ABC STEEL COMPANY

CASE ANALYSIS

Robert Cruz, newly appointed Shop Manager of ABC Steel Company, was making his
way through the plant back to his office. He had just reviewed the company’s most
recent operating statistics with his boss, Rudyard de los Santos, Operations Manager.
The statistics were shocking: ABC Company’s production backlog had reached such
proportions that top management decided not to accept any further business. The
company was paying penalties of P50, 000.00 a day due to non-fulfillment of contract
delivery dates.

ABC Company was one of the country’s largest producers of fabricated steel products.
The company fabricated and installed storage tanks, mine and cane car bodies, dump
bodies, boats and many types of structural steel. As shown in the organization chart
(Exhibit 1), fabrication and installation activities were organized as independent
activities.

Robert Cruz had recently been promoted from Quality Control Supervisor to Shop
Manager (see Exhibit 1). Twenty-nine years old, Robert had worked for ABC Company
for the past 2 years. He had previously worked as a sheet metal worker and as an
instructor at a United States naval base in Subic. Robert held an engineering degree
from a local university.

Plagued by an ever-increasing production backlog, ABC Company had placed Robert in

charge of all shop operations. There were 200 workers in the shop reporting directly
to leadmen who, in turn, reported to Bay supervisors.1There were five Bay supervisors
reporting to Robert. Before Robert’s appointment, Jim Fuentes, 45, was in charge of
the shop. It was decided to transfer him to the position of Field Manager. (This
position had formerly been a part of Rudyard’s responsibility.)

Before, he and Mr. de los Santos had reviewed the ABC Company’s performance.
Robert had isolated a number of critical problem areas in the fabrication shop.
Production control was a constant problem. Schedules were drawn up improperly and
they were seldom met. For example, a local construction firm had recently
contracted ABC Company to build 2 dump trucks. The contract price agreed upon was
P150,000 each, and the trucks were to be delivered in 8 weeks. ABC Company had
failed to meet the delivery date. The first dump truck was delivered after 10 week’s
time, and the production statistics revealed that “out of pocket” costs for the first
truck exceeded P170, 000. The second truck had yet to be delivered, and Robert
estimated that fabrication costs for the two would total nearly P400,000. It was
discovered that labor and material estimates had been inaccurate. More importantly,
Robert listed four reasons why target dates were not met: (1) the targets were
unrealistic, (2) shifts in manpower requirements were not anticipated,
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1All fabrication activities were carried on in separate sections of the plant called
“bays”. Most work orders were started and completed in one bay; less than 20% of the
production work flowed from one bay to another.
ABC STEEL COMPANY
CASE ANALYSIS
December 10, 2006
 (3 there were no consistent “follow-up” policies and (4) machine scheduling was so
poor that during one week, a huge cutting machine lay idle, while during the next
week it had to be run 22 hours a day.2

As shown in Exhibit 1, Rudyard de los Santos was acting Production Control Manager.
He and Gabby Alcantara, (Shop Production Control Supervisor), were working on a
more effective system of production control. But Robert believed it would be at least
six months before any new system would be ready for implementation. As the General
Manager admitted, production and control was a “hit and miss” affair.

Another problem Robert Cruz inherited when he took over the fabrication shop was a
shortage of skilled manpower. ABC Company had long prided itself on being a
producer of top quality steel products. The use of skilled welders, cutters, and steel
workers was ABC Company’s only assurance that this quality could be maintained, and
in recent years such skilled workers had become scarce.

Finally, Robert had been told that there were serious “discipline” problems in the
shop. Workers were often tardy. They fraternized constantly during working hours,
and often disregarded the authority of their leadmen and supervisors. Ninety percent
of the laborers came from a nearby baranggay, and many were also baranggay leaders
tended to be more lax in implementing company policies and taking disciplinary action
against the workers. Other baranggay leaders who did not hold positions of
responsibility with ABC Company were able to undermine the authority of the leadmen
and supervisors in the shop. Two of the five Bay supervisors were described by the
workers as “baranggay leaders”; two were described as being “not important” in the
baranggay. One supervisor was an “outsider” and did not reside in the nearby
baranggay.

When Robert’s appointment to the position of Shop Manager became known, many
persons in the shop were surprised. Although his performance in the Quality Control
Department had been excellent, many of the “old timers” in the shop believed he
lacked sufficient “management experience.”

