The Asian Motor Company Dilemma
The Asian Motor Company is an automobile spare parts company, which has been in business for over six decades. Close to 60% of the Asian Motor Company’s revenue is derived from three long-standing customers. The strength of the Asian Motor company is, on time delivery of high-quality products . The company has a long history of reliability and outstanding customer service. The major strength of the Asian Motor company is its long serving employees. The Asian Motor Company is unionised, and the management of the Company has a cordial relationship with the union.
A large number of the employees of the Asian Motor Company have been with the company for two to three decades. It is normal for most of the employee to work in the Company until they retire after many years of service. The turnover rate of the Asian Motor Company is very low due to employee satisfaction, engagement and the job security provided by the Company.
During the past, few years however, rapid changes has started occur in the automobile parts industry. A number of new competitors have entered the market. The new players are using modern technology and machinery and as a result their productivity is high. Several of the new companies have also introduced quality and business improvement initiatives such as TQM (Total Quality Management), Six Sigma into their production processes.
In addition, two of the major customers of Asian Motors have introduced, TQM, Six Sigma, ISO 9001 (Quality Management System) and lean production methods into their manufacturing processes. As a result, the Asian Motors are under tremendous pressure to improve their productivity, quality and efficiency to maintain their customer base and the market share.
The Asian Motors Management has realised that to sustain their business they have to rapidly improve their manufacturing processes and adopt new technology, install modern machinery and introduce business process improvements. They have decided to implement an Organisational Development (OD) and a change management process in the next six months. The Company has hired an OD consultant to implement a modernisation plan. The OD consultant has carried out her preliminary assessment and has submitted her report to the Management.
There are three major findings.
a) The employees with long service with the Company are very uncomfortable in adopting new business processes improvement methods, manufacturing processes (TQM, Six Sigma etc.) and working with new machinery.
b) The majority (30%) of long serving employees are expected retire within three years.
c) it is not cost effective to train employees who have been with the company for a long time and due to retire in the near future in the new business improvement processes and to use new machinery.
The employees of the Asian Motor Company have heard rumors that the management has invited a consultant to carry out a modernisation plan and implement a change management process. The employees have started to worry about their job security and the future. The union leaders during one of their regular meetings with the management have expressed their concern – “we believe this is our own business and have dedicated our entire life to serve the company well. In return we expect the Company to look after us but now we have a big question mark about our future.” The Asian Motor Company top managers have given an assurance to the union that the Company will never get rid of its employees and it is committed to retain employees and look after them as has been the Company tradition.
1. Why and how did the Asian Motor Company got into the current situation?
2. Why have the Asian Motor Company employees started to worry about their job security?
3. As an HR expert do you agree or disagree with the OD consultant’s findings and recommendations?.
4. As an HR expert what are your short- term and long-term recommendations to the Asian Motor Company management team?
Explain your answer