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Case 1: Ben Santos

BA 290 (General Management)

Group 3 | Atilano | Delacruz | Encarnacion | Leyritana

I.

Case Background

H. Braun, Philippines (HBP), a manufacturer of medical and chemical products in Europe,


Asia, and Latin America and a wholly-owned subsidiary of a West German multinational
corporation, had always been headed by a West German national. The current company president,
having been assigned to Latin America where he was exposed to a corporate planning system,
wanted to implement one in HBP. To assist him with the design and institution of the corporate
planning system, he appointed Ben Santos, a newly hired Assistant to the President, as Head of the
Indent Division of the Strategic Planning Committee.
II.

Problem Indicators

Ben Santos received negative feedback from some of the division managers of HBP with
regard to his proposed corporate planning system. The Division Managers of the Pharmaceuticals
and Medical divisions implied that his proposed planning system is straight from a book, while the
Manager of the Chemical Products Division could not see the need for a new system.
III.

Problem Statement

How can HBP reduce resistance to change and implement a formal corporate planning
system in the organization?
IV.

Problem Analysis

Assumptions:
All members of the management team of HBPexcept Ben Santos who is a Filipino
nationalare West German nationals. This will help in understanding the culture difference
issues of both nationalities.
The HBP President wants to implement a corporate planning system to improve the
Return On Equity (ROE) of the company. Currently, the company has an ROE that is
uniformly set at 20 percent. In order to gain competitive advantage, HBP needs to raise its
standards and grow with the industry.
Appendix 1 summarizes the different factors that resulted to the companys resistance to
change. HBP lacks a clear and concrete set of goals and strategies. The only strategy they are using
is the preparation of a two-year revenue and cost budget for each of the divisions based on the

guidelines from West Germany. This poses as a problem because the economy and culture of the
Philippines is different from that of West Germany. The company does not have a clear direction as
to where it is going and where it wants go. Budget plans and estimated production planning are not
enough for a company to gain competitive advantage, and attract and satisfy customers. HBP needs
to have a strategic plan to have better financial results. A uniformly set Return on Equity (ROE) for
over a number of years clearly states that the company is not growing; instead, it is stagnant and is
stuck in its comfort zone.
The division managers do not see the need for a new system since they are used to the
companys old practicesthe company gives them a budget and they do their own planning. In a
corporate culture where you get used to what is tradition, it is difficult for one person to suddenly
just go in and implement changes. When change is pushed onto a company without giving the
employees adequate warning and without helping them through the process of understanding the
said change, it will cause them to push back against it. There is also resistance because of the
division managers perception of Ben Santossomeone who does not know as much about HBPs
operations as they do, being a new hire in the company. They are also reluctant to take orders from
someone relatively young.
The President of HBP saw the need to implement a corporate planning system and assigned
Ben Santos the task. The problem with this approach is that the Board of Directors (BOD) is
bypassed. Generally, it is the role of the BOD to provide leadership in the development and
execution of a strategic plan for the company. In other words, this is where goals and objectives of
the company should emanate from. This being the case, the division managers may have viewed the
new president as too authoritative. Furthermore, the decision to implement a corporate planning
system should be made in headquarters, since HBP is a global corporation. Moreover, the request of
the president for the immediate implementation of the new planning system (i.e., implementation in
the middle of the year) may also be a reason why the division managers opposed it. According to
Hofstede, Germans in general have high uncertainty avoidance and do not like surprises; even if
they may improve the business outcome, new unexpected changes are not welcome.1
Managing a company in a different country can be challenging especially when differences
among cultures are not recognized. A global corporation like HBP faces cultural difference issues
that are causing some of its organizational members to develop restraining forces towards the
companys plans. Appendix 2 shows Hofstedes framework in identifying the differences in value
dimensions in Germany, Philippines, and Latin American country Argentina will help analyze the
1 "Germany Business Etiquette, Culture, & Manners."
Web.<http://http://www.cyborlink.com/besite/germany.htm>.

factors that led some of its organizational members to restrain to the companys plans. Germany has
a low score in power distance, which means they have low acceptance on unequal distribution of
power. On the other hand, Philippines has a high score in power distance. Typically, low score in
power distance also implies that control from the management is disliked and leadership from the
management is challenged. Especially in Germany, co-determination rights are comparatively
extensive and should not be taken for granted by management. 2 Thus, it can be inferred that the
divisional managers in HBP felt they were isolated when the corporate planning system was
formulated. As mentioned earlier, Germans also avoid uncertainty and prefer structured over
unstructured situations. For them, details are very important and need to be presented in a
systematic manner to create certainty that a project is well thought out. 3 Given that Germans score
high in uncertainty avoidance, they may prefer and be convinced by planning systems that are
proven to provide better performance to an organization. However, due to the lack of effort in
communicating the purpose and benefits of the corporate planning system to the division managers,
they may indeed find no reason for its implementation since their current planning works. Germans
significantly score low in long-term orientation. They prefer to preserve time-honoured traditions
and norms, view changes with suspicion, have low propensity to save for the future, and focus on
short-term results. In contrary, Brazil, an example of a Latin American country has a high score in
long-term orientation. This is evidently displayed when the president wanted to have a corporate
planning system that will guide them to achieve their goals.
V.

