organisation structure case studies

1. Case Studies

2. General Motors:Its Changing Organizations Design
The trials and tribulations of General Motors (GM) during the 1980s and 1990s
mirror those of organizations in the United States and around the world. GM's
position of market leader in automobile production and sales began to falter in
the early 1980s along with market leaders in other industries. Competitive forces
throughout the world were forcing US firms to rethink their strategies and their
organization designs. As more and more competitors from Asia and Europe
challenged GM's market supremacy and as technological developments in
manufacturing and information processing challenged GM's production
advantages, GM's management responded by implementing changes in its
organization design that continue into the second half of the 90s.
The first signs of problems began to appear in 1981 when the company reported
its first loss since 1921. This report coincided with the appointment of Roger
Smith as CEO, the sixth GM CEO since Alfred P Sloan, Jr., who served from 1937 to
1956. Sloan created the modern version of GM through the development of the
divisional organizational structure, which consisted of five independent
divisions— Chevrolet, Pontiac, Oldsmobile, Buick, and Cadillac—and the
competing product strategy. The competing product strategy encouraged each
division to compete for customers by delegating complete authority to each
division to design, produce, market, and sell its own particular line of cars. The
only limitation placed on the division was the overall corporate strategy of
encouraging car buyers to think of "trading up" as each year's new models hit the
show floors. Thus, the 'Chevrolet Division produced the starter cars, relatively
inexpensive and within the price range of the first-time car buyer. But with
increases in income the car buyer would be encouraged through promotion
and selling efforts to consider the more expensive Pontiac and Oldsmobile
vehicles, and ultimately the Buick and Cadillac.
This traditional divisional design was in place throughout the post-World War II
period when General Motors grew into the largest manufacturing organization in

3. the world. But something happened along the way. The divisional structure as it
evolved over time began to be identified as an impediment to progress and
market response. One of the outgrowths of the structure was the development of
a massive corporate support staff, which when created was supposed to provide
expert advice and consultation to the divisions. But over time these staff
members began to take over me decision making of the line units, and the
decision making began to grind to a halt in endless discussions in endless
committee meetings at corporate headquarters. As these corporate staff units
increased their influence through the provision of valued information, they
sought and received formal authority over many of the day-to-day decisions.
Thus, when Roger Smith took the reins in 1981, he began the process that
continues even to this day: redesigning GM's organizational structure with the
specific purpose of pushing decision making down into the operating divisions and
reducing the number of staff at corporate headquarters. In 1984, he announced
his first move: the creation of two autonomous groups, BOC and CPC. BOC
consisted of what had been the Buick, Oldsmobile, and 'Cadillac divisions, and CPC
consisted of what had been Chevrolet, Pontiac, and GM of Canada. Smith
delegated complete authority to each of the groups to organize in whatever way
the managers thought was necessary to get GM back on track—to regain its
competitive, growing, and profitable status.
BOC decided to organize around four completely autonomous product groups—
strategic business units (SBUs). Each product group would operate as Sloan had
envisioned his divisional structure would operate, exercising complete authority
to design, produce, and sell cars. By contrast, CPC organized around functional
lines with centralized authority, but with a matrix overlay to facilitate
communication across functional lines.
When 1993 rolled around, GM had replaced Robert Stempel, who had replaced
Roger Smith, with Jack Smith. Stempel had been in office barely two years, yet the
board of directors was unhappy with his deliberate management style. He simply

4. was moving too slowly in carrying out the turnaround that Roger Smith had
begun. The new CEO responded to the news that GM's market share had dropped
to its lowest point in 23 years, 29 percent, by creating a single operating division,
North American Operations (NAO); paring corporate staff from 13,500 to 2,500;
reducing the number of car models from 62 to 54; combining 27 different
purchasing departments into one; and eliminating nearly 16,500 hourly jobs by
offering early retirement. These seemingly harsh measures were necessary
according to Jack Smith to assure GM's very survival as an automaker.
The organizational design that GM now counts on to enable it to survive and
compete identifies the five traditional divisions—Chevrolet, Pontiac, Oldsmobile,
Buick, and Cadillac—as marketing units. But all production, product design, and
purchasing will be done in one separate unit. The story of GM's reorganization
efforts remains unfinished. In fact, what progress the company makes will depend
upon'; Jack Smith's success at eliminating the remaining vestiges of bureaucracy
that persist even in the midst of massive efforts to make the company more
responsive to market conditions" and technological developments. Centralization
or Decentralization? Which is the appropriate response: centralize some
functions, such as purchasing and production, and decentralize other functions
such as marketing?
Despite all the efforts of its CEOs from Roger Smith to Jack Smith, GM continues
its long slide down the profitability curve. The efforts to reverse this slide through
organization redesign and other measures seem to have yielded little gain. If
General Motors cannot cope with the rigors of global competition, can the
country?

5. l
1. Identify the environmental forces that have driven General Motors to change its
organizational design.
2. Have the changes in structure been in the appropriate direction? Have they
been misguided? Explain your answer and your reasoning.
4 General Motors has a collaboration with Hindustan Motors-makers of
iconicAmbassador.However,they are also trying to independently establish own
set up.what changes may happen to their parent organization structure?.
3. Discuss the possibility that redesigning the organizational structure is actually
an irrelevant response: to what ails General Motors.

