Jennifer Carter graduated from State University in June 2005, and, after considering several

job offers, decided to do what she always planned to do--go into business with her father,
Jack Carter. Jack Carter opened his first laundromat in 1995 and his second in 1998. The
main attraction of these coin laundry businesses for him was that they were capital- rather
than labor-intensive. Thus, once the investment in machinery was made, the stores could be
run with just one unskilled attendant and none of the labor problems one normally expects
from being in the retail service business.
The attractiveness of operating with virtually no skilled labor notwithstanding, Jack had
decided by 1999 to expand the services in each of his stores to include the dry cleaning and
pressing of clothes. He embarked, in other words, on a strategy of "related diversification" by
adding new services that were related to and consistent with his existing coin laundry
activities. He added these for several reasons. He wanted to better utilize the unused space in
the rather large stores he currently had under lease. Furthermore, he was, as he put it, "tired of
sending out the dry cleaning and pressing work that came in from our coin laundry clients to
a dry cleaner 5 miles away, who then took most of what should have been our profits." To
reflect the new, expanded line of services, he renamed
each of his two stores Carter Cleaning Centers and was sufficiently satisfied with their
performance to open four more of the same type of stores over the next 5 years. Each store
had its own on-site manager and, on average, about seven employees and annual revenues of
about $500,000. It was this 6-store chain that Jennifer joined after graduating. Her
understanding with her father was that she wow serve as a troubleshooter/consultant to the
elder Catrer with the aim of both learning the business and bringing to it modern management
concepts and techniques for solving the business's problems and facilitating its growth

A Question of Discrimination
One of the first problems Jennifer faced at her father's Carter Cleaning Centers concerned the
inadequacies of the firm's current HR management practices and procedures. One problem
that particularly concerned her was the lack of attention to equal employment matters. Each
store
manager independently handled virtually all hiring; the managers had received no training
regarding such fundamental matters as the types of questions they should not ask of job
applicants. It was therefore not unusual--in fact, it was routine- -for female applicants to be
asked questions such as "Who's going to take care of your children while you are at work?"
and for minority applicants to be asked questions about arrest records and credit histories.
Nonminority applicants--three store managers were white males and three were white
females, by the way-were not asked these questions, as Jennifer discerned from her
interviews with the managers. Based on discussions with her father, Jennifer deduced two
reasons for the laid-back attitude toward equal employment: (1) her father's lack of
sophistication regarding the legal requirements and (2) the fact that, as Jack
-Carter put it, Virtually all our workers are women or minority members anyway, so no one
can really come in here and accuse us of being discriminatory, can they? "Jennifer decided to
mull that question over, but before she could, she was faced with two serious equal rights
problems. Two women in one of her stores privately confided to her that their manager was
making unwelcome
sexual advances toward them, and one claimed he had threatened to fire her unless she
"socialized" with him after hours. And during a fact-finding trip to another store, an older
gentleman--he was 73 years old- complained of the fact that although he had almost 50 years
of experience in the business, he was being paid less than people half his age who were doing
the very same job.

The High-Performance Work System

As a recent graduate and as a person who keeps up with the business press, Jennifer is
familiar with the benefits of programs such as total quality management and high-
performance work systems.
Jack has actually installed a total quality program of sorts at Carter, and it has been in place
for about 5 years. This program takes the form of employee meetings. Jack holds employee
meetings periodically, but particularly when there is a serious problem in a store- such as
poor-quality work or
machine breakdowns. When problems like these arise, instead of trying to diagnose them
himself or with Jennifer, he contacts all the employees in that store and meets with them as
soon as the store closes. Hourly employees get extra pay for these meetings. The meetings
have been useful in
helping Jack to identify and rectify several problems. For example, in one store all the fine
white blouses were coming out looking dingy. It turned out that the cleaner-spotter had been
ignoring the company rule that required cleaning ("boiling down") the perchloroethylene
cleaning fluid
before washing items like these. As a result, these fine white blouses were being washed in
cleaning fluid that had residue from other, earlier washes. Jennifer now wonders whether
these employee meetings should be expanded to give the employees an even bigger role in
managing the Carter stores' quality. "We can't be every- where watching everything all the
time," she said to her father.
"Yes, but these people only earn about $8 to $15 per hour. Will they really want to act like
mini-managers?" he replied.

