Hanson PLC: The Acquisition Machine

Hanson PLC: The Company’s Structure and Control Systems and How They Match Its Strategy  

Strategic Control System- Matrix Structure:

From the organizational structure of 1986 we can find that the organization has two main subsidiaries. They are

o   Hanson PLC (UK) and

o   Hanson Industries (USA)

Hanson PLC looks after the British operations and Hanson Industries looks after the US operations. The control system of these subsidiaries are autonomous. Each of the subsidiaries is headed by a single director.

Central Level:

In the two subsidiaries few central staffs are responsible for monitoring the performance of the subsidiaries. They are also responsible for

• Ø  Selecting and motivating operating management,
• Ø  The treasury functions,
• Ø  Acquisitions and disposals and
• Ø  Professional services such as legal and taxation.

Divisional Level:

Divisional levels are headed by Divisional CEOs. These divisional levels are actually the groups of operating companies under the two main subsidiaries. The CEOs of the operating companies are responsible to the directors. Although Sir Gordon White did not look after this directly, rather he gave the responsibility to his right hand David Clarke. In the meantime White was primarily concerned with the company’s acquisitions.

Main Principles of Control System of Hanson:

Decentralization: in the Hanson operating companies all the day to day operating decisions are decentralized to the management of the operating companies. The management has unlimited autonomy. They are mainly responsible for the return on capital that they employ.

Tight Financial Control: in the company financial control is achieved through two devices

1.      Operating budgets: the operating company managers submit an operating budget to the corporate center for the coming year. After reviewing and consulting with operating management, the corporate staffs approve the budget which is then followed strictly.

2.      Capital expenditure policies: the operating company managers plan a capital expenditure plan which are then challenged by the central staffs. Later, it is accepted or rejected.

Incentive Systems: the organization shares profit with the management of the operating companies. A manager can earn up to 60% of his/her base salary after filling up a certain target.

Board Structure: the organization’s policy is that ‘no operating company managers can be appointed to the board of the subsidiaries. It eliminates any kind of conflict of interest.

De-emphasizing Operating Synergy: the organization is less serious about utilizing operating synergies. Hanson actually believes that this may cause inefficiency when each other may blame for their poor performance.