KENT CHEMICAL: ORGANIZING FOR INTERNATIONAL GROWTH Connected Consulting Agenda 1. Issue Identification 2. Analysis Company Organizational Structure Human Resources 3. Evaluation of Alternatives 4. Recommendation & Implementation Action Plan Communications Plan Timeline Contingency Plan Analysis Alternatives Implementation Outcomes Issue Identification Key Issue Mr. Morales is seeking an organizational solution that proves successful in a threatening global economic environment. Complexities Strategically Diverse Portfolio Lack of cooperation by regional & product managers Previous reorganization failures Cooperative Growth Strategy Restructure Organization Increase Cooperation Improve Coordination Analysis Alternatives Implementation Outcomes Company Analysis Consumer Products • Need to be managed locally & regionally Medical Plastics • Needs global control Fire Control Products • Global coordination critical for R&D Key Takeaway: KCI needs to tailor its business model to fit the needs of its product lines individually. Analysis Alternatives Implementation Outcomes Organizational Structure Analysis KCI Structure Does Not Follow Structure of KCP GBD Roles are not Defined GBDs add confusion to communication channels Capital allocation request reviewed on 3 levels Key Takeaway: KCI needs to clarify lines of communication and simplify its decision-making process. Analysis Alternatives Implementation Outcomes Human Resource Analysis Cooperation – Goals of different product lines & geographic regions are not aligned with KCI as a whole Coordination – Lack of coordination between price, product, & strategy Agency Problem – Ensuring the agent acts in the principal’s interest Key Takeaway: To resolve the current agency problem, KCI must implement new business practices to improve both cooperation and coordination. Analysis Alternatives Implementation Outcomes Financial Analysis KCI International Sales by Product • $598 Million – 27% of Total Revenue • CAGR – 13% • Consumer – 33% • Fire Protection – 45% • Medical Plastics – 35% Key Takeaway: To reduce the possible impacts of the impending U.S. recession, KCP needs to further prioritize its KCI division. Analysis Alternatives Implementation Outcomes Issue Identification Key Issue Mr. Morales is seeking an organizational solution that proves successful in a threatening global economic environment. Complexities Strategically Diverse Portfolio Analysis Lack of cooperation by regional & product managers Alternatives Previous Organizational Failures Implementation Outcomes Alternatives Revert to Geographic Structure Return to the original structure that allowed KCI to grow Analysis Implement Suggested Decision Matrix Implement Tailored Structure Adopt the suggested decision matrix across all KCI divisions Alternatives Implementation Adapt current structure to needs of individual product lines and regions Outcomes Criteria Adaptability Will the alternative allow KCP & KCI to adapt to the needs of the product lines and regions? Improves Cooperation & Coordination Will the alternative reduce the agency problem and improve coordination? Enables growth of KCI Will the alternative allow KCI to grow to its full potential? Clarifies Decision Making Will the alternative simplify the decision making process? Analysis Alternatives Implementation Outcomes Evaluation of Alternatives Adaptability Improves Cooperation & Coordination Enables Growth Clarifies Decision Making Total Revert to Geographic Structure 2 3 1 3 9 Adopt suggested Matrix 3 2 2 1 8 Tailored Structure 3 3 2 3 11 Analysis Alternatives Implementation Outcomes Cooperative Growth Strategy Restructure Organization Analysis Increase Cooperation Alternatives Improve Coordination Implementation Outcomes Phase 1: Restructure Organization Goal: Simplify decision making and resource allocation Adapt KCI organizational structure to specific needs of product lines and regions Clarify and simply decision making and resource allocation among KCI divisions Analysis Alternatives Implementation Outcomes Phase 1: Restructure Organization CEO Vice Chairman Reg. Director of EMEA VP Consumer Products VP Fire Protection Analysis Kent US KCI R&D Reg. Director of Americas VP Consumer Products Alternatives KCI Global Medical Global Fire Control Board Reg. Director of Asia-Pacific VP Fire Protection VP Consumer Products Implementation VP Fire Protection Outcomes Phase 2: Increase Cooperation Goal: Improve cooperation to maximize likelihood of successful implementation Control Mechanisms Structured Reporting Hierarchy Analysis Performance Incentives Productivity Linked Incentives Promotion Opportunities Alternatives Shared Values Clear Vision Statement Implementation Outcomes Phase 3: Improve Coordination Goal: Improve coordination to maximize productivity and likelihood of successful implementation Rules & Directives Routines Mutual Adjustment Analysis • Create clear job descriptions • Specify responsibilities and duties • Mandatory Meetings • Align activities with vision • Training • Mutual adoption of new practices Alternatives Implementation Outcomes Communications Plan KCI • Company-wide communication of new structure and responsibilities KCP • Training for new roles • Align activities with vision Vision Analysis • Company-wide communication Alternatives Implementation Outcomes Financial Projections Net Sales Net Income Year $ Millions % Growth $ Millions % Growth 2005 466 15.9 37 7.9 2006 578 24.0 38 6.6 2007 598 3.5 24 4.0 2008 628 5.0 31.4 5.0 2009 691 10.0 41.5 6.0 2010 795 15.0 55.7 7.0 Analysis Alternatives Implementation Profit Margin is returning to 2005 levels Outcomes Timeline Months 0-2 3-4 5-6 7-8 9 -10 11 - 12 Re-write job descriptions Implement training program Communicate performance incentives Establish control mechanisms Implement new organizational structure Analysis Alternatives Implementation Outcomes Contingency Plan RISK MITIGATION CONTINGENCY Company does not adapt to new structure Implementing cooperation and coordination initiatives Cooperation and coordination does not improve A communications plan that Tie rewards and trains new leadership consequences to productivity positions and emphasizes the key performance indicators company’s vision Analysis Alternatives Appoint new regional directors that will be more cooperative Implementation Outcomes Conclusion Key Issue Mr. Morales is seeking an organizational solution that proves successful in a threatening global economic environment. Cooperative Growth Strategy Restructure Organization Increase Cooperation Improve Coordination Outcomes Improved Profitability Analysis Employee Motivation Alternatives Implementation Maximize Productivity Outcomes
