Business Unit Managers Research Articles

TEAM MEMBER FUNCTIONAL BACKGROUND AND INVOLVEMENT IN MANAGEMENT TEAMS.

This paper examines the relationship between a team member's functional background and two indicators of intra-team influence: centrality in the team's workflow and involvement in team decision-making. It is argued that a functional background that provides valued expertise or that is similar to the functional backgrounds of other team members will be associated with both forms of influence but that power centralization becomes a critical moderating variable when predicting decision involvement. So whereas functional expertise leads to decision involvement in decentralized teams, functional background similarity matters more for decision involvement in centralized teams. A test of these hypotheses in a sample of managers from business unit management teams provides strong support.

Towards a globalized communications strategy: perceptions from New Zealand

Looks at the globalization of communications in New Zealand, in the compelling and e‐volutionary global marketplace. Explores the impact of environmental issues on marketing communications. Managers must reach out to and communicate with customers, consumers, and publics ‐‐ who impact markedly on overall market share and profit performance. The corporation plays a significant role in brand marketing and strategic business unit management, especially marketing communications. Whatever a globalized communications strategy means, it potentially spells integration within and between corporations, individuals, and brands. Whatever integrated global communications may mean, there would certainly be an expectation that communications would focus on customer needs and building relationships. What was found in New Zealand was a focus on globalized and integrated communications in terms of corporate imposition.

Business unit manager for Chemetall's Aerospace Division

Business unit manager for Chemetall's Aerospace Division

Discretion in Executive Incentive Contracts: Theory and Evidence

We examine the role of discretion in executive incentive contracts, and explore the trade-offs firms face in choosing among imperfect objective measures of individual performance, potentially more accurate but non-verifiable subjective measures, and overly broad objective measures of company-wide performance that include the performance of all agents in the firm. We generate implications and test the model empirically using a proprietary dataset of executive bonus plans. Consistent with our model, we find that discretion is less important in determining CEO pay than the pay of other executives. We also find that discretion is relatively important in determining executive bonuses at larger and privately held firms and that more diversified firms are relatively less likely to compensate their business unit managers based on firm-wide performance. Finally, we consider (and largely dismiss) tax-related explanations for our results.

Business unit manager for Chemetall's Aerospace Division

Business unit manager for Chemetall's Aerospace Division

Building the Innovative Organization: Management Systems That Encourage Innovation

Introduction How Innovation Works and How Corporate Managers can Influence the Process Corporate and Business Unit Management Tools 1: Structure and Process Corporate and Business Unit Management Tools 2: Personnel Management and Culture Corporate and Business Unit Management Tools 3: Strategy and Goals, or Purpose Corporate-Level Tools for Managing Projects and Ideas Ways General Managers can Influence Individual Projects Asking People to Help you Improve your Innovation Management System Conclusion

The Supply Organizational Structure Dilemma

SUMMARYThis article presents the findings of research into how and why large, multiunit firms make major changes to the organizational structure of the supply function. The research used case‐based methodology to investigate 10 large companies that had recently made a major supply structure change. A total of 15 major supply organizational changes were studied at the 10 sites. The research found that these major changes were a result of changes in the overall corporate structure, challenging the conventional view found in standard purchasing texts that supply executives have flexibility in matters of organizational design. The research identified that a common driver for corporate organizational change in each of the sites studied involved an attempt by the company to improve its cost structure. Chief financial officers (CPOs), business unit managers, consultants, and chief purchasing officers (CPOs) were all identified as having involvement in the supply organizational structure change process at some sites. A principal challenge for CPOs is to understand how to provide supply improvement opportunities under any organizational structure.

Offensive change management with the step-by-step method

The need to turn companies around can arise for defensive as well as offensive reasons. In the case of defensive reasons, such as cost reductions, one usually has to rely on rather authoritarian methods. When the driving force is of an offensive nature, as in the case of re-engineering, introduction of e-commerce or business unit management, the step-by-step method of change has proven itself powerful. This is illustrated here in a case involving the introduction of business unit management in a functionally organised multinational enterprise. An evaluation of and a speculation on the area of application of the method are given at the end of the paper.

STRATEGIC PERFORMANCE MEASUREMENT SYSTEMS: TRANSLATING STRATEGY INTO RESULTS

A large and growing number of companies worldwide are adopting strategic performance measurement (SPM) systems to help them execute their business strategies. SPM systems use some combination of financial, strategic, and operating measures to evaluate management's success in improving operating efficiency and adding value for shareholders. In many cases, the SPMs also provide the primary basis for rewarding top management, divisional operating managers, and, increasingly, rank‐and‐file employees. Some SPM systems are based entirely on a financial measure like economic value added (or EVA), which encourages managers to consider the opportunity cost of investor capital in making all operating and investment decisions. Other systems are based heavily on nonfinancial considerations, such as the balanced scorecard's emphasis on customer and employee satisfaction, operational excellence, and new product introduction.In this article, the author uses the findings of his recent survey of 113 North American and European companies to shed light on a number of questions: What are the most popular measures in such systems—are they primarily financial, nonfinancial, or amix of the two? To what extent is incentive compensation tied to such measures—and how far down in the organization are such measures (and incentives) extended? What are the most formidable challenges to implementing SPM systems in large corporations, with often diverse collections of businesses and tens if not hundreds of thousands of employees?Among the article's most notable conclusions, a majority of companies expect in the next three years to publish SPM targets and results in their annual reports. The most commonly cited financial SPMs will be cash flow, return on capital employed, and other variations of EVA. The most frequently cited nonfinancial SPMs are customer satisfaction, market share, and new product development. The greatest challenge in implementing SPMs is translating the vision and strategic objectives at the corporate level into performance measures that are relevant to activities at the business unit level, and securing buy‐in from business unit managers and employees.

