online case studies

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ONLINE CASE STUDIES 1

WANDERING AROUND

THE WORKPLACE

ANANDA WICKRAMASINGHE, CENTRAL QUEENSLANDUNIVERSITY

Dr Dias is the CEO for a large private hospital located in thecapital of a South Asian country. This hospital is a franchise of

an international hospital chain, and the main hospital andoffice is located in India. Dias is a qualified MBBS doctor withadditional administrative qualifications. Before he accepted

the current position, Dr Dias functioned as the head of a largestate hospital for children and maternity.

The hospital of which he is currently CEO is somewhat

different from his previous workplaces. It is managed by aboard of directors appointed by major shareholders, and thebusiness is publicly listed. There are 700 employees in this

organisation and there is a considerable number of doctorswho are consultants or who work on either a contract or a

job-availability basis. When Dr Dias assumed his job as CEO,

the hospital was making losses and its ownership wastransferring from an overseas company to a local businessman.Within a year, ownership of the organisation changed again,this time to a powerful politician who owned several

businesses.Dr Dias has a unique style of management and he always

interacts with employees at all levels, whereas the culture of

management is usually based more on hierarchy, favouritism,social class and patriarchy. Surprisingly, Dias was also educatedand has experience within such a culture, even though he

obtained his postgraduate training in Australia.Dias usually comes to the office early in the morning toorganise his work for the day. Before finishing his day he

habitually completes all incoming work, and then plans for thenext day. He is a very organised person and he has open-doorpolicy towards his employees. One doctor commented: he is

such a dedicated character, like I havent seen anywhere elseIve worked.

As a practice, Dias visits places in the hospital without

prior notice. He chats to all staff and people informally. Atfirst when he started managing like this, employees did notlike it because they thought he was coming to observe closely

how they were working. However, gradually he managed tochange this perception, and employees even started waiting

for him in order to talk to him and even discuss their issuesand grievances. In this way, Dias managed to create anenvironment that motivated people to engage in productivework practices and which enabled him to stay in touch with

employees at all levels of the organisation. Even a cleaneronce commented: When he started to visit regularly andwithout knowing, we were so scared and thought he is coming

for inspection and check whether we are working, but later werealised we can talk to him personally, and tell our concerns.We did not have that in anywhere we worked.

A doctor also commented that: I observed that hefrequently comes around five minutes before we finish our

shift. He seems independent in his management practice andwalking around routinely. When I asked him about his

practices one time, he said that he believes that being in touchwith his employees on a daily basis has remarkable impact onhis capacity to understand and getting to know what is going

on the hospital. He didnt want to be sitting in his office as theboss; he wants to be with the employees to grasp and feelwhat they are doing, and how they are doing, and what

difficulties they are having. Only then can you know youremployees and operations, and only then can you help tomake them better.

Nonetheless, most senior managers of the hospital areworking as usual and do not seem to follow what the CEO isdoing. While they support his direction and actions as the

CEO, and they align with his commitment and passion forexcellence, they do not share Dias style or hands-on passionfor the workplace. A senior manager stated that: as he is

being an exemplar and walking around in the hospital, wesometimes feel ashamed, it is obvious that we probably should

follow his example. Beyond this, when he asks us to do thingswe cant say no, even we want to because he is twice effectiveand productive as us and we would look like poor employees.

Another doctor who worked for this hospital also

recalled: He goes around talking to people: patients, familiesand employees. While he is working, he is also looking for poor

work behaviour and observing the quality of work. I saw many

times that he purposely touches staircases and beds and evengoes to toilets to see whether they are well cleaned. Normally

others cannot easily notice what he is really doing. For

example, one day while going to the surgery section, I saw himtouching the staircase and look at his hand, and then he

courteously called for a cleaner and asked to bring cleaning

stuff. The cleaner was scared and brought them as instructed.Dr Dias started to clean the staircase and the cleaner was so

embarrassed and begged to be able to continue the cleaning

herself, but he maintained a very warm smile and completedthe cleaning. I was so surprised about that situation and how

he did it. I never saw cleaners doing a half job after that. Nowthey are very serious about their responsibilities, and theirwork quality.

As time went on, employees became used to the CEOsdaily routine. In fact, they now feel that the CEO is friendlyand supportive, and that this really helps them to undertake

their work roles in the best way that they can. Within the firstyear of his employment at the private hospital, Diassucceeded in making the business profitable. The customer

orientation of the business has also dramatically improved. Asignificant number of overseas surgeons and consultantdoctors are now working for the hospital and continue to be

attracted to apply for positions there. Although the workplaceis not free from internal and national politics, Dias takes astrategic approach to these issues in order to meet the

expectations of internal and external stakeholders, and moreoften than not creates a positive and lasting change inproblem areas. He is an inspirational, down-to-earth and

friendly character who works with respect and dignity.

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2 ONLINE CASE STUDIES

ADVERT CO.

BY RACHEL MORRISON, AUCKLAND UNIVERSITY OFTECHNOLOGY

Sue Yan and George Thong were transferred on a two-yearcontract from the Indonesian office to the Auckland (NZ)

office of Advert Co., a large graphic design and advertisingcompany. Both Sue and George very were enthusiastic abouttheir new role in Auckland. They were also happy with the pay

increase they would receive. They would continue to get theirusual salary, which was equivalent to NZ$260 per week, as wellas an accommodation allowance of NZ$200 per week and a

one-off relocation bonus of NZ$3000.However, not long after arriving in New Zealand, Sue and

George find out that the local New Zealand employees in the

same department, doing exactly the same job, are earningnearly NZ$900 per week.

Within a few weeks of realising the difference in the pay

scales, Sue begins to post personal items home to Indonesiausing the company postal service. She also surfs the internetduring work time and takes long lunch breaks. Sometimes shedelegates part of her workload to her local colleagues,

reasoning that if they are being paid more, then they shouldalso do more work. George, on the other hand, is veryimpressed with the level of relevant qualifications held by the

locals. Most have at least a business degree, whereas Georgeand Sue only finished high school in Indonesia. He is also awarethat what his colleagues do is really helped by the fact that

most have English as their first language. George continues towork as hard as he can for Advert Co.Another reason why George feels grateful for his job is

that, on his first day in Advert Co., he was given a generalintelligence test, in which he scored very poorly. The test wasin English (Georges second language) and he spent much of

the time during the test making sure he correctly understoodthe meaning of the questions. Consequently he did notcomplete much of the test. George has always been very good

at arithmetic and has a sharp and logical mind, yet he gotmany of the numeracy and reasoning questions wrong due tohis confusion with and misunderstanding of the wording of the

questions.

Sally Jones was hired at the same time as George and Sue.She is the sort of person who gets stressed easily and worriesabout things. She really wants to make a good impression inher new job and is keen to make the most of this new

opportunity. In the first few weeks in her new job she oftenturns up to work half an hour early and is happy to stay late inorder to make sure that she keeps on top of her workload. She

is surprised that others in her team often seem to complainabout their own workloads and regularly miss deadlines. Mostarrive at work late and, though they seldom leave early, they

will take very long lunch breaks, chat with each other, talk onthe phone to their friends and surf the internet. Although theykeep themselves separate from the rest of the organisation,

they all get on very well together, and there is a pleasant andfriendly atmosphere in the team. They will cover for eachother if someone is pulling a sickie and exaggerate to

management about how long tasks really take so that they canwork slowly and take plenty of breaks. Sally really wants to be

liked by her workmates; she is a naturally shy person andsometimes finds it difficult to make friends. It does not takelong for Sally to realise that she has to fit in with the rest of

her team if she wants them to like her. She particularlyadmires Olive, a fun-loving, vivacious and popular designerwho always seems to be surrounded by friends. As a result

although it goes against her natureSue soon begins to relaxabout her own deadlines and to go out for extended luncheswith her colleagues. She and Olive become firm friends, and

although she is not happy about not being very productive atwork, she decides that she loves working for Advert Co. morethan ever.

Two months later

Management begins to notice that the members of Sallysteam are not working very hard. The managers meet to discuss

what might be done to improve performance. They decide to

renovate the office in which the team works. They improvethe lighting in the office, put in new air-conditioning units and

give all the staff new computers. Although Sallys team works

a little more efficiently for a few weeks, the change doesntlast long and the staff soon go back to their old ways.

