Benson Metal Company makes a variety of metals that are purchased by manufacturers or specialized metal firms.
It has been in existence for decades; thus, making it one of the five or six leading firms in the specialty steel industry. With such success, it has been listed on the stock exchange and has employed about 1,500 workers. The Benson Company and its competitors are moving into a changing environment, where it is a more sophisticated and technically more difficult steels, largely for the aerospace industry. Production for the aerospace industry requires more research skills and quality handling in all the stages of production.As the environment surrounding The Benson Company is changing and the steel industry is growing, the internal environment within the company will have to be well connected across different departments and have a good flow of communication and authority in order to meet the demand of its stakeholders and maintain its already established position in the industry. There is a formidable problem within the organization, as the production and sales department do not get along well; therefore, causing both departments to not inter-change information and resources that deal with the meeting of production demands.
The vice president of production Mr. Ramsey Stockwell also has a problem within his department and across the top-management team. The Benson Company would have to formulate solutions for their current dilemma within the organization because they cannot allow these problems to presently exist, as they could face a steep price for it. This report will attempt to analyze the current situation that dwells in the organization, by the use of organizational theories attempt to elucidate different alternatives the organization can implement to eliminate the enduring problems and the best choice in which it should consider taking.
Analysis and Summary As the growth in the steel-making industry moves to a more sophisticated and technical approach, the top-management should see this as an opportunity and not a threat. They should put their differences aside and make their organization the leading steel-making industry by gaining competitive advantage, where top-management use core competencies to increase value-creation (Jones et al). Growth and gaining of competitive advantage cannot happen with the current internal conflicts that exist within the organization.The root of the problem within the organization can be said to be the working behaviour in which Mr. Ramsey Stockwell displays. His working behaviour can be primarily based on his personality, as he hardly delegates authority to the good subordinates that work underneath him.
This creates a crisis of autonomy, where he works independently and lower level employees find themselves restricted by a cumbersome and centralized hierarchy (Greiner), which is not for the betterment of the department and the company as a whole. Employees working in this condition will be less motivated to carry out their day to day structured activities and easily loose interest in their jobs.Also, very skilled workers that have a lot more to offer don’t get the opportunity to input ideas and such skills are wasted. A centralized structure is helpful for organization’s who need to be stable (Adam), which is not valid in the case of the Benson company as they are facing a growth and technological advancement in steel making for the aerospace industry. On occasions, Mr.
Ramsey also violates the chain of command by giving orders directly to a manager or an ordinary foreman and doesn’t work through intermediate levels.This breaks the line of authority and reduces the amount of authority that esteemed individuals should have. With Mr. Ramsey performing such actions, he loses the benefits of good communication within the department. Not everyone in the department will be aware of the job processes in action, and the coordination and completion of task would become more difficult and complicated.
Due to the problems faced in the production department, reliable communication with the sales department becomes difficult. There seems to be a different structure within the production department compared to the sales department.Unlike the production department, sales have high morale and perform their tasks smoothly; possibly dues to the implementation of a decentralised structure within their organization, where employees have more freedom in initiating their ideas on new projects (Jones et al). When there is a difference in organizational structures between departments within an organization, it could be said that there would be a difference in goals and priorities. A difference in the goals and priorities between departments falls under the sources of latent conflict in stage 1 of Pondy’s Model of Organizational conflict (Jones et al).
When a difference exists in the orientation of departments, it affects the way the department views the organization and causes each department to pursue different goals that are incompatible. Incompatible goals create conflict (Sreenath) and this seems to exist between the sales and production department. The sales department try to push special orders into the production’s already existing schedule that is based on the normal orders. From this, it is evident that sales have a goal of maximizing their sales figure while the production department wants to remain efficient at producing output; hence the reason of their conflict.This conflict adds to the already existing friction in which Mr. Ramsey and Mr.
Rob Bronson (VP of sales department) have. The flow of information between these departments as well as other departments is eradicated because the structure of the production department is highly centralized; therefore, not all the subordinates are aware of production information and the conflict also hinders the ability and willingness to communicate with each other. Mr. Ramsey’s problems spill over to disagreement with the top management staff and chairman of the board of directors which leads to an agency problem.An agency problem is difficulty in determining managerial accountability, which arises when delegating authority to managers (Jones et al) such as Mr. Ramsey.
This problem is evident as the chairman of the board clearly said “I would never give him the job again”. Such an expression isn’t good for the internal climate of the organization and certainly does not lay a good impression on Mr. Ramsey’s behalf. Certain motivational methods can be used to iron out the problems that exist in their relationship.
Motivation is the Internal and external factors that stimulate desire and energy in people to be continually interested in and committed to a job, role, or subject, and to exert persistent effort in attaining a goal (Business Dictionary). With that being said, motivation should be consistent across all departments, as they thrive to achieve mutual goals that serve the organisations vision and mission. In the Benson company, motivation is one sided. The sales department get all the glory for the good work and production gets a lousy “well done” or consequently get blamed for the bad years in operations.
This should not be the case as success in sales can only be apparent if production is doing their job, no goods no sales. And it doesn’t help smoothing out the conflict that already exists between the two departments but it rather enumerates it. Production personnel’s’ would feel less appreciated than sales employees and this could father cause a distorted climate within the organization. Recommendation With all the faults associated with Mr. Ramsey’s working behaviour, production staff members remain loyal to him and admire his abilities and the continual efforts he displays to fight off sales pressure on production agendas.
