Management Control Systems 4-6
Management Control accumulation 1| Capital Case Abstraction 4-6| Mini case abstraction 5-2| Tom Breteler – 930228 | Max Leigh Norman – 910904 Hanway Tran – 831226 16/11/2012| | | Capital Case Abstraction 4-6: Grand Jean Aggregation Introduction This case abstraction covers case 4-6 of ‘Management Control Systems’, accounting by Robert N. Anthony and Vijay Govindarajan (2007, 12th edition). The case discusses Grand Jean Company, a jeans accomplishment company, and describes several processes and issues in their organisation and management.
In this report, we will we assay and altercate the capital problems that Grand Jean Aggregation faces, analyse and adduce solutions to these problems. During the advance of this report, we will about accredit to approach from the aloft literature, as able-bodied as alien sources area needed. Explanations of concepts, theories and abracadabra will be accustomed area necessary, but references will be provided in the end of the address accessible reference. Lastly, we realise our solutions accept their limitations and are absurd to be implemented easily, or anon effective.
But we accept that our proposed changes will acquiesce the aggregation to acquire the allowances from ability administration and added efficiency, as both bulb managers and contractors can abet to acquisition the best convenance to accomplish their tasks at hand. Background Grand Jean is a accouterment aggregation with a continued history, accepting been founded in the mid 18th aeon it has survived several abundant bread-and-butter crises such as two apple wars, the abundant abasement in the backward 1920s and the 1970s oil crisis.
Having survived so abounding bread-and-butter shocks and still be alive as a assisting company, it is accessible that this has acquired top administration in Grand Jean to accept that the business archetypal they are employing is a athletic archetypal that consistently works. The authentic administration archetypal that was developed in the 1910s area amount ability and amount assay was accustomed then; is article that we apperceive is still accustomed now in Grand Jean (Anthony & Govindarajan, 2007). Their acceptance of key metrics is absolute old fashioned: * Focus on assembly allocation for the factories. Budget ciphering a plant’s approaching assembly by attractive at celebrated assembly and add a little added for the afterward year * Using celebrated supervisor:employee arrangement There seems to be a lot of territorial mentality amid the altered departments in that anniversary administration focus on their own performance, and are accommodating to arbitrate in addition administration to amuse their own goal. The aggregation additionally seemed to amusement the administration and advisers at the address added favourably than administration and advisers at assembly plants.
Problems In this section, we shall added altercate the processes and diplomacy at Grand Jean Aggregation and lay out the problems, and added chiefly we will explain why they are problems. Firstly, we feel that the aggregation in all-embracing is ever acceptable and outdated, consistent in a accustomed abridgement of flexibility. The company’s processes and regulations are about austere and ever simplified, which has a abrogating aftereffect on the astute circadian operations. One of these regulations is the relationships Grand Jean Aggregation has with its ndependent contractors. Grand Jean has 25 company-owned accomplishment plants, which are amenable for about two thirds of the absolute production; the blow is done by almost 20 absolute manufacturers. Some of these contractors accept abiding relationships with Grand Jean, admitting some are absolute new and short-term. Contract agreements are fabricated by the assembly operations’ carnality president, Tom Wicks, and a beam amount is set for anniversary alone blazon of pants.
If a architect complies with Grand Jean’s affection and believability standards, they get paid the abounding beam price, but if Grand Jean is unsure, a lower amount is paid until the architect has authentic himself. This leads to a aerial about-face amount for contractors, because the acute calm and adopted antagonism in the apparel industry. Austere demands accumulated with lower banking (as able-bodied as non-financial) abutment can be abundantly demanding for new contractors, consistent in them not extensive the adapted quotas.
Grand Jean afresh anon terminates the relationship, and does not try to aid its contractors in any way that we accept noticed. This is a decay of invested time and assets in the relationship, which could be calmly abhorred by afterpiece accord and communication, accumulated with added a added adjustable framework. The absolute accessories are not acclimated for a aeon of time; which is an additional waste of resources. The key metrics that Grand Jean use to appraise the company’s achievement are absolute outdated.
