Submitted by: Submitted by bunny66
Views: 210
Words: 3243
Pages: 13
Category: Business and Industry
Date Submitted: 07/08/2014 12:56 PM
EXECUTIVE SUMMARY
This report presents a case involving problems at Axeon N.V., an industrial chemical conglomerate in late 1998. Axeon was headquartered in the Netherlands and has three subsidiaries in the U.K., Scandinavia and Southern Europe. The style of Axeon’s top-level management was to emphasize a high degree of decentralization. Managers at each subsidiary had the autonomy to determine their product mix, to develop new product and to build their own manufacturing facilities.
As a multinational company, Axeon was challenged by ineffective performance measurement systems and a lack of strategic corporate control. These deficiencies have led the Axeon to reward and motivate managers for solely focus on managing short-term revenue and profit for the own subsidiaries. As a result, the optimization of shareholder’s return in the long-term was jeopardized.
Understanding the fact that Axeon had grown from a small, simple functional organization to a complex, multinational conglomerate, top management at Axeon might not have designed or implemented proper strategic corporate control and performance evaluation systems. Further analysis reveals that the company’s performance control system was counterproductive. Managers were rewarded based on individual performance of their subsidiary alone and not on the collective performance and success of Axeon resulting in intense competition between subsidiaries and a lack of synergy for outperformance.
This case brought forward an example of this challenge when Ian Wallingford, Managing Director of Axeon’s British subsidiary, Hollandsworth Inc., made a seemingly profitable proposal for a project to manufacture AR-42, a protective coating chemical in the U.K. in October of 1998. This proposal was initially approved by the board of directors in Axeon and Hollandsworth but later became controversial given the validity and profitability and was questioned by top-management at Axeon.
A throughout review of the financial...