Ekato Ruhrwerke Company’s Change Process

Introduction

This is a case study report on Ekato Ruhrwerke. This report presents the technological and management change process in the company and how the changes affected the company. Ekato Ruhrwerke is a medium-sized company based in Southern Germany. It manufactures industrial mixing machines as its core business. Ekato’s customers come from the food processing and chemical industries. After its formation in 1933, Ekato employed a Taylorist style of management which worked well for a considerable period. Each employee’s creativity and innovation were encouraged in the workplace. This was essential for meeting the peculiar needs of each customer.

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Consistent changes in the market, however, rendered the old system ineffective in achieving the company’s objectives. Morale among the employees fell, and new forms of leadership could not be absorbed into the company. The old structures of the organization and the physical environment had to be changed. The company decided to engage consultants, after reexamining its strategies, so that they affect changes in its premises, technology, and organizational structure. The result of this consultation was a new factory complex, complete with a new organizational structure. The impact that these changes had on the company’s culture in management and production is presented in this report.

Answers

  1. The company realized that its old management and division of labor strategies could not accommodate the changes taking place in the market. Its traditional way of doing this caused unnecessary waste of time and resources. The communication flow was also ineffective, and much information was lost. There was less utilization of the specialized skills possessed by its employees. During peak seasons, the company outsourced labor. The company introduced changes in 1991 to combat these problems. A new factory complex was built, and the organizational structure was changed. The company engaged operation and management consultants to give recommendations on new processes and structure options. Architectural and production consultants gave their recommendations on designs for the new facility. Communication and transition options came from the organizational process consultants. These different categories of consultants recommended reconstruction options to the company. However, a significant amount of contribution also came from the employees. The company consulted individuals in the company, and they gave their opinion on the desired changes. Through these contributions, the company became aware of the reconstruction options open to it. In the end, it chose to implement a “fractal organization” on the advice of the consultants.
  2. Structural reorganization in a company requires a detailed study of the needs of the company and the suitability of the proposed structures. Every reorganization option works best under a given set of conditions or presumption (Schilling, 2010). These have to be present in the organization for the changes to be effective or successful. A fractal organization requires a workforce that can be easily trained or is already educated. The legal system must be stable. These prerequisites were present at Ekato. Therefore, the consultants did not hesitate to point it out as the most suitable form of organization for the company. The challenges that the company was undergoing could best be overcome by a fractal organization. The fractal organization ensures constant motivation for the teams. Communication among different fractals is smooth. They can rely on each other to accomplish individual tasks. Consultants saw it as perfect to overcome the low morale among the employees. Better satisfaction of the clients could also be achieved through fractals. This is because they handle all the client’s needs as a team. Its suitability to the company’s needs is what made the consultants recommend a fractal organization.
  3. Technological and organizational changes in an organization are driven by a variety of factors. Among these factors, there is the organization’s internal capability and competitive strategy (Emerald, n.d.). The company’s core values are also of paramount consideration in the decision to implement any changes in its organization. During the reorganization process at Ekato, all the stakeholders made contributions. The architects decided on a low rise complex that mirrored the company’s value for its workers and the environment. The investment decision was made after considering the needs of the company and employees. The company was not out for the cheapest solution, but one that would cater to its current and future needs. Employee safety, the durability of the premises, and creating a good environment for better productivity were essential to the company. Even when a company has made thorough preparations and taken steps to ensure there is a successful transformation, something could always go wrong. Each strategy is accompanied by various risks. Adopting the fractal organization had its risks too, and so did the construction of a new factory complex. The newly formed teams could fail to work smoothly. Information flow could also be disrupted, leading to a communication breakdown in the firm. The independent organizational units were likely to disconnect with each other and fail to achieve the collective aims of the company. The building (of a new complex) involved significant financial investment. This would amount to a massive waste of resources. This waste is realized when restructuring fails. The new teams could fail to be fully reintegrated into the new production units in the complex. The working relationships were also likely to be negatively affected by the change in the working environment. The company intended to improve the working conditions of the employees and make their environment more conducive to increased production. It is also intended to provide a healthier and safer environment. What if the architectural design of the new complex failed to realize this? These were some of the risks involved in building and implementing a fractal organization. Fortunately, the results were awesome. The changes were successful.
  4. Implementing changes in a company and maintaining or improving its competitiveness is no easy task. The changes should be introduced gradually and systematically (Ahmad & Schroeder, 2010). This is to avoid overwhelming the employees and causing chaos in the company’s organization. It also assists in gauging how successful the changes are likely to be. Ekato implemented the new structure in stages, and the transition was gradual. The employees were trained on the new form of organization and were involved in the change process. This acted as an introduction to the changes to them. During the construction of the complex, testing of pilot islands was undertaken. After completion, only a section of the newly formed islands was moved into the new complex. This was to study how well they would adapt to the new organization. Those that remained in the old building were gradually integrated into the system in another phase. Adaptation to the new structures was gradual but fruitful. Ekato undertook the changes in phases. Different stages as described above characterized its gradual adaptation of the fractal organization strategy. Ekato’s approach was different from what happens in many companies. In many cases, the management decides the changes to take place, and employees have to adapt to them. Employees are not always consulted or involved in formulating changes. Ekato, on the other hand, deeply involved its employees. Their contribution was solicited from the planning stages through the implementation. This was one of the significant contributors to the success of the reorganization. It was readily acceptable to the employees because they had adequate information about it right from the start.
  5. One of the biggest hurdles to a reorganization that was encountered was accommodating the needs of the various stakeholders. Different employees and production units had different needs that needed to be taken care of in the new structure. This was overcome by involving the employees in planning the reorganization. They gave ideas on how to go about the changes while incorporating the different needs of the company. Other difficulties were mainly concerned with fear. The introduction of a new organizational structure in many cases causes apprehension among employees. Some think that they may become irrelevant in the new setting, and fear losing their jobs. These fears were overcome through effective communication. Information about the planned changes was availed to the employees at all stages of the process. They also received training on the new structures. When it was time to move, the transition was smooth, and there was less apprehension. The change at Ekato was successful, and soon the old system was phased out. The improvements needed would be apparent, had the exercise face insurmountable hurdles or rejection by employees. In the case of Ekato, very little would be needed to improve the chances. I would suggest only that the company should have engaged some of its customers in the reorganization. The new islands were intended to handle customer needs as an independent unit, and customer satisfaction seems to have been of paramount importance. Therefore, views should have been collected from some of the customers to establish their preferences. Significant insights into customer expectations would have been acquired.
  6. Integrated performance strategies are employed (by many manufacturers) to measure performance improvement (Momaya & Ajitabh, 2005). The contribution that the changes at Ekato made to the improvement of performance can be measured using integrated performance strategies. Financial ratios that focus on the company’s solvency, profitability, liquidity, and efficient utilization of resources in production would be perfect. Improvements in profitability and customer satisfaction are indicators of a positive contribution to performance. These should be measured to show the contribution made by the changes. Product standards should be set, and customer satisfaction measured to constantly monitor the performance. Drops in standards or customer satisfaction are indicators of reduced performance. Profitability ratios may also be used to monitor the company’s performance.
  7. The new organizational framework at Ekato was up and running within 12 months of implementation. In two years, the old structures had been replaced. The new system benefited the company in significant ways. Direct and indirect areas registered a reduction of about 50% in throughput time. Supplies and raw materials’ inventories were halved, and a third of spare parts stores reduced. The use of machines improved, and machine costs significantly came down. This is because the company did not need to outsource services during the peak seasons. There was a 3% drop in personnel costs because the new system required significantly small numbers of personnel than the old system. The company got rid of double tasking, and the improved communication channels brought communication costs down. The new bonus system also improved individual performance among the employees. The new teams developed a group identity, and the islands became self-determining. This significantly reduced emergency cases as they can handle their issues. Stress levels among employees reduced; because individuals were now able to plan their working spaces and the environment was healthier. These changes improved the company’s competitiveness.

