Legend group frequently changed org

Legend group frequently changed organizational structure. It has become a tradition to reorganize
at least once a year. Apart from the fact that the whole enterprise which used to be Legend group and
now has become Legend Computer and Digital China is still a relatively young entity in search of an
‘optimal’ organizational structure, this tradition also relates to a conscious effort of management to
create a corporate identity as opposed to many sub-unit identities. In the Chinese culture the group-
level organizational unit is traditionally considered to be more important than both the individual
group member and the larger, more abstract organizational unit (such as a company or a group). To
overcome this tendency in Legend/Digital China, management frequently rearranged organizational
units by a process of splitting and merging units thus preventing employees from forming too strong
ties with one exclusive group at the expense of the larger organizational unit. In the same vein, the
ERP project had been announced as a major change project, albeit its final outcome was still unclear
at that time, as Hu Qiang recalls:
Legend keeps on restructuring to optimize its organizational structure. This habit makes the leaders of different departments think from the perspective of the whole company. They will not just do things in accordance with the benefit of their own departments. At the very beginning, Legend told its managers and employees that ERP would bring great changes to the company. Although they didn’t know what the specific changes would be and whether they themselves would be involved, they were prepared for the changes.
Currently, reorganization plans involve the IT department, the systems integration department, and a newly formed joint venture with a Taiwanese IT company, as Liu Yue Hui explains:
Since October, I have been thinking about a new strategy which will change the IT
department into an IT division. That means the construction of Digital China’s IT
[infrastructure] will be subcontracted to a profit center. The purpose of this strategy is to make
our cost structure more reasonable. It also facilitates getting contracts from outside companies.
In this way, we can stimulate the creativity and business developing ability of our IT team. …
only 60%-70% of their potential is currently used. So we want to motivate them through an
organizational reform.

The IT department, however, will not only be transformed into a profit center but also subjected to a process of splitting and merging to form new organizational units. First, the IT department will be merged with one of the system integration departments; second, at least half of this new division will be split apart and merged with the newly founded joint venture company.
This tradition raises the question how a continuously changing organizational structure will affect the implementation and use of the ERP system. Liu Shengrui explains how the ERP system will be adapted to organizational changes:
We classify the units in the ERP framework into profit centers, cost centers, and expense
centers. Where the resource is located does not affect the system. The expenses go along with a
certain unit. For each year, we can make a new design. For example, we add a new production
line this year. If it is a profit center, we will redesign the ERP framework. This year we have
added a Compaq department. So a new profit center has been added in the ERP system and
the initial value for this department was zero. If we have 10 or 20 personnel in this department,
we will transfer the information about these people into this new profit center. All the
expenses incurred by those people will enter this new profit center. For every structural
change, we will redesign the whole system. This is because when the personnel change, the
expenses will also change.
This type of adaptation will also apply if legally independent units under the control of Digital China’s headquarters in Beijing are affected; Liu Shengrui explains:
Digital China in Beijing is a holding company. There are several secondary entities below
this level. The SAP system can generate independent balance sheets and income statements for
each legal entity. Inside each such legal entity, we have many small profit centers. … Digital
China in Beijing is both headquarters and a platform. It is responsible for the sales in Beijing
and North China. We have many profit centers in this platform. In the Shanghai profit center,
we have a similar structure, which is corresponding to that of Beijing. When we make financial
statements, Shanghai can have its own statements, such as balance sheet and income
statements. We can also have the financial statements of a vertical department, say, a certain
profit center. The system can consolidate these financial statements automatically. Although
they are under different legal entities, they belong to one profit center. If we add a new
department this year, say, a profit center, we will add corresponding profit centers in each
platform. The financial statements can be generated and consolidated by the same process as
mentioned above. If we merge two departments into one, we will add the remaining value of
the two into one unit. We surely have to adjust the ERP system in case of these kinds of
change, but it is not a very difficult thing.
However, Qui Xiaodong, manager of the PC peripherals department, mentions some problems regarding the use of the ERP system under conditions of frequent organizational changes:
The ERP system can only provide basic information, but what I need is some aggregated information or information to be analyzed. I think the development [of this type of application] is very difficult because there are always changes. Though you can develop one that is fit for the specific business, the business direction or field will change next year. That means the newly developed system may be unfit for the new [situation]. Also, the structure will change. So I think perhaps it is unnecessary to spend heavily on developing individual information systems [within the ERP framework].
She also explains why organizational changes may cause problems in the use of the ERP system: If a department is taken apart and integrated with another, it is very complicated for the
ERP system to change. Because splitting will involve many things and a large amount of data
… For example, it is difficult to differentiate and divide receivables and payables when you
take a department apart. So in [our] BU, we refer to ERP only for the most basic data. ERP may
contribute more to headquarters and finance, for it relieves them of much routine work.