Examination: Case Study


Examination: Case Study

In the uncertain world of Qontrac International:

navigating through family, growth and succession management challenges.

Introduction

In 1989, Vishwanath Shetty began the Manufacturing-Electrical-Plumbing company Qontrac Ltd in Muscat. Qontrac expanded steadily and in 2005 when Vishwanath and his family relocated to Dubai, Vishwanath left Rajeev Kumar in place as assistant manager while maintaining close oversight. Recognising an opportunity to address a gap in the market in Dubai, Vishwanath established a business arrangement with his brother Advaith Shetty which allowed him to launch a branch in Dubai. Although the dynamics of the Dubai market were significantly different to Muscat, under Vishwanath management, Qontrac grew rapidly in size and service line until the 2009 recession. Vishwanath’s ability to secure a major contract in 2010 combined with a positive turn in the economy, reinstated Qontrac in the industry.

During the period 2013 to 2017, Vishwanath initiated a number of changes in Qontrac. Operations were expanded to Tema which was managed by Vishwanath’s brother, Ashwin Shetty. Ashwin managed the branch with full decision-making authority, with periodic overview by Vishwanath. This approach appeared to be progressing well until 2017 when it became apparent that the lack of accessible market combined with Ashwin’s overexpansion had resulted in the business being unable to meet its expenses. At the same time, with financial and health issues impacting on Advaith, he came to rely heavily on Vishwanath for financial support. For several years this continued until Vishwanath ended their partnership agreement without consultation leading a breakdown in the extended family relationships. Toward the end of this period, a further branch as opened in Pune which was managed by Jyothi’s brother, Naksh Pavithran. The decision-making authority was similar to that of the Tema branch and within a 12-month period, Pune too was experiencing financial difficulties due to available market and questionable management.

During the establishment and expansion of Qontrac, there were a number of significant decision issues made independently by Vishwanath or with the input of a family member. These issues will be evaluated through the course of the case study analysis and recommendations made to resolve the issues. While there are a broad range of decision issues identified in the case study, the analysis will be limited to the following: the individual decision by Vishwanath to personally continue to manage the Dubai branch; Vishwanath’s decision to cease business arrangements with Advaith; the group decision to appoint Naksh to manage the Pune branch; and the individual decision by Vishwanath not to initiate structural change in the organisation despite significant growth to the business.

A critical analysis and evaluation of the case study indicates that the root cause of the issues identified at Qontrac are the lack of business acumen of Vishwanath Shetty and his failure to use a structured decision-making approach.

Analysis

Issue 1

The decision by Vishwanath to manage the Qontrac branch in Dubai was a strategic decision initially made with disjointed incrementalism within bounded rationality (Cristofaro, 2017). The business environment in Dubai presented challenges that had not been experienced in Muscat causing Vishwanath to use his legitimate power and divert his focus on the new branch in a structured approach to managing the uncertainty in the business. With guidance from his brother, Vishwanath utilised the group knowledge to provide him with sufficient information to make ethical executive decisions. As the Dubai branch expanded, combined with financial and family complications, Vishwanath reverted to individual decision making which is an example of his desire for centrality of power. The impacts of his decision to self-manage the branch on an ongoing basis is reflective of a Vishwanath’s high locus of control however there were negative business implications of him having 130 direct reports. The approach resulted in an organisation of low innovation and lack of accountability by employees due to micromanaging. This individual, centralized decision making by Vishwanath lead to less rationality in decision making, a negative impact the business and undue pressure on Vishwanath.

Issue 2:

The decision to cease business arrangements with Advaith was an objective decision made in the interests of Qontrac. Although an individual decision, the decision led to family fractions. Complicating the issue was the background which included Advaith’s ill health, Vishwanath’s efforts to support Advaith and his business, and the extended period of their partnership with reciprocal business arrangements. The option for Vishwanath to use his legitimate power to end the business arrangement is complicated by the consideration that emotional involvement impacts on decision making and the ability to effectively reason which could explain the delay in the decision being made. This finalisation of the arrangement is an example of a non-routine decision applied objectively. Complicated by ethics, Vishwanath was required to make a moral decision applied with rationality (Schwartz, 2016). When considering the pillars of ethical values in decision making, we can identify that Vishwanath displayed respect and caring to Advaith through ongoing support however he eventually chose a utilitarianism approach in the interests of Qontrac. The perception of fairness by both Vishwanath and Advaith and the wider family negatively impacted on the Shetty family.

