The Wallace Group

Corporate Governance and Social Responsibility

To : Prof . Dr. Manal ElKordyBy: Ahmed ElKadrawy Ahmed Galal Mohamed Talaat Amr ElSayed

The Wallace Group Summary:

The Wallace Group, Inc. is diversified company dealing in the manufacture and development of technical products and systems.The company currently consists of three operational groups and a corporate staff.The three groups include Electronics, Plastics, and Chemicals, each operating under the direction of a Group Vice President.

The Wallace Group Summary:

The company generates $70 million in sales as a manufacturer of plastics, chemical products, and electronic components and systems.Principal sales are to large contractors in governmental and automotive markets. With respect to sales volume, Plastics and Chemicals are approximately equal in size, and both of them together equal the size of the Electronics Group.

The Wallace Group Summary:

Electronics offers competence in the areas of microelectronics, electromagnetic sensors, antennas, microwaves, and minicomputers. Presently, these skills are devoted primarily to the engineering and manufacture of counter measure equipment for aircraft. This includes radar detection systems that allow an aircraft crew to know that the yare being tracked by radar units on the ground, on ships, or on other aircraft. Further, the company manufactures displays that provide the crew with a visual “fix” on where they are relative to the radar units that are tracking them.

The Wallace Group Summary:

Structure

Structure

Structure

What Wallace asked Ramper’s to do?

Don’t give me a laundry list of problems, Fran. Anyone can do that. I want a set of priorities I should focus on during the next year. I want a clear action plan from you. And I want to know how much this plan is going to cost me!

Selected Interviews

Rampar: What is your greatest problem right now?Campbell: Trying to contain my enthusiasm over the fact that Wallace brought you in!Morale is really poor here. Hal runs this place like a one man operation, when it’s grown too big for that. It took a palace revolt to finally get him to see the depths of the resentment. Whether he’ll do anything about it, that’s another matter.Rampar: What would you like to see changed?Campbell: We badly need a management development program for our group. Because of our growth, we have been forced to promote technical people to management positions who have had no prior managerial experience. Mr. Tuscher agreed on the need for a program, but HalWallace vetoed the idea because developing such a program would be too expensive. I think it is too expensive not to move ahead on this.

Selected Interviews

Rampar: What is your greatest problem right now?Smith: Corporate brass keeps making demands on me and others that don’t relate to the job we are trying to get done.An example is the Vice President, Marketing (L. Holt), who keeps asking us for supporting data so he can prepare a corporate marketing strategy. As you know, we prepare our own group marketing strategic plans annually, but using data and formats that are oriented to our needs, rather than Corporate’s.

Selected Interviews

Rampar: What is your greatest problem right now?Kane: Knowing you were coming, I wrote them down. They fall into four areas:Our salary schedules are too low to attract good, experienced EEs. We have been told by our Vice President (Frank Campbell) that corporate policy is to hire new people below the salary grade midpoint. All qualified candidates are making more than that now and in some case are making more than our grade maximums. I think our Project Engineer job is rated too low.

Selected Interviews

Rampar: What is your . . . ?Lowell: . . . great problem? I’ll tell you what it is. I still cannot get the support I need from Kane in Engineering. He commits and then doesn’t deliver, and it has me quite concerned. The excuse now is that in “his judgment,” Sid Wright needs the help for the Air Force program more than I do. Wright’s program is one week ahead of schedule, so I disagree with “his judgment.”Kane keeps complaining about not having enough people.

Selected Interviews

Rampar: What is your greatest problem right now?Jones: Wheel spinning—that’s our problem! We talk about expansion, but we don’t do anything about it. Are we serious or not?For example, a bid request came in from a prime contractor seeking help in developing a countermeasure system for a medium-range aircraft. They needed an immediate response and concept proposal in one week. Tuscher just sat on my urgent memo to him asking for a go/nogo decision on bidding. I could not give the contractor an answer (because no decision came from Tuscher), so they gave up on us.I am frustrated because (1) we lost an opportunity we were “naturals” to win, and (2) my personal reputation was damaged because I was unable to answer the bid request. Okay, Tuscher’s gone now, but we need to develop some mechanism so an answer to such a request can be made quickly.

Internal environment analysis and External environment analysis.

SWOT Analysis

Strengths Opportunities Diversity of business activity. Strong technical knowledge in the aircraft & military supporting technology. Very strong knowledge team members. Highly qualified technical workforce

Potential growth of industry. High demand for the technology provided by the company. Wide market range in Military and aircraft industry.

Weaknesses Threats Morale is really poor. The president runs this place like a one man operation, when

it's grown too big. Hal admits he never listened to his key people when they

complained. No communication and feedback taking place between the

corporate staff and the groups No alignment between corporate strategy demands and

those strategy plans met for the groups themselves. Wallace Group is holding back Electronics because they are

"encouraged" to buy from Chemicals and Plastics, which have high prices due to manufacturing problems.

Fast growth lead incompetent members to be in management positions without working on providing training and support to fill the skill & knowledge gaps.

Damaged reputation of the group president. Low response to bids could be potentially cause problems for future

bids. Loss of credibility to potential costomer.

SWOT Analysis

Questions

What are the most important problems facing The Wallace Group? What is the most important one?

The president runs this place like a one man operation, when it's grown too big.Hal admits he never listened to his key people when they complained.No communication and feedback taking place between the corporate staff and the groupsNo alignment between corporate strategy demands and those strategy plans met for the groups themselves.Wallace Group is holding back Electronics because they are "encouraged" to buy from Chemicals and Plastics, which have high prices due to manufacturing problems.Fast growth lead incompetent members to be in management positions without working on providing training and support to fill the skill & knowledge gaps.

Questions

The Most important one is the president one man show attitude and low responses that is impacting negatively both internally (organizational) and externally on the company reputation and credibility to potential customers in the market.Develop a specific action plan to deal with these problems:

Questions

Develop a specific action plan to deal with these problems:

Separation between ownership & management (separation between risk peering and management control)Establish governance and control mechanism to prevent managerial opportunism.Board of directors (the largest weight of the shareholders) focused on clear vision and strategic plan and responsible for decisions and mentoring the managing directors.Provide Auditing systems.Financial control process ( separation of cost , profit & investment centers); clear KPIs / cost center Executive compensation ( use of recognition of salaries, long term incentives and benefits )Stet clear core values that should drive the business to growth and profit maximization; sustainability, customer relation and leverage the technical knowledge.

Questions

How do you handle the transfer pricing problems involved in the backward integration?

The acquisition of the plastic company has locked the Electronics Group into using its plastic products at a higher cost.Separate between the three entities and treat each as a separate financial cost center.Set a clear pricing policy per each product.Perform a cost benefit analysis for the Plastic Company upon which the decision will be taken to improve the process, sell the facility.

Questions

If Mr. Wallace is found to be one of the major problems, should he be addressed directly or indirectly?

He must be approached directly clarifying the need of separation between owner ship and management.The required organizational change should adders his value in setting strategies along with the managing directors team.

Questions

Has the Wallace Group’s diversification strategy been effective? If yes, please explain. If no, please explain.

No it was not effective as both Chemicals and plastics were depending on selling the majority of their production to the electrical division on prices that are higher than the electrical division.Allocation of more resources to electoral division and purchasing the required material at the most low cost level would improve the profitability of the group.

Thank You