1)RJSC started trading twenty years ago. Its Business Plan comprised one automatic lathe, one contract worth £15,000 and one employee. The employee was Dick Smith, the owner, aged 24. His ambition was to retire a millionaire at 45, having sold his profitable business, and concentrate on his fishing – preferably in the Bahamas.
2)Dick Smith survived the tough times through his own considerable abilities, and his stamina in working long and hard hours. He also was blessed in having a sympathetic and shrewd Business Advisor at his local bank. During the early years, he worked 14 hour days, six days a week, using family and friends to pack and dispatch his orders. Later on, he employed teenagers in the evenings and weekends, but he always followed strict Health & Safety rules to stay within the law. He was successful, though his Business Advisor was concerned that RJSC was under-capitalised. After a rocky start, RJSC was considered to be a profitable business.
3)As the business grew, Dick Smith hired more staff, who were all told of their boss’s ambition to retire a millionaire at 45. Each worker was expected to be committed and highly productive. In return, they could join a generous share-option scheme; enjoy annual bonuses and other incentive schemes.
4)Employees who were willing to accept these conditions found that Dick Smith meant what he said. Loyalty to the common cause was measured by the amount of overtime put in. This high amount of overtime had two effects. First, RJSC employees earned significantly more take-home pay which was neither contractual nor pensionable. Second, although the company was constantly growing, the work force did not have a parallel increase in size, as the large amount of overtime kept the number of employees to a minimum. Dick Smith had continuing face to face contact with them and knew each of his employees personally.
5)Dick Smith continued as he started. There was no pause in the intensity of work and he put in as many hours as his staff. Meetings took place either early in the morning or late at night so as not to affect the working day. He negotiated favourable loans with his bank and was careful in his expenditure. His office was Spartan but he was never in it, preferring to walk the floor and keep close contact with his workforce. He was always at hand to solve any problem, be it personal or business. The workers liked his ‘hands on’ approach and felt part of his dream. Dick informed them regularly of the business’s financial position and he had a reputation as a prudent and solid expert in financial matters. This reassured the staff and they felt that their future was in good hands.
6)Conditions may have been Spartan and the work itself under constant pressure, but each employee felt that their job was safe and rewarding in the long term. Tempers were often frayed and confrontation was seen as a necessary evil. It was the privilege of the owner as well as of any employee to lose their temper and it was a privilege that was often used. Dick Smith would rebuke anyone on his workforce; indeed, it was a ‘back-handed’ compliment to be dressed down by him. It was not all one-sided, and employees, regardless of their position, felt free to talk back to Dick or any of the other supervisors, and often did. Because this was the accepted way to decrease tension and to achieve action, the incident over which an outburst occurred was immediately forgotten. The employees appeared to be generally content and motivated, and underneath the tension and pressure each employee felt valued and integral to achieving the goals of the company.
7)Twelve years after founding his company, Dick Smith received a heavy financial blow. His local Business Advisor retired and his replacement applied central lending criteria to Dick’s bank loans. No more favourable deals from a local person, Dick’s loans were now dealt with within strict lending criteria.
8)If RJSC was to continue expanding, Dick Smith would have to take on outside finance and the bank recommended a local businessman, Bob Evans, who was known to be a keen moderniser of business practice and who believed in getting involved with the running of any of his investments.
9)The first project announced by Bob Evans was a review of working hours, especially as the Working Time Directive had become law and he wanted to regularise working practice. Overtime would be a casualty and workers were alarmed. Operations continued at the same hectic pace, and Dick Smith’s personal style did not appear to be appreciably different. He maintained his old office and was still available to help out on any particular problems that arose. However as time passed, it became more and more obvious to the employees that Dick Smith could be a strategic, not operational director. Day to day operations were to be delegated to supervisors. Dick moved to new headquarters in the more luxurious surroundings of a new building that had been built next to the factory as the corporate services centre of RJSC. Mr Smith was unable to spend as much time with the workers as before. In addition, Evans apparently had no interest in the workers themselves but on the ‘bottom line’, to the workings and problems of the production, which made staff feel undervalued and demotivated.
10)Evans made it clear that aggression was unacceptable in the workplace, so the time-honoured method of ‘blowing off steam’ as a prelude to constructive effort on a problem was no longer tolerated. Dick Smith was no longer around to arbitrate really serious arguments and his customary “OK, now that we’ve got that out of our system, let’s get back to work……” was absent. Grievance, disciplinary and harassment policies were introduced but a lot of the older staff bitterly resented the changes and became uncooperative. Many employees were shaken from their feeling of job security and the reduction in overtime impacted severely on their take-home pay.
11)In this atmosphere a second major organisational change occurred. A new man with the title of ‘works manager’ arrived to fill the vacuum created by Mr Smith’s forced attention to matters other than production. This man, Keith Molloy, was personally appointed by Bob Evans, the new partner. Molloy was young, a business graduate and had had previous experience in Process Re-Engineering with a large production company. Bob Evans considered that production methods were inefficient, wasteful and excessively costly. Molloy’s recruitment was a complete surprise to the shop floor and production employees.