Issue 3:

The decision to appoint Naksh to manage the Pune branch was a strategic decision yet it was not driven by rationality rather it was based on culture and social influences. Jyothi used her referent and personal power to influence her husband’s decision. The utility gained by Vishwanath through appointing family members to manage branches was both cultural and characteristic of social norms (Kansal, 2012). Jyothi’s over confidence bias persuaded Vishwanath to employ Naksh despite him having been unemployed for several years and having a lack of business knowledge. This combined with Vishwanath’s over confidence bias in the success of the venture despite existing competition, did not place the business well to succeed. Over the coming year, Naksh lack of experience and capability led to poor recruitment choices. Issues escalated with employees and clients and his inability to manage financial and business decision leading to a financial loss.

Issue 4:

Vishwanath made the decision to use his legitimate power not to initiate structural change in the organisation despite significant growth to the business and Jyothi’s firm belief in initiating structural change. The subjective decision is based on his uncertainty, lack of trust and desire to maintain control. Vishwanath’s intricate involvement on an operational level, provided him with too much information to consider the business objectively. In the instance of Jyothi managing HR and legal requirements of Contrac, it is considered that Viswanath did not have an appreciation for the importance of these facets. It is acknowledged that the Muscat branch did not appear to have the same level of challenges as other offices which could be based on the mentoring received by Rajeev combined with the structure that shows an increased ratio of support staff.

The root cause of the analysed issues is the lack of business acumen of Vishwanath Shetty. When considering the four issues raised, the commonality is the lack business acumen and deficiency of apparent process in strategic decisions. When considering Vishwanath’s approach to maintaining management of the Dubai branch, it is considered that he was unable to see that as the business expanded and he gained additional responsibly, he would need to step away from the operational management of the business into a more strategic business role to consider the broader needs of Qontrac. Similarly, although intertwined with ethics, the delay in ceasing the financial burden of the business arrangement with Advaith had a negative financial impact on Qontrac that was not visible to Vishwanath for two years which would suggest he had limited appreciation of how decisions impact on profitability. The decision to select a manager for new branches required a strategic decision following a structured process, yet Vishwanath agreed to a suggestion to appease Jyothi on the basis that Naksh’s knowledge of business reality was perceived to be greater than someone externally. Finally, Vishwanath’s lack of business acumen can be seen in his desire to maintain an organisational structure that was sufficient in the early stages of Qontrac however did not meet the needs of an International Company working within a dynamic business environment

Recommendations

The root cause of the analysed issues is the lack of business acumen of Vishwanath Shetty which impacts on the value he placed on structured strategic decisions. To bridge the gap in Vishwanath’s capability, decision theory supports the use of a structured decision-making process such as the 8-step model to guide rational decisions as a first step in the short term (Harrison, 1999). It is critical to the long-term success of Qontrac that corrective actions address the root cause and are preventative in nature drawing on the 5 Why’s to drill down into issues. This combined with Vishwanath applying reflection and evaluation of decisions and outcomes will strengthen decision making (Moilanen, 2015).

The immediate the recruitment of a Business Advisor will provide the opportunity for Vishwanath to be guided in the strategic decision making at Qontrac. Working within bounded rationality while still utilising his tacit knowledge, Vishwanath can better lead Qontrac by appreciating the interdependency of decisions in the business with the intention that a new organisational structure (Figure 2) be established that integrates experts into the organisation to address deficiencies. Vishwanath needs to increase his awareness of the implications of assumptions and bifurcation bias (Kano & Verbeke, 2018). The individual aspects of Vishwanath’s decision making includes his personality traits, ability for critical thinking, perceptions and approach to satisficing (Ashill & Jobber, 2013). Although not addressed in this response, managing the root cause will play an integral role in the identification of an appropriate successor.

Recommendation Issue 1

The issue of the management of the Dubai branch by Viswanath is interrelated to the organisational structure which will be addressed in the coming recommendations. When considering the specific issues that are present in the management of the Dubai branch, an objective, quantitative approach is required to assess the current state. The current culture of the organisation is one of staff uncertainty and lack of decision making. To address this issue, minimising Viswanath’s interaction on an operational level will increase team accountability and shared decision making. In the short-term, an assistant branch manager needs to be appointed from the existing team while recruitment commences for a branch manager to replace Viswanath. In the longer term, the introduction of decision support systems will provide organisational overview and allow technology to support decision making (Turpin & Marais, 2004).

