CASE SOLUTIONS FOR Organization Theory & Design, 13th Edition Richard L. Daft Chapter 1-12

CASE SOLUTIONS FOR Organization Theory & Design, 13th Edition Richard L. Daft Chapter 1-12

INTEGRATIVE CASE 1.0

DISORGANIZATION AT SEMCO: HUMAN RESOURCE PRACTICES AS A STRATEGIC ADVANTAGE OVERVIEW Semco was originally founded as a maker of marine pumps in Sao Paulo, Brazil, in 1953. For decades, under the leadership of founder Antonio Curt Semler, Semco operated in a traditional hierarchical fashion with strict rules and policies and tight bureaucratic control. However, after Ricardo Semler took the helm, he envisioned a very different type of workplace, one that is operated by self-managed teams in a decentralized design. Every six months, the organization reinvents itself, with one of six rotating CEOs taking the lead and a multitude of teams reorganizing based on current performance and future opportunities. Since that time, and led primarily by the employees of Semco rather than top leadership, Semco has grown into a highly successful, diversified organization with many related and unrelated business interests.

The organization loses very few employees through attrition, yet it receives thousands of applications from job candidates eager to work in a respected and respectful organization. In general, the elimination of bureaucracy has allowed this organization to become extremely agile and adaptive in an ever-changing business environment.

DISCUSSION QUESTIONS TO ASSIGN 1. How would you describe Semco’s organization design before and after the changes implemented by Ricardo Semler?

2. In what ways is Semco’s design similar to and different from the holacracy structure described in Chapter 3?

3. Describe the rather unusual Human Resource policies now in effect at Semco.

4. How did Semco handle downsizing during a weak economy? How did that approach benefit the company?

DISCUSSION 1. How would you describe Semco’s organization design before and after the changes implemented by Ricardo Semler?

In the early days, Semco was a classic hierarchical structure with centralized control. In fact, Semco’s management maintained a very tight control over

employees in the organization. Employees worked extremely hard and lived in fear of losing their jobs for failing to comply with all of the policies or to exceed high expectations. Semler himself adopted this mindset until stress started causing health issues, which prompted him to re-evaluate this management approach for himself and for all Semco employees.

Fairly rapidly, he led the organization to the ultimate in a decentralized design that functions autonomously. Employees work in self-managed teams, and their individual performance and contribution to the overarching goals of the organization determine whether they remain with the company and advance in terms of salary and other forms of compensation. Horizontal communication linkages are strong, and decision-making authority resides in the hands of all employees. Transparency is an important value within the organization, and all employees are given access to all financial documents, including salary and compensation information. Semco appears to have a very motivated workforce that finds fulfillment in work well done. As one employee reported, there is reciprocity: Semco respects its employees and treats them like adults who are capable of doing the right thing for the organization, and in return, satisfied employees work hard and make good decisions that benefit the organization.

2. In what ways is Semco’s design similar to and different from the holacracy structure described in Chapter 3?

Semco’s design is very similar to the holacracy structure described in Chapter 3.

Teams scattered in diverse locations around Sao Paulo form the fundamental building blocks of the organization, and these teams design and govern themselves. Teams evolve and disband organically, and teams at Semco have been instrumental in expanding the company into new businesses as well as exiting businesses that are not performing well and contributing to the overall health of the organization. One unique aspect of Semco’s teams is that they are re-evaluated on a more regimented schedule every six months, as opposed to evolving on an ongoing basis. As in most holacracies, roles within the teams are negotiated among team members, and each employee’s contribution to the team (particularly those who serve as team leaders) is evaluated by the employee’s peers. If a team member is not contributing, he or she may not be invited to participate in another team in the next six-month session, which is a motivating factor for individual performance. Another unique aspect of Semco’s structure is the executive team made up of six individuals who take turns serving as CEO. 3. Describe the rather unusual Human Resource policies now in effect at Semco.

Two of the major HR issues discussed in the case are working hours and compensation. Many of Semco’s employees are allowed to work as many hours as they wish from whatever location they wish. Their performance is judged solely on how well they deliver on desired outcomes for the organization. Even in

the manufacturing arm of the organization, workers jointly determine when they will work together to produce the company’s various products. Semco employees also determine their own salaries and other forms of compensation, as well as other benefits. If an employee feels he or she deserves a raise, he or she gets one. However, there is an element of peer pressure at work within Semco, or what Semler refers to as the ―free market‖ for employment within the company.

The organization makes all compensation information available to all employees, which motivates employees to be reasonable and not abuse this system.

Additionally, if an employee does not contribute and earn the compensation he or she has chosen, that employee will most likely be shut out from all of the teams.

That employee will be deemed superfluous to the organization and will be let go.

4. How did Semco handle downsizing during a weak economy? How did that approach benefit the company?

During an economic slump in Brazil in the 1990s, Semco employees took the initiative in implementing several strategies for surviving the crisis. First, they took ownership of several functions that had been outsourced and brought them back in-house. That means that workers voluntarily shifted to new or different roles in order to maintain their employment. A second, more unusual program allowed employees to set up their own individual businesses within Semco, using the company’s equipment. These employees acted as subcontractors for Semco, but they also took on work from other organizations. Employees enjoyed the advantage of financial assistance in starting their own businesses, and Semco reduced expenses while retaining the services of knowledgeable workers.

INTEGRATIVE CASE 2.0

WALMART’S FAILURES IN ENTERING THREE DEVELOPED MARKETS OVERVIEW For nearly three decades, Walmart has been expanding globally, and approximately 30 percent of the organization’s revenue comes from outside the United States. However, Walmart has had three significant failures in terms of global expansion: Germany, South Korea, and Japan. Walmart attempted to enter the German market by acquiring two existing retail chains, but the low-cost leader was unable to negotiate the lowest prices from suppliers, preventing it from offering significant discounts to price-conscious German shoppers. Walmart also attempted to enter the Korean market through acquisition, but in this case the organization failed to secure the right product mix or to adapt its marketing tactics to the local customs. Walmart eventually pulled out of both markets at a loss estimated to be in the hundreds of millions. Walmart continues to operate in Japan through its acquisition of the Seiyu retail chain, but locals generally perceive Walmart’s low-cost products to be low in quality as well. In short, Walmart failed to adapt its products and marketing to local cultural preferences, resulting in disastrous losses.

DISCUSSION QUESTIONS TO ASSIGN 5. How do you think it is both an advantage and a disadvantage to be as big as Walmart when entering a foreign market?

6. What were Walmart’s assumptions about Germany, Korea, and Japan that turned out to be wrong? Explain.

7. What mistakes might managers make expanding internationally when applying assumptions based on success in their home country?

8. What modes of entry did Walmart use for expanding international? Do you think some modes are more likely to succeed for a huge retail company like Walmart?

Explain.

DISCUSSION 5. How do you think it is both an advantage and a disadvantage to be as big as Walmart when entering a foreign market?

Walmart’s massive size gives it the financial resources to acquire existing retailers or to make other alliances that enable the firm to enter a new market fairly easily and quickly. In some cases, its size also gives it negotiating power with suppliers, which allows the firm to maintain its reputation as a low-cost leader. However, Walmart’s reputation is not always well received in every market. An organization this size is also typically fairly rigid and bureaucratic,

which can make it challenging for the organization to flexibly adapt to the unique cultural needs and preferences of each market.

6. What were Walmart’s assumptions about Germany, Korea, and Japan that turned out to be wrong? Explain.

Walmart’s most significant strategy is to be the low-cost retail leader. In Germany, the organization assumed it could negotiate super low prices with suppliers, which it would then pass on to consumers, but this was not the case.

Walmart could not become the low-cost leader in this market, and this problem was compounded by poor locations acquired outside major residential districts.

Price-conscious German shoppers refused to travel longer distances without the reward of getting the lowest prices. Walmart also assumed that many of its standard marketing and customer service approaches would work, but these were a bad fit with the German culture, especially in the retail industry.

Walmart made similar missteps in South Korea, believing that many of its standard marketing and customer service approaches would work, and here again these were a mismatch with the Korean culture. For example, Koreans prefer attractive stores with bright, eye-catching displays, but Walmart used its traditional stripped-down store design, which Koreans found unappealing.

Furthermore, Walmart assumed the Korean market would appreciate an alldiscount retailer, but in actuality, Koreans prefer a mix of low-cost and luxury goods in retail stores.

In Japan, Walmart’s low-cost leadership strategy is also working against it.

