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ReedTrek Manufacturing

Group 8: Jack Roe and Jill Roe

February 24, 2014

Table of Contents

Executive Summary: Page 3

Case Summary: Pages 3-4

Major Issues: Pages 4-5

Analysis of Issues: Pages 5-8

Action Alternatives: Page 8

Analysis of Alternatives: Pages 8-10

Recommendation: Page 10

Implementation: Pages 10-11

References: Pages 12

Executive Summary

ReedTrek Manufacturing’s Shenzhen, China plant had been losing money since coming online in 2006. In September 2011, the longtime expat Plant General Manager left the position. The hiring of an apparently competent local national as new Plant General Manager, as well as the elimination of eight superfluous managerial positions, were believed to be the right steps for putting the plant on the path for growth.

A short-term turnaround in early 2012, gave way to rapid declines over the course of the remainder of the year. Revenue, production, and customer satisfaction levels all declined, while customer returns and employee turnover reached new heights. After a thorough evaluation by ReedTrek’s Director of Operations, it was determined that the primary reason for the decline was the autocratic management style of the Plant General Manager. After this determination was made, the employee was relieved of his duties and terminated.

Several alternatives are offered at the conclusion of this study, with the suggestion of promoting the current Production Manager to the role of General Plant Manager as the best available course of action.

Case Summary

This case involves the China factory of an American company, ReedTrek Manufacturing. Zakaria Shirazi is the company’s new director of operations, and he is in charge of fixing the failing China plant. After a three day trip to the china plant, Shirazi has determined that the production line and the workers were not the cause of the losses. Instead, he determined that the plants general manager, Li Jianshen, was the cause of the underperforming plant. He determined this through meetings with the secondary level of managers and learning about Li’s management style. Li had a harsh management style and tried to use fear to motivate his employees. He would even go as far as public shaming of employees to try to motivate them to work harder. This helped to cause a high turnover rate of line employees, which increased the losses of the plant due to training costs. In the end, Shirazi determined that the best course of action was to terminate Li’s employment.

Major Issues

The major issues that arose in this situation were all management related. The most prominent major issue is the management style of Li, the general manager of the China plant. After right-sizing the management staff from what the previous Plant General Manager had put in place, Li had six direct reports in the operations and sales areas. All of these managers had good experience and knowledge, and should have provided Li with a strong management team with which to get the plant operating at a high level. While Li’s initial attempts to get production back on track were successful, and included the implementation of a clearly defined performance management process, his authoritarian management style quickly began to undermine his best efforts. He would have weekly meetings with his secondary managers, but he would only listen to the facts and not take input on how to fix the problems. Basically, his management staff was just there to tell him about operations. They were not allowed to offer solutions. Li, instead of creating a plan to fix issues, would resort to public shaming of his employees. He would shut down the plant to yell at an employee who had done something wrong. This created tension with the employees and created a dysfunctional work environment. This also cost the plant valuable time due to the amount of time it takes to get the line running again. In this factory, if one part of the line was shut down, the whole operations came to a standstill. The employee turnover was very high and the costs of training new employees were furthering the losses of the plant. Li did not offer solutions for fixing problems, but instead created problems. He created a situation where workers were punished instead of rewarded. Li did not let his managers manage, and took the task of improving the plant on all by himself. Firing Li was the only possible solution to the problems he had created for the China plant.

Analysis of Issues

The first issue to be addressed is the motivation of the employees. Normally, motivation is what causes people to put effort into their work. With Li as the general manager of the China plant, motivation took on a new meaning. The employees were more motivated not to get publically shamed than they were to work hard and create a superior product. There were no rewards for performance. In most factories or manufacturing settings, employees are striving to meet company goals for a reward. A reward system such as pay for performance would be ideal in this factory. If merit pay were used, the line workers would earn more for being more efficient. In this case, however, the employees were trying to not lose pay by disrupting the plant and creating rework. Li’s management style focused too much on negative reinforcement and punishment. The punishment used by Li lead the employees to low job satisfaction. Along with this low job satisfaction, the use of punishment instead of reward was one of the key causes of the high turnover rate of employees. This, in turn, made the factory spend more on training new employees, which was part of the reason the margins did not match the output.

