Barlow Industrial Supplies operates in a highly competitive industry that is undergoing continuous change. Many of the big industry participants are merging, and clients with extensive purchasing power are seeking to deal directly with manufacturers.
Barlow Industrial Supplies (BIS) employs more than 300 people on six sites in Sydney and has branches in all other states. Most of its contracts come from construction companies, and there is steady business from transport clients.
Two years ago, a new state manager for New South Wales, Hamish Skye, was appointed with the brief to make the company more competitive. He soon realised that one of the company’s failings was its rigid structure and heavy reliance on established industry models. Most of his senior managers had been with the company for many years.
Hamish Skye has taken an active role in attracting young and dynamic sales representatives capable of discovering new opportunities and thinking outside the industrial-supplies square. His aim is to reinvigorate the company from the bottom up, and he hopes that his “young guns” will promote the change necessary to ensure the company’s survival. There are signs that on some sites this approach is working.
This case study concerns one section of BIS, the Silverwater site. Mike Namtaff has been site manager for the past 15 years, the longest-serving site manager in Sydney. Now 50 years old, Mike worked his way up through the company and has a reputation as a straight operator and “good bloke”. He is so well known in the company, and has such long-standing networks in the local construction and transport industries, that for many years his management style and achievements have gone unquestioned.
Mike has maintained the site structure that worked successfully for him during the construction boom of the mid-1980s. His forte is operations, and therefore he spends the greater part of his time ensuring that his existing contracts are efficiently serviced. He has 20 staff, and his direct reports include a warehouse manager, John Warner, and five sales staff. Most of his site staff have been with him for more than five years and need little direction. But there is no doubt that Mike is in control. They do things his way or no way.
Despite recent changes in the industry and the economic environment, Mike’s site has maintained revenue. Although margins have slipped, Mike’s site is still one of the prime Sydney operations. Several lucrative and long-term contracts, secured at head-office level but filled through his site, have obscured the fact of his slowly dwindling performance.
Mike has heard on the grapevine that the Silverwater site has been selected to be the new West-side hub for Sydney. This will come about from the merging of three sites in a year’s time. Rumor has it that only one of the existing site managers will be retained. Mike realises that every monthly report he submits until the end of the year will be crucial, and all of them must show good results.
Twelve months ago, Hamish Skye recruited six “young guns” to help build up new sales in the Sydney territory. He consulted none of the site managers about the appointments.
Mike was allocated one new sales rep, Peter Roberts, aged 29, who has a real estate and retail-management background. Peter has received virtually no constructive advice from Mike regarding his sales role. Despite not being part of the industry network, Peter has built up his existing accounts by 45% and acquired three new accounts that are now among the top 10 revenue earners for the Silverwater site.
Peter is achieving results, which reflects well on Mike. For the first time in six years, Mike’s monthly reports to head office are showing substantial revenue from new clients.
Since Peter’s arrival, however, the smooth running of the warehouse has often been disrupted. The influx of new orders has seriously stretched warehouse operations, and Peter is constantly pushing timelines and circumventing procedures to service his customers.
John Warner, the warehouse manager, has complained to Mike about Peter’s lack of respect for procedures and his seemingly deliberate undermining of the chain of command. Despite this, Peter’s behavior goes unchecked.
John has requested extra staff to help him meet the increased demand from Peter’s new clients. On several occasions over the past two months, mistakes have been made on orders for existing customers, which, due to John’s vigilance, were corrected before the orders reached the clients. He knows that in such a competitive industry, a mishandled order can mean the loss of an account. He warns Mike that his operations are stretched to the limit, and that he can no longer be responsible for the outcomes.
Mike has refused John’s request for extra staff on the grounds that expenditure must be maintained at current levels for the next 12 months. He insists that this is a directive from the chief executive. John is angry about this, as he has heard that one of the adjacent sites is about to take on new staff. He is also puzzled by Mike’s laxity with Peter, because in the past Mike had always maintained strong control over everything that went on in his operation.
Mike has just stood back and let Peter do things his own way, except that he will not let Peter miss reporting deadlines or skimp on administrative details. In fact, as Peter’s volume of sales has increased, Mike has insisted that Peter make more time to fulfil his reporting requirements. He has even been reported to say, in a rare moment of anger: “If you would stop going out there and getting new clients, you would have more time to do your job properly.”
Mike tells Peter: “If you are going to get on in this company, you have to know what is important. You live and die by your end-of-month report.” Peter, however, feels that Mike is a hopeless manager and an industry dinosaur: In a moment of extreme frustration, he says this to Mike’s face and storms out of the warehouse. That afternoon, he signs up two new clients just to annoy Mike.
