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BUSINESS COMMUNICATION SKILL
CASE I
A Reply Sent to an Erring Customer
Dear
Sir,
Your
letter of the 23rd, with a cheque for Rs. 25,000/- on account, is to hand. We
note what you say as to the difficulty you experience in collecting your
outstanding accounts, but we are compelled to remark that we do not think you
are treating us with the consideration we have a right to expect.
It
is true that small remittances have been forwarded from time to time, but the
debit balance against you has been steadily increasing during the past twelve
months until it now stands at the considerable total of Rs. 85,000/-
Having
regard to the many years during which you have been a customer of this house
and the, generally speaking, satisfactory character of your account, we are
reluctant to resort to harsh measures.
We
must, however, insist that the existing balance should be cleared off by
regular installments of say Rs. 10,000/- per month, the first installment to
reach us by the 7th. In the meantime you
shall pay cash for all further goods; we are allowing you an extra 3% discount
in lieu of credit. We shall be glad to hear from you about this arrangement, as
otherwise we shall have no alternative but definitely to close your account and
place the matter in other hands.
Yours
truly,
Questions:
1. Comment
on the appropriateness of the sender’s tone to a customer.
2. Point
out the old – fashioned phrases and expressions.
3. Rewrite the reply according to the
principles of effective writing in business.
Case II
Advertising Radio FM Brand
A young, gorgeous woman is
standing in front of her apartment window dancing to the 1970s tune, “All Right
Now” by the one – hit band free. Across
the street a young man looks out of his apartment window and notices her. He moves closer to the window, taking interest. She cranks up the volume and continues
dancing, looking out the window at the fellow, who smiles hopefully and waves
meekly. He holds up a bottle of wine and
waves it, apparently inviting her over for a drink. The lady waves back. He kisses the bottle and excitedly says,
“Yesss.” Then, he gazes around his
apartment and realizes that it is a mess. “No!” he exclaims in a worried tone
of voice.
Frantically, he does his
best to quickly clean up the place, stuffing papers under the sofa and putting
old food back in the refrigerator, He slips on a black shirt, slicks back his hair, sniffs his armpit, and lets
out an excited , “Yeahhh!” in eager anticipation of entertaining the young
lady. He goes back to the window and
sees the woman still dancing away. He
points to his watch, as if to say “Come on.
It is getting late.” As she just
continues dancing, he looks confused.
Then a look of sudden insight appears on his face, “Five,” he says to
himself. He turns on his radio, and it
too is playing “All Right Now.” The man
goes to his window and starts dancing as he watches his lady friend continue
stepping. “Five, yeah,” he says as he
makes the “okay” sign with his thumb and forefinger. He waves again. Everyone in the apartment building is dancing
by their window to “All Right Now.” A
super appears on the screen: “Are you on the right wavelength?”
Questions:
1.
What is non – verbal communication? Why
do you suppose that this commercial relies primarily on non-verbal
communication between a young man and a gorgeous woman? What types of non – verbal communication are
being used in this case?
2.
Would any of the non-verbal communications in this spot (ad) not work well in
another culture?
3.
What role does music play in this spot? Who is the target market?
4.
Is the music at all distracting from the message?
5.
How else are radio stations advertised on TV?
CASE
III
EMPLOYMENT
INTERVIEW OF R P SINHA
Mr. R P Sinha is a MBA. He is being interviewed for the position of
Management Trainee at a reputed company.
The selection committee’s is chaired by a lady Vice – President. Mr. Sinha’s interview was as follows :
Committee
: Good morning !
Mr.
Sinha : Good morning to Sirs and Madam !
Chairperson
: Please, sit down.
Mr.
Sinha : Thank you (sits down at the edge of the chair, keeps his portfolio on
the table)
Q.
Chairperson : You are Mr. R. P. Sinha
A
Sinha : Yes, Madam. This is how I am
called.
Q.
Chairperson : You have passed MBA with 1st Division.
A.
Sinha : Yes, Madam.
Q.
Chairperson : Why do you want to work in our organization ?
A
Sinha : It is just like that. Also,
because it has good reputation.
Q.
Member A : This job is considered to be quite stressful. Do you think you can manage the stress
involved.
A.
Sinha : I think there is too much talk about stress these days. Sir, would you tell clearly what you mean by
stress ? I am very strong for any stress.
Q.
Member B : What are your strengths ?
A.
Sinha : Sir, who am I talk boastfully about my strengths. You should tell me my strengths.
Q.
Member C : What are your weaknesses ?
A.
Sinha : I become angry very fast.
Q.
Member A : Do you want to ask us any questions ?
A
Sinha : Yes Sir ! What are the future
chances for one who starts as a management trainee ?
The member tells M. Sinha the typical
career path for those starting as Management Trainee. The Chairperson thanks Mr. Sinha. Mr. Sinha promptly says in reply, “you are
welcome,” and comes out.
Questions:
1. Do you
find Mr. Sinha’s responses to various questions effective? Give reasons for your view on each answer given by
Mr. Sinha.
2. Rewrite
the responses that you consider most effective to the above questions in a job
interview.
3. Mr.
Sinha has observed the norm of respectful behaviour and polite
conversation. But, do you think there is
something gone wrong in his case ?
Account for your general impression of Mr. Sinha’s performance at the
interview.
Case
IV
Outsourcing
Backlash Gets Abusive, Ugly
I don’t want to speak to
you. Connect to your boss in the US,” hissed the American on the phone. The
young girl at a Bangalore call centre tried to be as polite as she could.
At another call centre,
another day, another yound girl had a Londoner unleashing himself on her, “
Yound lady do you know that because of you Indians we are losing jobs.”
The outsourcing backlash
is getting ugly. Handling irate callers is the new brief for the young men and
women taking calls at these outsourced job centers. Supervisors tell them to be
“cool”.
Avinash Vashistha,
managing partner of NEOIT, a leading US-based consultancy firm says,” Companies
involved in outsourcing both in the US and India are already getting a lot of
hate mail against outsourcing and it is hardly surprising that some people
should behave like this on the telephone.” Vashistha says Indian call centers
should train their operators how to handle such calls.
Indeed, the furore raised
by the western media over job losses because of outsourcing has made ordinary
citizens there sensitive to the fact that their call are being taken not from
their midst but in countries, such as India and the Philippines.
The angry outbursts the
operators face border on the racist and sexist, says the manager of a call
center in Hyderabad. But operators and senior executives of call centers reguse
to go on record for fear of kicking up a controversy that might result in their
companies’ losing clients overseas.
“It’s happening often
enough and so let’s face it,” says a senior executive of a Gurgaon call centre,
adding, “This doesn’t have any impact on business.”
