Management Case Studies

Solved Case Study: 'That's not my job' - Learning delegation at Cin-made

2012-03-17T01:55:00.001-07:00

When Robert Frey purchased Cin – Made in 1984, the company was near ruin. The Cincinnati, Ohi-based manufacturer of paper packaging had not altered its product line in 20 years. Labor costs had hit the ceiling, while profits were falling through the floor. A solid quarter of the company's shipments were late and absenteeism was high. Management and workers were at each other's throats.

Ten years later, Cin – Made is producing a new assortment of highly differentiated composite cans, and pre-tax profits have increased more than five times. The Cin – Made

workforce is both flexible and deeply committed to the success of the company. On-time delivery of products has reached 98 percent, and absenteeism has virtually disappeared. There are even plans to form two spin – off companies to be owned and operated by Cin-Made employees. In fact, at the one day "Future of the American Workforce" conference held in July 1993, Cin-Made was recognized by President Clinton as one of the best – run companies in the United States.

“How did we achieve this startling turnaround?" Mused Frey. "Employee empowerment is one part of the answer. Profit sharing is another."

In the late spring of 1986, relations between management and labor had reached rock bottom. Having recently suffered a pay cut, employees at Cin- Made came to work each day, performed the duties required of their particular positions, and returned home-nothing more. Frey could see that his company was suffering. "To survive we needed to stop being worthy adversaries and start being worthy partners," he realized. Toward this end, Frey decided to call a meeting with the union. He offered to restore worker pay to its previous level by the end of the year. On top of that, he offered something no one expected: a 15 percent share of Cin-Made's pre-tax profits. " I do not choose to own a company that has an adversarial relationship with its employees." Frey proclaimed at the meeting. He therefore proposed a new arrangement that would encourage a collaborative employee-management relationship “Employee participation will play an essential role in management."

Managers within the company were among the first people to oppose Frey's new idea of employee involvement. "My three managers felt they were paid to be worthy adversaries of the unions." Frey recalled. It's what they'd been trained for. It's what made them good managers. Moreover, they were not used to participation in any form, certainly not in decision making." The workers also resisted the idea of extending themselves beyond the written requirements of their jobs. " (Employees) wanted generous wages and benefits, of course, but they did not want to take responsibility for anything more than doing their own jobs the way they had always done them," Frey noted. Employees were therefore skeptical of Frey's overtures toward "employee participation." "We thought he was trying to rip us off and shaft us," explained Ocelia Williams, one of many Cin-Made employees who distrusted Frey's plans.

Frey, however, did not give up, and he eventually convinced the union to agree to his terms. " I wouldn't take no for an answer," he asserted. "Once I had made my two grand pronouncements, I was determined to press ahead and make them come true." But still ahead lay the considerable challenge of convincing employees to take charge :

I made people meet with me, then instead

Of telling them what to do, I asked them.

They resisted.

" How can we cut the waste on his run ?" I'd say, or "How are we going to allocate the overtime on this order ?"

"That's not my job," they'd say.

"But I need your input," I'd say. "How in the

World can we have participative management

If you won't participate?

"I don't know," they'd say. "Because that's

not my job either. That's your job. ?"

Gradually, Frey made progress. Managers began sharing more information with employees. Frey was able slowly to expand the responsibilities workers would carry. Managers who were unable to work with employees left, and union relations began to improve. Empowerment began to happen. By 1993, Cin Made employees were taking responsibility for numerous tasks. Williams, for example, used to operate a tin-slitting machine on the company's factory floor. She still runs that same machine, but now is also responsible for ordering almost $ 100,000 in supplies.

Williams is just one example of how job roles and duties have been redefined throughout Cin-Made. Joyce Bell, president of the local union, still runs the punch press she always has, but now also serves as Cin- Made's corporate safety director. The company's scheduling team, composed of one manager and five lead workers from various plant areas, is charged with setting hours, designating layoffs, and deciding when temporary help is needed. The hiring review team, staffed by three hourly employees and two managers, is responsible for interviewing applicants and deciding whom to hire. An employee committee performs both short – and long – term planning of labor, materials, equipment, production runs, packing, and delivery. Employees even meet daily in order to set their own production schedules. "We empower employees to make decisions, not just have input," Frey remarked. "I just coach."

