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Stephanie joined Innostat as the CEO after the death of the legendary Jack Donally. The company is at a turning point; growing in the prosthetic limb and surgical implant industry through Jack’s innovations, the company’s margins have shrunk as competitors have found ways around Innostat’s patents. Stephanie is faced with the challenge of determine how to guide the company, despite the complicated environment she is entering.
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Innostat has not launched any major new products for the past four years, something it needs to do to survive. Jack Donally, the former CEO did not trust his employees to innovate and instead looked outside the company for new ideas. One consequence was that while Innostat developed excellent manufacturing and sales teams, the R&D and marketing departments atrophied. Therefore, other parts of the company do not trust R&D and marketing to accurately determine the market potential of new products. Upon Jack’s retirement, the Board hired Stephanie as the new CEO. Her strong technical background was the basis of her selection, and enables her to generate new product ideas. Stephanie must balance what she feels is best for the organization with the company’s culture and vision.
Innostat has a top-down, centralized management and a formal, functional structure [Exhibit 1]. Formerly, every significant step the company took went through Jack Donally. The senior management in Innostat played a supporting role to Jack, rather than, developing their own initiatives; creating a culture that focused primarily on promoting implementation rather than innovation, as Frank Timoshotsky noted in his conversation with Stephanie. The fact that the departments are concerned about meeting their quotas and fixated on short-term results is due to: a lack of a broader company strategy, the role Jack played in the company, and a corporate structure that does not encourage or reward innovative thinking. As is common amongst organizations with functional structures, Innostat has faced challenges facilitating communication across departments and competing goals.
Stephanie’s First 100 Days
In her first 100 days in office, Stephanie must take the time to learn as much as she can about the organization and work to develop her referent power. At the same time, she needs to begin planting the seeds for the changes she will look to implement over time. This will involve efforts on many different fronts. See [Exhibit 2] for the short term organizational changes.
Research & Development
Short term, Stephanie will be heavily involved in R&D, and the department will report directly to her. This will allow her to develop new ideas, while including the department in the process and helping them develop their creativity. This will also help the department gain credibility amongst the other departments. Stephanie will spend time with department head Chuck Bukowski to ensure that Chuck accepts the increased role his division will play.
One of the big concerns Stephanie has is Jim Pappas, head of marketing, who is a high-level employee who does not fit into her long-term vision. As firing a high-level employee seems risky at this time, Stephanie will allow Jim to maintain his position, while concurrently creating a strategic sub-marketing team. Such a team is crucial as the company changes focus from simply creating products to: react to market needs, anticipate future trends, and identify emerging markets. The two parts of the marketing departments will communicate on issues of marketing, but Jim will remain the primary “wine-and-dine” marketer while the strategic team will determine the best approaches to marketing.
Stephanie recognizes that while a full reorganization might be optimal, it is impossible in the short-term. Stephanie does not have the referent power to force the change, and the culture in the organization indicates that many employees are not capable of increased responsibility in decision-making. Innostat will bring on full time integrators to help increase communication between departments and hasten development. While departments will continue to function structurally as they have in the past, the company will assign individuals from each department to specific products, allowing for more focused work without a full reorganization. Utilizing the integrators and sharing projects will encourage the different departments to communicate with each other; most critically R&D will rely on sales, and their close-up view of the market to help them determine target markets.
Following Frank’s advice, Stephanie will introduce incentives for innovation, by establishing the Jack Donally Memorial Award, presented to those who exhibit exceptional creativity and innovation. Short term, this will be an individual award. Frank will oversee the program; a move that will illustrate to the rest of the company: Stephanie’s faith in Frank, her respect of existing hierarchies, and Frank’s commitment to Stephanie’s ideas, despite being overlooked for the CEO position.
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As Stephanie builds her reputation and referent power, and begins to transform the culture of the organization, she will be able to implement greater change. Stephanie will need to execute a number of changes in order to develop the corporate culture and structure to match Innostat’s new vision. See [Exhibit 3] for the organizational structure in the long term.
Once Innostat is ready, Stephanie will restructure the organization with a focus on decentralization. The primary changes will be moving to a matrix structure. Since Stephanie’s arrival, employees have focused on specific products, so this will not be a drastic change. The company will introduce project managers, and employees will spend more time with their cross-functional teams. Consequently, the role of the full-time integrators will decrease, as teams will report to their project and division managers. Decentralization will come in time as cross-functional communication grows and divisions build further competency in their assigned functions. The benefits of this decentralization will be faster decision making that is responsive to changes in a specific market, technology, or environment.
Stephanie will create a fund to cover losses related to innovation to help counteract the risks inherent in increased autonomy and encourage risk-taking. This will help encourage employees to take reasonable risks without fear of repercussions. The independence to make their own choices will in turn make the employees more responsible for their actions.
To help promote innovation and teamwork following the shift to a matrix structure, the company will give the Jack Donally Memorial Award to the team that best utilizes creativity and collaboration to create and develop a new product. It will be awarded quarterly, along with a cash bonus, as recommended by Teddy Adler. Frank and a committee comprised of members from all areas of the company will select winning teams. The award will clearly illustrate to employees that the role that Jack Donally held previously has now become the job of the company as a whole.
Stephanie’s introduction to Innostat provides many challenges, where she must implement many changes to successfully lead the company. Stephanie will provide the departments with the tools they need to develop their abilities from the beginning, while still maintaining a role in R&D. Going forward, she will develop the referent power needed to implement change, and transition the company into a matrix structure with cross-functional teams. She will also create incentives for creativity, and improve the means of communications to allow the company to work together as a unit; allowing her to relinquish some control and focus on strategic planning with time.
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