1 Initial Problems
1.1 Introduction & Problem Identification
This paper provides a sample analysis and solution to the fictive Harvard Business School case study on Kent Chemical Products (KCP), an 1917 founded Ohio-based global leading chemical company. KCP produces plastic additives and further specialty chemicals and atis America’s largest supplier in this sector with revenues of $2.2 billion in the year 2007 (Bartlett & Wining, 2012, p.1). The case is set in July 2008, about the time when the recent global recession had been looming. The company’s situation is considered from the perspective of Kent Chemical International’s (KCI, a KCP subsidiary comprising the international divisions) President Luis Morales, who is the major decision maker in the case. Other key decision makers are Kent Chemical Products CEO and Chairman Ben Fisher, his son and Vice Chairman Peter Fisher and the President of Kent Chemical U.S. Angela Perri. Throughout great parts of the 20th century, KCP’s operations and sales remained mainly focused on the United States.
By the end of the century, in the year 1999, only 11% of KCP’s total revenues came through exports from outside the U.S., licensing agreements and minority Joint Ventures (JVs). From the year 1998, initiated by its newly appointed CEO Ben Fisher, the company began to pursue a more global strategy to stimulate further growth and thus wanted to become a company “[…] that develops, manufactures, and sells worldwide” (Bartlett & Winig, 2012, p. 3) by increasing its international alignment and global expansion ambitions. As a result of KCP’s new strategy, reinforced by the overall globalization tendency of the world economy, the company’s international sales as a proportion of total sales had climbed to 25% in 2007, where most progress in expanding international sales had been made until the year 2004. After Morales began implementing the global integration strategy by taking majority interests in KCP’s offshore JVs, acquiring further foreign companies and generally intensifying international manufacturing and sales, he was facing various problems.
His most obvious problem was that KCP’s international sales and income and thus overall firm growth have plateaued, since KCP’s international business has been the main driver for its overall firm growth. However, since 2004 only little progress has been made in expanding international sales. The company has only grown moderately at a much lower rate in the recent years after 2004, profit margins have declined and KCP has even shrunken in terms of sales volume after 2006. The reason for the decline in Kent’s profitability in the recent years, especially between the years 2006 and 2007, is the sharp increase in manufacturing costs, while sales volume has increased only moderately. This is probably a first impact of the impending global recession that is an additional external problem Morales and his company are facing and that piles the pressure on him to find a fast and sustainable organizational solution to set up the company for tough years to come. This urgent need for an organizational change leads to the heart of Kent’s problem, which is one of organizational structure and hence certainly the main reason restraining KCP’s further growth.
In detail, Kent definitely suffers from its inability to adequately coordinate its businesses due to its misarranged organizational set-up. Therefore both: in terms of the structure of Kent’s international organization KCI and especially the organizational linkages between the domestic and overseas divisions, withholding the company from adequately coordinating issues with global implications. In addition to these problems regarding Kent’s overall organizational structure and organizational linkages, there are also the more intangible continuing problems of poor relations and communication between the domestic-based business and the international subsidiaries. These manifest themselves as several facts: First of all, the U.S.-based organization failed to adapt demands for change, second, the U.S.-based business divisions have been unwilling to grant any autonomy to the international divisions and third the international subsidiaries, having a long history of independence, reacted to such treatment by resisting to being controlled and or managed by the domestic-based business divisions.
These problems Luis Morales faces as the President of KCI when he began pursuing an international expansion strategy. In the chapter 2, the problems will become investigated more detailed to show where the different causes for unsuccessful organizational changes come from. The strategies used are closely related to the theoretical coordination / configuration framework (Porter, 1986) and also in conformity with empirical evidence according to a current McKinsey study (Gibbs et al., 2012). Both stated that organizations get more difficult and complicated to manage once they pursue global growth and thus become larger, more international and more complex. In detail, it is stated that the two dimensions of configuration and coordination are positively correlated, where configuration comprises where and at what scale primary activities of the firm are conducted and coordination defines to what extent and how these activities need to be coordinated (Porter, 1986).
