Goshe Corporation, Acorn Industries, Continental Computer Corporation Case Study Essay
In the case study on the Goshe Corporation, we are introduced to the head of the organization, Banyon. He announced that there would be an average salary increase of 7% for workers. The problem began to arise when the Finance division only received a 5. 5% salary increase. The scientific programmers in the Finance division felt that their Electronic Data Processing (EDP) efforts should be duly rewarded, at least as much as any other employee at the Goshe Corporation, considering that this software shortened work schedules and lowered manufacturing costs.
This inherently contributes directly to the bottom line, corporate profitability.
The EDP programmers felt they did not receive a proper chance to prove they are acting to create profits for the Goshe Corporation. As a response to their perceived ill-treatment, the EDP programmers created a close shop environment and developed a hostile attitude towards other departments. As time passed, EDP became a division of its own, which was a project driven division. EDP became renamed MIS, Management Information Systems, and the head of EDP became the head of MIS.
The MIS department had a problem in that they were one to three months behind on all projects.
There seemed to be many personality clashes among all departments regarding things that involved the MIS projects. MIS was overloaded with projects, therefore they only got on-the-job training without any Project Management related training from Human Resources. Banyon never heard of this problem from Grandy. Demands were made by MIS to other departments so that MIS would accomplish its milestones, however, no consulting was done by MIS regarding the milestones. MIS submitted a purchasing proposal without consulting with the manufacturing division, even though the manufacturing division was part of the project.
Because of this the project ended up being too expensive and behind schedule. MIS felt that the Manufacturing division needed to make performance tests. It seems that functional management was afraid of MIS succeeding and this could impact future raises, therefore functional management acted to sabotage MIS’s efforts. The problem with Goshe Corporation seems to be the way its organization is structured. As a whole, Goshe Corporation needs to adapt. New policies must be established so that the involvement of people from different divisions will not occur in the form of “favors”.
A potential suggestion would be to truly apply a matrix structure. A matrix structure might cause lower efficiency for some departments but there would overall be a more cohesive structure and less conflict between employees from different divisions. MIS and representatives from other departments need to be involved in the planning stage in order to avoid unreal demands, milestones, and schedules. In lieu with altering the structure of the organization, the MIS department also needs to improve its communication skills.
MIS employees as well as the functional managers must be trained in order to understand what is expected from a project driven division that functions under a matrix structure. By understanding this their communication skills will improve as well. Although these things may cost money and time, these measures will pay off in the long run. Acorn Industries Acorn Industries initially sported a traditional organizational structure, although it possessed a somewhat decentralized management philosophy within each of its subdivisions. Acorn began with a single product line and focused on short-term production.
Acorn Industries ended up fully operating their commercial product line so they didn’t have to rely solely on government contracts. Acorn had a great reputation for their technological capabilities and the products they manufactured as well as possessing a strong marketing department. In 1993, upper management at Acorn decided that it was imperative for the organization to change corporate direction in order to maintain competitive with other manufacturers. In order to do this, they decided to initiate a strong acquisition program in which they acquired smaller firms through purchasing them and subsequently brought them under Acorn’s wing.
Upper management felt that this acquisition strategy would secure future growth and development, as well as permit them to diversify into other fields. The major problem with all these acquisitions was inherent in the fact that Acorn Industries had never applied or utilized any form of Project Management. In July of 1996, after years of research and development and intensive competition from a major defense company, Acorn Industries was awarded a major defense contract. Just as they operated in the past, they obtained this contract through their superior technological prowess and strong marketing efforts.
Acorn followed three factors in their marketing strategy: 1. Know exactly what the customer wants 2. Know exactly what the market will bear 3. Know exactly what the competition is doing and where they are going These contracts were granted to them, amounting to $80 million each and they would last from seven to ten years, reaching into early 2009. As a result of this enormous task ahead of them, Acorn was forced to change general managers, and brought on someone who had an extensive background in Project Management and was previously heavily involved in research and development.
This new manager began to face many underlying problems that existed at Acorn. One major problem was the existing Key Management Incentive Program. (KMIP). Under this program, each division manager’s performance was based on attainment of actual goals. If the annual objective was met, each division manager would receive a year-end bonus, but no attention to organizational growth or future planning was given. In particular, one program management manager’s expertise was entirely in the commercial field; his focus was on profitability and he did not network with various customers.
The KMIP was solely beneficial to division managers and not the organization as a whole. In addition to this, Acorn went from being a single product corporation with a short term production cycle, to adopting long-term government contracts with long term production cycles and diversified products. To combat these issues, in 1997 Acorn identified a director or project management. They were forced to bring in new talent to direct these projects. Previously, with just one singular project manager, this manager had a singular philosophy nd a centralized locus of control. With this new restructure, many capable employees left Acorn, questioning future growth and career potential. Acorn simply bit off more than they could chew, in too short a timeframe. These organizational structure shifts from a singular manager of short-term product cycles to a well-diversified product mix with many various managers and heads of divisions cannot be done overnight as employees of the old ways will feel out of their element and alienated by a sudden culture change within the organization.
