CHANGE COSTS MORE THAN PENNIES As you wipe your feet, you can’t help but notice
ID: 418603 • Letter: C
Question
CHANGE COSTS MORE THAN PENNIES
As you wipe your feet, you can’t help but notice how messy the carpet is. “Well, that’s what it’s for,” you think. “This is a factory, not a bookstore.” But seeing all those metal chips in the rug makes you think about the plant floor. You turn back around and survey the shop. Everywhere you look, parts are stacked in metal bins on wooden pallets, next to the palettes, on tables by machines, encroaching into the aisles—which are marked off with vibrant yellow striping to remind workers to keep them clear. It looks like there is much more work than the roughly $500,000 worth of parts that are actually in process.
Slowly, you begin to wend your way through the machines. Your plant uses five basic types of machines to make hundreds of thousands of different parts for everything from motorcycles to hospital beds to nail guns to industrial water purifiers. You make the mechanism that fills Downy bottles at Procter & Gamble and the tumblers that spit the movie tickets out from under the counter at theaters across the country. Machines are organized by type, so as a job moves through the plant, it will hit any number of machines in a particular order. A job with multiple operations might get moved around the plant from area to area up to seven times. Even though things are always moving, many areas of the plant seem crowded, as jobs line up waiting for their turn on the next machine. Red tickets in pans scattered around the shop and in a designated area are a reminder that there’s still quite a bit of scrap (or bad) work being run. Twenty-five percent of jobs going through the shop have to be fixed or rerun because the parts are the wrong size, if only by 0.001 inch. When you make it to the scheduling area, colored Post-it notes show how many jobs are rush, how many are late, and how many haven’t even been started. The on-time delivery rate is only 70 percent. For a precision machine shop that can cut metal to measurements in the ten-thousandths of an inch, the overall operations aren’t so precise.
Everywhere you look, you see disorder. Maybe those consultants were right: To be competitive, really to survive, you need to approach your operations in a more systematic fashion. A large percentage of companies with your capabilities have gone out of business, but even though there is less competition, there are fewer customers. The types of parts you manufacture are either being designed out of products or are being outsourced to China and Mexico. Without significant change, you’re not going to be able to survive the decade, let alone double your size in 2 years (which is your secret stretch goal).
Last week, a local manufacturing consultancy sent a few members to your shop to present a preliminary proposal on how they could help you run a more efficient operation. The company would assign a team to help your workers learn new, leaner processes of doing work; promises of increased productivity, profitability, and morale were made, with references galore. The consultants even invited you and your management team to take a plant tour of one (or more) of their most recent clients. Ultimately, the consultants would provide materials, workshops, and follow-up support to your shop employees every day all day for several days over a period of 6 months—for approximately $200,000. Right out of the gate, they would send two consultants to your shop for five consecutive weeks. But at $250 per hour per consultant, that’s a quick $100,000 to spend on teaching communication skills and showing workers how to identify waste issues that prevent them from doing their jobs effectively and efficiently.
With only $8 million in revenue in a business where labor and the costs of goods sold are high, your profits are slim. Spending money on the outsiders could very well mean finishing the year in the red instead of the black. Maybe you could hire someone to do the job full-time for half that amount. For $100,000, you could hire someone to do the same job full-time for a year. That might be better than having some consultants come, give their workshops, and leave the rest up to you after they head home. And will telling your employees that “things are going to change around here” be the best way to get things in order? Maybe it would be better if change initiatives started from the bottom. The majority of your sixty-five workers have been with you for over 20 years (turnover is not one of your problems), but with tenure comes intractability. In general, your employees are set in their ways. Still, they want the company to succeed, so maybe that concern will be a strong enough motivator.
1. Consider the above situation. What are the benefits to hiring outsiders to manage your change efforts?
2. Do you pay the $200,000 for the consultancy, do you hire a dedicated change agent, or do you try to marshal internal teams to spearhead a change effort?
3. What strategies might you use? Why? Explain. Please consider force-coercion, rational persuasion, shared power.
4. What specific change role of the three presented in the case would you excel in personally if you were in this situation? Which would be the hardest for you? Explain.
1. Outside change consultants
2. Internal Dedicated Change Agent
3. Employee working on one of the internal teams that are helping drive the changes
5. As a manager, what will be your “change management” style? Explain and discuss
Explanation / Answer
Answer to 5)
As a manager, my style of change management would be participative style. Because participative style helps in easy acceptance of decisions & also ensures commitment across the organization. This style of management helps in bringing the change easily because when we communicate to the subordinates in a friendlier manner, they tend to accept things easily & will also have dedication in the tasks performed by them which also ensures smooth transition.
Answer to 4)
I would excel in the 3rd option i.e. employees working in one of the teams that help in driving the changes.
The hardest for me would be outside change consultants. This is because they are completely external to the organization & we need to explain them the culture that is prevailing in the organization, policies & practices of the organization etc. and sometimes there can be chances of conflicts with internal employees that may sometime result in the project getting derailed. This would be the challenge of the project manager. Though external consultants have expert knowledge, hiring them sometimes would create problems in which case, an internal agent would be a better choice for the organization.
Answer to 3)
The strategy that I would select will be a rational persuasion strategy. This is because rational persuasion brings change by applying special knowledge & support. This strategy will help the management to decide whether to bring about the change management, whether it suits the organization or not etc. one more advantage of this strategy is that expert knowledge is used which helps the organization to face the change smoothly without much hindrances. Also if any employees don’t agree, expert power can be used to convince them that can make them better than before. When the strategy has been successfully adopted, it ensures long lasting & more internalized strategy than force coercion. If this logic is effectively communicated then the organization is sure of adopting the proposed change.
Answer to 2)
Payment of $200,000 can be a little higher cost for the organization and if I was in the similar situation, I would restrict from making the payment as it can be a huge expense in the budget for the organization. So I would try marshalling the internal teams to undertake the change by giving some additional training to them which wouldn’t cost that much to the organization.
Answer to 1)
Benefits of outside consultants:
Achieving clarity in the situation. Often an outsider can come & see the situation in a better view than someone who is inside the organization. An outsider has better experience & expertise on things than the insiders with less experience. It is for this reason that an outsider is considered to be valuable. An outside consultant with credibility can help the leaders in seeing things in new & clear way.
Second benefit is calibration. When experienced people come in the organization, they tend to share their experiences, experience of having worked with many companies who have faced with similar situations, the expert can questions from different viewpoints, challenge the leaders with his own assumption, the various sources of information etc. all these would help the leaders in understanding the company that they are looking at their own way & question it.
The third benefit is to be a catalyst. This really requires an independent advisor. In case of external consultant, he would tell the information more precisely & accurately than his direct reports. This is because an insider would sometimes be afraid of disclosing everything to his manager whereas this can be more easily identified by an outsider as he is not connected with company in any way except for that particular project & need not be afraid of anyone.