Danfoss Trata Essay

1. INTRODUCTION

Coming to Trata and talking to the employees, one is surprised by the fact they are all saying “We are Danfoss”. Going against common beliefs of untrusting and closed Slovenes, there is not a sense of “us” or “them” at Trata. There is only “we”. Exploring the story of Trata – its past, its present within Danfoss and its future – the idea of transnational learning may be seen at its finest. Perhaps not thought to be all that unusual to a pragmatist Dane, this marks a new experience for Slovene companies. A collaboration of equals. To a Dane living in the Danish flatlands and islands, surrounded by the sea, the entire world is seen as a marketplace, offering limitless possibilities for learning and sharing. To a Slovene, nestled cozily and safely in his valley, the neighboring hill is perceived to be an already distant world. Exploring the paths of Danfoss and Trata, sketches examples of the power of transnational learning – when the Danish flatlands meet the Slovene valley mentality and shows the potential of the Slovene institutional environment from a transnational perspective. It furthermore challenges certain common misconceptions of the Slovene environment and its institutional contexts (e.g. the Slovene labour market and its flexibility), providing good examples of the power of harvesting Slovene specifics through pragmatic Danish organizational levers.

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In this context, the main hypothesis of our case is thus based on the belief that the key to Trata’s success lays in its transnational approach to using allegedly unfavorable and rigid specifics of the Slovene environment, leveraging them in ways that help drive their success not hinder it. Having said this, the aim of the case is to identify and explore some of these key levers, since many of them at the first glance go against all the typical Slovene stereotypes (e.g. inflexibility, resisting change etc.). The question quickly arises, how a R&D and production driven manufacturing company like Trata could survive, yet alone thrive in an environment where ex-socialist manufacturing mastodons go bankrupt by the dozen, where change is seen as the worst of two alternatives, with the first linked to one of the highest job dissatisfaction rates in Europe1,

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35% of Slovene workers are thought to be dissatisfied with their work (Industrial relations in Europe, 2004).

and labour costs outweighing productivity. In an industry characterized by the need for flexibility, Trata has managed to bypass and even harvest the presumably inflexible Slovene labour market, immobile workforce, a rigid formal institutional environment and an user unfriendly tax system to name but few. Indeed it is in the Slovene nature to be overly critical and immediately assuming the position of a victim, however, when adopting an external and unbiased perspective one cannot help but wonder, how a pocket-sized country of only 2 million people has managed to carry out one of the smoothest and virtually shock free transitions to a fully-fledged open market economy in an rigid and user unfriendly institutional environment.

The following case represents the first draft and is structured in 4 parts. The first part provides and introductory description of Danfoss, one of the biggest industrial organizations in Denmark and of Trata, which has since its inclusion within Danfoss evolved into an important centre of excellence. The second part furthermore provides a more through depiction of the contexts and forces that brought Danfoss and Trata together and provides a conceptual starting point for our case. In the third part we examine some of the more important Slovene institutional specifics pertinent to the case, which act as a stepping stone for the forth part where we examine how Trata has managed to use and build on these specifics to their advantage. The final case will have an addition fifth part closing with some final thoughts and learning points. Danfoss: Denmark’s transnational prodigy

Despite being a family-owned company, Danfoss is today with over 21,300 employees worldwide and operating in over 21 countries one of Denmark’s leading and biggest industrial organizations – a leader in the fields of research, development, production, sales and services of cutting edge mechanical and electronic components for a wide array of different sectors, spanning from heating to air-conditioning and far beyond (Danfoss annual report 2005). Within this broad scope Danfoss operates in three key areas as depicted in Figure 1. The blue business division operates in the field of refrigeration and air conditioning, while the green division is linked to motion controls and the red operating in the area of heating. Within the red division Trata can be placed in the district heating part, referred to as the District Heating Business Area (now on denoted as DHBA). In addition to the three outlined divisions Danfoss has also an important ownership stake in Sauer Danfoss – one of the world’s leading manufacturers and suppliers of mobile hydraulics.

Figure 1: Danfoss business areas and general organization structure

Source: Danfoss website, 2007.
Being a true transnational company at heart, Danfoss’ success lies in its innate ability of striking a balance between centralization of certain common functions and best practices (e.g. sales), with external centralization (e.g. R&D) and decentralization of other functions and practices (e.g. production), enabling it to reap the rewards of global efficiency, while at the same time maintaining flexibility and facilitating worldwide learning, validating the concept of transnational companies as the most appropriate structures of contemporary multinational companies as seen by Bartlett and Ghoshal (1989).

Danfoss Trata: Slovenia’s industrial gem
This year Trata will mark its 70-year anniversary since France Smole opened a metal casting plant for casting and machining caste-iron products for industrial and municipal services. Building on a rich Slovene tradition of metal casting and machining the company flourished and after WWII started with its own programme of various regulation elements unearthing the first
beginnings of what would by today evolve as one of the

most promising R&D departments in the area of district heating and regulation elements in the world.
In the late 1950’s the company helped to co-found and became part of IMP, an enterprise for industrial installations, which by the beginning of the 1990’s (before the disintegration of Yugoslavia) had an overwhelming 90% market share in the areas of district heating controls and air conditioning. After an almost overnight loss of the Yugoslav market Trata struggled to rest afloat and started looking for strategic partners. In this light it was acquired in 1995 by Danfoss and became part of its DHBA. Following its inclusion in the Danfoss group, Trata after a series of reorganizations and production transfers from other locations (e.g. Sweden, Denmark and Germany) evolved into a centre of excellence and one of the strongest R&D and production facilities within the Danfoss group. In 2003 Trata was named one of the three most innovative Slovene companies and in 2004 also named the best employer in Slovenia and the 33rd best employer in Europe. In 2005 Slovenia’s leading newspaper Delo (eng. Work) rated Trata number 10 among 500 best companies in Slovenia. In 2007 Danfoss Trata was also named the best foreign investor in Slovenia.

Today Trata employs over 250 people, has sales in excess of 50 million EUR and has been growing at the rate of 20% annually for the past couple of years. As the former president of the Chamber of commerce of Slovenia Jožko ?uk put it at the 10th anniversary of Danfoss coming to Trata: “Danfoss Trata represents a marvelous example of European cooperation – cooperation that is based on knowledge and skills of the employees. It is one of the jewels of the Slovene economy”. 2. DANFOSS COMING TO TRATA: Understanding the past

Opulent historical dowry of know-how and skills
Going back to the times of the Austro-Hungarian Empire the Slovene territory has enjoyed both the advantages and perils of being a buffer zone between the East and West. Following the demise of the Austro-Hungarian rule, Slovenia successfully continued to leverage its geo-strategic position and
relative technological superiority first within the Kingdom of Serbs, Croats and Slovenes and later within the Socialist Yugoslavia. Being on the forefront of the proverbial iron curtain enabled Slovene companies and the economy to establish contacts and business relationships with western companies and economies, exposing them to their market mentalities, while at the same time providing them with access to foreign currencies – a scarce commodity in the enclosed East.

Tittering successfully on the iron brink, Slovene companies enjoyed premium market positioning and controlled sizable market shares in several technology driven industries in Yugoslavia such as household appliances and white goods (Gorenje),

telecommunications and electrical components (Iskra), commutators (Kolektor), power turbines and cast-iron products (Litostroj), steel and mercury production and processing, and industrial installations (IMP). In addition to this, the Slovene economy was also extensively involved in the car manufacturing industry mainly in the assembly of cars and production of various components of first and second tier. Such a close connection with the car manufacturing industry has remained until today, with Revoz (Renault) today being the biggest Slovene exporter2 and as much as one third of Slovene exports being directly tied to the car manufacturing industry.

A marriage of convenience
When asked about Danfoss coming to Trata and Trata’s consequent success within Danfoss Aleksander Zalaznik (Trata’s General Manager since 1993) gives a simple, yet truthful answer: “In the end things came together the right way it wasn’t a clearly defined strategy from the start”.

Sketching the forces that brought Danfoss and Trata together, Mr. Zalaznik points out how “Trata had always been a pretty good firm and always knew how to make money”. Like myriad other Slovene firms, Trata was among the top industrial firms in Yugoslavia, with above industry average salaries and a long history of technological superiority and know-how in the region. Painting a picture of Trata’s sound health, its move to a new location and
corporate building in 1987 (still within IMP) was financed almost completely out of cash flow – an unusual move for a socialist industrial prodigy enjoying the full benefits of never-ending soft budget constraints.

Yet despite its sound base, Trata like other Slovene firms was highly embedded in the Yugoslav socialism market, comprising 90% of its market by the beginning of the 1990’s. Following Yugoslavia’s turbulent disintegration in 1991, Trata lost its market over night, with its turnover plummeting from 22 million DEM3 to 6 million DEM in a matter of months. Relying on past cash reserves, Trata managed to scrape by for the next 2 years, slowly chipping away at its nest egg. By 1993 the reserves ran dry and Mr. Zalaznik was named General Manager, after the former GM jumped ship. Left with a company loosing money and some 300 employees with an unique technological knowhow, skills and years of priceless experience, Mr. Zalaznik believed “it would be a terrible thing to waste such a good firm” and resisted the common practice of rescaling and breaking the company into pieces, selling it in parts. Following an unsuccessful privatization attempt, Trata started looking for a strategic partner in an industry with only

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With an almost 8% share in total Slovene exports.
DEM is an abbreviation for German Marks (German: Deutsche Mark).

a few worthy suitors. Surprisingly its first contact with Danfoss “was more or less a chance one” at an industrial fair.
Looking at Danfoss, it district heating business at that time was still organized within the division of radiator thermostatic valves (now on denoted as RTVs) and represented only about 5-10% of the whole division’s turnover. Seeing the potential of the iron curtain collapse Danfoss came to the idea of organizing its district heating business separately from the RTVs in an independent entity called DHBA. Appointed to lead this ‘emancipation’ Nis Storgard was faced with the situation where all the R&D and production activities had to be disentangled from the RTVs and
established separately as self-sufficient. In addition Danfoss’ current R&D and production capabilities were only suitable for the Danish heating market, comprised of small individual houses, a total opposite of the large socialist apartment ghettos calling for larger systems and components. Thus, Nis Storgard was looking for a strategic partner with complementary production and R&D facilities, product range, competencies and know-how. Among a plethora of eastern European firms, Trata stood out as the most obvious and suitable candidate.

Despite both parties realizing the need for each other, it took 18 months to steer their marriage through the rugged privatization process in Slovenia, fraught with ideology and political quicksand. By 1995 however, Danfoss successfully managed to buy Trata from the Slovene development trust (SRD), paying “a very good price”, which was actually lower then the liquidation value of the firm. Danfoss got a good bargain. With the honeymoon quickly over Trata underwent extensive organizational restructuring, further complemented by the transfer of various dispersed activities connected with district heating from Denmark, Sweden and Germany. As one of the production workers said coming from her maternity leave “Trata was a totally different firm when I came back. Everything was more organized and tidy”. One of the first measures implemented by the Danes were whiteboards with employee photographs. This enabled accountability and location of each employee’s ware bouts – breaking the tradition of going out for coffees and beer during working hours as it was commonly the case in the “good old socialist times”, remembers one of the production line chief still working at Trata. With the centralization and transfer of previously dispersed activities, Trata assumed also complete technical responsibility. The time had come to start producing results.

3. TRATA’S SUCCESS
3.1. The Slovene socio-cultural contexts and specifics: getting into the head of a Slovene
The Slovene valley mentality
“When one of the members of Gorenje’s4 top management was asked by Eric Quint (chief industrial designer at Phillips) whether the children’s drawings
displayed on the walls in the hall in front of the conference room were made by local children, he replied no, and said they were made by children from the neighboring village”. (Prof. Arie Nagel, University of Eindhoven, the Netherlands).

Despite its smallness Slovenia makes for a diverse living environment. In turn, this diversity mirrors itself in many aspects of the Slovene valley mentality and its social space, where regional and local contexts, reinforced by historical events play pivotal roles in its social and economic structures – in this context however, instead of the word localities we use the term “valley communities” – despite the fact that many localities in Slovenia are not physically situated in a valley (e.g. the case of the Dolenjska region erecting high stone walls to ward of plundering Turks discussed later on). Our reason, however, for this is the belief that internal social cohesion and mutual rivalry are as patterns rooted in a distant past, tied with Slovenia’s historical and geo-political situation. In such societies, locality becomes more than an administrative abstraction as it gives social space a physical place. And as Eric Hobsbawm expressed it, such a place consisted of land, distrust towards cities, towards strangers (especially Jews) and governments (Kristensen, Jakli?, 1997).

Nestled between the Alps, the Panonian depression, the rugged Karst and the brink of the Adriatic Sea, the Slovene territory has throughout history been divided and occupied by myriad hegemons and neighbors, united only after WWI and fully independent since 1991. The northern Alpine region of Gorenjska (eng. ‘the upper land’) and northeastern region of Štajerska have historically remained closest to Austro-German influence and rule. For example, in his only visit to Slovene territory Hitler proclaimed these two regions as primordially German and said: “Make these two lands again German”. In the East, the Pomurska region draws strong influence from the neighboring Hungary and was once part of the Hungarian and later the Austro-Hungarian rule. The southern region of Dolenjska (eng. ‘the lower land’) represented the forefront for the Turkish plundering in the 15th and 16th century. Despite being absent of mountains and valleys,

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Gorenje is one of the prominent manufacturers of household appliances in Europe and the biggest Slovene multinational company.

the constant threat of the Turkish attacks forced people to erect high stone walls, in turn creating a variation of the enclosed valley mentality. In the Southwest and West, the Primorska region up to today remains closely linked with neighboring Italy and has only after WWI been returned back to Slovenia.

Drawing from the context of a long history of division and external over rule, the basic profile of the Slovene valley mentality slowly comes to emerge. It is marked by a relatively pronounced degree of introversion and psychotism which is manifested through high suicide rates and alcohol abuse, strong propensity towards depression and independence seeking (Musek, 2004). It is further complemented by a high tendency for submissiveness, being servile and a priori assuming the role of the victim. Looking at the four basic cultural dimensions according to Hofstede (2001) Slovenes are characterized by a relatively high degree of power distance marked by strong hierarchy, one of the highest degrees of uncertainty avoidance, a moderate degree of collectivism5 and a tendency towards more feminine values6 concerning interpersonal relationships and care for others. Table 1 displays a basic comparison between the Slovene, Finish and Danish culture, using Hofstede’s 4-dimension cultural typology. Table 1: Index scores and ranks (in brackets) for Slovenia, Finland and Denmark according to the Hofstede cultural typology

Slovenia
Power Distance
Uncertainty Avoidance
Individualism/Collectivism
Masculinity/Femininity

Finland
71
88
27
19

Denmark
33
59
63
26

Source: Hofstede, 2001.
By comparing Slovenes to the Fins and Danes, they display much higher degrees of uncertainty avoidance and power distance, lower levels of individualism and somewhat the same levels of feminine-related social values.

The (un)changing Slovene
Continuing from the previous section, a highly expressed level of uncertainty avoidance is of particular importance within the Slovene institutional context. In the Slovene culture safety (family) and work are perceived as fundamental social standards and yardsticks for all aspects of social and economical life. Such a high emphasis on security mirrors

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This has recently started to shift towards higher levels of individualism. As opposed to male values connected with materialism, power and status.

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74
16
23

itself in low adaptability and flexibility when faced with a new challenge. A typical Slovene is thought to resist change, for he is nestled cozily in
his ‘valley’, finally on his own land and master of his own fate.

Linking uncertainty avoidance to work patterns and the labour market, lifetime employment is in Slovenia seen as the gold standard, thought to bring ultimate social security. Compared to the Danes, the average job seniority in Slovenia is with 13,4 years almost twice as that of the Danes (8 years) (Survey on work conditions in 10 new EU member states, 2005). While long job seniorities and lifetime employment concepts can also bear positive outcomes in building tacit knowledge, skills and know-how, one of the highest job dissatisfaction rates in Europe for Slovenia (see Figure 2) reveals social and job security often tends to come at the expense of personal fulfillment and growth at the work place.

Figure 2: Dissatisfaction at work in selected EU member states in 2000-2001

Source: Industrial relations in Europe, 2004.
In a poll among top Slovene executives they perceive Slovene workers to “always go for the sure and safe thing” (Zagoršek, 2005). They believe this can be linked to upbringing and education patterns based on strong emphasis on rule obedience, adherence, being good and avoiding mistakes (Jazbec, 2005), reinforced by an education system focusing on reproduction and not value creation, a typical Austro-Hungarian and later socialist legacy.

A typical Slovene plays many roles
Arising form high valuation of work and low tolerance for risk, a typical Slovene is hard working and plays many different roles, through which he spreads the risks and ensures

greater security. As Jakli? (2004) points out: “An ordinary Slovene worker has many competing interests and is burdened with a complex set of social roles. He usually works two shifts. One in the factory and another one in the afternoon on the farm, or if not, a peasant acquires additional income through various moonlighting activities”. Slovenes similarly to the Danes have relatively heterogeneous work paths – however with one important distinction. While in the case of the Danes this heterogeneity is exogenous
and of vertical nature, with frequent job shifts and short job seniorities, the heterogeneity in the case of Slovenes is more endogenous and of horizontal nature, with Germanic style long-term employment careers at the same job and many side activities, projects and jobs, aimed at minimizing risk or providing a better living standard. In this view a typical Slovene, where work is concerned, does not like to have all of his eggs in one basket.

Non-formalized flexibility, the Slovene labour market and Slovene flexibilisation Despite or perhaps in spite of their apparent resistance to change, the Slovenes have contrary to autostereotypes and popular belief developed a relatively high degree of flexibility, however usually outside the realms of formal institutional contexts and more in the area of the informal or grey economy closely linked to multiple role playing discussed in the previous section or in the form of a strong informal social cohesion. Again linking this pattern to historical contexts, Slovenes have in the past mainly been in the role of peasants, handcrafters or workers in foreign-owned companies. In the position of antagonists, they were never actively engaged in the formalized economy, but were always part of the informal one. In this light, Slovenes developed the skills that enabled them to perform their economic activities under all circumstances. Linking this view of non-formalized flexibilisation with the allegedly inflexible and rigid Slovene labour market again shows that the Slovene labour market is not at all as rigid as it is thought to be, and that its flexibility again exists somewhere on the outskirts of the formalized economy. Indeed as Stanojevi? (2006) points out, the high level of labour market regulation in Slovenia does not necessarily imply also high labour market rigidity. As Stanojevi? and Vehovar (2005) show “the system has been highly regulated, but not inflexible at all, most certainly not at the company level”. The case of Danfoss Trata will later on provide a good example that gives merit to this view of a high degree of labour flexibilisation at the company level.

In their examination, Stanojevi? and Vehovar (2005) found only two distinct features labeling the Slovene labour market as highly rigid. The first feature pertains to payments and wages, which have remained compared to other ‘transitional’ societies relatively high and apart from the base pay
encompass an array of additions spanning from compensation for transportation to work, to compensation for meals and job seniority

add-ons. The second feature labeled rigid pertains to high degrees of job security, with the majority of Slovene workers (over 70%) engaged in open-end contracts (Ignjatovi?, Kramberger, 2000).
More relevant to the case of Danfoss Trata is the opposite view of unique labour market flexibility in Slovenia. Stanojevi? and Vehovar (2005) label it the dual labour flexibilisation. It is based on a intense increase of work input of full-time employees on one hand (mostly in the form of overtime, shift work and weekend work) and combined with afternoon jobs, grey economy activities, use of student work and increased use of temporarily employed – be it among younger and first time employees or through the use of employment agencies such as Manpower and Adecco lending hired help on demand – on the other hand. Stanojevi? and Vehovar (2005) call this also selective flexibility for these types of work patterns are consensual and the only means of ensuring higher degrees of social security and higher levels of income. 3.2. Danfoss Trata: leveraging Slovene specifics for success In the previous section we have briefly outlined some of the key specifics of the Slovene institutional and social contexts. They represent the very fiber of Slovene society and act as important frameworks for the functioning of both companies and individuals. In the proceeding sections we through the case of Danfoss Trata examine key areas where Trata has drawn upon and complemented these specifics and the Slovene environment, and made good us of them, leveraging its success.

It’s good to be in Slovenia – the key success factors of the Slovene (business) environment
Talking about key sources of competitive advantage from the environmental perspective for Trata both the supply chain director and the procurement director agree that Slovenia has a very favorable geographical position. “This is a comparative advantage for us. We know this local environment

important supplier pools are near. Slovenia is
somehow in the middle of everything”.
Not location per se, but in relation to relevant supplier pools is crucial to Trata’s procurement and manufacturing flexibility. Slovenia due to its long tradition in tool making and mechanical processing makes for a good supply base for cast-iron products, moldings, metal works, plastic and parts that require mechanical processing. “It helps that there are a lot of small suppliers of cast-iron products in Slovenia they are able to cover and satisfy our needs” comments the supply chain director. Indeed one of the biggest advantages of the Slovene suppliers is their “flexibility both in terms of quantity and speed. This is probably one of the reasons why the Slovene tool making cluster is so successful and we have a lot of suppliers working for the car industry”. Because they

are most often organized as small micro clusters, Slovene suppliers are quite flexible and as the procurement director concludes: “They are willing to do almost everything in order to stay in the business”. All these means that Trata has compared to other companies within the DHBA an above average share of local suppliers (about 50%). Interestingly a lot of Slovene suppliers have also become preferred Danfoss suppliers for the whole group.

In addition to Slovenia, neighboring Italy provides one of Europe’s strongest pools for brass products and components. Almost at hand’s length lays Germany, an important supplier market for electrical engines and drives. Furthermore the procurement director also notes that: “Today a lot of people are looking to China for suppliers, but they forget we have Serbia, Bulgaria and Romania right around the corner. There the costs of labour are not that different”. Concluding on supplier clusters, Trata’s supply chain managers also note that Slovenia has a very good logistical cluster; however it is not as important to Trata, because most of their products are sold through Danfoss’ central distribution system and not directly to the final customer. Still, they acknowledge: “It is good that they are there just in case, when we are under strong time pressure, they are in the position to carry out direct shipments to customers. Compared to Poland, Slovakia, Ex-Yugoslavia we have a comparative advantage in the area of Logistics”. From a technical perspective Slovenia is compared to Scandinavia also very competitive in terms of costs of engineers. A Slovene engineer still cost twice or three
times less then a Danish one. This means Trata can afford more engineers. Currently with some 20 top engineers Trata has one of the strongest R&D departments within the whole of Danfoss. Yet one of the project leaders within R&D rightfully explains: “Compared to Denmark we are still relatively cheap. Comparing to the East we are already expensive”. Moving away from its geographical position, the Slovene valley mentality, reinforced by a strong valuation of work and uncertainty avoidance, should also be seen as an institutional advantage, especially in the context of a transition to a market economy, where firms no longer enjoy unlimited soft budget constraints and need to shed socialist inefficiencies, mainly in terms of over employment. In this context, finding blue collar manufacturing workers, willing to work longer hours or even double shifts does not become a problem and in itself becomes a source of possible internal flexibility. As the procurement director at Trata, who also worked as a production director at Danfoss in Finland comments: “In Finland the economy has been stable for quite a few years, they have a good social net and firms do not go bankrupt everyday a 1,000 workers do not loose their jobs overnight they do not have the same pressure as we still do”.

An unique organizational culture
At the core of Trata’s internal focus lies an unique organizational culture. Setting foot in Trata, positive indoctrination is seen and felt everywhere. Everybody knows why they are there. People are put at the core of every process. Driving this unique organization culture is a relaxed and stimulating work environment, with everyone on a first name basis, absent of hierarchy, titles or job positions and reinforced by pragmatic and democratic leadership headed by general manager Mr. Zalaznik. “When I came to Trata, I could not stop smiling for 2 months…because I was so happy. It is simply good to work at Trata. Whoever comes to Trata, never wants to leave” explains Bojana Zupani? (a leadership development manager at Trata). Asked about where all this originates, the answer again sounds so easy and self evident: “I believe that things in firms start with the top management and leaders. I wish also other Slovene executives would be like those at Danfoss or Trata open, flexible, mobile, highly motivated and able to set up systems that foster such characteristics. Importantly, Trata’s top
executives act both as good managers and good leaders; the former often being overlooked in many Slovene companies.

