LEADERSHIP AND MANAGEMENT

At 6.30am on January 8, 2017, Ronald Huggins, a plant manager at a manufacturing plant in Modderfontein at AEL South Africa (a business in the AECI Group Limited), near ohannesburg in South Africa, walked into the factory through the turnstile gate. He was considering how to lead his team to ensure that the plant increased its capacity to meet growing international product demand. The visibly shrinking local mining industry, which accounted for 80 percent of AEL's total product supply, had affected local demand for the company's products. AEL had allocated only 20 percent of its total production to the growing international demand due to a lack of plant capacity. Huggins battled with how to grow the plant's capacity for international product supply from 20 percent to 80 percent. He thought about the challenges his team had faced, as well as the breakthroughs they had accomplished. They needed to stay ahead of the fierce competition that existed within the industry.

BACKGROUND

In 1996, Huggins started his career at AEL as an artisan and moved up through the ranks over the years. He held a section engineering management role for three years before he was promoted to plant manager of the initiating systems automated plant (ISAP) in 2013. Some of his plant manager roles involved management of the shock tube extrusion and automated assembly lines. His previous role as a section engineering manager involved working with the system upgrade project from the first phase, such as in the implementation of engineering standards. There were 121 employees reporting to Huggins, including 7 direct reports. He held a Master of Business Administration from the Gordon Institute of Business Science and a Bachelor of Technology in electrical and electronics engineering from the University of South Africa.

Company Background

AEL was a member of the Mining Solutions businesses of the established South African company, African Explosives and Chemical Industries (AECI) Group, listed on the Johannesburg Stock Exchange. It was originally designed to manufacture ammunition for use in the Anglo-Boer War (also known as the South African War) between the British Empire and the two Boer states from 1899 to 1902. The company was the leader in the development, production, and commercial supply of explosives, blasting services, and initiating systems for the construction, mining, and extraction markets in both Indonesia and Africa.

AEL had a footprint in more than 20 countries. It had 58 plants, 34 sites, and offices and production facilities in 16 businesses throughout Africa, as well as in Southeast Asia, Australia, Europe, and selected regions in South America. The company's offices and production facilities were in Botswana, the Democratic Republic of Congo, Ghana, Ethiopia, Egypt, Indonesia, Mali, Tanzania, Zambia and Zimbabwe, as well as in South Africa, where its head office was based in Modderfontein.

In 2006, a high-speed automated assembly line, known as the ISAP, was designed, built, and commissioned at Modderfontein to deliver high volumes of shock tube at reduced cycle times, significantly better than the previous manual processes. There were various automation stages involved in the ISAP, from the detonator manufacturing process right through to the final product assembly.

AEL's Modderfontein plant had been the flagship of the AECI Group since its inception. It therefore did not come as a surprise when the site was identified as ideal for implementing the new, advanced automated technology system that would replace the outdated manual system. The decision was aimed at achieving cheaper mass production of products, with minimal manual labor in the initiation system. The need to improve plant capacity to meet the growing international market demand was even more urgent considering the major restructuring AEL underwent in 2011 and 2012, which had led to retrenchments and loss of jobs. The restructuring became more apparent following the Marikana massacre, in which 34 miners were killed and 78 were seriously injured after the South African Police Service opened fire on a platinum mine in the Northwest province on August 16, 2012.

AECL's Mining Solutions pillar comprised chemicals and explosives, the latter falling under AEL, which had identified Australia and Indonesia as markets in which to establish its international presence. In 2017, AEL's initiating systems increased the company's bulk explosives from 1.7 percent to 6.5 percent. In South Africa, explosives volume grew by 4.8 percent and in the second quarter in 2017, but due to several mine closures, the initiating systems volumes ended the year with 1 percent growth. On the other hand, AEL's South African and other businesses in Africa experienced an impressive 5.2 percent growth by gaining new business on the continent. Meanwhile, AEL's Asia-Pacific regions saw higher year-on-year volumes of 12.5 percent, along with cash-generative, profitable business in Australia and Indonesia.

In line with the AECI Group strategy that involved continued geographical footprint expansion and ongoing domestic market growth, AEL was identified as one of the five pillars of growth under Mining Solutions. Ongoing innovation projects included the question of how to address the capacity growth required by increasing demand from the international market. Such projects were in line with the AECI Group's goals of continued success and profitability of the organization as a whole.

