The case of Ground Zero Coffee Inc. demonstrates the different aspects of independent control within one organization. The Ground Zero company specializes in roasting and grinding coffee imported from coffee growers in Guatemala on fair trade terms. The mastermind behind the ground Zero company’s philanthropic image and business ideas, William D. Brewster, was appointed to the company’s district manager position in Brewster’s home city in Knoxville, Tennessee. Brewster’s functions in the company are almost entirely autonomous, meaning he makes the most decisions for his district. However, in pursuit of finding solutions to resolve the consequences of the tragic accident that happened to his family, Brewster made questionable choices that may be regarded as an abuse of power. The division’s poor financial results caused by increased investment in a new division of mail coffee orders worsened the situation.
Firstly, considering the performance measurement aspect, the CEO’s decision to use the ROI index as a primary indicator for the success of the company’s divisions is sourced from the company’s growth goal. According to Kernez (2021), ROI presents a relatively informative indicator of a company’s growth for investors. However, in the case of Tennessee’s division, the development of a new service of mail-order coffee required significant additional investments. Thus, the company’s operating profit should be increased proportionally to maintain a positive ROI index value. The ROI index can successfully be applied to the financial data of divisions that do not undergo significant changes.
However, the Tennessee division presents a pioneering branch that focuses on developing new services and coffees, which implies a constant flow of investments. Furthermore, investments in the Tennessee division are supposed to benefit the whole company by developing new beneficial services. Therefore, using the ROI data for the branch is wrong as it will not provide accurate information about the branch’s success. Furthermore, despite having a low ROI compared to the goal, the profit margin and asset turnover index data are relatively high (Table 1). As Brewster function as a leader whose ideas outline the organization’s mission and culture, the correct index for the division’s productivity will be the combination of customers, vendors, and employees’ satisfaction level. As the case details imply that Brewster’s high organizational culture standards drive the overall company’s success, the satisfaction index will present a reference indicator for other divisions.
Table 1. Ground Zero Coffee Inc. Tennessee Division Key Financial Indicators
Furthermore, the leadership and the CEO should review the organization’s internal control structure that favors the full autonomy of division managers. While Brewster’s inconsiderate decisions in an emergency were ethically correct because, ultimately, they benefitted the company, it is unknown what other divisions’ managers can do to maintain high ROI. Thus, while autonomy provided Brewster to find more creative ways for the company’s development through snack bars, his primary functions centered on developing services and new coffees. Therefore, introducing additional control over divisions will ensure that managers focus the work on their primary functions.
In conclusion, the case demonstrated the importance of choosing the right performance indicators for the company’s different goals. While ROI presents an informative source for potential investors, the leadership can use more detailed indicators to measure individual divisions’ performance. For the Tennessee division specializing in innovation and organizational culture development, the ROI index does not provide accurate information about the division’s performance. Furthermore, it is necessary to reduce the autonomy of division managers to prevent cases like Brewer’s and ensure that managers’ work is focused on fulfilling their primary functions.
Reference
Kernez, R. (2021). Calculating your company’s growth rate (And other important business indicators).Forbes.