Focuses on the management of an ongoing change process

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STANLEY AUSTRALIA 607Stanley AustraliaCASE STUDYMIntroductionThis paper focuses on the management of an ongoing change process undertaken by theAustralian subsidiaries of the US multinational corporation, The Stanley Works. Thechanges are in response to the parent corporation's worldwide strategy, adopted as aresponse to increasing competitive pressures and which involved significant changes inculture and strategy.The Stanley WorksBackground: The Stanley Works (USA)The Stanley Works was founded in 1843 in Connecticut, USA, as a manufacturer ofhinges, bolts and other hardware. After meeting with early success, Stanley beganexporting in the 1870s, and shortly after the turn of the century established its firstoverseas production site. Over time, Stanley has diversified its product lines and expandedits international operations to the extent that it now produces more than 50 000 differentproducts, ranging from hand, mechanical, air and hydraulic tools to hardware, fasteningsystems, doors and automatic doors. It describes itself as 'a global manufacturer andmarketer of tools, hardware, doors and home decor products for professional, industrial,consumer and home improvement purposes'.1 Despite describing itself as 'global', Stanleycould perhaps be more accurately labelled as a US-owned-and-operated multinationalcorporation. Its many subsidiaries-some operating under the Stanley name, others(usually well-known acquisitions) retaining their identity-are quite tightly controlled bythe US headquarters.Stanley has built an international reputation as a manufacturer of quality tools andhardware. It is present in every major region in the world, and sales revenue in 1997 wasmore than US$2.67 billion. Despite this, the corporation has been under increasingpressure since the late 1980s. Traditionally, Stanley had been able to differentiate itsproducts from the much cheaper tools manufactured throughout Asia by virtue of qualityand brand recognition. However, in the 1980s Asian manufacturers began to improve thequality of their products and by the early 1990s the quality of some Asian products wasapproximating that of Stanley. This improvement, coupled with much lower costs, createdimmediate problems for the corporation. With competitive pressures increasing, Stanleybegan to lose market share and customers. In January 1997, a new CEO of the USCorporation, John Trani, was appointed, with the specific task of addressing theseproblems. He decided to institute sweeping changes in the way the corporation operated.The world-wide manufacturing and distribution sites would be decreased from 123 to 70,with two sources for each product category (one third-world, one first-world country).Additionally, the organisational structure would be changed from divisional to matrix.The effects that this would have on the Australian operations were to be profound andimmediate.By Christopher Andrews, Lee O'Mahoney and John Bourke608 ORGANISATION DEVELOPMENT AND CHANGEStanley in AustraliaThe Stanley Works owned and managed two independent companies in Australia at thistime. Stanley Australia manufactured hand tools and reported to a US vice-president (handtools). Stanley Bostitch manufactured fastening tools and fasteners and reported separatelyto a US vice-president (fasteners). Stanley Australia employed some 400 employees, whileStanley Bostitch employed 150, mainly at its Sydney operations.These two firms had felt the effects of the hostile market place even more than theAmerican parent because of the Australian tariff structure, as compared to that of the US.Increasing competition from imports had been coupled with the loss of business fromcrucial customers who had decided to import their own mechanics' tools from Asia (e.g.J. Blackwood and Son and Repco).The change processThe changes to be institutedIn the first half of 1997, the decisions of the US parent corporation were communicated tothe Australian office. The US parent company had asked for some input regarding costing,but otherwise the Australian divisions had given very little input to the diagnosis. StanleyAustralia management was charged with the preparation of cost justifications anddeveloping the implementation process, including alternative product sourcing and plantclosures. Bob Andrews, vice-president (human resources), when asked what goalsmanagement wanted to achieve, mentioned increased profitability and market share.The major effects of the changing global strategy were to be felt in Australia in twoways: manufacturing operations in the country would cease, and the two subsidiarycompanies, Stanley Australia and Stanley Bostich, would be combined. The demise ofmanufacturing meant the closure of four plants and the sale of a fifth (making vices). Thiswas top management's response to the assessment of the viability of the current strategiesand the threats from external environments-better quality and cheaper tools from Asiancountries. Following detailed investigation of alternative product sourcing, it soon becameapparent that some products enjoying market leadership in Australia were not availableelsewhere within the Stanley world. Accordingly, some product lines (screwdrivers andFIGURE M.1 The relationship between Stanley Australia and the US head officeThe Stanley Works (parent corporation in US)Vice-president (hand tools)-US Vice-president (fasteners)-USStanley Australia Stanley BostitchSTANLEY AUSTRALIA 609hacksaw blades, along with the world-competitive Stanley knife production) were given areprieve, thereby saving some 90 jobs in manufacturing.The closure of manufacturing operationsDespite the limited reprieve in manufacturing, the transformation was to be major. Therewere to be changes in all areas of the company's operations. Closures were to occur atplants in Hobart, Wangaratta, Sydney, as well as the West Heidelberg headquarters, whilethe vices and clamps plant in Coburg, which 'did not fit' the company's product lines, wasto be sold off.Changes-peopleThe most obvious part of the change process was the elimination of superfluous jobs inmanufacturing. Even taking into account the reprieve of certain manufacturing operations,Stanley Australia still needed to make some 300 employees redundant. The changes werenot all at the lower levels, either. At this time the CEO of Stanley Australia, John Francis,retired and was replaced by Mark Parow, a former senior sales executive with the Duluxorganisation. The purpose of this appointment was to give the Australian operation a solidsales and marketing orientation. Additionally, the sales/marketing