Questions:
1. Assume you are working as an operator
at a call centre in India and are receiving irate calls from Americans and
Lodoners. How would you handle such calls? Conceive a short conversation
between you and your client, and put it on paper.
2. “Keep your cool.” What does this mean
in term of conversation control?
3. Do you agree with the view that such
abusive happenings on the telephone do not have any impact on business?
Justify.
Note : Section I is compulsory & Section II
solve any six questions :
Section I
CASE STUDY:
No Minor Offence
Census data reveals high level of Under – age marriages
Census statics are
generally full of surprises. But this one is startling : 6.4 million Indians under the age of 18 are
already married. That’s not all. As many as 1.3 lakh girls under 18 are widowed
and another 56,000 are divorced or separated. The legal marriageable age for
women is 18, for men 21. A century and a half after Ishwarchandra Vidyasagar’s crusade against child marriage,
the practice persists. Obviously, the Child Marriage Restraint Act, 1929,
exists only on paper and has not been
able to deter parents from marrying off under –aged sons and daughters. The
incidence is understandably higher in rural areas, but not low as expected in
the cities. It’s more common in the BIMARU states, with Rajasthan leading the
way Ironically, the Act renders all under-age marriages illegal but not void,
which means that an illegally married couple can stay married . It is,
therefore, violated with impunity and hardly anyone is ever hauled up. Despite
the fact that child marriage is a criminal offence, action is rarely taken by
the police. Even civil society remains a passive spectator. There’s not enough
penalty-a fine of Rs.1,000 and imprisonment up to three shows that the state
does not view the crime seriously.
The practice is
linked to the curse of dowary. “Chhota Chhora dhhej kam mangta” ( the younger
the groom, the smaller the dowry demand) justifies many such alliances. The
grimmest part of the scenario is the physical havoc that early marriage wreaks
upon girls who are too young to bear the
burden of maternal and child mortality. There is also the belief that a daughters’ marriage is a scared obligation that parents must fulfill at the
earliest. A new legislation, Prevention of Child marriages Bill, 2004, to
replace the loophole-ridden 1929 Act is awaiting parliament’s approval. But
legislation alone is not enough. Compulsory registration of marriages is one
way of tackling the problem. Creating awareness about the ill-effects of such
marriages and mobilizing committed social workers to intervence are others.
However, social workers have to often function in hostile conditions. The 1992
case of Bhanwari Devi, the Rajasthan saathin who was raped for preventing a
child marriage, is chilling. In the end only education, economic security and
increasing empowerment of women can eliminate the problem.
Questions
1. Discuss ethically the drawbacks you find in the under-age
marriages?
2. How does the increasing empowerment of women help
eliminate problems if this type?
Section II
Solve any six questions :
Q2.
a)
What is moral hazards and why is it important?
b)
What is emergent strategy?
Q3.
a)
What are the objectives of a business, and which
is the most important?
b)
How many steps are there in the decision making
process and what are they?
Q4.
a)
What CSR issues exist for NFPs?
b)
What measures of performance are typically used
by these organization?
Q5.
a)
How globalization effect CSR?
b)
Is globalization threat for CSR?
Q6.
a)
Why is the measurement of performance important?
b)
What is ISO14000 and what factors does it cover?
Q7.
a)
What are the responsibilities of business in
their corporate decision?
b)
What is the relationship between CSR and
corporate behavior?
Q8.
a)
What are the 4 factors of sustainability?
b)
What are the factors of distributable
sustainability?
Q9.
a)
What
justification does stakeholder Theory use for considering stakeholder?
b)
What are the step involved in the incorporation
of environmental accounting into the risk evaluation system of an organization?
PRINCIPLES OF PRACTICE MANAGEMENT
CASE – 1
Aravali Hospital was built two years ago, and
currently has a workforce of 215 people. The hospital is small, but because it
is new, it is extremely efficient. The board has voted to increase its capacity
from 60 to 180 beds. By this time next year, the hospital will over three times
as large as now, in terms of both beds and personnel.
The administrator, Maya Joshi, feels
that the major problem with this proposed increase is that hospital will lose
its efficiency. “I want to hire people who are just like our current team of
personnel—hardworking, dedicated talented, and able to interact well with
patients. If we triple the number of employees, I do not see how it will be
possible to maintain our quality of patient care. We are going to lose our
family atmosphere. We will be inundated with mediocrity, and we will end up
being like every other institution in the local area—large and uncaring.”
The chairman of the board is also
concerned about the effect of hiring such a large number of employees. However,
he believes that Joshi is over-reacting. “It cannot be that hard to find people
who are like our current staff. There must be a lot of people out there who are
just as good. What you need to do is develop a plan of action that will allow
you to carefully screen those who will fit into your current organisational
culture, and those who will not. It is not going to be as difficult as you
believe. Trust me. Everything will work out just fine”.
As a result of the chairman’s
comments, Joshi had decided that the most effective way of dealing with the
situation is to develop a plan of action. She intends to meet with her
administrative group and determine the best way of screening incoming
candidates, and then helping those who are hired to become socialised in terms
of the hospital’s culture. Joshi has called a meeting for day after tomorrow.
At that time, she intends to discuss her ideas, get suggestions from her
people, and then formulate a plan of action.
Questions
1.
What can
Joshi and her staff do to select the type of entry-level candidates they want?
2.
How can
Joshi ensure that those who are hired come to accept the core cultural values
of the hospital? What steps would you recommend?
CASE – 2
Leo Medical Diagnostic and Research Center has patented its new
invention of poly fiber cardiovascular valve. The product developed is a novel
one and can be manufactured at a very low cost. The utility and life of the
product in laboratory testing was found to be more than the life of the
patients. The product could enhance the life of patient by at least five years.
Considering all these factors Leo Medical Diagnostic and Research Center chose
to set a unit to manufacture the product. However, the company has a dilemma.
As the product is new and requires the acceptance of medical community, it is
considering appointing a promotion and sales co-coordinator to manage the
promotional and communication efforts of the firm.
Questions
(a)
Do you
think the number of units of a product to be manufactured is a random number?
Explain your reasoning.
(b)
How does
one determine the number of units of a product to be manufactured in an
organisation?
(c)
What are
the elements you would take into consideration for forecasting the production
and sales requirement of the product developed by Leo Medical Center?
(d)
How
would you go about planning and organising the manufacturing and selling
efforts of the organisation?
