Crisis and IHRM - An Ethics Question for HRM

An Ethics Question for HRM

Case 3: Crisis and IHRM

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A. Malik (ed.), Strategic Human Resource Management and Employment Relations, Springer Texts in Business and Economics,

https://doi.org/10.1007/978-981-13-0399-9_17 K. Tasoulis (*) · M. Progoulaki

ALBA Graduate Business School & Deree School of Business, The American College of Greece, Athens, Greece

e-mail: ktasoulis@alba.acg.edu; mprogoulaki@acg.edu

engineering operations. Today, the firm employs 75 full time employees; approxi- mately 2/3 work in the fabrication plants and 1/3 in the administrative and design functions. Led by the two sons of the founders, Michalis Sofras, Chief Executive Officer (CEO), and Nikos Mandras, Managing Director (MD), this family run firm has contributed to landmark construction sites in Greece, including the Acropolis Museum, the Athens International Airport, and the Stavros Niarchos Foundation Cultural Centre.

SOFMAN’s values include: safety, quality, innovation, flexibility, and people development, underlined by a traditional, family culture. This is manifested in very low labour turnover rates and a large proportion of skilled technical staff who has worked with the firm for decades. In some cases, workers’ children have also been hired and internally developed by the company.

In terms of HRM practices, recruitment appears to be challenging in case of attract- ing highly-skilled individuals, especially in technical jobs which are not as popular in the labour market as in the past (e.g. assemblers, welders, fitters, painters). Although the company lacks a formal human resources (HR) department, common in small- medium enterprises (SMEs; Curran 2006), people development is emphasised through on- and off-the job training. For example, SOFMAN recently conducted an extensive development programme for engineers on leadership and management skills, while technical staff participated in craft-specific seminars, involving theory and practice.

Nonetheless, training needs are identified on an ad- hoc basis, such as when new equipment and machinery is introduced in the production.

The Greek Crisis and SOFMAN’s Strategic Response

The financial crisis tormenting the country since 2010, has played a key role in the evolution of SOFMAN’s business activities. In Greece, the crisis affected SMEs more than large multinational firms, while construction activity was one of the sec- tors most severely affected (OECD 2016). Faced with a very difficult macroeco- nomic and industry environment with few inland construction opportunities, top management decided to embark upon an internationalisation process for the first time in the firm’s history, initially seeking for opportunities to export. Figure 1 illus- trates evidence of SOFMAN’s growth in international operations, during a period that the home market was shrinking.

Through networking with Greek entrepreneurs and using personal contacts, a crucial theme for SMEs (Širec and Brada 2009), SOFMAN managed to earn its first international project as a contractor of a Greek-owned firm in Nigeria in 2010. This involved fabricating a sugar process refinery building and shipping it from Athens to Lagos. Word-of mouth and further networking enabled SOFMAN to secure 42 additional contracts in Nigeria, worth of € 12 million. “We were successful because of our quality standards and our ability to find innovative solutions to problems in very difficult circumstances; our small size provides us the flexibility to adjust and be responsive to customer needs”, says Mr. Sofras, CEO. As the firm acquired more experience and confidence operating in an international setting, it expanded its

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services to offer on-site installations. A € 4 million milestone project in the firm’s history involved the fabrication of a bioethanol and power generation plant in Greece and its installation in Ebola-stricken Sierra Leone, using SOFMAN’s own lifting equipment. Sierra Leone was not a desirable destination for most competitors given the unfavourable circumstances in the country, discussed below. However, to survive and compete with larger European multinational construction firms in the steel industry, “we had to go to places where others wouldn’t”.

In parallel to projects in Africa, the firm became a subcontractor of large construction firms managing projects in Central and Eastern Europe. Following a € 10 million contract for fabricating a refinery project in Bulgaria, SOFMAN was sub- contracted to produce steel structures in Greece (e.g. pipe racks, shelters) and install them in Slovakia and Czechia (formerly Czech Republic).

