Ultra-Sonic Engineering Corp. was a highly successful British-American Enterprise headed by Dan Rogers. Rogers had graduated from M.I.T. in 1980 with a degree in engineering, majoring in aviation. In 1982 he received his MBA from London Business School and immediately went about raising venture capital to start his own company By 1985 Rogers presided over a profitable single-product enterprise; Ultra-Sonic’s Jet Fighter planes had made him independently wealthy.
In 1988 Rogers was contacted by Robards, a fellow engineer from his college days at MIT. Robards was an aerospace scientist with the University of Hawaii, and had recently developed an esoteric engine after years of research, which he called the Silver Motor. At the same time, Ultra-Sonic’s own research division had produced tantalisingly viable plans for a new product which, it was suggested, would be called the Gyro-Copter. After some discussion, both men realised that the Silver Motor would require considerable development if it were to be used in the Jet-Fighters, but its design features made it immediately viable as an important feature of the Gyro-Copter.
At the beginning of 1989, Rogers initiated an important corporate restructuring in order to accommodate the development of the Gyro-Copter. He created two separate divisions which he designated as profit centres. Division A was wholly responsible for the engineering, manufacturing, assembly and quality-control of Jet Fighters. Division B was wholly responsible for the Gyro-Copter. Each division had five separate departments, including an accounting department which reported directly to the vice-president of the division, as well as to a centrally located financial control centre.
Rogers had envisaged a third division, headed by Richard Robards, to be designated as a cost centre. This division would produce the Silver Motor for use by Division B. Robards, however, managed to convince Rogers of the benefits of making him vice president of a third semi-autonomous division designated as a profit centre, Division C. The rationale for this idea was that international patent law prevented any other company from manufacturing the Silver Motor and that it would therefore be in great demand on the external market, in addition to being required by Division B.
It was expected that by mid-1989 all three divisions would be fully operational. Rogers envisaged that a new, more powerful, Central Services Division would provide the cohesive link between each of the three manufacturing divisions and thereby prevent inter-divisional disputes. To this end, Rogers recruited an astute senior executive by the name of Roy Lomas to head Central Services. Lomas immediately established three separate cells within his division: the marketing and sales department, the human resources and administration department, and the financial control and budgeting department.
With the new staff in place, Lomas then moved rapidly to establish a series of formalised accounting procedures applicable to all three production divisions. In order to gain consensus for this, he called a number of meetings which he requested be chaired by Edward Hyde, the manager of the Accounting department within Division B. Hyde and Lomas were old friends from their days together in Dubai, and conveyed the impression throughout the company that they were ambitious men with a wealth of experience in financial management and corporate restructuring. Hyde became the unofficial head of the Financial Control cell within the Central Services Division, although this position was formally held by the senior accountant of the corporation, Jack Monday, who was unambitious, lethargic and unconcerned by the pace of change within the organisation.
A number of senior executives who had been with Ultra-Sonic since its inception, viewed Lomas as being extremely effective in carrying out the desires and intentions of Rogers in an incredibly tight time-frame, whilst carefully minimising serious potential resistance. Others, however, felt that Rogers had lost interest in the operational concerns of his company, and was blind to the ruthless ambitions of Lomas and Hyde.
By mid-1990, Rogers began to seriously question the efficacy of retaining Richard Robards in the position of vice-president heading the Silver Motor Division. At company meetings, both Lomas and Hyde had repeatedly emphasised the mediocre performance of Robards’ division, to the point where it was widely accepted throughout the organisation that there were some fundamental management problems within that division. Rogers himself felt that, in such a tight global economic climate, the time had come to rationalise the corporate structure of Ultra-Sonic Engineering Corp.
In February 1991, Richard Robards received the following memorandum from Rogers:
“I enclose a copy of last year’s audited accounts for the Silver Motor Division, together with our projection of the results for this year. As you will no doubt notice, these results are extremely disappointing. They should leave you in no doubt as to the precarious state of your division’s current financial position.
