Case 3: Crisis and IHRM1

Crisis, Internationalisation and HRM in Project-Based

Organisations: The Tale of SOFMAN

Konstantinos Tasoulis and Maria Progoulaki

“I was following Abu and Mohammed in the jungle, under the hot sun and with great
humidity, unaware of where we were going. They said they had the solution for me.
Behind some tall branches hiding our view, we stepped to a place from where we
could see a quarry. Abu personally knew the local workers who agreed to make the
spare part for me in 2 days for 10 $, 1/100 of the shipping cost from Greece”. If not
because of loyalty and a sense of engagement, then why assist a foreign “boss” save
time and money?

Company Background

Elefsina is the birthplace of Aeschylus and the site of the ancient Eleusinian myster-
ies revolving around issues of life after death. In modern times, it hosts a major
industrial center, few kilometers away from Athens, Greece. Elefsina is also home
to SOFMAN S.A., a small-medium sized firm operating in the steel and mechanical
structures industry. SOFMAN was established in 2000, following the merger of two
steel and mechanical structures firms with 30 years of experience. The firm designs,
produces and installs steel structures in a tailor-made fashion, such as heavy indus-
trial constructions, bridges, steel buildings and architectural projects (SOFMAN
company website n.d.). SOFMAN uses the latest CAD-DAM manufacturing tech-
nology in the design of steel structures, and owns two fabrication plants. The main
plant is used for most of its production operations (e.g. cutting, welding, assem-
bling) while the second, developed in 2012, is dedicated to painting. The firm has
earned a number of international and European certifications related to quality of its

K. Tasoulis (*) · M. Progoulaki

ALBA Graduate Business School & Deree School of Business, The American College of
Greece, Athens, Greece
e-mail: ktasoulis@alba.acg.edu; mprogoulaki@acg.edu

© Springer Nature Singapore Pte Ltd. 2018 169

A. Malik (ed.), Strategic Human Resource Management and Employment
Relations, Springer Texts in Business and Economics,
https://doi.org/10.1007/978-981-13-0399-9_17

1
Malik A. (2018) Introduction. In: Malik A. (eds) Strategic Human Resource Management and Employment Relations. Springer Texts in
Business and Economics. Springer, Singapore. https://doi.org/10.1007/978-981-13-0399-9_1
Case 3: Crisis and IHRM 170

engineering operations. Today, the firm employs 75 full time employees; approxi-
mately 2/3 work in the fabrication plants and 1/3 in the administrative and design
functions. Led by the two sons of the founders, Michalis Sofras, Chief Executive
Officer (CEO), and Nikos Mandras, Managing Director (MD), this family run firm
has contributed to landmark construction sites in Greece, including the Acropolis
Museum, the Athens International Airport, and the Stavros Niarchos Foundation
Cultural Centre.
SOFMAN’s values include: safety, quality, innovation, flexibility, and people
development, underlined by a traditional, family culture. This is manifested in very
low labour turnover rates and a large proportion of skilled technical staff who has
worked with the firm for decades. In some cases, workers’ children have also been
hired and internally developed by the company.
In terms of HRM practices, recruitment appears to be challenging in case of attract-
ing highly-skilled individuals, especially in technical jobs which are not as popular in
the labour market as in the past (e.g. assemblers, welders, fitters, painters). Although
the company lacks a formal human resources (HR) department, common in small-
medium enterprises (SMEs; Curran 2006), people development is emphasised through
on- and off-the job training. For example, SOFMAN recently conducted an extensive
development programme for engineers on leadership and management skills, while
technical staff participated in craft-specific seminars, involving theory and practice.
Nonetheless, training needs are identified on an ad-hoc basis, such as when new
equipment and machinery is introduced in the production.

The Greek Crisis and SOFMAN’s Strategic Response

The financial crisis tormenting the country since 2010, has played a key role in the
evolution of SOFMAN’s business activities. In Greece, the crisis affected SMEs
more than large multinational firms, while construction activity was one of the sec-
tors most severely affected (OECD 2016). Faced with a very difficult macroeco-
nomic and industry environment with few inland construction opportunities, top
management decided to embark upon an internationalisation process for the first
time in the firm’s history, initially seeking for opportunities to export. Figure 1 illus-
trates evidence of SOFMAN’s growth in international operations, during a period
that the home market was shrinking.
Through networking with Greek entrepreneurs and using personal contacts, a
crucial theme for SMEs (Širec and Brada 2009), SOFMAN managed to earn its first
international project as a contractor of a Greek-owned firm in Nigeria in 2010. This
involved fabricating a sugar process refinery building and shipping it from Athens
to Lagos. Word-of mouth and further networking enabled SOFMAN to secure 42
additional contracts in Nigeria, worth of € 12 million. “We were successful because
of our quality standards and our ability to find innovative solutions to problems in
very difficult circumstances; our small size provides us the flexibility to adjust and
be responsive to customer needs”, says Mr. Sofras, CEO. As the firm acquired more
experience and confidence operating in an international setting, it expanded its
Case 3: Crisis and IHRM 171

