1. Enumerate the conditions why Corning had to undergo the series of structural changes.
Following the international growth and expansion of Corning, the following problems were being faced in the organization’s structure and management processes:
i) With the international expansion of CGW, the company was becoming too big and complex to be managed by its current structure. Hence a need was felt to create the international arm as a separate legal entity and hence Corning International Corporation (CIC) was born.
ii) CIC was created as a subsidiary to CGW to emphasize the growing importance of Corning’s overseas business. The management felt that the creation of CIC as a separate unit was important to upgrade the role of international managers and help them feel more accepted within Corning.
iii) Before the international strategy shift of the mid 1960s, CGW did not meddle much into the affairs of its foreign affiliates. The foreign affiliates maintained their own individual reporting and control systems. However, following the strategic shift to gain majority in these foreign subsidiaries, the management system and processes began changing, such as integration of subsidiaries’ accounting systems into the parent company. This caused problems as most of the subsidiaries were European non-English speaking countries and didn’t follow American standards. Hence a need was felt to integrate these foreign subsidiaries with the parent company so as to maintain uniform standards and processes.
iv) The acquisition of majority shareholdings in foreign subsidiaries also encouraged management to begin to coordinate and integrate its foreign operations. The task of unifying, coordinating and integrating the European operations specially was a difficult one. There was a long list of independent companies that needed to be brought under control and a lot of these companies were old rivals. Hence lack of coordination and cooperation existed at every level.
Furthermore, each of the European companies had export customers and offices in several other European countries. This caused lot of chaos and confusion when it came to bringing order into CGW’s European operations. Also, the European country affiliates were well established and extremely knowledgeable about their local environment. It was difficult for the newly appointed area managers who did not have the same level of market and product expertise to challenge these country affiliates and convince them in favour of consolidation of manufacturing operations.
v) The structure within CIC was organized on geographical dimensions. The top management had a tendency to take major decisions based on their local interests and hence promoted their local projects. As a result, conflicts started arising between geographical entities. Such conflicts could only be resolved at the desk of Forrest Behm, President of CIC, who was the only one with sufficient power and connections at the corporate level to communicate plans to and from top leadership of CGW. As the international operations expanded, Behm turned out to be the only one in a position to take a global perspective of the various international businesses and this in turn increasingly burdened him with more conflict-resolution issues. He felt that a structural change within the organization was required to bring in a global perspective amongst its people.
vi) Another challenge that Corning was facing was the transfer of technological knowledge from parent company to its foreign operations. Before major international expansion, this transfer was maintained through informal channels between technical experts in the parents company and the foreign plants. As the foreign operations expanded and technological innovations grew in size, the old model of knowledge sharing turned out to be insufficient to handle the growing demands. Hence foreign subsidiaries had to rely on the formal channels within the international organizational. This led to escalating frustrations on both the sides.
vii) Furthermore, the capital allocation process also changed following the majority shareholding in foreign subsidiaries. Before the consolidation, the decision process for capital allocation was done primarily by the local managers of the foreign affiliate, who would then go out and raise the capital on their own.
However, after these subsidiaries were acquired by Corning, they were required to submit a formal capital appropriation request prepared in English. The subsidiary general manager then had to chase it to the end through a series of corporate decision making filters. This allocation system had other major implications on the relationship between the technical personnel on each side. Whereas before, the technical managers from the parent company provided assistance to subsidiaries on projects, the former now became a part of the judge and jury system to decide on the capital allocation to these subsidiaries. As a result, the technical managers tended to become more conservative with their advice and assistance to the subsidiaries.
viii) Due to the incoherency of its area based organization structure, CIC found itself grappling with the global marketing coordination necessary for some businesses. There was no one who was responsible for coordinating between different foreign subsidiaries on global actions like price, product, sourcing etc. The needs of global product development were not being communicated to the R&D group. This meant that the international product development needs were being largely ignored.
In order to address the above mentioned problems, Forrest Behm, decided to restructure the organization by appointing three international business managers. The primary motive behind the appointment of these business managers was to supplement the organization with a global business perspective.
