Stone Finch Business Case - Organizational Development

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Stone Finch, Inc.: Recommendations for a More Integrated Enterprise I. Executive Summary
In 2009, Stone Finch was an international company operating in 12 countries with approximately 20,000 employees who provided products and services for water- and wastewater-related industries. The company consisted of two main divisions, one known as “Water Products” carried out the traditional business services that had sustained the company since its founding in 1975 by the Stone family. The other division, known as “Solutions”, was formed through the acquisition of Goldfinch Technologies in 2000, a 75-person biochemical services company, focused on offering biochemical services and developing new technologies, which was headed by Jim Billings. In addition, Stone Finch included 12 subsidiaries, eight of which served as entrepreneurial “incubator” research groups intended to develop ideas for the Solutions Division. As part of the merger, Billings became head of the newly formed Solutions Division. Stone recognized Billings as an innovative risk taker who could take the company in new directions; and in January 2004, Billings was named president and CEO of the entire company. As CEO, Billings focused on growing the Solutions group by implementing a radical strategy for stimulating innovation and attracting top talent through the encouragement and support of independent subsidiaries. Billings was particularly interested in developing technologies to help position Stone Finch in two markets: 1) nuclear waste water service and 2) groundwater purification for municipalities. Subsidiaries were formed by entrepreneurial individuals within the Solutions Division who, with some degree of career risk, would be directly invested in the subsidiary. If after four years an individual subsidiary succeeded, Stone Finch had the option to re-integrate that subsidiary into the Solutions Division. Funding for the costly research and development (R&D) initiatives for these subsidiaries would come largely from retained earnings of the Water Division, which was seen as a reliable income source for the company. From a financial perspective, bankrolling the growth of the Solutions Division was a successful growth strategy for Stone Finch. Revenues for 2008 exceeded $2.3 billion and represented a 74 percent increase over a four year period. During this period the Solutions Division had grown to 4,000 employees. Despite this success, a rift has developed between the two divisions of Stone Finch due to differences in their respective strategies, structures, processes, and reward systems. Conflicts are apparent between senior managers and division employees as well, and were exposed by recent feedback collected by the CEO. The remainder of our work will seek to document the business and behavioral issues underlying these conflicts, to analyze them in light of current organizational systems models, and provide recommendations to help the organization to move forward in a more productive, harmonious, and sustainable way.

Business issues identified:
1. The Water Products Division is losing market share and experiencing brand deterioration. 2. Continued investment of Water Products Division profits into the development of Solutions Division is being called into question now that Solutions has outgrown Water Products in total revenues (figure 1). 3. Disgruntlement and some loss of sales staff is occurring in both the Water Products and the Solutions divisions, and, while entrepreneurial talent is being added to the organization through subsidiaries, management and succession issues are looming in the rapidly growing company.

Behavioral issues identified:
4. Three classes of employees have emerged, with resentment brewing between long-time employees of Water Products and the entrepreneurs from the subsidiaries now merged into the Solutions Division. These different groups are not well integrated into the company. 5. Resentment, along...
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