Vardhman Packaging: Decision Rights in a 200-Person Firm
Vardhman Packaging makes corrugated boxes in a single plant with 200 employees. The managing director, who is also the majority shareholder, approves every purchase above ₹5,000 and signs every dispatch discount. Below him, a production head supervises eight shift supervisors, each of whom supervises 25 operators; the sales head has five area managers. In the last quarter, customer complaints rose to 34 from 11, on-time delivery fell to 78 per cent, and average order-to-dispatch time stretched from 6 to 11 days. Exit interviews show supervisors feel they have 'no authority' - a supervisor cannot sanction leave, approve overtime, or replace a worn die without the production head's signature. The production head works 65-hour weeks and is the only person who can authorise a customer credit note. Operator absenteeism is 9 per cent, and two supervisors resigned last month. The MD has asked you to advise on restructuring decision rights.
1. Is the problem a span of control that is too wide, or something else? Diagnose using span of control, unity of command and the parity of authority and responsibility, citing the numbers given.
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Span of control is not the binding constraint. The production head has 8 direct reports, and each supervisor has 25 operators doing routine, standardised work - both sit inside the normal range for such work (wide spans are workable where tasks are repetitive, as in assembly or machine-paced operations). Delayering or narrowing spans would change the org chart without touching the symptom.
What the numbers actually show. Order-to-dispatch rising 6 → 11 days, complaints 11 → 34, a 65-hour week for one manager, and two supervisor resignations are queueing symptoms: work is waiting for signatures, not for machines or people.
The real defects:
- Authority concentrated at the top. An MD of a 200-person firm approving every purchase above ₹5,000 is a decision bottleneck; the value of his time is being spent on stationery orders.
- Breach of parity of authority and responsibility. Supervisors are accountable for output and on-time delivery but cannot approve leave, overtime or a die replacement. Accountability without matching authority guarantees failure.
- Unity of command blurred across functions. A credit note is a sales/finance decision, yet it sits with the production head, so the sales head cannot close a commercial issue without going through another function.
Conclusion: the constraint is centralisation of decision rights, not span. Delayering would remove supervisors who are already the thinnest layer of management.
2. Propose a delegation structure with specific monetary and non-monetary limits, and state the two risks it creates and how each would be controlled.
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Delegation-of-authority matrix
| Decision | Shift supervisor | Production head | MD |
|---|---|---|---|
| Overtime approval | Up to 4 hours per operator per week | Up to a weekly budget of ₹25,000 | Above |
| Leave | Up to 3 days | Up to 15 days | Above |
| Spare parts / consumables | Up to ₹10,000 | Up to ₹1,00,000 | Above |
| Die replacement | Up to ₹25,000 | Up to ₹1,50,000 | Above |
| Credit note | None | Up to ₹20,000 | Above ₹20,000 |
| Dispatch discount | None | Up to 3 per cent | Above 3 per cent |
Design logic. Limits are set at the level where the cost of an error is small relative to the cost of delay. Each level must absorb 100 per cent of decisions inside its band - no upward referral - otherwise the matrix is decoration. The production head's limit on credit notes keeps a commercial check while removing the cross-functional detour.
Risk 1 - misuse of limits (split orders to stay under a threshold, or unauthorised discounts). Control: monthly exception report listing all approvals by person and band, a no-splitting rule, and quarterly sample audit by the accountant.
Risk 2 - capability gap at supervisor level. Supervisors have never decided anything and may over-refer or under-check. Control: a two-day delegation and cost-awareness workshop, a written note of what each band may approve, and a 90-day review of the matrix with data on cycle time and error rates.
3. The MD objects: 'If I delegate, I lose control.' Respond to him using the evidence in the case, and state what he should personally retain.
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Reframe what control is. The MD is equating control with personal approval of each transaction. Approval of every item above ₹5,000 is not control - it is a queue. The evidence that he does not, in fact, have control is in the numbers: he is signing everything and yet on-time delivery fell to 78 per cent, complaints tripled and order-to-dispatch nearly doubled. His current model has already lost control of the outcomes he cares about while consuming 65 hours a week of his own and his production head's time.
Control comes from standards, information and audit, not from signatures. A delegation matrix with published limits, a weekly exception report showing who approved what outside the norm, and a quarterly audit give tighter control than a rubber stamp, because they make deviations visible. Today nothing is visible except the pile in his in-tray.
What he should retain: capital expenditure above the matrix, pricing policy and discount bands, appointment and exit of supervisors, bank and funding decisions, and anything touching the shareholders' funds. That is roughly a dozen decisions a month, on which his judgement genuinely adds value.
Also flag the key-person risk. The production head is the single authoriser of credit notes and works 65-hour weeks. One illness stops dispatch. Delegation is not a concession to supervisors; it is insurance for the owner.