The main issue in the Mountainside Industries case is the problem of interdepartmental coordination and collaboration which spawn serious sub-problems as failure to optimize resources, hence, incurring opportunity costs in the areas of
- purchasing from identical suppliers;
- duplication of marketing efforts;
- non-compliance with delegated levels of disbursement authorities; and,
- losing business opportunities out of a diversified production processes, among others.
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There is a need hence to address primarily the corporate coordination issue and accompanying the restructuring with policy and organizational support through clear operating and management control system which are outlined below.
Problem analysis and diagnosis
In mergers and acquisitions, the risk of failure in coordinative efforts critical to optimizing resources is part of the inherent risk the new owner should have anticipated upon acquisition.
Considering the relative autonomy the different divisions have been used to before the merger, the new management did not call for a general meeting of all units to explain the new organizational set up with a new coordinative strategy headed by the new General Manager. In such a meeting, the symbiotic relationships of all units were not clarified and strategized, leaving each manager to fend and manage for himself as usual.
This is unproductive since the mergers are supposed to create a strategic advantage of resource maximization and optimization. Policy restructuring and reformulation did not accompany the merger to streamline a new system of operations which should have included a clear definition of signing authorities in terms of purchasing, marketing, expenditures, a compliance system through internal, management and operations audit and a performance management and evaluation system.
Likewise, the new management did not explore the possibility of retraining and reorienting the unit managers to recognize the new organizational operating system, accountabilities and employee code of discipline. Team building of officers and staff was not included in the organizational development (OD) process. Without addressing the above strategic restructuring and reorganization, Mountainside Industries is destined for chaos.
Alternative solutions & recommendations
The above-mentioned problem analysis, therefore, calls for the following strategic solutions and alternatives:
- Mountainside Industries must establish a new organizational setup with a distinct corporate mission and philosophy known to all. There is a need for a central purchasing, marketing, production, accounting and control functions with congruencies in terms of goals and objectives.
Rationalized operations should limit the authorities of the units in terms of volume and cost beyond which shall be handled by a corporate unit (marketing, purchasing, production, accounting and control) in charge of bigger and higher levels of authorities;
- Conduct a human resource organizational development process of cultural assimilation, policy consolidation and team building workshop series to smoothen the transition through organizational leadership processes;
- Create a cross functional team to address problems and issues arising out of the transition period until the streamlining objectives are achieved.
This team will represent the various units and formulate policies and coordinative process for compliance;
- Installing a system of corporate-wide management control which includes performance management, measurement and evaluation and reward system, budgeting and variance analysis, corporate and business unit strategic planning, responsibility accounting through profit and investment centers, transfer pricing, project management and risk assessment and management systems.
The system of management control systems will assure the owner, Mrs. Hill with reasonable assurance of smooth and responsive corporate processing and production system, a highly motivated manpower complement assured of learning and growth, customer satisfaction through quality products and services at lower costs; and, profitability and sustainability of corporate governance system, organizational leadership with social responsibility component.
Under the recommended comprehensive setup, Mrs. Hill can be additionally assured of an emerging relative autonomy through a system of stratified authorities and accountabilities.
Anthony, Robert. N. & Vijay Govindarajan. Management Control Systems, 11th International Edition, Singapore.McGraw-Hill Education (Asia), 2003
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