Jones Ironworks Inc.
Background
Frederick Jones was a master blacksmith who emigrated from England to Erindale, Ontario where he set up his shop. From this small shop, Fred Jones plied his trade, shoeing horses and making wonderful wrought iron works, using simple forges and hand tools. His works can still be found in the village of historic structures like St. Peter’s Church, a masterpiece that sits high above the Credit River. In the true spirit of Frederic Jones, all the products are hand shaped and forget out of solid steel. Each piece is solid piece heated in a forge until red hot iron is shaped by hand, one part at a time by a master blacksmith. Frederick jones Ironworks offers an extensive selection of historically…show more content… Freddie did not take into consideration the costs associated with the high turnover rate. He failed to include outfitting each new worker, a $150,000 yearly expense. If Mr. Jones tried a profit sharing plan ten years earlier without success, it will likely not affect productivity or the turnover rate in 1973. Like I speculated earlier, low productivity and a high turnover rate may be due to the undesirable, unskilled workers being hired from unemployment agencies. Freddie also failed to compare the high turnover rate to the industry average, which is 50%. He only concerns on the short-term profit of his company and are too conservative to take some good change for the long run operation. First, it is not rational for him to turn down the proposal of using piece rate paying system just base on his unsuccessful try in a profit sharing plan 10 years ago, because the market conditions have change a lot and the result of implementing the similar plan could be different today. Second, he is too stressed on the effect of the increase labor wage. Even though the company is experiencing a profit squeeze, it isn’t possible for it to go out of business immediately due to paying a little higher labor costs. Since the labor costs do not cover a big percentage of sales, the increase in labor cost will not have significant effect on its marginal profit, balance sheet, cash flow or working capital. In addition, he neglects the
