Sigtek and decline in the profit margin was
Sigtek is a small telecommunications company located in the New England region. Sigtek was founded by three Western Electric veterans to produce circuit boards for signal handling which it sold to AT&T and other long-distance providers. Sigtek had been acquired by a large technology company for about 10 years. The company practiced a laissez faire approach in managing Sigtek. Prior to their acquisition by Telwork, the profit margin sky-rocketed to nearly $100 million with 1,000 employees only to collapse to about 800 employees and $40 million a couple years after.
The rapid increase and decline in the profit margin was due to the deconsolidation of long-distance providers, mainly AT&T, and the influx of startup switch board manufacturers, due to easy entry into the market niche. In November of the year Telwork took over operations, they began formulating a Total Quality program based on a highly acclaimed model not only to improve product quality and encourage management practices, but also to gather all of the scattered and diverse companies they owned under a single corporate umbrella.
In April, they were ready to train instructors for the Total Quality program; John Smithers would be the candidate for Sigtek. Smithers was uneasy about taking on an instructor role due to the separation he had felt in the company, the differing corporate culture between his boss, Cross and Patricof. Smithers was more than adequate to assume the role, his experience with small computer start-up companies and his own work within the company were examples of his strong management abilities.
There were multiple barriers along the way for the Total Quality management program. After attempting to make the program a success Smithers stated, “the writing is on the wall” he asked to stop teaching but management would not allow this to happen because he was “too valuable and had too many followers to lose. ” Smithers found himself updating his resume in December of that year, lamenting, “I got into an organization where I thought I could accomplish something, I found a good mentor, but it didn’t work. ” He asks, “Could I have done something different? The problems that Sigtek face as a corporation, having been bought by Telwork, are largely centered on management and their approach as well as the one used to implement the quality program. With the merging of such companies, blending corporate culture and creating cohesion should be a priority, which management failed to do. The implementation of such a plan by Murphy and Smithers failed for various reasons including the lack of a unified corporate culture and cohesion from the management department as a whole.
As explained in the case, management perceived problems such as the components bouncing out of the boards as insignificant and focused on apparently more important issues. Failure to successfully implement the quality program led to a downward spiral resulting in an “untrusting environment. ” Furthermore, the “cookie cutter program” was implemented to a team that had not yet been formed. Changing corporate culture and, in addition, creating a cohesive workforce in that culture is a gradual process that cannot be accomplished immediately through classes.
The integration of initiatives in the quality program at Sigtek requires a cultural assessment by managers and a high degree of leadership in the organization, which Smithers and Murphy lacked. In short, the company was not ready to manage organizational change. There is a deep organizational gulf which divides the company – specifically between the Engineering and Manufacturing operations. Furthermore, the groups are also physically divided by a long hallway between two separate buildings. Smithers feared the deep divide would make any changes very difficult.
Additionally, Richard Patricof only promoted those who parroted his beliefs or rarely questioned him. It appeared that Patricof was also looking for personal gain and not really interested in those below him. Smithers attempted to implement the Top Quality Program, while initial feedback was positive, management did not follow up with plans which led to workers eventually pushing back, morale of the company declined. Smithers became caught in the middle and felt that he had compromised his plans to truly help employees.
One of the main complications was that workers on the line understood the Top Quality plans but the managers did not. Therefore, credibility became a problem for management and employees began to not rely on anything being improved. There were mixed messages from the executives, change was slow and cumbersome and there never seemed to be a unified plan. Due to this, buy-in was never achieved. Organizational change is a necessary process in growing a company’s potential and reach. However, change is often met by resistance.
Recommendations for Sigtek would be to employ an Organizational Change model – such as Kotter’s 8-Step Model. Step One: Create Urgency – For change to happen, it helps if the whole company really wants it. Develop a sense of urgency around the need for change. This may help you spark the initial motivation to get things moving. Step Two: Form a Powerful Coalition – Convince people that change is necessary. This often takes strong leadership and visible support from key people within your organization. Managing change isn’t enough – you have to lead it.
Step Three: Create a Vision for Change – When you first start thinking about change, there will probably be many great ideas and solutions floating around. Link these concepts to an overall vision that people can grasp easily and remember. Step Four: Communicate the Vision – What you do with your vision after you create it will determine your success. Your message will probably have strong competition from other day-to-day communications within the company, so you need to communicate it frequently and powerfully, and embed it within everything that you do.
Step Five: Remove Obstacles – If you follow these steps and reach this point in the change process, you’ve been talking about your vision and building buy-in from all levels of the organization. Hopefully, your staff wants to get busy and achieve the benefits that you’ve been promoting. Step Six: Create Short-term Wins – Nothing motivates more than success. Give your company a taste of victory early in the change process. Within a short time frame (this could be a month or a year, depending on the type of change), you’ll want to have results that your staff can see.
Without this, critics and negative thinkers might hurt your progress. Step Seven: Build on the Change – Kotter argues that many change projects fail because victory is declared too early. Real change runs deep. Quick wins are only the beginning of what needs to be done to achieve long-term change. Step Eight: Anchor the Changes in Corporate Culture – Finally, to make any change stick, it should become part of the core of your organization. Your corporate culture often determines what gets done, so the values behind your vision must show in day-to-day work. Mind Tools, 2011) Sigtek did not implement a proper organizational change model and could have benefitted from many of Kotter’s tactics, especially “Removing Obstacles. ” The purpose of the Total Quality Program should have been to provide product and service quality better than all competitors, the lowest-cost quality producer, to pursue quality improvement, manage through leadership, personally involve all employees through participative activity, and to be comprised of employees that approach the job fearlessly. However, they only achieved pure failure.
Telework was implementing the Total Quality program within a small organization as Sigtek and producing a program that fosters lies to employees. By separating the engineering and operations both departments clash, due to lack of performance management Instead, Sigtek should focus on positive reinforcement, allow the employees to stress their concerns to the higher management personnel. Sigtek should not lean on a rapid change in performance management to increase productivity and morale and should not force a program on employees, without them having the benefit of understanding the mission of the organization or program.
Appointing a lead, where both sides can come to an agreement would be more beneficial and introducing a program that integrates both department to work together, dissolves future issues with employees would be received more positively. In the end, truth outweighs private practices and job design and performance management are placed under one umbrella to influence positive results in employee relations and job results. ——————————————– [ 1 ]. Mind Tools. (2011). Mind Tools. Retrieved October 4, 2011, from Kotter’s 8-Step Change Model: http://www. mindtools. com/pages/article/newPPM_82. htm