An Oil and Fats Manufacturing Company: Assessing Human Resource Needs for Corporate Success

Discussion Questions

The Growth Issue

The Nikolai¹ organization was a leading producer of premium quality vegetable oils and fats in the Asia Pacific region. To strengthen corporate and organizational performance, Nikolai Asia in Johor, Malaysia, prioritized their attention to the middle management level because it demonstrated lack of leadership qualities, including innovation and creative flexibility. Mr Kay, the Senior Manager of Human Resource and Organization Development (HROD), aspired to further develop leadership qualities among its managers so they would take up more challenging roles in planning, executing, and managing organizational changes. He hoped that these measures would be a catalyst for further growth. With his assistant’s help, Mr Kay expected to identify the needs to be assessed so that they would be able to recommend comprehensive solutions using training and non-training interventions to transform managers into competitive leaders.

Mr Kay addressed these concerns to his assistant Mr Zul during their first discussion:

To date, the top management is satisfied with the company’s performance, we have achieved our target and contributed significantly to our current success. However, I am not satisfied with the attitude and norms showed by most managers. They have been complacent with the current system and structure. They need to be more proactive and show a sense of ownership. We must do something to change this mindset, but I don’t know-how. I was hoping you could look into the situation and give me your recommendations. If we could have some plans by next month, that would be really helpful.

Background of the Company

Sustainability, innovation, and going the extra mile were key strengths of Nikolai for generations. Nikolai organization was the world’s largest vertically integrated palm oil producer. It focused on refinery/specialty fats operations. The company’s vision was to be a leading corporation by providing superior products and services by consistently growing in profitability and volume. They aimed to accomplish responsible commercial triumph through nourishing customers’ needs, providing rewarding careers to its people, giving a superior performance to shareholders, cultivating an equally beneficial relationship with its business associates, while contributing to environmental and social causes in which they operated in, and work towards the growth of the country. As a global market leader, it had manufacturing operations in the Netherlands, USA, Malaysia, and Canada and sold to over eighty-five countries worldwide. It had one of the most refined specialty oils and fats technology bases in the industry which dated back to 1890 when the organization started its business in London. Nikolai’s specialty oils and fats business consisted of supplying fractionated oils and blends, specifically formulated as ingredients required by the processed food industry, principally for applications in bakeries, confectioneries, frying, margarine, and infant nutrition sectors. The products were mainly coating fats, filling fats, shortenings, hard stocks, high stability oils, and human milk fat replacer. The acquisition of the facility in Johor, Malaysia, in 2005 was to create Nikolai Asia. In 2015, they inaugurated a new plant in Xiamen, China.

The organization had 1,150 partners who delivered world-class solutions and helped Nikolai create healthy, sustainable, and cost-effective offerings. The notion of ‘Let’s Create Together’ was important in its commitment to innovation. Innovation was not simply a step; it was a journey that both the organization and its partners undertook together. Nikolai focused on continuous learning through training and development of various expertise. Their senior R&D professionals in the region were well-known in the field. They regularly contributed to palm oil related publications and gave lectures in numerous universities and conferences. This knowledgeable support was another benefit of the partnership with Nikolai. Partners were free to brainstorm, develop, and create new applications or improve the existing application with direct technical support and input from its skilled team of scientists and R&D staff. Nikolai Asia in Johor continued to support knowledge-sharing within palm oil industries, such as communicating its yearly observation from surveys to others. In return, they learned valuable information from other partners.

Mr Kay hoped to appease their partners by ensuring the company’s dedicated management team could interact with them in a more responsive, open, and transparent manner. In conjunction with this, Mr Kay’s main concern was to change the employees’ mindset. However, this could not be done without first changing the managers’ thinking and work methodology. They must be aware that the company relied on important values such as commitment, innovation, and excellence in execution. These were their key corporate strengths, and it was imperative to gain support from them. They needed to be aware of what the company stood for and what direction the company was heading towards.

Prior Performance Improvement Initiatives at Nikolai Asia Johor

Nikolai Asia in Johor had about 500 employees; 51 managers, and 150 executives. The HROD had developed various initiatives to develop its people and managers. In 2013, an opinion survey was conducted to gain feedback from its people on how the organization performed on work effectiveness, workplace environment, competencies, personal development, corporate integrity, management, corporate image, and region-specific comment. From the survey, the major issue that needed to be addressed first was personal development. Numerous initiatives had been considered and conducted to motivate and improve its human resources. The organization provided a promising career development path for non-managerial staff to gain promotion into managerial positions after several years of working experience. There were several organizational initiatives taken to support the employees; special consideration was given to employees who wanted to study further. Initiatives like a refinement of compensations and benefit plans helped, they also introduced flexi-time which decreased the workdays to five instead of six. Furthermore, the HROD piloted a movement analysis, which would structure its employees’ career paths and identify emerging talents and successors for key positions. All these initiatives were considered successful when the turnover rate of employees in 2015 decreased to 11% from 22% in 2014 and reached 9% in 2016.

