Kinko’s New Operating Structure
...lped the company rapidly grow, however it did not help to control the costs or to better serve the customers needs. After the consultants had finished their analysis of the company they realized that the franchising was not enough and Kinko’s should have a more centralized form of management. This central form of operating should be in the way that the purchasing and financing for the entire company will be handled mainly by the head office. This is done in order to reduce the costs of operating. Orfalea also felt that he did not have a need to take a title such as “President.” Due to the fact he would not take this title, they needed top managers to organize central control and create plans of actions to respond by meeting head-on with its competitors. If this were not done then it was felt that Kinko’s would lose its leading position in the market. The consulting firm Clayton, Dubilier & Rice recommended that Kinko’s develop and unambiguous set of internal authority relationships. This is in order for Kinko’s new managers to coordinate changes throughout the company to acquire new customers. With all the advice that was gained, Kinko’s now knows what they need to do in order to survive and prosper in a new environment. Discussion Questions: 1. What were the problems facing Kinko’s managers? The major problems for Kinko’s managers were a change in the organizational operating system. From being decentralized the operating system became centralized. Managers had been in complete control of their operations before the changes, after that they became limited in their decision-making. Managers faced new sets of rules and regulations. Besides this, new top managers were hired to control the company’s activities. All financial decisions were taken care of in the central office. It was not easy for the managers to adapt to these new rules. Other problems that managers were facing were finding ways to attract new customers and satisfying the existing ones. In a market full of successful competitors it is incredibly hard to keep the leading industry position. Many new rapidly growing chains were opening outlets in the Kinko’s major markets. This created intense competitive pressure from these new companies, which advised better, faster and cheaper services. Kinko’s with its decentralized structure could not respond quickly enough to the moves of the competitors, that is why they were losing their potential and existing customers. The managers of the decentralized Kinko’s now had to face having to deal with the new top-managers that were in full control of the new centralized organizational Kinko’s. 2. What steps did managers take to solve these problems? One of the first steps Orfalea took was that he called upon the services of Clayton, Dubilier & Rice Investment Firm. The investment firm found problems in the organizational structure. They decided Kinko’s needed a more centralized operating system. The investment firm advised them to recruit experienced top managers to provide a centralized control. Kinko’s also developed a clear set of internal authority relationships. For the survival of the Kinko’s empire, all the managers of all the stores had to agree that they would have to make the new organizational structure work. They acknowledged that this would be very difficult, however for the survival of the company it would have to be executed. Recommendations for the future: Our recommendations to the Kinko’s manager...