Metal Purchase Planner: Manager or Scientist?

The following appeared in a report presented for discussion at a meeting of the directors of a company that manufactures parts for heavy machinery:

“The falling revenues that the company is experiencing coincide with delays in manufacturing. These delays, in turn, are due in large part to poor planning in purchasing metals. Consider further that the manager of the department that handles purchasing of raw materials has an excellent background in general business, psychology, and sociology, but knows little about the properties of metals. The company should, therefore, move the purchasing manager to the sales department and bring in a scientist from the research division to be manager of the purchasing department.”

Discuss how well reasoned . . . etc.

In the first part the writer reckons that the falling revenues coincide with delays in manufacturing but fails to establish if it is indeed so. It is presented as a conjecture and a possibility. Unless and until some kind of data or investigation says that manufacturing is definitely the main culprit, it is not wise to do any kind of serious finger-pointing.

Nevertheless we have one thing for sure that there are manufacturing delays. This is definitely not good for the reputation and the revenues. So it may be a good idea to look for a possible solution. This delay may be the cause or just a symptom of the cause. Either way working on it as a starting point may lead to a solution.

The writer identifies with certainty that the cause in manufacturing delays is poor planning in purchasing metals. This poor planning is further attributed to the manager handling the raw material purchase department. The writer concedes that the manager has a good background but lacks knowledge about metals. In order to tackle the problem and apparently use the manager's strengths at the right place the writer proposes transferring the manager to sales department and replacing him with a scientist from the research division.

Although I agree with the initial train of reasoning, I do not find the solution to be convincing at all. Even if metal may be the main raw material for heavy machinery industry it is certainly not the only one. The manager in question seems to have managed other raw materials well but bungled up with metals due to lack of knowledge about metals. There is no complain wrt the manager's people handling skills either. If the manager has displayed acumen in handling other things it is reasonable to assume that he will be able to do the same for metals if given appropriate training. A scientist, on the other hand may be completely inappropriate for the job. Scientific knowledge about metals is not the same as commercial knowledge about metals. Getting metals at right price may entail knowledge about commodities markets, forward contracts, networking and metal market situations. A scientist may be completely out of his depth for such a job, no matter how much he may know about metals. While making a purchase plan for metals one may not know about a metal's melting point but definitely needs to know if there is a meltdown in the commodities market! A scientist without any business acumen or education may also face problems with people management. All in all it may turn out to be a disastrous solution. Hence the reasoning is seriously flawed.

All in all, replacing the manager with some other manager of comparable acumen but with better knowledge about metals may be a good idea. Alternatively the current manager can be trained. Replacing him with a scientist is a bad idea and will not solve the company's problems.

Price Slash and Growth

The following appeared in an announcement issued by the publisher of The Mercury, a weekly newspaper:

“Since a competing lower-priced newspaper, The Bugle, was started five years ago, The Mercury’s circulation has declined by 10,000 readers. The best way to get more people to read The Mercury is to reduce its price below that of The Bugle, at least until circulation increases to former levels. The increased circulation of The Mercury will attract more businesses to buy advertising space in the paper.”

Discuss how well reasoned . . . etc.

The writer reasons that lowering the price for the newspaper will help it to increase its falling circulation as in the last five years the newspaper has lost a bulk of readers to a lower-priced competitor. The writer is aware that lowering the price will lower direct sale revenues and justifies it by projecting more advertising revenue due to an increased circulation. I am cautiously optimistic about this reasoning.

I agree that lowering price will help Mercury compete with Bugle on the price front. I also agree that a newspaper can rely on its advertisement revenues and not on its sale revenue. This strategy has enabled many newspapers free distribution. eg. In London quite a few local newspapers (like City A.M., London Lite and Metro) are distributed free of cost. This enables them to capture a high readership and in turn attract a lot of local advertisement. This is generally enough to keep them profitable and growing. The same principle helps many newspapers to offer a discounted selling price and still be profitable.

