The Owner Who Signs Everything
Shakti Foods is a packaged-snack unit in Patna with 62 workers and annual sales of ₹6.4 crore. Founder Rakesh Ranjan still approves every purchase above ₹2,000, signs each dispatch challan and interviews every helper himself. Four supervisors each control about 15 workers, but they cannot sanction leave, reject sub-standard raw material or reschedule a batch. Consequences: order-to-dispatch takes nine days against four days for competitors, 22 per cent of last quarter's orders shipped late, and two supervisors resigned saying they had 'responsibility without authority'. Worker grievances reach Rakesh directly - over thirty a week - and he misses buyers' calls. He has now won a contract to supply 40 retail outlets that demands dispatch within 72 hours and a monthly quality report. He is thinking of hiring one works manager and keeping all decision rights with himself, because he fears losing control of quality and cash.
1. Diagnose what is wrong with Shakti Foods' organising. Use span of control, authority–responsibility parity, delegation and formalisation, and connect at least two symptoms to each.
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The symptoms are structural, not personal.
Span of control. Rakesh personally clears purchases, challans, hiring and thirty-plus grievances a week. No one manager can process that volume, so work queues at his desk; the nine-day cycle against a four-day competitor is a queue, not a capacity limit. His effective span at the top is 'every decision'.
Authority–responsibility parity. Each supervisor answers for output, quality and discipline over about 15 workers, yet cannot sanction leave, reject bad raw material or reschedule a batch. They resigned because they were accountable for results they could not influence. Parity means responsibility must be matched by the authority to act.
Delegation. Nothing has been delegated; routine and strategic decisions sit together. Retaining every decision right is not control - it pushes the cost of delay onto the customer.
Formalisation and scalar chain. There are no written approval limits, no dispatch standard and no grievance route, so the chain from worker to owner is used for trivia and is overloaded. The new 72-hour commitment cannot survive this structure.
2. Rakesh plans to hire one works manager but keep all decision rights himself. Explain why this will fail and outline the reorganisation you would recommend, naming the decisions to be delegated.
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A works manager without delegated authority becomes a fifth supervisor with a bigger title; the queue moves one desk sideways and the 72-hour commitment is still decided by one person. Authority must travel with the task.
Recommended reorganisation:
- Production: group the 62 workers into three cells of about 20, each with a supervisor holding a written authority sheet - batch scheduling, rejection of sub-standard raw material up to a stated value, overtime up to a stated number of hours, shift allocation.
- Commercial: dispatch documentation and credit notes up to ₹10,000 to a dispatch clerk; the works manager owns the 72-hour promise.
- People: leave sanction and first-level grievances settled within 48 hours at supervisor level, with a written grievance form and an escalation rule.
- Owner's retained zone: purchases above ₹25,000, pricing, new contracts, hiring above worker level.
- Quality: an inspector reporting to the works manager but with a dotted line to Rakesh, so local rejections cannot be quietly overruled.
The written authority sheet is the point: delegation becomes visible, limits are known, and the owner's signature is reserved for decisions that genuinely carry risk.
3. Rakesh says: 'If I let go, quality and cash will slip.' Explain the control arrangements that let a manager decentralise without losing control, and identify one residual risk.
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Control comes from standards, information and review - not from holding signatures. Once decisions are pushed down, the owner substitutes measurement for approval.
- Standards first: rejection percentage, on-time dispatch percentage, cost per pouch, and a maximum credit period. Without a standard there is nothing to compare against.
- Exception reporting: a one-page weekly dashboard showing only deviations beyond tolerance, so Rakesh reads four numbers and intervenes where they breach limits.
- Segregation of duties: the person who receives cash should not be the person who records it; the accountant reports to Rakesh and reconciles the bank account monthly.
- Periodic audit: surprise stock verification, sample checks on rejected raw material, and comparison of credit notes issued against sales returns.
- External check: customer complaints and returns measure quality independently of internal reports, which is exactly what the new retail chain will generate monthly.
Residual risk: the works manager may under-report rejections to protect his numbers. The independent quality line and the buyer's own complaint data are the safeguards, and the owner should review them rather than the challans.