Newell Rubbermaids Departmentalization Structure - Essay Example

Newell Rubbermaid – Case Study Case Study Questions i. Do you think that Newell Rubbermaid’s departmentalization structure puts the company in a strong position for profitable growth? Explain. The first step towards organizing a company is to organize its structure and processes. In my opinion Galli’s initiative to organize Newell Rubbermaid by departmentalizing its structure is the first step towards profitable growth. Earlier, Newell had focused its strategy on acquisition without any goals or plans for growth. Rubbermaid too focused on innovation without any direction or goals. Galli, the new companys CEO, took a bold step by departmentalizing the new company’s products into categories and regions not only help direct resources towards customers but also innovations according to product group in the future. Once this has been achieved, Galli should also organize the companys resources and develop a competitive strategy. A competitive strategy should match the companys products and services, with market demand to create a niche for them. Another aspect that Galli should also consider is creating value chain for effective distribution of the company’s products. It is only then would Newell Rubbermaid be able to capitalize on its new structure (Samuel 247). ii. How is Galli applying Mary Parker Follett’s guidelines on coordination to Newell Rubbermaid? Mary Parker Folletts guidelines on coordination emphasize on horizontal relationships and personal communication for coordination in organizations. This approach helps in planning process, as well as resolve problems as they arise by communicating them to decision makers. Galli has applied similar strategies by eradicating three headquarters, and merging them into one where decision makers are based. This way Galli and the team are able to communicate plans, strategies, and find solutions for problems as they arise. Moreover, it also encourages coordination among managers. However, Follett points out that the basic element in this guiding principle is the human element. Communication process among individuals is critical as well as implementing motivation programs and developing employee skills. She also points out that coordination is a continuous process, and must be revised to reflect the needs of the organization, environment and activities therein (Samuel 247). iii. Which of Fayol’s 16 general guidelines would you recommend that Galli emphasize in using organization to address Newell Rubbermaid’s challenges? Despite Gallis attempts to turn Newell Rubbermaid into a successful company with unmatched portfolio of global brands, he has yet to meet the challenges of rebuilding profits and getting its products into the global market. One guiding principle from Fayols list that can be implemented is to establish the scope of centralized authority and decentralization of operation. Newell Rubbermaid is the result of two different type of management which should be merged so that there is unity and centralization of authority to direct the organization towards productive goals and objectives. At this initial stage, the objective of the whole organization should be to increase profitability through effective and efficient resource allocation as well as through innovation, delegation, and implementation of organizational plans. At the same time, the individual divisional or department heads should be given enough authority to steer their departments towards the holistic goals and objectives of profitability. The second principle that needs to be implemented is to establish espirit de corps or team spirit. Having decomposed the two organizations, and shuffling its human resources, employees morale must have been low. This leads to poor performance and the general perception of job insecurity. To revive the spirit of the employees, efforts should be made to organize activities and work according to teams with specific goals to be achieved. This would help them develop a sense of achievement when they secure successes. Also, the company should develop an equity based program whereby everyone has a role to play in building the organization’s profitability and rewarded accordingly (Samuel 248). 2. Financial Information for NWL Period Ending Dec 2008 Dec 2007 Dec 2006 Total Revenue 6,470,600 6,407,300 6,201,000 Total Cost 4,347,400 4,150,100 4,131,000 Gross Profit 2,123,200 2,257,200 2,070,000 Total Expenses 1,922,400 1,516,900 1,413,400 Net Income/Loss (52,300) 467,100 385,000 * Figures in thousands Source: http://finance.yahoo.com/q/is?s=NWL&annual From the latest annual financial information, Newell Rubbermaid demonstrates increasing revenues for the years 2006, 2007 and 2008. However, these positive performances are marred by the increasing total costs which have affected the gross profits which increased during 2006 to 2007 but decreased again in 2008. In 2008, Newell Rubbermaid incurs substantial increase in expenditure of approximately 27 percent as compared to 7 percent in 2006-7. As a result, 2008 reported a net loss instead of profit. 3. Latest Stock Price Information The following is the latest stock information on NWL. The current stock price is $7.55. The performance of the stock indicates that NWL is performing moderately with occasional dip in performance resulting in negative earning per share. Its performance on the other hand is not so volatile as its range is between 7.52 and 7.75 which make its stock a good buy. Last Trade: 7.55 Trade Time: 12:02PM ET Change: 0.06 (0.80%) Prev Close: 7.49 Open: 7.68 Bid: N/A Ask: N/A 1y Target Est: 10.29 Days Range: 7.52 - 7.75 52wk Range: 4.51 - 23.76 Volume: 2,074,455 Avg Vol (3m): 5,671,420 Market Cap: 2.09B P/E (ttm): N/A EPS (ttm): -0.19 Div & Yield: 0.42 (5.80%) Source: http://finance.yahoo.com/q/bc?s=NWL&t=1d 4. Current News Article Summary Newell Rubbermaid: Can It Bounce Back? http://seekingalpha.com/article/127827-newell-rubbermaid-can-it-bounce-back?source=yahoo Newell Rubbermaid for the year 2008-9 has halved its dividend for the second time which has reflected negatively on its performance. The announcement to reduce its dividend indicates that the company is operating at a loss. Part of this decrease in profit is because of the companys long-term debt which has not been reduced in the recent years. Investors are expecting the company to increase its sales and earn profits quickly. However, the high price of oil and undervalued stock price are having tolls on the companys financial standing. Oil prices will incur high input costs, while reduced investor confidence would reduce the companys valuation. As a result earnings for the coming period will be less. For this reason the company is conserving cash by cutting down its dividend payout. References Samuel, C. Modern Management, 10th Edition. Prentice Hall/CourseSmart, 2005: 247 – 248. SeekAlpha.com “Newell Rubbermaid: Can It Bounce Back?” From SeekAlpha.com (March 25, 2009) available at: http://seekingalpha.com/article/127827-newell-rubbermaid-can-it-bounce-back?source=yahoo Yahoo! Finance: http://finance.yahoo.com/q/bc?s=NWL&t=1d , http://finance.yahoo.com/q/is?s=NWL&annual Read More