Four months later

Because performance still has not improved significantly inSallys team, management decides to initiate a performance-

based reward scheme. A system is set up whereby goals andexpectations are communicated to the team with a memo onthe noticeboard in the hall outside the office. The goals that

the team is required to achieve in order to get rewards are notonly significantly more challenging than the level at which the

staff are currently performing, but they also include moreambiguous requirements such as to improve work quality andto try hard. For example, the staff are expected not only todesign new layouts for many of the print advertisements of

Advert Co.s clients, but also to learn how to use the brandnew computer software required for the redesign. No propercomputer training is given and not a single team member

manages to master the new computer software before thefirst deadline passes.

Although some members of Sallys team really did try hard

to learn the new software and meet the targets set bymanagement, the only way that performance is measured is by

whether or not the final product arrives to the clients on time.

The quality of the work and the time required to completeeach job is not taken into account.

Eventually, after a lot of hard work, the team does manage

to meet a set of goals. However, when it is time (a monthlater) for staff to receive their rewards, the team discovers

that, to create a perception of fairness, all employees receive

exactly the same reward: an alarm clock with the companylogo on it. Not only can the team members now spend all day

at Advert Co., but they can also wake up to the company first

thing in the morning!Sallys team members are so upset that all their hard work

has come to nothing more than an alarm clock each that they

decide to send a letter complaint to management via email.The staff try to be reasonable in their email. They outline all

the extra work they have had do to learn the new computersoftware and they explain that the clocks are not very

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rewarding. The person who receives the email is Tom Jones.Tom is already quite frustrated with Sallys team and before he

even opens the email he thinks to himself about all the extratime and energy that has been expended on the team, andhow irritating it has become. The staff dont work hard and

always seem to be moaning.When Tom reads the email and sees that these same

employees are complaining yet againabout a special reward,

no less!he angrily writes a reply and sends it off to the wholeteam without really thinking or reading it over. The team is so

surprised and outraged to receive the negative reply that thestaff all walk off the job, resulting in the loss of two veryvaluable accounts for Advert Co. The conflict soon escalates

and Advert Co. is considering taking action against severalmembers of Sallys team, including Sally.


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STEEL PLANT

ACCIDENT

BY ROBIN CHENG, TAYLORS UNIVERSITY, MALAYSIA

Ian Seah, the production manager, was still in mourning. Theconscientious manager of an established steel company inMalaysia had tendered his resignation three months ago. Untilthen, Ian had taken great pride in the fact that the steel plant

had remained accident-free during his 15 years of service.In the last five days of Ians tenure, the process of melting

scrap metals was in progress as usual. All the employees have

to cope with intense heat at work, as aluminium meltingfurnaces burn at a temperature of 1000C. The job is veryperilous, as even a 0.0001 mm drop of liquid from the furnace

will burn right through human skin.Then, the steel plant situated in the northern region of

Malaysia exploded. This was the last thing that anyone hadexpected to happen under the watch of the meticulous plantmanager. The magnitude of the explosion was so great that ithad caused a big hole in the roof of the plant. When the

incident happened in the late afternoon, there were morethan 89 employees working in the plant. Many employeessuffered minor burns despite wearing safety glasses and

gloves. One of the employees, from China, did not recover. Hedied as a result of 60% burns to his body. The steel productionhalted for one month. The relevant authorities, consisting of

the police and the Energy Information Agency Administration(EIA), conducted a thorough investigation of the explosion.However, nobody could ascertain what actually happened

during the production process.Despite the psychological trauma of the experience, allthe employees resumed work. The employees worked in three

shifts: 7 am3 pm, 3 pm11 pm and 11 pm7 am. Of all thethree shifts, Ian was most troubled by his night-shiftemployees. As the supervisor was not strict, the night-shift

employees would get their colleagues to punch theirattendance cards for them. Many of them would log in on

time, but they would leave the plant and come back at 5 am.Ian had conducted several rounds of consultations with the

employees and encouraged them to rotate the work shifts.However, no one was willing to take up the offer as the nightshift allowance was higher than those for the day shifts. Ian

proceeded to assign the uncooperative employees to the dayshifts anyway. However, every time Ian rescheduled hisemployees work plans, the night-shift workers would retaliate

by complaining to their union. The night-shift employeesblamed the company for victimising them. The union wouldthen contact the company to find out how the company had

discriminated against its employees. The meetings betweenthe union, Ian and the HR manager were unpleasant andunfriendly. There was always an air of tension, as the union

would tend to protect its members. On a few occasions, theunion would conduct demonstrations in front of the factorytogether with the group of unruly employees. These events

attracted a great deal of interest from the news media inMalaysia, causing much embarrassment to the company when

it was then accused of discriminating against its employees.The steel produced by the company was to be delivered tothe construction and property development industry in

Malaysia, the AsiaPacific region and Middle Eastern countries.

However, the coordination between the purchasing anddelivery departments was poor. There was always a delay in

the delivery of the raw materials due to the companys

suppliers or because of late payments to suppliers by thecompany. This caused the production schedule to be

interrupted, the company to suffer down time as the

employees would be idle while waiting for raw materials toarrive, and additional costs to be incurred when employees

were then required to work overtime. Yet when the sales

orders were received, the delivery of steel was required withinthe same week. It was therefore difficult for Ian to plan the

production schedule. As a result, the companys clients would

receive their goods one week later, and the company wouldbe charged a 0.1% liquidated agreed damages (LAD) penalty

per day on each purchase order.

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MORTON SHARPE

SUSAN AINSWORTH, THE UNIVERSITY OF MELBOURNE

The first that employees heard of the issue was through themedia. The headline in the business section read: Two TopExecs Quit Morton Sharpe. Tony Penall, a middle manager atMorton Sharpe, was reading the newspaper on his daily train

ride to work. According to the journalist, Morton Sharpe wasone of Australias great hopes in the biotechnology industry: ithad succeeded in the past where many other similar

organisations had failed, by developing and thencommercialising a new vaccine for a common form ofhepatitis. At a critical point in the development of a new drug

to prevent Alzheimers disease, two of the executives involvedin the projectDr Marlene McGraw and Dr Walter Joneshad

suddenly resigned. Unable to quote any sources from withinMorton Sharpe on the reasons behind the resignation, the

journalist had written about the resignations in the context ofbroader problems in the industry: while biotechnology was

recognised as a future growth area, it was currentlyexperiencing a downturn in investor confidence. Theresignations could only add to these problems for Morton

Sharpe.By the time Tony Penall arrived at the Morton Sharpe

building, the office was buzzing with rumours and conflicting

versions of what had gone on. One version had the CEO, BrettBenton, sacking the two executives and having them escortedfrom the premises by security guards. Another version

recounted how Dr McGraw and Dr Jones had been forced toresign because of problems with the early results of clinicaltrials of the Alzheimers vaccine. In yet another version,

McGraw and Jones had issued Brett Benton with an ultimatum:either he change the way that he treated his managers andemployees or they would leave. He refused and they walked

out. Regardless of which version was true, the end result wasthe same: with 45 years of experience between them, the twoexecutives had left Morton Sharpe that same day.

At 11 am, an email bulletin from the CEOs office was sentto all employees. It provided information on how MortonSharpe was performing and discussed its bright future. There

was also an update on the business planning cycle and areminder to managers that they needed to complete

performance reviews with their staff by the end of May. Therewas no mention of the sudden departures of Drs McGraw and

Jones, nor of the Alzheimers vaccine project. Rather thandampening down the rumour mill, this email fed it. The rest of

the week was filled with talk and speculation amongemployees and middle managers about what had really goneon and what it meant for the project and the organisation.

To those closer to the top of the organisation, the

resignations came as no surprise. They had watched as the newCEO, Brett Benton, had gradually recentralised control andinstituted a very different approach in the organisation. The

trouble had started almost 18 months ago, when the previousCEO, Teddy Brewer, was still around. He had been with theorganisation for 30 years and headed it for 10. He had seen the

organisation through its sell-off from the government in thelate 1980s, and its struggle to cope with a fast-changing

environment and to compete with overseas researchorganisations that had much greater funding and support.

