Yong Woodworks Example

Yong Woodworks Example

Company history

Yong Chee Wah, a woodworker from Malaysia, immigrated from the small town of Malacca to Hobart, Australia in 1947 when he was 18 years old. He left a family of woodcrafters to start a new life in Australia. In Hobart, he started by working for various builders and quickly impressed his bosses and customers by delivering high-quality work on time. He lived frugally for 15 years and eventually built a custom furniture shop, Yong Woodworks Company (YWC), on a large piece of land.

In its first year of business, YWC employed five carpenters and made no profit. Luckily for Chee Wah, however, the riverside capital city soon developed as a thriving arts¬and¬crafts centre. Chee Wah became the carpenter of choice for many projects in Hobart and surrounding areas, and by 1970, YWC earned profits of AU $1.8 million. As the fine reputation of YWC spread, market pressures demanded it expand product offerings to include mass¬produced items. Chee Wah understood the need for change but insisted that even the mass¬produced goods be of the finest quality. To ensure consistency and quality, YWC produced a limited selection of office furniture. By 1975, the company grew to 100 employees and expanded to include two facilities - the original craft shop for specialty items and a factory for mass¬produced office furniture.

Throughout the 1980s and 1990s, the company grew to 250 employees and the factory expanded and was run in two shifts. By 1999, manufactured goods accounted for 75% of sales, and hand¬crafted products accounted for 25%. Even though YWC's custom market accounted for a smaller percent of sales, that business division enjoyed profit margins of nearly 200%, whereas profits for its manufactured goods were in the 20% to 50% range.

Company culture

Chee Wah held a vision for YWC as the premier provider of quality woodwork. In exchange for helping to build the business, his initial staff received generous percentages of YWC's profits rather than large salaries. This policy encouraged other hard¬working entrepreneurial workers to join the company. To make employees feel part of a large and caring family, the company held two large events each year and celebrated special occasions to bring workers and their families together. In return, workers felt committed to the company and were compelled to give their best efforts. Even when the company grew and hourly wages replaced profit sharing for practical reasons, Chee Wah insisted that all employees receive a bonus in profitable years.

Changes at YWC

In 1999, Chee Wah retired on his 70th birthday and passed the business to his oldest son, Yong Ee Leen, who had worked in the factory during summer breaks from school and then in the Finance department after he graduated from college. As the newly¬appointed chief executive officer (CEO), Ee Leen decided it was time for YWC to progress. He saw unlimited potential for mass distribution of YWC's manufactured products. Ee Leen believed YWC should take advantage of the profitable trend to export mass goods to foreign markets. YWC had been successful at pursuing mostly high¬end homebuilders and elite office supply stores without relying on retail¬distribution channels. But Ee Leen was convinced that the company could more than double its sales of manufactured goods if it pursued other retail markets more aggressively.

In addition, Ee Leen determined that YWC did not offer enough product variety. At one of his first leadership team meetings, Ee Leen suggested that YWC expand their line of manufactured shelves, tables and chairs, "Let the craft shop continue to make custom¬design products. The company is successful doing things the old way in that market. But we could produce a wider array of products in the factory - simple designs that could be mass¬produced and distributed in foreign markets. Many furniture makers supply products made from less expensive wood for mass-distribution. Let's do the same. Customers would be thrilled to get the YWC name through ordinary channels. To meet demand, we could add a third shift to become a continuous production facility without having to build a new factory. Our future depends on YWC diversifying products and markets."

Conflict at YWC

Ee Leen's proposed changes were met with resistance. Ian Condon joined the factory when the company expanded to two facilities in 1975. His strong work ethic and commitment to product quality earned him several promotions, leading to his current role as vice president of manufacturing, a post he has held for the last 10 years. Ian and Chee Wah had enjoyed a very respectful, open working relationship and had always listened to one another's ideas before making decisions. Ian didn't agree with Ee Leen's proposed changes and was against the idea of adding a third shift to make more products. He resented the idea that YWC should change its winning formula to produce cheaper¬quality products. The thought of cheap wood displaying the YWC logo disgusted him. Ian said, "We've grown into a substantial company by doing what we do best - making and selling high¬quality furniture. If we start making things fast and cheap, we will destroy our reputation - a reputation that Chee Wah spent his entire life building."

Furthermore, Ian thought of Ee Leen as a young entrepreneur who had not proven himself. "The son is not the father," Ian would think to himself. Ian felt Ee Leen tried to shorten deadlines without regard to the quality standards that were YWC's trademark. Their feuding caused rifts between manufacturing and sales. In general, the sales team was thrilled about growth that could increase their commissions, and they supported Ee Leen. Many of the sales people were young and eager to try new ventures. According to the vice president of sales, a classmate of Ee Leen's and the daughter of one of YWC's original worker's, "It's time YWC becomes a progressive, global company. Manufacturing will have to keep up with sales."

In support of organisational change, Sonali Patel, the vice president of human resources, insisted that YWC would improve its ability to meet deadlines if the compensation system were changed. Workers in both facilities were being paid a flat hourly rate, no matter how much they produced. Raises were based more on tenure than merit, and bonuses were now given regardless of company profitability. Sonali claimed that the system did not encourage people to work quickly enough. She believed employees - especially those in the factory - should receive a lower hourly wage but receive bonuses and incentives based on company