Solution on Southern Discomfort Case

CASE FOR ANALYSIS ~ SHOE CORPORATION OF ILLINOIS
OVERVIEW: This case deals with a manufacturer of women’s shoes that purposely changes styles frequently to take advantage of the flexibility of a small organization. However, decision making in the organization follows such a convoluted pattern that conflict is a given. Work flow needs to be re-examined, and adjusted for efficiency.
DISCUSSION QUESTIONS TO ASSIGN:
1. Analyze organizational structure.
2. What suggestions do you have for improvement in information flow?
3. How would you characterize the current interdependence between departments? How should it be improved?
4. Given that the president’s intent is to change shoe styles frequently, how could innovation be fostered?
Summary of facts
· Shoe Corporation of Illinois (SCI) produces a line of lower-priced women’s shoes.
· Average profit per pair of shoes has decreased from 10 years ago.
· The company has 2 factories within 60 miles of Chicago and a headquarters; offering 100 to 120 different products to customers each year.
· The external environment is unstable, requiring rapid responses to style demands.
· SCI’s organization chart is based on Functional Grouping.
· Large shoe houses hold the market for “stable” shoe market because of economies of scale, SCI offers trendy styles and their org structure allows for them to be flexible for this.
· The volatile product environment of SCI causes friction within the company. An e-commerce department, directed by Olsen, was recently created to help reduce friction but this has not had the desired effect as most employees are resisting change and do not want to use the new technologies. Olsen believes these technologies would increase communication and product awareness and reduce design/production/delivery times.
· SCI continues to use outdated procedures for deciding new styles and unclear/confusing production procedures.
· According to Allison, the average time from design to the pilot

References: Angerer, J. (2003). Job burnout. Journal of Employment Counseling, 98-107. Chiu, S., & Tsai M. (2006). Relationships among burnout, job involvement, and organizational citizenship behavior. Journal of Psychology, 517-530. Hsiu-Chao Chen, Frank Huang-Chih Chou, Ming-Chao Chen, Shu-Fang Su, Shing-Yaw Wang, Wen-Wei Feng, at al. (2006). A survey of quality of life and depression for police officers in Kaohsiung, Taiwan. Quality of Life Research, 925-932. Hunter, Larry W., & Thatcher, Sherry M.B. (2007). Feeling the heat: effects of stress, commitment, and job experience and job performance. Journal Academy of Management, 953-968. Koesten, Joy (2005). Reducing stress and burnout for financial planners. Journal of Financial Planning, 64-74. Roach, Cydney. (2007). Taking the lead during a merger. Journal of Strategic Communication Management, 8. Rubin, Irwin M., & Berlew, David E. (1984). The power failure in organizations. Journal of Training and Development, 36-38. Subramanian, Sharmila. (2006). An "open eye and ear" approach to managerial communication. Journal of Business Perspective, 1-10. Wasylyshyn, Karol M. (2005). Leadership development. Journal of Consulting Psychology, 5770. Wright, Robert F. (2000). Strategies for avoiding the micro management trap. Journal of Management Decision, 362-364. Case 14 Ramrod Stockwell This case considers conflict and politics in organizational settings. Ramsey Ramrod Stockwell, vice president for Production at Benson Metals, is becoming very uncooperative and difficult. Ramrod is having frequent run-ins with sales, who are exasperated with his uncooperativeness and refusal to supply them with reliable information concerning delivery dates, and production scheduling. Most students feel the problems stem from Ramrod, his obstinacy and rough diamond personality. They favor firing to reducing conflict and getting Benson Metals back on track. The problem is due to the internal power structure, unchanged in a changed environment with more importance placed on production than on sales. More company revenues come from the production and specialty steels, only produced because of skills in manufacturing. Historically, sales has been the most important function in Benson, and it is not willing to relinquish power and prerogatives and adjust to changing realities. Backed into a corner, Ramrod is fighting to protect the integrity of his department by being uncooperative and hoarding power to make others dependent on him. The case illustrates the difference between personal and institutional power. It highlights the need to analyze the context of behavior, not just the behavior itself. Teaching Objectives 1. To show students how the power structure in an organization changes as contingenciesfrom the environment and technologychange. 2. To expose students to the sources of conflict in organizational settings. 