Alternative Courses of Action

Appendix 3 shows the list of alternative courses of action and its corresponding advantages
and disadvantages. The division managers resistance to the implementation of the new planning
system can be rooted from Ben Santos assignment as the head of the Strategic Planning
Committee. As such, the resistance is not so much towards the formal planning system, but rather
towards Ben Santos. Nevertheless, there are still lapses in the formal planning system Ben Santos is
proposing. Several reasons pose for their resistance towards Ben Santos; this can be attributed to
him being a newcomer in the company, his age, his cultural background, and even his credentials or
experience (or lack thereof) in strategic planning. One approach that HBP can utilize to minimize
the resistance to the implementation of the corporate planning system is to hire an external
2 "What about Germany?" The Hofstede Centre. Web. <http://geerthofstede.com/germany.html>.

3 Ibid.

management consultancy firm to head the Strategic Planning Committee. Hiring an external
consultancy firm will help resolve the issues division managers have on Ben Santos, especially his
lack of experience on the matter. Instead of heading the committee, Ben Santos can act as a
facilitator between the consultancy firm and HBP. Hiring a consultancy firm will also help
minimize any bias that the Indent division may have towards achieving the goals set by the BOD.
Another alternative course of action that the company can take is to require the BOD to undertake a
board retreat. Board retreats are usually done when there is a need to discuss important issues about
the company, especially during transition periods. 4 There is a need for HBP to undertake a board
retreat since there is a new management. This will help the company align its strategic goals and
objectives with that of the new management. Moreover, having the BOD set these goals for the
company will eliminate any biases that the president may have with regards to goal-setting. The
downside, however, is that it is time-consuming, in contrast to just having the new management
implement its own corporate planning system.
VI.

Recommendations

From the alternative courses of action, and the table for criterions and weights in Appendix
4, the group recommends that it is best for HBP to hire an external consultancy firm and let the
BOD set the goals for the company. Hiring an external management consulting firm, although
expensive, will provide better results in implementing the goals set by the management due to its
capability and its available resources such as the experts in the field of management. Since they are
hired as an external consultant, unbiased judgment is expected from them. Division managers need
to be convinced of using the new planning system by increasing the driving forces. This includes
setting up several meetings to inform the division managers of the benefits of setting long-term
goals and letting the Board of Directors set those corporate goals that the divisions will
operationalize. Since stated goals come from the Board of Directors, division managers would most
likely comply and will ensure that their strategies will be aligned to the companys goals.
VII. Implementation Plan
Appendix 5 shows the Implementation Plan for HBP Company. The implementation of the formal
planning system will start from the third quarter of 1985 and commence in the fourth quarter of the

4 "Board Meetings & Retreats." Exponent Philanthropy to the Power of Small.


Web.<http://http://www.exponentphilanthropy.org/resources/by-topic/boards-andgovernance/board-meetings-retreats>.

same year in order that the implementation of the action plans set by the concerned divisions will
take effect on the following year.
The first step in the implementation timeline is for the BOD to conduct a board retreat. The
primary reason for the board retreat is to identify the goals and objectives of the company for the
following year. This will be done simultaneously with data gathering (i.e SWOT analysis), where
data gathered will be used in order to identify the companys position (i.e. in terms of current
market share, growth rates, etc.) and formulate strategies in relation to these data. After the board
retreat, results of the retreat will be cascaded down to the management and the strategic planning
committee where it will be reviewed. The next steps, steps four and five, will be handled by the
external consultancy firm (mostly analysis and evaluation of the formal planning system).
Frameworks and other planning processes in this stage must be coordinated clearly by the external
consultancy firm with the companys strategic planning committee to identify the assignment of the
strategic goals and objectives of the company to the concerned divisions. After this step is the
formulation of action plans by each department. This step tells the management how the department
will achieve the plans and goals set by the company. Lastly, a final review of the proposed planning
system will be in place before the implementation of the strategies of the formal planning system
for the following year.

APPENDICES
Appendix 1. Problem Analysis

Appendix 2. Hofstedes Framework

Appendix 3. Table for Alternative Courses of Action


ALTERNATIVE COURSES OF ACTION
Action

Advantages

Option 1: Hire an

It
to

Disadvantages

will

give

the

formal

external management

credibility

consultancy firm

planning system since division


managers will perceive them as
experts

(compared

Santos)

to

Ben

Costly
May

additional

data

require
from

divisions which may take


more time

It will remove any

bias from the data submitted by


the concerned departments and
division managers
Option 2: Status Quo
(assign Ben Santos as

Less expensive

Ben Santos is

inexperienced in terms of

head of Indent Division)

Strategic Planning

More resistance
from the division managers
because of their perception
of Ben Santos
Option 1: Request the

There

is

an

BOD to have a retreat

alignment of the strategic goals

(i.e.,

and objectives of the company

formal

planning

system to emanate from

with

that

of

the BOD)

management

Less

the

Time-

consuming

Costly

new

resistance

from the division managers


since the directive is coming
from the BOD

Unbiased setting of
goals and objectives for the
Option 2: Status Quo

company

Goals

and

(proceed with the plan


set by the president)

Shorter

implement

Appendix 4. Criterions and Weights

Appendix 5. Strategy Implementation Timeline

time

to

objectives may have the


tendency to be biased