Chapter 1—Baggage Claims—Is RFID the Ticket?4ltrpress.cengage.com/enrichment/Management...

Management Team Decision

From sports to school to work to civic involvement, working in teams is increasingly part of our experi-ence. But although working in teams is more and more common, making decisions as teams is not nec-essarily any easier. You will learn more about manag-ing teams in Chapter 10, but to give you more experi-ence with teamwork, a “Management Team Decision” exercise designed for a group of three to five students is included in each chapter. As a group, you must come to a mutually agreeable decision on the scenario presented. Each “Management Team Decision”; will focus on a management topic presented in the chap-ter. For Chapter 1, you’ll work with management roles, as you decide whether to implement RFID at your airport. What a trip! You’re exhausted from changing planes (three times because of cancellations) and try-ing to corral your colleagues as well as their luggage. And after all the cramped seats, complaining travelers, long lines, and marginal food, your team still hasn’t come to a decision about what do to—at your own air-port.

Last month, you and your management team from Hartsfield Jackson Atlanta International Airport (ALT) began discussing using radio-frequency identification (RFID) tags in the airport’s baggage-handling opera-tions. Recent reports on lost luggage have caused more than a ripple of concern, with roughly one in every 150 U.S. passengers losing a bag in any given year. U.S. airlines spent an estimated $400 million to replace mishandled luggage in a recent year, yet passengers are regularly incensed that the airlines give only partial reimbursements for lost bags and belongings. The cost of lost luggage, however, is not just the $400 million in reimbursements. There’s the time and expense of staffing large customer-service departments to take complaints, process claims, track down and identify missing baggage, and deliver found bags to either the owner’s travel destination or home. Multiple deliveries are often made because the bag arrives at the passenger’s destination after he or she has left for another destination or returned home. The International Air Transport Association estimates that airlines worldwide could save $760 million a year by reducing lost luggage.

Your team would love to reduce the costs associ-ated with lost luggage at Hartsfield Jackson, which consistently wins the title of world’s busiest passen-ger airport. Nearly 6.5 million travelers pass through

the airport in a given month and bring about 75 met-ric tons of luggage with them. That’s more than the either the monthly amount of mail or commercial freight (think FedEx and UPS) that passes through the airport’s facilities!

Thirty-one airlines take off and land at Hartsfield Jackson, but Delta accounts for over 58 percent of passenger volume. As (bad) luck would have it, Delta has a dismal ranking for lost luggage, reporting 6.8 mishandled bags per 1,000, second only to US Airways’ 7.7 losses per 1,000. Company-wide, Delta handles 1.3 bags per passenger, and there’s no reason to think this number is any lower in Atlanta, its biggest hub. That means Delta alone puts over 160,000 bags into the Hartsfield Jackson system each day!

To manage this tremendous flow of personal belongings, Hartsfield Jackson uses the bar-coding system in use at the majority of U.S. airports. Adhesive paper tags are very economical at 4 cents each, but they also rip, smudge, get misread, or get torn off completely. Scanners even have trouble with twisted tags. Baggage sorting with bar-coded tags is only 80 to 90 percent accurate. And once they’re printed, that’s it. If a passenger’s destination changes due to, say, inclement weather, flight cancellations, or being rerouted, the bar-code label can’t change to reflect the new itinerary.

Armed with all this, well, baggage, your team went on a trip to Las Vegas’ McCarran International Airport, which has been using radio-frequency identification tags to manage its bag handling. McCarran is the fifth-busiest airport in the United States, and it handles more than 70,000 outbound bags per day. Using bar-code readers, as many as 7,000 bags per day were not read properly and tossed into an “unknown” pile to be hand sorted. There was also the headache of lost luggage for passengers on quick three- and four-day excursions to consider. In the end, the airport decided to invest in a system based on RFID tags. Tags costs 21 cents apiece, or five times the cost of a bar-code tag, but the accuracy of the RFID system has cut the number of hand-sorted bags by 90 percent, and the tags can be rewritten electronically mid-travel if itiner-aries change. The RFID system has enabled the airport to let inbound passengers on long flights check their bags all the way to their casino or hotel, so that their luggage is waiting for them when they arrive.

What to do? Hartsfield Jackson is already in the middle of a $5.4 billion campaign to improve facilities.

Chapter 1—Baggage Claims—Is RFID the Ticket?

1MGMT Enrichment: Management Team Decision

New Management Team Decision.indd 1 6/2/09 12:39:28 PM


Management does a great job managing the finances of the airport, and Hartsfield Jackson is considered a good risk (meaning a safe bet) for lenders. The hard-ware required to start using RFID is cheaper than maintaining the hardware that manages the system of traditional bar-code tags, but the difference in the cost of the tags is substantial even if it is decreasing. And who’s going to foot the bill? Should the airlines, which are nearly all suffering financially, be expected to pay for the program that will ultimately benefit them as well? Delta already stopped paying its $3.4 million annual rent to the airport as part of its bank-ruptcy restructuring. If they don’t pay for the hardware required to read the tags, should airlines at least pay for the tags themselves?

Maybe you need to take another trip, this time to Furth, Germany, where Siemens, a provider of indus-trial software, has built a mock airport to demonstrate how automated technology can help airports improve efficiencies in nearly every aspect of their organiza-tion. Siemens’s automated luggage belts equipped with RFID readers can move at up to 30 feet per second, which means that passengers wouldn’t have to wait hours for their bags to show up at the carou-sel, as they often do now. Even though the people at McCarran were helpful, their airport has less than half the traffic of Hartsfield Jackson. Perhaps consult-ing with the folks at Siemens will help you better frame the issues for your massive operations. Or maybe you’d be better off visiting Denver International Airport, which is known for its notoriously flawed and inefficient automated baggage-handling system.

Form a team of four or five students to act as the management team of Hartsfield Jackson International Airport to determine if the tradeoffs of implementing RFID are worth the costs.

Sources: S. McCartney, “A New Way to Prevent Lost Luggage,” Wall Street Journal, 27 February 2007, D1; S. McCartney, “Why Airlines Keep Losing Your Luggage,” Wall Street Journal, 16 January 2007, D1; S. McCartney, “Travelers Blast Airlines for Lost Bags,” Wall Street Journal, 16 January 2007, online; J. Ogando, “It’s the Luggage That Flies at Siemens’ Mock Airport,” Design News, 8 January 2007, 30; R. Grantham, “Heightened Security Leads to 40% Increase in Checked Baggage,” Atlanta Journal-Constitution, 18 August 2006, online; K. Tagami, “Atlanta Airport’s Finances Rated High,” Atlanta Journal-Constitution, 16 July 2004, online; K. Tagami, “Airline Bankruptcies Blow Hole in Atlanta Airport Budget as Hangar Leases Flag,” Atlanta Journal-Constitution, 26 January 2006, online; http://www.atlanta-airport.com/sublevels/airport_info/pdfs/Traffic/200701.pdf.

Questions

1. Implementing RFID is a complex procedure that draws on many managerial roles. Describe the ways that the management team from Hartsfield Jackson will fulfill Mintzberg’s managerial roles and sub roles (see Exhibit 1.3) as it thinks through the decision.

2. Additional information gathering at Siemens’s mock airport is a good idea, but who to send? Identify how many and which type of managers to recommend for a fact-finding team and to tour the facility at Furth, Germany. Estimate how much money will be required to fund such a trip.

3. Do you implement RFID at Hartsfield Jackson immediately, or do you schedule a trip to Furth, Germany before deciding? Or do you decide not to implement RFID at all?




Your troubles began when the teenage clerk at one of your convenience stores wrestled a gun away from a would-be robber. On hearing the story, your friends said, “How brave!” and “Did you give him an award?” but you and the other managers in the company all had a very different reaction. You know you will have to fire the employee for violating a long-standing and well-known company policy against heroism. Convenience store robberies are a common occur-rence, and if your (mostly young) workers, manning dozens of stores, begin to attempt behind-the-counter vigilantism, you will have a serious problem on your hands.