3. To provide a vehicle for an action plan to resolve organizational conflict and devise a strategy for change. Based on real people and events, the case is best used after Chapter 14, on conflict and politics, so students have can analyze the power structure. It takes from 45 minutes to an hour to analyze, and with the Rondell Data case, it provides good exposure to managing organizational politics and conflict. Pop Quiz Questions 1. What is Ramrod Stockwells title? Answer: Vice president for production 2. Which function is Ramrod having the most problems with? Answer: Sales 231 Issues and Discussion Questions 1. What kinds of products and technologies does Benson Metals use? How have these been changing recently? Benson Metals, a medium-sized maker of specialty steel products, has traditionally used a craftslike technology to produce a variety of metals. In terms of Perrows model of technology, task variety and task analyzability are low, as there is still guesswork, skill, and even some black magic in manufacturing products. Benson also produces metals in very small quantitiespounds not tonsso that in terms of Woodwards model it is small batch, and the skills and knowledge of production people are more important than machines in getting the job donetask complexity is low. Recently, the company has moved into making sophisticated and technically difficult steels for the aerospace industry. Not only are they difficult to produce, these steels require more research skills, metallurgical analysis, and delicate handling in all stages of production. They are produced to very stringent specifications. In terms of Perrows model, task variety has increased and task analyzability has fallenproduction is more nonroutine and research oriented and depends more on the skills, experience, knowledge, and judgment of production personnel. Companies cannot imitate these skills, so they form a competitive advantage. The environment surrounding the company has changed to more uncertainty because a new range of products is manufactured. Both technology and environment have changed, affecting the contingencies facing the company, and increasing potential risks and returns. 2. What problems is Benson Metals encountering as it changes products and technologies? An increased level of conflict between sales and production poses a problem. Production is responding to the new pressures facing the organization, yet it is continually fighting with sales. Sales wants a rapid response to unexpected customer requests or tries to discover productions plans or when the finished product will be ready. Morale is falling as the effects of these conflicts spread. Managers in different functions are taking sides, usually siding with sales against Ramrod and production. Communication and decision-making have slowed as a result of uncooperative attitudes. Integration between functions is falling. This is dangerous for nonroutine technology that requires a high level of differentiation and integration to be effective. 3. What is causing these problems in Benson Metals? The sources of the conflict can be isolated. Keep the discussion focused on the people, principally Ramrod, and examine what he is doing wrong; this approach makes the later analysis of power more dramatic. The attitudes and behavior of Ramrod Stockwell cause the problem. Although he is competent, he causes conflict within his own function and other functions. In his own function he fails to delegate authority and keeps the reins of power in his own hands. He has a centralized management style and does not share information, which makes it impossible for subordinates to provide salespeople with the information they need. He does not follow the chain of command; he goes to people only when he needs them. Violating lines of authority reduces the authority of his managers and also leaves them uninformed. His attitudes affect relationships with other functions, especially sales, because he also does not allow subordinates to share any but routine information. Because of the centralization of authority in production, subordinates do not possess information. Only Rob Bronson, the vice president of sales, can get information from Ramrod, and he is too busy to do so (and too proud since he would have to admit 232 dependency on Ramrod). Stockwell says something can be done but fails to provide an accurate time frame, making planning difficult for sales and other departmentsmaking them dependent on Ramrod. Ramrod is a rough diamond and has little social contact with other top managers at Benson Metals, which further isolates him. Managers have suggested sensitivity training to help him better communicate and delegate. The conclusion is that Ramrod is the problemhis attitudes and values. What is the solution? Fire Ramrod? After the pros and cons have been considered (the firm would lose his valuable skills and expertise), the instructor can turn the discussion to the issue of the company power structure; students rarely raise this issue. 4. In the past, which function has had the most power in Benson Metals? How has the power relationship between production and sales been changing recently? Traditionally, sales has enjoyed most of the power: President Tom Hollis worked with Fred Benson and was the sales director. Most of the assistant to managers groomed for promotion come from sales. Sales gets the credit for good work while production is blamed in the bad years. Sales can slip orders into the production process, although, as in the Continental Can case, this causes significant problems that will increase as the sophistication of the metals increases. Production managers play second fiddle to salespeople: They have inferior facilities and limited access to resources and to top managers. The traditional power of sales reflects the fact that in the past, the main contingency facing Benson was to sell its products in a competitive market against four or five other companies who compete for the same customers. In this environment, developing customer relationships and servicing customers is very important. Recently the environment has changed and production has become more importantonly production can produce the kinds of steels customers want. In the new competitive environment: Production controls the main contingencies. Production has become central and