Gentran Machinery, INC.

Case Study

Executive Summary
The company Gentran Mahinery Inc. produces heavy machinery for manufacturing, mining and construction operations. The company had set up an international manufacturing joint venture in China with the Chinese State Corporation. Just six months into operation, there were major hurdles the partners had to deal with: cultural, language and management problems. The conflicts between the two sides were further incensed by the lack of Western exposure to Chinese managers and the strict hierarchical management system in the Chinese side of the joint venture. The Executive Assistant at the Hong Kong office, Bill Stevenson visited the joint venture in China and prepared a detailed report on the various issues making recommendation on the following aspects: (a) the general manager's position, power and authority in the joint venture, (b) the organizational design of the joint venture, (c) clarification of the responsibility of both parties, (d) reward system and appraisal system, (e) how to deal with both the Chinese and American incompetent managers, (f) how to deal with the communication problems, both language and cultural, and (g) final comprehensive and position outline of the potential of the joint venture.

Performance Management and Appraisal

Page 1

Gentran Machinery, INC. Case Study

Situation Analysis:
1995-97: The idea and impetus to operate in China was conceived by GM pacific. A JV was set up due to legal obligation that Chinese State Corporation had to have at least 50% control over foreign JV. Both the Chinese and Americans have their own interest in JV. Jan 1998: JV began its operation & the products were manufacture with the Chinese design. Sep 1998 (Current): The sales figures are very low as compare to the target set and more the cost of operation is very high. Though the GM head office management is aware that the financial projections were unrealistically optimistic but the major concern right now is that the company is operating way behind its schedule. It is expect to manufacture the first component of the GM design in the fall of 1998 and assemble their first major assembly is early 1999. There are several issues identified for the delay which also includes level of trust and communication between American and Chinese managers and among the Chinese managers themselves. The most pressing concern for the management though is the stalled process of cultural integration of the American way propagating the Responsible System and the existing Chinese system of doing work.

Issues and their Root Causes

Leadership Related Issues Lack of strong Top-down management resulting in lack of enthusiasm among the middle management No detailed plan or strategy for implementation of the new processes changes resulting in confusion about expected results Lack of strong leadership resulting in inter departmental friction Root Cause Presence of Power Centers: There are 3 major power centers that have developed in the organization; the GM Jack Bartlet, the Board of Directors and the AGM Wang Peng. Jack, as the GM of the organization should be the leader in charge but due to his passivity he has not guided the organization as a leader do in times of an impending GM Jack change Bartlet The Board is not willing to give up their total control of the organization and frequently reverse the managements decision. AGM The AGM Wang Peng, as one of the oldest The Wang Board managers he was the most respected and Peng feared among the middle management. He still believed in the old ways of working and continuously interfered in the work of other departments.
Performance Management and Appraisal Page 2

Gentran Machinery, INC. Case Study

Trust and Communication Related issues Language barrier resulting in communication breakdown. Lack of enthusiasm among the workers for the new responsibility system

Root Causes Lack of translators as there is a serious language barrier between the American and the Chinese workers. The middle management is not convinced that the top management would be willing to give up their powers, to adapt to the new system. Hence they do not feel enthusiastic about the new system. Organizational Make up, Appraisal and Reward Related issues No concept of chain of command, people indulging in Guan Xi Lack of coordination between departments Chinese workers believe in No work/ No Money whereas both the managements want to implement a new reward and Appraisal system which eliminates the No Work/No Money philosophy. Root Cause The Chinese Managers are used to working in an environment where the usual way of working involves the top management making the decision and use of politics to influence the decisions (Guan Xi). The management is finding it very difficult to change a thinking embedded for 40 years especially in an environment of mistrust. Hr related Issues Mismatch in the required KSA of the position and the people appointed in them There is little life for managers outside the plant for the managers which are leading to low morale, alcoholism and loneliness. Root Cause The Appointments to the posts on the Chinese side were arbitrary in nature, the perception was that undesired employees were shunted out by the main company into the JV project. The managers are put up away from the main city there is little interaction between the American employees and the Chinese counterparts.