CASE – 3
Hari Mohan has a position on the corporate planning staff of a large
company in a high technology industry. Although he has spent most of his time
on long-range, strategic planning for the company, he has been appointed to a
task force to reorganize the company. The president and the board of directors
are concerned that they are losing their competitive position in the industry
because of an outdated organisation structure. Being a planning expert, Hari
Mohan convinced the task force that they should proceed by first determining
exactly what type of structure they have now, then determining what type of
environment the company faces, now and in the future, and then designing the
organisation structure accordingly. In the first phase, they discovered that
the organisation is currently structured along classic bureaucratic lines. In
the second phase, they found that they are competing in a highly dynamic,
rapidly growing and uncertain environment that requires a great deal of
flexibility and response to change.
Questions
(a)
What
type or types of organisation design do you feel this task force should
recommend in the third and final phase of the approach to their assignment?
(b)
Explain
how the systems and the contingency theories of organisation can each
contribute to the analysis of this case.
(c)
Do you
think Hari Mohan was correct in his suggestion of how the task force should
proceed? What types of problems might develop as by-products of the
recommendation you made in question 1?
CASE – 4
Bharat Engineering Works Limited is a major industrial machineries
besides other engineering products. It has enjoyed market preference for its
machineries because of limited competition in the field. Usually there have
been more orders than what the company could supply. However, the scenario
changed quickly because of the entry of two new competitors in the field with
foreign technological collaboration. For the first time, the company faced
problem in marketing its products with usual profit margin. Sensing the likely
problem, the chief executive appointed Mr Arvind Kumar as general manager to
direct the operations of industrial machinery division. Mr Kumar had similar
assignment abroad before coming back to India.
Mr Kumar had a discussion with the chief
executive about the nature of the problem being faced by the company so that he
could fix up his priority. The chief executive advised him to consult various
heads of department to have first hand information. However, he emphasised that
the company lacked an integrated planning system while members of the Board of
Directors insisted on introducing this in several meetings both formally and
informally.
After joining as General Manager, Mr Kumar
got briefings from the heads of all departments. He asked all heads to identify
major problems and issues concerning them. The marketing manager indicated that
in order to achieve higher sales, he needed more sales support. Sales people
had no central organisation to provide sales support nor was there a generous
budget for demonstration teams which could be sent to customers to win
business.
The production manager complained about the
old machines and equipments used in manufacturing. Therefore, cost of
production was high but without corresponding quality. While competitors had
better equipments and machinery, Bharat Engineering had neither replaced its
age-old plant nor reconditioned it. Therefore to reduced the cost, it was
essential to automate production lines by installing new equipment.
Director of research and development did not
have specific problem and therefore, did not indicate for any change. However,
a principal scientist in R&D indicated on one day that the director of
R&D, though very nice in his approach, did not emphasize on short-term
research projects, which could easily increase production efficiency by at
least 20 per cent within a very short period without any major capital outlay.
Questions
(a)
Discuss
the nature and characteristics of the problems in this case.
(b)
What
steps should be taken by Mr Kumar to overcome these problems?
CASE – 5
The president of Simplex Mills sat at his desk in the hushed
atmosphere, so typical of business offices, after the close of working hours.
He was thinking about Rehman, the manager in-charge of purchasing, and his
ability to work with George, the production manager, and Vipulabh, the
marketing and sales manager in the firm.
When the purchasing department was
established two years ago, both George and Vipulabh agreed with the need to
centralise this function and place a specialist in charge. George was of the
view that this would free his supervisors from detailed ordering activities.
Vipulabh opined that the flow of materials into the firm was important enough
to warrant a specialised management assignment. Yet since the purchasing
department began operating it has been precisely these two managers who have
had a number of confrontations with the new purchase manager, and occasionally
with one another, in regard to the way the purchasing function in being carried
out.
From George’s point of view, instead of
simplifying his job as production manager by taking care of purchasing for him,
the purchasing department has developed a formal set of procedures that has
resulted in as much time commitment on his part as he had previously spent in
placing his orders directly with vendors. Further, he is specially irritated by
the fact that his need for particular items or particular specification is
constantly being questioned by the purchasing department. When the department
was established, George assumed that the purchasing manager was there to fill
his needs, not to question them.
As Vipulabh sees it, the purchasing function
is an integral part of marketing function, and the two therefore need to be
jointly managed as a unified process. Purchasing function cannot be separated
from a firm’s overall marketing strategy. However, Rehman has attempted to
carry out the purchasing function without regard for this obvious relationship
between his responsibilities and those of Vipulabh, thus making a unified
marketing strategy impossible.
In his previous position, Rehman had worked
in the purchasing department of a firm considerably larger than Simplex. Before
being hired, he was interviewed by all the top managers, including George and
Vipulabh, but it was the president himself who negotiated the details of the
job offer. As Rehman sees it, he was hired as a professional to do a
professional job. Both George and Vipulabh have been distracting him from this
goal by presuming that he is somehow subordinate to them, which he believes is
not the case. The people in the production department, who use the purchasing
function most, have complained about the detail that he requires on their
requisitions. But he has documented proof that materials are now being
purchased much more economically than they were under the former decentralised
system. He finds Vipulabh’s interests more difficult to understand, since he
sees no particular relationship between his responsibilities for efficient
procurement, and Vipulabh’s responsibilities to market the firm’s products.
The president has been aware of the
continuing conflict among three managers for some time, but on the theory that
a little rivalry is healthy and stimulating, he has felt that it was nothing to
be unduly concerned about. But now that much of his time is being taken up by
much of what he considers to be petty bickering, the time has come to take some
positive action.
Questions:
1.
Is
George’s view of the situation realistic?
2.
How do
you evaluate Vipulabh’s position?
3.
How
might this conflict be associated with factors in the formal organisation?
4.
What
should the president of Simplex Mills do now?
PURCHASE MANAGEMENT
Note: Attempt all the Question,
All the questions carry equal marks,
CASE 1
The Santek Images Business Unit
Consolidated Products is a $21
billion company headquartered in Atlanta, Georgia. The company’s five business units, which
offer a wide array of products and services, are the result of an aggressive
strategy of mergers and acquisitions starting in the late 1980s. The corporate staff is surprisingly small,
comprised of general management, legal staff, and human resources. Part of the reason for this small staff is
due to the eclectic array of businesses housed within one corporate
entity. A Business Week editor recently commented that “Consolidated Products
could easily be broken up into five separate companies, since at one time it
was five separate companies.” The editor
also said that if the company “ever learned how to leverage its size in the
marketplace, Consolidated Products could be a Wall Street powerhouse!”
While Consolidated Products is a
global corporation with facilities around the world, it operates each business
unit as a highly independent and decentralized company. The corporate culture is best described as
entrepreneurial, with each business unit being headed by an executive vice
president who has complete profit and loss accountability. One of the business units, Santek Images, is
the focus of this case.