nonsubstitutable. Production reduces the uncertainty facing sales, not vice versa. Even though the power of production is increasing, Bensons internal power structure does not reflect this change. Rob Bronson, the sales manager realizes the change but deliberately avoids a change in the status of sales, and the result is conflict. The message is that maybe Ramrod is not the problem; it is Bensons unchanged internal power structure in a changed environment. Ramrods attitudes and behaviors seem logical once it is understood that he wants to increase his functions power and status in the organization: He doesnt delegate authority and share information to increase his power over sales. Information is a power resource, and by hoarding information he can increase the uncertainty of other departments and their dependence on him. He agrees to all requests but gives no feedback. This increases his power and makes him nonsubstitutable. Ramrod, consciously or unconsciously, is withholding information to increase the dependence of others on him and to change the balance of power in his favor. A strong CEO would understand this and might 233 publicly recognize the importance of production and correct the imbalance. The chairman and his son are weak and the president is from sales, so nothing is being done. The level of conflict is escalating as sales fights back. 5. Suggest some ways to try to solve the problems the company is experiencing. What would be a good strategy for change? There are several ways of increasing the power of production vis--vis sales. Like Continental Can, Benson should create a production control department to buffer sales and production and reduce or eliminate sales ability to slip new customer orders into the production process. All requests should flow through production control, which transmits them to production. This reduces sales traditional power over production and helps promote a power balance. The support of top management is vital for a change in attitudes, and top management needs to recognize the increased status of production publicly. To increase the status of production, top management can improve manufacturing facilities and give Ramrod a bigger office and staff, a more central location, and greater access to top management. Create a task force to examine how environmental changes affect working relationships and to increase perceptions of the importance and status of production. Send Stockwell to a management training course to improve his skills at delegation. If these changes dont work, then fire him. 234 Case 15 Rondell Data Corporation Teaching Notes Copyright Gareth R. Jones, 1994 Synopsis The Rondell Data Corporation is an innovative electronic products company that manufacturers two major lines of electronic products, broadcast equipment and data transmission equipment. The company has grown from 100 employees in 1947 to over 800 employees in 1978. As it has grown and increased the number of new products developed and manufactured, it is having problems coordinating activities. The company structure is not sufficient to manage the breadth and depth of activities. As functions have grown and differentiated, each has developed subunit orientations. As different functions pursue their own goals and fight for their own interests, the level of conflict in the organization increases, and the engineering department, finds itself in the crossfire. Engineering handles all conflicting demands and interests of the other functions and integrates activities, but without power. Power results from informal working relationships built up over time. The president, Bill Hunt, attributes the lack of cooperation to problems with the head of engineering, not to the failure of organizational structure. The issue is that the company needs a new structure to coordinate its activities and reduce conflict. Teaching Objectives 1. To examine how conflict can emerge between functions because of poor organizational design. 2. To analyze the different sources of conflict in an organization. 3. To analyze how different kinds of structure can be used to reduce conflict and speed product development. This case is best used after the lecture on conflict, so students can pick out the sources of organizational conflict. It shows how the interests of functions differ and defines differentiation. Discussion can fill an entire class period if attention is given to redesigning the structure. Students sympathize with Frank Forbus, Rondells last director of engineering (Rondell has had three directors in four years), who is fired before Christmas because the CEO blames him and not Rondells structure for not resolving the conflict. Pop Quiz Questions 1. What are Rondells main product lines? Answer: Broadcast and data transmission equipment 2. What happened to Frank Forbus at the end? Answer: He was fired. 