The relationship between these two variables is exactly what the case of Kent Chemical Products shows and corresponds to the fundamental organizational challenge lying ahead of KCP. 1.2 Link of KCP’s Strategy to Porter’s Generic Strategies Porter’s framework of generic strategies include three different approaches a firm can follow in order to be successful. Those are named cost leadership, differentiation and focus. The differentiation strategy, according to Porter, requires special skills and resources such as strong marketing abilities, product engineering, creativity and a corporate reputation for quality or technological leadership. Furthermore, Porter stated that companies following the differentiation strategy pursue to attract highly skilled labor, scientists, or creative people.
According to the stated definition, KCP’s chosen strategy can be linked best to this theory amongst the Porter’s three generic strategies, since KCP is a chemical company, following a scientific approach strongly engaged in product engineering and R&D and thus relying on its strong reputation for quality and technological leadership. A tailored marketing and above all highly skilled and creative employees are also key success factors. However, following a strict cost leadership strategy or even partly (with reference to the focus strategy), would never be viable for a firm operating in this extremely capital demanding chemical/technology industry, carrying a huge responsibility due to the nature of its products and being highly dependent on its high R&D expenditures. 1.3 A Suitable Vision for KCP and KCI
Following a potential vision conceivable for the companies KCP and KCI: “We are the worldwide technological leader in the chemical industry. Our customers view Kent Chemical as their partner of choice. Our highly innovative products and intelligent solutions make us the most competent global supplier in the chemical industry. We generate a high return on our assets, while we strive for sustainable development and aim for making people’s lives better, safer, and healthier. We, the employees of Kent Chemical, welcome change as an opportunity and together ensure our success.” 1.4 Kent’s Fundamental Organizational Challenge
KCP’s fundamental organizational challenge is to cope with its transition from a domestic-oriented organizational structure to a truly multinational structure. Relating to Daft (2007), pointing exactly this process of firm development, he argues that organizations typically transit from domestic-oriented to global organizations following certain stages. It defines four different stages of organizational development. Stage one is labeled the domestic stage, in which the company is highly domestic-focused with few initial foreign activity through export. The second stage is the international stage of an organization, wherein companies pursue an “export-oriented multi-domestic” strategic orientation. In this stage, the company typically establishes something like an international division instead of having just an export department and hence competitive issues in each country are now independent of other countries.
Stage three is called the multinational stage, wherein the company has made extensive experience in several international markets, maintains manufacturing, Research and Development, and marketing units in a number of countries and probably of utmost importance, obtains a huge percentage of total revenues from sales outside its home country. In the fourth and final stage of organizational development, named the global stage the company’s strategic orientation is absolutely global, covering any single country and its organizational structure is that of a transnational matrix. Therefore corporations in the fourth, global stage such as “global players” like Nestlè, Anheuser-Busch InBev or Procter & Gamble no longer associate themselves with any domestic country. When KCP’s CEO and Chairman Ben Fisher announced in 1998 the company’s international expansion strategy, he attempted to progress to the third, so called multinational stage.
However, KCP currently appears to still stuck in the shift from stage two, the international stage, to stage three, the multinational stage. As the development of Kent’s foreign-to-total-sales ratio and thus the growing importance of its international segment shows, some considerable progress in Kent’s internationalization has been made. Nevertheless it is obvious that KCP has not yet successfully made the structural transition from the international to the multinational stage of an organization, which will be KCP’s fundamental key challenge for years to come. Even though the firm’s CEO Ben Fisher established KCI as a separate corporate entity within the Kent Chemical group, effectively KCI is not acting as more than an international division (second stage) bound into a still predominantly domestic-oriented company.
