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Black & Decker International
IMI PGDM HR 2011-13
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ORGANIZATION DESIGN AND DEVELOPMENT
CASE STUDY
BLACK AND DECKER INTERNATIONAL
Submitted to: Submitted by:
Dr. Richa Awasthy Vinod Gandhi
IMI, New Delhi 11PGDMHR59
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Table of Contents
Topic Page No
INTRODUCTION ............................................................................................................ 3
CASE-ANALYSIS ............................................................................................................. 5
Background ......................................................................................................................... 5
Organization Structure ......................................................................................................... 6
Black & Decker External Environment Analysis ..................................................................... 7 Opportunities ........................................................................................................................................... 7 Threats ..................................................................................................................................................... 7
QUESTIONS .................................................................................................................. 8
REFERENCES ................................................................................................................20
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INTRODUCTION
Black & Decker has been very successful in expanding its reach of core businesses across
the globe, but the acquisition of Emhart Corporation and its eight brands scattered
around the world presents a new set of product and organizational challenges to the
organization. Mr. Grunewald, vice president of product and market development for the
international group, is contemplating what organizational changes are required to align a
set of local operations into "global players."
The given case is a good example of how organization needs to be re-engineered with
global expansion plan. The case represents a brief review of Black & Decker's global
strategy. The concern is about making the organization work successful for Emhart. It
represents both- Restructuring the way the acquired companies went to market, as well as
Rethinking how the various parts of the businesses could be integrated on a global scale.
The analysis given in this document is in context to the scrutiny of the structure, processes,
people and the environment that is prevalent within the organization.
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CASE
ANALYSIS
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CASE-ANALYSIS
Background
Black & Decker was incorporated in 1917. Over the next 70 years, the company
established itself as dominant name in power tool and accessories, first in the United States
and then across a broad global front but particularly in Europe. It manufactured and sold a
wide line of electric and battery-powered power tools (and accessories), household
products, outdoor products, locks and hardware, plumbing products, and mechanical
fastening systems. It acquired Emhart Corporation in 1989.
Being a dominant player in power tools and accessories for many years, Black & Decker
realized that the industry was being mature, so they decided to change their strategy into a
diversified company. As per the case facts, the Product Life Cycle was at maturity where
further developments within the industry could result in little or no additional revenues. So
they decided to diversify the product to maintain the image as a leader in the power tool
industry. Mr. Nolan Archibald, the then CEO of black and Decker, had two key actions.
First, to develop a worldwide view toward the markets for the company‟s products and
Second, to reduce drastically the number of models needed to fulfill the global markets.
It is also given that there was decrease in earning as attributable to the acquisition; there
are things that have to be done in order to ascertain whether the acquisition may create
value for the shareholders, which is the CEO‟s primary responsibility.
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Hence, effort should have been concentrated on three essential tests
1. The attractiveness test
The industries chosen for diversification must be structurally attractive or capable of being
made attractive.
2. The cost-of-entry test
The cost of entry must not capitalize all the future profits.
3. The better-off test
Either the new unit must gain competitive advantage from its link with the corporation or
vice-versa.
Organization Structure
As given in case exhibit, the structure of the organization was a mixture of three forms -
functional units, product categories and geographical units. There were three group
presidents under the president & CEO of the company. Each group president leaded one of
the three divisions Power Tools & Home Improvement, Household Products and
Commercial and Industrial products. The power and Home improvement division had
further divisions divided on the basis of product and geography, each headed by an
individual president viz. U.S. Power tools, Europe, Hardware and home improvement,
International and Accessories & Fasteners. It is also given that the Europe division, in
addition to having full marketing and manufacturing facilities for power tools, was also
responsible for sales of households‟ products and for products of the hardware and home
improvement division and the power tools accessories division.
The international division had the accountability of two plants manufacturing household
products in Brazil and Mexico. It also took responsibility of the sales responsibilities for all
company products in the world outside of Europe and the United States.
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Black & Decker External Environment Analysis
Opportunities
To gain more market share by expansion across the globe. 21 percent growth rate
with much larger potential for the future.
It can also be deduced that Black and Decker‟s reputation for quality tools and
appliances has been decreasing. It requires the company to deal with its strategic
businesses.
