Case study


Case Study – Hill Enterprises

When Hill Enterprises was founded ten years ago, its total assets consisted of one automatic lathe, one contract worth $2,200, and one employee. The employee was Robert Hill, proprietor and sole owner, then 29 years old. He had one objective in forming Hill Enterprises – that of retiring with at least 10 million dollars in his personal bank account at the age of forty.

According to Robert Hill, the reasons Hill Enterprises was able to survive the first difficult years were his considerable abilities as a machinist, which he had developed during the nine years he was employed in the machine shop of a large manufacturing company, his willingness to work long and hard hours, and his knack for raising money for working capital. During his early years he would customarily spend his evenings working at the plant and his days visiting banks, insurance companies, and personal friends in an attempt to acquire sufficient funds to continue operations. For the most part he was successful, and though he often had the feeling that he was a bit overextended financially, his business continued to grow and to show profits.

Mr. Hill felt that another reason for his success was his ability to inspire the workforce to work toward his personal goal of $10 million dollars. His typical comment in interviewing a prospective employee was: “If you work for me you will have to work hard, for I intend to retire with $10 million dollars by the time I am forty. This means overtime, long hard hours, and unswerving loyalty to Hill Enterprises. If you are willing to do this, I’ll make sure that you will get your share of the profits.”

Potential employees who were willing to accept these conditions found that Mr. Hill meant what he said. Loyalty to the common cause was based on the number of hours of overtime that a person put in. This high amount of overtime had two effects. First, Hill Enterprises was able to give its employees approximately double the take-home pay they could receive from other companies, thus reinforcing the promises Mr. Hill had made concerning financial rewards to individual employees. Second, even though the company was constantly growing and the workforce was increasing in size, the large amount of overtime kept the number of employees to a minimum so that Mr. Hill had continuing face-to-face contact with them and could maintain a personal relationship with each of the workers.

As Hill Enterprises grew and progressed, Robert Hill continued his earlier pattern of operations. He set a grueling pace, continuing to work long hours late into the night and spending a large share of his time during the day attempting to raise additional working capital and financial support. He often held important conferences at 5pm in order that supervisory personnel would be free to handle their regular work during the ‘normal’ working hours. Mr. Hill seemed to enjoy the pace and pressure and seemed specially to like his frequent contact with the employees. His office consisted of a single desk in one corner of the production area.

Thus, he was immediately available to all to help with any problem, whether a production or a personal one. Many employees availed themselves of his accessibility and while he was in the plant he seemed to be constantly talking with one employee or another, either in his ‘office’ or on the production floor. Often, he would report on the progress of his financial affairs to the men, a practice which they enjoyed tremendously, as Mr. Hill would recount very vividly his financial manipulations.

The employees of Hill Enterprises responded to the situation by working long hours in poor environmental surroundings and under constant pressure of schedules and production deadlines. Hill Enterprises had at this stage set up operations in an old store building, and physical working conditions were considerably less attractive than those of competing organizations.

Under the constant pressure to meet schedules, tempers were often short. The accepted way to reduce individual tension was to ‘fly off the handle’. It was the privilege of Robert Hill, as well as of any employee, and it was a privilege that was often used. Robert Hill had the reputation of being able to deliver the best ‘dressing down’ of anyone in the organization, and it was not unusual for an employee to comment on the skill with which Mr. Hill had ‘chewed him out’. This situation was not all one-sided and employees, regardless of their position, felt free to talk back to Mr. Hill or the other supervisors and often did. Because this was the accepted way to release tension and to achieve action, the incident over which an outburst occurred was immediately put in the past once a resolution had been achieved. The employees seemed to enjoy their existence with Hill Enterprises, and underneath the tension and pressure each employee felt that he/she was capable, and that he/she was contributing to the goals of the company.

However, some nine years after the start of Hill Enterprises, as Robert Hill had often feared, his intricate financial dealings caught up with him. His considerably expanded enterprises were without adequate working capital and he was forced to bring in a new business partner, Donald Robbins, who was willing to invest sufficient funds to keep the company going.

One faction of the workforce thought that the arrival of Robbins was just another of Mr. Hill’s seemingly endless manipulations for capital. The other faction believed that his arrival was the harbinger of the end of Hill Enterprises as they had known it. They sensed that it would only be a matter of time before Mr. Hill would lose control of the internal workings of his organization and that the high wages and overtime pay would be slashed.

The immediate effect of the arrival of Robbins upon the operations of Hill Enterprises was negligible. Operations continued at the same hectic pace, and Mr. Hill’s personal activities did not appear to be appreciably different. He maintained his old ‘office’ and was still available to help out on any particular problems which arose. However, as time passed, it became more and more obvious to the employees that Robbins demanded a great deal of Mr. Hill’s time.

Although he retained his desk in the corner of the production floor for a while, Mr. Hill soon set up new headquarters in the more comfortable surroundings of a new building that had been constructed adjacent to the production facilities to house the sales and office activities of Hill Enterprises. Because of his new location and the demands made upon him by his new partner, Mr. Hill was unable to spend as much time with the men in the production area as before. In addition, Robbins’ apparent aloofness to the workings and problems of the production shop and its employees created resentment.

The employees noticed that shortly after Mr. Hill had moved his office, the time-honored method of blowing off steam as a prelude to constructive effort on a problem became more and more ineffectual. Mr. Hill was no longer around to arbitrate really serious disagreements, and his customary “okay, now that we’ve got that out of our systems, let’s get back to work” was missing. While blowing off steam was still an accepted practice, an element of bitterness seemed to now be apparent in such outbursts.

This bitterness and a sense of resentment toward Robbins permeated the atmosphere of the shop-floor, with the result that many employees adopted a fatalistic attitude both toward the future of Hill Enterprises and their own personal future.

