Management Case Study - Ad Lib Communication

Background Information

Management Case Study- AD Lib Communication

Background Information:

Ad Lib Communication was founded in 1977 by its actual president, Mr. Charles Martin, under the name Martin Advertising Ltd. At that time, Mr. Martin was a young artist, full of creative ideas and ambitions. He had already realized then that advertising would become a crucial part of marketing and part of our every day life.

Charles was a visionary and had big plans for the company. He worked for the ABC advertising agency. "We have to offer unique and complete services to our clients, help them establish a strategy and differentiate themselves from their competitors." Unfortunately for him, the general manager of the firm put a drastic halt on his dreams. "You're an artist, you're not supposed to think about those things, just draw your sketches and everything will be fine."

Charles didn't have only ambition he also had pride and talent. He slammed the door and left at once swearing he would make them realize their mistakes. He then went to see his favourite uncle, Nestor Flatnose, and convinced him to become his partner. He would provide the knowledge and his uncle the capital. After a short negotiation period and few legal papers, Martin Advertising Ltd. was created.

From 1980 to 2001, Martin Advertising enjoyed almost continuous growth specializing mainly in the tobacco and beer industries. By its revolutionary ideas and his personalized service, he was able to attract major accounts among the leaders of these industries. At the same time, he was able to attract several smaller customers from other sectors but 80% of his sales were coming from his 10 largest clients.

In 1993, the firm changed its name to Ad Lib Communication.

By 2001, A.L. expanded greatly to a point where they enjoyed an exceptional reputation. By then, 83 employees worked for Mr. Martin and the future looked good as people drank in increasing quantities.

However, since 2010 several unfortunate events started to hit the company severely and caused a steady decrease in sales revenue.

Most of A.L.'s clients reduced their ad expenses.
People became more and more health conscious causing a decline in alcohol and cigarette consumption, decline accentuated by rapidly increasing taxes. Thus, again A.L. clients suffered and cut on ad expenses.
Laws limiting advertising for tobacco and alcohol were voted.
Increasing competition from Ontarian and American firms.
Several firms merged to create advertising giants.

This situation was new to A.L. as growth came naturally as its clients were growing. But now they weren't anymore and several of them were starting to transfer part of their accounts to other firms.

The first reaction Mr. Martin had was to ask his vice-president (Mr. Black) to cut costs anywhere he could. His first decision was to eliminate the marketing research department. Then cuts were made in personnel, equipment and materials. Needless to say that these decisions created a feeling of anger and frustration from all employees and many were thinking of leaving the firm.

The Management Team

The worst was that the beautiful unity and team work that characterized the firm no longer existed. Everyone was trying to save his/her job and prove to Mr. Black how useful they were.

The Management Team

The management team was limited to two persons, Mr. Martin himself and Mr. Black, the vice-president.

Mr. Martin (president):

As mentioned before, Mr. Martin is an outgoing businessman, a visionary always ready to enter a good business venture. As a matter of fact, He is now involved in several other enterprises whether as a shareholder or as a member of the board of directors. He is profit-oriented and overly concerned with notions of efficiency. Any action undertaken by any employee or manager needs to yield an immediate result, or almost. However, Mr. Martin is not directly involved in the daily operations of the firm anymore. He leaves everything to Mr. Black unless capital investments are needed or when financial results are not up to his expectations.

Mr. Black (vice-president):

Mr. Black is the typical self-trained man. He started with the firm many years ago as a junior clerk with no more than a high school diploma in his pocket and climbed his way up to the position of vice-president. He is a man that strongly believes in hierarchy. He does whatever Mr. Martin tells him to do without ever challenging his authority and expects all his subordinates to do the same. That attitude pleases Mr. Martin but created a backlash from lower management and employees. Indeed, the man Mr. Black replaced a few years ago was a very knowledgeable person with a master's degree in advertising. He trusted his subordinates and delegated authority. However, since the projects he worked on were only profitable on a long term basis, he was fired and replaced by Mr. Black. Since then, employee morale decreased as they did not feel appreciated anymore. Moreover, the team spirit was decreasing as all decisions were to be accepted by Mr. Black and not worked out among managers as it was done before.

Operations

The following managers are involved with daily operations of the advertising firm. They all report directly to Mr. Black.

Sales Department (Mr. Redears):

In charge of 3 sales people. His responsibilities include sales development in Montreal and elsewhere in Canada.

Accounting Department (Ms. Bubblebath):

In charge of all accounting tasks: daily bookkeeping, financial statements, A/P, A/R etc. She has two clerks to assist her in her tasks.

Operations

Creative Department (Ms. Penpal):

Ms. Penpal has the responsibility to generate all the artistic creations and ideas needed by the production department in order to prepare the advertising message.

Production Department (Mr. Larsen):

This department is the central one as far as advertising is concerned. They have to take the client's requests and needs and create an entire advertising concept with the help of the creative department. Mr. Larsen is also in charge of all media time purchases. To assist him, he has 3 people; Ms. Gard, the layout manager, Mr. Thames, The audio manager and Ms. Kesen the TV manager.

Personnel Department (Mrs. Jones):

Officially, she's in charge of all recruiting and training activities but the reality is the she never has the last say in any decisions. Other managers do not accept any of her recommendations as she is not supported by Mr. Black.

Personnel Policies:

1. Candidates for potential employees are interviewed by Mrs. Jones. She selects 2 or 3 candidates for a second interview with Mr. Black. he then makes the final selection and hires the new employee. At this time, he also determines the employee's salary.

2. The employees receive a yearly salary increase.

3. The employees are covered by a group insurance plan as well as a dental plan.

4. The employees are not unionized.

5. The new employees receive one-week training coordinated by Mrs. Jones and supervised by the respective department head.

6. All employees have two weeks vacation no matter their seniority.

Process For Handling A Client'S Account

1. A sales representative convinces a client to accept the firm's services.

2. The client solvability is checked and eventually approved by the sales manager.

3. The client meets with the production manager to explain his needs and objectives.

4. The production manager sets up a meeting with the creative department manager and 1 or more of his assistants to prepare a first layout in order to show the client how the message will be done. The layout is then presented to Mr. Black who has to approve it before it could be shown to the client, if it is not, modifications have to be done before his final approval is granted.

5. The layout is presented to the client. If it is accepted, the production starts as soon as the contract is signed. If not, it's revised until an agreement is reached.

6. At any time during the production period, Mr. Black and/or the client can change a part of the ad.

7. When the production is complete, media time is bought and the advertising campaign is undertaken.

Required:

1. The board of directors is worried about the rapid decline of profits of the firm and the increasing turnover rate of employees. He has asked you to prepare a report to the board to examine the problem. The board wants observations on the operations of the firm and recommendations on the following:

i) The organisational structure of the firm