Performance

Management

AUTOMATION
CONSULTING
SERVICES

Automation Consulting Services

a. Is ACS out of control? Why or why not?
At first glance one assumes that ACS is out of control because all its four offices encounter
different problems that seem to impact the organizations performance on the short term and
the long term. As the company became bigger and more successful typical problems
associated with a highly decentralized strategy became apparent. It seems that those problems
encountered can be solved if some more measures of control are implemented, however with
their decentralized strategy those control measures might prove difficult to implement. The
first of the four offices, had to deal with the issue of overbilling customers that were not
tolerated by other departments. The Detroit office seemed to run out of projects due to a lack
of forecasting systems. The Boston office took on a project without having specific expertise
of that industry and the Philadelphia offices expenses went out of control since they were only
responsible for revenue. Since all of the offices seem to have major individual problems we
strongly recommend putting in place new levers of control that better align and focus the
departments on a common strategic direction and improve their communication as well as
building more common ground to better avoid future problems and improve overall firm
performance without destroying efficiencies derived by their decentralized focus.

b. Describe and analyse the problems identified in each of the

four offices
i.

The San Jose Office

The Partner Douglas Crowley decided that if the job was below the contract price ceiling, the
office has to cross-subsidize and raise the price in order to cover all the expenses. This
decision has been approved by the managing Partner Kyle Ross. The new personnel were not
guided on the business policies and practices for the San Jose office. The top management
should have communicated some guidance to the San Jose office because any deficiencies in
this office will impact the whole business.
The objective of ACS is to build strong client relationships. As the top management didnt set
any code of conduct or guidelines to run the business it has been impacted the management of
San Jose office and directly ACS. The top management wanted to take actions to punish this
but they wanted to avoid any clash which may weaken the relationships within the company
and between the partners. ACS founders should have done a meeting between the founders,
Ross and Crowley to talk about the management, the business practices and the objectives of
ACS.
They should return the fees charged to Powerhouse and tell them that were due to a billing
error regarding the difference of management and business practice between the top
management and the San Jose office which has been acquired recently.
ii.

The Detroit Office

The problem that arose in the Detroit office is that within two months about 50 percent of the
offices` projects with clients will be completed and there are almost no new projects in the

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pipeline. In case no other new project or major assignment comes in, half of the partners
would have no work, while revenues, profits and cash flows would sharply decline.
The problem originated due to the fact that the office had only a small number of large
projects and those projects were now about to close out, as two of the three of them were not
advancing into a second stage. The initial reaction of top management was to have a three
step emergency plan, where as a first step the jobless consultants were transferred from the
Detroit office to one of the other three offices, as a second step a marketing plan was put into
place to advertise work from new and existing clients and as a third a strong partner with
intensive selling skills was transferred to the Detroit office.
The Executive Committee however saw the crisis plan only as a short term emergency
measure or Band-Aid. They needed a longer term solution in order to prevent the problem
occurring again in the future. One of them came up with the idea of a client prospecting
system, which had already been discussed two years ago, but was abandoned for being too
time consuming. It would be designed to monitor prospecting activity and predict the
probable volume of upcoming work and staff requirements for all projects and help visualize
and manage how the company can reach their required utilization targets.
The main problem with this approach however would be the implementation of such a system
and the employees willingness to adopt it, which in their view would not only be to time
consuming but also give them less autonomy decreasing their efficiencies they achieved
through the decentralized control approach.
iii.

Boston

ACS has accepted to work with a new client, it turns out ACS doesnt have the capacity to
professionally accomplish the tasks they were subtracted for. It is the first time the company
worked with a non-manufacturing business, and it evicted that ACS wasnt ready to undertake
such a task.
The main problem has been that there were three core people working on the same area and
the same level of hierarchy; and no proper strategy has been put into place to try to conflict
with two people not accepting the same task. Indeed it has been the decision of one partner
accepted to work with a non-manufacturing business, which lead to a bad work due to the
lack of experience ACS had in the service sector jobs. For this bid, ACS had to subcontract
part of the workload to outside specialists.
The fact that recent trends and opportunities in the environment have showed increasing
interest in the service sector, there will be also a long-term problem as ACS is specialised in
the service sector. Maybe the team should start getting some training or hire more people that
have different specialisation.
iv.

Philadelphia

For Philadelphia office, the big problem is that as a revenue center, the focus on revenues, at
the exclusion of expenses, had allowed various expense categories at the office level to creep
up and get out of control.
Because the offices just have an overall expense budgets rather than an explicit line-by-line
budgets for expenses. So, managing partners dont have detailed expense information about
the number of dollars being spent on recruiting events, office equipment, training and other
supporting activities. Whats more, as revenue centers, partners dont have enough incentives
to manage cost. In this way, there are a lot more things buried in that 15% to 20% other
expenses that influence the final profit.

