Case: Texas Instruments

Case Summary

Paul Elmer, Vice President at Harvey- Hudson Electronics has been in a complex of
whether HHE should adopt management style of Texas Instruments or not
Texas Instruments was an outstanding company in the field of electronics in U.S.
posting an average growth rate of 24% since 1946.
In 1980s when electronics industry was expected to boom, TI sales were expected
to increase significantly because the company had control over both higher volume
and lower price a riddle other companies were having difficulty in solving.
TI History:
Started in 1930 as Geopysical Services Inc. , primary activities of GSI was focused
on the discovery of petroleum reserves throughout the world.
In 1946 Patrick Haggerty joined TI and under his influence the company formulated
a new objective and went beyond geophysical exploration to engineering and
manufacturing
In 1958 Jack Kilby of TI created 1st practical integrated circuit
By the early 1980s TI was engaged in activities in 4 major areas 1) Electronics 2)
Geophysical Exploration 3) Government Electronics 4) Non electronic industry
TIs culture promoted hardwork, loyalty and team work and was compared to
Japanese culture

OST System

The OST system (Objectives, Strategies and Tactics) followed by TI to

define the strategies the company intended to follow for further growth
and development and to identify the tactics required to successfully
implement such strategies
OST can be understood in 3 stages 1) Presentation of Hierarchy of Goals
2) Dual responsibility of line management 3) Impact of a matrix
organization composed of strategic and operating modes.
Managers at TI were responsible for strategic as well as operating mode.
Corporate Objective

Business Objectyive
Strategy
Tactics

Resource Allocation, Planning and

Reporting System at TI

Two budgets were prepared in case of TI one for operating expense and
strategic expense.
Internal operating statements showed operating and strategic expense as 2
separate line items
Reporting system at TI separated operating expense and strategic expense on
income statements.
Two formal aspects of the overall incentive compensation system at TI were:
KPA : According to it Bonuses were awarded to individual tiers in response to
their contribution to the firm as reflected by the rankings
Stock Option plan: Participants in the plan are required to remain with the firm
for certain number of years and certain number of shares are tied to the
attainment of the target EPS figure each year
Operating Committee dealt with the operational as well as strategic issues and
defined the OST budget for the forthcoming year. The 2 committees were:
Corporate Development Committee: Responsible for external business analysis
People and asset effectiveness committee: responsible for reviewing potential
productivity improvements of the firm

Solution

Mr. Elmer of HHE who is reviewing to adopt this type of model of TI

to HHE should not forget that TI organization since its inception
has adopted this model and its employees have been trained and
brought up in this kind of environment
This may or may not work for HHE
The employees at HHE may revolt to the change, they can also
leave the job
On other hand people can welcome it and it may transform the
organization.
In my views HHE if it wants to adopt the model should create an
own version of it which may suit its organization style.
Also HHE should bring the change slowly maybe division wise and
see the reaction rather than taking it on all divisions of the
organization at one go.