Japanese shoppers generally equate low cost with poor quality. Here again, Walmart also assumed that it could easily set up a network of suppliers, but it has found that to be more difficult than anticipated.

7. What mistakes might managers make expanding internationally when applying assumptions based on success in their home country?

As indicated by the specific examples listed in question 2, an organization cannot assume that what works at home will work abroad. The pricing structure, product mix, location strategies, or marketing methods that have worked effectively in the home country may not work in every country. Additionally, managers should anticipate challenges in terms of setting up supply chains and negotiating prices with suppliers within new markets, and as always, managers should expect stiff competition from domestic players.

8. What modes of entry did Walmart use for expanding internationally? Do you think some modes are more likely to succeed for a huge retail company like Walmart? Explain.

In Germany and South Korea, Walmart used acquisitions as its entry mode, while in Japan it started with a joint venture with Seiyu, which eventually became a full acquisition. The organization has also used start-ups and joint ventures to enter new markets.

The biggest advantage to acquiring and retaining a successful brand or entering into a joint venture with a successful brand is the name recognition and goodwill that comes from the domestic firm. These entry modes may also give the foreign entrant access to advantageous locations as well as favorable connections with a network of suppliers. If used properly, managers from the acquired firm or joint venture partner may be able to provide localized knowledge and insights that lead to success.

INTEGRATIVE CASE 3.0

IKEA: SCANDINAVIAN STYLE OVERVIEW What started with one entrepreneur selling staples to Swedish families during the postWWII economic boom has grown exponentially into a worldwide phenomenon: IKEA. Yet, the organization still retains its original cultural emphasis on such qualities as humility, common sense, and honesty. The company’s mission is to bring stylish, yet practical home furnishing solutions to the masses at affordable prices, which it achieves by negotiating smart deals with suppliers and selling assemble-at-home products through warehouse-like stores. Growth has come in two forms: one being the tremendous number of products now offered by the company, and the other being the number of stores the organization has opened and plans to open in new markets globally. However, global expansion has not always been smooth. The organization has had to learn some valuable lessons in adapting its products and processes to fit some markets, lessons that it hopes to apply as it continues to enter new markets, such as India.

DISCUSSION QUESTIONS TO ASSIGN 9. Evaluate IKEA’s approach to entering India. What do you think IKEA learned from its previous experiences with international expansion to guide its entry into India?

10. Describe IKEA’s unique culture. Do you think it should try to maintain the same strong culture values while expanding globally? Explain.

11. How would you describe IKEA’s approach to organization design?

12. How does IKEA stay innovative? Do you think its approach to innovation is related to its culture or structure? Explain.

DISCUSSION

1. Evaluate IKEA’s approach to entering India. What do you think IKEA learned from its previous experiences with international expansion to guide its entry into India?

IKEA’s entrance into global markets such as China and the U.S. taught the company many valuable lessons, especially about the need to make at least some adaptations to local culture and preferences. IKEA discovered that in some markets it would have to shift its focus to a different demographic, adjust its pricing structure, and modify its products and the way they are presented in stores. Experience in the U.S. also revealed that the organization must find a balance in how it treats its employees—keeping salaries somewhat comparable across the organization while also comparable to local expectations. IKEA will need to apply all of these lessons to its entry into India. While India’s young population who now possess greater financial resources seems to provide a tremendous opportunity, the company will need to adapt to fit Indian shoppers’ preferences for traditional goods purchased in small stores and to solve the problem of home delivery, given that most Indians use public transportation. This explains why IKEA is taking its time and doing so much market research before opening its first stores in India.

2. Describe IKEA’s unique culture. Do you think it should try to maintain the same strong culture values while expanding globally? Explain.

IKEA’s culture is one of its greatest strengths. Rooted in its Swedish homeland, the IKEA Way focuses on providing stylish, yet humble and affordable home goods for the masses, especially for those who want style and modest quality at lower prices. The organization’s culture emphasizes common sense, equality, and honesty combined with innovation, fun, and enthusiasm. Most students will agree that IKEA can and should continue to embrace its culture as it expands globally. In many instances, it will be possible for the organization to retain its commitment to providing innovative, stylish products at lower prices, even as it learns to adapt some products, work with a growing number of differing suppliers, and modify its stores and delivery processes to meet localized tastes and preferences. The essence of the IKEA Way can remain, even if presented in slightly different variations.

3. How would you describe IKEA’s approach to organization design?

IKEA possesses a very flat organizational structure, with only four levels from the CEO to the salespeople on the showroom floors. An annual practice is ―Antibureaucracy Week,‖ when executives and managers return to the showroom floors and stockrooms to re-familiarize themselves with customers and to observe cultural trends and shifts. IKEA also believes in keeping managers in touch with customers through ongoing surveys of customers regarding their experiences with IKEA’s stores, employees, and products.

4. How does IKEA stay innovative? Do you think its approach to innovation is related to its culture or structure? Explain.

IKEA stays innovative by maintaining a dialogue with its customers, and the company’s innovative spirit seems to be a product primarily of its problem-solving culture but is certainly enhanced by the free flow of information and lack of bureaucracy within the organization. IKEA is famous for continuously conducting surveys of its customers, and it also sends design teams out into consumers’ homes so they can better understand the way people live and what problems they encounter that could be solved through better design. The organization also makes a point of bringing in top designers who add style to the functional products they design, and who are now looking at local preferences for inspiration. Additionally, IKEA listens to its employees of all levels, who interact with customers and then often make valuable suggestions based on their experiences with those customers.

INTEGRATIVE CASE 4.0

ENGRO CHEMICAL PAKISTAN LIMITED: RESTRUCTURING THE MARKETING DIVISION OVERVIEW When Exxon divested its fertilizer business in 1991, the Pakistani unit of the company became Engro Chemical. Over the years, the organization shed its bureaucratic ways and became much more decentralized. However, the structure of the marketing department still created a number of challenges for the organization, so in 2008, Khalid Mir, General Manager Marketing, set out to restructure the marketing division. Despite following many savvy tactics in designing and implementing this restructuring, the change process did not go as smoothly as expected and several nagging issues still remained. Fortunately, after careful analysis, Mir recognized that his new structure needed only additional tweaks and not another complete overhaul.

DISCUSSION QUESTIONS TO ASSIGN 1. How would you describe the culture at Engro?

2. Why was there a need for restructuring?

3. What challenges did Engro face during the restructuring?

4. Evaluate the outcomes of the structural change.

DISCUSSION 9. How would you describe the culture at Engro?

Based on the information provided in the case, it would appear that Engro Chemical is functioning in a fairly stable environment and possesses an

achievement culture, which places an emphasis on the achievement of specific goals. Employees are expected to meet specified levels of performance, and their time spent on various tasks is carefully measured. However, there is also a strong element of the clan culture. The GM of Marketing, Khalid Mir, places a high value on employees and their feedback, which creates an environment that promotes open communication.

10. Why was there a need for restructuring?

Engro Chemical had begun to face major problems relating to employee turnover, inventory control, low market development, and suboptimal merchandising efforts in its original marketing-division structure. Employee turnover was high, especially among Tier III sales officers, because they felt there was a mismatch between their advanced level of managerial skills and the actual content of the job. Additionally, sales officers felt they were spending too much time traveling and not enough time on market development and merchandising efforts. Inventory control was also a problem in that distribution officers were stretched too thin, preventing them from providing efficient inventory control.

11. What challenges did Engro face during the restructuring?

Although the restructuring yielded some positive results, there were still a number of unresolved issues. First, under the old structure, standard operating procedures were clear and well-documented. But months after the new structure had been implemented, many employees in entirely new roles had yet to be fully trained and were still functioning without clear procedures or any written guidelines. Also, the reporting structure was not completely clear, leaving some employees confused about who to turn to for guidance and decision-making.

Some employees also felt that the company had not made enough of an effort to deal with the anxiety and disorientation of people losing their authority and power in the new structure. At the same time, however, the AMMs had gained so many new responsibilities and so much authority that they felt over-stretched and wanted more support, including IT support. And finally, while communication within the marketing division had increased, they did not yet feel a synergy with all other functional divisions: Manufacturing, Finance and Planning, Human Resource and Public Affairs, and Corporate Services.

12. Evaluate the outcomes of the structural change.

Ultimately, Mir was able to achieve many of his desired outcomes by restructuring.

Sales officers were freed up to devote far more effort to market development and merchandising, and internal communication within the department improved dramatically, eliminating delays in resolving grievances between customers, the field salesforce, and top management. The creation of the new Distribution &

Merchandising Officer role yielded a much more efficient control over inventory.