The Job Description

Based on her review of the stores, Jennifer concluded that one of the first matters she had to
attend to involved developing job descriptions for her store managers. As Jennifer tells it, her
lessons regarding job descriptions in her basic management and HR management courses
were insufficient to fully convince her of the pivotal role job descriptions actually played in
the smooth functioning of an enterprise. Many times during her first few weeks on the job,
Jennifer found herself asking one of her store managers why he was violating what she knew
to be recommended company policies and procedures. Repeatedly, the answers were either
"Because I didn't know it was my job" or "Because I didn't know that was the way we were
supposed to do it." Jennifer knew that a job description, along with a set of standards and
procedures that specified what was to be done and how to do
it would go a long way toward alleviating this problem. In general, the store manager is
responsible for directing all store activities in such a way that quality work is produced,
customer relations and sales are maximized, and profitability is maintained through effective
control of labor, supply, and energy costs. In accomplishing that general aim, a specific store
manager's duties and responsibilities include quality control, store appearance and
cleanliness, customer relations, bookkeeping and cash management, cost control and
productivity, damage control, pricing, inventory control, spotting and cleaning, machine
maintenance, purchasing, employee safety, hazardous waste removal human resource
administration, and pest control. The questions that Jennifer had to address follow.

Getting Better Applicants

If you were to ask Jennifer and her father what the main problem was in running their firm,
their answer would be quick and short: hiring good people. Originally begun as a string of
coin-operated laundromats requiring virtually no skilled help, the chain grew to six stores,
each heavily
dependent on skilled managers, cleaner-spotters, and pressers. Employees generally have no
more than a high school education (often less), and the market for them is very competitive.
Over a typical weekend, literally dozens of want ads for experienced pressers or cleaner-
spotters can be found in area newspapers. All these people usually are paid around per hour,
and they change jobs frequently. Jennifer and her father thus face the continuing task of
recruiting and hiring qualified workers out of a pool of individuals they feel are almost
nomadic in their propensity to move from area to area and job to job. Turnover in their stores
(as in the stores of many of their competitors) often approaches 400%.
"Don't talk to me about human resources planning and trend analysis. says Jennifer. We're
fighting an economic war and I'm happy just to be able to round up enough live applicants to
be able to keep my trenches fully manned."

Honesty Testing at Carter Cleaning Company

Jennifer Carter, of the Carter Cleaning Centers, andher father have what the latter describes
as an easy but hard job when it comes to screening job applicants. It is easy because for two
important jobs- the people who actually do the pressing and those who do the cleaning
spotting- the applicants are easily screened with about 20 minutes of on-the-job testing. As
with typists, as Jennifer points out, "Applicants either know how to press clothes fast enough
or how to use cleaning chemicals and machines, or they don't, and we find out very quickly
by just trying them out on the job." On the other hand, applicant screening for the stores can
also be frustratingly hard because of the nature of some of the other qualities that Jennifer
would like to screen for. Two of the most critical problems facing her company are employee
turnover and employee honesty. Jennifer and her father sorely need to implement practices
that will reduce the rate of employee turnover. If there is a way to do this through employee
testing and screening techniques, Jennifer would like to know about it because of the
management time and money that are now being wasted by the never-ending need to recruit
and hire new employees. Of even greater concern to Jennifer and her father is the need to
institute new practices to screen out those employees who may be predisposed to steal from
the
company. Employee theft is an enormous problem for the Carter Cleaning Centers, and one
that is not just limited to employees who handle the cash. For example, the cleaner-spotter
and/or the presser often open the store themselves, without a manager present, to get the day's
work started, and it is not unusual to have one or more of these people steal supplies or turn a
route." Running a route means that an employee canvases his or her neighbourhood to pick
up people's clothes for cleaning and then secretly cleans and presses them in the Carter store,
using the company's supplies, gas, and power. It would also not be unusual for an
unsupervised person (or his or her supervisor, for that matter) to accept a 1-hour rush order
for cleaning or laundering, quickly clean and press the item, and return it to the customer for
payment without making out a proper ticket for the item posting the sale. The money, of
course, goes into the worker's pocket instead of into the cash register. The more serious
problem concerns the store manager and the counter workers who actually have to handle the
cash. According to Jack Carter, "You would not believe the creativity employees use to get
around the management controls we set up to cut down on employee theft." As one extreme
example of this felonious creativity, Jack tells the following story: "To cut down on the
amount of money my employees were stealing, I had a small sign painted and placed in front
of all our cash registers. The sign said: YOUR ENTIRE ORDER FREE IF WE DON'T GIVE
YOU A CASH REGISTER RECEIPT WHEN YOU PAY. CALL 552-0235. It was my
intention with this sign to force all our cash-handling employees to give receipts so the cash
register would record them for my accountants. After all, if all the cash that comes in is
recorded in the cash register, then we should have a much better handle on stealing in our
stores. Well, one of our managers found a diabolical way around this. I came into the store
one night and noticed that the cash register this particular manager was using just didn't look
right, although the sign was placed in front of it. It turned out that every afternoon at about
5:00 P.M. when the other employees left, this character would pull his own cash register out
of a box that he hid under-neath our supplies. Customers coming in would notice the sign
and, of course, the fact that he was meticulous in ringing up every sale. But unknown to them
and us, for about 5 months the sales that came in for about an hour every day went into his
cash register, not mine. It took us that long to figure out where our cash for that store was
going."

