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The company presented in this case study is named Longxiang Building Materials. It is a relatively large company with over 800 employees and a good working reputation in its country and region. Longxiang specializes in producing quality construction materials, such as brick, concrete, cement, lumber, tile, metal beams, and other resources required in small and large-scale construction. In recent years, however, the tempo of growth has been slow. The company’s profit growth started to flatten, and all attempts at claiming greater market share within China were unsuccessful. The competition in China is fierce, meaning that any further progress would require extraordinary effort. The company directors chose a different approach. Instead of focusing inwards, their aim for the next five years is to prepare the company for going global. Longxiang is planning to expand its reach to the budding markets of India, Russia, and the Middle East and later use them as a trampoline to expand further into Europe and the Americas.
This effort is costly, however. With the company’s current problems, it is doomed to failure. There are several issues in the company, namely its high turnover rates, lack of interaction and understanding between senior and general managerial staff, and lack of qualified personnel. All these problems are common in the Chinese business sector. However, with skilled leadership and effective management, the detrimental effects of the surrounding business environment can be largely reduced. As a manager, there are several goals that you will need to accomplish in order to prepare Longxiang for its expansion to the outside markets. These are:
- Reducing the turnover rate among lower and middle-level managerial staff
- Improving communication between all three tiers of management
- Providing and implementing effective strategies to recruit and grow talent within the company
- Fostering a healthy corporate culture
The methodology of the Case Study
This case study relies on several methods of obtaining information. The information about the situation within the company was obtained through interviewing numerous employees – from senior managers to bottom-tier workers. A total of 55 interviews were conducted, with 5 interviews among the senior managerial staff, 10 – with mid-level managerial staff, 20 – with junior managers, and the rest – with the bottom-tier employees. The interview featured several open-ended questions, which required elaboration from the interviewee, and followed a certain subject and theme. Here are the questions included in the interview:
- Can you give a general opinion about the situation in Longxiang Building Materials?
- Can you name the issues in Longxiang that affect your work?
- Can you name the issues in Longxiang that affect other employees?
- What is your opinion on the effectiveness of lower/middle/senior managers?
- What is your opinion on the company’s corporate culture?
- What recommendations could you suggest to improve the situation in Longxiang?
Aside from interviewing employees, important theoretical information about approaches to leadership was extracted from scholarly sources. This information is used to assemble a coherent and all-inclusive course of action aimed to solve the company’s current problems. Lecture notes, information from academic and business journals, and dedicated websites were used to gather information on various leadership theories applicable to the current case study, namely the Bolman-Deal framework, LMX leadership model, and Transformational leadership model. Other than that, information from the media was used to outline the situation in the Chinese business sector in order to pin common problems associated with the Chinese hierarchical structures and business practices.
A number of interviews taken among Longxiang employees should exclude or significantly reduce the amount of bias in regards to the situation within the company. All outside information is recent and taken from trustworthy sources. The limitations of this research lie in the fact that the information taken from the interviews may be affected by the personal bias of the interviewees, and that media information is inconclusive and may not accurately represent other companies in this business sector, thus invalidating these companies as points of comparison.
Links to Theory
This case study is linked with several theories that will prove useful to solving the HR problems of Longxiang Building Materials Co. These theories are:
- Bolman and Deal Human Resource Frame. This theory focuses on practical approaches to solving HR-related problems through offering guarantees, rewards, and adequate leadership. Bolman and Deal (2008) state that when the company shows care and concern for their employees, “employees, in turn, are more productive, innovative, and willing to go out of their way to get the job done” (p. 141).
- Leader-Member Exchange Theory. This theory suggests an organizational approach to improving group productivity. Namely, it focuses on re-arranging the organizational structure of a company into cells, with high levels of cooperation between them, as a method of creating connections between leaders and members (Breevaart, Bakker, Demerouti, & Heuvel, 2015)
- Transformational Leadership Theory. This theory focuses greatly on the role of a manager and leader as a primary agent of change. Through the use of transformational leadership techniques, a manager is enabling growth among the employees, with the potential of turning them into leaders as well (Avolio & Yammarino, 2013).
- The concept of Guangxi. A model of forging relations between managers and employees, which is very widespread in China. It revolves around personal experiences and hardships that people go through together in order to establish relationships of trust and mutual understanding (Goh & Sullivan, 2011).
The problems plaguing Longxiang Building Materials Company are largely intertwined, with one problem stemming from the other. The problem with high turnover rates is largely caused by the company’s policies towards new employees. The company enforces a 6-month probation period, during which novice employees are expected to work full-time, as any real manager would, but at half-wages. The amount of work and responsibility is not properly compensated. Around 70% of all new employees drop out before finishing their probation period.