Santek Images
Santek
Images produces instant film and the imaging products that use that film for
industrial applications. Increasingly,
Santek has shifted much of its production requirements to oversees
producers. The outsourcing of finished
products, also called contract purchasing, represents a 180-degree shift from
the vertically integrated model that Santek pursued during the 1970s and
80s. A key driver behind the outsourcing
of non-core products was the realization that previous ways of doing business
could not support 10-20 new-product launches a year, which is the target that Santek’s
executive vice president has established.
Many
products at Santek use self-contained instant film, which Santek refers to as
media. Only one other company in the
world has similar technical capabilities.
However, Santek now faces intense competition from digital technology,
forcing the unit to make digital imagery part of its image acquisition core competency.
Most outsourcing at Santek now involves product hardware, such as the
product casing, rather than media.
There
are several reasons why Santek insources media while outsourcing hardware. Most of the innovation valued by customers
occurs within media rather than hardware, making media a primary area to focus
research and development efforts.
Furthermore, the margins for media products are higher than the margins
for hardware products. From an
investment and financial perspective, limited corporate resources are best
allocated to media rather than hardware.
While hardware is necessary, it does not offer the best financial and
innovative opportunities. This does not
mean that hardware is not important.
Santek recently suffered through an embarrassing recall because a
contract manufacturer produced a finished product casing that cracked when
exposed to high temperatures (above 90 degrees).
Asian
suppliers provide virtually all outsourced hardware requirements. While Japan is the epicenter for hardware
manufacturing, other low cost areas in Asia are emerging. Outsourcing to Asia offers two major benefits—access
to technology and low cost. As with most
electronics and their supporting components, U.S. and European producers are no
longer competitive.
Beginning
in 2002, Santek began to actively search for contract or outsource
manufacturers, particularly for camera hardware. Unfortunately, there was no organization in
place to formally support that effort.
While a small OEM group worked to find contract manufacturers during the
1970s to 1995, Santek did not endorse or focus on outsourcing as a key
corporate strategy. As a result,
creating an outsourcing organization was not a major concern at Santek.
In
2001, Santek formed a contract purchasing organization, which has primary
responsibility for hardware outsourcing.
The contract-purchasing director (also referred to as the outsourcing
director) reports to the vice president of new product delivery. This group has responsibility for procurement
(identifying and qualifying outsource manufacturers), product quality, and
working with contract manufacturers during new product development.
To
date, the contract-purchasing director believes his staff has done a good job
of shifting production from internal to external sources. In addition to managing two international
procurement groups, the contract-purchasing director is responsible for
managing relationships with the outsource providers. After several years of outsourcing, the
director of contract purchasing, Steve Keller, started to notice that the
performance gains from outsourcing were flattening out quickly. When he recently surveyed his contract
manufacturers about their perception of doing business with Santek, he was
surprised by their answers.
Of
the 12 contract manufacturers currently used, seven thought of Santek as just
another customer. These suppliers did
not believe there was anything unique or special about the relationship. Three other suppliers expressed serious
concern about doing future business with Santek since they were dedicating
their capacity (through longer-term contracts) to other customers (who were not
competitors of Santek). Two other
suppliers expressed an interest in developing a closer relationship with
Santek. It appeared that these suppliers
were developing new technology and products that aligned well with Santek’s
future product plans. These two also had
the longest working relationship with Santek of the current suppliers. Steve could not help but wonder if his group
could do more to develop or elevate the relationship with these two
suppliers. And, if he could develop the
relationship, could his group achieve greater performance improvements?
Questions:
1.
Many outsourcing decisions involve
the concept of a core competency. Define
what is meant by this term. Discuss if
film technology is truly a core competency of Santek.
2.
Develop a process that would guide
firms through the insourcing/outsourcing process. Create a process that is robust enough to use
across a variety of product/service applications.
3.
A major challenge with an
insourcing/outsourcing analysis involves gathering reliable data. Discuss the various groups that should be
involved when conducting an insourcing/outsourcing analysis. What information can each of these groups
provide?
4.
Do you think hardware suppliers are
candidates for alliances or partnerships with Santek? Why?
5.
Partnerships and alliances are
special forms of supplier-buyer relationships.
First, define the concept of partnerships and alliances. Second, identify when a firm should pursue a
partnership or alliance with selected suppliers. Use the portfolio segmentation tool to assist
with your answer.
6.
Develop a process that firms can use
when identifying and developing supply chain alliances.
CASE 2
Bryan Janz was just arriving back from lunch when his office phone
rang. It was his wife, Nina, calling
from home. Nina told Bryan that FedEx
had just delivered a package addressed to her.
The package contained a beautiful clock now sitting over the
fireplace. In fact, Nina said, “the
clock looks absolutely beautiful on our living room fireplace”. Thinking the clock was from a family member,
Bryan asked who sent the present. She
said she did not recognize the name—the clock was from Mr. James McEnroe. Bryan immediately told Nina that she had to
repack the clock because it was from a supplier who has been trying to win
business from Bryan’s company. They
definitely could not accept the clock.
Nina was very upset, and responded that the clock was perfect for the
room and, besides, the clock came to their home, not to Bryan’s office. Because of Nina’s attachment to the clock,
Bryan was unsure about what to do.
Questions:
1. What should Bryan do about the clock?
Ans:
2. What does the Institute of Supply Management (formerly the NAPM)
code of ethics say about accepting supplier favors and gifts?
3. Why do you think the supplier sent the clock to Bryan’s home and
addressed it to his wife?
4. Does the mere act of
sending the clock to Bryan mean that Mr. McEnroe is an unethical
Salesperson?
CASE 3
VCI/Ellison, which represents the consolidation of the
heavy transportation equipment units of two previously separate and regional
companies, is facing worldwide pricing pressures from customers and
competitors. The ability to meet
financial targets has presented a major challenge for this new global
company. With limited ability to raise
product prices, the alternatives facing VCI/Ellison have become managing
material costs better or absorbing price increases through lower profit margins
and profitability. Given that direct
materials represent over 70% of the company’s total costs, it becomes easy to
appreciate the impact that improved global sourcing efforts should have on
profitability.
From the time VCI, a European company, assumed
ownership of U.S.-based Ellison both companies have sought to leverage the
commonality between them on a global basis.
The company concluded early on that procurement offered excellent
opportunities for global synergy across the two continents. Ellison Equipment, working with VCI, has
implemented a multi-step global sourcing process designed to leverage the
volumes available through the newly combined units. This case offers insight into how two
geographically and culturally diverse companies, brought together through
acquisition, are attempting to gain synergy and efficiency through integrated
global sourcing. The challenges facing
this global effort include not only geographic separation, but also cultural,
language, technical, and business practice differences.