Gain more market share with industrial market, by offering quantity-based deals
and advertising the quality of its products.
Economies of scale inhibit ease of entry creating an opportunity for a large
company like B&D
Threats
Need to cater to the different demands that different cultures place on quality and
attention to detail
Vast differences in distribution, branding preferences, and local-sourcing laws in
the various international markets.
Requires following regulations and customs of different nations.
Main product lines - losing to Asian global competitor and to strong local
competitors in all parts of the world.
Need to be aware of new items that the consumer can use and develop them before
the competitors launch the product.
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QUESTIONS
Question1
What do you think of Grunewald’s plan for creating a ‘global lock business’? What
factors favor this action? What factors stand in the way?
Black & Decker has been very successful in expanding its reach of core businesses across
the globe. The recent acquisition of Emhart Corporation could be projected as perfect
opportunity for dramatic changes in the organization and profit growth of the company. It
would direct the company towards an opportunity to gain more market share because of the
presence of Emhart Corporation around the world.
Mr. Grunewald puts forward the idea of including marketing managers, product managers
and a local champion (project manager) within each lock company and group product
manager as part of organization design for smoothing of activities. Besides, considering
Strategic, managerial and operational activities for global approach, Mr. Grunewald
believes that Emhart‟s acquisition would require black and Decker to restructure all the
companies under the Emhart name and the way they would present themselves in the
market.
Factors that support
Grunewald‟s plan for creating a „global lock business‟ seems appropriate as the product
life cycle was at maturity where further development within the industry could result in
little or no additional revenues.
The addition of new market segmentation would diversify the existing portfolio of the
company and will help the company to increase the market share.
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It can be well planned strategy for Economies of scale, Economies of scope and cheaper
production costs depending on Globalization Strategy, Export Strategy or multi-domestic
strategy.
There is also existing solid international base of the company, which could be used for
building a global base for housewares. There is huge potential growth for Black and
Decker in the international market as it has been growing at the fastest rate of 21%.
The door hardware product industry is bound by old and narrowly constructed traditions.
This can simply be a case of marketing myopia. These firms are very mainly focusing on
limited segmentation and criteria towards security, systems and technology. None of the
products offering relates to the entire market segments. Hence, the integration of the
companies would progress market knowledge along the dimensions of competition,
consumer segments and product requirements.
Financially, the integrated company could bring in around $15 billion world market ($5
billion in locksets alone). It will enable the company to enable a complacent distribution
system around the world. Moreover it will help in setting global quality standards which
will help in promoting product innovation and bring a unified force and credibility.
Factors that restrict
There are various factors that could come in the way of making a global lock business.
There could be problems in coordination between the management of the acquired entities
with the risk of alienating and losing some of the key managers.
This will require close coordination among firms (e.g., JIT systems) and information
sharing (open computer systems).There might also be issues in finishing marketing
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research, simplifying production design and engineering, rationalizing distribution
channels and overcoming regional differences.
As, each of the company working under Emhart‟s management had been operating as an
autonomous unit, with its own design, manufacturing, marketing and support functions;
there will be a challenge in bringing them together under a single concept so that all the
departments are linked together efficiently and effectively.
It may also be difficult to implement and conceptualize the global market of their products
in different regions of the world. The systematic global planning and review through a
process of strategic, managerial and operational activities need to be aligned to the
globalization.
Also, the companies under Emhart were thought of expanding only in terms of expanding
their narrow line abroad; this narrow approach had led to a weak overseas business in Asia,
Latin America, the Middle East and Africa. There is a need to turn around the culture and
this approach and to maintain a good and strong business in the above mentioned
continents.
This case could also lead to an example where mismanaged growth can bring
diversification away from core businesses and core competencies rarely creates value for
the shareholders; which relates to the importance of organization design alignment with the
new kind of requirements. This will hence require long term planning, forecasting and
predicting of the return on investment relative to cost with proper market study.
Without strategic planning and coordination, the kind of inherited debt and the
unanticipated market fluctuations and weak economy may result in collapse or possible
bankruptcy of the corporation. The association between Black & Decker and these
companies must construct synergy in order to justify such deliberate moves and
expansions.
