Stone Finch, Inc.: Young Division, Old Division - Essay Example

?Introduction The case study discusses the business trajectory of Stone Finch. Stone Finch was founded in 1975. The firm has operated successfully inthe water / wastewater industry for 34 years. Its CEO, Jim Billings, is facing internal problems in the company due to poor organizational culture, personal conflicts, and disorganization. The company is divided in the Solutions Division and the Water Products Division. The cash cow of the Company is the Water Products Division, but despite the fact that this division brings in most of the revenues the executive management team has not made a significant investment in the manufacturing facilities in over 20 years. Another concept that created internal friction was the creation of the entrepreneurial subsidiaries. The firm has invested $139 million to fund the subsidiaries. There are morale problems at the enterprise and the firm has a bad employee retention rate. Three of the causes of low morale in the workplace are poor leadership, unhappiness with current position, and lack of clarity in the expectations (Itmanagersinbox, 2012). During the last three months the Solutions Division has lost eight employees that were in a fast track for advancement. The inability of the company to invest in its core business has caused the firm’s product to fall behind the competition. Jim Billings has a very tough challenge ahead. He must find a way to bring harmony to an organization that is facing chaos. Jim Billings is a strong leader that has the capability of inspiring others to achieve greater things. He did a great job of running Goldfinch Technologies. The firm was so attractive that Stone Finch acquired its operations. Mr. Billings had a loyal employee base. After the acquisition 80% of the former employees of Goldfinch Technologies stayed under the command of Mr. Billings in the newly formed Solutions Division. Jim has done a great job of increasing the profitability of the company. Profits are the most important variable for investors (Peavler, 2012). The sales of Stone Finch increased by 74% during the four years that Jim Billings has been CEO of the company. In 2008 the firm’s revenues reached $2.3 billion. Despite his great leadership ability Jim did not recognize that the two divisions were becoming more apart everyday. Jim Billings pushed the entrepreneurial subsidiaries concept so much that a lot of the employees began to dislike the extra attention the subsidiaries were getting. The middle managers realized that the entrepreneurial subsidiaries were absorbing a large percentage of the resources of the company. The entrepreneurial subsidiary concept was a very innovative idea that Jim Billings brought to Stone Finch. The concept improved the creativity of the employees and it enhanced the innovation of the company. Innovation drives growth and it improves productivity (Marketwire, 2012). A subsidiary had to be created from the idea of an employee of the firm. This person must recruit one to three team members that were knowledgeable in the technology. A subsidiary could be created if the R&D requirement could not be fulfilled by the internal human resources of the company. The employee selected for a subsidiary would leave their old jobs and become a part of the administrators of the new subsidiary. The managerial team of the subsidiary would own 20% of the firm, while Stone Finch owned the majority stake of 80%. The product developed by the subsidiary had to reach the market within five years. The only proposals that were considered were in the power plant and ground water arenas. The existence of the entrepreneurial subsidiaries originally increased the motivation of the employees because the concept provided an opportunity to develop a new technology and to obtain an ownership stake in the new subsidiary created. The contradictions between the two divisions can be managed by an immediate intervention by the managerial staff. The managers must get the employees from the divisions together to start a dialogue process that will eventually lower the friction between the two parties. Innovation is important, but the company cannot continue to invest all its resources in the entrepreneurial subsidiaries in hope to become the most innovative firm. The organization has to make changes in order to invest in its current products in order to increase their exposure in the market through effective advertising and marketing initiatives. The CEO of the company faces a variety of problems. The employees of the Water Products division are facing morale problems caused by the felt injustice that the executives of the company only care about the entrepreneurial subsidiaries. A lot of the financial resources of the company have been injected to the subsidiaries. Morale problems can lead to lower productivity by the staff. The morale problem is a serious issue that must be dealt with by the executive management team. A way to improve morale is by coordinating a series of social activities for all of the employees to participate. The priority of the firm should be to deal this serious issue that can destroy the corporate culture of the enterprise. Morale problems hurt the productivity of the workers. The firm should immediately start working on a plan to resolve the situation. A second problem that Stone Finch is facing is the loss of key personnel. The employees are leaving the firm because other companies provide better employment opportunities. If the company continues to lose employees the human capital of the firm is going to decrease. The loss of key personnel is another serious problem the company faces. If the firm loses more key personnel to the competition the firm is going to be at a competitive disadvantage. Jim Billings has to implement a plan to change the behavior of its employees. The firm needs a corporate culture in which all the members of the firm participate and are treated as equals. Jim is going to create a program to provide training and development to both divisions to improve five areas: cooperation, teamwork, synergy, communication, and leadership. The trainings sessions should be given by the HR department, managers, and external consultants. These trainings will improve the education of the employees in these subjects. The employees will realize the importance of teamwork and cooperation. Individualism has become an undesirable trait in an employee. Jim must hire a mediator that is going to work with the supervisors, leaders, and managers of both divisions to improve their working relationships. Mr. Billings will implement a plan company to make a commitment of investing 20% of the firm’s net income during the next three years in equipment and machinery to improve the operations of the Water Products Division. Conclusion As the CEO of the firm Jim should have acted in a more responsible manner in his handling of the entrepreneurial subsidiaries. He caused competition to occur among the workers and cooperation deteriorated. On hindsight Jim should have handled the situation much differently. Jim had an ambitious plan for the entrepreneurial subsidiaries. It might have been better for that plan to have been implemented in a slower manner. He should have invested less money in the entrepreneurial subsidiaries and more money in its core business. References Itmanagersinbox.com (2012). How To Deal With Low Morale in The Workplace. Retrieved November 14, 2012 from http://itmanagersinbox.com/1648/how-to-deal-with-low-morale-in-the-workplace/ Marketwire.com (2012). Minister Paradis Promotes Importance of Innovation in Creating Jobs and Growth at Advanced Manufacturing and Plastics Tradeshow. Retrieved November 14, 2012 from http://www.marketwire.com/press-release/minister-paradis-promotes-importance-innovation-creating-jobs-growth-advanced-manufacturing-1726208.htm Peavler, R. (2012). Profitability Ratio Analysis. Retrieved November 14, 2012 from http://bizfinance.about.com/od/financialratios/a/Profitability_Ratios.htm Read More