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© Malcolm Brady, 2006
Strategic analysis of a public sector organisational unit: the
case study revisited
Malcolm Brady
Dublin City University Business School
OR49 University of Edinburgh,
3rd -5th September 2007
© Malcolm Brady, 2006
Yard
• Premises with large surface area• Hard standing for vehicles
• Indoor and outdoor materials store
• Maintenance and repair workshop
• 34 permanent staff• Fitters/ mechanics
• Vehicle drivers
• General operatives
• Supervisory and administrative
• Process analysis
© Malcolm Brady, 2006
Yard Processes
• Road maintenance• Surface dressing• Winter gritting• Pothole repair• Chippings transport
• Facility maintenance• Water/ Waste water works/ Hand pumps
• Stores• Fuel/ Safety equipment/ signage
• Miscellaneous• All-year hire out of vehicle and driver• Winter hire out of trucks
© Malcolm Brady, 2006
Motivation
• Imminent move to new premises– Large capital cost
• Work practice agreements– Led to high labour costs– Inflation linked– Regular rostered overtime
• What to do with the Yard?
© Malcolm Brady, 2006
Method
• Issues are strategic and operational• Multimethodology
– Strategic analysis techniques• 5 force analysis
– Operational analysis• SSM/ CATWOE
• Approach– Direct observation– Interview– Study of documentation
© Malcolm Brady, 2006
Surface Dressing: Five force analysis
• Buyers – Area Engineers
• Satisfied with product quality but not with price• Are price takers - cannot negotiate price• Can be mandated to use Yard service
– Traditionally have low power, but increasing
• Suppliers• Bitumen (3 no.): capable of forward integration, but reluctant• Stone• Labour: strong active union
– Traditionally have high power over incumbents but decreasing
© Malcolm Brady, 2006
Surface Dressing: Five force analysis
• Incumbents • Monopoly• rivalry non existent
• Substitutes• Asphalt is a much more expensive alternative
» 10 times price but lasts 6 times longer
• Bitumen macadam is an alternative for road restructuring
» Area engineers are moving to this alternative
• Low threat in the short term
© Malcolm Brady, 2006
Surface Dressing: Five force analysis
• New entrants • Neighbouring LAs• Road contractors• Construction industry is booming: plenty of work• Work is seasonal• Significant capital investment required
– fleet of 10-20t trucks/ hard standing – bitumen sprayer and chipping spreader– Rubber tyred rollers – articulated tractor and tanker trailer– Pickups for traffic control
• Low threat
© Malcolm Brady, 2006
Surface Dressing: Five force analysis
• Should be an attractive industry for the incumbents, but is not
• Suppliers hold the power• Labour have appropriated the profits of the industry
• Bitumen suppliers generally assumed to be making good profits
• Incumbent traditionally has not bargained hard with suppliers
© Malcolm Brady, 2006
Surface dressing: CATWOE
• Customer (victim or beneficiary)• Public, road users (who use roads)• Area Engineers (who are responsible for roads and whose
budget pays for work)
• Actors • Machinery Yard Engineer and Supervisor• Surface dressing train: Drivers and machine operators (Yard
employees)• Traffic control (Yard employees and LA Area office
employees)• QA technician (quality check on bitumen binder and
chippings)
© Malcolm Brady, 2006
Suface dressing: CATWOE
• Transformation• Roads within LA area -> skid resistant roads• Poorly surfaced road -> a newly surfaced dressed road• Work at ordinary rates -> work at overtime rates
• Weltanschauung• Director: to ensure that road surfaces are adequate for the
volume of traffic using the road• Engineer: to ensure that surface dressing is carried out
efficiently and effectively• Others: to ensure that opportunitiy to earn substantial overtime
payment continues
© Malcolm Brady, 2006
Surface dressing: CATWOE
• Owner• Director of services (formerly County Engineer) (who can
choose to invest in or close down the unit)
• Environmental Constraints• Weather: work cannot take place during cold months (ie. from
October to April)
• Money: LA is seriously running over its annual budget
• Resources: LA is not investing in Machinery Yard vehicles or equipment and not replacing staff as they retire
© Malcolm Brady, 2006
Issues
• Employee rather than activity focused
• Little synergy between activities
• Culture of overtime
• High labour cost
• Charging based on inputs • No incentive for efficiency
• Poor timesheet control
© Malcolm Brady, 2006
Choices
• Close down
• Expand• Diversify -> macadam/ asphalt
• Expand -> other LAs
© Malcolm Brady, 2006
Recommendations
• Separate out activities• Increase control over jobs and timesheets• Negotiate an end to regular rostered overtime and other
allowances • Build travel, gate opening etc. into day’s work
• Close down stores• Transfer staff to strategic purchasing/ procurement
• Decentralise pothole patching to areas• Centralise water/wastewater facility maintenance• Centralise winter gritting budget
– Consider contracting out winter gritting
© Malcolm Brady, 2006
Recommendations: surface dressing
• Continue surface dressing • team is technically competent and efficient• but cost base must be reduced
• Charge based on work done, not inputs• Є/m2 according to dressing type and length of road
• Increase role for line manager (Yard Engineer)
• Authorise overtime• sign off timesheets
© Malcolm Brady, 2006
• Make Yard Engineer repsonsible for chipping dumps• Reinvest profits in new equipment
• Replace 10t with 20t trucks
• Consider contracting out some surface dressing work• To increase competition
• Safety recommendations• Accounting recommendations
• Full allocation of overhead• Report by job: cost/ revenue/ profit
• Rename the unit to Road Maintenance Service
© Malcolm Brady, 2006
Five force and CATWOE
• Complementary techniques
• Strategic and operational views of a situation
• Process decomposition– reduces complexity of overall situation
© Malcolm Brady, 2006
What happened since?• Detailed analysis of practices and costs carried out
– In 2005 basic pay made up only 40% of wage cost• Allowances total €0.6m
• Additional allowances uncovered
• Overhead burden to administer the allowances
– Yard breaking even• Making losses if depreciation taken into account
• No plant replaced in past 4 years
• ‘profits generated are shared between those working in the yard’
• Discussion with government department
© Malcolm Brady, 2006
Management decision to close the Yard
– Outsource the surface dressing operation– Gritting not sufficient to justify fleet of trucks– Shut down the stores– Centralise the water and wastewater maintenance– Decentralised pot-hole machines to areas
• Partnership discussions with unions– Other organisational units also being reviewed– Costs and practices no longer viable
• Cessastion of allowances/ compensation• redeployment
• Bluffing?
© Malcolm Brady, 2006
In practice
• Still operating from current premises – Owner requires MCC to vacate premises– Health and Safety improvement notice served Aug 06– Estimated cost of setting up new premises is €6m
• Work carries on as before– Surface dressing/ winter gritting– Still operating as a hire-out business
• Stores still open but little activity• Management paying attention to control systems• Unworked overtime practice found elsewhere
© Malcolm Brady, 2006
Issues
• Surface dressing– Core competency will be lost
• However demand steadily declining
– Possible holdup by outsourcees– Health and safety issue with surface dressing
• Clause 804 type roads less acceptable• SD on dense bitumen macadam to be carried out by contractor• Supervisory practices to be changed
• Must prevent unworked overtime practices migrating to other organisational units
• Individual accountability