Many organisations are finding that they can now structure themselves to be productive around the clock and around the globe. By Jarek Czechowicz
Since the 1970s, millions of blue-collar jobs have migrated from the West to Asia. In the United States, the Communications Workers of America have been lobbying for an inquiry into the movement of jobs overseas – everything from help-desk and financial services to architectural drafting and telemarketing.
Hewlett Packard, Deloitte Consulting, AT Kearney and IBM are among some of the heavyweights employing thousands of Asian professionals for about 10% of the cost of Western professionals. Many organisations find that they can structure themselves to be productive around the clock and around the globe, particularly in the area of software development.
Waving Communications is an Australian company that has become an innovator in wireless and communication technology. For many years the company produced radio and communications equipment for industry until Douglas Ayres succeeded his father in heading the business in the mid-1980s. Ayres had a strong interest in the emerging personal computer market and the internet.
Until recently Waving Communications was an unknown brand. Over the past 10 years the company has been steadily establishing a presence in Asia with design, research and development, and sales offices in South Korea, Vietnam and Thailand. Over the past three years it has outsourced call centre operations and a good deal of its programming to Indian based companies.
Its Australian manufacturing plant employs 270 people but the company is planning to close the facility in favor of two assembly plants in China. Management has not ruled out the possibility of the local plant reopening in five or six years. The decision has caused discontent in the community and has attracted some bad press.
Similar closures often go unnoticed when organisations have a low profile. But Waving Communications has been soliciting more publicity since entering the consumer-goods market. PR agents thrive on working with Waving Communications. At the same time they grimace at the messes they have to mop up whenever Ayres makes contact with the media.
Ayres is outspoken and often controversial. He sees himself as a philosopher and has never been averse to testing his ideas, in public, before they hatch. He recently stated that the dominant communities of the future will be neo-nomadic organisations like the one he is building. He claims that the growth of wireless computing will change the nature of connectivity, making existing communities more fluid and less distinctive. He believes that the organisation is its own community.
At one of his regular press meetings Ayres declares: “We are in the process of opening. two assembly plants in China as part of a $US12 million venture. We will expand our licensing arrangements with several European organisations. We will specialise in bringing together intercontinental components for assembly in China. We will design what we need and have it manufactured anywhere from Bangalore to Taiwan or Mexico.
“China will meet most of our assembly needs. It has over a billion skilled workers, most of them happy to earn 20 cents or less an hour. Many of their engineers and managers have had some training abroad and will work for 10-12% of the cost of their Western counterparts – or even less. We can’t ignore the benefits.”
Back in the board room Ayres and senior management are trying to plot the best course for the company.
Murray Harper is Australian national manager but has been the de facto strategist since Ayres senior ran the company. Harper says: “The main issue facing us at the moment is how much of our long-term investment stays in Australia, how much goes into China and how much goes into developing our presence in the rest of Asia. I think we should continue segmenting our production chain, but we need to retain our Australian identity. We can continue to locate smaller operations in a number of regions, under transnational management teams, but I don’t think we should be placing so many of our proverbial eggs in China.”
Ayres responds: “We need to be there. Potential users of our products in Asia number more than 200 million, and there are about 80 million in China alone. Within the next few years China could be the second-largest internet market in the world. We expect a boom in personal computing and TV-based internet access with devices using a combination of wireless and wired telephone, cable and satellite transmission.”
Harper: “I want to create jobs for Australians. Our products are easy to export. We can still service our markets quickly. As far as I know, other companies going down this track are not sacrificing so much of their home-based activities.”
Ayres: “You know that I’d like to have 50% of our production overseas within 10 years. We can’t develop globally if we have to supply products from an expensive local base.”
Harper: “Won’t you just end up losing your Australian shareholders if you take that much of your operation overseas?”
Ayres: “I think not. Let’s determine the minimum presence we need to maintain in Australia to be effective.”
Harper changes the topic: “One of the union reps has asked that you look at this list. They’d like the issues discussed at today’s informal meeting.”
Ayres glances at the three-page list. Some of it reads: Local workers should not have to compete against overseas wage levels. This company’s actions will encourage others to cut back on wage increases and benefits. Australia faces the threat of permanent loss of jobs to other nations. Multinationals will lobby to homogenise laws across national boundaries for not other reason than to protect their networks and intellectual property – a move that could adversely affect the rights of individuals.
Ayres says: “We’re not going to discuss these things in point form today. They know these meetings are casual.” He has initiated the meetings to gain broad support for the organisations’ plans, identify problem areas and develop useful ideas. Some participants have said the meetings are chaotic but many enjoy the experience because they have a chance to lobby anyone who will listen.
The meeting room fills with people selling their ideas over refreshments. It’s more like a party than a meeting. As he walks around looking for Ayres, Harper catches snippets.
“Japan, UK, Germany – soon they’ll all be setting up in China. We don’t want to wait too long.”
“In the short term the cost of moving is going to be higher than for keeping the business here, but in the long run we can cut our costs 40-50%.”
“Our ability to project manage remote service providers will be a key to shareholder return.”
“Call rates have fallen 30% in India after deregulation of the telephone industry. Our service agents can now work with most of our international customers.”
Harper is uncomfortable with these undisciplined gatherings. He asks a rhetorical question a little too loudly: “If everyone in this room is talking then who’s listening?” A palpable silence ensues and heads turn in his direction. Leaving the room he says: “Everyone has the answer but there’s no one to hear it.”
Heading for an exit, Harper decides it’s time he left the company. He hears voices near the door. A male says: “The grass often seems greener on the other side but most of the time it’s artificial turf.” A female replies: “As long as it’s high quality and low cost, how can we lose?” Harper can’t resist having the last word on that topic, and he snaps: “If the grass seems greener on the other side it’s only because you’re not caring for your own.”