The second issue to be addressed is the organizational structure. The China plant did have a formal organizational chart. It was two main levels of management and the employees working the line. The plant general manager was at the top and the second level had six managers for operations and sales. The plant was highly centralized, with Li making all of the decisions. This means that even his secondary management level could not offer solutions to the problems that they observed. Li was essentially a dictator in the China factory. There were plenty of both process and output controls in the plant, but Li took it upon himself to uphold them. The plant was very mechanistic, but when problems arose Li resorted back to punishment. Li should have used a more hands off approach. He had six managers below him with what should have been clear responsibility for the personnel below them. Li’s actions essentially overrode his secondary managers and made them no more than figureheads to the line workers. All of the secondary managers had ideas to fix the problems that came up in the plant, but they were not allowed to implement solutions. This also created a negative work environment for the managers. They were treated less like managers and more like information sources. They were not allowed to do the job they were hired for.

Another issue that this case involves is communication. This issue is across the board. The overall company management did not communicate well with the China plant management, and the China plant management did not communicate well with the company management. This is easily exposed by what Shirazi sees when he visits the plant. He was sent to the plant because the plant was underperforming. He and the overall company management had determined that it was part of the production that was to blame. However, once Shirazi visited the plant, he realized that it was more personnel related than production related. If better communication between the China plant and the company was established, this could have never occurred. The company should have not communicated solely with the plant general manager. Instead, the director of operations should have had contact with all the managers in the China plant. Li, when communicating with the director of operations, only gave his skewed view of what the problem was at the plant and with production. If Shirazi had communicated with the other managers from the plant, he may have had a better idea about what was going on. Li was obviously filtering information through his selective perception. He chose to share his one view of what was happening and his one view of how to fix it. The upward communication was coming from one place, Li. Obviously when a plant is located so far away from the company management, communications issues will arise. This is even more possible when the two trying to communicate are of two different cultures. The general manager of the plant must feel comfortable disclosing all of the information about the plant to upper management. If that does not occur, upper management will not be able to offer solutions or even fix problems that they have fixed at other plants.

All in all, the plant needed to do something about the management issue at hand. The employees needed to feel more comfortable doing their jobs, and not like they were on the chopping block for the simplest of errors. The general manager needed to be changed as well. A proper fit for a general manager would be one who would listen to his management staff. They would also allow their staff to make decisions to determine how to fix the problems that arose at the plant. Also, better communication needs to be established. This is on both a plant and company level. The director of operations should communicate with all managers of the China plant and not just the general manager. This would allow him to get a better picture of what the problems are. At the plant, there needs to be better communication between both the plant general manager and his secondary managers. If this were in place, most of the problems could be resolved quickly and without the need for a major overhaul of plant operations.

Action Alternatives

We have identified three possible action alternatives:

1. As ReedTrek’s management has taken a primary role in the selection of the Plant General Manager in the past, it is suggested that they allow a local executive staffing firm to take the lead in finding a good match for the position.

2. It is suggested that ReedTrek fill the vacant Plant GM position by promoting from within; specifically the Production Manager who acted as interim Plant GM in the past.

3. As the plant has never reached more than 60% production capacity, and has been losing money since opening, it is suggested that ReedTrek close the plant in Shenzhen.

Analysis of Alternatives

Alternative 1 has an unknown probability of success. The previous two Plant GMs had greatly differing management styles, and neither was conducive to productivity. Although ReedTrek hired a local national to fill the position vacated by an expat, there fear of continuing the trend if a “corporate” type of manager was hired, caused them to have selective perception during the hiring process. As the case states that they interviewed 25 candidates, they had obviously not had assistance from a local hiring firm. A firm of this type could have vetted the initial candidates, and gotten the number of interviews down to a more manageable level. As these firms would also be performing background checks, the issues Li Jianshen brought with him, might have been discovered during the vetting process. Long-term benefits cannot be determined at this time.

