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Leadership and Change Management: A Case Study of

Pemancar Mr. Danial Tareqa, the new plant manager was walking through the factory floor during his daily rounds in Pemancarb, a production plant located in Peninsular Malaysia. This is his first week on the job. Pemancar’s parent company, Nova Europe International Corporation (Nova), was not happy that Pemancar had not consistently achieved the production targets set by them. The previous plant manager, Mr. Adam was held to task for the non-achievement of the set targets. He was demoted and asked to head another small subsidiary a few months earlier. Before Danial was brought in, Pemancar was temporarily managed by managers brought in from Nova.

Danial heard that Adam, the previous plant manager, who had been working at Pemancar for nearly twenty years, might probably be laid off later. He keeps thinking of the situation in Pemancar and the changes he is going to make to ensure that the production targets are met and the cost contained. After walking through the factory floor, Danial took the stairs to the administrative office of Pemancar. Although it was nearly seven in the evening, there were still staff working at their desk. He needed to talk to the head of finance regarding the issues and problems faced in the factory. On his way to the office of the head of finance, he saw that one of the employees was filling in application forms to work in other companies.

aAll names have been changed. bThe name of the company has been changed to ensure confidentiality.

ASIAN CASE RESEARCH JOURNAL, VOL. 16, ISSUE 1, 115–132 (2012)

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This case was prepared by Dr. Zarifah Abdullah of Universiti Utara Malaysia and Dr. A. K. Siti-Nabiha of Universiti Sains Malaysia as a basis for class discussion rather than to illustrate either effective or ineffective han- dling of an administra tive or business situation.

Please address all correspon- dence to Dr. A. K. Siti-Nabiha, Graduate School of Business, Universiti Sains Malaysia, 11800 Penang, Malaysia. E-mail: [email protected]

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Danial reflected on the conversation and the information he gathered from the managers and other employees since the first week he was in Pemancar. In fact, in his various conversations with the employees, some of them did mention that they had created resumes, surfed the websites to look for other job opportunities, or applied for continuing education to prepare for the eventuality of being out of a job at Pemancar. He now needed to identify the issues and problems pertaining to the non-achievement of targets and the ways to keep the employees motivated and their morale high.

PEMANCAr

Pemancar is an automotive part production company located in Peninsular Malaysia. The company was established in the late 1970s and was owned by several state and federal government agencies. In the mid-1980s, the company was acquired by KL Corporation (KLCorp), one of Malaysia’s leading multinational conglomerates. Since the acquisition by KLCorp, the company has undergone a technical cooperative agreement with a Japanese company in 1987. This was to ensure that Pemancar is equipped with the latest technology and expertise of their production. The marketing and distri- bution of the products was then carried out by the marketing and sales department in Pemancar.

Figure 1 portrays the kind of organizational structure that used to exist at Pemancar while it was under KLCorp. Pemancar, under KLCorp was headed by a Plant Manager, who oversaw the whole operation of the plant and the support division. The Manufacturing Division consists of seven main departments, namely, Production, Engineering, Industrial Engineering (IE), Planning, Quality Management (QM), Product Industrialisation (PI), and Plant Operation. While the Support Division consists of the following six main departments, namely, Human Resources, Finance and Accounting, Controlling, Purchasing, Information Technology (IT) and Environmental, Health & Safety (EHS).

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In terms of manpower, Pemancar has approximately 1,700 employees of which 100 are at the middle management and managerial level, 130 are at the supervisory level, 100 are administrative (clerical) staff and 1,370 are at the operative level (direct and non-direct). under KLCorp, Pemancar is the largest plant in the northern part of Peninsular Malaysia, which produces various types of automotive parts. Its production volume (in kg) has increased from 9 million kg in year 1988 to 40 million kg in year 2003/04. Pemancar has grown and flourished over the years and its production volume has secured the company as one of the leading automotive parts suppliers in Malaysia. Its products are also exported to more than fifty countries, i.e. Europe (41%), the Middle East (23%), Australia (18%), ASEAn countries (15%) and other countries (3%).

Pemancar has received recognition at both the national and international levels. They have received several quality and management awards (such as the ISO 9002 recognition and the Malaysian Standard awarded by SIRIM, the European Standard and the gulf Standard, OHSAS, the China Standard CCCT) and also recognition awards from their customers (for example: Best Supplier Award, Best Supplier Performance Award, Quality Management Award, Export Excellence Award, and Energy Savings for Industrial Sector Award).

