Apex Manufacturing Company, Inc.

Before his retirement, John Hadley had been president and general manager of Apex
Manufacturing Company, Inc., for fifteen years. Under his direction the company had grown
from a small shop to a medium sized corporation with 1,200 employees.
Over the past eighteen months the profit picture of the company had a slow but
continuous slide into the red. Morale and productivity had also followed this slow yet steady
downward spiral. While it had been difficult to determine what the exact cause of the trend was,
it appeared to have started at the first news of the offer by ARMCO Plastics to buy out 51
percent of the stock of the company. Although ARMCO had said that there would be no change
in the status quo at APEX, there seemed to be a steady stream of ARMCO control being
exercised over the company. The latest of these perceived changes was the early retirement of
Hadley two months ago.
Hadley’s successor was Bill Linden, a long time employee of ARMCO and general
manager of their Cleveland plant. Upon coming aboard, he had taken little action, which had
raised the anxiety level of everyone in the plant.
On Monday of this week Linden had scheduled a Senior Manager’s meeting to discuss
the future of the company. This would be the first time that he would enumerate his expectations
of the company and its managers. His speech was short and to the point. His six point plan is as
follows:
1. The introduction of new manufacturing technology, which will begin in 3 months and be in
place within the next eighteen months. The new techniques and machines will replace our
old outdated processes and will affect approximately 75% of our work force.
2. In concert with my first point, we will replacing two of our present product lines with
updated versions that are presently being developed in the ARMCO R&D department. We
are planning to replace our basic model with a version that will give our customers twice the
capacity in half the time. The second line will be more expensive but its virtually
maintenance free. Our third line, which has been relatively unprofitable, will be dropped. As
you can see, these changes will have a marked effect on our profitability as well as on the
present work force. The changes tentatively projected are these:

• An overall increase in our current work force of 10%.

• A substantial change in the skill requirement of our present work force. This may entail a
substantial number of personnel in certain areas being terminated.

• A reduction of 50% of our customer service personnel.

• An increase of 30% in the production areas.

• Training for all new production personnel as the machinery is state of the art.
3. The advent of our improved product line will require an increase of staff in our
sales/marketing department. I estimate this will be in the neighborhood of 30%. This will
afford us the opportunity to recapture our market share and improve to the point where we
have a total of 40% of the market in the next five years. As you know, our present market
position is 25%.
4. We need to establish a promote-from-within policy whenever possible. I want this program
implemented within four months. This program will ensure not only that we keep our best
 people but that we think ahead of time about what type of skills our people will need for
their next career move.
5. As all you are well aware, there is a massive problem with low morale in this organization.
While we all could make guesses as to the cause, I feel that all it would be is guessing. I
therefore want to find out what exactly is causing the problem of low morale and develop
recommendations for combating it.
6. We will establish a different performance appraisal system based upon Management By
Objectives (MBO). Our present system is all but nonexistent. It is backward looking and in
most cases serves as a tool for punishment rather than as a support technique for improved
performance. This MBO system should also be tied to the merit pay system that we
implemented last year. If this system works well, it should also give us insight into the third
point. This system should be implemented and working well within the next twelve months.
Jayne Mico, the Director of Human Resources Management, called a meeting of the key
people in her department to discuss the matter. Attending the meeting were Robert Armstrong,
the Assistant Personnel Manager for OD, Joy Storm, the head of Administration, and Jeff Gilby,
the Assistant Personnel Manager and Director of Human Resource Development.
Jayne explained the situations as best she could and asked the meeting attendees to have
their inputs ready within the next ten working days. There were definite problems with the plan,
given what Jeff Gilby knew about the organization, they are:
1. The morale seems to be the key factor to trying increase productivity but some of the
changes that are going to take place are going to affect morale even more adversely than
doing nothing. The staff and managers feel that it is only a matter of time before they are
replaced by ARMCO personnel and that these technology innovations are just one of a
series of changes that will afford them (ARMCO) the opportunity to accomplish that goal.
2. It is true that over the past few years innovations in our product line have only been
cosmetic in nature and the market share that we once held has dwindled to half of what it
was. The new technology and updating of our product line are good ideas. Even with their
reservations about the new owners most employees will be in agreement with those needed
changes. The other associated issue is demographic where will we get the people to fill all
these new positions?
3. The promote-from-within policy would tend to indicate that APEX was serious about not
firing large numbers of people. At the least, it was trying to keep those personnel who were
the most productive. However, the changes in technology and major cuts in our customer
service department will be psychologically devastating to the plant as a whole. There are a
lot of good people who will be let go if this portion of the plan comes to fruition.
4. I have tough for a long time that the implementation of an MBO type of performance
appraisal system would be helpful in increasing productivity and improving morale.
However, given the general morale problems and some of the other tasks in the plan, now
might not be the appropriate timing to implement such a system. The staff might perceive
that this appraisal system is just a mechanism for “setting enough unachievable goals to fire
us”. Even though our other performance appraisal system is basically not working, people at
least use it. I wonder if the implementation of this program is the right thing now? But if we
have to go forward with it, what would be the best way to implement it given the rest of the
plan? Is the timing right? That is a crucial point.
5. Are the aspects of the plan that impact me thoroughly tested? We really have not done a
thorough needs assessment to see if the proposed plan is truly what is needed – at leat from
a Human Resource Development standpoint.
After two days of anguish over this, Jeff decided to seek more information from the
Director of the Human Resources Management group. It appeared that everyone was as
perplexed as he was. The decision was made to meet the next day and look for the solution
jointly.