Integrating Self-Managing Teams and HR Processes

Integrating Self-Managing Teams and HR Processes

Development of Self-Managed Teams at S.C. Johnson & Son in Chile

Introduction

While boarding the plane to Buenos Aires, Jaime de la Horra reflected on the self-managed teams’ initiative that was being implemented at SC Johnson’s Viña del Mar wax production plant in Chile. Jaime was concerned about the impact that the company’s new strategy, which had been articulated at its headquarters in Wisconsin, was having on the production lines. In recent months this plant had experienced a job redesign process, complemented with an employee development program that prepared workers to take part in self-managed teams (SMTs). Jaime was considered an ardent advocate of SMTs. He held the Operations Manager position at the plant, and led the SMT implementation process. However, sometimes he doubted whether the process would be successful, given the difficulties encountered.

Company History

SC Johnson was founded in Racine, Wisconsin, USA in 1886 by Samuel Curtis Johnson, dedicated to the manufacture of wooden floors. In a few years, consumer demand led the company to produce floor wax, its flagship product. In 1914 a process of international expansion was started. A subsidiary was opened in Britain, followed by Australia and Canada. Today SC Johnson operates in over 70 countries.

The beginnings of SC Johnson in Chile dates back to 1960 when a local businessman Alvaro Montt, who owned a local wax factory, contacted the SC Johnson headquarters and reached an agreement to produce licensed waxes. After the death of Alvaro Montt in 1967 the family sold the facilities to SC Johnson. From that year on the company took control of the factory, where production was increased to meet local market demands, with well-known brands such as Raid, Glade, Bravo and Ziploc, and it started to export products to Peru, Uruguay and Argentina.

In the 1990s the company made efforts to adapt its structure to the needs of a global market: Internationally the company reorganized its operations into clusters of countries. This large-scale worldwide agenda required the development of change programs that transformed not only the organization’s structure and work processes, but also local organizational cultures shared by workers in different countries.

Country Background

Chile is composed of a long narrow strip of land in Latin America’, on the west side of the southern cone, Eastern Island (Oceania), and part of the Antarctic region. Its estimated population surpasses 18 million people, mostly a mixture of pre-Hispanic native people who blended with Spanish and other countries’ immigrants from the sixteenth century onwards. Nearly 6 percent of its people still consider themselves members of several aboriginal ethnic groups. Additionally, in recent years Chile has received migrant workers from other Latin-American countries searching for a better economic future.

Chile, a democratic, presidential republic, has been ranked by The Economist Intelligence Unit (2014) first in Latin America, and 13th across the world, in terms of its business climate. Schwab (2015) points out the country’s strengths, such as a strong institutional setup (ranked 28th worldwide), low levels of corruption (25th), an efficient government (21st), and solid macroeconomic stability (22nd). Areas in need of improvement are highlighted by the World Bank (2015), including its educational system and energy supply. In 2010 Chile became the first South American country to join the Organization for Economic Cooperation and Development (OECD), setting for itself high standards in the development of policies to improve the economic and social well-being of its people. Exports of goods and services account for one-third of Chile’s GDP, commodities represent three-quarters of national exports, and copper provides 19 percent of government revenues. Other important exports in Chile are sulphate, wood-pulp, fish sub-products, fruit and wood (World Bank, 2015).

Quality of life indicators in Chile have shown significant progress over the last decades. The unemployment rate has remained close to 6 percent in the last few years (World Bank, 2015). Chile has the highest income per capita in Latin America, but has a Gini Index coefficient close to the regional mean, reflecting high economic inequality. When compared to developed countries, Chile ranks below the average in civic engagement, health status, jobs and earnings, social connections, work–life balance, housing, personal security, education and skills, and environmental quality (OECD, 2015). Despite the above, according to the PISA report (2012), Chile has one of the best primary and secondary education systems in Latin America. According to the OECD (2014), 18 percent of the Chilean adult population holds a complete tertiary education, less than the 32 percent average of the OECD countries, but above the 12 percent average in Latin America (World Bank, 2015).

