In 1990, Harold Sirkin and George Stark published an article in July-August issue of the Harvard Business Review called Fix the Process, not the problem. For copyright reasons, I cannot use it verbatim. But I will summarise its main ideas. The story starts in 1983. A factory making paper was losing $ 1 million a month. At the time, the chief executive officer, the CEO, was considering closing the company, firing all the employees, and writing off millions of dollars. Within a short time span though, the paper factory became profitable again. The reason was simple: every employee became a problem solver. Rather than waiting for top management to make decisions, employees took the initiative to solve problems as they appeared. This meant a complete change in the companys corporate culture. This change was neither easy nor obvious. The paper factory had 13 product lines. Only four were profitable or had the potential to become profitable. The rest of the products made no money but the sales were necessary to keep the machines running and employees employed. Clearly, the company had to focus on increasing the sales of these four product lines that made money. But that was very difficult. The only way was to improve the quality of the product and guarantee the quick delivery of its products however, this was the companys weak points. To make things worse, top management had a confrontational relationship with its employees. The first approach was top-down. Top management, analysed the problem (from their perspective only) and identified 10 key strategic initiatives. The plans would require investing an extra $ 25 million into the company and it would take five years. As the paper factory was losing $ 1 million every month, that time was impossible. So that approached was killed by top management. In desperation, top management proposed a bottom up approach. Employees were told that without their help, the company would go bankrupt and everyone would lose their job. However, the company was willing to invest time and resources to save the company. However, the employees had to solve the quality problems and the delivery problem. Top management was not sure how that could be done but they were ready to support their employees 100%. The paper factory was re-organized into five product groups (the four money making products and one that included everything else). The first step was to focus on learning from past mistakes. The input from everyone from the managers to the clerks was sought in a series of intensive brainstorming sessions. They contacted their three largest customers andgo them involved in these brainstorming sessions. The teams went to visit their customers factories to better understand their work flow as well. It was clear that shipping low quality paper was their single biggest problem. They had learned things that they had never known before and it helped them change the way they operated. They continued visiting their customers, bringing everyone along - machine operators, clerks, . not just sales people. If they wanted to improve things, they had no choice but to go right into the small details. The article goes into lots of details which is not necessary for us to consider. However, a few examples will illustrate some of the changes that were made. Early on in the transformation of the paper factory, the workers decided that low-quality paper would not be sent to customers. This was important to res-establish the companys reputation with its customers. However, it was costly as rolls of low quality paper were set aside. It also meant that the shipping targets set by the top management were not going to be achieved. Everyone understood that but agreed that the future of the company depended on its ability to produce good quality paper. However, after some time, the company was no longer content in scrapping poor quality paper. It wanted to change the way it produced paper to avoid producing poor quality paper in the first place. It was decided that an inspector would be placed at each machine. Whenever poor quality paper was produced, the machine would be stopped and the machine would be adjusted until it produced better quality paper. This extra cost was necessary to reduce the rejecting rate by 75%. These inspectors allowed the employees to learn how to make better paper in a more consistent manner Six months later, the customers had noticed the improved quality of the paper. A big customer called and said that if the quality was maintained, it would substantially increase its orders for paper. The machine operators continued to look for ways to improve the quality. They found not one major cause, but multiple small things that needed to change. They realized that if they changed some of the spare parts more often, the quality would improve. They also decided to buy raw material that was a bit more expensive but produced better results. These decisions were made without the approval of top management. Once the benefits of these changes were clear, the workers informed top management. By this time, the factory was producing good quality paper almost all the time, so there was no need for inspectors anymore. This reduced the cost of making the paper. By the end of the year, the sales had increased dramatically. The relationship between top management and the workers was excellent. Profits from the four profitable product lines had doubled. The factory had been cleaned up and customers were now invited to tour the factory. But things were not over. Over the previous year, the workers had developed an in-depth understanding of the needs of their customers. This in-depth understanding would have been unimaginable before this. Again, it was not one major discover but a series of small insights. For example, one machine operator made a suggestion which alone the factory to develop an unexpected competitive advantage. The machine operator had visited one of the customers plants. After watching their production process for a long time, he started talking to their machine operators. He said that they could probably use thinner paper. This seemed like a bad idea because paper is sold by weight. However, the manager realized that their competitors could not produce paper that was that thin. In effect, this was a new product with no competitor. This new competitive advantage was critical for the factorys long term survival. In the conclusion to the article, the authors contrast good companies and bad companies. Bad companies spend 90% of their time dealing with crises (upset customers, broken machines, and so forth). Good companies spend 80% of their time anticipating problems or finding new opportunities. They invest a lot in training staff not just in basic skills such as how to operate a machine but in advanced problem solving skills, such as how to identify the root causes of problems.

Question B1: At the beginning of the case, top management tried to solve the problem by themselves. They failed. Later, the responsibility for solving the problem was given to employees who had direct contact with customers. They succeed. Explain three reasons why the decision-making of lower ranking employees more effective than the decision of top management. (15 marks)

Question B2: Using the theories of leadership discussed in class and the facts of the text, explain which theory of leadership is being used in the case. Give two examples from the case to justify your choice. (10 marks)

Question B3: This case is a wonderful example of organizational change. Compare the facts of the case with the theory of organizational discussed in class. Create a table where you show the key steps in organizational change and what happened in this case. (15 marks)