CASE ANALYSIS

December 10, 2006

ABC STEEL COMPANY

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,
_______________
1
All 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.
 (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.
_______________
2
ABC 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.

2
 What’s worst, present problem multiply them (Pause). Of course,
management does not expect me to solve these problems all by 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…..

3
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 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.”

_______________
3
It 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.

4
5