Posted: August 10th, 2022

Smithfield Foods Management Led Loss

Smithfield Foods Management Led Loss

Coronavirus for the most part has brought about drastic changes in how most industrial centers and organizations operate. This has been particularly highlighted by the immense number of closures and increased reduction in production, performance and high turnover of workers across a multitude of industries and organizations across America in the course of the pandemic. The meat packing industry is a critical industry in the US primarily because its product is one of the most sought out food across the country. Generally, it is an industry that has been hit hard by the pandemic and continues to face increased challenges mainly due to poor management, lack of responsive governance and significantly a motivation for profit maximization rather than sustainable business policies implementation (Grabell and Yeung, 2020). One specific company that has bore the brunt of Covid-19 is the Smithfield Foods meat packing company, which is one of the largest processed food manufacturer in the US. Some of the key management problem that have precipitated in Smithfield Foods, manifesting in the company recording losses include uncertainty about the future, wellbeing of their employees in the meat packing centers, poor management communication between workers and the executives of the company, and problems with regulation and compliance all of which have only been magnified with the dawn of Covid-19.
Smithfield Foods recorded a $72 million loss in the second quarter of 2020, compared to $180 million profit it recorded the same time a year earlier, it also spent $350 million more on its workers across the board in 2020 which was a significant raise in expenditure (Demetrakakes, 2020). According to Smithfield Foods (2020) theses expenditures “included $195 million in people-related costs, $125 million in facility-related costs and $30 million in community-related costs.” Telford (2020) similarly identifies that the industry saw nearly 11,000 workers take leave of absence from work, due to the effects of the pandemic on the workers. But while their problems are linked to the pandemic, research on food industry report on preparedness for uncertainty indicate a general passive and unresponsive management nature to be the key player in propagation of the loss (Grabell and Yeung, 2020).
The current problem that faces Smithfield Foods packing company is the lack of oversight on its management and an increase need for maximization of profit above sustainable working policies. Reports released indicate that Smithfield Foods was warned 15 years in advance of an impending and industry paralysing outbreak, that identified their industry as a key target, and also indicated that this would create greater food shortages in the country were an outbreak/ pandemic to develop (Grabell and Yeung, 2020). The top management and corporate governance teams choose to ignore the report in a bid to maintain their profitability citing the matter as uncertain due to the fact that investing large sums of money in preventing a disease on the probability of the disease manifesting was less cost effective.
The report by the government modelling agencies urged social distancing in meat packing spaces, masks and protective gear to be afforded to employees, as well as, better scheduling of work to create a conducive environment for workers to perform (Grabell and Yeung, 2020). It warned that in the event of an impending pandemic, high absenteeism of employees would have resulted in national food shortage (Grabell and Yeung, 2020). The meat companies rely on maximum output of workers, most of whom have limited protective equipment and crammed in little spaces, and the result was that a majority of workers were infected. Which as predicted led to hike in price of meat and lower production costs which resulted in aforementioned losses during the pandemic.
Sustainability in planning and execution of work has been sighted as a key solution in reversing the damage. While Smithfield Foods executives argue and continue to present a revisionist perspective denying that Covid-19 could have never been predicted (Grabell and Yeung, 2020). Reports indicate that the executive postponed planned sustainable goals implementation against communication of poor working conditions by the workers, as well as poor employee protection, as they would have been too costly for the company in the short term. Researchers prior and during Covid-19 breakout show a general lack of protective gear for most employees many working with balaclavas instead of certified masks and protective equipment as well as crowded working and cafeteria for employees (Grabell and Yeund, 2020). They have been forced to spend 350 million in 2020 in order to implement majority of these goals, which was totally avoidable and less costly were they all to be implemented in the specified time period initially suggested. Better employee representation through unions, would work to improve communication with top management. Additionally, regulatory measures and compliance could be improved and adhered to in order to improve workers condition and create less openings for outbreaks of diseases.

References
Demetrakakes, 2020. Smithfield Foods Posts Loss Due to COVID. [online] Foodprocessing.com. Available at: [Accessed 14 July 2021].
Grabell, M. and Yeung, B., 2020. Meatpacking Companies Dismissed Years of Warnings but Now Say Nobody Could Have Prepared for COVID-19. [online] ProPublica. Available at: [Accessed 14 July 2021].
Smithfield Foods, 2020. Smithfield Foods’ Adjusted Operating Results Swing to Loss in Second Quarter Amid COVID-19 Pandemic. [online] Prnewswire.com. Available at: [Accessed 14 July 2021].
Telford, 2020. The meat industry is trying to get back to normal. But workers are still getting sick — and shortages may get worse. [online] Washington Post. Available at: [Accessed 14 July 2021].

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