TEXANA PETROLEUM CORPORATION

Corporate History: Texana Petroleum Corporation was a major producer and marketer of petroleum products in Southwestern United States. Till early 1950s, the company was processing and refining crude oil and selling petroleum products through a series of service stations operated by the company. In the early 1950s, Texana observed vital change in the organizational hierarchy. It faced stiff competition at the retail service station level from its competitors across the nation. Consequently, the sales volume declined from $500 million in the early 1950s to mere $300 million by 1955, thereby operating at just the break-even. Texana Petroleum is a multidivisional company, attempting to increase profitability by sharing resources and skills among divisions. The divisions are in conflict, and politics and the pursuit of divisional self-interest, preventing synergies from emerging. Donald Irwin and William Dutton were appointed as the CEO and the Chairman of Board, respectively, who eventually succeeded in divesting the companys retail outlets and expansion of companys business through internal development and acquisition. The worthy management was successful in establishing a profitable business model but the top managements requirement was to enhance cost savings through coordination. George Prentice was appointed as the executive vice president in 1966 for domestic operations and was responsible for the combined performance of the five divisions namely Petroleum Products, Polymer and Chemicals Products, Molded Products, Packaging and Building Products. The sales rose to $750 million along with a rise in profit. The prime focus of the management was to take advantage of the potential cost savings that could come from increased coordination between the domestic operating divisions.

Challenges Faced: The following challenges were faced by Texana Petroleum Corporation: Lack of communication between general managers of the organization. Evaluation of every division based on ROI was a very objective strategy taken up by the company and this needed a great deal of introspection. To institute HR practices which would help develop aggressive division managers to grow the sub divisions. Co-ordination among the divisional regional managers. Because of its centrality and non substitutability, the poly chemicals division views itself as the elite division. It responds to end-users needs when it wishes. Corporate profits were not up to full potential levels even on availability of resources. Divisions are rewarded on return on investment, so poly chemicals is unwilling to risk supplying new chemicals with limited demand, as this raises costs. Increased competitiveness in the market and petroleum sector. Rapid expansion caused new men from men into organisation causing differences in culture, opinions and way of handling situations. Divergent opinions of the managers in obtaining profits for their respective divisions. The ability of the divisions to grow depends on capital from the corporate center. As all the divisions wish to expand, including poly chemicals, there is a fight for limited resources.

Credible Solutions to Mitigate the Challenges The organization must change the multidivisional structure to reduce the power of poly chemicals and increase integration between divisions. Standardization of processes. . It can introduce integrating roles and create new positions to feed information between divisions and enhance product development as well as resource transfer between divisions.

Improve hiring and skill management practices. Revision of evaluation methods more suited to each division. The firm could introduce a multidivisional matrix structure at the corporate level. On the horizontal axis would be the various divisions; on the vertical axis would be the corporate staff offices of research and development (to be created), finance, marketing, and so on.

Can implement matrix organisational structure which groups employees by both function and division. This will make the managers responsible for all the divisions equally and improve co-ordination.

Making the objectives of Polymer and Chemicals division clear that overall growth of the firm is important rather than concentrating only on its individual profits. . It can centralize R&D at corporate headquarters so that the poly chemicals lose some power. This would ensure that end-using divisions requests for materials are in the interests of the corporation.

Changing the recruitment process of management personnel: The employees recruited were having characteristics of being loyal to dollars. Recruitment of managers who have worked in more than one division.

Creation of new roles and positions to handle inter-divisional issues and for smooth functioning of each division. To have some extent of centralised control to align the goals of each division with goals of the organisation. To have office at same floor to increase interaction among the divisional managers and executives. Going for knowledge management practices so as to facilitate knowledge sharing across the divisions.