Case Study: The Case of the Machinists’ Mutiny Leadership Write One-page Reflective Writing Assignment (answer the question )Case Study: The Case of the Ma

Case Study: The Case of the Machinists’ Mutiny Leadership Write One-page Reflective Writing Assignment (answer the question )Case Study: The Case of the Machinists’ MutinyQuestion: How can Mike convince the machinists to adopt the new system? Should he try at all? in selling into the heavy materials
handling market, where overhead
systems unloaded rail cars or moved
steel coils through large factories.
Mike Trail grew up working in
the factory, but in the early 1970s
he beaded for Chicago to work as
an engineering consultant. In 1983,
at age 36, he returned to take over
as president of Trail Manufacturing. The company had foundered during the recession of the early 1980s.
Factory construction in tbe United
States virtually disappeared, and
Trail found itself almost exclusively
in the replacement parts business.
To make matters worse, small suppliers in other industries, also hit
by recession, began looking for
new outlets for products made on
their aging screw machines. Several
of them entered the materials-handling components business, making a bad situation worse. Trail’s
volume fell by 40% and profits virtually disappeared.
HBR Case Study
At the moment ol decision, what would you do?
What happens when the ship’s captain
sees the New World-but the crew
wants to sail homel
The Case of
the Machinists’ Mutiny
“No,” Sandy answered quickly.
“At least it’s not meant as one. Hell,
Mike, I’ve been here longer than you
have. But we just can’t switch over
to the new equipment.”
Trail Manufacturing was a small
midwestern manufacturer trying
to define itself in a new world of
competition. It built cable crane
components-pulleys, hooks, bins,
and other integral parts of crane
systems-on aging, general-purpose
screw machines in the Benton Harbor, Michigan plant it had occupied
since its founding in 1903. The company’s broad product line and willingness to customize led to success
Mike Trail slashed factory and office jobs and sought new markets to
capitalize on Trail’s machining capabilities. He was forced to lowball
prices to win business, but with labor
and administration cut to the bone,
the company survived. When the recession ended. Trail’s business revived. As sales rose, many in the
company argued in favor of jettisoning the small orders that had come
into the plant during bard times.
Mike, however, saw potential in that
diverse set of low-volume jobs. The
bigger the company’s portfolio of
customer industries, he reasoned,
tbe more recession-proof its sales.
But Trail Manufacturing faced a dilemma. Its equipment lent itself to
the high-volume, stable products it
traditionally made; the long setup
times on its six-spindle screw machines meant the company needed
big production runs to achieve economic order quantities. Yet Trail
lacked any distinctive competence
in this high-volume market. Lots of
companies had general-purpose
W. Bruce Chew is an assistant
professor at the Harvard Business
School, where he teaches operations
management and strategy. This is
his second article for HBR.
HBR’s cases are derived from the
experiences of real companies and
real people. As written, they are
hypothetical, and the names used
are fictitious.
by W. Bruce Chew
“You can’t be serious!” Mike TVail,
the president and fourth-generation
owner of Trail Manufacturing, stared
at five older men standing uncomfortably in his small office.
“I’m afraid we are, Mike.” Sandy
Mulder, the most senior of the five,
was polite but firm. “We won’t
switch over to the new equipment.
We want to continue to work on the
screw machines.”
“But we’ve already bought the
equipment.” Trail’s voice rose,
caught somewhere between pleading
and outrage. “You’re due to start
training in three weeks. You knew
you’d be switching over; we’ve
talked about this for months.”
“We won’t do it,” Malcolm
Thierry, another member of the
group, stated more forcefully. “We’ll
quit first.”
“Is that a threat?”
14
HARVARD BUSINESS REVIEW Novembei-December 1990
screw machines, and some were
much better maintained, In smallvolume markets or in markets with
rapid product change, Trail simply
could not compete.
Mike decided that new technology
would make it possible to pursue
new markets effectively. He decided
to refit the factory with flexible manufacturing technology that offered
economies of scope as well as scale.
To help him refine his vision, he
turned to Marco Duncan, his chief
engineer. Marco had joined Trail after
several years at a major auto company. Soon after he signed on, he
single-handedly converted Trail’s
engineering staff from a traditional
sketch-by-engineer and blueprintby-draftsperson operation to a computer-aided-design [CAD] process.
He accomplished this in the face of
opposition from design engineers,
draftspeople, and, to some extent,
Mike himself.
Marco plunged into the flexible
technology project with enthusiasm;
he considered the factory an anachronism. Mike and Marco spent several months touring other plants.