HRM in Chile: Historical Perspective and Current State

During the last century labour laws and HRM practices in Chile have been pushed by sustained social movements and political initiatives. Current labour laws in the private sector (Law 19759) include a 45-hour per week work schedule, severance pay in the case of dismissal, the right to form unions, and collective bargaining (Codigo del Trabajo, 2015). The legal system protects employees’ rights in the judicial courts with effectiveness. Discrimination in HRM is explicitly prohibited by law. However, employment levels and compensation gaps disfavouring female and young workers are among the highest in the OECD (OECD, 2015).

The Global Competitiveness Report (Schwab, 2015), highlights Chile’s labour market rigidities, ranking the country in the 120th position across the world. Labour law requires employers to pay workers sizable tenure-dependent severance compensation at the moment of dismissal. Additionally, temporary workers cannot be contracted for longer than three months, after which period a permanent contract becomes legally binding. Maternity immunity protects women from the beginning of pregnancy until one year after the first twelve post-natal weeks, preventing employers from terminating their work contract. The law also requires mandatory pre and post-natal rest periods, of six and twelve weeks respectively. Finally, social security deductions from employee compensation are mandatory in Chile, which represent roughly 21 percent of the first US$2,500 of monthly gross income for every employee, and cover health insurance, unemployment insurance, and pension funding.

In the last 40 years, human resources departments of most larger companies have become highly professionalized, in part because of the impact of competition, understanding of the contribution of employees to organizational results, and the development of university level education programs which have trained many generations of human resources managers (Perez-Arrau Eodes& Wilson, 2012). This situation has led to an improvement in the reputation of human resources departments in larger Chilean companies. Nevertheless, in smaller companies, a struggle to develop their informal HRM practices still persists.

In Chile, work culture varies from company to company. In some firms HRM practices and values reflect a culture of professionalization and efficiency, while in other firms values of authoritarianism, high power distance and paternalism are common. These latter traditional work values, which probably originated in the nineteenth- and early twentieth-century agrarian and mining industries, can be a hindrance to the development of work designs that require collaboration and proactive behaviour, as is the case with SMTs (Raineri, 2003). The Viña del Mar production plant was an example of a company which shared, for most of its history, the traditional work values of authoritarianism and paternalism, values which needed to change, in order to implement SMTs.

The Viña del Mar Plant

After purchasing the plant, SC Johnson moved its administrative offices to Santiago. Soon, marketing, finance, accounting and human resources departments, and a general manager position, were created. At the Viña del Mar plant were kept only the production facilities and a human resources representative. While from the start SC Johnson brought its own management style, which promoted confidence in people, employees’ development opportunities, and open communications, the inherited hierarchical organizational structure remained in place until the late 1990s. The plant had several hierarchical levels, with low employee participation. Decisions were centralized, with occasional consultations with lower levels. This structure blended well with the pre-existing work culture. Each production line was headed by a ‘Line Supervisor’, a position not formally recognized, but historically respected. Such a position was usually held by a machine operator, with many years of experience, with a strong paternalistic leadership ascendancy over his peers. This position reported to company managers for productivity outcomes, loss of materials, performance, and other issues. Line Supervisors had very basic academic preparation. Most of them had only a few years of secondary education, limited interpersonal skills, with no immediate potential to develop professionally beyond a line operator post. Production workers held routine ridden positions in the production line, where they followed instructions from managers, with few opportunities to participate in work design and decisions. The Operations Department structure had six hierarchical levels (see Figure 31.1) .

For 20 years the company operated with this structure, with very low employee rotation, and consistent growth. Most of the time the work climate was positive, and management succeeded in overcoming crises and productivity problems. Company benefits were distributed to all members of the organization through a profit-sharing program.

The Change Program

The globalization process, experienced by most of the world’s economies during the 1990s, forced companies to redesign their strategies. Following other mass products companies, SC Johnson integrated some of its activities throughout Latin America, centralizing its production and management in a few countries. The decision to locate facilities depended on a variety of issues such as access to raw materials, workers’ competencies, social and macroeconomic stability, and market size. In 1998 SC Johnson grouped its activities in South America within clusters of countries. Production facilities were consolidated in a lead location, from where products were distributed to other countries. The activities in Chile were attached to the Southern Cone Cluster. In this cluster manufacturing was settled in two plants in Argentina and the Viña del Mar plant in Chile. This last plant had approximately 100 employees. Management was centralized in Argentina, due to market size and the local success of the firm’s products. Business results and management reports were sent to the USA from Argentina. Back office administrative functions were created in Argentina, and front office administrative functions were kept in countries where business was developed. Many functions that were previously performed in Chile began to be executed in Argentina, such as Production Engineering, Accounting, Finance and Human Resources. In order to adjust to new workloads, terminations were made in Chile, and new recruitments were made in Argentina.

