Rondell Data Corporation Study Question Analysis

1.What are the goals and subunit orientations of the different functions in Rondell?

The five principal functions in Rondell that must work together to produce new products are production, sales, research, engineering services (part of engineering), and the control department (containing accounting, purchasing, and materials control). Each function contributes something unique and has adistinct subunit orientation.

a. Production minimizes manufacturing costs. The goal is to obtain products from the engineering designdepartment for easy and inexpensive manufacturing. The manager in charge of production, Dave Schwab,is concerned about protecting his turf, and resists attempts by other departments to interfere withmanufacturing.

Production’s orientation is short-term technical efficiency.

b. Sales’ goal is to supply customers with new and innovative products to retain their business. It alsowants new products on time without shipping delays. Sales has a history of optimism about deliveringnew products quickly, and that optimism pressures other functions. Sales is to supply information toR&D for use in product development. Its orientation is toward meeting the changing needs of Rondell’scustomers—it is focused on the environment.

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c. R&D’s goal is to find innovative ways of improving existing products and creating new products.Some R&D functions try to improve the manufacturing process to reduce costs or increase reliability, butR&D is purely new product oriented. R&D causes problems by introducing new innovations into thedesign process at an advanced stage. Its orientation is toward long-run product development.

d. Engineering service’s job is to coordinate and integrate activities.

Engineering services takes the inputsfrom sales and R&D—new customer requests or improved component designs—and builds the final product design with production specifications. It sends these plans to production, which designs theassembly process to produce inexpensively and efficiently. Its orientation is to improve the effectivenessof internal systems.

e. The control department controls purchasing and materials control. It is a service department to themanufacturing and engineering services and has an internal systems orientation.

2.What are the sources of conflict in Rondell and why is the conflict among functions a major problem?

Although engineering services is responsible for product development, other functions, like R&D andsales, influence the new product development process. This causes conflict. Sales can set ambitioustargets for introducing new products over engineering’s objections. Both sales and R&D can intervenelate in the design process and make changes, creating problems for engineering services. The productionmanager constantly returns the product design plans sent to manufacturing because engineers have notworked out the bugs. More redesign becomes necessary, and manufacturing is slowed down, causingsales problems as product introductions are delayed. Manufacturing itself contributes, routinely sendingflawed plans back to engineering, though many errors could be corrected during the preproduction setup.Each function pursues its goals at the expense of the others.

Growing complexity of the company’s business and the wide range of products it produces resulted inengineering services as the linchpin of the product development because it coordinates other functions.Yet, this function is considered crucial by top management, which always sides with R&D or salesagainst engineering. R&D is considered the most important function because the company has been driven by technical developments that result in new products. Just as in the Ramrod Stockwell case, thereis a power imbalance, and different functions compete for power and control of resources.It is helpful to use the material on conflict in Chapter 14 and discuss the five main sources of conflict:a. Interdependence.

As Rondell has grown, each function pursues its own interests at the expense of theothers. Each subunit’s desire for autonomy conflicts with the organization’s desire for coordination, andRondell’s structure provides no coordination and integration necessary to pull activities together. b. Heterogeneous goals and priorities. Each function’s different goal and subunit orientation causes it toview problems differently. Subunits have become competitive as the attempts of one to achieve goalsthwart the attempts of another.c. Bureaucratic factors. Rondell’s structure has evolved historically and status inconsistencies havedeveloped among different groups and managers—between the heads of R&D and engineering.

Althoughthe head of R&D, “Doc” Reeves, formally reports to Frank Forbus, the director of engineering,informally Reeves has more status and power. The manufacturing manager is concerned about his lack of a degree, which he believes lowers his status, so he deliberately causes problems for other managers toincrease his power and status.d. Incompatible performance criteria. Each function is evaluated according to its goals, so when slowengineering design raises manufacturing costs or results in lost customers or penalty clauses in customer contracts, functions come into conflict.e. Competition for scarce resources.

Some functions, such as R&D, can command whatever resourcesthey want. Engineering services is running very lean, its engineers stretched thin, and no resources for aneffective preproduction unit. Given that profits have fallen, competition for resources might increase,which will worsen the problems.It is clear that the company needs to take action. Because structure is the source of the problem, the company must understand how structure works and see how it has contributed to problems.