Under Frey's new management regime, company secrets have virtually disappeared. All Cin-Made employees, from entry-level employees all the way to the top, take part in running the company. In fact, Frey has delegated so much of the company's operations to its workers that he now feels little in the dark. "I now know very little about what's going on, on a day-to-day basis," he confessed.

At Cin-Made, empowerment and delegation are more than mere buzzwords; they are the way of doing business – good business. "We, as workers, have a lot of opportunities," said Williams. "If we want to take leadership, it's offered to us."

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Solved Case Study of Disney's Design

2012-03-17T01:48:00.002-07:00

The Walt Disney Company is heralded as the world's largest entertainment company. It has earned this astounding reputation through tight control over the entire operation: control over the open – ended brainstorming that takes place 24 hours a day; control over the engineers who construct the fabulous theme – park rides; control over the animators who create and design beloved characters and adventurous scenarios; and control over the talent that brings the many concepts and characters to life. Although control pervades the company, it is not too strong a grip. Employees in each department are well aware of their objectives and the parameters established to meet those objectives. But in conjunction with the pre-determined responsibilities, managers at Disney encourage independent and innovative thinking.

People at the company have adopted the phrase "Dream as a Team" as a reminder that whimsical thoughts, adventurous ideas, and all – out dreaming are at the core of the company philosophy. The over all control over each department is tempered by this concept. Disney managers strive to empower their employees by leaving room for their creative juices to flow. In fact, managers at Disney do more than encourage innovation. They demand it. Projects assigned to the staff "imaginers" seem impossible at first glance. At Disney, doing the seemingly impossible is part of what innovation means. Teams of imaginers gather together in a brainstorming session known as the "Blue Sky" phase. Under the "Blue Sky", an uninhibited exchange of wild, ludicrous, outrageous ideas, both " good" and " bad", continues until solutions are found and the impossible is done. By demanding so much of their employees, Disney managers effectively drive their employees to be creative.

Current Disney leader Michael Eisner has established the "Dream as a Team" concept. Eisner realized that managers at Disney needed to let their employees brainstorm and create with support. As Disney president Frank Weds says, "If a good idea is there, you know it, you feel it, you do it, no matter where it comes from."

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Solved Case Study: Rise and Fall

2012-03-17T00:37:00.001-07:00

Jagannath (Jaggu to his friends) is an over ambitious young man. For him ends justify means.

With a diploma in engineering. Jaggu joined, in 1977, a Bangalore-based company as a Technical Assistant. He got himself enrolled as a student in an evening college and obtained his degree in engineering in 1982. Recognizing as Engineer-Sales in 1984.

Jaggu excelled himself in the new role and became the blue-eyed boy of the management. Promotions came to him in quick succession. He was made Manager-Sales in 1986 and Senior Manager-Marketing in 1988.

Jaggu did not forget his academic pursuits. After being promoted as Engineer-Sales, he joined an MBA (part-time) programme. After completing MBA, Jaggu became a Ph.D. scholar and obtained his doctoral degree in 1989.

Functioning as Senior Manger-Marketing, Jaggu eyed on things beyond his jurisdiction. He started complaining against Suresh the Section Head and Prahalad the Unit Chief (both production) with Ravi, the EVP (Executive – Vice President). The complaints included delay in executing orders, poor quality and customer rejections. Most of the complaints were concocted.

Ravi was convinced and requested Jaggu to head the production section so that things could be straightened up there. Jaggu became the Section head and Suresh was shifted to sales.

Jaggu started spreading his wings. He prevailed upon Ravi and got sales and quality under his control, in addition to production. Suresh, an equal in status, was now subordinated to Jaggu. Success had gone to Jaggu’s head. He had everything going in his favour-position, power, money, and qualification. He divided workers and used them as pawns. He ignored Prahalad and established direct link with Ravi. Unable to bear the humiliation, Prahalad quit the company. Jaggu was promoted as General Manager. He became a megalomaniac.

Things had to end at some point. It happened in Jaggu’s life too. There were complaints against him. He had inducted his brother – in – law, Ganesh, as an engineer. Ganesh was by nature corrupt. He stole copper worth Rs. 5 lakh and was suspended. Jaggu tried to defend Ganesh but failed in his effort. Corruption charges were also leveled against Jaggu who was reported to have made nearly Rs. 20 lakh for himself.