2. Identify the problems with the organization structure (until 1972; business manager concept) that led to the formation of World Boards.
i) Corning International Corporation (CIC) since its inception was not truly integrated with its parent organization Corning Glass Works (CGW). The creation of CIC as a separate company was insufficient from the onset. The relationship between senior managers in the parent company CGW and in CIC remained unchanged. The vice-presidents in CIC never really achieved the status and importance of vice presidents in CGW. As a result when the three international business managers were appointed by Behm with the status equivalent to Vice-Presidents, they faced difficulty liaising with vice-presidents and other senior managers in the domestic organization (CGW). They were simply viewed as lacking power, status and credibility to get things done.
ii) There was some hostility prevalent between the domestic and foreign arm of the organization. The domestic division managers felt that if they had to provide the foreign operations with so much support, they might as well run the foreign operations themselves. This contributed towards making the job of international business managers in acting as a liaison even more difficult.
iii) The role of the International Business Managers was not clearly defined since its inception. They were given very vague general mandates like “to straighten things out in consumer products in International” or “to put together a world strategy for products in Science and Medical”. As a result nobody understood what they were really there for and hence people could not establish a connection or relation with them. This contributed to some area managers feeling that they were wasting their time and energy in entertaining these international business managers and meeting their demands of time and information.
iv) There was lack of communication between Behm and foreign subsidiary country managers who felt that they were not informed of such a role being introduced in the organization hierarchy. As a result, employees in the foreign subsidiaries had no clarity who they were supposed to report to after the organizational changes. This contributed to a creation of general sense of defensiveness in the subsidiary employees from the outset. So the business managers were largely viewed by foreign subsidiaries as more of an interference and less of a coordination help.
v) The three business managers did not have the right skills to act as liaisons. Their inability to establish strong links between the foreign subsidiaries and the domestic products divisions was partly due to the attitude with which some of them had taken up these roles. For example, the international business manager for the Consumer Products Division came across as interfering and authoritative. This was not helpful in yielding the desired results.
3. Examine whether their current structure (world boards) is appropriate to the business environment. Provide suggestions to Behm on the proposed reorganization.
The current structure of world board is strong and is capable of bringing in order to the organization provided some changes are made to it. The world boards were not created to control or manage the foreign subsidiaries but rather to act as a channel to facilitate coordination, communication and cooperation between the parent company and its foreign subsidiaries. The members of the world boards must keep this vision in mind during their meetings and interactions.
We propose the following changes to the world board in order to make them more effective:
i) Behm should first start with putting a limit on the maximum number of people on the world boards to 6-7. This will avoid the problem of world boards becoming too big and chaotic to manage. The world boards should include at max 2-3 people from US product division, 2-3 people from subsidiary units and 1 international business manager.
ii) The Optical Products World Board was able to achieve results by successfully resolving their conflicts before the board meetings. All other world boards should follow their model and try to adapt it to as much extent as possible.
iii) The domestic division managers need to understand that the company as a whole can only be unified through corporate culture, shared vision and values, and management style rather than through formal structures and systems. Hence they should avoid trying to control the subsidiaries’ business the way they have been doing so far.
The domestic division managers should be encouraged to develop a networking and inter-dependent relationship with the subsidiaries. Internal attitude change within Corning’s domestic managers is critical to encourage coordination, participation and involvement of the subsidiaries. While being a part of Corning, the subsidiaries need some autonomy for themselves to develop an ability to make impactful contributions to the organization as a whole.
iv) Behm should ensure that the world boards meet regularly and achieve fruitful results. If left to themselves, things may go back to how they were. Hence a more direct involvement on part of Behm is required (at least in the boards that still have major difference of opinions) to facilitate communication and resolve difference of opinions.
v) Corning should slowly and gradually adopt the transnational model to promote worldwide integration and knowledge sharing to exploit both global and local advantages. The top leadership needs to see the organization as a network and should refrain from shaping it as a centralized hub. Interdependence between units should be promoted amongst product, functional and geographic units.
vi) Cross-subsidiary teams should be developed in the long run to compel different subsidiaries to work together for their own good as well as the overall good of the organization.