Visionary Design Systems - Case Study Example

Case Analysis: Visionary Design Systems [Name] [Professor Name] [Course] [Date] Contents Abstract 2 Visionary Design Systems 3 Overview 3 Problem Statement 3 a)Product Data Management 3 b)Compensation Scheme 4 Date Analysis 5 Suggested Alternatives 8 Key decision criteria (KDC) 8 Recommendations 10 Action and Implementation Plan 12 Ethical Issues 13 References 14 Abstract Visionary Design Systems, a California-based high-tech company, keeps the institutional philosophy that its employees should be empowered and the quality of products improved through offering incentives based on their output. The company deals in high-end CAD products. The founders of the company are the reasons behind the company’s successes. This paper offers an analysis of the company based on two of the major problems it faces. Even as the company’s empowerment philosophy and the high rewards are supposed to offer incentives for the growth of the company, it faces problems with implementing it. Further, the company faces difficulties with its Product Data Management (PDM) division (Mosler 1994). Visionary Design Systems Overview Visionary Design System is a high-tech company that is based in Silicon Valley. In the first three years of operation, its entire staff, including the application developers, the management and even the receptionists earned a large part of their income from bonuses and commission. The company had an underlying philosophy of management that provided that all employees should be empowered through incentives based on their output, through its compensation system. The company however faced difficulties in dealing with its compensation system. It also faced difficulties with its Product Data Management (PDM) division (Mosler 1994). Problem Statement a) Product Data Management The company’s Product Date Management (PDM) division faces many problems. PDM is designed to improve company’s capacity to generate and manage information. However, since the market for DPM was not yet operational, where the company could not realize earnings from its investments, it provided a major challenge to the company. In addition, the management did not appear to offer incentives to the PDM specialists so that they too would feel like owners of the company. A major concern that must have led to this was that although CAD sales exceeded the projections for each year, PDM couldn’t sustain itself profitably (Porter 1980). In addition, it failed to build the company to become a market leader in the field (Mosler 1994). b) Compensation Scheme The company has a strategy focused on creating a long-term customer-company relationship through which it can sell its HP CAD programs as well as offer customization, integration and training services (Darryl and McCarthy, 2006). It also aims to help its customers reestablish their individual design process as well as benefit maximally from their CAD systems. The company’s philosophies and values aim at ensuring that each staff is a partner and shareholder of the business and that their earnings should be based on their output. The philosophy of earning according to output reflects its compensation scheme for stock, bases and bonuses. The compensations like bonuses and commissions vary widely. Commissions that account for between 30 percent and 50 percent of the earnings of the company’s sales force and application developers depend on basis output (Mosler 1994). Concerning stock options, the company’s management believed that it motivated its workforce. However, there is a major concern as the employees did not adequately understand the fundamentals of the compensation system, such as their stock options and stock shares (Bandara, Gable and Rosemann 2005). Given the disappointing sales results that the company experienced through the first three-year production period, it can be argued that the issues of incentives were quantitative in nature and not qualitative. Among other significant problems that the PDM program faced included the tendency to allocate the resources to the non-productive sections of the company. Date Analysis By examining the problems of Product Data Management (PDM) at Visionary Design Systems and the compensation system, a range of problems are revealed. With regard to PDM, the problems faced are major inhibitors to the successful implementation of the PDM segment in the company. The founders of the company acknowledged that PDM was an important market for the business and that the long-term objective of the company was in the integration of the system. In this way, the customers of the business would apply CAD software and hardware. The company failed to develop its ‘goals,’ ‘mission,’ and tactics until it had operated for almost three years. Although the employees were in constant communication with the founders of the company, the ‘goals,’ ‘mission,’ and ‘tactics’ did not appear to be relating to their long-term objectives. In addition, the ratio sales representatives and the compensation system to the service specialists and the developers of the applications reflected the idea that the founders hoped more for the growth of the business rather than integration and support, even as larger profit margins originated from training and consulting. The company hired two product specialists because of the complex nature of the PDM. However, the two were never in a position to increase the revenue as PDM demanded for greater customer support such that the company was not in a position to perform as the application developers and sales force did not understand the PDM adequately to support it (Mosler 1994). In addition, the upper level management of the company has been disappointed by the performance of the PDM as they have seemingly failed to note a progress despite efforts to improve the company. Additionally, the incentive and empowerment of the employees seemed not to be working although the problems with PDM originated from the fact that the company initially wanted to generate profits even under situations when it was under-resourced. Both Bulatato’s view and that of Braxton indicated substantial problems with the PDM. In Bulatao’s view, the field the company was operated in was an emerging industry that needed extensive support for software development and sales. He also felt that the company was under-resourced as it could not support the consulting staff. Further, he believed that the sales process was difficult as most of the company’s employees did not understand it. Currently, sales representatives were trained at a