This is the case with Stryker, where the most substantial projects are approved by the Board of Directors.
Ang (1986) notes, however, that there can be agency problems where the interests of the division are misaligned with the interests of the corporation as a whole. A good system for CER, therefore, will incorporate checks into the system, to ensure that projects are aligned. To some extent, alignment at Stryker is generally the responsibility of the Capital Committee. The problem with this system is that the Capital Committee only sees projects that have already been approved by the divisions. This means that there might be some useful projects that are rejected at the division level but that might have been better for the company as a whole than the ones that were submitted to the Capital Committee. Further, there is the possibility that a project at the division level might be a good fit for a different division. There is no process by which communication exists between the different divisions, either in an interdivisional level or via the corporate level.
The lack of coherence between the different initiatives is a significant problem, arguably the most important one with the Stryker system. The company has achieved success with respect to quantitative measures but in qualitative terms there is the risk that its system has undermined the possibility of even greater success, where managers in the company are unaware of the activities in other areas and therefore may inadvertently undermine those areas (Bower & Gilbert, 2007).
Recommendations
The first proposal is that projects should be brought for a summary assessment by the Capital Committee prior to approval at the division level. The CC knows the spending limits for each division, but...
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