From this issue stem two other related problems – the problem of disconnection between lower, mid-level, and senior managerial staff and lack of competent and qualified personnel. Due to high dropout rates among lower-level managers, medium and senior staff are unable to establish proper connections, as they have to deal with new employees every 2-3 months. Restrictive policies towards new employees drive away potential talent, which results in subpar employees recruited instead. Combined together, these factors negatively influence the company’s productivity, cause unnecessary shortcomings and delays, and serve as a detriment to its overall growth.
Since these issues are interconnected, it is possible that improving the situation in one area will automatically lead to an improvement in others. The decreasing turnover rate could be done through increasing happiness and satisfaction from the job, which could be done in numerous ways. Reducing the probation period and increasing salaries for novice managers would help retain them. Other ways of reducing the turnover rate would include retaining the length and salary of the probation period but reducing workload.
Should the turnover rate be reduced, it would effectively improve the situation with communication between managers and help improve staff competency. However, dedicated measures will be required to facilitate further improvement. To promote effective communication and develop trust between senior, medium, and low-level managers, they must be organized into cells, where managers from different branches will have to work in close tandem. Cooperation should improve over time. Other methods of building trust between different staff members and employees involve conducting team-building exercises that promote positive experiences.
Lastly, the issue with acquiring and nurturing talent can be solved in two ways – through the promotion of existing employees to managerial positions and through better hiring strategies. Offering advantages and better pay to prospective employees is likely to attract new talent to Longxiang. At the same time, promoting and raising competent and capable employees among the company’s own ranks will ensure loyalty and long-term prosperity.
Recommendations and Solutions
The recommended solution for a high turnover rate would be to improve the wages for low-level managers and novice managers while reducing the overly long probation period. This correlates with the Bolman-Deal Human Resource framework. According to it, payment and trust are some of the highest motivators for employees, which would ensure they are staying in the company. While other options, such as decreasing workload, are viable and would certainly seem fair from the effort-reward perspective, most employees would prefer working full-time instead.
Organizing managers and employees into cells and removing interaction barriers between staff members in accordance with Leader-member exchange theory. According to Breevaart (2015), “employees in high-quality LMX relationships work in a more resourceful work environment. This resourceful work environment, in turn, facilitates work engagement and job performance” (754). The reorganization of Longxiang’s working structure would mean shifting away from the strong matrix model they have in employment today.
Growing talent and promoting self-improvement among Longxiang’s personnel could be done through Transformational leadership. According to Avolio and Yammarino (2013), “transformational and charismatic leadership involve unique bonding among leaders and followers – emotional attachment, respect, and trust form the basis of these approaches” (27). These levers are to be used to encourage and promote growth and strife for perfection. It could be done by attending team-building exercises and getting to know the employees outside the office. This coincides with the Chinese concept of Guangxi. According to Business Insider, “in China, it is necessary to spend time getting to know your Chinese counterparts outside the boardroom” (Goh & Sullivan, 2011).
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During the course of the project, these decisions were implemented:
- Salaries were improved, probation period was reduced from 6 months to four.
- Employees and managers were reorganized into cells and clusters with high levels of interaction between them.
- Team-building exercises and banquets were introduced as part of the corporate culture
- General Manager’s personal involvement became the basis for growth and self-improvement among low-level managers and employees.
The situation presented in this report is not too different from situations prevalent in other companies of the Chinese business sector. Many companies simply accepted them as trade-offs of working in this particular country. Solutions presented here, while tailored specifically to address Longxiang Building Materials Company, can be implemented in other places to a lesser degree. The theoretical foundation for the decisions made can be easily adjusted to serve the needs of another company. This report will have value for senior managers and directors of Longxiang Building Materials Company. It will also be of interest to my professor and my studying partners for educational reasons. To a lesser degree, this paper could be of use for managers and decision-makers of other companies that operate in China.
Avolio, B.J., & Yammarino, F.J. (2013). Introduction to, and overview of, transformational and charismatic leadership. Monographs in Leadership and Management, 5, 27-33. Web.
Breevaart, K., Bakker, A.B., Demerouti, E., & Heuvel, M. (2015). Leader-member exchange, work engagement, and job performance. Journal of Managerial Psychology, 30(7), 754-770. Web.
Bolman, L.G., & Deal, T.E. (2008). Reframing organizations: artistry, choice, and leadership. San Francisco, CA: Jossey-Bass.
Goh, A., & Sullivan, M. (2011). The most misunderstood business concept in China. Business Insider. Web.