ACM CORPORATION

QUANTITATIVE:

 Even after 10 years of substantial growth the firm had experienced significant decline in
sales and earnings during 1967 and 1968
 In 1956, ACM had sales of approximately $70 million, virtually all of which were made to
the automobile industry with production of automobile and truck frames accounting for
85% of the total
 Between 1956 and 1967, acquisitions were consummated at the rate of roughly 1 per
year, fundamentally changing the nature of ACM’s business
 As of 1968 only 32% of ACM’s total sales went to the automotive industry, while 31%
was in capital goods, 11% in rail road equipment, 12% in construction supply, 7% in
consumer goods, and 7% in aero space and defense
 17 divisions had their own offices which were located in 14 different cities across the
countries.
 ACM operated 30 plants in 23 cities
 The corporate head quarter unit consisted of approximately 20 management and
professional personnel
 9 measures of historical performance were employed, 5 of which focused on division’s
improvement over the previous year and 4 of which reflected longer run improvement
 One and five year plan were transmitted to corporate office on November 15
 The approval level for different organizational levels (divisional general manager, Group
vice president, President, Board of directors) in terms of capital project and Expense
project
 Approximately 50% of the division sales consist of products that are either new or
represent significantly different modification of items of produced 5 years ago

QUALITATIVE:

 ACM, a highly diversified firm with operations extending across broad areas of defense,
producer durables, and consumer durables.
 A number of operating problems had contributed to earnings decline(higher than
anticipated startup cost at the new automotive frame plant, unanticipated cutbacks in
spending by rail road industry, continuation of severe competition in air conditioning
equipment and textile fiber market)
 Maximum divisional autonomy was viewed enthusiastically by most key managers and
had enabled the company to make considerable progress in late 1950’s and early
1960’s.
 Mr. Briggs believed that ACM’s growth depended upon ability to obtain more effective
control over divisional operations
 Company’s strategy as one of related diversification focused on 3 main objectives;
independence from captive industry with a persistent threat of backward integration,
stability of cash flows, and the opportunities and momentum for additional growth
 ACM had evolved from medium sized, one product firm to a multidivisional organization
of 17 major operating units each of which sold their product in a different four digit SIC
category
 ACM diversification provided the problem of guiding a diverse set of divisions, the
markets and technologies of which were by and large unrelated to each other
 Management concept aimed at considerable decentralization and divisional autonomy
 Organizational devices to ensure corporate divisional coordination included
organizational structure, formal planning and control devices and the performance
evaluation system.
 In 1956, Mr. Briggs had been promoted from general manager to newly created group
vice president position, diversifying the divisions reporting to him
 Mr. Briggs main counseling centered around divisional manager’s forecast and job
entailed selecting, motivating, evaluating eight division general managers and not on
the basis of day to day contact
 The management organization of ACM’s divisions were determined by their divisional
general managers and differed considerable depending on the division’s size, product
lines and technologies.
 To maintain control over earnings and fund flows, 3 major reporting requirements set
up by their divisional manager were the annual budget, the five year plan, and the
project approval system.
 Purpose of 5 year plan was to induce divisions to consider longer term issues of strategy
and forecasting rather than to provide firm objectives for performance evaluation
 3 types of monetary reward to divisional managers; salary increase, stock option, and
incentive. Evaluated against the ability to achieve annual and long term improvements
in their sales, profits and ROI
 Management inventory is complete breakdown of existing skills, future needs and plans
to meet the future needs
 Turning in profits but lack of people to handle the growth they were expecting in next
two or three years
 Nobody focused on how to develop the management talent needed for the future
growth of the corporation as a whole