Galvor Company

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.

Introduction

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 UE’s stock.

Continued…..

M. Barsac-Galvor’s controller M. Boudry-Universal’s European controller David Hennessy- Galvor’s Managing Director

People and post

Working Style in UE

Business plan preparation

annually by each operating units.

6 month lag period and then two year projection

Projectio

n for a

long

period (5

year) SalesNet IncomeTotal assetsTotal employeesCapital expenditures

Acts asPerformance evaluation

for unit manager

Controller

BarsacAge 34

Data ProcessingPerrier – 8

peopleAge 32

Internal Control

Systems and Procedures

BlancAge 32

Chief Accountant

DussexAge 32

LegalVacant

General AccountingParel – 6 people

Age 21

Billing and Customer Accounts

Mme. Cardinaux – 12 people

Cost AccountingMathez- 12 people

Age 25

Organization of Controller’s Department (January 1997)

Geneva sets 2 year tentative objectives

January

Objectives negotiatedJanuary To

April

Objectives approved by Geneva and US Headquaters

May

Galvor prepares the Business Plan

June - July

Business Plan Timeline

Meetings in Geneva for the review of the Business Plan.August

Approval Of the Business PlanSeptemb

er

Requests for major Business Plan changesOctober

Budget for the following year due

November

Business Plan Timeline

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

Problems

What is your overall assessment of the

effectiveness of Universal Electric’s(UE’s) planning system as it is applied to Galvor?

Question-1

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

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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.

Question-2

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

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Geneva sets 2 year tentative objectives

January

Objectives negotiatedJanuary To

April

Objectives approved by Geneva and US Headquaters

May

Galvor prepares the Business Plan

June - July

Steps Galvor has gone to prepare long range as well as

annual plans

Meetings in Geneva for the review of the Business Plan.August

Approval Of the Business PlanSeptemb

er

Requests for major Business Plan changesOctober

Budget for the following year due

November

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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 Hennessy’s autonomy as a managing director?

Question-3

Authoritative working relationship Considerable autonomy.

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Look at the system from Galvor’s 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?

Question-4

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

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Look at the system from UE’s viewpoint. How

can UE’s imposing planning and control practices different from those required by an independent Galvor be justified?

Question-5

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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

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?

Question-6

UE has to rely on the financial reporting

system. Company has number of subsidiaries along

with more than 300 product lines. Do Quarterly reporting

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What specific changes, if any, would you make

in UE’s planning systems? In its other management systems? If the management processes need improving, how would you change them?

Question-7

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

time period

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Thank You….