PRODUCTION, PEOPLE AND MACHINES: THE FISHBONE ANALYSIS

The major investment in the ISAP upgrade in 2006 did not yield the expected results as far as return on shareholder investments was concerned. The stakeholder pressure began to mount because plant performance was at less than half of the set target and was not improving. In addition, the plant experienced challenges in identifying the root causes of problems and finding solutions. There was much blaming, and one easy scapegoat was the inefficiency of the machines, as they ran at about 40 percent of the target. To improve and eventually reach the targeted performance, the plant would need to more than double what is produced.

In 2013, the restructuring, retrenchments, and job losses that were a result of the shrinking demand for products in the local mining industry led to the decision to close the manual process plant, which had become obsolete and costly. Doing so led to the birth of an automated section that replaced manual production. This move occurred due to the belief that the newly improved, automated process was capable of cheaper mass production and could supply all the AEL regions. Unfortunately, the ISAP struggled to meet expectations and required immediate intervention.

Before moving roles to production, Huggins had successfully shaped AEL's engineering team and improved its competency. The move to production brought unique challenges of its own. Unlike the engineering department, which was mostly task oriented, production was mostly people oriented. For example, in production, Huggins found himself dealing with a lot of human issues, such as division among teams as well as division among management and shop-floor employees. Lack of motivation, absenteeism, and poor performance were some of the biggest challenges. Huggins had to iron out when he first moved into the office. He understood that moving from 1.2 million to 3 million units per month would mean 750,000 units per week and thus required more than a 100 percent improvement in the team's performance.

People Management

Following the restructuring, Huggins was one of four plant managers in the new structure. Huggins was responsible for ensuring that the company reached the desired international capacity. This required a highly motivated, goal-oriented team led by someone who possessed critical leadership styles, skills, and qualities. As a plant manager, Huggins aimed to achieve two milestones: one was to reach the target of 3 million units per month at the ISAP, and the second was to reach 12 million units per month for detonators. One of Huggin's philosophies, which he shared passionately and had managed to instill in his team, was to "own your problem." This strongly emphasized the importance of being self-sufficient by figuring out solutions, that is, finding solutions as a team instead of seeking help from the outside or from consultants. Huggins ensured the team's competence through ongoing multi- skilling and training. As a result, Huggin's subordinates attested to the fact that the team was completely competent, from engineering all the way through to quality management processes.

As part of transitioning from a task-oriented approach to a people-oriented approach in the engineering department, Huggins had to make a quick mental switch from "tools and spanners" to the "people and teams" who ran the machines. These people were not just tools or resources, they were people with emotions and feelings, from different cultural backgrounds and ethnicities, and of different genders and age groups. Huggins who had to learn how to manage a team made up of individuals where each team member had a different racial background from his own. The engineering team consisted of 121 employees, including team leaders and operators. Huggins was well-known across the plant from the time he had spent in the engineering department. He realized the needed benefit of learning each team member's name and background and the importance of addressing every single one of them by name. On top of this, he took it upon himself to learn Zulu, one of South Africa's 11 official languages and the one most widely used at the AEL Modderfontein plant. This was a breakthrough into winning the people's hearts, respect, and trust.

EFFECTIVE LEADERSHIP, EFFECTIVE LISTENING

Long before Huggins joined the ISAP production team, there was an outcry to move away from the plant's shift pattern, which was famously known as the '2-2-3." The shift was designed in such a way that employees worked two days and three nights, and then rested for two days. The employees suggested a change in favor of what was known as the "4 by 4" shift pattern, wherein employees worked two days and nights, and then rested for four days. The employees believed that the former shift pattern (2-2-3) had been a major cause of excessive absenteeism due to fatigue caused by limited rest and family time. The team felt that the two rest days allocated were insufficient for resting and catching up on family matters. Unfortunately, Huggin's predecessor and the leadership at that time were reluctant to respond favorably and hence rejected the suggestions based on their fear of the unknown.

One of the first things Huggins embarked on as an initiative toward building a winning team that could both be trusted and be trusted was to involve the team in addressing the dilemma of meeting the required targets. Huggins consulted his team and created an idea-sharing platform. The first idea suggested by the team was a shift pattern change. Employees believed that the shift pattern design was the reason behind the plant's poor performance and failure to reach targets. The employees therefore eagerly pushed for the 4 by 4 shift pattern. The line managers proudly disclosed that before Huggins came along, they had conducted a secret, unauthorized two-month trial of the 12-hour shift pattern. During the trial, performance had significantly improved, and the targets were reached.

