Page 347 - The Case Lab Book

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.

Paragraph 2 allows the class to draw out elements of strategy, structure and growth and allows the lecturer
to augment a number of the implications of these identified elements (Board 6).

Asking the question about the type of growth implied in paragraph 2 should lead to discussion about
diversification and geographic growth and the advantages and problems associated with such.

This paragraph also raises questions about responsibility and accountability and where they lie. The
lecturer acting as the CEO and pointing the finger at a student and telling him that he is the marketing director
and that he is fired because revenue has fallen by 10% should illicit from the student that it is not his fault rather
it is productions fault as they failed to produce the products in time (Board 7). The lecturer then turning to
another student and saying that she is the director for production and that she is fired will probably get a similar
response from her in that it is not her fault but rather R&D’s as they have not produced new innovative products
to sell and so it goes on with no director accepting responsibility for the fall in sales and revenue but blaming
another director.

Initiating a discussion on the appropriateness of the functional structure will lay the foundation for the
actions subsequently taken by the CEO. It can be argued that the structure is late functional early divisional
when, given its size, it ought to be multi-divisional. Consequently, structure does not support strategy

PARAGRAPH 3

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.

Asked what the CEO has done in this paragraph the students answer that he has created 15
independent domestic/foreign divisions each with profit responsibility but this did not work. Pushing the
students on why this is so it is possible to draw out the serious loss of synergy associated with this.
Moreover, when pushed on what strategy the individual divisions will follow, whether the parent or their
own, the answer is usually their own. But when asked who picks up the bill if a division makes a loss or its
director engages in a fraudulent or criminal act the answer is usually the parent thereby opening up a wider
debate.
PARAGRAPH 4

Having seen several large companies get into trouble when division directors made mistakes and the
division suffered large losses, Sweet concluded that he had gone too far with decentralisation. 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: unplanned capital expenditure (over £10,000)
2: new-product introduction
3: marketing and pricing strategies and policies
4: plant expansion
5: changes in personnel policies