The capital focus throughout the aggregation is to focus on assembly achievement and metrics that affect or can be acquired from absorption on assembly abundance e. g. production/year, accustomed hours/pair. However, there seems to be no application of metrics that affect the all-embracing achievement of the company. As mentioned before, the contractor’s that bootless to accommodated expectations were usually aloof replaced by a new architect in the aforementioned absolute facility, this is an action that impacts the company’s all-embracing performance, as time and money has to afresh be spent re-negotiating acceding of agreement, ambience up and starting assembly lines.
Overall the key metrics do not focus on activities that can accept a added abstruse appulse on the company’s performance. The abundant focus on assembly allocation causes the aggregation to absence alternative aspects that could accomplish improvements e. g. in bulb efficiency, gross accumulation margin, overhead- and aback appointment costs. The abundant focus on assembly additionally acquired some bulb managers to abundance appurtenances to be able to accommodated assembly quota. Grand Jean makes use of 5 abstracted business departments, this is motivated with the actuality that they advertise to altered customers.
We accede the administration anatomy of business in the accustomed accompaniment to be obsolete, because it doesn’t accomplish able use of the ability that can be acquired by accepting cross-departmental advice or by accumulation the business administration into one big unit. Accepting such agnate functions in 5 departments creates a lot of aerial back it comes to analysis and appeal forecasting. The 25 company-owned plants are advised as amount centres, implying their alone ambition is to ability a allocation at a amount as low as possible. If the focus is absolutely on accepting the everyman amount per artefact possible, affection is acceptable to abatement behind.
Additionally, the plants are run on a bound authoritative arrangement based on time-and-motion systems akin Taylor’s authentic method; authoritative it acutely outdated, fabricated worse by the odd use of anchored acquirements curves: implying acquirements curves are a arrangement to be activated instead of an advancing process. Entire budgets are fabricated extrapolating the assembly time for a distinct brace of jeans, and accumulation calibration allowances are religiously pursued; consistent in an acute abridgement of adaptability which acutely harms the accord and advice with the business department.
A aloft botheration as able-bodied is the restrictiveness of the assembly quotas. Like the budgets, the quotas too are extrapolated from alone assembly time per brace of jeans, and administered relentlessly: the budgets are pre-made annual one year advanced of time, and there is no adumbration of any adjustment actuality fabricated during that year. This acutely leads to an disability to accede to changes, and is ever simplistic to say the least. Additionally, the bar of budgets and quotas is aloft annual (! , because “we apprehend bodies to advance about here” (Anthony & Govindarajan, 2007). Shockingly, these decisions are fabricated arbitrarily after attention to alien circumstances. If a bulb alcove the quota, it is absitively to accept performed well, behindhand of delivered quality, and if not, the bulb is advised to accept been alive at a sub-reasonable akin of acceleration and efficiency. Grand Jean acknowledges artisan about-face and absence are big problems in the plants, yet they do not appearance any acquaintance of any articulation from those problems to the austere quotas.
Feedback is accustomed annual via phone, instead of in person, to see if the plants met the accustomed accustomed labour hours compared to the absolute labour hours, which is an accounting accompanying assumption that is about abnormal for applied issues such as production. This has abrogating consequences, the best advancing actuality the bulb managers application a assurance banal back they beat the quota, in adjustment to accomplish abiding they can ability the allocation afresh abutting year. This is done because assembly over the allocation is not rewarded, and assembly is accustomed to access from the year before, no amount how aerial the abstracts are.
Considering Grand Jean has to about-face bottomward orders every end of the year, this is a abashment back it comes to the acceptance of resources, assembly and accumulation potential. Still, Grand Jean claims to attending for alternative things but the allocation as able-bodied back evaluating plants, such as the affection of the association relations and agent satisfaction. There are no authentic standards apparent in the case for these abstracts however, authoritative the appraisement and benefit allocation arrangement absolute approximate and subjective.
This resulted in the accounts and business departments actuality adored college ratings than the assembly plants; which is decidedly ambiguous because best top-managers are from accounts and business backgrounds. To us, this smells of favouritism, which is never a base for a able appraisement system, which should of advance be cold and fair i. e. accept procedural justice. Also, it was issued in the case that offices are about understaffed because Mr. Wicks consistently adheres to the acceptable supervisor/worker arrangement of 11:1, although the actuality artlessly is that that arrangement is bereft and outdated.
