From Rhubarb to Rolled Steel: Middleton Productions Ltd. A Case Study in Engineering Entrepreneurship The changing fortunes of a family business provide the context for this case study. The story raises a number of issues central to entrepreneurship and entrepreneurial activity. As events unfold, the critical role of the manager as an innovator and change agent is highlighted. The reader can reflect on how successfully or otherwise the management of change has been executed by the different characters in the story. The story also illustrates that entrepreneurs not only need the skills and ability to innovate and exercise vision, but that they must also have the capacity to convince and motivate others to support them in pursuit of their ideas. A useful follow-up section on ‘Suggestions for Teaching’ is included. This Case Study was produced by Ted Sarmiento of Olmec Partnerships, for the Higher Education Academy Engineering Subject Centre, 2005. The Centre is also grateful to Dr Elizabeth Read, Development Manager for Enterprise and Entrepreneurship (students) at Coventry University, for providing the teaching materials for these case studies Contents From Rhubarb to Rolled Steel: Middleton Productions Ltd. ................................................2 Company History .................................................................................................................9 Company Profiles ..............................................................................................................10 What happened next?........................................................................................................15 Suggestions for use in teaching.........................................................................................16 1 From Rhubarb to Rolled Steel: Middleton Productions Ltd. A case study in engineering entrepreneurship Innovation and the family business As Christmas approached in December 2002, Susan Swift faced one of the toughest decisions of her life. She knew her decision to leave her current job would affect both her career and her family relations all at once. She did not know what she would do next, but felt that she could not go on as she had. She wanted to spend some time over Christmas with her twoyear-old son, and she knew that if she didn’t resign from the business, some crisis or other would steal away that precious time once again. On the other hand, despite the sacrifices, the business had been good to her and her family over the years, had provided her with a fairly privileged upbringing, and she knew that her family might not understand or sympathise with her situation, and may even become hostile if she left. When she had first arrived at Middleton Productions Ltd 3 years earlier, she was a little shocked at what she saw. The company consisted of an office, and two huge, separate workshops each the size of half a football pitch. Outside was another acre or so of yard area, where scrap and excess steel from old jobs was kept. The company specialised in making some of the largest steel fabrications ever produced in the UK. Typical jobs included constructing giant ladles for pouring molten steel, rolling and welding large-scale pressure vessels, cutting 10 metre diameter gears and machining winch/hoist drums for cranes and rolling 3” thick steel plate into cylinders. Many jobs were one-offs that no one else felt they had the capability to produce, and these jobs often came to Middleton Productions after a long search for a suitable supplier. The company was able to be agile and innovative in finding solutions to the problems of making steel articles that could weigh in excess of 20 tonnes and products that were sometimes too large, even for the company’s massive workshops. Customers included companies such as British Steel, BP, Kvaerner, British Gas and numerous oil companies who bought parts for offshore oil drilling platforms. However, the conditions in which these huge, precision steel components were manufactured left a great deal to be desired. Everywhere was dirty, dark and cold and that included Susan’s ‘new’ office. Equipment was old and poorly maintained, although it all worked reasonably well. There did not seem to be a particularly good feeling between management and workforce. The place looked as though it was stuck in a time warp, with one aging solitary computer and typewriters in regular daily use. Susan knew that she faced an enormous challenge to help bring 2 the family business up to date and take it forward, but she was not sure where to start. Although she remembered visiting the site when she was younger, she did not realise it had not progressed. Lawrence Swift Susan recalled that when she was young she was given a job of cleaning the offices at the weekends, when her grandfather was still in charge of the company. Lawrence Swift had been the driving force of the business since its inception in 1942 in a rhubarb shed near his family home between Middleton and Manchester. He started the company as a small jobbing shop with two other men and little more than a couple of lathes and a drill, to produce parts on a sub-contract basis for larger manufacturing companies. When war broke out Lawrence was drafted into the Navy. However, far from winding things down at this time, he managed to secure new contracts from the Navy to supply vital ships spares, which