Chengdu Bus Group Case Study Report

  1. Problem Statement

Chengdu Bus Group, a Chinese state owned company encountered significant problems a few years ago. The main problems were management problems and financial crisis. The causes of these problems were: complicated working relationships and politics among the company’s 14,000 employees, and over-competition among the four branch companies of Chengdu Bus Group. The complicated working relationships among employees made it difficult for the newly appointed CEO of the company Dr. She Chen to implement large scale organizational reforms in the company. Dr. Chen was given 3 years to reform the company which was already facing significant management and financial problems. Effecting organizational reforms within such a short period in a situation of complicated working relationships and politics is not an easy task. The reforms would be affected by complicated special relationships among the 533 managers of the company and possible solid opposition from to changes from major stakeholders of the company. The four branch companies, two of which are joint ventures with investors competed for the highly profitable routes. This led to over-competition, hence reducing the company’s profitability. Therefore, complicated working relationships led to management problems while over-competition among branch companies led to reduced profitability and financial crisis.

  1. Analysis

From the problem statement, it is clear that Dr. Chen faced a big challenge as he was tasked to bring reforms to the problem-rocked company. He had to reform the poor management system of the company and improve the financial performance of the company. There were possibilities of opposition from the company’s managers and employees, and indeed such oppositions were encountered. Dr. Chen’s first step was a fast-paced managerial reform. He had to design a reform plan and schedule for managers without their knowledge using a fast, accurate and ambitious strategy. This reflected a personality and values view of decision making of managers. Personality in decision making is dynamic; initiating changes through growth and development. His decision was based more on personal judgment, thinking, feeling and perception. From his management experience, he knew that his reform agenda was going to be strongly opposed by managers of the company who would prefer to maintain the status quo at the expense of the company’s future. He then initiated the reforms on managers and their positions quickly, precisely and without compromise.

The strategy of Dr. Chen was to make adjustments to the managerial positions before managers could be able to react effectively to the changes and potentially disrupt the process. In this decision making, Dr. Chen acted as a thinker; he was organized, he considered cause and effect, pros and cons, and he focused on consequences. This is made clearer when he told those who opposed his actions that after all events of reform have passed; there would be different impressions about him and his reforms. He contended that change is inevitable and that he acted in the best interest of the company and not for his own sake (exhibit 1). This showed that Dr. Chen followed his own thoughts as a thoughtful manager. As a good judger, the CEO was also there on time, came up with an agenda and a plan, followed his plan and organized his reforms. The decision making skills of Dr. Chen also demonstrated higher conscientiousness and lower agreeableness because he came up with a solution without agreeing with other managers of the company. This is an important aspect of personality in decision making of managers (Gillespie & Mann, 2004). It is important for a situation like that of Chengdu Bus group which required immediate changes.

Regarding the problem of increased competition among the four branch companies of Chengdu Group that resulted in financial crisis, Dr. Chen realized that the joint ventures of two of the branch companies were the main cause of the competitiveness. Therefore, he turned them into state-owned companies. As a result, the competitiveness ceased and all companies worked together and depended on the station company for services. All the bus stations were amalgamated into a single station company while the repair workshops were amalgamated into a single repair company. This indicates that Dr. Chen practiced effective strategic management to make the company a successful one.

Amalgamation is used by many companies as a strategy to enhance effective value chain and improve operations of the organization in order to achieve profitability. The move also reduced resource wastage, hence led to an effective management and utilization of resources. Optimization approach utilized in the strategic management of Dr. Chen also led to reduction of over-competition and operating costs. Utilization of Chengdu Group’s resources and reduction of over-competition and operating costs enhance profitability of the company and solve the financial problems faced by the company previously.

Dr. Chen also applied the principles and practices of ethics in his decision making. He knew what is wrong or right to do, even without the need of consulting with other managers. These principles are influenced by his values. When other members tried to question his reforms, he contended that he was doing everything for the best interest of the company. If the company was to improve, then it can be assumed that the overall economic welfare of the society will also improve (Goold and Campbell, 1998). Dr. Chen knew that he had a moral responsibility to give back to the community and serve the company as required by the terms of his job and profession. This reflected a true picture of theoretical decision making behaviours which require that ethics is essential in decision making because a rational decision is always to maximize and protect benefits for the sake of the organization’s prosperity. That is the exact attitude of Dr. Chen when he took over the leadership of the organization.

