Slade Company Plating Department
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The Slade Company was a small but prosperous manufacturer of metal products designed for industrial application. It was located in central Michigan with 500 employees. The plating department of Slade had formed certain informal team in which some employees had dishonest behaviors. In this paper, we will discuss Slade’s external environment, central problem, alternatives, analysis, and finally give some recommendation.
Slade’s competitive market is metal product market. It can be analyzed with the Porter’s Five Forces Model: risk of entry by potential competitors, rivalry among established companies, the bargaining power of buyers, bargaining power of suppliers, and threat of substitute products. Appendix 1 shows a summary of the five forces. The risk of entry by potential competitors is high. The capital requirement of small metal companies is not high, so building and establishing this kind of company doesn’t need a lot of resources. Also, Brand loyal of the current existence customers is not very strong thus new entrants are able to compete to enter the market.
Also, the competition between existing players in this industry is high. There are about 619,000 metal enterprises in the USA in 2005 (IBISWorld, 2007).There are many companies that produce different kinds of metal products in the market. Besides, the bargaining power of buyers is high because product difference for the buyers of the metal products is small. It is not easy to differentiate the quality of one metal product from another. In addition, the cost of switching for the buyers is low. The number of substitutes of metal products is also high thus the buyers have great bargaining power.
In addition, the bargaining power of the sources of inputs is high. The switching costs from one supplier to another are high because there are not many substitutes for the particular input for metal products. Besides, the number of suppliers who produce raw metals is small. The threat of substitute is high. There are many different kinds of substitutes for metal product company. These companies may also produce a large variety of product like Slade Company. Therefore, the substitute is low for this market. Only companies that produce high quality are able to not be substituted by the others.
The strategy for competing in the market was a broad-differentiation strategy. It was broad because it produced a large variety of products such as clamps, inserts, knobs, and similar items. Also, it differentiates from the other metal companies because of its good quality, good delivery, and reasonable price.
The competitive advantage of Slade can be analyzed by using the VRIO framework. First of all, Slade creates value by increasing revenue. The quality, delivery, and reasonable price are the factors for large and recurrent orders. Also, the skills of the employees enable the organization to expand and raise revenue. Besides, Slade is rare. Employees, company culture, technology, etc are the rare resources of Slade. The informal groups are the rarest element which makes Slade differentiates from other companies. In addition, Slade is inimitable and non-substitutable. The employees, talent management, and organizational cultures cannot be imitated. The employees cannot be copied, but the competitors can hire Slade’s people. However, the cost of hiring is high. Also, time-compression diseconomies and path dependence made it costly to imitable because Slade has been winning for long by plan but not by chance. Moreover, the organization itself creates competitive advantage. Although Slade is not a big company, it is able to get high sales volume and secured orders.
Organization Structure and Culture
There were 7 departments in Slade with 485 employees (excluding President and Production Manager). Be specific to the plating department, there were 38 people. The culture of this department was different from the others. Informal groups were formed among the employees. Certain members of the department tended to seek each other out during the free time on and off the job. These informal associations were built upon common activities and shard ideas about what was and what was not legitimate behavior in the department.
There are several problems at Slade. The major problem was the dishonesty among the Sarto’s group members in the Plating Department. They abused the “punch-in and punch-out system” for those who wanted to leave early or arrive late. One of the group’s members stayed late and punched the time cards of other members and helped gain them free time without pay loss. This operation of staying late rotated (Slade, 1995). They tried to do this in order to make more “overtime” salary.
The other problem is that the employees who were not members of the informal teams were excluded. Pearson and Herman were the non-members of the groups. Pearson work harder than anyone else in the department. However, almost no one criticized his effort. He was even expelled by the Tony’s team. “Tony and his group seemed to feel a distant affection for Bob, but the only contact they or anyone else had with him consisted of brief greetings” (Slade, 2005). On the other hand, Herman was the least hard working employee. He was not understood by the group. None of the members sought for Herman’s help. He never really got involved into the group, and he expressed that he preferred keep distant from the people in his department (Slade, 2005).