However a price cut is not a silver bullet to increase readership overnight. Of every one "free" newspapers that succeed, there are other ten that fail. It may also be noted that premium newspaper brands sometimes do not lower their prices and still command high circulation due to quality of content, strong distribution channels and creative marketing. The newspaper needs to sit back and analyze what made it loose 10000 customers over 5 years. Was it simply availability of a lower-priced alternative or were there other reasons too? After a thorough analysis a comprehensive strategy can be put in place of which price cut can be a part. Without such a soul-searching exercise there are no guarantees how effective a price cut may be in the long run.

In the end it is good to be able to get a quick fix to a problem. However, as they say, there are no short cuts to a place worth going. If Mercury indeed aims increase its readership and grow consistently over time, it needs to do more than a simple price slash. Undoubtedly a price slash would help. Whether it will be able to do so at the scale envisioned by writer is, however, doubtful.

Does Restraint in Use of Power Impress People?

“Of all the manifestations* of power, restraint in the use of that power impresses people most.”

*manifestations: apparent signs or indicators

Explain what you think this quotation means and discuss the extent to which you agree or disagree with it. Develop your position with reasons and/or specific examples drawn from history, current events, or your own experience, observations, or reading.

I feel that restraint in the use of power indeed impresses people. Such a restraint may not lead to any true benefit. It may even lead to serious losses and utter self-destruction. However it will generally impress people.

Restraint in use of power means being magnanimous, fair and tolerant. It signifies a strong belief in human values, compassion, wisdom, a good sense of humor and immense self-confidence. It is not reacting to random provocations and the ability to choose one's battles and enemies. When somebody shows such a restraint, people associate heroic knight-like qualities with the person. What follows is that such an entity is put on pedestal as the epitome of all that is good about the human kind.

However the wise and politically correct thing would be to completely annihilate the enemy at hand. Wise men have advised to never under-estimate an enemy or a disease. Those who do that, do at their own peril. Whole Europe practiced restraint against Hitler and that ultimately led to the disastrous second world war. One cannot preach to be practicing restraint from the apparent position of weakness while pretending to be strong and taking a moral high ground. It may work if your enemy is principled but will fall flat on the face if he is not. Mahatama Gandhi's restraint worked with the gentlemanly British but would it work with Hitler or Stalin? Not a chance in hell! Would it be impressive? Definitely. Would it work for sure? Most probably not. At best there can be restraint on the decision to use power or not. Once it is decided that use of power is inevitable, there is no room for restraint. You can pretend restraint strategically to give some apparent room to the enemy in order to relax and misguide him but that is as far as it goes.

Restraint in use of power can often be mistaken for cowardice and/or indecision. In this case it may get you sympathy but definitely will not impress anyone. One has to convey in no less uncertain words (and actions) that one is practicing restraint but one is not practicing abstinence and is sufficiently powerful. It has to be understood that being humble, not bragging, using controlled aggression and strategizing are different from restraint which is simple and foolhardy inaction in spirit of heroism by an essentially good human being. Being a practical realist I definitely do not believe in using the principle of restraint in my own life as it is a sure shot way to loss. However I agree that such a chivalric display from a position of strength will generally impress people.

Television and Arts Promotion

The following appeared in a memorandum issued by a large city’s council on the arts:

“In a recent citywide poll, 15 percent more residents said that they watch television programs about the visual arts than was the case in a poll conducted five years ago. During these past five years, the number of people visiting our city’s art museums has increased by a similar percentage. Since the corporate funding that supports public television, where most of the visual arts programs appear, is now being threatened with severe cuts, we can expect that attendance at our city’s art museums will also start to decrease. Thus some of the city’s funds for supporting the arts should be reallocated to public television.”

Discuss how well reasoned . . . etc.

