Magna International Inc. (Magna) is a Canadian car and light trucks parts maker, who design, develop and manufacture automotive systems, assemblies, modules and components, as well as engineers and assembles complete vehicles, primarily for sale to original equipment manufacturers (OEMs). Magna operates in three geographical regions: North America, Europe, and the rest of the world (mainly Asia, South America and Africa), making Magna an international company. We have investigated Magna and identified two key issues they are currently facing.
Firstly, Magna is suffering Quality Control problems in their divisions, such as Magna Powertrain, Magna Steyr, Magna Closures, Magna Car Top Systems, etc.
The current method of dealing with problems is a weak matrix structure. However, we recommend two alternatives that will increase Magna’s efficiency. Our first recommendation is to create a Dedicated Team. Our second recommendation is to enhance the existing Matrix Structure, by making it stronger. We illustrate numerous strengths and weaknesses for each recommendation.
The second issue Magna is dealing with is the increased pressure to unionize their employees.
To a degree, this matter seems unavoidable. We simply recommend Magana create a Management’s Rights Clause and/or Management Prerogatives Rights in order to protect their rights and clarify various aspects of employment rights from the beginning. Therefore, Magna needs to assess these alternatives from their internal perspective. As a consulting agency, we can only suggest alternatives that would suit the organization and improve their current drawbacks. Introduction Magna International Inc.
(Magna) is a Canadian car parts maker and supplier to a wide variety of automakers throughout the world. The systems Magna provides are major components in the final assembly of cars, for GM, Ford, Chrysler, Mercedes, BMW, Toyota, Honda, Porsche, Volkswagen, along with others. We have identified two issues with Magna, for which we have derived several alternatives. One issue is Quality Control (QC) in Magna’s systems, which is due to organizational structure when dealing with QC. Another issue that Magna is currently experiencing is the increasing pressures to unionize their employees.
Magna’s current QC procedure will be discussed, followed by an analysis of Magna’s two key issues we have identified including alternatives that we propose. Current Quality Control Process In order to properly asses the current situation with the QC processes an employee of Magna directly involved with such issues was interviewed. The company is organized in a number of independent divisions that are system/product oriented, for example Vision System, Powertrain System, Electronic System, etc. Each of these divisions is involved in a final system assembly stage and supplying systems to the car and light truck manufacturers.
Each division has its own chain of suppliers and sub-contractors to supply parts, to make adjustments or process them, and to perform primary assembly. The final assembly of the system is performed at one of the Magna division plants (Appendix A). The cross functional team (CFT) is comprised of representatives from the functional departments. These representatives are gathered from departments, such as Logistics, QC, Materials, Production, Accounting and Purchasing (Appendix B). They are assigned to the team, as CFT members, in order to deal with a specific problem at hand.
The CFT leader only has authority to gather information on the QC problems, workout possible solutions to implement with the respective cost associated with these solutions. The solutions are then conveyed to the Chief Operations Officer (COO) for consideration, decision and implementation. Once the problem is resolved, CFT members resume to their respective positions and duties. Other factors with regards to QC include financial risk, performance risk as well as problems between business to business relationships.
In terms of financial risk, if Magna’s quality is not up to par, their clients’ demand may diminish and will result in lower revenues. Currently, the Big Three (Ford, GM, Chrysler) represent 60% of revenues, therefore it is in Magna’s best interest to insure that demand does not diminish for these customers because a ripple affect will occur and Magna will also be affected by a decrease in demand and revenue. Along the same lines, if customers are not satisfied with the parts produced, they will find another supplier.
In addition, if defective parts have to be shipped back, it poses a financial risk given that Magna is losing the potential to make a profit from those parts, representing an opportunity cost. Furthermore, there are performance risks associated with QC given that customers may purchase parts that do not function or perform as they are intended to. Moreover, if Magna is supplying dysfunctional parts it will jeopardize the relationship with their customers by diminishing the trust and loyalty that has been established over the many years of their relationship.
