Gulf States Metal Inc. (GSM) is caught in a problem of slow and sluggish market where there is not much demand for it base products such as Nickel, Copper, Cobalt and ammonium sulfate. In addition the company is stuck with high procurement costs, lack of communication between its teams, poor management, low motivation that prevents innovation and ageing machinery without any alternate process.
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An issue presented in the case is to reduce the operating cost of the plant. Some avenues that can be used are to rethink the raw material procurement issues and if reduction in the workforce is possible. Since the company was incorporated about 10 years back, it has never shown any profit and the company is showing a loss of about 1 million USD each year. One of the main problems is the high procurement cost of the raw material. The market for Nickel and its derivatives was strong a few years back and the company had entered into a 30-year contract with a vendor to procure Nickel mats that are used in the refining process. The rates were negotiated considering the demand and supply conditions at that time and currently with the fall in demand for Nickel, the raw material is available at lower prices. But because of the higher rates mentioned in the contract, the company is forced to pay higher costs. Denison (2001) suggests that such occurrences affect the profitability of the company.
There is a severe lack of communication and hostility between different departments such as production and engineering. The top management made of the general manager, plant manager, director of engineering and director of operations. The general manager believes that it is only strong discipline that can make the supervisors and the workers to work harder and obviously does not feel the need for motivation and effective communication. None of the managers at GSM have had any exposure or training to modern management practices and feel that it is only inefficiency on the part of the director of operations who they believe is too soft with the staff. They want to replace him with someone who can talk hard and get the things in shape. They do not wish to give any consideration for the technical and human aspects of the problem. Holland (2000) has argued that such issues can severely affect the working of the company.
The effect on the supervisors and the staff is very detrimental and they feel frightened to innovate and express new ideas. New ideas would be coming from the frontline staff and since they are frightened of the consequences of failure, no one is ready to come up with suggestions. They feel that if the suggestions fail, then the personal consequences would be very bad. Cameron (2004) argues that such incidents create a very repressive environment where each supervisor, staff and manager tries to protect their turf and they believe that if they carry on with the same method, nothing bad would happen to their careers. The case also mentions the lack of safety standards and procedures in the plant. Workers do not use the prescribed safety gear such as helmets and eye goggles and such lack of safety practices has a demoralizing effect on the workers who probably feel that the management does not care for their welfare. The lack of safety procedures only helps to bring down the productivity even further.
The case mentions that the parent company bought an existing plant that was probably in use for quite some years. This would again imply that the plant was already old and depreciated well beyond its value. The technology process used to process the slurry is very unreliable and badly needs a shut down maintenance. This is not possible since the process has to be run continuously on a 24×7 basis. No alternate process lines have been built into the system that will allow the process to be diverted so that the defective lines can be repaired. Since there are no alternate lines, the maintenance crews have to work on live process lines and they cannot really do a good job. The staff is not kept informed about the work schedules or told what type of spares would arrive when. Such an approach has made them fatalistic in their outlook. Because of the lack of maintenance, the whole plant has become very dangerous, pipes have corroded, process fluids leak from overhead lines, the air and the environment around the plant has become very unhealthy and this is indicated by the corrosion that the cars in the parking lot display.
An important observation that has come up during the interview with the trio made up of the general manager, plant manager and the director operations are that they have the same mental attitude and are autocratic in their interpretation of how the work can be improved. They have a very bad opinion of the supervisors, who form the backbone of the company. It is the supervisors who are in contact with the workers and the trio seems to believe that whatever the supervisors do is bound to fail. Such a defeatist attitude has a detrimental on the morale of their morale to avoid further problems; the supervisors simply do not take a risk to bring in improvement. The trio has fostered a culture of hate, fear and nepotism and their attitude must first change if the operating costs are to be reduced. The GM also has expressed the inability to invest in new equipment and feels that improvements have to be done to the existing one. But with the culture of fear and repression and no motivation, such improvements are not likely to be forthcoming.
As given in the interviews with the lines of authority are clearly subverted by the top management as they give arbitrary order to the workers and do not even bother to inform the supervisor and managers. This creates a very bad impression on the workers as they feel that the supervisor or manager is perhaps not competent enough and as a result, indiscipline can occur since the workers would question their authority. If the top management feels that there is a need for them to intervene and if they have suggestions to make, then they should speak to the manager and supervisor, take them into confidence and then address the workers. This sidelining and circumventing of the established lines of authority is very harmful to the organization.
Maintenance and production teams do not have coordination and understanding at all. There is also an absence of proper maintenance call procedures, records are not kept and no established system of informing the maintenance department of any problems. As a result, the maintenance department does not know of any issues and when problems arise, the production department does not know where to find them. This leads to further wastage of time and aggravates the relations between them.
Holland (2000) suggests that in such instances a bottom up, change management approach is required to reengineer the company. Measures must be taken to build up the morale and motivation of the staff, increase effective communication, reduce infighting among the team and bring in urgent changes and modification to the process.
- Cameron Esther, Green Mike (2004), ‘Making Sense of Change Management’, New York: Kogan Page
- Denison Daniel R. (2001), ‘Managing Organizational Change in Transition Economies’, New York: Lawrence Erlbaum Associates
- Holland Winford E. (2000), ‘Change Is the Rule: Practical Actions for Change: On Target, on Time’, on Budget’, WinHope Press, dba Holland & Davis