Westport Electric Corporation:

Case Context

      In a meeting, James King, the supervisor of administrative staff budget section of Westport

Electric Company, a large manufacturer and seller of electric and electronic products, was discussing

his displeasure with the proposed increase in budget of the offices. According to him, these are not

justified and are clear indications of faults in the company’s budgeting system. The company

currently has six staff offices like those mentioned and they are tasked with providing advice to top

management and operating divisions as well as other staff offices. They also coordinated among the

divisions depending on their areas of activity. These staff offices are budgeted using the company’s

budget approval procedure, which according to some of its officers like King, needs a lot of

improvement. 

Q) What should Westport do about the evaluation problem raised in the case?

PROBLEM STATEMENT

      The budgeting system of Westport should be assessed as to its efficiency and effectiveness and

identify changes that will develop the current system. 

ANALYSIS AND RECOMMENDATION

     We recommend that top management actually pay considerable attention to the efficiency and

effectiveness of each business division. Currently, it appears that focus is given simply on bottom line

numbers; that is, each unit’s financial success is assessed solely on the basis of how handsome the

profits brought in for the company, without being given much performance evaluation as is needed in

any organization. Being distinct profit centers, both revenues and costs must be calculated for each

business segment. It is important to note that while the individual divisions may report the most

exorbitant of profit figures, the numbers do not carry with them as much meaning as when these are

put into context. As in the case of Westport Electric for instance, Kelly is quick to point out that the

company is certain to do better trimming down budgets handed to certain divisions such as legal

department and the Industrial relations According to him the trining given by the IR division is not

worth the money that they cost. Also during presentations the budgeting department should take

proper position on the appropriateness of the proposed budget or the efficiency of the activity. Also

the finance Vp and the divisional controller should raise their opinion / objections to the proposed

budgets if they believe it is not sufficiently tight. The finance minister should be given the official

power to approve or disapprove the budget presentations. There should be goal congruence of the

staff departments to perform optimally in the interests of the organization. Hence Westport should

take care that the evaluation of the budgets is done monthly and each division should be responsible

or take the responsibility of the results and       The budgeting system of Westport should be assessed

as to its efficiency and effectiveness and have a tight budget so as to have a goal congruence in the

interest of the organization.

Leranings:

There was no goal congruence between certain departments and the ineterst of the organistaion and

there was lack of responsibility centres ( an organization that is headed by a manager who is

responsible for its activities)

Other info on Westport Electric :

Overview of the organization

- een van de grootste producenten en distributeurs van elektronica in de VS. - One of the largest

producers and distributors of electronics in the U.S..

- activiteiten zijn onderverdeeld in vier groepen, elke groep geleid door een VP: - Activities are

divided into four groups, each group headed by a VP:

- Electrical Generating and Transmission Group; - Electrical Generating and Transmission Group;

- Home appliance Group; - Home Appliance Group;

- Military and Space Group; - Military and Space Group;

- Electronics Group. - Electronics Group.

- Iedere groep bestaat uit een divisies geleid door divisie managers. - Each group consists of a

division led by division managers. Elke divisie is een profit center. Each division is a profit center. Er

zijn 25 divisies binnen de organisatie. There are 25 divisions within the organization.

There are six corporate departments and a separate staff department in Office, each staff department

headed by a VP:

- Finance; - Finance;

- Industrial Relations; - Industrial Relations;

- Legal; - Legal;

- Marketing; - Marketing;

- Manufacturing; - Manufacturing;

- PR; - PR;

- de verantwoordelijkheden van de stafafdelingen bestaan uit: - The responsibilities of the staff

departments include:

- het adviseren van het top management; - Advising top management;

- adviseren van de divisies en de andere stafafdelingen; - Advise of the divisions and other divisions;

- het coördineren van hun respectievelijke verantwoordelijkheden binnen de divisies. - Coordinating

responsibilities within their respective divisions.

2. 2. Probleemstelling Problem

- de tekortkomingen in de - The shortcomings of review and approved the budgets of the ring

divisions;

- de aanzienlijke (onterechte) verhoging van de budgetten van twee stafafdelingen. - The significant

(incorrect) increase in the budgets of two staff departments.

- voor wie is het een probleem? - To whom is it a problem?

Het is een probleem voor de gehele organisatie. It is a problem for the entire organization. Maar met

name voor James King die werkzaam is op de afdeling Budgettering. But especially for King James

who works at the Department of Budgeting.

- waarom is het een probleem? - Why is it a problem?

Door een gebrek aan doelcongruentie bij de stafafdelingen presteren deze niet optimaal in het belang

van de organisatie. A lack of doelcongruentie the staff departments not perform optimally in the

interests of the organization.

- waar ontbreekt het aan? - Where lack?

- evaluatie van de budgetten (maandelijks); - Evaluation of budgets (monthly);

- prestatiemeting obv beschikbare budgetten tov werkelijke resultaten; - Performance based on

available budgets compared to actual results;

- geen resultaatverantwoordelijkheid bij de stafafdelingen; - No responsibility for results in the

divisions;

- een beloningssysteem voor stafafdelingen. - A reward system for corporate departments.

Analysis of the information in the case

3.1 Huidige procedure 3.1 Current Procedure

- de afdeling budgettering verspreid tijdig instructies en tijdsplanning tbv het indienen van de

budgetten van het komende jaar. - The department distributed budgeting and scheduling timely

instructions serving the submission of the budgets of the coming years. In deze casus gaat het over

de budgetten van de stafafdelingen.... This case is about the budgets of the departments staff ....