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Tucker Company

Essay by   •  November 28, 2011  •  Case Study  •  321 Words (2 Pages)  •  2,302 Views

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In 1968 the Tucker Company underwent an extensive reorganisation that divided the company into three major divisions. These new divisions represented Tucker's three principle product lines. Mr. Harnett, Tucker's president, explained the basis for the new organisation in a memo to the board of directors as follows:

In recent years Tucker has undergone substantial growth and diversification. If we are to meet the new challenges facing us in the marketplace, we must modify our organization. The diversity of our products requires that we reorganize along our major product lines. Toward this end I have established three new divisions: commercial jet engines, military jet engines, and utility turbines. Each division will be headed by a newly appointed Vice-President who will report directly to me. I have instructed each of these men to establish profit centers within their organizations so that the responsibilities and cost functions of individual departments can more clearly be identified and performance evaluated. I believe that this new profit center approach will enhance our performance through the commitment of individual managers. It should also help us to identify unprofitable areas where the special attention of the management may be required.

For the most part, each division will be able to operate independently. That is, each will have its own engineering, manufacturing, accounting department, etc. In some cases, however, it will be necessary for a division to utilize the services of other divisions or departments. This is necessary because the complete servicing with individual divisional staffs would result in unjustifiable additional staffing and facilities. Simple accounting procedures have been established to handle these interdepartmental or inter-divisional costs, so that the cost center requiring the service is billed appropriately.

The old company-wide laboratory was one such service organization. Functionally it continued to support all of the major divisions through the cost-charging methods described. Administratively, however, the manager of the laboratory reported to the manager of manufacturing in the military jet engine division.

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