The Irregular Work Shift Pattern Nursing Essay.

 

William defined medication error as any error in prescribing, dispensing or administration of a drug, irrespective of whether such errors lead to adverse consequences or not. A medication error could lead to severe consequence to both the patient and the hospital. Patient could suffer from side effects of the wrong medication, permanent injuries could occur or in the worst case scenario, death of the patient. As a result of medication error, patient could have an extended stay in the hospital and the hospital is liable to pay damages and incur the cost of hospital stay of the patient.The Irregular Work Shift Pattern Nursing Essay.

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When medication errors occur, it can affect the patient’s confidence and trust on the healthcare team. There are many reported case of medication error in the media and this could damage the hospital reputation.

Studies have been done and the findings have shown that the nursing department is the main department involved when a medication error had occurred. Drug administration is often associated as the higher risk areas in nursing practice. In the process of prescribing to the dispensing and the administration of the drug, the pharmacist or nurse may intercept prescribing errors and the nurse may catch dispensing errors but nurses are often the final individual involved before administering of the drug to the patient.

Numerous other studies have been done to determine the cause of medication error. Policies and procedures have since been introduced to reduce medication error. Nursing schools have taken steps to improve the knowledge of a nursing student in pharmacology and hospitals have addressed issues that contributed to medication error. A local government hospital in Singapore for example, has taken huge steps to improve and reduce medication error.The Irregular Work Shift Pattern Nursing Essay.

In that hospital for example, nurses are required to wear medication vest with a “do not disturb” advice written on the vest. This is to indicate to patient or relative and fellow healthcare professionals to not distract the nurse who is serving medication and this will allow the nurse to focus while administrating drug. Technological support such as the computerised physician order entry (CPOE) system has also been introduced to assist the nurse during the process of administration of the drug. To improve the knowledge on pharmacology, regular discussion and in-service talks are held.

Despite implementing many changes, medication error is still on the rise. For this study, the researcher aim to reduce medication error by using a non experimental, descriptive and quantitative research and look at the nurse itself and identify other possible factors that may have contributed to medication error. An important area for research and focus for this paper is to find out if there is any association between irregular work shift pattern among nurses and medication error in the ward.The Irregular Work Shift Pattern Nursing Essay.

Definition of term used in shift work.

In Singapore General Hospital, morning shift is from 0700hrs-1600hrs while afternoon shift is from 1300hrs-2000hrs. Night shift will be from 2100hrs to 0730hrs.

Irregular work shift pattern: Frequent alternating and rotating of shift from morning to afternoon shift or vice-versa.

Rotating shift: Work pattern consisting of days, afternoon and night shifts. Shift can be from morning to afternoon or afternoon to morning. Rotation can be fast for example, a staff can work afternoon shift today and be morning shift on the next day and this could go on for a couple of days before the staff off days.The Irregular Work Shift Pattern Nursing Essay.

Introduction

In a society and environment where services are to be provided around the clock, has lead to an increase in demand for shift work. It is important for the organisation to plan a good staff schedule to meet the demands of the clients. This is especially so in healthcare industry. With reports of shortage number of nurses from around the world, an effective scheduling shift is crucial for the success of a hospital. Hospital wards for example, need to be staffed 24 hours, 7 days a week, often with limited number of nurses (Clark and Walker, 2011). Studies have been conducted and it showed that shift work can have significant impact on the nurse. It is important to understand the ill effects of shift work on the nurse as patient’s life is at risk if nurses are made to work undesirable work schedules. It affects the nurse performance at work. Long hours, fatigues and lack of rest or break time to recuperate between shifts are associated with an increased risk of errors. Fatigue is recognised as one of the contributing factor in patient safety incident such as medication error. Absenteeism is also a major problem among nurses in hospital. Nurses who worked shift work have been found to have a higher level of absenteeism rate.The Irregular Work Shift Pattern Nursing Essay.

Significance of the study

There’s a limited number of study done to concretely relate that there is an association between irregular work shift pattern and medication error. If this study is suggestive that there is an association between irregular work shift pattern and medication error, the researcher hopes that the Ministry of Health (MOH) can ensure that steps are taken by the employers to reduce the risks of shift work of the nurses. Employers need to be aware of the potential safety impact, of a nurse working on shift and the need to manage shift work to improve patient safety

A review of literature on the topic was conducted. The literature review identified four key factors that could affect a nurse working on shift:

Circadian rhythms

Sleep Deprivation

Fatigue, errors and accident

Health

Circadian rhythms

Many of the health and safety impacts of shift work are associated with a disruption of the body clock or the circadian rhythm. Circadian rhythms are controlled by our hypothalamus in the brain. The circadian rhythms of shift workers working nights or rotating shifts can be disrupted which can lead to sleep disturbances, fatigues and health effects.

There are optimal shift patterns which can help mitigate disruption to the circadian rhythms and therefore reduce the risks, such as putting in place forward rotating shift patterns- in other words, moving from early to late to night shifts rather than reverse.

Sleep deprivation

Studies have shown that most adults require between seven to eight hours a sleep per day. Sleep is protective as it allows the body and mind to recuperate and rest. Numerous studies pertaining to shift work have indicated that shift worker slept lesser than the required seven to eight hours and the quality of the sleep is poorer. Sleep deprivation can be accumulated and this is one of the contributing factors to poor health, fatigue or burnout.

Fatigue, errors and accidents

Fatigue is defined as the decline in mental performance that results from long working hours, lack of sleep, poor quality sleep or poorly designed shift work causing disruption of the internal body clock. Fatigues have shown that it cans slower a person’s reaction, decreasing one’s vigilance, increased risk taking behaviours, impaired problem solving ability and it can affect a person’s decision making capacity. In healthcare, staff fatigue has been recognised as a contributory factor to patient safety incidents including drug errors (NPSA, 2004).

Health

Numerous studies have shown that shift work can have a significant impact on health of the shift worker. It is widely accepted that poorly managed shift work can have a negative impact on mental health, cardiovascular system, gastrointestinal system and reproductive system. Numerous other studies have shown that with the affects of shift work on health, lead to an increase in absenteeism rate of the shift worker. This will result in staffs that are on day off, being called in to work to replace the staff that went for sick leave or staff to be shifted to work on a different schedule or nurses having to stretch and care for more patient. This can lead to medication error.The Irregular Work Shift Pattern Nursing Essay.

3. What kind of research methods would be most useful for your topic?

Polit and Beck (2010, pg 16) define research method as “techniques researchers use to structure a study and to gather and analyze information relevant to the research question”. A quantitative approach using a descriptive design is proposed for this study.

The researcher chose to conduct this study at Singapore General Hospital (SGH). This hospital is chosen because it is Singapore’s flagship tertiary hospital with an estimated number of 1521 beds and 3627 nurses.