6. MicroAge Undergoes Massive Structural Change
In April 2000, MicroAge Technology Services transformed itself to an e-Business
infrastructure services company that operates as a virtual organization, with an agile
and mobile sales force able to reach broader geographic markets. "The rapidlychanging climate of the technology industry, primarily due to the growth of the
Internet and emphasis on reducing operating and technology costs through eBusiness, has made it clear that we must make significant changes to our business to
meet the demands of the new digital marketplace," said MicroAge Technology
Services President, Jeff Swanson.
"As a virtual organization, our sales teams will no longer be tied to physical
brick-and-mortar facilities. They will be able to cover broad geographic areas to
meet the needs of clients wherever they do business. At the same time, we will
continue migrating clients to MicroAgeDirect for product procurement so
MicroAge Technology Services sales associates can focus their full attention on
relationship management of their clients in fulfilling their infrastructure services
needs."
Swanson continued, "As a client-centric organization the need for physical
locations is minimized so that we can work more directly with clients to help them
profit from technology in the internet economy."
The company's strategic initiatives, aimed at transforming MicroAge Technology
Services into a flexible and agile organization fully .capable-of providing the eBusiness infrastructure services its clients require, included:
Expansion of market coverage through the establishment of a field structure
composed of thirteen broad geographic market areas, eliminating in three
phases the costly network of thirty-five branch offices.

7. Centralization of operations and, processes to lower costs and increase
efficiency as MicroAge Technology Services moved to a virtual, field
organization."Branch inside sales functions will transition to centralized sales
support and client site based sales teams as appropriate.
Completion of centralized service dispatch for all branches. MicroAge
launched plans to centralize service dispatch in order to implement consistent
quality standards and enhance overall client satisfaction.
Migration of all clients to MicroAgeDirect for product procurement. Sales
support for major clients will continue to be provided by existing client-site
teams or by a centralized team operating from the company's Tempe
offices.
MicroAge Inc., President Christopher Koziol noted that the restructuring of ,the
procurement function allows the MicroAge Technology Services sales force to focus
their full attention on serving the needs of clients and meet the demands of the new
connected economy. "This strategy allows our associates to focus their full attention
on managing client relationships and releases them from the burden of managing
product transactions, which are more efficiently handled by automated
procurement systems such as MicroAge Direct. We will also be able to reduce the
costs of delivering services and products, significantly streamline operations and
ensure consistent, high-quality service delivery to all clients. The most significant
benefits of this new structure will be improved sales productivity and growth
increased profitability, and client satisfaction," he said.
Questions for Discussion
1. The changes in organizational structure discussed in this case were initiated in
April 2000. Go on-line and look up MicroAge today. Do you think the company
has prospered as a result of these changes? Explain. What is the status of the
company today?

8. 2. MicroAge made several organizational changes at the same time. What problems
might be encountered by making so many changes at once? How can managers
deal with this type of massive structural change?
3. The MicroAge sales force will work independently for much of their time with
the elimination of the thirty-five field offices. How can managers at corporate
headquarters keep track of sales Activity? What technologies might be used to
ensure that sales goals are being met?
4. Compare organization structure of any Indian company involved in e
Commerce with Microage

9. Organizing For Innovation At Raytheon Company.
Raytheon Company depends upon innovation for survival. The company
competes in the highly technical and volatile electronic based product industry.
Its business with the government includes missile systems, radar, and underwater
surveillance products which account for more than half of its $7 billion annual
sales. The other half comes from business groups including such well-known
consumer products as Amana appliances, speed Queen laundry products, and
Caloric cooking appliances. In this environment the importance of development of
new products and new technology becomes crucial to the firm’s very survival and
it is imperative to design an organization that facilitates new product
development. Typically, firms create research and development (R&D) units to do
product and process development research and, Raytheon uses this
organizational form but supplements it with a centralized, corporate level, New
Products Center.
The New products Centre (NPC) is a 35 person group located at a corporate
headquarters in Burlington. Massachusetts. Since its formation in 1969, it has
participated in the early development of 39 products which have become
mainstays in the firm’s product line. The NPC stands alone and works with all the
divisions and subsidiaries of the company including those R&D units that are
parts of the divisions and subsidiaries. The company also uses other ways to
initiate and sustain innovation including external consultants as well as internal
and external ventures groups. The NPC plays the special role in this configuration
of approaches to innovation because it views the entire organization as both a
source of clients and a source of resources. All the expertise in all the divisional
R&D groups can be made available to the NPC during the course of developing
new products.
The NPC serves as a way to cross functional and divisional boundaries so as to
tap all the skills and abilities in Raytheon. The primary goal of the NPC is to
develop profitable products. New products are worthless if they do not generate
profits, no matter how brilliant or interesting the underlying idea. Thus the

10. bottom-line criterion for evaluating the performance of the NPC is its contribution
to profit. Its basic operating procedure is to develop the first functioning model of
a new product that can then be turned over to the appropriate product or
business center. If the product is successful, it will extend the product line and
will be manufactured with existing facilities and distributed through existing
channels.
The center is staffed by both generalists and specialists. The generalists are
capable of working on a variety of products and fields simultaneously. Three
major categories of specialists in Raytheon's NPC focus on: (1) computer
applications for electronic controls, (2) materials design and development, and (3)
product engineering which transfers the product manufacturing responsibility to
a product or business group. However, even the ablest of research and technical
talent will go untapped if a satisfactory relationship with the client group is not
established. In Raytheon every organizational unit is a potential client group of
NPC, and the development of satisfactory working relationships requires mutual
trust. A satisfactory working relationship includes agreement on which market to
target with what product, the scale of company investment, the role of each
person involved, and who will get credit for success and blame for failure. These
are important issues that must be negotiated before the real work of developing
the product can begin.
The internal operations, organization, staffing, and interpersonal skills are
critical to the success of the NPC. But its place in the overall organizational
structure is also critical. In recognition of the possibility that the center could be
the first victim of hard times when revenues and cash flows require
retrenchment, Raytheon funds the center's $3 million annual cost entirely out of
the executive office resources. This practice means that no operating division or
group will be assessed any cost for using the center's resources for product
development. In addition, the director of the center reports to the CEO thus
emphasizing the support of top management for the center's importance.
Raytheon's experience with its NPC indicates that it is one approach to organizing
for innovation that other firms could adopt.

