THE PARADOXICAL TWINS: ACME & OMEGA ELECTRONICS

In 1955, a Cleveland manufacturer bought the Technological Products of Erie

Both divisions manufactured printed circuit boards They always competed for the same contracts in the market Acme regularly won the contract, and proved to have a better management than Omega, thus generating higher profits

ACME ELECTRONICS:
Acme maintained divisions original management style and promoted the old general manager John Tyler - to president. Tyler explains that they have kept the same management style because it has proven to be effective for high volume manufacture of products and their assembly. Generally, employees were happy and comfortable in their working environment.

However, some middle managers have expressed their need of more freedom in taking decisions that concerns their department.
For almost all major decisions were taken by the top management represented by John Tyler

OMEGA ELECTRONICS, INC:

On the other hand, Omega hired a new president, and promoted some personnel within the plant. The new president did not believe on organizational charts, as he explains that since the plant is relatively small, the charts will only add more barriers between employees.

He didnt even believe in memos, thus he encouraged employees to drop by and talk things over.
However, many personnel in the company were not happy with this structure, and they argued that too much time was being wasted just to fill-in responsible employees of what needs to be done or solving problems that generated during work. Some people argued that when they first came to the organization, they werent even sure of their job-specification.

THE CHALLENGE:
In July 1966, both firms submitted bids to take on a proposal made by a major photocopy manufacturer.

The proposal asked for subcontractors to assemble the memory units for the photocopy manufacturers new experimental copier, and it required production of 100 prototypes at the beginning.
The contract was estimated to generate around $5-$8 million in annual sales. The photocopy manufacturer accepted both firms initial bid and asked them to produce 100 prototypes, putting great emphasis on the speed and the quality. Acme and Omega had only 2 weeks to produce the prototypes, even though, the final design of the copier was not complete.

Using the mechanistic and organic structure arguments, compare and contrast the management styles of Acme and Omega:

ACME MECHANISTIC STRUCTURE

1. The simple integrating mechanism:
The mechanistic structure is defined as to induce people to behave in predictable and accountable ways. Thus, at Acme, once John Tyler got the blueprints, he sent memos to all the departments explaining each their job specification in the assembly of the memory units. For example, a memo was sent to the purchasing department to start buying the necessary materials. Another memo with the blueprints was sent to the drafting department to create the manufacturing model. Tyler also sent memos to all the departments indicating the critical time limit that they had to deal with in their part in the assembly process and required all to work as efficiently as possible.

2. The decision-making authority is centralized:

At Acme, top management makes all the final decision concerning different levels in the production process.
For example, when the manufacturing process began, the Acme purchasing department was faced with an obstacle of an item not being available in the market; the ultimate decision to continue without the item was taken by Tyler and not the purchasing team.

3. Subordinates are closely supervised:

Through the whole manufacturing process, the work flow among the various departments and the decisions that department-heads were making was closely supervised by Tyler. He always maintained a close look on the work process by visiting each department on a daily basis and monitoring the work done, advising personnel on various matters, and finding the appropriate solutions when problems existed.
For example, on day-four, Tyler called on the head of mechanical engineering and asked for a progress report on their work on the chassis. The department notified him that they were waiting for some estimates and were behind schedule. The delay angered Tyler, who demanded that the department instantly start building without the estimates.

4. Each person in the organization is individually specialized and knows his responsibility and any behavior opposite to this is discouraged: During the process, the production foreman ignored contacting the methods engineers to do a proper layout, and he set-up the assembly process without the methods engineers approval of the layout, The methods engineers wanted to rearrange the assembly process the way they so fit, however, the plant manager replied that Tyler wanted the units immediately and there was no time to lose on rearrangement and they had to continue the way it was. Methods engineers knew their responsibility very well, and they were concerned with the fact that once they will try to install the missing parts, without their layout they will have to tear down the entire unit created and start all over. Few days later, the concern proved to be true, as the missing components arrived and they saw that they had to do a total disassembly to add the new part. Tyler asked the methods engineers to help-out and debate broke down between the production foreman and the engineers, making Tyler order all the units to be taken apart. This proves that each function in the organization clearly understood its specified role but taken with the time constraint, the production team didnt respect the methods engineers proposal. There was also lack of coordination.

5. Hierarchy and the vertical command structure:

In a mechanistic structure hierarchy is the principle integrating mechanism. On the bottom line, each function is separate and communication & coordination among functions are the responsibility of someone at the top of the hierarchy. At Acme, this is apparent in the organizational Chart:

The chart clearly shows that the communication goes on a vertical level from the president as orders down to each department (the memos sent once the blueprints arrived) and as progress report from departments to the president to make the final decision.
PRESIDENT

VICE PRESIDENT MARKETING

VICE PRESIDENT OPERATIONS

CONTROLLER

VICE PRESIDENT PERSONNEL

PLANT MANAGER

PRODUCTION

INDUSTRIAL ENGINEERING

MECHANICAL ENGINEERING

ELECTRICAL ENGINEERING

DRAFTING

PURCHASING

SHIPPING & QUALITY CONTROL

OMEGA ORGANIC STRUCTURE

1. The complex integrating mechanism:
Omega did not follow the top management down to the departments coordination approach. Instead, it created task forces and teams to coordinate the unit manufacturing process among the functions.
Since the president Jim Rawls did not believe in memos, he arranged for face-to-face meetings with the department heads, both when they received the proposal request, and when they were going to start production to discuss the project. On the other hand, during the manufacturing process, the teams continuously met together to discuss the progress of the departments.

