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The decision to choose Silvio Napoli as the general manager for Schindler India was not right. For status, his character and way of doing business was such that he used to dictate what to be done. The worrier character was not good for India where people are open minded. He did not have any international experience. Napoli ought to have been taken through some training before being assigned the job in India. Schindler also had very high expectation because Napoli believed that the company was to grow at a very fast rate in the first five years. Unfortunately this did not happen. Schinder's target was to sell 50 units in the first year and occupy 20% of the market share after five years.
There are however instances when Napoli made reasonable decisions in his role as general manager. Selecting a team of experienced members was one such instance. Adding buy-ins onto the company's business model was also a wise step. It was however very unwise of him to relocate his family at the same time when he was to begin his work as a general manager. So much time was wasted dealing with personal issues making him lack the much needed concentration. Rejecting to make alterations in the business plan when need arose was also a negative decision. The increase in transfer rates and imports rates from 22% to 56% was a big blow to the company but it was a good idea to turn to outsourcing strategy. The lack of urgency by the Europe plant to the needs of the India plant was also discouraging. Napoli should therefore have reported the matter to Mr. Schindler so that he could use his power to make the plans work out faster.
1. Did Schindler Make the Right Choice in Selecting Silvio Napoli as General Manager for India?
Schindler must have made the worst choice in selecting Silvio Napoli to be their general manager in India. As much as he might have had success in Switzerland, India was a new world that had its own way of doing business. It's no doubt that Napoli was an MBA graduate from Harvard Business School but in business there is more to offer than the mere knowledge. Besides heading such a huge firm, the company ought to have selected an individual with international experience in the real world. Gilson and Altman argue that some instances call for some change in doing business. It's a nice thing that he was successful in Switzerland but there were still many aspects that Schindler had to consider.
To begin with, Napoli's management style was not applicable in India. He is one person who believes that people have to follow what he says and he calls all the shots. He must have developed this form of leadership from the culture in Switzerland where hierarchy was very clear. For instance Napoli recalls that when he began his first job in Sweden, the employees were very responsive to anything he requested. This is just a confirmation that the leaders were very much feared in Switzerland. One of the employees even says "He was the assistant to Mr. Schindler, so I knew I'd better be nice to him." It must have been the culture in Switzerland to tread carefully with those in leadership. Unfortunately Napoli transferred this culture to India without really understanding that this was a different country with different traditions.
It is common for a businessman to confront a new culture by thinking that his way was the best way. This is exactly what Napoli did. From the study, he says he had to adapt his way of management which did not succeed. Schindler ought to have taken Napoli through some management training before giving him a job in a different country. The most important area that needed training was the issue of building relationships. As Henderson and Hooper put it a little thinking is important in business. Indians have a very different way of doing business since they value good relationships before anything else. For one to succeed in doing business in India, he has to understand that trust is a very important virtue for them. This is an area where Napoli definitely failed since be imposed his own way of management. Moreover, in India everybody is very respective of his position and duties. For instance moving a desk in the office can not be done by anyone else other than the "peon".
The best general manager had to be an individual who could change his behavior under different circumstances depending on the situation. It would therefore been a good idea for the company to take some of its managers through some kind of mentality test so as to determine the best man for the position. The general manager makes very important decisions for the company and therefore should understand his employees. A good organizational culture is also very important for any company. The general manager should therefore be capable of creating good relationship between employees and the leadership as well as amongst the employees. This is where Napoli went totally wrong. His colleagues describe him as impatient, impulsive and over-communicative on some occasions. If fellow workmates can say this about their general manager then there must be a very big problem.
The expectations of Schindler were very high since it needed to grow very fast within a short period of time. With Napoli's character: impulsive, impatient and so on, it would most probably take a very long time before the Indian branch stabilized and began making the required profits. Schindler's expectations were to make sales of about 50 units during the first year of business and acquire 20% market share in the first five years. These are definitely high expectations for an individual who had very little experience in international business. The company should have chosen a general manager who had worked for the company for a longer time and had the experience of working in various countries or various cultures. Just like in Switzerland where Napoli was answerable to the CEO, it would have been better if the company had done the same in India. It even appears that it was obvious that Napoli was not fit for the job in India. In the case study, one of his colleagues says "He wants everything done yesterday and in India things don't get done yesterday." This is a clear indication that Napoli's character was not compatible with the culture in India.