He is also a competent production man with a lot of experience and is very loyal to the Benson Company. The positive and negative aspects of Mr. Ramsey working behaviour brings forth a range of possibilities that the board of director’s have to consider when formulating a solution for the problems that currently exist in the organization. They could attempt to change Mr. Ramsey working behaviour to benefit the organization by implementing various techniques, they can change the entire organizational structure to a matrix one; where they can reap the benefits of integration or they can ultimately eliminate Mr.
Ramsey from the organization by discharging him.To alter Mr. Ramsey’s working behaviour for the betterment of the organization, the company will have to eliminate the agency problem that exist between him and the chairman of the board of directors and also eliminate his bad habit of not delegating, by teaching him about the techniques needed to delegate and the importance of delegation. The agency problem can be solved by implementing various techniques like governance mechanisms, stock-based compensation schemes etc.
(Jones et al).The solution that seems to work best in this situation is governance mechanism, which is the forms of control that align the interests of principal and agent to maximizes the organisational effectiveness (Jones et al). I recommend this solution to the agency problem because a question about the benefits that Mr. Ramsey currently enjoys was never brought up and the other solution would unnecessarily increase bureaucratic cost. To solve the problem of delegation, there are certain seminars and programs for a relatively cheap price that can educate Mr.
Ramsey about the importance of delegation.In these seminars, one of the many thing he will learn are the three most important principals that relate to the behaviour of a delegator; belief in people, consistency of standards and clarity of values (Hine). The successful completion of this solution will assist Mr. Ramsey to become a better worker and improve his communication with the rest of the organization. The company can also change their current structure to a matrix structure, which will focus on the reduction of functional barriers and overcome the problems of the subunit orientation, as seen between the sales and production department.The matrix structure superimposes the product structure literally over the functional structure, the result is a creation of dual authority by is balanced by top management and is formulated to maximize the strength and minimize the weaknesses of both structures (Gupta).
Introducing this structure will benefit the organization in the sense that, integration becomes easier to achieve and differentiation between the sales and production department can be kept at a minimum (Jones et al); making it easier for the company to meet current demands with more success and adapt to the changing environment in the steel industry.The changing of the structure in the Benson Company would not be easy, because they still face the problem that Mr. Ramsey displays. Putting him as part of a dual authority wouldn’t work to well, as he doesn’t seem to possess the necessary communication skills that will yield success. This procedure will change the climate around the organization, which would be difficult to adapt to.
Failure to implement this structural change successfully, can lead to the waste of time and resources which the organization does not have at their disposal.Lastly, the organization can lay off Mr. Ramsey. This solution will mean that Mr.
Ramsey’s services are no longer needed and he would have to leave the Benson Company. By doing this, the problems that he brings to the company in terms of his working behaviour can be eliminated. Laying him off would mean the company will have to find a suitable replacement in time to meet their current demands. There are various disadvantages to this solution:1) Mr.
Ramsey has been with the Benson Company for six years. Therefore, the company will lose his experience and loyalty. 2) He has subordinates that are loyal to him and the company could lose those employees. 3) The company is in a difficult period in their operations and a change in the managerial staff will not be convenient. Recommendation The solution that seems to be the best for the Benson Company will be to change Mr.
Benson’s current working behaviour to a more suitable one.By taking this route of action, the company does not lose the skills of Mr. Ramsey and his loyal subordinates. Mr. Ramsey has also worked for the Benson Company for six years meaning he knows his way around the company and has acquired more than enough knowledge about the working environment. Therefore, hiring a new manager would lose such benefits and could possibly increase the bureaucratic cost of the company.
The current growth in the steel industry will mean that the production manager should be knowledgeable of his environment and be capable to work in the inadequate plant facilities; Mr. Ramsey seems to have acquired such skills by working in the Benson Company.In terms of cost, this solution would be best in comparison to the changing of the organizational structure to a matrix structure. In the growing industry for steel, changing to the matrix structure would involve the hiring of other employees who have the skills to facilitate the process. Consequently, this solution of training Mr.
Ramsey’s working behaviour will be more cost effective. The company will have to deal with Mr. Ramsey’s failure to delegate to his subordinates and the agency problem in which he faces.The delegation problem can easily be fixed by hiring a consultant or taking him to seminars where he will learn the importance of delegation. Once he starts to delegate authority to his subordinates, he will have more free time to attend to more important issues in the production department and wouldn’t have to work later than others. When his delegation problem is solved, it can help solve his agency problem with the chairman of the board.
The agency problem that exists between the two individuals can be primarily based on the chairman’s perception, that Mr. Ramsey has an awful working personality.Thus, correction of his working behaviour can partly rectify the agency problem. If the agency problem exist cause of other reasons various methods can be used to resolve the disagreement. One method that can be used is stock based compensation schemes, which is monetary rewards in the form of stocks or stock options that are linked to the company’s performance (Jones et al). Conclusion The Benson Company is currently facing issues within the organisation that range from inadequate transfer of information between the sales and production department, inadequate delegation from Mr.
Ramsey (VP of the production department) and agency problem between Fred Benson (Chairman) and Mr. Ramsey.They face all these problems in a changing and growing steel industry, where the company should be performing at its best. After analyzing the issues that rotate within the Benson Company, the source of the problems seem to be Mr. Ramsey working personality and behaviour.
In order to solve the problems that exist, the company will have to alter Mr. Ramsey’s working behaviour, change to a matrix structure where integration between the sales and production department would be better or lay off Mr. Ramsey.In this report, the best solution would be to change Mr. Ramsey’s behaviour in the working environment by lecturing him about the importance of delegating authority to his subordinates and using various solution techniques to resolve the agency problem between him and the Chairman. This solution is chosen because it is cost effective and the experience Mr.
Ramsey has gained by working in the Benson Company would be an asset and will also help this organizational meet consumer demands in the difficult period that they are currently facing.