Critical Success Factors

For the success of any Joint venture the Critical Success factors are Effective communication between the two partners Development of local managers
Page 3

Performance Management and Appraisal

Gentran Machinery, INC. Case Study

Integrating cultures and traditions into a consistent company policy Good relationship with government agencies

Based on these CSF to measure performance effectiveness the company needs to establish KPIs indicative of each factor.

Recommendations
Removal of Power Centers: Mandatory measures Have a meeting between The GM and The Board to clearly demarcate role. Where in the board must have only advisory powers and the GM takes all decisions regarding the strategy and policy of the company. The GM needs to clearly outline the change process in a policy document that needs to be circulated among all the workers in the JV. Alternatives Available Removal of Wang Peng, Zhang Yan as AGM: Offer VRS to Wang Peng and a membership on The Board as an employee representative. Promote Zhang Yan to the position of AGM op and Eng. to leverage his contacts with the union and workers. He is also progressive thinking and in tune with the new responsible system the management wants to implement. Wang Peng as the GM,Jim Olenuk as AGM: If there is a need for a strong leader move Wang Peng as the GM, Jim Olenuk as the AGM and transfer Jack Bertlet. Also stress to Jim the importance of him needing to work with Wang Peng, Also Wang peng needs to be bought onboard to adopt a more open way of working. Sack Wang Peng, promote Zhang Yan as AGM: Remove Wang Peng from the position of AGM and also promote Zhang Yan to the post of AGM.

Decision Criteria Based upon the CSF we can establish decision criteria for the alternative as Positive Effect on cultural integration Positive Effect on development of local managers Positive Effect on co-ordination between the Chinese and American managers Positive Effect on relationship with government agencies

On evaluating the alternatives it is evident that alternative 1 is the most appropriate option.

Performance Management and Appraisal

Page 4

Gentran Machinery, INC. Case Study

Trust and Communication Related issues Mandatory Measures Hire translators for each department who work closely with both the American and Chinese teams Have sessions to educate the management on the new system. Conduct open forum town hall meetings where the middle and lower level management workforce can directly address their concerns to the top management. Organizational Make up, Appraisal and Reward Related issues Mandatory Measures Introduce a new reward and appraisal system based upon the CSFs identified. These will also help in bringing down the old structure. Educate the people on how the new Responsibility system would be implemented and its positive implication. Alternatives in increasing intra-department dependence Feedback from other departments to be included in the performance appraisal system Each manager should undergo a basic managerial course in the field of all other departments Based on the CSFs- Development of local managers and Effective communication between the two partners we can eliminate option 1.

New reward and appraisal system Based on the CSF KPIs have been identified. Critical Success Factors KPIs Effective communication between the Level of language course attended two partners No of Knowledge training Sessions conducted Development of local managers No of trainings attended by his sub-ordinates Integrating cultures and traditions into a No of suggestions given by the team consistent company policy implemented into action Good relationship with government Level of compliance with government laws agencies For each manager these KPIs should form a part of the Appraisal-Reward system.

Performance Management and Appraisal

Page 5

Gentran Machinery, INC. Case Study

Hr Related Issues Mandatory Measures: Develop a company database where every individual KSAs are maintain. Depending on the job specification for a particular position, assign the most suitable person. If some gaps still exists, give them require training or ask the main factory to take them back. Certain recreation facilities like sports, library, movie screening within the premise should be developed. This would increase the level of interaction among the employees. Assign a HR personnel who should be responsible for planning & scheduling the trainings required in different units of the organization

Action Plan
Have a meeting between The GM and The Board to clearly demarcate role. The GM needs to clearly outline and circulate the change process in a policy document. Move Wang Peng to the Board; promote Zhang Yan to the position of AGM op and Eng. Hire translators for each department who work closely with both the American and Chinese teams Have sessions to educate the management on the new system. Conduct open forum town hall meetings Introduce a new reward and appraisal system based upon the CSFs identified

Each manager should undergo a basic managerial course in the field of all other departments
Develop a company database where every individual KSAs are maintained. Certain recreation facilities like sports, library, movie screening within the premise should be develop. Assign a HR personnel who should be responsible for planning & scheduling the trainings require in different units of the organization

Performance Management and Appraisal

Page 6

Gentran Machinery, INC. Case Study

Performance Management and Appraisal

Page 7