Global
Sourcing Process Overview The global
process at this company features two teams, one at Ellison Equipment and one at
VCI, working concurrently on the same global project. While Ellison had experience using cost
reduction teams, VCI had never used teams within their procurement or engineering
areas. As part of this process teams are
aligned on both sides of the ocean working jointly on a commodity category or
project. The teams eventually work
face-to-face as they progress through the process steps.
Each global sourcing project has an expected duration of six months (although
the transition to a new supplier can take much longer). After working with an external consultant to
segment its primary products into six commodity groups, VCI and Ellison jointly
identified 27 project opportunities.
This process is designed to support nine projects at a time (each having
a six-month duration) with three iterations or waves. Each team pursues three categories of commodities
(which may have sub-categories or sub-commodities) simultaneously, so three
teams in a wave pursue a total of nine projects.
The team leader works with the team to develop time
schedules, a list of deliverables, and expected milestones within the six-month
project window. During this part of the
process the teams begin to quantify what they are studying by collecting and
validating data. Across each category
there may be four or five segments or sub-categories that require separate
analysis. While each team decides on the
segmentation of a category, both teams assigned to the project must agree on
the segmentation.
Even
thought each project technically has two teams assigned (one at each company
working simultaneously), they are really one team looking at the same
project. Teams can proceed to the next
process step without the explicit approval of the executive steering committee. However, teams are required to publish
progress updates weekly. A major
responsibility of the business analyst (discussed later) is to compile and
provide performance updates to the executive steering committee.
Some
managers consider Step 2, sourcing strategy development, to be the most
interesting and critical part of the global process. During this step the project teams identify
potential worldwide suppliers. One of
the realizations when beginning this process was that supplier switching,
including switching from long-established suppliers, was likely to occur. This realization was based partly on the
external consultant’s global sourcing experience. Supplier switching can be time-consuming and
difficult as new supply chain relationships are established.
From
the list of potential suppliers, the teams send Requests for Information
(RFIs), which they can modify to meet the specific needs of their category or
segment. The RFI is a generic supplier
questionnaire that introduces the global process and requests data about sales,
production capacity, quality certification (such as ISO 9000), familiarity with
the equipment industry, and major customers.
It is not unusual to send 400-500 RFIs during a project, depending on
the complexity of the category and segments the team is working.
The
RFI is a first filter in the supplier selection process. During this step it is critical that
suppliers return a high percentage of the RFIs, which are separated and
reported by region of the world. Of the
400-500 RFIs forwarded to suppliers, a team may receive and analyze several
hundred completed RFIs. The teams also
conduct a detailed supply market analysis to develop a thorough understanding
of the economics and dynamics of a particular market.
Step
2 is usually the first time that the two teams working on a global sourcing
project meet face to face. The European
and U.S. teams meet physically to conduct face to face analysis of the RFIs
returned by suppliers. It is each team’s
responsibility to establish the criteria for determining which suppliers will
receive Requests for Proposals (RFPs). A
key decision during Step 2 is whether a procurement opportunity appears to be
regional versus global. A lack of
globally capable suppliers can make a project a regional opportunity.
Step
2 requires a major effort on the part of engineering. Engineers on both sides will examine drawings
in an effort to commonize part specifications between locations. While a project team may conclude that a
global supply source does not exist, there may be opportunities to commonize or
standardize specifications across the two locations.
Step
3, requests for proposals, features the development, sending, and analysis of
formal proposals to the most promising suppliers identified in Step 2. The average number of proposals forwarded to
suppliers per project is 20-30.
Suppliers typically require six weeks to analyze and return the RFPs. The teams strive for a high percentage of
returned proposals, similar to the RFIs.
Team leaders, representing the project teams, report RFP progress to the
executive steering committee at a weekly meeting.
Teams are responsible for analyzing the returned
supplier proposals. Like the RFIs, teams
can set their own evaluation criteria and weights, but members must reach
consensus in their choices. The proposal
allows suppliers to provide design suggestions.
The teams usually meet via video or audio conferencing
to review the proposals. Engineers again
take a lead role in evaluating technical merits. Complex purchase requirements may require
teams to meet face-to-face for a second time.
Using standardized spreadsheet tools that are available to all teams,
each team analyzes its proposals and decides, based on the analysis, which
suppliers will be invited to negotiations.
A negotiation workshop takes place at VCI’s European
learning center during this step. This
session has several objectives—team members receive training in negotiation,
the project teams develop their negotiating strategy, and the teams select a
negotiation leader. If a team determined
that a sourcing opportunity was regional, negotiation will occur separately by
region. Teams select regional
negotiation leaders if the project is a regional opportunity or a single
negotiator if the project is global. The
decision of who should be the negotiating leader is based on discussion and
consensus rather than voting. Of the
first 27 projects, fully one-third of the negotiating leaders were selected
from outside the project teams.
Step 4 involves recommending a strategy and negotiating
with selected suppliers. Project teams
make a recommendation to an executive committee, specifically the vice
presidents of purchasing and engineering from VCI and Ellison. The executive committee may ask questions but
to date has not overturned any team recommendations. Team recommendations include the selected
supplier(s) with expected savings and timings identified. The teams also identify whether the suppliers
are regional or global but do not recommend contract length.
In
this step the negotiating team probes and discusses in-depth the proposals
submitted by suppliers. Suppliers can be
disqualified if engineering determines the supplier cannot satisfy technical
requirements, or the team is not satisfied with the commercial issues
All
negotiation in Step 4 is conducted face to face with suppliers at VCI/Ellison
sites. Half the negotiations so far have
occurred in the U.S. and half in Europe.
Before suppliers arrive they receive feedback concerning the competitiveness
of their proposal, which they are allowed to revise before negotiations
commence. Suppliers may be excused if
they are informed that they are not competitive and choose not to revise their
proposal. Once the lead negotiator takes
over, the team leader’s role begins to diminish (unless the team leader is also
the lead negotiator). The team leader
usually remains as part of the negotiating team.
Step
5, called supplier certification, features purchasing and engineering groups
receiving the team’s recommendation and preliminary terms of the negotiated
agreement. At this time functional
directors will begin to budget expected savings from the proposed contract into
their financial projections. Supplier
site visits can occur during this step by representatives of the functional
groups. For example, engineering,
procurement, and quality assurance may want to validate a number of topics
during this step. The time frame for
this step varies from one month to over a year.
Step
6, finalizing the contract, involves crafting the final contract based on the
outcome of the negotiations. The
negotiation leader remains with the process until the contract is
complete. While the legal department is
also involved, a buyer writes the contract using an agreement template. Contracts are typically three years in
duration. Both sides of the ocean are
involved in formalizing the contract if the agreement is global rather than
regional.
Global
agreements differ from traditional contracts.