OrgANizAtiONAL CuLturE uNdEr KLCOrP

under KLCorp, the mission of Pemancar is to become the most prominent producer of automobile parts in the region and in the world. It aspires to achieve its mission by satisfying the customers’ wants with the quality and competitive products and services that it has to offer. Pemancar believes that excellence begins with each individual, which is the catalyst of what they are doing. With the above mission in mind, Pemancar is committed to reach a world-class operation through their corporate philosophies and values. Pemancar’s corporate philosophies then were to always think of the Customer, Quality, Excellence, Shareholders, Employees, Services and Safety. The corporate values that

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they want to be inculcated in each and every employee are Sincerity, Trust, Openness, Realisation and Interdependence. under KLCorp and the leadership of Mr. Adam, the sense of responsibility and ownership (or empowerment) within most of the organizational members was lacking. They need to be instructed and pushed before they started to act on arising issues. This was strengthened by the view of the Assistant Manager (Industrial Engineering), Mr. Rahim, when he mentioned that people were more reactive then, rather than proactive. The monthly performance report to KLCorp was very simple. The Factory Controller, Ms. Lim, explained:

“under KLCorp, we did not prepare the monthly report in detail. The moment the top management sees the bottom line is good, that’s it! Everybody is happy.”

The Manager (Accounting), Ms. Anita, shared similar views when she indicated:

“under KLCorp, if you are not able to complete your report in the time period specified, it is still permissible for you to extend the submission to a few days later, or delay the submission and things like that!”

In addition, it is normal for the Finance department to be held responsible and answerable for all the deviations and variances from the budget. As indicated by Ms. Lim:

“Last time, if anything goes wrong, they will say “Finance!”. Since Costing is also under Finance, hence, they said, “you have to tell me why?” Anything that goes into [their departmental] costs, [they] will come back and ask me why.”

Pemancar, under KLCorp used to prepare not just the one upcoming-year budget but also the next five years’ budget, thus, the figures for the five-year budget were sometimes simply put rather than going through a process of deep thinking and justification. In other words, accuracy was not so much emphasized under KLCorp. In terms of performance, under KLCorp, the management regarded it as good performance if Pemancar could achieve 90% of what was required by the budget. Achieving a 100% performance was regarded as very good performance. As indicated by the Factory Controller, Ms. Lim:

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“Previously, our culture [is such that to be able to achieve] 93% is [considered] good! Hit 100%, [is considered] very good!”

The plant operates twenty-four hours a day, seven days a week and an average of 345 days in a year. The operatives are trained such that they are multi-skilled so that they can perform various production processes as and when required. This is made possible by running two unique shift systems called the Brazilian Shift System and the Rota Shift System. The employees worked together and regarded the factory as their second home. Teamworking was never a problem for the people at Pemancar, as indicated by Ms. Lim when she said:

“Of course, our people here, the good thing in Pemancar is, teamwork. Although, I’m from a different race, they give me good cooperation and teamwork.”

Even though Pemancar was a small business under KLCorp, it was considered as one of the best model plants and had contributed to the high profits of KLCorp. Hence, even during economic recession, the employees were given lucrative bonuses, as explained by one of Pemancar’s managers:

“We are only a small business in KLCorp. And yet we were seen as one of the best models at the time. During recession, we heard of electronics plants being closed down here and there. We, however, were enjoying three, four months bonus during that time.”

ACquiSitiON by NOVA EurOPE iNtErNAtiONAL COrPOrAtiON

The acquisition of Pemancar took place following two major events that had a huge impact upon its operation. With the liberalization of the Malaysian economy and the opening up of trade barriers through the Asian Free Trade Agreement, the management of KLCorp felt that they had to find a business partner to sustain the existence of Pemancar. Moreover, their Japanese counterpart, who had been pro- viding the technical assistance for Pemancar, had been

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bought over by Pemancar’s competitor. Thus, the Technical Cooperative Agreement was terminated in late 2001.

In 2001, KLCorp went into a technical agreement contract with nova, one of the world’s leading automotive industry suppliers. nova was established in Europe in the late 19th century. It is an international conglomerate with nearly 90,000 employees working at more than 100 locations in 30 countries. Subsequently, 30% of Pemancar was divested to nova. In 2003, nova increased their interest in the joint venture to 51% and, subsequently, to 70% in 2005 in order to strengthen their position. For nova, the joint venture will put them in a position to close the regional gap in its global production activities in Southeast Asia. They have a more solid production and sales base, which will make the ASEAn and Australian markets accessible to them and, therefore, increase their market share. With annual sales of more than 30 million units of its products, the region is said to have more than twice the market volume of China.

