Work Related Learning: Puddingdown Playhouse - Essay Example

? Work Based Learning Submitted by Submitted to Sarah Moore Williams For Work Based Project work Introduction Corporate governance is critical to managing the affairs of an organisation. The intricate nature of relationships between the various stakeholders of a business ensures that managing such relationships is critical to business. These relationships are better managed by utilising sets of customs, laws, policies and processes. One of the more important issues that are dealt with through corporate governance is the amount and extents of power available to central figures in organisations. (Shleifer & Vishny, 1997) Moreover corporate governance promotes accountability and transparency within an organisation to ensure that business processes are not tainted in favour of one group, individual or lobby. In recent years the appearance of large corporate scandals such as Enron Corporation, HIH, One Tel etc. have focused attention to corporate governance again. (Bowen, 2008) This particular study of corporate governance practices in Puddingdown Playhouse and its parent company Sparkling Theatres Limited is aimed at highlighting inept corporate governance strategies in order to warrant their improvement. Recommendations are included with each piece of critique in order to achieve relevance. Nature, Purpose and Structure of Organisation The Puddingdown Playhouse is a small company that is based within a small community setting. The company is aimed at providing cheap and sustainable entertainment to local residents while providing chances to socialise at the same time. Moreover the company aims to protect the legacy of a historical theatre that was established in 1266. The company is structured rather haphazardly and powers are concentrated within the upper tier management. The middle and lower tier management is without much power. This infuses strict morale problems for the middle tier employees and especially for the lower tier employees. The Board of Directors is not highly organised for the parent firm or for Puddingdown Playhouse and this represents a huge challenge for corporate governance. Internal and External Stakeholders and their Information Needs The internal stakeholders of the company are without doubt its employees who work to make the company a success. The overall process in place does not consider the acting functions of the company and does not provide any information to them. This is a discriminatory practice as the actor’s skills are largely utilised to drive business but they are kept without information. The actor’s should be apprised of the company’s performance and should be encouraged through bonuses. The other internal stake holders are the accounting staff who have the information but fail to place it successfully enough. This could be improved by automating the process better and by utilising better tools. The external stakeholders of this company are the share holders who need to be apprised of the internal workings better. This would ensure their constant input to ensure accountability and transparency as well as economic efficacy. Another major external stakeholder is the community of Puddingdown that is served with the theatre’s presence. In case that the theatre relapses or closes its business down the quality and level of entertainment would decrease significantly which would have a direct bearing on the community. The community needs to be told how their efforts are keeping the theatre in business and where the theatre might need their support. Moreover, the community could be used to identify groups that do not frequent the theatre often and targeted marketing for these groups could ensure their increased participation in the theatre. Identification and Evaluation of Corporate Governance Systems in Place plus Ethical Dilemmas faced by the Staff The Operations Director, Johnny Dee is also on the board of “Feature Foods” and this poses an ethical dilemma. He may choose to promote theatres that respond best to his other company’s products and neglect potential business opportunities elsewhere. Furthermore the Operations Directors is responsible for “administration, marketing, mounting of plays etc.” which indicates a wide range of powers available to him. The various functions being performed by Johnny Dee should be spread out further amongst other employees who report to the Board in order to promote transparency and accountability. As far as the role of the Financial Controller is considered there are few noticeable aberrations from normal business operations practices. For one thing, there is nobody who could serve consistently on this position which indicates job pressure and possibly cajoling. The powers allocated to the Financial Controller are large as well and there are no adequate checks and balances imposed on him. Furthermore the company has no real internal audit system and the presence of a Financial Controller who was previously an auditor is a bad omen. The Financial Controller could be and can manipulate the situation to his or to the advantage of certain other people. This is pretty much in line with what happened at Enron Corporation when an external auditor was hired as the chief accountant who abused his position to issue falsified financial statements. The Financial Controller should report to the Board rather than the Operations Director alone and he should have no part in the day to day affairs such as catering and cleaning. Moreover the Management Accountant and the Financial Accountant possess little real powers and are largely responsible for reporting alone. Given the fact that the accounting team is a small one, there are great chances that it could be manipulated as desired. This in itself presents a great challenge. The position and functions of the Sales Manager are highly justifiable and represent proper powers, authority, responsibility and control. In contrast the Payables Department is like an orphan within the organisational structure. Re-staffing and retention of existing staff are immediate concerns. Moreover the chances for fraud are both immediate and obvious in lieu of the previous fraud by the sacked Payables