The Crimson Press Curriculum Center

First Page and the Assignment Questions:
In July 2003, Kevin Wentworth, CEO of Kranworth Chair Corporation (KCC), was considering a major reorganization—a divisionalization—of his company's organization structure:

Like many entrepreneurs, I have always been focused on top-line sales growth, and I have constantly been impressing on my managers to drive sales. My belief was that if you do that, everything else takes care of itself. Up until recently, I think our approach made sense. We had very little competition, and our margins were huge.

   Now things are changing. We've got some major competitors who are making headway. I think we needed to take a fresh management approach to find opportunities to do things better. Our new divisionalized organization structure should help us serve our customers better and maybe force us to eliminate certain markets or products that are not producing results.

   But I'm not sure it's working very well. We're seeing some finger pointing between the managers of the newly created divisions and the managers in charge of corporate departments. There is a lot of politics involved in defining the roles, responsibilities, … and rights, of each of the responsibility centers, and it's not clear to me yet exactly where to draw the lines.

THE COMPANY

In the early 1980s, Weston Krantz, an avid outdoors person, developed a new design for a lightweight, portable chair that could be stored in a bag and carried anywhere. Convinced that his design had commercial value, in 1987 Weston co-founded Kranworth Chair Corporation (KCC) with his longtime friend, Kevin Wentworth, who had an MBA degree and financial expertise. (The corporation's name was a contraction of the founders' names; Krantz and Wentworth.) KCC was headquartered in Denver, Colorado, in the foothills of the Rocky Mountains. KCC produced a broad line of high quality and fashionable portable, folding chairs, which were branded as various models of the Fold-it! brand. In its early years, KCC sold its products exclusively to distributors.

Assignment

1.   Identify the most important key recurring decisions that must be made effectively for KCC to be successful. In KCC's functional organization, who had the authority to make these decisions? Who has the authority to make these decisions in KCC's new divisionalized organization?

2.   Did KCC top management go too far in decentralizing the corporation? Did they not go far enough? Or did they get it just right? Why?

3.   Evaluate KCC's new performance measurement and incentive system. Assuming that KCC will retain its new divisionalized organization structure, what changes would you recommend, if any? Why?

4.   Assume that the R&D function is to be decentralized (given to the divisions). Would this necessitate changes to KCC's performance measurement and incentive system? If so, which and why? If not, why not?