The researcher will sought consent and approval from MOH, SGH Division of Research and the university ethical board to conduct the study. Once permission is granted, the researcher will approach MOH for funding. Upon approval, the researcher will hire a team of nurses and an expert statistician to assist with the study. Nurses hired will be trained to be data collectors and will be given policies and protocol to adhere to. The statistician will assist in the statistical analysis. Computer software called Statistical Package for Social Sciences (SSPS) will be used. Power analysis will also be used by the statistician to determine the appropriate sample size required for this study.The Irregular Work Shift Pattern Nursing Essay.

A questionnaire will be used as the data collection method. Questionnaire was chosen because opportunity for biasness will be lesser as the questions will be presented in a consistent manner (Burns and Grove, 2011). It will also offer rights to anonymity and confidentiality as names are not required to be written on the questionnaire. However there are some limitations when using the questionnaire because the options given are provided by the researcher and is brief. This might affect the validity and accuracy of the data as it might not reflect the true opinion of the subject. The researcher will gather the samples through the data collected through the use of questionnaire.

Structured interview will also be conducted for this study on the basis of the literature review that examined other possible ill-effects of shift work and how it might have led to the medication error. This structured interview will allow the subjects to better express themselves and give a more accurate account on topic. To reduce recall biasness for this study, interviews will be conducted within 3 days of the medication error incident. All interviews will be conducted in a meeting room provided by the hospital. This is to ensure that the right to privacy and right to anonymity and confidentiality are adhered to.

3.1 Most appropriate approach.

Burns and Grove (2011, pg 49) define research design as “a blueprint for the conduct of a study that maximizes control over factors that could interfere with the study’s desired outcome”.

For this study, a non-experimental, descriptive, quantitative approach was selected.

Non experimental

The researcher chose a non experimental study because the researcher is more interested in exploring possible relationships between irregular work shift pattern and medication error than to test a possible solution to the problem (Polit and Beck, 2010)

Descriptive

Burns and Grove (2011, pg 35) describe descriptive as a design used to help identify new meaning and problems with current practice with a view to improve practice outcomes in the near future. A descriptive research is chosen because limited numbers of research have been done and little is known if there is any association between irregular work shift pattern and medication error in the ward. Outcome of this study can provide a basis for future research.

Quantitative

In order to undertake the above study, a quantitative approach was selected by the researcher. Burns and Grove (2011, pg 34) describe quantitative research as “a formal, objective, rigorous, systematic process in which numerical data are used to obtain information about the world”. A quantitative approach is best suited for this topic because it allows the researcher to measure and analyze the data using statistics and rule out other possible factors that could contribute to medication error. This method will also allow the researcher to study in detail, the relationship between the independent and dependent variable and be more objective about the findings of the research.

Retrospective study

A retrospective design was chosen. Polit and Beck (2010, pg 235) describe retrospective study as “a phenomenon observed in the present is linked to phenomena occurring in the past”. This design is better suited for this topic because the data will be collected after the medication error had occurred. The researcher will focus on the presently occurring outcome, and then tries to ascertain if there is any association with the irregular work shit pattern of the nurse. The researcher had no control over the independent variable, which is the irregular work shift pattern of the subject as the presumed causative factor had already occurred.The Irregular Work Shift Pattern Nursing Essay.

.3.2 Who would you need to recruit as participants? What sort of sample will you need and how will you recruit them?

Permission will be obtained to conduct the study from MOH, the hospital ethical committee, the medical board and nursing directors. Upon approval, the researcher will obtained permission to have access to the Risk Management System (RMS). This will enable the researcher to gather the data required to recruit the subjects.

At the hospital, any clinical incident for example, medication error, must be reported in the RMS by the nurse involved and his/her ward supervisors. With the support of the nursing directors, the researcher will seek cooperation from ward supervisors from across the hospital to participate in this study. The aim, topic and details of the study will be e-mailed to the ward supervisors and details of the study were to be shared to the ward staff during roll-call before the start of every shift.

The researcher will access to the RMS each day to monitor for any reported cases of medication error. If a medication error had occurred in the ward, the researcher will e-mail the ward manager involved and will obtain consent to conduct the study. Upon getting the consent, the trained data collector will be sent to the ward with a set of questionnaire that is stored in a laptop provided by the researcher. The data collector will than asked the nurse who had committed the medication error to complete the questionnaire in a quiet comfortable environment. The data collector will than photocopy 2 weeks of the nurse duty roster prior to the medication error incident.

With the help of a statistician, the researcher will than analyze the questionnaire and the working schedule of the nurse involved and decides if the subject meets the criteria to be included in the sample for the study.

Population and Sample

Kerlinger and Lee (2000), describe population as all elements (individuals, objects or substances) that meet specific set of criteria for an inclusion in a study. The population for this study will be nurses who had committed a medication error in the ward and have reported the incident on the RMS.

Burns and Grove (2011, pg 51) defines a sample as “a subset of the population that is selected for a particular study, and the members of a sample are the subjects or participants”. In this study, the samples are nurses who had committed a medication error and met the sampling criteria during the period of data collection. The authors add that sampling involves selecting a group of people, events, behaviours or element with which to conduct a study (Burns and Grove, 2011).The Irregular Work Shift Pattern Nursing Essay.

Sampling Criteria

According to Burns and Grove (2011, pg 291), sampling criteria are “characteristics essential for eligibility or membership in the target population”. For this study, the subject had to meet the following criteria to be included in the sample.

Inclusion criteria:

SGH nursing staff.

Have conducted a medication error and reported the incident in the RMS.

Have worked irregular work shift pattern for 2 consecutive weeks.

Can be of either gender or any race.

Have at least 1 year of working experience in the same ward/discipline.

Willing to participate in the research.

Exclusion criteria:

Agency nurses

Subjects who did not meet the criteria will be excluded from the study.

Sampling method

For this study, the researcher selected to use purposive sampling. Burns and Grove (2011) describe purposive sampling as a “judgemental” or “selective sampling”. This method is appropriate for this study because proportionality is not a major concern and it will enable the researcher to purposively select the targeted sample quickly and study in-depth with regards to the topic.

Issues that might affect sample recruitment and sample size

Issues that might affect the sample recruitment and sample size would be the unreported cases of medication error.

Subjects who met the sampling criteria might be coerced to participate in the research due to the influence from the ward supervisors. They might also fear that if they did not participate in the study, they could be punished and it might affect their job performances.

Subjects who met the sampling criteria might be not willing to participate in the study due to time constraint.

3.3 Data collection methods.

Burns and Grove (2011, pg 361) define data collection as a “process of acquiring the subjects and collecting the data for the study”. Burns and Grove (2011, pg 362) adds that during the duration of data collection, “researcher should focus on obtaining subjects, training data collectors, collecting data in a consistent way, maintaining research controls as indicated in the study design, protecting the integrity (or validity) of the study and solving problems that threaten to disrupt the study”.The Irregular Work Shift Pattern Nursing Essay.

A team of nurses will be hired to be data collector. They will be trained and policies and protocols will be given for them to adhere to.

Questionnaires design by the researcher will be used as the data collection method. Burns and Grove (2011, pg 353), describe questionnaire as “a printed self-report from designed to elicit information through written or verbal responses of the subject. The information obtained from the questionnaire is similar to that obtained by an interview, but the questions tend to have less depth”.

Questionnaires tend to have a low response rate. In an attempt to overcome this problem, the researcher will create the questionnaire using Microsoft Word and the questionnaire will be stored in the laptop provided by the researcher. Data collectors will go to the ward personally with the laptop and the necessary requisite needed and subjects are required to complete the questionnaire using the laptop provided. Subjects are required to complete the questionnaire online so as to minimise human error when the statistician is collating the data. To prevent the employers from accessing to the data given by the subject, the data collector are instructed by the researcher to bring the subject to quiet room, preferably the tutorial room in the ward, and stay with the subject whilst the subject is completing the question. A “do not disturb” sign will be placed on the door. Upon completion of the questionnaire, the data collector will save the data in a separate folder with passwords and only the statistician and the researcher will have access to it.

Validity

Before the questionnaire is deem suitable to be used and distributed across the hospital, a panel of experts, comprising of a doctor, a senior nurse clinician, a senior pharmacist and a representative from the ethics committee, will review the questions in the questionnaire. The panel of experts will assess the content validity of the questions and the researcher will seek for constructive feedback and will address issues recommended by the panel of experts. This is done to ensure that questions asked are clear and is easy for subject to understand.

Reliability

According to Burns and Grove (2011, pg 332), “reliability is concerned with the consistency of the measurement method”. The same set of the online questionnaires will then be tested out on two wards to seek the consistency in the respective responses. The trained data collector will ensure that the questionnaires will be done in a quiet comfortable environment to prevent interruption.

Structure of the question

The questionnaire will consist of mostly close-ended question and a few open ended questions and is divided into 3 sections.

In section A, a Yes or No option will be provided and subjects are required to tick the empty boxes provided. Questions will be asked to determine if the subject meet the sample criteria.

In section B, a True or False option will be provided and subjects are required to tick the empty boxes provided. Questions will be asked to evaluate subject knowledge on hospital polices and protocols introduced to reduce medication error.

In section C, the researcher will use a Likert-type scale to gather data. Six different response options ranging from disagree to strongly disagree will be provided by the researcher. Questions will be asked on subject’s attitudes and views on the impact of irregular work shift pattern and how it affects the nurse performance at work. In section D,

Close-ended questions are questions designed by the researcher with available option to choose from. It is used because this is a descriptive study and it will enable the researcher, with the help of a statistician, to gather data and to understand in-depth regarding a broad spectrum of information and situation known by the subject (Burns and Grove, 2011).The Irregular Work Shift Pattern Nursing Essay.

Open-ended questions are questions which require written responses from the subject. Open-ended questions are also used for this study because it will enable the researcher to gather information about beliefs, attitudes opinions, knowledge, or intention of the subjects with regard to the irregular work shift pattern (Burns and Grove, 2011).

Subjects will than undergo a structured interview session on a separate date with the researcher to encourage the subject to elaborate further on how irregular working schedule can affect the performance of a nurse in the ward. According to Burns and Grove (2011, pg 350), “an interview involves verbal communication between the researcher and the subject during which information is provided to the researcher”. A structured interview is needed for this study because it will enable the researcher to explore in-depth and elicit more information from the sample size (Burns and Grove, 2011). To reduce recall biasness for this study, interviews will be conducted within 3 days of the medication error incident

3.4 Data analysis.

According to Burns and Groves (2011, pg 52), “data analysis reduces, organizes, and gives meaning to the data”. After the data was collected from the subject duty roster, questionnaire and the interview, the statistician will organize and analyzed the data using descriptive statistic. Analysis of quantitative data is carried out using numbers. The reply to each of the question in Section A and B of the questionnaire will be coded using numbers. The reply to each question at Section C will be coded using numbers on an ordinal scale of 1 to 6. The statistician will assist in collating the data using Statistical Package for Social Sciences (SSPS). The frequency of a particular response to a question will be calculated as a percentage and the data will be illustrated using graph and bar charts.

4. Deliverables.

This study is important because there are very limited numbers of studies associating irregular work shit pattern and medication error. Although policies and steps are put in place to reduce the number of medication error in the hospital, the number of medication error is still on the rise.

Using the findings of this study and with the approval of MOH, the hospital can explore of alternative ways to reduce medication error. Cost savings should not be the primary concern but the safety of the staff and patients must be considered.

The findings of this study can be used to improve the nurse’s performance at the ward level, thus leading to a better quality care for the patients. The findings of this study might also decrease the absenteeism rate of the nurse.

At the hospital, Trend care system is used by nursing supervisors for scheduling of staff roster and the allocation of staff at ward level. Using trend care system, the ward supervisor can schedule staff to rotate shifts in every two to three days or in every three to four week. The nurse supervisor should avoid weekly or fortnightly working shift pattern unless requested by the staff. Where possible, adopt a morning to afternoon shift working schedule instead of having the staff to work afternoon followed by morning shift. This is to ensure that staffs have adequate rest.

Human Resource (HR) department could also think of alternative ways assist wards that is understaffed without having to call in staff to work on their scheduled off days.

5. Scheduling of the study

The total period of this study will be over 24 months. In the first 3 months of the study, the researcher will write a written permission to the hospital and seek cooperation to conduct the study. During the fourth month, the researcher will sought approval from the hospital, the health ministry and the university institutional review board (IRB) which will be discussed on point 6 under ethical considerations. The researcher will than hire team of nurses and train them to be data collector. A statistician will also be hired for this study. Recruitment of study participants & data collection will commence on the 9th month of the study and will go on for a period of 1 year. The statistician will than assist in statistical analysis. Writing of results will take place on the 22nd month to the 23rd month and the researcher will submit the result of the study to MOH on the 24th month. During this period, there will be research team meetings and further development/consolidation of project and updating of literature review on every last Saturday of every month.

Details of cost

Project Researcher

$1000

Statistician (for 1 year)

$1000

Nurses x 3

$800

Laptop and Printer

$800

Stationeries

$100

SPSS software

$100

Total

$5400

Table 1: Summary of Project Activity and Milestones

Activity

Months of Projects

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

Searching for hospital for participation of study.

Seeking permission and cooperation from the hospital.

Seek approval from institutional review board (IRB) and Ministry of Health (MOH)

Hiring staff: Team of nurses and training them to be data collector/ Statistician

Data collection

Data analysis

Collating and writing up results

submitting results to MOH for review

Research team meetings and further development/consolidation of project team

6. Ethical considerations.

Ethical consideration is an important component in research studies. It begins at the identification of the research topic and is applied throughout the course of this study. If this study were to be conducted, the rights to self-determination, privacy, anonymity and confidentiality and informed consent will be strictly observed.The Irregular Work Shift Pattern Nursing Essay.

