AirTex Aviation and Inland Steel Company

Discuss two elements of the control system that Frank and Ted implemented. In your opinion were these appropriate and if so what will they help achieve? After they purchased the business of Airtex Aviation, Frank and Ted implemented a control system across the whole company. I would like to discuss both action controls and personnel controls in the system. Action controls include: 1) Profit centers were merged into departments; 2) Profit centers identified revenues and expenses, which were communicated to the profit center manager; 3) Departmental managers were accounted for their profit centers, and would receive a bonus for their performance; 4) The profit center managers have their own authority.

For example, they could price their products or services, they could also do what is best for their departmental interests, they could buy needed capital equipment and operating supplies within established purchase order limits, and they also had the authority to hire, fire, and administer the salary schedule independently; 5) Giving the departmental heads the granting authority and the responsibility for collections to motivate them to manager their accounts receivable; 6) Establishing an Administration Profit Center in order to make the managers effectively control their costs. Personnel controls include: 1) Ted called up and dealt with suppliers by himself instead of letting Sarah Arthur manage this issue since she was not capable of doing the company’s best interests. He also established a better relationship with the bank by himself since no one in the company would get this job done; 2) Conducting a Daily Department Report to help improve departmental managers’ management skills; 3) Frank rehired the old salesmen and led them to finish the first aircraft sales; 4) Two departments, Fuel Department and Flight School, have significant accounts receivable. Ted handed the receivables to the dispatchers, who are loyal employees. In my opinion, there actions were appropriate. They will help achieve both tight action and personnel controls. Thus, the system will support the management and provide information in order to make decisions. The business of AirTex and Aviation will finally succeed.

Case 2 – Inland Steel Company
Homework questions: Brief answers to Questions 1 and 2.
1. What kind of MCS did Inland Steel have before it undertook its quest for organizational effectiveness? Before it undertook its quest for organizational effectiveness, Inland Steel had people-oriented management control system. This strong people-oriented culture succeeded in providing employees the right motivation and incentives. The company treated their employees very well and concerned about the workers, it even created a shelf for those incompetent workers until they retired. Thus, employees had tremendous loyalty to the company. In the meanwhile, this management control system had disadvantages. It was difficult to reduce workforce, correct mistakes, and make decisions.

2. Is or should the control system be different after the change? If so how? The control system should be different after the change: 1) The employees understood what is required in their particular roles and were capable of performing well. Getting rid of those who were not incompetent means that the new system would not allow the company to take responsibilities for those who did not perform well and all employees in the company should work hard to achieve the company’s objective. In other words, the new control system would make stayed employees understand the desired actions and results of the company. The stayed employees were competent enough to accomplish their jobs; 2) The new system supported a better organizational structures. Downsizing the 17 layers of managers to 7 would not only significantly reduce the time of making decisions but also make mistake-correcting process less resistant; 3) Under the new system, employees were motivated to perform well without additional reinforcements provided by the organization.

All the employees understood that they would lose their jobs if they don’t perform well. 4) The new system emphasized on people, which is a good choice since their responses will determine whether the system will succeed or not. In addition, concentration on personnel controls has relatively few harmful side effects and relatively low out-of-pocket costs. In order to keep a 20% cost reduction in the next three years, the company must reduce the same percentile of salaried workforce. The outside consultants recommended the company downsizing the existing 17 layers of management to 7. The downsizing consisted of two phases. The first step was to redesign the organization, and the second step was to select personnel. Basically, the new control system chose those who were at least evaluated to have good performance, competent in an attempt to keep the company’s organizational effectiveness.