DRAWING BY TIMOTHY CARROLL
talking with vendors, and meeting
with consultants. At a nearby suite
of offices, away from the day-to-day
headaches of the company, the two
hammered out the vision that was to
take Trail Manufacturing into the
next century.
At the heart of that vision were
eight numerically controlled machining centers, each with its own
materials-handling robot. The eight
flexible machining cells would replace Trail’s 28 six-spindle screw machines. This move was not as radical as it might sound. The 11 oldest screw machines could no longer
hold the necessary tolerances. They
would need replacing even if Trail
did not move to a new technology.
Nor did the plan represent an unreasonable financial gamble. The
flexible machining cells cost over
$400,000 each. With the necessary
mainframe computer and support
equipment, the project’s total cost
exceeded $4 million-more than
twice the net book value of the company’s property, plant, and equipment. But Trail’s conservative financial structure made it very credit-
worthy. Attractive loan terms from
local banks and training subsidies
from local government moderated
the financial risks even more. The
troubles of the U.S. auto industry
taught Michigan’s banks and politicians the importance of making
healthy companies healthier.
Mike and Marco recognized that
the conversion of machining would
be a huge change for the organization, so they moved to deal with rumors and employee concerns as
quickly as possible. Mike reserved a
nearby auditorium and unveiled the
plan before virtually the entire company, He explained that when the
new technology arrived the company
would begin a new era. Time clocks
would be eliminated, all employees
would be salaried, and each would be
given ten shares of the company’s
privately held stock. (Total employee
ownership would represent only 6%
of outstanding shares, but Mike believed it served an important symbolic purpose.)
Following the presentation there
was a question-and-answer session
that lasted into the night. Most of
15
CASE STUDY
the questions came from the hourly work force, whose greatest concern was job security. Mike sought
to reassure them. “We lost a lot of
good people when business went
sour. This plan is designed to protect jobs, not replace tbem. No one
will hit the streets because of the
new equipment. But we’re going to
need significant changes in the nature of work and attitudes from both
hourly people and managers.”
Still, the reception was not enthusiastic. Marco later recalled that
if tbere had been a vote it would
Marco: “The
problem isn’t
the oid machine,
it’s the whoie
company.
We need a ciean
break.”
have been 124 against change and 2
in favor. “But one of the two has his
name on tbe building,” he quipped.
Mike and Marco pressed on. They
worked with a local community college to develop a training plan to
teacb employees computer programming and the operation of the new
equipment and robotics. The entire
work force went through introductory sessions. Marco then asked for
volunteers to form the first three
teams of five members each. Tbe volunteer teams tended to consist of
younger employees with some computer experience. Once the equipment for a machining center began
arriving, the designated work team
received advanced training. When
tbe training was complete, and tbe
equipment installed, tbe team became responsible for tbe 24-hour,
7-day-a-week operation of the machining center.
Marco anticipated startup problems, and he was right. The first
flexible machining cell did not produce a sbippable product until the
end of its third week of operation.
When Team One shipped its first
complete order, 29 days after start16
up, the screw-machine operators presented a bottle of champagne to the
team. “It got to be embarrassing,” a
member of Team One recalled. “We
were busting our humps with tbe
whole plant watching, and we were
still turning out garbage. I think even
Mike was starting to sweat. Thank
God we finally began shipping product and they started up Cell No. 2.
That finally took the heat off of us.”
Six months after the first equipment arrived, four cells were up and
running. Team Five was in training,
and things seemed to be going
smoothly. At least that’s what Mike
thought before Team Six showed up
in his office.
“What’s tbis all about?” Mike, genuinely puzzled, asked the men. “Why
don’t you want to operate the new
equipment?”
“There’s no reason for us to operate it,” Malcolm shot hack. “We’ve
shut down all the old junk; now
we’re running only the newer screw
machines. They work great. Tbey
take a long time to set up, but who
cares? We’re only using them for the
high-volume jobs. The low-volume
stuff is already on the new machines.
I think it’s probably best for everybody if we just stay where we are.”
“We can’t stay where we are,”
Mike rebutted. “You guys are well
aware of the plan. What’s really going
on? Is it the hours? The weekendsIs this about higher pay?”
“It’s not any of that stuff,” Sandy
replied. “We’re not thrilled to work
longer shifts and weekends, but four
days on, three days off will be OK.
And the pay is fine. If it was just
money, I’d have left here years ago.”
Mike knew that was true. Sandy
was a highly skilled operator who
had received offers from other
companies in the past. He had been
hired by Mike’s father and had
trained most of the people in the
plant, including Mike when he was
a teenager.
