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Corning is a decentralized company currently being plagued by both external and internal threats, such as market uncertainty and poor communication and planning systems. The company has just recently started to recover from a large layoff in 1975, which reduced worker job confidence. The Houghton family has a preference for an informal workplace with an ambiguous leadership style that contradicts the formal and strict resource allocation system designed for their international strategy. The current strategy being employed differs with the owner’s philosophy, which is important, since the President must buy into the plan to understand and communicate it effectively. This miscommunication creates goal incongruence, which is exemplified by the confusion of corporate divisions about whether they should be focusing on reducing cost or being an innovator. Also, each officer has been described as having work that overlaps, showing no focus and a lack of efficiency. The fact that each of the over 150 businesses groups have to write up a resource allocation request and business strategy creates the issue of finding time to read each report.
Corning shifted their focus from a domestic and exporting company to a multinational manufacturing company. The lack of specialization and ambiguous leadership imposed by the Houghton family faced the problem of a required organizational structure change. However, changing the corporate structure while imposed by these demands led to an inefficient structure hybrid structure that refuses to give specialized responsibilities to MacAvoy as a Chief Operating Officer, as he has to not only watching over operations globally, but is solely in charge of the North American market, creating an inefficiency with the Chief International Officer.
Corning’s resource allocation process shows another ill fated effort towards an organized and objective budgeting and planning process. The inefficiencies and disorganized implementation of the plan that resulted plague company performance. The underlying problem of inadequate communication dissemination of Corning has led the managers, workers and committees to focus on different goals. The Resource Committee and Business Committee through the splitting of a previously larger group, which was believed to be slowing down innovation due to conflicts of interest between two subgroups (cost reduction and innovation). However, by just splitting the two groups, nothing was effectively put into place to arbitrate the issue, and once again the resource committee (known for having only accountants) focused mainly on cost reduction while the business plan focused on which projects had innovative ideas.
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Problems within each group individually are also evident. The business planning committee prioritizes projects based on the categories “superthrust, thrust, emphasis and sustain”. Although these categories have an implicit meaning to them, they are not actually defined to divisions, as the Lee Wilson of Electronics is in disagreement as to why his business is a “sustain” company, when it is clearly an “emphasis” in his eyes. This is a large issue, since the company doesn’t seem to have the opportunity to formally petition to change their position to the business strategy committee. These rigid rules eliminate many potential projects that show promise, as Thiney explained that his project presentation went well, impressing managers and officers, showing great potential for the companies future.
The Resource Committee’s issues lie within the fact that the resource allocation requests are not accurate because many firms are unsure of what they need for the year. However, since it is mandatory, they always ask for more than required, which negates the effectiveness and use of writing these reports. The Manufacturing and Engineering division are a scarce resource, making it even more important to have accurate resource allocation requests. The largest issue with the resource allocation process lies within the fact that the individual companies are not committed to these budgets and allocations. Optical Waveguides has decided to hire external engineers to continue with it’s projects, which, not only increases costs for the company as a whole, but wastes the entire resource planning process. Since communication is lacking in Corning, Wilson is under the impression that he can possibly expense the extra engineers to M&E, which is below the Division Operating Margin (DOM) and does not effect their performance appraisal and bonus (which looks at profits above DOM). This is, in reality, not allowed according to the controller.
The main problem for Corning is communication and organization. They should set objective goals, communicate them through effective channels (email, managers, company gathering), and provide opportunities to give feedback from division managers and workers, possibly through anonymous suggestion boxes. This would also eliminate the fact that businesses can get stuck in categories such as “sustain”. As Riesbeck suggested, resource allocations should occur throughout the year as required, as well as quarterly checks to ensure an effective budget is given. Also, the allocation decision should use a participative approach, which has been proven to increase worker commitment to a budget, since they understand how it came to be.