Case 1: Ben Santos BA 290 (General Management)
Group 3 | Atilano | Delacruz | Encarnacion | Leyritana
I.
Case Background
H. Braun, Philippines (HBP), a manufacturer of medical and chemical products in Europe, Asia, and Latin America and a wholly-owned subsidiary of a West German multinational corporation, had always been headed by a West German national. The current company president, having been assigned to Latin America where he was exposed to a corporate planning system, wanted to implement one in HBP. To assist him with the design and institution of the corporate planning system, he appointed Ben Santos, a newly hired Assistant to the President, as Head of the Indent Division of the Strategic Planning Committee. II.
Problem Indicators
Ben Santos received negative feedback from some of the division managers of HBP with regard to his proposed corporate planning system. The Division Managers of the Pharmaceuticals and Medical divisions implied that his proposed planning system is straight from a book, while the Manager of the Chemical Products Division could not see the need for a new system. III.
Problem Statement
How can HBP reduce resistance to change and implement a formal corporate planning system in the organization? IV.
Problem Analysis
Assumptions: ● All members of the management team of HBP—except Ben Santos who is a Filipino national—are West German nationals. This will help in understanding the culture difference issues of both nationalities. ● The HBP President wants to implement a corporate planning system to improve the Return On Equity (ROE) of the company. Currently, the company has an ROE that is uniformly set at 20 percent. In order to gain competitive advantage, HBP needs to raise its standards and grow with the industry. Appendix 1 summarizes the different factors that resulted to the company’s resistance to change. HBP lacks a clear and concrete set of goals and strategies. The only strategy they are using is the preparation of a two-year revenue and cost budget for each of the divisions based on the
guidelines from West Germany. This poses as a problem because the economy and culture of the Philippines is different from that of West Germany. The company does not have a clear direction as to where it is going and where it wants go. Budget plans and estimated production planning are not enough for a company to gain competitive advantage, and attract and satisfy customers. HBP needs to have a strategic plan to have better financial results. A uniformly set Return on Equity (ROE) for over a number of years clearly states that the company is not growing; instead, it is stagnant and is stuck in its comfort zone. The division managers do not see the need for a new system since they are used to the company’s old practices—the company gives them a budget and they do their own planning. In a corporate culture where you get used to what is tradition, it is difficult for one person to suddenly just go in and implement changes. When change is pushed onto a company without giving the employees adequate warning and without helping them through the process of understanding the said change, it will cause them to push back against it. There is also resistance because of the division managers’ perception of Ben Santos—someone who does not know as much about HBP’s operations as they do, being a new hire in the company. They are also reluctant to take orders from someone relatively young. The President of HBP saw the need to implement a corporate planning system and assigned Ben Santos the task. The problem with this approach is that the Board of Directors (BOD) is bypassed. Generally, it is the role of the BOD to provide leadership in the development and execution of a strategic plan for the company. In other words, this is where goals and objectives of the company should emanate from. This being the case, the division managers may have viewed the new president as too authoritative. Furthermore, the decision to implement a corporate planning system should be made in headquarters, since HBP is a global corporation. Moreover, the request of the president for the immediate implementation of the new planning system (i.e., implementation in the middle of the year) may also be a reason why the division managers opposed it. According to Hofstede, Germans in general have high uncertainty avoidance and do not like surprises; even if they may improve the business outcome, new unexpected changes are not welcome.1 Managing a company in a different country can be challenging especially when differences among cultures are not recognized. A global corporation like HBP faces cultural difference issues that are causing some of its organizational members to develop restraining forces towards the company’s plans. Appendix 2 shows Hofstede’s framework in identifying the differences in value dimensions in Germany, Philippines, and Latin American country Argentina will help analyze the 1 "Germany Business Etiquette, Culture, & Manners." Web..
factors that led some of its organizational members to restrain to the company’s plans. Germany has a low score in power distance, which means they have low acceptance on unequal distribution of power. On the other hand, Philippines has a high score in power distance. Typically, low score in power distance also implies that control from the management is disliked and leadership from the management is challenged. Especially in Germany, co-determination rights are comparatively extensive and should not be taken for granted by management. 2 Thus, it can be inferred that the divisional managers in HBP felt they were isolated when the corporate planning system was formulated. As mentioned earlier, Germans also avoid uncertainty and prefer structured over unstructured situations. For them, details are very important and need to be presented in a systematic manner to create certainty that a project is well thought out. 3 Given that Germans score high in uncertainty avoidance, they may prefer and be convinced by planning systems that are proven to provide better performance to an organization. However, due to the lack of effort in communicating the purpose and benefits of the corporate planning system to the division managers, they may indeed find no reason for its implementation since their current planning works. Germans significantly score low in long-term orientation. They prefer to preserve time-honoured traditions and norms, view changes with suspicion, have low propensity to save for the future, and focus on short-term results. In contrary, Brazil, an example of a Latin American country has a high score in long-term orientation. This is evidently displayed when the president wanted to have a corporate planning system that will guide them to achieve their goals. V.