And in general, greater job satisfaction emerged, which reduced the degree of employee turnover. Employees felt their jobs corresponded to their education and skill levels, and they saw a clear path forward for advancement within the organization.

INTEGRATIVE CASE 5.0 THE NEW YORK TIMES VERSUS AMAZON OVERVIEW As this case reveals, the perception of an organization’s internal culture can vary widely depending on who’s talking. On August 15, 2015, two New York Times reporters published an ―insider’s look‖ at Amazon, the retail giant. According to their sources, which they claim to have corroborated carefully, Amazon’s hard-driving, highly competitive work environment often pushes people far too hard. The article detailed stories of workers sabotaging each other to make their own performance look better and of managers treating employees facing difficult life situations, such as illness or death in the family, without any empathy or compassion. However, Amazon’s founder and CEO Jeff Bezos, as well as other longtime employees, describe the organization as fiercely fast-paced and demanding, which they say attracts and satisfies high achievers.

DISCUSSION QUESTIONS TO ASSIGN 1. Using concepts from Chapter 11, how would you describe Amazon’s organizational culture? Discuss.

2. How important do you think Amazon’s culture is as the cause of Amazon’s corporate size, dominance, and success? Explain.

3. What do you think would happen to Amazon’s competitive advantage and dominance in the marketplace if it adopted a more people-centered (clan) culture? Discuss.

4. Based on Jeff Bezos’ letter to his employees about The New York Times article, do you think Bezos is out of touch with the impact that Amazon’s culture has on its employees? Explain.

5. If your instructor assigns it, read the blog response from an Amazon executive (Nick Ciubotariu, Senior Vice President, Software Engineering at Bright Machines) about the NYT’s article, at https://www.linkedin.com/pulse/amazonians-response-inside-amazon-wrestlingbig-ideas-nick-ciubotariu/ How does that blog affect your opinion about Amazon’s culture?

DISCUSSION 1. Using concepts from Chapter 11, how would you describe Amazon’s organizational culture?

Amazon describes itself as the most customer-centric organization out there.

From this, we can quickly deduce that Amazon is a classic example of the adaptability culture with a strategic focus on satisfying the ever-changing demands and preferences in the external environment. Its culture encourages an entrepreneurial mindset, and employees are driven to pursue innovative, creative ideas that actively create change in the marketplace.

2. How important do you think Amazon’s culture is as the cause of Amazon’s corporate size, dominance, and success?

As Bezos himself stated in his response to the New York Times article, ―I don’t think any company adopting the approach portrayed could survive, much less thrive, in today’s highly competitive tech hiring market.‖ In other words, Bezos believes that the organization’s intense focus on using technology to satisfy rapidly changing customer demands had led to Amazon’s incredibly rapid growth and to its arguably complete domination of retailing. He argues that Amazon’s work environment attracts the best and brightest overachievers, who have helped and continue to help the organization achieve extremely high levels of success.

Year after year, Amazon’s employees have developed surprising innovations that have revamped the nature of buying and selling products in ways many people never imagined.

3. What do you think would happen to Amazon’s competitive advantage and dominance in the marketplace if it adopted a more people-centered (clan) culture?

Students’ answers may vary, but they should understand that shifting to a more people-centered clan culture would bring the company’s focus inside, on its employees. Amazon credits its success to its relentless focus on the external environment, so a move away from that focus would probably diminish the organization’s success and growth. An interesting point of discussion would be to brainstorm ideas for creating a work environment that is perhaps more supportive of employees while still retaining an external focus.

4. Based on Jeff Bezos’ letter to his employees about The New York Times article, do you think Bezos is out of touch with the impact that Amazon’s culture has on its employees?

Students’ answers may vary. Some may say that he must be out of touch, given the number of former and current employees interviewed for the article who all paint a similarly negative picture. However, other students may say that it’s a matter of perception. What others may see as overly demanding and lacking in compassion, Bezos sees as a challenging and exciting work environment in which employees willingly put their careers ahead of other priorities.

5. If your instructor assigns it, read the blog response from an Amazon executive (Nick Ciubotariu, Senior Vice President, Software Engineering at Bright Machines) about the NYT’s article, at https://www.linkedin.com/pulse/amazonians-response-inside-amazonwrestling-big-ideas-nick-ciubotariu/ How does that blog affect your opinion about Amazon’s culture?

This blog post is similar to Jeff Bezos’s response, only much longer and more detailed. The author manages to debunk some of what was written in the article, suggesting that at least some of what was reported is urban myth, and he offers a very different picture, at least of his division of the organization. Here again, this should challenge students to recognize that a corporation’s culture can be perceived by its members in differing ways. Just to give one example, new hire orientation in which new employees are indoctrinated into the organization’s culture and guiding principles can be perceived positively as education and training or negatively as brainwashing. It should, however, be understood that this is a standard practice among large corporations and not some bizarre or scary practice unique to Amazon.

NOTE TO INSTRUCTORS: Appendix A, Nick Ciubotariu’s blog post starting on the next page, can be shared as a class handout.

APPENDIX A: NICK CIUBOTARIU’S BLOG As I woke up ready to start the weekend (without the slightest inclination to work, I might add – much more on this later), I glanced at my iPhone to appease my Facebook addiction and see what my friends were up to. Much to my surprise, a New York Times article describing Amazon had polluted my feed.

Amazon is a big company, and gets referenced often. I’ve read many articles that describe us. Some are more accurate than others. Sadly, this isn't one of them. This particular article, has so many inaccuracies (some clearly deliberate), that, as an Amazonian, and a proud one at that, I feel compelled to respond.

To baseline, no one asked or expected me to do this. As I cracked open my laptop to write this article, people were already discussing its existence on certain email distribution lists, and the expressions were mostly of disbelief at how uninformed the article was. It’s certainly not how I anticipated spending a good part of my Saturday. But I’m not going to stand idly by as a horribly misinformed piece of ―journalism‖ slanders my company in public without merit. I don't have the data to discuss the past - so I won't. However, so much that is written here is deliberately painted to match current reality, and it does not, even by a stretch of the imagination. That is not responsible journalism - that's a hatchet piece. So let's correct that, starting now.

Getting some bonafides out of the way of what actually qualifies me to rebut this article: 

I actually work here, and can give you a data-driven perspective of what life at Amazon is really like, today. I’m not an anonymous source, and I’m not something

a journalist made up to generate clicks. I am putting my name and reputation behind everything I write, and willing to stand by my words 100%. 

I’ve been at Amazon since March 24, 2014, which means I have 18 months of data to draw from – recent, on-the-ground experience. I have worked in two of our biggest product groups: Marketplace and currently, Search and Discovery, which means my experience covers a good swath of the Amazon populous.

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I’m an Engineering Leader. I manage other managers, as well as Engineers – which means I run an organization and have visibility into both Executive direction as well as everyday Engineering cadence. I sit on the floor, in a desk, not an office, by choice – because I like to be close to my folks – so I can relate to what it’s like for individual contributors as well as managers.



I’m a technical Bar Raiser, which means I’m part of a select group of people at Amazon who not only has visibility into our hiring standards and practices, but has the direct responsibility of ensuring they are always met.

More important, all those who know me know I’m a people-centric manager first and foremost: I live and breathe by the Golden Rule, and I believe in kindness, respect, integrity and transparency, and that being a good human being comes before anything else. Those principles are not for sale, at any price – not to me. And they never will be. I’ve never been afraid to speak my mind, publicly, about companies I’ve worked for where those principles get violated – scan my LinkedIn publisher feed and you’ll find that counter-example quite quickly. And if Amazon was the type of place described in this article, I would publicly denounce Amazon, and leave.

Quoting from the article: ―Data creates a lot of clarity around decision-making,‖ said Sean Boyle, who runs the finance division of Amazon Web Services and was permitted by the company to speak. ―Data is incredibly liberating.‖ Yup, I 100% agree. So, in very Amazonian fashion, I’m going to do what Jodi and David did not. I’m going to use data, and provide you with actual facts, starting now.

The headline itself, and subsequent "experiment" references

There is no ―little-known experiment‖. That’s just silly. No one at Amazon has time for this, least of all Jeff Bezos. We’ve got our hands full with reinventing the world.