Despite the unanimous mind-set of your man-agement team, you realize that firing the employee outright may create negative fallout among the other employees. At least one employee in particular is likely to vocally protest the firing. As you sit with your team trying to decide how to resolve this issue, one of your managers proposes implementing a peer review process at the company. A panel of employees would be responsible for arbitrating disputes and resolving any disagreements between how managers enforce the rules and how employees experience those rules being enforced.

Advocates trumpet the benefits of peer review systems. Peer reviews are practical and cost-effective, particularly compared with formal legal arbitration, and they allow disputes to be resolved internally. Because peer reviews give employees some say in the out-come of disputes, the employees are more likely to find the decisions credible and acceptable. Many managers also like peer reviews because they help to avert the backlash that a manager may experience for unilaterally disciplining an employee who has violated company rules.

Detractors, however, say that peer reviews may give employees too much control over the manage-ment decision process. Review panels effectively diffuse the decision making function throughout the organization in a way that is counter to the centralized decision making of traditionally structured companies. In addition, creating and maintaining peer review sys-tems requires a commitment of time and resources. Employees lose work hours (and thus productivity) when they participate on panels. And management should consult with a knowledgeable attorney to make sure that review panel procedures conform to National Labor Relations Board (NLRB) dictates about work

teams. The process must be shared with all employ-ees, who also must be trained in the process. And what will you do if employees reverse a management decision?

Nonetheless, the number of companies using peer review systems is increasing as their popularity grows. One consultant alone has over 500 companies, includ-ing Kodak, Hooters, Marriott, and Red Lobster, using his peer review process.

For this exercise, assemble a team of five students to act as the management team for the convenience store chain in this scenario.

Questions

1. Which historical management theory gives the best justification for implementing peer review systems? Which theory would not support peer reviews?

2. Do you implement a peer review process in the convenience store scenario? Explain your decision.

3. Regardless of your answer in question 2, as a team draw up guidelines for a peer review process. What would you need to consider if you were to create a review panel? For example, do you need to set restrictions on the ratio of employees to managers on the panel (will there even be managers on the panel?). How many years of service should an employee have to participate? Should the panel include a mix of employees from different departments?

4. Now, following the guidelines you established in question 3, imagine that your team is the review panel for the convenience store clerk who foiled a robbery. Discuss the situation and come to a decision regarding the outcome. Do you fire the employee, warn the employee, or commend his actions?

Chapter 2—Peer Review for Conflict Resolution




One of the reasons you accepted a management posi-tion at MicroTek several years ago was the company’s laid-back culture. A loose organizational structure enables employees to move freely between proj-ects, and the open office space encourages informal encounters and generates a feeling of teamwork. And among the very generous corporate perks is a policy allowing employees to bring their pets to work. It is not uncommon to see a small animal sitting in an employee’s in-box drinking from a hamster lick. Several employees bring their dogs, large and small, to the office.

As the company has grown, thanks in part to its informal culture, more and more people are taking advantage of the pet policy, and problems are aris-ing. Food is swiped from desks, animals are rooting through trash bins, and dogs are marking territory on the partitions that surround their owners’ desks. Visiting customers often try to mask startled (at best) or disapproving (at worst) looks when they tour your facility for the first time—and even the second and third times. During a recent breakfast meeting, when a board member refused to share her bagel with the CFO’s dog, the dog relieved itself on her briefcase. At least one employee has complained of allergic reac-tions due to the high levels of pet dander in the office air, but rather than change the policy, you installed a high-power air cleaner.

Despite the challenges, you have resisted changing the pet policy because it symbolizes both the com-pany’s relaxed culture and MicroTek’s commitment to its employees’ work-life balance. This afternoon, how-ever, you were notified by the federal Occupational Safety and Health Administration (OSHA) that your office does not meet the required indoor air quality standards. Apparently, the cleaner you installed can’t handle all the pet dander. To meet the standards, you’ll need an even more powerful air cleaner that costs between $100,000 and $200,000. That would be a significant investment in the pet policy! And who knows if it would solve the allergy problem. Is the policy worth the cost?

In 2003, only 5,000 offices participated in “Bring Your Pet to Work Day,” but the number doubled the very next year. Companies bigger than MicroTek have figured out how to make pet policies work: IAMS Pet Food; Replacements Ltd., the world’s largest supplier of old and new china; and Netscape, to name a few. A quarter of Burton Snowboards’ 230 employees bring

their dogs to work every day! Anecdotal evidence from those companies indicates that pets can spur creativity and lower occupational stress. You ask your-self, “How committed am I to the pet policy?” Is the pet policy just trendy (or avant-garde), or does it say something deeper about your company?

For this Management Team Decision, assemble three or four students to act as the management team for MicroTek. Include both pet owners and people without pets to avoid any bias. Before you begin the exercise, have each team member privately write down answers to each of the following questions. By sharing your individual responses, you may be able to have a more varied and rounded discussion.

Sources: K. Maher, “For Some Co-Workers, Bringing Fido to Office Has Become Pet Peeve,” Wall Street Journal, 12 January 2005, B1; “Making the Office Pet Friendly,” Plant Sites & Parks, February 2001, 11; S. Linstedt, “Pets at Work Is Gnawing Subject for Many Buffalo, N.Y., Firms,” Buffalo News, 30 September 2002; M. M. Perotin, “Some Fort Worth, Texas–Area Employers Allow Pets at Work,” Fort Worth Star-Telegram, 12 August 2002; P. Lopes Harris, “Firms Begin to Ban Pets at Work,” San Jose Mercury News, 2 January 2001; J. Saranow, “Anybody Want to Take a Nap? Fun Perks Didn’t End with the Dot-Com Bust—They Just Changed,” Wall Street Journal, 25 January 2005, R5.

Questions

1. Do you buy the expensive air cleaner, or eliminate the pet policy? Why?

2. If you choose to stop allowing animals at the office, what effect, if any, do you think the change will have on the company’s culture?

3. Can you think of a way to allow people to bring pets to work without upgrading the air cleaner or running afoul of OSHA?

Chapter 3—Dog Day Blues




In the world of charitable organizations, the most gru-eling activity must certainly be fund-raising. Although soliciting donations for popular causes can be easy, lesser-known nonprofits, which do very important work, may have difficulty consistently raising enough money to function. Sometimes, corporate sponsorship is necessary to obtain adequate funding. The obvious plus to corporate sponsorship is the cash, and per-haps greater visibility and legitimacy in the community (depending, of course, on the reputation of the spon-sor). But corporate sponsorship can also have draw-backs. Potential donors may think that the charity no longer needs additional funding or withdraw support because they perceive that the charity has sold out to corporate financial inducements.

In considering a possible sponsorship, managers of charitable organizations can find themselves facing an ethical dilemma. Consider the following situation: A health-care foundation that is putting on a benefit concert to raise money to fund research on respira-tory diseases signs up a popular regional band. Unable to cover the costs for the band, concert hall, decora-tions, and publicity, the foundation entertains an offer from operators of a new and controversial waste incineration plant, who are willing to put up $50,000 to become sponsors of the event.

Such situations are all too common in the world of nonprofit fund-raising, and getting these decisions right can often mean the difference between success and failure. To execute this management team deci-sion, you will need to assemble a team of four or five students. Your management team will be working with the following scenario:

Women Against Violence (WAV) is a prominent local charity focused on providing victims of domestic violence with temporary housing, helping them cope with stress, and, in some cases, helping them begin a new life. During the 1990s, your management team was able to lift the fund-raising for WAV to all-time highs. Now, however, tight economic conditions have dried up donations. WAV’s management team is meet-ing to determine how and when to shut down opera-tions; you receive a call from a local company, Famous Brewery and Bottling Company. Famous not only has its own brewery and specialty beers, but it also bottles and distributes beer for larger, nationally known beer brands. Famous is a progressive company, with women makingup almost half of its top management

team. But you also know that alcohol is involved in many domestic abuse situations.

