WINTOD Pte Ltd (“WT”) prides itself as the supplier of quality products to its customers in the electronic industry. Its customer satisfaction is extremely high because WT has never experienced a stock out. WT believes if a stock out occurs, its customer satisfaction will fall.

Joe is the sales manager at WT. Each year, he prepares the sales budget for his product line (that means Joe determines selling prices and quantities). In the past 3 years, the sales budget has always been reviewed by his superior before the sales budget was accepted by senior management and thereafter set as the sales target for each year. If the sales team exceeds the sales target by 10%, they are rewarded with an extra half month salary each.

In each of the last three years, Jerry, the production manager complained that he had to incur extra costs to produce units to meet ‘adjusted’ sales quantities to prevent a stock out. This resulted in him missing the production costs targets in every year and hence missing out on his bonuses. He believes the reason is because the sales budget is inaccurate (or deliberately made lower). Jerry bases his production and purchases of raw material on the sale budget. The need to maintain product quality means raw material has to be sourced from the same supplier. This supplier charges 10% extra if orders are rushed (delivery within 2 weeks from date of order).

Joyce, who is the newly appointed CFO, wants to cut cost and maintain WT’s reputation for quality. She wants to ‘use’ the organisation architecture (OA) to achieve her goals - maintain customer satisfaction, i.e. no stock out for the year, and cutting operational costs by 5% across all units in the firm.

Required:

a. Using your knowledge of OA, explain the current OA and its effect on Joe and Jerry. Is the OA effective in achieving WT’s objectives?

b. Give three (3) suggestions for changes to the OA in order for Joyce’s goals for WT to be achieved.