Fiffie International - Case Study

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1. Introduction

Figgie International

Figgie International began in 16 when Harry Figgie acquired dozens of small companies and merged them. By 18, the company consisted of 6 divisions offering dozens of various products. The company once generated $1.1 billion annual revenues, and about $6 million profits for its shareholders. However, the company ended up bankrupt by 14. This report will identify the problems in the company and suggest ways in which the failure could have prevented.

. General Management Issue

.1 Organizational Cultural And Management Style

.1.1 No Clear Plan

The company should have had a clear plan which guided the division to direct improvement and work practices. However, at Scott Aviation, manufacturer of emergency oxygen masks, there were once 0 projects being run simultaneously. The project's goal often clashed with another's. It was also hard to allocate human resources to handle those projects as it took a great deal of time to meet with consultant, to install and test the system. As the result, Dick DeLisle, the director of operations at Scott Aviation, needed to work more than 1 hours a day, seven days a week. Besides, there was no clear goal for what the employees should do or what they need to achieve. There were no clear definition of the term ¡§world class¡¨ and the employees did not know how to get to that stage.

.1. Centralized Decision-Making

In Figgie International, only Harry and his son made decisions. Employees were assigned tasks but they were not given control over their tasks. For instance, Dick was responsible for the output at his division, which means he needed to be given authority to make sure the production process ran smoothly. However, his operations were greatly disrupted by the doctor's plan which was implemented merely by the consultants, Dick had no control over the decisions. It is understandable that employees would be very frustrated and perhaps not work as effectively when this happened.

Moreover, a lot of the directors in the Figgie International tended to please Harry by going along with his plans to upgrade all its divisions to world class. They did that as they received considerable salary and commissions from the company. It is almost impossible to make the most beneficial decisions to the entire company in these circumstances, and the company suffered as a result.

Besides, it is suggested that management in Figgie International must make correct decisions for the company to succeed; those decisions must not be biased. Max H. Bazerman, Harvard Business School professor, points our that ¡§managers audit their decision-making process, perhaps against a checklist of common snafus¡¨ (cited in Hintze, 00, n.p.). In the case, Harry was less likely to make sensible decisions when he tended to support plans that looked good to him. Furthermore, when the company has formal policies for recruitment, promotion, resources allocation and strategy setting, employees not only have sense of security, they will be also able to participate more in decision-making process.

.1. Lack of Communication

Top management failed to communicate with the employees, which might have prevented the company from successfully launching the proposed changes. For example, Dick did not even know that his plant was about to be modernized. He became aware of the company's plans only when the huge machine was at the door. As employee did not feel the plans belonged to them, they were not likely to actively contribute to them. Another problem associated with the lack of communication with employees is that top management might not understand what kind of machine the divisions need. In fact, the division installed inappropriate machines and leaded to decreased output and idle investment.

The top management also refused to listen to the employees. As Figgie International did not have a formal dismissal policy, people could be fired for giving advice different to that of Harry. (p. 6). Or, Harry would sack executives during their presentation for saying something not acceptable to him. Dismissal could be costly and may also have affected morale of remaining employees.

.1.4 Problems with Consultants

The ability of consultants was questionable. Deloitte and Touche had ¡§responsibility for managing the engagement and focused on manufacturing and operational issues¡¨ (p. 5). Lawson, one of the consultants from Deloitte and Touche, however, had little experience in manufacturing engagement, and he did not really know the definition of ¡§world-class manufacturer¡¨. It is hard to believe that plans suggested by the consultants would benefit the company. This is because the consultants only did what Figgie told them to, they never questioned whether or not his ideas were feasible, economically justified for the company, or if the savings from the plans would outweigh the consulting fees.

. HRM Issue

.1 Problems With Poor Management

.1.1 Poor Dismissal Policy

It is extremely important to that valuable human resources remain in the company. However, Harry treated employee dismissal lightly. He was claimed to be ¡§America's Toughest Bosses¡¨ by Fortune magazine. One of the reasons is that he ¡§demanded a lot from his managers and tolerated few mistakes¡¨(p.). From the case, we could not see if Harry ever found out why his staff failed to meet his standards as he simply fired those did not measure up. It is assumed that the company did not have an appropriate discipline policy. Moreover, discipline should not be linked only with employee dismissals. If Harry managed to identify the problems, work practices in the company could have been improved. From the above analyses of the poor management in the organizational structure and the poor dismissal policy, it easily to notice that the employees were under stress. It greatly affected the performance and the productivity of the company. Moreover, from the case, Harry treated them in a rigid way so his attitude and management style contributed to the employees' lack of motivation. Employees were not happy to work in the company with such unfair treatment. Their lack of satisfaction was likely to contribute to the decrease in productivity and lots of other organizational problems.

.1. Poor Recruitment Policy

The company was basically run by Harry, his family and friends. One of the problems associated with relying heavily on family members is that they might not have experiences required for the position. Bias could also occurr in decision making with family members. For example, Harry appointed his son, Harry III to be the Vice Chairman ¡V technology and strategic planning - which bore responsibility for the company's modernization drive. However, Harry III had no operating experience and it is hard to convince anyone that he was able to lead the company to modernization. Harry's wife was a vice president for facilities planning but all she actually did was the job of a ¡§decorating consultant¡¨, but earned between $0,000 and $50,000 a year. Also, recruiting family members contributed to employee turnover and low morale. This is because capable employees would have fewer promotion opportunity.