There is still only poor coordination and communication but a lot of conflict between the U.S.-based and oversea divisions, which should be revised urgently. In order to finally realize the transition to the multinational stage and to generate further growth through increasing international sales, it will be of utmost importance for Morales and the other executives to abolish the existing lack of coordination on issues with global implication in order to be able to coordinate price, product, or sourcing decisions globally. Furthermore KCP’s strong domestic orientation needs to become given up to provide the international subsidiaries with more autonomy and scope for decision-making and use their specific knowledge to tailor KCP’s products and marketing efforts to the individual demands and needs in the different countries. 1.5 Task Analysis and Role Assignment
Luis Morales as the President of KCI, Kent’s international subsidiary, assisted by the implemented GBDs, bears the brunt of finally ensuring more coordination and integration within the Kent group. Morales saw the integration failure mainly as a failure in conflict management, while in retrospect there is no doubt that the assignment of roles and tasks thus far was a major reason for the failure of KCI’s integration process. While Morales hoped the global business directors (GBD) for each product division would function as an integrator between Kent’s domestic and international divisions, implementing the GBDs did not help to integrate KCI at all. Besides the problems concerning role assignment especially with focus on heritage and regional expert knowledge (more detailed explained in part 2), also mistakes have been made in setting the individual tasks within the integration process.
Morales definitely failed in defining the tasks of the GBDs sufficiently, so they defined them for themselves, what in combination with their overall “U.S.-focused” attitude were doomed to failure. With all this in mind, it was also a major flaw to make the GBDs the chairs of the subsequently established world boards, since their acceptance and reputation has been damaged in both the domestic and the international organizations. As first but vital steps to solve these problems regarding the role and task assignment, Morales supported by Peter Fisher should put together a mix of U.S.-VPs and foreign-based managers in key roles, like the GBD-positions and define their roles in detail such that regional managers are enabled to obtain extensive authority over their operations.
This includes also country-specifically tailored marketing and technology control while the GBDs should strongly concentrate on integration tasks and act more as an intermediate between the domestic and international organization instead of trying to gain or maintain control over the operative activities of the firm. 1.6 Why These Problems Emerged Now and not Earlier in the 1990s Morales has begun implementing an international expansion strategy in 1998/1999 (and not earlier) by taking majority interests in offshore JVs and subsidiaries, that caused more control and responsibility for KCI and a significant growth in overseas operations and sales.
According to the introduction of coordination/configuration after Porter and the compatible empirical study by Gibbs et al., it lead to a stronger need for more coordination and integration of the firms international divisions and also on a product basis, since the new amount of requests were not longer feasible by Morales alone as KCI’s principal top-level contact. In addition to this development, there has also been the global economic recession that began in 2007/08 and piled the pressure for Kent’s organizational restructuring to keep the firm profitable and shelter it from financial distress. 2 Unsuccessful Responses
2.1 Changes Morales Made
2.1.1 The GBD Concept
The first major reorganization in 2006 started with the announcement of Angela Perri as the new president for the U.S. businesses of Kent Chemical Products and Peter Fisher as vice chairman with responsibility for all corporate staffs and the international operations. Furthermore, Kent Chemical International became a separate legal entity structured as subsidiary of KCP. In the same year, Luis Morales started the first organizational change & new structure by the appointment of three new so called “Global Business Director” (GBD) with responsibilities for each of the three product lines. Because of several reasons, in sum the restructuring failed: First of all, all three appointed GBDs were managers with a long career in the United States and it is not stated that they have some experiences working in a foreign country or culture -which is only suboptimal for the target to extend the international business.
This overall goal requires multinational influences and thinking to support empathy and social skills coming from working in several areas and regions. Secondly, an issue that came along with the implementation of the new roles was the missing initial definition of the role of GBDs tasks, goals and responsibilities that would have strengthen the position in order to mandate decisions affecting other top-level managers. This could ensure acceptance and freedom to act only by the measure that would cause a ratification of GBDs actions and competencies. Furthermore the necessary interfaces and collaboration links have not been established in the first place which leads to the result of ignorance how to work together with GBDs from other managers’ point of view. One advantage of the newly established concept was the newly diversified view of the direct-reports to Morales.