You put the representative from Famous on speak-erphone so the entire team can hear her. She pro-poses that Famous sponsor a spring festival to raise money for WAV. Famous will give WAV $40,000 to organize the festival (for advertising, tent and game rentals, concession stands, and so on), and WAV will receive all of the proceeds from the festival. In return, Famous wants to set up a booth at the festival and have its name and logo next to WAV’s on any promo-tional materials, such as flyers, banners, and buttons. You thank the representative and turn off the phone. Turning to your team, you say, “So, do we take the money or not?”

You will be making a decision for or against corpo-rate sponsorship for WAV by Famous Brewery and Bottling Company. Before beginning the exercise, review Exhibit 4.6.

Sources: D. H. Dean, “Associating the Corporation with a Charitable Event through Sponsorship: Measuring the Effects on Corporate Community Relations,” Journal of Advertising, Winter 2002, 77; D. Nelson, “Sponsorship or Selling Out?” Fund Raising Management, June 1998, 32; A. Taylor, “Poverty: Lack of Income Kills Off Low-Pay Unit,” Community Care, February 20, 2003, 9.

Questions

1. Rank the ethical intensity of the decision. Consider assigning a numerical value to each of the six factors, on a scale of, say, 1 to 5. Add the six values together and assess the sum against a possible 30 points.

2. As a team, examine the situation through the lens of each of the principles of ethical decision making. What is your final decision?

3. What role did the ethical intensity of the decision play in your ultimate decision?

Chapter 4—Sponsorship or Sellout




Because of your company’s success, the end-of-the-year accounting review is usually an upbeat occasion, and this December is no different. Your company man-ufactures an innovative kickstand that reduces injuries by keeping a child’s bike from falling all the way to the ground. After the device was written up in a parent’s magazine recently, sales to specialty bike shops—your primary customers—have started to climb. Despite the increased demand, you can still make kickstands to order.

At a meeting with your management team, you remark that although sales are increasing at a slow but steady rate, the company still has a large amount of excess capacity. A colleague agrees and then enthusi-astically announces, “I know how to take care of that. Let’s sell to Wal-Mart!” A hush falls over the meeting. Becoming a Wal-Mart supplier would mean honing your current distribution process into a finely tuned, perfect delivery operation. The retailing behemoth gives suppliers a 30-second window to deliver their goods to Wal-Mart distribution centers; you currently ship product via UPS ground. Wal-Mart requires severe price concessions from all its suppliers, a practice that has forced many American manufacturers to out-source production overseas in order to get their pro-duction costs low enough to meet Wal-Mart’s pricing mandates. Master Lock, Carolina Mills, Levi’s, and, a bit closer to home, Huffy Bicycle are a few examples. Your company uses local suppliers for metal, paint, plastics, and packaging, and it pays its 25 workers above-market wages. Thankfully, at the moment your company is the only manufacturer of the kickstand, so you have more freedom to set a competitive price on that item. If you begin selling through Wal-Mart, however, imitators will soon follow, and that would definitely affect your already modest margins. Not to mention that Wal-Mart uses historical price data about a company and its competitors to drive prices down across industries. Suppliers are rarely if ever granted a price increase; on the contrary, they are asked for regular price decreases!

In addition, if vendors want their products on Wal-Mart’s shelves, they have to implement Wal-Mart’s “customized business plans.” Each year, the big retailer hands its suppliers detailed “strategic busi-ness planning packets.” Wal-Mart grades its suppliers

with weekly, quarterly, and annual report cards. And when it comes to discussion of price, there is no real negotiation even for household brands. Plus, Wal-Mart often requires its suppliers to underwrite the costs of the retailer’s supply-chain productivity initiatives, such as using radio-frequency identification (RFID) tags on their products for inventory tracking, a system that can cost between $13 million and $23 million to put in place. Trying to meet Wal-Mart’s requirements has pushed many small- and medium-sized businesses into bankruptcy. Businesses that stay afloat have gen-erally done so by outsourcing to China (in areas such as shoes, house wares, and apparel, 80 to 90 percent of Wal-Mart’s inventory comes from China).

But there are also benefits to selling to Wal-Mart. You have instant access to the world’s largest global retailing network. Doing things the “Wal-Mart way” inevitably leads to more efficient operations. And the volume! You could sell exponentially more kickstands through Wal-Mart than through the small specialty retailers to whom you currently sell. If doing business with Wal-Mart is so bad, why do Unilever, P&G, and Dial sell 6, 17, and 28 percent of their goods, respec-tively, to the giant retailer? A former president of Huffy Bicycle once said that Wal-Mart gives you “a chance to compete. If you can’t compete, that’s your prob-lem.” You agree, to a point. Before you can voice any of the pros and cons, another manager expertly sums up the dilemma by saying, “The only thing worse than selling to Wal-Mart is not selling to Wal-Mart.”

Before you begin this Management Team Decision, each team member will probably need to do some preliminary research on Wal-Mart’s business practices; go to the campus library to find articles on topics such as productivity, inventory management, and even Wal-Mart’s business practices. A visit to the Wal-Mart stores website (http://www.walmartstores.com) can give you a wealth of information on how the company manages its suppliers. You may also wish to visit the PBS show Frontline’s web page “Is Wal-Mart Good for America?” http://www.pbs.org/wgbh/pages/frontline/shows/walmart/secrets.

Sources: C. Fishman, “The Wal-Mart You Don’t Know,” Fast Company, December 2003, 68–80; M. Boyle, “Wal-Mart Keeps the Change,” Fortune, 10 November 2003, 46; C. Y. Chen, “Wal-Mart Drives a New Tech Boom,” Fortune, May 2004; “Is Wal-Mart Good for America?,” Frontline, http://www.pbs.org/wgbh/pages/frontline/shows/walmart.

Chapter 5—Selling to Wal-Mart




Questions

1. As a team, use this exercise to practice one of the group decision-making techniques discussed in the chapter. Work together to decide which technique to use.

2. Do you apply to become a Wal-Mart supplier, with all that entails? Why or why not?

3. If you become a Wal-Mart supplier, what key areas of your operations will need to change and how?

4. Think about how the decision-making technique you chose affected the outcome of your decision. Do you think your collective decision would have been different if you had used, say, dialectical inquiry instead of the stepladder technique?




When you first started in the business of inventing video-game systems, it was fresh and exhilarating. Nintendo had revolutionized the home video-game industry by making arcade-quality graphics available on home game consoles. By the mid 1990s, the com-pany’s Super Nintendo Entertainment System was a market leader, selling 49 million units, and your Sega Genesis system was no slacker, selling 30 million units globally. Today, however, video games and con-soles have little in common with Nintendo’s ground-breaking Mario Brothers and Donkey Kong games, let alone Atari’s Pong.

The video-game industry is a $17 billion industry and consoles sell hundreds of millions of units. Sony’s first PlayStation sold 102.5 million units worldwide, and its PlayStation 2, which was so powerful the Japanese government feared it could be used to make advanced weaponry, has sold 111.3 million units since its launch. Microsoft’s first-generation Xbox sold roughly 25 million units and used chip technol-ogy that made it more powerful than Sony’s market leader. Then Microsoft upped the ante with the Xbox 360, whose new-generation microchip transmits data 3.5 times faster than the original Xbox. Then Sony trumped Microsoft by making its PlayStation 3 even more powerful; it contains a chip able to perform 218 billion calculations per second—speed on par with a supercomputer!

All this one-upmanship comes at a heavy price that pushes smaller players out of the market. For example, Sony spent $1.8 billion just to develop the microchip that powers its PlayStation 3 console, which retails for approximately $500. Even at that price, though, Sony is selling the PlayStation hardware at a loss and counting on making up the money on the sale of related video games, which it expects will take three years! The same is true of Microsoft, whose Xbox console retails for nearly $300 but hadn’t earned Microsoft a single penny after six years on the market.

