The Gekko Case: Part 1

GEKKO CASE-STUDY: PART ONE (download .doc here)

History

In 1677, one year after the Great Fire of London, the first mention of Gekko can be evidenced. Thomas Gekko established the company in order to supply the army of Charles II with brass buttons for their uniforms. On the back of British Imperial expansion as well as the First and Second World Wars, Gekko grew. However, after 1950, the inaction and reduction in the British military meant that Gekko’s problems began to emerge.

Gekko’s products are very high quality. The breastplates, for example, which are made for the Queen’s Cavalry, can only be made by four people in the United Kingdom, three of them work at Gekko. On some of the lines it can take up to ten years to learn sufficient skills, on others, a production line produces hand-painted work to customer requirements. The issue of quality is what most of the Gekko employees believe makes them special. The managers maintain that many bulk order for plastic or printed objects can be done cheaper elsewhere.
Work Practices

The importance of tradition in the company has meant that most of the work in the shop has not been modernised for tens, if not hundreds, of years. The factory still operates a bureaucratic piece-rate, time-motion attitude towards work. “We have a strict hierarchy here,” one production manager pointed out, “the offices and factory are separate and we have the Production manager, superintendent, supervisors, charge hands and then the workers”. Change, innovation and democracy were not seen as good things.

Up until the 1980s the workforce was strongly unionised and at one point the factory was closed down for nine weeks concerning a redundancy dispute. Health and Safety was such a low priority in the factory that two Improvement Notices were placed on it by the Health and Safety Inspectorate. Few of the stampers that have been at Gekko for a while have all their own fingers. Despite this, the workers are generally loyal to the company are proud of their reputation for quality

The lack of formal procedures has led to a reliance upon the intrinsic knowledge of many of the workers. The know-how to manufacture breastplates or cavalry helmets is not written anywhere within the company. Even the old quality manager (appointed three years ago) pointed out that “if you stuck to the rule book, you’d never get anything done”.

Gekko had strong ties with its suppliers and had been using some of them for over a hundred years. Material comes into the workshop regularly and is processed by several (manual) production lines. There are no information systems and all jobs are organised by ‘old hands’: experienced production managers who know where the relevant casts are kept and how to set up the ancient machinery.

The Forces for Change

After 1980 several market factors combined to necessitate changes within Gekko:

• The cutting back of military expenditure meant that there were less orders for the buttons and badges which had been the staple product of the company. The decline in orders has caused the workforce to third in the last thirty years.

• The movement towards competitive tendering in the MoD meant that Gekko now had to compete with other companies in India and China who were catching up with Gekko quality but at a much lower price.

Internally, a number of issues began to develop:

• Gekko’s processes had not modernised. Orders often arrived late and it was virtually impossible to let customers know when their deliveries would arrive. Although training was allocated an increased budget, there was no system to identify training needs, nor the effectiveness of training. Whilst the quality inspector received no training, people were allowed to train on computers who did not use them in the workplace.

• Administration (there was no marketing department) would create deadlines for production which production could rarely meet. The adherence to quality, of which production was so proud, meant that set up and turnaround times were very slow and quality control very stringent.

• Due to the increase in labour, insurance and material costs overheads were increasing and consequently profits were diminishing. Whilst during the 1980s and 90s the turnover at Gekko remained a constant at around £2 million.

• The machinery and procedures at Gekko were ancient and the lack of investment in the company worsened the situation – quality was only being produced at a high premium. The decision taken in 1993 by the MoD to deal only with firms who possessed ISO 9000 meant that the company needed to modernise quickly.

• The ancient production systems within Gekko meant that work was often retracing the same steps and that as a consequence delivery times were rarely met. This state of affairs was known by management as “the Gekko shuffle” and was a constant source of conflict between management and workers.

The culture of the company was very traditional and neither workers nor managers liked the idea of change. Workers saw themselves as highly skilled artisans who should not be directed. Distinctions between levels and roles were closely guarded with a long apprenticeship needed for any newcomers.

As administration generally dealt with customer complaints, they increasingly became dissatisfied with the performance of production. The bad feeling was made worse by the differentiation between administration and production on working times and pay. Production would start half an hour earlier than administration on Weekdays, but would leave at 1.30pm on Fridays, which appeared unfair to many of those working in administration, especially when customer complaints came in on a Friday and could not be responded to by production. Conversely, production disliked working on a piece-rate system when most of the administration department were being paid a salary. This was, they maintained, symbolic of the differential esteem bestowed upon offices, as opposed to the shopfloor.
Questions

• What are the main strategic problems at Gekko?
• If you were a new leader what are the key points of your new strategy and plan?
• What forms of resistance might you expect?