he sent back to his colleagues to produce. Unfortunately, when he returned from duty he scrutinised the books and found his colleagues had been less than honest in his absence. Because of this, Lawrence did not want to continue as a partnership and bought out his colleagues to bring the company into his sole ownership. The company flourished with him in charge on a day-to-day basis. Although Lawrence could be a tyrant at work, Susan remembers her grandfather as a kind, gentle and quiet man at home. She recalled a story about a machinist, Ned, who signed himself into the Army, but regretted it later and asked Lawrence to help him. Lawrence somehow convinced the recruitment office to throw him out, and was able to hang on to one of his best machine operators. He always tried to be fair with his employees, many of whom, like Ned, ended up working for the company their whole working lives. Malcolm Swift Susan’s grandfather Lawrence had three sons, the first of whom, Malcolm was born before Lawrence’s call-up into the armed forces. The other two, Kevin and Simon, were born after the war. This meant that there was a considerable age gap between the brothers and so it was Malcolm that started work alongside his father first. Malcolm had been more than keen to get stuck in and aged 13 he used to break in to the factory at weekends when it was empty and teach himself to weld and operate the machinery! However, his father insisted that he should be well educated and after boarding school, he went to the local university to study Mechanical Engineering. He combined this with his first legitimate work in the factory, often arriving after lectures, to sweep up or do whatever jobs were left over from that day’s work. After completing his engineering degree, Malcolm continued to work at the business and went on to do an MBA in his spare time and was eventually put in charge of one of the workshops. Later, in his socalled retirement he also studied for a PhD, always wanting to know more about the intricacies of engineering production methods. One day Lawrence went home for lunch but unusually he didn’t return. He had suffered a heart attack and over a period of 24 hours, Malcolm suddenly went from Workshop Manager to become Managing Director of the family business when he least expected to. His father survived but decided not to return to the company and left Malcolm in sole charge, although he was happy to offer any advice if asked. Until this incident it was usual for Lawrence’s wife to provide lunch for the whole family at their house nearby, which was often used as an informal, but highly effective, 3 company communication session. With Lawrence’s retirement this practice faded out and was never replaced. Kevin Swift Malcolm was helped as MD by his two brothers who both came to work for the business but had very different ambitions for themselves. Kevin, some four years younger, had been sent to the same strict boarding school as Malcolm, and had also studied Engineering. After serving his apprenticeship, Malcolm put him in charge of the fabrication workshop, where he wished to remain. He was not looking to run the company himself, as in truth he did not really like working for the family business as he often felt he was not rewarded sufficiently, but felt it his duty for the sake of his father. He decided early on that he when he would retire as soon as he could, and eventually did so at age 50 and went to live aboard his boat on the Mediterranean island of Comino, near Malta. Simon Swift Simon, the youngest of the three was a very different kettle of fish. Unlike his brothers he escaped the strict regime of boarding school and was sent to a local private school. He did not perform academically as his brothers had, and chose not to go to university but started work for the company straight from college. Like his two brothers, he served a kind of apprenticeship, starting at the bottom sweeping the factory floor and learning to use every machine as well as welding. Simon had a natural ability to weld and form metal and became highly proficient at turning out any size or shape of precision parts that the company was asked to produce. He was imaginative and innovative in finding new ways to construct parts that had never been made before. For example, when a sculptor asked the company to make a large scale commission that was bigger than the factory, Simon’s solution was to remove the roof (which was overdue for replacement anyway) in order to accommodate the piece. However, he also had a negative side to his personality and could be bad tempered and aggressive, especially when others couldn’t see his solutions as clearly as he could. He was a control freak, and would often re-design the production schedule ‘his way’. Malcolm appointed Simon to oversee the machining and rolling area, and began a highly productive period for the business, with all three brothers playing to their strengths. Alan and Peter Flower During this period Malcolm also recruited a non-family member Alan Flower, as the company’s quality manager. Malcolm had been impressed with Alan at university for his attention to detail. Alan was not an overly ambitious man, and was happy when he became Quality Manager as he was not looking to run the business for himself. In his father’s tradition, Malcolm also found a place in the company for Alan’s son, Peter, who was studying history at university and wanted some work experience. He later joined the company full time and eventually became the weld tester and trained to carry out non-destructive testing (NDT), although he did not have his father’s attention to detail and was probably not really suited to the job. When he had first started with the company Peter was put on an hourly-paid rate along with the rest of the employees, but once he felt competent as the company’s only NDT operator, he became unhappy with this arrangement. He felt that with his degree, he should be salaried along with the other management team, and this was eventually agreed. Unfortunately for Peter long hours were sometimes required to finish urgent jobs and this sometimes resulted in his salaried income being less than it would have been on the hourly-rate. Malcolm’s management Malcolm adopted his father’s approach and liked to show his appreciation for his workforce, and every year would set up a day out in the summer and also provide meat and wine at Christmas for each of the 35-40 employees. During these good years, Susan recalls her father driving a Rolls 4 Royce and her mother a Daimler, with her other uncles having similarly well-appointed cars. However, despite the good intentions, tensions rose between the management and the workforce and Malcolm ordered all the prestigious company cars to go and issued management with AustinRover Metros instead. He was loyal to his staff, and was almost always able to accommodate the comings and goings of the workforce, who returned after going to other companies or even after a spell in prison! Even so, there were ever-present tensions between management and workers, a strain that Peter unwittingly exacerbated. Having spent a great deal of time on the shop floor, Peter was friendly with a number of the operators, and would often tell them if there were concerns about a job being late. This resulted in work grounding to a halt on these projects and overtime incentives having to be paid. Malcolm ‘retires’ As Malcolm was several years older than his brothers, his retirement came around first. Ever eager, Simon was appointed as the new Managing Director, and Malcolm ‘retired’ from the business, by reducing his time from 5 to 4 days-per-week. He kept his office and did not see it necessary to alter the financial arrangements that required all company cheques to be signed off by himself and now Simon. Simon in charge Simon was now the driving force of the company, but he was unable to entirely shake off the everpresent influence of his older brother. Nonetheless Simon was always eager to impress Malcolm and he worked tirelessly to search out new work and keep the business going well. However, he also wanted to spend more time pursuing his other passion of flying and would often disappear for days on end to a flying club located on the South Coast. To make this possible he looked for, and found, bigger and bigger jobs that would keep the factory busy for long spells, so that he could spend time at the flying club. When the time came for Kevin’s retirement, Simon was caught unprepared. He had assumed, despite his continual warnings from his brother to the contrary, that Kevin would do the same as Malcolm had done and continue with the business, even after his pension had matured. But Kevin was true to his word, and at the age of 50 he retired and never once returned to the factory. Simon could not believe what had happened and had no real plan for what to do next. Appointment of a non-family manager, Paul Scott Eventually, to deal with much of the day-to-day running of the business, Simon enlisted the help of a friend’s son, Paul Scott, an engineer who was looking for a change in career. Simon hoped that Paul, along with Alan, would emulate the success the business had had while the three brothers had worked together. The incentive for Paul was tremendous. Simon was the last family member likely to work in the organisation, and had planned to retire in the next 10 years or so. Paul would take over the business since in effect he had become a non-shareholding director. However, he found it very difficult working for Simon, who kept strict control on the finances and expected the same commitment as himself. This meant being available 24 hours a day, 7 days a week if necessary, especially as new contracts often included late-delivery penalties that could cost the company a great deal. Simon decided that the company should run two shifts to help alleviate this problem, but this meant that Paul was sometimes needed during each shift. He found the regime increasingly difficult, especially as it meant he was unable to spend time at his holiday home that he had recently bought in France. Although Simon was often away, Paul could not see any light at the end of the tunnel, and with the support of wife and family he decided that the potential reward was not worth it and decided to leave, once again catching Simon unprepared. Having felt he had been let down by outsiders as he saw them (non-family members), Simon was keen not to recruit another ‘external’ replacement for Paul. However, when his niece Susan 5 arrived home from Germany for Christmas, he felt this could be the break he was looking for. Susan was Malcolm’s daughter, and Lawrence’s grand-daughter. What safer pair of hands than these? Besides, she had studied engineering or something similar at university – the fit seemed perfect. Susan Swift Simon was right. Susan had studied engineering at university, but only by pure chance. Her father had been very influential, almost dominating in her early life decisions. She recalled him selecting her ‘A’ levels subjects for her, without consultation - Maths, Physics, and Chemistry – none of which she particularly liked or was good at. So with two D’s and an E Susan phoned some universities to see if she could get a place. Birmingham offered her a place on an engineering degree, and she quickly worked out that engineering courses might be struggling to fill places that year. She phoned her local university to see if they had any similar courses and found that they were willing to offer her a place studying mechanical and materials engineering, an offer that she accepted without hesitation. Although she was due to attend a local university, her mother insisted that she leave home, which she did and consequently enjoyed the whole academic and social life to the full, so much so that after just one term she announced that she would do a PhD, much to the disbelief of her parents. Six years later she was awarded her doctorate and her supervisor asked her what she would like to do next. The answer was that she wanted to work for the leading specialist in the country, who was based in Oxford. Somewhat reluctantly, she sent her CV to Oxford and received a call a few days later inviting her to come for an interview, which resulted in an immediate offer of post– doctorate work. She was then offered a Royal Society scholarship to perform research in Germany and spent two highly enjoyable years there. When she came home for Christmas and bumped into Simon, she recalls him saying something like, “you do engineering – do you want a job?” This was a huge decision for Susan, but a chance to help out the family business could not be turned down easily, and so she agreed to work for the business as soon as she could leave her work abroad. Susan’s experiences When she arrived a month or so later to take on the role of Estimating and Contracts Manager (see organisational chart), she was ‘gob smacked’. The place was cold, derelict and dirty. It looked as though it had not changed or been cleaned much or since she worked there at weekends as a teenager. The offices all had heavy steel shutters, some of which were welded shut, so that daylight was scarce. The office team included 72 year old Maggie, who would come in every Friday, as she had for decades, collect the clocking-in cards, and painstakingly transcribe by hand the hours each employee had worked that week onto a script. Then she would calculate the wages, before going to the bank for cash to make them up for collection later that day. There was a single computer that held a database but it was rarely used, and the two full time office staff preferred typewriters for invoices and letters. Pauline, the loyal PA/secretary/heartbeat of the office, had worked for the company since she left school at 16 and knew everyone and everything about the place. She warned Susan that Simon could be a bully but she also knew that when the chips were down, she felt she could rely on him to save the day. Angela looked after the invoicing and payments, which 6 she did without any help of the computer, which Susan felt was less than efficient for an organisation of this size. Pauline was absolutely right about Simon - he was inspirational and at the same time dreadful. He was an excellent negotiator, a charmer, and was able to leave meetings he had gone into owing money for late delivery and come out the other side with a bagful of credit and some new orders besides. He would calculate the price of a job on a scrap of paper, illegibly, and was happy to sign a contract based on this guess alone. Unfortunately, he would not or could not share this knowledge with Susan, which made her role all the more difficult. Simon and Malcolm between them controlled the finances very shrewdly and it was very difficult for Susan to know which jobs had been profitable and which had not. She believed that investment in the company was vital for future success, but found that Simon was not interested and tended to see profit more in terms of his retirement fund than potential for further investment in the business. In the factory Simon commanded a great deal of respect from the shop floor as they knew that he could say to any of them, at any time, if he felt they were not doing a job right, “Move over and I’ll do it myself”, and on occasions he did just that. Susan felt at a disadvantage as she did not have this practical background and had to accept that when a welder said he couldn’t do something, he couldn’t. However, the factory was in poor condition, aside from the cold and filth, some of which was unavoidable. There was hostility between the 30-40 shop floor employees and management. Company property was treated with disdain, while personal toolkits were immaculate. Susan felt that the prevailing attitude could be summed up with the phrase, she’d heard a few times “How can we get one over on the management?” by means of skiving, excessive overtime or other tricks. At this time there were no hardhats, no safety procedures, no clear gangways, and machinery was generally not fixed to the floor as it often needed to be moved to accommodate large jobs. All