To render this study ethical, the researcher needs to obtain permission and sought approval to conduct this study from the university Institutional Review Board (IRB) & the hospital’s ethical committee. Burns and Grove (2011, pg 130) describe IRB as “a committee that reviews research to ensure that the investigator is conducting the research ethically”.

Informed Consent

Burns and Grove (2011, pg 122) define informed consent as the “prospective subject’s agreement to participate in a study as subject after the transmission of essential ideas and content from the investigator to the prospective subject”. The researcher will informed the subjects about the aims and purpose of this study and the methods use to collect the data. Burns and Grove (2011, pg 125), adds that “researchers using questionnaires to collect relatively harmless data do not need to obtain a signed consent form from the subjects. The subject’s completion of the questionnaire may serve as consent”. At the top of questionnaire, the researcher will include a statement such as, “your completion of this questionnaire indicates your consent to participate in this study.”

The Right to self-determination

The rights to self-determination will also be maintained. According to Burns and Grove (2011, pg 110), “the right to self-determination is based on the ethical principle of respect for persons, and it indicates that humans are capable of controlling their own destiny”. The researcher will treat subjects as an autonomous agents by informing them about the study and allowing them to voluntarily choose to participate or to withdraw from the without any penalty (Burns and Grove, 2011). Due to the vulnerability of the subject, due to the medication error done, the researcher will reassure the subjects and will ensure that subjects are not coerced into participating in the research.The Irregular Work Shift Pattern Nursing Essay.

Right to Privacy

The researcher will protect the subject’s right to privacy, by informing and securing the subject agreement to participate and voluntarily share private information with the researcher. Private information includes information received during the interview session such as the subject’s attitudes, beliefs, behaviours, opinions and record (Burns and Grove, 2011). The researcher will reassure the subject that any information received will not be shared without the subject’s knowledge or approval.

Rights to Anonymity and Confidentiality

According to Burns and Grove (2011, pg 117), “on the basis of the right to privacy, the research subject has the right to anonymity and the right to assume that the data collected will be kept confidential”. The authors add that “complete anonymity exists when the subject’s identity cannot be linked, even by the researcher, with his or her individual responses”. For this study, anonymity will be strictly observed by not having the subject’s to write their name on the questionnaire and not including the name of the subject on research report.The Irregular Work Shift Pattern Nursing Essay.

The ethical consideration of confidentiality will strictly be maintained by the researcher. Burns and Grove (2011, pg 117) define confidentiality as “the researcher’s management of private information shared by a subject or participant”. The researcher will refrain from sharing information without the permission of the subject. Information received and the data collected will be stored in the researcher computer. Data stored in the computer will be protected by software with secret password in order to protect subject’s confidentiality.The Irregular Work Shift Pattern Nursing Essay.

7. Reflections of your study

While conducting the study, the subject might withdraw from the study due to various reasons. This could affect the overall data of the study.

The nurse might not collaborate with the researcher and the team while training the nurses in data collection. Being health professionals, they are well trained and knowledgeable. By training them, the researcher and the team are questioning their abilities.The Irregular Work Shift Pattern Nursing Essay.

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CASE SYNOPSIS
Derived from a preponderance of primary data and field interviews and supplemented by secondary research, the case describes two dilemmas that Mr. Ralph Dweck, as the new owner of Catalya hats, a family-owned firm, faced. First, in order to grow the business some form of outsourcing of production seemed to make the most sense to Mr. Dweck given his limited ability to finance additional local investments. He therefore determined that there was a need to find international business collaborates in order to expand the firm’s production of hats. His management team, made up of former managers from the family firm, opposed the proposal. His management team’s pride would not allow them to see Catalya hats made anywhere else but in Ecuador and certainly not by anyone else but by “family” members. A compromise was reached to produce hats in-house and to operate using a shift system.
Demand for the hats rose and then fell accordingly driven by numerous factors including an overly high price point. The second shift seemed “unnecessary “yet cutting the second shift would negatively affect employee wages. Reluctantly top management agreed with Mr. Dweck that although it would break with Catalya tradition, they would relent and allow certain lower priced models of the hat line to be made overseas. This would allow operations in Ecuador to concentrate on the higher quality, more difficult hats to mass manufacture, specialty hats that made Catalya the Rolls Royce of the market.
Once the offshoring hurdle was overcome and outsourcing commenced, Mr. Dweck had to then address the negative press derived from the fact that his contractor in China was subcontracting the work to other factories in China who forced their workers to work long hours in harmful working conditions and for less than minimum wage. Mr. Dweck, nor anyone else in the firm, was informed that their manufacturer was subcontracting the work. The case ends with Mr. DeGast (a consultant originally hired to set up the outsourcing arrangements and later hired as a full-time employee) having to confront Mr. Dweck with the bad news that the firm’s agreement with their contractor did not preclude subcontracting the work. This unfortunately included the subs not being bound by any requirement for employee working conditions that Catalya set with the contractor.

This is no Tea Party!
It was march of 2012 and Mr. Ralph Dweck, a normally mild mannered and peaceful man, was pacing back and forth in an alarming manner in the conference room during an emergency meeting of the top management of Catalya Hats. His panama hat, the symbol of his company and the top of their cherished hat product line, bounced up and down in synch with his pacing. Everyone in the room was anxious since they knew that Mr. Dweck rarely if ever called an emergency meeting – and pacing was just not in his behavioral repertoire. At least not until now!
As the President of Catalya Hats he had a significant amount of responsibility, running a former privately owned business that went back nearly three generations with nearly one hundred employees who were all regarded as family. He took upholding the tradition of making quality Panama hats very seriously and thought of his employees and their families as an extension of his own. It was apparent to everyone in the room that he was under heavy duress, exasperated and clearly distressed.
“How did this happen!” He shouted to no one in particular. He then suddenly threw a bundle of hard copied e-mails on the conference table with a loud thud causing all of the managers to jump back in surprise. “Look at these copied articles from the press in Shanghai. Our label has been in Shanghai for only four months and every day for the past week the press has been publishing articles about our licensee Xion International and the poor working conditions in their factory; and of course we are named as the licensor!”
“Actually it wasn’t even Xion’s factory that got hammered in the press.” The President corrected himself. “The journalist reported that Xion International was actually subcontracting the work to other factories in China who forced their workers to work long hours in harmful working conditions and for less than minimum wage. They stated the subcontractors had no written management or ethical codes of conduct that would ensure that supervisors and the executives would act socially responsible.” Murmurs could be heard from the group with each person wondering who was responsible and ultimately whose head or heads would roll.
President Dweck then dumped another pile of papers of the table, with the overflow spilling all over the floor in disarray. “And if that wasn’t bad enough, these are just a few of the posts on XiaoNei, the Chinese version of Facebook (renren.com). They include pictures and videos of employees, working conditions, pay stubs, and testimonials as to the horrendous treatment the workers have been receiving in the factory. It makes me very angry to think that anyone would treat their employees in such a fashion – I know we wouldn’t! Luckily nothing as of yet has hit the American press, Facebook, Twitter, or LinkedIn but it would seem just a matter of time before some American reporter surfing the net will come across these little gems and go viral with them. Do any of you know have the faintest notion of what this will do to our company and brand image?”
They all knew this was a rhetorical question yet all heads instantly turned to Janice Warling head of Public Relations, hoping that she not only had an explanation but a prepared solution for dealing with this catastrophe. Yet she too was very much caught by surprise by this latest development and seemed like a deer in the headlights – frozen in time and space. Brian Bianco the Vice President of Operations, started to try to explain how this “might possibly could have happened” yet he was immediately cut off by the President with a stern, hawk-like stare. Tori Baugmart the Vice President of Human Resources, and Evelyn Choi Manager of Production both took a deep breath knowing their turn would come to describe their role in this tragedy.
All eyes then turned to look for Armando Degast the recently appointed Vice President of Licensing and the one responsible for brokering the deal with Xion International. Everyone including the president was anxiously awaiting not only an explanation but the implications and possible brand damage due to this public relations debacle. Yet Armando was nowhere to be found – he had received a “sneak preview” of the articles from Dweck’s personal secretary before the meeting and was at that moment on the phone with Xion International trying to figure out if the articles were not only true but also how Xion was handling these allegations. He knew that “the hare had certainly lost his spectacles” and was running out of time before the “red queen chopped of his head.”
Panama Hats: Not from Panama!
Panama hats ironically were the cultural icon of Ecuadorians for thousands of years and became popular in Ecuador when hat weaving became a cottage industry in the 1600’s. It wasn’t until the 1800’s and the building of the Panama Canal that Ecuadorian hat makers found a ready market for their products in Panama City and by 1850 the United States market had “discovered” these hats buying over 200,000 hats per year. (Anonymous, 2016)