This comes from the situation of different views to the issues caused by the circumstance that Morales had the opportunity of regional directors focusing mostly on the local issues on the one hand and GBDs focusing a bit more on products on the other hand. So in fact, all disciplines were set but to make it successful, the right connection to domestic managers and disciplines are missing to ensure a product and market focus within the KCI leadership team. But this potential advantage was only the theory where little successes could have been found – in case of a right definition and implementation of the concept. The organization chart from 2006 offers several drawbacks like the fact, that GBDs were not “real” vice-presidents (which are per definition people reporting directly to the president / vice chairman).
The GBDs reported in first instance to Morales as president of the separate legal entity KCI and in consequence of that, the product division mangers did not really respect and accepted the GBDs as equals. Furthermore the regional director for EMEA (Europe, Middle East and Africa) saw them only as a burden that requires more organizational resources and time to align and coordinate. Last but not least, the clear definition of GBDs targets and goals was missing which lead to the behavior known from neo classical economy theory of principal agent problem (Ross, 1973), where hidden agendas and actions of one individual causes loss of performance – in the case of KCI it is caused by asymmetric information between other established managers (“agents”) who feared the loss of competencies and power in their area of responsibility and the newly established GBDs (“principals”). 2.1.2 World Boards
Due to the unsuccessful first organizational change by introduction of GBD concept, Peter Fisher had the idea to implement another change to correct the GBD concept and optimize the organizational issues. This lead to the deployment of so called world boards in the year 2007 with the goal to support GBDs with their target to improve international activities of KCI. These world boards should be composed of representatives from domestic and international organizations on the one hand and different product and functional areas on the other hand. For each of the company’s global businesses fire protection, medical plastics and consumer products, a world board was formed. At the presentation of this concept, Fisher showed also the updated role of GBDs and overall tasks of the world boards. Also this change was no huge success. Only the fire protection world board performed well and met the stated objectives.
A reason for this was the internationality of the fire production product ranges itself because the opportunities, risks and other topics had global implications that made it easy to discuss on a worldwide level without micro discussions about local specialties. Another success factor was the internal organization of the fire protection world board where the GBD who served as board chair, discussed all relevant topics and issues with the domestic division vice president before the official world board meeting to avoid politicization of the discussions. The other two world boards have been unsuccessful which leads to the result that all in all this organizational change was also a fail. Diverse factors like the big size and huge number of participants in the world board meetings and also a lack of support from key domestic managers.
Reason for this was the fear to give up power or the endeavor to enter the next career step and manage international activities on in their responsibility. Furthermore, the status of the GBDs was not the best – resulting from the fail of the first organizational change that led to a lack of reputation in combination with the impression of some managers that the top leaders tried to give GBDs more power to establish them now by force after failing in the first try. So all in all, both organizational changes failed. The ideas itself were not bad but the implementation was a disaster – starting from communication and alignment before the changes, selection of the key people, definition of their role and communication of cooperation models that were all done only halfway. 2.2 General Options for Organizational Design of Kent Chemical Referring to the five traditional organizational structures of Pearce and Robinson (Pearce and Robinson 2009, p. 345): simple, functional, divisional, matrix and product-team organizational structure, there are several opportunities to set a structure for Kent that would support the overall goal of international growth.
In consequence, the matrix organizational structure (with some adoptions to Kents preferences) could fit best, because it is an organization “in which functional and staff personnel are assigned to both a basic functional area and to a project or product manager. It provides dual channels of authority, performance, responsibility, evaluation, and control […]. The matrix form is intended to make the best use of talented people within a firm by combining the advantages of functional specialization and product-project specialization.” In the specific case and with respect of the specific requirements of Kent Chemical International, it could make sense to establish this organizational structure both to ensure clear focus on the product range and also the region with equal weights. This could have several advantages like an uniform authority level of managers with different areas of responsibility.