On the new-year day of 1993, Jaggu was reverted back to his old position- sales. Suresh was promoted and was asked to head production. Roles got reversed. Suresh became boss to Jaggu.

Unable to swallow the insult, Jaggu put in his papers.

Back home, Jaggu started his own consultancy claiming himself as an authority in quality management. He poached on his previous company and picked up two best brains in quality.

From 1977 to 1993, Jaggu’s career graph had a steep rise and a sudden fall. Whether there would be another hump in the curve is a big question.

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Solved Case Study: 'Mechanist’s indiscipline behavior'

2012-03-17T00:33:00.002-07:00

Dinesh, a machine operator, worked as a mechanist for Ganesh, the supervisor. Ganesh told Dinesh to pick up some trash that had fallen from Dinesh’s work area, and Dinesh replied, “I won’t do the janitor’s work.”

Ganesh replied, “When you drop it, you pick it up”. Dinesh became angry and abusive, calling Ganesh a number of names in a loud voice and refusing to pick up the trash. All employees in the department heard Dinesh’s comments.

Ganesh had been trying for two weeks to get his employees to pick up trash in order to have cleaner workplace and prevent accidents. He talked to all employees in a weekly departmental meeting and to each employee individually at least once. He stated that he was following the instructions of the general manager. The only objection came from Dinesh.
Dinesh has been with the company for five years, and in this department for six months. Ganesh had spoken to him twice about excessive alcoholism, but otherwise his record was good. He was known to have quick temper.

This outburst by Dinesh hurt Ganesh badly. Ganesh told Dinesh to come to the office and suspended him for one day for insubordination and abusive language to a supervisor. The decision was within company policy, and similar behaviors had been punished in other departments.

After Dinesh left Ganesh’s office, Ganesh phoned the HR manager, reported what he had done, and said that he was sending a copy of the suspension order for Dinesh’s file.

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Solved Case Study: Prejudices in workplaces: Real or Perceived?

2012-03-17T00:29:00.002-07:00

Manjula Srivastav had been head of marketing for the last four years at Blue Chips, a computer products firm. The company’s turnover had increased by two – and a half times during the period and its market share in a number of precuts had also moved up marginally. What was creditable was that all this had happened in an environment in which computer prices had been crashing.

Although she had a talent for striking an instant report with people – particularly with the company’s dealers – Srivastav often found herself battling against odds, as she perceived it, as far as her relationships with her subordinates and peers in the company were concerned. Srivastav had to fight male prejudice all the way. She found it unfair that she had to prove herself regularly at work and she used to make her displeasure on that score quite obvious to everyone.

Six months ago, Blue Chips had been taken over by an industrial group which had a diversity of business interests and was, more importantly, flush with funds. The change of ownership had led to a replacement of the managing director, but it had not affected the existing core management team. Anand Prakash, the new managing director, had his priorities clear. “Blue Chips will go international,” he had declared in the first executive committee meeting, “and exports will be our first concern.”

Prakash had also brought in Harish Naik as his executive assistant with special responsibility for exports. Naik had been seconded to Srivastav for five weeks as a part of a familiarization programme. Much to her surprise, he had been appointed, within two months, as the vice president (exports), with compensation and perks higher than her own. Srivastav had made a formal protest to Prakash who had assured her that he was aware of her good work in the company and that she would have an appropriate role once the restructuring plan he was already working on would by put into effect.

One morning, as she entered the office and switched on her workstation, a message flashed on her screen. It was from Prakash. “Want to see you sometime today regarding restructuring. Will 2.30 be convenient?” It went.

Later at his office, Prakash had come straight to the point. He wanted to create a new post called general manager (public affairs) in the company. “With your excellent background in customer relations and connections with the dealer network, you are the ideal material for the job,” he said, “and I am offering it to you.” Srivastav was quick to react. “There is very little I can contribute in that kind of job,” she said. “I was in fact expecting to be promoted as vice president (home marketing).” Prakash said that the entire gamut of marketing functions would be looked after by Naik who would have boardroom responsibility for both domestic and export sales. “If you continue in marketing, you will have to be reporting to Naik which I thought may not be fair to you. In any case, we need someone who is strong in marketing to handle public affairs. Let me assure you that the new post I am offering will in no way diminish your importance in the company. You will in fact be reporting to me directly.”