―On Monday mornings, fresh recruits line up for an orientation intended to catapult them into Amazon’s singular way of working.‖

Yes – this is called ―New Hire Orientation‖, or NHO. At Microsoft (referencing my personal experience), this is called ―New Employee Orientation,‖ or NEO. Every company has one, and they call it something. Here’s what happens at ours, precisely: 

New employees get a good breakfast (fruits, pastries, cereal, that kind of thing)

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They immediately get a laptop and backpack

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They get a ―Welcome to Amazon‖ introduction

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They fill out benefits paperwork

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They learn a bit about the company, including our leadership principles

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They hear a story about how important our customers are, as ―Customer Obsession‖ is widely known to be our first and foremost leadership principle

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They hear from a guest speaker about their experience at Amazon

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They get their badge picture taken, and receive their badge

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At the end, the employee’s Manager is waiting for them to welcome them to Amazon, and the new employees get taken out to lunch

This happens from 8 AM – 12:15 PM, or 9 AM – 1:15 PM. Anyone else know of any other company that has a somewhat similar process for new employees?

―They are told to forget the ―poor habits‖ they learned at previous jobs, one employee recalled.‖

This is completely false, and also, well, quite impossible. Amazon shares tons of ―habits‖ with many other companies, and we hire the best people from those companies because we want to learn from their experience. No one in New Hire Orientation says this. New Amazonians are encouraged to ―come up with better ways‖, a recurring theme of how we encourage innovation, and something you hear often at Amazon. ―Unless you know better ways‖ is something we live by. The world doesn’t stand still. If you don’t evolve, you perish. And as things get better, we are not only open about incorporating them, we foster the practice of doing so.

―To be the best Amazonians they can be, they should be guided by the leadership principles, 14 rules inscribed on handy laminated cards.‖

In an article, a prominent business magazine called our Leadership Principles ―Amazon’s secret weapon‖. They were absolutely right (no irony here – they help make this company great). They are also so secret that we proudly display them for everyone to see. Most, if not all, are things people readily agree with, and are repeated in one form or another by other companies that call them ―Core Values‖, ―Core Principles‖, and so on. I’m certain that at the time of their writing, they were drawn from past experience not only within Amazon, but other companies.

―When quizzed days later, those with perfect scores earn a virtual award proclaiming, ―I’m Peculiar‖ — the company’s proud phrase for overturning workplace conventions.‖

This is complete and utter reader bait. No one is "quizzed" - the quiz is totally, 100% voluntary – for that matter, no one will mention it again, aside from New Hire Orientation - and you’re told during orientation that it’s an easy way to get your first phone tool icon (some people go as far as collecting these icons). For some, it’s a fun practice. I didn’t take the quiz for 3 weeks, and I admit it’s because I was new and I wanted a phone tool icon. From the quiz itself: To help you understand our Peculiar Ways, we’ve created a quiz. If you answer 100% of the questions correctly, you’ll earn the phone-tool award. If you get an answer wrong because you disagree with the principle itself, then maybe we need to reconsider our way of thinking.

Wait. What?!? But the article is telling me that people get ―catapulted‖ into a ―singular way of working‖. Perhaps if Jodi and David had bothered to actually fact-check most of what they wrote with, you know, current Amazonians, this ―article‖ would have never made it to print. Alas, here we are. But let’s continue.

What are some of these evil quiz questions, you might ask? They mostly explain why we do things like obsess about our customers. Here’s a sample: one asks why we show customers reminders that they’ve already purchased an item if they’re about to accidentally re-purchase it. The correct answer?

Reminding customers that they’ve already bought an item is the right thing to do. It helps them from accidentally ordering the same thing twice, building trust that we’re a helpful partner. That’s awful, right? I mean, what customers would want that?

I’ll give you a big hint about this quiz: all 10 or so questions are about how well we treat our customers, and why we do that. It’s because it’s the right thing to do, and it’s why our customers continue to love us. Our customer obsession is what earned us first place in USA Today’s Customer Service Hall of Fame for the sixth year in a row. As long as Amazon is around, and I’m here, we’ll continue to be customer-obsessed, because that’s a good thing.

―At Amazon, workers are encouraged to tear apart one another’s ideas in meetings, toil long and late (emails arrive past midnight, followed by text messages asking why they were not answered), and held to standards that the company boasts are ―unreasonably high.‖

No. No one encourages this. In fact, we get immediate growth feedback for this kind of nonsense. We go into meetings and discuss stuff, just like any other company does. If we quickly come to consensus - awesome. We save time and get out early, and that’s a great outcome. If we don’t, we debate – but we debate politely and respectfully, and you are given constructive feedback to course-correct if you are rude or disrespectful. No one, I repeat, no one is encouraged to ―toil long and late.‖ As a matter of fact, I’ll take a bit of time to expand on this: When I interviewed at Amazon, I heard all the horror stories from the past. They’re actually pretty well known in Seattle. I was told they were true, that the company continues to take steps to make things better, and that work-life balance was taken seriously. I wasn’t convinced, but I took a bet, because I wanted to work on Computational Theory problems and Distributed Systems at scale that can only be found at Amazon. Here’s my experience: During my 18 months at Amazon, I’ve never worked a single weekend when I didn’t want to. No one tells me to work nights. No one makes me answer emails at night. No one texts me to ask me why emails aren’t answered. I don’t have these expectations of the managers that work for me, and if they were to do this to their Engineers, I would rectify that myself, immediately. And if these expectations were in place, and enforced upon me, I would leave.

If Amazon used to be this way (and it most likely was, as you’ll see in the quote below), from my 18 month experience working in two of its biggest product groups, that Amazon no longer exists. Last year, during all-hands, a very high ranking Executive said, verbatim:

Amazon used to burn a lot of people into the ground. This isn’t how we do things anymore, and it isn’t how I run my business. I want this to be a place where people solve problems that cannot be solved, anywhere in the world, but they feel good about working for a great company at the same time. And if you’re burning people into the ground with overwork, you’re not doing it right, and you need to course-correct, or you don’t need to be here.

The internal phone directory instructs colleagues on how to send secret feedback to one another’s bosses. Employees say it is frequently used to sabotage others.

(The tool offers sample texts, including this: ―I felt concerned about his inflexibility and openly complaining about minor tasks.‖)

We refer to this as ―Anytime Feedback‖, and no one ―instructs‖ you to do anything. It’s simply there to use if you need it. And right at the top, there is a ―Strengths‖ section, and below, an ―Areas for Improvement‖ section. I receive anytime feedback, both positive and constructive, for the folks that work for me. I’m given feedback via the tool, mostly positive, some that addresses my growth areas, that my boss discusses with me. I can always provide it to anyone in the company, at any level. Some people never use it, and just, you know, talk to each other. Some write emails. Certainly, it is not used to sabotage others in the company, and here’s why:

One of the few things the authors got right is that Amazon is a very data-driven company. If the feedback does not have very specific data, as a manager, you are

trained to dig deeper before accepting it (whether it’s positive or negative), and the tool allows you to do just that: reject the feedback by sending it back for clarification.

Managers are also coached on diving deep into feedback to ensure that what Jodi and David state to happen – employee sabotage – actually does not.

The sample text bit is just comical: that’s there to help you in case you don’t know what to write. Conveniently, Jodi and David left out the sample text in the Strengths section, which, again, is the first thing you see on the Anytime Feedback page. Don’t worry, I’ll take care of that: ―I immediately felt confident about his abilities to organize the project! He quickly mobilized the team to meet a key project milestone!‖

The next 3 paragraphs

There is no ―culling of the staff‖ annually. That’s just not true. No one would be here if that actually took place and it was a thing.

―The company, founded and still run by Jeff Bezos, rejects many of the popular management bromides that other corporations at least pay lip service to and has instead designed what many workers call an intricate machine propelling them to achieve Mr. Bezos’ ever-expanding ambitions.‖

I don’t know what the hell this even is, or where to start. What are the popular management bromides that we reject? There is no intricate machine, and I have no idea what Jeff’s ambitions are, other than to continue to grow Amazon. Most of us work here

because we want to solve the world’s most challenging technology problems. We come to work, do our best, have fun, and go home. While what the authors write sounds evilscary-bad, it lacks, you know, facts and substance.

―This is a company that strives to do really big, innovative, groundbreaking things, and those things aren’t easy,‖ said Susan Harker, Amazon’s top recruiter. ―When you’re shooting for the moon, the nature of the work is really challenging.