.1. Low Employee Morale

Harry awarded successful managers with good salaries, which is considered an old management style. Employees nowadays are not necessarily satisfied with material rewards alone, but also need respect and job security. As mentioned before, Harry sacked his employees for failing to meet standards, or saying something Harry did not like. Employees might leave the company as their higher hierarchical needs are not met.

The consultants were also demanding and they required meetings from time to time. If they were refused they would say something like ¡§we don't want to go back to Dr. Figgie and tell him that you didn't have time to meet with us¡¨ (p. 56). This gave people limited choices but to meet with them. Those meetings with the consultants disturbed the employees' schedule greatly; they had to work overtime to get their work done. They were also lacking the support from the top. After being given responsibility and accountability, employees also required support from the top management. Employees are just like soldiers in the battlefield. If they are ordered to fight without any backup support, they will lose soon after the battle starts. This is because even the most experienced managers cannot predict what will actually happen. From the case, top management needs to be ready to support their employees when they need it.

.1.4 Empowerment

There is no doubt that Harry was a capable businessman, who was able to build his company from dozens of small companies to a large corporation with 6 divisions. However, when the company grew, he was not able to handle everything effectively on his own. In other words, simple structures, in which all authority was allocated to the top management would not be effective any more. That could be one of the reasons to explain why Harry set up divisions like independent businesses, and each business had its own president, and profit and loss account.

However, Harry needed not only set up divisions, but also empower his employees. Empowerment lets employees have real responsibility and accountability. Instead of consultants hired from outside, people in charge in the factories must be given authority to make key decisions related to the changes. There were two reasons why people employed by the divisions should make decisions. Firstly, they had the best knowledge of the factory, they understood the production processes and how each process related to another process. With employee participation, the company was more likely to convert into ¡§world-class¡¨ operation. Secondly, listening to its own employees would help to prevent employee demotivation. Imagine what would happen if the employees kept being asked to follow plans which they knew would never work. It is easy to recognize the employees would be extremely frustrated. However, employees are more motivated when given autonomy (Carlopio, 00, n.p.). Thus, ¡§empowered¡¨ factory managers can determine what machines they need, schedule to install the machines and identify the right time move to the next development.

. Principles And Lessons Drawn From The Case

From this case, some lessons are obvious. Some suggestions about what the top management in the Figgie International should do are outlined below.

.1 Two-way Communication

It is vital to get opinions from all employees from bottom levels up as this will help the management make more beneficial decisions. Opinions from the employees were especially important in this case as the decisions involved employees in the factory, and in fact, they were the ones most affected by the decision. Moreover, they knew actually what was needed, and what would work. Employees sometimes might hesitate to deliver bad news. Cialdini, suggests that to solve this problem by ¡§setting up mechanisms that foster internal debate and endow subordinates with powers that appear special¡¨ (cited in Hintze, 00, n.p.).

. Right Scale And Pace Of Change

It is impossible to decide upon one single scale and pace for every company, as each company is unique, with its own background, culture and resources available. Bryan and Hulme (00, n.p.) suggest that ¡§in a short-term turnaround¡K two or three (initiatives) are preferable¡K in a two - to three-year corporate-performance program, 15 to 0 corporate-wide initiatives may be necessary¡¨. For Figgie International to improve, it certainly needed initiatives in various stages. Harry and his son should have decided upon the initiatives with its employees from time to time.

. Outside Experts

A company might not have all expects it needs in various business life cycles. Therefore, the management in Figgie International needed to hire outside experts to give advice about strategies leading to modernization. The management needed to have a rough idea of the company's problems and plans, so that, they are able to choose capable and experienced consultants. Furthermore, it needed to set a budget for the advice and about how to allocate its resources. This could have prevented the company from cash flow restraints, which affected its operation.

4. Conclusion

It is easy to suggest ways to prevent the company failure in retrospect. For Figgie's to succeed, it needs to be a learning organization which means it should be ¡§innovative, creative and problems¡¨. The top management has the responsibility to make sure the company continues to learn.

Human resources are precious resources to companies. It is always possible to have machines and advice from outside consultants provided that companies have significant funds. Yet, Figgie International might not acquire needed human resources with monetary rewards. Employees nowadays join and stay with one particular company, depending various factors, such as work environment, organizational culture and company policies. To maintain precious resources in the company, it is important to find out what employees need and what satisfies them.

Bryan, L., & Hulme, R., (00). Managing for Improved Corporate Performance, McKinsey Quarterly, issue ., Retrieved October, 00, from,

http//www.afrboss.com.au/magarticle.asp?doc_id=46&rgid=&listed_months=0

Carlopio, J., (00). Control experiment, AFR BOSS, Retrieved October, 00, from,

http//www.afrboss.com.au/magarticle.asp?doc_id=46&rgid=&listed_months=0

Hintze, J., (00). Bias blinding, AFR BOSS, Retrieved September, 00, from,

http//www.afrboss.com.au/magarticle.asp?doc_id=08&rgid=&listed_months=1

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