department was to beincreased (to heighten company focus on this area) and restructured to remove thoseemployees whose skills did not align with the new requirements.The process of informing the workers and the world of the cutbacks was a story initself. The strategy adopted by Stanley to minimise internal resistance was formed bymanagement, and was described by Bob Andrews, vice-president (human resources), as anattempt to allow people to 'depart with dignity', Helping the workers take the next step intheir employment or towards retirement was also considered important. The central plankof this approach was a commitment to openness and honesty. The workers were informedof the decision on 16 October 1997, half an hour before the media, the unions and theCommonwealth Employment Service (CES), ensuring that they were the first to know.This honoured a commitment by the corporation's CEO that employees would be the firstto learn of decisions that vitally affected them, such as plant closures. The next day, unionswere advised of a sophisticated outplacement programme.Stanley made certain that employees knew what the changes were and why they had tooccur. This enabled the employees to understand and accept the impact of the changes.There was no participation and involvement of employees because of the considerable timeconstraints that had been imposed by the US parent company. To address the natural fearsof the employees, Stanley adopted a range of measures. Again, the emphasis was onopenness and honesty, but this was supplemented with a number of programmes. The'over 50s' section of the work force was given special consideration. Professional firmsprovided outplacement and financial advisory services in the earliest stages in recognitionthat the job market would be toughest for this group. Similarly, a wide-ranging 'griefcounselling'network, involving the CES, the Department of Social Security (DSS) andprofessional private services, was implemented. To maintain continuity, the unofficialtradition of giving departing workers a card (signed by their colleagues) and a gift wasretained, but altered. Instead of fellow workers contributing to the gift-which wouldleave the last to depart in the cold-Stanley gave these workers a gift voucher, on conditionthat no collection be taken up.In May 1996, a three-year redundancy agreement had been negotiated with the threemajor unions, forestalling potential major disaffection in the course of negotiations. Bothsides had expressed satisfaction with the outcome.Another tool that Stanley had used to minimise resistance following the announcementwas negotiation. Management negotiated with employees on incentives to remain at workand to maintain production schedules. Since the workers were still needed for up to ninemonths after the initial announcements, the company also had to discourage people from'cashing in' their accrued sick leave and attempt to maintain morale and loyalty. Theredundancy agreement was one method used to address these issues and was explained in610 ORGANISATION DEVELOPMENT AND CHANGEdetail (along with the superannuation package) to the workers. For example, printouts ofestimated entitlements were provided to employees. Additionally, a bonus of two weeks'sick leave payment was included, on condition that the individual's attendance recordstayed within acceptable limits. Additionally, a volunteer programme meant thatredundancy was held open to all employees. Thus, even those who would still have jobswith the restructured firm could apply. The jobs that successful applicants left open couldthen be applied for by those whose positions were scheduled to become redundant.Throughout the entire process, meetings with employee representatives were held atfortnightly intervals, and it was stressed that the company would keep them advised of anydevelopments. In return it was asked that the employees be honest and up-front with theirconcerns. Outplacement facilitators provided these meetings with feedback on ongoingprogrammes.To evaluate the success of this programme, Stanley looked at such factors as industrialdisruption, unfair dismissal cases and absenteeism. Also, each step in the process had abudget, costed in detail and approved at a senior level, with a continual review of costs.Management was pleased to note that all budget targets were met. Similarly, althoughinevitably present in such a situation, absenteeism was blunted by an estimated 3%-meaning that all incentives programmes paid for themselves abundantly.Although the Australian plants had reacted reasonably well to the changes, extra pressurefrom the US to meet profitability goals resulted in further unscheduled downsizings.Cultural changesConcurrent with the operational transformations, Stanley Australia began a process of farreachingcultural change. Management stated that they wished to give employees a greaterrole in decision making, subject to them accepting accountability for their actions andresults. They also recognised the need to implement a process of communication andinvolvement in teams and for individuals. This transition was perceived as necessary forthe integration of all employees, to increase employee satisfaction, to reduce waste costsand to improve overall efficiency.While divesting itself of manufacturing skills and people, the company increased itsnumbers and skills in logistics and sales and marketing. This resulted in a slightly changedcompany demographic. The workforce was now younger and more skilled. Almostimmediately, a greater preparedness to spend became apparent. This was enabled by theincreased margins achieved from importing, rather than manufacturing, and necessarybecause of the need for competitive marketing, closure and clean-up of activities and theneed for a new modern National Call Centre.Stanley had few industrial relations problems during the process. The company wasconcerned that it might spend valuable time on legal issues relating to the redundancies.This did not eventuate. In fact, there was only one claim for unfair dismissal from the 300redundancies, and the Industrial Relations Commission rejected this claim. Stanley saw thisas a good evaluation mechanism, showing that the strategies implemented were a success.Indeed, it generated plaudits from Head Office in the US and officers of the company'semployer association.ProcessesThe virtual elimination of manufacturing has had significant impacts on the processes ofStanley Australia. For example, ISO 9001 became ISO 9002 as the design function wasremoved from Australia. This meant that procedures for processes throughout theorganisation had to be rewritten, if only to reflect organisational change. The