For some people it doesn’t work.‖

Yes. Amazon is, without question, the most innovative technology company in the world. The hardest problems in technology, bar none, are solved at Amazon. This is why I'm here. My mentor, an Executive at one of the biggest software companies in the world, told me in our monthly 1:1, as recently as 3 days ago: ―There isn’t another company with the size, complexity, and Engineering strength of Amazon. It is the undisputed world leader.‖ And it is true. Our sheer size and complexity dwarfs everyone else, and not everyone is qualified to work here, or will rise to the challenge. But that doesn’t mean we’re Draconian or evil. Not everyone gets into Harvard, either, or graduates from there. Same principles apply.

―Nearly every person I worked with, I saw cry at their desk.‖

I don’t know Ben Olson, and I don’t know when he left the company. If his story is true, his manager, whoever they were, should be ashamed. I’ve been here 18 months, and I’ve never seen anyone cry. And if that was truly the environment in books marketing,

Ben should have said something immediately. That’s just wrong, and certainly not something we encourage. In today’s Amazon, management and HR would take care of that in an instant.

I can, however, tell you what happens in my group. We work hard, and have fun. We have Nerf wars, almost daily, that often get a bit out of hand. We go out after work. We have ―Fun Fridays‖. We banter, argue, play video games and Foosball. And we’re vocal about our employee happiness. And that’s encouraged from the Corporate VicePresident I skip to, and the Director I report to. Aside from our yearly survey, which asks very precise questions hitting at the core of employee happiness, our organization conducts our own polls, which get actioned by my group’s Leadership Team, of which I am a part of. We listen to what our folks are telling us.

Because hiring the very best of the very best is incredibly difficult, especially at Amazon. And it’s just stupid to create and, heaven forbid, foster an environment that encourages people to leave just as you’ve worked so hard to find and hire them in the first place.

Next paragraph deals with growth. Yay – we’re growing!! Then secrecy: we’re required to sign confidentiality agreements. Yes, just like just about every other technology company out there. They're referred to as NDA's, or Non-Disclosure Agreements.

They've been standard in industry for decades. Then there’s this:

―..life inside its corporate offices is largely a mystery‖.

It’s such a mystery that Glassdoor, CareerCup, Quora.. - well, ―the Internets‖ as a whole know all about Amazon, just like this article pretends to. I meet with people every day who ask what life at Amazon is like, and I tell them. I do this formally at least twice a week, for any interview I Bar Raise, because candidates ask. I’m doing it right now, for everyone that's gotten this far into the article and still cares.

The next several paragraphs deal with why people want to work at Amazon, and most is accurate. They come here because innovation in technology happens here more than anywhere else. What I take issue with is below:

―Amazon is in the vanguard of where technology wants to take the modern office: more nimble and more productive, but harsher and less forgiving.‖

Why, on Earth, would we want to be harsher and less forgiving? There is a virtual armsrace for the world’s top talent. Hiring in technology is incredibly difficult, more so in giant technology hubs like Seattle, where competition is fierce. If anything, we do our best to foster and grow the talent we hire through continuous improvement, leadership and mentoring, not by being ―harsh and less forgiving‖. That leads to a revolving door of talent, and no one wants that.

On Hire and Develop the Best and Elitism

I cannot speak about Jeff Bezos’s early life – I don’t have that data. I can tell you that our Leadership Principles are taken very seriously, and they play a large part in Amazon’s success. I do take issue with the fact that Jodi and David have no idea how to interpret the Leadership Principles. Hire and Develop the Best isn’t there to ―conjure an empire of elite workers‖. We are a very selective company in who we hire – as are Microsoft, Facebook, Google, and many of the other top companies in technology.

Most would say we’re the most selective, and the data would say they are correct. But that doesn’t mean we’re ―elitist‖. Elitist implies snobby, aristocratic, blue-blood. Anyone who knows anything about Amazon would tell you that hardly describes us. Being ―most selective‖ is not the same thing by any means. As a matter of fact, here is the ―Hire and Develop the Best‖ leadership principle, verbatim:

Leaders raise the performance bar with every hire and promotion. They recognize exceptional talent, and willingly move them throughout the organization. Leaders develop leaders and take seriously their role in coaching others. We work on behalf of our people to invent mechanisms for development like Career Choice.

Is any of this bad? Would you not want to work for a company that recognizes talent based on merit, not politics and bureaucracy? Would you not want to work for leaders that help you develop to become your best? Would you not want to be a part of a company where movement is encouraged, rather than restricted?

Other erroneous or unsubstantiated parts of the article. ―Within Amazon, ideal employees are often described as ―athletes‖ with endurance, speed‖. That’s just not

true, and I’ve never heard anyone say that. I also think teaching Amazon’s Leadership Principles to one’s children is kind of funny (my opinion only, if there are indeed Amazonians that do this). I’m too busy teaching my child Judo, reading and chess.

She’s also busy teaching me about Disney Jr. The authors are right when comparing the food perks. They don’t exist, like they do at Google and Facebook. Some people wish they did, others do not care. Our cafeterias are subsidized, and there are no free drinks at the offices in Seattle, though this policy is not company-wide. And then, there’s this:

―...from the bare-bones desks to the cellphones and travel expenses that they often pay themselves.‖

The desks are a tradition from the old Amazon ―door desks‖ and, looking at how nice they are compared to the sterile, hospital white, pressed-wood cubicle desks at other companies, they probably cost a lot more to make. Our cell phone expenses are reimbursed, and the fact that people ―often‖ pay for their own travel expenses is wrong – and, to be frank, just plain stupid – who would work at such a company?!? You’re actually encouraged to get an Amazon corporate card by some of the posters found on the company walls and in the elevators just to make travel reimbursement easier for you. My business travel has averaged twice monthly, and no one has ever told me I had to fund my own travel expenses. I also approve travel expenses for those working for me quite frequently via a, you know, "Travel Tool" – I’ve heard companies have those.

In what happens to be a recurring theme throughout this article, simple fact-checking

would have really helped.

―Of all of his management notions, perhaps the most distinctive is his belief that harmony is often overvalued in the workplace — that it can stifle honest critique and encourage polite praise for flawed ideas. Instead, Amazonians are instructed to ―disagree and commit‖ (No. 13) — to rip into colleagues’ ideas, with feedback that can be blunt to the point of painful, before lining up behind a decision.‖

Again, no. Absolutely, unequivocally, no. Have Backbone/Disagree and Commit states:

Leaders are obligated to respectfully challenge decisions when they disagree, even when doing so is uncomfortable or exhausting. Leaders have conviction and are tenacious. They do not compromise for the sake of social cohesion. Once a decision is determined, they commit wholly.

I bolded respectfully for a reason. We don’t rip into each other. If this happened at Amazon before, it doesn’t happen now, not where I work and worked. What this does encourage is something that I have not found in any other company, and something that has been reinforced throughout my career at Amazon, including, in writing, in one of my training documents, citing verbatim:

“Executive mandates don’t fly around here”

I have worked in companies where the highest paid person in the room would make

a decision, and that was that. Right, wrong or indifferent, you were either the wolf or part of the flock of sheep. At Amazon, people are encouraged and expected to call out bad/suboptimal projects, ideas, patterns, etc., no matter the level. I have done this myself many times, twice to Senior Vice-Presidents that report to Jeff. I did it in a respectful manner, and simply pointed out that ―the data did not justify the project‖ and/or ―the data did not support their assertion.‖ I’m almost positive that at most other companies, this would have been equivalent to career crucifixion. Instead, I got polite praise in both instances, with no further argument.

Everyone here is empowered to ―push the big red button‖, so to speak, when the train is about to go off rails, no matter their level and role. And that's one of the things that makes this place so great. There is an expectation that you do this in a data-driven and respectful manner, without negative emotion, or you get coached very quickly to do it the right way. That’s the ―Have Backbone‖ part of the leadership principle. The ―Disagree and Commit‖ portion is just as simple: If you’ve exhausted your side of the debate, and the votes go against you, you commit to the direction that your peers have decided to pursue.

A bunch of stuff that's also wrong or inaccurate

I have never been called an ―Amabot‖, nor have I heard anyone utter this term. I’ve never been called an Amhole, and I’m completely certain this is made up, as I’ve never heard anyone say this, and as an insult, it wouldn’t make a very good one, in my opinion. I have never been criticized for not having an Internet connection, not

answering emails at night, or otherwise not having a life outside Amazon. If that happened, I would leave. If it is happening in other parts of the company, despite my personal experience and that of thousands of others in the two product groups I’ve worked in, it needs to stop – immediately. I have never seen a 50-60 page document – that is not Frugal in terms of time spent, and certainly would not be encouraged. In a sad and continued pattern of setting the record straight with this article, most Amazonians and especially Executives insist that written material adhere to at ―6 pages or less‖ rule. I have never been ―pop-quizzed‖. I have never been called ―stupid‖, and if anyone called me, or anyone that worked for me, that, the next conversation they would have would be with an HR Business Partner in the room.