2. The joint specialization approach and the mutual adjustment process:

At Omega, employees from different departments worked together and met regularly to solve problems. This was possible because of their casual meetings. For example, during one progress report session, purchasing department indicated that there was a missing component not available in the market for some time; as a result, the head of the electrical engineering department suggested using a possible substitute having the same components. Unlike Acme, the production foreman and the methods engineer met together and prepared the assembly plans needed to start off the production. Because of the teamwork, Omega engineers were able to find out that there was an error in the original cable design by the photocopy manufacturer. After working together, both the mechanical and electrical engineering department redesigned the cable, and Jim Rawls sent the new draft to the photocopy manufacturer to get a formal approval.

3. Decentralization:
Unlike Acme, there is no vertical hierarchy at Omega. All the decisions were made by mutual assessment among the various departments involved in the particular manufacturing process.

This was possible because Rawls encouraged face-to-face meetings and not just sending memos and receiving reports. The decentralized structure enabled flexibility, and Omega people were quick to initiate change and adapt quickly to rising problems.
As a result, Omega finished the production of the units by July 22 with having them inspected by Quality control, while Acme shipped the units on July 29 without final inspection.

How do the differences between the companies management styles explain the way they coordinated the production of the memory unit prototypes for the photocopying customer?

 In the Acme case, the mechanistic way of management proved to be inefficient when it came to coordination among the different departments. The functions at Acme worked solely on the part of the manufacturing process, and when problems existed they reported to their head manager, then to the top manager Tyler, who coordinated with the other departments. This vertical way of integrating among the various departments proved to be ineffective specially when problems like the missing component and the erroneous cable-blueprints came to surface, and it caused to delay the manufacturing process which was almost 10 days late than that of Omega (July 29-August 2).

 On the other hand, the decentralized approach of Omega proved to be very effective in the production of the memory unit prototypes. Because of working together and mutual adjustment approach, Omega engineers were quick to find a solution to the missing component and redesign a new draft for the erroneous cable-blueprints. The high level of integration between the various departments proved its effectiveness as Omega was able to ship its units with full inspection at July 22.

 Moreover, when the units were shipped, ten of Acmes prototypes were proved to be defective, while all of Omegas memory units were defectfree and passed the photocopy manufacturers tests. Thus Acme was faced with two problems delay in production, and more delay as to improve the defective products.

However, on the other hand, Omega was also faced with a problem and that was to reduce the high costs associated with the production.

Which company did better?

As to the production process and the reliability of the memory units, Omega did a better job than Acme in manufacturing the prototypes.

Acme was quick to respond back, and it did achieve a better quality and lesser costs of 20%, enabling it to get the final contract.

If Omega was so much more effective than Acme, why didnt it win the final contract? How can you account for the photocopier manufacturers decision?

 The basis of the photocopier manufacturers decision resides in the fact that it was heading towards a real contract of sales up to $5-$7 million and not just 100 prototypes.
As the 100 prototypes were made, Omega definitely excelled with its organic structure.

But now the terms changed, there was a million dollar contract on the line and the photocopy manufacturer wanted a zero defect but low cost.
Omega did not find the suitable way to reduce its costs, whether in buying cheaper inputs or reducing costs during the manufacturing process. Acme quickly picked up on lost ground and solved its problem of defected units, and even managed to decrease its costs by 20% with its strict mechanistic management style.

In the bottom-line, what matters for the photocopy manufacturer is the final outcome and not what happens during the process, and at the end, it would definitely care for its profits, thus it chose Acme that proved it can quickly catch-up and reduce costs.

What changes would you recommend to Acme and Omega if they are to survive in the future in this increasingly competitive industry?

It is apparent that both companies are following the two extremities of management style by choosing the mechanistic and organic management structures.
Thus, Acme should create more flexibility in its departments, and improve the communication process among the various departments so that they can work better together and solve problems quickly as they appear. On the other hand, Omega should create better monitoring, probably by top management, to ensure that all the coordination and communication during the process of productions maintains its financial prospect so that they can maintain low level of costs.

Do you think Acme and Omega should merge to better compete in the future? What problems might be encountered in such a merger?

In the long-run, a merger between Acme & Omega can be very beneficial for both firms in terms that they will learn from each other and have better chance in competing with other rivals in the industry. Both firms lack what the other has with respect to management structure. Acme needs to learn how Omega excels in its communication and coordination structure among the different departments, to avoid any obstacles and find quick solutions to rising problems. While Omega needs Acmes skills in monitoring the process when each job is being done to keep a close look on the task force, especially in terms of keeping costs under control . However, in the short-run, they will definitely face the problem of which management style to adapt to. Whether to keep Acmes strict hierarchy or maintain Omegas flexibility? Whether to keep Tyler or Rawls as the head of top management? A merger will help both firms to get rid of their extreme mechanistic and organic structure and find a balanced structure based on what each management excels in.