The Wallace Group Case
The Wallace Group Case
PROBLEM ANALYSIS
The Wallace Group is a company that manufactures and develops technical products and systems. It has three primary operational groups consisting of electronics, plastics, and chemicals. By far the largest asset of the Group is the electronics. This asset is approximately the size of both the plastics and chemical groups of the corporation. It also contributes the most to the net income at approximately 70%. The plastics and chemical divisions were acquired for the purpose of diversifying the income of the corporation from the original electronics group.
The Wallace Group currently faces some problems with it company in relation to improper management. To begin with, the company seems to have difficulty in the hiring process. It seems that the company is focused on cutting cost rather than looking for effective employment solutions. For example, instead of creating a management developing program to train and recruit managers, the company relies on promoting technical staff. The cost cutting approach is also impeding the hiring of qualified engineers. The company focuses on hiring employees at the least possible salary as an alternative to paying the required amount for qualified expertise. Another issue that arises is un-standardized methods of collecting data and presenting information. For example both the vice president of marketing and the director of advanced systems collect and utilize data for marketing purposes. Their problem lies in the fact that both managers are using different data and formats for essentially the same purpose, and therefore they create redundancy and higher workloads. By far, the most crucial problem facing the group is the lack of vision and direction from the president, Mr. Wallace himself. His diversification program that resulted in the acquisition of the chemical and plastics divisions lacked forward looking vision. He simply required the companies to maintain a profitable operation without any direction to improve.
RECOMMENDATION AND IMPLEMENTATION COSTS
In terms of priority, I would first recommend that the Wallace Group implement a corporate governance policy familiar to a business of its size. This would require that the company adopt a board of directors. A board of directors has five responsibilities:
1. Setting corporate strategy, overall direction, mission, or vision
2. Hiring and firing the CEO and top management
3. Controlling, monitoring, or supervising top management
4. Reviewing and approving the use of resources
5. Caring for shareholder interest.
By setting a corporate wide strategy the group will have a direction to focus its resources on. For example, the company could implement a diversification in customers. Instead of relying mainly on the Dept. of Defense the group could expand into the civilian sector or even foreign governments. The board of directors could also manage the CEO or in this case Mr. Wallace. It would give him performance requirements and if not met they could seek out a replacement. Currently nobody can challenge Mr. Wallace because of his position and holdings in the company. The review and approval of resources would be another helpful aspect that a board of directors would bring. In this case the company could evaluate whether to continue to purchase their raw materials from sister Wallace groups or seek outside sources. Finally, a board of directors would take the shareholders into interest. They would seek to increase the bottom line of the investors rather than the current policy of just maintaining a profit.