management styles of Acme and Omega

1. Using the mechanistic and organic structure models, compare and contrast the management styles of Acme and Omega. How do the differences between the companies' management styles explain the way they coordinated the production of the memory unit prototypes for the photocopying customer? Which company did better?

2. If Omega was so much more effective than Acme, why didn't it win the final contract? How can you account for the photocopier manufacturer's decision?

3. What changes would you recommend to Acme and Omega if they are to survive in the future in this increasingly competitive industry? Do you think Acme and Omega should merge to better compete in the future? What problems might be encountered in such a merger?
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The Paradoxical Twins: Acme and Omega Electronics
Part I
In 1955, Technological Products of Erie, Pennsylvania, was bought out by a Cleveland manufacturer. The Cleveland ?rm had no interest in the electronics division of Technological Products and subsequently sold to different investors two plants that manufactured printed circuit boards. One of the plants, located in nearby Waterford, Pennsylvania, was renamed Acme Electronics, and the other plant, within the city limits of Erie, was renamed Omega Electronics, Inc. Acme retained its original management and upgraded its general manager to president. Omega hired a new president, who had been a director of a large electronics research laboratory, and upgraded several of the existing personnel within the plant. 
Acme and Omega often competed for the same contracts. As subcontractors, both ?rms bene?ted from the electronics boom of the early 1960s and both looked forward to future growth and expansion. Acme had annual sales of $10 million and employed 550 people. Omega had annual sales of $8 million and employed 480 people. Acme was consistently more effective than Omega and regularly achieved greater net pro?ts, much to the chagrin of Omega’s management.
Inside Acme
The president of Acme, John Tyler, credited his ?rm’s greater effectiveness to his managers’ abilities to run a “tight ship.” He explained that he had retained the basic structure developed by Technological Products because it was most ef?cient for high-volume manufacture of printed circuits and their subsequent assembly. Tyler was con?dent that had the demand not been so great, its competitor would not have survived. “In fact,” he said, “we have been able to beat Omega regularly for the most pro?table contracts, thereby increasing our pro?ts.” Acme’s basic organization structure is shown in Exhibit 1. People were generally satis?ed with their work at Acme; however, some of the managers voiced the desire to have a little more latitude in their jobs. One manager characterized the president as a “one-man band.” He said, “While I respect John’s ability, there are times when I wish I had a little more information about what is going on.”
Inside Omega
Omega’s president, Jim Rawls, did not believe in organization charts. He felt that his organization had departments similar to Acme’s, but he thought the plant was small enough that things such as organization charts just put arti?cial barriers between specialists who should be working together. Written memos were not allowed, since, as Jim expressed it, “the plant is small enough that if people want to communicate, they can just drop by and talk things over.” Other members of Omega complained that too much time was wasted “?lling in” people who could not contribute to the problem solving. As the head of the mechanical engineering department expressed it, “Jim spends too much of his time and mine making sure everyone understands what we’re doing and listening to suggestions.” A newer member of the industrial engineering department said, “When I ?rst got here, I wasn’t sure what I was supposed to do. One day I worked with some mechanical engineers and the next day I helped the shipping department design some packing cartons. The ?rst months on the job were hectic, but at least I got a real feel for what makes Omega tick.” Most decisions of any signi?cance were made by the management team at Omega.
Part II
In 1966, the integrated circuits began to cut deeply into the demand for printed circuit boards. The integrated circuits (ICs), or “chips,” were the ?rst step into microminiaturization in the electronics industry. Because the manufacturing process for ICs was a closely guarded secret, both Acme and Omega realized the potential threat to their futures and both began to seek new customers aggressively. In July 1966, one of the major photocopy manufacturers was looking for a subcontractor to assemble the memory unit for its new experimental copier. The projected contract for the job was estimated to be $5–$7million in annual sales. Both Acme and Omega were geographically close to this manufacturer and both had submitted highly competitive bids for the production of 100 prototypes. Acme’s bid was slightly lower than Omega’s; however, both ?rms were asked to produce 100 units. The photocopy manufacturer told both ?rms that speed was critical because their president had boasted to other manufacturers that they would have a ?nished copier available by Christmas. This boast, much to the designer’s dismay, required pressure on all subcontractors to begin prototype production before ?nal design of the copier was complete. This meant that Acme and Omega would have at most two weeks to produce the prototypes or delay the ?nal copier production.