A multiple-choice genetic algorithm for a nonlinear cutting stock problem

In the environment of intense competition facing many firms today, cutting costs from operations while meeting customer expectations is a prime objective. Industrial computing can help satisfy this objective by guiding many aspects of operations planning-for instance, mathematical models of operational problems can be developed and solved as part of information systems. Typical approaches come from the fields of operations research (mathematical programming), computer science (constraint satisfaction), or the interface (metaheuristics such as genetic algorithms, tabu search, and neural nets). To illustrate how to use computational models to gain a cost advantage in operations, let's consider an actual cutting stock problem faced by a Fortune 500 wire and cable manufacturer. Our team, consisting of a vice president, several IT professionals, and business unit managers, sought to reduce scrap and other costs with the help of an operations research consultant. I will describe two approaches to the problem: mathematical programming and genetic algorithms. Each approach has advantages and disadvantages in application.

Market competition, management accounting systems and business unit performance

Increasing competition in the market, due to the application of modern manufacturing technology, deregulation of economies, and privatization or corporatization of government owned enterprises, makes decision makers use of management accounting systems more important (Bromwich, 1990). There have been calls for research into the use of management accounting systems under the changing circumstances (Kaplan, 1983; Shank and Govindarajan, 1989; Bromwich, 1990; Bromwich and Bhimani, 1994). This paper reports the results of a study which offers an explanation for the relationship between intensity of market competition and business unit performance, by incorporating into the model managers use of the information provided by the management accounting system (MAS). To assess the relationship, data were collected from 61 business unit managers by way of personal interviews. The results indicate that the intensity of market competition is a determinant of the use of the information which, in turn, is a determinant of business unit performance. In other words, managers use of the information plays a mediating role in the relationship between the intensity of market competition and business unit (BU) performance. An interpretation of the results is that those organizations which use the information can effectively face competition in the market and thereby improve performance.

Leadership in Strategic Business Unit Management

The action research study focuses on the ways a successful general manager engages in a process of large organizational change of a business unit. The unit itself had undergone an overhaul earlier as part of a corporate-wide organizational change project to decentralize power to its business units. The study is limited to that particular phase in which three levels of management take part in a search conference in order to develop a broad basis of involvement. The major observations and psychodynamic processes are subsequently discussed in relation to an older study of successful general managers and to the changed relations between leaders and followers after intensive restructuring.

Discussion of earnings-based bonus plans and earnings management by business unit managers

Guidry, Leone, and Rock use business unit data from a multinational conglomerate to reexamine whether earnings-based bonus plans are associated with earnings management. By focusing on business unit compensation, the authors increase the power of the tests and control for earnings management incentives provided by stock-based compensation. Questions raised by the study include the generalizability of the findings beyond the sample firm, the economic significance of earnings management, the effect of earnings management on bonus awards, and how group-level incentives to manage earnings interact with incentives at the business unit level.

Earnings-based bonus plans and earnings management by business-unit managers

This study tests the bonus-maximization hypothesis that managers make discretionary accrual decisions to maximize their short-term bonuses. By using the management and financial reporting database of a large conglomerate, we extend previous investigations in two ways. First, the analysis is conducted using business unit-level data, which reduces the aggregation problem that is likely to arise using firm-level data. Second, managers in this setting are paid bonuses based solely on business unit earnings. The potentially confounding effects of long-term performance and stock-based incentive compensation are thus absent. These innovations yield robust evidence consistent with Healy (1985).

Spectrum of quality management implementation grid: development and use

Presents the details of a Quality Management Implementation Grid derived from the TQM Adoption Model of Dale and Lascelles (1997). The Grid, which has been developed to fit within an A4 boundary, should be used by Directors and Managers of organizations and business units to diagnose the stage of development of their continuous improvement process against each of seven defined levels of TQM the Grid: root causes of problems, issues being faced, typical organizational behaviours and effective transitional action. The idea is that a manager can consider the details of the problems, issues and behaviour with respect to their business and decide the actions to be taken to move the improvement process forward.

