Wallace Group Strategic Analysis Essay
The Wallace Group is a company that manufactures and develops technical products and systems. It has three primary operational groups consisting of electronics, plastics, and chemicals. By far the largest asset of the Group is the electronics. This asset is approximately the size of both the plastics and chemical groups of the corporation. It also contributes the most to the net income at approximately 70%. The plastics and chemical divisions were acquired for the purpose of diversifying the income of the corporation from the original electronics group.
The Wallace Group currently faces some problems with it company in relation to improper management. To begin with, the company seems to have difficulty in the hiring process. It seems that the company is focused on cutting cost rather than looking for effective employment solutions. For example, instead of creating a management developing program to train and recruit managers, the company relies on promoting technical staff. The cost cutting approach is also impeding the hiring of qualified engineers. The company focuses on hiring employees at the least possible salary as an alternative to paying the required amount for qualified expertise. Another issue that arises is un-standardized methods of collecting data and
Their problem lies in the fact that both managers are using different data and formats for essentially the same purpose, and therefore they create redundancy and higher workloads. By far, the most crucial problem facing the group is the lack of vision and direction from the president, Mr. Wallace himself. His diversification program that resulted in the acquisition of the chemical and plastics divisions lacked forward looking vision. He simply required the companies to maintain a profitable operation without any direction to improve.
In terms of priority, I would first recommend that the Wallace Group implement a corporate governance policy familiar to a business of its size. This would require that the company adopt a board of directors. A board of directors has five responsibilities:
1. Setting corporate strategy, overall direction, mission, or vision
2. Hiring and firing the CEO and top management
3. Controlling, monitoring, or supervising top management
4. Reviewing and approving the use of resources
5. Caring for shareholder interest
By setting a corporate wide strategy the group will have a direction to focus its resources on. For example, the company could implement a diversification in customers. Instead of relying mainly on the Dept. of Defense the group could expand into the civilian sector or even foreign governments. The board of directors could also manage the CEO or in this case Mr. Wallace. It would give him performance requirements and if not met they could seek out a replacement. Currently nobody can challenge Mr. Wallace because of his position and holdings in the company. The review and approval of resources would be another helpful aspect that a board of directors would bring. In this case the company could evaluate whether to continue to purchase their raw materials from sister Wallace groups or seek outside sources. Finally, a board of directors would take the shareholders into interest. They would seek to increase the bottom line of the investors rather than the current policy of just maintaining a profit.
After a board of directors has been established I then try to solve some of the hiring problems that the company is now facing. I would take the suggestion of Industrial Relations VP and implement a management development program. This is to ensure that an inefficiency created by non-qualified personal in management positions is reduced or eliminated. Another aspect of the hiring process that I would restructure is the starting salaries of the employees. It was mentioned by the hiring directors keep rejecting applicants due to them being unqualified. In order to attract qualified employees the group will have to offer competitive salaries. This increase in salaries will be offset by less employee turnover. According to the Bay Area Industrial Education Council the cost of an employee turnover within the first 90 days who has an hourly salary of $25 can cost the company nearly $16,800 (www.baiec.org)
Now that we have the right people, in the correct positions, along with a board of directors in place, we need to address the issues of inefficient information systems. Currently each division of the Wallace Group has its own information gathering system. This individualization of the process creates redundancy and inefficiency. By collecting the data once and using a single information management system the company will reduce costs. In fact, Procter & Gamble saved nearly $1 million dollars by synchronizing its information systems with its retailers such as Wal-Mart. (Information week, issue 1041) The same results on a smaller scale would take place at the Wallace Group. It would also improve morale since their will be less work for employees and a smoother application of data.
It is sometimes difficult for a manger, such as Mr. Wallace, to adapt a strategic management style from an entrepreneurial position to a complex organization. For this transition I would introduce Mr. Wallace to a couple of theories on organizational adaptation. The first theory I would establish is the institutional theory. In essence it “proposes that organizations can and do adapt to changing conditions by imitating other successful organizations.” (Wheelen, pg 7) This means that the company should evaluate companies of similar size and structure and try to adapt useful management techniques from them.
This is particularly solid approach since the methods employed have already been tested and the results can be predicted. The other theory I would use to educate Mr. Wallace is the organizational learning theory. It states that “organizations adjust defensively to a changing environment and use knowledge offensively to improve the fit between the organization and its environment.” (Wheelen, pg8) To utilize this theory the company must respond to the changes to reduce negative impacts and position itself to take action. This allows for the company to essentially learn from its environment and lead to its own innovations in strategic management.
Wheelen T.L., Hunger J.D., Strategic Management and Business Policy Prentice Hall, Upper Saddle River, NJ (2004)
Bay Area Industrial Education Council, Employee turnover cost table retrieved Jun 10, 2005
Information Week Issue 1041 Wal-Mart to Suppliers: Clean Up Your Data retrieved Jun 10, 2005