The long working hours, low wages and working conditions are the main factors that led to the low moral among the employees. The working hours of the plating department were long. In addition, the compensation of the Plating Department was depending on the degree on skill. The die making and set-up operations craftspeople had high paid because the job required the greatest degree of skill. The employees of finishing departments which divided operationally and geographically between plating and painting were paid less because they were less trained but relatively skilled. And the employees of the remaining operations had relatively low pay since these operations only required unskilled labors.
The average starting salary was low comparing with other companies. Pay in the department was low for the central Michigan area. “The 1996 starting salary in the Slade Plating Department was $8.00; Tony Sarto’s hourly wage was $12.00. The average wage for semi-skilled workers in the U.S. was $12.00. Firms similar to Slade in the Michigan area, such as suppliers to the auto industry, paid an average hourly wage of $14.70. United Auto Workers working at the ‘Big Three (General Motors, Chrysler and Ford), had starting salaries around $13.00 an hour and earned on average $19.00 an hour. The minimum wage in 1996 was $4.25, raised to $4.75 on October 1, 1996 (Burton, 2001).
There were two kinds of teams at Slade. They were formal team and informal team. “Formal teams are the organizational groups commonly thought of as departments or functional areas. The team is expected to produce a product, deliver a service, or perform a function that the organization has assigned” (Gale, 2006). The plating department as a whole was a formal team. It sought to improve productivity. On the other hand, informal teams are generally formed for social purposes. “They can help to facilitate employee pursuits of common concerns, such as improving work conditions. More frequently however, these teams form out of a set of common concerns and interests, which may or may not be the same as the organization’s” (Gale, 2006).
The problems and the related issues were caused by the informal teams of the plating department. Informal teams are generally formed for social purposes. “They can help to facilitate employee pursuits of common concerns, such as improving work conditions. More frequently however, these teams form out of a set of common concerns and interests, which may or may not be the same as the organization’s” (Gale, 2006). There were both positive and negative aspects of the informal teams at Slade.
Positive Aspects of Informal Teams
“Tony’s group emphasized more than just quantity in judging a person’s work. The group stressed high standards of both quality and inventiveness. A confidence had grown among them that could master and even improve upon any known finishing technique” (The Slade). As a group, they can keep the high productivity level during high order periods.
Besides, the group members were willing to help each other. “The most valued help of all was of a personal kind, though work help was also important (Slade, 2005). They were always sharing lunches, and lending and borrowing personal stuff to each other, but they seldom did these to other members of the department.
Learn from each other
The members can share exchange their opinions and experience, so they can learn from each other. The members recognize the strong teamwork, help each other, and solve problems together.
Negative Aspects of Informal Teams
Informal leader - Tony Sarto
Since Tony Sarto was an informal team leader and was respected highly by others. He was also the arbiter between other members. Sarto’s personal belief will influence the whole team, such as he was believed that their pay was low than the market, so that leave early were acceptable and reasonable.
Discourage Individual Performance
Employee who wishes to be a member of the informal team should align with the team norm regardless you agree or disagree the norm. Outstanding employee, such as Bob Pearson who works harder than others will be inflicted by exclusion. Employee who didn’t wish to be isolated should follow the team norm, pay more and do less which harmed the company.
Negative Team Norm
Most of them believed that their hourly pay rate is low, compared to other companies. In order to compensate their loss, most of them leave early by asking other colleagues to help the punch the time card. Thus their hourly pay rate is rise by shortening their actual working hours. Such dishonest practices and group cheating are commonly accepted by the employees and treated as fair compensation to the employees. As a result, a culture of making individual better off by cheating the company will be established.
Cheating Culture Extend
Once the group cheating activity in plating department is informally accepted by the Company, other departments will be followed and imitated. Then, a cheating culture will be emerged, and employees doing a little cheating activity will greatly harm the company. Later, cheating activity is not only limit to leave early, stealing company properties and corruption will be resulted. Company should enhance the control over the employees by recruiting more supervisors to monitor employees’ activities and job. As a result, trust between employees and the company will be totally broken. Operation cost will be greatly increased and their product price will increase, product quality will be poor. These will make the company closed down.
When there are more and more employees follow Sarto, an informal union will be established. The number of followers will continuous increase and Sarto will become the unions leaders. They will negotiate with the company for raise the hourly pay rate and enhance employee benefit. Once their requests are not being satisfied, they will threaten for striking. As a result, most of the time and resources will be spent on negotiation.