I’m puzzled. A few weeks ago, I got a progress report from Joe Oster, telling me that earlier frictions between our team and Ormico had lessened considerably, that high-quality research was under way, and that the prospects for a long-term relationship with Ormico appeared fairly good. Then today I get this letter from John Westphal [vice president of Ormico, Inc.] saying that he wants to terminate the Ormico contract effective immediately.
Larry Simms, Head of the Physical Sciences Division of Omega Research Institute (ORI), was speaking with Joyce Gardner, Head of the Electronics Division. He continued:
As you know, we had some difficulties with this project and had to replace Wayne [Sweeney] to avoid losing the contract. But I distinctly remember how pleased John was just a few months ago when we produced a second patentable process. I called in all the participants, got some special reports, and tried to piece together what happened here. Now I need to make some recommendations to senior management that can help to avoid a situation like this again.
Omega Research Institute was a multidisciplinary research and development organization conducting research in the physical and natural sciences. It employed approximately 1,000 professionals, and was organized essentially by branches of science. The main units were called divisions and the subunits were called laboratories. A partial organization chart is shown in Exhibit 1.
Most of the institute’s work was done on the basis of contracts with clients. Each contract was a project. Responsibility for the project was vested in a project leader, and, through him or her, up the organizational structure in which the associated laboratory was located. Typically, some members of the project team were drawn from laboratories other than that in which the project leader worked. Indeed, it was the ability to put together a team with a variety of technical talents that was one of ORI’s principal strengths. Since team members worked under the direction of the project leader during the period they were assigned to the project, an individual might be working on more than one project concurrently. The project leader could also draw on the resources of central service organizations, such as model shops, computer services, editorial, and drafting. The project was billed for the services of these units at transfer prices that were intended to cover their full costs.
THE ORMICO PROJECT
In October 2002, John Westphal, a vice president at Ormico, had telephoned David MacInnes of ORI to outline a research project to examine the effect of microwaves on various ores and minerals. Mr. MacInnes was Associate Director of the Physical Sciences Division and had known Mr. Westphal for several years. During the conversation, Mr. Westphal asserted that ORI ought to be particularly intrigued by the research aspects of the project, and Mr. MacInnes readily agreed. He was also pleased because the Physical Sciences Division was under pressure to generate more revenue, and this potentially long-term project from Ormico would make good use of the available . . .
- Prepare a list of the problems associated with the Ormico project, classifying them into categories that you consider meaningful for managerial action.
- What should Dr. Simms recommend be done to avoid similar problems in the future?