CASE 227

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The following case describes an unusual organizational arrangement for an actual manufacturing firm. The company is
largely run by the employees through teams. When projects are instituted, it is common to pass the idea through the relevant
teams first, before any changes are made. However, not everything can be passed through all the teams that may be involved
in the change, and this can be a source of trouble.

C A S E
OILWELL CABLE COMPANY, INC.
Jack R. Meredith

As Norm St. Laurent, operations manager for Oilwell
Cable Company, pulled his Bronco 4x4 onto Kansas
Interstate 70, he heard on the CB about the traffic jam
ahead of him due to icy road conditions. Although the
traffic was moving some, Norm decided to get off at
the eastern offramp for Lawrence, rather than the more
direct western offramp, to save time. While waiting for
the offramp to come up, Norms mind drifted back to
his discussion with Bill Russell, the general manager,
on the previous day. Norm had been contemplating add-
ing microprocessors to their rubber mixing equipment in
order to save manual adjustments on these machines. This
would improve throughput and reduce costs simultane-
ously, though without displacing any employees. Based
on the data Norm had seen, it appeared that the micro-
processors could cut the production time by 1 percent and
reduce scrap from the current rate of 1 percent down to
one-half of 1 percent.
However, it seemed that this might be an issue that
should first be submitted to the production team in charge
of rubber mixing for their thoughts on the idea. Once
before, an even simpler change had been made without
their knowledge and it wound up causing considerable
trouble.
As the traffic wound around two cars in the ditch by the
highway, Norm reflected on how difficult it was to make
changes at this plant with their team management process,
though there were advantages too. It probably stemmed
from the way the company was originally set up.
History of Oilwell Cable Company (OCC)
Originally known as the Chord Cable Company and located
in New Jersey, the firm had been experiencing severe man-
agement difficulties. When acquired by new management
in 1983, they renamed it Oilwell Cable Company and
relocated in Lawrence, Kansas to be closer to their primary
customers in northeastern Oklahoma. Their product line
consisted primarily of flat and round wire and cables for
submersible pumps in oil wells.
The manager chosen to head up the new enterprise, Gino
Strappoli, gave considerable thought to the organization of
the firm. Gino envisioned a company where everyone took
some responsibility for their own management and the suc-
cess of the business. Gino preferred this approach not only
for personal reasons but because cable manufacturing is a
continuous process rather than a job shop-type of activity.
The dedicated allegiance of the relatively few employees
in a process firm is crucial to staying competitive. In such
industries, direct labor commonly constitutes only 5 percent
of the cost of the product, with indirect labor being another
5 percent. By contrast, in a job shop the wages paid for labor
are a major determinant to being cost-competitive, often run-
ning 30 percent of product cost, thus introducing a potential

