Pcl Electronics in China free essay sample

To: General Manager From: Consultant Date: January 30, 2012 Subject: PCL Control Sustainability Introduction PCL is a European consumer electronics and healthcare company that has recently entered China. They have a wide variety of televisions, DVD players, PC monitors, audio products and PC peripherals. PCL is able to compete within the consumer electronics market as they have low prices and a large network of distributors. PCL uses innovation to stay ahead of competitors and keep up with the latest technologies. PCL is currently in the growth stage and they need to maintain continuity. PCL organizational objective is to implement controls without having a detrimental effects on relationships with chain retailers and dealers. PCL also needs to ensure they do not loose prominent shelf space within the retail stores. PCL needs to minimize the amount of NFF returns. Key Problems Issue one two three Challenge 1: Sales Team PCL’s sales team was under immense pressure from the Dealers to meet sales targets, which was set at 132% of previous year’s sales. This was concerning to the sales team in that the prescribed expectations outpaced actual market growth, causing a disconnect in communicating the organization’s goals and providing the correct incentives to reach those goals. While results controls aim to enhance performance by tying rewards directly to the accomplishment of the desired results, problems may arise when the targets are perceived to be unattainable. PCL’s sales team resorted to aggressive sales techniques at the expense of the company’s greater goal of minimizing unnecessary returns and exchanges of demo sets and slow-moving goods. Results Controls The sales targets for the sales team act as results controls as well. However, these targets are not considered tight because they are not communicated and internalized effectively. The sales team feels as though the goals are not reasonable since the sales targets are increasing at a rate much greater than the market growth rate. Therefore, it can be concluded that the sales team has had little input in setting these targets, causing low levels of internalization and motivation. PCL should carefully analyze market growth and PCL sales over time as well as allow the Sales Team to participate in setting realistic sales targets so that the Sales Team does not feel pressured and in turn, does not relay this pressure to the dealers. Challenge 2: ASC The third issue is the lack of motivation for the after sales service team to regularly monitor the third-party ASCs. As a result, the ASCs do not inspect returned sets carefully and even go as far as to fake inspection records. This fraudulent behaviour results in a large number of NFFs which are an unnecessary drain on PCL’s profits. Thus far, the after sales service team has not caught or punished the ASCs for incompliant behaviour. The after sales service team’s lack of motivation to actively monitor and punish the ASCs stems from the fact that they report to the general manager of PCL as opposed to the TV division manager. Because the after sales service team’s performance rewards or punishments are not directly tied to the success of the TV division, the team has no incentive to ensure ASC compliance. Results Controls Implementing results controls at PCL is feasible because the organization can determine what results are desired, the employees have influence over the results, and the results can be measured. Results controls that PCL has implemented include the following goals: the NFF rate is to be reduced to 20%, the TV return and exchange rate to be reduced to 3. 5%, and the total savings realized by PCL due to more efficient TV returns within six months to be at least US$1. 13 million. These are understandable objectives and what employees must do to achieve these objectives must be conveyed to them clearly and repetitively. In order for these results controls to be effective, PCL must ensure that the measurement of these objectives is accurate and not influenced by biased individuals. There should not be a significant time lag between the employee’s performance and the measurement of the results to ensure that the employees are constantly kept motivated. Seeing as the objective of PCL is to minimize the losses associated with television returns, the aforementioned performance dimensions are tailored to meet this objective and are therefore, congruent. These results controls are also tight because they fulfill the requirement of specificity. They must also be effectively communicated to all entities which have influence in meeting these standards such as the ASCs and the after sales service team. The inclusion of these areas in which the organization desires compliant performance ensures that these controls are complete as well. Finally, there must be a direct link between the accomplishment of the results and the rewards or punishments that may be realized. In this case, quarterly bonuses will be provided to the ASCs who exhibit the highest level of compliant behaviour to incentivise these third party entities to thoroughly inspect the returned TV sets. This type of reward is also a group reward which will act as a cultural control, encouraging mutual monitoring among ASC employees. A negative incentive such as punishment policies and penalties for NFF returns