“You are being unfair and you are diminishing my importance in the company,” reported Srivastav. “You know that I am a hardcore marketing professional and you also know I am the best. Why then am I being deprived of a rightful promotion in marketing? Tell me,” she asked pointedly, “would you have done this to a male colleague?”

“That is a hypothetical question,” said Prakash. “But I can’t think of any other slot for you in the restructuring plan I want to implement except what I am offering.”

“If the reason why you are asking me to handle this fancy public affairs business of yours,” said Srivastav, “is that you can’t think of any other slot for me, then I would have second thoughts about continuing to work for this company.”

“May I reiterate,” said Prakash, “that I value your role and its is precisely because of this that I am delegating to you the work I have been personally handling so far ? May I also state that I am upgrading the job not only because it is important but also because it should match your existing stature in the organization?”

“I need to think about this. I will let you know tomorrow,” said Srivastav and left the office.

Question 1. What should she do?
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Solved Case Study: Promoting the protege

2012-03-17T00:25:00.004-07:00

The die was cast. Prem Nath Divan, executive chairman of Vertigo, the country’s largest engineering project organization, decided to switch tracks for a career in academics. Divan was still six years short of the company’s retirement age of 65. His premature exit was bound to create a flutter at the Vertigo board. Having joined Vertigo as a management trainee soon after college, he had gradually risen through the hierarchy to take a board position as the marketing director of the firm at 32. He had become the president five years later and the youngest chairman of the company at 45. But, by the time he was 50, the whizkid had acquired a larger than life image of a role model for younger managers and a statesman who symbolized the best and brightest face of Indian management.

On his wife’s suggestion that it would be wise to discuss the move with one of his trusted colleagues before making a formal announcement of his intention to seek premature retirement, Divan called on Ramcharan Saxena, a solicitor who has been on the Vertigo board for over a decade. Saxena was surprised at Divan’s plan. But he was unfazed. “If that is what you want to do for the rest of your life, we can only wish you well”, he told him. “The board will miss you. But the business should go on. We should get down to the task of choosing a successor. The sooner it is done, the better.

“I think the choice is quite obvious, “said Divan, “Ranjan Warrior. He is good and …” Divan was taken aback to see Saxena grimace. “You don’t have anything against him, do you?” he asks him. “No, no,” said Saxena, “He is good. A financial strategist and a visionary. His conceptual skills have served the company well. But he has always had staff role with no line experience. What we need is someone from operations. Like Richard Crasta.”

“Richard known things inside out alright”, said Divan, “But he is just a doer. Not fire in the belly. Vertigo needs someone who understands the value of power and known how to use it. Like me. Like Ranjan.”

“That is just the problem, “said Saxena. “Prem, let me tell you something. Ranjan is a man in your own image. Everyone known that he is your protégé. And are never popular. He has generated a lot of resentment among senior Veritigo executives and there would be a revolt if he were to succeed you. An exodus is something we can’t afford to have on our hands. We should think of someone else in the interest of stability to top management.”

Divan could not believe what he heard. He had always prided himself on his hands – on style and thought he had his ear to the ground. “How could I lose touch?” He wondered, somewhat shaken.

“When you are the boss, people accept your authority without question,” continued Saxena. “In any case, you have been successful at Vertigo and it is difficult to argue with success. But the moment you announce your intention to leave, the aura begins to fade away. And in deciding on your successor, the board will seek your opinion, with due regard to your judgment. The board member must do what in their view is right for the company. Having said that, may I also mention that if there is a showdown in the boardroom, you could always choose to stay on? We would like it. Or we could bring in an outsider.”

“I have finalized my career plans and there is no question of staying on beyond six months from now,” said Divan. “The board is scheduled to meet next month. Let us shelve the matter till then. In the meantime, I rely on you, Ram, to keep this discussion between the two of us.”

“Of course yes,” said Saxena.