You wonder if all these big investments make sense. After all, despite the general increase in the number of consoles sold, the same folks tend to buy the consoles year after year. Game playing in Japan is

declining about 10 percent per year, and in the United States game consoles have been in the same percent-age of households (36 percent, to be exact) for years. That means competitors are all vying for the same cus-tomers, those 18 to 34-year-old men who get a rush from the screamingly fast action of complex games. That is, until Nintendo came out with Wii, a simple console designed to play simple games and priced at a relatively reasonable $250. Wii was designed to attract new customers to video-gaming, like women and older consumers. As for handheld video games, Nintendo’s DS is simpler than the Sony equivalent PSP3 and has sold more units. The cost to develop a game for DS is one tenth the cost to develop games for other plat-forms, which means Nintendo recoups its investments more quickly.

In the end, the industry is still exhilarating—not so much from the excitement of creating something new, but in a swimming-with-sharks kind of way. Sega hasn’t been a serious force in the industry for over 20 years. If you’re going to get back into the game, so to speak, how should you do it?

Assemble a team of four or five students to play the management team at Sega trying to reestablish itself in the gamer market.

Sources: Y. I. Kane & N. Wingfield, “Out of the Box: Amid Videogame Arms Race, Nintendo Slows Things Down,” Wall Street Journal, 2 November 2006, A1; J. Alabaster, “Nintendo’s 9-Month Net Beats Full-Year Target,” Wall Street Journal, 26 January 2007, B4; Y. Kim, “In War of Game Consoles, Chip Makers Are Winners,” Wall Street Journal, 1 March 2007, online; R. Guth, “IPod Envy: Microsoft’s Xbox Whiz Drives Strategic Shift,” Wall Street Journal, 5 January 2007, A1.

Questions

1. Using Porter’s Five Industry Forces, map the video-game industry.

2. What are the risks and opportunities of the strategies followed by Sony and Xbox? Of Nintendo?

3. Do you try to reestablish Sega by participating in the attack-and-respond dynamic of escalating technology, or do you try to follow Nintendo’s go-simple path out of the video arms race? Explain.

Chapter 6—Playing the Game




Ever since Procter & Gamble merged with Gillette, your phone has been ringing off the hook from invest-ment bankers wanting your company, Colgate, to make a deal with Alberto-Culver, S.C. Johnson, Reckitt Benckiser, or Clorox, and today is no exception. Your management team has assembled to listen to yet another set of bankers outline some grandiose propos-al. You’ve got another plan for Colgate, however, and it doesn’t involve a big acquisition. Quite the opposite, in fact. For the first time in nearly a decade, Colgate’s earnings shrank last quarter (by 10 percent), and you are planning to cut 4,400 jobs, restructure the com-pany, and save $300 million in the process.

Colgate’s problems are no secret. In a decades-long tug-of-war, P&G has regained the edge thanks to its innovation machine. In the last five years, P&G has aggressively expanded in the oral care markets where it competes most heavily with Colgate. New flavors of Crest whitening toothpastes, Crest Whitestrips, SpinBrush, and a licensing arrangement with W.L. Gore for Glide floss have all helped Crest reemerge as the leader in the markets it serves. Colgate’s most recent innovations—Colgate Total, Motion and Actibrush electric toothbrushes, and Simply White tooth whitener—are now either fading memories or also-rans. And even though Colgate has a strong reputation as a reliable brand, it has been slow to develop new products for developing and existing mar-kets. Perhaps it’s just gun-shy. The company’s most aggressive innovation was the tooth-whitening sys-tem Simply White. Regardless of the product’s qual-ity, the bottle and applicator looked like Liquid Paper and proved no match for P&G’s Crest Whitestrips. After that near debacle, Colgate managers apparently decided that going for big hits wasn’t a workable strat-egy. The company now seems to be playing catch-up to P&G and GlaxoSmithKline, a new competitor in the oral care market. In fact, in a recent year, P&G spent $229 million on its toothpaste and tooth-whitening products; Colgate spent only $80 million.

Innovation isn’t the only area in which Colgate has failed to invest. The company’s annual ad budget of $1 billion pales in comparison with the $5 billion P&G spends each year to promote its consumer products. Heavy spending has helped P&G capture 51 percent of unit sales and 70 percent of dollar sales in the

tooth-whitening segment. Colgate weighs in with 21 percent and 10 percent, respectively. P&G’s innovative approach to advertising has helped catapult its prod-ucts to the forefront of consumers’ minds. For exam-ple, advertising and sales for Whitestrips began on the web, where the demand was overwhelming. Once the product was rolled out on the market, the day after Colgate’s Simply White, P&G had a blockbuster. Simply White hit the shelves and stayed there.

After hanging up from yet another conference call with investment bankers urging your management team to consider a merger, you lean back in your chair and look around the table. “I think we all know what we’re not going to do,” you begin cautiously. “The real question is what we are going to do. Now that we have announced measures to conserve resources, we need to decide how to invest what we save.”

For this exercise, assemble a team of four or five students to play the role of the management team at Colgate.

Sources: “Can Colgate Brush Off the Competition?” Marketing Week, 27 January 2005, 23; Seth Mendelson, “The War of the Roses: Colgate and Crest Have Fought for Decades for Supremacy in the Toothpaste Category. Suddenly, One Has Gained an Edge and the Other Is Challenged to Change Its Strategy,” Grocery Headquarters, January 2005, 64; David Kiley, “Reuben Mark: Profit and Floss,” BusinessWeek, 20 December 2004, 46; Pallavi Gogoi, “Colgate’s Big Bid to Freshen Up Profits,” BusinessWeek Online, 8 December 2004; “Colgate: Brushing Mergers Aside,” BusinessWeek Online, 4 February 2005; Eric Dash, “Colgate to Cut Jobs and Use Savings to Spur Sales,” New York Times, 8 December 2004, C1; “Squeezed: Colgate-Palmolive Shuts Factories to Save $300 Million,” Sunday Business (London), 12 December 2004.

Questions

1. Is innovation really necessary at Colgate? In other words, in a market saturated with innovation, is there something to be said for the “keep it simple” approach? Explain.

2. Do you use the $300 million saved from operational cuts to fund innovation, or do you use the money to better market current products?

3. Where do you suggest Colgate look for sources of innovation?

4. As Colgate begins implementing a new innovation strategy, do you recommend that the company follow a compression approach to innovation or an experiential approach? Why?

Chapter 7—Brushing Up at Colgate




As a member of the regional sales management team for a multinational corporation with offices located on almost every continent, you’ve made some tough decisions throughout your career. Unfortunately, you feel that today’s decision might possibly be the team’s hardest yet. Sales in Asia have been dropping lately, and the team has been charged with choosing one of its salespersons to take over as the new regional man-ager for that area.

Two salespeople immediately come to mind. Laura, one of the potential candidates, has been a sales rep-resentative for the North American region for seven years. She has a master’s degree in business admin-istration and was a foreign exchange student in Hong Kong for two years during college. She is extremely competent, knowledgeable, and confident and has consistently been a top performer at the company since she was hired. Adam, the other possible can-didate, has been with the North American region for only four years, but before that he served three and a half years as a sales representative for the European region of a well-known competitor. He too is qualified, with a master’s degree in business and considerable experience in international assignments, but his perfor-mance has not been quite as stellar as Laura’s. Neither candidate speaks any Asian languages.

Lingering in the back of your mind is a conversa-tion you had with a colleague a few days ago. You and John, a fellow team member, were discussing interna-tional assignments, and the subject of sending women abroad came up. John said that in his experience, women do not make good expatriate candidates for several reasons. First, they are not as willing as men to take assignments in foreign countries because of

family obligations and other personal reasons. Second, women are typically not as successful as men in for-eign assignments because certain cultures tend to view women as inferior to men. (Including some Asian cultures, you think to yourself.) Last, John said that women are more likely to be subjected to discrimina-tion or sexual harassment than men are. Although you initially agreed with John’s perception, you later con-clude that times have changed: after all, the world is much smaller and more culturally diverse today than it was when you went on your first international assign-ment.

You can’t stop thinking about John’s comments, though. You enter the meeting room weighing the pros and cons of each candidate and wondering if Laura would be accepted by her Asian counterparts.

