PONCIANO RETAILING COMPANY: Yesterday

Mr. Ponciano Samonte was 25 years old when he organized his business firm, Ponciano Retailing Company. He asked Danny, the younger brother of his high school classmate, to join him in his newly formed business.

As the years passed, the firm made good in the grocery retail business. Together, Ponciano and Danny established one branch after another. Within a span of 20 years, 19 branches were established throughout Central Luzon and Cagayan Valley.

The total number of employees reached 405 and everyone showed respect to the leadership abilities of the two pioneers. Ponciano and Danny worked in a mutual trust with each other. Ponciano always consulted Danny on several important aspects of running the business. Danny was always busy training personnel on several aspects of managing a branch so there has never been a shortage of managers.

Because of his loyalty and ability, Danny was well taken care of by Ponciano. He receives an executive salary that was above industry standard, plus allowances and medical benefits. He is provided with an executive car. He is authorized to make decisions on operational matters. To assist him in his task, Danny trained two junior executives.

All went well until Ponciano died and full ownership and control passed to Ponciano's eldest son, Patrick. What Patrick did was to slowly introduced measures to centralize decision-making. Previously, the store managers had the authority to determine the types of merchandise to carry, the quantity, and the timing of the purchase. The recruitment and training of store personnel were functions exercised by the store managers. The above functions, as well as some other tasks, are now performed by top management through a staff in the central office. The changes introduced effectively reduced the authority and influence of the store managers. Danny's authority was also greatly reduced.

Just a month after the centralization order was implemented, Danny felt the demoralizing effect on the managers and employees assigned to the branches. Sales dropped by two percent and a number of key employees started to make moves to look for suitable jobs elsewhere. The rate of absences and tardiness also began to go up.

Danny was alarmed by the situation and he informed Patrick about the strong possibility of negative growth for the company. Patrick told Danny not to worry because he thinks it is easy to replace those who will leave.

Questions:

1. What do you think are the changes in the retailing company? Does it affect the organizational structure?
2. Are the changes a big mistake? Why and Why not?
3. If you are in the position of Danny what will you do?