This paper will review the "Codman & Shurtleff, Inc.: Planning and Control System" case study found in the 2nd edition of " Accounting for Managers: Texts and Cases". The case illustrates a comprehensive formal planning and control system used in formulating and implementing strategy at Codman & Shurtleff, one of Johnson & Johnson's 155 subsidiaries. This paper will focus on the relationship between organizational innovation and formal planning and control systems in a decentralized organization as well as the effect of organizational reward practices. Based on the facts presented, the paper will conclude by developing a plan of action Codman & Shurtleff could potentially take to improve their planning and controlling system.
Codman & Shurtleff, Inc. was founded by Thomas Codman in 1838 to design surgical equipment. After the acquisition of the company by Johnson & Johnson (J&J) in 1964, Codman & Shurtleff began operations as one of J&J's autonomous subsidiaries.
Codman markets approximately 2,700 general and specialty surgical instruments to hospitals and surgeons worldwide. Products manufactured by the subsidiary involve advanced technologies and include instruments, equipment, implants, surgical disposables, fiber-optic light sources and cables, surgical head lamps, surgical microscopes, coagulators, and electronic pain control simulators and electrodes. (Bruns, 1998)
The case begins by focusing on the tentative actions the management team at Codman & Shurtleff must take in considering a revision to their budget targets due to a projected two-million dollar shortfall in planned profits for the year. With only a few months into the year, the projected shortfall is nearly twice the contingency fund for the entire year. (Bruns, 1998)
Various explanations for the projected profit shortfall include:
An unfavorable currency exchange rate due to a weakening of the US dollar against European currencies. The unexpected weakness has improved Codman's sales in Europe since...