To work this Management Team Decision, you will need to assemble a team of four to six students to represent the sales management team in the scenario.

Sources: L. Stroh, “Why Are Women Left at Home? Are They Unwilling to Go on International Assignments?” Journal of World Business, Fall 2000.

Questions

1. Use either the stepladder technique or the nominal group technique (see Chapter 5) to decide which candidate the company should send abroad. Defend your decision.

2. Did the decision-making process change your mind? How so?

3. Determine what, if anything, the company should do to prepare the chosen candidate for the Asian assignment.

Chapter 8—Men or Women, Who Goes Abroad?




By definition, toys should be fun. Unfortunately for you, competing in today’s toy industry is anything but. Cutthroat competition and children’s changing inter-ests have pushed toymakers to consolidate, cut costs, and grow through licensing agreements with media giants such as Disney and Nickelodeon, something many toymakers consider to be selling out.

No one needs to explain the crushing pressure to you. You’re the new CEO of Lego, the first outsider in the company’s history to run the family-owned business—because you were hired to save the com-pany from sure decline. Last year, Lego had over $1 billion in sales. Its proprietary manufacturing operation pumps out 15 billion components a year— that’s 1.7 million bricks, Lego people, and other elements per hour. By the numbers, Lego is the world’s leading tire maker, producing 306 million tiny rubber tires a year for its sets. Lego’s iconic bricks are so versatile that with a pack of only six bricks, a child can create 915,103,765 unique configurations. It’s no wonder that Lego beat out Barbie and the teddy bear to be named Toy of the Century by Fortune magazine and by the British Toy Retailers Association.

Despite the volume of product being produced, the perennial accolades, and a reputation for nurturing creativity in children, Lego is losing money at an alarm-ing rate. On last year’s $1 billion in sales, the company lost a whopping $240 million. It also carries about $750 million in debt. That means you begin your stint as CEO squarely behind the eight ball. First on your list of things to do: change the company mission from “nurturing the child” to “I’m here to make money for the company.”

Part of what’s weighing Lego down is the fact that the company does it all. Lego uses its own design-ers to develop new products; other companies use a combination of in-house talent and innovation labs to come up with new product ideas. Lego manufactures its bricks (and other products) on extruding machines it developed itself at company-owned factories in Denmark and Switzerland, where labor costs are stratospheric; 70 percent of the world’s toys are man-ufactured in China by contract manufacturers hired just to produce the toys and with labor that costs pennies on the kroner. Lego distributes all of its own products; other companies use third-party logistics companies such as DHL and UPS to manage distribution. Lego even books $5.2 million in travel per year through an

in-house travel agency that uses proprietary software; most companies use dedicated travel services, such as American Express Travel.

To bring Lego back into the black, you’ve got to cut costs, and the fastest way to cut costs is outsourcing. The biggest savings would come from outsourcing your production, but that also carries the biggest risks. Controlling your manufacturing would be difficult. You’d have to share your machinery technology—what if a contractor started using your technology and specifications to make black-market Legos, something not at all inconceivable if you outsourced to China? And there’s the fact that Legos are part of the fab-ric of Billund, the Danish town of 6,500 where the bricks were invented and where Lego’s headquarters employs most of the company’s 8,000 workers. Most of the people in Billund work for Lego. Still, savings from outsourcing manufacturing alone would bring the company to nearly break-even levels.

Controlling distribution helps you manage inven-tories and track sales trends, but should Lego really operate its own distribution network? So many compa-nies specialize in this area that it’s hard to equal their capabilities. Even something that is as seemingly easy to outsource as travel is not so easy. In-house travel agents know the ins and outs of Lego’s travel policy; an outside provider is not always able to recognize a breach in the policy. Lego managers book 10,000 air tickets a year, and the head of the travel department says her team saves the company $325,000 in admin-istrative costs alone over working with an outside company.

One thing is certain: You’re not going to be able to make a decision on what to outsource (if anything) without consulting your management team. Form a team of four or five students to act as the manage-ment team for Lego. You may want to refer to Exhibit 9.13 as you work through the following questions.

Sources: A. Cohen, “Lego Builds Self-Booking Tool,” Business Travel News, 19 June 2006, 10; Q. Hardy, “Son of Lego,” Forbes, 4 September 2006, 108; M. Defosse, “Toy Industry’s Essential Block: Outsourcing. Few Markets Have Been More Speedily Outsourced to Low-Wage Lands than the Ones for Toys and Sporting Goods. Lego’s Recent Announcement Is a Prime Example,” Modern Plastics Worldwide, August 2006, 20–22; “Outsourcing Move by Lego,” New York Times, 21 June 2006, C11; “What’s NXT? Lego Embraces Third-Party Development,” PR Newswire, 15 September 2006; J. Pisani, “The Making of a Lego. The Bricks Are so Versatile That Just Six of Them Can Be Arranged in 915,103,765 Ways. No Wonder Lego Has Been Named ‘Toy of the Century’—Twice,” BusinessWeek Online, 29 November 2006; “Picking Up the Pieces: Lego’s Turnaround,” Economist, 28 October 2006, 76; “LEGO Group Outsources Logistics to DHL,” M2Presswire, 27 October 2005; N. Schwartz, “One Brick at a Time,” Fortune, 8 June 2006, 45

Chapter 9—Letting Go at Lego




Questions

1. What risks, if any, does outsourcing pose to Lego’s corporate identity?

2. What do you think Lego’s core and noncore business activities should be?

3. Do you outsource production, which will by itself achieve your cost-cutting goal, or do you outsource a smattering of other functions and keep Lego a “toymaker” rather than a “toy marketer”?




Evenings at home are the only time you can look over your management team’s monthly reports without interruptions. Tonight, you’re quietly sipping coffee (decaf, naturally) as you review the reports in the comfort of your favorite chair. You are suddenly jarred, however, by a single line deep in one report, that might have gone unnoticed if you hadn’t carved out this time away from the office. In discussing the pros-pects for a new opportunity, one of your managers wrote, “Pressures in the current quarter have forced us to cut costs by discontinuing efforts in this promis-ing new area.” Unbelievable! As you continue reading, you can’t get this line out of your head. Why is the company abandoning “promising” avenues of growth and revenue because of external pressures? You finish reading the reports and resolve to discuss the issue with all of your managers—not just the one who wrote the report.

The next morning, you ask your senior vice presi-dent to investigate, and in short order, he discovers a pattern of nonconversion. In other words, even though your company, IBM, obtains thousands of patents each year, management seems to have tremendous difficulties turning its basic research into functioning businesses. The reason apparently stems from the company’s focus on existing markets and short-term results. Rather than focusing on turning new ideas into new products and services, IBM’s most talented and experienced executives are being rewarded based on how much revenue their divisions generate and the number of employees reporting to them. Not surpris-ingly, they’re more concerned with growing existing products and services than they are with developing new products and services for the future. As a result, IBM has left many innovations on the table for outsid-ers to scoop up. For example, IBM invented the rela-tional database and the router, but it was Oracle and Cisco that built huge companies around them.

You call your management team together and pose this problem: “How are we going to transform the work of our research scientists into new businesses? We need to figure out how to recognize and nurture these emerging business opportunities. IBM has hun-dreds of thousands of employees and billions of dol-lars in revenue. Surely, we have enough resources to commercialize our great ideas!”

In response, your VP for strategy says, “I wonder if we could do it with teams.”

For this Management Team Decision, assemble five or six students to act as the management team at IBM.

Source: Alan Deutschman, “Building a Better Skunk Works,” Fast Company, March 2005, 69–73.

Questions

1. Are teams a good idea for IBM’s emerging business opportunities (EBOs) given the company’s culture and well-defined organization? Why or why not?

2. If you do use teams, what kind of team would be best in the situation described? In other words, how much autonomy should teams working on EBOs have?

3. Who would you choose to lead the EBO teams experienced executives who are successfully managing established divisions or less experienced managers who want to prove themselves? Explain your rationale. (You may want to review Chapter 1, Section 3, “Kinds of Managers.”)

