In the case of Codman and Shurtleff, one can detect how well the industry coordinates their financial planning and control process. As the reader observes, they encounter plethora of issues, which reveal the strengths and weaknesses of their systems. Their reporting relationships are mainly based on the principles of decentralized management (Simons, 2000).
The main strengths of such a system are in reduction of responsibility of one managerial unit as they are several managers, which allows utilizing more people in the process of decision-making and shortens line of overall communication. Moreover, the decision-making process is dependent on the current situation, which allows human beings to showcase their skill and talent and disperses power among several people. Despite all the strengths presented, decentralized management system also has its weaknesses, such as a lack of standards and uniformity in the organization, capable people are not always available when it comes to the process of decision making, the issue of coordination arises. Furthermore, it requires more training programs that can appear time-consuming and be too costly for the company.
Moreover, the operations in the presented organization are mainly integral and autonomous, which means that the direct responsibility is on the management of the separate subsidiary companies. Plans of the company can be classified differently based on their aim and field. For example, considering the mission of a company, it mainly addresses the Medical field, and specifically Neuro Spinal Surgery business. The strategies they implement are 5- and 10- year plans, which can aid in boosting their economic state. Therefore, their flowing chart would look similar to the following:
The planning and control system used at Johnson & Johnson has the strengths and weaknesses. The main strength is in the independence of each company, since it develops an individual plan and strategy and sets the targets by itself. Moreover, 5- and 10- year arrangements can aid in developing long-term views and learning objectives, which happen to be the responsibility of each separate company. Long plans promote innovative culture and help in determining the effectiveness of the system. As the company controls the output rather than the process, it allows individual areas to seek alternative ways of achieving the mission. Busy managers are often forced to review their strategies to attain the end goals. Furthermore, staff planners implement proper management approaches, making them more effective in the long run.
Nevertheless, the system has its weaknesses, such as ineffective controlling, caused by its complexity. Additionally, there are no standards set, which is the cause that there is complete freedom over the processes, some of which can be feeble or old. The system described in the case study offers less flexible possibilities to implement, leading to another problem of stoicism. The most significant point in the question of coordination issue is associated with the ‘free system’, making it hard to determine whether each operating subsidiaries’ strategy will sabotage others, creating unwanted competition between them. No changes can be suggested per se; only new ideas are possible. The focus on the subsidiaries is often lost, the cost structure is not emphasized, and the conflicts between different management systems are unavoidable.
Over the last several years, Fortune magazine has polled the 240 largest U.S. companies’ CEOs to gather data on the management quality of major U.S. corporations. CEOs of various companies have repeatedly ranked Johnson & Johnson as one of the most innovative and well-supervised firms in its industry (Simons, 2000). Management of the company is deemed adequate for several reasons: clear corporate vision and communication principles to avoid misunderstandings.
The management planning and control systems play the primary role in establishing the quality of the organization. The company’s autonomy allows it to be in charge of its destiny and be solely accountable for its performance, whether good or bad. The company concentrated on its long-term success plan rather than short-term ones, which had proved to be an effective business strategy. The tactics for the company development were favorable and appropriately done. Management was encouraged to propose creative solutions to the various issues, which proved to be the most successful tactic a company could take.
Based on the case study’s information, I would design a reward/incentive system for Roy Black and the Codman & Shurtleff Board to capture maximum benefit from planning and control procedures to make it more flexible. The expectancy theory could help with that task since it breaks the motivation into three parts that employees may experience and assign them to each component. Firstly, the company needs to make an effort to understand what they are expecting from the employees. This can be done by examining the effectiveness of the separate organizations within the Johnson & Johnson management. The expectancy requires hiring the appropriate people who can sufficiently accomplish the given job and maintain their leadership positions. Moreover, the company needs to organize proper training and give its employees adequate resources to complete the task.
After ensuring that the company can perform appropriately, it is essential to measure the execution and link the rewards to certain completing levels. Additionally, raising awareness about prizes and bonuses can positively affect the productiveness of employees since they would understand what they can accomplish (Simons, 2000). Furthermore, the system’s last step would be to make sure that the rewards are valuable enough for the workers (Simons, 2000).
The reward system can give monetary and non-monetary prizes for outstanding performance, causing the management to establish the same reward system. Moreover, the rewards have to be individual since they can significantly impact the employee’s job satisfaction and performance. Certain people can value money more, while others would be more interested in developing their skills via company training. The rewards have to be term-based, which increases their value and presents on the organizational level.
Considering the quote of Roy Black about the decentralized management, I agree with the presented statement. A decentralized management system makes everyone accountable for the company’s chattels, what they do and for their performance. Therefore, rather than blaming the whole company, one can blame individual management for inevitable failures. Moreover, the presented system gives more liberty to the employees, and it can be more rewarding than a centralized management system. Furthermore, the system allows more sufficient decision-making, since there are several managers, who can contribute to the solution of various problems that company faces. However, regardless of the strengths, decentralizes management system has its defects, including lack of organizational uniformity and coordination issues, and the need to enhance the quality of training programs for the employees. Additionally, the trainings are costlier in the decentralized system, since there are more people needing them.
Simons, R. L. (2000). Codman & Shurtleff, Inc: Planning and control system. Harvard Business School.