Handling Change at Ferguson the Credit Function

Leadership and Organizational Change

Prof. Paul Ingram

Individual Case Study

Handling change at Ferguson The credit function

Olga Gromova

8/12/2016

Executive Summary

Management is considering restructuring Ferguson’s credit function due to pressure from shareholders to reduce costs and move toward an economy of scale and the central credit office’s desire to improve the efficiency of local decision-making. However, our analysis demonstrates that none of the above goals can be achieved via restructuring. Moreover, there is a high risk that these moves will damage current performance, as the forces for change are external to the business. Instead, we recommend a set of measures to boost credit function efficiency within the existing structure.

Analysis

We split our analysis into parts: 1) Whether consolidating the credit function benefits Ferguson 2) and areas of concerns and opportunities to improve credit function performance.

1. Whether consolidating the credit function benefits Ferguson

Worseley UK insists on consolidating the credit function because it believes that centralization will increase profits, and its other subsidiaries are organized in this way. However, it fails to recognize that financial performance is culture-dependent—what works in European culture could be disastrous in U.S. culture. The Lincoln Electric example shows the dangers involved in blindly copying something that worked elsewhere without understanding the market’s cultural specifics.

It is important to notice that Ferguson’s credit function is not completely decentralized, as its credit application function has already been centralized. Also, the strategy and standards are determined centrally. Consequently, the low hanging fruit has been already picked. Moreover, local credit managers support multiple KOB branches in the same geographic location, so obvious redundancies have been eliminated as well.

Given the size of a credit function compared to the total...