C A S E OILWELL CABLE COMPANY, INC. Jack R. MeredithAs Norm St.

Laurent, operations manager for Oilwell though there were advantages too. It probably stemmedCable Company, pulled his Bronco 4x4 onto Kansas from the way the company was originally set up.Interstate 70, he heard on the CB about the trafc jamahead of him due to icy road conditions. Although the History of Oilwell Cable Company (OCC)trafc was moving some, Norm decided to get off atthe eastern offramp for Lawrence, rather than the more Originally known as the Chord Cable Company and locateddirect western offramp, to save time. While waiting for in New Jersey, the rm had been experiencing severe man-the offramp to come up, Norms mind drifted back to agement difculties. When acquired by new managementhis discussion with Bill Russell, the general manager, in 1983, they renamed it Oilwell Cable Company andon the previous day. Norm had been contemplating add- relocated in Lawrence, Kansas to be closer to their primarying microprocessors to their rubber mixing equipment in customers in northeastern Oklahoma. Their product lineorder to save manual adjustments on these machines. This consisted primarily of at and round wire and cables forwould improve throughput and reduce costs simultane- submersible pumps in oil wells.ously, though without displacing any employees. Based The manager chosen to head up the new enterprise, Ginoon the data Norm had seen, it appeared that the micro- Strappoli, gave considerable thought to the organization ofprocessors could cut the production time by 1 percent and the rm. Gino envisioned a company where everyone tookreduce scrap from the current rate of 1 percent down to some responsibility for their own management and the suc-one-half of 1 percent. cess of the business. Gino preferred this approach not only However, it seemed that this might be an issue that for personal reasons but because cable manufacturing is ashould rst be submitted to the production team in charge continuous process rather than a job shop-type of activity.of rubber mixing for their thoughts on the idea. Once The dedicated allegiance of the relatively few employeesbefore, an even simpler change had been made without in a process rm is crucial to staying competitive. In suchtheir knowledge and it wound up causing considerable industries, direct labor commonly constitutes only 5 percenttrouble. of the cost of the product, with indirect labor being another As the trafc wound around two cars in the ditch by the 5 percent. By contrast, in a job shop the wages paid for laborhighway, Norm reected on how difcult it was to make are a major determinant to being cost-competitive, often run-changes at this plant with their team management process, ning 30 percent of product cost, thus introducing a potential 241. 228 CHAPTER 5 / THE PROJECT IN THE ORGANIZATIONAL STRUCTUREconict between labor and management. Gino reasoned that minimal production. Management felt a commitment to theif he could obtain the employees commitment to improv- employees to avoid a cutback, more so than in a normallying productivity, reducing scrap, being innovative with new organized rm. But nally, in 1990, top management toldtechnologies, and staying competitive in general, he would the teams that they would have to choose a method forhave a very viable rm. handling this problem. Alternatives were shortened work- With the approval of the new owners, Gino initiated his weeks, layoffs, and other such measures. The teams choseplan. Of the original labor force, only a few moved to Kan- layoffs. Next, management drew up a list of names of rec-sas, including Gino and the rms controller, Bill Safford. ommended layoff personnel representing a vertical sliceAll new equipment was purchased for the rm, and a local through the organizationa top management employee,labor force was selectively recruited. As the rm was orga- some professional and technical people, and a number ofnized, the team management process was developed. Eleven production employees. These lists were given to the teamsteams were formed, six of which constituted the production who then decided what names

to change and what namesarea. The remainder included the management team; the to keep. Management largely went along with the teamsresource team (support functions such as computing ser- recommendations, and the layoffs (about 20) took place.vices, accounting, etc.); the technical team (including the With a slimmer work force, the division increasedlab employees, R & D, and so on); the administrative team their productivity even more signicantly (see Exhibit 2),(ofce and clerical); and the maintenance team. allowing them to cut their product prices from between 10 These teams basically set their own work schedules, and 20 percent. As the country climbed out of the stagnantvacation schedules, and job functions. They addressed com- economy in 1991, the division was excellently poised tomon problems in their work area and interfaced with other capitalize on the increased economic activity, although oilteams when needed to solve problems or improve processes. itself was still largely in the doldrums. Increased demandWith Ginos enthusiastic encouragement, the team approach in mid1991 forced the division to use overtime, and thengrew and took on more responsibility such as handling temporary help. They didnt want to get back in the samegrievances and reprimanding team members when needed. workforce predicament they were in earlier. In January 1985 the rm became protable and laterthat year came fully on-stream. Gino soon thereafter left for The Team Management Processanother position, and the operations manager, Bill Russell, wasselected to succeed him. At this point, Norm was brought The 1990 layoff was a traumatic situation for the teams andin to replace Bill as operations manager. Norm had years of the team process. Following that episode, the employeesexperience in manufacturing and was a degreed mechanical were unsure whether the team management process mightengineer. (See Exhibit 1 for the organization structure.) require too much responsibility on their part. They had As Norm recalled, from 1985 to 1989 the rm rapidly faced reprimanding employees in the past, and had evenincreased productivity, improving prots signicantly in the asked one employee to leave who tried to deceive them. Inprocess and increasing in size to 140 employees. In so doing, general, they were very receptive to employees individualthey became the low-cost leader in the industry and gained a problems and had helped their colleagues through toughmajority of the market share. This resulted in a virtual four- times on many occasions, but now they were unsure.fold increase in sales since the days of Chord Cable Co. They Team size varied from a low of 3 to a high of 17. Thewere now approaching almost $25 million in annual sales. advantages of the team process to the rm seemed signicant, In 1989, however, the recession hit the oilwell industry. in the minds of the team members and area managers. OneAdded to this was the slowdown in energy consumption, member of the maintenance team noted that the team processeffective conservation, and the oil glut. For almost a year gave much more responsibility to the employee and allowedthe company bided time and idle employees were paid for the rm to obtain the maximum talent from each person. General manager Bill Russell Controller Operations manager Human resource manager R&D manager Bill Safford Norm St. Laurent Sheree Demming Burt MacKenzie Accounting Purchasing Production Maintenance Human resources Lab Quality assurance Exhibit 1 Organization Chart: Oilwell Cable Division 242. CASE 229 400 300Productivity index 200 100 0 1986 1987 1988 1989 1990 1991 Year Exhibit 2 Productivity HistoryThe rm, in response, spends $1,000 per person per year on decide whether something should come through the teamsupgrading the skills of the employees in such areas as team or if it was unnecessary to consult them. Though the teamseffectiveness training, technical skill acquisition, communi- met on company time, they were not eager to spend morecation skills, and general skill building. Bill Russell sees the time on team meetings.