of this meant that the company needed to change to keep up with ever stringent safety legislation. However, Susan recalls that everything was always done on a shoestring, for example the cheapest possible overalls were issued to the workforce, even though it made no economic sense as better quality work wear would last longer and need fewer replacements. Susan felt that Alan’s son, Peter, was not good for the business either, as his antics often disrupted the workflow. For example if he had had an argument with Simon, as was often the case, he would often find ‘failed’ welds on that day’s work. However, she sensed that sacking him was not an option, due to the over riding loyalty that her family business had historically shown its employees, and in particular the son of her father’s trusted Quality Manager. Nonetheless, Simon felt that he had found a new lease of life when Susan joined the company, and he could now plan for his retirement in a few years as he now had someone to entrust with the business. He continued to be inventive and enterprising, and secured a lucrative contract to build a new shaft for a dockside crane. 7 He also secured another job for a precision bearing housing that was larger in diameter than either workshop, but had no-idea how the company could produce it, saying “don’t worry the answer will come to me soon”. The answer, when it did arrive, was that he ordered the clearout of the entire stock yard, fabricated the piece in several sections and placed them all together in the new outdoor workshop to measure the tolerances before final welding took place. One day, Simon noticed that the rollers were producing poor quality rolled sections that were warped on one side. On investigation he noticed that the foundations for the rollers, which would accommodate 3” thick steel plate, were collapsing on one side, producing a conical rather than a cylindrical shape. For Simon this was another opportunity. He re-designed the rollers so that one side could be lowered and was able to offer customers a unique proposition of rolled steel cones which had previously been unavailable from any supplier. Susan was not shy to make her presence felt on the shop floor, but often felt the workforce was only grudgingly tolerant of her, even though she had immediately tried to clean the place up a bit by revamping the canteen/break area. Unfortunately her efforts were not rewarded and it was trashed again within weeks. The operators, all male, almost always referred to her as Malcolm’s daughter and she felt they became increasingly hostile to her when she was pregnant. Before that she felt that she was almost accepted as “one of the lads” but walking onto the shop floor with her pregnancy clearly showing somehow upset the balance, and she felt uneasy in her role. Simon continued his strategy of securing only larger contracts so that he could spend as much time as possible away from the factory, and this left Susan with nobody to really show her the ropes properly. She recalls losing out on a £160K contract because she really didn’t know the true cost of the job, and felt unable to lower her price. At the time there wasn’t much work going through the factory and she was sure Simon would not be happy when he found out. However, when she told him, he just shrugged and said, “we’ve lost it, let’s move on”. Unfortunately she was none the wiser for the next time, and was at a loss as to what to do next. Eventually, the long hours, frustrations of a domineering Managing Director who was often absent, lack of clarity about the company finances and an overall lack of any kind of strategic plan for the future meant that Susan thought the time had come to make some hard decisions. With Christmas around the corner she did not want to end up overseeing a night shift for another late job as she had the year before, instead of spending it with her son. On the other hand, what would her uncle and father say if she said she wanted to leave? As she drove home on a cold, dark December evening, she wondered what to do next…………. 8 Company History Middleton Productions Ltd Year Event 1938 Lawrence Swift founds Middleton Productions Ltd 1939 War breaks out – Lawrence joins Navy 1944 1945 1961 1963 1967 1973 1974 1978 1979 Lawrence Swift returns from serving in the Navy Lawrence Swift buys out company from original partners Malcolm Swift starts work at the company Number of Employees Turnover 3 N/A 8 £57,000 16 £98,000 Kevin Swift starts work at the company Simon Swift starts work at the company Lawrence Swift has heart attack – Malcolm becomes MD Malcolm Swift recruits Alan Flower Kevin Swift become Fabrication Shop Director Simon Swift becomes Machine Shop Director 25 30 35 1983 Malcolm Swift recruits Peter Flower 35 1993 Malcolm ‘retires’ – Simon becomes MD 40 1996 Kevin retires 45 1997 Simon recruits Paul Scott 40 2001 Paul Scott resigns 35 2002 Simon Swift recruits Susan Swift 35 £732,000 £544,000 £819,000 9 Company Profiles Name – Susan Swift Occupation – Sales Director Age – 28 Qualifications Ph.D. Mathematical Modelling B.Sc. Mechanical and Materials Engineering A’ Levels Maths, Physics, Chemistry Previous work experience Post Doctorial Research Fellow at Oxford University Royal Society Fellow in Germany Returned to join the family firm Hobbies and Interests Skiing, motorbikes, girl guide leader, camping, member of the local church Name – Peter Flower Occupation – Non-destructive tester (NDT) Age – 32 Qualifications B.A. History A’ Levels History, English, Drama Qualified NDT operator Previous work experience Joined Middleton Productions straight from University Hobbies and Interests Real ale brewing, hard core rock, rambling. Name – Alan Flower Occupation – Quality Manager Age – 58 Qualifications B.Sc. Mechanical Engineering A’ Levels Physics, Chemistry, Maths Previous work experience – Design Engineer for HPL Contracting Ltd Hobbies and Interests Rambling, classical concerts, art 10 Name – Simon Swift Occupation – Managing Director Age – 50 Qualifications HND in Engineering Previous work experience Welder, Vertical bore operator, Gear Cutter Lathe operator, General Foreman, Machine Shop Director (all at Middleton Productions Ltd) Hobbies and Interests Skiing, Scuba Diving, vintage racing cars, parachuting, flying Name – Kevin Swift Occupation – Retired Fabrication Director Age – 60 Qualifications City and Guilds in Motor Vehicle Engineering Previous work experience – Welder, Rolls operator, Milling machine operator General Foreman, Fabrication Shop Director (all at Middleton Productions Ltd) Hobbies and Interests Farming, sailing, gardening Name – Malcolm Swift Occupation – ‘Retired’ Managing Director Age – 62 Qualifications B.Sc. Mechanical Engineering A’ Levels Maths, Physics, Chemistry Previous work experience – Labourer Apprentice Welder Managing Director (all at Middleton Productions Ltd) Hobbies and Interests MBA Engineering Management Ph.D. Materials Engineering (welding techniques) Middleton Productions Ltd 11 Name – Paul Scott Occupation – Project manager within ESSO Age – 38 Qualifications B.Sc. Chemical Engineering A’ Levels Maths, Chemistry, Biology Previous work experience – Shop Floor Manager - Horville Engineering Sales and Contracts Manager- Middleton Productions Ltd Hobbies and Interests Golf, fine wines, holiday home in Southern France 12 Organisational Chart 1990s Malcolm Swift Managing Director Kevin Swift Fabrication Director Simon Swift Machining Shop Director Alan Flower Quality & Production Fabrication Shop ~19 shop floor employees Machining Shop ~26 shop floor employees 13 Organisational Chart 2002 Malcolm Swift ‘retired’ MD Alan Flower Quality & Production Peter Flower NDT Manager Foreman Fabrication (~12 shop floor employees) Simon Swift Managing Director Susan Swift Contracts & Estimating Office staff (3) Foreman Machining (~14 shop floor employees 14 ) What happened next? Middleton Productions Ltd. Simon could not find another potential successor for the company and he and Malcolm decided that the best thing to do would be to close operations and dissolve the company. The company was finally wound up a year or so later once all ongoing contracts had been completed and each employee had either finally retired or found another job. Malcolm Swift – finally retired properly! Alan Flower - took early retirement. Peter Flower – left the company to join another firm. Susan Swift - became a lecturer in Materials Science followed by lecturer in Entrepreneurship at a UK University. Simon Swift - pursued his hobbies full-time and now runs a highly successful skydiving and flying club. The club is run as a family business with both his son and daughter involved full time. 15 Suggestions for use in teaching This case was originally prepared for use in an MBA module entitled Entrepreneurship and Innovation for Engineers. The learning outcomes that were used were: evaluate the philosophies and theories behind entrepreneurial behaviour, incorporating the entrepreneurial personality. Differentiate between different groups of entrepreneurs and critically review their similarities, differences and the methods of management of these different groups. critically assess an organisation’s characteristics that facilitate the innovation process. Plan and implement activities, which will establish an innovative environment within an organisation’s structure. analyse a company’s strategic approach to Innovation Management including company culture and the role of the individual in the process and as a result recommend strategic changes to improve a company’s Innovation Management. underpin work with reference to supporting literature, up to date research and appropriate case studies. Topics covered during the module included: • • • • • • • • What is an Entrepreneur? Entrepreneurial types Characteristics of Entrepreneurs What is innovation? Stages of Innovation Managing Innovation Creating an innovative organisation Innovation Strategy For this module the students were placed into groups and each group was given one of the characters in the case study to concentrate on initially. They were then asked to review the case study and, incorporating the material presented in the sessions, deliver a short presentation around the type of entrepreneurial (or otherwise) personality that had been assigned to their group. A framework for this was provided to the groups. The second task for each group was to prepare a presentation of a suggested future Innovation Strategy for the family firm. Both these tasks were assessed as part of the overall module. An alternative suggestion for group discussion could be: Had Susan Swift remained with the company, what might she had done differently from her predecessors? 16
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