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The decision making process at Peterson Industries is causing concerns for several managers in the organization. The current situation is the result of growth. In the earlier days, the company was smaller. This made it possible for decisions to be taken at personal level between various managers.
This is no longer possible because of the current size of the company, and the geographical spread of its operations.
Summary of Findings
The three main findings relating to the decision-making problems at Peterson Industries are as follows. First, there is a problem relating to the allocation of resources. The annual resource allocation meeting is proving to be an inefficient method of resource allocation based on the actual business needs.
Managers feel that the annual exercise is too intense and only leads to posturing by departments to attract as much resources as possible.
Secondly, the company’s organizational structure has weaknesses that are causing an overlap of responsibilities. The Chief Operating Officer (COO) and the Chairman of the International Office both have responsibilities that affect international operations.
This is because the COO is in charge of operations and budgeting in the entire organization. This ambiguity leads to delays in the making of important decisions. It also reduces accountability.
Thirdly, the company’s prioritization system lacks the confidence of all the managers. A case in point is the incident involving Sam Kells who is the Vice President and General Manager of the Peripherals Division. Kells was uncertain regarding the correct strategic classification of the Peripherals Division.
He felt that the Peripherals Division deserved a higher ranking. In addition, Kells felt that according to a publication by the company’s CEO, the Peripherals Division is supposed to have a higher classification in relation to its strategic importance.
Based on the findings, Peterson Industries has three main problems. The first problem is the resource allocation process. The current process will lead to a loss of confidence in the systems in use in the organization.
If the managers feel that they have to fight for everything, then the acrimony that would follow would damage working relationships.
Secondly, the current structure of the organization is a problem. There is a need to reorganize the operations of the company in such a way that the entire international division reports to one person. This will clarify the responsibilities of the person in charge and it will enhance accountability.
Thirdly, the company has a weakness when it comes to the prioritization of the strategic business units. It is imperative for all senior managers to understand the reasons behind the classification. Failure to do this may negatively affect working relations.
The solution to the resource allocation problem is the one alluded to by Pierre le Goff. Pierre proposed that the company should have more resource allocation meetings to reduce the competition for resources.
This should take place quarterly. Alternatively, the resource allocation meeting should not result in a definite budget, but a set of rough estimates that each manager could justify in the future.
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On the issues to do with strategy, each division needs to have a say in the process of prioritizing the divisions, because of the importance of this classification in resource allocation. It is also important for the company to work with financial budgets covering a longer period in order to cover strategic initiatives.
Finally, the management structure of the organization needs to be reviewed in order to put the entire international division under one person. This will make it easy for the responsible person to account for the operations of the international division.
In order to implement these solutions, the company should consider the following recommendations. First, resource allocation affects the operations of all the divisions. Further, it affects the morale of all managers and it weakens their commitment to the organization.
Therefore, there is a need to ensure that their support is sought in the process of resource allocation.
Secondly, it will not be very easy to transfer the components of international business that fall under the COO. This is because the organization still carries some characteristics of a small company based on the philosophy of the founders. However, failure to do it will hinder long-term success.
The best approach is to transfer the functions in phases.
Thirdly, the organization needs to be more aggressive when handling strategic issues. The case study shows that the company uses long-term thinking to plan, and short term thinking to execute. This will not yield success. There is the need to match strategy to execution.
Lessons Learnt and Potential Improvements
The main lesson learnt from this case study is that the long-term success of a company depends on several factors. Dealing with one factor cannot solve all the problems.
Secondly, this case demonstrates the fact that companies struggle to assign responsibilities to their engineers rationally because they expect too much from the engineers. The best way to handle this situation is to ensure that engineers have a say in the operational planning of the company.
An improvement in the decision-making process of an organization is not an easy thing to achieve. Sometimes, it takes mistakes to improve systems. Each organization is unique. Therefore, each organization requires unique approaches to issues to solve its problems.
Friedman, L. (1996). Peterson Industries: Loius Friedman. Boston, MA: Havard Business School Publishing.