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Monday, September 04, 2006

XYZ Research Corporation Final Review

Primary Issues:
XYZ had reached a plateau in sales volume and wished to expand the size of the company.
Market intelligence for the industry is fragmented resulting in incomplete information related to expansion, profit, competitors etc…
Internal issues within XYZ may be contributing to functional limitations.
XYZ was/is privately held with aging founder who acts as primary source of referrals and perceived expertise/competitiveness for the company.


XYZ Assets/Strengths:
Location. XYZ is located near a major land grant research university that has provided collaborative support as well as highly trained personnel over the 36 years of XYZ operations.
ISO accredited full service laboratory with long term reputation and experience working with a majority of the leading organizations within the industry. XYZ prided itself on fast turn-around with superior service.
Relatively debt free
Marketing strength-particularly ability to retain customers via quality personalized service
Impeccable reputation of founder

XYZ Limitations/Weakness:

Unattractive physical location due to long term expansion to meet ‘growth in place’ with resulting functional limitations based upon work flow
Concerns related to XYZ competitiveness based on price alone.
Competing research within the industry as a whole resulting in saturation and lessening effectiveness of marketing message.
Failure of marketing and technical liaison / project managers to be utilized.
Unclear expectations regarding amount of time to be dedicated to testing versus marketing and vague job descriptions in general.
Minimal employee knowledge regarding financial aspect of the company in general
General employee morale issues related to poor communications, perceived irregularities in bonus structure, other related issues
Failure to invest in most up to date technology resulting in reduced competitiveness
Impeccable reputation of founder resulting in high dependency upon one individual
High turn-over among new hires
Impeded communication between departments and less than optimal flexibility for day to day operations/communications both in sales/marketing as well as information flow and budgetary tracking.




Discussion:

XYZ is currently suffering from it’s own success in both terms of physical growth and company structure as well as founder reputation. As with many privately held companies, XYZ employees and customers are becoming increasingly concerned with the ability of the company to continue-much less grow-after the current founder ceases to run day to day operations. Dr. Brown, the founder of XYZ, has utilized his personal reputation to grow a company into an organization unable to be fully run by one person. Unfortunately, it appears much of the day to day decision making, company reputation and guiding principles are closely held by Dr. Brown in much the same manner as when the company was originally founded. Failure to invest in new equipment, poor communication throughout the company, inadequate standards and expectations in relation to job descriptions, expectation and goals as well as a poorly functioning and unattractive physical location all appear to be sending the wrong message to employees and clients.


Suggested Course of Action:

XYZ needs to recognize it’s own success and begin systematically integrating standard operating procedures, job descriptions and so forth in order to fully communicate expectations, compensation and related operational concerns. A feedback loop of communication should be implemented with clear expectations, performance feedback, work objectives and company goals, clear job descriptions with outcomes delineated and an objective reward system. Dr. Brown must re-examine his reliance upon his own reputation as the primary source of referrals with an ongoing effort to build upon the success and dedication of XYZ as a whole. This will require a determined effort to place ‘real’ responsibility and ‘credit’ to upper and middle management on a regular basis. Further, this must be communicated both internally and externally to both clients and employees with recognition and responsibility placed in the hands of others. Additionally, Dr. Brown needs to examine his long term plans for transference of XYZ for the future and communicate this both internally and externally. Since Dr. Brown has expressed a desire to grow the business does he intend to sell it or keep it? [Assuming he intends to keep it]. Not enough information is provided to determine a course of action regarding the future of XYZ however, proper planning should be immediately started with communication regarding intent once a desired course of action is decided upon. Dr. Brown could begin to groom his successor to ensure the most seamless transition possible while allowing XYZ as a company to fully grow and expand while capitalizing on Dr. Browns reputation and relationships within the industry. This would also allow for proper introductions with major clients in order to assure both employees and clients of the long term prospects for XYZ as an ongoing concern.

In the interim, XYZ should examine the message it is sending to prospective employees, clients and so forth by failure to invest in the most up to date technology and lackluster physical environment. Although XYZ is not able to relocate at the moment, updated technology and some effort to improve the physical work space of employees should be made immediately. The company is relatively debt-free and is generating significant revenue available for reinvestment in the company. The technology and work conditions both result in quantifiable results in terms of sales and morale while sending a message that the company is viewed as an ‘ongoing concern’ to the owners.



It is improbably that XYZ would benefit from reducing it’s pricing strategy given the type of service and fast response as well as growing market. The existence of a major competitor with a significant market share will likely preclude XYZ’s ability to compete on an economy of scale model therefore the current pricing structure and emphasis is considered the most viable. However, XYZ management needs to do a better job of communicating this strategy to others at the company in order to explain both the rationale as well as clarify objectives among employees since there is obviously confusion among employee’s who do not fully understand XYZ’s target market or strategy.

XYZ would greatly benefit from a total quality management approach which explored the most productive methods of both service and skills among current employees as well as identified gaps in needed staffing. Communication flow, accounting and other variables would also be identified and addressed; for example, by analyzing workflow and positions, clarification as to the amount of time to be spent on technical concerns versus marketing concerns or budgetary issues would no longer be considered erratic. Identification of project managers or liaisons to bridge the gap between marketing and science related departments would be another probably outcome. Likewise, updated modifications in accounting or computer/IT related resources to better reflect end user support would not only empower employees while reducing frustration but more adequately reflect the full potential of both saving money AND increasing potential revenue.
Only after revamping the internal communications, initializing an exit strategy for Dr. Brown and beginning to groom his successor(s), upgrading technology and work environment can XYZ begin to address the need or desirability to pursue new markets. Continued reliance upon Dr. Brown in the development of new market areas would only prove to increase XYZ’s future risk and perception of control. On the other hand, new markets would provide the perfect opportunity for a successor to be groomed while Dr. Brown retained oversight of current client relationships. Once upgraded technology, a clear commitment to future growth of the company and successor strategies were in place, new hires may be more inclined to believe there was a ‘future’ at the organization rather than utilizing it as a stepping stone to other positions or merely sacrificing the hire due to low employee morale.

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