Recommendation Issue 2

More timely management of the cessation of business arrangement and financial support between Advaith and Vishwanath is framed around the requirement for clear business structures and charters that are independent to family arrangements. Vishwanath had the opportunity to improve the level of ethical decision making through being open with Advaith and discussing the partnership cessation rather than doing this covertly. When applying theoretical frameworks to evaluating decisions, the process could have been better managed through considering the discourse test and applying this approach. The use of the 8-step decision process would have provided Vishwanath the opportunity to document and discuss the decision with Advaith rationally. Although the situation has ended, in an attempt to address the family fraction, this should still be attempted.

Recommendation Issue 3

Despite the persistence of Jyothi, Vishwanath had the opportunity to use both personal and positional power to take a utilitarianism stance regarding the appointment of Naksh. Through the use of the 8-step model, Vishwanath was in a position to rationally assess the engagement of Naksh. Consideration of joint decision making would allow an alternative perspective to be considered with a tradeoff being to offer an alternate role to Naksh. The approach taken by Vishwanath with both the Pune and Tema branches where a family member was appointed as Manager, was to allow complete delegated authority for making decisions. In both instances, this was unsuccessful leading to financial and quality loss. In the instance of the Muscat branch, Vishwanath initially made Rajeev Kumar (who was not a family member) assistant manager in charge of daily operations with a weekly update to Vishwanath. In the instance of Pune and Tema, Vishwanath applied bifurcation bias which negatively impacted on the business outcomes due to his lack of oversight of the two managers. Future recruitment should be approached as merit based to bring the greatest benefit to the business.

Recommendation Issue 4

The reassessment of the organisational structure would maintain legitimate power with Viswanath while supporting the organisational strategy (Lunenburg, 2012). Through introducing experts into the decision-making process, a more viable outcome for the business could be achieved. While it is acknowledged that conflict will arise, these differing opinions bring opportunities to challenge and strengthen decision making processes. A tiered structure would bring a formal alignment to decision making being organisational, group and individual bringing a greater rationality to the process. When assessing the international organisational structure of Qontrac International in January 2018, there is little consistency in the numbers of staff applied to strategic and operational functionality across branches. An alternative structure, more appropriate to an international organisation may be seen in Figure 2. The integration of a human resource department would provide employees with role descriptions, clear reporting lines and decision structures while the defined authority would minimise role ambiguity.

Conclusion

Vishwanath’s failure to recognise and address the gap in his business capabilities created issues at Qontrac. Through the implementation of strategies that supplement Vishwanath’s existing capabilities and the development of an approach to structured decision-making processes, the impacts of sub-optimal decisions making will be minimised.

Bibliography

Ashill, N. J., & Jobber, D. (2013). The Effects of Experience on Managerial Decision-Making Uncertainty. Journal of General Management, 39(1), 81-110. doi:10.1177/030630701303900105

Cohen, M. D., March, J. G., & Olsen, J. P. (1972). A Garbage Can Model of Organizational Choice. Administrative Science Quarterly, 17(1), 1-25. doi:10.2307/2392088

Cristofaro, M. (2017). Herbert Simon’s bounded rationality. It’s historical evolution in management and cross-fertilizing contribution. Journal of Management History, 23(2), 170-190. doi:10.1108/JMH-11-2016-0060

Harrison, E. F. (1999). Rational decision making. In The managerial decision-making process (5th ed.). Boston: Houghton Mufflin.

Kano, L., & Verbeke, A. (2018). Family firm internationalization: Heritage assets and the impact of bifurcation bias. Global Strategy Journal, 8(1), 158-183. doi:10.1002/gsj.1186

Kansal, P. (2012). Succession and Retirement Planning: Integrated Strategy for Family Business Ownders in India. Vilakshan: The XIMB Journal of Management, 9(1), 23-40.

Lunenburg, F. C. (2012). Organizational Structure: Mintzberg’s Framework. International Journal Of Scholary, Academic, Intellectual Diversity, 14(1), 1-8.

Moilanen, J. H. (2015). The Wisdom of Tacit Knowing-in-Action and Mission Command. Adult Learning, 26(3), 101-108. doi:10.1177/1045159515583258

Schwartz, M. S. (2016). Ethical Decision-Making Theory: An Integrated Approach. Journal of Business Ethics, 139(4), 755-776. doi:10.1007/s10551-015-2886-8

Turpin, S. M., & Marais, M. A. (2004). Decision-making: Theory and practice. ORiON, 20(2). doi:10.5784/20-2-12

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