This may result in an unfavourable image on Magna’s part and will create a risk of being replaced by another supplier. As a result Magna may choose to find other companies with higher standards to outsource to and form a strategic partnership with them. To re-establish trust with their customers, they will have to provide superior performance, social ties and specific investments such as training new supplier personnel on how to produce certain parts and establish contractual agreements specifying for example the limit conditions on products and also who will be responsible for losses incurred as a result of faulty products.
Thus, with this background knowledge of Magna’s QC problem, we suggest two alternatives for Magna, a Dedicated Team Approach and Strong Matrix Team Approach. Alternatives Dedicated Team Magna’s current CFT (weak matrix structure) is ineffective because the CFT leader does not possess enough authority to resolve the issue in a timely manner, hence cost effective. In order to achieve successful project completion, one of our recommendations is to implement a Dedicated Team (Appendix C). This structure is preferred when considered solely from the project manager’s point of view.
People and assets are allocated completely to the project for as long as they are needed to complete the project. Furthermore, in a Dedicated Team, the project manager has full line authority over all the resources. This effectively sets up a separate goal-oriented department of the company, which is its own functional department. The project manager still has the problem of managing and integrating other companies and external organizations contributing to the project, but has full mastery over all the people and groups working on the project within his/her company.
This goal-oriented structure makes planning, control and general project management simpler and easier than with other forms of organization. There can be much better integration of everyone who is involved in the project and communication between them (formal and informal) is faster, direct and frequent. Teamwork is much easier to develop and therefore creates a higher degree of commitment to the project objectives, especially when the team is permanent. Conflict is likely to be less than other project organization forms and if complications arise it can be solved more easily.
Consequently, project teams tend to maximize the probability of completing projects on time, within budget and to specification. Unfortunately, teams are not the most flexible way in which to use company resources. If more than one team exists in the same company, it becomes necessary to increase the numbers of specialists on the payroll because each specialist (or group of specialists) must be allocated fully to each project team for the project’s life. It is usually difficult to switch specialists from one project to another to take account of day-to-day fluctuations in workload.
Division of labour within functions is therefore more difficult so that a dedicated project team might have to make do with a generalist in a function where a specialist would be preferred. Therefore, although the Dedicated project team (separate divisional form of project organization) enables projects to be managed more effectively than the functional organization and it avoids some of the problems of more complex organizational forms, it can generally be used on larger projects capable of sustaining bigger functionalist groups within the team.
The team structure is appropriate, therefore when a company is handling a single important project, or where one project is much more important than the others, it justifies setting up a completely separate company division. In that case, the size of the project and the volume of the work should be great enough to provide full time activity for each of the functional specialists or groups assigned to the project.
Dedicated project teams cannot be used when a company is handling several relatively small projects simultaneously on a continuous basis because they would splinter up the function resources. This splintering inhibits the transfer of personnel between projects according to demand and reduces the number of projects that a company can handle for a given number of staff. Strong Matrix Team One of the reasons that Magna is experiencing problems with effectively dealing with its QC problems has to do with its organizational structure.
Magna currently has in place a weak matrix system which creates problems with its reporting dimensions. The current belief is that in order to get things done in the organization there has to be a dual-reporting structure, in which one person is assigned to two bosses. With regard to the QC procedure Magna currently has in place, the CFT leader that has no real authority or decision making power over the problems that arise. The CFT leader’s duty is simply to gather information, analyze the problem, provide solutions, and report all this to the COO.
The COO discusses this information with the board of directors who decide as a whole which option to choose and then vertically pass down the information to the CFT leader. This process exerts a lot of time and every hour of idle production costs the company millions of dollars. Another issue with the current matrix structure is that employees that are part of this CFT are having a difficult time dealing with this vertical chain of authority; they have to deal with their functional manager as well as their team leader. This usually results in the CRT leader’s requests being left out of the equation.