Christine Machacek, managing director of SBU Holzbau GmbH (SBU), clearly understood

that her company faced a leadership crisis. In a time of adversity within the company,

Machacek overcame her skepticism about management consultants and hired a team to help

her make fundamental changes in how the company was being managed. Machacek noted, I

was incredibly lucky to find consultants who were differentwho thought holistically and

considered the human factor.

The team of consultants that Machacek chose at the end of 2013 wereaccording to their own

definitionspecialized in sensitive change. They first focused on the companys

management team. Above all, they tried to clarify the distribution of roles and the

communication processes between Machacek and SBUs authorized officer, Friedrich Nagel.

Machacek noted that a fish rots from the head downward. If we do not have a values-oriented

understanding of leadership, we will not be successfulregardless of what we do with our

products. She realized that although she had an important decision-making function as a

shareholder, Machacek needed to play this role only three or four times a year. In the meantime,

she could fully focus on her other roles as human resources director, head of marketing,

commercial director, and head of support functions, while Nagel would take the operative lead

of the company and manage both sales and research and development (R&D). As shareholder,

[Machacek] does, of course, have the highest role, said Nagel, but in-betweenin another

rolethe relationship can also be turned upside down.

In a further step, the consulting team helped to establish clear organizational structures and

communication processes for an extended management team of seven people. Responsibilities

and authorities were clearly defined in an organization chart. Most importantly, responsibility

and authority were also transferred from the top management to other people in the

organization. This led to a huge leap forward, said Christian Satzger, SBUs production

manager. Everyone could move about more freely within a certain scopewith a credit of

trust, combined with a reassuring You can do that.

This shift was valid for managers and for all employees in the company. They did not only

have the opportunity but also the clear task to design their own workplaces to a great extent,

explained Satzger. For example, every employee was allowed to arrange his or her own

workstation in a newly built production hall, which resulted in a much higher degree of

efficiency.

With the transfer of responsibility, people in the company also began to show more willingness

to be accountable. For example, when a wall element was finished in the plant, the responsible

employee confirmed with his or her signature, I have produced this wall and everything is in

order. As a consequence, production faults could be reduced to an absolute minimum.

COMMON VALUES

All employees of SBU were invited to a further workshop with the management consultants.

The purpose of this workshop was to develop a set of company values that everyone could

identify with. The consultants started with a catalogue of a few dozen values, but the workshop

participants were also allowed to forward their own suggestions.

In the next step, all employees could allocate a certain number of points to those values that

they most strongly identified with. By a process of eliminating those values with the lowest

scores, everyone agreed on twelve values, one for each month. These values described how

people wanted to interact with each other within the company and how they wanted the

company to interact with its partners, customers, and subcontractors (see Exhibit 1). The inhouse

joinery team spontaneously offered to produce a wooden values tree that presented the

values in an intuitively accessible way.

The management team also recognized that autonomous and self-responsible work would only

be possible if everyonemanagers and employees alikemet each other on an equal footing.

After 15 years of addressing each other very formally with the German pronoun Sie, Machacek

and Nagel tried to change to the informal pronoun du. They also extended the offer to all other

SBU employees during the following Christmas party to be on a first name basis in order to

reduce the hierarchical distance between the management team and the rest of the employees.

Everyone was completely surprised because we originally came from a very stiff corner,

remembered Nagel. Today, however, it is completely normal that every apprentice is using

the informal form of addressing the owner. Machacek was convinced that this move

contributed to a considerable increase of trust within the whole company.

LEADERSHIP QUALITY

The changes in the leadership and organizational culture were soon bearing fruit. Machacek

and Nagel both emphasized their excellent co-operation with each other. The management team

continued to hold workshops that were organized by the consultants twice per year. SBU

production manager Satzger highlighted the very fruitful interplay between a highly gifted

engineer and an extremely empathetic and attentive managing director. He also compared the

SBU team to a big family.

The whole new organization was characterized by a strong team orientation. For example,

every Friday, the production team held a meeting in which all important developments and

problems were discussed, always focused on the question What can we do to improve

together? One item was also regularly on the agenda of these meetings: every week, one team

member would make a statement that was linked to one of SBUs core values. For example,

to remind the whole team of the value of gratitude, one team member would say thank you

to a colleague for a particular thing that the colleague had done.

The management team also considered a positive feedback culture as critical for the company.

It is all about praise and encouragement rather than yelling at others, explained one member

of the senior management team. Whenever there is any issue, it is openly discussed. Openness

and respect are important values for us, and we also bring these values to life. Employees

were also openly informed about the organizations goals, as Machacek pointed out: Friedrich

Nagel and I noticed that when we are transparent as leaders, when we tell them what is on our

mind and explain what we want to achieve, we get commitment in return.

FOCUS ON QUALITATIVE GROWTH

In addition to changing the leadership culture, SBUs top management team came to an

agreement on the strategic direction that they wanted the company to follow. For me, growth

was always quantitative growth, said Machacek. And this is where Ias someone who shuns

riskswas always quite cautious, very much unlike Friedrich Nagel. But at one point in time,

we both began to understand that we could also grow qualitatively. And it was really interesting

to see that qualitative growth automatically triggered quantitative growth.

The high-quality standards that the company and its management set for themselves were also

added as a tag line to the new company logo: SBUConstruction systems in perfection.

