Peter Small of the Harvard Business School undertook to write case material on the budgetary control system of the Empire Glass Company, a manufacturing company with a number of plants located throughout Canada. In particular, Peter Small was interested in how James Walker, the corporate controller, saw the company’s budgetary control system. Therefore, Small focused his research on the budgetary control system in relationship to the company’s Glass Products Division. This division was responsible for manufacturing and selling glass food-and-beverage bottles.

Organization

Empire Glass Company was a diversified company organised into several major product divisions, one of which was the Glass Products Division. Each division was headed by a vice president who reported directly to the company’s executive vice president, Landon McGregor.

(Figure A shows an organisation chart of the company’s top management group.) All of the corporate and divisional management groups were located in British City, Canada.

McGregor’s corporate staff included three people in the financial area – the controller, the chief accountant and the treasurer. The controller’s department consisted of only two people –

Walker and the assistant controller, Allen Newell. The market research and labour relations departments also reported in a staff capacity to McGregor.  All of the product divisions were organized along similar lines. Reporting to each product division vice president were several staff members in the customer service and product research areas. Reporting in a line capacity to each divisional vice president were also a general manager of manufacturing (responsible for all of the division’s manufacturing activities) and a general manager of marketing (responsible for all of the division’s marketing activities).  Both of these executives were assisted by a small staff of specialists. Figure B presents an organization chart of the Glass Products Division’s top management group. Figure C shows the typical organization structure of a plant within the Glass Products Division..........

Question

What are the strengths and weaknesses of Empire Glass’s planning and control practices? Your response should include arguments for and against treating the manufacturing plants as profit centers and the problems this may create.