81721_Ch05.indd 227 9/16/08 12:52:06 AM

 228 CHAPTER 5 / THE PROJECT IN THE ORGANIZATIONAL STRUCTURE
conflict between labor and management. Gino reasoned that
if he could obtain the employees commitment to improv-
ing productivity, reducing scrap, being innovative with new
technologies, and staying competitive in general, he would
have a very viable firm.
With the approval of the new owners, Gino initiated his
plan. Of the original labor force, only a few moved to Kan-
sas, including Gino and the firms controller, Bill Safford.
All new equipment was purchased for the firm, and a local
labor force was selectively recruited. As the firm was orga-
nized, the team management process was developed. Eleven
teams were formed, six of which constituted the production
area. The remainder included the management team; the
resource team (support functions such as computing ser-
vices, accounting, etc.); the technical team (including the
lab employees, R & D, and so on); the administrative team
(office and clerical); and the maintenance team.
These teams basically set their own work schedules,
vacation schedules, and job functions. They addressed com-
mon problems in their work area and interfaced with other
teams when needed to solve problems or improve processes.
With Ginos enthusiastic encouragement, the team approach
grew and took on more responsibility such as handling
grievances and reprimanding team members when needed.
In January 1985 the firm became profitable and later
that year came fully on-stream. Gino soon thereafter left for
another position, and the operations manager, Bill Russell, was
selected to succeed him. At this point, Norm was brought
in to replace Bill as operations manager. Norm had years of
experience in manufacturing and was a degreed mechanical
engineer. (See Exhibit 1 for the organization structure.)
As Norm recalled, from 1985 to 1989 the firm rapidly
increased productivity, improving profits significantly in the
process and increasing in size to 140 employees. In so doing,
they became the low-cost leader in the industry and gained a
majority of the market share. This resulted in a virtual four-
fold increase in sales since the days of Chord Cable Co. They
were now approaching almost $25 million in annual sales.
In 1989, however, the recession hit the oilwell industry.
Added to this was the slowdown in energy consumption,
effective conservation, and the oil glut. For almost a year
the company bided time and idle employees were paid for
General manager
Bill Russell
Controller Operations manager
Bill Safford Norm St. Laurent
Accounting Purchasing Production Maintenance
Exhibit 1 Organization Chart: Oilwell Cable Division
81721_Ch05.indd 228
minimal production. Management felt a commitment to the
employees to avoid a cutback, more so than in a normally
organized firm. But finally, in 1990, top management told
the teams that they would have to choose a method for
handling this problem. Alternatives were shortened work-
weeks, layoffs, and other such measures. The teams chose
layoffs. Next, management drew up a list of names of rec-
ommended layoff personnel representing a vertical slice
through the organizationa top management employee,
some professional and technical people, and a number of
production employees. These lists were given to the teams
who then decided what names to change and what names
to keep. Management largely went along with the teams
recommendations, and the layoffs (about 20) took place.
With a slimmer work force, the division increased
their productivity even more significantly (see Exhibit 2),
allowing them to cut their product prices from between 10
and 20 percent. As the country climbed out of the stagnant
economy in 1991, the division was excellently poised to
capitalize on the increased economic activity, although oil
itself was still largely in the doldrums. Increased demand
in mid-1991 forced the division to use overtime, and then
temporary help. They didnt want to get back in the same
workforce predicament they were in earlier.
The Team Management Process
The 1990 layoff was a traumatic situation for the teams and
the team process. Following that episode, the employees
were unsure whether the team management process might
require too much responsibility on their part. They had
faced reprimanding employees in the past, and had even
asked one employee to leave who tried to deceive them. In
general, they were very receptive to employees individual
problems and had helped their colleagues through tough
times on many occasions, but now they were unsure.
Team size varied from a low of 3 to a high of 17. The
advantages of the team process to the firm seemed significant,
in the minds of the team members and area managers. One
member of the maintenance team noted that the team process
gave much more responsibility to the employee and allowed
the firm to obtain the maximum talent from each person.
Human resource manager R&D manager
Sheree Demming Burt MacKenzie
Human resources Lab Quality assurance
9/16/08 12:52:06 AM

400
300
Productivity index
200
100
0
1986 1987 1988 1989 1990
Year
The firm, in response, spends $1,000 per person per year on
upgrading the skills of the employees in such areas as team
effectiveness training, technical skill acquisition, communi-
cation skills, and general skill building. Bill Russell sees the
major benefit of the team process as its production flexibility.
Employees are also very receptive to change. Since the 1990
layoffs, the employees have become much more sensitive to
outside threats to their jobs. This spurred quality and produc-
tivity gains of over 30 percent in 1991.
The primary benefit of the team process to the employ-
ees is having a say in their own work schedule. A typical
secondary benefit was the elimination of penalties for mak-
ing an error. The employees feel that this is an excellent
place to work; absenteeism is only 0.7 percent, and only
two people have left voluntarily since 1988.
Overall, the employees seemed to feel that this process
worked well but wasnt utopian. It doesnt give away the
store, one employee commented. Two disadvantages of
the process, according to the employees, were the time and
energy it required on their part to make decisions. As an
example, they noted that it required three full days for the
teams to come up with the revised layoff lists. Normally
the teams met once a week for an hour and a half.
But when the teams made a decision, the implemen-
tation of the decision was virtually immediate, which
was a big advantage over most management decisions.
Although this process required more time on the part of
the employees, the total amount of time from idea to full
implementation was probably less than that in a traditional
organization, and it was clearly more successful. When
asked if he would ever be willing to work in a regular work
environment again, one team member voiced the opinion
that this process while very good, really wasnt that much
different from a well-run, open, traditional organization.
Teams realized that not every decision was put through
them. They felt that this was appropriate, however. They also
recognized the difficulty facing management when trying to
81721_Ch05.indd 229
CASE 229
1991
Exhibit 2 Productivity History
decide whether something should come through the teams
or if it was unnecessary to consult them. Though the teams
met on company time, they were not eager to spend more
time on team meetings. Especially after the layoff crisis, the
teams realized that self-management was a two-way street
and frequently hoped that upper management would make
the tough decisions for them.
In summary, the teams felt that the process was based
on trust, in both directions, and was working pretty well.
The Cable Production Process
As Norm pulled his truck into the OCC parking lot, he
noticed that there were quite a few empty spaces. This
1992 winter had been more severe than most people had
expected, based on the November and December weather.
The snow was almost over Norms boots as he slogged his
way to the buildings. Upstairs in his small, jumbled office,
Norm pulled out the microprocessor file from his desk
drawer and sat down to review the production process.
Their primary raw materials, which made up about 60
percent of the products cost, included copper rods, lead,
polypropylene, nylon, and rubber. Inspection consisted
of submerging the cable in water and charging it with
30,000 volts. To date, none of their products had ever been
returned. However, just in case they were ever queried
about a cable they had produced, they kept samples of all
their cables for five years back.
The firm considered itself very vulnerable to new tech-
nology, and hence kept an active R & D lab in continuous
operation. Simple advances in process technology or insu-
lation and jacketing materials could wipe out their market
overnight, so they didnt want to be caught napping. Other
methods of oil extraction were also a constant threat. Since
they competed in a world market, they were highly exposed
to foreign competition, and the location of their competi-
tors was often a major factor in sales.
9/16/08 12:52:07 AM
 230 CHAPTER 5 / THE PROJECT IN THE ORGANIZATIONAL STRUCTURE