3.What kinds of organizational design choices and structure does Rondell use to control its activities? How do these contribute to the problems it is experiencing?

Rondell uses a functional structure to coordinate its activities. It is a relatively small company, with only800 employees, and it appears to have about five levels in the hierarchy, counting first-line supervisor and shop floor employees. The arrangement of functions has grown rather haphazardly over time. Therationale for having both R&D and engineering services report to the director of engineering is historical precedent, as the head of R&D also has a dotted-line relationship to the president. Similarly, the rationalefor having purchasing and materials control in the control department while quality control is inengineering services developed as a temporary wartime need.

There is no separate production controldepartment to coordinate manufacturing, engineering services, and sales. Manufacturing seems to do itsown scheduling, and preproduction engineering is weak and underdeveloped.Rondell’s pattern of differentiation contributes to its problems because task and role relationships amongfunctions are not well defined. There are few formal integrating mechanisms, which promotes conflict.Going through Galbraith’s list of integrating mechanisms shows few formal links between functions suchas task forces and teams. Most cross-functional contact is high up in the organization between the headsof the functions, not between lower level personnel.

The single high-level executive committee was the brainchild of the controller and a relatively recent development. It was not working well because the president used it to pass on routine information, not for integrating among the functions. Both differentiation and integration in Rondell promote conflict among functions because the structure isnot complex enough to coordinate the growing need for cross-functional communication.Decision-making is centralized, and Hunt is involved in all important decisions between himself and keyfunctional managers. This centralized style prevents lower-level managers from solving their own problems through mutual adjustment. Thus, Rondell is not making the best use of its managers’functional skills and abilities.

Not much use is made of formalization or standardization except insidemanufacturing, where Schwab has developed a very mechanistic structure. In building this barrier between manufacturing and the other functions, Schwab, the production manager, has caused major coordination and communication problems that foster conflict.Rondell uses the informal more than the formal organization to coordinate activities, and this causesconflict.

The power of the key managers results from their historical contribution to the company. Eventhough the organizational chart shows that “Doc” Reeves reports to Frank Forbus, Reeves has more power and has the ear of the president. Forbus should have considerable formal power, but because of theinformal decision-making, he is powerless to resist sales, R&D, or manufacturing when they cause problems at any stage of the design process—hence the conflict problem.Many of Rondell’s problems come from the design choices by top managers and especially by Hunt, whohas paid little attention to design.

4.How might you change Rondell’s structure to reduce conflict and speed product development?

There are many ways of changing structure and redefining task and role relationships, and the pros andcons of each of these can be discussed.Rondell could increase integration among functions. It could create product development committeesfrom different functions who discuss product development and solve problems. Higher up theorganization, the executive committee could function more effectively with an agenda and by holding thefunctions accountable for meeting goals. If integration increases, this might coordinate what is still arelatively small organization.This solution would require Hunt to change his management style.

He must decentralize authority tofunctional level managers and avoid siding with one function over another. Given the history of thecompany, this is unlikely. A more radical solution might be necessary, involving a change in the level of differentiation to change the power of different functions and realign them. Engineering services has become the most central function. How can its power be increased? How can anew power balance be achieved? The company could use cross-functional teams and create a productteam, responsible for a new product from development to manufacturing.

This would be a radical change.R&D would be split off from engineering design and kept centralized, reporting directly to the president.Members of the R&D department might be assigned responsibility for liaison with each team and for transferring knowledge to each team.An engineering services manager who is responsible for coordinating teams and other functions wouldhead each cross-functional team. Each team would be responsible for new product developmentactivities, including preproduction planning, and would assume many responsibilities of themanufacturing department, which would become a resource.

Schwab would supervise the assembly of the final product and not cause problems. Team leaders would report to the executive vice president. In this arrangement, the power of engineering services is increased because its managers lead the productteams, and the power of the other functions is reduced as their members report to the team leaders. Thearrangement is flexible because as each product proceeds to the routine manufacturing stage, memberscan be reassigned to new teams. Such a structure would break down the functional boundaries that causeRondell’s present problems, reduce conflict, and speed product development.

A third option would be to keep the functional structure and to formalize the product development process by creating written guidelines that govern how a new product passes from stage to stage withminimal intervention from other functions. Here, the goal would be to increase the level of standardization to control cross-functional activities.