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Question 2
What are the organizational implications of this strategy? What kind of structure,
culture, and systems are necessary to make it work? What would be your action plan
for implementation?
The integration will require close coordination among firms (e.g., JIT systems) and
information sharing (open computer systems). The very first implication will be to fit the
former Emhart‟s entities into a consolidated operation. The above mentioned External
Environment analysis represents some of the organizational implications of this strategy.
Referring Org. theory by Richard L. Draft, there are three main components of the
organizational structure
1. It should designate formal reporting relationships of the managers and supervisors
along with the number of levels in their hierarchy and the level of control.
2. There should be proper distribution of individuals into different departments and the
departments into the organization.
3. There should be effective communication, coordination and integration across all
departments.
There is a need for managers to design organization for a complex international
environment, since the company is developing overseas operations to take advantage of
global markets. It typically evolves through four stages, beginning with a domestic
orientation, shifting to an international orientation, then changing to a multinational
orientation, and finally moving to a global orientation that sees the whole world as a
potential market. Structure dictates the relationship of roles in an organization, and
therefore, how people function. An outdated structure can result in unnecessary ambiguity
and confusion and often a lack of accountability.
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The common ways to address the problem of integration and knowledge transfer are
through global teams, stronger headquarters planning and control, and specific
coordination roles.
Hence, the organizational structure should be designed to provide both vertical and
horizontal information flow. Vertical flow is necessary as there are so many companies and
departments which will help in enabling control within the organization. There should be
centralized decision making within the organization. Some horizontal linkage is required
within the different departments in order to improve communication and coordination.
As there would be a great need of coordination among product managers at the same levels
in the organization but in different groups in different parts of the world; if there will be
some horizontal linkage, there will be more sharing of information and ideas among
managers which would help in reaching organizational goals more effectively. There
should be a functional horizontal linkage structure within the organization.
Some important considerations in designing an effective organizational structure
· Clarity
The structure of the organization should be such that there is no confusion about people's
goals, tasks, style of functioning, reporting relationship and sources of information.
· Understanding
The structure of an organization should provide people with a clear picture of how their
work fits into the organization.
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· De-centralization
The design of an organization should compel discussions and decisions at the lowest
possible level.
· Stability and adaptability
While the organizational structure should be adaptable to environmental changes, it should
remain steady during unfavorable conditions.
Culture
Organizational culture plays a vital role in improving the organization‟s effectiveness. It is
defined as a set of values, rules and regulations that control the attitude, behavior and
interactions between members of the organization. The diverse national and cultural values
also influence the organization‟s approach to coordination and control. Three varied
national approaches are the centralized coordination and control, a decentralized approach,
and the formalization approach. Organization culture should reinforce the strategy and
structure that the organization needs to be successful in its environment.
Black and Decker should develop a culture referring to the model “Relationship of
Environment and Strategy to Corporate Culture” – Depending on the needs of the external
environment and the organization‟s strategic focus; the four categories (Adaptability
Culture, Mission Culture, Clan Culture, and Bureaucratic Culture) relate to the fit among
cultural values, strategy, structure and the environment. It would be a unique combination
of its management philosophy, management practices, associated relationships and the
approach of dealing with the external environment changes.
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As there is acquisition of other companies, it becomes vital to develop sense of belonging
to the existing employees towards Black and Decker, so that there will be generation of
effective and efficient operations. This should further be imparted to all of its companies
across the world, for that, the culture needs to be corporate keeping the priority – values of
all the employees. Moreover, the employees should be enthusiastic to expand their
commitments beyond their employment contractual duties and timings. To provide loyalty,
conventions and teamwork, the company must develop a Clan Culture.
More than any other, this culture focuses on the needs of employees as the route to high
performance. It further creates involvement and participation, thus a sense of responsibility
and ownership and, hence, greater commitment to the organization.
Corporate Culture has a significant impact on employee experience and therefore business
performance
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Action plan includes taking care of employees and making sure they have whatever they
need to help them be satisfied as well as productive. Paying good wages, sending
employees on learning trips, cultural trainings, are few ways to maintain employee
commitment and satisfaction in such case. Employee should be empowered to use their
own initiative and creativity in serving customers.
