Case Scenario:
Jane Memorandum:
In an attempt to address ZAK-Squared's increasing global operating costs and declining revenues, I have outlined two potential options for reorganizing our software-development units. Our current structure is not working and we need to do something to recapture our competitive edge.
In its report, Kersey International Consulting cited our software development efforts as an area of great concern. The report made it clear that our software products are not meeting the needs of our European clients. This is forcing us to dedicate resources from other functional areas simply to make the products work, instead of crafting top-notch products that fit our clients' needs. As a result, our costs have increased, which has substantially affected our profit margin in Europe and taken a toll on our U.S. operations.
I'm most frustrated by the fact that we have faced similar challenges in our U.S. operations, but we have always been able to respond quickly as an organization to implement successful solutions.
I have outlined two options for restructuring our software development efforts. I probably don't have to tell you that I am concerned about containing costs and generating revenue through an increase in sales.
I realize that advantages and disadvantages exist for each; I would like you to review the options I have outlined and provide a detailed report that clearly discusses the advantages and disadvantages of each, and any suggestions you might have.
Regards,
Jane
Option 1:
We reduce costs by consolidating and locating all software development in our Palo Alto facility; we put software development under the supervision of the vice president of development. This should cut a great deal of overlapping functionality across our markets and allow for tighter coordination of our initiatives. Below I have outlined how this plan might look in terms of the organization.
Reporting structure:
• Create two director positions; one for each region-North America and Europe
• Create a European translation task force for each product suite; the task force will focus on creating a priority list for European integration
• Create three project management positions for each task force; these project managers will oversee the progress of each software suite translation
• Create a development steering committee that includes the functional vice presidents and the CEO
• Require European affiliates to channel requests for development support through their regional director
Compensation and rewards systems:
• Reward employees in the software-development division for
• Completing major initiatives
• Implementing innovations that cut development or conversion time
• Reducing required postdevelopment customizations
Recruiting:
• Hire additional software engineers to staff the translation teams
• Recruit domestically for the director of North America, and recruit in Europe for the director of Europe; the European director must have implementation experience in the region
• Hire three project managers with international technology project experience
Training and development:
• Provide mentoring and support structures for existing software engineers to increase proficiency with conversion projects
• Provide information about the specific needs and requirements of European clients
Decision-making process:
• The steering committee will assign a timeline, a resource budget, and a priority rating to projects requiring customization support
• The development steering committee will make all resource-allocation decisions
• Regional directors will oversee their respective software-development projects
• A project manager will be assigned to all special projects that are expected to take more than 100 hours
• European affiliates will channel requests for development support through their regional director
Communication routines:
• Directors will provide progress reports on initiatives to vice presidents and the CEO
• Each task force will meet weekly to review progress and issues
• Each task force will assign priority ratings to its issues and forward them to the directors
• The steering committee will meet monthly
• A project manager from consulting, or possibly from research and development, will be assigned to all special projects that are expected to take more than 100 hours
Culture:
• Develop the following key characteristics:
• A sense of accountability among the leadership
• A focus on teamwork in production
• Pride in ZAK-Squared's innovation history
Option 2:
We reduce costs by consolidating functions by region. By dedicating resources to address regional software-development needs, we should be able to control overall project costs and eliminate costly reactionary resource allocations. Additionally, we will create a tighter fit between our North American and European operations by flattening the organization and streamlining the top-management team.
This option will allow for greater responsiveness across our markets as well as tighter coordination across our regional initiatives. Looking ahead, this structure will allow for greater flexibility as we expand into other regions.
Below I have outlined how this plan might look in terms of the organization.
Reporting structure:
• Hire vice presidents for North American and European operations who will report directly to the CEO
• Eliminate functional vice president positions in the United States
• Create functional directors who will report to regional vice presidents
• Strengthen functional groups-such as sales and consulting-in the European region
• Create a European software-development group that will be responsible for new-product development and customization support
• Under the European development group, create three development teams responsible for the European conversion of each product suite
• Create an oversight committee, composed of the regional vice presidents and the CEO, that will evaluate the performance of the units
• Create regional cross-functional teams that will develop a priority list for regional initiatives
Compensation and rewards systems:
• Reward employees in the software-development division for
• Completing geographical initiatives
• Implementing innovations that cut development or conversion time
• Increasing profitability of their region
Recruiting:
• Hire vice presidents for North American and European operations
• Recruit domestically for North American functional directors, and recruit in Europe for functional directors of Europe; European functional directors must have implementation experience in Europe
• Hire software engineers for European software-development functional group
• Fill gaps in other functional groups
Training and development:
• Provide mentoring and support structures for existing software engineers to increase proficiency with conversion projects
• Provide information about specific needs and requirements of European clients
Decision-making process:
• Regional vice presidents will make all resource-allocation decisions
• Regional functional directors will oversee their respective regional software-development projects
• A project manager from consulting, or possibly from research and development, will be assigned to all projects that are expected to take more than 100 hours
Communication routines:
• Directors will provide progress report initiatives to regional vice presidents and the CEO
• Firm-wide communications will be primarily across regions at the vice president level
• Focus on communication will be primarily vertical within regions
• Cross-functional teams will be developed within geographical regions to share and disseminate best practices
Culture:
• Develop the following key characteristics:
• A sense of accountability among leadership
• A focus on teamwork in production
• Pride in ZAK-Squared's innovation history
-mail from Matthew Sullivan: New Business Model
Tasha's message is pretty frightening. She pretty well diminishes any hope that we have of continuing to operate in any way that resembles the ZAK-Squared that we know. Spiraling engineering costs means that our technological advantage will disappear.
A lot has happened lately, and we have gotten through it, but we always thought that we would at least be able to rely on the advantage of having unparalleled design done in the U.S. offices. But I guess those days are ending. We will have to face this before it's too late—with these new cost realities, research and development is not in ZAK-Squared's future, and we need to figure out what functions to retain.
We must identify a new business model that will fit whatever is left over for us. The consulting business makes plenty of money and few of those employees require specialized computer science degrees—their degrees seem common.
Perhaps it is time to start phasing out our own design to begin expanding our marketing department so that our consulting services can compete with the accounting firms and others who do this kind of thing. The consultants will never know the difference—just that they had better keep on billing.
E-mail from Zheng Hong: Design Company
Wait! You seem to think that the talent pool ends at the U.S. border. We are a design company and will continue to be a design company. It doesn't matter to me whether our design people are down the hallway or across the world.
If we need to hire software designers in India or China instead of in California or North Carolina and their offices are there and not here, then the crisis is solved. Let's get back to work.