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The case of Ground Zero Coffee Inc. demonstrates the different aspects of independent control within one organization. The Ground Zero company specializes in roasting and grinding coffee imported from coffee growers in Guatemala on fair trade terms. The mastermind behind the ground Zero companys philanthropic image and business ideas, William D. Brewster, was appointed to the companys district manager position in Brewsters home city in Knoxville, Tennessee. Brewsters functions in the company are almost entirely autonomous, meaning he makes the most decisions for his district. However, in pursuit of finding solutions to resolve the consequences of the tragic accident that happened to his family, Brewster made questionable choices that may be regarded as an abuse of power. The divisions poor financial results caused by increased investment in a new division of mail coffee orders worsened the situation.
Firstly, considering the performance measurement aspect, the CEOs decision to use the ROI index as a primary indicator for the success of the companys divisions is sourced from the companys growth goal. According to Kernez (2021), ROI presents a relatively informative indicator of a companys growth for investors. However, in the case of Tennessees division, the development of a new service of mail-order coffee required significant additional investments. Thus, the companys operating profit should be increased proportionally to maintain a positive ROI index value. The ROI index can successfully be applied to the financial data of divisions that do not undergo significant changes.
However, the Tennessee division presents a pioneering branch that focuses on developing new services and coffees, which implies a constant flow of investments. Furthermore, investments in the Tennessee division are supposed to benefit the whole company by developing new beneficial services. Therefore, using the ROI data for the branch is wrong as it will not provide accurate information about the branchs success. Furthermore, despite having a low ROI compared to the goal, the profit margin and asset turnover index data are relatively high (Table 1). As Brewster function as a leader whose ideas outline the organizations mission and culture, the correct index for the divisions productivity will be the combination of customers, vendors, and employees satisfaction level. As the case details imply that Brewsters high organizational culture standards drive the overall companys success, the satisfaction index will present a reference indicator for other divisions.
Table 1. Ground Zero Coffee Inc. Tennessee Division Key Financial Indicators
Furthermore, the leadership and the CEO should review the organizations internal control structure that favors the full autonomy of division managers. While Brewsters inconsiderate decisions in an emergency were ethically correct because, ultimately, they benefitted the company, it is unknown what other divisions managers can do to maintain high ROI. Thus, while autonomy provided Brewster to find more creative ways for the companys development through snack bars, his primary functions centered on developing services and new coffees. Therefore, introducing additional control over divisions will ensure that managers focus the work on their primary functions.
In conclusion, the case demonstrated the importance of choosing the right performance indicators for the companys different goals. While ROI presents an informative source for potential investors, the leadership can use more detailed indicators to measure individual divisions performance. For the Tennessee division specializing in innovation and organizational culture development, the ROI index does not provide accurate information about the divisions performance. Furthermore, it is necessary to reduce the autonomy of division managers to prevent cases like Brewers and ensure that managers work is focused on fulfilling their primary functions.
Reference
Kernez, R. (2021). Calculating your companys growth rate (And other important business indicators).Forbes.
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