Investigations conducted by Huggins showed that the proposed 12-hour shift pattern was the same as the existing shift pattern in terms of the total hours worked. According to Huggin's research on sift patterns, he identified that there was nothing harmful about the 4 by 4 shift

pattern, in fact, it had been shown to be more practical and favorable, especially in critical industries that required extended focus and concentration levels such as in health and safety working environments. Given the employees' motivation to change to the new shift pattern, Huggins consulted with management, employees' representative teams, and the risk assessments team on extended chemical exposure concerns, additional cost implications, fatigue possibilities, and the legal aspects of explosives regulations that might hinder the successful implementation of the new 12-hour shift pattern. Following the positive outcomes of these consultations, the company decided to do an authorized trial run. Before the trial run commenced, several terms and conditions were communicated to employees, one of which was that safety and quality were not to be compromised.

The trial run was a big success and new production numbers improve from 1.2 million to 2 million units. This represented an almost 30 percent improvement in less than three months. The successful implementation of the 4 by 4 shift pattern won Huggins the trust of his team. This reciprocal exchange between the two parties helped to build a solid foundation for a trusting, successful working relationship

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MACHINE EFFICIENCY

At the beginning of 2014, after the successful shift pattern change, the plant embarked on another major intervention that led to further improvements in plant performance. One of the products specifically manufactured for one of AEL's main clients was experiencing a major quality failure, valued at about R6.5 million. The quality defect was related to a machine part called the "crimper." Each of the five machines consisted of two crimpers, totaling ten crimpers. The defect had cost the plant approximately R500,000 per month in maintenance.

The first thing Huggins did was gather everyone working on those machines for a group troubleshooting session. The goal of the session was to identify the problem and determine what could be done to fix it. The team brainstormed an astonishing number of ideas, which led to an impressive number of designs, including one that was collectively agreed upon by the team. As a follow-up, Huggins brought in a company to assist in refining the final design into a working prototype crimper. The prototype's installation and trial run in one machine was a huge success, and eight more crimpers were built and installed. The entire project cost a little under R0.5 million, but it saved the company approximately R1.2 million per month in maintenance costs, improved quality all the way to 99.9 percent for the first time ever, and improved monthly production from 2.6 million units to 2.9 million units. The project paid off in less than three months.

From an analytical point of view, the success of the crimper design project was about more than just good design, it was mostly about a successful collaborative team effort and was a living testimony of the plant's self-sufficient and self-reliant approach. The project was a success because the team took a personal interest in the success of the crimper, and the design was their idea, with no external help from consultants. The crimper project gave the people a sense of both achievement and pride because it also made them realize their potential and capabilities, which was exactly what Huggins wanted to achieve. It was through this project that the team was built and the employees integrated. Following the success of the crimper design project, a number of other related projects were started to upskill machine operators so that they could understand and fix their own machine breakdowns, thereby freeing the artisans to focus on bigger, more complicated breakdowns and projects.

Motivation

In 2015, following the successful achievement of the 3 million units per month target, another bottleneck appeared in the manual assembly line process. After having reached the 3 million units per month target, a dip followed and then a quick recovery following the Lonmin platinum mine strike in 2012 - 2013. Huggins identified a concerning lack of motivation as well as a low

sense of morale that prevented the team from reaching its production target. One production shift could make only 7,000 instead of the 14,000 units that were expected on each shift. As part of his efforts to remedy the observed situations, Huggins decided to motivate and enhance the morale of his employees. He approached the team and his fellow managers with an initial suggested target of 10,000 units (3,000 units more), agreeing to offer meal vouchers to the team as an incentive for achieving the new target. The employees had a goal, something to look forward to, and the satisfaction that would come with reaching that goal.

Initially, the agreement was based on canteen meal vouchers, but this was later upgraded to take out meals from Nando's, a South African restaurant famous for its grilled chicken meals. After 47 days, each shift had produced and exceeded the 14,000-unit target, and each shift received 60 bags worth of the promised food for each shift. The monthly food expense reached a record high of R8,000 and aroused the concerns of the company's top management. The reward system lasted for 12 months before it was stopped. Luckily, Huggins had been upfront with the teams, pointing out that the incentive was not permanent and that if would cease at some point. The team therefore knew that they had to enjoy it while it lasted.