ratio of 1:1 as they were not included reasonably in the training program. He also felt that the compensation structure was unfair, as Visionary Design Systems was chosen by companies as they wanted PDM in a period of two years. However, he earned no commission for that. He also found that customers reduced the consulting time as the product was too expensive, thus believed that the company should develop software that enabled companies to start up with the least consulting time. However, he was not given development hours. In Braxton’ view, if PDM has to work, it had to be integrated with CAD, however, there were few resources to facilitate that. He also believed that there was the need to create infrastructure capabilities before the sales would eventually come. This was different from CAD where the company had already suppliers, sales force, product and clients. He also felt that the sale staff was not adequately educated. It can be viewed that a large number of the customers and employees have a scanty knowledge of the PDM market. Under this situation, PDM has to invest time in creating a customer base and infrastructure for the company. The managers however tend to assume that the present compensation plan (option-intensive) will be successful. Thus the company’s HR system appears as reluctant to offer incentives to the PDM specialists so that they too would feel like owners of the company. A major concern that must have led to this was that although CAD sales exceeded the projections for each year, PDM couldn’t sustain itself profitably. In addition, it did not build the company to be a market leader in the field. Consequently, management felt over involved. For instance, the market was projected to rise to US$1.2 billion in 1998 from US$ 325 million in 1998 as the tools offered engineering companies, such as Anderson Consulting, Digital, IBM and HP, an advantage. The CAD vendors were the early market leaders, they started by developing PDM programs to accompany their CAD products. Visionary Design Systems hired Fred Bulatao from HP where he had established a reputation to lead the company. Following an assessment of the company, it was revealed that although customers were satisfied with the quality of the company’s products, the volumes of sales were still low. In addition, the company was not recognized in the industry as a player in the field. Bulatao also noted that he was always seeking consensus or requesting for permissions and this slowed decision making. Even as the company further hired another specialist called Bill Braxton, the same problems subsisted (Mosler 1994). Suggested Alternatives Visionary Design System should pursue certain alternatives to overcome the shortcomings in its compensation system and the PDM division. The company will have to use an alternative business plan that reflects its long-term goals. The company should use an alternative strategy that financially supports infrastructures capable of improving profits (Johnson, Scholes and Whittington 2011). Visionary Design Systems should also maintain positive growth and reputation among its competitors and customers through investment in knowledge of its application developers and sales team. The company should provide operating capital operating capital to facilitate the training of its sales team and application developer, with regard to PDM implementation (Darryl and McCarthy 2006). The company’s sales force should be trained to improve the design procedure. Visionary Design Systems should use a compensation system that emphasizes on the growth of the employees rather than the business. Key decision criteria (KDC) Visionary Design Systems should make certain decisions based on: Expanding its customer base through maximizing customer satisfaction; Improving overall sale of CADs; Improving its profitability and return on investment. Building a solid reputation through a solid corporate image within the emerging industry; Improve employee incentive mechanisms to boost their morale Train its workforce and improve coordination or teamwork between workers of different departments, such as the application engineers and the sales team. Alternative Analysis Through comparing advantages and shortcomings of the aforementioned alternatives with those presently applied in the company, the most applicable options the company can adapt are conceived. First, through developing a business plan that reflects the long-term goals of the company, the company is able to focus on channeling resources on the most important sectors. The present scenario depicts a situation where the company is using much capital on certain sectors PDM, thus PDM has not been able to sustain itself financially. The company should use a strategy that financially supports infrastructures capable of improving and sustaining profitability. In the present strategy, although the business makes profits, they cannot be sustained. Visionary Design Systems should maintain positive growth and reputation among its competitors and customers is through investment in knowledge of its application developers and sales team. In the present scenario, the present business strategy is less effective as the company is not even recognized as a player in the emerging industry, where players such as Digital, IBM and HP thrive. The company should provide operating capital operating capital to facilitate the training of its sales team and application developer, with regard to PDM implementation. This will improve the knowledge of the employees on fundamentals of PDM. In the present scenario, the company faces a situation where the employees, even those in the PDM division, are less aware of the PDM. Further, The Company’s sales force should be trained to improve the design procedure. Visionary Design Systems should use a compensation system that emphasizes on the growth of the employees rather than that of the business. This will ensure that employees are actively motivated while at the same time working towards long-term objectives of the company. Recommendations The company’s top-level management will have to acquire operating capital to facilitate the training of its sales team and application developer, with regard to PDM implementation. The personnel should also be trained to serve as the extensions of the specialists. Through this, the company’s profit-making potentials will be increased. Additionally, the company would be provided with an improved reputation, such as of serving its products properly. Recounting Bulatao and Braxton’s opinion also offer valid grounds for creating