Jack is the purchaser of raw materials for GKS, a contract manufacturer. GKS prides itself in supplying quality component parts to its customers for the electronic industry. As a result, spoilage costs at GKS is often as high as 20% for raw material.

Jack often purchases raw material in bulk as he believes it lower the overall costs. He is paid a bonus if the actual material costs is within 5% of budgeted amounts. GKS practices participative budgeting. Jack recommends the price for the purchase of raw materials and the quantities to purchase after consulting with the production and sales managers. For the last two years, Jack has been receiving a bonus as the actual materials purchases costs have been within 5% of the budget for each year.

Kosh, who is the newly appointed CEO, wants to cut and maintain GKS's reputation for quality. He wants to adjust or reorganise the organisation architecture (OA) to achieve his goals - reduce material spoilage by 50% front he current levels and cutting operational costs by 5% across all units in the firm.

Required:

(a) Using your knowledge of OA, explain if the current OA is balanced for Jack and whether there is any downside to the current situation for GKS. (9m)

(b) Give two(2) suggestions for changes to the OA in order for Kosh's goals for GKS to be achieved. (6m)