1. How are companies like Waving Communications benefiting Australia?
2. Is the informal meeting style appropriate?
3. Is Harper acting wisely or being difficult?
4. Is the company likely to attract or lose Australian shareholders?
5. Can the company compete globally with most of its operations in Australia?
The Lexus and the Olive Tree, Thomas Friedman, Harper Collins, London, 1999.
The Globalisation Myth, Alan Shipman, Icon Books, Cambridge, 2002.
Dangerous Markets, Dominic Barton, Roberto Newell, Gregory Wilson, Wiley Finance, New Jersey, 2003.
World Class: Thriving Locally in the Global Economy, Rosabeth Moss Kanter, Touchstone Books, 1997.
Proposed Solution #1
Ashley Oldfield is general manager, shared services and operations at Intouch in Brisbane. He has had 20 years’ experience in the finance sector, mainly banking, and is now in the outsourcing industry.
It is inevitable that companies like Waving will move overseas. After all, we are in the globalisation era and Australia has a limited market. Foreign markets allow companies to grow, albeit in areas other than those covered by their established labour source. There are always human resource “casualties” but they can be helped by re-skilling.
Shareholders expect the company to maximise the return on investment but they are also interested in the socio-economic effects of company actions. Ayres and his team must put more emphasis on shareholders’ interests when formulating and communicating strategies, as support can be withdrawn if needs are not satisfied.
Locating the assembly plants in China is a long-term investment decision that would create efficiencies and increase profitability in the long run, with a resultant rise in the company’s share price.
Ayres has highlighted that Australia is an expensive local base for the assembly of its products. Although Waving may still be able to compete globally if it retains these operations, the question is to what extent and with what effect on key stakeholders. Given the speed at which communications technology develops, Ayres and his team need to formulate strategies to keep the company ahead. This can be done by concentrating on its core competencies: managerial co-ordination and being the sector innovator.
By further breaking down and outsourcing its activities, such as the assembly plant, to achieve cost effectiveness, Waving will enhance its co-ordination of operations on a global scale.
Ayres has introduced an informal meeting style to increase the involvement of employees in the decision-making process. Employee participation is an important part of decision making, as it is an integral component of knowledge management – a source of competitive advantage.
Ayres has recognised that by involving employees in decision making he is obtaining information from those close to the customer and the production activities. Several people working together, building on each other’s strengths, are more likely to increase and improve solutions than if they worked independently. There is also a higher likelihood of choosing the best option, as the decision is reviewed by people with diverse perspectives – from top-level management to “ground-level” employees. These employees will be expected to implement the decisions made. Involving them creates psychological ownership of the decision. Greater job satisfaction, organisational commitment and feelings of empowerment will follow – which will reduce staff turnover and increase motivation.
Harper feels he is losing power over decision making and is resisting the involvement of staff. The main concerns for Harper are: the power gained by staff through their participation, and less value for his role – or at worst, no job at all. Given his long-term involvement as company strategist, Harper has difficulty progressing from a command and control leadership style to a “hands off” facilitator role. Ayres needs to recognise Harper’s mindset and assure him that his role is not threatened.
Harper should be given some personal development training to develop a more facilitating style. He needs to understand that weeding your patch of grass (removing inefficiencies) helps it to thrive.
Proposed Solution #2
Paul Watts is managing director and co-owner of Markinson Technologies, an Australian-based software developer and a supplier of enterprise distribution and integrated enterprise e-commerce solutions. He has been with Markinson for 17 years and oversees the sales team.
Waving Communications is still transitional in building a strong global delivery model and is experiencing growing pains.
There seems to be a personal relationship problem between Harper and Ayres. Harper, the senior manager handling strategic planning under the old regime, now seems to have a diminished role. Ayres is ready to talk about Harper’s point concerning the reaction of shareholders. The fact that Harper changes the topic, and an issue of such strategic import is not resolved, suggests that the management structure is not in place for issue resolution. Ayres must affirm his leadership and Harper should be brought on board fully, or he should leave the company. Division at a time like this would be very detrimental.
The conflict is also evident in Harper’s criticism of the informal meetings. As a member of senior management he should tackle this matter privately with Ayres, rather than addressing rhetorical questions and criticisms to the meeting in general.
The overall strategy is still uncertain. The company plans to close the Australian plant but has not ruled out reopening it in five or six years. It may be prudent to get some advice from Australian manufacturers operating in Asia to inspire confidence in the overall strategy.
Waving Communications has poor public relations. Ayres needs to appoint a PR and promotions staff member to ensure clear and effective communication. It even seems that the public, including employees, became aware of the closure of the Australian manufacturing facility via the media. The staff should have been told before the media, and such a sensitive communication should have been well prepared in terms of the message, full or staged disclosure, the medium and by whom.
Operational processes could be improved. The union representative would like to have union issues discussed at the informal meeting. A more formal process should be in place for raising sensitive union issues with senior management.
The informal meetings initiated by Ayres to gain broad support for the organisation’s plans, identify problem areas and develop useful ideas are inappropriate. This kind of communication requires a structured meeting to ensure that all participants are given the same view of a common plan, and that problems and ideas are documented for follow-up.
To be globally competitive, Ayres wants to take advantage of low-cost labour. Assembly in China will not only minimise production costs but also distribution costs. By investing globally, getting work done where it is most cost effective and operating close to its customers, the company stands to benefit shareholders through maximising profit. A strong communications and selling plan should retain existing shareholders and attract new ones.
Waving Communications benefits Australia in being recognised internationally as a global leader in wireless and communication technology. It has the potential to create a well-sustained company with good dividends. It has the potential to create other jobs outside the manufacturing sector in Australia and will be able to retain a fair proportion of its profit in Australia.