Globe Maintenance Pty. Ltd. (Part 1)
Mr. Burns founded Globe in 1971 as a spin-off of a family company, taking a $120,000 client with him as part of the arrangement. The contract with the customer called for the cleaning of ashtrays, waste-paper baskets and vacuuming offices and hall-ways. The company expanded as a result of the hard work of Mr. Burns and a small, dedicated workforce. Soon Globe offered additional services including window cleaning, gardening and mechanical maintenance of heating and air conditioning. In 1980 Globe won a contract to provide ramp services for an airline in Globe’s home city. This included the cleaning of aircraft while at the terminal, some baggage handling and other labour intensive non-mechanical services. These ramp services accounted for half of Globe’s sales, and 60% of profit, due to fewer competitors, higher capital investment and higher risk.
The company grew by taking advantage of any opportunity that came along. By 1989 Globe was a medium sized maintenance company, employing 1800 people in various departments that all directly reported to Mr. Burns (i.e., sales and marketing, accounting and debt collection, personnel and training, equipment purchase and maintenance, scheduling, general cleaning staff, and specialist staff). As a result of having grown without acquisitions or mergers, all departments and store rooms were on the same property.
Although a simple flat organisation in terms of structure, the operations were extremely complex and fluid as there was a great deal of two way communications needed between the departments to complete any one contract. For example, sales needed to know what staff and equipment were available before selling contracts, equipment needed to know the types of sales anticipated as well as the training requirements of the cleaning staff allocated to use some equipment types, and personnel needed to know anticipated sales and current staff capabilities and levels. As each department depended on the others, the barriers between the departments tended to break down. This effect was heightened by the minimal number of rules Mr. Burns had put in place. Mr. Burns instead felt that the “can do” attitude and strong work ethic, which had typified the employees, were more important in achieving Globe’s goals.
Mr. Burns had engaged two consulting firms over the past three years. Each had spent days interviewing staff and management, and had recommended re-organisation of the company structure and processes, and had suggested that more sophisticated strategy, planning, budgeting and accounting systems were necessary. Currently, pricing of services is done in line with the competition and profit is used to pay salaries and buy supplies and equipment. The consultants also felt that there needed to be a clear structure with formalised work procedures, as well as the establishment of a formal system of interdepartmental information flow. The managers of the departments had attempted to implement some of the rule and procedure changes, however, both times these efforts appeared to get lost in the more pressing aspects of business and in the resistance of the staff. However, the resistance to change did not indicate underlying labour-management hostility as much as a lack of appreciation for the need to change. The employees were quite proud of the company they had built and did not see the limitations on further expansion. While the actual cleaners were unionised, the union had been cooperative during the past ten years and the staff felt their allegiance lay with Globe.
In early 1993 Mr. Burns announced his retirement and the sale of Globe to a large conglomerate holding company. The strategic planning unit of the new holding company studied Globe and its environment. Although they concluded that the ramp service market was going to become more competitive, they thought that they had an advantage with their expertise and cost efficiency. Although there were a number of small operators successfully competing on smaller jobs and a near monopoly of a few very big operators on the big jobs, the basic building maintenance market was tight but viable as well. Therefore, they determined the following strategy was necessary to allow the long term survival and expansion of Globe:
You have been hired to head the implementation of these changes during the next three years. Globe is expected to be profitable at the end of this time. You have examined Globe’s situation and agree that the recommended strategy is the best for the organisation. The holding company has allocated 50% of Globe’s 1992 profits for this reorganisation (i.e., $250,000 – not including equipment costs, which are to be funded by the divisions).
You have been hired into the managing director position in the case. You know that you have four main questions to ask yourself: (1) where are we?, (2) where do we want to go?, (3) how can we get there?, and (4) how will we get there?
Since you have been given the answer to the second question (i.e., the strategic planning unit of the conglomerate holding company has outlined the answer to “where do you want to go?” in the three points above), your task is to address the remaining three points.
Start out by assessing the answer to the first question, “where are we?” What can you gather about the organisation, its strengths, weaknesses, positioning, resources, strategies, etc? Then, address the third and fourth questions by roughly outlining the approach you would take to implement these changes, including critical considerations, how you influence your Division Managers, and what your critical milestones might be. Be sure to focus on the content from week 6, and, of course, draw from weeks 1 through 5 where necessary.
You may find it helpful to address the following series of questions: