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As the analysis of competitive strengths and weaknesses in the valve market indicated
(Table 4, Appendix A), the company was uncompetitive. It was vital, in your opinion, that
this competitive problem be solved. Historically, the company was organised by
department, with each director and the office manager, who was effectively independent,
reporting to the managing director. Each director was responsible for a range of specific
and shared activities. The finance director dealt with the accounts function, management
information (shared with marketing and sales), data processing (shared with the technical
department), security, personnel and the canteen (both shared with the office manager).
The production director was responsible for the entire production process (except design),
costing (shared with finance), warehousing, physical distribution and all factory
maintenance. The technical director was responsible for all research and development,
design and installation (shared with marketing and sales). The marketing and sales
director was responsible for sales and promotion, sales insurance (shared with the finance
department and office manager), and servicing existing customers' equipment. Finally, the
office manager was responsible for purchasing (shared with finance, and production),
secretarial support, cleaning, company legal services and public relations (shared with
sales and marketing). There was little decentralisation of authority.
The result of this organisational design was, in your opinion, unfortunate. Some of the vital
operations in the company were carried out poorly, or not at all. Burke Engineering failed
to meet the demands of the customers in many important areas: in controlling the flow of
business through the company from the receipt of order, to achieving the required speed
of delivery, and level of after sales service.
Because of the wide range of often overlapping functions, there had been a tendency to
steadily increase the number of managers in each department. But because of the broad
span of responsibilities in each department, managers were poorly skilled. Shared
responsibility also caused an enormous amount of friction as the early memos had shown,
and a poor flow of information between departments. This poor flow of information was
only resolved by lengthy meetings throughout the week to coordinate the activities of the
various departments.
Decisions are slowly, if ever, made. Though there was low management turnover in the
company, as a result of the high salaries, there is very low morale in many areas
particularly amongst the younger managers. Management were also very hostile to any
interference in their work from other departments.
The combination of overlapping authority with increased manpower had substantially
raised the company's expense base. Costs, as a proportion of total sales, had continued to
rise throughout the last 3 years. Because of the shared responsibility within the various
areas, few attempts had been made to effectively control cost. All administrative
overheads have substantially increased, and there has also been a steady rise in the costs
of installation and servicing, and overall management expenses. You feel that a drastic
overhaul of the organisation is necessary to achieve the demands of the business plan,
with the definition of new departmental responsibilities.
Action
How should J Franklin restructure the organisation to meet the demands of the new
business plan? What are the most important issues that need to be considered?
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