Reference no: EM132659045

Case: Ponciano Retailing Company: YESTERDAY

Mr. Ponciano Samonte was 25 years old when he organized his business firm, Ponciano Retailing Company. He asked danny, the younger brother of his highschool classmate, to join him in his newly formed business.

As the years passed, the firm made good in the grocery retail business. Together, Ponciano and Danny established one branch after another. Within a span of 20 years, 19 branches were established throughout Central Luzon and Cagayan Valley.

The total number of employees reached 405 and everyone showed much respect to the leadership abilities of the two pioneers. Ponciano and Danny worked in a mutual trust with each other. Ponciano always consulted Danny on several important aspects of running the business. Danny was always busy training personnel on several aspects of managing a branch so there has never been a shortage of managers.

Because of his loyalty and ability, Danny was well taken care of by Ponciano. He receives an executive salary that was above industry standard, plus allowances and medical benefits. He is provided with an executive car. He is authorized to make decisions on operational matters. To assist him in his task, Danny trained two junior executives.

All went well until Ponciano died and full ownership and control passed to Ponciano's oldest son, Patrick. What Patrick did was to slowly introduce measures to centralize decision-making. Previously, the store managers had the authority to determine the types of merchandise to carry, the quantity, and the timing of purchase. the recruitment and training of store personnel were functions exercised by the store managers. the above functions, as well as some other tasks, are now performed by top management through a staff in the central office. The changes introduced effectively reduced the authority and influence of the store managers. Danny's authority was also greatly reduced.

Just a month after the decentralization order was implemented, danny felt demoralizing effect on the managers and employees assigned to the branches. Sales dropped by two percent and a number of key employees started to make moves to look for suitable jobs elsewhere. The rate of absences and tardiness also began to go up.

Danny was alarmed by the situation and he informed Patrick about the strong possibility of negatuve growth for the company. Patrick told danny not to worry because he thinks it is easy to replace those who wil leave.

Questions:

1. What do you think of the reaction of the employees regarding the decentralization policy of Patrick?

2. Do you consider the decentralization policy as a big mistake? Why or why not?