4. What will your management team need to do to help EBO teams be successful? Remember, the whole point of looking into EBOs is to increase IBM’s revenue and reach.

Chapter 10—Taking a Chance on Teams at IBM




When your systems engineer left to have a baby, you had no idea how hard it would be to replace her. You’d heard the labor market for engineers was tight, but you thought it wouldn’t be too tough to find a new hire for a company as well known as Raytheon. That was six months ago.

Today, your team is sitting down again with another crop of 200 resumes to compare against the job specifications: Ph.D. in science or computer engi-neering; experience in manufacturing; knowledge of the manufacturing software you use and with Pro/Engineer Wildfire, a computer-aided design (CAD) software package; able to get top-secret government security clearance; willingness to relocate to Waltham, Massachusetts, where Raytheon is headquartered; and more technical competency requirements. Really, when you look over the list, you don’t think the requirements are that stringent, particularly when you consider that Raytheon designs and manufactures air-craft, missile systems, and intelligence and information systems for the U.S. Department of Defense.

And your pool of applicants is nowhere near that of some other companies. Microsoft receives 60,000 resumes a month, but it has only 2,000 openings for software-development jobs. Of the 100,000 resumes it received from graduating students last year, it screened only 15,000, interviewed 3,500, and hired 1,000. Come to think of it, though, your chances of getting hired at Microsoft are better than your chances of filling your systems engineer opening.

As you sit down with your team and begin to sift through the 200 resumes, you see right away that 100 don’t have a Ph.D. Of the remaining 100 candidates, 40 wouldn’t be able to get security clearance, 23 are overqualified, and 18 don’t have manufacturing experi-

ence, and 10 only have experience on 2001i, an earlier version CAD software. So out of your 200 applicants, only 9 are left, and you haven’t even broached the question about relocating.

You’ve gone through seven similar piles of resumes in the past six months. The whole point of specifying the exact qualifications you want in an applicant was to save time getting the person up and running at the company. Maybe you’d have been better off loosen-ing up the requirements and developing appropriate training programs. What if none of the applicants left standing after this round wants to relocate? Then you’ll be starting with another pile next month—or sooner.

Form a team of four or five students to play the role of the hiring team at Raytheon and work through the following questions to come to a decision.

Source: S. Begley, “Behind ‘Shortage’ of Engineers, Employers Grow More Choosy,” Wall Street Journal, 16 November 2005, A1, A12.

Questions

1. What are the risks to keeping the job requirements tightly structured?

2. What are the risks to loosening up the job specifications?

3. How would loosening up the job specifications affect your training needs?

4. Do you hire an applicant who meets a good number of the job requirements and is generally compatible with the corporate culture; or do you wait for the perfect candidate, even if that means another six months of interviewing?

Chapter 11—Hire or Holdout?




Two weeks ago, you were pleased to receive a fat envelope from the U.S. government awarding your aeronautics company several hefty contracts with the Department of Defense. As a result of the contracts, you’ll have to increase production, so you immedi-ately placed ads in the local paper for four skilled mechanics.

Resumes have been flooding in, and to your sur-prise, the prospective applicants fall into one of two groups. In addition to the usual crop of inexperienced youngsters eager to start their careers, you have an equally large pool of retired mechanics, many of them older than 65. They’ve spent their entire lives building planes and now want to work only 15 to 20 hours a week.

Flipping through the second pile, you realize that you face a difficult decision. Younger hires would require more training and supervision, but they could eventually become productive full-timers with the potential to stay at the company for most (if not all) of their careers. On the other hand, older veterans would be able to jump in feet first, but they would work fewer hours and probably have much shorter careers with the company. Whereas the veterans will expect pay commensurate with their experience, the newbies will accept much lower starting salaries

Between 2000 and 2010, the number of Americans between the ages of 55 and 64 will jump 47 percent, compared with a scant 2.8 percent increase in the number of those aged 25 to 34. The group that makes up the bulk of most companies’ management talent, those aged 35 to 45, will actually shrink by 13.7 per-cent! With the graying of the work force, this may be the first time you have to decide whether to hire older or younger workers, but it certainly won’t be the last.

For this exercise, assemble a team of three or four students to represent the senior management team at the aeronautics firm in the scenario. Try using the dialectical inquiry technique discussed in Chapter 5 (Planning and Decision Making).

Source: Donna Fenn, “Respect Your Elders,” Inc., September 2003, 29; Bureau of Labor Statistics, http://www.bls.gov.

Questions

1. Do you hire older workers or younger workers? Explain your choice.

2. What challenges can you foresee in managing a multigenerational work force?

Chapter 12—Is Older Necessarily Wiser?




Labor is probably the single largest expense of any business. According to some estimates, labor costs average about 60 percent of sales. In addition to sala-ries, labor costs include health insurance, paid time off, child-care benefits, tuition reimbursements, and any number of other programs designed to extrinsi-cally motivate the work force. Many companies offer the same types of benefits across their organizations without knowing whether the benefits really motivate employees at all. In other words, companies often don’t know what return they are getting on their labor investment. The same is true where you work.

As you head back to your desk from a meeting on cafeteria-style benefit plans, your boss intercepts you and says she wants to talk with you about cutting labor costs. As she plops into your side chair, she is already describing a new type of software that applies data-mining technology to employee information to determine what is the best motivator. “We can get rid of one-size-fits-all benefit programs and tailor the ben-efits to each employee. This software lets you slice and dice employee data, such as age, seniority, edu-cation, commute time, residential ZIP code, even the age and condition of the person’s office,” she says. “We could find out if we could pay someone, say, 20 percent less if we gave a three-month sabbatical every couple of years. Or we could predict the reaction of certain employees if we cut our 401(k) match. Maybe that’s not as important to everyone as we think. We could find out who would quit if we did that and who couldn’t care less. Basically, we could find out what

incentives would spike productivity the most with each employee, and that way we could cut costs without sabotaging morale. It would reduce the guesswork of rewarding our employees. Here is some literature on the various programs. I’d like your team to draft a recommendation to top management by next Monday. I’m really excited about this.” She leaves a small stack of brochures on your desk corner and leaves your office.

All you can do is wonder, “What will the employees think of this idea?”

Assemble a team of three or four students to review the issue of mining human resource data for information to help you customize incentives.

Sources: M. Conlin, “Compensation Is Getting Personal: Companies Are Mining Employee Data to Identify the Perks That Spur Productivity,” BusinessWeek Online, 6 December 2002, available at http://businessweek.com/.

Questions

1. Which motivational theory provides the biggest justification for employee data mining? Explain.

2. Does employee data mining violate any of the motivational theories? If so, which ones and how?

3. Will your team recommend mining employee data or, despite your boss’s enthusiasm, will you present reasons not to begin mining employee data? Explain your choice, using the motivational theories in the chapter as support for your recommendation.

Chapter 13—Mining Human Capital




With 500 full-time employees, roughly 500,000 unpaid volunteers, 2,303 affiliates worldwide, and upward of $160 million in annual donations, Habitat for Humanity International (HFHI) is the 19th largest nonprofit orga-nization in the United States. Since it was founded in 1976 by Millard and Linda Fuller, HFHI has built some 175,000 houses around the world, more than 20,000 of them in a single year. Clearly, what started as a straightforward, ecumenical Christian ministry has grown into a global force for housing the poor and one of the world’s most renowned nonprofit organizations. And that success is due in large part to the efforts of Millard Fuller, an avid fund-raiser, prolific author (he has written nine books), sought-after public speaker, and an all-around passionate spokesperson for the cause.

When Fuller’s tenure as president was set to end after 28 years at the helm of HFHI, he and the board of directors had serious disagreements about the tran-sition of leadership. Fuller feared that the board was moving toward a culture of “bean-counting” and away from a strong Christian commitment. He charged that many board members were not spiritually grounded. The board defended its Christian focus, but recognized that the organization’s mission had become much larger than the influence of a single individual.

