Case: Airtex Aviation
Ted Richards and Frank Edwards, long-time college friends and Harvard Business School graduates, purchased Airtex Aviation on December 29, 1989. At the time of the purchase, Airtex Aviation, located in Center County, Texas, was finishing up a fiscal year in which they had losses of sales totaling 500,000 dollars and a negative net worth. So, it was obvious to Frank and Ted early on that they were going to have their work cut out for them in order to turn their “fixer-upper” into a successful, profitable business. Ted and Frank knew little about the aviation industry at all going into the purchase, so they were planning on relying completely on their management skills to achieve their goals. Problems
Airtex Aviation conducted activities through six informal departments at the time of purchase: Service, Flight, Aircraft sales, Parts, Avionics, and Fuel Line. The organizational structure at this time was extremely centralized, and it gave too much authority and responsibilities to Sarah Arthur, Airtex’s under qualified accountant. She received all bills, checks and cash for all departments and kept them in her records. She also managed the receivables and payables for all six departments, none of which she communicated with the departments. So, as a result of Sarah’s central repository approach to information sharing, the department managers had no understanding of the profitability of their operations, and no basis for good decision-making. Frank and Ted knew that in order to address these issues they would have to create a new control system to completely decentralize Airtex’s organizational structure. New Control System
Ted had decided that the role of his control system would be that of a task manager, and he would personally take the role as an emotional leader for managers to make their own decisions. He began implementing his control system by establishing profit centers for each major activity,...
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