Skip to content

Gmfc Case Study

Read the following to answer: Read the Case Study: “GMFC Custom Conveyor Division,” write 250 words based on the Union organizer role: Develop a strategy for organizing the plant in the case.

Considerations:

Authorization card campaign
Contacts with employees
Campaign Literature
Comparisons you want employees to make
Bargaining-unit determination
Coping with delays
Potential ULP charges

Case:
Last year, General Materials and Fabrication
Corporation (GMFC) acquired a manufacturer
of custom-built conveyer equipment
used in the freight forwarding industry. The
nonunion plant, renamed the Custom Conveyer
Division (CCD), employs about 120
production employees, 3 supervisors, a general
supervisor, a production manager, 2 engineers,
3 office clericals, and a plant manager.
The production employees are in five semiskilled
job classifications: fabricator, welder,
prepper, painter, and assembler.
The fabricators convert raw material, such
as steel plates and tubes, into parts using
presses, sheers, numerical-control cutting
equipment, and the like. Welders take the fabricated
parts and create frames for conveyer
subassemblies. They also weld sheet metal
into complex slides and chutes. Preppers
clean welding slag, grind welds, degrease
welded assemblies, and perform other cleaning
functions for painting. Painters spray
paint assemblies using a variety of paints
and painting equipment, taking special care
not to paint areas where additional parts will
be attached. Assemblers, working in teams,
use the welded subassemblies and fabricated
parts (purchased parts such as rollers, chains,
sprockets, belts, motors, and switches) to
assemble the equipment and test its operation.
Then the assemblers travel to the installation
site to combine the subassemblies and
test the completed custom installation.
The plant is located in Cumberland, a small
rural city of about 2,500. All the employees
are hired from about a 20-mile radius around
the plant. The starting wage for all classifications
is $9 per hour, with an increase to $9.50
after a 60-day probationary period. Wages
increase to a maximum of $11 per hour in three
50-cent increases at six-month intervals. About
75 percent of the employees are earning the
maximum hourly rate. CCD pays for comprehensive
health insurance for all employees and
provides for 80 percent of the cost of dependent
coverage. Turnover is very low, averaging
about 5 percent per year from all causes. Two
other plants in Cumberland hire employees
with the same types of skills and pay a starting
wage of $8 per hour. Most of GMFC’s employees
have been hired from those plants.
The plant earned over $1.25 million after
taxes last year on gross revenues of $9 million.
Sales have been increasing about 20 percent per
year recently. Total labor costs last year were
$4.5 million. Materials cost $1.5 million. Facility
maintenance was $0.5 million and depreciation
on the plant and equipment equaled $0.75
million. Taxes totaled $0.5 million. Labor and
material costs are variable. Maintenance and
depreciation are fixed for the next year since
the plant has about 20 percent unused capacity.
If expansion continues, there is enough space
on the current property to double the plant size
at a cost of about $10 million. The local labor
market can provide workers with the required
entry-level skills if the operations were to double
over the next four years. Five other competitors
manufacture this type of equipment,
but GMFC-CCD has established a reputation
for high quality and low cost, and its market
share is expanding. Because most of the conveyer
systems are used in airports and warehouse
operations in large cities, transportation
is required for each unit shipped. GMFC paid
about $16.5 million for the operation when it
was purchased last year.
UNION ORGANIZING
The district director of the United Steelworkers
in the region in which Cumberland is located
wants to increase the number of members in
the district. He received an e-mail today from
Dave Neumeier, an employee of GMFC-CCD,
who is a former Steelworker member. Dave
suggested that CCD was ripe for organizing
given the $2 and $5 difference in wages
between CCD ($11 maximum) and GMFC’s
main Central City operation. He said some of
the preppers were dissatisfied, too, because
their work was much more repetitive and
dirtier than the other jobs but the pay was the
same.
The district director assigned two of his
newest organizers, Rebecca Shea and Rick
Anderson, to attempt to organize the plant.
Rebecca just graduated from the state university
with a bachelor’s in labor studies. Rick
was a welder for a heavy-equipment manufacturer.
The district director has given them
a copy of the GMFC contract that’s currently
in force (see the mock negotiating exercise at
the end of Chapter 11). Rebecca and Rick have
been instructed to try to get jobs at the plant
and begin organizing internally. If that’s not
possible, they are to contact Neumeier and
get names and addresses. In either event, they
need to formulate a strategy for organizing.
MANAGEMENT
James Holroyd, the plant manager, has just
held his weekly supervisors meeting. A supervisor,
Steve Christian, said a new employee
who just moved to the area, Dave Neumeier,
has a Steelworkers local sticker on the inside
of his toolbox. While there has been no union
activity at CCD, Holroyd was told by GMFC
top management to make sure the operation
remained nonunion. While work has been
steady lately, a layoff is possible in two months
if new orders aren’t received.
The plant has a generous recreational program
for employees, with a party every quarter,
an outboard runabout, a recreational vehicle,
and an extensive videocassette library for free
use by employees.


The challenge

We were recently contracted by a major player in Zimbabwe. The company wanted to know if it was paying unnecessary labour costs as a result of overstaffing. The exercise required us to go into each department and establish if the department was overstaffed in its individual roles and job families and was an opportunity to identify departments that were understaffed. In this post you will read how we cut costs and improved productivity by reducing overstaffing and eliminating understaffing.

