Fifteen Direct Reports at Sri Lakshmi Foods: Structure, Authority and Control
Sri Lakshmi Foods, a partnership at Guntur, makes three products - pickles, papads and ready-to-cook masala mixes - sold across Andhra Pradesh and Telangana. It has 145 employees and six departments: purchase, production, quality control, sales, accounts and human resources. The general manager, Mr Prasad, has fifteen people reporting directly to him: the six departmental heads plus nine supervisors, the maintenance in-charge, the stores clerk and his personal assistant. Every purchase above Rs 5,000 and every credit sale above Rs 10,000 needs his signature. Average approval time is nine days and a customer complaint from Warangal took 23 days to close. The quality inspector, Ms Fatima, is answerable for rejecting substandard raw material, but every rejection must be cleared by the stores clerk, who reports to the GM and is judged on keeping the stores stocked. Production supervisors are appraised only on monthly tonnage. Last quarter 14 per cent of the pickle batch was returned for fungus, and the sales head says she cannot promise a delivery date without asking the GM.
1. Using evidence from the case, identify the organising principles being violated and explain the link between the quality failures and the way supervisors are appraised.
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1. Span of control is too wide and too mixed. Fifteen direct reports is roughly double what a single manager handling three product lines can supervise, and the group is not homogeneous - departmental heads, shop-floor supervisors, a maintenance in-charge, a stores clerk and a PA all need different kinds of attention. Symptoms: nine-day purchase approvals and a 23-day complaint closure. The Rs 5,000 purchase limit is trivial for a 145-person firm and converts the GM into a bottleneck.
2. Authority–responsibility parity is broken for Ms Fatima. She is held answerable for rejecting bad raw material but has no authority to reject: the decision sits with the stores clerk, a junior who reports elsewhere and is rewarded for availability, not quality. Responsibility without matching authority is the classic violation; the person who is accountable cannot act, and the person who acts is not accountable.
3. Unity of direction is missing. Purchase is judged on cost and stock, production on tonnage, quality on rejects - three directions pulling apart, with no single product owner answerable for the customer's experience.
4. Goal displacement through measurement. Appraising supervisors on tonnage alone tells them that quantity is the only thing that counts. Accepting damp raw material raises tonnage and lowers rejections at the inspection gate, and the cost surfaces later as a 14 per cent fungus return. The measure has replaced the goal. Control systems that reward one number invite exactly this behaviour.
2. Recommend a structure and a redistribution of decision rights for Sri Lakshmi Foods, justifying your choice against the alternatives.
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Recommended: a product-division structure over a shared functional base. Create three product divisions - pickles, papads, masala - each headed by a product manager accountable for volume, quality, cost and delivery of that line. Keep accounts, HR and bulk procurement of common inputs (salt, oil, packaging) as central functions serving all three, because duplicating finance and HR across a 145-person firm would be wasteful.
Why not pure functional? Three products with genuinely different process risks - moisture and fungus in pickles, drying conditions in papads, grinding and blending in masala - cannot be managed by one production head optimising a single tonnage number. That is precisely what failed last quarter.
Why not a full divisional copy of everything? The firm is too small for three separate finance and HR departments; the duplication cost and loss of buying power would outweigh the coordination gain. A hybrid is the proportionate answer.
Decision rights to move down:
- Raise the purchase approval limit to a realistic level (say Rs 25,000) with a rule requiring three quotations above Rs 10,000, and monthly exception reporting to the GM.
- Give the quality inspector written authority to hold or reject any incoming consignment, with the inspection report going to the GM and the product manager - not to production.
- Let the sales head approve credit sales within slab limits per customer, with ageing reports reviewed weekly.
- Let the product manager commit delivery dates. Delegated authority must come with the resources to use it, otherwise it is only blame transferred downward.
3. The GM is willing to delegate but asks how he will keep control. What should he put in place, and why does delegation not remove his own accountability?
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Control after delegation works through measures and exceptions, not signatures.
- A small dashboard per division: return/rejection rate, order-to-delivery days, purchase cycle time, cost per unit, contribution per product. These are the numbers that were missing when the fungus problem grew to 14 per cent.
- Exception reporting: the GM sees only cases outside agreed limits, weekly, instead of every Rs 5,000 bill. The nine-day approval queue disappears only if the default is action, with reporting afterwards.
- Segregation of duties: the stores clerk must not be the person who clears quality rejections; the inspector's report and the store's inward register should be reconciled monthly by accounts.
- Written delegation with limits: what may be decided, up to what value, and what must be escalated. A delegated power with no ceiling is not delegation but abdication.
- Periodic review of the measures themselves: tonnage alone drove the wrong behaviour, so appraisal must combine quality returns, delivery reliability and cost.
Why accountability stays with the GM: authority can be delegated, responsibility for results cannot. The GM remains answerable to the partners for the 14 per cent return even though a supervisor accepted the material. Delegation changes who acts, not who answers. This is why delegated authority must be matched by resources, competence and a reporting line - and why the GM must be able to show he set the limits, monitored them and acted on exceptions.