Alternative 2 has a good probability of success if additional actions are taken. The case offers no specific data during the tenure of James Chu, Production Manager, but it can be assumed that he was at least competent. Chu, having seen two separate and distinct management styles fail previously, would not be likely to repeat the negative acts of his predecessor. Long-term training and support established by the Director of Operations, Zakaria Shirazi, would increase the probability of success for moving Chu into the role of Plant General Manager. The short-term success for this alternative would be one of stability within the plant, which should lead to immediate gains. Long-term, this alternative could see the plant reach high levels of success, assuming constant support from upper management and good interaction with stateside plants.

Alternative 3 is not made lightly, and could possibly be the best alternative given the unknowns of keeping the plant operating. The problem with the pre-established levels of measuring success could be one of analysis. Perhaps the plant can never operate at more than 60% capacity based on market share and production levels. By all accounts, with the exception of the added cost for the extra level of management put in place, operations under William McLean were seemingly successful. Replacing McLean with a local national, which was done, removing the extra level of management, which was done and which probably played a large part in the early success of Jianshen, and allowing time for stability in the workforce under known management, would allow for clearer analysis of production expectations. However, immediate closing of the plant would allow ReedTrek to deal much easier with the unknown of the futures. Past performance has damaged the reputation, client base, and market share of ReedTrek in the Asian market, so closing the entire operation and selling whatever could be sold could offer a long-term solution.

Recommendation

While Alternative 3 would offer a quicker and simpler solution to ReedTrek’s Asian market problems, we recommend implementation of Alternative 2. Obviously, if Alternative 1 were to be chosen, an interim manager would be needed and the likely choice would be James Chu, Production Manager. We suggest that ReedTrek take the positive step of promoting from within and bring James Chu up as Plant General Manager. This would increase employee morale in the sense that all employees would be able to feel as though they could aspire to better positions within the company. Chu’s knowledge, history, and apparent ability to work well with the plants existing management team, as well as with ReedTrek’s senior management, should pay both short and long-term dividends. While success is not guaranteed, we believe this alternative offers the highest possible level of success if ReedTrek hopes to maintain a presence, and eventually be successful in Asian markets.

Implementation Issues

The implementation issues for Alternative 2 are fairly basic. Will most, if not all, employees welcome the promotion of James Chu? Will Chu be able to assume the full-time role of Plant GM and be respected as such by the second tier managers he had previously been on the same level with? Will Chu choose or develop a management style that will lead to success for the Shenzhen plant?

Will most, if not all, employees welcome the promotion of James Chu? Based on the case and how Li’s management style created problems from the line up, it is believed that any change will be welcomed with open arms. Assuming Chu has been an active and positive Production Manager, trying his best in a bad situation, it can be assumed that his promotion will be greeted favorably.

Will Chu be able to assume the full-time role of Plant GM and be respected as such by the second tier managers he had previously been on the same level with? Again, Chu’s past actions and interactions will be the basis of his success and acceptance from his contemporaries. Prior to promoting Chu, Shirazi should poll all of the second tier managers as to who out of their group might make a good Plant GM. This survey would allow him to get a feel for how others perceive Chu.

Will Chu choose or develop a management style that will lead to success for the Shenzhen plant? If Chu is promoted, Shirazi will need to offer full support and guidance for the first few months. Not all of Li’s ideas were bad, but his actions corrupted any possibility of success, so keeping them in place would prove next to impossible. Chu and Shirazi would have to establish metrics for success for the Shenzhen plant based on both the production requirements of the company, and the cultural makeup of the employee base.

References:

Howell, J & Mark, K. (2012). ReedTrek Manufacturing (A). Ivey Publishing. http://www.iveycases.com.

Howell, J & Mark, K. (2012). ReedTrek Manufacturing (B). Ivey Publishing. http://www.iveycases.com.

Howell, J & Mark, K. (2012). ReedTrek Manufacturing (C). Ivey Publishing. http://www.iveycases.com.

Osborm, R. Schermerhorn, J. Uhl-Bein, M. (2014). Organizational Behavior (13th Ed.). Hoboken, NJ: John Wiley & Sons, Inc.