Sun Hydraulics Essay

1623 Words Oct 22nd, 2011 7 Pages
Sun Hydraulics: Leading in Tough Times

Case Study

Executive Summary Sun Hydraulics, an industry leader of hydraulic valves and manifolds, has seen steady growth over the past eight years. It has been a profitable company throughout the years with varying return on sales. Presently Sun is constrained by declining sales and high labor costs heading into the present recession. The horizontal corporate structure has proven ineffective in ridding itself of low performing employees that are weighing down the company and thus decreasing profitability. It is time for Allen Carlson, president and CEO of Sun Hydraulics Corporation, to address the employees and shareholders of his decision on how Sun plans to deal with labor and profits
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The organization is multi-functional, created in Koski’s vision of “horizontal management”, with no job titles, no hierarchy, no departments, no budgets, no direct sales channels, etc. The employee’s feel strongly about this structure, as Chairman Clyde Nixon put it, “Sun’s unstructured environment is the key to our quality.” This unique approach created an active exchange of information among engineering, manufacturing, marketing, and commerce. This horizontal structure does have a downfall, unproductive workers can hide or simply do what they want and choose not to cooperate. Overall the structure seems to work for Sun, and employees genuinely are empowered to work for the greater good of the company. Financially speaking Sun Hydraulics has seen measure growth in sales from 1996 through 2000. Their revenues have grown from $47,374,000 to $66,268,000 from 1996 to 2000 respectively, but I was disappointed in Sun’s fluctuating profitability during this same time, seemingly caused by continually growing labor cost. As a percent of sales, profitability fluctuated from (1%) in 1996 to a high of 7% in 1998. There were steady increases in Labor and Manufacturing Overhead that have adversely affected the bottom line from the high water mark in 1998. As Allen looks to the future he faces a

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