To enable us to protect the long-term career prospects of employees in other divisions, I propose to restructure the corporation and close down your division. The Silver Motor project will not be jeopardised. You will be made chief engineer of Division B and will retain your vice-presidential salary package. I do hope for your support in this painful process. The economic downturn has necessitated dramatic action.”
Richard Robards went white in the face. He knew very well who was behind this. So Lomas and Hyde had eventually got to Rogers, he thought to himself. Robards had never understood the intricacies of financial management techniques and was thus unsure of how he could prove to Rogers that the figures enclosed with the memorandum did not accurately reflect the performance of his division.
After a few moments of anxious reflection, he summoned Chris Raven, head of the accounting department within his division. Chris was the youngest departmental head within the corporation. At just 23 years of age he lacked experience in organisational politics, but his training as an accountant at Princeton provided him with the well-developed ability to interpret even the most convoluted accounting data.
“Here are last year’s audited accounts for our division.” Robards said as he handed them to Raven. ” I would like you to analyse them thoroughly this afternoon. The matter is crucial! Are there any glaring inadequacies amongst these figures? Do they tell the full story with respect to the profitability of our division?”
Chris Raven took just one and a half hours to uncover the dubious cost-allocation figures hidden in the report. He realised however that this particular accounting method had been sanctioned by the Central Services Division over a year ago at a meeting where Hyde had been a key player. This led him to reflect on his relationship with Edward Hyde. Hyde had acquired an awesome reputation as a man not to be crossed, and was tipped to be the next departmental accountant manager to be formally promoted to the Financial Control cell within the Central Services Division at Head Office.
Chris remembered that, just over a year ago, when a specialist task force to decide upon an equitable formula for the setting of transfer pricing between divisions was chosen by Roy Lomas, the vice-president of Central Services, Hyde had been particularly tenacious in advocating the importance of his own division’s profitability. His rationality was certainly quite convincing; he emphasised the tremendous medium-term market potential of the GyroCopter and put forward the case that the whole project may be jeopardised if considerable “slack” were not built into the transfer price formula between divisions B and C.
At first, Chris himself was not a member of this all-important task force. It was only after Richard Robards had approached Dan Rogers that Roy Lomas reluctantly invited Chris to engage in the final series of meetings. Chris felt rather uneasy in this climate. It appeared to him that the other task-force members had already decided upon the importance of favouring the immediate profitability of Division B at the expense of Division C. At one particular meeting, Chris was drawn into a protracted and rather heated argument with Hyde. This single event had seemingly created an irreparable rift between the two men.
Now this rift had returned to haunt Chris Raven. Hyde’s formidable reputation as a high performer in the company acted as a suit of armour. Any attempt by Raven to question the rationality of Hyde’s financial vision would run the risk of being perceived as sour grapes. Hyde had made it common knowledge throughout the company that “the young pup from Princeton” had attempted unsuccessfully to “discredit his financial wisdom and expertise”.
Reluctantly, Chris returned to Richard’s office with the necessary accounting information required to reveal the shortcomings of the audited accounts figures It took him some time to convince the vice-president of the merits of his analysis, but after two and a half hours of painstaking explicatory discussion, Richard Robards was sufficiently convinced of the severity of the situation to immediately telephone Dan Rogers The three men set up a crisis meeting for the following morning.
That evening Dan Rogers’ Ferrari spun off the highway, skidding treacherously across a slither of sheet-ice. The car rolled twice before bursting into flames. The next morning Roy Lomas moved to install himself as the new president of Ultra-Sonic Engineering Corp.
Case analysis. undertake the following steps (for exam case study analysis, don’t need references)
1. Identify issues relevant to organizational behavior and design. You should aim to identify between 3 and 4 issues (or problems). You may identify one main issue and a number of smaller issues or sub-issues
2. Use the concepts, models and theories that we have covered in the course to analyze the case. Indicates at least 2 relevant theories and applies these theories to the case
3. Outline one or more possible solution or intervention strategies for each issue identified, based on your analysis. Please ensure that your solutions or interventions are developed from the application of the theories and concepts you outlined in your analysis.