Alternative Courses of Action
Appendix 3 shows the list of alternative courses of action and its corresponding advantages and disadvantages. The division managers’ resistance to the implementation of the new planning system can be rooted from Ben Santos’ assignment as the head of the Strategic Planning Committee. As such, the resistance is not so much towards the formal planning system, but rather towards Ben Santos. Nevertheless, there are still lapses in the formal planning system Ben Santos is proposing. Several reasons pose for their resistance towards Ben Santos; this can be attributed to him being a newcomer in the company, his age, his cultural background, and even his credentials or experience (or lack thereof) in strategic planning. One approach that HBP can utilize to minimize the resistance to the implementation of the corporate planning system is to hire an external 2 "What about Germany?" The Hofstede Centre. Web. .
3 Ibid.
management consultancy firm to head the Strategic Planning Committee. Hiring an external consultancy firm will help resolve the issues division managers have on Ben Santos, especially his lack of experience on the matter. Instead of heading the committee, Ben Santos can act as a facilitator between the consultancy firm and HBP. Hiring a consultancy firm will also help minimize any bias that the Indent division may have towards achieving the goals set by the BOD. Another alternative course of action that the company can take is to require the BOD to undertake a board retreat. Board retreats are usually done when there is a need to discuss important issues about the company, especially during transition periods. 4 There is a need for HBP to undertake a board retreat since there is a new management. This will help the company align its strategic goals and objectives with that of the new management. Moreover, having the BOD set these goals for the company will eliminate any biases that the president may have with regards to goal-setting. The downside, however, is that it is time-consuming, in contrast to just having the new management implement its own corporate planning system. VI.
Recommendations
From the alternative courses of action, and the table for criterions and weights in Appendix 4, the group recommends that it is best for HBP to hire an external consultancy firm and let the BOD set the goals for the company. Hiring an external management consulting firm, although expensive, will provide better results in implementing the goals set by the management due to its capability and its available resources such as the experts in the field of management. Since they are hired as an external consultant, unbiased judgment is expected from them. Division managers need to be convinced of using the new planning system by increasing the driving forces. This includes setting up several meetings to inform the division managers of the benefits of setting long-term goals and letting the Board of Directors set those corporate goals that the divisions will operationalize. Since stated goals come from the Board of Directors, division managers would most likely comply and will ensure that their strategies will be aligned to the company’s goals. VII. Implementation Plan Appendix 5 shows the Implementation Plan for HBP Company. The implementation of the formal planning system will start from the third quarter of 1985 and commence in the fourth quarter of the
4 "Board Meetings & Retreats." Exponent Philanthropy to the Power of Small. Web..
same year in order that the implementation of the action plans set by the concerned divisions will take effect on the following year. The first step in the implementation timeline is for the BOD to conduct a board retreat. The primary reason for the board retreat is to identify the goals and objectives of the company for the following year. This will be done simultaneously with data gathering (i.e SWOT analysis), where data gathered will be used in order to identify the company’s position (i.e. in terms of current market share, growth rates, etc.) and formulate strategies in relation to these data. After the board retreat, results of the retreat will be cascaded down to the management and the strategic planning committee where it will be reviewed. The next steps, steps four and five, will be handled by the external consultancy firm (mostly analysis and evaluation of the formal planning system). Frameworks and other planning processes in this stage must be coordinated clearly by the external consultancy firm with the company’s strategic planning committee to identify the assignment of the strategic goals and objectives of the company to the concerned divisions. After this step is the formulation of action plans by each department. This step tells the management how the department will achieve the plans and goals set by the company. Lastly, a final review of the proposed planning system will be in place before the implementation of the strategies of the formal planning system for the following year.
APPENDICES Appendix 1. Problem Analysis
Appendix 2. Hofstede’s Framework
Appendix 3. Table for Alternative Courses of Action ALTERNATIVE COURSES OF ACTION Action
Advantages
Option 1: Hire an
●
It to
Disadvantages
will
give
the
formal
external management
credibility
consultancy firm
planning system since division managers will perceive them as experts
(compared
Santos) ●
to
Ben
● ●
Costly May
additional
data
require from
divisions which may take more time
It will remove any
bias from the data submitted by the concerned departments and division managers Option 2: Status Quo (assign Ben Santos as
●
●
Less expensive
Ben Santos is
inexperienced in terms of
head of Indent Division)
Strategic Planning ● More resistance from the division managers because of their perception of Ben Santos Option 1: Request the
●
There
is
an
BOD to have a retreat
alignment of the strategic goals
(i.e.,
and objectives of the company
formal
planning
system to emanate from
with
that
of
the BOD)
management ● Less
the
Time-
●
consuming ● Costly
new
resistance
from the division managers since the directive is coming from the BOD ● Unbiased setting of goals and objectives for the Option 2: Status Quo
company ●
Goals
and
(proceed with the plan set by the president)
●
Shorter
implement
Appendix 4. Criterions and Weights
Appendix 5. Strategy Implementation Timeline
time
to
objectives may have the tendency to be biased