Looking at the whole study, the main problem seemed to be on poor leadership. This is enough proof that Napoli was not fit for the job. On several occasions he was seen to underestimate the potential of his management team and yet he had hired them for the same job of providing advice. For instance when he realized that the team had taken an order for custom glass pod elevators, he rejected the order because he claimed that it was a violation of the company's strategy. Remember this was a decision from a team he had picked because he needed assistance from the members. On another occasion he rejected another offer to equip a government building in Mumbai with glass walled elevators. Team members insisted that it was only a minor modification of their S001 model but Napoli insisted that it would be difficult for a new team to install the elevators. A good general manager should be one who can accept challenges and be ready to take up the job as long as it is for the good of the company. Similarly he should be able to accept the views of his management team because this is what they are paid for. There is no need in having a team whose views do not count on any occasion. He dictated all that was to be done.
2. As Luc Bonnard, How Would You Evaluate Silvio's First Seven Months as General Manager of the Indian Company? What Advice Would You Offer?
Even though there were negative attributes with Silvio's performance, it is worth saying that he also showed very positive performance on some occasions. For instance he was very logical in selecting his management team. His plan was well thought since he understood the kind of environment he was working in. It was therefore wise for him to select his team from a pool of experienced candidates identified by Egon Zehnder. Starting with 42 year old Kara Signh as the managing director, to 33 year old Jujudan Jena who was recruited for the position of chief financial officer, it was wise of him to pick a team of experienced individuals to help him since he lacked the experience. All the members are of the right age ie below 55 just like the Indian Market requires. They will be able to reason together on the same page. This team would help show the right way by which the company was to follow. Considering the fact that the selected team was from India, they had a clue on what to expect and would therefore provide the best advice. The kind of competition in India's Elevator market calls for a strong team.
Most importantly, he had a reason for the selection of every member of the team. For instance when picking the chief financial officer, he said "You try to see whether the character of the person is compatible with yours...". This is an indication that he did not just choose blindly but was looking at very important characteristics. He is justified to do so because if you choose someone that you are not compatible with, it might be difficult to make decisions. A compatible team ensures that there is trust amongst the members and most importantly good relationship or cohesion. Without trust, members will all be in differences and poor working relationships is the last thing one would need for such a company with high expectations.
It was also a positive initiative for Silvio to hold a meeting with his teammates to introduce them to one another so that they could know who they were working with. Meeting also helps bring about one on one communication among team members and thereby developing trust among the members. It is through this meeting that members could also share views on how to run the business. Silvio also had the desire to get views from the management team rather than solely relying on his own ideas. Considering that these were people who were to help run the company, it was important that buy-ins from the team were added to Silvio's business model right from the word go. Eckerson supports the idea of considering the views of other employees.
On a negative point of view, it was wrong for him to relocate his family when he was supposed to start his work in India. The best option would be for him to either move the family after he had established the company and it had started running or he would have moved the family prior to his commencement of work. There was so much time lost dealing with family issues like the accidents his children had gone through leave alone spending so much time looking for a good place to live. In his book Operational excellence Schneider believes that planning and time management are very important in business. This time could be dedicated to working at the company. Because of his family problems: his child getting cut on the forehead, his wife suffering from food poison and his son breaking his leg made him unsettled and therefore he could not concentrate on his work. There was no single goal that was well executed because he was not settled.
He also ought to have accepted to make alterations when the market required that the business plan needed to be altered. Alterations can bring about positive feedback for the business. The problem with Silvio was that he was so determined to go by his business plan even when it was so obvious that it won't work. For instance his plan suggested that there would be no customization of products. On the other hand, customers reveled that there was no way the standard product line was going to be accepted for the initial orders received by Schindler India.
The best advice I would give the company is for its management to reevaluate Schindler India's business plan. From there, Silvio will have to gain the teams respect and support for the business to run smoothly. The culture back in Switzerland was that you had to respect your leader. This is the reason as to why Silvio earned respect from the company's employees regardless of how tough he was. The situation in India is however different; Silvio has to make sure that he is respected by the management team. His "worrier" style of management was not doing him any good in India. Perhaps it was time that he learned the "monk" attributes for him to earn the respect of team members.