Furthermore it ensures the link to the corresponding product division managers and functional areas on corporate level. Next to this approach focusing only on changes within Kent Chemical International, another way to optimize the organizational design is the integration of the separate legal entity KCI that deals with the international business and transfer the responsibility for regional issues also to the product division managers who then diversify their organization after regions. This has the advantage that on the one hand, specialties of the individual product ranges are taken into account by the possibility to adapt the division to the special requirements and on the other hand, the existing vice presidents can stay in their position avoiding power struggles, politicization or double reporting within the organization. 2.3 Could the GBD Concept Have Worked?
In general, the concept of global business directors could have worked with the limitation that several changes starting from concept development, alignment, selection of key people and resources until implementation of this new organizational concept must have been considered more intensively. But it could not work in the way it was done by Morales in 2006. Some tools and approaches can be useful to optimize the organizational change. First of all, a very easy and also useful tool of chance management can become used– a discussion and preliminary alignment with other managers and especially the president and vice president to gain backing, collect other opinions and maybe detect some shortcomings. Next to this step and the final conception of the change, the change management tools of a detailed project implementation structure, working packages, detailed goals for each step and manager and also factors to evaluate the success / failure later must become defined.
Furthermore, the steps before the appointment and communication of the new directors are very important. These include a clear definition of the role, responsibilities and reporting streams for GBDs and also a presentation of the strategy to other managers to unify and clarify why the company decided to take these steps. These actions require the uncovering of shortcomings, the overall formulation of goals and especially how this concept targets company long term focus. Furthermore it is inevitable to show also personal benefits for the managers. Secondly, the selection of the three GBDs must be strategically with respect of the overall goal of international growth. Therefore the managers itself must also have an international background – which was not ensured by initial implementation because Morales “appointed three global business directors (GDBs), each with a long, successful U.S. career” (Bartlett & Winig, 2012, p. 5).
Next to the origin, competence levels must be at maximum to gain acceptance of colleagues and especially critical opponents. This could be done via the change management tool used in the “Change-Process Control phase” that requires some personal interviews with human resources department, other managers and long-time colleagues knowing the person and his strengths and weaknesses. Last but not least, another step that would have improved the GBD concept implementation is a companywide announcement and communication of the change, presentation of the directors and the hoped-for goals to be achieved. 3 Sterling Partner’s Recommendations
3.1 New Management Challenges
As international sales started becoming an increasing proportion of Kent Chemical’s total revenue (from 11% in 1998 to 25% in 2007), a more strategic approach to the international market was necessary. Since 2004 the process seemed to stagnate despite two reorganizational efforts. One of them was the introduction of Global Business Directors (GBDs) on a VP-level and the second attempt to overcome the challenge of integrating KCI with KCP was the incorporation of “World Boards”. Unfortunately, both strategies brought little to no improvement regarding communication and coordination between the domestic and international business units. The main problem seems to be the company’s organizational structure. The internal organization is insufficient and outdated since the company is growing and becoming more and more international.
Also, the linkage to the international subsidiaries obviously does not work. In addition, there is an imminent global recession that already had an impact on Kent’s earnings but might impose an even more serious thread if the management will not be able to find an organizational fix. Looking at the company’s recent history, we can state that Kent Chemical is an international but not a multinational company yet, bundling the informational flow through the U.S. headquarter and preferring to fill key-positions with American managers. Even with KCI becoming a separate legal entity, the division continued functioning more like an international division in a heavily domestically oriented firm. Further efforts of internalization included taking majority interests in all 15 of Kent Chemical’s offshore join ventures and the mentioned introduction of Global Business Directors (GBDs) and “World Boards”. Neither the general relations, nor the communication or the coordination between the domestic entity and the overseas subsidiaries improved.