They include productivity improvement requirements to offset material
increases. The agreements also encourage
technical advancements by the supplier to further reduce material costs or
enhance product performance. This
process also includes a formal process to manage improvements, whereas the
process for previous or non-global agreements has been informal. And, in a somewhat significant departure from
previous contracting practices, incentives such as 50/50 improvement sharing
are starting to appear.
Step
7, sample testing and approval, assesses the samples provided by the selected
supplier. Production facilities go
through a production readiness stage, initial sample inspection reports are
developed, parts are checked off of production tooling, and the negotiation
leader develops a production rollout plan with help from his or her counterpart
on the other side of the ocean.
Step
8, the concluding step of a global project, is the production readiness
stage. The selected supplier may send a
day or weeks worth of supply to be used in actual production. Logistics becomes part of the implementation
team if there is a switch from one supplier to another.
Organizational
Enablers VCI/Ellison has put in place certain
enablers that support global sourcing.
This includes the formation of an executive steering committee, the use
of global teams, formally selected team leaders, and the creation of a business
analyst’s position to support the operational and analytical needs of the
teams.
An
executive steering committee at each unit reviews and prioritizes projects for
study. A sourcing director at VCI and a
counterpart at Ellison drive the process at both organizations. Working jointly, these executives recommend
projects for study, solicit input from functional areas in terms of cost savings
and quality improvement opportunities, develop a plan to pursue the project
(including assembling a cross-functional team), track the status of each
project through weekly progress updates, and manage the global process to
ensure its continued success. The
executive steering committee members conduct a video conferencing meeting each
week for two hours. This meeting also
involves team leaders for projects that are in process.
Cross-functional
teams are an integral part of this process.
Two teams, one from VCI and one from Ellison, work simultaneously on the
same sourcing opportunity, each with a formal team leader, two functional
members (usually from engineering and purchasing), and a business analyst that
supports both teams. Each project
consists of seven combined positions across two teams. The team leader and business analyst are
full-time assignments while the buyer and engineer provide a part-time
commitment.
Teams
are responsible only for the first four steps of the global sourcing
process. The two teams usually come
together physically two or three times over a project’s duration. Both sides agree, however, that face to face
interaction is time consuming. At the conclusion
of each project the teams are required to write a “white book” documenting the
lessons learned from their experience.
With
any team-based approach the role of the team leader is critical to
success. Project leaders are responsible
for planning team meetings, which are held once or twice a week depending on
the phase of the project, and reporting project status to the executive
steering committee. Planning includes
setting the meeting agenda, ensuring the global process steps are followed, and
working with team members to meet time lines and achieve project goals. The leader also communicates with each
member’s management when necessary to ensure commitment. Agreement is widespread that the team leader
is a critical part of the process, particularly when the leader must work with
members to balance their priorities while still challenging the team to achieve
demanding performance improvement targets.
Each
set of teams that works on three projects simultaneously has a business analyst
assigned to support the effort. The time
required for managing requests for information (RFIs) and requests for
proposals (RFPs) across two continents is extensive. VCI/Ellison created a full-time business
analyst position to manage the required tasks when pursuing global agreement. Exhibit 1 outlines the key features of this
position.
Exhibit 1
Positive and Negative Features Related to
the Business Analyst Position
|
Positive Features
|
Negative Features
|
|
Experience from
the position builds expertise about the global sourcing process
|
Managing three
projects simultaneously creates an intense work pace
|
|
Full-time
commitment to the process helps the business analyst avoid other job
distractions
|
Process has
some inefficiencies (faxing, handling reams of paper, some software
inefficiencies), creating additional and perhaps unnecessary work burden
|
|
Team leader and
business analyst are key “point people” to management and suppliers
|
Long and
stressful days can affect morale and promote turnover
|
|
Given the work
required to manage RFIs, RFPs, and negotiations, the global sourcing process
would not succeed without the analyst position and a strong analyst
|
Too many RFI
suppliers pass to RFP stage, creating intensive work requirements for the
analyst
|
|
Business
analyst position prepares individuals for future sourcing careers
|
Obtaining
drawings for RFPs from engineers is a time consuming process
|
A
repeated sentiment among managers is that this nine-step process introduced a
discipline to sourcing at VCI/Ellison.
Each sourcing project moves lock-step over a six-month period with
weekly reporting to an executive steering committee. Global sourcing teams must meet deadlines and
milestones, make sure information gets to suppliers, and thoroughly research
the supply base before negotiating and awarding contracts. The process has made everything “official”
with suppliers, who have taken VCI/Ellison’s global efforts seriously.
While
external consultants played a critical and highly visible role in developing
and using VCI/Ellison’s global process, managers point out that the use of
consultants caused some concern. For
example, consultants assumed the role of team leader with several early teams,
raising questions concerning who should lead the teams and their
qualifications. The consultants often
dictated what the RFPs should contain, which created some disagreement within
project teams. The consulting group also
insisted on top management presence at weekly meetings. While this demonstration of executive
commitment was valuable for the first few months, later meetings became too
detailed to warrant executive attendance.
Finally, too much time was spent educating consultants about the heavy
equipment industry. There was some
surprise initially at the lack of experience of the consultants sent to work
with VCI/Ellison on a day-to-day basis.
Faced with intense competition, increasing expectations from
customers, reduced product life cycles, and localized geographic markets,
Whirlpool Corporation (a Fortune 500 manufacturer of appliances) realized that
the need to achieve a competitive advantage from its sourcing and material
efforts was greater than ever. Part of
the strategy to achieve this advantage involved pursuing an alliance with a key
steel supplier. Steel is a major
component used across all of the company’s finished products (such as washing
machines, dishwashers, refrigerators, and others). The purchasing managers at Whirlpool faced a
number of questions with regard to their purchasing strategy:
• What do we need to do to
be competitive?
• Who is best suited to be the primary steel supplier?
• What do we need to know, and how do we get the information
required to answer this question, especially with regard to our organizational
culture, technological roadmap, and where both organizations are moving in the
long term?
• How do we implement a strategic alliance?
• How do we establish a strategic alliance in terms of
confidentiality agreements, termination agreements, and negotiation strategies?
• How do we provide the supplier with evaluations to ensure that
this alliance continues, with regard to continuous performance, goal
achievement, and commitment?
• What do we do if we do not meet our objectives—change the
situation or simply terminate the agreement?
Whirlpool realized it needed to reduce the number of steel
suppliers it used and locate a supplier with a common desire to enter into a
longer-term alliance. Whirlpool’s
organizational goals were to leverage the selected supplier’s technical
capabilities through early supplier involvement, day-to-day redesign support,
and process improvement. At the same
time, top executives realized that in order to obtain these benefits, it was
important that the supplier partner perceive value in the relationship.
