Rondell Case Study

Running head: THE RONDELL DATA CORPORATION CASE STUDY

The Rondell Data Corporation Case Study Russ Joseph Ricky Sethi Bonnie VanKampen Michelle Woodley University of Southern California

Rondell Case Study The Rondell Data Corporation Case Study

The importance of both organizational design and culture are evident in analyzing the case study of the Rondell Data Corporation. By exploring the background of the problem, information regarding organizational functioning, the impact of organizational culture on the strategy and success of the company, and problem identification, recommendations can be offered. Possible solutions to the current dilemma at Rondell Data Corporation will provide an increased understanding of the role of organizational structure related to the improvement and overall performance of a company. Background Bob Rondell started the Rondell Data Corporation in 1920. The basis for its inception was Rondells invention of several electrical testing devices, while on staff as an engineering faculty member of a large university. In 1947, the company entered into the radio broadcasting equipment market. By the early 1960s, the company had increased its business to include data transmission equipment. The company had a reputation of being a source of high quality innovative designs and described itself as being able to convert problems to solutions in their sales brochures. By 1978, two major lines were recognized: broadcast equipment and data transmission. Broadcast equipment accounted for 35% of the company sales. Data transmission was also blossoming with increased demand for highly specialized and innovative designs. The size of the original payroll in 1920 is unknown, but as of 1947, Rondell Corporation had reached 100 employees. In contrast, by 1978, the time of the current dilemma, the employee

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count had risen to 800. The organizational structure of the Rondell Corporation is fairly flat with minimal layers for communication flow. Although multiple layers of management did not exist, there was a lack of an integrated information structure within the company. An integrated information structure would have facilitated cross communication necessary to achieve the common goal. Key Personnel One of the key players in the Rondell Data Corporation is Bill Hunt, the current President. Bill Hunt has been with the firm since 1946. He was a student of Bob Rondells, and joined the company as an engineer. He became the assistant to the president in 1956 and president in 1960. Bill Hunt, along with Ralph Simon, Executive Vice President, holds enough stock to command effective control of the company. Dave Schwab, Production Manager, joined the company in 1955. Upon joining the company, he was instrumental in exposing widespread irregularities in the production and control departments. Following this, Dave was promoted to production manager, and brought in a new group of production specialists to the company. His exact education level is unknown, other than the fact that he does not have a degree. Ed doc Reeves is employed as Director of Research. He joined Rondell in 1960 and worked directly with Bill Hunt in developing major innovations in the data transmission equipment. He became director of research in 1967 and is widely respected in the Company. In fact, he is referred to as a creative genius. In the past, he had been offered the Director of Engineering position, but turned it down.

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Ron Porter, Vice President of Sales, has been with the company since 1957. Ron has a B.S. in engineering and has always worked in sales. He was made sales manager in 1967 and appointed Vice President of sales in 1974. Frank Forbus is the most recent hire. He joined the company in 1977 as Director of Engineering, replacing an employee who had been dismissed. Franks educational background includes a Masters degree in engineering. His duties include administrative responsibility for research, as well as complete responsibility for engineering services. Prior to coming to Rondell, Frank Forbus worked as the division director of engineering in a large industrial firm. Current Situation Currently, the year is 1978 at the Rondell Data Corporation. There has been a gradual increase in disputes between research, engineering, sales, and production staff over the last 2-3 years. The disputes seem to center on the problem of new product introduction, and are focused on the engineering department. The engineering department is seen as being to blame for the etiology of the problems. The Director of Engineering position has been a revolving door since the retirement of the longtime Director approximately 3 years previously. This original Director of Engineering had held the position for 30 years. The current Director of Engineering, Frank Forbus, has only been in his position for 8 months. He has identified some communication issues between departments and upper management. In an attempt to rectify the communication problems, Frank has instituted a new communication strategy with the production manager and the president concerning the latest product, the 802. During one of these meetings with the president and the production manager, the

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president interjects that a new filtering design will be added to the product with the expectation that engineering and production will solve any potential delays caused by this revision. Subsequently, the 802 design is shuttled back and forth between engineering and production at least 4 times with the result of production staff assigned to another rush job. The company is faced with both internal dissatisfaction of employees and external dissatisfaction of their customers. Structure of the Engineering Function Much of the growing dissatisfaction at Rondell Data Corporation can be traced back to the inefficiencies that arise from Rondell's outdated organizational structure. The organizational structure at Rondell follows a strictly functional approach. The functional areas are divided as Production, Sales, and Engineering. Since Rondell started out as a small firm that worked on custom solutions, this model served it well in its initial period. However, as Rondell has experienced major expansion, this same structure is now seriously inhibiting Rondell's future growth. Relying on personal relations, Rondell lacks the cohesive and clearly organized structure required of a larger company. As the company has grown, the different departments have grown at different rates and interactions have changed disproportionately. The engineering, research and development departments at Rondell are the major casualties of this irregular expansion. Although the overall organization theme at Rondell is along functional lines, engineering services seems to be the exception. Much of its workforce is distributed among the other departments. This distribution of personnel leaves engineering services without a clear mission or purpose and further blurs the lines of authority. The displacement of engineering personnel