focus onoverseas purchasing, rather than domestic manufacturing, led to increased lead times andstorage space with an initial concomitant reduction in market responsiveness. This placedincreased pressure on the computer systems, coinciding with, and complicated by, stepstaken to remove the Year 2000 Bug.At the individual level, the process changes opened new career opportunities for peoplein logistics, sales and marketing. Unfortunately, this was far outweighed by a reduction inSTANLEY AUSTRALIA 611the number of opportunities in other areas. The new technologies introduced (for example,the national call centre) resulted in some job loss, but there was no overt resistance as theywere seen to be vital to the company's survival.These changes impacted at the organisational level. The increased levels of stock takenin to counter the higher lead-time reduced the amount of space available for the company.This placed pressure on the occupational health and safety systems. For example, in 1998a forklift ran over a worker's foot, causing severe injury. It was the first such incident atStanley for many years.In general, the organisational processes became more technologically advanced. Theincreased emphasis on IT systems enabled the company to plan to become more responsiveto its markets. Given the skilled workforce now employed, management planned a greaterreliance on self-managed teams, although this was still a long way off. Additionally, tooperate the new systems, workers hired in the future will need to be more highly skilled.This will create a more professional, skilled and diverse organisation at all levels and willassist in the process of increasing worker autonomy.Changes: structureStructural changes resulting solely from the demise of manufacturing were easilyidentifiable. Firstly, manufacturing was divested, as were certain support staff. There wasincreased emphasis on the purchasing, forecasting and planning functions. Additionally,the marketing manager position was divided into two, one manager being responsible formechanics' (Sidchrome and Stanley) tools, the other for builders' tools (mainly under theStanley brand). As stated previously, the sales and marketing departments experiencedgreatly-increased prestige, remuneration and strategic influence.The merging of Stanley Australia and Stanley BostitchThe merger of two related, but different, subsidiaries of the American corporation wasalways going to create a host of problems for those managing it. On 16 October 1997 theintegration of Stanley Bostitch into Stanley Australia was announced. At the individuallevel, the goal was to keep the two groups in a position of visible equality. It was hopedthat this would help alleviate any resentment and resistance from the Stanley Bostitchemployees, who might otherwise perceive the change as a 'takeover'. Much had to be doneto reassure and motivate Bostitch personnel-primarily in sales and services departments.Effects: peopleThis strategy was only partially successful. Since the new amalgamated company hadinitially planned to utilise virtually all of the Stanley Australia systems and processes, theformer Stanley Bostitch employees faced a great deal of change. Fear of impending adversechange and new challenges prompted a variety of reactions, not always positive incharacter. Perhaps some mitigation of the tensions came from the recognition that StanleyAustralia systems and processes were often more advanced and efficient.At the group level, the former Stanley Bostitch employees initially struggled to adjust tothe new situation. For example, their typical customers had previously been fencingcontractors, builders and the like. Now they were expected to sell to major retailers.Inevitably there was some reluctance to embrace the transformation. As time went on,however, they became increasingly inculturated. Management expect that they willcontinue to adjust as they increase their familiarity with the Stanley Australia systems andgain some 'ownership' over them.The organisation as a whole is now in a state of cultural flux. Stanley Bostitch had beenoperating in a laissez faire, even ad hoc fashion. An analysis of its former environmentreveals a 'support culture',2 where there was high trust and harmony with a sense ofbelonging.Stanley Australia, by contrast, had been run on traditional lines-though it was in theprocess of being 'opened up'. It could, therefore, be described as a 'power' culture focusing612 ORGANISATION DEVELOPMENT AND CHANGEon strength, direction, control and loyalty. There were strict processes, rules, regulationsand procedures. Additionally, management had the long-term goal of moving towards anachievement-orientated culture, with everything assessed in terms of the ultimate, superordinategoals.The combination of these two contradictory cultures in the two organisations causeddissonance for many employees. The problems were exacerbated by an ongoingtransformation of the Stanley Australia culture, which initially placed the employees in astate of uncertainty.ProcessesThe processes and procedures undertaken by the amalgamated company are still beingresolved. In general, the operative principle is that the most appropriate processes will beused. This contrasts with the initial decision to utilise, in areas of duplication, the StanleyAustralia processes over those of Stanley Bostitch. The effects of this policy are yet to beseen in full. At an individual level, the Stanley Bostitch employees have suffered fromincreased uncertainty and decreased morale in the short term. The salespeople wereexpected to take responsibility for geographical areas, and sell all Stanley products withintheir areas. It has been difficult for the former Stanley Bostitch employees to sell what hadpreviously been Stanley hand-tool products to the more sophisticated major retail outlets.At a group level, it is hoped and expected that, in time, the shared problems experiencedby the sales staff will mould them into a close unit. At the organisational level the only realchange that was expected was the different skill mix, which could have had an impact onfuture strategies and performance. Stanley has subsequently modified its approach,allowing more specialisation back to Bostitch products by those who possess only thisknowledge and skill.Performance management processes, based on the Stanley leadership qualities andpreset goals, have been upgraded and will be supplemented by consequent succession andtraining plans. Self-managed teams are on the agenda and will be implemented whenstability returns to the organisation.Changes: structureThe structural changes necessitated by the merging of the two firms were as follows:

