Michael's Homestyle Pasta

Mike Valenti, is facing an urgent crisis a few hours before New Year's Eve 2001. Southern Pasta Company (SPC), acquired by Michael's Homestyle Pasta (MHP) on December 10, 2001, has shipped seafood stuffed pasta shells contaminated with Salmonella to its biggest customer, a chain of over 200 restaurants, on New Year's Eve, the biggest night in the year for the restaurant.

This crisis could lead to termination of the contract by SPC's customers leading to financial losses. The restaurant could also take the product off the menu altogether resulting in the impact to the entire industry. It could also mean damage to the reputation of SPC as well as MHP even though the new management wasn't liable for the actions taken place under the old management. The FDA could also issue press releases in the national media over the danger posed by the contaminated supplies. Most importantly, this crisis could lead to small children, the elderly and people with weak immune system getting sick and perhaps dying.

The crisis came to light when Fred Jones, the quality assurance manager of SPC on New Year's Eve morning, informed the top management at MHP about the shipment of the contaminated product. Fred had falsified the laboratory results after SPC's President, Hans Shmidt, threatened him of being fired. Friedrich Walz, the founder of SPC, and Hans had knowingly let the contaminated product be shipped out of the plant. Both of them flew to Europe ten days after the acquisition was completed were planning to return back only after New Year's Eve.

In the due diligence period leading up to the acquisition, Walz provided MHP with very little information. Mike was concerned about the culture of secrecy prevalent at SPC and was anxious about the information not disclosed. After digging into SPC's operations, Mike realized that SPC's employees intensely hated Walz and Schmidt for their top-down management style. Both of them expected all their orders to be executed without any questions.

Earlier too, SPC had to recall its products due to salmonella contamination in May 2001. Although subsequently FDA inspected and cleaned up SPC's plant, MSH's director for quality assurance had still observed lack of cleanliness. After the recall, SPC had worked with its customers to inspect, retool and develop cooking procedures. It is apparent that the existing procedures have not been adhered to in the months leading up to the acquisition.

On another level, Mike needs to ensure that situation such as contamination of inventory rarely occurs in future. Mistakes such as contamination might still be tolerable but he needs to make sure that nobody engages in fudging up of any information. He has to work towards building a more open culture at SPC so that the employees become proactive in reporting such unethical practices.

Objective