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CASE: Accounting for Authority

What is RILs business strategy?

1. To radically increase sales and profits at reasonable cost levels by:

Boosting sale of scooters

Increasing sale of mopeds by linking it to scooter sales

2. To ensure sale of genuine spare parts of RIL and thereby havesatisfied customers.

Important Organizational shortcomings at RIL

1. RIL did have a structure in place to implement its businessstrategy.

Individual roles and responsibilities were not clarified

Poor system to support the structure

Absence of periodic review of system in place

The processes in the system were neither laid down clearly norwere they were not reviewed periodically

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2. The MD Mr. Sinha believed that ends justified the means.

Thus short-term gains seem to be gaining precedence over their

long-term consequences to the company.

The approach has gained legitimacy since is signaled asacceptable from the top. This in turn has reinforced behaviouraccordingly.

3.

Management at RIL was weak .

Only Mr. Deshmukh GM (Spares & Services) took a firm stand on theissue.

The MD woke up only when the auditors interjected and he was afraidof the consequences especially from the foreign collaborators.

What needs to be done? Some action points:

The MD now needs to do the following:

First talk to Pandit and explain the companys business strategy andthe reasons for adopting a particular approach.

Define Pandits role and the problems that have arisen out of non-

conformity to systems.

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Call the marketing & service team along with the factory team, state

the business goals and evolve critical parameters that are jointlyaccepted and introduce systems to monitor their achievement.

Define the role of marketing & the service team, sales and factory

accountants in relation to the business strategy.

Work out a system of personally monitoring the above every week, till

the MD is confident that the system is in place.

Call all the dealers along with the GM (M) and GM (S&S) and the

branch managers and explain the new system and the need for it.The system should be improved upon interactively.

Alternatively, Mr. Pandit should be transferred to a function that haslittle or no interaction with sales and marketing before the systembreaks down.

By doing so, the sales & distribution role should be reinstated to

where it rightfully belongs - the branches.

Removal of Mr. Pandit may cause temporary upheaval. However,installing a simple document-based system pending the design &

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implementation of a more comprehensive IT based solution will takecare of the situation.