235 Issues and Discussion Questions 1. What are the goals and subunit orientations of the different functions in Rondell? The five principal functions in Rondell that must work together to produce new products are production, sales, research, engineering services (part of engineering), and the control department (containing accounting, purchasing, and materials control). Each function contributes something unique and has a distinct subunit orientation. a. Production minimizes manufacturing costs. The goal is to obtain products from the engineering design department for easy and inexpensive manufacturing. The manager in charge of production, Dave Schwab, is concerned about protecting his turf, and resists attempts by other departments to interfere with manufacturing. Productions orientation is short-term technical efficiency. b. Sales goal is to supply customers with new and innovative products to retain their business. It also wants new products on time without shipping delays. Sales has a history of optimism about delivering new products quickly, and that optimism pressures other functions. Sales is to supply information to R&D for use in product development. Its orientation is toward meeting the changing needs of Rondells customersit is focused on the environment. c. R&Ds goal is to find innovative ways of improving existing products and creating new products. Some R&D functions try to improve the manufacturing process to reduce costs or increase reliability, but R&D is purely new product oriented. R&D causes problems by introducing new innovations into the design process at an advanced stage. Its orientation is toward long-run product development. d. Engineering services job is to coordinate and integrate activities. Engineering services takes the inputs from sales and R&Dnew customer requests or improved component designsand builds the final product design with production specifications. It sends these plans to production, which designs the assembly process to produce inexpensively and efficiently. Its orientation is to improve the effectiveness of internal systems. e. The control department controls purchasing and materials control. It is a service department to the manufacturing and engineering services and has an internal systems orientation. 2. What are the sources of conflict in Rondell and why is the conflict among functions a major problem? Although engineering services is responsible for product development, other functions, like R&D and sales, influence the new product development process. This causes conflict. Sales can set ambitious targets for introducing new products over engineerings objections. Both sales and R&D can intervene late in the design process and make changes, creating problems for engineering services. The production manager constantly returns the product design plans sent to manufacturing because engineers have not worked out the bugs. More redesign becomes necessary, and manufacturing is slowed down, causing sales problems as product introductions are delayed. Manufacturing itself contributes, routinely sending flawed plans back to engineering, though many errors could be corrected during the preproduction setup. Each function pursues its goals at the expense of the others. Growing complexity of the companys business and the wide range of products it produces resulted in engineering services as the linchpin of the product development because it coordinates other functions. Yet, this function is considered crucial by top management, which always sides with R&D or sales against engineering. R&D is considered the most important function because the company has been 236 driven by technical developments that result in new products. Just as in the Ramrod Stockwell case, there is a power imbalance, and different functions compete for power and control of resources. It is helpful to use the material on conflict in Chapter 14 and discuss the five main sources of conflict: a. Interdependence. As Rondell has grown, each function pursues its own interests at the expense of the others. Each subunits desire for autonomy conflicts with the organizations desire for coordination, and Rondells structure provides no coordination and integration necessary to pull activities together. b. Heterogeneous goals and priorities. Each functions different goal and subunit orientation causes it to view problems differently. Subunits have become competitive as the attempts of one to achieve goals thwart the attempts of another. c. Bureaucratic factors. Rondells structure has evolved historically and status inconsistencies have developed among different groups and managersbetween the heads of R&D and engineering. Although the head of R&D, Doc Reeves, formally reports to Frank Forbus, the director of engineering, informally Reeves has more status and power. The manufacturing manager is concerned about his lack of a degree, which he believes lowers his status, so he deliberately causes problems for other managers to increase his power and status. d. Incompatible performance criteria. Each function is evaluated according to its goals, so when slow engineering design raises manufacturing costs or results in lost customers or penalty clauses in customer contracts, functions come into conflict. e. Competition for scarce resources. Some functions, such as R&D, can command whatever resources they want. Engineering services is running very lean, its engineers stretched thin, and no resources for an effective preproduction unit. Given that profits have fallen, competition for resources might increase, which will worsen the problems. It is clear that the company needs to take action. Because structure is the source of the problem, the company must understand how structure works and see how it has contributed to problems. 