Westport Electric Corporation:

Case Context In a meeting, James King, the supervisor of administrative staff budget section of Westport Electric Company, a large manufacturer and seller of electric and electronic products, was discussing his displeasure with the proposed increase in budget of the offices. According to him, these are not justified and are clear indications of faults in the companys budgeting system. The company currently has six staff offices like those mentioned and they are tasked with providing advice to top management and operating divisions as well as other staff offices. They also coordinated among the divisions depending on their areas of activity. These staff offices are budgeted using the companys budget approval procedure, which according to some of its officers like King, needs a lot of improvement. Q) What should Westport do about the evaluation problem raised in the case? PROBLEM STATEMENT The budgeting system of Westport should be assessed as to its efficiency and effectiveness and identify changes that will develop the current system. ANALYSIS AND RECOMMENDATION

We recommend that top management actually pay considerable attention to the efficiency and effectiveness of each business division. Currently, it appears that focus is given simply on bottom line numbers; that is, each units financial success is assessed solely on the basis of how handsome the profits brought in for the company, without being given much performance evaluation as is needed in any organization. Being distinct profit centers, both revenues and costs must be calculated for each business segment. It is important to note that while the individual divisions may report the most exorbitant of profit figures, the numbers do not carry with them as much meaning as when these are put into context. As in the case of Westport Electric for instance, Kelly is quick to point out that the company is certain to do better trimming down budgets handed to certain divisions such as legal department and the Industrial relations According to him the trining given by the IR division is not worth the money that they cost. Also during presentations the budgeting department should take proper position on the appropriateness of the proposed budget or the efficiency of the activity. Also the finance Vp and the divisional controller should raise their opinion / objections to the proposed budgets if they believe it is not sufficiently tight. The finance minister should be given the official power to approve or disapprove the budget presentations. There should be goal congruence of the staff departments to perform optimally in the interests of the organization. Hence Westport should take care that the evaluation of the budgets is done monthly and each division should be responsible or take the responsibility of the

results and

The budgeting system of Westport should be assessed as to its efficiency and effectiveness and have a tight budget so as to have a goal congruence in the interest of the organization.

Leranings: There was no goal congruence between certain departments and the ineterst of the organistaion and there was lack of responsibility centres ( an organization that is headed by a manager who is responsible for its activities)

Other info on Westport Electric :

Overview of the organization

- One of the largest producers and distributors of electronics in the U.S..

- Activities are divided into four groups, each group headed by a VP: - Electrical Generating and Transmission Group; - Home Appliance Group; - Military and Space Group; - Electronics Group.

- Each group consists of a division led by division managers. Each division is a profit center. There are 25 divisions within the organization. There are six corporate departments and a separate staff department in Office, each staff department headed by a VP: - Finance; - Industrial Relations; - Legal; - Marketing; - Manufacturing; - PR;

- The responsibilities of the staff departments include: - Advising top management; - Advise of the divisions and other divisions; - Coordinating responsibilities within their respective divisions.

2. Problem

- The shortcomings of review and approved the budgets of the ring divisions;

- The significant (incorrect) increase in the budgets of two staff departments.

- To whom is it a problem? It is a problem for the entire organization. But especially for King James who works at the Department of Budgeting.

- Why is it a problem? A lack of doelcongruentie the staff departments not perform optimally in the interests of the organization.

- Where lack? - Evaluation of budgets (monthly); - Performance based on available budgets compared to actual results; - No responsibility for results in the divisions; - A reward system for corporate departments. Analysis of the information in the case

3.1 Current Procedure

- The department distributed budgeting and scheduling timely instructions serving the submission of the budgets of the coming years. This case is about the budgets of the departments staff ....