Some of the issues KCC is facing relate to the division of responsibilities between a functional and a divisional structure, and how best to achieve an effective relationship between these areas. Manager talent is another concern. Managers are coming from a centralized structure, and some are not trained to handle divisional responsibility, although they have been tasked with this responsibility. Consequently, some of the decisions made by the divisional managers are questionable from the perspective of the owners.

Corporate control over supply chain management and R&D has also caused issues with the divisional managers. Corporate controls supply-chain decisions, which takes away the division managers’ ability to control some significant cost decisions, such as which supplier to purchase from. Corporate also controls R&D, which can significantly affect product design and quality, and ultimately, customer satisfaction. This can lead to decreased financial results. Therefore, the overall issue relates to the controllability principle, and how to best assign responsibilities for various functions and encourage goal congruent decision making.

To start the analysis, the advantages and disadvantages of decentralization are explored. Here are some of the advantages of decentralization:

Freeing up top management time, thus allowing top management to focus on the most important decisions. Given Kevin’s increasing outside interests (ranching), this would suit his needs.

Enhancing the ability for growth by developing the management team. The decentralized structure will allow Ed and Joe to develop general management skills, which they could use to advance into the corporate office to further alleviate top management (owners) time.

Allowing quicker (more responsive) decision making. Given the company has two distinct markets, quick response time could prove