost drivers" segment of the strategic cost management theme. This is the only case we use in the required course that deals explicitly with the "cost driver" theme (the "learning curve" for labor cost).

Study Questions

Freddie and his father are genuinely perplexed about this labor productivity problem. Can the company expect a better result if it manages compensation better? Or, is low productivity a fact of life for which low pay is the consequence in a business where "committed and motivated" workers are just not necessary?

Your assignment is to evaluate the various claims and counterclaims and to recommend a course of action. Exhibits 1 and 2 are reference sources on the "philosophy" of work and workers.

1. Comment on the arguments presented by Freddie Jones in support of a $10 piece rate.
2. Comment on the counter-arguments by Freddie's father in support of the current pay system.
3. What are your recommendations and why do you make them?