Exley Chemical Company: Alternatives for motivating High Performance

Case 11.1

The Exley Chemical Company

The Exley Chemical Company is a major chemical manu¬facturer making primarily industrial chemicals, plastics, and consumer products. Company sales and profits have grown, and its ratio of net profits to sales is about average for the industry, but in the last year or so both sales and profits have been disappointing (see Table 11.2)

Because new products are constantly being introduced into the line and methods of use are constantly changing,
the relative importance of different product groups is constantly shifting. For example, the major product groups experienced changes in percentage of total sales over a 5-year period (see Table 11.3)

THE ORGANIZATION
The general structure is shown in Exhibit 11.1. Production is carried on in four plants across the United States, each of which has a plant manager. The marketing vice president handles sales, advertising, and marketing services.

All research is administered and done at the corporate research laboratory, including the development section, which is responsible for the development and improve¬ment of production processes. The engineering department handles all planning and construction and the develop¬ment of new processes and pilot-plant operations.

In addition, to manage the increasing amount of new products being developed, a product development divi¬sion was established about 3 years ago. Prior to this, when the research division developed new products, they were passed on to the engineering division from the pilot-plant operation. Unfortunately, this method was in¬adequate for the complex coordination of these projects, so the new division was established. The product devel¬opment division was to coordinate efforts in developing new products, including recommending manufacturing capacity, sales programs, and so on. The division was to conduct surveys to analyze market potential for new products and recommend the development or produc¬tion based on these surveys. During the period following the creation of the product development division, prob¬lems emerged.

THE SITUATION
Conflicts were created with several other departments. For example, the product development division started using a small force of specialty salespeople to conduct pilot market¬ing programs. This did not go over well with the marketing department. Also, the product division was given respon¬sibility for market research, but the tasks of sales analysis and forecasting remained in the marketing division. Fi¬nally, a product manager was appointed for each separate group of products who was responsible for the coordina¬tion of all company activities for the product. This resulted in more problems.

The product manager often needs to visit customers in order to get more realistic input on market conditions, but marketing executives resent this. They feel that all cus¬tomer relations should be handled through marketing, be¬cause these visits tend to confuse the customer. "Judging from what I've seen, Product Development couldn't care less about what we are doing in terms of integrating our markets," said the marketing vice president.

Sales executives tend to question the sales estimates issued by the product managers. These estimates are usually based on the total product market rather than on Exley's share, which often tends to inflate sales estimates. "The product development group is aggressive and they want to grow, but you have to grow within guidelines. The product guys are going to have to learn to work with the other divisions," said a sales manager.

At a recent meeting of the Chemical Manufacturers Association, a product manager learned that a competitor was about to patent a new process for the production of polymers, which presumably will reduce costs by about one¬third. Exley's research person in charge of polymers said that they had several interesting possibilities that might break in a few months. "I think corporate headquarters needs to integrate operations better. We can't be a bunch of entrepreneurs around here. We've got to have more team¬work on these projects," said the project manager.

The manager of sales proposed to the consumer proj¬ects group that Exley's antifreeze be promoted directly to

Table 11 .2
Years Sales in Billions
5 years ago 81
3 years ago 93
2 years ago 108
Last year 111

Page 2
Table 11.3
PERCENT OF SALES
5 YEARS AGO LAST YEAR
Chemicals 61 55
Plastics 31 33
Consumer 8 12
_ _
100 100

Large retail outlets. He has forwarded a proposal to the project manager with a no~: "Our customers feel this is a hot idea; can production supply the needed quantities at a com¬petitive price?" The product manager has found that the two people in research and engineering who are most knowledgeable regarding this product are now deeply involved in a new project, so little has been done to date. "The big frustration is that you can't get help from other departments, if it doesn't have a large return for them. Each division head works on the project that makes the most for them, but it doesn't necessarily help us bring new products to market," said the product manager.

Exhibit 1.1..1
Organization chart-The Exley Chemical Company

Director Product Development Div.
Design & Construction Manager
Chemical Engineering Manager
Plastics Engineering Manager

Chapter 11
Director Industrial Relations
Manager Plastics Research
Manager Consumer Research
"i"
Intergroup Development Interventions
Manager Special Sales
Manager Advertising & Sales Promotion
Manager Distributive Branches
Manager Sales Service
Director of Sales
General Sales Manager
Manager Sales to Distributor Accounts
Manager Sales to Manufacturers
Manager Sales to Industrial Accounts

Page 3 Case Analysis form

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