All complex organizations must be broken down into manageable pieces to ensure that roles and responsibilities...

 

  

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All complex organizations must be broken down into manageable pieces to ensure that roles and responsibilities for making and executing critical decisions are clear. A good way to determine what the important decisions are in your company is to look at the sources of value in your business and then organize the macrostructure around them. Take the case of British Gas, a division of the multinational energy and utility company Centrica. In 2006, faced with a serious performance crisis, the company's new leadership team started looking at the sources of value in its business. Managers began by examining differences in profitability by service, by geographic area, and by customer segment. They discovered that profitability and growth varied much more by customer segment than by any other variable. One segment used large amounts of gas or electricity and paid regularly through guaranteed direct debits. Decisions that helped the company retain these customers, such as how to handle home moves and how best to offer additional services, were most important for this segment. A second customer segment used less energy and paid regularly through a system of prepayment cards. Here the key decisions related to controlling costs, particularly those associated with processing additional payments and with meter reading. A third segment wasn't as consistent in keeping up payments. For that group, the critical decisions related to managing receivables. Recognizing those different sources of value, managing director Phil Bentley decided that the best way to structure the company was by customer segment. He established three separate businesses: Premier Energy, Energy First, and Pay-As-You-Go Energy. This new structure allowed him to place accountability for decisions that directly affected customers, such as service levels, positioning, and product bundling, in the business units. Corporate headquarters could focus on noncustomer-facing matters such as IT and finance. The alignment of structure and decisions helped British Gas improve its performance significantly. It reduced customer attrition from about 20% to less than 10%. Its bad debt fell, and the business began growing for the first time in years. Source: Harvard Business Review. (2010). The Decision-Driven Organization. (a) What was the objective of British Gas Leadership? (b) What is the information they collected? (c) How they analyzed this information? (d) What are the decisions taken and what are their impacts on British Gas? All complex organizations must be broken down into manageable pieces to ensure that roles and responsibilities for making and executing critical decisions are clear. A good way to determine what the important decisions are in your company is to look at the sources of value in your business and then organize the macrostructure around them. Take the case of British Gas, a division of the multinational energy and utility company Centrica. In 2006, faced with a serious performance crisis, the company's new leadership team started looking at the sources of value in its business. Managers began by examining differences in profitability by service, by geographic area, and by customer segment. They discovered that profitability and growth varied much more by customer segment than by any other variable. One segment used large amounts of gas or electricity and paid regularly through guaranteed direct debits. Decisions that helped the company retain these customers, such as how to handle home moves and how best to offer additional services, were most important for this segment. A second customer segment used less energy and paid regularly through a system of prepayment cards. Here the key decisions related to controlling costs, particularly those associated with processing additional payments and with meter reading. A third segment wasn't as consistent in keeping up payments. For that group, the critical decisions related to managing receivables. Recognizing those different sources of value, managing director Phil Bentley decided that the best way to structure the company was by customer segment. He established three separate businesses: Premier Energy, Energy First, and Pay-As-You-Go Energy. This new structure allowed him to place accountability for decisions that directly affected customers, such as service levels, positioning, and product bundling, in the business units. Corporate headquarters could focus on noncustomer-facing matters such as IT and finance. The alignment of structure and decisions helped British Gas improve its performance significantly. It reduced customer attrition from about 20% to less than 10%. Its bad debt fell, and the business began growing for the first time in years. Source: Harvard Business Review. (2010). The Decision-Driven Organization. (a) What was the objective of British Gas Leadership? (b) What is the information they collected? (c) How they analyzed this information? (d) What are the decisions taken and what are their impacts on British Gas?

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a The objective of British Gas leadership was to improve the companys performance by structuri... View the full answer