Discussion

There are many lessons to be learned from the case studies. The importance of involving employees in a company’s change process is underscored. This ensures that they embrace the changes and do not reject them. One also learns that change is unavoidable. A company should be flexible in its strategies to accommodate the needs of a changing market environment.

Comparison

This section of the report compares technology management at Ekato and Mayekawa. The two companies are similar in various ways. There are similarities in the way they handled technology management during their transformation processes. Both companies are manufacturers of industrial machinery.

Ekato and Mayekawa were forced to change their organizational structures by the existing changes in their markets. Ekato realized that its structure could not adapt to the new leadership that the market required, and its employees had become demoralized. Mayekawa also realized that it could not meet market expectations if it continued pursuing its traditional strategies, and sales were dropping at an alarming rate.

The two companies valued their customers and used innovative ways to produce custom made products for them. The employees’ creativity in both companies was used to solve customer needs. When it was time to change, both Ekato and Mayekawa pursued strategies that reduced bureaucracy in management. Though the options were essentially different, they were both meant to reduce the bureaucracy that made decision making and flow of information slow. Mayekawa created autonomous entities that worked independently to realize the collective goals of Mayekawa. Changes within Enako also led to the creation of self-regulating units of management for the realization of the company’s objectives.

The two companies differ in various aspects of their organization. Mayekana used its employees’ expertise, creativity, and innovations to increase its market share and develop new markets. Its main goal was to increase sales. Ekato was more interested in providing satisfaction for its customers and creating a long-lasting partnership with them. Though the companies adopted similar decentralization moves, they were fundamentally different.

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Mayekawa created autonomous legal entities that were spread in different parts of the world. Ekato, on the other hand, formed self-regulating management units that operated within the company. They were located within its factory complex.

A company’s internal capabilities and competitive strategies determine how it manages its technology and information (Ahmad & Schroeder, 2010). Technology and information are vital for the growth of any company. This explains the move by Mayekawa to create autonomous units spread across the world. It had resources to fund the move, and its main strategy was to increase sales by expanding into new markets. Ekato aimed at creating a long-lasting partnership with its customers. It, therefore, opted to have units operating within the company. It was a midsized company without the resources for a major expansion. The similarities and differences in the way they chose to manage their technology can be explained (by their strategies) to improve competitiveness.

References

​Ahmad, S & Schroeder, R 2010,Knowledge Management Through Technology Strategy: Implications for Competitiveness”, Journal of Manufacturing Technology Management, Vol. 22 no. 1, pp 19- 25.

Emerald n.d, Knowledge Management, Technology, Strategy and Competitiveness. Web.

Momaya, K & Ajitabh, A 2005, “Technology management and competitiveness: is there any relationship?” International Journal of Technology Transfer and Commercialization, Vol. 4, No.4, pp. 518 – 524.

Schilling, M. A 2010, Strategic Management of Technological Innovation, 3rd Ed, McGraw-Hill Irwin, New York.

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