After 11 months of wrangling, Fuller, who was approaching 70 years of age, agreed to step down as CEO and hire an interim CEO. Fuller took a new posi-tion with the title Founder/President and became the chief spokesperson for Habitat. Taking the CEO posi-tion was Paul Leonard, who couldn’t have been more different from his predecessor. Leonard, a retired real estate and construction industry executive, had expertise in organizational development and a deep knowledge of the construction industry. He accepted the position and with it responsibility for the overall management of HFHI for a period of two years.

Only three months after naming Leonard as CEO, however, the HFHI board of directors fired Fuller altogether for a pattern of “divisive and disruptive” public comments and went so far as to lock him out of the HFHI building. In the face of soaring land costs and growing housing regulations, Leonard will have

to contend with a changing external environment that requires more careful planning. At the same time, HFHI’s five-year plan calls for the organization to seek exponential annual growth, rather than the 5 to 10 per-cent annual growth it has been experiencing in recent years.

As a member of the board, you face significant challenges as well. Even though Leonard was a solid choice for interim CEO, the board is conducting an executive search to fill the permanent position. Should the permanent CEO be more like Fuller, a passionate and charismatic evangelist not afraid of setting tremen-dous stretch goals (like eradicating substandard hous-ing in 20 years), or like Leonard, a methodical execu-tive who can manage and grow Habitat’s sprawling, decentralized organization? Or should the permanent CEO fit an altogether different profile?

Assemble a team of four or five students to act as the board of directors of HFHI. As a group, discuss each of the following questions to identify the chief characteristics the new CEO of HFHI will need to pos-sess.

Sources: J. Jewell, “New Times, New Leaders: Firing of Millard Fuller the Result of Longstanding Tensions,” Christianity Today, April 2005, 24; L. D. Maloney, “No House of Cards: Leadership Changes Stirred a Cauldron of Emotions at Habitat for Humanity, but the Foundation of the World’s Premier ‘Sweat Equity’ Housing Group Remains Strong,” Builder, April 2005, 120; J. F. Krentz, “Davidson Man to Lead Habitat for Humanity,” Charlotte Observer, 5 February 2005; “New CEO Takes Helm at Habitat for Humanity International; Millard Fuller to Continue as Founder President of House-Building Ministry,” PR Newswire, 11 October 2004, http://www.prnewswire.com; J. Pierce, “Habitat Founder and Board Disagree on His Retirement Date,” Christian Century, 5 October 2004, 15.

Questions

1. Does HFHI need a leader or a seasoned manager? In other words, do you look to fill the CEO position with a visionary leader (like Fuller) or a seasoned manager (like Leonard) whose strengths lie more in organizational development than charismatic passion?

2. The new CEO will need to work with both the employees of HFHI and its hundreds of thousands of volunteers and donors. What leadership style will you look for in prospective candidates to meet the needs of those two constituencies?

Chapter 14—Transition at Habitat for Humanity




As you watch the falling snow, you can’t help think-ing about the way the fax machine coughs out legal missives into a collection bin. You are a partner at Shaw Walker Theobald, a law firm with offices across the United States, and your office sits right next to the constantly humming fax machine. You’re at your wit’s end from the incessant buzzing. Documents of all lengths and levels of importance come through the fax; sometimes, a lawyer on one floor will write a question on a cover letter, send it by fax to a lawyer on another floor at your firm, and then request the answer by fax! While you pack your briefcase before heading home, you think, “What a drain on productiv-ity! And the client ends up footing the bill. There has to be a more efficient way to communicate.”

After you finish dinner, you open your work, and are again distracted—not by a fax, but by the pinging of your teenager’s instant messaging on the com-puter in the den. Immediately, you think you’ve hit on a solution for the office. If the firm used instant messaging, you could save the energy used by the fax, eliminate all the paper, and have answers in an instant. Communication would reach terminal speed! Unfortunately, you can’t just implement your idea when you walk in tomorrow morning. You’re only one of many partners, and they all have to approve any-thing that affects the management of the firm. How are you going to persuade a team of people trained to object? Instead of pulling a brief out of your bag, you flip to a clean sheet on your legal pad and begin draft-ing a convincing memo.

Getting StartedThis exercise will give you practice in writing memos and giving verbal feedback. You will begin by writing a memo on your own based on the scenario you just read. Then assemble a team of five or six students. Make enough copies of your memo so that each team member can have one. The job of the team is to review and critique all the memos. You will want to review Section 3.3 on giving feedback before con-vening the team to evaluate the memos. Choose one team member to be the moderator. The moderator will be in charge of keeping the discussion on track and ensuring that it doesn’t disintegrate into subjective attacks.

Activities

1. Write a memo to your colleagues proposing the use of instant messaging to speed communication.

2. Convene the team and critique the members? memos. Try to use descriptive terms to give feedback about the memos. Avoid words such as “good” and “bad”—they don’t give the writer any real information about the effectiveness of the memo. Here are some adjectives that you might find useful as a starting point:

1. Convincing 2. Persuasive 3. Condescending 4. Concise 5. Wordy 6. Informative 7. Detailed 8. Sparse 9. Neat 10. Hard to follow 11. Clear 12. Sloppy 13. Off-putting 14. Effective 15. Inappropriate 16. Unprofessional

Don’t limit your comment to a negative adjective, either. If you say a memo is hard to follow, explain why. What makes it hard to follow? If you say a memo is wordy, explain how it is wordy. And be specific: point out which phrases are redundant, unnecessary, or repetitive.

3. Assume that your individual proposal was accepted, and the partners (your team) have asked you to announce the new capabilities and outline the rules for their use. Determine the best way to communicate the instant messaging plan to the junior partners, associates, paralegals, and office staff. Using whatever medium you think is best, write out your communication. For example, if you think e-mail is best, draft

Chapter 15—Communication Dilemmas and Decisions




a relevant e-mail. If you think a memo would be appropriate, then draft one. If you think oral communication would be a better choice, draft the speech you will give. Regardless of your medium, you will need to remember your audience.

4. If you have time, repeat the group critique session with the second communication. You may also wish to discuss as a team which medium would be the best for telling everyone at the firm about the new instant messaging initiative.




When you first came to H & R Block four years ago, you had a vision: increase the scope of the company and transform it from a simple tax preparation service to a full-service financial services provider. And why not? Block has roughly 17 million customers, and converting only a fraction of them to financial services clients would mean substantial growth for the 60-year-old company. Couple that with the company’s recent expansion into mortgage financing, and Block could become a financial services powerhouse.

Eagerly you set about mapping the company’s growth. You bought Olde Financial, a discount-brokerage business, and quickly found yourself with around $50 billion in assets under management. You hired financial advisers, and then to get them more clients, you instructed tax preparers to refer new financial prospects to them. Another way you planned to fuel growth was by aggressively opening new tax preparation outlets. Today, Block has more U.S. store-fronts (over 11,000) than Barnes & Noble (2,356), Gap (3,051), and even growth-happy Starbucks (6,409)! Over 1,000 outlets were added just this year to expand coverage during tax-filing season.

Despite all the good ideas, H & R Block is not producing the results you expected. In fact, it is strug-gling. Assets under management in the financial ser-vices division have declined by more than 30 percent (around $28 billion) since the division was acquired, and its advisers are leaving faster than they can be replaced. Outwardly, you say that the economic upswing is creating more demand for junior advisers, the largest percentage of your financial managers, but you also know that even new advisers are going to fol-low the money. And the money seems to be flowing out of Block. Mortgage refinancing, which at its peak contributed an incredible 70 percent of pretax income, now contributes only 28 percent per year, or $112 mil-lion. Mortgage activity has dropped since the Federal Reserve began increasing interest rates, and competi-tive pricing among lenders has not subsided as you expected it would.