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And at the same time, the incentive system under this revenue-focused company had a
problem, too. Because the incentive plan rewarded partners based primarily on office-specific
profits but not on firm-wide growth and profitability. So, every office partner just makes
decisions for its own office, which may not contribute to the whole company profit or may
influence other offices performance.

c. For each problem identified, propose which lever of control

should be used and suggest a specific solution or action
i.

The San Jose Office

The San Jose office employees were not part of ACS at the beginning; they had a different
code of conduct and business practice which is not corresponding to ACS objectives and
strategy.
The employees should be guided according to ACS business practices. They should have a
clear guideline which helps them to perform and reach ACS objectives. San Jose office
should have a right control system and ACS should implement it in the San Jose office to
avoid any future misunderstanding and malpractice. The cross-subsidizing issue would have
not been used. Any malpractice should be punished. The culture within the company should
be redefined in order to maintain good relationship between the employees. In the San Jose
office, the management should use the boundary and belief lever of control. They need to use
the belief level of control and explicitly set of beliefs in order to define the basic values of the
company, sets the objectives, and purpose of ACS. They also should implement the boundary
control system to formally set the rules and set the limit in order to punish any malpractice
from any employees by implementing code of business ethics and conduct and setting clear
rules and limits.
ii.

The Detroit Office

In order to prevent future situations like in the Detroit office, where employees have no
projects or something to work on, a company wide interactive control system should be
implemented that would monitor incoming and prospective projects, making sure there is
always adequate demand in each office for the services ACS is offering.
An interactive control system could also improve communication with top management by
setting up meetings to discuss ongoing performance, prospective work and threats to the
company. However, if they adopt such a system, the partners have to be convinced that such a
systems benefits outweigh the effort to run and implement it. This on the other hand could be
achieved by implementing a belief control system that aligns all the partners objectives and
goals to the overall objectives and strategy of the company. On top of that another control
lever, the boundary system, could be used to ensure that every office is using the client
prospecting system appropriately, thereby establishing better overall control of each
departments overall goals and objectives, while still allowing for a decentralized company
structure.
The next step would be to inform the partners that the financial incentive system is not
enough to ensure long term performance targets and therefore a new interactive monitoring
system has to be put in place. To avoid too much opposition a belief system that encourages
participation and strategic focus could also be implemented to align overall goals and interests
of the organization.

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iii.

Boston

Concerning the controlling problem the Boston Office had, there should be a focus on the
boundary control system and the interactive control system. This way ACS could better
understand and follow the controls of the company. Thanks to this boundary control system
the company could pursue its fixed strategy to implement a new way of working, and simplify
the decision taking between the partners. Thanks to the interactive control system, the
opportunities in the sector market can be caught to better work with these companies, and to
implement new strategies concerning this new market entry.
i.

Philadelphia

For this problem, diagnostic control system should be used, which would address these
problems, as profit plans, budgets, goals, and objectives would be developed to assist the
different offices in maximizing revenue and controlling expenses. Because Philadelphia office
lack focus on expense that is related and important to final profit, so it is necessary to build a
specific expense budget to control cost.
In this way, the long-term solution is to figure out a strategy to control expenses and promote
ethical behavior and perhaps reassess the strict revenue focus.
And the short-term solution is to transform these revenue centers into profit centers so that
managing partners should be responsible for not only revenue, but also cost. In this way, there
are some changes happening. Firstly, founders should negotiate profit targets with each
managing partners. Secondly, the incentive plan need to modify that will reward partners
based primarily on firm-wide growth rather than office-specific profits. So, this incentive plan
calls for a unified view for the company development, and tied to profit to promote cost
control as well as revenue growth. And the reasons for this (rising costs, slowing growth rate,
etc.) should be communicated to the managers so that they know the reasons for this quick
change. Eventually, expenses must be budgeted and monitored closely, but this would involve
a change in culture.

d. Identify the tensions highlighted in the case

In each office there is tension between top management and regional consultant partners, as
each of the four offices have major individual problems, which top management can sense,
but due to their decentralization approach can not completely identify and understand. Each
partner is under pressure as top management fears that things get out of hand. Even though
decentralization has helped prior performance they dont seem to feel comfortable anymore to
manage their offices without guidelines or controls giving them too much freedom to operate.
Also the tension between partners and managers builds up as issues like overbilling and lack
of demand for new projects and costs seem to pose problems and cause a lot of disagreements
between them. Employees start to resist and clash more often with the office partners. In order
to deal with the conflicts and tensions ACS should put into place common values and belief
systems like a credo or common vision and mission statement to align and motivate every
employee and to better manage overall performance.

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