My personal favorite

I’m kind of flattered that Jodi and David think of me as a ―star employee‖ by way of being a Bar Raiser – being invited into the Bar Raiser program, and graduating, was one of the toughest and most rewarding things I have ever accomplished. Thanks guys!!

I’ve already covered the Anytime Feedback tool, and completely agree with below:

―Craig Berman, an Amazon spokesman, said the tool was just another way to provide feedback, like sending an email or walking into a manager’s office. Most comments, he said, are positive.‖

Hey, guess what - Craig was right! And he works for Amazon! But, to just to make sure,

I even looked through for the folks that report to me, including Managers and their subordinates. On average, the ratio of positive feedback to negative feedback was over 5:1. What I find fascinating is how Jodi and David over-index on this tool as if it were the most nefarious devices known to man. It is no different than what is found at tons of other companies – it’s really just another way of providing feedback. I don’t want to be dismissive of the examples provided, but singling out several outliers to vilify an entire company does not represent truth in journalism.

Organizational Level Ranking

I won’t discuss Organizational Level Ranking, or OLR. Some companies, such as Microsoft and Accenture, no longer use it. Others, such as Amazon, Google, Facebook, Apple and others still use it. Yahoo instituted it two years ago. I will dispute – vehemently so – the assertion that ―You learn how to diplomatically throw people under the bus‖. To assert otherwise without a single shred of data is irresponsible and just plain wrong. We don’t have time to do that here, or to teach people that. Also, it's bad.

Also, HR participates in OLR, and makes sure that we don't do that, because it's bad.

On the gender gap

Science is gender-neutral. I have seen Amazon do more to encourage diversity than any other company I’ve worked for. My Bar Raiser mentor is one of the most capable leaders I have ever met – she is a stellar professional and Amazon is lucky to have her.

As a Bar Raiser, one of my responsibilities is to ensure that we ―Hire and Develop‖ without a single shred of prejudice. Quite frequently, I interface with Directors and CVPs that are women, who have earned my trust and respect, and I quite frankly have no idea what to make of the following:

―Several former high-level female executives, and other women participating in a recent internal Amazon online discussion that was shared with The New York Times, said they believed that some of the leadership principles worked to their disadvantage. They said they could lose out in promotions because of intangible criteria like ―earn trust‖ (principle No. 10) or the emphasis on disagreeing with colleagues. Being too forceful, they said, can be particularly hazardous for women in the workplace.‖

I honestly don’t understand this. One ―Earns Trust‖ through actions, not through gender.

Here's the Earns Trust of Others leadership principle:

Leaders listen attentively, speak candidly, and treat others respectfully. They are vocally self-critical, even when doing so is awkward or embarrassing. Leaders do not believe their or their team’s body odor smells of perfume. They benchmark themselves and their teams against the best.

How would adhering to this work against a specific gender? How could being an attentive, respective leader, who is vocally self-critical and candid be a bad thing??

Even if this could logically happen based on gender, of all things (and I can't for the life of me rationalize how) HR is in the room for promotion and review discussions to ensure that what Jodi and David refer to doesn't happen. As a father to a single child (a daughter), who I hope one day will be the best at whatever she chooses to be, this part of the article angers me the most. I want to state that I am not disputing Michelle Williamson’s account of what she was told by her boss – what I am disputing is that it’s a widespread practice, as the article makes it out to be. As an Amazonian, this is not something I’ve ever encountered, and as a Manager and owner, I would flag comments such as the one her former boss made immediately.

The next part of the article devotes itself to one-off examples (which sound absolutely horrible). Quoting from the article: ―Mr. Berman, the spokesman, said such responses to employees’ crises were ―not our policy or practice.‖ He added, ―If we were to become aware of anything like that, we would take swift action to correct it.‖ Craig, you’re now aware. If these examples are indeed accurate, we need to verify what happened and ensure nothing like this ever happens again. On a positive note, I can relate to the lady whose leadership team was supportive when her husband was diagnosed with cancer. When I first went to work for Amazon, I left the Seattle area for the opportunity to help run a very successful and fast-growing Engineering office in Tempe, Arizona. Family health reasons in adjusting to the extreme temperatures of a desert climate forced us to move back. I moved back during review time, and moved to another product group. And my review, as well as my yearly results, didn’t suffer one iota. Amazon was extremely supportive of my move, worked with me when I needed

time off to be with my family, and ensured my performance review fairly reflected my contributions to the company. I have done the same, multiple times, for folks that work in my organization with similar circumstances. We are all encouraged to do this because it’s the right thing to do.

A stream of departures

This part of the article deals with attrition. I don’t know what the numbers are. I have some idea of how many people want to work here, and that number is staggering. In every interview I participate, as part of the introduction and as an ice- breaker, I ask a very simple question: ―What brings you to Amazon?‖ The answers vary, but thematically, most candidates provide a version of this:

I want to work on the most complex problems in the world, with the best and brightest people in the world.

This is, in effect, what Amazon is all about. And reading the article, it's patently clear that Jodi and David don't comprehend this. It’s not about ―the cause of delivering swim goggles and rolls of Scotch tape to customers just a little quicker.‖ In 1997, Amazon revolutionized the way the world shops. Today, we’re the world’s most innovative technology company that just happens to sell books, among other things. We are a multi-faceted business that spans the breadth of technology innovation, from cloud computing to devices to search to advanced robotics, and countless other spaces. It’s

not an easy place to work. We thrive on challenge, innovation, and winning. We believe that every day is still Day One. And alongside that, we're a human company that cares about its employees. Perhaps we weren't before - but even if we didn't want to be, today, we have to be. Because we are not the only ones in the race for talent, and everyone wants the very top people we work so hard to hire. And the very best of the very best always have choices, and exercise them quickly if they need to.

The Amazon described in this article may have existed, in the past. Certainly, I’ve heard others refer to ―how things used to be‖ but it is definitely not the Amazon of today.

And it’s really a shame Jodi and David didn’t take the time to write a fact-based article.

I’ve done my best to rectify that, on their behalf, as well as the New York Times. All three of you are quite welcome.

INTEGRATIVE CASE 6.0

LEAN INITIATIVES AND GROWTH AT ORLANDO METERING COMPANY OVERVIEW The Orlando Metering Company has been manufacturing water meters for the worldwide utilities industry for decades. Early on, OMC developed a friendly, cooperative, and supportive work environment. Even when the organization transitioned to a lean manufacturing operation that focused on working in teams, the collaborative and positive atmosphere continued. Employees felt empowered, and their contributions and suggestions were acknowledged and celebrated. However, OMC has recently lost its way. Its parent company decided to transfer the production of four product lines to the Orlando plant, and this shift has resulted in a number of challenging technical issues. Furthermore, the plant has had to double its workforce, so it has turned to temporary agencies to provide new workers. The plant’s leadership has been so consumed with resolving technical problems that they have not adequately trained the new workers, and all employees seem to have lost sight of the team-based work environment that is the hallmark of lean manufacturing. As a result, employee morale is low, turnover and absenteeism are high, and productivity is declining rapidly.

DISCUSSION QUESTIONS TO ASSIGN

1. What is your understanding of lean manufacturing? How does it differ from a smart factory?

2. Why do you think employee morale is low? Explain.

3. How would you describe OMC’s culture? What caused the change in culture?

4. What should Ed do now to reduce turnover and absenteeism?

DISCUSSION 1. What is your understanding of lean manufacturing? How does it differ from a smart factory?

The key objective in lean manufacturing is to deliver high-quality, low-cost products quickly while maintaining a safe and pleasant working environment. The primary outcomes include: a decrease in the cost of space, inventory, and capital equipment; a reduction in throughput time, cycle time, or lead time; an increase in capacity utilization, and a reduction in lost-time accidents. Perhaps the biggest factor in achieving these outcomes is an empowered workforce organized under team-based leadership, in which line production or team leaders follow daily checklists to meet the explicit expectations for each day. Other important elements in a lean environment include tracking charts and other visual tools that reflect actual performance compared with expected performance, daily accountability meetings focused on performance, and a disciplined approach to adhering to established processes.

