Introduction

Galvor Company founded in 1946 by M. George Latour Was involved in:

Fabrication Buying Parts Assembling them into High quality, moderate cost electric and electronic measuring and testing equipment.

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Growth began after 1960. From 1960 to 1971 sales grew from 2.2 million new francs to 12 million new francs. (1 new franc = $ 0.2) On April 1974, Galvor was sold to Universal Electric Company for $4.5 million worth of UEs stock.

People and post

M. Barsac-Galvors controller M. Boudry-Universals European controller David Hennessy- Galvors Managing Director

Working Style in UE
Business plan preparation annually by each operating units. Acts as Performance evaluation for unit manager

6 month lag period and then two year projection

Sales Net Income Total assets Total employees Capital expenditures

Organization of Controllers Department (January 1997)

Controller Barsac Age 34

Legal
Dussex Age 32 General Accounting Parel 6 people

Data Processing Perrier 8 people Age 32

Internal Control Systems and Procedures Blanc Age 32

Chief Accountant

Vacant

Age 21

Billing and Customer Accounts

Mme. Cardinaux 12 people

Cost Accounting Mathez- 12 people Age 25

Business Plan Timeline

January Geneva sets 2 year tentative objectives January To April Objectives negotiated May Objectives approved by Geneva and US Headquaters

June - July

Galvor prepares the Business Plan

Business Plan Timeline

August September October November
Meetings in Geneva for the review of the Business Plan.
Approval Of the Business Plan Requests for major Business Plan changes

Budget for the following year due

Problems
Overstaffed Language Different Accounting Principles and Standards Problems with the internal records Lack of professional knowledge and training

Question-1
What is your overall assessment of the effectiveness of Universal Electrics(UEs) planning system as it is applied to Galvor?

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Single controller-Tax specialist Heavy burden in both Time and money Initially no such system existed Lack of employee training Spending 80% of their full time in reporting. Language Problem Different Accounting method Size Vs Cost

Question-2
Identify, in as much detail as possible, all of the new management systems and techniques that UE has required Galvor to establish. In particular, trace the various steps Galvor goes through in preparing its long-range as well as annual plans.

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New Management Systems and Techniques required
Converting from simple to Centralized System structure Planning and controlling System GALVOR need to change and adopt itself to the current parent company Experts for the new subsidiary Uniform reporting and controlling system INFORMAL WAY of COMMUNICATION

Steps Galvor has gone to prepare long range as well as annual plans

January

Geneva sets 2 year tentative objectives

January To April Objectives negotiated May Objectives approved by Geneva and US Headquaters

June - July

Galvor prepares the Business Plan

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August September October November
Meetings in Geneva for the review of the Business Plan.
Approval Of the Business Plan Requests for major Business Plan changes

Budget for the following year due

Question-3
What is your evaluation of the effectiveness of the working relationships between Hennessy and UE executives in Geneva? What do you infer from the telexes about Hennessys autonomy as a managing director?

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Authoritative working relationship Considerable autonomy.

Question-4
Look at the system from Galvors viewpoint. Suppose Galvor were an independent company. If you were a consultant to Galvor, how would the management planning and control practices you would recommend for the company differ from those imposed by UE?

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Simple, Informal, De-centralized Less-staff planning Proper cost allocation should be done Reporting should be done Quarterly Training in both language

Question-5
Look at the system from UEs viewpoint. How can UEs imposing planning and control practices different from those required by an independent Galvor be justified?

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Galvor
No really workable financial statements for 2 years and no reporting system Secrecy of financial reports has been maintained ( No data has been shared even to Top management appointed by UE) Financial Data Only balance sheet and statement of income once a year

UE
Monthly Reporting System Every decision is taken by Top management Monthly Reports-

Statement of preliminary net income Statement of income Balance sheet Statement of changes in retained earnings Statement of cash flow and many others

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Galvor No planning and controlling System UE Tight Planning and Controlling System

Question-6
To what extent should a large international organization, such as UE, rely on a comprehensive system of financial reporting and control to achieve its strategic objectives?

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UE has to rely on the financial reporting system. Company has number of subsidiaries along with more than 300 product lines. Do Quarterly reporting

Question-7
What specific changes, if any, would you make in UEs planning systems? In its other management systems? If the management processes need improving, how would you change them?

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The reporting norms should be made easy Forecasting should be done for a reasonable time period

Thank You.