Eau Doux is an engineering company which is specialized in the customized production of equipment for French water authorities. However, the company is lacking adequate engineering quality and management structure to face challenges in its niche market. Decision-making processes are too simplified to create the required strategy for a differential advantage. The board of directors has made several blunders in their policy-making process which ultimately led to an acquisition. Essentially managerial weaknesses have exposed the established company to the risks of product substitutions and imitations. There lacks the skill, professionalism, and innovation in the management structure. The company, which boasts of a “well deserved reputation for customized production” of water equipment of outstanding quality, is finally sold off (Gold& Bratton, 2001). A transformational leadership style is necessary for the effective implementation of boardroom decisions and resolutions. The current state of affairs is such that important ideas are squandered in their execution process due to a lack of effective follow-up leadership, supervision, and oversight. Eau Doux Company must adopt a completely different paradigm in management structure and organizational leadership style to tap the full potential of its qualified and talented engineering workforce.
Henri Fayol Classical School of Management
According to Henri Fayol Classical School of Management, managerial roles are described as:
- Controlling performance
Henri Fayol management theory identifies the following fundamentals to organization planning:
- Division of work- Specialization of labor leads to job efficiency since employees direct their efforts towards a common task that corresponds to their competencies and skills profile.
- Authority and Responsibility- Authority is associated with responsibility since managers have administrative control of power which exacts obedience. Managerial authority is denoted by the intelligence, experience, and personalities of individuals in positions of authority (Gold& Bratton, 2001).
- Discipline- Good discipline is essential to running organizations. Managers are therefore accountable for the effective implementation of programs and can sanction disciplinary measures against subordinates who exhibit deliberate violation of underlying principles of an organization.
- Unity of Command-According to the hierarchy of command in leadership, subordinates should only receive orders from one superior manager for goal-oriented actions to be generated.
- Unity of direction-Organizations needs to have a reference central authority and elaborate action plan for carrying out their operations.
- Subordination of individual interest to general interest- Personal interests of individual employees is substituted with the goals and objectives of an organization (Lynch, 2010).
- Remuneration of personnel- Employees should be properly compensated for services rendered by an organization. Salaries should therefore be fair to both employees and employers.
- Centralization- This refers to the most appropriate ways of utilizing workers’ potential following the structure of an organization.
- Stability of tenure of personnel- A stable workforce is necessary for the effective implementation of organizational processes and for sustainable productivity to be realized.
- Initiative- Different levels of an organization’s structure need to be motivated to ensure the success of the action plan. Motivation is therefore derived from the zeal to achieve and the initiative to prosper.
- Esprit de corps- Working teams are essential for the business success of organizations. Teamwork is developed through the proper utilization of communication channels available in organizations. Managers and subordinates need to pull their efforts together towards common tasks in organizations. Group/team objectives supersede individual goals (Mullins, 2008).
Whittington’s Classical School
Authors of Whittington’s classical school assume that a rational managerial activity exists and that profit maximization is the main principle for a business organization in its entire strategic planning process. The surrounding environment for the company is considered predictable and controllable (Woods& Adrian, 2001). The strategic planning process is therefore geared towards creating perfect environmental balance opportunities and resources available at the discretion of the company. The strategic planning process is guided by clear organizational objectives by formulating and implementing appropriate strategies which can yield maximum profits. Eau Doux Company is engaged in research and development towards the best products for monitoring and filtration water systems. However, the company is deficient in the necessary engineering quality and management structure that could ensure the effective implementation of strategies towards profit maximization. Porter proposes the “five forces” approach as a means of examining the competitive environment:
Threat of Entry
Competitor entry into the market is determined by several factors which include “economies of scale, economics of scope, and capital requirement for entry, access to distribution channels, learning curve, and expected retaliation as well as differentiation” (Toth, Grunig& Grunig, 2007). New entrant experiences small volumes of sales coupled to substantial costs of setting up the business as compared to established rivals. Large firms with a huge capital base and consolidated production units are better placed to benefit from economies of scale than small firms combined. Operation and running costs are equally high for entrants. Access to distribution and marketing channels is also a challenge faced by entrants.
The power of buyers
The high power of buyers is witnessed if the products and services in the market are undifferentiated while purchasing volumes are significantly high and fewer buyers are present. More buyers for a limited supply of water equipment in France have led to an escalation of prices leading to reduced purchasing volumes. The cost of manufacturing water equipment is high taking into consideration the R&D costs and production costs. The maintenance segment of the market is more lucrative since pricing regimes are predictable and controllable leading to the decision by Eau Doux Company to switch from manufacturing of water equipment to customization of parts made by other plants.