On the tax front, the company faces serious com-petition from smaller upstarts like Jackson Hewitt and Liberty Tax Service, which are both experiencing

increases in the number of returns prepared at Block’s expense. This tax season Jackson Hewitt handled nearly 6 percent more returns than last year. Compare that with Block, which has lost over one million cus-tomers in the past three years. Aggressive cost cut-ting is minimizing damage to the bottom line, but it is also having some adverse effects, including waits as long as two to three hours for some customers. Digitally, Block is being surpassed by Intuit’s TurboTax software. Even though Intuit’s TurboTax costs 50 per-cent more than Block’s competing TaxCut software, Intuit has three times the market share of TaxCut, and is growing by double digits each tax season. All this trouble has caused Block’s revenues to slide over 5 percent from last year.

As you hang up the phone from yet another apolo-getic conference call with Wall Street analysts, during which you revised your expectations for earnings per share sharply downward, you sigh and sink back into your chair. You are getting tired of announcing quar-terly losses. Plans should be flexible enough to change if expected results don’t materialize, but you really believe in the growth strategy. One analyst even said, “It seems like a smart strategy, and they seem to have the right infrastructure, but for some reason it’s just not happening.” You think to yourself, “There’s got to be a way to get things back on track!”

Form a team of four students to answer the follow-ing questions.

Sources: G. Meyer, “H & R Block Sees Jump in Revenue,” Kansas City Star, 18 March 2005; F. P. Gabriel, Jr., “Block Still Falling Short in Investment Services—Despite Aggressive Campaign, It Can’t Retain Advisers,” Investment News, 6 December 2004, 1; D. Stires, “Taxing Times at H & R Block,” Fortune, 21 March 2005, 181–184; G. Meyer, “H & R Block to Add 1,000 Outlets to Bolster 2005 Tax Office Traffic,” Kansas City Star, 19 September 2004.1

Questions

1. As a team, identify where more control is needed at H & R Block. Is control in these areas possible? Explain.

2. Build a balanced scorecard for H & R Block that proposes objectives and measures for each the four quadrants of the card (financial, customer, internal, and learning).

Chapter 16—Is H & R Block Taxed to Its Limits?




The whistle blows signaling the end of the work day, and you automatically cringe. These days, that whistle seems like a warning bell for the mass exodus of employees you’ll soon experience. You’re a top manager at a nuclear power generator that employs thousands of engineers—for now, anyway. Very soon, though, you’ll start loosing baby boomer workers to retirement. And you’re not the only one. Within one decade, 43 percent of the workforce will be eligible to retire. United States businesses expect a 10 million worker shortage by 2010.

As you wait the arrival of your management team, you start to review the topic of your after-hours meet-ing. Your company will be hit hard by a double loss. Not only will you lose people (hard to replace), you’ll lose their know-how (nearly impossible to replace). Skilled engineers have spent years acquiring the “tricks-of-the-trade” and developing strategies for dealing with specific problems, so when they retire, a huge knowledge base will walk with them out the door.

A recent survey found that 63 percent of companies worry that the retirement of talented workers will cre-ate a “brain drain.” Like many companies, yours has put off dealing with its aging workforce. Even though there’s a plan for retaining some of your older workers on a part time basis, it’s only a temporary measure. What you really need is a way to transmit knowledge from one group of employees to another—and to iden-tify who has the knowledge you need to transmit.

Many companies in similar situations have devel-oped knowledge management projects. Bruce Power—another nuclear power generator—uses a knowledge management system called Kana IQ that helps engineers document their solutions to certain problems so that future workers can search previ-ous employees’ notes using decision trees and other algorithms. Technology isn’t the only way to stem the knowledge hemorrhage, however. Some companies are implementing mentoring programs to educate their next generation of skilled employees. At Tennessee

Valley Authority power plants, younger engineers are assigned to shadow older engineers to facilitate the transfer of impossible-to-document skills.

So what will you do? Operating a nuclear power plant with less experienced workers is a dangerous proposition. Profitability and efficiency aren’t the only concerns: safety is also paramount. You can’t delay much longer or you’ll be in a crisis when the retire-ments start in large number. When you open your door to see what on earth is keeping your manage-ment team you see them standing on your threshold mid-knock. It’s time to get down to the hard business of creating a process for transmitting the wisdom of your older employees to your next generation of workers.

Sources: A. Fisher, “Retain Your Brains,” Fortune, 24 July 2006, 49; A. Y. K. Chua, “The Curse of Success,” Wall Street Journal, 28 April 2007, R8; S. Earley, “To Keep KM Current, Pay Attention to Context Changes,” Information Outlook, April 2006, 31; E. Schwartz, “Reality Check: Filling the Void Left by Baby-Boomer Techies,” InfoWorld, 6 March 2006, 22; “Putting It Off Until Tomorrow,” PR Newswire, 26 January 2006.

Questions

1. How can you find out which employees are about to retire? And how do you determine whose knowledge is most critical? Develop a strategy for identifying soon-to-retire workers and ranking the importance of their knowledge.

2. What are the pros and cons of developing a knowledge management database? What could you do to keep your engineers from becoming overly dependent on a database? What steps might you take to ensure that your knowledge management project stays inclusive and accessible?

3. What if you developed a mentoring program? What would be the pros and cons of that?

4. Will you invest in a knowledge management project or a mentoring program? Explain your decision

Chapter 17—Brain Drain




As you read in Chapter 5, crisis management plan-ning is an important component of business planning and corporate communication. Typically, when you hear “crisis management,” you think of a company responding to catastrophic publicity, but companies also need to think about managing smaller negative encounters because those encounters play a large role in customer retention. The retention rate for custom-ers whose complaints or problems are resolved satis-factorily is 70 percent; when complaints are resolved quickly as well—typically on the spot—the retention rate soars to 95 percent. But when complaints are not resolved to the customer’s satisfaction, customer retention falls to 46 percent. And research shows that for major purchases (defined as being over $100), cus-tomers whose complaints are unresolved stay with the company only 19 percent of the time. So, companies should have a plan for responding to customers? com-plaints and problems. Putting service recovery plans in place enables companies to respond quickly, the biggest factor in reversing the damage from negative customer experiences.

In the spa industry, customer service and satis-faction are paramount. Not only do customers have high expectations for spa and salon services such as massage, skin treatments, nail treatments, and hair coloring and cutting, but spa service tabs can quickly surpass that $100 threshold defining major purchases. And what would upset a customer more than a hor-rendous haircut, botched fingernails, or looking in the mirror to see half an eyebrow?

For this exercise, assemble four to five students to act as the management team for a local salon and day spa that is getting ready to expand into several new neighborhoods by adding four local salons. Your salon has always had a high reputation for service, but as

you expand, your experienced staff will be spread thin. In the next month, your team plans to hire and train 25 new cosmetologists and estheticians (skin-care providers). To ensure that the new stores are suc-cessful, your team has decided to map out very clear service recovery procedures. After all, during the train-ing periods and the first few months the new stores are open, mistakes are bound to happen. How you respond to them will mean the difference between a successful expansion and possible bankruptcy.

Sources: R. A. Donnelley, Jr., “Managing the Moment of Truth for a Service Organization,” Supervision, December 2004, 3; M. De Paula, “Dispensing with the Data Dump to Achieve Customer Loyalty,” Banking Wire, 11 February 2005, 24.

Questions

1. As a team, brainstorm a list of service failures that could occur in a salon and day spa. (The examples of a bad haircut, damaged nails, and blotchy skin were mentioned above, but there are many more possibilities.) Then identify ways that you can resolve each problem on the list quickly and to the customer’s satisfaction.

2. There are bound to be situations that you haven’t planned for. How will you instruct your employees to handle unanticipated problems?

3. How can a complaint-response system be considered part of delivering quality service?

4. What kind of metric(s) can you create to measure the quality of your service delivery? Manufacturing companies typically measure things such as on-time delivery, defects per million, production rate (how many pieces per hour), and so forth. What can a spa measure to keep its service operation in control?

Chapter 18—Recovery Plan



Chapter 1—Baggage Claims—Is RFID the Ticket?4ltrpress.cengage.com/enrichment/Management...

Documents

Transcript of Chapter 1—Baggage Claims—Is RFID the Ticket?4ltrpress.cengage.com/enrichment/Management...