Referencing Styles : Harvard Winning the European Market: Strategic Change at Arup Packaging Limited Part 1 Arup Packaging Limited is a large manufacturer of packaging solutions. Arup’s products include glass, aluminium, plastic and paper based packaging solutions. Arup mainly operates in Australia and comprises of four business units. The business units are organised based on the material used in packaging solutions: glass packaging, aluminium packaging, plastic packaging and paper packaging. Arup is an unlisted public company; this means it is a company that has issued shares to the public but is not listed on the Australian Securities Exchange. In 2016, Arup celebrated 50 years. The company employs around 800 people across its four manufacturing plants, distribution centres, sales offices and corporate office. The sales offices and distribution centres are located in Sydney, Melbourne, Brisbane and Perth. Arup recently opened a sales office in Paris. The four manufacturing plants and the corporate office are all located in close proximity to each other in Newcastle in New South Wales (NSW). Newcastle is located in the Hunter region of NSW, about 160 kilometres north of Sydney. Arup is proud to be one of the few manufacturers that continues to exclusively manufacture in Australia. Arup believes that its investments in advanced technology have resulted in consistently high quality packaging solutions. The management team and the Board of Directors see product quality as Arup’s competitive advantage, insulating it against competition from cheaper production options overseas. Arup’s core values are teamwork, integrity, excellence and innovation. Out of Arup’s 800 employees, about 700 are located in its manufacturing plants and corporate office in Newcastle. Manufacturing employees are represented by the Australian Manufacturing Workers’ Union. This union has generally had a harmonious relationship with Arup management. Since it started as a plant with just 100 employees, Arup has been a strong part of the Newcastle community. It is one of the largest employers in the region and continues to attract local employees. Since its inception, Arup has concentrated on high quality packaging produced in large quantities. Arup’s customers are some of the largest food and beverage manufacturers in Australia. Arup has found that these customers have stable product lines and their packaging solution requirements remain mostly stable. Often the biggest changes requested by these customers are modification to existing packaging (e.g., larger size aluminium can, different coloured beverage bottle). Only needing to make minor product changes has meant Arup has been able to maintain high levels of productivity. While orders from these customers initially grew rapidly, in the last 5 years the growth has plateaued. In response, Arup’s Board of Directors initiated a strategic review and a risk analysis of Arup in 2015. After this exercise, the Board of Directors and the top management team identified their dependence on a few large customers in Australia as a significant risk to Arup’s future. The Board members and the top management team decided to look at expanding Arup’s customer base while maintaining the company’s existing clients. Page 2 of 11 @S Perera_FHRM In 2015, Annie Lee, CEO since 1999, retired and Franco Weller joined as the new CEO of Arup. Franco was given a mandate to take the expansion initiative forward. The Board of Directors encouraged the hiring of a senior manager to handle strategy and business development. This position reports directly to the CEO. Brenda Petersen started as Head of Strategy and Business Development in April 2016. Since joining Arup, Brenda has been working tirelessly to attract new customers outside Australia. Brenda’s most promising leads have come from Europe. Most potential clients were impressed by Arup’s high quality products. After months of hard work, Brenda has been able to secure packaging orders from a group of clients in France and Belgium. Orders will start in September 2017. Brenda is confident that this is the beginning of a new market for Arup’s products. At Arup’s Board meeting in February 2017, the CEO, Franco Weller, reported these new developments to the Board of Directors. The Chairman and the Board were pleased with this outcome and asked the top management team to develop plans as to how this initiative will be taken forward. The top management team (see figure 1 below) met early this week to discuss the implications of these new customers to Arup’s business strategy. At the management meeting, Brenda presented the new strategic initiative. She emphasised the following factors in relation to the new customers: ï‚· The new customers require mostly paper and plastic packaging products at this stage. ï‚· Unlike the customers in Australia, these European organisations are medium sized and offer a wide variety of products. This means the orders for packaging products are likely to be smaller and more varied. ï‚· These customers usually change their packaging designs at least once a year, so stable product designs that Arup is used to will need to change. ï‚· The European customers are offering a higher price than Australian customers. Even when freight costs are taken into consideration, Arup’s profit margins are likely to be higher from these European customers compared to those in Australia. Brenda ended her presentation, emphasising that it was critical to ensure that the first orders in September 2017 are completed on time and to high standards. She said that the first orders should be seen as a first step towards attracting more orders and potentially more European companies willing to buy Arup’s products. The following is a transcript of the conversation that took place after Brenda’s presentation. Franco: I agree with Brenda. We need to make sure that those first orders are perfect. In my discussions with the Board of Directors, I