In 1997, Modern Terminals Limited, located in Hong Kong, China, and industry leader for a quarter of a century in container production, hit a rapid downward spiral in an attempt to respond to changing market forces. The company moved to alleviate their problems through layoffs. While their measure was necessary at the time, there were serious consequences to its proud culture. However, by 2001 Modern Terminals had made a turnaround that was as dramatic as their initial downfall.
Starting in 2001 employee efficiency skyrocketed, operating costs were under control, business volume doubled, profit increased by nearly 50% and, again, Modern Terminals dominated China’s container industry. Modern Terminals attributed its success to a will to better itself and a constructive cultural shift with help from The Pacific Institute.
“It was a huge effort,” stated John Lee, Modern Terminal’s Director of Operations and form Chief Nuclear Officer for Millstone Nuclear Station (a successful client of The Pacific Institute) “Has it been worth it? Yes. The numbers speak for themselves.”
In late 1997, left unprepared for industrial changes from a financial crisis and increasing competition, Modern Terminals forcibly restructured without considering its internal culture. Management was cut by 30 percent and staff by 21 percent – 400 out of nearly 1800 employees. The restructuring produced confusion, leaving remaining employees with a lack of guidance and the company losing productivity with disconnected workers. Modern Terminals’ competition continued to grow while employees reported a loss of trust as the company’s market power diminished.
“In the spring of 2000, business conditions took a downward turn,” Lee said. “Internally, we observed increased nervousness among the staff [about] their future in the organization…Poor business conditions of the past three years seemed to have had an adverse effect on trust within the organization.”
According to Modern Terminals management, the company would not survive with its current culture. “We decided to turn our attention to cultural change within the organization,” Lee said. “Consequently, our first objective was to develop and implement a cultural change program.” Starting on their road to recovery, Modern Terminals was attracted to The Pacific Institute’s approach to confronting individual and leadership effectiveness.