Activity #1 – Case Study

The XYZ Company was started in 1975 as a small consumer product company. During the first 25 years the company’s research and development (R&D) staff developed a series of new products that proved to be very popular in the marketplace. Things were going so well for the company that they expanded the plant and added a second production shift.

The company’s slogan became "We don’t sell our products. We allocate them." This was reference to the fact that the firm only had a staff of 25 salespeople who generated annual revenues in excess of $88 million and without any type of marketing department.

However, there was a change in the industry’s environment and the company experienced its first financial setback in 1995. The company had a net operating loss of $1.8 million. Two years ago, the loss was $2.4 million, and last year it was $3.6 million. The chief financial officer estimates that this year the organization will lose approximately $7 million dollars.

Alarmed by this information, Big Bank, the company’s largest creditor, insisted that the firm make some changes and start turning things around. In response to this request, the CEO (and founder of the company) agreed to step aside, although he was respected and still very popular with the employees. The board of directors selected Beatrice Malone (Consultant wizard and financial genius of the 90s).

After making an analysis of the situation, Ms. Malone concluded a number of changes must be made to turn the firm around. Four most important were:

More attention must be given to the marketing side of the business, although the most vital factor for past success has been the sales force.

There must be improvement in quality. Currently 3 percent of the company’s output is defective, compared to a 0.5 percent industry average.

There must be a reduction in staff.Ms. Malone estimated that the company could get by with two-thirds of its current production personnel and only half of the administrative staff.

Hire a new CEO.

Ms. Malone has not shared these ideas yet with the board of directors, but she intends to do so. For the moment, she is considering the appropriate steps and strategy to recommend, and the overall effect that the changes will have on the employees and culture.

Discuss the following:

What was wrong with the organization’s culture?

Identify some of the cultural forms (levers) that must be contended with? What needs to be done to change the culture?

What resistance to the recommended changes do you anticipate?

What strategies do you recommend to counteract the resistance?

What specific steps should Ms. Malone take in implementing this change?