requested permission to recruit a General Manager to be in charge of these European customers. This manager will report directly to me and will work closely with Brenda. The Board approved it. Franco showed the proposed organisational chart (see figure 2) to the top management team. Page 3 of 11 @S Perera_FHRM Jeremy: This might look like we are just adding another manager to the top management team (refers to the proposed organisational chart), but this is a more significant change. For the last 50 years, we have worked with large organisations, our orders are large and design changes are very minor. Do you think we have the capability to handle the design requirements of these customers from Europe? Franco: I agree that expanding our customer base into Europe is a significant strategic change for us. But it reduces our reliance on a few customers in this region. To answer your question, I don’t think we have the design capability at the moment. We need to develop that quickly in order to get to production in September. Gabrielle: From an HR perspective, this is a huge change. Our employees and managers are used to working on large orders and long production cycles. We have always praised and rewarded productivity. This kind of change requires a complete mindset transformation. Basically, we need to rethink how we approach work. Brenda: Yes, but it will make us a more versatile producer of packaging solutions. Remember, innovation is one of our core values, but our innovations have been small and incremental. It is time we really lived that value. Jose: You know that we are all committed to the expansion strategy. It is just that this is all happening quite fast and we don’t have a lot of time to get our act together. I suggest that we work in smaller groups to work out what this means for each of our functions. That way we can have a more concrete discussion when we meet again this Friday. Franco: You are right, Jose, that is a great idea. I will leave it up to you all to work out the
smaller teams. Check with Brenda if you have any questions. Brenda will email information about the September 2017 orders to you. As usual, my door is open if you have any questions. We all need to work on this if we are to make this happen by this September. Gabrielle, General Manager, Human Resources, was the first to speak as the other managers walked out of the conference room. “Brenda, I really need your help to work out what employees we are going to need. Since the new customers will mostly use our paper and plastic products, it will be great if Manju and Chris can join us.” “I’ve got about 30 minutes”, said Chris. “Same here, I can spare about 30 minutes and then I have a production meeting”, added Manju. Gabrielle, Brenda, Chris and Manju sat down. The following is a transcript of the conversation that took place among these four managers. Brenda: First and foremost, we need to recruit a General Manager to head the European Division. Someone who is familiar with both plastic and paper Page 4 of 11 @S Perera_FHRM production at the very least. Added bonus if they have experience in glass and aluminium packaging. Gabrielle: Yes, and it is a new position. It will be like mixing Chris’ and Manju’s jobs to create a new job. So I will need to do a job analysis first. Chris: Then we need some factory workers. Manju and I can give you an estimate of employee numbers you need. But do you realise that the factory workers we need to work in the Europe product line will need a different skill set to the factory workers that we have at the moment? Gabrielle: Yes, and we also need to work out whether it is actually a new position or very similar to the job description of our existing factory workers. Chris: We haven’t looked at the job descriptions of our current factory workers for several years. Those might need updating as well. Manju: Most of our supervisors look at job descriptions as bureaucratic paper work. I am afraid sometimes they shift tasks around without considering the job descriptions or letting HR know. Gabrielle: This is not a good look. A few minor changes are fine, but if there are significant changes we do need to update those job descriptions. Brenda: I think one other thing we need to reflect on is whether we want to take the same specialisation approach with the factory workers who will be working in the European production line. Given our long production cycles, our factory workers are trained in one specialised task. They rarely see the big picture as to how it all come together as a final product. The specialisation approach helped maintain our really high levels of productivity, but that approach may not work with the new venture. We may want to think about some cross-training and job rotation options. Chris: That is a great idea. Specialisation kept our productivity high but I think some of our workers found the work to be mind-numbing after a while. Recently, Joe who has worked on the factory floor for 15 years told me that he could stack boxes in his sleep! Manju: Yes, but I think sometimes they take that as something to be proud of. On our floor, the teams really see themselves as packing team, raw material team etc. They take pride in their section’s output. That’s great, but the downside is that they get into all sorts of turf wars because they see themselves as their section and not as part of the whole paper packaging team. Gabrielle: Another aspect we need to think about in terms of the new production line is how rigidly we want to control factory workers’ schedules. With long production cycles, at the moment the supervisor sets the tasks weeks ahead and there is little the factory workers can do to change anything. With shorter production cycles, we may need to let the team decide how to swap tasks around to get higher productivity. Chris: Yes, that is an interesting point, something we need to reflect on. Page 5 of 11 @S Perera_FHRM Brenda: You know something