Growth and Profitability at Fresenius
Introduction
Fresenius has decentralized business units with scores of vital functions replicated across the group (Podolny & Sjomanm 1). The manager’s experience little coordination and communication, but the CEO believes that this approach allows managers to make swift decision founded on local conditions. This aspect helps managers in focusing on their own results. Fresenius enjoys a pride in its spirit of adaptation that allows the company to foster entrepreneurs in the enterprise. The company experienced constant growth from 1990 to 2005. The growth was because of acquisitions.
The constant growth affected the organization’s debt-to-equity advantage. This triggered below-investment ratings prompting the CEO, Mark Schneider to trust that the organization’s profit- oriented culture and entrepreneurial culture would create impetus to stimulate continuous growth in the company (Podolny & Sjomanm 1). Notwithstanding the debt status that threatened to hinder aggressive acquisitions, several markets remained unmoved (Podolny & Sjomanm 1). The CEO had to capitalize on these markets through making cost-conscious and coordinated initiatives. To ensure feasibility of the approach proposed by the CEO, the company growth depended on profitability and improved sales. There are scores of challenges experienced when combining profitability and growth but the CEO needs to combine entrepreneurial and profit-oriented culture with any latent synergies in the organization.
A latent synergy occurs in a company with the company’s management not realizing it. A latent synergy does not require any management or control until its realization. According to Davidsson and Naldi, latent synergies can be risky and may trigger incomprehensible work in the entire company leading to unimaginable financial losses (Davidsson and Naldi 64). Mark must realize that productive companies realize consistency among their components portions. He should not make changes to one element without putting into consideration the consequences of the other parts.
The company has three distinct business units among the FMC AG that deals with marketing of dialysis and kidney disease treatment. Fresenius Kabi, which deals with infusion and nutrition therapies, and the Fresenius ProServe that offers services of hospital management (Podolny & Sjomanm 10). Mark must consider all the business units of the company. Control spans job enlargement degrees and types of planning systems and decentralization and the matrix structure requires selection with respect to the internally persistent groupings. The groupings should correspond with the present condition of the company, its size and age, status of the industry it functions in and its development technology (Schwenker and Botzel 59). Mark must pay attention to the fit of the three basic units of the company.
Mark should adopt professional bureaucracy, which depends on skills standardizations as opposed to working procedures or outputs (Mintzberg 8). Given that the company is a compel health care organization, Schneider should work on operating tasks on skilled people who must exercise considerable control over their own responsibilities. Mark should surrender some of his power to professionals and to the institutions and associations selecting and training the professionals (Mintzberg 8). This lead to a more decentralized organization where professionals can exercise their powers over scores of decisions both from strategic and operating processes. Power should flow down the hierarchy to the professional functioning at the core of the business. Decentralized organizations are ideal framework for corporate growth (Mintzberg 8). Their structures allow organizations to respond swiftly and flexibly to shifting demands in the market. Decentralized structures hold positive impacts on an organization’s growth culture. They also form a basis for entrepreneurial activities on the staff and managers parts (Kumar 106). Decentralized structures also enhance conditions for communication and transparency, which are necessary for developing a culture of trust in the company.
A democratic structure will enhance continuous growth and profitability (Schwenker and Botzel 59). Given that the company requires professionals to work independently for productivity purpose, the operating units will be immense hence the need for few first-line managers. The managers will spend much of their time connecting their units to the wide environment to guarantee sufficient financing (Kumar 106). This way, the managers become salesperson hence increasing the sales volume consequently triggering growth and profitability.
According to Mintzberg, professional bureaucracy is most productive for companies that are stable but in complex environments such as the Fresenius (Mintzberg 8). Mark should also engage standardization because it allows professionals to perfect their proficiency an aspect that makes them realize considerable effectiveness and efficiency. The same standardization triggers adaptability issues. When the environment is stable, professional bureaucracy becomes productive as it identifies the requirements of it clients besides offering standardized programs that help in serving the customers (Kumar 106). Professional bureaucracy is democratic, and it provides professional workers with the freedom that enhances close coordination.
Mark should also adapt divisionalized form given that Fresenius has diversified product lines (Mintzberg 8). Divisionalized forms are suitable for companies with fewer opportunities. The diversification supports such organizations in forming a market-oriented unit for every distinct product line hence adapting some elements of centralization models.
The management should allow considerable autonomy to the three units, and each unit carries out its own business. Fresenius should opt for revolution for it to remain effective. Mark should establish external consistency as it will help in putting up with short periods of critical disruption to realign the fit sporadically (Mintzberg 9). Mark should consider steadiness, lucidity and harmony, as they are crucial aspects in organization design. To achieve coordination, the CEO should standardize the skills of its employees to meet organizational needs. For a complex organization like Fresenius, sophisticated specialists should combine their efforts in teams of projects coordinated through joint adjustment.
Conclusion
Building a base for constant growth ensures sustainable success. This is because it establishes accomplishment of an organization’s duties.Financial priorities and human foundations are key considerations as the two ensures growth and profitability. The synergy formed through successful coordination is a powerful force (Davidsson and Naldi 64). It emerges from constant encounters between groups and people with divergent world opinions, experience and knowledge, and it changes the entire company into something better. To convert the growth prospects to performance, excellence, market leadership and innovation, Mark must consider all the possible options of the whole growth process. He should design decentralized structures besides focusing on exploiting the benefits of the reformed decentralized structures. Schneider should also prevent duplication of resources through adding some components of centralization to the decentralized structures (Schwenker and Botzel 59). Fresenius can maneuver a path to profitable development through combining the best components of centralized models and decentralized models.
Work Cited
Davidsson, Per and Naldi, Lucia. Small firm growth. New York: Now Publishers Inc, 2010.
Kumar, Dhirendra. Enterprise growth strategy: Vision, planning and execution. New York: Gower Publishing, Ltd., Sep 30, 2010.
Mintzberg, Henry. “Organizational design: Fashion or fit”. Harvard Business Review, 1981.
Podolny, Joel and Sjomanm, Anders. Growth and profitability at Fresenius. Harvard Business School, 9. (2005): 1-25
Schwenker, B, and Botzel, S. Making growth work: How companies can expand and become more efficient. London: Springer, Dec 19, 2006.