The Better Interview

Like virtually all the other HR-related activities at Carter Cleaning Centers, the company
currently has no organized approach to interviewing job candidates. Store managers, who do
almost all the hiring, have a few of their own favorite questions that they ask. But in the
absence of any guidance from top management, they all admit their interview performance
leaves something to be desired. Similarly, Jack Carter himself is admittedly most comfortable
dealing with what he calls the "nuts and bolts" machinery aspect of his business and has
never felt particularly comfortable having to interview management or other job applicants.
Jennifer is sure that this lack of formal interviewing practices, procedures, and training
account for some of the employee turnover and theft problems.
Therefore, she wants to do something to improve her company's batting average in this
important area.

The New Training Program

The Carter Cleaning Centers currently have no formal orientation or training policies or
procedures, and Jennifer believes this is one reason why the standards to which she and her
father would like employees to adhere are generally not followed. The Carters would prefer
that certain practices and procedures be used in dealing with the customers at the front
counters. For example, all customers should be greeted with what Jack refers to as a "big
hello." Garments they drop off should immediately be inspected for any damage or unusual
stains so these can be brought to the customer's attention, lest the customer later return to pick
up the garment and erroneously blame the store. The garments are then supposed to be
immediately placed together in a nylon sack to separate them from other customers'
garments. The ticket also has to be carefully written up, with the customer's name and
telephone number and the date precisely and clearly noted on all copies. The counterperson is
also supposed to take the opportunity to try to sell the customer additional services such as
waterproofing, or simply notify the customer that "Now that people are doing their spring
cleaning, we're having a special on drapery cleaning all this month." Finally, as the customer
leaves, the counterperson is supposed to make a courteous comment like "Have a nice day" or
"Drive safely." Each of the other jobs in the stores- pressing, cleaning and spotting,
periodically maintaining the coin laundry equipment, and so forth- similarly contain certain
steps, procedures, and most importantly, standards the Carters would prefer to see upheld.
The company has had problems, Jennifer feels, because of a lack of adequate employee
training and orientation. For
example, two new employees became very upset last month when they discovered that they
were not paid at the end of the week, on Friday, but instead were paid (as are all Carter
employees) on the following Tuesday. The Carters use the extra two days in part to give them
time to obtain everyone's hours and compute their pay. The other reason they do it, according
to Jack, is that "frankly, when we stay a few days behind ; paying employees it helps to
ensure that they at least give us few days' notice before quitting on us. While we are certain
obligated to pay them anything they earn, we find that psychologically they seem to be less
likely to just walk out on us Friday evening and not show up Monday morning if they still
haven’t gotten their pay from the previous week. This way they at least give us a few days'
notice so we can find a replacement." There are other matters that could be covered during
orientation and training, says Jennifer. These include company policy regarding paid
holidays, lateness and absences, health benefits (there are none, other than workers'
compensation) substance abuse, and eating or smoking on the job (both forbidden), and
general matters like the maintenance of a clean and safe work area, personal appearance and
cleanliness, time sheets, personal telephone calls, and personal e-mail. Jennifer believes that
implementing orientation and training programs would help to ensure that employees know
how to do their jobs the right way. And she and her father further believe that it is only when
employees understand the right way to do their jobs that there is any hope their jobs will be
accomplished the way the Carters want them to be accomplished.