that I saw when I visited our potential customers and their food and beverage factories? They start each day with a group meeting. The supervisor talks with each team. Tells them about their performance the previous day; for example, in production he tells them about the number of units completed and how many had to be thrown out as defects. Then they talk a little about that day’s performance goals. They also chat a little about social things related to employees. For example, someone’s partner is in hospital, someone’s child started kindergarten. All in all, it only takes about 5 minutes. I think it is something we can think about adopting with this new production team. Manju: I have been thinking about something like this for a while. I like that idea. Brenda: Before Franco started, when Annie was our CEO, we used to do these Town Hall meetings every quarter with each production line. Annie would talk to glass packaging one day and then the aluminium packaging the next. It was a good way to link employees to the big picture and show why their work really matters. I don’t think we have done that since Franco started; we have all been busy with the new strategic plan. I am going to suggest to Franco that we need to restart that. Gabrielle: Great ideas, but I am concerned that if we adopt these new strategies only with the new production team, we will end up with two different factories under the same name; two different cultures really. That would divide our team. Teamwork is one of our core values. So, as much as possible, as we think of strategies for the European production line, we should see whether we can adopt these with our existing factory workers. This “morning team catch-up” idea for example, I think if we do it, we should do it with the current employees too. Chris, Manju and Brenda nodded their heads in agreement. PART 2 Factory Workers for European Packaging Section After their initial management meeting to discuss the expansion of Arup’s customer base to include European customers, (see part 1 of the case study), the senior managers were encouraged to form small teams to work on changes required in different functions of the business. Chris (General Manager, Plastic Packaging), Manju (General Manager, Paper Packaging) and Gabrielle (General Manager, Human Resources) formed a small team to work on human resource activities related to the planned expansion. The following is an excerpt from a meeting that took place among these three managers. Gabrielle: Thank you for being part of this team, Chris and Manju. I really appreciate your input. Your experience in production and your understanding of the factory worker position will be of great value as we plan what HR needs to do to support this expansion. Page 6 of 11 @S Perera_FHRM Today, I would like to focus on two issues. First, recruitment and selection of factory workers for the European Packaging section. Second, we need to brainstorm ideas about how we set remuneration for these factory workers. Chris: No problem, Gabrielle. Manju and I ran the numbers and then we had a chat with Brenda. We think you are looking at about 150 factory workers for the new European Packaging section. Gabrielle: That is going to be challenging. According to Brenda, I need to have these employees in place at least by August. That gives me less than 5 months to recruit and place 150 factory workers. Manju: Yes, it is going to be challenging. Have you given some thought to recruitment? Gabrielle: Yes, and I also looked at our current employee demographics and externally what the labour market is like. Here is a quick summary of our current factory worker demographics (See Tables1 and 2). Chris: This confirms what we see every day on the factory floor. Our factory workers are mostly men and more likely to be over 30 years of age. You said you looked at some labour market information, Gabrielle, anything interesting there? Gabrielle: Yes, I looked at unemployment figures on the Australian Bureau of Statistics website. I narrowed them down to where we are, the Hunter region of Ne
w South Wales. Unemployment is lowest among men aged 30 to 55, our typical factory worker. It looks like that segment of the labour market is pretty saturated. But, something that may be useful is that highest unemployment, about 20%, is among youth, those aged 18-24 who live in this region. I found a report that identified rural youth unemployment hotspots, and Hunter region is one of them. Manju: Well, there’s an opportunity for us. We should specifically target those 18-24 year olds in our recruitment efforts. The other group we can focus on is women. It will be good to increase the number of women among the factory workers. Gabrielle: I agree. However, in the past, these are two groups that we haven’t had much success attracting. Often our recruitment practices attract men who are in their 30s or older. Our turnover is quite low, so we have never had to recruit large numbers like this before. To attract a large number of applicants, we really need to think of some creative recruitment practices. Chris: Yesterday, I was looking at our employee survey responses from December 2016. I thought the survey results to some extent can explain our low turnover. Ninety three percent of our current factory workers strongly agreed with the statement “I am proud to work for Arup”. And Gabrielle, you will like this, 94% strongly agreed with the statement “I would recommend others to work here”. Page 7 of 11 @S Perera_FHRM Manju: That is excellent news. We can use our current employees to get the message across to potential job applicants. We do have a strong reputation in the region as a large, desirable employer. However, I agree with Gabrielle, we really need to think creatively about our recruitment practices in this instance. Young people or women do not necessarily see factory worker positions as attractive. Gabrielle: I can ask Sandra, who handles recruitment, to