Figure 1
Classic Fedora Hat

In 1906, President Theodore Roosevelt visited the construction site of the Panama Canal where he is photographed wearing one of these unusual hats. This picture published in world newspapers and magazines publicized this hat and made it a fashion phenomenon. From then on the hats kept its name of “Panama” Hats, though Ecuador received its recognition as their place of origin through time and the clarification with the history behind these gorgeous hats. (See Figure 2, below). Later, the glamorous style of the 1940’s gave these hats even more place and recognition. Throughout history, people from all walks of life, including presidents, artists, and politicians, wore and benefited from “Panama” hats. Many famous heads have worn them too, such as Humphrey Bogart, Orson Welles, Gary Cooper, Ernest Hemmingway, Winston Churchill, Harry Truman, Paul Newman, Alberto Santos Dumont and celebrities of today like Johnny Depp, Sean Connery, Kevin Spacey, Madonna, Monica Bellucci, and Javier Bardem amongst many others. (Lopez, 2012)

Figure 2
“Teddy” Roosevelt and the Panama Hat
(http://www.thegenuinepanamahats.com/History)

Industry Background (SIC Code 2353: Hats, caps, and millinery)

This industry code refers to “Establishments primarily engaged in manufacturing hats, caps, and millinery, and hat bodies.
 Baseball caps, except plastics
 Caps: textiles, straw, fur-felt, and wool-felt-mfpm
 Chauffeurs’ hats and caps, cloth
 Harvest hats, straw
 Hat bodies fur-felt, straw, and wool-felt
 Hats, trimmed
 Hats textiles, straw, fur-felt, and wool-felt
 Helmets, jungle-cloth: wool-lined
 Millinery
 Opera hats
 Panama hats
 Police hats and caps, except protective head gear
 Uniform hats and caps, except protective head gear” (OSHA, n.d.)

Hoovers’ industry analysis lumps this industry category into Apparel Accessories Manufacturing (NIACS 315990: Apparel Accessories and Other Apparel Manufacturing) and reports that:
Demand is determined by consumer tastes and the level of consumers’ discretionary income. The profitability of companies depends in part on effectively controlling the costs of manufacturing, both in the US and internationally. Smaller companies can compete effectively by specializing. The US industry is concentrated: the top 50 companies account for about 80% of sales. Imports account for nearly all of the US market. The largest suppliers to the US are China, Mexico, Vietnam, and Italy. Major export markets for US apparel accessories manufacturers include Canada, Mexico, and the Dominican Republic. Exports account for more than 95% of US production. … US retail sales for clothing and clothing accessories stores, a potential measure of apparel accessories demand, increased 0.5% in the first nine months of 2016 compared to the same period in 2015. … The men’s market for apparel accessories has improved as men have been more willing to embrace certain styles, such as hats. An increase in hat purchases can be tied back to more celebrities, such as Justin Timberlake, Pharrell, and Usher, wearing hats, as well as the popularity of the television show Mad Men, in which central character Don Draper favored fedoras. Male consumers are expected to be a major growth driver for personal accessories sales in the US, according to Euromonitor. (Hoovers, n.d.)