Benchmarking as a strategy for managing conflicting stakeholder perceptions of information systems

The paper describes how failures to align information systems (IS) strategies in 18 US companies required IS managers to constantly justify their cost/service compromises to various stakeholders — senior executives, business unit managers, and end-users. IS managers tried to influence stakeholder perceptions with ‘soft’ evidence such as successful application projects, user endorsements, and other IS anecdotes. In addition, IS managers used benchmarks to provide more ‘objective’ evidence. Given the hostile environment caused by misalignment, some IS managers used a variety of tactics to manipulate the benchmarks to obtain a ‘good report card’, such as picking a reference group of only mediocre performers and undermining the integrity of the data collection process. We present a framework to understand the context of misalignment which can help stakeholders flush out their differences to arrive at a common strategy for the portfolio of IS activities. In the context of a shared strategy, benchmarks targeted at a performance improvement — rather than turf-protection — can be achieved.

Achieving Leadership in Environmental R&D

Protection of the environment is one of today's clearest societal imperatives. School children are learning about the dangers to the environment, activists are pushing for greater environmental protection, and legislators are creating increasingly tougher controls to reduce environmental damage. The R&D management community is clearly serious about rising to the environmental challenge. In money terms, estimates suggest that over $10 billion is being spent annually in the U.S. on industrial R&D related to environmental issues (1). Reviews of environment-related R&D initiatives of several companies have appeared in the literature (1, 2). The Industrial Research Institute is conducting a multiorganizational research project to identify best practices in organizing and conducting strategic management of environmental R&D. A working group convened by the European Industrial Research Management Association (EIRMA) has concluded that R&D focus is clearly shifting from clean-up technologies to fundamentally cleaner and safer products and processes (3). However, review of the published literature and discussions with numerous R&D directors suggest a significant company-to-company variation in how R&D is approaching environmental considerations. Some are struggling with basic compliance requirements for the R&D laboratories while others are exploring environment-driven innovation opportunities or even leading their corporations to new strategic horizons. Some are focusing their attention solely on clean-up technologies while others are developing new, cleaner alternatives. Five Steps to Take The progression of an R&D laboratory from compliance management to strategic leadership on environmental matters can be described as a five-step evolution: 1. Reactive.--R&D organizations operating on this first level simply develop and implement basic management systems and processes to digest and address the multitude of federal and state environmental regulations specific to R&D facilities. Environmental management is treated as an administrative burden and delegated to a safety and environment manager. The R&D staff is told what to do and what not to do with respect to regulatory requirements. An environmental policy has not yet been developed, or if developed, not widely disseminated. 2. Participative.--At the next stage of evolution, the R&D management and staff are aware of the need to collectively manage the environmental well-being of the facility. Teams are in place to plan and implement such good citizenship programs as waste reduction and recycling, energy management and green alternatives, through facility-wide participation. Awareness and training initiatives are underway to sustain the momentum of the participative efforts. 3. Active.--R&D organizations at this third stage have moved on to establishing an environmental analysis and planning framework for their R&D projects. The management and staff routinely examine the environmental dimensions of all proposed R&D projects before they are undertaken, and regularly review the results from ongoing projects against original assumptions. Management systems such as environmental checklists and stage-gate analyses are in place to institutionalize the planning and review processes. 4. Innovative.--At this advanced stage of progression, the R&D organization is actively seeking out innovation opportunities in environmentally-friendly products, processes and services. Unlike the organizations in the active stage, those in the innovative stage place high priority on generating promising, environmentally-driven R&D project ideas. The R&D director has the explicit or implicit support n of some business unit managers for this opportunity search. The staff is knowledgeable and enthusiastic about the potential for such contributions. 5. Leadership. …

A new model for reforming the planning review process

Planning review meetings between business unit managers and corporate managers are notoriously disappointing. The main problem isn't the design of the process or the capability of the participants. Rather, it's the lack of an adequate corporate‐level strategy as context for the reviews.

Organizational Design for Business Units

This paper studies empirical differences across decentralized firms with respect to the allocation of tasks from the parent firm to its business units and the level of compensation risk imposed on business unit managers. We structure our empirical analysis around two hypothesized determinants of these organizational structure decisions: the parent firm's task expertise relative to that of the business unit's and the relative importance of the business unit to the performance of the parent firm. We develop a principal-agent model of the task allocation and compensation risk decisions as a function of these two determinants, and test several research hypotheses suggested by this model. In our analysis, we use the term relative expertise to refer to the competence of the parent, relative to the business unit manager, to make the division's operating decisions. Relative task expertise can be characterized in several ways; we consider three such characterizations and, using our model, find that they have different implications for the allocation of tasks and the imposition of compensation risk in decentralized firms.1 We label our three characterizations of relative expertise as follows: Cost

Aggregate Performance Measures in Business Unit Manager Compensation: The Role of Intrafirm Interdependencies

The purpose of this paper is to investigate the determinants of the extent to which the incentive compensation of business unit managers is based on aggregate performance criteria measured at an organizational level higher than a manager's business unit level. We present a simple agency model of a multidivisional firm to show that the use of aggregate performance measures relative to more localized performance measures is an increasing function of intrafirm interdependencies. Using proprietary compensation data from Hewitt Associates LLC, we test whether the relative use of aggregate performance measures is related to our empirical proxies for intrafirm interdependencies and find evidence consistent with our predictions. Management accounting textbooks usually emphasize the controllability principle within the framework of responsibility accounting as the basis for