Smurfit Kranworth Case

In July 2003, Kevin Wentworth, CEO of Kranworth Chair Corporation (KCC), was considering a major reorganization--a divisionalization--of his company's organization structure:

Like many entrepreneurs, I have always been focused on top-line sales growth, and I have constantly been impressing on my managers to drive sales. My belief was that if you do that, everything else takes care of itself. Up until recently, I think our approach made sense. We had very little competition, and our margins were huge.

Now things are changing. We've got some major competitors who are making headway. I think we needed to take a fresh management approach to find opportunities to do things better. Our new divisionalized organization structure should help us serve our customers better and maybe force us to eliminate certain markets or products that are not producing results.

But I'm not sure it's working very well. We're seeing some finger pointing between the managers of the newly created divisions and the managers in charge of corporate departments. There is a lot of politics involved in defining the roles, responsibilities, ... and rights, of each of the responsibility centers, and it's not clear to me yet exactly where to draw the lines.

THE COMPANY

In the early 1980s, Weston Krantz, an avid outdoors person, developed a new design for a lightweight, portable chair that could be stored in a bag and carried anywhere. Convinced that his design had commercial value, in 1987 Weston co-founded Kranworth Chair Corporation (KCC) with his longtime friend, Kevin Wentworth, who had an MBA degree and financial expertise. (The corporation's name was a contraction of the founders' names; Krantz and Wentworth.) KCC was headquartered in Denver, Colorado, in the foothills of the Rocky Mountains. KCC produced a broad line of high quality and fashionable portable, folding chairs, which were branded as various models of the Fold-it! brand. In its early years, KCC sold its products exclusively to distributors.