In this atmosphere, a second major organizational change occurred. A new man, with the title of ‘Works Manager’ arrived to fill the vacuum created by Mr. Hill’s enforced attention to matters other than production. This man, Rod Bellows, was 35 years old, and a business school graduate who had ten years’ experience with a large chemical company. He was hired by Hill Enterprises on the insistence of Donald Robbins, who felt that the production activities were inefficient and excessively costly. His appearance on the scene came as a surprise to the production employees.

During his first few days with the company, employees often saw Bellows with Robbins in the production area. The men appeared to be conversing in earnest, and often pointed and gestured towards machines or individuals. Bellows continually took notes on a large clipboard which he carried with him. During this period, none of the employees were spoken to by either of the two men. The men in the production area had not had official indication of Bellows’ duties, responsibilities, or position with the company. They knew only by rumor that he was the new Works Manager.

Bellows made the following comments about his responsibilities at Hill Enterprises shortly after his arrival: “This company has tremendous potential and an unlimited future. Robert Hill is a dynamic individual with great skills. He has certainly been successful to date. Mr. Robbins and I will, I think, complement these skills and make the company even more successful. Mr. Robbins has the ability and experience to do some long-range planning and get our financial affairs in order, and I have the responsibility and ability to make our production activities more effective. A major part of the problem as I see it is that we use our time inefficiently in production. We don’t have any effective scheduling procedures or channels of responsibility and authority, with the result that the men spend a lot of time bickering with each other and conversing about things with which they should not really be concerned. Their job is to get out the production. Our job is to organize the production activities in such a way that this can be done at the least cost to the enterprise. The whole basis for the current situation is that in the past Hill Enterprises has been small enough to be controlled effectively by one man. Now, however, we are no longer really a small firm and we cannot continue to operate like one. I have some ideas and techniques which I plan to initiate, which I think will increase the effectiveness and efficiency of our production operations by 50% in very short order.”

At the beginning of his third week as Works Manager, Bellows issued a series of changes in procedures to the production employees. Without exception, these changes were made without consulting any of the men on the production floor. All of them were issued as formal directives, a new practice which many of the employees thought was unnecessary and undesirable because of the effectiveness with which they felt the existing informal channels of communication had been used. The extent of the changes requested by Bellows were significant, ranging from changes in production scheduling techniques to changes in working conditions for individual employees. One employee estimated that to carry out these written orders hundreds of additional work-hours would be required.

Bellows’ personal contacts with individual employees were limited and consisted mostly of quick and forceful answers to any questions or problems that might be brought to his attention. Many of his decisions seemed to indicate a lack of awareness of the capacity of the tools and machines used in the production process. For example, because of his insistence on machine speedups for certain operations, several expensive tools were ruined, and valuable production time was lost. Bellows justified these machine speedups as important tests to gauge the limits of existing production capacity. After having received several memos from Bellows which they considered unreasonable, one small group of machinists had given him the nickname of ‘the fool’. As the number of written memos coming from Bellows’ office increased, the resentment towards them became more apparent, and a strong adverse reaction to his presence was evident on the part of the production employees.

Some four months after Bellows’ arrival, co-operation between the supervisors and the workers hit a new high. Unfortunately, this co-operation was used to undermine any and all changes that the new Works Manager attempted to put into effect. As new orders and procedures originated from Bellow’ office, the employees carried them out to the letter because, in many cases, they afforded a justified means of wasting time and reducing production. Bellows gave no indication that he was aware of this situation.

Bellows also attempted to establish formal channels of communication within the production operations, for he felt that much needless discussion and confusion existed under the present system. He issued several organizational charts which described the ‘approved’ way in which communication was to be affected within the organization. These charts were uniformly ignored by the employees, who continued to rely on the previously accepted informal channels of interaction. It even became an unwritten policy that all information channeled to Bellows under the new system was censored and reviewed by the person or persons affected before it was sent to Bellows.

Bellows spoke with Robbins, who agreed that they weren’t getting enough information from the workshop floor. With Robbin’s approval, Bellows invited all the floor supervisors into his office for a meeting. He started this meeting talking about how he knew that all the long-time employees were proud to be working at the company and he appreciated that. He also knew that they were all loyal to each other, appreciated the comradery that had been fostered. One of the supervisors started to ask a question, but Bellows quickly cut him off, saying, ‘your boss is speaking, have some respect”. He said that other companies did not pay workers such high wages, and that there would be changes.

Bellows intended to bring in an updated plan called “Hill 2.0” in which quality and cost cutting would be the main focus. His intention was to put the workers into groups and have a portion of their pay be based upon the group’s performance. He said he would allow the supervisors to develop and train the groups.

To monitor the expected positive effects of these changes, cameras would be installed on the floor, and efficiency experts would be brought in to examine the camera footage. One of the supervisors, John, stood up and said he had enough of these changes. Bellows yelled at him to sit down, still standing, and John looked him dead in the eye and said, “do something, Junior”. Another supervisor jumped between the two and a slowly pushed John out of the room. Bellows said the meeting was over and everyone left.

Yet in this new atmosphere, the old loyalties to Robert Hill did not fade entirely. The Office Manager, the Plant Superintendent and several Foremen attempted to get Hill’s ear from time to time to inform him that things were not running smoothly. Mr. Hill was always surprised by such comments, and he tried to reassure the men by making such remarks as “It will take some time for us to get to know each other well, but I’m sure that everything will be straightened out in a little while.”

Nine months after Bellows had taken the position of Works Manager, approximately 25% of the production force had taken new jobs at production shops in other organizations. The morale among those remaining was poor, and a significant increase in production rejects was experienced. However, during this same period, both Robbins and Bellows felt that important advances had been made in ‘cleaning up’ production activities and that the company was ‘looking better and healthier all the time’.

end of case.