On his way home, Divan thought about the matter in detail. Bringing an outsider would undo all his life’s work at Vertigo. There were considerations like cuture and compatibility which were paramount. The chairman had to be an inside man. “Richard lacks stature, “Divan said to himself. “Ranjan is the one I have been grooming, but heavens, the flip side of it all had missed me completely. There is no way I can allow a split at the top just before I quit. I must leave on a high note in my own interest. I must find a way out of he imminent mess.”

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Transforming Reuters: Question & Answers

2012-02-29T11:23:00.003-08:00

Question and Answers for Transforming Reuters:

1. What technological paradigm shift did Reuters face in the 1990s? How did that paradigm shift change the competitive playing field?

2. Why Reuters was slow to adopt internet-based technology?

3. Why do you think Tom Glocer was picked as CEO? What assets did he bring to the leadership job?

4. What do you think of Glocer’s attempts to change the strategy and organizational culture at Reuters? Was he on the right track? Would you do things differently?

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Dow Chemical Case Study: Question & Answers

2012-02-29T11:18:00.001-08:00

Question and Answers for Dow Chemical case study:

1. Why did Dow Chemical first adopt a matrix structure? What benefits did it hope to derive from his structure?

2. What problems emerged with this structure? How did Dow try to deal with them? In retrospect, do you think those solutions were effective?

3. Why did Dow change its structure again in the mid 1990s? What was Dow trying to achieve this time? Do you think the current structure makes sense given the industry in which Dow operates and the strategy of the firm? Why?

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Boom and Bust in Telecommunications: Solved Answers

2012-02-29T11:11:00.001-08:00

Question and Answers:

1. Why did the strategic plans adopted by companies like level 3, Global crossing, and 360 Network fail?

2. The managers who ran these companies were smart, successful individuals, as were many of the investors who put money into their businesses. How could so many smart people have been so wrong?

3. What specific decision-making biases do you think were at work in this industry during the late 1990s and early 2000s?

4. What could the managers running these companies done differently that might have led to a different outcome?

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Solved Case Study of George David

2012-02-29T11:01:00.000-08:00

Questions & Answers:

1. What makes George David such a highly regarded manager?

2. How does David get things done through people?

3. What evidence can you see of David’s planning and strategizing, organizing, controlling, leading and developing?

4. Which managerial competencies does David seem to posses? Does he seem to lack any?

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Case Study: Transforming Reuters

2011-08-18T05:44:00.000-07:00

London-based Reuters is a venerable company. Established in 1850 and devoted to delivering information around the world by the fastest means available—which in 1850 meant a fleet of 45 carrier pigeons—by the late 1990s the company had developed into one of the largest providers of information in the world.

Although Reuters is known best to the public for its independent, unbiased news reporting, 90 percent of Reuters’ revenues are generated by providing information to traders in financial markets. In the 1990s the company used a proprietary computer system and a dedicated telecommunications network to deliver real-time quotes and financial information to Reuters terminals—devices that any self-respecting financial trader could not function without.
When Reuters entered the financial data business in the early 1970s, it had 2,400 employees, most of them journalists. By the late 1990s its employee base had swelled to 19,000 most of whom were on the financial and technical side. During this period of heady growth Reuters amassed some 1,000 products, often through acquisitions, such as foreign-language data services, many of which used diverse and sometimes incompatible computer delivery systems.

The late 1990s were the high point for Reuters. Two shocks to Reuters’ business put the company in a tailspin. First came the Internet, which allowed newer companies, such as Thompson Financial Services and Bloomberg, to provide real-time financial information to any computer with an Internet connection. Suddenly Reuters was losing customers to a cheaper and increasingly ubiquitous alternative. The Internet was commoditizing the asset on which Reuters had built its business: information. Then in 2001 the stock market bubble of the 1990s finally broke; thousands of people in financial services lost their jobs; and Reuters lost 18 percent of its contracts for terminals in a single year. Suddenly a company that had always been profitable was losing money.

In 2001 Reuters appointed Tom Glocer as CEO. The first nonjournalist CEO in the company’s history, Glocer, an American in a British-dominated firm, was described as “not part of the old boys’ network.” Glocer had long advocated that Reuters move to an Internet-based delivery system. In 2000 he was put in charge of rolling out such a system across Reuters but met significant resistance. The old proprietory system had worked well, and until 2001 it had been extremely profitable. Many managers were therefore reluctant to move toward a Web-based system that commoditized information and had lower profit margins. They were worried about product cannibalization. Glocer’s message was that if the company didn’t roll out a Web-based system, Reuters’ customers would defect in droves. In 2001 his prediction seemed to be coming true.