The HROD’s mission for 2018 was to turn Nikolai Asia Johor into a more sustainable organization. It became a great challenge for the HROD to ensure that their managers and executives supported the leadership culture to understand ‘the way things are done around here’ and embrace organizational values. From time to time, the company had developed a series of initiatives. For example, in 2016, the company set a policy that training was compulsory for all management levels to equip them with relevant knowledge and skills. Specific training was identified to ensure their performance was congruent with their core values and competencies criteria, as depicted in Exhibit 1. They were trained in managerial, analytical, and problem-solving. The training process did not start with needs assessment, instead by delivering the training session and evaluating the performance. This was HROD’s strategy to substitute the process so that they would be able to produce more practical results. The HROD had requested assistance from a consultant to assess and analyse the training’s effectiveness and trainability of the participants or managers who attended the training. The in-house training was an ongoing process as trainers were required to assign a specific task, then the result was reviewed. From this review, HROD hoped that they would be able to identify the participants’ needs for improvement by determining how managers could adapt with the knowledge that they had gained from the training.

Something Is Not Right

Even though employees were satisfied with their career growth in this company, the remark below revealed different issues:

Executives and managers observed that they have huge opportunities to get promoted as this company values their experiences and rely more on internal promotion rather than promoting from external sources. Even though employees worked hard to achieve company goals, they worked within a comfortable and contented mode. As they came from non-managerial levels, they were used to being told and instructed rather than coming up with new, innovative ideas and solutions. This is in contradiction to our values of continuous development and innovation.

To create an open culture, employees were encouraged to voice their opinions and channel their feedback through a communicative and interactive platform such as Town Hall meetings held twice a year in Nikolai. Throughout the process, it was observed that non-executive or operation levels were more participative than middle managers in dialogue sessions with top management. The purpose of the meetings was for the Chief Operating Officer (COO) and HROD to communicate the company’s performance or key initiatives and convey organizational updates to everyone. The organization believed that a culture of openness and two-way communication must be institutionalized for employees to engage.

A Way Forward

To maintain a conducive and desirable workplace, Nikolai’s HROD had seriously monitored the ongoing opinion survey. The result in the year 2015 (Exhibit 2) showed some significant changes and responses from middle managers:

The achievement of significant changes on how their managers and executives promote leadership culture were still below the top management’s expectations. The culture must start with how they reflect internally — to understand their purpose, gain clarity about what they and the organization stand for — and identify how to communicate these values to the rest of the organization. Indeed, managers and executives must understand and communicate a clear vision to create an attractive environment for people to share these values. The leadership culture transformation initiative was introduced in 2015 to bring about a sense of belonging, leadership, and responsibility among executive-level employees and above. In conjunction with this, managerial employees were assigned special tasks named the Big 5 Projects, focusing particularly on human resources, sales, operation, productivity, and R&D. A brainstorming session was conducted to understand major challenges and obstacles on every element of the project from middle management. Based on the above practice, they were expected to understand and identify major factors that hindered the organization from moving forward and consequently recommend practical solutions. The platform served as a knowledge-sharing platform between managers and their teams within the company. The top management hoped that middle management could adapt to the new environment through this exercise.

Take Action!

Mr Zul was curious to know why middle managers’ issues were still not resolved regardless of the numerous efforts made by this firm. He agreed with Mr Kay’s observation that most of their managers still thought like those working on the operation levels as they were promoted from that part of the organization. They lacked charisma and the right attributes to be leaders or ‘captains’ who could guide, instruct and direct their team. Mr Zul opined that it was time for Nikolai to stop reacting to the problems at task, and that they should be careful about getting down to a level of detail that did not address the ‘big picture’. After talking to Mr Kay and going through the survey reports, he realized the need to respond to larger and more important issues. Middle managers must be trained so they could react well to business problems and new competition. Mr Zul felt that he needs to get the internal issues resolved before they were ready to face new challenges and opportunities. Since Mr Kay wanted to get some recommendations within the month before the COO’s visit, Mr Zul thought that he should come up with an assessment report on the actual problem that had led to the performance discrepancies among middle manager. Without the gap analysis, he would not be able to recommend any suitable program for them.