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MANAGING ORGANIZATION DEVELOPMENT A Case Study

By : Pungki Purnadi M.W.
for CHRP24 Wednesday, 17th April 2013

RECENT ORGANIZATIONAL TRENDS

ORGANIZATIONAL CHALLENGES IN THE 21st CENTURY Keep abreast in global competition Create value-add through intellectual capital (as opposed to physical and financial capital) Manage risk in global capitalism

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RECENT ORGANIZATIONAL TRENDS

ORGANIZATIONAL REQUIREMENTS IN THE 21st CENTURY Think globally, act locally Is structured to enable speedy decisions Evolve to provide value added service Build empowered professional teams

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RECENT ORGANIZATIONAL TRENDS

ORGANIZATIONAL REQUIREMENTS IN THE 21st CENTURY Flatter organization More authority/responsibility to lines Self-management Check & Balance in corporate governance Global culture development

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ORGANIZATION CONCEPT
Organization, Strategy, and People issues are interrelated. We cannot have a proper organization if we consider them separately even when we are only requested to solve part of the issue.

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CONCEPT OF INNOVATIVE ORGANIZATION

Pyramid

To be innovative, organization concept has been completely changed CREATIVE DESTRUCTION OF ORGANIZATIONS
Empowered Teams
Top Management team

CEO COO
Center

Business Units

Team Leader

Business Team
Member Characteristics : short layers, team on life-cycle, bottomup & top-down, market based pay & frequent change between team leader & members, free choice of career

Division Characteristics : rigid & stable position, top down, seniority based pay & promotion

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Clarify Business & Organizational Model Core Platform Design

Group Platform is an important organization structure
Win Model
Competitiveness Break Point Line

Business Portfolio

C D E

G H

Operation ( D/SCM ) Group Platform Support

Operation ( D/SCM )
Thickness

Technology * Knowledge Management Finance Accounting Tax Human Capital Legal & Brand
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Clarify Business & Organizational Model

Group Company Management

The CITIGROUP example Business groups are categorized by key markets but sharing central Resources.
Management Committee

Citigroup Global Consumer group

Global Corporate & Investment Bank

Citigroup Global Investment Management

Citigroup International

Citibanking

Cards

CitiCapital

Global Equities Citibank Global Securities Services

Global Fixed Income

Global Investment Banking & Global Relationship Banking

The Citigroup Global Citigroup Asset Retirement Private Management Services banking Travelers Life & Annuity Citigroup Alternative Investment

CitiFinancial

Primerica Financial Services

Salomon Smith Barney Global Private

Citibank E-business

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Internal and External Environment Analysis are the key input in developing strategies and initiatives to be organization model.
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Internal Analysis

SWOT
Weaknesses

Strength

Weaknesses

How will Organization's past performance Strengths affect future actions?

Opportunities S-O Initiatives W-O Initiatives Threat

S-T Initiatives W-T Initiatives

Opportunities

Threats

External Environment Analysis

S-O: How to leverage on the internal strength to take advantage of external opportunities. (GROWTH) W-O: How to improve internal weaknesses by taking advantage of external opportunities. (SUSTAIN) S-T: How to use the internal strength to reduce its vulnerability to external threats (SUSTAIN) W-T: How to prevent company's weaknesses from making it susceptible to external threats (SURVIVE)
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How are key environmental drivers going to affect business?

Divisionals S&I must also in line with PTPs Strategic Directions and Key Initiatives.
PTP Strategic Directions PTP Key Initiatives

Deliver a robust business through enhanced portfolio management to contribute a total value of USD ??? Billion
Undertake regular performance benchmarki ng to enhance competiti veness level. Strengthen Long Term Manpower Planning to support business objectives

PTPs Strategic Directions

Develop in -house capabilities in business building, field rejuvenation, sma ll field development and abandonment. Expand and enhance local basin knowl edge. Build competitive advantage through Enhanced business building relationshi p in focus countries. capability development in PTPs Participate in partnerships which create advantage beyond that identified Institutional Capabilities player.

of an individual

Expand around core producing areas to provide leverage for future advantages Develop and implement the identified niche technology areas.