11. Questions
I.
Evaluate Raytheon's approach to organizing for innovation. What
alternatives come to mind? Would any of these alternatives be appropriate
for Raytheon to consider?
II.
Select an Indian company known for Innovation. Justify choice.
III.
Compare their approach with Raytheon

12. Krispy Kreme: Where Growth Is Really Sweet
At Krispy Kreme's 324th store opening in late October 2003, a crowd began
gathering early outside the store. Close to 100 people huddled under a tent and
umbrellas on that cold, rainy morning" waiting for the store's opening. With the
local media present, the store opened at 5:30 A.M. to the crowd's chanting
"Doughnuts! Doughnuts!" One customer who had been in line since 3:00 A.M.
admitted to getting up early to see Presidents and Governors—and now to
purchase Krispy Kreme doughnuts. As admirable—or crazy—as this may seem, it's
tame compared to the doughnut dedication shown by others. Some people will
even camp out at the stores in the final days of construction and set up before the
opening. Rob Perugini camped outside of the 324th Krispy Kreme for 1 7 days
before the opening, breaking the old record of 13 days. What does Krispy Kreme
do to produce such devotion to its doughnuts?
The Founding and Early Growth of Krispy Kreme
Krispy Kreme Doughnuts, founded in 1937, has grown from a small doughnut
shop in a rented building into "a leading branded specialty retailer, producing
more than 5 million doughnuts a day and over 1.8 billion a year." After purchasing
a yeast-raised doughnut recipe from a French chef in New Orleans, Vernon
Rudolph, Krispy Kreme's founder, began making doughnuts in a rented building in
Winston-Salem, North Carolina, and selling them to local grocery stores. Soon
Rudolph began selling hot doughnuts directly to customers. In the ensuing years,
Krispy Kreme grew into a small chain of stores, all using the same recipe. Product
quality varied, however, and the company established a dry-mix plant and
distribution system to ensure a consistent product. Krispy Kreme continued to
expand and enjoyed steady growth until the mid-1970s when the company was
sold to Beatrice Foods subsequent to Rudolph's death.

13. The sale to Beatrice Foods ushered in an era in which Krispy Kreme stores
sold ice cream, sausage biscuits, and other food products in addition to doughnuts. Even the doughnut recipe was changed. Horrified by what was happening, a
group of Krispy Kreme franchisees repurchased the company from Beatrice foods
a few years later.
With the 1982 repurchase, Krispy Kreme refocused on making the hot
doughnut experience a company priority. The company continued expanding
throughout the Southeastern United States, and then in 1996 it opened its first
unit outside the Southeast. This store was in New York City. In 1999, Krispy Kreme
opened its first store in California. National expansion has accelerated rapidly
since then. In December 2001, the company opened a store in Canada, its first
outside the United States.
Growth Through Excellence
Krispy Kreme has a strategic philosophy that is oriented toward growth through
excellence. The company's strategic philosophy revolves around the following
beliefs:
•"All products we make in our stores will have a taste and quality that are second
to none."
•"The starting point in controlling product quality is controlling the quality and
freshness of the ingredients."
•"We will be thoroughly prepared to execute growth inineeded."
•"We view quality, service, and innovation as keys to creating and maintaining a
competitive advantage."

14. • We view our company as a set of capabilities, not just a product or brand."
• "We view our growth and success as a company as a natural result of the growth
and success of our people."7
Krispy Kreme's growth has been partly fueled by the company's obsession with
product consistency. Krispy Kreme strives for such consistency that a doughnut
purchased anywhere in the world at any time will taste exactly the same. This is
accomplished by testing all raw ingredients before delivery is accepted. If a test
sample of a shipment does not meet the company's standards, the entire
shipment is rejected. Krispy Kreme also makes sample doughnuts from every
single 2,500-pound batch of mix to ensure that each batch is blended correctly.
Krispy Kreme is more like a factory than a bakery. Krispy Kreme stores typically
operate around the clock, producing doughnuts for walk-in customers as well as
for wholesale purchase by supermarkets and grocery stores.
National expansion through franchising has driven a good portion of Krispy
Kreme's growth, particularly since the mid-1990s. Significant growth has occurred
even though a Krispy Kreme franchise is the most costly food franchise
available—being about five times the standard cost for most operations, as
estimated by the International Franchise Association. A Krispy Kreme franchise
costing $2 million per location on average, is both extraordinarily difficult to
obtain and in great demand. Krispy Kreme requires its franchisees to have "$5
million in net worth to apply and . . . ownership and operating experience with
multi-unit food service operations." Krispy Kreme also seeks "area developers"—
franchisees who will open at least 10 stores in a region.
Krispy Kreme stores are high-volume operations with higher profit margins
than other fast-food business. A typical McDonald's franchise has revenues of
about $1.5 million annually and a typical Dunkin Donuts averages about $744,000.
In fiscal 2001, Krispy Kreme franchisees had average revenue of $2.2 million per