recommendations to the company. For instance, the two believed that the company should focus more of its resources on the market to develop its compensation system as well as increase its sales. According to the two, company should in addition develop software that can enable its customers to start business with the least expenses. Further, PDM project should be handled in a similar way as handling individual businesses. The company should also encourage an atmosphere where the employees are able to understand the how the upper-level management operate and make decisions, as Visionary Design Systems is a company where the employees are treated as the most exceptional and important part of the organization. The company should further develop create a free atmosphere where the employees are able to innovate new ideas as well as make critical decisions for the company. Bulatao had noted that decision-making in the organization is a slow process since he could make individual decisions and had to wait for a series of approvals from the top level management. The company should thus ensure that the workers have enough data they can apply for informed decision making. The staff should also be given the freedom to create their own budget, based on the departments or projects. To support and sustain its long-term objectives, Visionary Design Systems should restructure its compensation system to encourage support of the employees rather than the growth of the business. This would ensure that the company grows through continued support of its staff. In addition, the salaries of the sales team and that of the application developers should be greatly increased and the commissions and bonuses reduced until the growth of the company is aligned with support of the staff. Consequently, part of the capital required for the increased customer support would be generated from the realignment. Further, the compensation system should reflect the company’s successes based on attaining its goals and objectives. Visionary Design Systems should maintain positive growth and reputation among its competitors and customers is through investment in knowledge of its application developers and sales team. To achieve this, the company’s upper-level management must plainly communicate its objectives and strategies and operations so that each employee in the company is supported and is able to clearly understanding the direction of the company. In this way, the specialists are able to feel supported rather than overwhelmed. Action and Implementation Plan For Visionary Design Systems has to increase the PDM segment, it will have to develop a business plan yet again that reflects its long-term goals. First, changes will have to be made to the PDM. For instance, a company plan or strategy should be developed that would financial support an infrastructure that is capable of improving returns of the business. Formulating the business plan would call for regrouping of the software developers or engineers with the employees responsible for the PDM project. The company should also commit the right amount of resources to the related divisions in the company as well as create room for the investment capital (Porter 2000). For the company to increase its PDM division therefore, it will have to reinitialize a business strategy or plan that reflects its long-term goals and objectives. The company’s top level management will have to acquire operating capital to facilitate training of its sales team as well as the application engineers in PDM. In this way, Bulatao and Braxton should train the employees to be an extension of themselves. Through implementation of this strategy, it would raise the company’s capacity to earn more revenues as well as earn higher profit margins, thus strengthening the company’s potentials for future growth. Further, it would ensure that the company improves it reputation in the field, and establish itself as a market leader (Bandara et al 2007). Ethical Issues Visionary Design Systems should endeavor to practice good ethics while it seeks to increase its profitability and growth. From the management viewpoint, ethical behaviors would ensure long-term success of the company. The company should avoid have social responsive, where even as it adjusts its policies as mentioned earlier under recommendations, should be in line with the social demands and pressures. Even as the company will seek to develop a business plan that reflects the long-term goals of the company, it should consider the principles of social responsibilities, meaning, it should focus on the long-term objectives for the overall benefit of the society. In Conclusion, the problem with PDM appear to have arose from the company’s demand for zero investment growth and allocating resources to the non-manufacturing sectors. The company should focus on ways of improving its PDM division and products. This will involve giving the workers in the PDM division, such as application engineers and the sales staff better compensation plans that keeps them motivated. In addition, the PDM product should be improved to increase the customer base. For instance, they should focus on developing products that ensure customers start businesses with minimal expenses (Gong and Janssen 2011). References Bandara, W., Indulska, M. Sadiq, S. & Chong, S. (2007). Major Issues in Business Process Management: An Expert Perspective. In Proceedings ECIS 2007 - The 15th European Conference on Information Systems, pp. 1240-1251, St Gallen, Switzerland. http://espace.library.uq.edu.au/eserv.php?pid=UQ:12295&dsID=BPM_issues_expert_study_report.pdf Bandara, W., Gable, G. & Rosemann, M. 2005. “Factors and measures of business process modeling: Model building through a multiple case study”. European Journal of Information Systems, 14, 347-360. Darryl, D. & McCarthy, C. 2006. “Towards a learning organization? Employee perceptions”. The Learning Organization, 13.5525–536 Johnson, G, Scholes, K & Whittington, R. 2011. Exploring Strategy. Financial Times Press. London. Gong, Y. & Janssen, M. 2011. “From policy implementation to business process management: Principles for creating flexibility and agility”. Government Information Quarterly, 29 (Supplement 1), Pages S61-S71, Elsevier. Mosler, K. 1994. Visionary Design Systems: Are Incentives Enough. Cambridge: Harvard business school Porter, M 1980. Competitive Strategy, Free Press, New York. Porter, M 2000. What is Strategy?. Harvard Business Review. Available at: http://hbr.org/product/what-is-strategy/an/96608-PDF-ENG] Accessed 30 April2013. Read More