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3m Control Systems

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3M Corporation

Company Background:

The Minnesota Mining & Manufacturing Corporation (3M) was founded in 1902. It reported sales revenues of $16.7 billion during the year 2000. These revenues came from 3M's six business divisions: industrial; transportation, graphics, and safety; healthcare; consumer and office; electro and communications; and specialty materials. All business divisions were profitable in 2000. The same year, the company made more than 60,000 products and about $5.6 billion sales came from products that had been introduced during the prior four years and another $1.5 billion came from products introduced during 2000. Annually, more than 75,000 employees worked to create more than 500 new products. The company was recognized for its vertical organizational structure, with businesses established by technologies and markets. It was one of the most admired corporations in America and was awarded the National Medal for Technology, the U.S. government's top award for innovation, in 1995.

Business Goals and Strategy:

3M Corporation's each division is treated as a profit center with no interdivisional business between the six divisions. The business unit strategy is to "hold" as the company wants to maintain and increase profitability and market share. In terms of corporate strategy, 3M functions as an unrelated diversified corporation with the prime goal to innovate consistently, thereby offering a large product base to customers and maintaining competitive advantage.

Current Management Controls with Evaluation and Recommendations:

Early in 3M's history, chair and CEO William L. McKnight introduced a number of formal and informal controls to enable the corporation to innovate consistently and achieve its goals. The current management has continued to expand and embrace these controls, believing innovation to be the cornerstone of 3M's future.

1. 3M promoted intrapreneurship - This is a very good control. 3M was the leader in intrapreneurship and encouraged its employees to practice entrepreneurship within the established corporation. This is a very big financial and non financial motivation for employees as it allows them to proceed with their plans and contribute towards the growth of the company. It also gives them a chance to take risks without the fear of reprisals. This often fosters new business developments which benefit the employees as well as the company. This control ties up with the "15% option" in which employees have the option of spending up to 15% of their workweek pursuing individual projects of their choice. They don't have to disclose or justify the project to a manager. This control definitely supports the strategy of 3M by giving the employees the freedom and motivation to innovate regularly. 3M Corporation should continue with this control.

2. 30% of business unit revenues should come from products introduced in the last four years - This control ensures that new products are invented each year. This control should be continued as it makes it mandatory for each business unit to develop new products each year and supports the company strategy of innovation.

3. Career advancement opportunities - All 3M employees have equal career growth and advancement opportunities. There are two career ladders: a technical career ladder and a management career ladder. No matter in which field an employee is, he will get equal growth opportunities. This is a very good control as it enables employees to grow in their own fields. This helps in making an employee's current job more attractive to him and eliminates any chances of him changing his area of expertise because of career advancement. This is a very good control and helps the employees to remain focused and benefits the company by fostering greater employee satisfaction and growth.

4. Provision of seed capital - Product inventors request seed capital, money used for the initial investment in a project for concept development, market research, or initial product development, from their business unit managers. If the manager refuses funding, the inventors can request funding from any other business unit within 3M Corporation. If none of the business units support the proposal, the inventor can take funds up to $50,000 from the corporate office. 3M Corporation awards about 90 such grants each year. This provides the much needed financial support to employees who have innovative concepts and enables them to give shape to their concepts, as a result supporting the strategy of 3M by innovating new products. The company should continue to encourage and financially support these ventures.

5. No punishment for a product failing in the market - As mentioned in the above control, the employees are encouraged to embark on new ventures and the funds are provided by the corporation. In case such a venture fails and the product is not accepted in the market, the employees are guaranteed their previous jobs. Based on past experiences, company culture emphasizes that a failure can turn into a success. This practice encourages employees to fearlessly proceed with their plans. It is a good control and supports the strategy of 3M but this could sometimes result in careless employees who go ahead with their plans without carefully analyzing it. This could translate into loss for the corporation. I would recommend that there should be a mild penalty for failed products, just like there are big rewards for successful products.

6. Rewards for successful product inventions - The team members of successful ventures receive raises, promotions, and recognition. The Golden Step award is given when a new product reaches a revenue goal of $2 million in the U.S. or $4 million worldwide. The Carlton award honors technical employees who have made major contributions to 3M through technical innovations. Once the new product exceeds a cutoff sales target, a separate department is created. After another cutoff a separate business unit is created and the product inventor is given the opportunity to head the new business unit. This is a very good control and ensures appropriate compensation to employees and also contributes



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