Case Study
Restructuring of Internal Environment enables Modern Terminals Limited to Handle Exterior Change:
In 1997, Modern Terminals Limited, located in Hong Kong, and industry leader for 25 years in container production, hit a rapid downward spiral in an attempt to respond to changing market forces. The company moved to alleviate their problems through redundancies.
However, by 2001, Modern Terminals had made a turnaround that was as dramatic as their initial downfall. Employee efficiency skyrocketed, operating costs were under control, business volume doubled, profit increased by nearly 50% and again, Modern Terminals dominated China's container industry. The company attributes its success to a will to better itself and a constructive cultural shift with help from The Pacific Institute.
Diagnosis:
Tension, Distrust and Financial Crisis
In late 1997, left unprepared for industrial changes from a financial crisis and increasing competition, Modern Terminals forcibly restructured without considering its internal culture. Management was cut by 30% and staff numbers by 21%. The restructuring had actually produced confusion, leaving remaining employees with a lack of guidance and the company losing productivity with disconnected workers. Modern Terminals' competition continued to grow while employees reported a loss of trust as the company's market power diminished.
John Lee, Modern Terminals' Director of Operations and former Chief Nuclear Officer for Millstone Nuclear Station (another successful client of The Pacific Institute), explains: "In the spring of 2000, business conditions took a downward turn... internally, we observed increased nervousness among the staff [about] their future in the organisation... poor business conditions of the past three years seemed to have had an adverse effect on trust within the organisation... we decided to turn our attention to cultural change within the organisation". Modern Terminals was attracted to The Pacific Institute's approach to confronting individual and leadership effectiveness.
Intervention:
Using their Organisational Culture and Effectiveness Survey (OCES), The Pacific Institute brought into focus the cultural barriers that Lee and his administrators knew existed, but couldn't resolve. To recreate their culture, Modern Terminals engaged The Pacific Institute's Australia and UK offices to tailor programmes specifically attacking the mental barriers dividing the company's vision from its current reality.
75 managers and 550 supervisory staff participated in the IIE programme. Simultaneously, Modern Terminals' employees learned about self-efficacy, leadership effectiveness and how to work within the mission, vision and values of their organisation. According to Modern Terminal's management, The Pacific Institute's IIE programme and Leadership Impact Analysis (LIA) (in addition to training 50 internal facilitators) allowed Modern Terminals to start and continue the necessary recovery. John Lee delivered this verdict on the change intervention: "The Pacific Institute's Investment In Excellence [IIE] programme is excellent for this important personal and organisational development. It is the king of tools that delivered the cultural shift that made the strategy changes possible."
Measurable Results:
The quick turnaround of 2001 was sustained in 2002 and again in 2003. The company is ahead of their organisational goals for 2008, and after 18 months of training and culture-building with The Pacific Institute, Modern Terminals Hong Kong has experienced:
- 8.7% Market share increase in Modern Terminals' most competitive market
- 12% increase in Operational Margin
- 17% increase in Equity Return
- 18% increase in Asset Return
- 21% decrease in Soft Costs
- 36% decrease in Variable Costs
- 62% decrease in Fixed Costs
- 120% increase in Shareholder Dividends
"Organisational effectiveness is the result of organisational culture, which in turn is the effect of personal and leadership effectiveness", reports John Lee. "We are proud of what we have accomplished with The Pacific Institute, and we are totally confident that the cultural change programme will get us where we want to go in the years ahead."
