The Most Important Facts Surrounding the Case
The case study under analysis explores the Navistar company and the changes it has undergone over its recent history. Originally, the company was known as International Harvester. Archie McCardell, the organization’s CEO in the latter part of the 1970s, decided to make changes and shift the company’s focus in order to minimize operation costs. However, during this process, labor issues grew more persistent and eventually resulted in a massive crisis and the largest employee strike in the company’s history (“Navistar: Managing Change” 1).
Over the following decade, International Harvester struggled to deal with these financial and labor issues, and hired several different CEOs with versatile approaches to the problem. However, the company’s debt grew, the business never picked up the pace, and eventually the company had to reduce its staff by 85%, give up most of its operations and specialties, and sell off its equipment and even its brand name (“Navistar: Managing Change” 2).
The major problem highlighted in the case study is that of workforce management, because throughout the company’s history, IH implemented a number of different approaches, many of which resulted in plummeting product quality, decreasing production volumes, and growing costs for hiring and training. Finally, the United Automobile Workers Union became involved, and the working conditions of the IH employees improved. However, the organization’s strategy, as well as its culture and philosophy, became outdated with the passage of time (“Navistar: Managing Change” 4).
Resistance to change, caused by the old-fashioned views of the leaders and lack of support for innovation, became the key barrier for IH. Even though McCardell’s leadership and cost cutting strategy are seen as the causes of the crisis, they had been successful throughout the first fiscal year of his tenure. The situation deteriorated as soon as the cost cutting impacted the UAW; this implies that the people in the organization were not ready for the change and unprepared to sacrifice their benefits for a better future.
The Key Issues in the Case
The major issue in the case study is the management of organizational change from the perspective of preparation. Reading the history of International Harvester, it is easy to notice that a difficulty with managing human resources, as well as achieving internal integrity and a high level of job satisfaction, were ongoing struggles for the company.
As it turned out, when the time came to adjust to the reality of the company’s financial issues by means of cutting costs and re-arranging operations, the company’s leaders and managers were to predict the necessity of changes in relation to the workforce and ensure readiness to change prior to implementing any drastic measures.
Instead of approaching the employees, informing them of the situation and struggles of the company, and ensuring their understanding of the problem, the leader and the managers treated the human resources of the company as one of the aspects that needed to be adjusted, as if they were not expecting any pushback.
Another massive problem was the lack of morale in the company, attributable to the inequitable treatment of the employees and a huge wage gap between the executives and the workers. In other words, the company’s leaders failed to model the behaviors appropriate to the situation, and emphasized the differences between employees of different levels. Additionally, the economic situation was quite challenging at the time, and eventually exposed the company to the loss of revenue due to recession, which had a huge negative impact on top of that caused by the company’s instability (“Navistar: Managing Change” 5).
Finally, the generous salaries of the executives made the employees believe that the crisis at IH was not as bad as described by the leaders. This factor contributed to the workers’ lack of readiness to change, as well as their distrust of the leaders.
Evaluation of the Courses of Action
Since the crisis at International Harvester lasted for many years and involved multiple factors and contributors, there have been a number of strategies employed to address it. Initially, the challenges began prior to the end of the 1970s, when the company found itself in debt and with insufficient operations. At that time, McCardell was hired as the CEO, and began applying his vision—namely cutting costs—to the company’s problems. Although his approach proved effective at the beginning of his term, the part of his change implementation plan that affected the workers resulted in a massive failure and caused a backlash in a form of a strike.
The reason for such a response was threefold. First, the employees who were protected by the UAW were not adequately informed of the upcoming change; second, the relationship between the leaders and the employees was based on distrust that was aggravated by the huge wage gap and inequitable treatment; and third, the levels of workforce integrity and commitment to the company were relatively low. When all these factors are taken into account, the consequential conflict between the employers and the employees is a logical outcome. It is possible to state that this course of action was initially perceived as an opportunity to save the company, but turned out to be its path to decline. Its major disadvantage was a lack of appropriate planning and preparation for change.
The subsequent solutions continued working along the lines of cost cutting, as the size of the company’s financial losses grew by the month. This strategy resulted in staff reduction, drop in salaries, depressed sales, and the scarcity of working capital. Finally, the businesses and equipment groups of IH were sold off to other companies. Once the company had dealt with its financial burdens and turned into a small lead firm, its then-CEO Donald Lennox decided to make a change and rebuild the company under a new name (Navistar), using new approaches.
From the start of this new scheme, Lennox directed Navistar toward cost-effectiveness, a smart supply chain, and a just-in-time approach to manufacturing, thus transforming the business’s image (“Navistar: Managing Change” 7). This solution was based on experience gained from the painful lessons of IH. Starting fresh and restructuring their approach to the cost of operations helped Navistar recover and become successful again, gradually increasing annual revenues over the following years.
In the final analysis, the solution that involved selling off the company’s businesses and equipment group was a necessary sacrifice Navistar had to make, in order to cover its losses and be able to make a new start. In addition, having learned their lessons, the leaders adopted a new perspective on production costs, choosing an innovative approach and improving their manufacturing through research and development (“Navistar: Managing Change” 8). Moreover, it appears the initial scarcity of available resources at Navistar was a good learning experience, in terms of managing lean capital and practicing cost-effectiveness.
Finally, a new approach to compensation and employee relations was another aspect of change in the company. Basically, Navistar gave up the authoritative top-down approach to the establishment of pay ranges for the workers. Instead, the leaders provided more freedom to the employees, assigning wages based on performance and thus ensuring workforce motivation.
The Best Course of Action
The best course of action for IH would have been the adequate implementation of change in the initial stages, back when McCardell was in charge. To be more precise, it was clear that IH was in need of change as a result of its capital losses. However, the absence of readiness to change and barriers to change were natural phenomena that could have been addressed through preparatory measures and planning.
That way, instead of relying on the old-fashioned authoritative model of giving strict orders without much communication, and expecting the workers to obey without input, the leadership of IH could have invested some effort in the establishment of a trusting relationship with the employees, while educating them about the situation in the company and the need for change.
Even though it was practically impossible for IH to keep all of their workers and avoid the reduction of salaries, they could have warned the employees about the upcoming restructuring, provided recommendations to the workers who were laid off, expressed gratitude, apologized for the drastic measures, and explained the future course of action to the remaining staff. This level of communication could have been one way to avoid the strike and its adverse effects, such as financial losses and damaged reputation.
However, preventing the strike was just one of the tasks of the IH leaders. It would have been an important step forward, but it would not have helped the company to minimize losses and weather the upcoming recession.
With regard to the financial flexibility the business needed at the time, the best way to ensure it would have been to reorganize the supply chain and optimize manufacturing and operations. A just-in-time approach was the course of action that would have been the most appropriate, knowing the company’s urgent need to cut costs. However, this strategy can be quite challenging to put into practice, since it requires a very precise organization of the supply chain and the compliance of the suppliers.
The disadvantage of the former part is that it requires time and careful planning. The challenge of the latter aspect is the potential risk of losing some of the suppliers. However, with the business and brand presence as powerful as that of IH at the time, it was likely that the company’s suppliers could have agreed to the new terms and adjusted operations to match the needs of just-in-time manufacturing.
After all, in the case study, it is said that the downfall of International Harvester caused troubles to many stakeholders, including not only the laid-off workers, but also the suppliers (“Navistar: Managing Change” 7). Therefore, the possibility of the whole infrastructure falling apart could have become a powerful stimulus, for all sides involved or affected by the crisis, to unite and help International Harvester prevent the decay and keep as many jobs as possible.
Works Cited
Navistar: Managing Change. Case Study.