1) Does Airtex Need a New Control System at the time of the takeover? How is Airtex doing? A New Control System and a New Management System is in immediate need for Airtex. At the time of takeover, Airtex is in serious management issues and financial hard time that make the company close to bankruptcy. Prior to being purchased by Ted and Frand, Airtex is missing a company objective and an overall strategy that’s shared by the whole company. The management control system at Airtex has three basic issues – Lack of direction, lack of motivation, and personal limitations.
Since it was all about one woman, Sarah Arthur- the accountant, who aggressively control all the information in her office, other employees have no idea about the performance and profitability of the company and each department. Employees and department managers do not know what the company expect from them, nor do they have motivations to perform well. All they knew was that airplanes would fly and that Sarah would come around at the end of each day and collect their money.
Apparently, serious issues exists from the direction, and motivation perspective.
Additionally, Sarah as the head of management, has no accounting training or any previous management training experience. Her management philosophy was to be the “central repository of all information”, which is the main reason leading the company to a fail. She is not capable of manage a company. Given Airtex has so many problems in management control, a new system and organization structure is needed, which will delegate proper amount of responsibility to each departments and optimize the efficiency and profitability of the company.
2) What are the key challenges for Ted in setting up the new control system? The first challenge for Ted is to educate the department managers with management skills. Most of the employees at Airtex graduated from high school and are lacking professional training. Before delegate managing responsibilities to department managers, Ted has to educate them with management skills so that they can make correct decisions on their own. Action control will not be effective unless the managers know what actions are desirable and they have the ability to ensure the desirable actions occur.
The second challenge is to take over the control of the company from Sarah and delegate the responsibility to employees. Before being purchased, Airtex’s everything is under Sarah’s control. All the other employees have no idea about the performance of the company or their performance. In order to make results control effective, employees should have significant influence on the results in the desire performance. 3) Is decentralization a good choice? In my opinion, decentralization is a good choice for Airtex. First of all, the aviation industry that Airtex involved in requires specialty knowledge about the aircraft business operation.
Neither Ted nor Frank has sufficient aviation expertise or operating experience. Delegating power to those experienced department managers is a wise choice as long as the appointed managers have enough management skills to implement result and/or action controls. Additional assessment and training of the department managers are required before Ted give out power, and many of the current managers (e. g. Service and parts department manager – Carl, who has retirement mentality) are to be replaced with more suitable individual.
Second, a decentralized organization structure could effectively motivate Airtex employees to produce excellent work, and encourage managers to improve management performance. The previous centralized system under Sarah’s control has limit people’s capability. After each department has some autonomy to make their business decisions and get compensated on their results, people will be more willing to contribute for the team. There’s still some disadvantages of decentralization – It takes two or three weeks to find out what the incoming checks are for and sometimes no one accounted for it. This create some trouble of booking the transactions.