  • the sales, marketing, finance and logistics departments were to be unified, with thecentral base in Melbourne. The structure was still to be divisional, based on theexisting structure of Stanley Australia the former CEO of Stanley Bostitch would become redundant, the position beingabsorbed within the role of managing director, Stanley Australia human resources was to be outsourced to a consultancy on a two-days-per-weekbasis.Effects: structureAt the individual level, the structural changes mean that career opportunities haveincreased. There will be new chains of command with the concomitant problems ofadjusting to new expectations and management. Already, with the process still very muchunder way, there have been some shakeouts. Another noticeable effect has been the fear ofStanley Bostitch employees that they will be swamped and lost in the Stanley Australiastructure. To combat this, every effort has been made to give the Stanley Bostitch peopleequality in the organisation.At the group level, teams now often consist of a mix of Stanley Bostitch and StanleyAustralia employees. As an organisation, there was some difficulty in reconciling the HRpolicies of the two groups, but it was expected that this would be achieved as the newstructure coalesces.At the time of writing, there are many hopeful signs of a successful transition from amanufacturing to sales and marketing ethos within the organisation. The success of theSTANLEY AUSTRALIA 613plant closures is measured by their achievement within budget, free of industrialdisruption, unfair dismissal claims and spurious Workcover claims. The managing directoris committed to quarterly expositions of company results and forecasts. Key performanceindicators, such as sales, inventory turn-overs and safety, are posted daily throughout theestablishment, including interstate branches. The Managing Director has joined the SafetyCommittee. Profitability and sales are at satisfactory levels, which decrease the level offocus upon the Australian operation from the US headquarters.SummaryDue to competitive global pressures, The Stanley Works in Australia has undergonecomprehensive changes in strategy and culture. The strategic change affected a largenumber of employees over the entire organisation, and the pervasiveness was such that alllevels of the organisation were impacted upon. The merger of Stanley Works and StanleyBostich involved far-reaching cultural changes for all employees, based primarily onincreased decision making for employees, and communication and involvement in teams.With the pace of change involving much more than just the departure of some300 employees over an 18-month period, some facets of organisational change sufferedneglect. The time pressures and expectations of the US headquarter led to, at times,insufficient communication and less direct involvement in the change processes by thepeople affected.Notes1 www.stanleyworks.com2 D. Harvey and D. Brown, An Experiential Approach to Organization Development, 5th ed.(New Jersey: Prentice-Hall, 1996): 411.3 R. DeSimone and D. Harris, Human Resource Development (Orlando: Dryden Press, 1998).

 

 

 

Reference no: EM13301033

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