Page 154 - CL How to Read a Case Study

Ice Breaker : Case Study

The Business Communications Group plc (BCG) had, in its seven years of existence,
established for itself a dominant position in a number of global markets in the US,
Europe and latterly China. The credit for its success lay at the feet of one man, its
founder; Chairman; and Chief Executive, Richard Sweet. Sweet had developed the
company on the basis of planned introduction of new products supported by
imaginative marketing, and good customer service. On the basis of this BCG had
achieved a current annual turnover in excess of $2 billion and an IPO after five
years. With its high profit margins, and continually rising share prices, it had rapidly
become one of the favourites of investors. However, it had recently become
apparent to Sweet that the organization structure, no longer supported the
company's strategy.

For years the company had been organized along functional lines, with directors in
charge of finance, marketing, production, personnel, purchasing, engineering, and
research and development. In its growth, the company had expanded its product
lines beyond its original product of network systems, Satellite Communications
Systems, and Network applications. However, concern had arisen that its
organization structure did not provide for profit responsibility below the office of
the CEO, did not appear to fit the product or geographic dispersion of its
businesses, and seemed rather to accentuate the "walls" impeding effective
communication and coordination between the functional departments of
marketing, finance, production, personnel and Research & Development; there
seems to be too many decisions that could not be made at any level lower than the
CEO.

As a result, Sweet decentralized the company into twelve independent domestic and
foreign divisions, each with complete profit responsibility. However, after this
reorganization was in effect, he began to feel that the divisions were not adequately
controlled. There developed considerable duplication in purchasing and personnel
functions, each division manager ran his or her operations without regard to
company policies and strategies, and it became apparent to Sweet that the
company was disintegrating into a number of independent parts.

Having seen several large companies get into trouble when a division director made
mistakes and the division suffered large losses, Sweet concluded that he had gone
too far with decentralization. As a result, he withdrew some of the authority
delegations to the division directors and required them to get top corporate
management approval on such matters as:

(1) any unplanned capital expenditure over $10,000,
(2) the introduction of any new products,