(Reference: Deloitte Consulting Presentation 2007)
Systems
Organizations are often treated as systems. Black & Decker represents open system
approach. Scott (2003) defines it as “congeries of interdependent flows and activities
linking shifting coalitions of participants embedded in wider material resource and
institutional environments”.
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1. Self-maintenance: Agents in the system take resources from the environment to survive
2. Protection: Systems do not have to protect from the environment, they have to use it as a
source of information
3. Boundaries: Open systems do have boundaries, which are difficult to define
4. Sub-systems: Systems have subsystems that are linked in dynamic interaction
5. Negentropy: Energy that turns into work (opposite of entropy which never turns into
work). Open systems take the energy from the environment and they recreate themselves
As per understanding of this case, the organization needs to constantly interact with its
environments. Hence, this open-system organization is not passive. Black & Decker org.
system approach is to reach out, draws energy from the environment, and tries to shape the
environment.
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Open-system organizations usually follow a simple cybernetic model of input --
throughput -- output, with special emphasis on throughput (how to change the inputs or
alter and use the energy imported) and output (recurrent cycles of quality service to
consumers).
(Referring Organization Design & Development: Concepts & Applications by Ph.D B. K.
Srivastava) Black and Decker should mainly focus on these three subsystems. A value and
goals sub-system (culture, philosophy, overall organizational goals, group goals and
individual goals), decision and control subsystem (goal setting, planning, organizing,
implementing and controlling) and Social sub-system (communication, interpersonal
relations and human resources).
Focusing on these subsystems can improve in various ways including
More Effective Problem Solving
More Effective Leadership
More Effective Communication
More Effective Planning
More Effective Design of Projects, Products and Services
More Effective Organizational Results
Avoid Founder‟s Syndrome
Question 3
Assume you were Grunewald’s OD consultant. What coaching advice would you have
for him in executing the strategic change?
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As on OD consultant I would suggest him to follow the Lewin’s planned change model and
force field model persistently incorporating SYSTEM model design (most of the action
plan and recommendations I have briefly described in above part of analysis.)
Aligning the related differences in the behavior of the M&A employees, can be done by
introducing information that shows discrepancies between behaviors desired by
organizational members and those which are currently shown by the members.
As there will be changes taking place in Black and Decker in terms of structure and
processes, Mr. Grunewald should focus on this stage for the change in behavior and
attitude of the employees in sync with the organizational goals and objectives.
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Additionally, I would recommend some of the analysis as
1. Proper learning and development environment :
Existing head in-charge of lock factories could be trained for job profile of liaison role.
Also, Training is very important for bringing out the new culture in the organization to
make employees work with existing and new management.
2. As Japanese sales personnel would directly report to the group product manager; it may
result in conflict between the other marketing managers and sales personnel. As and when
required, for effective work flow, the marketing manager for Japanese operations could
also be introduced.
3. Effective technology integration will be must requirement (example: effective MIS) as
there will be need of supply chain management. It will result in better forecasting, planning
and coordination activities among managers.
Based on the opportunities for growth in these three lines, it is also recommended
On the Corporate Level: Consider the overall environment and the present growth in
foreign markets, horizontal integration accompanied with a focused diversification could
be the best strategy.
On the Business Level: B&D should continue to pursue a differentiation strategy
throughout its businesses. Some considerations should also be given to developing more
overall low-cost provider products in each of its business as well, as in present in its
security hardware business.
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Continue to pursue a related diversification strategy by leveraging distribution synergies
between the business units
Create synergies by marketing the professional tool line
A high degree of strategy control must be in place
Regular Evaluation on : Sales growth percentage, market share and time
The additional manpower shall be added to the project for the specialized processes
Last but not the least, I suggest them to do consider PLAN-B for the safe escape
REFERENCES
1. Org. Theory, Change, and Design by Richard L. Draft
2. Deloitte Consulting Presentation on cultural fit 2007
3. http://managementhelp.org/misc/open-systems-benefits.pdf
4. Organization Design & Development: Concepts & Applications by B. K. Srivastava