- The product is found as Non-Conforming Material (NCM)
- The P/N, Lot #, Date and the problem is noted
- The Lot is quarantined
- Supplier is contacted to figure out the depth of the problem
- Cross-Functional Team (CFT) is established to investigate the issue
- Further engineering input is produced to find the source of the problem (QC and Materials)
- Costs are assessed (Production, Accounting, Purchasing and Logistics)
- Courses of action are presented
- Options are chosen and presented to the team and the supplier
- Decision made and implemented
The cross functional team (CFT) is comprised of representatives from the functional departments. These representatives are gathered from departments, such as Logistics, QC, Materials, Production, Accounting and Purchasing (Appendix B). They are assigned to the team, as CFT members, in order to deal with a specific problem at hand. The CFT leader only has authority to gather information on the QC problems, workout possible solutions to implement with the respective cost associated with these solutions. The solutions are then conveyed to the Chief Operations Officer (COO) for consideration, decision and implementation. Once the problem is resolved, CFT members resume to their respective positions and duties.
Other factors with regards to QC include financial risk, performance risk as well as problems between business to business relationships. In terms of financial risk, if Magna’s quality is not up to par, their clients’ demand may diminish and will result in lower revenues. Currently, the Big Three (Ford, GM, Chrysler) represent 60% of revenues, therefore it is in Magna’s best interest to insure that demand does not diminish for these customers because a ripple affect will occur and Magna will also be affected by a decrease in demand and revenue. Along the same lines, if customers are not satisfied with the parts produced, they will find another supplier. In addition, if defective parts have to be shipped back, it poses a financial risk given that Magna is losing the potential to make a profit from those parts, representing an opportunity cost. Furthermore, there are performance risks associated with QC given that customers may purchase parts that do not function or perform as they are intended to. Moreover, if Magna is supplying dysfunctional parts it will jeopardize the relationship with their customers by diminishing the trust and loyalty that has been established over the many years of their relationship. This may result in an unfavourable image on Magna’s part and will create a risk of being replaced by another supplier. As a result Magna may choose to find other companies with higher standards to outsource to and form a strategic partnership with them. To re-establish trust with their customers, they will have to provide superior performance, social ties and specific investments such as training new supplier personnel on how to produce certain parts and establish contractual agreements specifying for example the limit conditions on products and also who will be responsible for losses incurred as a result of faulty products.
Thus, with this background knowledge of Magna’s QC problem, we suggest two alternatives for Magna, a Dedicated Team Approach and Strong Matrix Team Approach.
Alternatives
Dedicated Team
Magna’s current CFT (weak matrix structure) is ineffective because the CFT leader does not possess enough authority to resolve the issue in a timely manner, hence cost effective. In order to achieve successful project completion, one of our recommendations is to implement a Dedicated Team (Appendix C). This structure is preferred when considered solely from the project manager’s point of view. People and assets are allocated completely to the project for as long as they are needed to complete the project. Furthermore, in a Dedicated Team, the project manager has full line authority over all the resources. This effectively sets up a separate goal-oriented department of the company, which is its own functional department. The project manager still has the problem of managing and integrating other companies and external organizations contributing to the project, but has full mastery over all the people and groups working on the project within his/her company.
This goal-oriented structure makes planning, control and general project management simpler and easier than with other forms of organization. There can be much better integration of everyone who is involved in the project and communication between them (formal and informal) is faster, direct and frequent. Teamwork is much easier to develop and therefore creates a higher degree of commitment to the project objectives, especially when the team is permanent. Conflict is likely to be less than other project organization forms and if complications arise it can be solved more easily. Consequently, project teams tend to maximize the probability of completing projects on time, within budget and to specification.
Unfortunately, teams are not the most flexible way in which to use company resources. If more than one team exists in the same company, it becomes necessary to increase the numbers of specialists on the payroll because each specialist (or group of specialists) must be allocated fully to each project team for the project’s life. It is usually difficult to switch specialists from one project to another to take account of day-to-day fluctuations in workload. Division of labour within functions is therefore more difficult so that a dedicated project team might have to make do with a generalist in a function where a specialist would be preferred.
Therefore, although the Dedicated project team (separate divisional form of project organization) enables projects to be managed more effectively than the functional organization and it avoids some of the problems of more complex organizational forms, it can generally be used on larger projects capable of sustaining bigger functionalist groups within the team. The team structure is appropriate, therefore when a company is handling a single important project, or where one project is much more important than the others, it justifies setting up a completely separate company division. In that case, the size of the project and the volume of the work should be great enough to provide full time activity for each of the functional specialists or groups assigned to the project.
Dedicated project teams cannot be used when a company is handling several relatively small projects simultaneously on a continuous basis because they would splinter up the function resources. This splintering inhibits the transfer of personnel between projects according to demand and reduces the number of projects that a company can handle for a given number of staff.