“I still don’t see tbe problem,”
Mike insisted. “The new equipment
will make your job so much better.”
“It’s like this, Mike,” Sandy said
haltingly, searching for words to express his point of view. “I’m a screwmachine guy. That’s what I do, and
I’m good at it.”
“Of course you are, Sandy; nobody’s arguing with that.”
“Well, I’m not so sure I’ll be as good
a computer operator. Bernie’s got
two, three times my experience with
Sandy: “I’m a
screw-machine
guy That’s what
i do. And i’m
good at it.”
computers, and he and his team
barely got the first cell running in
a month.”
“Sandy, we’ve got training to help
you out,”
“Yeah, yeah. I know there’s training, but me and some of the guys are
a little old for school. We’re a good
team now. We pull together and we
cover for each other. If you spread us
around nights and weekends, we
can’t do that anymore.”
“We’ve been through all this before,” Mike answered testily. “We
can’t afford to have this new equipment sit idle for 16 hours a day. It has
to he run around-the-clock. Sandy, if
you’re worried about your ability to
run the new equipment…”
“I didn’t say I couldn’t team to do
it, OK? I’m just saying maybe I don’t
want to. I like my job. That’s not
such a bad tbing. When tbe union
came sniffing around here two years
ago I told them I liked my job and
I told tbe other guys tbat we didn’t
need anybody else in our plant. I
told them you understood the plant
and you’d be square. Well, we’re telling you now, we won’t switch. Maybe we’re wrong. Maybe we’re just
old and stubborn,” Sandy grinned.
“Or maybe you’re just young and
stubborn.”
That night Mike TVail met with
Marco Duncan, shop manager Darrell Montgomery, and Bob Block, the
company’s CFO and treasurer.
“I’m open to suggestions,” Mike
announced after recounting the
scene that had taken place in his office earlier that day.
“Amazing,” Darrell answered. “I
knew they weren’t enthusiastic
HARVARD BUSINESS REVIEW November-December 1990
about the switch, but I had no idea
they’d pull anything like this!”
“Were there any warning signs?”
Mike wondered.
“None.” Darrell thought back over
the past few weeks. “I mean, there
was some complaining, but all the
nonvolunteer teams kicked a little
bit before the switch. And the startup problems left a bad taste in everyone’s mouth. But once the switch is
done, the teams have been OK. Team
Four’s working fine now, and 1 expect
Team Five will too.”
“That’s all water under the bridge
anyway,” Marco interjected. “What
we have to decide is how to respond.
We can’t permit the screw machines
to remain in operation. That defeats
the whole plan.”
“Let’s just take a minute on this,”
Darrell said. “What if we do keep the
newer screw machines- They still
hold the tolerances.”
“That’s not the issue,” Marco shot
back. He began to pace back and
forth, much as he had when he and
Mike originally created the technology plan. “The problem wasn’t just
old machines. The problem w a s and is-the whole company. We bave
been an inflexible company with
inflexible machines and inflexible
people. Thi.s whole fiasco just reinforces that. We need a clean break
with the past.
Darrell: “Just give
me some time on
tinis.Wecan bring
Sandy and tiie
guys around.”
“Last week’s a good example,” he
continued. “I’m talking with Rockwell’s aerospace people about contract machining. On these jobs, we
wouldn’t even purchase materials.
We’d be a machining center for them,
like part of their own process. Hightech stuff that uses our expertise:
prototypes now, then ramping up
with them. We’d practically be partners. In the middle of this, Stan’s all
excited because he’s sold a job making lawn-mower spindles: one-shot
deal, low margins, no engineering,
huge volume so it would tie up two
or three cells for a couple of months.
That’s not the kind of business we
want. If the screw machines are
there, the salespeople will still sell
the old way to fill them up. Over
time, the whole plan could unravel.”
“What should I do?” Mike asked.
“I can’t imagine firing Sandy.”
“You can’t,” Darrell spoke up
quickly before Marco could answer,
“Mike, you know what Sandy means
to this place. If it weren’t for Sandy
and Malcolm and a couple of others,
we never would have survived the
startup. They bailed us out. 1 told you
that it was going to be tough to teach
the operators to write and modify
software. Half of the guys are scared
to touch the programs and the other
half won’t quit tinkering with tbe
programs we’ve got. Some of the
guys who are good at software still
go to Sandy when they’re writing a
tricky job to talk about speeds and
cutting sequences. We need him. Just
give me some time on this. Now that
I know how they feel, we can bring
Sandy and the guys around.”
