Read and respond to the following question:
Using cognitive dissonance theory, explain the actions of Pat, Dinah, and Fred
Developed by Mary McGarry, Empire State College, and Barry R. Armandi, SUNY-Old Westbury
MagRec, Incorporated was started by Mr. Leed, a brilliant engineer (he has several engineering patents) who was a group manager at Fairchild Republic. The company’s product was magnetic recording heads, a crucial device used for reading, writing, and erasing data on tapes and disks.
Like any other start-up, MagRec had a humble beginning. It struggled during the early years, facing cash-flow and technical problems. After a slow start, it grew rapidly and gained 35 percent of the tape head market, making it the second-largest supplier in North America. Financially, the company suffered heavily because of price erosions caused by Far East competition. Unlike all its competitors, the company resisted moving its manufacturing operations offshore. But the company accumulated losses to a point of bankruptcy. Finally MagRec entered a major international joint venture and received many new sales orders. Things looked good again. But.…
When Fred Marsh promoted me to sales manager, I was in seventh heaven. Now, six months later, I feel I am in hell. This is the first time in my life that I am really on my own. I have been working with other people all my life. I tried my best and what I could not solve, I took upstairs. Now it’s different because I am the boss (or am I?). Fred has taught me a lot. He was my mentor and gave me this job when he became vice president. I have always respected him and listened to his judgment. Now, thinking back, I wonder whether I should have listened to him at all on this problem.
It started late one Friday evening. I had planned to call my West Coast customer, Partco, to discuss certain contract clauses. I wanted to nail this one fast (Partco had just been acquired by Volks, Inc.). Partco was an old customer. In fact, through good and bad, it had always stayed with us. It was also a major customer. I was about to call Partco when Dinah Coates walked in, clutching a file. I had worked with Dinah for three years. She was good. I knew that my call to Partco would have to wait. Dinah had been cleaning out old files and came across a report about design and manufacturing defects in Partco heads. The report had been written nine years ago. The cover memo read as follows:To: Ken Smith, Director of MarketingFrom: Rich Grillo, V.P. OperationsSub: Partco Head Schedule
This is to inform you that due to pole-depth problems in design, the Partco heads (all 514 in test) have failed. They can’t reliably meet the reading requirements. The problem is basically a design error in calculations. It can be corrected. However, the fix will take at least six months. Meanwhile, Ron Scott in production informs me that the entire 5,000 heads (the year’s production) have already been pole-slotted, thus they face the same problem.
Ken, I don’t have to tell you how serious this is, but how can we OK and ship them to Partco knowing that they’ll cause read error problems in the field? My engineering and manufacturing people realize this is the number-one priority. By pushing the Systems Tech job back we will be back on track in less than six months. In the interim I can modify Global Widgets heads. This will enable us to at least continue shipping some product to Partco. As a possible alternate I would like to get six Partco drives. Michaels and his team feel that with quick and easy changes in the drives tape path, they can get the head to work. If this is true we should be back on track within six to eight weeks.
A separate section of the report reads as follows:Confidential
(Notes from meeting with Don Updyke and Rich Grillo)
Solution to Partco heads problem
All Partco heads can be reworked (.8 hrs. ea.—cost insignificant) to solve Partco’s read problems by grinding an extra three-thousandths of an inch off the top of the head. This will reduce the overall pole depth to a point where no read errors occur. The heads will fully meet specifications in all respects except one, namely life. Don estimates that due to the reduced chrome layer (used for wear) the heads’ useful life will be 2500 hours instead of 6000 hours of actual usage.
Our experience is that no customer keeps accurate records to tell actual usage and life. Moreover, the cost is removed since Partco sells drives to MegaComputer, who sells systems to end-users. The user at the site hardly knows or rarely complains about extra costs such as the replacement of a head 12 to 18 months down the line instead of the normal 2 years. Besides, the service technicians always innovatively believe in and offer plausible explanations—such as the temperature must be higher than average—or they really must be using the computer a lot.
I have directed that the heads be reworked and shipped to Partco. I also instructed John to tell Partco that due to inclement weather this week’s shipment will be combined with next week’s shipment.
Dinah was flabbergasted. The company planned to sell products deliberately that it knew would not meet life requirements—“risking our reputation as a quality supplier,” she said. “Partco and others buy our heads thinking they are the best. Didn’t we commit fraud through outright misrepresentation?”
Dinah insisted I had to do something. I told her I would look into the matter and get back to her by the end of next week.
Over the weekend I kept thinking about the Partco issue. We had no customer complaints. Partco had always been extremely pleased with our products and technical support. In fact, we were its sole suppliers. MegaComputer had us placed on the preferred, approved ship to stock, vendors list. It was a fact that other vendors were judged against our standards. MegaComputer’s Quality Control never saw our product or checked it.
Monday morning I showed the report to Fred. He immediately recollected it and began to explain the situation to me.