The first reason for that was the U.S. based headquarters’ failure to adjust to new systems and demands. The second reason was the international subsidiaries’ unwillingness of cooperating with or being managed by the company’s U.S. headquarters. The resistance was probably caused by the abduction of the international divisions’ autonomy. Furthermore, the domestic unit went as far as withholding funding of the UK subsidiary because of an unsolved issue with their outstanding receivables.The introduction of GBDs as intermediaries seemed logical but also failed due to multiple reasons; the candidates’ skills and qualifications for such a key position remained as unclear as the necessity of selecting solely “American veterans” with little to no multicultural background. All three GBDs were perceived differently; with the consumer product GBD being the least accepted to the medical plastic GBD being the most accepted. Another reason for the failure of the GBDs was the lack of a clear definition (and approach) of their roles and goals. Despite their own devastating definitions, it should have been either Peter Fisher being the Vice Chairman of the international division or Luis Morales having most experience and responsibility with the international operations. 3.2 What Kent got for $1.8 Million
Despite a solid $1.8 million fee, Kent did not get a holistic recommendation. Instead, they were advised by the consultants to take a “tailored approach” to the firm’s reorganization. One might ask the question why the modest idea of a unifying single-company structure never came up. That company could probably be transformed rather easily into a global company (with a U.S. headquarter) by adding geographic-, product-based and global matrix elements. The complex organizational matrix was well thought and addresses one of the main issues Kent Chemical is facing – how to address different demands of different products & markets (segmentation according to local/global needs). Unfortunately, the decision matrix is very complicated and requires large amounts of input. Another potential problem is the recommendation that the Vice President of the product division makes any final decision regarding product development. This might lead to similar problems in management as already experienced before. The poor domestic-international division communication and coordination would mostly be left unaddressed and the international subsidiaries’ desire for control would be addressed only partially. 3.3 Sterling’s Decision Matrix
The newly constructed matrix is a variable organizational product of multiple decision-matrixes. It ranks the three main product divisions (consumer products, medical plastic and fire control products) according to their local-global focus. Consumer products need the most local approach, fire control products are in-between the other two categories and the most efficient approach for the medical plastic division is a global one. The logic behind Sterling’s complex suggestion seems plausible, addressing one of the main issues – the different needs of the three product divisions and their segmentations with regards to the amount of how global or local these needs are. Nevertheless, the implementation of this theoretical concept requires extensive input, which makes it barely realistic.
In fact, it would require input from more parties than the previous concept of the World Boards. The consultants’ recommendation definitely addresses parts of Kent Chemical’s challenges and would mainly solve the product segmentation problem. Sterling’s plan seems very theoretical and it is questionable how helpful the tool would be in practice. The CEO Ben Fisher distrusts outside consultants and avers complex organizational structures. Thus, making his support for Sterling’s recommendation unlikely. The significant problems regarding the insufficient domestic-international coordination and communication remain mostly unaddressed. 4 Decision
4.1 Management of Processes within Kent Chemical
The management of processes in Kent Chemical is hardly an issue; neither locally manufactured products, nor medical-plastics products which are manufactured in the two specialized plants in California and the Netherlands, As far as we know, Kent’s Process Management did not face any serious challenges. However, a major process development program is how resources are allocated such as the new products to be manufactured have to be considered within a new global structure. Facing different market-specific needs and the communication between the R&D, domestic management and regional markets are critical challenges. 4.2 Financial Situation at Kent
As of 2007, sales of Kent Chemicals in the international market show a steady grow, especially after the glut in the US market, which is quiet likely to stay low for the upcoming years. In Figure 1, it is obvious that Consumer products and Medical Plastic international sales count for almost half of the US market size while Fire-Protection international sales are almost as big as the US sales.
Figure 1: Sales of Kent Chemical Products
However, after a state of steady growth from 2003 to 2007, Kent’s international growth dropped to 3.5% in 2006 as shown in Figure 2:
Figure 2: Year to Year Change in Net Sales Internationally
By having a closer look at the financial changes between 2006 and 2007, the declines in the net income of Kent International is highly correlated and aligned with the overall profit drop within the whole company. However, the total sales increased from $2.072 billion in 2006 to $2.238 billion in 2007, the total cost of sales were dramatically increased from $1.44 billion in 2006 (69.4% of sales) to $1.7 billion in 2007 hence total costs are more than 76% of the total sales. 4.3 Final Decision
Looking at the financial performance of the company stated above, even if Sterling’s proposal made sense, Kent Chemicals would not be able to afford such a complex model. Implementing Sterling’s solution means hiring more stuff, spending more time on the decision matrixes due to bureaucracy and therefore increasing Kent’s overall costs. Moreover, the financial crisis, which became obvious to Kent’s decision makers, would not allow any further trials. Business has become more vital and a straightforward solution has to be implemented. As Morales has to decide a final structure for Kent’s International and find a way to fully integrate the international arm of the company with its domestic headquarter, Morales is left with few alternatives to choose from: 1- Sterling’s Proposal. As mentioned before, the financial performance of the company and the global upcoming recession would make this alternative very unlikely.