“That hasn’t worked out so well in
the past,” Marco countered. “When
engineering didn’t want to go to
CAD we waited and waited. They
never came around. We had to eliminate the draftspeople to get them to
make the effort to leam CAD.”
“Waiting’s got other problems,”
noted Bob, weighing in for the first
time. “It’s taken me six months to
find a buyer for the screw machines.
I finally found a guy in Canada, but
he’s in a rush. If we don’t sell them to
him it could be a year before I find another taker. There are a lot of screw
machines on the market. And with
four million bucks in this project, we
could use the cash.”
“We-can’t have the old machines
in the plant for another year,” Marco
said flatly
“But let me take a different cut at
this,” said Bob, shifting gears. “Mike,
after we talked this afternoon I
pulled together some of the numbers
on sales by department. With half
the new cells up, the screw machines
are running a lot fewer jobs. But they
still account for over half our sales
and even more of our profits.”
HARVARD BUSINESS REVIEW NovembeT-December 1990
“That’s not true,” Marco interrupted. “The CNC jobs have much
highermargins.”
“Those are your
projections,
Marco, not reality,” Bob corrected.
“Those margins reflect sales increases we haven’t had yet and a
much higher utilization rate than we
have now. The operators are still
Bob: “Maybe
the guys are right.
But i feei iike
we’re being
biackmaiied.”
working on the software, and we
haven’t seen the productivity numbers you had figured on either. The
CNC operators are producing at
about the same parts-per-hour rate
they were on the screw machines.”
“But that’s just a better reason to
switch over the remaining volume,”
Marco insisted. “They’re long-run
jobs. They’d raise utilization and free
up the operators to work more on
their software skills.”
“Hold on. We aren’t switching
anything for a while,” Darrell announced. “The software’s not written for those jobs yet.”
“That’s supposed to be done,”
Marco protested.
“Well, I doubt we can get it ready
for the scheduled switch-over next
month. We could go outside and stay
on schedule, but it would cost a bundle. And I’m not so sure we could get
the quality we need.”
“Do Sandy and the guys know
this?” Bob wondered.
“I don’t know. It’s no secret, if
that’s what you mean.”
“So maybe the guys are right
about keeping a few of the screw
machines running,” Bob suggested.
“But I sure don’t like the way
they’ve gone about it. I feel like
we’re being blackmailed.”
“Not me,” Mike spoke up at last.
“I feel like Columbus on the verge of
discovering America, and my crew is
announcing that the world is flat after
all and we’re going back to Spain.”
continued on page 20
17
CASE STUDY
How can Mike convince the machinists to adopt the
new system? Shouid he try at aii?
Four experts in operations management consider his choices.
CHAD FROST is president and CEO
of Amprotech, Incorporated, a company dedicated to implernenting advanced manufacturing.
Mike needs fo regain control
and leadership of the
project.
As Columbus did centuries ago,
Mike must persevere and accomplish
his vision. His task is doubled in this
case. He must lead not only the people going through the changes but also
the people responsible for designing
and leading the change process. If
Mike falters now, the entire project
will collapse and Trail Manufacturing might go out of business.
Mike needs to regain control and
leadership of the project. As president, he should be following the project plans with performance reviews
and milestone checks to be sure his
team is staying on the plan and not
compromising its success. Had Mike
done this at Trail from the beginning,
be wouldn’t be facing the surprise of
20
incomplete machine software programs and less-than-expected part
production volumes. Now he must
force the project team to go back to
those basics and add discipline and
resources until the expected results
are realized.
The situation with Sandy may
have been unavoidable, but it could
have been mitigated. Sandy and his
team should have been interviewed
more carefully. If all attempts to get
Sandy and his team to change prove
unsuccessful, moving them to new
positions should be considered or an
outplacement program organized to
help them find jobs elsewhere. The
balance of the people will know if
Mike did everything he could for
Sandy, who should continue running
the screw machine until the implementation is back within planned
performances.
As leader, Mike should realize
change is a process, not an event. It
happens slowly over a long period of
time and follows a carefully thoughtout plan with contingencies for unexpected events. Trying to move tbe
machine project at a faster pace than
people can absorb change will not
work. Mike’s role in this process is
to establish goals and let everybody
know where they fit in the overall
company plan.
Marco is the wrong person to direct tbe implementation oi the project. The director must have no illusions about the schedule. Mike
should replace Marco witb an experienced realist who likes performance
measurements. Marco should manage design and manufa…
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