Once in charge, Glocer again pushed an Internet-based system, but he quickly recognized that Reuters’ problems ran deeper. In 2002, the company registered its first annual loss in history, £480 million, and Glocer described the business as “fighting for survival.” Realizing that dramatic action was needed, in February 2003 Glocer launched a three-year strategic and organizational transformation program called Fast Forward. It was designed to return Reuters to profitability by streamlining its product offering, prioritizing what the company focused on, and changing its culture. The first part of the program was an announcement that 3,000 employees (nearly 20 percent of the workforce) would be laid off.

To change its culture Reuters added an element to its Fast Forward program known as “Living Fast,” which defined key values such as passionate and urgent working, accountability, and commitment to customer service and team. A two-day conference of 140 managers, selected for their positions of influence and business understanding rather than their seniority, launched the program. At the end of the two days the managers collectively pledged to buy half a million shares in the company, which at the time were trading at all-time low.

After the conference the managers were fired up; but going back to their regular jobs, they found it difficult to convey that sense of urgency, confidence, and passion to their employees. This led to the development of a follow-up conference: a one-day event that included all company employees. Following a video message from Glocer and a brief summary of the goals of the program, employees spent the rest of the day in 1,300 cross-functional groups addressing challenges outlined by Glocer and proposing concrete solutions. Each group chose one of “Tom’s challenges” to address. Many employee groups came up with ideas that could be rapidly implemented—and were. More generally, the employees asked for greater clarity in product offerings, less bureaucracy, and more accountability. With this mandate managers launched a program to rationalize the product line and streamline the company’s management structure. In 2003 the company had 1,300 products. By 2005 Reuters was focusing on 50 key strategic products, all delivered over the Web. The early results of these changes were encouraging. By the end of 2004 the company recorded a £380 million profit, and the stock price had more than doubled.

Questions:

1. What technological paradigm shift did Reuters face in the 1990s? How did that paradigm shift change the competitive playing field?

2. Why was Reuters slow to adopt Internet-based technology?

3. Why do you think Tom Glocer was picked as CEO? What assets did he bring to the leadership job?

4. What do you think of Glocer’s attempts to change the strategy and organizational culture at Reuters? Was he on the right track? Would you do things differently?

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Case Study: Dow Chemical

2011-08-18T05:35:00.000-07:00

A handful of major players, compete head-to-head around the world in the chemical industry. These companies are Dow Chemical and Du Pont of the United States, Great Britain’s ICI, and the German trio of BASF, Hoechst AG, and Bayer. The barriers to the free flow of chemical products between nations largely disappeared in the 1970s. This, along with the commodity nature of bulk chemicals and a severe recession in the early 1980s, ushered in a prolonged period of intense price competition. In such an environment, the company that wins the competitive race is the one with the lowest costs. Dow Chemical was long among the cost leaders.

For years Dow’s managers insisted that part of the credit belonged to its “matrix” organization. Dow’s organizational matrix had three interacting elements: functions (such as R&D, manufacturing, and marketing), businesses (like ethylene, plastics, and pharmaceuticals), and geography (for example, Spain, Germany, and Brazil). Managers’ job titles incorporated all three elements (plastics marketing manager for Spain), and most managers reported to at least two bosses. The plastics marketing manager in Spain might report to both the head of the worldwide plastics business and the head of the Spanish operations. The intent of the matrix was to make Dow operations responsive to both local market needs and corporate objectives. Thus the plastics business might be charged with minimizing Dow’s global plastics production costs, while the Spanish operation might determine how best to sell plastics in the Spanish market.

When Dow introduced this structure, the results were less than promising: Multiple reporting channels led to confusion and conflict. The many bosses created an unwieldy bureaucracy. The overlapping responsibilities resulted in turf battles and a lack of accountability. Area managers disagreed with managers overseeing business sectors about which plants should be built where. In short, the structure, didn’t work. Instead of abandoning the structure, however, Dow decided to see if it could made more flexible.