3. What Advice Would You Give to Silvio Regarding His Decision on the Non-standard Glass Wall Elevator that Has Been Ordered?
Despite the fact that the company was going to make a loss if it accepted the order, Silvio should just go ahead and accept it. The most important thing at this point is for the company to penetrate into the market. Unfortunately, sometimes a business just has to make some loss to benefit from it in another way. The market is dominated by strong competitors with four of them occupying over 75% of the market share. Schindler India and others are only left with less than a quarter of the market share. This is the chance to show customers the difference between the Schindler and other competitors. If Silvio can accept the order, the company will most likely be accepted in the market because it provides what the customers need.
The company could still end up making profits if Silvio demonstrate reliability, pulls off installation and most importantly provide the customers with superior services than its competitors. Even though it's always good for the management to commit itself to the company's business plan, sometimes it calls for adjustments in one way or the other to benefit from market share. At this point the company had not received much entry into the market. By accepting the order to supply a government building with elevators that had glass walls, it will give the company entry into a very important part of the market. The government as an institution adds new buildings every now and then. Supplying the government building with the best elevators, might earn the company more orders when need arise.
Customer loyalty is very important in business because it keeps the customers coming back. It also opens for more ways because a good job to a customer will make him inform his friends about the good job you did and this might help the company own a bigger market share. Besides the team's members some of who are experts in the elevator industry understand that the glass-walled elevator was only a modification of the standard product the company had. There is no doubt that it might cost the company a little more but the most important issue is it will still give the company a very good opportunity to penetrate into the market.
Silvio should also take up the initiative to inform Mr. Schindler about European plans which are definitely not giving him the support he needs. It was very important for the company to outsource the S001 model to local suppliers immediately. Any details will definitely be disadvantageous to the company. Mr. Schindler needs to be informed about the situation so that he might use his power and position to talk to the Europe plant to quickly respond to the needs of the Indian plant. The increase of rates of import duty from 22% to 56% has a very devastating effect to the company's objective of breaking even. It was very wise for the company to take the alternative idea of outsourcing elevators to local suppliers. This is the spirit of a successful company at this point in time when competition is high. Plans to accelerate the supply of S001 could not be delayed any longer because this was the only available chance for the success of the company. 50 units are enough to make good money for the company. Informing the CEO about the delays might see things change.
4. How Should He Deal with the Challenge He Is Facing Over Transfer Prices and Limited Technical Cooperation from the Europe Plants?
Both the transfer prices and limited technical cooperation from the Europe plants are serious issues that need immediate attention since they are crippling the company pursue for success. According to the company's business plan, the company was to outsource key logistic and manufacturing function in order to gain the much needed competitive advantage. This is the best way for the company to evade the high import duties charged by India and high transfer prices and most importantly to keep the overhead cost low. The first option he has would be to stick to the plans because this will cut the cost. By doing so, there will be no need to import items from abroad because the company will deal with what is locally available.
He should therefore stick to the outsourcing concept because this is the best way to avoid the transfer rates and high import rates. However, since the European plant seems to be slow in responding to Schindler India's needs, it would be better for Silvio to inform Mr. Schindler about the issue. With his position and power, he is most likely to make the European companies to harry up. On the other hand if he kept quite, all the blame will be upon him, and the company will lose out on its desire to own 20 % of the market share. One of the responsibilities of a general manager is to discuss the company's policies and strategies with the top management. The final approval comes from top management. In this situation, Mr. Schindler should be informed about the delays because he is in a better position to deal with the European plants. Time is of the essence for the company and it cannot afford to waste any single minute if it is to remain competitive in the market. All its competitors must be looking for ways to cut down on their overall costs. The best company will therefore be that which acts quickly and respond to the needs of the customers. Unfortunately, issues to do with increase in transfer rates or import duties do not concern the customers. For them, the most important thing is getting the best products at reasonable prices.