While OMC has adopted the principles of lean manufacturing, it does not appear to be a smart factory at the time of this case’s writing. A smart factory utilizes computer-guided machines to handle many of the routine tasks, and smart factory plants are digitally connected to one another and to suppliers and customers in a digital supply chain network. Smart factories typically use tools such as computer-aided design, computer-aided manufacturing, robots, and three-dimensional printing to increase speed and accuracy.

2. Why do you think employee morale is low? Explain.

A number of stressful changes have occurred over the last 18 months within this organization. By adding four new product lines, the plant’s leadership team has been forced to evaluate and replace old technology, to revise and update antiquated product designs to meet current quality standards, and to overcome a number of other technical hurdles. At the same time, the organization has needed to double its workforce and move from one shift to two. To accommodate the high demand for new employees, OMC has relied on hiring through temporary agencies, so the new employees have a lower level of commitment to the organization. With so much energy and attention going towards resolving technical and workflow issues, the organization has lost focus on the positive effects of the lean, team-based environment. Both long-time and new employees

have been left wondering where they fit into this organization and how they can and should be contributing. More than likely, they also do not feel appreciated, and they have not received any support in adapting to change. All of these factors have combined to lower employee morale.

3. How would you describe OMC’s culture? What caused the change in culture?

Prior to the adoption of lean manufacturing principles and even throughout the rapid, yet well-managed change to a lean environment, OMC’s culture could be described as a clan culture. OMC worked hard to create a collegial, friendly, cooperative, and supportive environment for its employees, and this atmosphere was actually enhanced by the shift to team-based operations. Employees felt empowered, and their contributions and suggestions were acknowledged and even celebrated.

However, since the plant was forced to take on four additional product lines, these cultural characteristics have begun to break down. Upper levels of management have been completely consumed with resolving technical issues, leaving the overall operations unattended. The workforce has doubled, and mostly with temporary workers who have not been properly onboarded to fit into OMC’s culture. Even worse, these new workers have not been trained to follow the lean, team-based practices, and even long-time workers have abandoned them. In short, OMC has lost its footing. Without a clear cultural compass, employees feel lost and disenfranchised.

4. What should Ed do now to reduce turnover and absenteeism?

Ed has only three months to reduce turnover and absenteeism, so he needs to lead the organization through the process of restoring the team-based culture, starting with his most immediate high-level managers and then extending throughout the organization. Also, at the very least, Ed needs to organize formal training in lean principles for the new employees, but it might be beneficial to put all employees through some degree of training. He also needs to restore teams and team leaders, and to create a structure that encourages vertical and horizontal communication and provides ongoing support for the team environment. A longer-term strategy would include the establishment of a human resources department that can stabilize the workforce and provide appropriate training on an ongoing basis. Given how successful this organization has been with the principles of lean manufacturing, and how readily they once adapted to a team environment, it seems entirely possible that they can recover, even in the short timeframe they’ve been given.

INTEGRATIVE CASE 7.0

SCG LAMPANG: OVERCOMING COMMUNITY

RESISTANCE TO A SUSTAINABILITY PROJECT OVERVIEW Back in the 1990s, the King of Thailand began to encourage Thai businesses to engage in sustainability measures through the Sufficiency Economic Philosophy (SEP). One national organization that responded by embracing CSR is the Siam Cement Company (SCG), a 54,000-employee company that is also involved in chemicals and packaging.

SCG’s top leaders have since become so dedicated to CSR that they routinely put people and the environment ahead of profits. SCG also participates in many sustainability projects and encourages employees to actively work on these projects.

This case explores a unique situation, however. SCG’s Sustainable Organization Manager Daniel Anuwat is trying to convince villagers near the Lampang plant to work with SCG to build inexpensive check dams, which could offer many benefits to the village, including preventing soil erosion and preserving rainwater for use during the dry season. So far, villagers have resisted the construction of the check dams, presumably in the belief that the dams will disturb the spirits that flow with the water through nature.

So far, Anuwat’s efforts to educate the villagers on the benefits of the check dams have failed to overcome their resistance.

Note that a follow-up interview with Daniel Anuwat was conducted 10 years after the time of this case. The interview is provided at the end of this document.

DISCUSSION QUESTIONS TO ASSIGN 13. Do you support the idea of paying villagers to build check dams? Why? 14. Other than paying villagers, what other approaches should the Lampang managers take to overcome the villagers’ resistance to change regarding the check dams?

15. How did SCG implement a corporate culture that strongly supports CSR and sustainability? Discuss.

16. How do you think a national sufficiency economic philosophy might have affected SCG’s approach to sustainability? Explain.

DISCUSSION 13. Do you support the idea of paying villagers to build check dams? Why? Students’ answers will vary but should demonstrate logical reasoning. Some will note that the company has already tried to educate the local people, so paying villagers to build check dams is a reasonable alternative. The villagers will enjoy earning some extra money, and in the end, they will be able to witness the benefits of the check dams, which may ultimately change their perception in ways that other persuasion methods have not been able to do in the past.

However, other students may insist on continuing to attempt to educate villagers and appeal to their reasoning and emotion until they fully buy into the

sustainability projects. They may point out that paying the villagers to build the dams will most likely result in a temporary solution, while finding a way to encourage villagers to fully embrace the check dams will more likely result in an ongoing, sustained solution to the problem.

14. Other than paying villagers, what other approaches should the Lampang managers take to overcome the villagers’ resistance to change regarding the check dams?

Based on Anuwat’s comments, it seems that he and SCG are not completely clear about why villagers are resisting the check dams. Is it really because of religious beliefs, or are there other reasons, concerns, and fears? Perhaps the first step should be to nurture relationships with the villagers in the hope of eventually discovering the true source of their resistance so that a compromise can be reached. Second, it’s possible that the educational presentations were not clear enough or strong enough for the villagers to understand. Perhaps some of the headmen and other village leaders could be taken to other areas so they can see working check dams to better understand how they function. They could talk to other villagers to find out how they feel about their check dams. Witnessing the benefits of the check dams firsthand may inspire them to convince the Lampang villagers to agree to this new development.

15. How did SCG implement a corporate culture that strongly supports CSR and sustainability? Discuss.

SCG’s commitment to CSR has been strongly demonstrated, communicated, and supported by top leaders on down so that it is now completely embedded as a foundation within the organization. The company has created numerous CSRrelated positions at both the corporate and division levels, all of whom work toward a variety of sustainability projects and efforts. Also, the company’s sustainability values are posted where everyone can see them, CSR project and activities are routinely communicated through business communications, and meeting facilitators look for every opportunity to incorporate the company’s values and activities into every meeting by relating them to specific decisions and outcomes. Additionally, employees are strongly encouraged to adopt a CSR mindset for themselves by getting involved in hands-on projects, such as the check dam project.

16. How do you think a national sufficiency economic philosophy might have affected SCG’s approach to sustainability? Explain.

Student answers may vary but should demonstrate logical reasoning. Thailand’s national sufficiency economic philosophy was probably just one of several factors that led to SCG’s new approach to sustainability. The case explains that most Thai companies had a short-term focus on maximizing profits during the 1990s.

However, when a major financial crisis swept through Asia in 1997, many corporate leaders no doubt recognized a need to change. At this same time, the

King of Thailand was promoting a CSR philosophy, so in essence, this new mindset was probably seen as a potential solution to the problems that SCG and other Thai companies were experiencing at that time. The philosophy gave the entire company a more hopeful, positive viewpoint that everyone could rally around as they recovered from the financial crisis. It’s possible that SCG would still have embraced CSR on their own, but it was certainly fortuitous that the government was promoting this philosophy at the same time.

SCG Lampang: Overcoming Community Resistance to a Sustainability Project (B) A follow-up interview with Daniel Anuwat occurred 10 years after SCG Lampang’s efforts to overcome resistance and gain village buy-in to the idea of check dams and green spaces around the Lampang cement plant. Anuwat is now the community relations manager for the CementBuilding Materials Division.

Daniel Anuwat’s description of what happened: "We did finally learn how to engage the villagers in our check dam project for reforestation. Then the project hit a tipping point and buyin really took off. Some cement plants borrowed our model for gaining community engagement to build check dams. The reforestation around the Lampang cement plant is now complete (see photos in Exhibit 1).

Exhibit 1 Area Around Lampang Cement Plant Before and After Check Dams

“First, we decided not to pay money for building check dams. This would make SCG the owner of the project and leave villagers disengaged. It was important that they feel ownership and maintain upkeep of the check dams, so their work must be voluntary. I recall from business school the story of the shopkeeper and the children. The children played noisily outside the window of his room in the rear of his shop. He asked them to play elsewhere, and they refused.