Acting as a lifeline, communication is seen as one of the key elements of Trata’s organizational culture. Wherever prudent, things are based on the widest possible level of consensus, with joint setting of goals, joint arrangement of tasks and ways of working, regular follow-ups (not monitoring) of success. “People at Trata know what they are doing and know what is happening with the firm and where we are headed” explains one of the employees. Two examples of this communication are (1) quarterly employee meetings with the general manager, where Mr. Zalaznik addresses all employees and brings them up to date with events relevant to Trata, and (2) a monthly newspaper called Trata news with important stories spanning from employee and department presentations to new technologies, products, techniques and important successes and milestones.

Indeed, it is the constant feedback and celebrating of achievements and milestones that helps to reinforce the Trata team spirit. As one of the employees said: “Celebrating success and milestones is a very important part of our culture. In December 2006 when we reached an important sales target, all the employees were surprised by a smoke alarm. All outside, they were greeted by Champaign and helped to release red balloons in the air. Some might find this silly, but I found it nice. Someone took the time to surprise me”.

On the production floors Trata’s unique culture may be seen at its finest, with a special break area where workers meet twice or thrice a day, sit down and have a cup of coffee. As explained by one of the production line managers: “The coffee breaks implemented

by Danfoss are intended to be socializing meetings it is not just drinking coffee. Workers usually start at 6 a.m. and have their first coffee break around 7 a.m. At 10 a.m. they have a 30 minute snack break and at noon another 10 minute coffee break. At 1:50 p.m. we usually have a quick wrap-up meeting and go over the days results”. Within these coffee breaks weekly 15
minute meetings are held with every department, technologist, planner and production line leader. Once a month meetings with the production director are also held.

Danfoss Trata – a people company, not a production company When asked about the most important source of Trata’s success and competitive advantage Bojana Zupani? suddenly smiles, as being asked the world’s simplest question: “Definitely the people”. Today “All people at Trata know why they are here we know what our main goals are and what we have to do”. Although slowly fading into oblivion such a high sense of belongingness may today be viewed as a positive relic of workers’ management –one of the fundamental principles of socialist ideology, further reinforced by a propensity towards collectivism discussed in one of the previous paragraphs. Today certain elements of the Danish management styles, such as employees participating in setting goals and absence of hierarchy successfully build on the socialist self-management past.

Sharing her view Mr. Zalaznik also believes the main reason why Trata has managed to survive the shock of loosing the Yugoslav market and consequently thriving within Danfoss is the fact it had a “a solid base of people left from the good old IMP times”. By adding new employees with the right drive and placing them in teams with more mature base employees, Trata has managed to extend its fundamental success driver and nurture a new generation of dedicated Trata employees. Employee education and training also plays an important part in this context.

Realizing the potential in their employees, employee education and personal growth are seen as essential. As Bojana explains: “At Trata, education and training are seen as something essential and crucial not as a reward or penalty”. On the job training and development are seen as the most useful tools for growth. This is further reinforced by a highly developed formal education and training scheme. “In general there is no problem to do anything education and training-wise in this area” concludes Bojana. On the top management level, everybody is sent to visit the Danfoss headquarters in Denmark “to achieve greater cultural fit and networking”. Coming back, they
go through specialized education and training programs within the DHBA system. Based on last year’s employee satisfaction surveys, Danfoss also discovered the firm is good at management, but less so at leadership (e.g. motivating, encouraging, leading etc.). Thus Danfoss has in the past year developed programs and workshops for developing

such skills (e.g. personal development for leaders, leadership coaching, focus on situation leadership etc.).
On the middle management levels leadership and management training is complemented by more concrete programs like the Danfoss Productivity Program (or DPP), which is based on lean manufacturing principles. Personal development schemes are also incorporated at this level. On the operational level more attention is focused to on the job training which constitutes about 80% of their education and training, the remaining 20% is organized in the form of classroom training. As one of the production workers explains, despite working in assembly she has finished a welding course. “By finishing this course I still cannot weld on my own, but I liked that they sent me to learn something new”. In addition to the welding course, she has also participated in communication workshops organized for all Trata employees, finished a computer course and a seminar on dealing with hazardous materials and substances. This is jut one of the examples of Trata’s policy of people being able to work on at least three different processes and creating their own internal market for flexibility. In the end, it is thus not surprising that Trata is one of top 10 Slovene companies in terms of investing in their employees’ education and growth.