As Peter’s frustration grows, so does his disruptive behavior in the warehouse. When his wife asks him why he does not find a job in which his talents would be better utilised, he replies that the money is good and, compared with previous jobs, he does not have to work hard to get results. “Anyway” he says, “Mike’s time is limited, and a wise person once told me that waiting is sometimes a better strategy than action.”
When lunching with other site managers, Mike learns that Hamish Skye has been meeting each month with each of his young guns. Peter has never mentioned these meetings to Mike. Mike’s colleagues, who have also been assigned young guns, warn him: “Watch your back mate, there are vipers in our midst.”
Mike realises that in order to save his job, he must gain Peter’s respect. He leaves the lunch determined on a new course of action.
How could Mike have better handled his new recruit? What can he do to rescue the situation? Hamish Skye’s strategy seems to have worked, but what are the consequences? Peter seems to be the winner in this situation, but what will he lose in the process?
Proposed Solution #1
Dr Mary Corbett is a director of Australian Business Class, a management consulting organisation that specialises in improving business performance. She has a background in science and more than 12 years’ senior management experience in product commercialisation and business development. Mary is an Associate Fellow of AIM.
One of the essential elements that BIS seems to have overlooked is the vision or purpose of the business for the future. Although Hamish may have had the objective to make the company more competitive, he has not communicated his strategies to the site managers or their employees. This has resulted in a lack of direction and leadership and an all-consuming focus on bottom-line reporting.
Compounding this is a lack of respect and trust among the staff. There are clear signs that communication is failing at several levels, with John frustrated by a lack of resources, conflicting stories about recruiting in other areas, and Mike concerned about meetings between Hamish and Peter. Although innocent in intent, the meetings are felt to have sinister undertones.
BIS should have implemented the following:
1. A clear vision of future direction. This should have been communicated to all staff, followed by a facilitation process to ensure their commitment to (not just tacit acceptance of) the strategy. This would help everyone to see what the future looks like and give them an understanding of the need for change.
2. A value system with which all staff are aligned. For example, “respect for people” and “working together” would be appropriate for this business, but neither is being demonstrated in the behavior of the management or the staff. When the values and purpose of the organisation are in place and actively managed, they become visible behaviors in the workplace and create a mechanism for open and honest communication.
Once the purpose and values are established, the organisation is ideally placed to implement a strategy around “creative abrasion” – in essence, using diversity and conflict to improve operational performance. Hamish (unknowingly) has already used some of the principles of creative abrasion by employing his “young guns”, people with different outlooks, behaviors and skills to the long-serving BIS employees. However, it is not enough to simply employ this mix of individuals: they must be managed and integrated to maximise the synergies.
Individuals and organisations make small improvements in the short term through increased activity and new skills; quantum leaps and sustainable improvements are achieved only by creating new paradigms. These are borne out of valuing the differences between behaviors, however they can be accessed only when there is a common purpose and a value-based structure.
Peter, although achieving substantial results, has been “let loose” in the organisation. Without leadership and coaching from his immediate supervisor, Mike, he is creating chaos. It is beginning affect the quality of supply, and this will affect the monthly reports that Mike is preoccupied with.
There is a lot of ground to be made up on the relationship side before headway can be made on the main issues:
- The company’s vision.
- The leadership required from Mike and Hamish.
- Management of creative abrasion.
In response to the questions
If Hamish had explained his overall strategy to maintain the competitive advantage and had involved Mike (and other site managers) in recruitment, Mike could have handled Peter more effectively. This would have helped to develop trust between Peter and Mike rather than Peter feeling he was Hamish’s special recruit. It would have given Mike an understanding of the need for diversity in the workplace and a chance to develop his whole sales team by capitalising on their different skills.
Mike will need to consider several points. Respect needs to be earned, and there will be no quick fix with Peter. He should focus on his relationship not only with Peter, but also with Hamish, John and the rest of the staff. If John feels an apparent prejudice in Mike’s treatment of Peter, the rest of his staff will too, and this needs to be resolved as a matter of urgency.
Mike needs to coach Peter in matters relating to relationship building. Peter could coach Mike and other sales staff in business development and securing new clients. And both could discuss the process and resourcing issues with John to ensure that the increase in orders was managed, without compromising quality.
Hamish showed poor leadership in not involving site managers and by holding monthly meetings with the new recruits without their managers. Had he managed the integration of the “young guns” into the company, the bottom-line results would probably have been far greater, relationships would have been built on trust and respect, staff would have had access to different skill sets, and synergies would have resulted.
