XYZ CORPORATION
Sam Jenkins is the Chief Executive Officer (CEO) and President of Delta Chi Corporation, a firm manufacturing a broad line of consumer and commercial paper products ranging from towels and bags to the disposable drapes used in the surgical suites of hospitals. Company sales for the past year amount to $5.5 billion and Delta Chi has enjoyed good profits for the past several years.
Delta Chi has its headquarters in Baton Rouge, Louisiana, and four manufacturing plants in different parts of the country. The company is departmentalized along functional lines, each function being headed by a vice-president. In other words, production is the responsibility of the vice-president of production, sales is the responsibility of the vice-president of sales, etc.; however, the CEO has the ultimate responsibility for overall profitability. Recently, Mr. Jenkins has been trying to find ways to decentralize the responsibility for producing profits and to design an organizational structure that would highlight each vice-president’s contribution to corporate profits. At one time, he contemplated arranging the activities by product divisions, separating the major products into individual divisions and putting a division manager in charge of each. This structure would create separate profit centers and would enable each division’s contribution to profits to be readily measured. Many company products are produced by the same equipment from basically the same raw materials in the same manufacturing process. Channels of distribution also overlap.
Annually, corporate planning is accomplished at a three- to four-day conference of the top executives of the corporation, usually at a location away from the headquarters building. At the conference, the long-range plan is reviewed and another year is added. The long-range plan now covers three years. Management feels that a longer period would be unrealistic in view of the number of changes in the industry and the speed with which they occur.
Questions
1. What are the advantages and disadvantages of XYZ’s current functional structure? Discuss the fundamentals of organizing, and how these might affect Mr. Jenkins’ choice of an organizational structure.
2. What are the advantages and disadvantages of decentralizing responsibility for producing profits?
3. Recommend an organizational structure to Mr. Jenkins and discuss how your recommendation would allow Mr. Jenkins to meet his objectives by discussing the advantages and disadvantages of the structure you are recommending.
4. Finally, comment on the whether the strategic planning horizon the company currently employs is realistic or unrealistic.