It is however, still important that Schindler India maintains good relationship with the company's plant in Europe because these are parts of one family. There is no need Silvio to make the managers of the plant in Europe to look incompetent. It is important that he reports the matter to the CEO in a manner that would not make the management of the Europe plant look incompetent. There might be some miscommunication or some technical problem that was beyond the control of the management team of the plant. In business sometimes things happen beyond the control of the management team but the most important thing is how the team deals with it. Its good that Alfred Schindler understands that the business experience in India was similar to that of a battlefield. He also understands that the environment in India was very hostile and calls for the management team to be tough. The sudden increase in transfer rates is an example of the hostile environment. It calls for Silvio to remain calm and deal with the issue in the right way. A direct communication with the general manager of the Europe plant could also have been of importance. The best mode of communication would be to call him directly other than using mails or talking to other members of the management team. Alternatively he would have taken a fight to the Europe plant to find out what the issue really was. A good general manager should act fast to make corrections whenever necessary. It is of no help for him to remain in India and keep waiting for response from Europe. Urgent issues need urgent response and this was an urgent issue that ought to be solved immediately.
5. What Action Should Luc Bonnard Take with Napoli Moving Forward?
Looking at Napoli's profile, he seems to posses the much needed knowledge to run a business. He needs to understand that every environment has its own way of doing business. To begin with Napoli needs to be taken for some serious training on how to conduct business in different countries or cultures. It is not just enough to base the success of an individual on his educational background, his character or his performance in one project. There is no doubt that Napoli was successful in Switzerland. But this is India and not Switzerland. Moreover, in Switzerland he used to report to the CEO and the Swiss culture was such that employees were very cautious when dealing with people in top management positions. However, the culture was totally different. For instance unlike in Switzerland where a young veteran said "He was the assistant to Mr. Schindler, so I knew I'd better be nice to him", the situation totally different in India. The first question he was asked by M.K was "who are your friends inside the company? Who doesn't like you?" This implies that Indians are much brave and would speak their minds out. Other than training he also needs to shade his worrier character and pick up the monk character.
Luc Bonnard as the Vice Chairman of the member of the Executive Committee should therefore make sure that Napoli looks at his business plan afresh. Together with his management team, Napoli should re-evaluate the company's aspirations since the business model seemed to be over ambitious. For instance it stated that the company was to make a high level growth by the end of its first five years in the market. What he did not understand was that the market environment in India was unpredictable and you have to use the first year to learn before making conclusive plans. Similarly, the business model the company went for had never been attempted in India. Even though it's wise to come up with new ideas in business, a research has to be done before putting the idea to practice. Focusing on the standardized elevators was not a wise move because it had never been done before. There is a need for a business model to be flexible if a company is to succeed in any competitive market. This is also an area that Bonnard should ensure that Napoli readjusts in his business model. The biggest obstacle to Schindler India' success has to be Napoli's business model. If he has to continue as at general manager, Bonnard should also ensure that this obstacle is conquered for the company to register any growth.
Bonnard should also ask Napoli to reevaluate his management team. To be specific, the chief financial officer needs to pull up his socks. It is the responsibility of the chief financial officer to evaluate the market situations and predict any possible changes to come in future. He seems to have failed on this part because it was his responsibility to inform the company in advance about the changes in transfer prices and export. The idea of using outsourcing as a strategy to go past the problem of increased transfer and import rates seemed to have backfired. The chief financial officer should advice on money matters and therefore he must have been the source of this strategy. Apart from Jena Jujudhan, he does not seem to have enough experience to control financial matters of an international company under pressure of establishing itself in a new market.
Although it might not be wise to suck a general manager after such a short time, this might also be a good solution for the company. Another experienced member could be given the mandate to run the plant in India while Napoli could be returned to Switzerland where he seems to be successful. As the Vice President, Bonnard should also consider teaming up with a local elevator company because it might have an understanding of how the market in India works. By going into the new market without merging with any other company, it proved to be a little bit difficult. Even though the management team was made up of experienced members who had worked in India, this was not enough. All of them were from different companies and therefore had different strategies. Bonnard should therefore consider merging with a local company in order to benefit from some of its customers.
Silvio Napoli might have been a good manager judging from his performance in Switzerland but he is definitely not a good leader. Good leadership calls for patience and respect of other people's opinion. He was supposed to listen to what members of the management team advised. Schindler should reconsider his choice for the general manager's position for the India plant. For a company with such high expectations, you need a general manager that has enough international experience in order to adapt to the new cultures. Just like Schindler puts it, India is a very hostile environment for business because you never know what to expect. For a company to succeed in India, it should b well prepared for any eventualities. This therefore calls for the addition of an emergency kitty in the annual budget.