Strong Matrix Team
One of the reasons that Magna is experiencing problems with effectively dealing with its QC problems has to do with its organizational structure. Magna currently has in place a weak matrix system which creates problems with its reporting dimensions. The current belief is that in order to get things done in the organization there has to be a dual-reporting structure, in which one person is assigned to two bosses. With regard to the QC procedure Magna currently has in place, the CFT leader that has no real authority or decision making power over the problems that arise. The CFT leader’s duty is simply to gather information, analyze the problem, provide solutions, and report all this to the COO. The COO discusses this information with the board of directors who decide as a whole which option to choose and then vertically pass down the information to the CFT leader. This process exerts a lot of time and every hour of idle production costs the company millions of dollars. Another issue with the current matrix structure is that employees that are part of this CFT are having a difficult time dealing with this vertical chain of authority; they have to deal with their functional manager as well as their team leader. This usually results in the CRT leader’s requests being left out of the equation.
Another recommendation is that Magna strives for a strong matrix system where the CFT leader would be given more authority to deal with QC problems (Appendix D). This would reduce the down time as well as reduce time for investigations. We are suggesting that the CFT leader be empowered to make QC decisions such as shipping the parts back to the supplier, fixing the problems in-house and scraping the parts. This can be created on the organizational chart as the CFT leader being placed on an equal standing together with the functional mangers. His position would be permanent and he would be in charge of arranging the teams with the help of the functional leaders of every department. In this case the employees in the team would be responsible for finishing their projects assigned to them by their functional managers as well as the CFT leader. The first area in Magna that must be addressed to work cross functionally more effectively is structure. Structure is not just about changing the organizational chart structure; it’s about setting up a horizontal structure in addition to a vertical one. Magna needs to address the following areas in order to successfully implement a strong matrix system. A strong matrix structure depends heavily on alignment; the management system must be redesign to support a horizontal orientation. Also a new system of accountability is needed that fosters collaboration and learning, instead of competition and blame. Steering councils for business processes and the portfolio of projects must be established at a senior level. Magna also needs to standardize collaborative methods in order to support team operations. In a strong matrix structure there must be shift from optimizing functions to optimizing business processes. Optimization in a matrix is about creating business processes that are as effective and as possible. The shift from a vertically aligned organization to one aligned in two dimensions requires a redefinition of roles for everyone from the bottom to the top of the organization. Leaders have to learn to manage without authority and control.
In addition, we would also like to propose that Magna bring in QC representatives from each of its suppliers for training, so that the suppliers become familiar with the QC standards of Magna. This will reduce the number of QC problems before they reach Magna.
One of the strengths is its efficiency, the use of resources between departments. Also a strong matrix has an easier post-project transition due to the fact each member can return to their functional department. Effectiveness is another strength associated with a strong matrix structure. The CFT leader has direct authority to expedite and monitor projects.
A strong matrix structure also has its disadvantages. One drawback is that it could be stressful. Stress could be derived from tense work environments for employees who are getting direction and reporting to two different managers. Another drawback is group participation. Employees in the team need good interpersonal skills. Group participation may not work to their full potential unless they understand the work in question and adopt a mutual respect for a team member.
Unions
In addition to QC problems, Magna experiences union concerns. The Canadian Auto Workers (CAW) currently represents Magna workers at two plants and they are trying to further expand into the various divisions of the company. Magna will allow voluntary recognition at up to 45 plants employing 18,000 workers. With the information at hand it seems as if Magna and CAW have an open shop arrangement, which means that employees can work without obligation to join a union. However, if the union agreement between Magna and CAW were to take place there are certain stipulations such as a ‘no-strike clause’ that will be enforced. This counter argues the Norris La-Guardia Act of 1932, which ended the use of injunctions by employers. It banned their use to prevent strikes and have employees sign non-union agreements also known as yellow dog contracts. If this union arrangement is to take place it poses controversy given that workers “lose the right to strike [and this] takes away a fundamental historic right in exerting pressure on management for change and gains in wages and benefits”. In the Magna agreement, the traditional grievance process will be replaced by a ‘concern resolution process’.
In addition, it seems as though Hargrove, the CAW president, is willing to go to unorthodox lengths to secure more members for a CAW whose auto-sector membership is in long-term decline. Essentially, it is as though he is trying to provide job security but in our opinion may be doing this to collect union dues.
It would be in Magna’s best interest to establish a Management’s Rights Clause, which states that it gives the employer all rights to manage the business except as specified in the contract. For example, if the contract does not specify the criteria for promotions, with a management’s right clause, managers will have the right to use any criteria they wish. Another clause of benefit to Magna would be to put in a Management Prerogatives Rights Clause. This clause gives management the right to schedule work hours, hire and fire workers, set production standards, determine the number of supervisors in each department and promote, demote and transfer workers.
Conclusion
In conclusion, Magna’s current issues are QC problems and union pressures. In terms of QC problems, we recommended implementing a Dedicated Team or Strong Matrix Structure. In terms of Union pressures, we recommended Magna create a Management’s Rights Clause and/or Management Prerogatives Rights Clause to protect their interests. Basically, we are confident that which ever alternative Magna selects, their current performance will improve.
Appendices
Appendix A:
Appendix B:
Appendix C:
Appendix D: