QUESTION 2

Ampang Film Productions is a film production entity. owned by a trio of best friends, Ramlee, Aziz and Satar. The partnership is located at the heart of Kuala Lumpur, Malaysia. Founded in January 2, 2004, Ampang Film Productions began its operations with a production of dramas and telemovies for Radio Televisyen Malaysia (RTM), the nation's public broadcaster, and ASTRO, a Pay television (TV) service. Ampang Film Productions gradually earned respect as one of the more prolific TV production houses in the country - its productions consistently had prime time leverage on national TV As of 2010, they produced 40 drama series and 25 telemovies altogether.

Among those which achieved high ratings include:

1. Dreaming Tower (13-episode family drama)

2. Metro Squad (6-episode police drama)

3. Tropic Tiger (IO-episode army drama)

4. Special Unit series Seasons 1-4 (156-episode police drama)

5. The Promises of Diana

6. Ember

7. Mary Marianne 1

8. Mary Marianne 2

9. Shadow Hunter

The Partnership Agreement

The three partners were bound by a partnership agreement i.e. Partnership Deed or Articles of Partnership. It contained the following terms:

x. All partners were allowed interest on capital at 10% per annum.

xi. All partners were to be charged interest on drawings at 10% per annum, calculated from the date of such drawings.

xii. Partners Aziz and Ramlee were credited with salaries of RM 3,000 per month while remaining partner Satar RM 2,500 per month.

xiii. All partners were to share the balance of profit and loss in accordance to their respective capital contribution.

Converting Partnership to Company

Soon after their success in the TV production industry, the partners decided to expand their business into film. Realizing that film making would require a big budget, they agreed to convert the partnership into a Sdn. Bhd. (Limited Liability Company). They felt that this would enable them to avoid any liability for whatever debts the business would incur. In addition, having the 'Sdn. Bhd.' made it easier for them to obtain loan facilities. Ramlee, as general manager, had been eager to know about the ways of registering a company vis-a-vis a partnership and had asked his secretary to deal with the respective jurisdictions.

On 1st January 2014, the partners terminated the partnership and formed a limited liability company named Ampang Film Productions Sdn. Bhd. All assets and liabilities of the partnership are taken over by the company, except for one motor van with a carrying amount of RM 9,400, of which Ramlee has bought over at an agreed price of RM 5,000.

The purchase consideration consisted of several units of ordinary shares at RMI each - according to the value of the partnership's assets - in Ampang Productions Sdn. Bhd. and divided among the partners in a profit sharing ratio. All other remaining balances in the partners' current accounts had been settled in cash. The cost of dissolution incurred had been RM 2,400.

Ampang Film Productions Sdn. Bhd.

Once the company took form, the three of them and several members of their top management arranged to have their very first meeting on the company's directions and goals. The meeting was also to decide on the company's new organization structure.

During the meeting, it was agreed that Ramlee would be the Chief Executive Officer (CEO) of the company, him being the largest shareholder of the company. Aziz would continue his position as Chief Financial Officer (CFO), assisted by Maria, a new Account Executive, and several otherassistants. Satar would hold the position as Chief Operating Officer (COO). The three of them would sit on the Board of Directors. The new organisational structure reflected these changes.

Figure 1 Ampang Film Productions' New Organizational Structure

By the end of the meeting, they were able to draw up the company's vision and mission:

Vision:

To enhance the Malay arts appreciation in building a global reputation for Malaysian films.

Mission:

1. To venture into new methods of directing by facilitating new technologies and infrastructure in modern film making.

2. To create new intellectual masterpieces by cultivating ideas via sensitivity and creativity in themes, techniques and conceptual local films.

3. To upgrade the local film scene through various modes of realism and originality.

4. To highlight "Our Films Reflect Us" via quality films that portray social and moral themes.

5. To create healthy generation of viewers via intellectually stimulating art messages.

6. To continue the survival of film producers towards crafting excellence in film production as a national agenda.

Change of Culture

Under the new restructure, all employees were informed of the company's vision and mission. The two statements were distributed across all levels of management. As a consequence, all employees had to adhere to the new rules and regulations.

This appeared to be the most difficult part for them. Ramlee, as CEO, had little time for this and, instead, had empowered all Heads of Departments to manage it. He spent his time entertaining the clients.

The employees began to show signs that they were refusing to adapt to the changes. Among others, the new directions required the company to upgrade its technologies to ensure that it would be able to produce quality films. That Ampang did and, consequently, the new technologies required that its employees be trained. Most were reluctant to join the training programme.

Ampang also made it a point to hire new employees with the relevant qualifications and experience, among which required a background in IT systems and equipment. As a result, these new employees received higher salaries, which made the present and senior employees unhappy. When they approached the COO with the matter, Satar said, "We need them because of their IT expertise. We lack that at present. Hence, the higher salaries are necessary".

Dissatisfied with the COO's explanation, the older employees demanded for their current salaries to be adjusted to compensate for the imbalance in salaries between the older employees and the new ones. They asked for the matter to be raised in management and for the CEO to take action. In the meantime, operations were disrupted as the older employees began to misbehave e.g. taking unnecessary annual leave, going missing from their jobs, etc. Satar was not pleased as this would mean grievous delays in meeting the TV stations' deadlines.

He called Ramlee's office but no one answered. He then dialed Ramlee's mobile phone and, luckily, he answered. Satar asked for his whereabouts, to which Ramlee replied that he was entertaining clients at Saujana Golf & Country Club in Subang. Satar briefed Ramlee on the situation and asked him to come to the office the next morning for a further discussion of the issue. Ramlee agreed. After which, Satar called Aziz and asked him to join the meeting as well.

Secret Meeting

At 9:00 a.m., Ramlee, Satar and Aziz sat down in Ramlee's office, each with a mug of coffee. Ramlee began the meeting by apologising for his absence from the company, citing the need to keep the clients of their future production projects happy .

Ramlee : Sorry, guys, for not being in the office lately. There 're prospective clients to see. I'm happy to report that, in principle, they've agreed to fund our films provided we can consider their profit sharing terms.

Satar : You 're right, Ramlee. But, the least you could've done was tell us your whereabouts. We've got serious issues with our employees. Some of them are unhappy with the new conditions and they 're requesting for salary adjustments. Things have become worse now that some of them have not been coming to work. We've got deadlines to meet. Otherwise, we'll be in trouble.

Aziz : I think we should resolve this internal problem first before we do anything else. I'd say we should put ourselves in the shoes of our employees. You can't say that you don't see the large salary gap between the existing and the new employees - the new guys are earning triple of what the seniors are getting. It makes sense that they are unhappy. You 've got to admit at some point that we've failed to understand our own organizational culture - the way we do things around here.

Ramlee : Satar, I understand about our deadlines and our employees' gripe. The best thing is that we ensure all employees comply with the new rules and regulations of the company. We must reject their annual leave applications if they are supposed to be on the job. We must emphasize our show-cause policy. Whatever it is, they must follow the rules.

Aziz : Well, I think we should discuss this with all Heads of Departments and staff representatives. We must understand that not everybody can easily adapt to a new culture. We need to carefully explain to them as to why we are doing this. We must make effort to help them adapt to the changes.

Satar : Yup. I agree. You 're the CEO, Ramlee. You know what needs to be done. Lets do it for the sake of the company s future.

The meeting ended two hours later with the three of them agreeing to revisit the issue at hand. They decided that the issue could prove disruptive and expensive to the company's affairs and long-term future survival.

POST-MEETING DEVELOPMENT

Ampang was at crossroads. It was facing a serious situation that involves various aspects ranging from accounting, management, ethics, operations and governance due to its conversion from partnership to a limited liability company. Ramlee, CEO, recognizes that the future success of the company hinges upon the involvement of all employees, himself included. He realized that employee engagement has a number of implications for an organization's profitability. He believed that through improving employee retention, satisfaction, and safety culture and workplace, organization's are able to keep their bottom line healthy while engagement strengthens all of these factors. Thus, increase in productivity would be expected.