Part of Trata’s flow of communication are also regular employee satisfaction surveys, whose results are discussed at workshops by team leaders and their members. In addition, acting as a sort of proverbial bridge between communication and development annual employee talks are one of the most fundamental tools in Trata’s internal and people focus. Structured in 5 parts, they start with employees being asked how the feel at Trata and of a review of past realizations and problems. The second part touches on future goals both on company, team and individual levels. In addition, this part is also linked with the employees’ annual bonus. Once the future goals are set,
key and needed competencies are examined in part three. The forth part is linked to developmental expectations, where employees have the opportunity to voice their future job plans and wishes, not just at Trata, but within the whole of Danfoss. The fifth part closes with setting an action plan or development plan for employees to fulfill their developmental expectations.

Organizing for success, not work
One of the key catalysts of Trata’s success also lies in it organization and approach to work. With a clear and precise focus on internal processes Trata as a R&D and a manufacturing facility does not have a sales department or function, for it is set up as a separate firm acting as a correspondent between the DHBA headquarters and Danfoss Trata, enabling Trata to develop and grow in areas where it has true competitive advantage. As a consequence of this internal view Trata’s matrix organizational structure evolved naturally as a result of pragmatic focus on “what we have to do, rather then job

positions. We have work to be done” says Bojana. This enables a higher degree of involvement in different interconnected processes. At the core of this strong internal focus lies a highly perfected structuring of goals, a typical Danish influence, which has in turn become through the organization culture deeply embedded in all Trata employees. Such a high focus on work processes and process management enables people to “work flexibly, because they are familiar and integrated with many different processes”.

Perhaps the organizing for success, not work is best observed and felt on the production floor. Work is carefully structured and organized to suit the needs of each individual production line. Each production line is broken up into U cells, which look like little selfsufficient islands. Each production worker’s space is minimized to one square meter. “Within this space he has everything that he or she needs. He does not have to go running around for parts and component” comments a production line chief. At each such production unit, all the processes are carefully studied and broken down into many small processes. Different configurations are drawn and explained at each such unit, depending on the number of workers present at the unit.
Nothing is left unexamined; there is a clear feeling of structure and purpose, yet there is no feeling of a Fordist production line. “There is a production norm at Trata and we have an expected time in which to finish a certain amount of work for planning purposes” comments one of the production line chiefs.

A merger of Danish and Slovene mentalities
In a sense Trata’s marvelous transformation and re-birth within Danfoss could in large part be credited to the successful fusion of the Danish pragmatist flatlands mentality and the Slovene valley mentality. Let us briefly examine how they interact and complement each other.

Compared to the Danes Slovenes describe themselves as much more hardworking. “Our perception is that we are more willing to work more compared to the Danes. In Denmark if an employees says to his boss he cannot do it, the boss will not understand this as his unwillingness to work, but his inability to work. In Slovenia, if an employee says to his boss he cannot do it, he will understand as if he does not want to do it. In Denmark it is the responsibility of your employer or the firm to enable you to finish your work in 8 hours” comments one of the middle management employees. Yet perhaps not necessarily such a positive trait (being hard working), a pragmatist Dane is structured and organized. He takes his time to explore the problem down to its fundamentals. Whereas a typical Dane would plan 80% of his time and in the remaining 20% succeed usually at the first try, a typical Slovene would plan for about 20%, followed by myriad iterations and re-thinks in order to get to the final solution. As the chief accountant at

Trata notes: “We (Slovenes) if something comes along, we drop everything and attend to the matter. With the Danes, there is a waiting line and things must wait their turn. We are often jumping from one thing to the other; never completely finishing anything everything is urgent. They (the Danes) plan a lot. For them things are not as urgent as we perceive them to be. If it is really urgent, then their boss must give their work to somebody else, so they can attend to the matter. To Slovenes they might seem very slow and rigid, but it works for them”. We the Slovenes still have a little bit of
the Balkan mentality in us. As one of the employees comments: “They (the Danes) understand we have an emotional charge and like to throw ourselves into something, which we do not sometimes finish”. However, if a Dane makes for a good planner, a Slovene is a master of improvisation. This can party be connected with the balancing of myriad ‘urgent’ chores that have to be done on a daily bases, but can also in large part be linked to certain historical contexts. Always living in someone else’s country and rule meant finding ways to ‘play the system’. As one of the employees notes: “In Denmark the system is like that, that it provides general guidelines and people can change things. In Slovenia you have to get around the system the system is often the drawback”. As a result of this improvisational tendency, Slovene workers tend to be much more flexible and responsive in times of time pressures and constraints. “When push comes to shove, we are able to do things quickly and effectively, using unconventional methods the Danes value or resourcefulness”.

Balancing flexibility and demand unpredictability
As a production company, Trata is forced to balance a highly unpredictable demand in its key eastern markets, a wide array of over 4,000 different components and parts in small batches and sales of highly specific products needed in relatively small quantities. Yet the procurement director surprisingly sees this as an advantage, not a problem: “Small quantities are an advantage, especially if you have good relationships with suppliers. It enables you speed and flexibility. There is always space and time for small batches”.

