CASE STUDY: BEN SIMMONS

Ben Simmons, 30 years old and an MBA graduate is about to present a corporate
planning system to his company division managers. He is anticipating some strong
resistance from the division managers based on his initial discussions with them.

MBA and MPA students will acquire exercise in evaluating the proposed
corporate planning system and assisting Ben in overcoming resistance to change.

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In May 2003, Ben Simmons , 30 years old was discussing with his former professor
a set of materials he would present in a one-day planning workshop to be held
by his company in Makati City the following week. The workshop should deal
with the institution of a corporate planning system designed by Simmons and
endorsed by the company president to the division managers for compliance.
Simmons wanted to know the best way to present and defend his corporate
planning system during the workshop.

Company Background

H. Braun, Philippines (HBP) was a wholly-owned subsidiary of a German

multinational corporation which manufactures a line of medical and chemical
products in Europe, Asia and Latin America. The Philippines subsidiary was
organized into five operating divisions each distributing a selected line of products
to institutional and retail outlets.

HBP has always been headed by a West German national. The current company
president had no previous experience in the Philippines but was transferred from
a Latin American assignment to assume a position in the Philippines in January
2003. Historically the, the five operating divisions of HBP had also been headed by
West German nationals who reported to their counterpart product heads at
company headquarters in West Germany, as well as to the president of the
Philippine operation. At the time Simmons joined the company, the same
procedure was being followed. Among the priorities of the announced agenda of
the new head’s presidency was the institution of a corporate planning system for
HBP.

Ben Simmons

Ben Simmons was an accountancy graduate from ADMU in Manila. After two
years of work, he went back to school and earned his MBA degree in 1999. Prior
to joining HBP, Simmons performed financial analysis and staff planning work with
three financial institutions in the Philippines.

In February 2003, Simmons applied and was interviewed for the position of
Assistant to the President of HBP. During the interview, he learned that the
president needed someone who would assist in the design and institution of a
formal corporate planning system. Simmons was hired briefly after these
interviews.

Following his appointments, Simmons had several discussions with the president
concerning the need for a better planning system for the company. “How can we
managed this company effectively if we do not have clearly stated strategies to
guide us?” The president had asked Simmons in one of these meetings. Simmons
believed that it was the president’s exposure to a corporate planning system
during his Latin American assignment which influence his thinking concerning
planning for the Philippines operation. Consequently, the president formed a
Strategic Planning Committee to coordinate the effort to design a corporate
planning system for the HBP. The president was the chairman of the committee,
with Simmons, who was Head of the Indent Division, joining him were the heads
of the Finance and Accounting Departments, as members. As Head of the Indent
Division, Simmons was the most senior head in HBP. Simmons was assigned the
primary task of preparing the proposals for the corporate planning system of the
company.

The Planning System at HBP

As a first step in undertaking his assignment. Simmons familiarized himself with

the planning system currently used in the company. Essentially, the system
consisted of the preparation of a two-year revenue and cost budgets for each of
the divisions based on planning guidelines emanating from West Germany. These
guidelines were typically few and usually consisted of prescribed budget formats
and target return on “bound capital” which the Philippine subsidiary had to try to
achieve. For some number of years to 2003, Simmons learned that the target ROE
had uniformly been set to 20%. He gathered that the target return represented
headquarters’ assessment of the “opportunity cost of capital.” Occasional, the
planning guidelines included sales growth objectives for specific products-usually
new products- sold by certain divisions.

Divisional reports on actual performance were sent to the counterpart product

divisions in headquarters in West Germany every quarter. These reports served as
the basis for updating the second year’s budget forecast.

Bonuses for the managers and employees of HBP were paid when the Philippine
subsidiary made profits. It was Ben Simmons impression, however, that although
divisional profit targets were taken seriously by the division managers, no heavy
sanctions attended the failure to meet these targets.

Proposing a Corporate Planning System

Simmons went back to his personal files on the corporate planning systems of the
companies where he had previously worked. He also read a number of the latest
American books on corporate planning. Finally, he compiled a set of
macroeconomic indices and forecasts which he believed would be useful planning
material for the company. From these, he compiled the set of materials to
comprise the proposed new planning system for HBP. (Shown as exhibit 2 to 6).
When Simmons presented these materials to the president for comment, the
latter convened the Strategic Planning Committee where the proposal was
discussed and approved with only one minor modifications. Following these, the
president issued a memorandum to the division managers (see exhibit 2)
announcing the adoption of the proposed system.

Initial Reactions from the Division Managers

Simmons spent the next few weeks interacting with the division managers
concerning the proposed planning system. The reactions of the managers irritated
him. “The division managers of the Pharmaceuticals and Medical divisions gave
childish reasons for criticizing my proposal. They implied that I copied the system
straight out of a book, which of course is not true,” Simmons related. “The
manager of Chemical Products said he couldn’t see the need for a new system. He
explained that in his division, he uses estimated planned production of the textile
mills, adds a factor for new mills and derives the bulk of his sales forecast in this
manner. He told me, I’ve been doing this for the last four years and so far, I’ve
been able to hit the forecasts, even allowing for the 10 percent growth rate
targets for certain products coming from West Germany. My methods works, so
what more do you want?”

When Simmons reported these negative reactions to the president, the latter
suggested that they conduct a one day workshop to discuss the proposal. The
president asked Simmons to prepare well for the workshop and added that he
was anxious to have a corporate planning system installed by second half of the
year.

Guide Questions.

1. Why are the division managers resisting Ben Simmons proposed planning
system?
2. How should Simmons respond to this problem?
3. Should he modify his proposed planning system? If no, why? If so, how?
CASE STUDY ANALYSIS FORMAT

1. Title of the Case

11. Point of view

111. Objective

1V. Problem

V. Areas of Consideration

V1. TOWS Matrix

V11. Alternative Courses of Action

V111. Conclusion

1X. Recommendation