Part III - Inside Acme
As soon as John Tyler was given the blueprints (Monday, July 11, 1966), he sent a memo to the purchasing department requesting them to move forward on the purchase of all necessary materials. At the same time, he sent the blueprints to the drafting department and asked that they prepare manufacturing prints. The industrial engineering department was told to begin methods design work for use by the production department foremen. Tyler also sent a memo to all department heads and executives indicating the critical time constraints of this job and how he expected everyone to perform as ef?ciently as they had in the past.  On Wednesday, July 13, purchasing discovered that a particular component used in the memory unit could not be purchased or shipped for two weeks because the manufacturer had shut down for summer vacations. The head of purchasing was not overly concerned by this obstacle, because he knew that Omega would face the same problem.  He advised Tyler of this predicament, who in turn decided that Acme would build the memory unit except for the one component and then add that component in two weeks. Industrial engineering was told to build this constraint into their assembly methods. On Friday, July 15, industrial engineering noti?ed Tyler that the missing component would substantially increase the assembly time if it was not available from the start of assembly. Mr. Tyler, anxious to get started, said that he would live with that problem and gave the signal to go forward on the assembly plans. Mechanical engineering received manufacturing prints on Tuesday, July 12, and evaluated their capabilities for making the chassis required for the memory unit.  Because their procedure for prototypes was to get estimates from outside vendors on all sheet metal work before they authorized in-house personnel to do the job, the head of mechanical engineering sent a memo to the head of drafting requesting that vendor prints be drawn up on the chassis and that these prints then be forwarded to purchasing, which would obtain vendor bids. On Friday, July 15, Mr. Tyler called the head of mechanical engineering and asked for a progress report on the chassis. He was advised that mechanical engineering was waiting for vendor estimates before they moved forward.  Mr. Tyler was shocked by the lack of progress and demanded that mechanical engineering begin building those “damn chassis.” On Monday, July 18, Mr. Tyler received word from the shipping department that most of the components had arrived. The ?rst chassis were sent to the head of production, who began immediately to set up an assembly area. On Tuesday, July 19, two methods engineers from industrial engineering went out to the production ?oor to set up the methods to be used in assembly. In his haste to get things going, the production foreman ignored the normal procedure of contacting the methods engineers and set up what he thought would be an ef?cient assembly process.  The methods engineers were very upset to see assembly begin before they had a chance to do a proper layout. They told the foreman they had spent the entire weekend analyzing the motions needed and that his process was very inef?cient and not well balanced. The methods engineers ordered that work be stopped until they could rearrange the assembly process. The production foreman refused to stop work. He said, “I have to have these units produced by Friday and already I’m behind schedule.”
The methods engineers reported back to the head of industrial engineering, who immediately complained to the plant manager. The plant manager sided with the production foreman and said, “John Tyler wants these units by Friday. Don’t bother me with methods details now. Once we get the prototypes out and go into full production, then your boys can do their thing.” As the head of industrial engineering got off the phone with the plant manager, he turned to his subordinates and said, “If my boss doesn’t think our output is needed, to hell with him! You fellows must have other jobs to worry about, forget this one.” As the two methods engineers left the head industrial engineer’s of?ce, one of them said to the other, “Just wait until they try to install those missing components. Without our methods, they’ll have to tear down the units almost completely.”
On Thursday, July 21, the ?nal units were being assembled, although the process was delayed several times as production waited for chassis from mechanical engineering to be completed. On Friday, July 22, the last units were ?nished while John Tyler paced around the plant. Late that afternoon, Tyler received a phone call from the head designer of the photocopier manufacturer, who told Tyler that he had received a call on Wednesday from Jim Rawls of Omega. He explained that Rawls’s boys had found an error in the design of the connector cable and had taken corrective action on their prototypes. He told Tyler that he checked out the design error and that Omega was right. Tyler, a bit overwhelmed by this information, told the designer that he had all of the memory units ready for shipment and that as soon as they received the missing component, on Monday or Tuesday, they would be able to deliver the ?nal units. The designer explained that the design error would be recti?ed in a new blueprint he was sending over by messenger and that he would hold Acme to the delivery date on Tuesday.