Fig. 1 SOFMAN sales and exporting activity during the crisis in Greece. (Source: SOFMAN,
SA. Internal document, Note: Amounts are in €)

services to offer on-site installations. A € 4 million milestone project in the firm’s

history involved the fabrication of a bioethanol and power generation plant in
Greece and its installation in Ebola-stricken Sierra Leone, using SOFMAN’s own
lifting equipment. Sierra Leone was not a desirable destination for most competitors
given the unfavourable circumstances in the country, discussed below. However, to
survive and compete with larger European multinational construction firms in the
steel industry, “we had to go to places where others wouldn’t”.
In parallel to projects in Africa, the firm became a subcontractor of large con-
struction firms managing projects in Central and Eastern Europe. Following a € 10
million contract for fabricating a refinery project in Bulgaria, SOFMAN was sub-
contracted to produce steel structures in Greece (e.g. pipe racks, shelters) and install
them in Slovakia and Czechia (formerly Czech Republic).

The Project in Sierra Leone: Leadership & HRM Issues

While the manufacturing of the customised steel structure in Greece seemed busi-
ness as usual, transportation and installation in the middle of the jungle was cer-
tainly not an ordinary activity. The CEO led the team in the initial stages of the
project in Free Town, the capital of Sierra Leone, where machinery and the steel
structures were shipped, and subsequently, at the construction site in Makeni. The
project involved the management of several difficulties first and foremost, health
and safety conditions in an underdeveloped country, where some regions were suf-
fering a humanitarian crisis due to Ebola, leading to the death of an estimated 3955
people (“Ebola in Africa” 2016). Poor infrastructure was also an impediment, such
as the low quality of roads affecting the transportation of heavy machinery from the
Case 3: Crisis and IHRM 172

port to remote rural areas. Low quality of institutions (e.g. banking), theft, and gen-
erally low levels of security posed significant risks that had to be managed by the
CEO and the project team, in collaboration with the Elefsina office. On top of these,
cross-cultural differences were another major challenge.
The installation project team in Sierra Leone comprised a leading project man-
ager and highly skilled construction workers, in charge of the erection of facilities.
The team’s manager was an experienced SOFMAN engineer who conducted on-site
management, and communicated with the leadership team in Athens almost on a
daily basis, particularly in the first stages of the project. Skilled construction work-
ers were supplied by a subcontractor in Greece. SOFMAN took the latter decision
concerning the supply of construction staff in order to manage risk and control the
costs of the operation, as well as to obtain access to technicians quickly and effec-
tively, from a known and trusted firm. Technicians were selected following careful
evaluation and discussions between the leadership teams of SOFMAN and their
subcontractor, reflecting the importance of team member selection in such projects
(Anyanwu 2013). The client mandated that the project team was assisted by a group
of low skilled workers, who were supplied by a sub-contractor from Sierra Leone,
introducing an element of national diversity in the team.
A key challenge for SOFMAN was to enable the project team to work as a cohe-
sive unit. The CEO and the Greek project team of expatriates lived together in the
best possible accommodation at Makeni, which became the home of the project
team for several months to follow. During this period, the CEO set team norms and
bonded the project team through discussions and shared activities such as cooking
meals, treating all members as part of a unit representing SOFMAN, and setting
three priorities: a) strict focus on health and safety practices inside and outside the
construction site, b) strong quality orientation, encouraging team members to read-
ily report problems when they occur, and c) efficiency in all levels of operations.
In terms of the collaboration with local unskilled workers, SOFMAN’s CEO
attempted to integrate these workers to the team as well as improve their competen-
cies by transferring technical know-how in fundamental areas. However, cross-
cultural differences posed a significant challenge. Locals were perceived as friendly
and warm but professionally unreliable, with a different work ethic and a laxed
orientation when it came to timing. “Tomorrow could mean next week in Sierra
Leone, so we had to adjust to the culture and be proactive in our planning. Also,
despite our efforts to upskill local workers and transfer some of our knowledge, I
learned the lesson that some people unfortunately are reluctant to learn.”
Nonetheless, in many cases locals contributed to troubleshooting and offered out-
of-the box solutions. For example, when a hydraulic part was needed in order to fix
a crane, locals guided SOFMAN employees to a quarry whereby such materials
were available, saving money and the time that would have been required to ship the
items from Greece. Some of these locals became integrated to SOFMAN’s culture
and felt part of the project team, otherwise they would have not contributed. The
CEO was collecting the fruits of his personal leadership and care to his workers.
SOFMAN successfully completed the project and identified additional business
opportunities, such as renting their own materials and equipment to other
Case 3: Crisis and IHRM 173

international firms operating in the country. The firm still continues operations in
Sierra Leone and nearby regions, having developed a joint venture in steel construc-
tion services with a local company specialising in logistics.