Power of suppliers
Few market suppliers lead to high suppliers’ power while the bargaining power of customers is reduced. The cost of switching from one supplier to another is also high since prospects of supplier integration in the future are feasible. Suppliers of customized parts appear to compete effectively with manufacturing water equipment such as Eau Doux Company in France. There is a lucrative presence of counterfeit products which is offering customers cheaper water equipment. Manufacturers of branded quality water systems are therefore not reaping the benefits of their expensive capital investment in the research and development of durable water equipment (McCabe, 2010). Some of the manufacturers have incurred huge losses such as Eau Doux Company whose management has been forced to change twice in ten years. The mergers and acquisitions have rendered the outcome of R& D interventions obsolete.
Threat of substitutes
The market price for a company’s products and services is determined by the threat of substitutes. The introduction of product substitutes could render existing products obsolete or superfluous. The probability of customers switching from a traditional product to a substitute is determined by their perceptions of quality and value issues with either product. A perceived high value from products substitutes makes it easy for customers to switch. The threat of substitutes is imminent in the competitive market of water equipment production in France. Eau Doux Company’s reputation in manufacturing quality water systems and equipment is threatened by a rival market of counterfeits that are cheaper and affordable to customers. The company is farced to invest in piecemeal R&D projects to develop equipment that can withstand imitation. However, the lack of an effective management structure in the engineering department renders the entire project to be a white elephant that cannot be implemented.
Competition in the market increases under conditions where the threat of entry is probable, either power of suppliers or buyers is high and the threat of substitutes is likely to challenge the market position of existing company products. The competition also increases as companies strive for market leadership. The presence of many competitors creates an oversupply of products and services. Extra competition is witnessed in markets where global customers are present. Markets for production and supply of monitoring equipment for waterways in France are competitive due to a parallel supply of cheaper counterfeits.
Eau Doux Company is forced to abandon its lucrative specialty in manufacturing water equipment to focus on the customization of products manufactured by other companies due to the problem of counterfeits. Competitors specialized in generic substitution of their patented products succeeded in pushing Eau Doux out of its niche market (Lynch, 2010). That notwithstanding, the management comes up with a proposal for hiring experts in the fields of system design and water management to develop a product range that could not be pirated. The team of accomplished academics succeeds in developing a centralized water quality monitoring system that could be used for monitoring the physical integrity and biochemical purity of water up to 100 miles. This innovative idea is noble enough to address the concerns of different market segments from domestic to industrial users. The system was equally environmental-friendly, allowing for the treatment of water effluents and constitutions in a particular area of surveillance.
The team of expatriates was also pursuing the prospects of developing a fully automated, integrated system that could effectively connect the central monitoring unit to filtration systems. However, loopholes in the management hierarchy characterized by poor communication between line managers and the technical team arrested effective implementation of the project (McCabe, 2010). Line managers shift the blame to engineers who have modified the original design 150 times. A prototype design cannot, therefore, be realized due to the haphazard management structure in the engineering department which is not communicating properly on the appropriate ways of implementing the project. Many financial resources are subsequently wasted.
Transformational leadership is appropriate for innovation to take place within organizations. According to transformational leadership theory, creative ideas are created through teamwork, dialogue, delegated authority, autonomy, and feedback processes (Mullins, 2008). There is a need for more work in the areas of effective communication between managers, engineers, and subordinate staff. An ordinary cleaner easily comes across crucial documents on the draft memorandum for switching from manufacturing to customization of parts and simply exposes the company to trade unionists and the public.
Eau Doux Company possesses very aggressive teams of sales engineers, R&D experts, and human resource professionals but lacks vision-oriented project managers and overall leadership by the board of directors. Product innovation and market research are undermined by lukewarm decision-making and poor implementation strategies. The company has incurred huge R&D expenditure as a result of ongoing research which cannot be concluded because of serious quality concerns. R&D program for a centralized water quality monitoring system was such a noble idea that could have revolutionized business prospects for Eau Doux if defined timelines and professional ethics could have been followed (Rieple& Haber berg, 2009).
The leakage of important company information is causing Eau Doux its market niche, profitability, reputation, and existence (Toth, Grunig& Grunig, 2007). How an important company leaks to the media through an ordinary cleaner is unbelievable. The subsequent strike organized by trade unionists illustrates the extent to which the breakdown of communication channels is costing the company its reputation and business prospects. A noble idea by the R&D to develop an integrated central water monitoring, surveillance, and filtration system is the first of its kind in the region. However, Implementation of the pioneering project is withheld by disgruntled elements within the company which then proceed to disclose the idea to another manufacturing company. There are serious lapses in communication systems within the company which is benefitting competitors.
