Shipyard on the open seas
By the looks of it, the restructuring exercise now being carried out in the management of Malta Shipyards in the context of low productivity was more than overdue. Productivity was identified as one of the two main problems of Malta Drydocks (as the...
By the looks of it, the restructuring exercise now being carried out in the management of Malta Shipyards in the context of low productivity was more than overdue. Productivity was identified as one of the two main problems of Malta Drydocks (as the shipyard was then known) in the Appledore report, which had been commissioned in1996.
Not surprisingly, the evaluation styled the problems at the Drydocks as structural, arising mostly from overmanning at craft and supervisory level and an uneconomical level of productivity, due among other things to too few hours of the working day being worked productively.
Once overmanning was addressed, from the standpoint of the enterprise, through down sizing four years ago, raising productivity was the main target of the yard. The sharp overrun of the loss forecast for last year made it painfully evident that not enough progress was made in that regard. Significantly, the latest initiative to address that persistent weakness seems to have kicked off with the abolition of the post of the production executive.
The expatriate incumbent, who had been engaged on a one-year definite contract, was offered a different post but preferred to leave. Questions have to be asked, as many have been done already, such as by Saviour Rizzo, the acting director of the Centre for Labour Studies at the University of Malta (The Times, June 7). Among his queries were the following: Was an effective strategy drawn up to deploy the right number of employees in the right place at the right time? Have there been any appraisal exercises? Was a genuine attempt made to devise a system of empowering the workers, intended to bring about a shift in the work culture that seems to be so elusive at the yard, and at the same time ensuring equity and fairness?
Additional basic questions have to refer to the management aspect. The Investments Minister and the shipyards' chairman and its CEO have publicly recognised that further downsizing was not the answer. In fact, a reduction in workforce could cause serious problems of deployment of workers.
Once that was known to be the case, the basic question to ask is what has been going on at the supervisory and managerial level over the past three years. The worry results for 2006 were pegged on two clear facts. The enterprise beat its targeted turnover, but registered a massively bigger loss that originally forecast. It would be futile to ask whether management had been forced through competitive pressure to accept orders that implied a low contribution. As a price-taker, the shipyard does not influence the bottom price clients are prepared to pay. It has to fashion its output cost to achieve the best possible margin at the going rate. That cost depends on the cost per unit of labour employed, taking into account efficiency levels as well as payroll costs.
Working within unavoidable supply-price constraints, the manager has to focus on productivity, which depends on the quality of equipment used and the skills and effort of the direct and indirect labour force. The worse-than-expected outturn recorded in 2006 did not arise when the company closed its books at the end of the year.
Monthly management accounts are kept. They exist to show what an enterprise has achieved relative to its budget and previous year's performance, and to help the management predict how the year would end on the basis of a rolling forecast. Doubtlessly the company was doing that all along 2006. One has to ask, therefore, what corrective action was devised and implemented when it started becoming clear that the yards' strict objectives would be missed by much more than a mile. Was it not realised early on that, with the labour force at a numerically economic level, a managerial and supervisory shake-up was called for? With the high-calibre chairman-CEO tandem at the top of the enterprise tree, it is hard to imagine that the signals were not read and noted very early on.
It is all well and good for the Investment Minister to remind all those whose livelihood depends on the shipyard that the government cannot make up the losses incurred beyond the end of 2008, as a result of the strictures of the European Union and aside from the amount of losses that have already been written off.
Painting the reality picture as sharply as could be does help to focus the mind of all of those who are required to look at it. That is part of the solution, but the rest has to come from updated action. There is a three-year-old collective agreement in force which laid out new working time arrangements aimed at cutting overtime cost, reorganisation of work practices to increase productivity and to give financial rewards to encourage flexibility and multi skilling.
So far, no one has stated that there was any shirking from those commitments. If there was not, while emphasizing and embedding the commitment further, the solution to low productivity over the coming 18 months has to be sought elsewhere. The new repositioning exercise is a step in that direction.
Will it be enough? Are other steps required? If so, what are they? Are they being discussed behind closed doors? With whom?
This is the sort of focus that has to be brought on Malta Shipyards. To mire it once again in political argy bargy, whoever contributes to it, will not help the 1,700 families who depend on the enterprise one tiny bit.
As the shipyards' chairman pointed out, the company faces the harsh reality of "competition from meaner and leaner shipyards that are far more competitive and their management is giving better results." He also reminded that the foremen, executives and supervisors are (also?) responsible for productivity, that this had to increase by 10 to 12 per cent annually, but that had not taken place.