The Performance Appraisal

After spending several weeks on the job, Jennifer was surprised to discover that her father
had not formally evaluated any employee's performance for all the years that he had owned
the business. Jack's position was that he had "a hundred higher-priority things to attend to,"
such as boosting sales and lowering costs, and, in any case, many employees didn't stick
around long enough to be appraisable anyway. Furthermore, contended Jack, manual workers
such as those doing the pressing and the cleaning did periodically get positive feedback in
terms of praise from Jack for a job well done, or criticism, also from Jack, if things did not
look right during one of his swings through the stores. Similarly, Jack was never shy about
telling his managers about store problems so that they, too, got some feedback on where they
stood. This informal feedback notwithstanding, Jennifer believes that a more formal appraisal
approach is required. She believes that there are criteria such as quality, quantity, attendance,
and punctuality that should be evaluated periodically even if a worker is paid on piece rate.
Furthermore, she feels quite strongly that the managers need to have a list of quality
standards for matters such as store cleanliness, efficiency, safety, and adherence to budget on
which they know they are to be formally evaluated.

The Career Planning Program

Career planning has always been a low-priority item for Carter Cleaning, since "just getting
workers to come to work and then keeping them honest is enough of a problem, "as Jack likes
to say. Yet Jennifer thought it might not be a bad idea to give some thought to what a career
planning program might involve for Carter. Many of their employees had been with them for
years in dead-end jobs, and she frankly felt a little badly for them: "Perhaps we could help
them gain a better perspective on what they want to do," she thought. And she definitely
believed that the store management group needed better career direction if Carter Cleaning
was to develop and grow.

The New Pay Plan

Carter Cleaning Centers does not have a formal wage structure nor does it have rate ranges or
use compensable factors. Wage rates are based mostly on those prevailing in the surrounding
community and are tempered with an attempt on the part of Jack Carter to maintain some
semblance of equity between what workers with different responsibilities in the stores are
paid.
Carter does not make any formal surveys when determining what his company should pay.
He peruses the want ads almost every day and conducts informal surveys among his friends
in the local chapter of the laundry and cleaners trade association. While Jack has taken a
"seat-of-the-pants"
approach to paying employees, his salary schedule has been guided by several basic pay
policies. Although many of his colleagues adhere to a policy of paying minimum rates, Jack
has always followed a policy of paying his employees about 10% above what he feels are the
prevailing rates, a policy that he believes reduces turnover while fostering employee loyalty.
Of somewhat more concern to Jennifer is her father's informal policy of paying men about
20% more than women for the same job. Her father's explanation is, "They're stronger and
can work harder for longer hours, and besides they all have families to support."