Dow’s decision to keep its matrix structure was prompted by its move into the pharmaceuticals business is very different from the bulk chemicals business. In bulk chemicals, the big returns come from achieving economies of scale in production. This dictates establishing large plants in key locations from which regional or global markets can be served. But in pharmaceuticals, regulatory and marketing requirements for drugs vary so much from country to country that local needs are far more important than reducing manufacturing costs through scale economies. A high degree of local responsiveness is essential. Dow realized its pharmaceutical business would never thrive if it were managed by the same priorities as its mainstream chemical operations.

Accordingly, instead of abandoning its matrix, Dow decided to make it more flexible to better accommodate the different businesses, each with its own priorities, within a single management system. A small team of senior executives at headquarters helped set the priorities for each type of business. After priorities were identified for each business sector, one of the three elements of the matrix—function, business, or geographic area—was given primary authority in decision making. Which element took the lead varied according to the type of decision and the market or location in which the company was competing. Such flexibility that all employees understand what was occurring in the rest of the matrix. Although this may seem confusing, for years Dow claimed this flexible system worked well and credited much of its success to the quality of the decisions it facilitated.

By the mid-1990s, however, Dow had refocused its business on the chemicals industry, divesting itself of its pharmaceutical activities where the company’s performance had been unsatisfactory. Reflecting the change in corporate strategy, in 1995 Dow decided to abandon its matrix structure in favor of a more streamlined structure based on global product divisions. The matrix structure was just too complex and costly to manage in the intense competitive environment of the time, particularly given the company’s renewed focus on its commodity chemicals where competitive advantage often went to the low-cost producer. As Dow’s then-CEO put it in a 1999 interview, “We were an organization that was matrixed and depended on teamwork, but there was no one in charge. When things went well, we didn’t know whom to reward; and when things went poorly, we didn’t know whom to blame. So we created a global divisional structure and cut out layers of management. There used to be eleven layers of management between me and the lowest-level employees; now there are five.

Questions

1. Why did Dow Chemical first adopt a matrix structure? What benefits did it hope to derive from this structure?

2. What problems emerged with this structure? How did Dow try to deal with them? In retrospect, do you think those solutions were effective?

3. Why did Dow change its structure again in the mid-1990s? What was Dow trying to achieve this time? Do you think the current structure makes sense given the industry in which Dow operates and the strategy of the firm? Why?

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Case Study: Boom and Bust in Telecommunications

2011-08-18T05:20:00.000-07:00

In 1997 Michael O'Dell, the chief scientist at World-Com, which owned the largest network of “Internet backbone” fiber optic cable in the world, stated that data traffic over the Internet was doubling every hundred days. This implied a growth rate of over 1,000 percent a year. O'Dell went on to day that there was not enough fiber optic capacity to go around, and that “demand will far outstrip supply for the foreseeable future.”

Electrified by this potential opportunity, a number of companies rushed into the business. These firms included Level 3 Communications, 360 Networks, Global Crossing, Qwest Communications, World-Com, Williams Communications Group, Genuity Inc., and XO Communications. In all cases the strategic plans were remarkably similar: Raise lots of capital, build massive fiber optic networks that straddled the nation (or even the globe), cut prices, and get ready for the rush of business. Managers at these companies believed that surging demand would soon catch up with capacity, resulting in a profit bonanza for those that had the foresight to build out their networks. It was a gold rush, and the first into the field would stake the best claims.

However, there were dissenting voices. As early as October 1998 an Internet researcher at AT&T Labs named Andrew Odlyzko published a paper that de-bunked the assumption that demand for Internet traffic was growing at 1,000 percent a year. Odlyzko’s careful analysis concluded that growth was much slower—only 100 percent a year! Although still large, that growth rate was not nearly large enough to fill the massive flood of fiber optic capacity that was entering the market. Moreover, Odlyzko noted that new technologies were increasing the amount of data that could be sent down existing fibers, reducing the need for new fiber. But with investment money flooding into the market, few paid any attention to him. WorldCom was still using the 1,000 percent figure as late as September 2000.

