Case For Analysis: Covington Corrugated Parts & Services
Covington Corrugated Parts & Services is a Virginia based company providing precision machine parts and services to the domestic corrugated box and paperboard industry. The business is owned by Larisa Harrison and operates from a 50,000 square foot factory in the rural Shenandoah Valley with 150 employees, many of them now nearing retirement. Due to changes in the economy and new competition their dominant 70 percent of the market share is rapidly declining. While management was focused on building the business, the box and paperboard industry was changing; plastics and reusable containers were becoming more ...view middle of the document...
The unstable economy and changes in the industry have prompted competitors to lower costs by moving operations abroad and purchase newer equipment that requires less maintenance and fewer of Covington’s parts. The company’s managers have differing opinions on which path the company should take to achieve growth and the current structure is not designed for the challenges they face.
While management was focused on getting the job done the external environment changed. New competitors and higher quality machines were changing the manufacturing industry and the company lacks a strategy to change with it. Each of Covington’s managers has a different vision of the company’s future making consensus and decision-making a major issue. The lines of authority and responsibility are blurry, causing conflict between managers and department directors. The latest manager’s meeting can be described as chaos.
An additional issue facing the management team is the replacement of the workforce being lost to attrition. The loyal, hard-working employees have set a high standard for future members of the Covington team and the younger generation has not yet established themselves as a similar strength workforce.
In the past two decades Covington has been successful operating without a clearly defined organizational purpose. While this organizational design was not a problem in the past, it is now a threat to the company. The latest quarterly earnings illustrate that the once stable Covington is not recession-proof. The company needs to redefine its organizational purpose to include strategic intent and operating goals. Economic and industry changes have caused a decrease in customers and increase in competition. Surviving industry manufactures are investing in technology and moving their operations overseas. If Covington is going to continue to be successful, the company needs a strategy for interacting with this competitive environment.
Communication problems among Covington’s management team stem from the lack of structural dimensions and established operating goals. The company has been operating organically in a mechanistic environment. The company would benefit more from standard rules, procedures, and a clear hierarchy of authority. The loose and haphazard structure to which it has grown accustomed has resulted in managers and directors wasting valuable time and resources by needlessly overlapping responsibilities.
The 50,000 square foot factory Covington operates from is located in a very rural area. A majority of the original employees were neighbors to the area and are now preparing for retirement. Larisa realizes she can’t expect their replacements to have the same values and work ethic. The pool of potential employees grows smaller every day as the area’s younger generation moves further and further away in search of more lucrative employment opportunities.