Dr. Chen also realized that the salary system of the company was not fair and just. He knew that the most important members of the organization needed to be motivated with a better benefits and compensations. However, when he became the CEO he noticed that the frontline staff who worked very hard received lower salaries than back-up staff who did not work as hard. According to the manager, this step led to low job satisfaction and high turnover rates among the members of the front line staff. He then increased the salaries and bonuses of frontline staff in order to improve their job satisfaction and reduce their turnover rates (Meyer & Herscovitch, 2001). Furthermore, he initiated reward system to motivate employees and abolished punishments. This led to the overall improvement of job satisfaction and employee commitment and engagement in the company; hence increasing the overall performance of the company. Heymans, (2002) suggests that the attitude and the commitment of employees are directly attributable to the levels of motivations and incentives. Higher salaries, better compensations and rewards motivate employees and lead to better attitudes and more commitment.

  1. Alternatives

Although the actions and steps taken by Dr. Chen to improve the performance of the company were fruitful, there is still a need to develop some alternative steps to make it even more effective. There are various steps that effective managers and leaders may choose to undertake, and devote their resources to make them successful in implementing appropriate strategies. The following are some of the possible alternatives that can be considered by management in enhancing better performance of the company and become solutions to the problems faced by the company.

  • The company should develop detailed mission and vision statements and a set of behavioral norms or organizational culture that can be shared by all the four branch companies within an integrative system in order to enhance cohesiveness, integration, proactive participation, and synergy among various departments in the company.
  • The management should also develop and implement a customer-focused policy which ensures that the company achieves customer satisfaction, efficiency in services provision, community benefit, and strong relationship with customers. This should include improved quality of customer service, strategies of improving service delivery in order to satisfy customers and earn their loyalty, and improvement of customer service skills of employees.
  • The CEO should also develop a simple, flat, lean, customer-driven, focused, risk-taking, responsive and flat organizational structure in order to enhance better services and operations of the company.
  • Strategic corporate level of governance should also be developed and formal and informal education provided for those with the responsibility of governing at all levels in the organization.
  1. Recommendations

Dr. Chen and the company’s management develop detailed mission and vision statements and a set of behavioral norms or organizational culture that can be shared by all the four branch companies within an integrative system in order to enhance cohesiveness, integration, proactive participation, and synergy among various departments in the company. This integrative system will enhance effective management because all stakeholders will be able to participate in decision making. Well defined mission and vision statements can also be used to set milestones for the company. It enables the company to know where it is going and what it will do to achieve its objectives. In order to fulfill its mission and vision, the company should develop a set of behavioral norms and organizational culture that guides employees and managers of the company.

  1. Implementation

The implementation of the above recommendation should be done by the company’s management in collaboration with other stakeholders of the company including customers and employees. The company management should collect opinions and views of employees based on their experience of the company’s operations. The opinion of the employees will be taken into consideration because they understand the needs of the company’s operations. Therefore, their opinions will be used by the management to make appropriate decisions on the kind of organizational culture to develop, and the mission and vision required for the company. The company should also determine the needs of customers through a customer survey whereby the company asks questions to the customers in order to establish what they need and how they want things to be done.

After the data containing opinions of all stakeholders have been collected, the company management then sets out appropriate mission and vision as well as establishing an appropriate organizational culture and norms of the company. The established mission and vision will then be communicated to all stakeholders of the company by the company management in an effective manner. A feedback loop will then be provided for stakeholders to give their feedback concerning the implementation of the new policy. The company’s organizational culture will then be integrated into the company upon acceptance by most members of the organization.

Chengdu Group should then monitor and evaluate the success of the new policy in order to measure its effectiveness. This should be done by checking the operations, management strategies, and performance of the company in order to establish whether these elements reflect the vision and mission of the company. The company should also monitor all employees and managers to determine whether they behave and work in line with the norms and organizational culture of the company. This implementation period should take a period of six months at most. This will ensure that the company meets its three-year performance ultimatum period.

 

References list

Gillespie, N.A. & Mann, L. (2004). Transformational leadership and shared values: the building blocks of trust. Journal of Managerial Psychology, 19, 588 – 607.

Goold, M. and Campbell, A. (1998). Desperately seeking synergy, Harvard Business Review, 76(5), 131-143.

Heymans, D.R. (2002). The relationship between job insecurity, job satisfaction and organisational commitment of maintenance workers in a parastatal. Unpublished master’s dissertation, Vaal Triangle Campus of the Potchefstroom University, Vanderbijlpark.

Meyer, J., & Herscovitch, L. (2001). Commitment in the workplace: Toward a general model. Human Resource Management Review, 5(4), 34-52.

Poropat, A. E. (2009). A meta-analysis of the five-factor model of personality and academic performance. Psychological Bulletin, 135 (2), 322–338.

Fredrick Chepkonga

B. Economics & Finance, B/ED, Writer, Educator with experience of 12 years in research and writing.

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