When the blueprint arrived, Tyler called the production foreman in to assess the damages. The alterations in the design would call for total disassembly and the unsoldering of several connections. Tyler told the foreman to put extra people on the alterations ?rst thing on Monday morning and to try to ?nish the job by Tuesday. Late Tuesday afternoon the alterations were ?nished and the missing components were delivered. Wednesday morning, the production foreman discovered that the units would have to be torn apart again to install the missing components. When John Tyler was told this, he “hit the roof.” He called industrial engineering and asked if they could help out. The head of industrial engineering told Tyler that his people would study the situation and get back to him ?rst thing in the morning. Tyler decided to wait for their study because he was concerned that tearing apart the units again could weaken several of the soldered contacts and increase their potential rejection. Thursday, after several heated debates between the production foreman and the methods engineers, John Tyler settled the argument by ordering that all units be taken apart again and the missing component installed. He told shipping to prepare cartons for delivery on Friday afternoon. On Friday, July 29, 50 prototypes were shipped from Acme without ?nal inspection. John Tyler was concerned about his ?rm’s reputation, so he waived the ?nal inspection after he personally tested one unit and found it operational. On Tuesday, August 2, Acme shipped the last 50 units.
Inside Omega
Jim Rawls called a meeting on Friday, July 8, that included department heads to tell them about the potential contract they were to receive. He told them that as soon as he received the blueprints, work could begin. On Monday, July 11, the prints arrived and again the department heads met to discuss the project. At the end of the meeting, drafting had agreed to prepare manufacturing prints while industrial engineering and production would begin methods design. On Wednesday, July 13, at a progress report session, purchasing indicated a particular component would not be available for two weeks, when the manufacturer reopened from summer vacation shutdown. The head of electrical engineering suggested using a possible substitute component, which was made in Japan, containing all of the necessary characteristics. The head of industrial engineering promised to have the methods engineers study the assembly methods to see if the unit could be produced in such a way that the missing component could be installed last. The head of mechanical engineering raised the concern that the chassis would be an obstacle if they waited for vendor estimates and he advised the group that his people would begin production even though it might cost more. On Friday, July 15, at a progress report session, industrial engineering reported that the missing component would increase the assembly time substantially.
The head of electrical engineering offered to have one of his engineers examine the missing component speci?cations and said he was con?dent that the Japanese component would work. At the end of the meeting, purchasing was told to order the Japanese components. On Monday, July 18, a methods engineer and the production foreman formulated the assembly plans, and production was set to begin on Tuesday morning. 
On Monday afternoon, people from mechanical engineering, electrical engineering, production, and industrial engineering got together to produce a prototype just to ensure that there would be no snags in production. While they were building the unit, they discovered an error in the connector cable design. All of the engineers agreed, after checking and rechecking the blueprints, that the cable was erroneously designed. People from mechanical engineering and electrical engineering spent Monday night redesigning the cable and on Tuesday morning, the drafting department ?nalized the changes in the manufacturing prints. On Tuesday morning, Jim Rawls was a bit apprehensive about the design changes and decided to get formal approval. Rawls received word on Wednesday from the head designer of the photocopier ?rm that he could proceed with the design changes as discussed on the phone. On Friday, July 22, the ?nal units were inspected by quality control and were then shipped.
Part IV: Retrospect
Ten of Acme’s ?nal memory units were ultimately defective, while all of Omega’s units passed the photocopier ?rm’s tests. The photocopier ?rm was disappointed with Acme’s delivery delay and incurred further delays in repairing the defective Acme units. However, rather than give the entire contract to one ?rm, the ?nal contract was split between Acme and Omega, with two directives added: (1) Maintain zero defects and (2) reduce ?nal cost. In 1967, through extensive cost-cutting efforts, Acme reduced its unit cost by 20 percent and was ultimately awarded the total contract.
EXHIBIT 1 Acme Electronics Organization Chart