The impressive component of the voucher incentive was that, among other things, it created a common goal and interest. It also brought the teams together and helped them to realize their potential while enjoying the reward. In order to ensure that there would be no unexpected or undesirable outcomes, prior to the incentive's implementation, Huggins made a deal with the teams to make safety and quality the top priorities. The entire team, which consisted of technicians, artisans, operators, and the production team, compiled and played by the rules. The success of the takeout scheme was such that, even after it was stopped, employee performance kept increasing beyond the initial target and consistently reached and maintained 15,300 units per machine.

Performance Management and Employee Retention

"I have not had a single resignation on my plant since I have taken over the same team I have started with, I still have today," said Huggins, when asked about the teams he had built. He also mentioned incidents where employees from other departments had approached him about possible opportunities to work under his leadership. He declared his commitment to developing and upskilling his team. Huggins also confessed that he spent more of his allocated budget on employee training than other managers did. Many employees were trained for the sake of personal improvement and to ensure that they stayed motivated. Even though Huggin's machine operators were not tradespeople by qualification, they were capable of fixing many of their own machine breakdowns, freeing artisans to work on highly skilled and more challenging jobs.

After the restructuring that occurred at AEL in 2011 and 2012, Huggin's biggest challenge was to improve employee motivation levels, which involved empowering them through competency and skill building. In order to do so successfully, he had to get rid of the "us versus them" attitude, or the division between operators and technician (or artisans), and operators and management. In a way, he needed to build a team of teams, where everyone saw each other as one team united by one vision and one goal.

AEL shift managers had all been with the company a minimum of 10 years. They described a good leader as someone who was responsible for shaping the work environment, and they all agreed that such shaping had to occur through transparency and open and honest direct communication, which encouraged accountability. During a focus group interview, the shift managers proudly disclosed that they were among the very few well-paid employees in the industry. They also felt that their high performance was not well recognized. The shift managers made it very clear that money was simply not sufficient motivation.

The source of the dissatisfaction made sense when linked to a comment made by a former

operations manager, who said, "People get paid to do their job." The statement appeared to be one of the most popular and general overviews of employees by their employers. Such a statement could seem logical and harmless but could unfortunately be understood literally and have a detrimental impact on how management viewed employees. That is, such a view could lead employers to view employees as resources, pieces of machinery or equipment, without feelings and emotions who were hired to do the job they were paid for, not to have an opinion or to question how things were done. That statement alone seemed to be one of the root causes of the team's former dissatisfaction.

COMPETITION, THE GOAL, AND THE FUTURE

One point of concern was a difference in views among the management, operations manager and the assembly plant employee, shift managers on the competition and what the organization should focus on to ensure growth and profitability, the organization's goal alignment. The shift managers strongly believed in the potential growth of the local mining industry by means of reclaiming the piece that was taken away by the "flexible small companies." The shift managers believed that it was the organization's rigidity, and nothing more, that caused it to lose the local market share to the flexible local competition.

The reality was that the local mining industry was indeed shrinking, but the insufficient communication between the organization and its lower-level employees had to be addressed too. The top management was crystal clear on its plans to cut its losses, as far as the local mining industry was concerned, and focused on the bigger picture, namely, internationalization. The challenge was how to align the management and employees and move in the same direction remained.

THE WAY FORWARD

The fact that 80 percent and 20 percent of AEL's production served the local and international markets, respectively, proved to be counterproductive given the forecasted local market versus the growing international market. The plant urgently needed to focus its resources on future-proofing the organization. Such plans involved redesigned lines and machinery, like the coiler prototype machine to ensure that the organization had enough capacity to satisfy growing international market demands for coiler end products. Basically, 20 percent of the organization's total product supply is needed to target the local mining market, whereas 80 percent is needed to target the international mining market.

When asked about the future of AEL, the shift managers collectively raised their concerns about the shrinking local market. The competition, which had started as "babies," had grown and claimed a share of the market. Although they did not offer the same high-class services and products as AEL did, these competitors were apparently more flexible. For example, they could supply products of any quantity, according to customer demands, with no minimum order. However, both junior and senior management of the organization agreed on one thing: the local mining industry was shrinking, and remedial action was needed to ensure that the company remained both afloat and profitable. The question remained; how could Huggins take the plant to the next level of excellence to supply the international demand?

Source: Ivey Case Study, 2020-03-30

QUESTION 1

Identify the factors applied by Huggins in order to enhance team performance and goal attainment.

QUESTION 2

Evaluate Huggin's servant leadership style and how he applied it to lead his team to high performance. Support with THREE (3) justifications.

QUESTION 3

Propose a solution how Huggins can enhance his team's motivation levels to stimulate performance.