As it turned out, Odlyzko was right. Capacity rapidly outstripped demand, and by late 2002 less than 3 percent of the fiber that had been laid in the ground was actually being used! While prices slumped, the surge in volume that managers had bet on did not materialize. Unable to service the debt they had taken on to build out their networks, company after company tumbled into bankruptcy—including WorldCom, 360 Networks, XO Communications, Global Crossing. Level 3 and Qwest survived, but their stock price had fallen by 90 percent, and both companies were saddled with massive debts.

Questions

1. Why did the strategic plans adopted by companies like Level 3, Global Crossing, and 360 Networks fail?

2. The managers who ran these companies were smart, successful individuals, as were many of the investors who put money into these businesses. How could so many smart people have been so wrong?

3. What specific decision-making biases do you think were at work in this industry during the late 1990s and early 2000s?

4. What could the managers running these companies done differently that might have led to a different outcome?

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Case Study of George David

2011-08-18T05:15:00.000-07:00

George David has been CEO of United Technologies Corporation (UTC) for more than a decade. During that time he has received numerous accolades and awards for his performance as a CEO. Under his leadership UTC, a $343 billion conglomerate whose operating units include manufacturers of elevators (Otis Elevator), aerospace products (including Pratt & Whitney jet engines and Sikorsky helicopters), air conditioning systems, and fire and security systems, has seen earnings grow at 10–14 percent annually—impressive numbers for any company but particularly for a manufacturing enterprise.

According to David, a key to United Technologies’ success has been sustained improvements in productivity and product quality. The story goes back to the 1980s when David was running the international operations of Otis Elevator. There he encountered a Japanese engineer, Yuzuru Ito, who had been brought in to determine why a new elevator product was performing poorly. David was impressed with Ito’s methods for identifying quality problems and improving performance. When he was promoted to CEO, David realized that he had to lower the costs and improve the quality of UTC’s products. One of the first things he did was persuade Ito to work for him at UTC. Under David, Ito developed a program for improving product quality and productivity, known as Achieving Competitive Excellence (ACE), which was subsequently rolled out across UTC. The ACE program has been one of drivers of productivity improvements at UTC ever since.

Early in his tenure as CEO, David also radically reorganized UTC. He dramatically cut the size of the head office and decentralized decision making to business divisions. He also directed his accounting staff to develop a new financial reporting system that would give him good information about how well each division was doing and make it easier to hold divisional general managers accountable for the performance of the units under them. He then gave them demanding goals for earnings and sales growth and pushed them to improve processes within their units by implementing the ACE program.

At the same time David has always stressed that management is about more than goal setting and holding people accountable. Values are also important. David has insisted that UTC employees adhere to the highest ethical standards, that the company produce that have minimal environmental impact, and that employee safety remain the top consideration in the work-place.

When asked what his greatest achievement as a manager has been, David refers to UTC’s worldwide employee scholarship program. Implemented in 1996 and considered the hall-mark of UTC’s commitment to employee development, the program pays the entire cost of an employee’s college or graduate school education, allows employees to pursue any subject at an accredited school, provides paid study time, and awards UTC stock (up to $10,000 worth in the United States) for completing degrees. Explaining the program, David states, “One of the obligations that an employer has is to give employees opportunities to better themselves. And we feel it’s also very good business for us because it generates a better workforce that stays longer.”

David states that one of his central tasks has been to build a management team that functions smoothly over the long term. “People come to rely upon each other,” he says. “You have the same trusting relationships. You know people; they know you. You can predict them; they can predict you. All of that kind of begins to work, and it accelerates over the tenure of a CEO. If you have people bouncing in and out every two to three years, that’s not good.”

According to Sandy Weill, former chairman of Citicorp and a UTC board member, David has the right mix of toughness and sensitivity. “When somebody can't do the job he’ll try to help; but if that person is not going to make it work, that person won't be on the job forever.” At the same time Weill says, “He does a lot of things that employees respect him for, I think he is a very good manager. Even though David is demanding, he can also listen—he has a receive mode as well as a send mode.”

Questions of George David Case Studies:

1. What makes George David such a highly regarded manager?

2. How does David get things done through people?

3. What evidence can you see of David’s planning and strategizing, organizing, controlling, leading, and developing?

4. Which managerial competencies does David seem to posses? Does he seem to lack any?

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