The strategic alliance augurs well for KLCorp since the corporation is expected to benefit from nova’s product technology, which will further enhance Malaysia’s competi- tiveness in the ASEAn region and other markets. At the same time, the joint venture will also benefit from the production and marketing of one of the world’s top brand names in the kind of products manufactured. nova will have access to KLCorp’s product dealer network in Malaysia, which is one of the largest in the country.

LifE with NOVA

Value creation is a central management philosophy in Nova. All employees are encouraged to understand the added value they have created in their day-to-day actions. In this way, all employees need to think and act as entrepreneurs. This concept is also very much stressed by the Manager (Accounting), Ms. Anita when she said:

“nova is very specific. nova has a management style that requires individual responsibility and they delegate the responsibility downwards. For instance, you can be a clerk

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but you have got a certain responsibility. Previously, a clerk would process all the invoices, and, hence, checked by the supervisor and released. Another executive would have a look and then sign off. now, under nova, once the clerk goes in, it’s automatically posted for payment. So, the responsibility is with the clerk to make sure that everything is in order. OK? Hence, the burden is going down!”

The management is also attentive of the development of corporate spirit, focusing on the culture of high perform- ance, striving for the best, cooperation, responsibility and learning and knowledge management. Employees at nova are required to take full responsibility for their actions and performance. Employees are expected to welcome construc- tive criticism, honour suggestions from other stakeholders, and be innovative to achieve performance improvement. nova managers are expected to foster a cooperative manage- ment style that encourages delegation and accountability. Programmes to facilitate the exchange of knowledge and expertise internally, and with their partners outside the corporation are formulated in pursuance of employees’ life- long learning.

A new management team, which comprises some members from the old management team, outsiders and expatriates from nova, has been set up to manage and run the plant operations at Pemancar. Mr. Adam, the head of production, was promoted to be the plant manager. However, during the first two years after their partial takeover, nova did not implement many changes to Pemancar. nova’s management sent over their people to visit the plant in order to study and understand how works are done at the plant. Pemancar’s productivity level, in terms of output per employee, was below nova standards. A higher productivity level was expected. Ms. Anita as the Manager (Accounting) highlighted:

“For nova everything must be the same. If it’s a plant, the way you calculate, the way you define things must be the same as their other plants.”

The Senior Manager (Quality Assurance), Ms. Freida added:

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“nova is very tight in terms of manpower. Pemancar’s has been cut tremendously to ensure that if this is the level that you are producing, hence, this is the level of manning that you should be having.”

Consequently, in 2005, with the majority stake of 70% of Pemancar, nova decided to reduce the number of employees and intensively implement various changes to improve productivity and contain costs. nova philosophy, i.e., high performance culture, value creation, quality without com- promise and effective communication were to be adopted and integrated by Pemancar’s management.

iNtEgrAtiON iNtO NOVA gLObAL OrgANizAtiON

The integration of Pemancar into nova global organization was made through organizational restructuring and intro- duction of new procedures and processes in almost all areas in Pemancar. One of the reasons for the restructuring is to align the organization according to the type of structure that nova has for all its subsidiaries all over the world. The second reason for the restructuring is to break down the high levels of bureaucracy and hierarchies that Pemancar used to have under KLCorp. This is also one of the ways to achieve the corporate spirit of having a good cooperation between all the employees. As the Senior Manager (Production), Mr. Solleh responded:

“now [under nova], we have a flatter organization! under KLCorp our organizational structure was more like a pyramid, but now, we are going towards a flatter organization. That is one other thing that we have introduced. under nova, it’s not advisable to create layers.”

Thus, Pemancar has to implement new administrative and reporting procedures, budgeting processes, information sys- tem and performance evaluation systems. In terms of the report, nova expected a very detailed one as Ms. Lim, the Factory Controller indicated:

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“nova compares every single figure. For example, if you take your conversion costs. you need to extract out and show as a separate item the repair/maintenance costs. They want you to show the movement of your repair/ maintenance costs every month… per standard product. They want you to show your energy costs every month. They want you to show your freight costs every single detail. They compare. And by improving all these costs, then only you can see your costs reduced. This we have never done before [under KLCorp].”

