Precision Technology Assignment Help
Introduction
Precision Technology makes precision-machined parts for assembly line manufactured vehicles and is regarded by car manufacturers as the leader in the production of disc brakes, different gears, transmission gears and turbocharger turbines. Precision Technology’s only production facility is located near Melbourne, Victoria, where it employs approximately 800 staff. The business sells its products directly to vehicle manufacturers. Precision Technology’s customers are limited in number but include Ford Australia, Mitsubishi Australia, General Motors Holden and Toyota Australia. Because of the highly competitive and captive market, it is particularly difficult to attract new customers.
Precision Technology manages its entire range of products from initial research to prototype development to manufacturing and finally marketing them throughout Asia and Australia. Over each of the last three sales volume has dropped marginally. Although this remains a matter of concern for Precision Technology, it has not created a crisis to date as the drop-off in sales has been offset by increased profit margins that have resulted from across the board reductions in production costs. Precision Technology has placed significant emphasis on managing its costs of production right through this recent period to the point that this has become a key competitive strategy. However, the technical expertise in Precision Technology is very much regarded as a primary source of its overall competitive advantage.
Precision Technology has invested heavily in its research and development capacity. The Research and Development function is continually improving both its product development and manufacturing processes. In addition, car manufacturers expect Precision Technology to constantly enhance the design and characteristics of its products to meet their and their customers’ needs. As well as achieving and maintaining critical ISO Quality Certification, Precision Technology has also been awarded specific forms of accreditation that provide the business with subcontracting partner status. All of the major car manufacturers insist that their suppliers have this status. It is a prerequisite for entering into contracts or partnerships.
Background to the case
Competition from Asia is getting stronger and stronger. For example, Taiwan is manufacturing products that compete directly with Precision Technology’s range. Although the quality of products from Taiwanese competitors does not as yet meet the quality standards of Precision Technology, they are available at considerably lower prices. To compound its problems, Precision Technology is currently being adversely affected by a downturn in the new car sales market. Although the new car market experiences cynical trends, the timing of the current downturn is, to say the least, unfortunate.
Throughout the first six months of the current financial, Precision Technology’s situation has steadily deteriorated. Sales have continued to fall but profit margins have had to be reduced because of the increased price competition from Asian parts manufacturers. For the first time in its history, Precision Technology has been forced to make employees redundant and this action has in turn led to a breakdown in employer-employee relations. For over 30 years, Richard Collins had been CEO of what was originally a family owned and operated business. Ian Collins, Richard’s eldest son, became Precision Technology’s CEO a little under two years ago. The business became a public company toward the end of Richard’s period of leadership. Currently the majority of shareholders consist of Collins family members and their close friends who had seen the potential that Precision Technology offered private investors. Institutional investments from banks in particular has grown steadily since the business was listed three years ago. These institutional investors now hold just in excess of 40 percent of the company’s share capital. It is these institutional investors that are particularly concerned about the present direction of the business and they don’t see any action being taken to turn the situation around.
A management review is proposed by the shareholders
At a recent shareholder’s meeting, voices and emotions were raised as the institutional shareholders, in particular, forcefully stated their concerns and directly questioned the effectiveness of the CEO and the entire senior executive group. Some of the more relevant issues surfacing at the meeting provide insight into the seriousness of the issues:
…there are no clearly defined objectives for the business, no sense of where the company should be headed…policies and strategies are strictly reactive in the short-term, with no longer-term vision of where the business ought to aim…there are no clearly defined strategies for mobilizing the staff as a whole behind common objectives…the management committee is unable to agree, to take decisions together and to resolve the conflicts…
After a fairly frank and fiery exchange, it was agreed that a systematic and detailed audit of the financial and managerial practices of the company should be undertaken in order to confirm or refute the assertions raised in the meeting. A significant shareholder recommended employing an experienced management consultant who could provide an expert and independent assertion of the company. Those present at the meeting were somewhat surprised when the CEO, Ian Collins, did not try to counter this proposal and even seemed to be in support of it.
A management consultant who was recommended to the company accepted the commission of the Board of Directors to evaluate the financial and managerial performance of Precision Technology. For a number of weeks he had unrestricted access to all areas of the business. Wanting to make optimum use of this open access, he decided to employ a variety of information-gathering techniques:
- One on one interviews with members of the senior executive group
- Focus group meetings
- Analysis of existing secondary information (documents, company policies, notes etc)
- Meetings with individuals and teams on location
- An assessment of work practices and procedures
Consultant’s Analysis
Structures
An organization chart of Precision Technology as drafted by the management consultant is to be found at Figure 8.2 (I will attach this as a picture separately). This action was needed because no official organizational chart for Precision Technology was available. The consultant provided several observations based on research and on how the business seems to actually be operating: The Management Committee is made up of the executives at level M2, which are the Commercial, Production, Quality, and Administration and Finance Sections.
Ian Collins, is both CEO and sits on the Board of Directors. He has overall control of and responsibility for the company but this in no way restricts his father, Richard Collins, who has a personality that exudes strength and charisma, from presenting himself in the workplace and exerting his considerable influence. Ian very much acknowledges the need to enhance management effectiveness at Precision Technology as quickly as possible and to the extent necessary while, at the same time, having regard for the needs and concerns of staff and for preserving the organization culture and values that, in the past, contributed to the success of the business.
The role of Assistant to the CEO is lacking in clarity. Currently, this position is held by David Collins, Ian’s brother. David’s youth and somewhat non-assertive personality restrict him from providing a leadership role in the business. Presently he is working independently on a range of special projects delegated to him by Ian Collins.
The Commercial Division is comprised of three departments, each possessing the same level of status or standing in the Division.