Plant managers feared to aberrate from that arrangement due to the actuality that Mr. Wicks managed a bulb with that ratio. This causes the plants to run with a supervisor/work arrangement that doesn’t acclimate to the alteration alien ambiance (Anthony & Govindarajan, 2007). Lastly, the aggregation does not appropriately accede the differences in technology and accessories and age of the plants, instead Grand Jean demands according achievement from them all. This is acutely not prudent, and after-effects in the earlier plants accepting added difficulties in extensive the quota.
Proposed solutions The aggregation needs to advance the advice channels amid the business and assembly departments. It seems as admitting these departments are alive absolutely apart from anniversary alternative which is apropos as their accord is one of the best important aural the organisation. Assembly relies on abundance targets set by the marketers, by accepting abundant added approved meetings, face to face rather than on the phone, there should be a bargain accident of desperate changes in abundance needed.
It is added acceptable that a afterpiece accord amid these departments will annual incremental changes in assembly which is abundant easier and cheaper to manage. Consequently there will be abundant beneath diffusion or balance appurtenances actuality produced. Continuing with the affair of collaboration, the 5 business departments charge to assignment as genitalia of the aforementioned unit, rather than alone units with the aforementioned name. The argument refers to some departments activity about their own business in adjustment to accommodated aims and objectives, alike if these accomplishments accept abrogating after-effects for alternative departments.
All departments in the organisation are aggravating to add amount to the end artefact but this should not be done by trampling on others who are aggravating to accomplish the aforementioned goal. The managers or anniversary business administration charge to accommodated and ensure that no accomplishments taken by their alone units accept a abrogating appulse for another. This is not to say there shouldn’t be a aggressive attributes aural the close but it should be adapted so as not to annual adverse repercussions. At present, the appraisement arrangement and benefit allocation arrangement seems absolutely abstract and inexact.
Firstly, the bent that occurs in favour of the banking departments needs to be eradicated. This could be done by outsourcing the assignment of appraisement the departments. As continued as the alien close knew the industry and had a set of austere guidelines as to how to amount the achievement of anniversary department, there would be no bent and ratings amid departments should be added analogously advance out. Currently, there is no allurement for plants to aftermath at best ability because if they appear to go over quota, they do not get adored for accomplishing so.
This ties in accurately with the additional aspect of the ratings system. The case provided no exact guidelines to which anniversary administration was actuality assessed. Mr Wicks would alarm the departments and accept a chat about whether or not they met their assembly allocation and about ‘how things are’. The managers charge to accept face to face diplomacy and aggregate bulb inspections in adjustment to absolutely barometer how assembly is performing; this will accord a abundant added authentic annual and accredit bonuses to be allocated added precisely.
Contractors aftermath about a third of Grand Jean Company’s banal and as such, are an basic allotment of the assembly process. Instead of initially alms a lower price, Grand Jean could abate ambiguity by acceptance their contractors time to move up the acquirements ambit by acceptance them a lower abundance to be produced, which would be gradually added already artefact affection and assembly believability is delivered. Thus architecture Grand Jean’s accord with their contractors, and alienated ability destruction, admitting the absolute accessories actuality re-used.
The bargain architect about-face would access the utilisation of the plants which will accommodate itself to added assembly in the continued term. As has been mentioned previously, some of the plants are up to 30 years old admitting some are as new as alone 5 years old, however, there seems to be no allowance for this is the targets set by the company. It stands to acumen that 30 years old technology is abundant added acceptable to; breakdown, be added cher to maintain, and be beneath able than 5 year old technology.
Therefore, the quotas and best achievement of anniversary bulb should be heavily accompanying to how new the bulb and the technology is, audacious the agents are of appropriately accomplished amid the plants. Therefore, bulb managers charge to assignment added carefully with bazaar departments because they will be able to assignment out what targets are acceptable for anniversary bulb rather than a ‘one admeasurement fits all’ allocation arrangement which at present, isn’t alive decidedly effectively. These new targets could be accomplished through an antecedent affair and appraisal of the branch and assay diplomacy every ages to accomplish abiding the targets are actuality met.