In addition, the report will need to be submitted on time, without fail, as the Manager (Accounting), Ms. Anita mentioned:

“They want the information, timely! So they have a certain guideline as to when the reporting is supposed to be done and it’s fixed, per day, per month, per time!!! Thus, if nova requires it by twelve noon European time, then that’s the time you’ve got to submit… by hook or by crook! you’ve got to get it done!”

Moreover, nova introduced new product specifications, new product recipes, new machinery and technology and imposed higher quality and production standards. Practically, these changes have an impact on all aspects of Pemancar, from the work-culture to the specifications of the products manufactured. All these together have created a lot of changes, which, simultaneously, has created a lot of stress at Pemancar, as noted by Mr. Adam:

“Honestly, people are flexible. But, at the moment, maybe there are too many things and changes all at once. It seems they are at a loss. Because we have the machine relocation, we have the recipe to be changed; we have the new product to be introduced. And then we have the new system that we have to follow. So, it is a little bit chaotic.”

Since 2003, when nova held the majority share, Pemancar has undergone several restructuring exercises. The final organizational structure implemented in Pemancar resulted in people moving to different sections or having new responsibilities. The restructuring was done to comply with nova’s requirement, which standardised the organizational

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structure of its plants worldwide. The previous pyramidal, hierarchical and bureaucratic type of structure in Pemancar was replaced with a leaner and flatter structure to promote better and effective communication flows in the organization.

Since plants within nova are not allowed to handle direct sales to the end customers or retailers, the marketing and sales functions of Pemancar are now handled by a separate marketing arm, which is another separate company. Thus, the sales and marketing staff of Pemancar have been either absorbed by this marketing arm or have opted to leave the company. The focus on Pemancar is now totally on production, as explained by Mr. Adam

“nova will send their team to Pemancar to study the plant capability, prices and whatsoever! Then they will propose a certain amount that we have to produce. However, prior to that, we have to propose to them also what is our intention for next year, based on our capacity. Thus, based on that, there is some negotiation”.

Several departments were affected by the re-structuring exercise. The Finance Department has been split into two dif- ferent departments, i.e. Accounting Department and Controlling Department. The Technical Department has been segregated into Product Industrialisation (PI) and Quality Management (QM) departments. The Production Department, which was previously separated into two production areas, has been merged into one production area, headed by the Head of Production Department. Pemancar also placed two expatriates from nova in Quality Management and Plant Operations so that they are able to manage both quality and plant opera- tions according to nova standards. nova has a very strict standard. If the required quality level is not achieved, then the whole production batch will be rejected. Thus, there is a need for Pemancar’s management to ensure that they produce good quality products. Due to the re-structuring, downsizing and re-shuffling exercises, many employees, especially those at the management level need to transfer to different sections or newly created departments.

Many meetings were developed according to nova Corporation’s meeting structure. The meetings are held

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often, as often as daily, weekly or monthly, but are usually short, between half-hour to one hour at the most. Among the meetings are the Quarterly Operations Review Meeting, Monthly Management Meeting, the Daily Factory Operations Meeting (FOM), the daily business team meeting, the shift coordination meeting (twice per shift per day) and roll call for every shift.

Another change that had a huge impact in Pemancar was the reduction in the number of employees through the voluntary separation scheme (VSS), which was offered between 2004 and 2005. More than 100 employees took the VSS, including a number of long-serving skilled supervisors and senior supervisors. Consequently, some sections in the production department were crippled because they did not have enough skilled staff to manage and operate the section. To ensure smooth running of the factory, Adam had to negotiate with some of the skilled employees who took the VSS to stay for a few months to train the remaining employees so that they could do the required tasks.

To fill the vacancies, some senior operators were promoted to the supervisory level. From managing four or five different machines and small production sections, they were now responsible for twenty machines and more people. Adam realised that some of them were not capable of managing a bigger section of probably twenty machines and more people. Furthermore, they did not have the required supervisory skills.

nova closely monitors the operations and performance of Pemancar. Detailed monthly reports need to be submitted to nova. nova implemented strict cost control whereby they compare and contrast every single figure of the cur- rent month with that of the previous month. Previously, the reports submitted to KLCorp were not comprehensive. KLCorp was satisfied as long as Pemancar’s bottom-line was higher than expected. However, the bottom-line is not the only important information that the current management monitors. According to the factory controller, “…Nova goes for every single detail.”

Adam found that gaining acceptance to all these new changes, even at the management level, is not easy.

