Pibrex, a European leader in the production and development of polymers, faces the loss of its three Russian subsidiaries. This threat stems from issues encountered after entering the region in 1992 and then being hit with the Russian financial crisis of August 1998. As result, a steering committee comprised of three senior managers from Pibrex Region Europe North (PREN) exercised many anti-crisis initiatives including assigning newly appointed financial controller Elena Michailova with the task of auditing all three Pibrex Russian subsidiaries. Upon completion of Michailova’s audit, she has discovered that it is the combination of remaining issues from the reduction period and the Russian financial crisis that threaten the existence of Pibrex’s existence in Russia. The steering committee’s ultimate goal is to resolve these issues to ensure survival of the Russian subsidiaries and breaking financially even in the near future. Issues
1. Lack of an integrated operating system and task redundancy across departments
2. Large differences in wages between managers, sales, marketing, and production workers
3. Very little communication between management and subordinates
4. Poor working conditions
1. In the plant there is a lack of order and financial control
2. Contention between staff and management
3. Bad management and employee relations
4. Outdated facilities
Let us use the five why’s method of analysis to find the root cause:
1. Why is Pibrex in danger of losing its Russian subsidiaries? Pibrex is in danger of losing its Russian subsidiaries because of unresolved issues lingering after the reduction period and the Russian financial crisis.
2. Why were these issues left unresolved?
The issues were never resolved by previous management.
3. Why were these issues never resolved by previous management? Managers were distant and many times unaware of issues within the organization. 4. Why were managers distant and unaware?
There was a lack of communication and operational control for the management of Pibrex Russia. 5. Why was there was a lack of communication and operational control for the management of Pibrex Russia? Pibrex used a decentralized structure worldwide. This structure was complicated and Russians did not easily adapt to it. Pibrex Region Europe North had many other subsidiaries besides Russia therefore issues in the Russian subsidiaries were often over looked. This limited progress and denied proper management of Pibrex Russia. The root cause of Pibrex being in danger of losing is Russian subsidiaries is the use of a decentralized structure. Alternatives
1. Go to a much more centralized structure that the Russians are more accustomed to
2. Restructure management my replacing all managers
3. PREN would focus more on the Russian subsidiaries
4. Drop all Russian subsidiaries and disperse production duties among other subsidiaries in PREN Criteria
1. Financial losses from the Russian subsidiaries must stop
2. Management should be more accessible and properly trained
3. Communication between managers and subordinates is key
4. Improve workforce morale
5. Increase efficiency
Pibrex needs Elena Michailova to take the job of financial and managing director of Pibrex KZ. I believe that her taking on both positions is the only scenario where Pibrex can keep the Russian subsidiaries and eventually make them profitable again. Michailova has seen the issues and identified them through her audit. There is no one else more qualified than her to take on these two positions. She also happens to be Russian a unlike her predecessor. This should help greatly in resolving the tense relationship with the workers and management. With her experience and a well thought out restructuring plan, I have the up most confidence that the Russian subsidiaries can be saved. Programming the Decision
Elena Michailova as the experience, all she needs is a solid restructuring plan. The short term issues should be addressed immediately. Finances will be tight at first so she might have to think outside of the box to be able resolve some of these issues. For instance, if the budget will not allow for a new integrated operating system she might have to find a better way of communication to cut down on task redundancy and revenue loss due to missed deliveries. Michailova will also have to decide if she can make the decentralized management work in Russia. If she can get the Russians to adapt to the concept it might be beneficial. Decentralized management makes access to excellent expertise but if the Russians cannot adapt then it might be more productive to have a more centralized form of management for them. She will also have to deal with the financial crisis. This might mean more layoffs to cut costs. It will definitely mean making production more effective. The subsidiaries will not survive in this financial climate if it cannot find ways to save money and make a profit.