Close leadership gap and inculcate Global Champions mindset in PTP

Strengthen staff development efforts. Implement structured succession planning. Enhance leadership development program. Implement intervention plans to uplift mindset change in courage , meaning, ownership and value.

Organization Model & Structure

Initiatives
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MANAGING ORGANIZATION DEVELOPMENT CASE STUDY Of Chemical Company

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Case Study
Introduction

Advanced Chemical India Corporation (ACI) is founded in 1982 by current owner & president, Mr.Gupta. ACIs overall sales turnover in 2000 hit US$800 million and profit is US$30 million before tax. 60% of ACIs are sold in domestic market although overseas sales have been growing steadily. ACI originally started producing basic chemical products that are used in clothes. Gradually other applications are developed such as for automobile, home appliances. Some products for homes are sold directly from supermarkets in India with ACI brand. They have three plants in India and sales offices in US, UK, Hong Kong. Thailand and Malaysia. All plants produce basic chemicals and modified products based on needs of clients. About 2160 employees are hired. Their organization organized by functions. There are 160 employees in HQ, 1500 in production with production engineering, 400 in sales in various branches, and 100 in R&D. HQ covers marketing and corporate functions as Finance, IT, Legal, Purchasing, HR etc.. ACI uses patents licensed by UK chemical companies. But by developing own products for specific clients, some new patents are developed by ACI and registered. ACIs corporate philosophy is Keep High Quality in products. The culture of ACI is basically conservative.
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Case Study
Business Issues
Global competition around ACI is getting severer. Now for low cost (basic) product, ACI is competing with Chinese companies and for high end (modified) products competitors are US/European/Japanese chemical companies. As a result of severe competition, though the sales has increased by 5%, the profit has decreased by 20% last year. Both commodity and specialty (high end) chemicals divisions are reducing profits. Mr. Gupta wants to transform ACI, review its business model and lift ACI into the next era of growth. He considered that organizational issues of ACI are followings. Since many Products introduced, profit control for each product is getting difficult. And the final responsibility of each product is not clear. Functional organization becomes barrier to develop/introduce products in speedy manner. HQ seems too big. He feels difficulty to manage everything by himself Therefore he decided to transform ACI from functional to business unit base organization ( basic chemical and specialty/modified chemical units). Also he wants to reorganize HQ and R&D to more value oriented organization Currently Job based pay and incentives with profit share (for total ACI profit) are used. Mr. Gupta also feels the necessity to change these according to the organization change
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Case Study (1: Chemical Company)

ACIS CURRENT ORGANIZATION STRUCTURE
Functional Depart HQ Division Planning Finance & Accounting Research R&D Board of directors CEO (Gupta) Development Process Engineering Purchasing & Logistic IT HR & Labor Relations Legal &Intellectual Property Production X Plants Y Plants Z Plants Sales A Branch B Branch UK Branch US Branch Control Engineering Production

160

100

1500

Division have 4-6 management layers

400

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Case Study 1 Chemical Company

Questions : Organization recommended for ACI?
Structure & Managing system People Management

Corporate (HQ) management system recommended? People management recommended?

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Case Study (Designing Workforce Planning )

Business Issues Global competition around ACI is getting severer. Now for low cost product, ACI is competing with Chinese companies and for high end products competitors are US/European/Japanese chemical companies. As a result of severe competition, though the sales has increased by 5%, the profit has decreased by 20% this year. Both commodity and specialty chemicals divisions are reducing profits. Mr. Gupta wants to transform ACI, review its business model and lift ACI into the next era of growth. Through his new leadership, he put the company growth target of 15% per year. Currently Job Based Pay and incentives with profit share (for total ACI profit) are used, but the resignation for core job like production & process engineers and also sales are quite high ie : 10%. Mr. Gupta also conduct re-engineering organization and transform into Business unit Based Organization. The number of organization layers is only 6 layers with 14 salary grades per job family. Employee market is also tight since so many high flyers Indian prefer to have overseas jobs.

