Crown Point Case Study

MANAGEMENT CONTROL SYSTEMS

CROWN POINT CABINETRY

GROUP CASE ASSIGNMENT

Introduction

The purpose of this report is to describe and evaluate different factors both external and internal that influence practices and evolution of Crown Point Cabinetry. Firstly, the critical factor for success in the cabinet industry will be described. Secondly, situation in the company before 1993 and evolution after change in leadership will be explained and evaluated. Later, future prospects of Crown Point Cabinetry and possibility of transferring experiences to another organisational settings will be discussed. The report will be concluded by general lessons to be learnt about management control found in the case study. This report also includes an explanation of the modus operandi of our group, while producing this report.

Cabinet Industry Description and Factors Critical for Success

The United States cabinet industry is a highly fragmented industry with long-term growth and it is highly dependant on a population and income growth. New housing, home resale, and home repair, remodel and design trends are demand drivers for the U.S. furniture sector. The continued exploration of new markets, adding more value to product offerings and search for an export market opportunities are essential for U.S. furniture manufacturing success.

Crown Point Cabinetry is relatively large manufacturer with high potential. The company has a greater market share than average manufacturer in the industry. Crown Point Cabinetry competes in domestic market where competition in the furniture sector is based on specialized inputs such as highly skilled workers, high quality of raw materials and tools.

Several critical success factors for Crown Point Cabinetry can be identified:  

• Offer a variety of high quality cabinet product lines, and ensure plenty of choices exist for high-end consumers and designers.
• Ensure customer satisfaction by streamlining the ordering process, offering warranties on products and workmanship, delivering on time, and hiring top-notch contractors to install cabinets and countertops.
• Create awareness of the company’s services: extensive advertising; generate good will; encourage referrals; build an effective word of mouth marketing campaign to let the happy customers recommend the company’s services.
• Ensure competitive advantage on the furniture market.
• Reduce lead-time and amount of backorders.
• Lower employee turnover because handcrafting of each cabinet requires highly skilled workforce and provide training if necessary.

Situation in Crown Point in and before 1993

Crown Point Cabinetry was Claremont based cabinet making company, founded in 1979 by Norm Stowell. The company gained a local reputation for superior craftsmanship, and by 1992 Norm had grown the business to more than 100 employees, including all of his seven children. The company managed to grow its revenues annually along with the company’s reputation despite operating in highly fragmented market and its dependency on the dealer network. However, when Brian took over the position of CEO in Crown Point, nothing was running as smoothly as at the beginning. The relationship with management, described by many workers as “horrible”, had devastating consequences on the company and resulted in 300 per cent staff turnover and uncontrolled absenteeism. The approach taken by the management to solve the arising problems was to wield a heavy hand, which had no effect and in fact, only made things worse. The management effectively suppressed any signs of creativity of its employees and demotivate its staff which had a tremendous effect on the final product. Therefore, the company once recognized for high quality of cabinets and on time delivery, compromised its capability to perform in line with its core values. Poor in process quality control combined with low staff morale resulted in a huge level of backorders and waste. After taking the company over in 1993, Brian quickly realised that changes need to be implemented in order to keep the Crown Point afloat and to ensure its success.

Evaluation of the Nature, Evolution and Impact of the Changes in Crown Point Cabinetry after 1993

“Starting today, things are going to change…Today this place isn’t a particularly desirable place to work. My vision is that one day people will say to you ‘You work at Crown Point? Wow, I’d love to get in there.’ ” These words, that Brian Stowell used to vocalize his vision for the future of Crown Point Cabinetry, can be nearly viewed as a new vision statement for Crown Point. And it was his vision that served as a cornerstone for the incredible conversion of the company over the following 9 years under his leadership. Brian hasn’t simply announced the need for change but he also specified the areas of his main concerns. Due to a low efficiency of production, caused by skimpy first-time quality, efficiency of the production was rather low. As a result the company was unable to provide its people with retirement benefits. Brian was determined to transform the company.

Beside the vision he voiced in his speech, we can also identify an expression of how the organization needs to evolve over time to meet its objectives. The strategy of Crown Point is to be based on first-time quality and nurturing the employees who try hard to achieve it. Having clear vision and the strategy required for the desired change to take place, Brian was able to proceed to its implementation.

The change started with a period of restructuring and painful transition. Based on management evaluation 17% of employees lost their job by 1994. However, the selection process of employees who were seen as the source of quality problems was often politically charged. One year into the process Brian’s wife Becky presented a solution. By getting rid of the management layers the organization structure was flattened. New Team-based management approach took place and employees became directly involved in decision-making. Former managers were placed to work alongside their former subordinate. It seems that setting a new structure was a necessary step in order to implement a new strategy. Getting part in work performance evaluation, hiring and firing process led to an empowerment of the employees. However, the alteration of the organisation structure also brought about many challenges. This new challenges required new solutions. By end of the year 1994 teams have designed co-worker review sheet or “scorecards”. These were used for evaluation of team member performance and recommendation for salary increases. A transition to a new team-based management approach caused a shift of power and also responsibilities towards the employees.