The Project in Sierra Leone: Leadership & HRM Issues

While the manufacturing of the customised steel structure in Greece seemed business as usual, transportation and installation in the middle of the jungle was cer- tainly not an ordinary activity. The CEO led the team in the initial stages of the project in Free Town, the capital of Sierra Leone, where machinery and the steel structures were shipped, and subsequently, at the construction site in Makeni. The project involved the management of several difficulties first and foremost, health and safety conditions in an underdeveloped country, where some regions were suf- fering a humanitarian crisis due to Ebola, leading to the death of an estimated 3955 people (“Ebola in Africa” 2016). Poor infrastructure was also an impediment, such as the low quality of roads affecting the transportation of heavy machinery from the

Fig. 1 SOFMAN sales and exporting activity during the crisis in Greece. (Source: SOFMAN, SA. Internal document, Note: Amounts are in €)

Case 3: Crisis and IHRM

port to remote rural areas. Low quality of institutions (e.g. banking), theft, and gen- erally low levels of security posed significant risks that had to be managed by the CEO and the project team, in collaboration with the Elefsina office. On top of these, cross-cultural differences were another major challenge.

The installation project team in Sierra Leone comprised a leading project manager and highly skilled construction workers, in charge of the erection of facilities.

The team’s manager was an experienced SOFMAN engineer who conducted on-site management, and communicated with the leadership team in Athens almost on a daily basis, particularly in the first stages of the project. Skilled construction workers were supplied by a subcontractor in Greece. SOFMAN took the latter decision concerning the supply of construction staff in order to manage risk and control the costs of the operation, as well as to obtain access to technicians quickly and effec- tively, from a known and trusted firm. Technicians were selected following careful evaluation and discussions between the leadership teams of SOFMAN and their subcontractor, reflecting the importance of team member selection in such projects (Anyanwu 2013). The client mandated that the project team was assisted by a group of low skilled workers, who were supplied by a sub-contractor from Sierra Leone, introducing an element of national diversity in the team.

A key challenge for SOFMAN was to enable the project team to work as a cohe- sive unit. The CEO and the Greek project team of expatriates lived together in the best possible accommodation at Makeni, which became the home of the project team for several months to follow. During this period, the CEO set team norms and bonded the project team through discussions and shared activities such as cooking meals, treating all members as part of a unit representing SOFMAN, and setting three priorities: a) strict focus on health and safety practices inside and outside the construction site, b) strong quality orientation, encouraging team members to read- ily report problems when they occur, and c) efficiency in all levels of operations.

In terms of the collaboration with local unskilled workers, SOFMAN’s CEO attempted to integrate these workers to the team as well as improve their competen- cies by transferring technical know-how in fundamental areas. However, cross- cultural differences posed a significant challenge. Locals were perceived as friendly and warm but professionally unreliable, with a different work ethic and a laxed orientation when it came to timing. “Tomorrow could mean next week in Sierra Leone, so we had to adjust to the culture and be proactive in our planning. Also, despite our efforts to upskill local workers and transfer some of our knowledge, I learned the lesson that some people unfortunately are reluctant to learn.”

Nonetheless, in many cases locals contributed to troubleshooting and offered out- of- the box solutions. For example, when a hydraulic part was needed in order to fix a crane, locals guided SOFMAN employees to a quarry whereby such materials were available, saving money and the time that would have been required to ship the items from Greece. Some of these locals became integrated to SOFMAN’s culture and felt part of the project team, otherwise they would have not contributed. The CEO was collecting the fruits of his personal leadership and care to his workers.

SOFMAN successfully completed the project and identified additional business opportunities, such as renting their own materials and equipment to other

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international firms operating in the country. The firm still continues operations in Sierra Leone and nearby regions, having developed a joint venture in steel construction services with a local company specialising in logistics.

Project Management in Central and Eastern Europe

SOFMAN entered the European market as a fabrication subcontractor in 2012. In 2016, it was contracted to manufacture and install steel pipe racks, process build- ings and shelters in Slovakia. In comparison to Sierra Leone, this was a larger scale project with more demanding technical requirements. Nonetheless, the project team structure remained similar in many respects. This team consisted of a project manager, a SOFMAN engineer in charge of the supervision of the project and four engineers specialising in specific functions (e.g. surveying, safety, quality); the latter were leased from specialized firms in Greece. Additionally, 30 skilled workers in charge of the installation were also sourced through subcontractors based in Greece and Slovakia and offered their services for the specific project. Such a structure enabled SOFMAN to control the project through the site engineer, but also attain flexibility and control costs. Simultaneously, SOFMAN opened an office in Slovakia in order to facilitate its business operations in the country, hiring two local employees for administration and accounting purposes. Overall, the approach followed and team synthesis reflect a gradual strategic move from a home-based ethnocentric approach, to a polycentric perspective, utilising an increasing amount of host- country human resources (Perlmutter 1969).