15. location. This jumped to $2.8 million in fiscal 2002 and $3 million in fiscal 2003.
Company stores had even higher annual sales volume, reaching about $4 million
in fiscal 2003.
"Krispy Kreme now takes an ownership stake in all new franchisees, claiming
anywhere from 33% to 75%," a strategy that increasingly is being adopted by
other franchising companies. 'The parent companies engage in such partnerships
because they lead to higher earnings and faster expansion." Krispy Kreme takes
an ownership stake even though franchisees "have the money and desire to open
as many stores as the company will allow."
While fueling growth, this joint-partnership strategy has not been a smooth road.
A lawsuit over the terms of an alleged contract was filed by two franchisees in
northern California. An equity fund that was formed by 35 Krispy Kreme
executives to invest in franchise stores was disbanded in the aftermath of the
Enron scandal so "that no individual's personal gain would conflict with the
overall good of the company."
Krispy Kreme's rapid growth has also been facilitated by its use of information
technology. The company uses the Internet as well as a corporate intranet to aid
national and international expansion. Using its information technology, Krispy
Kreme has made more and more of its services and information accessible to
corporate staff, stores, franchisees, and suppliers. The vast majority of orders
from individual units are placed over the company's intranet. Using the Internet
and intranet, individual stores from anywhere in the world can train employees
around the clock.
Krispy Kreme continues to expand into new markets, both in the United States
and overseas. In fiscal 2003, the company entered 17 new U.S. markets as well as
one in Canada. It also opened its first store outside of North America, which is in
Sydney, Australia. At the end of fiscal 2003, the company is also preparing for a
store opening in London. In addition, the company acquired Montana Mills Bread
Company and successfully introduced Krispy Kreme Signature Coffees—an
outgrowth of its earlier acquisition of Digital Java, Inc. Krispy Kreme has

16. developed a roasting process for coffee beans that ensures the same high level of
quality and consistency with its coffees as it has with its doughnuts.
In line with its emphasis on product consistency, Krispy Kreme's opening of a
new store engenders highly consistent customer behavior. A Krispy Kreme store
opening attracts a lot of attention. The experience of James Consentino, a West
Palm Beach, Florida, franchisee is typical on the morning of a store opening and in
the ensuing days. "At 5:30 A.M. that morning, he'll let in a mob of people who've
been waiting outside for hours for the warm doughnuts streaming from his ovens
at a rate of 2,640 per hour. The event will probably be covered by a TV news
crew—most Krispy Kreme openings are—and in his first week Consentino will
take in almost as much in revenue as the typical Dunkin' Donuts store makes in a
year."
Review Questions
1. What are the key elements of Krispy Kreme's philosophy'? How do these
elements relate to the organizing trend of balancing decentralization with
centralization?
2. What type of organizational structure does Krispy Kreme appear to be using?
3. What is the potential for developing a network structure at Krispy?
4. Based on its recent growth history, (Including expected entry in India),what
type of organizational structure should be used to accommodate the growth in
the next 5 years?

17. Tata Electric Locomotive Company-TATA MOTORS
Tata Electric Locomotive Company started functioning at J'Pur in 1955 and was
engaged in manufacture and supply of electric engines to the Indian Railways.
Known as TELCO; it soon began to make diesel trucks in collaboration with World
renowned Mercedes- Benz at the same location. TELCO duplicated the facility
near Pune in 1965 and 1985 initiated a third facility at Lucknow. Today it is
known as Tata Motors.
The main activities at Telco consisted of manufacturing the spare parts and
assembling these parts into Engine, transmission and the Truck: selling Trucks
and accessories: procurement of raw materials required for manufacture of
these parts as well as other indirect items: making drawings and designs of
product, spare parts, equipment etc; maintaining a check on quality; ensuring
proper upkeep of various equipments etc. In addition to these activities, TELCO
management started as Engineering Research Centre (ERC) at Pune in early 70's.
Automobile policy changes initiated by Government in 1978, enabled TELCO to
design and develop four wheel products other than trucks to which TELCO was
initially restricted. TELCO soon developed smaller Trucks, which could successfully
compete with Japanese products. Encouraged by this success, TELCO came into
market with products like Tata Mobile and others which were serving as
passenger cars also. This range of vehicles known as Tata Family' was
manufactured at Pune. However, these products did not enjoy a great success.
The other two Jeep like offerings Tata-Sumo and Safari were however, a great
success initially. TELCO started working on design and development of a car in
1995. ERC was briefed to make a car which could compete with Zen, but should
have diesel engine. With help from French & Italian designers, TELCO successfully
launched Indica car by 1998. Later on, a large version Indigo was introduced.
Unfortunately for TELCO, however the environment had changed and many other
cards like Matiz, Santro etc were available to the customer, in addition to new

18. models introduced by Maruti. So initially the car model failed. After a series of
quality improvement, car model Indica succeeded.
In 2004, TELCO became Tata Motors. In 2008/09 of company launched a small car
at Rs.1 lac price - Nano, which would be produced at a new location. It also
introduced several variants of models already existing. Also Tata Motors also
brought car models with engines procured from FIAT. Nano plant in Gujarat has
been activated recently.
Q.1: How do you think TELCO activities were organized initially?
Q.2: In light of the current situation, do you think Tata Motors needs to charge its
organization structure?
Q.3: How would you like to effect this change? Why?
Q 4 In the past two years,Tata Motors is losing market share rapidly,with the
offtake of Nano car reduced drastically.A new MD has been appointed and one of
his mandates is to reduce costs.How could this be achieved via restructuring?

19. ABCL Petrochemical Company
ABCL is a Petrochemical company, which was founded as collaboration between a
UK Company and an Indian Management Group in the late 60's (The
collaboration agreement expired in the 70's).
Almost from the inception, the company manufactured and sold three products P, A and T- at the only facility near Pen in Raigad district. These products found
applications in Resins, Industrial salt, Paints, Dyes respectively. During the next
two decades, when the Industrial activity in the country and particularly around
Thane- Belapur belt, was expanding rapidly, the company found theses products
(known collectively as Commodity products) to be in short supply with the supply
far outstripping the demand. The financial performance was exceptionally well (It
may be mentioned that till 1991, any company had to get Government license to
increase volume, add any new product and to get collaboration).
Basic activities within the company consisted of manufacturing these products in
the facility (the equipment had been installed with the help of the foreign
collaborators, and was capital intensive and complicated) maintaining and
repairing / replacing the facility, modifying the manufacturing process to suit
Indian conditions, purchasing raw materials (which were standard outputs of
other petrochemical companies in the vicinity and spare parts required for the
equipment importing critical auxiliary material, distribution the finished products
though 10 wholesalers/ Distributors located across India. Due to the restrictions
mentioned earlier the company started an in-house R&D activity in the mid 80's
and successfully developed 10 new products for applications in pharmaceutical
perfumery, pesticides, Agrochemicals etc. these products were required in low
volumes but fetched higher prices. This portfolio was known as specialty
chemicals. Due to very little competition and low volumes, these products were
also sold through some distribution channels. Company kept on doing something
exceptionally well tell 90's.