The Director of Operations for the region met several times with the Chilean General Manager. They concluded that a major change in the organizational structure and production processes at the Viña del Mar plant was necessary. The excessive number of hierarchical levels was not compatible with the company’s new production objectives. One of the first decisions made was to remove the Operations Manager and the Production Manager. The former position was offered to Jaime de la Horra, and the latter position was eliminated, as was the informal position of ‘Line Supervisor’. The latter was a significant change for production workers, accustomed to receiving work instructions from their supervisors on a daily basis. A voluntary outplacement program was offered to line supervisors. Most of them were close to retirement age and willing to accept the generous financial offer, which included technical training that would enhance their job market value. The new structure had only four hierarchical levels (see Figure 31.2). In each production line the firm decided to develop SMTs, replicating changes made at plants in other countries.

Initiating the Self-Managed Teams

A few years earlier, the company had conducted similar changes in its plants in the USA, England and Argentina, where experience in the formation of SMTs was gained. The new work system required the delegation of responsibilities previously held by supervisors to the production line workers. At the Viña del Mar plant, the plan was to form teams at each line, ranging from 5 to 15 members each. Team leadership roles were defined in the areas of Production, Quality Assurance, Maintenance, Financial Resources, Security, Hygiene and Environment and Human Resources. These roles did not imply endorsement of responsibilities. All team members were expected to handle these tasks through collaboration. Team duties in Human Resources included participating in the selection process of new hires, recommending the termination of team members who repeatedly performed below expectations, solving conflicts within the team and scheduling work shifts. A set of values (i.e. collaboration, participative decision making, and self-management) was also promoted.

The company developed communication procedures for the SMTs, including formal meetings, reports, and production data information folders. Evaluation systems were created, including annual assessments of team goals’ attainment, and a bi-annual 360-degree individual performance evaluation. Team members’ compensations received no significant changes, remaining almost 90 percent of workers’ compensation fixed, and small incentives dependent on production indicators.

In Chile the SMTs’ development process began with a meeting in 1998, where Argentina’s Operations and Human Resources units presented their SMTs’ implementation experience to other South American countries’ managers. Jaime attended this meeting, where he was invited to lead the SMTs implementation in Chile. Initial stages of the SMTs program at Viña del Mar were supported by the HRM and Operations ‘back office’ from Argentina, taking advantage of their previous experience.

The new work system offered SC Johnson more flexible structure and processes, development of a participative culture, delegating operations and management responsibilities to lower hierarchical levels, and the enhancement of relationships across production units. Additionally, the project allowed for employees’ development opportunities, creating a more motivating and challenging work experience, and facilitated traineeship in new technologies. Employees had an opportunity to develop a wider range of skills, more autonomy, and a more comprehensive understanding of the business. Changes also allowed more attractive jobs to be offered to new applicants.

SMTs’ Implementation Strategy

To deploy the SMTs the company used a change implementation structure consisting of three work groups (see Figure 31.3).

The Steering Committee: Formed by senior executives responsible for implementing global strategies; included the Human Resources and Operations Directors for the Americas and directors in analogous positions at the Southern Cone Cluster level. Some of them had participated in the implementation of SMTs in the USA and Argentina.

The Implementation Committee: Included ‘back office’ executives from Argentina and ‘front office’ executives from Chile. The group held the responsibility to lead the SMTs program in Chile. This committee included the Human Resources Managers in Argentina and Chile as well as Jaime, the Operations Manager in Chile, and Edita Olivares, the Production Department Manager in Chile.

