DED 4th Intake – Case Study for Individual Assignment 2
Case Study for Individual Assignment 2
Auto Bright Pte Ltd started as a family business with five employees 33 years ago. The Company was the agent of auto spare parts in Singapore for a well-known Japanese brand of vehicles. Over the years, the Company has besides retaining this agency, been producing auto spare parts for other vehicle types.
The founder, Mr Tan KT, now in his late-60s is still very much in control of the management of the Company. Under his leadership and with his foresight and courage, he expanded the Company rapidly. In 2018, it recorded a sale turnover of some $48 million, with a net profit margin of about 7%. In 2016 and 2017, the sales were $50 million and $45 million respectively.
The Company now has four departments: Marketing and Sales Department, Production and Engineering Department, Warehousing and Logistics Department, and Corporate Services Department which comprises Finance, Purchasing, Human Resource, IT, Office Admin and Facilities Management. Mr Peter Tan BK, the elder son of the senior Tan, is helming the Marketing and Sales Department, while the younger son, Mr Edmund Tan is looking after the Production and Engineering Department. The other two departments are headed by non-family members, who started as Executives and rose through the rank.
The two junior Tans are graduates in their 30s and have been helping their father right after graduation. They are open-minded and eager to improve and expand the business.
Today, Auto Bright has approximately 150 employees, of which 50% are in production, 20% in marketing and sales, and 30% in the rest. About 40 are in executive and managerial levels. The rest are non-executive production, warehousing and support staff. Half of the employees have been with the Company for at least 10 years. They are loyal (annual staff turnover rate was about 10% while in the market, around 15%) and competent in their respective roles. Most have not worked in other companies and thus have little clues on the practices outside.
There is no union in the company, although some employees may be General Branch members.
The employees are good executors and workers. They do not know much of the direction, strategies and challenges of the Company. They typically wait for instructions from the bosses, particularly the Tans. Decision-making in the Company is highly centralized. On many issues, even the two sons would await signals from their father.
Many employees stay in the same department or section for years, and hence they do not really understand the operations and challenges of other departments or sections. As a result, they have developed a silo mindset and an internal orientation. Turf protection is also common.
Employees are essentially told what to do on a verbal basis. They do not have a proper job description. Normally, new employees would just follow what the seniors are doing. By and large, the seniors are helpful and willing to impart knowledge to the newer employees. As a result, work relations among co-workers and seniors are respectful and harmonious.
Employee communication is usually done on an ad hoc basis. Annually during the staff dinners, the senior Tan will share some information concerning the Company’s performance and challenges. However, during those social functions, most employees did not pay attention to speeches and statistics. The senior Tan actually likes to go to the shop floor to ‘chitchat’ with the staff, particularly the long serving employees.
On special matters and announcements, the Management or Human Resource Department may send emails to staff or put up circulars in the staff notice boards.
During the department/section staff meetings, which usually happen once every two months, the manager may mention the priorities and the near-term plan of the department/section. These are typically near-term programs or issues concerning customers and production. Often, they spent time on fire-fighting issues.
The senior management team, essentially the Tans, would do corporate planning every few years. It is not known if the analysis and planning have been vigorously done as they have never engaged any planning or business strategy consultants.
The mission of Auto Bright is “To produce quality auto parts at reasonable cost to serve the needs of our customers.”
The core values of the Company are:
Human Resource management has been focusing on recruitment and payroll, and compliance with regulatory requirements. The HR Manager, started in the Company 20 years ago as the Secretary to the senior Tan, is hardworking and committed. She is trusted by the Tans and had been sponsored by the Company to do a diploma in Human Resource Management and several short courses, primarily on matters relating to employment laws.
The Company does not have a structured performance management framework. At the end of each year, the Human Resource will ask each manager to evaluate the performance of his/her subordinates. The performance evaluation reports and ratings will be returned to Human Resource on a confidential basis. The managers do not discuss performance issues with the employees, unless the employee made a mistake which has to be corrected. Human Resource will tabulate the performance ratings and present them to the Senior Management (mainly the Tans) for review. With that, they decide on bonus payment and promotion.
Annual increments are usually uniform based on job levels regardless of individual performance. Occasionally, the Management gave merit increment and market adjustment to some employees.
The senior Tan is paternalistic and conservative in the ways he treats his employees. He values service loyalty to the extent of allowing a number of poor performers to stay on in the Company. If not because of the interventions of his two sons, more poor performers would have stayed on.
Operations and Management Issues
While the Company is doing decently well in sales and production, more management and operation problems and issues have been creeping up. There are several instances of overlapping in efforts and gaps in execution and servicing customers. Inconsistency often appeared. Needless to say, the Company is receiving more customer complaints. There were several occasions where delivery of auto parts was delayed, or the wrong items and quantity were delivered. On 2 occasions in the last 6 months, the Sales Team had committed to supply certain parts, but later found out that there was not enough stock in the warehouse. Apparently, the tracking of the stock level has not been up-to-date and diligently done. The warehouse supervisor complained that the inventory system is not robust and user-friendly.
When problems arose, employees started pointing fingers at each other. Even the department and section managers are not proactive and objective in dealing with issues and conflict. When the customers became unhappy, the Tans stepped in to appease the angry customers. The loyal customers are more understanding. However, some customers have passed on the management of their companies to their respective children and the latter are less forgiving.
While the Company is still performing satisfactorily in the recent 3 years, the business and operation landscape has changed. Competition has intensified, leading to a drop in profit margin. Competitors are able to offer cheaper products with quality almost as good as that of Auto Bright. Given time, the quality of the competitors’ products will catch up and improve further. Customers are more demanding and less tolerant of lapses arose from the Company’s internal operation and coordination.
Separately, more and more end consumers are also buying auto parts through e-commerce from China.
With the older employees retiring, younger and better-educated employees have joined the Company. Their expectations have increased. The younger employees want more clarity, empowerment and flexibility to do their work. They also expect more communications and transparency, and differentiation in performance evaluation and rewards.
Having more foreign workers is not an option as the Singapore Government has tightened the inflow of foreign workers. The company has already reached the foreign worker quota.
- Does the Company need to change? Why?
- Which areas should be changed? Why?
- What are the human resource policies and practices that should be changed?
- What should Mr Tan KT do to ensure that the change initiatives will more likely succeed?