While all of this was occurring in 1984 at Whirlpool, the
management team at Inland Steel was considering a different set of
questions. Four vice presidents of
marketing at Inland Steel, an integrated steel producer located in the same
geographic region as Whirlpool, were reviewing their market strategies and the
recent changes that had occurred in their strategic alliances. They had made the decision to reduce their
customer base, and were forming a new management plan. This was part of Inland’s Customer
Relationship Management strategy, which entailed reducing their customer base
in order to serve only their preferred customers that would yield the highest
long-term profitability for the company.
This strategy was a direct result of Inland Steel’s total quality
management program, which dictates that to delight the customer one must
identify key markets and focus on those markets.
A major component of this market strategy was to approach key
customers with the idea of entering into long-term agreements. In doing so, Inland Steel realized that the
best opportunity for reducing costs was to become involved early in new product
design with key customers. However, to
achieve this objective, the vice presidents realized that significant capital
investment would be required to update Inland Steel’s facilities with
state-of-the-art steel processing technology to align technologies with key
customers. In some cases, this involved
some degree to risk, as aligning capital investments with specific key
customers could “shut out” new business with other potential customers. However, the management team reached a
consensus that the only way to succeed in the current market structure was to
reduce costs through early involvement in customer new product designs, and to
back this up with capital investments in design capabilities and new
facilities.
Meanwhile, Whirlpool executives were mulling over whether Inland
Steel was the right supplier to form an alliance with. Whirlpool Corporation had used Inland Steel
as a supplier for several years, but had used many different steel suppliers
during this period. The strategy of forming
a formal buyer-supplier partnership was a relatively new one. As these two companies explored the idea, it
became obvious that a complementary common strategic vision existed between the
two companies, which could make such a partnership a reality. This common vision was based on the fact that
the Whirlpool Corporation needed to sustain a competitive advantage and support
its direct customer relationships, while Inland needed to manage the transition
inherent in a customer-focused market strategy.
Thus, Whirlpool Corporation sought to work with Inland Steel to realize
reduced costs vis-à-vis the competition, and Inland sought to obtain a major
share of Whirlpool’s steel contract.
While this initial concept seemed straightforward, it required almost
seven years to make it a reality.
The vision was made a reality by first understanding that reducing
cost did not simply mean lowering the price paid per ton of steel, but rather
to take cost out of the business
processes, which takes much more time.
Linkages throughout every step of the value chain, not just between
purchasing and sales, had to be established (See Exhibit 1). The end goal became to maximize profitability
at both companies, while not relying on explicit formulas and equations
formalized in contract form. Along the
way, the companies encountered a number of obstacles. However, as the vice president of purchasing
at Whirlpool Corporation described the process, “Neither of us let these
problems get in the way of cost reduction efforts, which in the long run far
exceeded the changes in market steel prices.”
Overcoming the obstacles in the relationship required a seamless
organization and the elimination of levels of bureaucracy. Functional personnel in each firm had to be
able to communicate directly with their counterparts in the other firm, all the
way to the chief executive office. The
underlying foundation of the relationship was challenged many times during the
early years. “The reason why this
relationship works,” says the vice president of marketing at Inland Steel, “is
that Whirlpool Corporation created an environment that allowed questions to be
laid out on the table every time a new issue came up.”
A
Roadmap to Trust
The following is a timeline of the development of the strategic
relationship between Whirlpool Corporation and Inland Steel. In 1984, Inland Steel began to share its
market strategy and management vision with Whirlpool. The sharing was unique because the supplier
(Inland Steel) actually took the initiative when pursuing the strategic
alliance. By 1986, Whirlpool had reduced
its supply-base from eleven steel suppliers to seven, and Inland had invested
over $1 billion in new capital investment.
This investment was specifically designed for Whirlpool’s steel
requirements in the appliance industry, which could not be used in their other
major market, the automobile industry.
Inland Steel needed to be granted access to Whirlpool’s engineering
personnel to identify the different ways that Whirlpool Corporation was using
steel and convert these into process specifications. At this point, Inland was given assurances
that it would receive a larger volume of Whirlpool’s orders. One of the most important of Whirlpool’s
later actions was that the company actually did place the orders it said it
would.
In 1988 and 1989, the alliance was reevaluated by Whirlpool
Corporation, and Inland’s orders from Whirlpool increased by 30%. Simultaneously, Inland began the first of
their joint cost-reduction projects, which sought to eliminate cost from the
business processes. By 1990, Whirlpool
had reduced its number of steel suppliers to four. The companies held a joint leadership meeting
to bring discussion of the alliance to top management’s attention and to
formally develop a supplier council. The
companies also developed a long-range vision, which was deemed critical to the
success of the partnership.
The alliance solidified in 1993.
By this time, Inland Steel had established resources at its technical
center dedicated to the needs of Whirlpool.
In 1994, Whirlpool increased its orders to Inland Steel by another 15%,
bringing the total to approximately 80% of Inland’s total steel
requirements. At this point, the two
companies were sharing joint strategies, and Whirlpool’s organizational
restructuring was developed around the Inland Steel relationship. Purchasing management was actively involved
in top-level strategic planning. To
date, the strategic relationship between Whirlpool and Inland Steel is in place
and producing benefits that a traditional relationship could not have produced.
Issues
and Concerns
In the process of developing greater trust between the two
organizations, the companies had to address a number of issues directly. First, different employee practices between
the two companies often led to conflict.
This conflict was reduced in part by promoting greater cross-cultural
interaction, such as having a purchasing manager work at the supplier’s plant,
which helped to smooth over any differences in corporate culture that
existed. The sharing of cost data was
also problematic, but this happened in segments so as to target specific cost
drivers in different areas of the business process. In the long run, by focusing on quality
improvements and reject-rate reduction, hourly labor costs became almost a non-issue. Even though Whirlpool had several CEOs during
this period, the relationship between the companies remained intact because of
the level of trust that had developed over time. The relationship was no longer between people
but rather between organizations.
Inland Steel was also concerned that a single-sourcing policy
might cause it to lose touch with the market, and was concerned with
confidentiality of information. At the
same time, Whirlpool was concerned about the technological risks of relying on
only one supplier. However, these concerns
were ultimately dwarfed by the belief that both companies would be low-cost
producers in the long-term because of the relationship.
Mechanisms to Support the Relationship
Executive management at both companies recommend that
organizations considering pursuing partnerships need to think early on how they
will deal with issues such as those just mentioned. Although no single right answers exist, there
are different approaches to these issues that must be tailored to the specific
situation. For example, significant
organizational realignment was needed so that people could work specifically
with their counterparts in the other firm.