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lacks integration and hinders the engineering services' effective interaction and cooperation with other departments. The role of engineering services becomes amorphous and undefined. Additionally, confusion and frustration arises from the role of research and how research interweaves with engineering services. Upper management describes the engineering services department (ESD) as being "responsible for maintaining cooperation with other departments, providing services to the development engineers, and freeing more valuable people in research and development (R&D) from essential activities that are diversions from and beneath their main competence". Obviously, R&D is seen as the star of the organization, even though it appears to have the least interaction with the rest of ESD and the organization. The "division" of the ESD prohibits effective interaction with the other departments. Instead of increasing the product line under the direction of engineering services (e.g., make more standard products for volume sales), engineering services is bogged down by the details of managing its disparate components and employees. Instead of being tightly integrated with sales and production, design is floundering under the auspices of genius. Although this creative input is vital to Rondell's continued growth, the organizational structure is dragging on the potential of the company. Although management defines the role of engineering services as a cross-disciplinary, cross-functional group acting as the intermediary in allowing the rest of the organization to produce efficiently, the clear lack of authority of engineering services has rendered it essentially powerless. ESDs suggestions go unheeded (e.g., Dave Schwab's line workers grabbing engineers for help on the floor 4 days after their conversation) and it's deadlines go not met. Because engineering continues to be organized along a narrow, specialized line of thinking,

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interdepartmental friction arises from too much centralized control and an emphasis on staff positions over line positions. Organizational Culture Organizational culture is defined as the fundamental assumptions shared about an organizations values, beliefs, norms, symbols, language, rituals, and myths-all the expressive elements that give meaning to organizational membership and are accepted as guides to behavior (Cook, Hunsaker, and Coffey, 1997, p.112). In the Rondell case, a strong culture had existed, but was now being replaced with subcultures. The subcultures behaviors were incongruent with the overall organizations previous values. This incongruency gives rise to many conflicts and decreasing productivity of the organization. The cultural system at Rondell was based on several beliefs. Length of employment was highly valued and in some cases was the basis for selection of key individuals. Informal relationships were the means used to communicate and accomplish the goals of the organization. There was very little formal structure within the company and little respect for the hierarchical structure by most members. Each department had a particular niche, a turf, a function and the belief was that any other department should not invade this space. The department was held responsible to take care of its members regardless of the impact on the overall organization. Rondell prided itself on a close family tradition and yet, Rondell was faced with a culture of uncooperativeness among its different departments. The conflict between the founding values and the values that had developed were very visible in the behavior of the staff at Rondell. Not only was there little cooperation, but blame was placed on others for the current

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lack of success. For several years, the firm had experienced a steadily increasing number of disputes between research, engineering, sales, and production people (Seeger, J., Rondell Data Corporation). Each department, using a high external locus of control, found reasons to blame the other departments for Rondells decline in profitability. When originally founded in 1920 as Rondell Equipment Co., the organizations values based on a tradition of a long-standing reputation as a source of high-quality, innovative designs led to an elitist mentality. Rondells employees boasted that they were the best and performed so well because of the family spirit within the old organization. This TraditionalElitist model made it hard for the organization to adapt to growth and rapid change. The real test of the effectiveness of a corporate culture comes when the organizations environment changesSometimes a strong culture can be like a millstone around the neck of a firm that is trying to respond to environmental changes (Reimann and Wiener, 1988). The first generation employees had been able to conduct business within the organization on the basis of more personal relationships and an informal structure. Bill Hunt, the current CEO prided himself on not needing the red tape of bureaucracy and appeared to highly value a companys ability to function without conflict. However, Bill Hunt gave little leadership in growing the organization and was not visionary in diagnosing the changes that would besiege Rondell. As the company grew and added second generation employees, a more formalized structure was needed. The strong family culture had become dysfunctional, giving way to divergent subcultures. As the differences between the individuals became more and more apparent, the members began to identify more with their own profession or department and less

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with the organization as a whole. These subcultures began to function as countercultures and pitted one member against the other. Organizational Problems and Changes for Success Rondell has a typical organization by Function. This structure works best in a company with relatively few and similar products; but depends on managerial control and coordination (Cook, Hunsaker & Coffey, 1997, p. 87). The functional design works for companies with few products because all functions are working toward the same goal; develop, build and ship the product. Additionally, this design is most efficient when departmental tasks are relatively independent of each other. Ideally this design is suited to encourage specialization, but problems develop when people develop tunnel vision and tend to perceive multifunctional problems from the vantagepoint of their narrow area of expertise. This can lead to conflict and turf protecting, straining the process of communication and coordination in the absence of a decisive leader (Cook, Hunsaker and Coffey, 1997, p.87). One of the most significant issues facing the Rondell Corporation in relationship to the structure of the company is the fact that the entire performance system enabled, and indeed seemed to encourage, individuals to see their own performance as separable from the enterprise as a whole (Ott, J., 1996). In an organization with many product lines, functionally structured organizations can loose track of the importance of individual products or new product development efforts and fail to provide the functional integration needed. Rondells external environment has changed and their product breath has grown to two major lines with an increasing number of orders calling out unique specifications. New product introductions at Rondell require timely, integrated efforts. In the model 802 project, Doc Reeves