come up with some specific suggestions. We usually ask for at least one year experience in a factory environment, but I don’t think we need that for these European packaging factory worker positions, do we? Manju: No, Chris and I chatted about this. I don’t think it matters whether the applicants have any experience or not. From our perspective, the three most important attributes are; first, being fit and healthy. At times the factory worker role can be physically demanding. There is heavy lifting and repetitive movements involved in the job. Second, attention to detail. Our product quality depends of workers’ attention to detail. And third, taking safety requirements seriously. Working on a factory floor can be hazardous. That is extremely important. Chris: Yes, and they must be willing to do shift work. Our morning shift starts at 6.00am and the afternoon shift is from 3.00 in the afternoon until 10.00pm. Not everyone will be willing to start that early or work so late. Manju: And teamwork, we are looking for people who enjoy working in a team environment. Gabrielle: I agree Manju. That’s important. I think general knowledge and experience using basic tools will be nice to have as well. I think we have covered a lot of information about recruitment and selection of the factory workers for the European Packaging section. Now to my second point, pay and benefits. Any ideas? Chris: Well, like our current factory worker position, this new position will be covered by the Manufacturing and Associated Industries Award. We have always kept the base pay slightly above the Award rate; I suggest we do the same here. Manju: Yes, I agree, being slightly above the Award rate helps in attracting new applicants. But, I have been reflecting on this. The factory workers in the European Packaging section will have a wider skill set compared to our current factory workers. They will work with both plastic and paper products. So, should their base pay be higher than our current factory workers? Gabrielle: Ideally yes. But if we do that, a large number of current factory workers might want to transfer to the European section. It can create staffing issues in your departments. Chris: One way to resolve this issue maybe to think of some payment that is in addition to base pay. For example, I am thinking of a skill based incentive that we can pay based on completion of different types skill training. Page 8 of 11 @S Perera_FHRM Manju: That’s a good option. But let’s also look at the total remuneration package. It is not always about the money, is it? We can add some benefits to their total remuneration package that can attract new applicants as well as retain them once they are hired. CASE STUDY QUESTIONS Please ensure that you have read the complete case study (i.e., both Parts 1 and 2) before you answer these questions. 1. What specific recruitment practices would you recommend to Arup Packaging Limited to in order to reach applicants aged 18-24? What specific recruitment practices could Arup adopt to reach potential female applicants? Justify your recommendations. 2. Drawing on the meeting excerpt in Part 2 and other case material, list the selection criteria you would recommend to be used to select applicants for Factory Worker – European Packaging position. Justify your recommendations. 3. Identify selection methods to measure each selection criteria you recommended in response to question 2. In choosing selection methods, take into consideration time, cost and the large number of factory workers that need to be hired in this case. Justify your recommended selection methods. 4. What type of incentives and benefits could Gabrielle and the team use in order to attract applicants to the Factory Worker European Packaging position? Suggest at least 1 incentive and 2 benefits. Justify your recommendations. Use approximately 350-400 words per question in your response. The introduction should be no more than 200 words. You need to support your responses with relevant academic literature. Make sure you use the HR concepts discussed in this course when responding to these questions and apply them to this case. Look at assessment related material in the course outline (especially in relation to referencing and formatting requirements) and the assessment feedback sheet for this assignment before you finalise your response. Page 9 of 11 @S Perera_FHRM DEMOGRAPHICS (FACTORY WORKERS) ARUP PACKAGING LIMITED Table 1: Employees by Gender Gender Number of Employees % Total Factory Workers Male 526 87.3% Female 76 12.6% Total 602 Table 2: Employees by Age Categories Age Category Number of Employees % Total Factory Workers 17 years and under 4 0.7% 18 to 20 years 15 2.5% 21 to 24 years 36 6.0% 25 to 34 years 84 14.0% 35 to 44 years 192 31.9% 45 to 54 years 169 28.1% 55 to 64 years 84 14.0% 65 years and over 18 3.0% Total 602 Page 10 of 11 @S Perera_FHRM Figure 1: Current organisation chart of the top management team at Arup Packaging Limited CEO Franco Weller General Manager, Plastic Packaging Chris Roberts General Manager, Paper Packaging Manju Putnam Chief Financial Officer General Manager, Supply and Logistics Jose Vasquez General Manager, Human Resources Jacqui O’Connor Head of Strategy and Business Development Brenda Petersen General Manager, Glass Packaging General Manager, Aluminium Packaging Jeremy Sutcliffe Abi Lewis Gabrielle Pestoni Page 11 of 11 @S Perera_FHRM CEO Franco Weller General Manager, Plastic Packaging Chris Roberts General Manager, Paper Packaging Manju Putnam Chief Financial Officer General Manager, Supply and Logistics Jose Vasquez General Manager, Human Resources Jacqui O’Connor General Manager, Packaging- Europe VACANT Head of Strategy and Business Development Brenda Petersen General Manager, Glass Packaging General Manager, Aluminium Packaging Jeremy Sutcliffe Abi Lewis Gabrielle Pestoni Figure 2: Proposed organisation chart of the top management team at Arup Packaging Limited .