20. However, with liberalization and globalization the import duty protection
provided on all the company products vanished and import of all company
products from abroad became a reality, thereby squeezing the margins. The
company also began to feel the need for development of higher value added
products, reduce costs etc.
Q1. How do you think the activities of the company were arranged initially?
Q2. With which changing environment is there a need to change the organization
structure?Why?
Q3. How would you re-organize? Why?
Q 4 study and compare organization structure of Reliance

21. Lucent: Clean Break, Clean Slate?
The company that could seemingly do no wrong in the first three years after it
was spun off from AT&T in 1996 seriously lost its way in 2000. Worst of all, it has
been completely bested by archrival Nortel Networks Corp. in the key market for
optical-fiber telephone switches.
The contrast with Nortel is what stings Lucent execs the most. It was only a few
years ago that Nortel was the industry dog. But today, Nortel has 45 percent of
the exploding optical-transmission-switch market. That compares with just 15
percent for Lucent, which decided in 1996 to develop a slower switch precisely
because its customers weren't asking for anything faster. Lucent now rues the
decision to settle for less transmission speed. And CEO Henry Schacht is quick to
acknowledge that he is as much at fault as former CEO Richard McGinn. Schacht
says he is planning one-on-one meetings with Lucent's customers and is reviewing
all the processes now in place with an eye to streamlining Lucent's cumbersome
structure.
Under McGinn, Lucent embarked on an organizational overhaul in September
2000. To head up key divisions, it has appointed some aggressive new outsiders
who are not mired in the company's bureaucratic mindset. One of those, CFO
Deborah C. Hopkins, is putting in place a companywide standard for evaluating a
product's profitability, replacing the piecemeal, business-by-business standard
used before. The company is also chopping away at management layers, more
closely tying compensation to performance, and trying to better integrate its
vaunted Bell Labs with product-development teams. But the world's largest
telecom-equipment maker actually has a more cosmic task: It must remake itself
into a company that can be quick to respond to needs, quick to deliver new
technology, and far less bureaucratic. And it has to do all of this while suffering
from a 20 percent turnover rate that is siphoning off top talent.
Granted, such an overhaul has been prescribed for just about every lumbering
old economy behemoth. Lucent is determined to pull itself apace with that market.

22. And it may have a secret weapon: In September, Lucent named Jeong Kim to head
its optical-networks business. Clearly different from the Lucent lifers around him.
Kim has reorganized the group into 17 small divisions based on product lines, with
managers closely matched to customers and compensation tied to performance. His
goal: to improve time to delivery by 30 percent. "I have a 100-day plan," he says.
Kim's entrepreneurial spirit is sorely needed at Lucent, and he is convinced he
already has had a positive effect on morale. He recently visited a Lucent plant in
North Andover, Massachusetts, and found general managers there very involved in
suggesting ways the operation could he improved. "They were really taking
ownership of their operation. And morale was running really high. I was very
encouraged."
Lucent must also start regaining the trust of its employees if it wants to stem
the flood of talent that started rushing out the door as soon as executives' preIPO options were excersid on October 1, 1999. And it hasn't done any better at
hanging on to the employees who came on board with its many acquisitions.
Adopted employees who have headed for the doors regularly complain that they
found them selves stifled by Lucent's many-layered management. "There are a lot
of top-level people trying to get out of Lucent right now," our Silicon Valley
headhunter says.
Lucent's executives are sounding all of the right turnaround noises. William T.
O'Shea, vice president for corporate strategy and business development, is in
charge of a massive effort that kicked off this past summer to streamline Lucent's
businesses. The goal: in encourage entrepreneurship. "We are putting new people
in charge and organizing groups to focus their energy in small teams." he says,
rather than structuring the company in large, often uncommon inactive divisions.
And the company is including Bell Lab researchers in these teams, to make sure
that their invention are properly promoted. "We are bringing a much broader
collection of people to the table internally to make strategic decisions," he says.

23. Questions:
1What are the reasons behind these changes in strategy?
2 How would you characterize the changes in Lucent's vertical and horizontal
structures?
3What other management issues do you see in this case? How do they combine
with issues of org structure?

24. DECENTRALIZATION AT CURTICE-BURNS, INC.
Curtice-Burns, Inc., consists of seven food manufacturing divisions with sales in
excess of $270 million. The company grew primarily through acquisitions of
food companies which then became divisions of the company. The
management philosophy at Curtice-Burns, Inc., emphasizes decentralization
and autonomy. Each division is completely responsible for its own business—
with the exception of major capital investments. To underscore the
importance of decentralization, the company has a headquarters staff of only
12 people.
President and CEO Hugh Cumming is committed to decentralization and can
readily identify the advantages and disadvantages of the approach. The
primary advantage is the clearly defined responsibility of each division's CEO
for that division's performance. A CEO whose division's-performance is below
planned performance cannot blame headquarters for meddling in division
matters. Instead, he alone makes all the strategic and operational decisions.
A second advantage derives from the company's incentive plan. Because of
the cyclical nature of the food business, Curtice-Burns does not tie its
incentive plan to the performance of a single division. Rather, the plan is
based upon overall corporate results and allocated to the divisions on the
basis of payroll. The incentive plan creates positive peer pressure because a
poorly performing division will reduce the bonus for all divisions.
Decentralization stimulates and sustains the entrepreneurial spirit so often
found in small business, but often missing in large corporations. All the topmanagement personnel began their careers in small business, and they tend
to continue to manage entrepreneurially. For example, when one division
decided it was time to get into the natural potato chip business, it did so in
less than a month. By contrast, Pepsico's Frito-Lay Division took 15 months to
bring out the product.