- Asian Market – headed by its Commercial Manager, Doug Jameson
- Australian Market – headed by Craig Dalton
- Marketing and Commercial Consolidation – headed by Maria Carlucci
A Quality Management Centre has recently been established that reports directly to the CEO. Elaine Bartok is in charge of the Quality Project Team that is responsible for coordinating the various quality operations. Its role is primarily functional, in that it coordinates with those who have operational responsibilities and those who are responsible for quality in the various production areas. These programs are primarily technical and people from outside the organization provide training for them. As an aside Precision Technology does not employ its own internal training staff and as yet has not developed an internal means of providing practical training to its operational members.
The Research and Development Department consists of a team of over 80 people, deployed throughout a number of areas of activity, including materials and components, brakes and brake systems, precision gearing systems and turbocharger turbines, industrialization, processes and methods, tooling, and so on.
The Production Division’s activities are based on the two core activities of the business: brake systems and gear/turbine systems. The production methods, technology employed and workflow processes involved with each of these two products are very much contrasting and so the two structures are, for all practical purposes, independent of each other.
The logistical and purchasing teams work for both the brake systems and gear/turbine systems section. Personnel in the purchasing teams are multi-skilled and are considered to be very technically competent. The manager in charge of subcontracting is part of this function.
The Administrative Division (Departments of Administration and Finance) consists of four departments that occupy the same hierarchical level. These departments are Personnel, Legal and Industrial Relations, Finance and Accounts, and Information Technology.
Hire Expert Writers at
Affordable Price
WhatsApp
Get Assignment Help
Issues and Highlights
The consultant highlighted certain points in the report:
Precision Technology is a business with a definable culture, set of values and management practices that are strongly technical in nature. The core production processes are staffed by more than half of the business’ workforce. Human Resource Management is not designed as an identifiable or dedicated support function. Decisions relating to the functions and practices of HRM (such as recruitment, promotions, training etc) are handled by the relevant operational managers. The personnel team led by Laura Fenner only undertakes basic administrative tasks and processes that relate to areas such as employee record keeping. The lack of a clear, coherent HRM policy demonstrates the attitude the business has towards HR in that senior management consider HRM to be simply a factor of production that contributes to the manufacture of reliable, high quality products.
The Commercial Research Division is managed by a relatively small team. Although the Research and Development Department is very well resourced, it is relatively ineffective when product innovation is the performance measure. Apart from the original, traditional brake systems and gear/turbine systems technologies that enable Precision Technology to establish itself successfully in the marketplace, Research and Development have not developed any ground breaking products that are needed to give the business a clear competitive edge. The department is perhaps focusing too much on production methods and short-term operational objectives. The mission and purpose of Research and Development and the performance indicators that apply to it are anything but clear. The department appears to have gradually assumed a subordinate role to production, and is more focused on improving what is currently being done (i.e. quality improvement) than creating new products (i.e. innovation)
Executive Management Practices
Everyone in the company recognizes the yawning gap in communication between level MI (senior executives), M2 (management) and level M3 (middle managers in charge of the technical and commercial teams). The senior executives find delegation to be a skill they find difficult to engage in. They candidly confess their lack of confidence in the managers and middle managers who report to them. Their subordinates, in turn, feel frustrated as they don’t have any specific or meaningful responsibilities. Important information typically is spread by rumor. There are few forums of mechanisms (including commitees) that involve both management and senior executives in open and direct communication. Integration between the two levels of management is though direct contact, which is built on personal affinities. Contacts between people working in sales and marketing, production and administration are infrequent and often confrontational. Thus, the business is highly compartmentalized, both horizontally and vertically and people at all levels have difficulty working together.
At management level (level M2), the pre-eminent forum is the ‘Management Committee’. This committee includes all 12 managers at this level in the hierarchy and meets every fortnight for half a day that ends with a business lunch. The committee’s objectives include identifying important strategic options for Precision Technology, developing action plans for the implementation of these strategies, and to take significant decisions that are needed to guide the development of the business.
There are other committees including the administrative committee, and the sales, production, quality and purchasing committees. Their role is to identify and refer issues to the management committee for their action and to make decisions about operational matters directly related to areas such as sales, production, financial management and personnel. These committees generally meet on a weekly basis.
Many people in Precision Technology have reached the conclusion that too many committee exist and/or they meet far too frequently. The purposes of the committees are either unclear, redundant or forever changing in light of the prevailing or immediate short-term issues and concerns. A compounding problem is that many of the members of one committee are also the members of another. For example, the quality committee’s membership includes 9 of the 12 members of the management committee. It is not surprising then that many senior managers appear to spend more time attending meetings than focusing on their jobs.
There are no formal bodies such as the Level M2 committees at Level M3 (middle management). At Level M2, decisions and information flow vertically. Additionally, there is no committee linking Level M2 with M3
Enquiry presentation
A month after accepting the brief to evaluate the business, the management consultant presented the outcome of his investigation to the Board of Directors, exactly as they have been outlined above. Apart from some specific details and some minor differences in perception, the shareholders found themselves in agreement with the analysis of the day to day operations of Precision Technology and unanimously endorsed his report and the conclusions reached.
On the basis of the report, the shareholders requested that the work of the consultant be continued on the basis of providing ways of improving the situation as stated in the report. Following discussion, the shareholders stipulate that the management consultant must take into account three key conditions when developing any proposals or recommendations for action. These conditions, regarded as critically important given the current circumstances in Precision Technology, were that:
- Any new system affecting the operations of Precision Technology be implemented in a way that avoids any major internal disruption or negative impacts on the normal conduct of the business, i.e. implementation must be undertaken as smoothly as possible
- Any recommendations do not involve any additional staff retrenchments
- Any changes implemented must not affect people outside Precision Technology, including subcontractors and customers, in a negative way.
