Case Study

Argamassa Construction Materials

1. Table of Contents

1. CURRENT SITUATION..................................................................................................................3
1.1 Argamassa and Leandro Giuntini................................................................................................3
1.2 Leandro Giuntini and Eduardo Santiago...................................................................................3
2. IDENTIFYING The PROBLEMS..................................................................................................4
2.1 Increase in costs................................................................................................................................4
2.2 Cutting down employee benefits...................................................................................................4
2.3 Lack of trust......................................................................................................................................4
2.4 Loosing good relationship...............................................................................................................4
3. POSSIBLE ALTERNATIVES........................................................................................................5
3.1 Reduction in Overtime Hours........................................................................................................5
3.3 Competitive Pricing.........................................................................................................................6
4. RESOLVING THE ISSUES.............................................................................................................6
5. RECOMMENDATION.....................................................................................................................7
6. REFERENCES...................................................................................................................................8
1. CURRENT SITUATION
1.1 Argamassa and Leandro Giuntini

After learning the cement mortar business from his father’s company, Leandro Giuntini and his

brother Flavio founded Argamassa in 2003. With the help of their father, who provided the

connections of the industry. By having Flavio focused on sales, Leandro Giuntini focused on

manufacturing operations and new product formulas. It guaranteed a on time delivery with great

quality. By 2010, Argamassa owned 3 manufacturing plants and employed over 90 people. All

other companies at that time never treated their employees well but Giuntini was not like that, he

helped his employees in building homes and used to lent money for their purchases. Their Sales

increased by 86% in 2005 and another 48% in 2006. Giuntini celebrated the company’s

anniversaries and Christmases by giving gifts and bonus to their employees which gained a good

relationship and trust between the employees and the management.

1.2 Leandro Giuntini and Eduardo Santiago

Eduardo Santiago is an old friend of Giuntini who had done finance at the University of

Pernambuco and looking to work in business administration which was his dream. When he first

joined Argamassa his duty was to solve the rampant disorganization and inefficiency. At that

time Production was using 55% of its capacity, whereas employees were working overtime.

Costs were increased which decreased the profits, but Santiago managed the situation by

appointing a new competent manager and monitoring the key performance indicators he reduced

the material wastage. By the end of 2008, there was no overtime pay which balanced the

situation of loss and profit. Then to increase the profit Giuntini surged the prices without
informing Santiago at the time whereas two new entrants joined the market with reduced prices

which diminished the sales by 10% and stopped all employees’ additional benefits.

2. IDENTIFYING The PROBLEMS

2.1 Increase in costs

Variable costs increased by 15% and fixed costs by 10% in 2007, which resulted 81% drop in the

company profits. So, to rise the profits Leandro Giuntini soared the price of the products without

consulting Santiago when there are two new companies started business by providing the same

products with low prices. Thereby the sales of Argamassa dropped by 10%

2.2 Cutting down employee benefits

Since the sales are dropped by the increase in the price of the products. Leandro Giuntini reduced

the employee benefits to just above the minimum required by law without consulting Santiago.

He also stopped paying for lunches or groceries of the employees, which played a large part of

the reason why some employees came to work with Argamassa than from working in other

companies.

2.3 Lack of trust

Even after the reduction in the employee benefits, employees agreed with Giuntini because

Santiago promised them that they will again give their benefits when profits did. So, they trusted

Leandro Giuntini as he was the person who helped the workers a lot. But Giuntini broke their

trust on him when the profits started by cost reduction, he invested the money on buying new

trucks rather than reinstating the employee’s benefits.

Since there is no change in benefits even after seeing the profits, there started a toxic relationship

between the labour and the management. Sales representatives who normally pushed Argamassa

products started dedicating more time to other companies’ products which dropped the growth in

sales and even employees started being less productive to stay longer than the expected time and

receive overtime pay as compensation for their benefits.

