Jingshan Machinery Works: Struggling for efficiency and fairness in a state-owned enterprise in China

One of the most pressing issues facing China today, particularly given the imminent accession of the People’s Republic to the World Trade Organization (WTO), is the question of what to do with the State Owned Enterprises (SOEs), who historically have not performed as economic actors, and who appear totally unprepared in the face of foreign competitors in the domestic Chinese market. This case looks at the dilemma of reform from the intensely personal view of a manager of an SOE. The JingShan Machinery Works is a prominent Chinese SOE, which needs to reform itself if it is to compete in the new, open, Chinese domestic market. This means, among other things: streamlining processes; reducing labor; redesigning the organization; and introducing accountability, transparency, and a service culture. Manager Wang Hongguo has spent his life at JingShan, but he knows that the requirements of instilling such competitive vitality in the enterprise will lead to great trauma within the social community that JingShan represents. The case focuses on the redesign of the Purchasing Department at JingShan, where Manager Wang needs to consider a variety of options, ranging from spinning the activity (and the people off), to redefining the authority and autonomy of the activity while remaining within JingShan. At the same time, there are a clear set of values held by prominent stakeholders that need to be balanced and traded-off against each other. In the background, invisible but still powerful, are the emotions of a manager who has spent his life in an organization playing by one set of rules, and who now finds himself, at the end of his career, having to make significantly disruptive decisions to address an entirely new set of rules.