Project Management in Central and Eastern Europe

SOFMAN entered the European market as a fabrication subcontractor in 2012. In

2016, it was contracted to manufacture and install steel pipe racks, process build-
ings and shelters in Slovakia. In comparison to Sierra Leone, this was a larger scale
project with more demanding technical requirements. Nonetheless, the project team
structure remained similar in many respects. This team consisted of a project man-
ager, a SOFMAN engineer in charge of the supervision of the project and four
engineers specialising in specific functions (e.g. surveying, safety, quality); the lat-
ter were leased from specialized firms in Greece. Additionally, 30 skilled workers in
charge of the installation were also sourced through subcontractors based in Greece
and Slovakia and offered their services for the specific project. Such a structure
enabled SOFMAN to control the project through the site engineer, but also attain
flexibility and control costs. Simultaneously, SOFMAN opened an office in Slovakia
in order to facilitate its business operations in the country, hiring two local employ-
ees for administration and accounting purposes. Overall, the approach followed and
team synthesis reflect a gradual strategic move from a home-based ethnocentric
approach, to a polycentric perspective, utilising an increasing amount of host-
country human resources (Perlmutter 1969).
Following the same recipe, the CEO aimed to establish norms and increase the
cohesion of this nationally diverse project team, so that they would all work with the
culture and quality standards of the firm. After all, SOFMAN was eventually account-
able for the project. In addition to training offered to all employees on various issues
(e.g. health and safety, quality), SOFMAN incentivises employees through a perfor-
mance-based reward scheme for all employees, including those leased by the Greek
and Slovak subcontractors. Additionally, rewards and strict penalties were set based
on workers’ compliance to health and safety project standards.
Working with locals provided a number of benefits and solutions to SOFMAN. For
example, the local administrator helped the site manager identify and communicate
with local suppliers who provided items required in steel panels. In some cases,
however, new cross-cultural differences became relevant, which were in sharp con-
trast to those experienced in Africa. In Slovakia, Greeks perceived locals as punc-
tual, accountable and having a good work ethic, yet quite strict, introverted and
distrustful towards foreigners. Such cross-cultural problems were managed by the
interventions and site visits of the CEO, who used various methods to increase the
sense of identity and unity in the team. Relying on its well-established production
capabilities in Greece as well as project-based, culturally diverse teams seems to
have worked well for SOFMAN. Flexible teams comprising of a core SOFMAN
manager, engineers and workers from home and host country subcontractors,
enabled the firm to respond to customer needs on a project basis, without having to
Case 3: Crisis and IHRM 174

increase the size of its workforce in the long-run. This would have been a risk with significant cost
implications, given the high levels of volatility and uncertainty in the construction market of the home
country.

Future Prospects

During the Greek crisis, SOFMAN gained unique experience on managing con- struction projects in the sub-
Saharan Africa and Europe. Pursuing international business opportunities involving fabrication and on-site
installation, as well as expansion to other geographical areas reflect the growing confidence of top execu-
tives in SOFMAN’s ability to compete internationally. As the firm was successful in its endeavors in both
continents, SOFMAN intends to expand its operations in Greece and abroad. It is currently licensing a third
plant in Greece, which is expected to double its annual output. It is also in the process of setting up a
subsidiary office in Europe, which is expected to enable the firm to identify further business develop- ment
opportunities, as well as increase its ability to manage international projects. While the state of the Greek
economy could have inspired Aeschylean dramaturgy, SOFMAN’s gradual but bold internationalisation steps
are paying off, signaling a promising future for the firm.

Case Study Questions

1. Discuss SOFMAN’s response to the changing external environment since 2009/10. Examine the key
factors underlying SOFMAN’s strategic choices and critically evaluate the internationalisation strategy.
2. Critically evaluate SOFMAN’s HRM practices in the process of internationalisa- tion and offer suggestions
for improvement.

References and Recommended Readings

Anyanwu, C. I. (2013). The role of building construction project team members in building proj- ects delivery. Journal of
Business and Management, 14(1), 30–34.
Curran, J. (2006). “Specificity” and “denaturing” the small business. International Small Business Journal, 24(2), 205–210.
Ebola in Africa: The end of tragedy? (2016, January). The economist. Retrieved from http://www.
economist.com/blogs/graphicdetail/2016/01/daily-chart-12
OECD. (2016). OECD economic survey: Greece 2016. Paris: OECD Publishing. Retrieved from
https://doi.org/https://doi.org/10.1787/eco_surveys-grc-2016-en
Perlmutter, H. (1969). The tortuous evolution of multinational enterprises. Columbia Journal of World Business, 4(1), 9–18.
Širec, K., & Brada, B. (2009). How does networking Impact the SMEs growth? Organizacija, 42(2), 59–66.
https://doi.org/10.2478/v10051-009-0003-4. Retrieved from http://www.dlib.si/ stream/URN:NBN:SI:DOC-
ZOIJLL28/d5d9100c-fe12-46a9-b2c8-cc4da618b32e/PDF.
SOFMAN company website. (n.d.). Our projects. Retrieved from www.sofman.gr.