Due to the urgency of the matters above, a post-meeting was developed with his management team and the following matters were established:

i. Roles and responsibilities - Employees from all levels of management must understand and appreciate each individual's job description and responsibilities. Human Resources (HR) has been asked to organize a series of programmes to help employees in this aspect.

ii. Remuneration packages - HR is to draft appropriate remuneration packages for all employees.

iii. Culture -To facilitate the company's culture, top management is to establish strategic goals and plans so that all are able to acknowledge them and embed them in their own individual work culture.

iv. Management strategy- Top management is to revisit the company's existing strategies, of which a thorough discussion of issues, and participation of all parties within the company, is anticipated.

v. Monitoring - Ramlee is to scrutinize and monitor all developments and updates of the above.

APPENDICES

i. Partners' Backgrounds and Roles

Ramlee, Aziz and Satar have been best friends since college. Their solid relationship has been the driver for their professional success.

Ramlee, 40 years, is a Bachelor of Business Studies graduate, and Chief Executive Officer (CEO) of Ampang Film Productions. As CEO, he oversees most of the company's marketing and sales, and finance as well as the day-to-day operations of the business. He is also responsible for all planning and decision-making activities, and some human resource and administrative functions. Although passive at times, he is still seen as a charismatic leader and a visionary.

Aziz, 38 years, is a Bachelor of Accounting graduate, and Chief Financial Officer (CFO) of Ampang Film Productions. He recently qualified as a Chartered Accountant (CA). He is responsible for all financial and investment activities, including cash management. As computers are increasingly used in the recording and organization of data organization, he naturally spends more time in developing strategies and implementing the long-term financial goals for the organization. He has good communication skills and is seen as an assertive individual. He reports directly to Ramlee.

Satar, 38 years, and Chief Operations Officer (COO), holds a Bachelor of Arts (Hons) Degree in Digital Film Arts. He is responsible for managing the overall film production operations. He is to ensure that all film, TV and theatre productions stay on schedule and within budget. Going beyond schedule leads to an increase in production costs, which is likely to result in the delay, or, in a worst-case scenario, the cancellation of the project. He must understand all aspects of production, both on and off the set. His prior jobs with other production houses count for his vast experience. He is to deal with the concerns of the directors, actors and actresses, and crew members. He is regarded as a firm and passionate individual with an aggressive attitude. He also reports directly to Ramlee.

ii. Revenues and Expenditures

The main revenues of the partnership come from the sales of TV programmes to Radio Televisyen Malaysia (RTM), the country's public broadcaster, and other services e.g. visual and sound editing, animation and visual effects, offered to production houses. In order to generate multiple incomes, Ampang Film Productions also rent out their production equipment to other producers for a fee. The categories of expenses consist of administrative, production, marketing and finance. Examples of administrative expenses are office salaries, office general expenses, depreciation of office building, and furniture and fittings.

Production expenses include fees for writers, directors, cast, stuntpeople, and dancers; travel and living expenses; wardrobe, make-up & hairdressing expenses, and all other expenses related to film production e.g. production rights, production sets, special effects, playback, editing, music, film lab expenses, depreciation of production equipment etc.

Marketing expenses include publicity expenses, depreciation of motor vehicles, and certificates and royalties while loan and bank charges are treated as finance expenses.

As to date, Ampang Film Productions has 40 permanent employees with low staff turnover.

Required:

(a) The restructuring of the organization represents a major change in strategy for Ampang Film Production Sdn. Bhd. Based on the Change Model developed by Balogun, J and Hailey (2008), analyze the nature, Scope and type of this strategic change for Ampang Film productions.

(b) Define critical factors of failure in assuring building share culture in the organization in Ampang Film Productions.

(c) Explain the main responsibilities of a CEO and Identify the ways in which Ramlee appears to have failed in fulfilling his responsibilities as CEO

(d) For change to be successful, implementation efforts need to fit the organizational context. In relation to the case, discuss the contextual features or elements given by Balogun, J and Hailey (2008).