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said, this wont affect the other modules of the 802 much. However, an integrated team would be better equipped to make such a call versus an individual Director. An integrated team would consist of representation from design, purchasing and manufacturing. Instead, the wrong call made by Doc Reeves has put a heavy workload on Engineering and Drafting employees. Another example of the problems caused by functional design and centralized decision making is Dave Schwabs Thanksgiving review of the 802 prints. Dave Schwab reviews the prints and makes decisions that are not within his scope. A statement from Dave Schwab about tolerance crazy engineers indicates that people in the wrong function are making the decisions. Since a design engineer doesnt fully understand the manufacturing capabilities, involving a manufacturing representative on a project team would improve the process by taking into account both design needs, as well as manufacturing needs. Doc Reeves wrongly assumed the scope of the effort needed for Engineering Services. Because the decisions are being made in the wrong place without the input from all of the involved parties, Frank Forbus and Engineering Services appear to be taking the brunt of the blame. The actual blame lies within the organizational structure and design of the Rondell Data Corporation and its segregated departments. The organizational culture of Rondell Corporation is one that values age, experience, and seniority. All key management personnel have been with the company over 15 years. There has been minimal turnover, except for the Engineering Department. There have been references made to past failures of personnel, secondary to being too young. Creative genius is revered, evidenced by the role Doc Reeves plays within the company and his relationship with his superiors.

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Preserving family spirit is important to the company in the sense that a more high tech manner of communication was never implemented, even with the growth of the company over time. Management seems to highly value the personal touch and sees this as the most effective method for communication to facilitate business practices. Because culture is the focus for an organizations strategies, Frank Forbes failed to see that before he would be able to have any affect on the strategies at Rondell, he would need to change the culture. Classic machine bureaucracies, with their reporting structures too rigid to adapt to faster-paced change, have to be unfrozen to be improved (Weick, K. & Quinn, R., 1999). Frank was not able to empower himself or obtain managements empowerment to begin the process of changing the culture at Rondell. Formal structures were needed along with a breaking down of the silos that had been formed by the functional groups. A cross-sectional team model, combining the inputs from sales, research, engineering, and production, would have assisted in enabling Rondell to improve their productivity and increase their chances of survival in the changing industry. Because of the centralized and functional scheme, resources are being diverted with engineers being called away to production to deal with problems. Additionally, design needs to be aligned more with sales and with research. Rondell is experiencing the current problems of poor communication and inefficient development processes because they are living in the past. Rondell would benefit from revisiting their organizational structure by going through an Organizational Design process. It would not be recommended that Rondell goes through this process by themselves and a qualified consulting practice with emphasis in Organizational Design should be brought in to help Rondell.

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In addition, Rondell needs to find a better way of developing products, communicating information and making timely decisions. Although a thorough review of the personnel and current practices at Rondell is critical and a long term goal, it appears that in the short term, a change to a Product Line focused Organization structure would help bring focus to new product development and push down decision making to the people most involved with the product line. A realignment of how people, tasks and tools are assigned to projects or product lines needs to happen. The current centralized management structure is making ineffective decisions and reducing the effectiveness and responsiveness of the company. The company needs to make a shift from vertical decision making to managing cross-departmental work processes. A relationship map for Rondell showing the systems view of the organization, including the customer, product and flow of work will highlight the deficiencies in the organization. In developing a new organization structure, the relationship map will show how work crosses functional boundaries and show the relationships through which products are produced (Rummler, 1995). The management team needs to focus on company direction and resources and provide the teams a degree of autonomy to make the day to day decisions. In summary, we recommend the following major changes: 1. Retain the services of a qualified consulting team to help the management team. 2. An Organizational Design process should be initiated to determine the best organizational structure for the company. Our assumption is the new organizational structure will be product line focused. 3. A cross-functional approach should be taken to accomplish key company tasks such as new product development. 4. Decisions be pushed down into cross-functional teams who have the responsibility for delivering a timely, quality and manufacturable product.

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5. Teambuilding should be a priority at Roundel with the stoppage of the constant finger. Organizational wide efforts should be made at breaking down functional barriers and creating an environment of team participation and decision making. 6. Engineering Services should add a project management function to aid the team in coordination, planning and monitoring project progress.

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Cook, W., Hunsaker, P., and Coffey, R. (1997). Management and Organizational Behavior. McGraw-Hill Companies, Inc., Chicago. Ott, J.,Classic Readings in Organizational Behavior, 2nd Edition, Wadsworth Publishing Company, Albany, 1996, p.265-271. Reimann and Wiener, Corporate Culture: Avoiding the Elitist Trap, p.40. Seeger, J., Rondell Data Corporation Rummler, G. & Brache, A. (1995). Improving performance. San Francisco: Jossey-Bass Publishers, p.9. Steers, R.& Black, J., Organizational Behavior, 5th edition, Harper Collins College Publishers, New York, 1994, p. Weick, K. & Quinn, R. (1999). Organizational change and development, Annual Review of Psychology, v.50, 361-386.