3. What kinds of organizational design choices and structure does Rondell use to control its activities? How do these contribute to the problems it is experiencing? Rondell uses a functional structure to coordinate its activities. It is a relatively small company, with only 800 employees, and it appears to have about five levels in the hierarchy, counting first-line supervisor and shop floor employees. The arrangement of functions has grown rather haphazardly over time. The rationale for having both R&D and engineering services report to the director of engineering is historical precedent, as the head of R&D also has a dotted-line relationship to the president. Similarly, the rationale for having purchasing and materials control in the control department while quality control is in engineering services developed as a temporary wartime need. There is no separate production control department to coordinate manufacturing, engineering services, and sales. Manufacturing seems to do its own scheduling, and preproduction engineering is weak and underdeveloped. Rondells pattern of differentiation contributes to its problems because task and role relationships among functions are not well defined. There are few formal integrating mechanisms, which promotes conflict. Going through Galbraiths list of integrating mechanisms shows few formal links between functions such as task forces and teams. Most cross-functional contact is high up in the organization between the heads of the functions, not between lower level personnel. The single high-level executive committee was the brainchild of the controller and a relatively recent development. It was not working well because the president used it to pass on routine information, not for integrating among the functions. 237 Both differentiation and integration in Rondell promote conflict among functions because the structure is not complex enough to coordinate the growing need for cross-functional communication. Decision-making is centralized, and Hunt is involved in all important decisions between himself and key functional managers. This centralized style prevents lower-level managers from solving their own problems through mutual adjustment. Thus, Rondell is not making the best use of its managers functional skills and abilities. Not much use is made of formalization or standardization except inside manufacturing, where Schwab has developed a very mechanistic structure. In building this barrier between manufacturing and the other functions, Schwab, the production manager, has caused major coordination and communication problems that foster conflict. Rondell uses the informal more than the formal organization to coordinate activities, and this causes conflict. The power of the key managers results from their historical contribution to the company. Even though the organizational chart shows that Doc Reeves reports to Frank Forbus, Reeves has more power and has the ear of the president. Forbus should have considerable formal power, but because of the informal decision-making, he is powerless to resist sales, R&D, or manufacturing when they cause problems at any stage of the design processhence the conflict problem. Many of Rondells problems come from the design choices by top managers and especially by Hunt, who has paid little attention to design. 4. How might you change Rondells structure to reduce conflict and speed product development? There are many ways of changing structure and redefining task and role relationships, and the pros and cons of each of these can be discussed. Rondell could increase integration among functions. It could create product development committees from different functions who discuss product development and solve problems. Higher up the organization, the executive committee could function more effectively with an agenda and by holding the functions accountable for meeting goals. If integration increases, this might coordinate what is still a relatively small organization. This solution would require Hunt to change his management style. He must decentralize authority to functional level managers and avoid siding with one function over another. Given the history of the company, this is unlikely. A more radical solution might be necessary, involving a change in the level of differentiation to change the power of different functions and realign them. Engineering services has become the most central function. How can its power be increased? How can a new power balance be achieved? The company could use cross-functional teams and create a product team, responsible for a new product from development to manufacturing. This would be a radical change. R&D would be split off from engineering design and kept centralized, reporting directly to the president. Members of the R&D department might be assigned responsibility for liaison with each team and for transferring knowledge to each team. An engineering services manager who is responsible for coordinating teams and other functions would head each cross-functional team. Each team would be responsible for new product development activities, including preproduction planning, and would assume many responsibilities of the manufacturing department, which would become a resource. Schwab would supervise the assembly of the final product and not cause problems. Team leaders would report to the executive vice president. 238 In this arrangement, the power of engineering services is increased because its managers lead the product teams, and the power of the other functions is reduced as their members report to the team leaders. The arrangement is flexible because as each product proceeds to the routine manufacturing stage, members can be reassigned to new teams. Such a structure would break down the functional boundaries that cause Rondells present problems, reduce conflict, and speed product development. A third option would be to keep the functional structure and to formalize the product development process by creating written guidelines that govern how a new product passes from stage to stage with minimal intervention from other functions. Here, the goal would be to increase the level of standardization to control cross-functional activities. 239