In addition, it appears there are disgruntled elements within the management of Eau Doux who are working with competitors to bring down the company and limit its innovative potential from being fully manifested. Leakage of patented product information violates the company’s code of ethics and professional guidelines. Management of the company needs to outline stringent disciplinary measures with provisions for dire consequences on persons with questionable character. That notwithstanding, communication channels, between different departments of the organization, need to be reinforced by appropriate leadership style. Transformational leadership empowers followers to be actively engaged in decision-making and problem-solving interventions. It also provides for feedback mechanisms where subordinates interact freely with managers and are empowered to give and receive feedback on matters of mutual interest without fear of reprisals. There is a need for greater interaction between different departments within the organization for innovation to take effect successfully (Woods& Adrian, 2001).
Since Eau Doux is an engineering company, regular training of sales engineers and the R&D practices are welcome provided that management offers an oversight role. It is also important that engineering standards and specifications are followed while designing systems for water monitoring, surveillance, and filtration processes. Professional standards are important as a strategy for manufacturing quality products that cannot be imitated. The imitation issue can be dealt with it constructively if patents and trademarks can be effectively protected legally speaking. The idea of switching from manufacturing to water systems to customization of parts made by other companies appears desperate and a risky venture. The reputation o the company in manufacturing quality water surveillance systems and the amount of investment into R& D interventions cannot allow the company to backtrack on the projects.
There is a need for hiring a more sophisticated, talented, and experienced engineering department that can design systems of sound quality (Lynch, 2010). Counterfeits and product substitution represent a threat to their market niche and future business prospects. The issue of affordability of Eau Doux products can be dealt with sufficiently to ensure that the purchasing power of the different market segments is factored in the pricing policy. Professional ethics and code conduct should guide the human resource department at Eau Doux Company during recruitment and selection. Job analysis is necessary before recruitment and selection to determine approximate procedures for hiring and compensation systems.
The effective performance management process
Performance management is a systematic process of evaluating employee productivity and performance by managers to determine the extent to which the vision and mission of an organization have been achieved. Several components are designed by managers to ensure that employees; actions do not contradict established organizational goals. These components include;
Planning tasks and setting expectations
Strategic planning is part and parcel of effective organizations. Planning enables tasks and processes to be carried out systematically. The efforts of individuals and teams within organizations are therefore directed towards business goals through effective planning (Gold& Bratton, 2001). As such, employees must be integrated into the planning process to ensure the successful implementation of the purposes of a company that has employed them.
Continuously conducting employee monitoring
The actions and behaviors of employees are continuously monitored by managers of an organization. Employee monitoring enables managers to judge employees’ performance on assigned tasks as well as creates an opportunity for giving and receiving feedback as far as achieving organizational goals is concerned.
Developing and training
Effective organizations have an established structure for training their employees from time to time. Employee training and development is carried out under performance benchmarks. Through effective employee training programs, managers entrust their subordinates with new tasks that come with higher levels of responsibility. Training, therefore, acts as a tool for streamlining work processes with skills acquisition interventions based on performance indicators (Gold& Bratton, 2001). Employee training reinforces workers’ competencies to perform their duties in addition to helping them adapt to organizational changes.
Systematic appraisal of employee performance in a summary manner
Employee performance also entails the identification of talented workers from unsatisfied laborers. Performance appraisal systems are therefore applied in performance management against standards and indicators that measure workers’ performance results. The best performance is rated against exemplary individual performance (Gold& Bratton, 2001). Poor performance refers to appraisal rates from unsatisfied employees and those with a negative attitude towards their tasks and organization in general.
Non-Classical School of Management by Henry Mintzberg
Henry Mintzberg presents the non-classical theory which seeks to challenge the rational approach in strategy formulation and structure of organizations commonly applied in the classical theory of management. Mintzberg critiques traditional managerial behaviors by revealing the weaknesses of top management “as creatures of the moment rather than far-sighted strategists” keen to develop their interests (Woods& Adrian, 2001). According to the nonclassical approach exemplified by Mintzberg, intuition is fundamental for the effective management of organizations since it enhances uniformity and formality for purposes of strategy formulation. The nonclassical approach emphasizes the need for creative and spontaneous thinking in management based on the reality of situations. This contradicts the classical approach of management thinking which focuses on bureaucratic and structured processes. Managerial roles as stipulated by Mintzberg include the following:
- Interpersonal- this entails the administrative duties of a manager who plays a figurehead role for an organization. Managerial roles also include leadership responsibilities where the manager facilitates the creation of a favorable work atmosphere that motivates subordinates to excel in their careers and job performance enhanced. Interpersonal managerial roles also include liaising between an organization and the external environment. Managers, therefore, develop webs of contacts that ensure that an organization is properly networked (Toth, Grunig& Grunig, 2007).
