Chapter 02

HRM Insight 2.1: William Beckett Plastics Ltd (pg. 31)

An explanation of how the company responded to its changing environment

The reason for including this ‘story’ is to illustrate the unpredictability of the external environments that many businesses operate in. Whilst they have some influence over aspects of their internal environments, many of the important external changes that affect their businesses are simply outside their control. The issue becomes of reacting in appropriate ways and having the capability to react quickly to opportunities and threats.

In this case, the company had for over 18 months invested in new production capacity, particularly in new machinery and tooling to increase its product range and delivery times. Applying for grants to extend its premises was only one of its investment decisions.

The loss of its biggest UK customer did not immediately result in a discontinuity of orders – the company transferred production to Brazil over several months – but the loss represented a major blow to Beckett Plastics order book and revenue flows. But this was not the end of the story! The remaining three major UK manufacturers of tool steel products also closed over the next 9 months, two because of insolvency and the third as a result of the floods that hit Sheffield in the Summer of 2007. Although these three did not collectively represent the same degree of lost business that the closure of the Dormer factory did, nevertheless, they added to the growing sense of uncertainty within the senior management team.

At the same time as the company was trying to balance its investment strategy with a reduced customer base and a falling order book, it also was being penalized by the increase in the value of the pound. Part of its expansion strategy had been to grow the business in the USA and this had been successful. However, it had priced an exchange rate of $1.75 into its financial planning scenario, and as the pound appreciated against the Dollar to well over $2.00 the Sterling value of American sales fell to the point where such sales were only making contributions to overheads rather than generating profits.

Although business had been very good in the first half of 2007, the second half turned out to be much worse. The company had benefited from its earlier investments, but these had not yet come fully on line and it was faced with a need to cut costs and expenditure. The decision not to pay an annual bonus to its workforce, something that was always directly related to overall profitability, was a direct consequence of the situation the company found itself in. This in turn produced a negative reaction on the part of some of the semi-skilled shop floor operatives who felt that management had failed to meet their expectations as bonuses had been paid in the previous three years. Equally, senior management felt that their efforts to maintain employment in a period of financial uncertainty had not been appreciated by elements of the workforce and felt let down by what was perceived as a lack of support and commitment from their employees.

The first half of 2008 represents a very challenging period for the company who need to find a way to overcome its financial difficulties. Its investments in new products and markets may well pay off and compensate for the loss of traditional customers; on the other hand, it may be necessary to make short term adjustments to the labour force to bring its cost base in line with its income.

What would you do if you were managing the company?

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Oxford University Press, Online Resource Centre, Chapter 02.

Chapter 02