Industry Specifics
According to the Commercial Office of Ecuador in Los Angeles (9/16), Ecuador is known as a country specialized in producing fine varieties of straw hats that meet high standards and demands of consumers internationally.
The straw hats, also known by the famous name “Panama Hats” worldwide have been well received in the United States the last few years. The demand for these hats has experienced a significant increase and it is estimated that demand will continue to increase. The hats have various designs, shapes, colors and different qualities.
Prices. When it comes to price, the quality of the hat is a determining factor, and its quality is determined mainly by three factors: tissue, tissue quality and uniformity of color. The hat color is generally a natural beige, although it can be processed to obtain other colors either pure or more white and bright colors.
Hats are categorized by degrees, with 1 being the degree of lower quality and lower price, and grade 40 the better quality and higher price. The higher the grade, the more expensive and better quality will be the hat. The word “degree” is used to indicate the number of threads per linear inch which the hat has. The finer the hat is, the longer it takes the manufacturing process.
Ecuadorian hats are sold at a higher value because the quality of Ecuadorian hat is higher than that of its competitors. Hats from China are hats lowest priced in the market. These are made of an artificial material and fluctuate between US $ 15 and US $ 50.
Hats degrees between 1 and 4 of the Ecuadorian competition reach a price range between US $ 90 to US $ 130, while hats between grades 4 and 8 fluctuate from US $ 200 to US $ 250. For fine hats highest level, prices range from US $ 340 to US $ 500.
Demand. In the last 5 years’ straw hats imported to the United States from Ecuador has quadrupled. It can be seen that the vast majority of products entering the United States through Florida, Hawaii, Puerto Rico, California, among others, indicating that Ecuadorian hats are marketed and distributed from places with warm climates, where a hat can be included and adapted to the style of clothing worn in these places.
Hats, generally do not have a definite style since there are a number of designs and prices. You can find many hats of low quality and lower value in the US as well as in more reputable stores and shops known as high quality. However, Ecuadorians in order to have a better quality and to be recognized for their fine hats seek to promote their hats to people with purchasing power. High quality hats are products that are commonly seen on golfers, owners of sailboats and yachts. These are also promoted in world events such as tennis, golf, among others.
Panorama in Ecuador. Exports from Ecuador to the world represent US $ 29,122,100 during the period January 2013 to June 2016. The United States is the country with the most demand, accounting for 19% of total exports. Countries such as Japan, France, Germany, Spain, United Kingdom and Panama, follow. Currently, Ecuador is focusing on the production of straw hats with fair trade, this so that the Toquilleras and all those who weave hats may benefit directly from marketing them.
Imports: Increased competition in price has been due to the importing of China hats. These are of lower quality and inexpensive to make. They are made of synthetic fiber and are perfect for consumers who do not focus on quality and want to wear the hat only in the summer. Direct competition comes from European hats: Germany, England and Italy, which have a small disadvantage in quality but an advantage in price.
Consumer: This product is trends in the summer. Thus, typical consumers are located in warm areas of the country, especially in areas close to the beaches, because of the environment they have and fashionable clothes that people in these areas wear.
With demand for these hats increasing worldwide, and the implementation of fair trade in Ecuador, there is a promising future for all Ecuadorian producers of hats. In conjunction with this, the industry should focus on promoting hats in warm areas of the United States, where the product has increased demand and better reception, given the environmental, climatic and trend dress consumers in these areas, particularly, during the summer. (Commercial Office of Ecuador in Los Angeles, 2016)
Catalya Hats: A Family Success Story
Catalya Hats, a millinery company began from a simple design of a Panama hat in Ricardo Catalya’s home in Ecuador. Mr. Catalya had no idea that when he crafted his first Panama hat in 1906 to protect himself from the sun, it would become an iconic fashion classic. His hats were crafted from the finest natural toquilla straw fiber; no fibers were ever the same. In fact, each hat had its own character because the materials were different in shape and color. Toqilla comes from a straw plant, which cannot be woven by a machine it can only be woven by hand. Depending on the weave count one hat could take anywhere between one week to three months to manufacture.
It did not take long for many powerful businessmen and celebrities from the United States to take recognition of these handcrafted pieces at the time. The company’s strategy was to become a globally integrated quality hat company. For over 100 years the industry has praised the company, and helped the company raise its annual revenue to $25.5 million by 2006.
Nearly all of the top managers started their careers with the firm and had worked their way up to their positions. The firm’s practice, started by its founder, was for all employees to learn the business from the ground up starting with working on the production line assisting the hat makers (regardless of their actual field of expertise) and then rotating through every job dealing with hat production and distribution including actual hat making. This approach to employee training ensured that everyone in the firm, regardless of their specific tasks and responsibilities, had a personal connection to not only every job performed but also to most the people who performed them.
The company’s accomplishments were due in no small part to its cross functional corporate structure; a structure that reinforced egalitarian decision-making. By definition, the company’s team or project members came from more than one functional area of the company, working together toward a common goal and a common bound; a love of hats. This structure ensured that the work groups were able to carry out the company’s mission of making every hat a unique experience. Catalya’s organizational culture was therefore family-based and family driven as enlivened through the managers’ and employees’ work attitudes and behaviors. The top-level managers were leaders in regard to setting and implementing these values, beliefs and how an employee should be treated as well as how an employee should perform when representing the firm both within and without.
Throwing Your Hat into the Ring: The New Owner

The firm finally maxed out its production capacity at the turn of the 21st century, stalling the family’s plans for international growth and expansion. Although profitable, the family did not have the financial wherewithal to support a sizable plant investment and therein continued focusing on process and production improvements through technological innovation. In 2006 the firm was reluctantly sold to a private investor, Ralph Dweck, who had the capital needed to expand the name and brand. An essential part of the purchasing agreement was that Mr. Dweck agreed to retain the current employees and staff for a minimum of two years and that he would remain true to the quality and traditions of the firm.
Mr. Dweck understood that his new staff may not see or agree with his “big picture”, his vision for international growth and expansion, and hoped that he could move them out of their “familial” surroundings and transition them into a more corporate, professional milieu and mindset.
At the first major executive meeting he rolled out his plans to enter into new international markets and distribution channels. Everyone seemed onboard with these growth plans until Mr. Dweck discussed the need to find international business partners in order to expand the firm’s operation. These partners, specifically firms with excess production capability, would dramatically increase the firm’s production capacity while leveraging Catalya’s good name. Some form of outsourcing of production seemed to make the most sense to Mr. Dweck given the limited financial investment required nonetheless his proposal received opposition from many of the top managers within the firm.
Brian Bianco the Vice President of Operations argued that no one could make Catalya hats like Catalya employees and that unless these “partners” were going to be trained by Catalya hat makers that the products would be of inferior quality. He proposed instead to increase the current plant size and capacity, take on a larger work force, and continue the tradition of producing high quality hats made in Ecuador. He felt that local monitoring and quality control techniques would ensure that the firm would maintain high production standards; standards that would allow the firm to continue to excel as a top flight connoisseur hat maker.
Evelyn Choi Manager of Production echoed his concerns about outsourcing production reminding everyone of Ricardo Catalya’s legacy and the pride employees had in working for such a prestigious firm. Janice Warling in Public Relations thought that they would garner for more public support by “making local, being global” and that they could leverage the “fair trade” movement by touting how well their workers were paid as well as their pristine working conditions. She thought that they could even seek government funding and support to help them grow the business (low or no interest loans, tax abatements or rebates, etc…). Tori Baugmart the Vice President of Human Resources reinforced these sentiments and indicated that labor was plentiful, fairly well skilled and was not overly costly as compared to other workforces.
In response to these negative comments Mr. Dweck tried to explain to his team the need to ride the wave of consumer demand for these hats without committing a huge amount of resources for gearing up production. He was afraid that this increased demand might be short-lived, having quadrupled in the last five years, and that the firm might get caught in a fad downturn rather than climbing up the surging wave of a fashion trend. Outsourcing seemed to be the best short term solution to solving the supply gap, a gap that could not be shrunk through price increases.
The Hat Still Has a Silver Lining
Mr. Bianco asked that the management team be given some time to study the situation and to make a counterproposal that would specifically address the need to increase production capacity locally and maintaining the same high quality standards. This new “solutions task force” (though far more informal in operations then it sounded as named by Mr. Dweck) was given three months to propose a viable alternative that could be quickly implemented. The team first chatted with the employees to see if they had any ideas and then did some external research including talking with suppliers, competitors and government officials. At the end of the three months the team proposed the following options:

