Question

SE 20-1 Audio Visual Corporation

Audio Visual Corporation (AVC) manufactures and sells visual display equipment. Headquartered in Boston, it has seven sales offices with nearby warehouses that carry its inventory of new equipment and replacement parts. AVC has a departmentalized manufacturing plant with assembly, maintenance, engineering, scheduling, and cost accounting departments as well as several component parts departments.

When management decided to upgrade its AIS, they installed a mainframe at headquarters and local area networks at each sales office. The IS manager and four systems analysts were hired shortly before they integrated the new computer and the existing AIS. The other IS employees have been with the company for years.

During its early years, AVC had a centralized decision-making organization. Top management formulated all plans and directed all operations. As the company expanded, decision making was decentralized, although data processing was highly centralized. Departments coordinated their plans with the corporate office but had the freedom to develop their own sales programs. However, information problems developed, and the IS department was asked to improve the company’s information processing system once the new equipment was installed.

Before acquiring the new computer, the systems analysts studied the existing AIS, identified its weaknesses, and designed applications to solve them. In the 18 months since the new equipment was acquired, the following applications were redesigned or developed: payroll, production scheduling, financial statement preparation, customer billing, raw materials usage, and finished goods inventory. The departments affected by the changes were rarely consulted until the system was operational.

Recently the president stated, “The systems people are doing a good job, and I have complete confidence in their work. I talk to them frequently, and they have encountered no difficulties in doing their work. We paid a lot of money for the new equipment, and the systems people certainly cost enough, but the new equipment and new IS staff should solve all our problems.”

Two additional conversations regarding the new AIS took place.

BILL TAYLOR, IS MANAGER, AND JERRY ADAMS, PLANT MANAGER

JERRY: Bill, you’re trying to run my plant for me. I’m the manager, and you keep interfering. I wish you would mind your own business.

BILL: You’ve got a job to do, and so do I. As we analyzed the information needed for production scheduling and by top management, we saw where we could improve the workflow. Now that the system is operational, you can’t reroute work and change procedures, because that would destroy the value of the information we’re processing. And while I’m on that subject, we can’t trust the information we’re getting from production. The documents we receive from production contain a lot of errors.

JERRY: I’m responsible for the efficient operation of production. I’m the best judge of production efficiency. The system you installed reduced my workforce and increased the workload of the remaining employees, but it hasn’t improved anything. In fact, it might explain the high error rate in the documents.

BILL: This new computer cost a lot of money, and I’m trying to make sure the company gets its money’s worth.

JERRY ADAMS, PLANT MANAGER AND TERRY WILLIAMS, HUMAN RESOURCES MANAGER

JERRY: My best production assistant, the one I’m grooming to be a supervisor, told me he was thinking of quitting. When I asked why, he said he didn’t enjoy the work anymore. He’s not the only one who is unhappy. The supervisors and department heads no longer have a voice in establishing production schedules. This new computer system took away the contribution we made to company planning and direction. We’re going back to when top management made all the decisions. I have more production problems now than I ever had. It boils down to my management team’s lack of interest. I know the problem is in my area, but I thought you could help me.

TERRY: I have no recommendations, but I’ve had similar complaints from purchasing and shipping. We should explore your concerns during tomorrow’s plant management meeting.

ANSWER THE FOLLOWING QUESTIONS:

1.

Identify the problems the new computer system created, and discuss what caused them.

2.

How could AVC have avoided the problems? How can they prevent them in the future?

Answer 1

1. The problems stem from a total lack of communication at AVC. The failure to communicate has existed for years and exists between all levels of management.

Top management did not adequately plan for the IS upgrade and did not involve non-IS employees in the process. In addition, through lack of direction or control, top managementhas allowed the IS group to change not only information systems but also operating systems and procedures without operating management approval. Further, there appears to be a lack of concern by IS over the problems the new systems have created for operating management. A new computer system was purchased and a new IS team was hired; however, topmanagement failed to win the confidence of current operating management who are accustomed to a more decentralized approach.

Communication problems continued during the systems design phase.The IS group failed to involve operating management in systems changes and apparently operating management failed to communicate their interest in being involved. As managers in a decentralized atmosphere they could have forced IS to communicate but they chose to ignore the problem.Therefore, the failure to communicate properly can be traced to both the IS and user groups. This problem was worsened by top management not adequately planning the conversion process and their failure to perceive the potential problems between IS and operating management.

The new systems are now complete. Operating management realizes that there has been a centralization of decision-making and a loss of operating flexibility resulting in employee morale problems.Yet, they are still unable or unwilling to communicate with top management, who continue to be unaware of operating problems with the new IS system.

2. The problems could have been avoided by top management doing a better job of planning and communication, holding meetings between the IS staff and user groups throughout the systems design and implementation process, and by top management soliciting input from both user groups and IS staff in order to more closely monitor the project’s progress.

To avoid future problems, AVC management needs to review organizational relationships to ensure proper organization and to insist on better cooperation and communication.In addition, top management should evaluate management personnel to determine if interpersonal problems are a road block to good internal communication.