Planning Cycles at McDougal Aircraft Corporation

Walter Donaldson, vice-president for Human Resources for the McDougal Aircraft 
Corporation, returned the phone to his desk and thought as he stared out his 
window at the company's vast production facility.  He has just received a 
phone call from Jim Walters, who directed planning operations for the company.  
McDougal had just learned that it had been awarded the contract to build the 
new CJ-7 widebody transport by the Department of Defense.  The contract called 
for 1,000 of the craft to be built at a profit of $150 million over the next 
five years.  Production was scheduled to begin one year from now.

McDougal Aircraft was the second largest aircraft manufacturer in the United 
States.  The news was cause for rejoicing in the company because it would 
ensure the company's fortunes for at least the next five years.  Indeed, the 
contract was the only thing standing between the company and financial 
disaster.  McDougal had allowed its product development activities to fall 
behind during the previous ten years and had been beaten by Boeing Aircraft in 
entering the emerging fuel-efficient, short-haul, widebody aircraft business.  
Indeed, the Boeing 757 and 767 models accounted for almost all new orders 
being placed by the major domestic carriers.  McDougal had been unsuccessful 
in every case in bidding against Boeing.

Although the news was good for McDougal, it was troublsome for Donaldson.  He 
thought, I don't know why I stay in this industry.  Human resource planning is 
suicidal in this business!  Look at the acres of assembly facility we have 
sitting idle out there!  For the past five years I have been presiding over 
plans and protocols for laying off hundreds upon hundreds of our employees.  
I've worked to develop our placement programs to try to find other types of 
employment for highly trained engineers, technicians, electricians, 
assemblers, and so forth.  Now I'm going to need them again and I don't know 
where I'm going to find them.

He pulled a manual marked "McDougal Aircraft Corporation: Classification Plan" 
from the credenza behind his desk and turned to the section on organization 
design (Exhibit 5-2).  The document detailed how McDougal assembly operations 
were organized.  Each assembly operation was directed by a production 
supervisor who was responsible for the operation of two assembly lines.  Each 
line was supervised by a line supervisor, who reported to the production 

                                 Exhibit 5-2
                             Organization Plan:
                        McDougal Aircraft Corporation
                             Assembly Operations

                            Production Supervisor

Line Supervisor                                 Line Supervisor

Quality Control Inspector                       Quality Control 

Instrumentation Specialist                      Instrumentation 

Aircraft  Electrician                           Aircraft  Electrician

Aircraft  Welder                                Aircraft  Welder  

Aircraft Assembler                              Aircraft Assembler

Materials Handler                               Materials Handler

Each assembly line, in addition had 4 quality control inspectors, 16 
instrumentation specialists, 16 aircraft electricians, 16 welders, 40 aircraft 
assemblers, and 30 materials handlers.

In addition, Walt had compiled operating data on the company's operations for 
the last ten years.  In the past several years operations had remained fairly 
constant at a level far below the capacity of the company's physical 
facilities.  In the current year, for example, the company had used only a 
quarter of the physical space available.  In the last five years the annual 
production of aircraft was 100 units.  He turned to a computer printout 
indicating the staffing levels McDougal employed to produce those 100 units 
during the last year (Exhibit 5-3).  He noted the number of employees in each 
position, annual turnover rates (turnover rate is defined as the ratio of the 
number of employees leaving the employer during the year to the total number 
of people employed that year), the average annual wage or salary paid to 
people, the average time spent in the position before promotion, and the  
average time employees had already spent in the position.

Walt's job was all too familiar to him.  He had been through cycle of boom and 
bust several times before during his twenty-year tenure as personnel 
professional in the aircraft industry.  Somehow he had to come up with a 
staffing plan for McDougal's corporate management.  He had to tell them what 
they would need to do in order to have on board the human resources required 
to fulfill their new contract with the federal government.  He took a pencil 
and legal pad and began to sketch out the steps necessary to develop the plan.

The purpose of this exercise is to allow you to become familiar with the steps, 
information needs, and problems of this exercise as contained in Exhibits 5-2 
and 5-3.  Your results should be presented in both narrative and numerical 
form.  The recommendations you make should be detailed enough to leave no 
doubt in line management's mind as to what steps will be necessary to fulfill 
the new government contract.

           Step 1: Determine how many more units per year McDougal Aircraft 
           will have to produce over the next five years.
           Step 2: Translate this corporate production objective into a human 
           resource objective.  How many people will you need in each 
           position next year (the first year of the five-year contract)?  
           For subsequent years?
           Step 3: What are the company's current internal labor supplies for 
           each position?
           Step 4: What do you forecast these supplies to be by next year for 
           each position?
           Step 5: Forecast the company's labor demand in external labor 
           markets for next year.  How many people will the company have to 
           hire from outside for each position?
           Step 6: How will you define the external labor market for each of 
           the positions?  Where will you direct your recruiters?

                     Personnel Inventory, McDougal Aircraft Corporation, 
January 1982
                          Average      Average      Average    Time          Time
                          Number       Annual       Wage       To            In
                          of           Turnover                Promotion     Position
                          Employees    Rate                    (Years)       (Years)

Supervisor                50           0.15         $45,000    10            2

Supervisor               100           0.20          28,000    5             3

Quality Control
Inspector                200           0.50          25,000    5             2

Specialist               800           0.20          20,000    5             2

Electrician              800           0.40          21,000    5             2

Welder                   800           0.25          20,000    2             2

Assembler              2,000           0.20          16,000    2             6

Handler                1,500           0.20          12,000    1             1

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