I do not believe that Peter is in any way the winner in this situation. He is obviously unhappy and frustrated in his current role. There are no obvious signs that executives are unhappy with Mike’s performance, and no reason to assume that he will be replaced. In such situations, no one is a winner. Instead, there is a knock-on effect of frustration that leads to reduced morale and eventually resignations and retrenchments.
A lack of leadership in an organisation is often worse than a lack of a sustainable competitive advantage.
Proposed Solution #2
Ralph Hunt is vice-president of Mincom IT Contracting and leads a team of 60 people in Australia and overseas. For the past 25 years, he has worked with IT companies around the world, including in China and Japan, and has run his own management consulting business. He is a Fellow of AIM.
In principle, there is nothing wrong with Hamish Skye’s strategy of introducing innovation from the bottom up to reinvigorate his company. For innovation to flourish, however, the process must be supported by the culture, systems, infrastructure, a climate of trust and, above all, leadership from the top.
Hamish seems to have used the bottom-up approach to avoid his responsibilities for top-down leadership and change management. Unfortunately, it is not an either/or proposition. Unless both approaches are used, the momentum for change will peter out or result in chaos.
Hamish communicated neither his vision nor his strategy to any of his direct reports. Consequently, they still do not know what he is doing or why; what is expected of them; or the timeframes involved. His “young gun” policy and his covert encouragement of internal competition have backfired, resulting in his managers scrambling to protect themselves, to the increasing detriment of the business.
From now on, Hamish needs to make the tough decisions, communicate the reasons for those decisions to staff, enact change, then monitor and amend where necessary. For instance, if Hamish has decided to let Mike or any other managers go, then he needs to do so as quickly as possible. Alternatively, he must be more open with them about the future and what their roles will be. If he wants to use the young guns to drive the business, then he must ensure that his managers are in a position to support the consequences.
In short, Hamish needs to lead, not just act as a catalyst.
Although the situation is not entirely of Mike’s making, his response – stemming from a climate of uncertainty deliberately created by Hamish – has had a negative effect on the operations and staff of the Silverwater site. To reverse this effect, Mike, like Hamish, must now demonstrate stronger leadership. He must take urgent action if he is to have a future in the company, but even with the best will, it may well be too late.
As a matter of priority, Mike must review site operations and determine what changes need to be made to systems, infrastructure, reporting processes and resourcing to ensure that the site can cope with increased demand.
For Mike to swiftly implement the changes, however, he must first ensure the co-operation and support of his key staff. This means sharing with Peter, John and others all the appropriate big-picture information with regard to the situation at Silverwater; securing their involvement in the review process; and getting their “buy in” for any changes introduced.
Given Peter’s influence with Hamish, Mike must also demonstrate to Peter that he values his skills and achievements, and in turn convince Peter of the benefits and knowledge to be gained by working co-operatively with Mike.
Peter has taken on an informal, though counterproductive, leadership role at the site. Perhaps Mike could exploit this by creating a formal leadership role for Peter in the sales team. This would give Peter the influence and control that he seems to want, and the other reps would certainly benefit from exposure to Peter’s methods.
These actions will probably increase Peter’s level of involvement and ownership, result in him accepting more responsibility and accountability for his actions. The collaborative process will also reassure John of his position, allow him to regain confidence in Mike’s leadership and rebuild the sense of team that existed before Peter’s arrival.
Mike then needs to manage upwards and ensure that Hamish hears about what is happening in his area, but from Mike, not Peter. Mike needs to demonstrate to Hamish that he is embracing and leading the change and innovation process, and getting results.
In short, Mike must reinvent his leadership role at the site, and at the same time ensure that Hamish perceives him as an agent for positive change.
Peter has a few challenges of his own to face. Although young and new to the industry, he has an opportunity to play a pivotal and positive role in the revival of the Silverwater site. However, to gain the knowledge of the industry, company and operations that is necessary for his ongoing success, Peter must actively rebuild his relationships with Mike and John, learn to work with and not against them, and benefit from their experience.
In addition, Peter must be open with Mike with regard to any contact he has with Hamish and ensure that Mike is aware of any discussions that may affect him and the Silverwater business.
In short, Peter must now have the maturity to be accountable for the effect on the organisation of his actions and informal leadership behavior.
This case study demonstrates that although a bottom-up approach may be appropriate for introducing change and innovation, leadership, at whatever level, must always be from the top down.