The accustomed allotment arrangement is acutely primitive. The authoritative managers assay abstracts from the antecedent year and ‘add on a few’ because they accept the ability has added and the agents ‘should’ accept gotten bigger at their jobs. Whether these across-the-board statements accept some accuracy or not, it is accessible Grand Jean charge to accept a added specific allotment and planning strategy. Using a added astute allotment arrangement with added amplitude would actualize absolute acquirements curves instead of artificial, anchored ones.
Due to added adjustable targets and specific advice from anniversary alone bulb capacities actuality used, accompanying with the anticipation of actuality adored for activity over allocation production, there should no best be any charge to abundance assurance banal in adjustment to accommodated targets after on in the year. Conclusion To conclude, it can be said that accustomed diplomacy at Grand Jean Aggregation are adamant and outdated, accurately in the areas of application relationships, centralized communication, budgeting, and accolade systems. Our cardboard has declared and explained the capital issues at hand, and provided accessible solutions to these problems as well.
With these fixes in place, we as a aggregation feel that Grand Jean could abundantly advance its way of accomplishing business. Mini Case Abstraction 5-2: North Country Auto, Inc. It is accustomed that in North Country Auto, Inc. (NCA) the abstracted business units operated added as absolute companies than subdivisions aural a company. The business units’ managers themselves were acquainted of the ambiguous bind that the focus on their own advantage acquired to the all-embracing aftereffect of the company; alike actuality absolutely acquainted that there were alternating situations that would accept benefited the aggregation had one administration accustomed a lower profit.
The aggregation lacks ambition accordance amid its business units, and Mr. Liddy’s endorsement of the accustomed aggregation anatomy doesn’t do annihilation to antidote the accustomed friction. Instead of absorption on activities that actualize accurate amount appear its customers, the aggregation is agreeable in accounting activities that do annihilation to antidote the abridgement of ambition congruence. We anticipate Mr. Liddy should spontaneity the accustomed anatomy for the new car-, acclimated car- and annual department, and instead anatomy it up with capital business units, new and acclimated car sales as one and anatomy boutique as the additional one, with the service- and genitalia administration operating as support.
The new and acclimated car sales and anatomy boutique would accomplish as accumulation centres with the service- and genitalia assemblage operating as an amount centre. To actualize ambition accordance aural the company, the administration achievement barnacle bonuses should be removed. Instead NCA should apparatus a two tiered benefit program, the company’s achievement should annual for the beyond allotment of the benefit program, to accomplish abiding that the administration managers aren’t alone cerebration of their own performance.
A advancement would be to accept a 20% administration barnacle and 80% aggregation barnacle benefit system. This would still acquiesce a administration with accomplished achievement to get a acceptable accolade for their aloft accustomed performance. This would access the anticipation that the now altered departments strive to assignment calm to accumulate all-embracing profits up and all-embracing costs down. Such a accolade arrangement would about-face the personnels’ focus on the company’s absolute performance.
The aggregation should apparatus on one unified IT-system to accomplish it easier to allotment advice and appropriately advance inter authoritative communications, thereby accretion the achievability of accomplishing synergy furnishings from the aggregate ability aural the organisation. Restructuring the workflow, IT-systems and organisational anatomy itself won't accomplish any absolute effects, if the advisers and managers themselves don’t embrace the new organisational structure, the accomplished ameliorate will aloof end up actuality a new alignment on paper.
Hence why Mr. Liddy will accept to be able to put in ample accomplishment to appearance that top administration is acknowledging the new organisation that we propose. While it is accessible to appraisal a time anatomy for implementing a new workflow and advice system, it is added difficult to appraisal a time anatomy for back peoples’ behaviour will absolutely change. After a change in behaviour, there is absolute a low achievability to accretion any synergy furnishings from the new organisational structure.
To apparatus this new organisation we adduce a alongside multistage process; this requires top administration to assignment on designing a new workflow, advice system, organisational structure. And brainwash and absorb administration managers and advisers to accretion abutment for the new organisation to defended a alive implementation. Bibliography Anthony, R. N. ; Govindarajan, V. (2007). MANAGEMENT CONTROL SYSTEMS. 12th Edition. Net MBA website. [Online] Consulted on the 12-11-2012. URL: http://www. netmba. com/mgmt/scientific/ Appendix Proposal for new organisational anatomy for NCA.
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