Especially after the layoff crisis, themajor benet of the team process as its production exibility. teams realized that self-management was a two-way streetEmployees are also very receptive to change. Since the 1990 and frequently hoped that upper management would makelayoffs, the employees have become much more sensitive to the tough decisions for them.outside threats to their jobs. This spurred quality and produc- In summary, the teams felt that the process was basedtivity gains of over 30 percent in 1991. on trust, in both directions, and was working pretty well. The primary benet of the team process to the employ-ees is having a say in their own work schedule. A typical The Cable Production Processsecondary benet was the elimination of penalties for mak-ing an error. The employees feel that this is an excellent As Norm pulled his truck into the OCC parking lot, heplace to work; absenteeism is only 0.7 percent, and only noticed that there were quite a few empty spaces. Thistwo people have left voluntarily since 1988. 1992 winter had been more severe than most people had Overall, the employees seemed to feel that this process expected, based on the November and December weather.worked well but wasnt utopian. It doesnt give away the The snow was almost over Norms boots as he slogged hisstore, one employee commented. Two disadvantages of way to the buildings. Upstairs in his small, jumbled ofce,the process, according to the employees, were the time and Norm pulled out the microprocessor le from his deskenergy it required on their part to make decisions. As an drawer and sat down to review the production process.example, they noted that it required three full days for the Their primary raw materials, which made up about 60teams to come up with the revised layoff lists. Normally percent of the products cost, included copper rods, lead,the teams met once a week for an hour and a half. polypropylene, nylon, and rubber. Inspection consisted But when the teams made a decision, the implemen- of submerging the cable in water and charging it withtation of the decision was virtually immediate, which 30,000 volts. To date, none of their products had ever beenwas a big advantage over most management decisions. returned. However, just in case they were ever queriedAlthough this process required more time on the part of about a cable they had produced, they kept samples of allthe employees, the total amount of time from idea to full their cables for ve years back.implementation was probably less than that in a traditional The rm considered itself very vulnerable to new tech-organization, and it was clearly more successful. When nology, and hence kept an active R & D lab in continuousasked if he would ever be willing to work in a regular work operation. Simple advances in process technology or insu-environment again, one team member voiced the opinion lation and jacketing materials could wipe out their marketthat this process while very good, really wasnt that much overnight, so they didnt want to be caught napping. Otherdifferent from a well-run, open, traditional organization. methods of oil extraction were also a constant threat. Since Teams realized that not every decision was put through they competed in a world market, they were highly exposedthem. They felt that this was appropriate, however. They also to foreign competition, and the location of their competi-recognized the difculty facing management when trying to tors was often a major factor in sales. 243. 230 CHAPTER 5 / THE PROJECT IN THE ORGANIZATIONAL STRUCTURE QUESTIONS1. If Norm chooses to go ahead with the microprocessor a Project Management Ofce? Is there another arrange- conversion on the machinery without passing it by the ment that might be a good alternative? team, what are the potential conicts that might arise? 5. How much impact might microprocessors have on pro- What are the advantages of such a move? duction costs? Assume that variable overhead represents2. If Norm decides to put the decision to the appropriate the same percentage of costs as xed overhead. Find the production team, what are

the potential problems? What net present value if the microprocessors cost $25,000 would be the advantages? and their installation runs another $5,000. Assume a3. If the production team chooses to approve and imple- 10% margin. ment this microprocessor conversion project, what form 6. Compare Norms recollection of the divisions produc- of project organization will this represent? tivity gains between 1985 and 1989 to Exhibit 2. Explain4. Given the size of this organization and the number of the inconsistency. projects they deal with, would it make sense to institute 7. What would you recommend that Norm do? The following reading discusses a new phenomenon in the increasingly global competitive environmentgeographically dispersed project teams. The competitiveness of global rms is often facilitated by new electronic technologies, and these technologies are also useful to the success of globally dispersed project teams, as described in the article. However, other aspects of such dispersed teams are more problematic, and the article illustrates these, as well as approaches used by proj- ect managers for circumventing them. Finally, some of the advice given in the article should be useful as well for project teams that arent geographically dispersed.