1. Several competitors had excess production capacity which could be utilized on a “need only” basis. In order to protect the proprietary nature of hat production, Catalya would supply their own work force and train them to utilize their competitors’ equipment and facilities. The team though was not comfortable “exporting” their core competency and skilled employees to a competitor’s location in fear of intellectual theft and recruitment of key employees.
2. Once they approached the competitors in terms of excess capacity, one or two of them suggested that Catalya buy them outright and take over their entire operation. These competitors were much smaller in capacity and therefore would only incrementally add to the firm’s capacity and therefore would allow the firm to incrementally meet demand while not potentially overproducing. After touring the plants in question though, the team concluded that the energy and cost involved in converting the plants to the “Catalya way” was going to take far too much expense and effort.
3. Catalya’s current plant operated using a single shift system – the shift arrived at 7 AM, performed programmed maintenance and supply replenishment, and by 8 AM started assembling hats; production ended at 4 PM so with cleanup and maintenance the workday ended at 5 PM. Short breaks (15 minutes) occurred every two hours with an hour lunch break at noon. Being with family was so important to the Catalya’s and their employees that altering these routines seemed out of the question. Yet when asked for alternatives to outsourcing certain employees indicated that they would be willing to work an evening shift if it would keep production “in-house” – their pride would not allow them to see Catalya hats made anywhere else but in Ecuador and certainly not by anyone else but by “family” members. Of course they would expect a pay differential that would warrant working this later shift and they also expected that shift deployment would be rotated so that everyone, including top management, would have the opportunity to serve the firm.
   A Tip of the Hat or Keeping It Under your Hat?
   The team agreed that the third option seemed the most viable, especially since the answer came from employees who would then be implementing the solution. The task force developed a detailed plan of operations that addressed machine and supply maintenance, personnel needs and assignments (including management), budget (including projected cash flows and profits), projected quantities, as well as special needs pertaining to quality control. The second shift would start at 5 PM, start production at 6 PM, have a light meal at 9 PM (1/2-hour break) and end at 1 AM. This second shift was shorter than the first since the team feared that workers would become overly drowsy and quality would slip. The team presented all of the alternatives to Mr. Dweck who agreed that option three was the best short term solution and asked them to go ahead with executing a second shift.
   Mr. Dweck however did not drop his plans for licensing the firm’s brand and manufacturing processes. He firmly believed that the business path to buildup brand recognition and market share and to catapult the brand to the top of the clothing accessories market was through licensing and in essence franchising the company name. Competition in this industry was deemed as very challenging and licensing to him seemed the best choice to quickly and with minimal costs enter new markets while leveraging the company’s brand. Mr. Dweck, unbeknownst to the management team, then hired a consultant, Mr. Armando Degast, to investigate possible licensing partners and to then make the necessary contractual arrangements to finalize a deal.
   Hats Off to the Management Team but then Hold onto Your Hats!
   Mr. Bianco and his management team seemed to have accomplished the impossible. Their second shift plan took only three months to implement and was quite a success, not only adding an additional 40% to the firm’s production capacity (the estimates were around 25%) but also adding an additional 10% to the firm’s bottom line and increasing employee annual income by 20% (due to overtime). By 2010 however, even operating at maximum overtime (including working holidays) and increasing the base price of the hats by 15%, the plant could not keep up with the skyrocketing demand. Mr. Dweck was cautioned by a marketing consultant not to push the price point too high but for the next year the firm was successfully able to creep up the price another 10% without impacting demand.
   By January of 2011 demanded not only slackened but started to drop off, reducing back orders from 120 days to 60 days. In six months, assuming sales held firm, the firm would be “caught up” with back orders and would no longer require a second shift. Field research indicated that local competitors with similar quality hats were operating at near 100% capacity at slightly lower prices thereby cutting into Catalya’s client base. More important, customers were becoming more price sensitive and that lower cost “panama style” hats were flooding the market, mainly from Asian manufacturers, creating a price ceiling for luxury hats.
   Mr. Dweck presented these findings to his management team, indicating that lower demand in the long term would necessitate dropping the 2nd shift. Tori Baugmart in HR immediately admitted that dropping the 2nd shift would reduce employee salaries by 20%, an unacceptable alternative given the negative impact it would have on their employees’ standard of living and quality of life; they had become accustomed to these higher wages and could not afford wage reductions. Janice Warling in Public Relations denoted that this would become a PR nightmare. Not only would employees become disgruntled, leading to negative word of mouth, but the press would have a field day with the story – perhaps negatively impacted the brand name and certainly bringing disfavor from the government.
   Mr. Dweck then discussed with the team alternatives to dropping the second shift – he brought up the possibility of worker layoffs, reduction in benefits (i.e. vacation, personal and sick time) including retirement plans, reduced operating hours for each shift, and even dropping the price of the hats. Each alternative met with strong resistance from the management team, except a drop in price.
   Mr. Dweck was not only prepared for this eventuality, he in fact banked on it. He indicated that a drop in price would cut into profits and that the firm needed those additional funds for product design and technology-based investments. Both Mr. Bianco and Ms. Choi indicated the need to reinvest in the plant and to streamline product design since their plant was aging. They needed newer, more flexible and efficient hardware and software to create and manufacture new hat lines with better consistency and lower costs.
   Pulling the Hat Over Their Eyes
   An argument ensued amongst the team members based upon the notion that employees came before machines with Mr. Dweck silencing the group and asking for cooler heads. At this point he reintroduced the licensing idea. Profits would be derived from licensing the hat, a new revenue stream, with the royalties going straight to the bottom line. Mr. Dweck saw this venture as generating a profit with minimal risk to the firm while adding to brand equity and value in the long run. As the licensor, Catalya Hats would grant rights to the licensee to use Catalya’s intellectual property including its trademark, logo, slogan and production trade secrets. More important, employees could keep their second shift while operations would get their equipment and software; a win-win for everyone (and just as he had planned and hoped for).
   Mr. Bianco thanked Mr. Dweck for putting forward this alternative and asked that the team be provided with more detailed information so they could analyze the pros and cons for the firm. Two weeks later each team member received from Mr. Dweck an electronic packet of information detailing the pros and cons of a licensing agreement including a standard licensing agreement form and a hotlink to a list of the major foreign manufacturers of Panama hats. (See Appendices A and B.)
   A few weeks later the team came back to Mr. Dweck and reluctantly agreed that although it would break with Catalya tradition, they would relent and allow certain lower priced models of the hat line to be made overseas. This would allow operations in Ecuador to concentrate on the higher quality, more difficult to mass manufacture, specialty hats that made Catalya the Rolls Royce of the market. More specifically, they wanted the licensee’s hats to be distributed in fairly local markets and more specifically not in the US. They felt that the US market would devalue non-Ecuadorian Peruvian hats and therefore negatively impact the firm’s brand name; a name that took many years to develop and protect.