Interview with Robert Cruz

Edison Mojica, an MBA student specializing in Organizational Behavior, had been

observing the operations of ABC Steel Company as part of practicum for a number of
weeks. He was waiting in the Shop manager’s office when Robert Cruz returned from
his meeting with Rudyard de los Santos. He and Robert sat down and the new Shop
Manager began to talk.

Robert: Well I know I’ve got my work cut out for me… You should see those
penalty figures! We’ll be bankrupt in another five months at this
rate! I’m still swimming in a pool of problems…Lots of them. Old
problems dropped into my lap.
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2ABC Steel Company fabrication operations were carried on during two eight-hour
shifts. The first shift was from 8 AM to 5 PM; the second shift was from 5 PM to 2 AM.

ABC STEEL COMPANY

CASE ANALYSIS
December 10, 2006

What’s worst, present problem multiply them (Pause). Of course,

management does not expect me to solve these problems all by

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 myself. I’m new in this position….besides, the odds seem to be on
my side. I would need the help of other departments.

Edison: What do you mean by “odds”?

Robert: Well, take the case of my supervisors in the shop. They are too old
to be my subordinates. (Laughs) Not only that, they’re too good to
their men. I don’t get any bad reports from them. That’s not an
accurate reflection of things. The supervisors can’t afford to go
against the majority’s rule…you know how baranggay folks are….

Edison: But do you get results from your supervisors?

Robert: It’s not a question of getting results from them. It’s more a
problem of getting the best results. Do you think that my
supervisors would have the guts to ask their men to cut out their
chat-chats during working hours, or their coming late to work? Or
even correcting their poor working habits? Everyone tries to be a
supervisor here, you know.

Edison: How do you propose to correct this situation?

Robert: The Personnel Department will have to help me handle this problem.
My supervisors and leadmen will be given supervisory training. If
they still don’t’ learn… Well, I think I have to be more firmed with
them. Right? You see, before I stepped into this shop, these
supervisors had been doing the things they’re doing now for
generations. I’m not exaggerating. I think previous management
had been too lax with them. To break a rule was not uncommon.
Nobody seemed to check on anyone. Now when I came in, I tried to
push these rules. What happened? The workers thought that I’ve
created new rules for them. They think I’m trying to be strict with
them.

Edison: What’s your major problem in the shop?

Robert: I have many major problems. (Laughs) But I think production control
is the worst of them. We never seem to have completed any job on
time. This is what’s costing us money. Planning and scheduling are a
hit and miss affair. It’s really hard to break a habit, isn’t it?
Besides, our production control section is undermanned, I think.
What we‘ve got to do is get the men to think in terms of a schedule,
a plan ….rather than just working on the job in front of them…..

ABC STEEL COMPANY

CASE ANALYSIS
December 10, 2006

The Problem of Overtime

The following day a Bay Supervisor entered Robert’s office and requested that
the entire fabrication work force be placed on overtime that weekend to complete a

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number of unfinished jobs.3 The Shop Manager knew that in recent months overtime
expenses were extraordinarily high. Mr. de los Santos and top management had
tolerated this extra expense because it seemed to be the only way to meet deadlines.
Before granting the Bay Supervisor’s request, Robert asked for detailed description of
the operations that were to be completed during the overtime period.

The Bay Supervisor became angry. He stood up and exclaimed loudly. “Nobody in my
twenty years in this shop has demanded this from me. Who do you think you are?”

The two men stared at each other. After a few moments Robert suggested they review
the matter with Mr. Rudyard de los Santos. The Operations Manger, sensing that the
Bay Supervisor was very upset, decided that the Supervisor on this occasion need not
submit a description of work to be completed. However, it was made an operating
procedure from that time on that a proposed overtime activities list had to be
submitted before any overtime could be allowed in the shop.

The following week Robert found that it would be necessary for one of the fabrication
bays to work overtime. He approached the Bay Supervisor and asked him to work
overtime on the following day. To Robert’s surprise, the Supervisor told him that the
men could not make the overtime because they all had “previous appointments.”

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3It
was a company policy that all overtime requests had to be approved by the Shop
Manager. The workers were also given the right to refuse to work overtime.

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