- Informational- Managers are responsible for collecting relevant information about the organization. They also disseminate useful information to various departments of their organization for purposes of decision-making and managing operations. Managers also play the spokesman role in clarifying to the outside world about the nature and purpose of their organizations (). Essentially, managers transmit useful information to partners and would-clients as need be.
- Decisional-This entails the entrepreneurial role of managers where they direct operations within their organizations to adapt to change. Unexpected changes are dealt with by managers as well. Major decisions such as allocation of resources are done by managers who are equally responsible for accounting purposes (Woods& Adrian, 2001). Managers also negotiate with other organizations on behalf of their organization to create lucrative deals for mutual benefit.
Mintzberg focus on ideal organization structure demonstrated five fundamental principles, namely;
- Simple structure
- Machine bureaucracy
- Professional bureaucracy
- Divisional zed form
There is sufficient excitement and spontaneity in management practices that recognize faith and belief in people instead of organizations. This directs that management processes are intuitive-based to respond appropriately to various issues and programs which emerge in the course of running organizations. This opposes the classical approach where formalities dictate the operations of organizations. Strategy is derived from deliberate decisions (Gold& Bratton, 2001). On the other hand, the nonclassical approach believes in predicting the future by perpetuating a culture of interdependence and teamwork. As such, modern management demands that processes are designed for innovation instead of bureaucracy.
Eau Doux Company lost its reputation as established manufacture of water systems due to a haphazard approach in the management process. The rigid framework through which managerial roles were conducted explains the shortcomings of the classical school approach in management. Bureaucratic red tape procedures expose the company to threats of substitutes and counterfeits. Managerial roles are conducted poorly from planning to implementation. There is no oversight over engineering projects as well as R&D research programs. Despite the company has recruited the best brains on matters about designing water systems for monitoring and filtering purposes, there is no sufficient managerial oversight over the projects (Woods& Adrian, 2001). Innovative water systems and designs are wasted at the initial stages of research since uncalled-for modifications are done without consultation with a higher authority. The organization’s leadership structure is distorted and communication lapses among different levels of management are evident. The top leadership is not in touch with departmental managers for either engineering or marketing departments.
The top leadership is also guilty of pursuing personal interests at the expense of the organization’s objectives. As such, they allow the company to collapse to receive hefty financial send-off packages. Much of the financial resources spent on expensive R&D programs are not accounted for. Various projects are halted even after huge financial investments have been directed on their actualization. Collection and dissemination of relevant information to the company is faulty (Rieple& Haber berg, 2009). Managers are not in control of sensitive information such as data on the ongoing R&D programs and external information regarding the market. As such, leakage of patented information of water systems being developed to create a niche in the market costs the company financial investment on the projects and its reputation. Information about the shift from the manufacturing of water systems to selling customized parts by the board of directors simply gets into the hands of a semi-skilled sweeper who informs the trade unions in a clear act of sabotage.
Decision-making is faulty from right from the top to bottom levels of management. The board of directors is observed to come up with fictitious deals to sustain a company whose structure and culture of doing business are faulty. There is no systematic planning for a shift from manufacturing water systems to customization of parts made elsewhere (Gold& Bratton, 2001). This decision lacks corporate substance apart from being designed hurriedly. The top management of the company appears to react to situations since they lack the necessary tools and competencies to predict future outcomes accurately. Decisions are made without detailed research neither are they based on factual information available both in industry and markets. Blunders are therefore generated which compromise the reputation of the company as well as undermine its position in a highly competitive market.
Eau Doux Company remains in business but from an inferior position. The company is forced to change its management structure several times due to its rigid approach to organizational leadership. There is no clear strategy for implementing action plans, neither is there a formula for marketing the few products being produced. It is also evident that Eau Doux’s management is deficient in the will and strategy to adapt to change effectively.
Markets that have a particular market leader are more established than those where different companies are engaged in rivalry over the leadership position. A new entrant in the market is therefore likely to experience challenges ranging from substantial initial capital outlay, operational costs, and stiff competition from existing brands. However, the threat of entry becomes manageable if customers perceive the new products and services to be of higher quality and value than existing commodities in the same market. A supplier network that limits the number of suppliers in the market effectively takes over different market segments due to consolidation of production, distribution, and maintenance services that meet customers’ needs and demands (Toth, Grunig& Grunig, 2007). Fewer buyers in a highly fragmented market are privileged to have many alternative sources increasing their bargaining power. Purchasing volumes are subsequently high.
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