Page 365 - Business Principles and Management

C HAPTER 13 A SSESSMENT

CASE 13-2: Reorganizing a Business
Hector Fuego had just been hired by the board of directors to become the
new CEO of You Build, Inc. You Build is a 50-year-old building supply
company that operates in the southwestern United States. The company
has a very successful history and has seen expansion to 50 stores in 23
cities. However, in the past three years, operations have been much less
successful because the largest retailer in the industry, Home Warehouse,
began to expand into the areas served by You Build. Home Warehouse
built larger stores in very convenient locations with a broader set of prod-
ucts and low prices. It was clear the Home Warehouse was threatening the
success of You Build. The board of directors made it clear to Mr. Fuego as
they discussed their expectations with him that his most important priority
was to find ways to meet the competition and maintain the success of You
Build, Inc.
Because of its history, You Build had developed a very traditional line
organizational structure. All strategic planning and major decisions were
made by the CEO and a team of three vice presidents. There were two
more levels of management at the corporate level; four regional offices
with managers who reported to the corporate level; a management team
in every city that had three or more stores; and a store management team.
Most of the managers had many years of experience with You Build and
had worked their way up through the system. Mr. Fuego believed most of
the managers were very good at their jobs and worked hard to make the
company successful. However, it seemed that the current organizational
structure made decision making very slow, and the many employees at the
store level who worked with customers had little input into store opera-
tions. He learned that the previous CEO had little contact with managers
or employees of individual stores.
Hector Fuego wanted to change the organizational structure of You
Build, Inc. He believed the business would be more effective if the orga-
nization was flattened and the line organization was replaced with a
team organization. The executives would set an example by forming a
team to do corporate-level planning, advised by regional teams of experi-
enced employees and store managers. City management positions would
be eliminated, and each store would develop teams of employees to make
decisions for the store’s departments. He knew the change would not be
easy because the company had used the traditional organizational struc-
ture for 50 years.

THINK CRITICALLY
1. What are the advantages and disadvantages of the change in organi-
zational structure Hector Fuego is planning?
2. How do you believe You Build’s managers will feel about the change?
How do you believe the employees will feel?
3. What steps do you recommend that Mr. Fuego follow to prepare
managers for the change? What should he do to prepare employees
for their new role in the organization?

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