Support Group: Formed by four plant workers, selected based on their leadership skills, technical capabilities and influence among peers. They served as ‘hands-on’ change facilitators.  Members had their job descriptions redesigned in order to accommodate their SMTs support duties. One member came from Quality Control, two were production line operators and the fourth a crane operator. Their new positions became part of a new unit called ‘Operations’, reporting directly to Jaime. This group was responsible for transmitting information from the lines to management and vice versa, and for explaining to other employees, on the job, how the new system worked. One of its members described their new role: ‘to listen carefully to the problems faced by production line workers during the SMTs implementation, explain and facilitate the emergence of cooperation, make them accountable for their actions, and ultimately help in the formation of SMTs.’

Through several months the Support Group received training in topics such as ‘Communications Tools’, ‘Teamwork Values’ and ‘Managing Change’. Additionally, they took trips to visit the plants in Argentina, to learn from their experiences. One member described his experience: ‘. . . we had to stand up to higher levels of expertise and responsibility in order to lead the change process at the operational level’. Another member said that they became ‘. . . closer to each other and to the line workers’. Another member stated that ‘we felt appreciated by the executive staff . . . our motivation and commitment to the company increased’.

In order to analyse the challenges facing the implementation of SMTs at the plant, the Implementation Committee conducted a SWOT analysis (Strengths, Weaknesses, Opportunities & Threats). The analysis showed that the organization was partially prepared to initiate the SMTs.

To assess workers’ perceptions towards the change program the Implementation Committee conducted a survey labelled ‘First Social Analysis’ at the plant. In the words of a Support Group member: ‘This first survey was a failure. People did not understand what SMTs were about. Additionally, the survey had over 60 questions which generated a lot of confusion among workers.’ The survey’s failure suggested to the Implementation Committee how far the program was from success. Workers showed difficulties in understanding basic concepts such as the nature and benefits of SMTs, and the need for an increase in their participation. These concepts were foreign to their habitual way of doing things at work, as well as an unfamiliar way of looking at themselves and their roles in the plant. In reaction to these survey results, the Implementation Committee decided first to explain to the employees what the objectives, purpose and benefits of the SMTs program. After selling the program across the production plant, the Implementation Committee decided to apply a ‘Second Social Analysis’ survey, consisting of 20 questions aimed at understanding the perceptions employees had about their current work situation, as well as their desired future work conditions. This second analysis indicated the need to improve communications at the company. Workers felt that their opinions were not being considered. Employees’ needs for career development were also detected, and their wish to have more involvement in decisions concerning their own work, including the desire of operators to choose their work team mates themselves.

While collecting responses to the second survey an Implementation Committee member was surprised when a worker arrived at her office with tears in his eyes. The worker had heard rumors that they would use new computer equipment. The worker knew that his inability to read would be discovered and feared losing his job. Soon the Implementation Committee concluded that the plant had many workers with literacy problems, who were also hiding their weaknesses, partly because of embarrassment and partly out of fear. A plant manager commented: ‘Some employees may ask for directions many times, even though written instructions may be attached to their machines. Some workers seem to have constant problems with their eyesight. . . . The truth is they simply can’t read.’

The Pilot Program

The Implementation Committee decided, in a first stage, to launch the SMTs at one production line as a pilot program. The line chosen was ‘Doypack’, the flexible packaging line. If success was achieved, other production lines would follow. The first activity with workers at the Doypack line is described by an Implementation Committee member:

“We met with all members of the line. We explained to them the reasons for change, emphasizing recent opinions of dissatisfaction from customers, the advantages of SMTs, such as providing more flexibility and better quality control in production. We also explained that SMTs were being introduced first at their line, how this would be a gradual transition process, and how we should all learn and participate in the process. I remember a lot of skepticism and doubts from employees about what we were proposing. It was hard to gain their commitment, but we also made it clear that this was a one-way street, mandated from headquarters.”

The Doypack line had state of the art technology and a motivated workforce. But workers at the line had uneven education levels. Some had not completed high school and others had received extensive technical training. An individual evaluation was conducted to assess the competencies of each employee at the Doypack line. As a consequence, the Company sent some employees to complete their high school education, and paid for their tuition. Others were sent to training workshops in topics such as Computers, Boilers, Electro-mechanics and Inventory Management. All Doypack employees also received training specifically geared towards developing SMTs skills. Courses were dictated by members of the Support Group and by an outside consulting company, about topics such as interpersonal communications, team meetings and self-management. Education would gradually help them develop the skills necessary to work in SMTs. According to Edita Olivares, member of the Implementation Committee: ‘The objectives of the training program were fulfilled step by step . . . We trained 90 percent of the workers. Emphasis was placed in introducing computers into the work processes. Everybody wanted to learn how to use them.’