The creation of a supplier council was also instrumental to the
relationship. This approach permitted
the sharing of strategies and tactics so that each party became aware of each
other’s activities. Senior management
discussion, both structured periodic meetings and informal spontaneous
telephone conversations, also helped promote greater trust. Quarterly performance reviews by Whirlpool
were helpful to Inland for understanding how well they were meeting performance
expectations. Engineers from Inland were
also co-located at Whirlpool’s product development center, which created many
other informal avenues for communication.
Whirlpool
has begun to apply the same “customer service” principles used by Inland to
their own customer based. Whirlpool’s
CEO has redefined his company’s mission as a fabric-care of a food-preservation
enterprise rather than as a washing-machine or refrigerator maker. Whirlpool sales executives recognize that
certain distribution channels make up the majority of their sales volumes – in
this case, what they call the “Power Retailers”, such as Circuit City, Sears,
and Electric Avenue. These retailers
demand 100% availability, and Whirlpool’s logistics managers meet this
expectation. A second set of customers,
building contractors and government agents, purchase in smaller volumes, but
also require higher levels of customer service. Thus, they promise close to 95% availability
for this group. Finally, the “Discount
Outlets” and “Mom and Pop” operations require 85% availability, as they
purchase infrequently and in smaller volumes.
In effect, a different customer service standard is set for different
customers, depending on their importance.
The underlying outcome for both parties in this agreement is that
the relationship became viewed as a covenant, which implies a greater
commitment than a contract. In the words
of one Inland Steel executive, “A covenant implies a promise that is enduring
and provides a way to manage expectations.
The single most important tenet of the relationship is the need to
satisfy the end consumer who purchases the finished appliance. By focusing on this covenant, the
relationship should survive and prosper over the long term.”
Questions:
1. Discuss what the following statement means: ‘It can take years for
a buyer/seller partnership to begin delivering results.’
2. Discuss the advantages of having point-to-point contact (Exhibit
1) between functional groups at different companies. Are there any disadvantages to this approach?
3. What role does trust play in the relationship between Whirlpool
Corporation and Inland Steel? Provide
examples from the case that illustrate trust within this relationship.
4. Why is it important to have a strategic fit between the companies
involved in a buyer/seller alliance or partnership?
5. When formulating its purchasing strategy, what other strategy
alternatives besides an alliance with another company could Whirlpool
Corporation have pursued?
CASE 5
Consolidated Products is a $21
billion company headquartered in Atlanta, Georgia. The company’s five business units, which
offer a wide array of products and services, are the result of an aggressive
strategy of mergers and acquisitions starting in the late 1980s. Exhibit 1 provides an overview of
Consolidated Products and its five primary business units. The corporate staff is surprisingly small,
comprised of general management, legal staff, and human resources. Part of the reason for this small staff is
due to the eclectic array of businesses housed within one corporate
entity. A Business Week editor recently commented that “Consolidated Products
could easily be broken up into five separate companies, since at one time it
was five separate companies.” The editor
also said that if the company “ever learned how to leverage its size in the
marketplace, Consolidated Products could be a Wall Street powerhouse!”
While
Consolidated Products is a global corporation with facilities around the world,
it operates each business unit as a highly independent and decentralized
company. The corporate culture is best
described as entrepreneurial, with each business unit being headed by an
executive vice president who has complete profit and loss accountability. This case focuses on the Engineered Materials
business unit.
ENGINEERED MATERIALS
The
Engineered Materials business unit, acquired in 1999, is the newest and
smallest addition to Consolidated Products portfolio of companies. Part of this business unit’s efforts over the
last year have centered on becoming more integrated across the various
functional groups that make up the business unit. Unfortunately, this unit was previously part
of Andreas Manufacturing, an old-line company with a strict hierarchical culture. Executive managers at Consolidated Products
knew this purchase would present some interesting challenges regarding how this
unit would fit in with the entrepreneurial culture that Consolidated Products
has tried to create. Unfortunately,
Engineered Materials is struggling. In
fact, internal problems created by the efforts to change the culture helped
push 2003 sales down 8 percent as the rest of the industry increased by 5
percent.
Executive
management believes that the use of cross-functional teams is a primary way to
change the unit’s culture while achieving major performance improvement
savings. One of the teams that
management expects to deliver major cost savings is the composite materials
team. This team, chartered in November
2002, had initial savings targets of 15 percent cost and productivity savings,
which translated to $3 million in annual savings. The team, which has been meeting on a regular
basis for 12 months, has struggled to develop a purchasing strategy for
composite materials. Unfortunately, this
team is not working well together or making much progress, which has frustrated
executive management and has affected the financial projections for 2004 and
2005. The team has fallen far short of
its expectations. While no one has
formally identified the exact reason(s) for the less than optimal performance,
an internal consultant has interviewed several team members. Examples from comments made by these team
members include—
§ Some
of the team’s members are not that committed to the assignment. One even commented that his regular job
responsibilities come first. After all,
that’s where his manager really holds him accountable. And, he continued, what is really the risk of
not supporting the team? The way this
member sees it, the real risk comes from putting in too much time on the team
and neglecting “the real work.”
§ Some
of the team members maintain they do not really understand the team’s
goals. The goals that the team developed
are vague, or simply address team behavior.
For example, one goal is for the team to “meet once a week.”
§ While
the team has a formally designated leader, he spends too much time talking and
not enough time listening. He also gets
angry when team members don’t agree with his position on an issue. Several members commented how rude he can be
to team members.
§ Some
members perceive that management is not forthcoming with the necessary
resources. In the opinion of one
member,” Team members spend too much time requesting the necessary resources
rather than working together on team assignments.”
§ One
member asked what qualified him to be on a team. He said he was never on a cross-functional
team in his 20 years with the company.
How is he supposed to know what it takes to be part of a “higher
performance work unit?” This member
further questioned whether the Engineered Materials unit, given its history and
culture, is ready for team-based management.
Although the methodology was not rigorous,
the internal consultant quickly determined that the use of teams at this
business unit was in serious need of help.
Questions:
1.
Gaining team member commitment is
critical to team success. Discuss how
this unit can use its employee performance evaluation and reward system can
encourage members to support cross-functional project teams. Be sure to provide examples of the kinds of
rewards available to team members.
2.
Goal setting is also important to
team success. Discuss how organizations
and teams should establish goals, and why having team goals is important.
3.
Research has demonstrated a strong
link between effective team leadership and cross-functional team success. Describe the characteristics of an effective
team leader. Next, describe the
responsibilities and requirements of cross-functional team leaders.
4.
Identify the kinds of resources, in
general, that cross-functional sourcing teams should be provided to be
successful. (Note: A specific team could
differ in its needs compared to other teams)
5.
Identify the types of training that
team members at Engineered Materials will likely require before they can
effectively support team interaction and activities.
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