Case 10: The Staff Tail and the Operational Dog
McNeill Fabrications Limited was a family owned business specializing in the fabrication of pollution control equipment, such as smoke scrubbers, etc. On one early July day, McNeill employees were greeted at the factory door by news that the firm was near bankruptcy.
Nobody could understand it. John F. McNeill had started the Company in 1988 on a shoestring and a prayer. Working from his one-car garage on his own, he eventually hired one, then two, then three helpers who got paid whenever the money from the contract came through. The Company grew in this atmosphere of pulling together, with employees coming to the firm as a result of referrals from others. The most confronting people in the plant in terms of loyalty and quality were not the managers, but the employees themselves who had built McNeill up from scratch alongside old John. John ran a lean machine: by 1995, the Company had 147 people of which 32 (22%) were sales and support. John had to be dragged kicking and screaming into hiring marketing people: he felt that the line worker, the producer, was more important. Finally, in 2000, the ratio got up to about 30% sales and support, and the Company was prosperous, with profit sharing that kept everyone loyal and committed to McNeill’s, and especially to John.
John was first to the plant every morning. He personally powered up the machinery, got the coffee going in the lunch room and bantered with employees. He also spent at least a third of his time on the floor, helping with a particular project. The worse insult you could give John was not to call his office when a finished scrubber was being loaded onto a flat-bed for delivery. He would rush down to the floor and nod approvingly as his people nudged the great burner onto the Company truck. One day, in 2003, John was helping three of his people fasten a sheet of tin to the side of a burner; he felt faint, dropped to the plant floor and within a matter of minutes, he lay dead of a massive heart attack. His employees were in complete shock, mourned him for weeks, and then the Company moved on, in the hands of John, Jr., MBA graduate and right hand man to his father.
John felt that the Company was reaching only a fraction of its potential markets. Also, he felt that the plant was not sufficiently organized. Within six months, the entire operation had been described by procedure, and “JJ” was enforcing them diligently. He also decided that the structure of the organization needed shoring up and he instituted three layers of management in the Company. He also computerized all of the records, and the new procedures and organized computerized quality assurance. The staff to line ratio moved up to 40%, and then 50%. Such was the affection of the employees for the McNeill family (and John Junior had some of his Dad’s charisma) and despite grumblings of “this place is getting too gol-darned organized”, most people went along with the changes. And now, five years later, disaster was close to striking.
Second generation owners of family owned firms face a tremendous challenge: to sustain the success and prosperity of the business their parent(s) developed. John Junior lost sight of the fundamental ingredients of his father’s success: focus on the employee; involvement in the business; balancing staff to line operation, and starting from where the system is. He now needs to:
- Negotiate some breathing space with suppliers and customers in order to plan the re-birth of McNeill;
- Consult with his employees on the future direction of the firm, list the decisions that need to be made and proceed to short term implementation;
- Develop a new Business Plan that incorporates the hard lessons learned and involve his loyal employees in rolling it out;
- Get trained in the less academic side of operating a business, e.g. watching the bottom line, balancing staff-line ratios, understanding the nature of the operation, etc.
- Carefully monitor the changes that he has initiated.
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