Pilot Program Progress

Three months after launching the pilot program, Edita and Jaime engaged in informal conversations with Doypack employees. The intention was to diagnose the progress of the program. Results confirmed that the training received by employees had positive effects that went beyond the workplace. However, problems were also detected, as employees comments in those interviews show:

‘Education has improved my quality of life. I feel closer to my family. Now I can help my children do their homework when they get back from school . . . it keeps me close to them.’

‘I have a better understanding of how other areas of the company work. Computers allow me to see what happens with other operators, discover when they have problems, and help them. Last month supermarkets had run out of red wax. Computers allowed operators preparing white wax to recognize the situation. They changed the production routine and manufactured red wax.’

‘Changes have generated stress on workers. Sometimes we spend hours discussing how to do something. We find it hard to agree on work procedures. This is exhausting. We lose lots of time arriving at agreements.’

‘Now I can perform all tasks at the line . . . We also make decisions that benefit our work. For example, we changed the packaging line process so that the boxes stay closer to the product, reducing the processing time. The relocation of the machines also created a more comfortable work environment.’

Jaime and Edita decided to communicate their findings to the Support Group, and requested them to meet with Doypack workers, in order to tackle several issues: (1) Communicate and celebrate progress, (2) Seek mechanisms to decrease stress for workers, (3) Identify and dismantle within-group conflicts, and (4) Strengthen the sense of self-efficacy by providing additional training or coaching as needed.

The Support Group met with the Doypack line workers. They started the meeting by thanking them for the effort delivered. They pledged to help workers find better ways to organize work, reduce stress, and create a greater balance in their workloads. Individualized coaching programs were offered to those in need. They decided to take an afternoon off and celebrate progress with team members at a barbecue.

Throughout the following summer Edita and Jaime continued engaging in informal talks with Doypack line employees. Improvements were detected. As several workers recounted: “There are many decisions we have agreed upon and need not discuss again. We did a mapping of our work processes, and improved them.” “We can change the production line in a few hours, if we need to. We call for a meeting, decide what to do, and distribute the work.” “We are closer to each other. We even share our personal family lives. That did not happen before.”

However, some employees still indicated dissatisfaction:

“I’m afraid to be wrong. Accepting more responsibilities increases errors. . . . There was this person who ignored technical problems at the line and tried to avoid the situation. His teammates confronted him, the Support Group pressed him to help. On similar events he still ignored the group. Soon he was changed to another production line. In the future he could be dismissed.”

The interviews also indicated that employees were aware that the company had not adapted the pay systems to the new responsibilities. Complains stated that ‘. . . we have not been rewarded for the new achievements . . . It seems the company does not plan any changes in compensation. They believe that more work and responsibilities are compensated by the training we received.’

Jaime knew he needed to decide whether to expand the SMTs program to the other production lines. While flying to Buenos Aires, he missed the high-altitude views over the Andes mountains, without appreciating the beauty that nature offered him. He was absorbed in deciding how to give a second wind to the SMTs program on his return to Viña del Mar.

Christiansen, L. C. (2017). The Global Human Resource Management Casebook,  2nd Edition [VitalSource Bookshelf version].  Retrieved from vbk://9781317362449

Always check citation for accuracy before use.

Christiansen, L. C.  (20170804). The Global Human Resource Management Casebook,  2nd Edition [VitalSource Bookshelf version].  Retrieved from vbk://9781317362449

Always check citation for accuracy before use.

Christiansen, L. C.  (20170804). The Global Human Resource Management Casebook,  2nd Edition [VitalSource Bookshelf version].  Retrieved from vbk://9781317362449

Always check citation for accuracy before use.

Christiansen, L. C.  The Global Human Resource Management Casebook,  2nd Edition [VitalSource Bookshelf version].  Retrieved from vbk://9781317362449

Always check citation for accuracy before use.