Woody Company is a small sole-proprietorship that specializes in the manufacture of high quality bar stools. Currently, three types of bar stools are marketed with increases in standing orders currently reaching $750,000. Mr. Woody has decided to expand his organization to and aggressively pursue the market, but realizes that issues with defective wood from his suppliers, manufacturing quality defects and problems associated with late delivery of his finished product has impacted his profit margin (Bateman & Snell, 2007, p. 317). My assistance has been solicited to optimize the organizational structure, recommend pay structure and determine work allocation within the company.
A small company is, by definition, one that employs less than 500 employees (Hatten, 2007, p. 5). This is only relevant from the prospective that being a small business by definition allows for certain assistance from the Small Business Administration and tax code specifications. More importantly, the small business is a mindset of operation that will capitalize on the potential strength of flexibility and responsiveness that can only be exercised with a company that “can move fast, can provide quality goods and services to targeted market niches, and can inspire greater involvement from their people” (Bateman & Snell, 2007, p. 298). Mr. Woody has provided a mission and vision statement for his company that states the following: “To manufacture world-class products that are competitive in the world market in quality, reliability, performance, and profitability (and) to create a culture where pride, ownership, employment security, and trust are a way of life” (Bateman & Snell, 2007, p. 317). What follows is a plan that will meet these expectations and provide opportunity for increased growth.
Some of the agility that is afforded by keeping the focus of the company on remaining small is a greater ability to use a mechanistic structure that is able to remain responsive, promoting both a high involvement and a continuous learning environment, enhancing quality improvement standards and embracing lean manufacturing as a means to improve overall profitability.
Figure 1 (p. 8) is the proposed organizational chart for Woody Company which I will use to illustrate work responsibilities covered later in this proposal. Although this structure may serve to contradict some popular beliefs that organic structures can be more responsive to changing company dynamics and market realities (Bateman & Snell, 2007, p. 292), a 2006 article in the Academy of Management Journal which studied the difference between mechanistic and organic structures contradicts this viewpoint. In this study Sine, Mitsuhashi and Kirsch prove that mechanistic structures promote “low role ambiguity, high levels of individual focus and discretion, low coordination costs, and generally high levels of organizational efficiency” (pp. 130-131).
I submit that this type of organizational structure is precisely what Woody Company needs to build on existing successes. By following my model of reorganization, the benefits that can be seen in a more organic structure, such as an inherently increased amount of flexibility through coordinated decision making and individual employee empowerment, can and will be realized. Top-down investment in the continuous training of the employees of Woody Company, through the direct efforts of the Human Resource and Training Office is an investment that will pay rewards in not only employee loyalty, but also efficiency in all the operations.
Focus on Communication Strategies
Management focus on preventing or lessening communication barriers will serve to not only empower all employees, but also help improve processes which may lead to greater efficiency and profits. One recommendation to potentially remove communications barriers is a daily operations walkthrough meetings each morning on the manufacturing floor by all managers. This not only improves situational awareness across the organization, but also provides the staff the opportunity to address concerns and raise issues that challenge management. Clear and open communications are a significant attribute to process improvement and come at a very low price.
Implement Lean Manufacturing
Another key influence to improving overall quality and efficiency is the hiring of a Lean Manufacturing Champion to ensure the lean process is effective. A Lean Champion is best defined in the January 2006 Manufacturing Today magazine as:
“They [Lean Manufacturing Champions] set and maintain the goals of the improvement projects, making sure that they are aligned with the overall business priorities and objectives. Lean champions also act as coaches and teachers, educating the entire organization, including the supply base, on the importance of lean. They are also facilitators and negotiators, helping to smooth out internal manufacturing and organizational issues, and keep lean initiatives on track” (Weissman, 2006, ¶ 4).
Dedicating Woody Company resources on adapting Lean Manufacturing principles and actions will ultimately lead to greater process efficiency and quality which will lead to greater profits and growth potential. Lean principles are an investment in personnel and processes.
Buy Quality Materials, Produce Quality Products through Automation
Woody Company can take two steps in the manufacturing process to realize immediate improvements in the quality of goods produced. First, the company needs to re-evaluate their raw material supplier relationships. The purchasers for the company must procure only the finest in raw materials as a first step in reducing waste through not bringing defective materials into the plant in the first place. This can be done by pre-screening suppliers and making sure that they meet standards of quality such that are proven through ISO 9000 certification. Analyzing history on dollars lost through defective raw materials can be translated into perhaps paying more in order to secure premium raw wood materials. The second method to improve quality should be a review of manufacturing processes with a focus on introducing computerized cutting, joining and measurement equipment.
The cost associated with automating the manufacturing process can be offset through improved production capacity, more accurate fabrication, and greater flexibility in the types of wood products that can be manufactured. Using computer controlled equipment removes the human error element during production runs, and expands the potential product line opportunity to other areas of manufacturing. Figure 1 (p. 8) shows the manufacturing areas as Pre-Fabrication, Fabrication and Assembly and Finishing. The specialization of the staff in these modules builds on proven advantages mass customization (Bateman & Snell, 2007, p. 307), but does not necessarily mean that every order needs to be unique. The key is that specialization provides greater flexibility. Personnel resource allocations that I have recommended are based on my perception of the more labor intensive areas of the process, but personnel can and should be cross trained. Personnel allocations should ensure that each area of the process contains at least some personnel that are skilled woodworkers, and that quality checks are implemented at each stage, to include as a final check, shipping and receiving.
Pay and Bonus Plan
Compensation of personnel at Woody Company should be based on responsibility, experience and proven performance. Consideration should be given to financial bonuses for employees who perform above and beyond expectations and rewards for the various teams in the company that have proven efficiency and demonstrated cost savings.
Woody Company needs to make strategic changes to increase market ownership and profitability. Increasing manpower alone is a simplistic and perhaps ineffective solution. The appropriate action will rely on a willingness to focus on improving current competencies and develop capacity for increased areas of the wood furniture market. My recommendations are a starting point; now Woody Company needs to act in order to take the company to the next level.
Bateman, T, & Snell, S. (2007). _Management: The New Competitive Landscape (7th ed.)_. New York: McGraw-Hill/Irwin
Hatten, T. (2006). _Small Business Management: Entrepeneurship and Beyond (3rd ed.)._ New York: Houghton Mifflin Co.
Knudson, B. (2007, September). Implementing A Vision. _Manufacturing Today_, _7_(5), 48-51. Retrieved January 6, 2008, from Business Source Complete database.
Sine, W., Mitsuhashi, H. & Kirsch, D. (2006, February). Revisiting Burns and Stalker: Formal Structure and New Venture Performance in Emerging Economic Sectors. _Academy of Management Journal, 49_(1). 121-132. Retrieved January 5, 2008 from Business Source Complete database.
Weissman, R. (2006, January). We Are the Champions. _The ManufacturerMagazine_ retrieved January 6, 2007 from http://www.themanufacturer.com/us/content/3947/We_are_the_champions