Final Examination Paper Read Case In Point Newell Rubbermaid

Final Examination Paper Read Case In Pointnewell Rubbermaid Leverag

Read Case in Point newell Rubbermaid Leverages Cost Controls to Grow © Thinkstock and answer the 6 discussion questions in your own words. (100 Points) DUE DATE : Wednesday, 28 JULY Read Chapter 15 on Essentials of Control Newell Company grew to be a diversified manufacturer and marketer of simple household items, cookware, and hardware. In the early 1950s, Newell Company’s business consisted solely of manufactured curtain rods that were sold through hardware stores and retailers like Sears. Since the 1960s, however, the company has diversified extensively through acquisitions of businesses for paintbrushes, writing pens, pots and pans, hairbrushes, and the like. Over 90% of its growth can be attributed to these many small acquisitions, whose performance Newell improved tremendously through aggressive restructuring and its corporate emphasis on cost cutting and cost controls.

Usually within a year of the acquisition, Newell would bring in new leadership and install its own financial controller in the acquired unit. Then, three standard sets of controls were introduced: an integrated financial accounting system, a sales and order processing and tracking system, and a flexible manufacturing system. Once these systems were in place, managers were able to control costs by limiting expenses to those previously budgeted. Administration, accounting, and customer-related financial accounting aspects of the acquired business were also consolidated into Newell’s corporate headquarters to further reduce and control costs. While Newell Company’s 16 different lines of Business may appear quite different, they all share the common characteristics of being staple manufactured items sold primarily through volume retail channels like Wal-Mart, Target, and Kmart.

Because Newell operates each line of business autonomously (separate manufacturing, research and development [R&D], and selling responsibilities for each), it is perhaps best described as pursuing a related, linked diversification strategy. The common linkages are both internal (accounting systems, product merchandising skills, and acquisition competency) and external (distribution channel of volume retailers). Beyond its internal systems and processes, Newell was also able to control costs through outcome controls. That is, business managers were paid a bonus based on the profitability of their particular unit—in fact, the firm’s strategy is to achieve profits, not simply growth at the expense of profits.

Newell managers could expect a base salary equal to the industry average but could earn bonuses ranging from 35% to 100% based on their rank and unit profitability. In 1999, Newell acquired Rubbermaid, a U.S.-based manufacturer of flexible plastic products like trash cans, reheatable and freezable food containers, and a broad range of other plastic storage containers designed for home and office use. While Rubbermaid was highly innovative (over 80% of its growth has come from internal new product development), it had difficulty controlling costs and was losing ground against powerful customers like Wal-Mart. Newell believed that the market power it wielded with retailers like Wal-Mart would help it turn Rubbermaid’s prospects around.

The acquisition deal between these two companies resulted in a single company that was twice as big and became known as Newell Rubbermaid Inc. (NYSE: NWL). In 2010, Fortune named Newell Rubbermaid the number 7 “Most Admired Company” in the home equipment and furnishings category. Case written by Mason Carpenter to accompany Carpenter, M., Bauer, T., & Erdogan, B. (2009). Principles of management (1st ed.). New York: Flat World Knowledge. Based on information retrieved April 3, 2010, from and from the Newell Rubbermaid Web site: .

Discussion Questions

1. The controlling facet of the P-O-L-C framework introduces you to a variety of controls. What do other organizations you are familiar with do with regard to control that is similar to or different from what we see in the case of Newell?
2. What types of controls does Newell use?
3. Does Newell use behavioral controls? What are some examples?
4. Does Newell use outcome controls? What are some examples?
5. How do the controls Newell uses fit its strategy?
6. At the end of the case, how has Newell adjusted its strategy? What changes in controls has it made as a result?

Paper For Above instruction

This essay explores the control systems employed by Newell Rubbermaid and examines how these controls align with its strategic objectives. Effective control mechanisms are vital for organizations to ensure efficiency, maintain strategic direction, and achieve desired outcomes, especially during periods of rapid growth and diversification.

In the context of the P-O-L-C framework—Planning, Organizing, Leading, and Controlling—control refers primarily to the processes that ensure organizational activities conform to plans, standards, and strategic goals. Other organizations, similar to Newell Rubbermaid, employ various control measures, which include both behavioral and outcome controls. For example, firms like Procter & Gamble utilize comprehensive performance management systems incorporating outcome-based bonuses for managers, as well as behavioral controls like adherence to operational procedures and ethical standards. These mechanisms are similar to Newell's approach but often vary based on organizational culture and industry dynamics. While some companies emphasize strict behavioral controls—such as operational procedures and compliance monitoring—others may focus more on outcome controls linked to financial performance, as seen in Newell's bonus structures tied to profitability.

Newell primarily employs outcome controls, which focus on results rather than processes. A clear example of this is the bonus incentive system where managers' compensation is linked to the profitability of their business units. This outcome-based control motivates managers to improve financial performance and align their efforts with corporate profitability targets. Furthermore, Newell uses financial controls through extensive integration of financial accounting systems, enabling close monitoring of expenses, revenues, and profitability at the unit level. These systems support the company's strategic goal of rigorous cost control and operational efficiency. These outcome controls directly support Newell’s core strategy of cost leadership and profitable growth by incentivizing managers to prioritize activities that enhance financial results.

Behavioral controls are also apparent in Newell’s management practices. The company’s standardization of processes, implementation of integrated information systems, and centralized control of administrative and financial activities exemplify behavioral controls. By enforcing specific operational procedures and consolidating functions at the corporate level, Newell ensures consistency and adherence to company standards across its diversified units. For instance, integrating the sales and manufacturing systems guides managers to follow standardized procedures, reinforcing desired behaviors aligned with cost efficiency and process optimization.

The control mechanisms employed by Newell fit seamlessly with its strategy of diversification through acquisitions and cost leadership. The company’s focus on integrating acquired companies' financial and operational systems ensures a consistent approach to cost control and performance management across all business units. The use of outcome controls through bonus incentives drives managers to focus on profitability, directly supporting the firm’s goal of achieving profitable growth rather than mere expansion. The behavioral controls—standardized processes and centralized oversight—ensure that organizational behavior complies with the strategic emphasis on efficiency and cost control, thereby fostering a unified corporate culture aimed at maximizing value creation.

Following its acquisition of Rubbermaid, Newell faced challenges related to cost control and customer relationships. To address these, Newell adjusted its strategic approach by emphasizing tighter integration of its control systems and emphasizing profitability as the primary measure of success. The company increased its focus on outcome controls to motivate managers and align their efforts with corporate profitability goals. It also enhanced behavioral controls by standardizing processes further and strengthening monitoring systems to ensure cost efficiencies. These control modifications reflect Newell’s strategic shift toward leveraging its large distribution channels and market power to improve Rubbermaid’s cost management and overall performance. This strategic and control realignment underscores the importance of adapting control systems to support evolving corporate strategies, especially when integrating diverse business units.

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