Brewer had even delayed his retirement by four years in orderto see the hepatitis vaccine project through to completion;given its success, he had then felt that he could leave the

organisation in a strong position. He had therefore announcedto the board of directors that he was planning to retire andhad started the search for a successor. In the early stages of

this search, he had recommended that the board considerappointing his deputy, Dr Richard Smith, who had also beenwith the organisation for many years and had a solid scientific

background. However, the board had told Brewer that it didntthink Smith had broad enough industry experience to take onthe role, and that it was concerned that he lacked the

commercial acumen needed to take Morton Sharpe into thefuture and to attract the sort of private funding necessary tosupport new drug development. In a face-to-face meeting

with Smith, the chair of the board of directors had discussedthese issues and indicated that, while the board felt that he

was not ready to assume the CEO role, it hoped that Smithwould stay on and continue to make a valuable contributionto the organisation, including supporting whoever was chosen

as the new CEO.

And so the search began. After months of interviews, theboard of Morton Sharpe finally settled on an executive who

had had had a meteoric rise in the mining and finance

industries: Brett Benton. There was some debate amongmembers of the board as to whether someone without a

scientific background could successfully lead and manage

Morton Sharpe. However the case was made by the chair ofthe board that, after so long under the stewardship of one

CEO, the organisation needed a fresh perspective and new

blood. Besides, he felt that they were not capitalising onopportunities to attract new funding because scientists and

business people spoke different languages. He argued that

appointing someone from the finance industry could assist inbuilding the relationships with potential investors that Morton

Sharpe needed and that scientists found so hard to establish.Benton, the new CEO, started in January that year and

brought with him many new ideas. He was a big fan of a

bestseller put out by a consultant, Chuck Norman, calledMuscular Leadership: Taking Back your Power. Chuck Normanhad done big business in the United States and was now

coming to Australia to capitalise on the sales of this book witha seminar series and a number of speaking engagements.Essentially, Normans idea in Muscular Leadership was that

managers had given away their power and become soft andweak. For too long they had given away their responsibilitiesfor decision making by involving and empowering employees.

The result, Norman argued, was a business leadership that wasscared to lead and employees who didnt respect theirmanagers. Now was the time to take their power back. In

short, managers needed to toughen up. Before becoming asuccessful author and consultant, Norman had done time inthe army and he was renowned for running boot camps for

management. These camps featured a combination of physicaltraining and military exercises where there was clear authority,control and obedience. According to Norman, the campssimulated the experience of the muscular leadership

philosophy he wrote and spoke about at seminars and in hisbook.

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At Morton Sharpe, one of Brett Bentons first initiativeswas to give all his managers at department head level or above

a copy of Chuck Normans book and to require them to attendone of Nortons seminars. The managers then had to report toBenton personally about how they were going to change their

approach to implement these new ideas. This muscularleadership was a marked departure from Teddy Brewers style:Brewer had been consultative and had expected managers to

consult their employees in turn about any decisions thataffected them at work. He had encouraged his managers toask employees for suggestions on improvements and new

ideas, and had held special meetings every month with a cross-section of employees and managers in order to get feedbackon how the organisation was performing and to enable him to

keep in touch with any problems.Not surprisingly, some senior managers were not happy

about this new muscular leadership approach. They felt that

the organisation was successful and had thrived by involvingpeople in decision making and planning. The organisation was

an industry leader and had a good public reputation, beingrecently featured in the federal governments National Reporton Innovation. It had grown to 300 employees, most of whom

were highly experienced technical specialists, scientists and

medical researchers who had to work on long-term researchand development projects. It seemed natural that managers

would seek out the advice and opinions of such employees.

Dr McGraw and Dr Jones were among a group of seniormanagers who met informally to discuss their concerns among

themselves. They had then gone to Benton to discuss whether

such a change in leadership approach would work in MortonSharpe. Rather than discuss their concerns, Brett Benton saw

this as a direct challenge to his authority. He responded to

their criticisms of muscular leadership with a directive thatthey were to attend the advanced boot campthey would

then have to repeat the process of reporting to him personally

about how they were going to change to implement this newapproach.

McGraw and Jones went to Richard Smith to complainabout the approach that Benton was adopting. Smith tried toreassure them that every new CEO likes to put his stamp on

the organisation, but that, with time, Benton would realise thatthe organisation could not function in that way. Privately,however, he was not so sure. Already, Benton had been

excluding Smith from decision making. Benton preferred tomeet with the chair of the board alone, and when Smithsuggested that he accompany Benton, he was told that it was

not his role. Smith was used to being Teddy Brewers right-hand man, but it was clear that Benton preferred to operatealone.

Muscular leadership was not the only new idea thatBenton brought with him. He had been given a briefing earlyon in his tenure about the potential challenges to Morton

Sharpe, including its current problems and projects. Thesechallenges included committing significant funds to researchprojects that were high risk and that could take at least five

years to show a return, if at all. The senior managersresponsible for research and development, including DrsMcGraw and Jones, advocated further funding for theAlzheimers project. More funds would enable them to expand

the clinical trials that would indicate whether there were anysignificant issues that would prohibit the vaccine from beingapproved by the Australian Therapeutic Goods

Administration, or similar bodies in other countries. Even ifthey had encouraging results, if the sample for a clinical trial

was too small, it would be harder to reach a conclusion aboutits effectiveness and potential side effects. With more fundingthey could complete a larger and longer trial using a control

group. McGraw and Jones argued that, given the ageing of thepopulation, such a vaccine had an important humanitarianpurpose and this was an opportunity for Morton Sharpe to

make a significant contribution to a looming worldwide healthproblem.

However, Benton had different ideas. He agreed that

population ageing presented particular challenges for medicalresearchers and scientists. However, with his background infinance, he was more interested in products that had a shorter

development time and could return more significant short-term gains to investors. He had already thought of such aproduct: a new anti-ageing cream. Rather than commit more

funding to the Alzheimers project, he decided to commencefunding for this new project and directed McGraw and Jones

to initiate and organise the new venture. At this point, RichardSmith intervened and tried to appeal to Bentons pragmaticside. He explained that such a product was outside the specific

expertise of their current medical and scientific staff, yet they

were highly specialised in the area of vaccine development.Vaccine development is our strength, our core business,

argued Smith. Hire new staff, was Bentons response.

Alarmed by this change in direction, McGraw and Jonesconvened another informal meeting with the other senior

managersthis time offsite, at a local bar. They discussed

what had happened in the meeting with Benton and all agreedthat it was untenablealready, years of work had been

committed to the Alzheimers project. After a few hours of

letting off steam about Benton, they came to the issue of whatcould be done about him. Thats where they were stumped

none of the senior managers knew any of the board members

well enough to approach them about Benton and they wereafraid if they did, Bentons retribution would be swift and

decisive.However the board had concerns of its own. It had

received Morton Sharpes performance results for the last six

months and the board members were worried about someareas of the organisation. There had been a sharp rise inturnover and absenteeism among research staff that had

delayed deadlines on major projects. As continued privatesector funding was contingent on staged deadlines being met,there would be increased financial pressures. When this issue

was raised in the board meeting, Benton responded that theyhad to expect some dip in productivity with the change inleadership. He argued that the problem lay with certain senior

managers who were attempting to undermine his authority.Benton reminded the board that it had hired him because itwanted a fresh perspective and a new approach; he now

needed the power to manage as he saw fit and assured theboard that once management realised he was not going toback down, the projects would be back on track.

After the board meeting, Benton called a meeting of hissenior managers and announced that there would be cutbacksbecause deadlines had not been met. He told them he haddecided to reduce funding in areas that did not contribute to

business profitability, including funding for employees toattend scientific conferences, corporate sponsorship of a bi-annual industry seminar, financial support for an industry


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policy and lobby group and scholarships for final-year highschool students to study science at university. In addition, he

told Smith, McGraw and Jones that staff cutbacks would benecessary. As the Alzheimers project was the largest, theywould need to identify five people who were going to be

made redundant so that the new hires on the anti-ageingcream project could go ahead. It was this decision thatsparked the showdown between Benton, McGraw and Jones.

McGraw and Jones refused to carry out the direction and toldBenton they did not believe that he had the right to make sucha decision when he clearly did not understand the

international significance of this research. Unused to beingchallenged so directly, Benton was taken aback. He re-issuedhis order to identify five staff to be made redundant, adding

that if McGraw and Jones did not do it, he would find

managers who would. And so McGraw and Jones resigned onthe spot, rather than be implicated in carrying out such a

decision.Employees were not the only ones to read about this in

the newspaper. The chair of the board had just arrived back

from an overseas trip and landed at 6 pm when he saw themedia coverage of the resignations. He tried to contactBenton by landline and by mobile, but Bentons phone was

turned off and his personal assistant said he was unavailable ashe was meeting with potential investors. The chair of theboard had expected to be informed before any major

decisions had been made. This was the other face of muscularleadership.