How we intervened

Human resources practitioners have often been said to rely on subjective judgement when choosing when to hire, maintain or downsize their workforce. This leads to overstaffing or understaffing which in turn leads to unnecessary labour costs or failure to meet targets and deadlines. To avoid this, we developed a methodology that includes the input of subject matter experts (Heads of Departments – HODs) and statistical techniques in determining whether headcount adjustments should be done in each role.

Broadly speaking, our methodology is defined as follows:

  1. Defining headcount drivers – Each role consists of a specific set of duties. If business activity related to these duties changes, the number of incumbents required in the role changes. This is especially true for operational and tactical roles. For example, the number of required by a mine depends on the number of shifts the mine has. The number of Human Resources Officers a company requires depends on its total staff complement. The number of shifts and the company’s total staff complement are the headcount drivers for the Guard and Human Resources Officer roles respectively.
  2. Engaging HODs to provide data – We encourage the participation of each HOD in the data collection stage. This encourages buy in from these important stakeholders as it improves the chances of them implementing our recommendations. We explained to all HODs in this company the importance of providing accurate data and how it would be used. We requested the following information from each HOD:
    1. Average number of employees per quarter in each role
    2. Headcount drivers – to analyse how many employees are needed to do the work
    3. Average tenure and average salaries of employees in each role. Retrenchment costs in Zimbabwe are linked to the number of years a person has worked in an organisation and their average salary.
    4. Estimated cost of hiring an employee by role
  3. Data analysis – Where more than one headcount driver is provided, we combine the headcount drivers into an aggregate measurement of business activity using weighted averages. We then rank the resulting aggregate business activities for the period under study: for this particular exercise, we had seventeen business quarters. If a quarter has business activity of zero percent (0%), it implies that the quarter has the least activity when compared with other quarters. If a quarter has one hundred percent (100%) business activity, it implies that the quarter has the highest recorded business activity in the period under study.
    The resulting ranked business activities are labelled as relative business activity since they are a comparison of several periods. We use ordinary least squares regression (OLS regression) to establish the relationship between the relative business activity and the number of employees in each role. Where the coefficient of determination (R squared) is less than 50%, we use simple proportion calculations to determine the required number of employees in a role.

Related: Always keep learning: 5 HR analytics courses online

The diagram below (click to enlarge) shows an example of the relationship between relative business activity and the number of employees in the Technician position.

In the example above, a 22.5% increase in relative business activity calls for an additional technician if workload is to be maintained. An R squared equal to 70.4% implies that the relationship between business activity and the number of employees is strong. The stated OLS regression equation can be used to determine the required number of employees given the current relative business activity. The isolated data point labelled 98% represents the technicians’ current relative business activity.

Related: How to get Maximum Value from Employee Net Promoter Score

Given the established relationship between relative business activity and the number of technicians, the trend line suggests that the staff numbers are in excess of what is required. A downward adjustment of two technicians would shift the data point downwards towards the trend line which represents optimal staff numbers. If the point was below the trend line, an upward adjustment towards the trend line would be required.

To establish whether a department is overstaffed or understaffed, we determine the number of employees that would be required if relative business activity was at its 25th percentile level and the 75th percentile level respectively. If a department’s relative business activity is above its 75th percentile level, we flag the department as potentially understaffed. If a department has relative business activity that is below its 25th percentile level, we flag it as potentially overstaffed.

The argument here is that there is a natural relative business activity level that is neither too high nor too low. A significant deviation that is above the 75th or below the 25th percentile relative business activity level represents significant deviation from optimal staff numbers. If relative business activity per employee is too high, there is possibly employee burn out whereas if business activity per employee is too low, it is possible that there are too many employees doing little work.

Results

We flagged 63 employees as potential overstaffing for this company. We presented results in the following format for each department in a dynamic dashboard based in Microsoft Excel.

The example above shows a recommended downward adjustment of 2 employees in the technician role from 8 incumbents to 6 incumbents. Retrenchment costs corresponding to this reduction amount to $2,800. The savings to be gained from this adjustment amount to $16,800 per year. The number of months to breakeven represent the time it would take the company to recover the retrenchment costs if the recommendation is implemented. In this example, the company would need only two months to recover the retrenchment costs. All this information was summarised in a dynamic calculator in Microsoft Excel. See the table below (click to enlarge).

Reassignment of employees

There are options when it comes to adjusting headcount. Instead of terminating employment contracts, your organisation can reassign employees in the same job family from one role to the other if one role is overstaffed and the other is understaffed. For this to be implementable, employees should have the capacity to deliver once they have been reassigned. For the company in question here, most employees in operational positions had the same basic skills and could be reassigned which minimised the number of terminations.

Conclusion

By identifying the key duties carried out by employees in each role, Human Resources Practitioners can make better decisions regarding whether they should hire, maintain or downsize their staff complement. The use of statistical techniques in establishing the link between business activity and staffing levels brings objectivity to the decision making process. Furthermore, the process of monitoring your headcount is not a one-time exercise. You should continuously monitor your staff complement as business activity fluctuates to ensure that you do not overwork your employees due to understaffing or pay unnecessary labour costs due to overstaffing.

Team Members

  1. Memory Nguwi – Managing Consultant, Industrial Psychology Consultants
  2. Leopold Ramutsamaya – IT Consultant, Industrial Psychology Consultants
  3. Tapiwa Chipoyera – Research Consultant, Industrial Psychology Consultants

Check out our previous articles on Key Drivers of Retail Sales Performance and on How to Reduce Workplace Accidents Using People Analytics.