In the first part of the argument the writer tries to correlate the increase in the number of people visiting the city's art museums to increase in number of people watching television. This can be, at best, partially true. The writer assumes that the museums get all publicity only from television. It is very much possible that they are promoted by not only television but also by newspapers, radio, Internet, art magazines, tourist offices and travel guides. Besides the programs supporting visual arts is not run on all channels. The writer clearly mentions that only the public television runs most of the visual arts programs. In this era when people have hundreds of channels to choose from it is very naive to assume that all the people view the channel promoting visual arts. Unless and until only public television is available to majority this cannot have a major impact on people coming to see museums.

If we assume that it was indeed only television that caused this growth, it is very hard to see how. One possible explanation can be that 5 years ago a very large number of people watched television while the number of people visiting museums was very small. So a 15 percent increase in television viewership may have actually diverted a small chunk to museums. However that small chunk may have been enough to raise museum visits up by 15 percent! Besides such a far-fetched scenario I do not see any other way of logically correlating the two.

The writer further reckons that fall in TV viewership would lead to fall in people going to museum so some funds for supporting the arts should be reallocated to public television. It is not clear at this stage if such promotions are run on public television free of cost or at some cost to museums but in either case it does not make sense to do such a thing.

If it is at a cost, it makes sense to switch to another channel with comparative cost and coverage that is not doing as bad. Alternative promotional vehicles can be explored by putting in place a concrete marketing plan employing a mix of all media and resources. Even if they are run free of cost on public television, it makes more sense to spend the funding money under a well thought marketing plan as the impact of television cannot be over emphasized. It is good to have but not indispensable. So, either way simply reallocating funds seems to be like a knee-jerk reaction to a non-existent problem. The public television, by all means, is not the museum's problem. Their problem is to increase visitors which can be done in many ways without reallocating funds.

Centralization and Profit

The following appeared in a memorandum from the business department of the Apogee Company:

“When the Apogee Company had all its operations in one location, it was more profitable than it is today. Therefore, the Apogee Company should close down its field offices and conduct all its operations from a single location. Such centralization would improve profitability by cutting costs and helping the company maintain better supervision of all employees.”

Discuss how well reasoned . . . etc.

The writer says, "When the Apogee Company had all its operations in one location, it was more profitable than it is today. Therefore, the Apogee Company should close down its field offices and conduct all its operations from a single location." This argument correlates conducting business from a single point with profit. I do not agree with this reasoning.

Companies spread operations to more than one location
-to expand their business into new countries or regions that demand a local presence
-to take advantage of time differences and be operational 24x7
-take advantage of favorable, business friendly regulations (tax breaks, less bureaucracy, ease of starting or closing a business) and/or conditions (availability of cheap labor, abundant raw material, excellent infrastructure, availability of credit) not available in the current location

Generally growth and the desire to penetrate new markets leads to companies expanding to more than one location. Such growth entails commitment in terms of investment in new infrastructure and resources. So apparently this can affect the bottom line profit of the company. However such an effect should be more than offset by the fact that this adds to assets of the company and long term strategic interests. So, in all probability Apogee is undergoing such a growth cycle and there may be nothing to really panic about. Acting in haste and repenting in leisure is not a good thing to do.

The writer further says, "Such centralization would improve profitability by cutting costs and helping the company maintain better supervision of all employees." This statement assumes that operation costs are the only reason behind profit falls. It further assumes that all employees from all locations would be willing to shift. Such a sudden shift will not only be catastrophic loss to the company in terms of loss of assets sold in haste but may also lead to severe attrition. If the company is public, not to mention the effect it may have on the investor sentiment. The statement suggests that the decision to expand may not have been taken carefully and the decision to contract may go down the same path.

The only condition in which this may actually be a good decision is if the branches opened are quite old and still not turning profitable. A close review or even downright shutting down of such branches may be needed to cut down losses. It still would not make sense to indiscriminately close down all branches.

Concluding, the writer's reasoning links centralization and profits without any logical proof for the same. He assumes that people will be ready to re-locate and centralization will not cause any attrition. The whole reasoning looks like thought in hurry and shallowly.

