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Case 2: The Wallace Group

The Wallace Group is in the business of manufacturing plastics, chemical products and

electronic components. Concerned with recent market performance, company president, Harold

Wallace, believes low company productivity is linked to its personnel. As a result, Wallace hired

an outside human resource consulting agency to explore possible performance indicators. In

addition, he also requested a set of priorities for the company to concentrate on to optimize

company performance and profit maximization.

Synopsis of the Case

Born as a single electronics manufacturing company, The Wallace Group, has evolved

into a diversified organization focused on producing plastics, chemical products, and electronic

components. The Wallace Group generates about $70 million a year, with majority of the net

income (70%) deriving from electronics manufacturing. The corporation uses a divisional

structure, which is divided into three operational groups and a corporate staff. The Chairman and

company President, Harold Wallace, oversees the organization while each group is managed by

its own vice president (Bamford, 2017, pg. 2-6).

In the beginning, Wallace was the sole owner of the electronics company, but wanting to

expand his company’s portfolio, Wallace purchased a plastics company and a failing chemical

company. During the acquisition process, Wallace attracted investors and incorporated the

organization, establishing The Wallace Group. Consequently, debts incurred by previous group

transactions forced Wallace to provide a public stock offering, lessening his net result and

company ownership. Wallace owns 45% of company stock while the remaining share is shared

amongst the public and the previous owner of the chemical company (a mere 5%) (Bamford,

2017, pg. 2-3).

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Relevant Factual Information about the Problem or Decision the Organization Faced

The Wallace Group is facing several organizational challenges. The primary problem within

the organization is the lack of solid leadership and company direction. Employees have become

frustrated with Wallace’s performance and have tried to force his resignation. Wallace has failed

to define and communicate the corporate vision, values, and priorities resulting in confusion

amongst personnel. Additionally, the company has outgrown itself and has hired inexperienced

managers from within, leaving technical gaps across the organization. Although, The Wallace

Group did expand its company portfolio, the organization did not restructure or align resources to

ensure the company functioned effectively. Those shortfalls have created personnel and

administration problems (Bamford, 2017).

Explanation of Relevant Concepts, Theories & Applications from Course Materials

The most significant issue the corporation is facing is tied to its leadership and management.

In the beginning, the electronics group was a sole proprietorship with Wallace at the helm. As

the organization acquired the plastic and chemical companies, it also acquired their values,

culture, and resources. When two companies or more fuse together, leadership should integrate

change management processes to ensure a smooth transition (Kansala & Chandanib, 2014).

Consequently, when Wallace acquired the two groups, he did not redefine the company strategy

nor did he resolve their inherited problems; instead, he insisted the vice-presidents continue to

operate as previously before (Bamford, 2017).

To further complicate issues, when the organization grew, Wallace promoted himself to the

chairman and the president position of The Wallace Group, but did not revamp the organizational

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structure leaving corporate governance muddled. Although, its acceptable for a business owner to

hold both chairman and president positions, it is critical to establish a clear distinction between

owner and manager roles to avoid conflicts of interest (Segal, 2020). In an annual stockholder

meeting, stakeholders proposed a resolution calling for Wallace to resign as president. Although,

the resolution was defeated the incident exposed growing frustration and resentment between

owner and employees (Bamford, 2017). Several examples depict the autocratic leadership style

of Harold Wallace and his inability to delegate or consider team member inputs, which has only

degraded confidence in management.

The second significant issue is the company strategic management program. Despite initial

meetings with group vice-presidents during the onboarding process, Wallace has failed to

formulate a corporate mission, vision, company objectives and policies. Without a core direction,

each group has operated independently of each other causing conflicting priorities and

misalignment of resources. Moreover, substandard corporate governance also caused personnel

and administration gaps. Several managers within The Wallace Group have complained of

personnel shortfalls, overlapping of job responsibilities, and inadequate recruitment of skilled

workers. Additionally, the corporation does not have a career development program to train

inexperienced managers (Bamford, 2017).

Recommendations

Initial course of action should begin with developing a solid strategic management plan.