12)During his first few days with the company, Molloy and Evans seemed to be everywhere. Molloy continually took notes on a large clipboard, timing everything with a stopwatch. None of the employees was spoken to by either of the two men. The men on the shop floor had not even been told who Molloy was. They knew only by rumour that Molloy was the new works manager.
13)Molloy was overheard to say to Evans that the company had tremendous potential. He thought that Dick Smith was a charismatic individual with great skills who had certainly been successful to date. He saw Bob Evans and himself as complementing those skills and making the company even more successful. Bob Evans had the ability and experience to do strategic business planning and keep a healthy bank balance. Molloy had the ability to tighten production methods and increase profits through quality management.
14)Molloy and Evans considered that RJSC could no longer operate as a cottage industry and should adopt modern business practices throughout. The workers’ job was to hit production targets. Molloy’s job was to organise the production in such a way that it would be done at least cost. The whole basis for the situation was that in the past RJSC had been small enough to be controlled effectively by one person. Now, however, RJSC was not really a small firm and could not continue to operate like one. Molloy had ideas and new techniques which he planned to initiate that he thought would increase the effectiveness and efficiency of production operations by 50% within a 6 month time frame.
15)At the beginning of his third week as works manager, Molloy issued a series of changes in procedures to the shopfloor. Without exception these changes were made without consulting any of the workers in the factory. All of them were issued in typewritten memo form, a new practice which many of the workers felt was unnecessary and undesirable because the preferred the old, informal channels of communication.
16)The changes requested by Molloy were significant, ranging from changes in production scheduling techniques to changes in working conditions for individual employees. Moreover, they were to be effected without using more overtime.
17)Molloy’s personal contact with individual employees was brusque and forceful. Many of his decisions seemed to indicate a lack of awareness of the capacity of the machinery used in the production process, and because of his insistence on machine speedups for certain operations, several expensive repairs were required and valuable production time was lost.
18)After having received several memos from Molloy which they considered unreasonable, Molloy began to be held in contempt by the workforce. As the number of written memos coming from Molloy’s office increased, the workers began to take an active dislike to him. Some four months after Molloy’s arrival, co-operation between the ‘old-timers’ – both the supervisors and the workers – hit a new high. Unfortunately, this co-operation was used to undermine any and all changes that the new works manager attempted to put into effect. As new orders and procedures originated from Molloy’s office, the employees carried out the orders to the letter because, in many cases, they afforded a justified means of wasting time and reducing production. Molloy gave no indication that he was aware of this situation.
19)Molloy also attempted to establish formal channels of communication within the production operations, for he felt that much needless discussion and confusion was in existence under the present system. He introduced Quality Circles and Staff Representatives in a bid to formalise communication. These reforms were uniformly ignored by the employees, who continued to rely on the previously accepted informal channels of action. It even became an unwritten policy that all information channelled to Molloy under the new system was edited and reviewed by the person or persons to be affected before it was sent to Molloy.
20)Yet in this new atmosphere the old loyalties to Dick Smith did not fade entirely. The office manager, the line managers and several production supervisors attempted to get his ear from time to time to inform him that things were not running smoothly. Dick was always surprised by such comments, and he attempted to reassure the men by saying that these were just teething problems. In addition, he made several trips to the factory, talking with the employees individually and asking them to give Molloy a chance, as it was important for the success of RJSC.
21)Morale seemed to improve for a while until Molloy issued a statement that all problems should be dealt with under the new policies – in other words, no-one was to take issues directly to Dick Smith.
22)Shortly after this statement was issued by Molloy, Dick Smith again made several trips to the shopfloor, talking to individual workers, and attempting to explain that other problems prevented his spending as much time in the factory as he previously had. Nor did anyone ask Dick about his retirement ambitions.
23)As time passed, the situation continued to deteriorate. Many of Molloy’s acts and orders seemed to be in direct contradiction to Dick Smith’s former policies and procedures. The individuals affected were confused as to which procedures to follow. Attempts to have Molloy clarify his orders whether left the questioner more confused than before or were greeted with a curt, “we don’t have time to discuss that. It is perfectly clear, just read the policy”. Within a few months, several of the staff talked of leaving to look for employment and many did so.
24)There was roughly 25% labour turnover in the nine months after Molloy had taken the position of works manager. The morale among those remaining was poor and there were significant increases in product rejects. But, during the same period both Evans and Molloy felt that important advances has been made in ‘cleaning up’ production activities and that the company was ‘looking better all the time’. In fact, profits had risen slightly.
- What type of Leadership style did Dick Smith employ? Give reasons for your answer
- How did Dick Smith motivate his employees?
- When Evans and Molloy joined the company, what functions of management were employed? Give reasons for your answer.
- How did Evans and Molloy motivate the workforce?
- Comment on the success of the business(1thing) and the methods to manage the change from Dick Smith to Evans and Molloy (1thing1)
Sample Solution