Manager. The response of the management to install a weak figure head for such a troubled department may serve as an encouragement for someone else looking to defraud the organisation. It would have been far better if the management was more coherent and could install a stronger figure head even if rather inexperienced at this position. This would allow the management to groom a strong person in place. Trying to overwork the team and providing overtime as compensation is tantamount to promoting an unhealthy work life balance that would force more and more people to seek employment elsewhere. Moreover, the presence of weak controls within the Payables Department is an immediate threat to the very existence of the company. The previous fraud was instigated by an individual but if a new fraud is initiated by a small group that is in close collaboration with each other, it could easily mean the end of the company’s finances. The only guarantee against this that is the Internal Audit Department has been removed and this represents another major problem for corporate governance. The use of an outdated accounting system SAGE line 50 will only allow looser controls to be implemented that would facilitate fraudulent activities. The box office system is not in good health either and needs to be revisited for improvements through technology upgrades and website based bookings. The current skills and tools of the employees must also be upgraded in an effort to promote economic efficacy. Environmental PEST Analysis A PEST (Political, Economic, Social, Technological) analysis is utilised to assess the external (or environmental) factors facing an organisation. (Decide Guide, 2009) The classification allows identification of factors that may affect a company’s business whether they are contributory or detrimental. (Gillespie, 2007) PEST analysis for Puddingdown Playhouse is presented below: Political The company may soon find its governmental support fund removed; Changes in legislation may require the company to invest in changes. Economic Consumer spending is already low and is recovering only gradually after the global recession; Incoming competition may spell hard times as Puddingdown Playhouse would have to struggle harder to keep them in the market. Social Audiences are fast switching to newer forms of entertainment especially digital entertainment methods; Audiences are looking for online presence of businesses through marketing on social networking websites that Puddingdown Playhouse does not possess. Technological Changes in the entertainment industry such as the advent of downloadable content off the internet is encouraging more and more people to stay at home to entertain themselves; Newer advances in stage technology such as lighting, fog effects etc. make performances far more appealing to audiences. Company SWOT Analysis A SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis is an internal assessment of the company’s position to carry out economically feasible business operations. The variables used within a SWOT analysis all relate to the internal position of the company that is impacted in large part by the internal stake holders. (Armstrong, 2006) SWOT analysis for Puddingdown Playhouse is presented below: Strengths Puddingdown Playhouse has an established market presence that provide it with obvious advantages over new market entrants; The company has the support of the community as well as a versatile acting troupe that is in great demand; The company’s image is further enhanced through the policy on outreach programs that provide the theatre with more business. Weaknesses Loose corporate governance structure in place that promotes fraud and other ethical issues; Powers are too deeply ingrained in persons rather than in positions; Internal audit has been disbanded even after the recent fraud; Transparency and accountability mechanisms are absent all the way from the bottom to the top alike; The tools in use are outdated and inefficient; The company does not have a clear picture of its future direction because the data it possesses is not highly useful and would need stringent auditing and rearrangement to make it meaningful. Opportunities The company is finding a steadily expanding market as seen in the 300% increase in sales in 2007; The lack of any established classical entertainment venues makes Puddingdown Playhouse an obvious choice that could be banked upon to house other displays of art which would gather large audiences (diversification of business); Threats The theatre will find its government support removed in lieu of cost cuts by the government; A rival theatre has opened up in another part of Puddingdown; Changing legislation will demand changes in facilities that would require upfront investment; Given the state of corporate governance profits may decrease and some of the investors may decide to leave the venture. Conclusion Puddingdown Playhouse is facing a number of internal and external threats but none of them are uncontrollable. However if these issues are treated in a lax fashion, there might be chances that the company would fail. Corporate governance needs to be improved in large part through management initiative and involvement. Failing to do so could spell the end of Puddingdown Playhouse as competition is springing up and the company is bursting at the seams due to ethical dilemmas and fraudulent activities. Bibliography Armstrong, M., 2006. A handbook of Human Resource Management Practice. 10th ed. London: Kogan Page. Bowen, W.G., 2008. The Board Book: An Insider's Guide for Directors and Trustees. New York: W.W. Norton & Company. Decide Guide, 2009. PEST Model: Political, Economic, Social and Technology Analysis. [Online] Available at: HYPERLINK "http://decide-guide.com/pest/" http://decide-guide.com/pest/ [Accessed 21 August 2011]. Gillespie, 2007. PESTEL analysis of the macro-environment. [Online] Available at: HYPERLINK "http://www.oup.com/uk/orc/bin/9780199296378/01student/additional/page_12.htm" http://www.oup.com/uk/orc/bin/9780199296378/01student/additional/page_12.htm [Accessed 21 August 2011]. Shleifer, A. & Vishny, R.W., 1997. A Survey of Corporate Governance. Journal of Finance, 52(2), pp.737-83. Read More