Is a Flat Organizational Structure a Good Thing?

“Corporations and other businesses should try to eliminate the many ranks and salary grades that classify employees according to their experience and expertise. A ‘flat’ organizational structure is more likely to encourage collegiality and cooperation among employees.”

Discuss the extent to which you agree or disagree with the opinion stated above. Support your views with reasons and/or examples from your own experience, observations, or reading.

I do not think that flattening the organizational structure is a good idea.

On one hand a flatter structure can encourage collegiality and cooperation, as the statement says. People are less likely to be upset to find that somebody at a similar level is earning way more than them. This would also encourage cooperation as there will be no competition to get a little ahead in the race. This would undoubtedly cut the stress associated with the job.

On the other hand a flatter structure will discourage competition which will, in turn, discourage performance. Employees will not have any incentive to do things better than their peers. Such a culture may discourage performers and encourage mediocrity. The best performing people may tend to leave for organizations that take into account their hard work and desire to excel.

I feel that in essence flattening organizational structure is a populist, egalitarian, socialist step that can severely affect performance of a corporate on the whole. Like all grand socialist ideas they do sound good on paper but never work in the practical world as they are too idealistic. A better idea may be to encourage team work by linking rewards to both personal and team performance. People in general will not wake up to perform or be team players if it does not benefit them in a concrete way.

The cliched climb up the corporate ladder has to be visible in terms of milestones and rise in salary: which is the whole rationale behind having many ranks and salary grades. I agree that this creates rivalry but it also gives people reason to do things in a better way. However when performance is linked to team work along with individual performance, people will desist from being unnecessarily hostile to each other. Flattening the organizational structure is definitely not the answer in a capitalistic corporate environment.

Of Saving Energy and International Cooperation

“It is unrealistic to expect individual nations to make, independently, the sacrifices necessary to conserve energy. International leadership and worldwide cooperation are essential if we expect to protect the world’s energy resources for future generations.”

Discuss the extent to which you agree or disagree with the opinion stated above. Support your views with reasons and/or examples from your own experience, observations, or reading.

I agree with the statement above. If we expect to protect the world’s energy resources for future generations, it is definitely not possible without international leadership and worldwide cooperation. The reasons are not too difficult to fathom.

The current world order can be seen as consisting of a few blocs: Western Bloc (Basically all developed and first world countries like USA, European Union, Japan, Australia, Canada etc.), BRIC countries(upcoming economies of Brazil, Russia, India and China growing at a stupendous rate) , Islamic Union (basically oil rich developing countries with Islam as their state religion like UAE, Saudi Arabia, Qatar), other second and third world developing countries and the countries in total chaos (countries with lowest human development index like North Korea, Sudan, Ethiopia, Iraq and Afghanistan). Each bloc has different needs and very few, if any, are prepared to think of long term solutions.

Developed countries are the biggest consumers of energy resources. Even while they preach to developing countries to cut down their fuel consumption, they do not seem to be implementing the same for themselves. The only exception to this rule is the European Union (EU) that has invested more money than anybody in finding energy conservation solutions. USA on the other hand refuses to cut its fuel consumption, cut down its green house emissions or cut down its fuel subsidies that keeps fuel prices artificially low and consumption high. This gives an easy excuse to developing countries like India and China to not do any thing about their ever-increasing energy thirst. For the poor countries it does not even make sense to talk about expensive energy saving initiatives as they barely have money to even feed their people, what to talk about energy sensitivities!

The basic problem is that nobody wants to put a brake on the current energy-dependent development in their respective countries. Political concerns and obsession with its super-power status prevents US from doing anything about it. China sees the moral preaching to cut down energy consumption as a Western attempt to curb its growing power. Taking cue from these two giants most of the other countries refuse to do anything in name of "national interests".

All in all a loose-loose situation for the future generations wrt energy security. Without international leadership and worldwide cooperation the future for them indeed looks bleak.