Multi Chem
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2. INTRODUCTION TO MULTI-CHEM LIMITED
Incorporated in 1985, Multi-Chem is a drilling and routing service specialist and a major distributor of specialty chemicals and materials to PCB manufacturers. Already established in South East Asia, Multi-Chem expanded to Suzhou, China in March 2002 and Wuxi, China in April 2003. In April 2004, they moved into laser drilling in China which complements their strengths in mechanical drilling and allows them to drill microvia of sizes not achievable by mechanical drilling.
Multi-Chem is currently the leading PCB drilling and routing specialist, in terms of both capacity and technology, serving the leading PCB manufacturers in the Huadong area.
Traditionally in the PCB-related industry, in May 2002, Multi-Chem diversified to the business of IT distribution. Their IT security business now spans Singapore, Malaysia, Thailand, Vietnam, China and Indonesia. Today, the Group comprises the Company, 12 subsidiaries and 4 associated companies, with operations spanning South East Asia and China, along with a staff strength of more than 500.
Mission
To be leading drilling service specialist and major distributor of specialty chemicals and materials
To be a leader in terms of both capacity and technology in the area of PCB drilling and routing services
Objective
Quality assurance
Continually seek to provide quality services to their customers and maximize returns to shareholders
Strategies
Continue to focus in the China market
Continue to focus on the distribution of only the top names in IT Security products
3. ORGANIZATIONAL ARCHITECTURE
Upon close scrutiny of the annual report and intensive research, we derived the Organizational Architecture (OA) of Multi-Chem. Essentially the OA is focused on three components namely decisional rights within the firm, ways of evaluating performance and the reward system. It is imperative that all the three aspects are designed such that the stool is balanced and functional.
3.1 Assignment of Decisional Rights
The Group is lead by group of experienced leaders with both high educational qualifications and many years of experience. They are better equipped with knowledge to lead and manage the company.
It is not clearly stated if Multi-Chem assigns responsibility and decision making rights pertaining to their areas of responsibility to the lower management. Judging from Multi-Chems large corporate size, we can assume that managers appointed for each department, and an overall in-charge in each of the region where the company operates. However, it is noted in the annual report that the Chief Executive Officer and the Chief Operating Officer are in charge of the overall direction, development and operations of the group. Since the top management is the one who has the ultimate say in decision making, Multi-Chem has to some extent practices centralized decision making.
It is desirable for the above superiors to continuously monitor the lower management to ensure that their personal goals are in congruence with the companys. However, this system can be extremely time-consuming as the higher-ranked managers consents are required before a decision can be made and Multi-Chem operates in different countries. If urgent attention was needed to implement a decision, time spent in consulting the top management and briefing them on the issues faced might lead to a loss in productivity. Decentralization allows lower-rank managers to make and be held accountable for their decisions, resulting in greater responsibility and motivation to act in line with the companys goals.
3.2 Reward System
It is essential that the reward system is closely tied to the performance evaluation to motivate the employees to work in the best interests of the company and reduce goal incongruence. Rewards given by Multi-Chem are linked to employees performance, contribution to the company and their level of responsibility.
Multi-Chem does not focus much on monetary rewards to the employees; instead they provide training and grant employees the opportunity to work in their overseas subsidiaries. Employees of Multi-Chem would then strive to perform well so as to be eligible for these trainings which are beneficial to them since it provides them with additional knowledge and skills. The Group conducts yearly appraisals to evaluate the performance of staff providing them with a sense of self-awareness that would encourage them to undertake training to improve their skills and abilities. However, trainings which require selection might create internal strife such as jealousy amongst employees hence reducing the benefits of training.
Multi-Chem also rewards employees based on its financial performance. The remuneration of Multi-Chem is fixed in accordance with the experience of the person in question, role performed, market comparison and contribution of the individual and/or the performance of the company. By determining the level and mix of remuneration, the Remuneration Committee (RC) ensures that the directors interests are aligned with those of shareholders. Remuneration awarded by Multi-Chem serves to attract, retain and motivate employees.
The following is a breakdown of the remuneration of the key management of the group.
Management Amount
2004 ($000)
2003 ($000)
Directors of the company
1,979
1,200
Directors of subsidiaries
Others
From the table above, there is no information on how the remuneration package is related to the financial performance of the company. Furthermore, the measurement and evaluation of individual performance as part of remuneration may be subjective. Such information should be revealed to stakeholders for greater transparency.
3.3 Multi-Chem Shareholder Options
It is stated in the annual report that there were no options granted in the final year. Multi-Chem should have a policy that grants share options as a bonus to its eligible employees and directors. Stock options would help align employees interest with that of the shareholders, as it allows them to participate in the equity of the company and encourages them to focus on long term goals. Not granting