All the above aforementioned factors in turn call for increased responsiveness and flexibility, something that companies operating in the Slovene business environment find increasingly difficult to achieve. Yet when looking at Trata, achieving the needed flexibility seems almost effortless. Trata achieves this through a dual flexibilisation process, using both external and internal sources of flexibility. The most relevant source of external flexibility comes from the use of temporary employment through agencies such as Manpower and Atama supplying Trata with hired contractual workers for production and assembly activities in demand and
production peaks. In addition, Trata also uses summer student jobs as an additional source of external flexibilisation during the summer’s highest peaks.

Figure 3: The distribution of regular and temporary workers as a source of external flexibility
350

Regular workers

Temporary workers

300
250
200
150
100
50
0
Jan

Feb

M
ar

Apr

M
ay

Jun

Jul

Avg

Sep

Okt

Nov

Dec

Source: Danfoss Trata internal newsletter, January 2007.
On average these temporary employed workers constitute somewhere between 20 to 30% of all production workers at Trata. Being able to acquire them almost at a day’s notice is seen as an important source of production flexibility. In addition, wherever a need arises to hire additional manufacturing workers permanently such workers also provide a good base for recruitment. Using this example, we can see that the Slovene labour market is not as rigid as it is thought to be, at least not from the employers’ perspective.

From the internal perspective, flexibility is incorporated and designed on a plethora of company levels. From the organizational perspective Trata’s matrix organization evolved as a natural consequence of a focus on processes, not jobs and positions. As Bojana Zupani? explains: “Our matrix organizational structure is a consequence of us working in the DHBA. It evolved naturally. When DHBA was expanding, Danfoss was buying new facilities which had to be integrated into the DHBA systems. It was expected that Trata and its employees would play a leading role in their integrations. All of a sudden people had many different obligations and so the matrix form developed”. One of the employees provides an example: “The rules at Trata are there to guide you, not limit you. If the rules are out of date or inappropriate the system has to be designed in such a way that you have the possibility to change things as to make it work. At Trata we can change our organizational structure and standards every 2 days, if this will help us to be better”.

Reinforced by the matrix structure, Trata’s organizational culture is also all about change and flexibility. Because mistakes are not sanctioned or even publicly pointed out “People at Trata simply dare are not afraid to do things. Mistakes are not punished” explains one of the workers and continues: “At Trata people are very open to change because we are used to it and know it will be for the better”. Regarding these constant changes, after setting district heating as an independent division, myriad production lines, and other processes and activities were transferred from Denmark, Sweden and Germany to Trata. The purchasing director comments: “When Danfoss came, their philosophy of constant improvement became normal to us. If once a year a new production is transferred and integrated into Trata and Danfoss is constantly implementing new techniques and systems, people are faced with such an environment on an everyday basis. The first time 12 years ago, the first move and integration was hard we did not know how to do it. Because we were collaborating with the Danes things were often very loose with few concrete guidelines. We had to improvise and perhaps this was easier then if we had a full list of procedures to follow and specifications of how to do it. In the end our core strength is that these transfers were done by the same people at Trata, who accumulated this knowledge and developed the skills and the know-how in this area”.

From the micro perspective internal flexibility is achieved through workers being equipped and trained for several processes and jobs. “It is the policy of Danfoss that every production worker should be able to perform on at least three different positions doing at least three different jobs” comments a production line chief. This enables Trata internal flexibility and the possibility to move workers between departments. In addition to this, Trata uses also a system of +/- 40 hours meaning that: “If we are running short on certain materials or components or on work workers stay at home. They still get their regular pay but need to make up the hours”.

References
1. Bartlett, C.A.; Ghoshal, S. (1989). Managing across borders: the transnational solution. Harvard Business School Press.
2. Danfoss annual report (2005).
3. European Comission (2004). Industrial relations in Europe 2004. 4. Hofstede, G. (2001). Culture’s Consequences: Comparing Values, Behaviors, Institutions and Organizations Across Nations. Thousand Oaks: Sage. 5. Ignjatovi?, M. and Kramberger, A. (2000) Fleksibilizacija slovenskega trga dela, Statisti?na omrežna sodelovanja za ve?jo evropsko usklajenost in kakovostno sodelovanje (Slovenian labour market flexibilisation, Statistical networks for better European cooperation), B. Tka?ik (ed.), Ljubljana: SORS. 6. Jakli?, Marko (2004). Symbolic interactionism approach to study socio-economic development in Slovenia. East European Quarterly, XXXVIII, No.1. 7. Kristensen, P.H., Jakli?, M. (1997). ATLANTIS VALLEYS: Local Continuity and Industrialization in Slovenia Contrasted with West Jutland, Denmark, and Third Italy.

8. Stanojevi?, Miroslav. (2006). Slovenia: Rigidity or Negotiated ‘Flexibility’? Working text.
9. Stanojevi?, Miroslav; Vehovar, Urban. (2005). Strong Labour and Gradual Transition to Market Economy: The Case of Slovenia. Working text.

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