Western Utilities Company Case Analysis

1. Review your work and model answer. Are there any differences between the two and what constructs are the most important? (2 to 3 paragraphs)
2. What alternatives are available to Western Utilities? (1 paragraph)
3. What would you recommend? (1 to 2 paragraphs)

Western Utilities Company

Western Utilities Company, a privately owned utility company; has been faced with an expansion of its facilities resulting in financial inefficiencies. President Robert Delgado has requested a review of all operating standards. He requested that John Givens and Hilda Hirsh provide a broad outline of MBO performance standards that would identify key standards with which to control performance. Three years ago, Western Utilities, under the direction of a different management consulting firm, implemented a system of management by objectives (MBO) for the purpose of evaluating department managers, sales engineers, and consumer service employees.

The advantage of such a system of controls is that top management can rapidly scan a printout and detect any trouble spots in the department. Givens and Hirsh attempted to set the standards as if personnel were working at a normal pace. After review, Givens and Hirsh raised the performance level on several items. Their justification was that if a standard can be achieved without a challenge, it is probably too low. Delgado had specifically asked for goals that were not easily attainable. There was a certain amount of negative reaction, but in the end departments agreed.

The Situation
During the past year, however, a significant degree of dissatisfaction has emerged. In the first year participation was encouraged and rewards were obtained. The employees set their goals high and productivity increased.
Now, however, problems are being reported in the evaluation of performance, and many managers are claiming that the standards set by Hirsh were too tight or unfair. The president said, "Yes, we have had a few operating problems. But no system is perfect." Hirsh noted that the consumer department has exceeded their monthly labor cost standards, so she called William Walton, manager of the consumer department, and "red-lined" his performance report. Walton hit the roof. He called Givens and said, "The system is grossly unfair and inaccurate as a measure of performance. The real objective is to control total costs. My department has done this, even though we were over in labor costs. There was a heavy snowstorm last month with lots of frozen lines, and we had to get people out there on overtime. The real need is to maximize customer service and to keep costs to a minimum, which we have done."

Two other department managers complained that the system was unfair, and several engineers are threatening to resign. In their complaints to Givens, they pointed out that it appeared Hirsh was only looking for failures to report, under the cover of the MBO system. Robert Delgado thought: We may need to take another look at our system; maybe MBO doesn't work in a utility. As a result, he has hired yet another management consulting firm the one for which you are currently employed.