westport electrical corporation case analysis

Westport Electrical Corporation

Prepared by: Milan Padariya, 63-MBA(Pharma)

CASE 4-5: Westport Electrical Corporation

BRIEF OF THE CASE:

In a meeting, James King, the supervisor of administrative staff budget section of Westport

Electric Company, a large manufacturer and seller of electric and electronic products, was

discussing his displeasure with the proposed increase in budget of the offices.

According to him, these are not justified and are clear indications of faults in the company’s

budgeting system. The company currently has six staff offices like those mentioned and they are

tasked with providing advice to top management and operating divisions as well as other staff

offices.

They also coordinated among the divisions depending on their areas of activity. These staff

offices are budgeted using the company’s budget approval procedure, which according to some

of its officers like King, needs a lot of improvement.

OVERVIEW OF THE ORGANIZATION :

One of the largest producers and distributors of electronics in the U.S..

Activities are divided into four groups, each group headed by a VP:

- Electrical Generating and Transmission Group;

- Home Appliance Group;

- Military and Space Group;

- Electronics Group.

Each group consists of a division led by division managers. Each division is a profit center.

There are 25 divisions within the organization.

There are six corporate departments and a separate staff department in Office, each staff

department headed by a VP:

- Finance;

- Industrial Relations;



- Legal;

- Marketing;

- Manufacturing;

- PR;

The responsibilities of the staff departments include:

- Advising top management;

- Advise of the divisions and other divisions;

- Coordinating responsibilities within their respective divisions.

PROBLEM:

- The shortcomings of review and approved the budgets of the ring divisions;

- The significant (incorrect) increase in the budgets of two staff departments.

To whom is it a problem?

It is a problem for the entire organization. But especially for King James who works at the

Department of Budgeting.

Why is it a problem?

A lack of doelcongruentie the staff departments not perform optimally in the interests of the

organization.

Where lack?

-Evaluation of budgets (monthly);

- Performance based on available budgets compared to actual results;

- No responsibility for results in the divisions;

- A reward system for corporate departments.



Q) What should Westport Electric do about the evaluation problem raised in

the case?

The case study provides a brief idea about the issues regarding the budget evaluation inWestport

Electric Corporation. Over the years the amounts necessary to run the operations has been

increasing as compared to the previous year and that is a concern for the authorities.Though

they have various methods of evaluating the budget, the increasing expenses didn’t seem to be

under control.

According to a supervisor, James King, the budget should be approved only when it is found that

the budget is sufficiently ‘tight’. There has to be a deep discussion, raising every issueregarding

the expenses to find out where can be the cost cutting done. Any personal favours to approve any

kind of budget for the respective department should be stopped and theconcerned authorities

should look into that matter.

The departments which show laid back behaviour but still ask for a raise in the budget should be

taken under scrutiny and see if the efficiency of such a department can be increasedwithout

increasing the amount of their budget. Or such kind of work can be contracted out toa third party

for better results.

The employees in the case study didn’t seem to be satisfied with the kind of trainings taken

by the IR department. The funds were getting wasted in such kind of trainings which were

nogood for anyone. The authorities need to look into the workings of such departments and

findout how the functions can be made more practice and viable.

The employee participation is important in identifying the issues in the organisation and

this can work only when the employees are not afraid to talk about it so a system is necessary

where the employees can dodge complaints regarding the work or inefficiency of the

departments.

Finally, it reverts to the knowledge and capability of the higher authorities to evaluate the budget

properly and provide necessary suggestions.



ANALYSIS AND RECOMMENDATION:

I recommends that top management actually pay considerable attention to the

efficiency and effectiveness of each business division. Currently, it appears that focus

is given simply on bottom line numbers; that is, each unit’s financial success is assessed solely

on the basis of how handsome the profits brought in for the company, without being given much

performance evaluation as is needed in any organization.

Being distinct profit centers, both revenues and costs must be calculated for each

business segment. It is important to note that while the individual divisions may report the

most exorbitant of profit figures, the numbers do not carry with them as much meaning as when

these are put into context.

As in the case of Westport Electric for instance, Kelly is quick to point out that the company is

certain to do better trimming down budgets handed to certain divisions such as legal department

and the Industrial relations According to him the training given by the IR division is

not worth the money that they cost.

Also during presentations the budgeting department should take proper position on the

appropriateness of the proposed budget or the efficiency of the activity. Also the finance VP

and the divisional controller should raise their opinion / objections to the

proposed budgets if they believe it is not sufficiently tight.

westport electrical corporation case analysis

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