Following the same recipe, the CEO aimed to establish norms and increase the cohesion of this nationally diverse project team, so that they would all work with the culture and quality standards of the firm. After all, SOFMAN was eventually accountable for the project. In addition to training offered to all employees on various issues (e.g. health and safety, quality), SOFMAN incentivises employees through a perfor- mance-based reward scheme for all employees, including those leased by the Greek and Slovak subcontractors. Additionally, rewards and strict penalties were set based on workers’ compliance to health and safety project standards.

Working with locals provided a number of benefits and solutions to SOFMAN. For example, the local administrator helped the site manager identify and communicate with local suppliers who provided items required in steel panels. In some cases, however, new cross-cultural differences became relevant, which were in sharp con- trast to those experienced in Africa. In Slovakia, Greeks perceived locals as punc- tual, accountable and having a good work ethic, yet quite strict, introverted and distrustful towards foreigners. Such cross-cultural problems were managed by the interventions and site visits of the CEO, who used various methods to increase the sense of identity and unity in the team. Relying on its well-established production capabilities in Greece as well as project-based, culturally diverse teams seems to have worked well for SOFMAN. Flexible teams comprising of a core SOFMAN manager, engineers and workers from home and host country subcontractors, enabled the firm to respond to customer needs on a project basis, without having to

Case 3: Crisis and IHRM

increase the size of its workforce in the long-run. This would have been a risk with significant cost implications, given the high levels of volatility and uncertainty in the construction market of the home country.

Future Prospects

During the Greek crisis, SOFMAN gained unique experience on managing construction projects in the sub-Saharan Africa and Europe. Pursuing international business opportunities involving fabrication and on-site installation, as well as expansion to other geographical areas reflect the growing confidence of top execu- tives in SOFMAN’s ability to compete internationally. As the firm was successful in its endeavors in both continents, SOFMAN intends to expand its operations in Greece and abroad. It is currently licensing a third plant in Greece, which is expected to double its annual output. It is also in the process of setting up a subsidiary office in Europe, which is expected to enable the firm to identify further business development opportunities, as well as increase its ability to manage international projects.

While the state of the Greek economy could have inspired Aeschylean dramaturgy, SOFMAN’s gradual but bold internationalisation steps are paying off, signaling a promising future for the firm.

Case Study Questions

1. Discuss SOFMAN’s response to the changing external environment since 2009/10. Examine the key factors underlying SOFMAN’s strategic choices and critically evaluate the internationalisation strategy.

2. Critically evaluate SOFMAN’s HRM practices in the process of internationalisation and offer suggestions for improvement.

References and Recommended Readings

Anyanwu, C. I. (2013). The role of building construction project team members in building projects delivery. Journal of Business and Management, 14(1), 30–34.

Curran, J. (2006). “Specificity” and “denaturing” the small business. International Small Business Journal, 24(2), 205–210.

Ebola in Africa: The end of tragedy? (2016, January). The economist. Retrieved from http://www.

economist.com/blogs/graphicdetail/2016/01/daily-chart-12

OECD. (2016). OECD economic survey: Greece 2016. Paris: OECD Publishing. Retrieved from https://doi.org/https://doi.org/10.1787/eco_surveys-grc-2016-en

Perlmutter, H. (1969). The tortuous evolution of multinational enterprises. Columbia Journal of World Business, 4(1), 9–18.

Širec, K., & Brada, B. (2009). How does networking Impact the SMEs growth? Organizacija, 42(2), 59–66. https://doi.org/10.2478/v10051-009-0003-4. Retrieved from http://www.dlib.si/

stream/URN:NBN:SI:DOC-ZOIJLL28/d5d9100c-fe12-46a9-b2c8-cc4da618b32e/PDF. SOFMAN company website. (n.d.). Our projects. Retrieved from www.sofman.gr.

A. Malik (ed.), Strategic Human Resource Management and Employment Relations, Springer Texts in Business and Economics,

https://doi.org/10.1007/978-981-13-0399-9_18 R. Bebenroth (*)

Kobe University, Kobe, Japan e-mail: rbeben@rieb.kobe-u.ac.jp R. Bartnik

Cologne Business School, Cologne, Germany

Dalam dokumen Strategic Human Resource Management and Employment Relations (Halaman 170-176)