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Thus, Adam focused on getting commitment from the managerial level as compared to those from the shop floor, he commented:

“I focused more on the management since the shop floor is more like the follower. But if the management cannot set an example as a rule to be followed by the shop floor people, the shop floor people will never follow. now the management has to play their role. This is the area that I’m having difficulty with at the moment, i.e., to change their management mindset.”

thE PuSh fOr highEr EffiCiENCy, PrOduCtiVity ANd quALity

nova was particularly concerned with the high number of the workforce that Pemancar had at the shop floor level, which did not meet nova’s level of productivity and efficiency. nova has a certain standard of production volume for skilled employees. Based on that standard volume, nova knows how much Pemancar is supposed to be producing given the number of employees that it has. However, Pemancar was not able to produce the volume, which was expected by nova, which reflected upon the skill and productivity level of the employees at Pemancar. One way of achieving a higher level of productivity is through either increasing output (i.e. volume of production) or decreasing inputs such as the number of the workforce. Thus, as part of their objective to achieve a required productivity level, the non- performing workforce were asked to leave the company. Simultaneously, nova required Pemancar to increase their volume of production from 3.5 million units to 4.9 million units. Moreover, nova required Pemancar to reduce over- time costs and scrap levels. Thus, there was pressure on Pemancar’s management to reduce the overtime costs but not at the expense of output. Also, Pemancar needed to monitor the overtime costs. Pemancar managed to reduce the overtime costs by 22% by late 2006, which was within a period of four months.

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Even though they aimed to further reduce the overtime costs to 15%, Adam felt that this needed to be done progres- sively since the shop-floor employees tended to also depend on overtime as their source of income. Other than overtime costs, scraps and rework were also monitored. under the previous management, if the bottom-line improved, nobody queried or bothered to find out what was in the report. However, under nOVA, things had to change. Whatever figure is promised to them, must be remembered, because that is what the company has to deliver. Otherwise, an explanation is required. For instance, if a promise is made to reduce scrap to RM10,000, there is a need for the figure to be reconciled so that an explanation on how and from where the savings come from can be done. This is considered a great change as the Pemancar Factory Controller noted that they never did that in the past. Also, priorities are also given to non-financial indicators such as the accident rate and the sickness rate, which are also monitored closely.

The control on overtime and the various changes to production also has an impact on the production operators. The production operators were also demoralised since some of the existing problems could not be solved, especially when the continuing problems hindered them from achieving their output targets, which deprived them of their good ratings and, consequently, their related performance incentives. Thus, in frustration and to show their protest as the problems related to their work were not solved and affected their incentives, some of the production operators who could not get along with their superior gave excuses for not producing, such as being sick, going on leave, or reasons such as defec- tive supplies, machines not working or simply not producing as much as required.

Even though Nova sent some of the operators for a few weeks to one of nova’s best performing plants in Europe to learn how to use the new machines, problems in handling the machines still existed. The people from the European plant came to install the machines in Pemancar, but when the machines broke down, it took time for the engineers in Pemancar to solve the problem.

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The Factory Controller noted that people did not adapt to these changes quickly, and some even resisted the change. The staff at the management levels adapted to changes much faster than those at the lower levels. The Accounting Manager noted that it is relatively easier to get her people to change as opposed to those on the shop floor as her section is smaller and the staff are more highly educated and, therefore, could rationalize and understand better as to why change is needed. In addition, they are trained and used to working under pressure as they have various deadlines to meet. Thus, they did not find it difficult to change to what was required by nova. However, she could understand how difficult it is for the Production Manager in getting his people to change, especially those at the lower levels. She said:

“The operators don’t really understand what is required and the necessity for it... For nova Corporation, if you don’t perform, if you don’t meet the target, they close up. It’s possible, they have done it before. Even after they took over Pemancar, there’s one plant that nova has been operating for so long and yet they (nova Corporation) closed it down. Just like that! Simply because the plant was not performing! So, it could happen to us. So, you have got to understand as an employee that you have got to perform, make sure the results are up.”

The Accounting Manager’s view is shared by the Factory Controller when she commented:

“…the production operators need time to change. Even for a minor change also they do not realize. However, once they have realized it, it’s good. It will stick there forever… and they will remember! But the problem is…they need time to change.”

There is also the delay in communication flow, especially at the factory and production department. The factory has a larger number of people as one manager noted:

“The factory groups are much bigger, they have more people who are not that skilful…for the information to go down to the lowest level takes sometime for them to understand. For us, our group is, very small. I go directly to the clerk and talk to them, it’s easier. But for the factory

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managers, information flow from the managers to the assistant manager to the executive and supervisor, etc., by the time it reaches them, it might be a different thing or and maybe the momentum is not there anymore… Unless the Production Manager goes directly to one person… but the manager cannot go down to everybody. So it’s not going as fast and they don’t know. So, we had some problems, like some issues with scrap items and things like that which is due to communication problem.”

