Assuming Control at Altex Aviation Harvard Case Solution & Analysis

Assuming Control at Altex Aviation Case Study Solution

Problem Diagnosis

This case highlights the purchase of Altex Aviation by two managers and close friends, Frank and Ted. It highlights the problems that had been faced by the managers as a result of the prior acquisition condition of the company when the company was losing sales and money. It further highlights the changes made by the new owners in the organizational structure, accounting systems, reporting lines, profit centers and management positions at Altex Aviation. Our purpose is to analyze all the decisions and the changes in the current system that have been made by Ted and Frank and then comment upon the future prospects of the company.

Case Analysis

We first begin the analysis by discussing the need for a new system after Altex Aviation had been acquired by Ted and Frank.

Need for a New System and Critical Problems

New system was really needed by Altex because the company was facing some serious and the most critical problems before the acquisition by Ted and Frank. The first critical problem was the current management system of the company where the head of the accounting department, Sarah Arthur, was keeping all the details of the accounts and the transactions in her head and the accounting system was informal. The system was highly complicated and incomprehensible for the employees as all the department managers were not aware about how much profit and how their departments were generating profits for the company. All they had to do was to collect their cash and hand it over to Sarah.

Assuming Control at Altex Aviation Harvard Case Solution & Analysis

A centralized system was being followed by the management at Altex and although Bill Dickerson was the real owner of the company, the actual management of the company and handling of all the major operations was done by Sarah. If any of the departmental managers needed anything they had to contact Sarah and the departmental managers did not like to visit Sarah’s office due to her rude behavior.

It consumed a lot of time for the departmental managers to get something approved by Sarah for purchase. Sarah managed all the bills, checks, accounts receivables and she also collected all the cash from all the departments and kept it. The payables were also managed by Sarah. The second most important critical problem at Altex was the cash crisis faced by the company. Altex had incurred a loss of $ 100,000 dollars on the total sales of $ 2 million for the year 1971 and this has resulted in a negative net worth for the company in 1971.

The company also had to pay its suppliers and the debts of the company had grown largely that the capability of the company to pay its suppliers. Therefore, a new solution had to be designed to solve these issues. The current management system is completely ineffective therefore a new system is needed that provided the useful information for making all the informed decisions and the organizational structure also needed to be changed.

Purpose of New System

The most important purpose for designing and implementing the new system was to take charge of the company from Sarah Arthur as Frank and Ted did not want her to take over all the managerial responsibilities. The new system is really important for Altex as stated by Ted because control of the organizational operations is one of the most critical function of the management. If the current control problems persist, then it can result in large losses and ultimately the failure of the company.

The behavior of the employees is being influenced by Ted with the help of the management control. Ted is taking all the required steps to convey to the management of the company and its employees about what is important for the success of the organization. People are the most important asset of any organization and therefore, controlling the actions of the people ultimately decides about the success or failure of the organization.

The purpose of the new system is clear however, Ted and Frank also need to devise solutions for the potential problems of the new system. For instance, Frank has decided to decentralize the organization however, Ted and the departmental managers have not agreed to this yet. Also, the timing of decentralizing the operations and authorities is another issue. Just 1 month has passed since Frank and Ted had acquired the company.

Most of the departmental managers have not finished the high school and they were not aware about receivables and they have not heard about them before. The changes that were being made to the existing system were fast and so there was no time to either train the current mangers or fire them to hire new talent. These issues can result in several problems such as:

Motivational Problems: Employees might be just self-interested and they might not be willing to take the risks as required in fear of losing their investments and incurring losses. They might be reluctant to make good investments and thus these motivational problems can create other risks such as the risk of theft and employee fraud..............

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