That did not only mean that SBU was trying to offer solutions for the customers construction

tasks at the highest possible level of quality; it also meant that SBU would adhere to schedules

and agreed budgets. SBUs management team was also strongly focused on developing and

maintaining trusting and fair relationships with customers, suppliers, subcontractors, and

employees.

We offer premium construction services in an interplay of construction management,

engineering, and craftsmanship, said Nagel. We do not want to become the largest player

there are others who can do thisbut we always want to secure the best projects in a certain

market segment. Machacek added, We never make any promises that we cannot hold. In

the rare case that something went wrong, SBUs management would make sure that the

problem was immediately resolved to the entire satisfaction of the customer.

The management team also saw well-functioning communication structures as a major

precondition for reaching its high-quality standards. For example, every fortnight, project

teams conducted meetings in which the current project status was discussed. The team

members distributed tasks among themselves, considered possible risks, analyzed the quality

of co-operation with subcontractors, and tried to find potential for improvement. The plan for

the following two weeks was also agreed upon in these meetings. The division of workfor

example, who would be responsible for which assembling taskswas autonomously decided

by the team, without any need to include senior managers in the decision-making process (as

had been the norm before the organizational changes).

QUALITY OF WORK

The level of perfection that SBU was striving for could only be reached with an exceptionally

high quality of work from the employees. SBUs management team was convinced that highquality

work began in the recruitment and selection process. Employees were not selected

solely based on their qualifications. It was at least of equal importance that their values matched

the company values. Unlike before, job interviews were no longer conducted only by members

of the top management team. Before anyone received a binding job offer at SBU, the

candidate was also interviewed by the members of the team that the new recruit would later be

part of. The teams recommendation would then be considered in the final decision-making

process.

To do outstanding work, you also need the right tools of the tradeand enough time,

Machacek said. That means that you cannot put too much pressure on people to do everything

in a minimum amount of time. She was convinced that when people have more time, they

will also deliver higher quality. Machacek also tried to reduce overtime to an absolute

minimum and did not want her employees to work 45 or 50 hours instead of the normal working

time of 40 hours per week.

There were approximately 15 different working hour schedules at SBU. Each schedule was

tailored to the needs of the individual employee. Even some members of the management team

worked part-time. From 2015 on, the company organized yearly employee surveys. The results

of these surveys were analyzed in workshops (together with the team of consultants who also

accompanied the organizational changes) with the aim of deriving improvement activities. The

company also started to offer a new bonus scheme in which all team members would get a

bonus based on the performance of the company as a whole (i.e., on the joint

performance of the whole team).

Every Friday, the company offered free pretzels for all employees, and when Machacek spent

some time in South Tyrol, she brought apples for everyone. During summer, the company

organized a barbecue for the employees, and in fall, a Bavarian beer festival. In a jointly

organized fundraising campaign, SBU employees helped the victims of a flood disaster.

Whenever the employees needed support with anything (for example, additional training), they

also knew that they could always directly approach the top management team.

RESULTS OF THE ORGANIZATIONAL CHANGE AND THE FOCUS ON

QUALITATIVE GROWTH

The organizational changes and the clear focus on qualitative growth soon led to tangible

results. The companys turnover doubled within three years from 7.5 million in 2013 to 14.9

million in 2016. At the same time, there was a fivefold increase in return of sales, while the

number of employees remained at the same level of around 40 people. At the same time, the

company was able to operate completely without debt financing.

The effective coordination and co-operation between the different departments and employees

enabled SBU to offer almost unrivalled short construction times. For example, SBU was

able to complete a new turnkey seminar building for a Bavarian university in a record

construction time of only 10 weeks. SBU had become well known as a reliable partner that

always adhered to schedules, which also contributed to the companys ability to prevail against

much larger competitors. The organizational changes also enabled the company to enter new

markets. Prior to 2013, most projects had a size of between 0.5 and 1 million.

Four years later, SBU worked on several projects in the range of 3 to 4 million.

The company continued to innovate and develop new product offers. Because the public sector

remained SBUs only customer segment, the company tried to enhance its offerings with new

types of construction systems. SBU also entered the mobile hybrid construction segment with

what it called a new chessboard modular construction system. This new system facilitated

the construction and later removal of temporary buildings. The company filed a patent in

connection with that system.

SBUs quality development was also externally recognized. In 2018, the company received

an award as one of the best employers of Bavaria. In 2017, it was selected as a finalist for the

Grand Prix of the Mittelstand, one of the most renowned business awards in Germany. The

new organizational structure with clearly assigned responsibilities and the changed

organizational culture even convinced some of the employees who had quit their jobs in the

period of crisis in 2012 and 2013 to return to SBU.

Finally, Machacek was convinced that she was taking the right path:

For a long time, I used to feel very lonely as a manager. Today, I actually have a lot of

colleagues. I learned that I can delegate responsibilityand that others are also willing

to take the responsibility if I really share it. And that definitely also enhances the quality

that we are able to offer to our customers

1. In which market does SABU operate, and what are the main factors that can have an influence on whether a company succeeds or fails in this market?

2. What are SABU competitive advantages and disadvantages?

3. What requirements does the management and leadership system of the company need to meet in order to enable SABU to fully harness its competitive strengths?

4. According to the case, what are the main reasons that led to the crisis situation that the company was facing?