Acorn attempted to do the right thing by shifting their structure from a centralized approach with one manager to a decentralized method with several various managers, but this all happened too quickly as they had to find a way to meet production for these government contracts. If they slowly expanded to fill the void and meet production requirements over time they would most likely have done a much better job at fulfilling requirements without making initial employees feel ostracized; these employees would have gradually adapted with the organization rather than feeling like they didn’t belong in this new corporate structure.
Continental Computer Corporation Continental Computer Corporation began as an organization that consisted of three separate divisions, the Lampco Division, the Eton Division, and the Ridge Division. The Lampco Division was responsible for tasks and contracts coordinated for the Department of Defense, the Eton Division manufactured disk drives, and the Ridge Division was the primary research and development center for peripherals and terminals.
The Lampco Division was the main reason the corporation was split into separate entities: Continental was required to keep two sets of books for Lampco, one set for government usage and one for internal control. Initially the Ridge division was isolated, but as the company grew Ridge became decentralized in order for each division to do their own R&D activities. Problems arose from day one, since Lampco must subcontract out a good portion of its work due to the technological requirements that in-house employees are unable to meet. Lampco employees mingle with employees from other divisions and begin to arbor jealousy towards members of the Eton division. Wages were not equal across divisions, and employees were well aware of this fact. Many Lampco employees desired to transfer to Eton because it was the most highly profitable division and its employees received the highest pay rates. Overall Continental Computer Corporation utilized a confusing pay scale. Continental employs several engineers who earn more than their department managers, five consultant engineers who were earning more than the department managers, and four consultant engineers who were earning just as much as the division managers.
The Eton division, although one may think they would have the highest levels of unity and success due to their high wage earnings, possesses certain problems in and of itself. The Engineering and Manufacturing members of the Eton division feel alienated, as they are not allowed to speak to customers, even though they may be called upon to respond to customer requests. Obviously, one of the main problems facing the Continental Computer Corporation is the fact that there is an overwhelming demand for employees outside the Eton division to work there due to high wages.
Planning is also a huge issue throughout the organization, resulting in difficulty for functional managers to make commitments. One may consider the fact that Continental has never fired an employee to be a strength, but it can be viewed as a weakness of management as an inability to shed the workforce of excess and not being able to bring in new employees who can provide valuable new perspectives and experience to the organization. When examining the structure of the Continental Computer Corporation, we notice that the Lampco Division was operating as an isolated fully matrix structure.
In addition to this, the Ridge division eventually became decentralized and transformed also into a fully matrix structure, and was able to provide its R&D services to both the Lampco and the Eton divisions. In this case study it is apparent that the corporation seems to be gravitating towards three independent matrix structures. A likely solution to their combat their inefficiencies and their confusing pay scale and planning issues is to eliminate the matrix structure for the entirety of the Continental Computer Corporation, and adopt a projectized structure.
Rather than isolating employees of the Eton division and making other employees jealous of them for being paid higher, these employees can be integrated into the operations of the other divisions and work with the other employees yet still receive higher wages because they possess skills that few other employees in the world, let alone in the Continental Computer Corporation, possess. In the study Ed White mentions that the most difficult job in the entire computer world is designing the disk drives.
He goes on to mention that: “These people are specialists in a world of their own. There are probably only twenty-five people in the world who possess this expertise. We have five of them here at Continental. ” Looking at these statistics justifies the higher pay of these engineering marvels employed in the Eton division, but keeping them isolated in this division not only limits their talents but helps harbor jealousy from employees in other areas of the company.
By operating in a projectized structure these 5 employees’ talents can be utilized more effectively on a project-by-project basis. Also, employees wouldn’t possess the desire to transfer to the Eton division in hopes of receiving higher pay as this wouldn’t be an option anymore; instead they could reinvigorate hopes that as long as their work was of good quality and they learned important skills if a position of a top engineer became available they might be able to fill this opening.
Ed White might argue that integrating everyone into a single projectized structure rather than three isolated divisions would not solve the issue of bookkeeping. But one solution to this is to conduct separate accounts on a project-by-project basis. In this manner, those projects that would be done under the previous umbrella of the Lampco Division could meet the earned value reporting accounting requirements necessary to fulfill the Department of Defense requirements.
I also feel that it is important for any corporation to possess the ability to be able to fire employees and to make room for new employees. A problem noted in Continental was that they maintained a high turnover rate of ~10% for young, skilled workers. For a company in the technology industry this is quite appalling. Being unable to fire employees may result in Continental possessing upper management types who might possess outdated skills and they may be preventing space for younger employees who are willing to work hard and learn new skills rapidly.
The inherent advantage in keeping a younger workforce is that fresh, young employees are cheaper to retain than older and potentially over-comfortable employees who may not be as productive and hungry as a young employee who is willing to put in more hours and effort. General Themes/Lessons Learned The main theme that seems to connect these three case studies is the necessity to alter or modify the organizational structure. As all these organizations grew from their more humble beginnings, they began to realize that the way they were initially structured did not suit the new direction in which they planned to head. In the Goshe Corporation,