3. POSSIBLE ALTERNATIVES

3.1 Reduction in Overtime Hours

Though the factory was running on half of its capacity, the employee continued to work

overtime. This led to more burden on the company which incurred more loss. Therefore, it was

necessary for the administration to decrease the expenditure. For example, without raising any

worries about the future of the organization, the organization should disclose the situation to the

workers, or split the overtime into different groups that can contribute to expenditure control,

without impacting the productivity.

Result:

Decreasing the expenditure will consequently stabilize the situation. The organisation should

have applied the rule to prevent such an issue, as there is a basic financial concept requiring the

sales to balance the expenditures.

3.2 Finding more Revenue Sources

concepts. For example, leveraging the capital available for manufacturing, providing consumers

more facilities, or seeking alternative means of funding for a brand-new investment.

Result:

When a business has different variety of resources and assets available, it will have the ability to

generate more sales resulting in more profits.

3.3 Competitive Pricing

Any company's management must consider conducting a market analysis. A cheaper price does

not necessarily mean the quality of the commodity is inferior. In comparison, the higher price

applies to the higher quality for certain clients. Thus, price is also a key factor in improving

sales.

Result:

The organisation will be able to make the most of its profits and keep the sales as high as

possible by researching the market and the pricing policy.

4. RESOLVING THE ISSUES

First, we discussed the decision of Giuntini to invest in trucks and manufacturing instead of

returning workers' former benefits as company turned to profitability. The bond between labour

and management was impaired by this promise infringement. This argument drew our attention

to the importance of employee trust in management. Trust in organization influence organization

process and performance, such as rate of revenue, net income and retention of the employees. As

we learnt trust towards management are based on 3 categories: ability, goodwill and honesty.

Clearly, Giuntini did good on the first two factors. His dedication and willingness to perform
several tasks at the same time reflected the trust of employees in his leadership expertise and

abilities. In addition, at the start, the compensation and respectful treatment of the employees

reflected his caring nature, consideration for their needs, and made them feel that the

management will help them in any difficulties. The breach of promise has had a significant effect

on management and workplace attitudes. Present employees have become less active and poor

habits have been followed by new hires. In order to preserve employee trust in the company,

Giuntini can promptly enforce the benefits restore procedures.

The current situation at Argamassa has also raised us questions regarding internal

communication and leadership. As Giuntini emphasises on productions and manufacturing

process, he spends more time to deal the relationship with workers and front-line staff. Also due

to his competitive management style and good employee benefits, the employees were firmly

committed to the company. They were ready to accept the cuts and get along with him through

the difficulties. This created undoubted leadership among the employees. Eduardo Santiago then

discovered two possible complications from the cutback judgement of Giuntini. First, after

Giuntini wanted to cut costs by abandoning the different perks for employees, he avoided

working with Eduardo Santiago, who played a major role in the problem-solving process in

2007. This resulted in discontinued function of Santiago’s role. Furthermore, it confused the

leadership recognition towards workers which passively affects the productivity of the workers

and the quality of management. As we learned in this course we would apply “rational decision-

making process” to the Argamassa’s case. When an issue is identified, we should start to collect

relevant information. This information gathering process requires a open communication

channel. A number of parties that share the interest of the company should be considered by the

decision maker. In this situation, before deciding to increase the costs, Giuntini should consult
with the consumers, estimate the potential competitors and determine the implications. On the

other side, he should devote more time getting input from front line staff, consulting

management peers, and encouraging subordinates to plan consequential impacts before choosing

to cut off the benefits of employees.

5. RECOMMENDATION

Firstly, Giuntini should restrain himself from interfering in Santiago role and stop his

micromanaging. This will offer flexibility to Santiago and other executives to introduce new

ideas and will give workers a strong view about who they can listen to and follow. Secondly, the

marketing budget should be increased in order to retrieve the sales growth of the company. This

will bring new clients to Argamassa for Business. Lastly, gain back the trust of employee and

create a new compensation structure. This would decrease the toxic relation between employees

and management, improve the work efficiency and reduces overtime costs.

6. REFERENCES
[1]. Johns, G., & Saks, A. M. (2019). Organizational behaviour: understanding and managing life

at work. Toronto: Pearson.