25. The decentralized concept is not without difficulties. For example, the emphasis
on divisional marketing of regional brands does little to promote the visibility of
Curtice-Burns stock. Consequently, the stock sells at prices lower than what the
company's board of directors thinks is appropriate. Investors simply are not
familiar with Curtice-Burns.
A second disadvantage of decentralization is the inherent duplication of functions
such as accounting, sales, and marketing. A corollary problem is that some
divisions (acquired companies) are too small to operate independently. Small
divisions often cannot provide the full range of functional support required to
operate as an independent unit.
A third problem is difficult to define. But it relates to the managerial question of
knowing when headquarters should assist or even overrule division decision.
Constant interference in division affairs obviously ruins the concept, but total
disregard is likewise ruinous. Striking a balance between the two extremes is a
problem only because it is a matter of managerial judgment.
Cumming believes the advantages of decentralization outweigh its disadvantages.
In fact, he sees the practice as the primary cause for the company's steady
growth.
Questions
1. Evaluate Curtice-Burns, Inc.'s policy of decentralization.
2. What specific company strategies facilitate the use of decentralized authority?
3. At what point should Cumming consider centralizing certain functions?Which are
the function most likely to be centralized when and if that point is reached?

26. FORD'S GLOBAL STRATEGY: CENTERS OF EXCELLENCE
In 1986 Ford passed its bigger competitor, General Motors, with earnings of $3.3
billion. Ford's market share is about 20 percent. But success, in many instances, may
be only temporary, and Ford's chairman, Donald E. Petersen, is concerned about
complacency. Indeed, the company has to work hard to maintain its reputation for
stylish, aerodynamic cars and high quality.
Under the former leadership of Henry Ford II, the company was very centralized.
But Petersen's plan is to make Ford an integrated global enterprise. Thus, a great
deal of authority for the development of specific models or components is now
centralized in the company's various technical centers around the world rather
than in Detroit. Under this plan, the car or its components are developed in the
technical center with the best expertise in a particular field, anywhere in the
world. This could save the company a lot of money by avoiding duplication in
development and reducing tooling costs. For example, Ford of Europe, located in
England, is the center for developing the platform for the new model that will
replace the European Sierra and the American Tempo and Topaz. Ford will sell the
new cars in Europe and in the United States. Similarly, in Japan Mazda (Ford owns
25 percent of the company), which has much experience in building small cars, will
be the center for developing the platform for the replacement car for the Escort.
The North American center of excellence will focus on midsize cars. Similar centers
are planned for major component, such as transmissions and engines. While
these centers of excellence develop platform and key components, exterior and
interior styling will be the responsibility of companies in various regions.
The concept of the centers of excellent may seem promising, yet a previous
attempt in the early 1980s to build a "world car in Europe failed. It is said that the
American car Escort, shared only one part with European counterpart, namely, a
seal in water pump.

27. Questions :
1. What do you think of Ford's overall decentralization with centralized authority for
development of specific cars and components at the technical centers?
2. Why does Ford think that the concept of having centers of excellence located in
various part the world will be the correct organization structure for the twentyfirst century?
3. Research to find out if these centres of excellence are still operating.
4. As is known Ford came to india a few years ago.Research and report their
organization

28. Stopping the Sprawl at HP
When Randy Mott joined Wal-Mart fresh out of college in 1978, its in-house tech
staff had only 30 members and company founder Sam Walton had not yet
become a believer in the power of computing to revolutionize retailing. But Mott
and his cohorts developed a network of computerized distribution centers that
made it simple to open and run new stores with cookie-cutter efficiency.
Then in the early 1990s, Mott, by this time chief information officer, persuaded
higher-ups to invest in a so-called data warehouse. That let the company collect
and sift customer data to analyze buying trends as no company ever had, right
down to which flavor of Pop-Tarts sells best at a given store.
By the time Mott took his latest job last summer, as CIO of HP, he had become
a rock star of sorts among the corporate techie set as an executive who not only
understood technology and how it could be used to improve a business but how
to deliver those benefits. Besides his 22-year stint at Wal-Mart, Mott helped Dell
hone its already huge IT advantage. By Welding nearly 100 separate systems into
a single data warehouse, Mott's team enabled Dell to quickly spot rising inventory
for a particular chip, for instance, so the company could offer online promotions
for devices containing that part before the price fell too steeply.
Now Mott, 49, is embarking on his boldest and most challenging project yet:
a three-year, $1 billion plus makeover of HP's internal tech systems that will
replace 85 loosely connected data centers around the world with six cutting
edge facilities—two each in Austin, Atlanta, and Houston. Mott is pushing
sweeping changes in the way HP operates, slashing thousands of smaller projects
at the decentralized company to focus on a few corporate wide initiatives
including scrapping 784 isolated databases for one companywide data
warehouse. Says Mott: "We want to make HP the envy of the technology world.”
If it works, Mott’s makeover could have more impact than any new HP advertising
campaign, printer, or PC and could turbocharge the company’s already impressive
turnaround. HP posted profits of $1.5 billion in its second quarter, up 51% from
the year before, on a 5% increase in sales. If Mott is successful, HP’s annual