Strategic management is a key factor to a company’s long-term success because it provides the

long-range plans for the company, therefor a significant effort should be invested into employing

a proper strategy. Strategy development involves the creation of a company mission, objectives,

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and policies (Bamford, 2017, pg. 2). It also involves identifying the strengths, weakness, and

possible opportunities and threats of the organization. Once a strategic plan is executed, the

organization can align business decisions and activities to achieve profit maximation and

sustainability even in times of instability (LaMarco, 2018).

The next recommendation focuses on organizational structure. An organizational structure

lays out the official reporting chain and relationships that steer the work flow of a company

(Ingram, 2019). Without clear guidance, employees may find it difficult to understand who is

responsible for what (Ingram, 2019). To eliminate confusion, corporate leadership should

modernize the organizational structure and define roles & responsibilities for the chairman, board

of directors, president, vice-presidents, and employees. In addition, the functions of each group

should also be outlined.

Alternative Recommendations

Unfortunately, only about 51% of small businesses surpass five years of operation (Otar,

2018). To avoid business failure, The Wallace Group should focus on these five items: market

need, pricing analysis, industry competition, balancing capital requirements, and formulating the

right team (Otar, 2018). Another key factor to organizational success is leadership. Research

shows that organizations who had good leaders in its ranks increased the average net income by

$2.4M (Zenger, 2015). Meanwhile, extraordinary leaders were able to bring in an additional

$4.5M of net earnings (Zenger, 2015). While there may be a debate on whether or not great

leaders are born or created, companies should adopt a leadership development model to mold

and further develop their organizational leaders (Zenger, 2015). Not only can good leaders

increase company profits but it can also reduce morale issues because leaders are invested in

their people and not just profits (Percy, 2020).

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Conclusion

In conclusion, The Wallace Group has acknowledged their company’s market performance is

tied to personnel issues. Observations revealed low employee morale, grievances with Harold

Wallace, and poor corporate governance. Although the manufacturing company aims to increase

its overall net income, the company needs to solidify a strategic management plan, align their

organizational structure and invest in their organizational leaders to resolve their personnel

problems.

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References

Bamford, T.L.W.J.D.H.A.N.H.C. E. (2017). Strategic Management and Business Policy. [MBS

Direct]. Retrieved from https://mbsdirect.vitalsource.com/#/books/9780134538662/, pgs. 2,

2-1 through 2-10

Ingram, D. (2019). Why Is Organizational Structure Important?. Small Business - Chron.com.

Retrieved 29 October 2020, from https://smallbusiness.chron.com/organizational-structure-

important-3793.html.

Kansala, S., & Chandanib, A. (2014). Effective Management Of Change During Merger And

Acquisition. Core.ac.uk. Retrieved 29 October 2020, from

https://core.ac.uk/download/pdf/82714373.pdf.

LaMarco, N., 2018. Why Is Strategic Management Needed?. [online] Small Business -

Chron.com. Available at: <https://smallbusiness.chron.com/strategic-management-needed-

61313.html> [Accessed 21 October 2020].

Otar, C. (2018). Council Post: What Percentage Of Small Businesses Fail -- And How Can You

Avoid Being One Of Them?. Forbes. Retrieved 29 October 2020, from

https://webcache.googleusercontent.com/search?

q=cache:PGV2HLYcmbYJ:https://www.forbes.com/sites/forbesfinancecouncil/2018/10/25/w

hat-percentage-of-small-businesses-fail-and-how-can-you-avoid-being-one-of-them/

+&cd=17&hl=en&ct=clnk&gl=us.

Percy, S. (2020). How Servant Leaders Boost Profits And Employee Morale. Forbes. Retrieved

29 October 2020, from https://cc.bingj.com/cache.aspx?

q=good+leaders+improve+morale&d=4848580077751914&mkt=en-US&setlang=en-

US&w=YW8aOxSptxGc4VqkHfFMy4srpDWRVEUi.

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Segal, T. (2020). CEO vs. President: What's the Difference?. Investopedia. Retrieved 29 October

2020, from https://www.investopedia.com/ask/answers/difference-between-president-and-

ceo/.

Zenger, J. (2015). Great Leaders Can Double Profits, Research Shows. Forbes. Retrieved 29

October 2020, from https://webcache.googleusercontent.com/search?

q=cache:iDy8U3zmpNIJ:https://www.forbes.com/sites/jackzenger/2015/01/15/great-leaders-

can-double-profits-research-shows/+&cd=1&hl=en&ct=clnk&gl=us.

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