   Mr. Dweck outwardly reluctantly agreed with his team’s recommendations though this was exactly what he wanted, to subcontract out production, reduce operating costs and grow profit margins. A day later he e-mailed an announcement to the team that he would bring into the firm some expertise on international licensing, an area they had no experience with. Mr. Dweck had Mr. Bianco research LIMA (The International Licensing Industry Merchandisers’ Association – http://www.licensing.org/). After initially reading about the organization, Mr. Bianco then surfed their “consultant” site, lamenting that only one firm that provided this type of service was located south of the US border, in Mexico; not a very promising start. (http://www.licensing .org/limanet/directory/consultants/, 11/29/2016) He contacted them and found that they had limited experience in apparel licensing and they recommended him to several large US firms.
   In the interim, Mr. Dweck e-mailed the team that he had conducted his own personal search on LinkedIn which yielded a list of just a few individuals with a strong background in apparel licensing and who were familiar with Ecuadorian trade laws. He was particularly fond of one consultant, Mr. Armando Degast, since he had brokered several deals between other South American apparel firms and Asian manufacturers. Mr. Degast’s resume and client list was then circulated to the management team along with a list of potential licensees for Catalya Hats. The team ruminated over his resume and the list and decided that Mr. Degast’s background was well suited to represent Catalya Hats since he had represented other family-based firms that decided to grow market awareness of their products and raise capital by leveraging their brand name with minimal investment costs. The team, with Mr. Dweck in the background, held a Skype interview with Mr. DeGast, who was then in China at the time. They were satisfied that the man on the screen could deliver to Catalaya Hats a client who would appreciate their tradition and values and produce a hat worthy of the Catalya name. A few days later Mr. DeGast was hired and immediately went to work finding a licensee who would live within the limitations imposed by the firm in terms of product quality and distribution.
   A Feather in Mr. Dweck’s Cap
   After several months of meetings and negotiations with potential licensees, and several “near deals”, Mr. Degast came back with what looked like a viable licensee, Xion International. The contract had been vetted through the legal department with no obvious problems and specifically included clauses pertaining to where the licensee could ship their products to, what “lines” of products they could produce under the Catalya name, and the fact that all products before mass production would need to be inspected by Catalya personnel. This would require that several of the staff at Catalya inspect Xion’s operation and ensure that work process and product met their high standards. The management team was particularly impressed with the fact that the contract required that Catalya provide Xion employee training and technical support at the Licensee’s expense.
   Mr. Dweck was satisfied with the financial package – there was a flat annual fee for the licensing rights of $500,000 US dollars (Ecuador adopted the US dollar as their currency in March of 2000) as well as a 10% royalty on any item at wholesale cost. Mr. DeGast estimated that early production runs could reach as much as 100,000 units; with wholesale costs of the least expensive hats running $5/unit. That would add another $50,000 to the deal with no out of pocket expense for the firm except Mr. Degast’s consulting fee (10% of the flat rate) and some fixed labor costs from the legal department.
   The deal was finalized in summer of 2011 with personnel from Catalya on-site in Shanghai supervising Xion’s employee training and production operation. Mr. DeGast was hired as VP of Licensing with the understanding that if this deal worked out well other deals with other vendors around the globe were in the offing. Xion had very modern computerized equipment, a highly motivated staff, and a very able workforce who quickly adopted to the Catalya way of hat making. Computerized quality controls worked quite well and employed ISO 9000 standards, with reject rates even lower than Catalya’s own operation for mass produced hats. Although far more formal than their Ecuadorian counterparts, the Chinse workers took great pride not only in their work but in the firm they worked for; adding Catalya to their family was viewed as highly positive.
   Pulling a Rabbit out of the Hat or Coming Up Empty Handed?
   During the ignominy in Mr. Dweck’s office, Mr. Armando Degast found out from the public relations officer at Xion International, through her connections with the press, that the factory in question was not a Xion factory but a factory of a subcontractor! Outsourced? He allowed the public relations officer to continue while he sat speechless and listened.
   One of the subcontractor’s factory workers, Hiro Lin, a 56-year-old employee in the factory, made an inquiry about the labor conditions to the local government. Mr. Lin felt it was worker abuse and since it was an International company he was ultimately making hats for, he expected to be treated as though he were working in their factory. A majority of the factory workers felt the same way and it reflected in the quality of the product; reject rates were well above Xion’s acceptance rate from their subcontractor. This resulted in short-term production shortages with Xion stocking out with their deliveries to their retailers. This affected Catalya’s brand reputation since consumers inevitably bought whatever brands of Fedora hats were on the shelves within their price range. Since this occurred within the first three months of the contract period, Catalya had no historical basis for determining production and sales irregularities; quantity and quality were not below contract standards.
   In the interim, the government official told Mr. Lin she would file his report, but no report was ever filed. Instead, the official contacted a local member of the press who went undercover into the subcontractor’s factory and recorded firsthand the substandard working conditions including pictures of Catalya hats in production. That lead to the series of articles published in the local papers as well as some minor news leaks in social media.
   When the “story” was finally finished, Degast asked why this work was subcontracted out and not done in-house. He was told that the first few production runs were so small that it was not cost effective for Xion to manufacture them; Catalya hats were farmed out to smaller, “sweat shop” factories.
   Degast was stunned that Xion had subbed out the work and worse Xion had not notified Catalya of such actions. Where in the contract were they allowed to do sub out production? After he finished his call with Xion, a quick call to the legal department confirmed that the licensing agreement did not preclude subcontracting. Subcontractors were therefore not held liable to Catalya work and product standards set in the contract with Xion. The head of the legal department said one could make an argument that quality control standards were certainly implied (if Xion had to meet those standards, any product produced for Xion had to meet the same standards) yet working conditions only applied to Xion factories. Any “damages” from this incident would therefore have to be directly addressed with Xion and not the actual factory in question.
   The Final Straw
   Degast knew that Mr. Dweck was not going to be happy with this turn of events. How could he tell him that the company’s reputation had been tainted by an organization that Catalya’s management team hadn’t vetted? He could he tell Mr. Dweck that proper precautions were not taken (due diligence) in signing the contract with Xion? Although the legal department should have caught this glitch in the contract it was Degast’s responsibility to research Xion including their propensity to contract work out (and to whom). Degast walked back to the meeting, hat in hand, preparing himself for the worst understanding what happens to the messenger who brings the king bad news.

REFERENCES
Anonymous. (2016, October 27). A Short History of the Panama Hat. Retrieved from The Panama Hat Company of the Pacific: https://www.brentblack.com/pages/history.html.
Commercial Office of Ecuador in Los Angeles. (2016, September). Demand Increases for Panama Hats in teh United States. Retrieved from Pro Ecuador: http://www.proecuador. gob.ec/pubs/la-demanda-de-sombreros-de-paja-toquilla-aumenta-en-estados-unidos-septiembre-2016/.
Hoovers. (n.d.). Apparel Accessories Manufacturing . Retrieved from Industry Description: http://0-subscriber.hoovers.com.liucat.lib.liu.edu/H/industry360/description.html? industryId=1162.
Lopez, J. (2012, November 1). http://www.thegenuinepanamahats.com/History. Retrieved from The History Behind Panama Hats.
OSHA, U. S. (n.d.). Description for 2353: Hats, Caps, and Millinery. Retrieved from Industry Group 235: Hats, Caps, And Millinery: https://www.osha.gov/pls/imis/sic_manual. display?id=520&tab=description.

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