Problems a) Calling for resignation of the President.

Based on Frances Rampar interview with Harold Wallace, he stated that one of his managers called for resignation of the President which is Harold himself. Even though the vote was defeated, it was clear that people who voted are upset with the way things are going. b) Electronics and Plastics group lack of growth in market and profits. c) Initial decline of Chemicals operations. Analysis We will analyze the problems based on each department interview to get whole perspectives. a) Industrial Relations 1. Morale Problem. Morale is poor. Harold Wallace runs company like a one man operation and seems too busy to handle everything. 2. Human Capital Management. Lack of competent employee. Frank Campbell faced difficulties to find competent employee to management positions and eventually forced to promote technical people who had no prior managerial experience. He suggested to make management development program yet declined because it was seen too expensive. Recruitment and Selection. Company doesnt seem to have a proper employee recruitment and selection system. There are recruiting backlog especially for engineering position because the pay scales not competitive enough, job specs are too high or using wrong recruiting channels. This shows there are some problems concerning human capital management in company, especially in human development, recruitment and selection system and remuneration. b) Advance System Lack of integrated planning between corporate and group Top management keeps making demands that do not relate to the job that the group trying to get done. This make things become redundant because the data that should prepared one time, keep asked by another division to take the data again. This thing will make the job become inefficient. c) Engineering Lack of competent employee Because the company do not attracted new competent employee, they become lack of competent employee and depend on some key person that seems do not have regeneration or successor in their position. In some time, that key persons will retired, and lack of successor will jeopardy the company to sustain in business. d) Administration Complicated office bureaucracy The company seems generate wheel spinning in their administration. For example, request from partner that must be answer, cannot be respond immediately because supervisor approval came late or do not have respond. e) Operation Restriction in getting cheap raw material Manufacturing problems in chemical and plastic group, has forced them to raise price and electronic group has suffer the consequences because they encouraged to buy plastic and chemical from the sister group and make production more costly. However, price of raw material from another supplier is cheaper. There must be a company policy that allow them to purchase raw material from another supplier in a special circumstances or allow sister group to purchase the raw material in discounted price. Based on the sales and net income data, it can be inferred that the chemical company is not so effective. It is strongly suggested that Wallace Group should increase the production efficiency in its chemical company, therefore it can make the chemical price cheaper.

f) Financial Data Analysis Profitability Ratio

Profitability ratio measures of the degree of success or failure of a given company for a given period of time. From profitability ratio, the profit margin on sales increase by 1.4% compare with prior year. Return on asset also increase. When we want to assess a company's performance, we also need to compare it with its peers' performance. Since the data was not available, we cannot whether the ROA 4.6% was good or not. Return on share capital increased 2%. We must compare it with other investments (for example time deposit). Payout ratio decrease by 28% compared with prior year. It can make the stock is not attractive for investors. Coverage Ratio. From the ratio above, we can see that Wallace increase its long term debt. Running a business by using debt as financing source has positive and negative impacts. For example if a company used more equity as financing source, it can have good control on its company. But negative thing is it must pay dividend and the portfolio is not good. If a company use debt as its financing source, it does not need to pay dividend and the portfolio is better, but it must pay interest expenses to the bank and it has less control to the company. Activity Ratio Activity ratio measures how effectively the company is using the assets employed. From this ratio, we can say that there is no significant improvement done by company because the asset turnover ratio is same compare with prior period. Root Cause a) Unclear corporate value & system. Wallace tendency to run company like one man show is reflecting the unclear corporate system in Wallace Group. Wallace Group seems also didnt have a clear corporate value. Companies generate corporate strategy from value, structure from strategy, system from structure, and skill from system. The unclear corporate value will also make corporate cannot generate a good corporate strategy, structure, and system. b) Not integrated system. Wallace Group system between divisions is not integrated. This create lacking of information distribution, then create problems that have been explained above, for example lacking information about employees current competence level and what training they should have before they are promoted into higher positions, and also the slow respond from supervisor that make a loss opportunity to cooperate with other company (in this case a prime contractor). c) Not competitive salary, lack of qualified people Wallace Group seems lack of qualified employee. Many divisions are request employee from other division to help their division. If we analyze, the root of this problem is not competitive salary that Wallace Group offer. They want to get good quality people, but they offer lower salary from other company. The lower salary offer should be related to the flat profit that Wallace Group get.

Problem Mapping

Solution Alternatives a) Change functional division into SBU Currently, electronic, plastic, and chemical group are working as a functional division. In this alternative, we recommend to change functional division into Strategic Business Unit (SBU) and actually give them a role as SBU. By this change, even though they still part of a larger business entity, but they can have their own marketing plan, competition analysis, and marketing campaign, therefore increasing their sales. In this alternative we also recommend in that Wallace should have a role as BOD so he has to review and challenge management performance, and hire another professional to be the CEO of the Wallace Group. b) Developing management development program (MDP) In this alternative we recommend Wallace Group to restructure its Human Capital Management, including job specification, job competencies, job analysis and career planning (including career management system). Management Development Program also needed to develop employees with appropriate skills before they are promoted to a higher/managerial position. Developing this program will be expensive, but we believe not to developing the program will be cost Wallace Group more in the long term, due to the low competence level of their employee. c) Using integrated system Effective management requires an effective, efficient, and integrated system. Integration has advantages such as effective support processes, using resources optimally, reducing suboptimization and minimizing problems in communication between different areas. Wallace Group seems didnt have this system yet and many problems in the company are related to the lack of this system. We believe using an integrated system is a good alternative to reduce problems in Wallace Group. Solution Each alternative has its superior to other alternatives and will result better if combined. We believe that the best for Wallace to do the entire three alternatives in the end. As the priority what alternative should be done first, it is the alternative that gives the biggest impact to Wallace Group. Our recommendation for implementation priority is: firstly, change functional division into SBU; secondly, using integrated system; thirdly, developing management development program (MDP).