The Core Problem Facing King Engineering

The Core Problem Facing King Engineering  
Executive Summary (~200 words)
The core problem facing King Engineering is a lack of a definite structure to assess the company’s performance. With such a problem, the company is unable to track its progress or assess its progress against a set or adopted measures. This problem has been caused by several elements, including the many changes the company has experienced in the recent past and a lack of coherence between corporate managers and group managers. Further, this problem is exacerbated by factors like poor innovation in the company that limits growth, the disconnect between the younger and older employees, and the great emphasis on numbers and hitting targets instead of adopting practical measures. To help avert the core problem, the company could either choose to the alternative of developing company-wide goals. These should be divided into short- and long-term goals to help ease the process of tracking progress and performance. The other solution or recommendation would be to adopt the balanced scorecard system. With this system, the company would be able to develop unit-specific objectives and track its progress using objective-specific KPIs. This recommendation is preferred because, first, it is specific to each business unit, and second, it makes sure that growth is assessed objectively.
Introduction
For a company that has been in existence for more than half a century, one would think that a solid foundation or structure would be the least of its problems. However, this is not the case for King Engineering. King Engineering is a service engineering and construction firm that grew to a powerhouse by the year 2016. Through its three main business units, including the Transportation Group, the Energy & Chemicals (E&C), and the Infrastructure & Technology (I&T), the company was able to make a name for itself and to traverse the business world. However, a number of issues have plagued the company in the recent past, and these have greatly contributed to its stagnation and struggles recently. Provided in this case analysis is King’s main problem, the causes of the core problem, a discussion of the probable alternatives, a recommendation of the apt alternative, and an action and implementation plan to help actualize a turnaround for the company.
Problem Statement (~50 words)
The core problem facing King is the lack of a definite structure to assess the company’s performance. Without a definite structure or management system that allows the company to assess its performance against set objectives objectively, it becomes difficult to actualize rewards, assess the company’s progress, and project the future. Further, it is challenging to implement contingencies that can cater to unforeseen circumstances. This brings about the controllability principle and its influence in determining the influence of actions or inaction that took place over a period of time (Merchant & der Stede, 2017). So, the lack of a definite structure to assess the company’s performance is crippling King’s progress.
Analysis (~900 words)
One of the causes of the core problem identified is the changes the company has experienced in the recent past. Changes for the betterment of a company are a great initiative. However, these can also be to the detriment of a company if they are not adopted and implemented strategically. In the case study, King’s business model had undergone many changes in the recent past to the point where it became difficult to use the company’s data for future projections. For example, Jim Anderson did not have any credible data points that he could use for “model estimation purposes.” The implication of the above is that the company is undergoing many changes that hamper its progress instead of enhancing its progress. The future of the company should be informed by its past. However, if the available data is not reliable enough to project the company’s future trajectory, the adopted changes are detrimental to the company’s progress. So, the many changes King has undergone have rendered its future bleak with regard to the relevance of its historical data points.
Lack of coherence, especially in strategy between corporate managers and group managers. It is crucial for companies to set goals and objectives to help them attain these goals. However, at King, there appears to be a disconnect between corporate and group managers. The goals at the corporate level are expected to be attained at the group level. However, as per the case, the group managers are also expected to develop their own goals. The development of goals at multiple levels is a risk that impairs the company’s development of a clear strategy. While the goals might be apt and bear a mark of quality, they are likely to never be attained, impacting the performance evaluation process. The conclusion on such is likely to be poor performance, but this could be misleading considering the confusion and disconnect in the company.
The other cause of the core problem is poor innovation in the company. The management control adopted at King appears to be stifling creativity and innovation. Therefore, the company is making minimal changes to its business strategy and investment ideas. As indicated in the case study, new investments are difficult to come by at King because of the corporate scrutiny that they are subjected to. The case study reveals instances when managers pass on the opportunity to propose new investments because of the fear that their ideas would not pass the corporate scrutiny. Though the oversight from corporate managers is crucial, it appears to be overbearing and condemns the company to stagnation. There should be some level of freedom for the group managers to help encourage innovation. With little room for error, it becomes difficult for the managers to explore and seek opportunities for growth and expansion of their units. In one instance, Bill Houchin (President of I&T) speaks about the inability of managers to take risks because of the downside of having to take responsibility for investments even when factors outside their influence played a role in the outcome. The room for error should be expanded for the sake of helping managers to explore and experiment, of course, within agreeable boundaries.
Another cause of the core problem entails a great focus on numbers and basing performance on whether managers have, in fact, hit their targets. As indicated in the case study, the management incentive plan was changed in 2016, and it was based on whether managers were able to hit their Gross Profit Sold (GPS) and Net Operating Income (NOI) targets. A focus on the numbers often introduces a subjective approach to evaluating performance. Having the final numbers as the only results that matter limits the view of a company’s true or real structure and performance. As it was indicated by the president of I&T, Bill Houchin, the targets set are not practical and often cause problems further down the organization. The real picture is lost with an emphasis on ratios and numbers, and everyone’s focus shifts to trying to attain a ratio that may not apply to their business unit. Aside from the above, there is also the problem of holding managers accountable for the flows and returns on investment proposals. In doing this, corporate managers ignore the controllability principle. Employing the controllability principle could allow corporate managers to assess results based on the action or inaction of managers. However, a narrow and limited focus on the numbers and ratios means that managers are being held accountable even for aspects and factors they cannot control.
The disconnect between the employees is another crucial issue that greatly contributes to the core problem facing the company. The average age of the employees in the company is 47, and the 36-45 age group appears to be non-existent in the company. So, the company has a divide between old and young employees with different plans, company outlooks, and future projections (personal and company-based). While this issue can be ignored as a cause or contributor to the company’s main problem, it is crucial to understand the differences in demeanor between these two groups of employees and the impact of the same. For older employees, productivity and performance are measured based on the number of hours a person clocked and whether they sh...