29. spending on tech should be cut in half in the years ahead, from $3.5 billion in
2005, say insiders.
More important, a Wal-Mart style data warehouse could help HP make
headway on its most vexing problem in recent years: how to capitalize on its vast
product breadth. While HP sells everything from $10 ink cartridges to multimillion
dollar supercomputers, the company has operated more like a conglomerate of
separate companies than a one-stop tech superstore. “We shipped 55 million
printers, 30 million PCs, and 2 million servers last year,” says CEO Hurd. “If we can
integrate all that information, it would enable us to know exactly how we’re doing
in Chicago on a given day, or whether the CIO of a big customer also happens to
own any of our products at home.”
Mott’s initiatives may well stir up a hornet’s nest within HP. They will likely
require thousands of layoffs, while requiring the support of remaining staffers in a
company that has long resisted centralized control. Mott is testing the limits of
the HP culture, taking away the right of thousands of IT workers to purchase their
own tech equipment.
But Mott has the absolute backing of Hurd, who began recruiting him shortly
after arriving at HP in February 2005. The pair have known each other for years.
At both Wal-Mart and Dell, Mott bought data warehousing gear from Hurd, who
was a leading evangelist for the technology during his years at NCR Corp. Hurd
eventually wooed Mott in July on the strength of a $15 million pay package and a
promise to support him if he’d sign on for the aggressive three year
transformation.
Still, Mott’s greatest strength may be that while a technologist, he has the
management skills to actually make IT take root in a company’s culture. Linda M.
Dillman, a onetime Wal-Mart CIO and now its executive vice president for risk
management and benefits administration, recalls how Mott championed the
deployment of IT by showing how it achieved Wal-Mart’s business goals.
Underlings say Mott’s low-key Southern charm belies an intensity that typically
brings him into the office by 6:15 a.m. He has no patience for quick summaries
during grueling two day long business reviews he convenes once a month. That

30. certainly jibes with Hurd’s view of the world which is why he’s centralizing HP’s
balkanized information systems, even while working to decentralize operational
control. The idea is to make sure all of HP’s businesses are working off the same
set of data, and to give them the tools to quickly make the best decisions for the
entire company say, a single customer management system, so executives can
know the full breadth of what any account buys from HP.
Questions
1. In what ways is Randy Mott trying to change HP’s structure and the way it
works?
2. In what ways has he been trying to change HP’s Culture?
3. How will the changes he has made affect HP’s competitive advantage and
performance?
4. Research about HP’s org structure in India Is it appropriate to conditions in
India?

31. Organisation Structure of Saxe Realty Company
Saxe Realty Company, Inc,. located in the San Francisco bay area, was founded in
1938 by Jules and Marion Saxe. For most of its history, the company was a single
office agency run by its history, the company was a single-office agency run by its
founders. Over time, the company grew in size and sales revenue, which
increased from 41 million in 1973 to over 10 million in 1979. Rather than a single
office, the company had six branches in the San Francisco and Marin County
areas.
The firm grew for many reasons. An important reason was the founders’ ability to
do certain things very well. They knew how to select location, time moves, and
design offices. They recruited and hired people with above-average ability and
trained them to be effective salespeople. The rewards of growth were enjoyed by
the Saxe family and employees of their firm.
But with growth came problems stemming from the mismatch between the firm’s
organization structure, management practices, and the requirements of a large
firm compared to a small one. In the early days, Saxe Realty could handle its
business matters in simple and informal ways. After all, its business matters in
simple and informal ways. After all, it was a family corporation, and family
members ran it as a family, not as a business.
Some of the problems that surfaced with growth included the absence of clearly
defined roles and areas of responsibility. People were in jobs because of family
relationship rather than skills. Important decisions were made by relatively few
people, who often did not have knowledge of all available information. The firm,
moreover, had no strategic plan. It responded. The firm, moreover, had no
strategic plan. It responded and reacted to opportunities rather than being
responded. In a sense, the firm’s success had simply outgrown its organization.
Saxe consequently had to make many changes in its operations and organization
structure, the overriding goal being to move Saxe away from an entrepreneurial

32. style firm toward a professionally managed one. The change itself involved a
process of preparation and implementation.
The organization structure that Saxe adopted relies on geography as the basis for
departmentalization. There is a central office and the branch offices report to it.
Geographic departmentalization encourages decentralization. One of the
outcomes sought by Saxe’s top management. Branch management are
responsible for the day to day activities of their offices. The central office
maintains overall direction through planning and controlling processes. For
example, all branch offices participate in the annual planning process, during
which objective for each branch are developed. These objectives are then the
targets and the responsibility of branch managers.
Saxe’s top management developed formal descriptions for all key positions,
defining the responsibilities of each job with special attention to avoiding overlap
and duplication of effort. The company’s experience during its entreneurial stage
was that things were often left undone because everyone assumed that someone
else was doing them. In other instances, several people would assume
responsibility for a task when it required the attension of only one person. A key
consideration in the new organization structure was to define explicitly and
formally the work expected from each individual job.
The new structure provides for reporting channels from each branch associate to
the chief executive officer. The chain of command is the channel for progress
reports on planned objectives, financial and sales reports, and other
informational needs. In comparison with the previous organization, the chain of
command is much more explicit and formal. Individuals are encouraged to go
through channels.
The entire change at Saxe has been both extensive and time consuming. Nearly
every aspect of the firm’s operations has been affected, and the changes took two
years or more to fully implement.

33. Questions for Analysis
1. Draw an organization chart that depicts the structure being implemented at
Saxe.
2. Which alternative structures could Saxe have implemented and what would
be the advantages of each in comparison to the Saxe did implement?
3. What are the relationships between the planning function and the
organization function as depicted in the Saxe case?
4. How is Hiranandani real estate organized in India?