MagRec had been under tremendous pressure and was growing rapidly at the time. “That year we had moved into a new 50,000-square-foot building and went from 50 or 60 employees to over 300. Our sales were increasing dramatically.” Fred was head of purchasing at the time, and every week the requirements for raw materials would change. “We’d started using B.O.A.s (Broad Order Agreements, used as annual purchasing contracts) guaranteeing us the right to increase our numbers by 100 percent each quarter. The goal was to maintain the numbers. If we had lost Partco then, it could have had a domino effect and we could have ended up having no customers left to worry about.”
Fred went on to explain that it had only been a short-term problem that was corrected within the year and no one ever knew it existed. He told me to forget it and to move the file into the back storage room. I conceded. I thought of all the possible hassles. The thing was ancient history anyway. Why should I be concerned about it? I wasn’t even here when it happened.
The next Friday Dinah asked me what I had found out. I told her Fred’s feelings on the matter and that I felt he had some pretty good arguments regarding the matter. Dinah became angry. She said I had changed since my promotion and that I was just as guilty as the crooks who had cheated the customers by selling low-life heads as long-life heads. I told her to calm down. The decision was made years ago. No one got hurt, and the heads weren’t defective. They weren’t causing any errors.
I felt bad but figured there wasn’t much to do. The matter was closed as far as I was concerned, so I returned to my afternoon chores. Little was I to know the matter was not really closed.
That night Fred called me at 10:00. He wanted me to come over to the office right away. I quickly changed, wondering what the emergency was. I walked into Fred’s office. The coffee was going. Charlie (Personnel Manager) was there. Rich Grillo (V. P. Operations) was sitting on the far side of Fred’s conference table. I instinctively headed there for that was the designated smoking corner.
Ken (Director of Marketing) arrived fifteen minutes later. We settled in. Fred began the meeting by thanking everyone for coming. He then told them about the discovery of the Partco file and filled them in on the background. The problem now was that Dinah had called Partco and gotten through to their new vice president, Tim Rand. Rand had called Fred at 8:00 p.m. at home and said he was personally taking a red-eye flight to find out what this was all about. He would be here in the morning. We spent a grueling night followed by an extremely tense few weeks. Partco had a team of people going through our tests, quality control, and manufacturing records. Our production slipped, and overall morale was affected.
Mr. Leed personally spent a week in California assuring Partco that this would never happen again. Though we weathered the storm, we had certain losses. We were never to be Partco’s sole source again. We still retained 60 percent of its business but had to agree to lower prices. The price reduction had a severe impact. Although Partco never disclosed to anyone what the issues were (since both companies had blanket nondisclosure agreements), word got around that Partco was paying a lower price. We were unable to explain to our other customers why Partco was paying this amount. Actually I felt the price word got out through Joe Byrne (an engineer who came to Partco from Systems Tech and told his colleagues back at Systems Tech that Partco really knew how to negotiate prices down). He was unaware, however, of the real issues. Faced with customers who perceived they were being treated inequitably, we experienced problems. Lowering prices meant incurring losses; not lowering them meant losing customers. The next two financial quarters saw sales revenue decline by 40 percent. As the sales manager, I felt pretty rotten presenting my figures to Fred.
With regard to Dinah, I now faced a monumental problem. The internal feeling was that she should be avoided at all costs. Because of price erosions, we faced cutbacks. Employees blamed her for production layoffs. The internal friction kept mounting. Dinah’s ability to interface effectively with her colleagues and other departments plummeted to a point where normal functioning was impossible.
Fred called me into his office two months after the Partco episode and suggested that I fire Dinah. He told me that he was worried about results. Although he had nothing personally against her, he felt that she must go because she was seriously affecting my department’s overall performance. I defended Dinah by stating that the Partco matter would blow over and given time I could smooth things out. I pointed out Dinah’s accomplishments and stated I really wanted her to stay. Fred dropped the issue, but my problem persisted.
Things went from bad to worse. Finally, I decided to try to solve the problem myself. I had known Dinah well for many years and had a good relationship with her before the incident. I took her to lunch to address the issue. Over lunch, I acknowledged the stress the Partco situation had put on her and suggested that she move away for a while to the West Coast, where she could handle that area independently.
Dinah was hurt and asked why I didn’t just fire her already. I responded by accusing her of causing the problem in the first place by going to Partco.
Dinah came back at me, calling me a lackey for having taken her story to Fred and having brought his management message back. She said I hadn’t even attempted a solution and that I didn’t have the guts to stand up for what was right. I was only interested in protecting my backside and keeping Fred happy. As her manager, I should have protected her and taken some of the heat off her back. Dinah refused to transfer or to quit. She told me to go ahead and fire her, and she walked out.
I sat in a daze as I watched Dinah leave the restaurant. What the heck went wrong? Had Dinah done the morally right thing? Was I right in defending MagRec’s position? Should I have taken a stand with Fred? Should I have gone over Fred’s head to Mr. Leed? Am I doing the right thing? Should I listen to Fred and fire Dinah? If not, how do I get my department back on track? What am I saying? If Dinah is right, shouldn’t I be defending her rather than MagRec?