QUESTIONS

1. If Norm chooses to go ahead with the microprocessor
conversion on the machinery without passing it by the
team, what are the potential conflicts that might arise?
What are the advantages of such a move?
2. If Norm decides to put the decision to the appropriate
production team, what are the potential problems? What
would be the advantages?
3. If the production team chooses to approve and imple-
ment this microprocessor conversion project, what form
of project organization will this represent?
4. Given the size of this organization and the number of
projects they deal with, would it make sense to institute
a Project Management Office? Is there another arrange-
ment that might be a good alternative?
5. How much impact might microprocessors have on pro-
duction costs? Assume that variable overhead represents
the same percentage of costs as fixed overhead. Find the
net present value if the microprocessors cost $25,000
and their installation runs another $5,000. Assume a
10% margin.
6. Compare Norms recollection of the divisions produc-
tivity gains between 1985 and 1989 to Exhibit 2. Explain
the inconsistency.
7. What would you recommend that Norm do?

The following reading discusses a new phenomenon in the increasingly global competitive environmentgeographically
dispersed project teams. The competitiveness of global firms is often facilitated by new electronic technologies, and these
technologies are also useful to the success of globally dispersed project teams, as described in the article. However, other
aspects of such dispersed teams are more problematic, and the article illustrates these, as well as approaches used by proj-
ect managers for circumventing them. Finally, some of the advice given in the article should be useful as well for project
teams that arent geographically dispersed.

D I R E C T E D R E A D I N G
THE VIRTUAL PROJECT: MANAGING
TOMORROWS TEAM TODAY*
J. R. Adams and L. L. Adams

Extraordinary demands are placed on project personnel
demands that require extraordinary commitments in order
to accomplish the task at hand. Generating this commit-
ment through the process of team building is a primary
responsibility of any project manager. The processes of team
building have been studied extensively by both academics
and practitioners for decades, but until recently nearly all of
these studies were conducted within the bureaucratic setting:
that is, the team members shared a common workplace, saw
each other frequently, knew each other well, and expected to
continue working together for an extended period of time.
The team building concepts developed within such an envi-
ronment naturally reflect these working conditions as either
stated or implied assumptions, and the concepts derived from
*Reprinted from PM Network, Project Management Institute, Inc.,
January 1997, Vol. 11, Number 1. 1997, Project Management Institute
Inc. All rights reserved.
these studies can be assumed to hold only as long as these
assumptions hold.
These concepts still hold for projects intended to sup-
port and improve bureaucratic organizations. In the vast
majority of cases, however, the working conditions expe-
rienced by modern projects differ greatly from those sur-
rounding traditional bureaucratic work. Nevertheless, the
basic definitions of team building continue to emphasize
the assumption of typical bureaucratic working conditions.
For example, one leading textbook in the field (Kast and
Rosenzweigs Organization and Management: A Systems
and Contingency Approach, McGraw-Hill, 1985) states
that actual teamwork involves small groups of three to
fifteen people that meet face-to-face to carry out their as-
signments. Even in PMIs current PMBOKGuide (pp.
99100), one of the five basic tools and techniques of
team development is called collocation, which involves
. . . placing all, or almost all, of the most active project
team members in the same physical location to enhance

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