Kranworth Chair Corporation

2253 Words Jul 19th, 2014 10 Pages
Some of the issues KCC is facing relate to the division of responsibilities between a functional and a divisional structure, and how best to achieve an effective relationship between these areas. Manager talent is another concern. Managers are coming from a centralized structure, and some are not trained to handle divisional responsibility, although they have been tasked with this responsibility. Consequently, some of the decisions made by the divisional managers are questionable from the perspective of the owners.

Corporate control over supply chain management and R&D has also caused issues with the divisional managers. Corporate controls supply-chain decisions, which takes away the division managers’ ability to control some
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KCC does have different markets, but local information is not unique in the sense that the company seems to be operating out of one location.

Providing clearer responsibility and associated accountability. This is one area that is causing KCC issues. Division of responsibilities and the associated accountability need to be revised for better goal congruence; this issues will be discussed in more detail later.

Making managers more cost conscious while being responsive to customer needs and market developments. This could give KCC an advantage if the managers are capable of handling the new responsibilities.

Increasing the motivation and commitment of other managers who are now allowed to “run their own show.” This advantage is highly reliant on the performance measurement and incentive systems being aligned to the responsibility division.
Here are the disadvantages of decentralization:

Corporate management will give up authority. Kevin seems to be somewhat accepting of this, but it’s not clear whether the other owners are.

The key concern is that the “salespeople” lack the experience to be “managers.”

There are potential losses of economies of scale in key functions, as was noted in the case with advertising.

Tough cost allocation problems must be settled, such as for R&D and other corporate overhead support functions. If left unsettled, dysfunctional
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