Handling Change at Ferguson: Credit Function

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Handing Change at Ferguson: The Credit Function

Executive Summary
John Culbert is given the difficult task of selecting the best approach that will capitalize on opportunities to increase the performance efficiency of the credit function without disrupting its current customer-oriented culture. His main challenge is the lack of a comprehensive system to evaluate the gains from centralization and the problems it could potentially create vis-à-vis the current status quo. Hence, we suggest a basic framework for him to evaluate the costs and benefits associated with changing the structure of the credit function. Given that the change is mandated by his managers, there are high potential cost-savings, and low risks associated with restructuring, we recommend the implementation of an adapted version of the Charlotte Pilot in other geographic markets. Furthermore, as a protective cost-saving measure in a declining economic environment, we recommend utilizing his informal performance ranking system to reduce redundant staff, particularly where multiple credit managers are assigned to the same branch office. Analysis

“Why mess with something that works?” There are no simple answers to deciding whether to restructure the credit function, and considerable judgment is required to weight the gains of centralization against the potential pain it could cause, especially as the credit function plays a key role in the continuing business growth of Ferguson and its hallmark superior client service. We believe there are three main criteria for choosing to go forward with the desired changes and implementing the Charlotte Pilot model.
Firstly, the change is mandated by John’s manager, CFO Brad Miller. Ferguson had been a high-growth story and the decentralized model for the credit function supported such expansion strategy. However, the company’s model is not well suited for increased competition, which along with the imminent decline in construction, creates pressure...
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