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POWERDOME

SUSAN AINSWORTH, THE UNIVERSITY OF MELBOURNE

The first that employees heard of the issue was through themedia. The headline in the business section read: Two TopExecs Quit Morton Sharpe. Tony Penall, a middle manager atMorton Sharpe, was reading the newspaper on his daily train

ride to work. According to the journalist, Morton Sharpe wasone of Australias great hopes in the biotechnology industry: ithad succeeded in the past where many other similar

organisations had failed, by developing and thencommercialising a new vaccine for a common form ofhepatitis. At a critical point in the development of a new drug

to prevent Alzheimers disease, two of the executives involvedin the projectDr Marlene McGraw and Dr Walter Joneshad

suddenly resigned. Unable to quote any sources from withinMorton Sharpe on the reasons behind the resignation, the

journalist had written about the resignations in the context ofbroader problems in the industry: while biotechnology was

recognised as a future growth area, it was currentlyexperiencing a downturn in investor confidence. Theresignations could only add to these problems for Morton

Sharpe.I wish this had never happened. We should have waited,

we would have made it through somehow. But this is worse

than I ever expected. John was talking half to himself and halfto his long-time friend and colleague, Mick. Mick responded:Its too late now, whats done is done. We need to make a

decision whether it is worth persevering or whether we justget out and start again. Were still young enough to do that,and well write this off to experience.

Still, it wasnt that simple just to walk away. John and Mickwere part of a group of friends who had started their internet-based business, PowerDome, while still at university. It had

turned from a hobby into a serious concern, with investorsvying to sink money into it in the mid-1990s. Unlike many oftheir dot.com counterparts, John, Mick and their friends Scott,

Erik and David resisted the temptation to accept as muchinvestment funding as they could get, in preference forretaining control over their start-up. They had not spent as

carelessly as other dot.coms and had pursued more modestgrowth, so they had been able to survive when many other

internet start-ups had failed in the late 1990s.Yet PowerDome was not without its problems. It had

grown organically from a five-person operation to anorganisation of over a hundred staff. It was easy enough when

it was just the five of themthey were all friends, approachedwork in similar ways and seemed to have the same values andinterests. They didnt explicitly discuss how they were going toapproach working togetherit just seemed to happen and

evolve. But as the business grew and they employed morepeople, there seemed to be more and more problemsemerging. For a start, all five founders were involved in every

aspect of the business, with little clear definition of their roles.Such a loose arrangement usually worked for them; howeverthere was an incident early on in the life of the company

where this had created major problems. A crucial order hadnot been processed and they had lost an important customer;

all five founders had thought that someone else was dealingwith it, so no action had been taken. At this point, one of the

five founders, Scott, tried to talk to the others about creatinggreater clarity about their respective responsibilities. Ratherthan do what they normally did, which was just chat around a

topic over coffee, Scott decided to call a formal meeting andlet them know beforehand that this was the issue he wantedto discuss. He thought that if he approached it in this way, the

other founders might get the message that they needed tostart doing things differently.

However, the meeting did not go as planned. First of all,

John didnt show up at all and then Mick, Erik and David wereall 30 minutes late. When the meeting eventually started itwas clear that they were all perplexed as to why Scott was

acting so weird. Scott started off by describing the problemas he saw it: At the moment, we all do some of each functionbut we dont really know which one of us has done what and

this is why we lost this customer. Im not blaming anyoneitjust demonstrates to me that we need to work out whos

responsible for what. If were going to be a business then weneed to start acting like one.

Erik was the first one to respond: Now hang on a minute

since when did you start getting all corporate? This was

supposed to be our own company, our way, have youforgotten that? Dont you remember when we sat around on

deck chairs and talked until 3am over pizza and beer in my

dads garage about starting our own business? We didnt wantit to be like, just another company.

David chimed in: I agree with Erik. I think youre just too

stressed at the moment.Erik continued: Thats right man, I dont know whats going

on with you but I think you need just take a day off and get

some perspective.I know thats how we started out, Im just not sure we can

keep going if we dont change. Im not suggesting a complete

turnaround, just a better idea of whos responsible for what,replied Scott.

But Erik was having none of it. Look, we messed up.Mistakes happenno ones to blame. Just because there wasone mistake, doesnt mean we should change who we are. We

went into this with a commitment to do it our way, weshouldnt abandon that at the first sign of trouble.

Scott looked across at Mick, who had so far said nothing,

but Mick wouldnt meet his gaze. So Scott asked him directly:Mick, is that what you think too? Mick looked at Erik andDavid and shifted uncomfortably in his seat. This was the first

real conflict they had ever had. He said: Yeah, I think weshould just keep doing what were doing.

Scott had hoped that Mick might have seen things his way

but after that, he gave up trying to change the way theyoperated. He hoped the mistake wouldnt happen again, buthe started to have doubts about the long-term viability of

PowerDome. Unfortunately, as PowerDome grew, the sameproblems seemed to resurface in different ways.

When PowerDome was big enough to start hiring staff, it

had sought to recruit the same sort of people as themselvesnot just in creative roles, such as software, research andproduct development, but also in administrative rolesresponsible for finance and operations. The founders prided

themselves on the lack of rules and procedures in thecompany, with any employee being able to talk to anyfounder about any issue at any time. Rather than have

CASE STUDY

5


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employees reporting to managers, they were encouraged toform their own project teams to work on issues of interest to

them that would benefit the company. All they had to do tostart such a project team was discuss it with any one of thefive founders, who all supported experimentation and

innovation and accepted that failure was a part of growth.Problems started to occur in 1997, when PowerDome

experienced its first financial crisis. Six months earlier, Scott

had been headhunted by a larger firm and the other fouroriginal founders had decided to buy out his share of thebusiness. As far as Scott was concerned, he could see the

writing on the wall but didnt pursue it with the rest of thegroup because he had tried before and it hadnt worked. Thecost of buying out Scotts share of the business was

compounded by the lack of money coming in: sales were notgenerating the degree of income that was needed to financethe companys current operations. At the same time, staff

were continually lobbying for more resources to fund theirprojectsprojects that had already been approved by one of

the founders and had funds committed to them. However, notall projects were successful and even fewer managed togenerate a financial return for PowerDome. This situation led

to a major conflict between the remaining four founders: John

and Mick argued for rationalising the projects and pursuing amore conservative research and development agenda, while

the two founders, Erik and David, refused to accept that any

project could be cut. As far as Erik and David were concerned,they had given their support and if they were required to

withdraw it, they would leave the company and take staff with

them. Negotiations and discussion continued on this issue fortwo months, during which time the financial position of

PowerDome deteriorated. This added urgency forced John and

Mick to suggest a solution they had never envisaged: buyingErik and Davids share in the company and accepting that their

partnership was over.

Erik and David left, and shortly after, 30 staff resigned.These employees were not all from the cancelled projects and

some left because they felt that PowerDome was changing inways they didnt like. John and Mick heard on the grapevinethat these staff had all gone to work for Erik and Davids new

start-up, which could potentially be a direct competitor forPowerDome. The staff departures left critical skill gaps in theorganisation. PowerDomes informality and its lack of rules

and procedures meant that there were few records and littledocumentation of work in progress, so it was difficult for theremaining staff to pick up the work of these departed

employees. They usually found out that a task needed to bedone when something went wrong, and then it was too late.

Chastened by this whole experience, John and Mick were

determined to avoid such financial crises again. They hired twoprofessional managers to be responsible for finance andadministration. However, they were used to being closely

involved in the day-to-day running of the company andemployees were used to the PowerDome way of operating,where the founders were readily accessible and informality

and flexibility were the norm. The staff were not used tohaving to account for their time, or report on resources andprogress, or plan projects and budgets. Yet this was what thenew professional managers required. They considered they

had been brought in to sort out PowerDomes financial andadministrative mess by introducing some standard businessdiscipline. This involved establishing some basic planning,

monitoring and reporting systems that would helpPowerDome to manage and organise its resources more

effectively and efficiently.However the two professional managers were not

prepared for the resistance they encountered. What they

considered to be normal business practice was seen by staff asencroaching on their freedom and not in line with thePowerDome way of doing things. Staff consistently ignored

the managers requests and went straight to John and Mick,who continued to listen and respond to the concerns ofemployees. Eventually, the managers became so frustrated

that they organised a meeting with John and Mick. Theyoutlined the problems as they saw them and presentednumerous examples of the lack of cooperation of staff. John

and Mick responded by presenting the employees version ofevents: the staff were constantly being asked to fill in formsand document processes, which to them was a waste of time.

Before starting any project, the employees had to develop aproject plan and a budget, but because much of their work

was development, they often didnt know what the projectwould involve or the extent of resources required. John andMick also questioned whether all of the procedures and

systems were really necessary and suggested that they might

be inhibiting the innovation of the company. Moreover, mostpeople came to work for PowerDome because they were

attracted to the flexibility and autonomy that the organisation

offered its employees. At this point, the two managersrealised that they didnt have John and Micks full support, and

shortly afterwards they resigned. John and Mick interpreted

their appointment and resignation as another experiment thatdidnt pay off, and attributed their departure to a lack of fit

between the managers and PowerDomes culture. They were

just too different and they didnt understand that employeeswere used to doing things the PowerDome way, said John.

Unfortunately, soon after PowerDome entered another

financial crisis, this time brought on by product failure. Theyhad sunk a lot of resources into developing a new product

that they were relying on to succeed by being the first of itskind in the market. However, a competitor had brought out asimilar product before their own; this created a shortfall in

expected income for which PowerDome was not prepared.John and Mick responded by trying to raise new investmentfunds but, by that stage, many investors were wary of internet

start-ups. PowerDome had survived the bursting of thedot.com bubble, but now it was in danger of going under.

That was one of the reasons that MegaFirms offer had

looked so attractive. It proposed a merger with PowerDome inwhich John and Mick would retain control of PowerDome as asubsidiary. At first, John and Mick were reticent because of the

differences between the two companies: MegaFirm was a verylarge, well-established multinational with a record of buyingout smaller internet firms and capitalising on their innovations.

But representatives of MegaFirm assured John and Mick thatthey would be left alone to run PowerDome while takingadvantage of MegaFirms financial stability. John and Mick

were told that they would retain their existing staff, andoperate as before but subject to routine and normalorganisational and management controls. Given thedifficulties that PowerDome faced, John and Mick agreed to

the merger and even thought they might be able to learn fromtheir counterparts at MegaFirm, particularly about how tomanage and lead a company.


10/27


That was six months ago and the merger has comeunstuck. John and Mick have found out the hard way what

MegaFirm meant by routine and normal organisational andmanagement controls. They were inundated with requestsfrom MegaFirm corporate offices to comply with a series of

administrative and procedural systems. First they had tocreate a more formal organisational structure: a new level ofsupervisors was introduced to reduce reliance on John and

Mick and to enable more accountability to be assigned atlower levels in the organisation. Then John and Mick wererequired to provide MegaFirms human resources department

with job descriptions, performance plans and evaluation for allstaff. Then they were required to provide growth projectionsfor the next three years, and cost reduction plans for the next

12-month period. And it was not only John and Mick who werebeing inundated with such requests. PowerDome employeeswere being contacted directly by people from MegaFirm on an

almost daily basis, people they had never met. After eachincident, PowerDome employees complained to John and

Mick. Staff were threatening to leave, and a few had alreadydone so, fed up with the amount of time that administrationwas consuming and the reduction in freedom to develop new

ideas and consult with PowerDomes founders. MegaFirm wasattracted by PowerDomes talent or human capital, as theyput it, but didnt seem to appreciate the effects that their

different way of managing was having on PowerDomesemployees. MegaFirm thought that since everyones job wasnow secure, and they had received a pay rise, the staff should

be happier and hence more productive. Instead, the staffseemed less and less interested in their work and on the vergeof revolt. Rather than being left alone, John and Mick felt

inundated and overwhelmed by MegaFirm. They are havingdaily crisis meetings about the situation with MegaFirm andare seriously considering whether to leave and start again.


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RESONUS

CORPORATION

BY STEVEN L. MCSHANE, THE UNIVERSITY OF WESTERNAUSTRALIA, BASED ON AN EARLIER CASE WRITTEN BY

JOHN A. SEEGER

Frank Choy is normally a quiet person, but his patience has

already been worn thin by interdepartmental battles. Choyjoined Resonus Corporation, a hearing-aid designer andmanufacturer, eight months ago as director of engineering.

Production of the latest product has been delayed by twomonths, and Choys engineering services department (ESD)which prepares final manufacturing specificationsis taking

the heat as the main culprit for these delays. Similar delayshave been occurring at Resonus for the past few years. Theprevious engineering director was fired after 18 months; the

director before him quit after about the same amount of time.Bill Hunt, CEO of Resonus for the past 15 years, respondedto these problems by urging everyone to remain civil. Im surewe can resolve these differences if we just learn to get along

better, he said whenever a dispute broke out. Hunt dislikedfiring anyone, but he felt the previous engineering director wastoo confrontational. I spent too much time smoothing out

arguments when he was here, Hunt thought to himself soonafter Choy was hired. Frank, on the other hand, seems to fitinto our culture of collegiality.

Hunt was groomed by the companys founder and tookgreat pride in preserving the organisations family spirit. Healso discouraged bureaucracy, believing that Resonus

operated best through informal relationships between its

managers. Most Resonus executives were similarly informal,except Jacqui Blanc, the production director, who insisted on

strict guidelines. Hunt tolerated Blancs formal style becausesoon after joining Resonus five years ago, she discovered andcleaned up fraudulent activity involving two production

managers and a few suppliers.The organisational chart shows that Frank Choy oversees

two departments: ESD and research. In reality, Doc Kalandry,

the research director, informally reports directly to the CEO(Hunt) and has never considered the director of engineering tobe his boss. Hunt actively supports this informal reporting

relationship because of Docs special status in the organisation.Doc Kalandry is a living genius, Hunt told Choy soon after he

joined the business. With Doc at the helm of research, thiscompany will continue to lead the field in innovation. Huntsfirst job at Resonus was in the research group, and Choysuspected that Hunt still favoured that group.

Everyone at Resonus seems to love Docs successfulproducts, his quirky style and his over-the-top enthusiasm, butsome of Choys ESD staff are also privately concerned. Says

one engineer: Doc is like a happy puppy when he gets a newproduct idea. He delights in the discovery, but also wont let

go of it. He also gets Hunt too enthusiastic. But Docs toooptimistic; weve had hundreds of production change ordersalready this year. If I were in Franks shoes, Id put my foot

down on all this new development.Soon after joining Resonus, Choy realised that ESD

employees get most of the blame and little of the credit for

their work. When production staff find a design fault, theydirectly contact the research design engineer who developedthe technology, rather than the ESD group that prepares the

specifications. Research engineers willingly work withproduction because they dont want to let go of their project.The designers seem to feel theyre losing something when one

of us [ESD] tries to help, Choy explains.Meanwhile, production supervisors regularly critique ESD

staff, whereas they tend to accept explanations from the higher

status research department engineers. Production routinelycomplains about every little specification error, many of which

are due to design changes made by the research group, saysone frustrated ESD technician. Many of us have more than 15years experience in this work. We shouldnt have to prove our

ability all the time, but we spend as much time defending

ourselves as we do getting the job done.Choys latest troubles occurred when Doc excitedly told

Hunt, the CEO, about new nanoprocessor technology that he

wanted to install in the forthcoming high-end hearing-aidproduct. As with most of Docs previous last-minute revisions,

Hunt endorsed this change and asked Choy and Blanc (the

production director) to show their commitment, even thoughproduction was scheduled to begin in less than three weeks.

Choy wanted to protest, knowing that his department would

have to tackle unexpected incompatibility design errors.Instead, he quietly agreed to Hunts request in order to avoid

acting like his predecessor and facing similar consequences (i.e.

getting fired). Blanc curtly stated that her group was ready ifChoys ESD unit could get accurate production specifications

ready on time and if the sales director would stop making wilddelivery promises to customers.

When Docs revised design specs arrived more than a

week later, Choys group discovered numerousincompatibilities that had to be corrected. Even thoughseveral ESD staff were assigned to 12-hour days on the

revisions, the final production specifications werent readyuntil a couple of days after the deadline. Production returnedthese specs two days later, noting a few elements that

required revision because they were too costly or difficult tomanufacture in their current form. By that time, theproduction director had to give priority to other jobs and

move the new hearing-aid product further down the queue.This meant that manufacturing of the new product wasdelayed by at least two months. The sales director was furious

and implied that Frank Choys incompetence was to blame forthis catastrophe.

CASE STUDY

6


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FINDING A HOME FOR

DIGITAL IN THE

CREATIVE

ENTERPRISE

BY STEVEN L. MCSHANE, THE UNIVERSITY OF WESTERN

AUSTRALIA

A few years ago, TBWA Worldwides hired Colleen DeCourcyto fill its newly created chief digital officer position. Soon

thereafter, she unveiled a new organisational unit,

TBWA\Digital Arts. DeCourcys announcement came in adecidedly new-school way: she tweeted it. With this unit,

TBWA would use its roving band of digital geniuses as a centre

of excellence and thereby catapult the organisationstraditional creative talent into the digital age. In DeCourcys

words, it was to be advertising at the speed of culture.

What DeCourcy and chief digital officers at other mega-

agencies failed to anticipate was the number of barriers.DeCourcys Digital Arts group never integrated well with

TBWA, beset as it was by the typical agency bureaucraticinfighting, turf wars and the realisation that injecting digital

into hulking organisations like TBWA would need more thanjust hiring a crew of hotshots. According to one source, I dontthink everyone in the company had clarity about how it was to

work.Even the CEO of TBWA Worldwide Tom Carroll

acknowledged that Digital Arts hit some bumps in the road.

We played with certain things, we experimented with certainthings, and some of it has worked and some of it hasnt, henoted. We get better every day. We learn more every day.

But perhaps the most important thing that Carroll andother corporate heads learned was that chief digital officersdo not fit easily into traditional creative giants. DeCourcy

recently left TBWA, as did her counterparts at the creativeagencies Ogilvy & Mather and Young & Rubicam. None of thecompanies has since filled these positions with new staff. The

remaining digital geniuses have been folded into existingmedia departments. In effect, the experiment of creating anorganisational structure with an elite digital SWAT team has

come to an end.

Perhaps the main problem with a chief digital officer and ateam of digital geniuses is that the unit will never match a

sprawling organisational structure. DeCourcys Digital Artsgroup operated at the worldwide level, as part of the MediaArts unit. Thus, financial questions arose when it plugged in to

local agencies, such as whether billing for the well-compensated digital artists would come out of a local officesbudget. The New York-based digital units also faced resistance

from local offices that were wary of losing client revenue toheadquarters. They appeared to parachute in on projects andtake too much credit.

Another problem was that the digital leaders foundthemselves pulled in different ways. It was unrealistic toexpect a single digital leader to take responsibility for the

entire agencys digital success or failure. Its just one person,said Ogilvy North America CEO John Seifert. What I think theflaw has been is that too much has been assumed or made of a

single person in that role, which meant that the digital chiefswere just stretched in a million directions.

Finally, digital was never a centrepiece in the competitivestrategy of traditional agencies. Although they wanted greaterdigital know-how, such all-purpose shops mainly tout their

breadth of services, not their digital prowess.

The reality is there is a degree to which these agenciesfeel the need to get digital, said one source. And if we

remember at their heart that theyre advertising agencies, then

theres probably only a certain degree [of digital expertise]that they need to have as creative services companies.

This reality seemingly has sunk in. Chief executives claim

that their agencies no longer need chief digital officers, andthey assert that digital is not all or nothing, in TBWAs Tom

Carrolls words. Our guys get closer and closer to doing what

[digital agencies do]. We get closer every dayand thatsenough.

In response, Ogilvys John Seifert argues for closer digital

integration rather than a distinct corporate structure fordigital experts, because the rank and file have to be part of

this digital revolution. The chief digital officers who havedeparted generally agree, noting that Digital needs to be sointegral to the organisation that its not distinguished by a

group or individual leaders. In effect, traditional creativeagencies are taking a bottom-up rather than top-downapproach to their digital transformation.

Sources: B. Morrissey and A. McMains, The Twisting Path to New Agency Models, AdWeek, 10 May 2010; A. McMains, NewStrategies Replace Solo Acts, AdWeek, 28 June 2010.

CASE STUDY

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SIMMONS

LABORATORIES

ADAPTED BY WILLIAM STARBUCK FROM A CASE WRITTENBY ALEX BAVELAS

Brandon Newbridge was sitting alone in the conference roomof the laboratory. The rest of the group had gone.

One of the secretaries had stopped and talked for a whileabout her husbands coming enrolment in graduate school andhad finally left. Brandon, alone in the laboratory, slid a little

farther down in his chair, looking with satisfaction at theresults of the first test run of the new photon unit.He liked to stay after the others had gone. His appointment as

project head was still new enough to give him a deep sense ofpleasure. His eyes were on the graphs before him, but in hismind, he could hear Dr William Goh, the project head, saying

again: Theres one thing about this place you can bank on. Thesky is the limit for anyone who can produce! Newbridge feltagain the tingle of happiness and embarrassment. Well, damnit, he said to himself I have produced. He wasnt kiddinganybody. He had come to the Simmons Laboratories twoyears ago. During a routine test of some rejected Clansoncomponents, he had stumbled on the idea of the photon

correlator, and the rest just happened. Goh had beenenthusiastic: a separate project had been set up for furtherresearch and development of the device, and he had been

given the job of running it. The whole sequence of events stillseemed a little miraculous to Newbridge.

He shrugged himself out of his reverie and was bending

determinedly over the sheets when he heard someone comeinto the room behind him. He looked up expectantly; Gohoften stayed late himself and now and then dropped in for a

chat. This always made the days end especially pleasant forNewbridge. But it wasnt Goh. The man who had come in was astranger. He was tall and thin. He wore steel rimmed glasses

and had a very wide leather belt with a large brass buckle.The stranger smiled and introduced himself. Im Lester

Zapf. Are you Brandon Newbridge? They shook hands.

Dr Goh said I might find you in. We were talking aboutyour work, and Im very much interested in what you aredoing. Newbridge waved to a chair. Zapf didnt seem to

belong in any of the standard categories of visitors: customer,visiting firefighter, shareholder.

Newbridge pointed to the sheets on the table. There arethe preliminary results of a test were running. We have a newgadget by the tail and were trying to understand it. Its notfinished, but I can show you the section were testing. He

stood up, but Zapf was deep in the graphs. After a moment, helooked up with an odd grin. These look like plots of a Jenningssurface. Ive been playing around with some autocorrelation

functions of surfacesyou know that stuff. Newbridge, whohad no idea what he was referring to, grinned back andnodded, and immediately felt uncomfortable.

Let me show you the monster, he said, and led the way tothe workroom.

After Zapf left, Newbridge slowly put the graphs away,

feeling vaguely annoyed. Then, as if he had made a decision, hequickly locked up and took the long way out so that he would

pass Gohs office. But the office was locked. Newbridgewondered whether Goh and Zapf had left together.

The next morning, Newbridge dropped into Gohs office,mentioned that he had talked with Zapf, and asked who hewas. Sit down for a minute, Goh said. I want to talk to you

about him. What do you think of him? Newbridge repliedtruthfully that he thought Zapf was very bright and probablyvery competent. Goh looked pleased.

Were taking him on, he said. Hes had a very goodbackground in a number of laboratories, and he seems to haveideas about the problems were tackling here. Newbridge

nodded in agreement, instantly wishing that Zapf would notbe placed with him. I dont know yet where he will finallyland, Goh continued, but he seems interested in what you are

doing. I thought he might spend a little time with you by wayof getting started. Newbridge nodded thoughtfully. If hisinterest in your work continues, you can add him to your

group.Well, he seemed to have some good ideas even without

knowing exactly what we are doing, Newbridge answered. Ihope he stays; wed be glad to have him. Newbridge walkedback to the lab with mixed feelings.

He told himself that Zapf would be good for the group. He

was no dunce; hed produce. Newbridge thought again ofGohs promise when he had promoted him: the person who

produces gets ahead in this outfit. The words now seemed to

carry the overtones of a threat.That day Zapf didnt appear until mid-afternoon. He

explained that he had had a long lunch with Goh, discussing his

place at the lab. Yes, said Newbridge, I talked with Jerry thismorning about it, and we both thought you might work with

us for a while.

Zapf smiled in the same knowing way that he had smiledwhen he mentioned the Jennings surfaces. Id like to, he said.

Newbridge introduced Zapf to the other members of the

lab. Zapf and Link, the groups mathematician, hit it off welland spent the rest of the afternoon discussing a method for

analysing patterns that Link had been worrying over the lastmonth.

It was 6.30 pm when Newbridge finally left the lab that

night. He had waited almost eagerly for the end of the day tocomewhen they would all be gone and he could sit in thequiet rooms, relax and think it over.

Think what over? he asked himself. He didnt know.Shortly after 5.00 pm, they had almost all gone except Zapf,and what followed was almost a duel. Newbridge was

annoyed that he was being cheated out of his quiet period andfinally resentfully determined that Zapf should leave first.

Zapf was sitting at the conference table reading, and

Newbridge was sitting at his desk in the little glass-enclosedcubby he used during the day when he needed to beundisturbed. Zapf had got out the last years progress reports

and was studying them carefully. The time dragged.Newbridge doodled on a pad, the tension growing inside him.What the hell did Zapf think he was going to find in the

reports?Newbridge finally gave up, and they left the lab together.

Zapf took several of the reports with him to study in theevening. Newbridge asked him if be thought the reports gave a

clear picture of the labs activities.Theyre excellent, Zapf answered with obvious sincerity.

CASE STUDY

8


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Theyre not only good reports; what they report is damngood, too! Newbridge was surprised at the relief he felt and

grew almost jovial as he said goodnight.Driving home, Newbridge felt more optimistic about Zapf

s presence in the lab. He had never fully understood the

analysis that Link was attempting. If there was anything wrongwith Links approach, Zapf would probably spot it.

And if Im any judge, he murmured, he wont be

especially diplomatic about it.He described Zapf to his wife, who was amused by the

broad leather belt and brass buckle. Its the kind of belt that

pilgrims must have worn, she laughed. Im not worried abouthow he holds his pants up, he laughed with her. Im afraid thathes the kind that just has to make like a genius twice each day.

And that can be pretty rough on the group.Newbridge had been asleep for several hours when he was

jerked awake by the telephone. He realised it had rung several

times. He swung off the bed muttering about damn fools andtelephones. It was Zapf. Without any excuses, apparently

oblivious of the time, he plunged into an excited recital ofhow Links patterning problem could be solved.

Newbridge covered the mouthpiece to answer his wifes

stage-whispered Who is it? Its the genius, replied

Newbridge. Zapf, completely ignoring the fact that it was 2.00am, continued excitedly, starting in the middle of an

explanation of a completely new approach to certain photon

lab problems that he had stumbled on while analysing pastexperiments. Newbridge managed to put some enthusiasm in

his own voice and stood there, half-dazed and very

uncomfortable, listening to Zapf talk endlessly about what hehad discovered. It was probably not only a new approach but

also an analysis that showed the inherent weakness of the

previous experiment and how experimentation along that linewould certainly have been inconclusive. The following day

Newbridge spent the entire morning with Zapf and Link, the

mathematician, the customary group morning meeting havingbeen called off so that Zapf s work of the previous night could

be gone over intensively. Zapf was very anxious that this bedone, and Newbridge was not too unhappy to call off themeeting, for reasons of his own.

For the next several days Zapf sat in the back office thathad been turned over to him and did nothing but read theprogress reports of the work that had been done in the last six

months. Newbridge caught himself feeling apprehensive aboutthe reaction that Zapf might have to some of his work. He wasa little surprised at his own feelings. He had always been

proudthough he had put on a convincingly modest faceofthe way in which new ground in the study of photon-measuring devices had been broken in his group. Now he

wasnt sure, and it seemed to him that Zapf might easily showthat the line of research they had been following was unsoundor even unimaginative.

The next morning, as was the custom, the members of thelab, including the secretaries, sat around a conference table.Newbridge always prided himself on the fact that the work of

the lab was guided and evaluated by the group as a whole, andhe was fond of repeating that it was not a waste of time toinclude secretaries in such meetings. Often, what started outas a boring recital of fundamental assumptions to a naive

listener uncovered new ways of regarding these assumptionsthat would not have occurred to the researcher who had longago accepted them as a necessary basis for his or her work.

These group meetings also served Newbridge in anothersense. He admitted to himself that he would have felt far less

secure if he had had to direct the work out of his own mind, soto speak. With the group meeting as the principle ofleadership, it was always possible to justify the exploration of

blind alleys because of the general educative effect on theteam. Zapf was there, and Link was sitting next to him, theirconversation about Links mathematical study apparently

continuing from yesterday. The other members, BobDavenport, Georgia Thurlow and Arthur Oliver, were waitingquietly.

Newbridge, for reasons that he didnt quite understand,proposed for discussion this morning a problem that all ofthem had spent a great deal of time on previously, before

coming to the conclusion that a solution was impossible, thatthere was no feasible way of treating it in an experimentalfashion. When Newbridge proposed the problem, Davenport

remarked that there was hardly any use going over it again; hewas satisfied that there was no way of approaching the

problem with the equipment and the physical capacities ofthe lab.

This statement had the effect of a shot of adrenaline on

Zapf. He said he would like to know what the problem was in

detail and, walking to the blackboard, began setting down thefactors as various members of the group noted the problem

and simultaneously listed the reasons it had been abandoned.

Very early in the description of the problem, it wasevident that Zapf was going to disagree about the

impossibility of attacking it. The other members of the group

realised this, and their descriptions and recounting of thereasoning that had led to its abandonment dwindled away.

Zapf began his statement, which appeared had to have been

prepared in advance, though Newbridge knew this wasimpossible. He couldnt help being impressed with the

organised and logical way in which Zapf was presenting ideas

that must have occurred to him only a few minutes earlier.What Zapf had to say, however, left Newbridge feeling a

mixture of annoyance, irritation and smug superiority overZapf, in at least one area. Zapf held the opinion that the way inwhich the problem had been analysed was very typical of

group thinking. With an air of sophistication that made itdifficult for a listener to dissent, he proceeded to comment onthe American emphasis on team ideas, satirically describing

the ways in which they led to a high level of mediocrity.During this time, Newbridge observed that Link stared

studiously at the floor, and he was very conscious of Georgia

Thurlows and Bob Davenports glances towards him at severalpoints of Zapf s little speech. Inwardly, Newbridge couldnthelp feeling that this was one point at least on which Zapf was

off on the wrong foot. The whole lab, following Gohs lead,talked and practiced the theory of small research teams as thebasic organisation for effective research. Zapf insisted that the

problem could be approached and that he would like to studyit for a while himself.

Newbridge ended the morning session by remarking that

the meetings would continue and that the very fact that asupposedly insoluble experimental problem was now going toget another chance was another indication of the value ofsuch meetings. Zapf immediately remarked that he was not at

all averse to meetings to inform the group about the progressof its members. The point he wanted to make was thatcreative advances were seldom accomplished in such


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meetings, that they were made by an individual living with aproblem closely and continuously, in a rather personal

relationship to it. Newbridge went on to say to Zapf that hewas very glad that Zapf had raised these points and that hewas sure the group would profit by re-examining the basis on

which they had been operating. Newbridge agreed thatindividual effort was probably the basis for making majoradvances He considered the group meetings useful primarily

because they kept the group together and they helped theweaker members of the group keep up with the ones whowere able to advance more easily and quickly in the analysis of

problems.It was clear as days went by and meetings continued that

Zapf came to enjoy them because of the pattern that the

meetings assumed. It became typical for Zapf to hold forth,and it was unquestionably clear that he was more brilliant,better prepared on the various subjects that were germane to

the problem being studied, and more capable of going aheadthan anyone there. Newbridge grew increasingly disturbed as

he realised that his leadership of the group had been, in fact,taken over. Whenever the subject of Zapf was mentioned inoccasional meetings with Dr Goh, Newbridge would comment

only on the ability and obvious capacity for work that Zapf

had. Somehow he never felt that he could mention his owndiscomfort, not only because it revealed a weakness on his

part, but also because it was quite clear that Goh himself was

considerably impressed with Zapf s work and with thecontacts he had outside the photon laboratory.

Newbridge now began to feel that perhaps the intellectual

advantages that Zapf had brought to the group did not quitecompensate for what he felt was evidence of a breakdown in

the cooperative spirit they had enjoyed before Zapf s arrival.