Also, the fact that many managers find this solution almost impossible implement due to its complexity would add a strong resistance to the implementation. Moreover, Ben Fisher, the CEO does not trust consultants and is unlikely to support such a complex organizational structure. 2. Handing all final decisions and global operations control to the domestic managers in the US. One of the takeaways the consultants gave to Kent is the fact that their three divisions are not homogenous. The market structure for the Fire division with its highly local regulations is different than the Medical product market with its multinational characteristics. On the other hand, it could be impossible to meet the diversity in demands from the US for the different consumer products markets, which are highly dependent on the needs of the local markets. Morales has to come up with his own tailored solution based on the differences of the company’s divisions. A unified structure has been proven in the previous several attempts to fail.
The understanding of the needs of each market and the structure of the divisions demand are the key points to build the new organizational structure. Therefore Morales solution should consist of developing a dual-hierarchy structure, which consists of the domestic product managers in Kent’s headquarter and the regional VPs who know the market needs they are serving. This structure would provide Fisher with the integration between the domestic and the international arms of the company. It will also help in the coordination between the company’s future global strategy via the domestic product managers and the needs of the regional and local markets by the regional VPs. However, such structure should theoretically solve the main problem of the integration between the domestic and global operations, practically it could be harder to implement. As long as the company’s employees do not understand the urgency of the problem and the need for such a solution, they might resist the change.
Another critical point that the management of the company failed to understand is the diversity within the different subsidiaries. Because Kent Chemicals acquired most of them, they have to introduce a wide cultural understanding. The subsidiaries need to have a common base where they can share the same culture of the company. This for instance could help the German and the Korean Fire-protection subsidiaries to cooperate instead of competing in each other market. This issue should be communicated through the domestic managers to the different regional VPs. John P. Kotter introduced an eight stages process of creating a successful major change. Having Morales understanding them and following Kotter’s clear structure would indeed increase his chances of succeeding. Kotter’s first stage is ‘Establishing a sense of urgency’. Therefore, Morales should meet with Fisher and Angela Perri to get them on board with his proposed structure. He also should not only get their support but also the support of the people who would lead the change (Product Managers and Regional VPs).
Kotter goes further, arguing that the vision has to be communicated widely opposed to what Kent’s previous consumer-products GBD, who argued before that he did not care about how his new role was seen as long as things were done his way. Additionally, Morales should do what Kotter called “Empowering Broad-Based Actions” by getting rid of the obstacles of the structural change. Also, focusing more on the locality of the consumer product division. Adding more overseas control to reduce the centralization to Ohio’s headquarter could eliminate many obstacles as well as provide a middle point -A European and an Asian middle points- for quicker responds to local or regional needs. However, the responsibilities of such middle points should be clarified to avoid any control conflicts between them and the company’s headquarter located in Ohio.
It is also important to understand that this change could take few years to be completed; therefore generating short-term wins would eliminate disappointment and encourage the people who achieved those wins. In order for this structural change to succeed, Morales has to learn from the previous mistake of hiring the wrong people to do the job. Thus, he has to work closely with the HR department to choose the right people to lead the managerial positions in the new structure; People who have the capabilities and the credibility to implement the change. Additionally, the consumer division should get a more sense of diversity even in the domestic headquarter. Having that all said, applying such a structure would prepare Kent Chemical with the tools and the right communication to grow internationally without losing control of the company’s activities.
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