Reference no: EM133168538

BUMGT1501 Management Principles - Federation University

Section A: Case Study Analysis

CHANGE AT INTERNATIONAL INDUSTRIES

The atmosphere in the room is tense. Ted Jones-Mason, CFO for International Industries has just finished his presentation. President Brenda Wood, sits quietly making notes. After a pause, she breaks the silence.

‘From what you have shown us, Ted, it seems that we face the following problems in Australia. Our plant is not competitive when benchmarked against international best practice or against our other plants in China, Germany and the United States. Our production costs are the highest in the world. Our low productivity and high labour costs are killing us. In short, we must either cut our Australian losses and expand elsewhere or make our Australian operations more competitive.'

Ted looks directly at Brenda. ‘Brenda, that's it in a nutshell. Our Australian operations are bleeding badly. Worse, their financial performance is now affecting the group's overall profitability and ability to grow. If we don't do something quickly about Australia, we risk being taken over by Mega Manufacturing of China. If that happens, the Australian plant will certainly be closed. You are all aware that our share price has dropped 20 per cent in recent months and that it is rumoured in the financial media that we are now a potential takeover target if we don't do something about stemming the losses in our Australian operations.'

Brenda nods in acknowledgement then turns to face Steve Jaworski, vice-president of manufacturing. ‘Steve, what do you think?'

‘Ted is right. The point I wish to make is this, if we could achieve 90 per cent of best practice figures for productivity and labour costs our Australian plant would be among the most profitable in the company. It's basically that simple. Our performance is appalling. We have rotten production figures because our plant and equipment is archaic and we don't have any labour flexibility. Excessive penalty rates make it uneconomical to operate the plants seven days a week, absenteeism is ridiculously high, our workers are not motivated, we constantly face fights with the unions over demarcation, our workers show more loyalty to the unions than they do to us and the safety record of the Australian plant is the worst in the company. Yet, our pay and conditions of employment are among the best in the industry. Our labour turnover is low - no one ever leaves. It's just that no one works either.'
‘I don't know if you realise it or not,' interrupts Ted, ‘but according to the US Bureau of Labor Statistics, Australia is the least efficient manufacturing country in the world.'165

‘I hear you Steve,' says Brenda, ‘but I must admit it sounds like a terrible indictment of our Australian management. Rachel, you have been quiet so far, what have you got to say?'
Rachel Barberis, vice-president of people and culture, looks at the faces around the boardroom table. ‘It seems to me we have a terrible problem, but it is solvable. In the past, we have been able to ignore much of what is hurting us now because business was so good. The newly completed China and US plants were not in full production and the German plant was undergoing a major technological overhaul. Australia now has to be competitive or it is going to be run over.'
‘The unions need to understand that workers will fall into two groups - those that can work with robots and those who will be replaced by them,' adds Steve. ‘As of today, we can replace 250 jobs with robots and save ourselves at least $10 000 000 a year.'
‘That might be the case, but I can't see the union agreeing to lose 250 jobs to foreign built robots,' says Ted.
‘What we have to do is get our Australian management back to basics,' says Brenda. ‘We have stated that our corporate mission is to be the fastest growing, most profitable company in the industry. The company's committed to investing in people, R&D and equipment. We want to be the best by constantly seeking technological improvement and superior teamwork.'
‘I agree,' interjects Rachel, ‘but we haven't even articulated a clear human resource strategy linked to our strategic business objectives. We have management problems and we have industrial relations problems - all are human resources related. The Industrial Union of Manufacturing Workers and the National Clerical Association are strong because we are not doing a good job of managing our people. The unions manage our workers, not us. Our managers have abrogated their HR management responsibilities. For heaven's sake, the unions tell us who to hire and fire, whether or not we can use contractors - we even have to ask them if it is okay to automate or outsource any activity. We can't do anything without getting their permission. We say we are an equal employment opportunity employer, but we give preference to union workers, we promote on seniority and not on ability, and if we have to reduce staff members, it must be done on the basis of "last on, first off". A practice, I need not remind you that clearly discriminates against women. We can't reward our best workers - performance is an irrelevancy. Everyone is paid the same. Trying to fire someone for unsatisfactory performance is a nightmare and more often than not we end up paying "go away" money.
Added to all of this the Australian industrial relations laws are a major block to efficiency.'166

Ted interjects, ‘The problem is that the FWC is overly concerned with process and job protection. Productivity does not come into it.'
‘I agree that the situation in our Australian operations is a major worry,' adds Steve. ‘Unless things change we will have no option but to shut them down. To survive they must stop operating by twentieth century rules and prepare for the twenty-first century. It needs to be

understood by our Australian management and the unions that International Industries does not have to invest in their country.'
Brenda pauses, ‘I agree major changes are required in management personnel, employee attitudes and in our approach to human resource management. Rachel is right, we have a business strategy but we don't have a people strategy. This is our last chance to save the Australian operations. Rachel, I want you, Steve and Ted to get together and formulate an action plan for the board's consideration at the July meeting.'

Case Questions: Please answer these two questions, A1 and A2. Please use relevant examples from this case in your responses to these questions where possible. Use approximately 300 words for each question. Please use appropriate theory to support your answers and use APA referencing to cite academic material used. The APA referencing is not included in the word count.

A1. Identify two significant issues that International Industries are facing from the information in the case study.
a) Explain why these are issues.
b) What would you recommend the organisation to do to address the two (2) issues which you identified.

A2. Identify the various stakeholders involved and determine which ones are likely to represent the forces for change or the forces resisting change.