More and more of the morning meetings were skipped. Zapf sopinion concerning the abilities of others of the group, except

for Link, was obviously low. At times during morning meetings

or in smaller discussions he had come close to rudeness,refusing to pursue an argument when he claimed it was based

on another persons ignorance of the facts involved.His impatience of others led him to also make similar

remarks to Dr Goh. Newbridge inferred this from a

conversation with Goh in which Goh asked whetherDavenport and Oliver were going to be kept on; his failure tomention Link led Newbridge to feel that his comments were

the result of private conversations between Zapf and Goh.It was not difficult for Newbridge to make a quite

convincing case about whether the brilliance of Zapf was

sufficient recompense for the break up of the group. He spokeprivately with Davenport and Oliver, and it was quite clearthat both were uncomfortable because of Zapf. However,

Newbridge didnt press the discussion beyond the point ofhearing them say that they did feel awkward and that it wassometimes difficult to understand the arguments Zapf

advanced, but often embarrassing to ask him to fill in the basisfor his arguments. Newbridge did not interview Link in thismanner.

About six months after Zapf s arrival at the photon lab, ameeting was scheduled to give the sponsors of the researchsome idea of the work and its progress. It was customary atthese meetings for project heads to present the research being

conducted in their groups. The members of each group wereinvited to other meetings, held later in the day and open to all,

but the special meetings were usually attended only byproject heads, the head of the laboratory and the sponsors.

As the time for the special meeting approached, it seemedto Newbridge that he must avoid the presentation at all cost.He felt that he could not trust himself to present the ideas and

work that Zapf had advanced, because of his apprehensionabout whether he could present them in sufficient detail andanswer questions about them. However, he also did not feel

he could ignore these newer lines of work and present onlythe material that he had done or that had been started beforeZapf s arrival. He believed also that it would not be beyond

Zapf at all, in his blunt and undiplomatic way, to comment onNewbridges presentation and reveal his inadequacy if he wereat the meeting. It also seemed quite clear that it would not be

easy to keep Zapf from attending the meeting, even though hewas not on the administrative level of those invited.

Newbridge found an opportunity to speak to Goh and

raised the question. He told Goh that, with the meetingscoming up and with the interest in the work and with Zapf s

contributions to the work, Zapf would probably like to cometo the meetings, but there was a question of how the others inthe group would feel if only Zapf were invited. Goh passed

this over very lightly by saying that he didnt think the group

would fail to understand Zapf s rather different position andthat Zapf certainly should be invited.

Newbridge immediately said he agreed: Zapf should

present the work because much of it was work he had done,and this would be a nice way to recognise Zapf s contributions

and to reward him, because he was eager to be recognised as a

productive member of the lab. Goh agreed, and so the matterwas decided.

Zapf s presentation was very successful and in some ways

dominated the meeting. He attracted the interest andattention of many of those who had come, and a long

discussion followed his presentation. Later in the evening,

during the cocktail period before dinner, with the entirelaboratory staff present, a little circle of people formed about

Zapf. One of them was Goh himself, and a lively discussiontook place regarding the application of Zapf s theory.

All of this disturbed Newbridge, but his reaction and

behaviour were characteristic. He joined the circle, praisedZapf to Goh and to others, and remarked on the brilliance ofthe work. Newbridge, without consulting anyone, began at this

time to take some interest in the possibility of a jobelsewhere. After a few weeks, he found that a new laboratoryof considerable size was being organised in a nearby city and

that the kind of training he had would enable him to get aproject-head job, equivalent to the one he had at the lab withslightly more money.

He immediately accepted it and notified Goh by letter,which he mailed on a Friday night to Gohs home. The letterwas quite brief, and Goh was stunned. The letter merely said

that he had found a better position; that he didnt want toappear at the lab anymore for personal reasons; that he wouldbe glad to come back at a later time to assist if there was any

mix-up in the past work; that he felt sure Zapf could supplyany leadership that the group required; and that his decisionto leave so suddenly was based on personal problemshehinted at problems of health in his family, his mother and

father. All of this was fictitious, of course. Goh took it at facevalue but still felt that this was very strange behaviour andquite unaccountable, for he had always felt his relationship


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with Newbridge to be warm, and that Newbridge was satisfiedand, in fact, quite happy and productive.

Goh was considerably disturbed, because he had alreadydecided to place Zapf in charge of another project that wasgoing to be set up very soon. He had been wondering how to

explain this to Newbridge, in view of the obvious help thatNewbridge was getting from Zapf and the high regard in whichhe held him. Goh had even considered the possibility that

Newbridge would want to add another person to his staff withthe same kind of background and training that Zapf had, as thishad proved so valuable.

Goh did not make any attempt to meet Newbridge. In a way,he felt aggrieved about the whole thing. Zapf, too, was

surprised at the suddenness of Newbridges departure. WhenGoh asked Zapf whether he preferred to stay with the photongroup instead of the new project for the Air Force, he chose

the Air Force project and went on to that job the followingweek. The photon lab was hard hit. The leadership of the labwas given to Link, with the understanding that it would be

temporary until someone could come in to take over.


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PROFITEL INC.

BY STEVEN L. MCSHANE, THE UNIVERSITY OF WESTERNAUSTRALIA

As a formerly government-owned telephone monopoly,Profitel enjoyed many decades of minimal competition. Even

today, as a publicly traded enterprise, the companys almostexclusive control over telephone copper wiring across thecountry keeps its profit margins above 40%. Competitors in

telephone and DSL broadband continue to rely on Profitelswholesale business, which generates substantially more profitthan similar wholesale services in many other countries.

However, Profitel has stiff competition in the mobiletelephone business, and other emerging technologies (e.g.voice over internet protocol, or VOIP) threaten Profitels

dominance. Because of these threats, Profitels board ofdirectors decided to hire an outsider as the new chiefexecutive.

Although several qualified candidates expressed aninterest in Profitels top job, the board selected Lars Peeters,who had been the CEO of a publicly traded Europeantelephone company for six years. This was followed by a brief

stint as CEO of a mobile telephone company in the UnitedStates until it was acquired by a larger organisation. Profitelsboard couldnt believe its good fortune; Peeters brought

extensive industry knowledge and global experience, a high-octane energy level, self-confidence, decisiveness and acongenial yet strongly persuasive interpersonal style. He also

had a unique presence, which caused people to pay attentionand respect his leadership.The board was also impressed with Peeters strategy to

bolster Profitels profit margins. This included investing heavilyin the latest wireless broadband technology (for both mobiletelephone and computer internet services) before

competitors could gain a foothold, cutting costs through lay-offs and the reduction of peripheral services, and puttingpressure on the government to deregulate Profitels

traditional and emerging businesses. When Peeters describedhis strategy to the board, one board member commented thatthis was the same strategy Peeters had used in his previous

two CEO postings. Peeters dismissed the comment, saying thateach situation is unique.

Peeters lived up to his reputation as a decisive executive.Almost immediately after taking the CEO job at Profitel, he

hired two executives from the European company at which hehad previously worked. Together, over the next two years,they cut the workforce by 5% and rolled out the new wireless

broadband technology for mobile phones and the internet.Costs increased somewhat due to downsizing expenses andthe wireless technology rollout. Profitels wireless broadband

subscriber list grew quickly because, in spite of its very highprices, the technology faced limited competition and Profitelwas pushing customers off the older technology to the new

network.In the meantime, however, Profitels customer satisfaction

ratings fell. A national consumer research group reported that

Profitels broadband offered the countrys worst value.Employee morale also declined due to lay-offs and thecompanys public image problems. Some industry experts also

noted that Profitel selected its wireless technology withoutevaluating the alternative emerging wireless technologies,

which had been gaining ground in other countries. Peetersaggressive campaign against government regulation also hadunintended consequences. Rather than achieving less

regulation, criticising the government and its

telecommunications regulator made Profitel look even morearrogant in the eyes of both customers and government

leaders.

Profitels board was troubled by the companys lacklustreshare price, which had declined 20% since Peeters was hired.

Some board members also worried that the company had bet

on the wrong wireless technology and that subscription levelswould stall far below the number necessary to achieve the

profits projected in Peeters strategic plan. This concern came

closer to reality when a foreign-owned competitor won a $1billion government contract to improve broadband services in

regional areas of the country. Profitels proposal for that

regional broadband upgrade had specified high prices andlimited corporate investment, but Peeters had been confident

that Profitel would be awarded the contract because of itsmarket dominance and existing infrastructure with the newwireless network. When the government decided otherwise,

Profitels board fired Peeters, along with the two executives hehad hired from the European company. Now, the board had tofigure out what went wrong and how to avoid this problem in

the future.

CASE STUDY

9


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