In Pemancar, seniority is defined as the length of service for the company and not by knowledge or performance. This affected the inter-departmental communication flow within the organization, especially the bottom-up communication flow. Consequently, heads of other departments tend to take things lightly when highlighted by the subordinates from other departments. The lower level staff are also reluctant to speak up. Some of the managers in production also noted that the inherent culture of seniority has an effect on communication flow in the organizations:

“For example, if I’m listening to an engineer, who is at the executive level, who is a university graduate with a degree, coming to me and he’s saying, “OK…I’ve checked the machine etc., etc.”. Somehow the credibility is there as opposed to the worker at the machine who has seen the machine many years, but he doesn’t have data, he doesn’t have the tools, but he’s coming to me and saying, “Boss, this machine is good because….”. Even though you listen to him and register in your head but hard to process because…I don’t know… so, I think it’s also us (the managers), not only them.”

In fact, one Section Head highlighted that one of the major problems that existed at the bottleneck area was weak supervisors — in terms of communication, delivery, responsi- bility, and attitude. However, the management realized that supervisory skills could not be taught and acquired overnight. It would take time and effort and they would need to be continuously motivated. As mentioned by one of the Production Executives, the change is slowly taking place. For instance, previously, if a machine stopped functioning, the supervisor did not feel the urgency to go and find out the

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reason why the machine stopped and what was to be done about it. However, that is not the case anymore. They would immediately go and find out the reasons and take prompt action to overcome the problem. However, the changes were not up to nova’s expectations. The plant performance was not consistent, “it was up in one period, but low in another”. In nova, if one fails to deliver, after several attempts and opportunities have been given for improvement, he/she will have to take the responsibility for the failure and will either be transferred to other nova plants, or be requested to leave the organization. As a result, Adam was asked to leave the company and head another small subsidiary of Pemancar.

Adam reflected on the time of the turbulence at Pemancar:

“…our people are so used to KLCorp culture, KLCorp way of doing things. We are proud of it. We felt that we are a market leader in this country. And we are also exporting to more than fifty countries. Obviously we are doing something right. So, now Nova wants us to change. Why is nova asking us to change almost immediately? This kind of transition takes time. So there was a lot of mayhem and misunderstandings of how things should be done here. nova has no patience to come and sit down with you and explain to you, we have to do this, we have to move this. They said, ‘We want to be here, this is the system, go and implement, and I expect this result’.”

dANiAL’S jOb

The managers in Pemancar admitted that many cultural differ- ences exist between the previous and the current management. Previously, under the Malaysian conglomerate’s management, they were exposed to the Japanese quality culture such as the 5S System, total quality management (TQM), implementation of quality circles, and the teambuilding concept as part of the mission of the Malaysian government to adopt the “Look East Policy”. After being more than twenty years under the Malaysian management, now they have to adapt to the European based culture.

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132 ACRJ

The situation in Pemancar was chaotic since the changes were to be carried out simultaneously. The problems were further compounded since nova introduced new product specifications, new product recipes and the use of new machines and technology at Pemancar. nova required higher production levels together with lower cost and better quality and fewer employees.

Danial assumed office in mid 2007, and has vast experience in turning around various non-performing plants within KLCorp. He has an engineering background and also accounting knowledge, especially on costing. He was asked by KLCorp to sort out Pemancar. Even though Pemancar was considered one of the best plants of KLCorp, their performance is not up to the standard required by nova. Danial was informed that Pemancar has the capacity to produce a production volume of 5.2 million units and the budgeted volume for the current year is 4.9 million units. However, Pemancar was unable to consistently achieve their monthly production target. Danial realised that Pemancar employees have been working under stress because they have not been able to achieve their output target, especially after the reduction in employees. The employees continued to worry that further retrenchment would be done in the near future, or, that if they are not performing, they will be asked to leave the company without due notice, as happened in a few cases either at Pemancar or at other locations. As one manager from nova said:

“Whatever patience that nova has, is up and until the fifth year. If it takes longer, then drastic decisions will be made. If the company is still underperforming and nova is not able to recover their investment, the integration period is considered over.”

Danial knows that he has only one year to improve the performance of Pemancar to bring it up to nova’s standards. If not, nova might close down Pemancar.

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