Based on the above, please provide Mr. Gupta with 5 years manpower planning scheme, in order to achieve his target for 15% company growth.
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Case Study (Designing Career Model )

Employees Issues Global competition around ACI is getting severer. Now for low cost product, ACI is competing with Chinese companies and for high end products competitors are US/European/Japanese chemical companies. As a result of severe competition, though the sales has increased by 5%, the profit has decreased by 20% last year. Both commodity and specialty chemicals divisions are reducing profits. Mr. Gupta wants to transform ACI, review its business model and lift ACI into the next era of growth. Through his new leadership, he put the company growth target of 15% per year. Currently Job Based Pay and incentives with profit share (for total ACI profit) are used, but the resignation for core job like production & process engineers and also sales are quite high ie : 10%. The number of organization layers is only 6 layers with 14 salary grades per job family. Employee market is also tight since so many high flyers Indian prefer to have overseas jobs.

Based on the above, please provide Mr. Gupta with a career model, in order to reduce the employee turn over up to 3%.
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Case Study (Designing Succession Planning )

Job Purpose
GM Basic Chemical Business Unit is having main accountability to manage two production plants with number employees around 1000 people consisting of Production department, QA/QC, maintenance and Sales at their spreading offices. This position has an authority to set production planning, control the quality and set price on the marketing and sales up to their overseas offices. Dimension of sales target is around US$300M per year. GM Advance or Modified Chemical Business Unit is having main accountability to manage one production plant with number employees around 500 people consisting of Production department, R&D, maintenance and Sales at their spreading offices. This position has an authority also to set production planning, produce specific product as per customer needs, control the quality and set price on the marketing and sales up to their overseas offices. Dimension of sales target is around US$ 200M per year. Based on the above please define the Job Competencies Profile of both positions in the new organization and who are the candidate can fill-up the above both GM Positions.

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Case Study (Designing Succession Planning )

People Issues
After Re-organization, Mr Gupta is having difficulty to find the good candidates to fill up the GM Position of his two business units. He has Mr. Subramaniam which is now as Plant Manager X. Mr. Subramaniam is a tempered person but a perfectionist guy in job. He has been respected by his subordinates due to the result of the production which always meet the target. Mr. Subramaniam is a career person, since he started his career since the beginning of ACI and until now he is still a single man at the mature age. He has Mr. Kumar which is now as Plant Manager Y. Mr. Kumar is an easy going person and having a good leadership style in managing his plant. Everybody in Plant Y loves him very much. In term of competencies he has the one who always being sent for Leadership training. Mr. Kumar is just married person and still his first baby born. Kumar also quite mature on his age. He has Mr. Sanjeev who are now as R&D Manager. Mr. Sanjeev is a keen person, patient and persistence. Not many innovative product is produced during his leadership. However his accurate calculation and good judgment on the financial (cost of product) makes him good in the eye of Mr. Gupta. Sanjeev is a family person, sometime he brings his grown children at the office while waiting his end of the working day.

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Case Study (Designing Succession Planning )

People Issues
He has Mr. Venkat who are now hold Planning Manager position under Specialty Chemical Product Division. He work side by side with Mr. Rajiv who are the Plant Manager Z. Venkat is a senior and mature person who has career from bottom as operator and getting higher education with scholarship from England. Before holding Planning Manager, he was the second person in charge in R&D Division. He always do some risk analysis during his career which put him good in front of Mr. Gupta. He is also family man with good children education perspective. He has Mr. Rajiv who are now as Plant Manager Z. Mr. Rajiv is a thinker style person but having a good communication skills. It is proven that he has so many client relationship and can maintain his product sales to the big customers and industries. Rajiv is the bright young person who are having a great career jump from fresh graduate to become a capable engineer and promoted to become Plant Manager. He is in close relationship with another young bright lady engineer at the R&D department. They may be in wedding ceremony next year. Mr. Gupta still has a strong lady of Ms. Bhindi who are now just handle head of corporate planning. Ms. Bhindi is MBA graduated from Harvard Business School. She just joint ACI 4 years ago and her last three years performance are outstanding and most of the managers agreed that she is the star lady of the company. Before handle Head of Corporate Planning, she was the brightest financial planner in the Finance & Accounting Department. Now she is learning by doing on the production operation by having good relationship with most of all engineers in those three plants. Until today she is still single and no clue that she has special relationship with somebody.
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Case Study 1 Chemical Company

Based on the above people situation, please recommend the succession planning process and scheme

Leadership Development recommended?

Establish the Talent Criteria to fill up the GM business unit position People Development Program for each person Performance Management System

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