The Incentive Plan

The question of whether to pay Carter Cleaning Center employees an hourly wage or an
incentive of some kind has always intrigued Jack Carter, His basic policy has been to pay
employees an hourly wage, except that his managers do receive an end-of-year bonus
depending, as Jack puts it, "on whether their stores do well or not that year. However, he is
considering using an incentive plan in
one store. Jack knows that a presser should press about 25 "tops" (jackets, dresses, blouses)
per hour. Most of his pressers do not attain this ideal standard, though. In one instance, a
presser named Walt was paid $8 per hour, and Jack noticed that regardless of the amount of
work he had
to do, Walt always ended up going home at about 3:00 P.M., so he earned about $300 at the
end of the week. If it was a holiday week, for instance, and there were a lot of clothes to
press, he might average 22 to 23 tops per hour (someone else did pants) and so he'd earn
perhaps $300 and still finish up each day in time to leave by 3:00 P.M. so he could pick up
his children at school. But when things were very slow in the store, his productivity would
drop to perhaps 12 to 15 pieces an hour, so that at the end of the week he'd end up earning
perhaps $280, and in fact not go home much earlier than he did when it was busy. Jack spoke
with Walt several times, and while Walt always promised to try to do better, it gradually
became apparent to Jack that Walt was simply going to earn his $300 per week no matter
what. Though Walt never told him so directly, it dawned on Jack that Walt had a family to
support and was not about to earn less than his "target" wage, regardless of how busy or slow
the store was. The problem was that the longer Walt kept pressing each day, the longer the
steam boilers and compressors had to be kept on to power his machines, and the fuel charges
alone ran close to $6 per hour. Jack clearly needed some way short of firing Walt to solve the
problem, since the fuel bills were eating up his profits. His solution was to tell Walt that,
instead of an hourly $8 wage, he would henceforth pay him $0.33 per item pressed. That way,
said Jack to himself, if Walt presses 25 items per hour at $0.33 he will in effect get a small
raise. He'll get more items pressed per hour and will therefore be able to shut the machines
down earlier. On the whole, the experiment worked well. Walt generally presses 25 to 35
pieces per hour now. He gets to leave earlier, and with the small increase in pay, he generally
earns his target wage. Two problems have arisen, though. The quality of Walt's work has
dipped a bit, plus his manager has to spend a minute or two each hour counting the number of
pieces Walt pressed that hour. Otherwise, Jack is fairly pleased with the results of his
incentive plan, and he's wondering whether to extend it to other employees and other stores.

The New Benefit Plan

Carter Cleaning Centers has traditionally provided only legislatively required benefits for its
employees. These include participation in the state's unemployment compensation program,
Social Security, and workers compensation which is provided through the same insurance
carrier that insures the stores for such hazards as theft and fire). The principals of the firm-
Jack, Jennifer, and their families have individual, family-supplied health and life insurance.
Now, Jennifer can see several potential problems with the company's policies regarding
benefits and services. One is turnover. She wants to do a study to determine whether similar
companies' experiences with providing health and life insurance benefits suggest they enable
these firms to reduce employee turnover and perhaps pay lower wages. Jennifer is also
concerned with the fact that her company has no formal policy regarding vacations or paid
days off or sick leave. Informally, at least, it is understood that employees get 1 week's
vacation after 1 year's work, but in the past the policy regarding paid vacations for days such
as New Year's Day and Thanksgiving Day has been very inconsistent. Sometimes employees
who had been on the job only 2 or 3 weeks were paid fully for one of these holidays, while at
other times employees who had been with the firm for 6 months or more had been paid for
only half a day. Jennifer knows that this policy must be made more consistent. She also
wonders whether it would be advisable to establish some type of day care center for the
employees' children. She knows that many of the employees' children have either no place to
go during the day (they are preschoolers) or have no place to go after school, and she
wonders whether a benefit such as day care would be in the best interests of the company.

Guaranteeing Fair Treatment

Being in the laundry and cleaning business, the Carters have always felt strongly about not
allowing employees to smoke, eat, or drink in their stores. Jennifer was therefore surprised to
walk into a store and find two employees eating lunch at the front counter. There was a large
pizza in its box, and the two of them were sipping colas and eating slices of pizza and
submarine sandwiches off paper plates. Not only did it look messy, but also there were grease
and soda spills on the counter and the store smelled from onions and pepperoni, even with the
4-foot-wide exhaust fan pulling air out through the roof. In addition to being a turnoff to
customers, the mess on the counter increased
the possibility that a customer's order might become soiled in the store. Although this was a
serious matter, neither Jennifer nor her father felt that what the counter people were doing
was grounds for immediate dismissal, partly because the store manager had apparently
condoned their actions. The problem was, they didn't know what to do. It seemed to them that
the matter called for more than just a warning but less than dismissal.