34. NUCOR
It was about 2 p.m. on March 9 when three Nucor Corp. electricians got the call
from their colleagues at the Hickman (Ark.) plant. It was bad news: Hickman's
electrical grid had failed. For a minimill steelmaker like Nucor, which melts scrap
steel from autos, dishwashers, mobile homes, and the like in an electric arc
furnace to make new steel, there's little that could be worse. The trio immediately
dropped what they were doing and headed out to the plant. Malcolm McDonald,
an electrician from the Decatur (Ala.) mill, was in Indiana visiting facility. He down
arriving at 9 o'clock that night. Lss Hart and Bryson Trumble, from Nucor's facility in
Hertfore County N.C., boarded a plane that anded in Memphis at 11 p.m. Then they
drove two hours to the troubled plant.
No supervisor has asked them to make frit trip, are no one had to. They went
on their own. Camping out in the electrical substation with the Hickman staff, the
team worked 20-hour shifts to get the plant up and running again in three days
instead of the anticipated full week. There wasn't any direct financial incentive
for them to blow their weekends, no extra money in their next paycheck, but-for
the company- their contribution was huge. Hickman went on to post a firstquarter record for tons of steel shipped.
What's most amazing about this story is that at Nucor it's not considered
particularly remarkable. Says Executive Vice President John J. Ferriola, who
oversees the Hickman plant and seven others, "It happens daily." In an industry
as Rust Belt as they come, Nucor has nurtured one of the most dynamic and
engaged workforces around. The 11,300 nonunion employees at the Charlotte
(N.C.) company don't see themselves as worker bees waiting for instructions from
above. Nucor's flattened hierarchy and emphasis on pushing power to the front
line lead its employees to adopt the mindset of owner-operators. It's a profitable
formula as Nucor's 387% return to shareholders suggests. Nucor gained renown
in the late 1980s for its radical pay practices, which base the vast majority of
most workers' income on their performance. An upstart nipping at the heels of
the integrated steel giants, Nucor had a close-knit culture that was the natural
outgrowth of its underdog identity. Legendary leader F. Kenneth Iverson's radical
insight: that employees, even hourly clock-punchers, will make an extraordinary

35. effort if you reward them richly, treat them with respect, and give them real
power.
Nucor is an upstart no more, and the untold story of how it has clung to that
core philosophy even as it has grown into the largest steel company in the U.S. is
in many ways as compelling as the celebrated tale of its brash youth. Iverson
retired in 1999. Under CEO Daniel R. DiMicco, a 23-year veteran, Nucor has
snapped up 13 plants over the past five years while managing to instill its unique
culture in all of the facilities it has bought, an achievement that makes him a
more than worthy successor to Iverson,
At Nucor the art of motivation is about an unblinking focus on the people on
the front line of the business. It's about talking to them, listening to them, taking
a risk on their ideas, and accepting the occasional failure. It's a culture built in part
with symbolic gestures. Every year, for example, every single employee's name
goes on the cover of the annual report. And like Iverson before him, DiMicco flies
commercial, manages without an executive parking space, and really does make
the coffee in the office when he takes the last cup.
Although he has an Ivy League pedigree, including degrees from Brown
University and the University of Pennsylvania, DiMicco retains the plain-talking
style of a guy raised in a middle-class family in Mt. Kisco, N.Y. Only 65 people—
yes, 65—work alongside him at headquarters.
Money is where the rubber meets the road. Nucor's unusual pay system is the
single most daring element of the company's model and the hardest for outsiders
and acquired companies to embrace. An experienced steel-worker at another
company can easily earn $16 to $21 an hour. At Nucor the guarantee is closer to
$10. A bonus tied to the production of defect-free steel by an employee's entire
shift can triple the average steelworker's take-home pay.
With demand for steel scorching these days, payday has become a regular
cause for celebration. Nucor gave out more than $220 million in profit sharing
and bonuses to the rank and file in 2005. The average Nucor steelworker took
home nearly $79,000 last year. Add to that a $2,000 one-time bonus to mark the
company's record earnings and almost $18,000, on- average, in profit sharing. Not
only is good work rewarded, but bad work is penalized. Bonuses are calculated on

36. every order and paid out every week. At the Berkeley mill in Huger, S.C., if
workers make a bad batch of steel and catch it before it has moved on, they lose
the bonus they otherwise would have made on that shipment. But if it gets to the
customer, they lose three times that.
Managers don't just ask workers to put a big chunk of their pay at risk. Their
own take-home depends heavily on results as well. Department managers
typically get a base pay that's 75% to 90% of the market average. But in a great
year that same manager might get a bonus of 75% or even 90%, based on the
return on assets of the whole plant. "In average-to-bad years, we earn less than
our peers in other companies. That's supposed to teach us that we don't want to
be average or bad. We want to be good," says James M. Coblin, Nucor's vice
president for human resources.
Compared with other U.S. companies, pay disparities are modest at Nucor.
Today, the typical CEO makes more than 400 times what a factory worker takes
home. Last year, Nucor's chief executive collected a salary and bonus precisely 23
times that of his average steel-worker. DiMicco did well by any reasonable
standard, making some $2.3 million in salary and bonus (plus long-term pay
equaling $4.9 million), but that's because Nucor is doing well. When things are
bad, DiMicco suffers, too.
Executive pay is geared toward team building. The bonus of a plant manager, a
department manager's boss, depends on the entire corporation's return on
equity.
So there's no glory in winning at your own plant if the others are failing. But to
focus only on pay would be to miss something special about the culture Nucor has
created. There's a healthy competition among facilities and even among shifts,
balanced with a long history of cooperation and idea-sharing. Since there's always
room for improvement, plant managers regularly set up contests for shifts to try
to outdo one another on a set goal, generally related to safety, efficiency, or
output. Ryan says Nucor's Utah plant is the benchmark these days. It is the most
profitable, with the lowest costs per ton. "They've got everything down to a
science," says Ryan admiringly. "It gives you something to shoot for."

37. Questions
1. What is Nucor's managers' approach to organizing?
2. In what ways has this approach affected its organizational structure?
3. Study Tata Steels India operation and Compare its organization structure
with Nucor.What are the differences and what is the reason for those
differences?