The message is simple. It is up to all those involved in the Malta Shipyards' to translate it into meaningful action.
Not surprisingly, the evaluation styled the problems at the Drydocks as structural, arising mostly from overmanning at craft and supervisory level and an uneconomical level of productivity, due among other things to too few hours of the working day being worked productively.
Once overmanning was addressed, from the standpoint of the enterprise, through down sizing four years ago, raising productivity was the main target of the yard. The sharp overrun of the loss forecast for last year made it painfully evident that not enough progress was made in that regard. Significantly, the latest initiative to address that persistent weakness seems to have kicked off with the abolition of the post of the production executive.
The expatriate incumbent, who had been engaged on a one-year definite contract, was offered a different post but preferred to leave. Questions have to be asked, as many have been done already, such as by Saviour Rizzo, the acting director of the Centre for Labour Studies at the University of Malta (The Times, June 7). Among his queries were the following: Was an effective strategy drawn up to deploy the right number of employees in the right place at the right time? Have there been any appraisal exercises? Was a genuine attempt made to devise a system of empowering the workers, intended to bring about a shift in the work culture that seems to be so elusive at the yard, and at the same time ensuring equity and fairness?
Additional basic questions have to refer to the management aspect. The Investments Minister and the shipyards' chairman and its CEO have publicly recognised that further downsizing was not the answer. In fact, a reduction in workforce could cause serious problems of deployment of workers.
Once that was known to be the case, the basic question to ask is what has been going on at the supervisory and managerial level over the past three years. The worry results for 2006 were pegged on two clear facts. The enterprise beat its targeted turnover, but registered a massively bigger loss that originally forecast. It would be futile to ask whether management had been forced through competitive pressure to accept orders that implied a low contribution. As a price-taker, the shipyard does not influence the bottom price clients are prepared to pay. It has to fashion its output cost to achieve the best possible margin at the going rate. That cost depends on the cost per unit of labour employed, taking into account efficiency levels as well as payroll costs.
Working within unavoidable supply-price constraints, the manager has to focus on productivity, which depends on the quality of equipment used and the skills and effort of the direct and indirect labour force. The worse-than-expected outturn recorded in 2006 did not arise when the company closed its books at the end of the year.
Monthly management accounts are kept. They exist to show what an enterprise has achieved relative to its budget and previous year's performance, and to help the management predict how the year would end on the basis of a rolling forecast. Doubtlessly the company was doing that all along 2006. One has to ask, therefore, what corrective action was devised and implemented when it started becoming clear that the yards' strict objectives would be missed by much more than a mile. Was it not realised early on that, with the labour force at a numerically economic level, a managerial and supervisory shake-up was called for? With the high-calibre chairman-CEO tandem at the top of the enterprise tree, it is hard to imagine that the signals were not read and noted very early on.
It is all well and good for the Investment Minister to remind all those whose livelihood depends on the shipyard that the government cannot make up the losses incurred beyond the end of 2008, as a result of the strictures of the European Union and aside from the amount of losses that have already been written off.
Painting the reality picture as sharply as could be does help to focus the mind of all of those who are required to look at it. That is part of the solution, but the rest has to come from updated action. There is a three-year-old collective agreement in force which laid out new working time arrangements aimed at cutting overtime cost, reorganisation of work practices to increase productivity and to give financial rewards to encourage flexibility and multi skilling.
So far, no one has stated that there was any shirking from those commitments. If there was not, while emphasizing and embedding the commitment further, the solution to low productivity over the coming 18 months has to be sought elsewhere. The new repositioning exercise is a step in that direction.
Will it be enough? Are other steps required? If so, what are they? Are they being discussed behind closed doors? With whom?
This is the sort of focus that has to be brought on Malta Shipyards. To mire it once again in political argy bargy, whoever contributes to it, will not help the 1,700 families who depend on the enterprise one tiny bit.
As the shipyards' chairman pointed out, the company faces the harsh reality of "competition from meaner and leaner shipyards that are far more competitive and their management is giving better results." He also reminded that the foremen, executives and supervisors are (also?) responsible for productivity, that this had to increase by 10 to 12 per cent annually, but that had not taken place.
The message is simple. It is up to all those involved in the Malta Shipyards' to translate it into meaningful action.