The Grievance
On visiting one of Carter Cleaning Company's stores, Jennifer was surprised to be taken aside
by a long-term Carter employee, who met her as she was parking her car. "Murray (the store
manager) told me I was suspended for 2 days without pay because I came in late last
Thursday, said George.
"I'm really upset, but around here the store manager's word seems to be law, and it sometimes
seems like the only way anyone can file a grievance is by meeting you or your father like this
in the parking lot." Jennifer was very disturbed by this revelation and promised the employee
she would look into it and discuss the situation with her father. In the car heading back to
headquarters, she began mulling over what Carter Cleaning Company's alternatives might be.

The New Safety Program

Employees' safety and health are very important matters in the laundry and cleaning business.
Each facility is a small production plant in which machines, powered by high- pressure steam
and compressed air, work at high temperatures washing, cleaning, and pressing garments,
often under very hot, slippery conditions. Chemical vapors are produced continually, and
caustic chemicals are used in the cleaning process. High-temperature stills are almost
continually "cooking down" cleaning solvents in order to remove impurities so that the
solvents can be reused. If a mistake is made in this process-like injecting too much steam into
the still a boil over occurs, in which boiling chemical solvent erupts out of the still and over
the floor, and on anyone who happens to be standing in its way. As a result of these hazards
and the fact that chemically hazardous waste is continually produced in these stores, several
government agencies (including OSHA and the Environmental Protection Agency) have
instituted strict guidelines regarding the management of these plants. For example, posters
have to be placed in each store notifying employees of their right to be told what hazardous
chemicals they are dealing with and what the proper method for handling each chemical is.
Special waste-management firms must be used to pick up and properly dispose of the
hazardous waste.

A chronic problem the Carters (and most other laundry owners) have is the unwillingness on
the part of the cleaning-spotting workers to wear safety goggles. Not all the chemicals they
use require safety goggles, but some--like the hydrofluoric acid used to remove rust stains
from garments--are very dangerous. The latter is kept in special plastic containers since it
dissolves glass. The problem is that wearing safety goggles can be troublesome. They are
somewhat uncomfortable, and they become smudged easily and thus cut down on visibility.
As a result, Jack has always found it almost impossible to get these employees to wear their
goggles.

Carter Cleaning Company Going Abroad

With Jennifer gradually taking the reins of Carter Cleaning Company, Jack decided to take
his first long vacation in years and go to Mexico for a month in January 2008. What he found
surprised him: While he spent much of the time basking in the sun in Acapulco, he also spent
considerable time in Mexico City and was surprised at the dearth of cleaning stores,
particularly considering the amount of air pollution in the area. Traveling north, he passed
through Juarez, Mexico, and was similarly surprised at the relatively few cleaning stores he
found there. As he drove back into Texas, and back toward home, he began to think about
whether it would be advisable to consider expanding his chain of stores into Mexico. Quite
aside from the possible economic benefits, he had liked what he saw in the lifestyle in
Mexico and was also attracted by the idea of possibly facing the sort of exciting
challenge he had faced 20 years ago when he started Carter

Cleaning in the United States:

I guess entrepreneurship is in my blood," is the way he put it. As he drove home to have
dinner with Jennifer, he began to formulate the questions he would have to ask before
deciding whether to expand abroad.

Cleaning in Challenging Times

As the economic turndown worsened, revenues at the Carter stores fell off steeply. Many of
their customers were simply out of work and didn't need (or couldn't afford) dry cleaning.
Working customers were cutting back wherever they could. The Carters actually found
themselves giving
away some free cleaning services. They started a new program wherein existing customers
could get one suit or dress cleaned free each month if they needed it for a job interview.
In the midst of this downturn, the Carters knew they had to do something to get their
employment costs under control. The problem was that, realistically, there wasn't much room
for cutting staffing in a store. Of course, if a store got very slow, they could double up by
having a cleaner spotter spend some of his or her time pressing, or having the manager
displace the counter person. But if sales only fall 15% to 20% per store, there really wasn't
much room for reducing employee head count because each store never really employed that
many people in the first place. The question therefore naturally arose as to whether the
Carters could cut their employment expenses without
dismissing too many people. Jennifer Carter has several questions for you.