to the PCL factory will also be implemented. The after sales service team must be provided with a direct incentive to effectively monitor the ASC personnel. Therefore, the service team’s bonus should depend on the amount of goods returned to the factory and penalties should be received for NFFs. Aligning performance measures of the two groups with the PCL’s objectives will ensure higher levels of compliance. Behavioural Controls Return Process In regards to the return policy set in place for the return of merchandise, only products that are deemed functionally defective are accepted. These returns must be returned within 15 days of purchase. In the short run, these action constraints were very effective solutions to the high return rate, however these behavioural controls must be analyzed in terms of tightness and sustainability. The action constraints put into place by the second cross-functional team are congruent with the organizational objective of enforcing a stricter return policy. At this point, the current action control system has a clear definition of actions and is understandable by the salespeople and the ASC. However, the current control system is not sustainable because it lacks completeness – there is very little action tracking. There is no incentive for an individual in the ASC team to properly inspect returned goods if accountability is unassigned. In consequence, a possible solution is to have all parties sign off on the customer return record, as the respective merchandise makes its way to the repair warehouse. This would include signatures from the salesperson that accepted the return, his/her supervisor, the cross-functional inspection team, and the respective member of the ASC. This not only adds accountability to the individual employee, but also provides a record for the number of NFF returns. Finally, completeness of the action control system requires results reinforcement. As mentioned in the results section, positive and negative policies will be tied to the number of NFF returns accepted by ASC and the after-sales service team. Goods must come in original packing When salespeople working at chain retailers accept returns, it is important to ensure that the returns are made in a form that is resellable. PCL’s new controls stated that returned goods would be required to come in their original PCL packaging, with all the original accessories. This control is effective because it is congruent with the company’s ultimate goal of serving its customers in a way that will be cost-efficient. This behavioural control is under an umbrella which aims to be complete in that employees involved can have some impact in the areas in which the organization wishes to achieve some goal. In order to make this control sustainable, PCL should tighten action by introducing a written log sheet on which salespeople and another member of a cross-functional team, such as a supervisor, inspect the returned good and verify that it is in its original packaging. Such measures would ensure institutional memory is in place so that changes in personnel will not disrupt the control process. Increase labour charges for inspection returns As part of the new incentive and penalty scheme for ASCs, labour charges for inspection of returns would be increased. This results control will be effective because it is specific and measurable. In addition, this control aims to align this third-party’s goals with PCL’s own goals in minimizing the cost of handling returns. By increasing labour inspection charges, PCL will be effectively transferring some of the responsibility to the ASCs to encourage the ASCs to critically assess each return that is shipped to them. To properly enforce this objective, PCL should draft these specific terms on paper to increase the control’s specificity. Issue Controls Other Recommendations Sales People Must Visit Dealers: The field salespeople are required to visit top dealers on a weekly basis in order to gain feedback and work out follow-up actions to help solve any problems the dealers may have. This is done on a rotation plan, as to help monitor the salespeople. This separation of duties allows PCL to ensure salespeople are not getting to friendly with dealers and also to ensure all problems are being solved immediately. PCL should continue to execute this control, as it helps monitor the quality and sales people to ensure they are doing a proper job. As a suggestion PCL could do this on a monthly basis or bi-monthly basis, as every week is too often. This would still allow PCL to monitor quality among salespeople, but would not be a large cost to the company. Project Team Meetings: Every two weeks the project team is required to meet to review the controls that are in place and to ensure they are doing their jobs properly. If anything is not working, or if a problem has come up, the project team will work together right away to solve the issue. This is a control in itself to help ensure the controls are all working. PCL should continue to follow through with this, as it is helping the company. In the future when another problem, as big as the problem of a large amount of NFF returns arises, PCL should make another project team to come up with a solution. By choosing team members who have a wide array or knowledge across the company, PCL is giving itself the best opportunity to fix the problem.