Case Study: RST Carports and Metal Roofing Case
History
RST Carports was founded in 1980 as a private Midwest small business company. The business includes a 600,000 square foot building with office space to support its management. The business is in Albany Indiana and initially produced and installed 4 versions of carports which was gradually increased to 48 versions over the years. In 2000, the business ventured into the metal roofing business and began manufacturing and installing 18 varieties of metal roofing from the same facility in Albany. The company was profitable every year from 1981-2017, only losing money in its initial year of existence. The company used a pull system to control inventory, used the Seven Quality Tools and Seven Management Tools to solve 90% of their problems, and used Six-Sigma and Shainin Red -X Problem Solving to solve their complex problems. All of the Executive Managers were Six Sigma Blackbelts certified by ASQ.
In July 2017, Jerry Jones, the President, and private owner of the very successful business sold the company to WXY Corporation, a large competitor, for $60.8M. WXY elected a new Divisional Manager from its corporate office, Art Anderson, to replace Jerry Jones the week after the sale. Anderson immediately brought in a WXY SWOT team to make a one-month assessment of the RST management and working employees and to review its methods of operation.
Structure Changes
One month after the sale, Art Anderson elected to change the RST management structure, reducing over 50% of the executive management positions, approximately 40% of the middle and lower level manager positions, and 30% of the employees who performed the manufacturing and installation work. All management employees were forced to take a 20% reduction in pay, and working employees were forced to take a 10% reduction. Many of the original RST executive management team elected to retire immediately. Gone were CFO- Dan Demis, Operations Manager- Larry Lange, Engineering Manager- Andy Andrews, Maintenance Manager- Bob Bex, and Materials Manager- Carl Candle. The Quality Manager, Earl Engle, quit shortly after the takeover and moved on to a competitor for a higher-paying job.
The CFO and HR Manager positions were consolidated into one position. The CFO manager retired, and the HR Manager quit. The Materials Manager and Purchasing Manager positions were also consolidated; the Materials Manager retired, and the Purchasing Manager quit. The Engineering Manager and Maintenance Manager positions were also consolidated, and both managers retired. The IT Managers position was eliminated, and that service was transferred to Corporate office at WXY. The Information Technology Manager was offered a lower paying job at Corporate, and elected to quit. Anderson acquired replacements from Corporate office.
Worker Morale
In January 2018, the disgruntled working employees asked for the United Steel Workers Union to attempt to step in and help organize the non-management employees into a union because of the numerous safety problems and the reductions in pay they were forced to take after the takeover. There were several employee meetings between the Steel Workers Union and the 200 workers who manufactured and installed the products throughout 2018 and 2019. While waiting on the Steel Workers Union to negotiate with management on forming a union, several other working employees also retired or quit. One of the problems that RST was going through was having lost much of the expertise in the management and employee worker ranks after the takeover. Due to a lack of experience in key areas, there was an increase in accidents, increased quality problems in manufacturing with misfits and missing parts in kits going to the builders in the field, and absenteeism increased significantly. There were several quarrels between management employees, management employees and workers, and workers and workers. The once collaborative group of individuals who had collaborated effectively for several years had become combative after the takeover.
Management Morale
Unfortunately, the workers were not the only ones who were affected. As can be seen in the management overtime chart, the management employees were now being required to work 60-hour weeks with no pay for overtime, which they had received pay for before the takeover, but with minimal overtime hours. Bickering between the quality manager and operations manager had increased due to the declining quality levels of assembled units. The reduced quality had a direct correlation with the rescinding profit margins. The Engineering Manager was arguing with the Purchasing manager for changing venders to secure lower prices (with lower quality) from new suppliers (current WXY vendors) who had replaced metal rolls from their previous suppliers. Problems with rust, holes, mismatches, and cracks were the main problems, and the thicknesses of the metal sides and roofing varied out of specification, with mounting holes also being off location causing re-drilling and leaks through off-center existing holes. The new Operations Manager, 36 year-old David Davis (who was handpicked by the Divisional Manage, Art Anderson to implement all the changes) conflicted with most of the other managers because of the eroding performance of the company over the previous 2 years. Unfortunately, most of the previous managers who were qualified Six Sigma Black and Green Belts were no longer employees, so solving for these complex problems did not happen. It was a constant fire drill trying to sort and contain defective materials.
Worker Overtime
Because of the drastic reductions in the number of working employees, the remaining employees seldom received a weekend off, and without the union they were asking for, some were fired when not showing up on the weekends. This resulted in a continuous revolving door of new employees being hired, which resulted in more injuries to workers and increased quality problems with all products. This was one of the main complaints that employees addressed with the Steel Workers Union.
Training
Most training programs were eliminated, and the training function handled by the previous HR Manager, Olga Older, was transferred to WXY Corporate training. The prior requirement of 48 hours per year training for each management and working employee was reduced to 2 hours of diversity and sexual harassment training annually for all employees. The previous two-day orientation training program for new hires was eliminated and new employees were sent to jobs with 4 hours on-the-job training with current workers on the job. This was another main complaint that employees addressed with the Steel Workers Union.
Years of Service
As can be seen in the spreadsheet, there were many management employees with more than 30 years of experience in their positions who elected to retire. Many of these employees were replaced with other employees selected by WXY corporate to fill these positions. The years of experience of the new management employees appear to be significantly less than those who left.
What Needs to be Done?
Finally, after the first 4 months in 2020, the CEO of WXY hired W2 Solutions Consulting Company to go into the RST company and determine what needs to happen. W2 Solutions is a consulting company that investigates organization’s’ management structures, management culture, worker culture, reengineering, future viability and closures, and makes recommendations on whether a company is salvageable. As an employee of W2 Solutions, your job as the student, will be to review all the data listed in the spreadsheet, complete interviews with all managers (the spreadsheet information will be used as if you interviewed these management employees and determined experience level, management style, leadership style, and power type, which is listed in the spreadsheet), and determine what changes are necessary to return the company to the levels of profitability it had achieved from 1981-2017, if possible.
Use the 6 charts, and the experience levels, the traits of the managers concerning management style, the leadership style, and type of power used to help you make your decision on what structural changes might be possible to save this company. By reviewing the management styles, power structure, and levels of experience, and the six Excel spreadsheets, please come up with a Pareto list of three recommendations that might be beneficial in turning the company around to its past performance achievements.
The decision to shut RST down might be feasible, but you should be able to use some of the things you have learned thus far in the course to make changes to salvage a company that was profitable for 36 years before going into this 3-year slide.
Things to Consider
How is the experience level different between the 1980-2017 management group and the 2018-2020 group?
How do the Leadership Styles differ between the two groups and within the groups?
How do the Management DecisionStyles differ between the two groups and within the groups?
How do Power Types differ between the two groups and within the groups?
What possible changes between 2018-2020 happened that could cause a very profitable company for 37 years to be unprofitable within a couple of years.
How did the previous management and leadership styles between the managers who ran the company from 1980-2017 compare and conflict with the 2017-2020 management team?
How did the reductions in force of the management and working employees affect the company’s profitability? Did the company achieve the expected results with the employee workforce reduction plan that had been recommended to the new President?
Set up a Pareto analysis of the three most important things that need to happen to bring RST back to profitability. Use a Microsoft Excel bar chart to develop your Pareto chart and paste it into your MS Word document.
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