He had an idea. He paid the children $0.25 each day to play outside his window. After a few days, he refused to pay them again, so they refused to play there. By paying them, he gained ownership over their behavior. By contrast, we wanted the villagers to feel ownership for the check dams.

“How did we get the villagers engaged? We realized that we were being logical and trying to persuade with our heads, and villagers connect with their hearts. Therefore, we stopped talking at them and started listening. Gradually, they started to express their concerns and fears. Our heartfelt listening may have created the biggest change in their attitudes toward SCG and the check dam project.

“Another big change was to show them rather than try to tell them everything in words. We took a few key villagers to see the early experimental check dams built by the King. The villagers could actually "see the water." They could see the green forest. They could see the potential.

Once we stopped talking and started listening and showing, villager buy-in took hold.

“We also addressed specific issues. In the village with fear over the dams restricting spirit flow, we worked with the monk from the local temple. He explained to villagers how spirits would flow with the water into the soil and up through plants and trees. The villagers understood.

"We did not get to the bottom of the gunshot incident concerning the monk headman. It may have been a misunderstanding. Alternatively, perhaps the individual with the gun was mortified and withdrew his objection.

"With respect to the NG0 letter demanding that we cease reforestation, we made some inquiries and discovered the letter was fake. A teak wood contractor forged the letter to protect his ability to cut down teak trees for sale, which was profitable. One of the most valuable trees in the forest is teak. Once the letter forgery became public, the problem disappeared. It did illustrate, however, that not everyone benefited from check dams. The wood contractor lost out because village norms turned against the random cutting down of trees for personal profit.

“Another issue raised after we built the cement plant was villagers’ concern about possible toxic dust from the plant. We again used heartfelt listening and showing. We took villagers to the plant and showed them the manufacturing process, including raw material and finished packaging.

They could touch the dust and even taste it without harm. We also took them up on the mountain to witness the mining operation. Rather than scrape down the mountain, which is easier and cheaper, we adopted a mining technique called semi open cut mining. This cuts the very top of the mountain and drills down vertically to minimize deforestation. This procedure also minimizes dust and leaves a natural view. When we finish mining, we can replace the top as it was. The villagers understood the value of what we were doing once they could actually see it.

“One other thing here in Lampang was to create a dialog center for the villages. People had no mechanism to talk through concerns that arise. An NGO helped us design a dialog process that teaches villagers how to talk through village issues, problems with us (SCG), or with each other.

They learned new skills of communication and a place to meet that have been helpful.

“Once we got buy-in locally, the check dam project really took off. Currently there are over 80,000 check dams built across seven Northern provinces. Can you believe it? SCG’s target for the year 2020 is 100,000 check dams.

We were worried early on that a forest fire might damage a cement plant. Forest fires dropped from a high of 225 per year to three. The villagers learned to love the green forests. The number of bird species around the Lampang plant quadrupled. (Exhibit 2). The number of wildlife species nearly doubled. We have reforested about 450 acres around the Lampang plant and thousands of acres nationally.

Exhibit 2 Resurgence of Bird and Animal Species around the Lampang Plant Biodiversity of Bird Species near the Cement Plant

Biodiversity of Wildlife near the Cement Plant

“Perhaps the biggest outcome has been the increase in farmer income. Previously they had two rice crops per year. Now there is enough moisture retained in the soil to allow seven crops per year rotating among various vegetables and fruit along with rice. Many of the farmers’ incomes doubled or tripled. They are so happy to earn their living off the land and to have their children staying in the local area rather than moving to a city for jobs and higher pay.

“Let me emphasize that I think it all started with listening and showing rather than telling and persuading, which developed more of a heart connection to achieve buy-in with villagers. That is not a fancy solution, but it overcame villagers’ resistance to change.”

INTEGRATIVE CASE 8.0 COSTCO: JOIN THE CLUB OVERVIEW Since opening in Seattle in 1983, Costco has become an iconic success story. The company was the first to go from zero to $3 billion in sales in less than six years, and today it is the number two retailer behind Walmart. Costco boasts 770 stores, 245,000 employees, $140 billion in annual revenue, and 94 million members, 90% of whom renew their annual memberships. Perhaps even more impressive is that Costco is ranked 12th among Fortune’s 50 Most Admired Companies in the World. The big box store is known for providing great value to its customers, and it is also known as a topnotch employer. Employees earn wages well above the industry average, and they receive health care and other benefits not often found in retail settings. With its ―flat, fast, and flexible‖ structure, Costco appears to adapt to environmental change well. In

recent years, for example, Costco has entered the online retailing business and has already been dubbed the ―king of Internet sales.‖ DISCUSSION QUESTIONS TO ASSIGN 1. Describe the culture at Costco. How do you think the culture contributes to Costco’s success?

2. How does Costco motivate its employees? Would you like to work at Costco? Why? 3. What environmental issues must Costco deal with?

4. In what ways does Costco try to be a socially responsible company?

DISCUSSION 17. Describe the culture at Costco. How do you think the culture contributes to Costco’s success?

Costco is obsessively focused on providing excellent customer service in the form of high quality (sometimes even brand name) products offered at low prices, meaning great value for customers. The product mix within each store is specially selected and tailored to meet the needs of the store’s neighborhood, and Costco stores offer additional services for members, such as opticians, pharmacies, and automotive service and repair. The company also believes in treating its workforce well, with the idea being that a satisfied, happy workforce will treat their customers well. Costco’s structure supports its cultural focus.

Being ―flat, fast, and flexible‖ allows managers to make quick decisions that serve the local needs of customers and employees. Of course, managers are trained to make decisions by following the organization's five-point code of ethics: be lawful, serve the best interests of customers and employees, respect suppliers, and reward shareholders. In general, all Costco employees are empowered to make smart decisions that benefit the customer.

18. How does Costco motivate its employees? Would you like to work at Costco? Why? The most obvious way that Costco motivates its employees is by offering aboveaverage wages and benefits. Costco employees earn an average of $21 an hour, which far exceeds the industry norm of $10 to $11.50 per hour. (CEO Craig Jelinek is a vocal proponent of raising the minimum wage for all workers in the U.S.) Both full-time and part-time employees receive health care benefits, can participate in 401k retirement savings plan, and receive rewards and bonuses for suggestions that better the company. The organization believes in promoting from within, and managers receive financial assistance for graduate educational programs. The one black mark on Costco’s record is that it has been criticized for not promoting women, but the company has sought to address this issue in recent years. Most students will agree that the organization offers attractive

benefits to employees, although some may still not want to pursue a career in retail.

19. What environmental issues must Costco deal with?

Like all organizations, Costco faces an ever-changing external environment.

Among the most prominent issues in recent years are increased expectations to address ESG (environmental, social, and governance) concerns, the ongoing need to attract the best employees through excellent salaries and benefits, and the dramatic growth in Internet retailing. Costco has been particularly successful in dealing with this last issue. In its first year in the Internet retail category (2018), Costco’s consumer satisfaction score edged out Amazon’s, making it a topranking performer in this arena.

20. In what ways does Costco try to be a socially responsible company?

For years, Costco has taken deliberate actions to reduce its carbon footprint. For example, it has focused on sustainability efforts that lower the costs of water and energy consumption and address issues such as food waste and safety.

Costco’s management believes that the short-term cost of CSR activities is balanced by long-term benefits in terms of reputation, customer and employee service, and profitability.

INTEGRATIVE CASE 9.0

THE DONOR SERVICES DEPARTMENT OVERVIEW At a sponsorship agency in Guatemala, employees are proud of the work they do, bringing sponsorship money to poor children and families who need assistance. But trouble is brewing in the Donor Services department. Morale is low, tension is high, and no one really knows how productive they are. The problem is that the department manager is so absorbed in other work that he is virtually ignoring operations within the department. The woman who has been assigned to oversee operations on a daily basis has not been given managerial authority or training, so workloads are uneven and employees aren’t trained to do their jobs properly. Adding fuel to the fire is a ―clique‖ of three women who resent what little authority the supervisor has over them, and they routinely voice their negative opinions to each other and to others. Work in this department is heading off the rails.

DISCUSSION QUESTIONS TO ASSIGN 1. What do you consider the major problem in this Sponsorship Agency? Explain.

2. What is the level of intergroup conflict? What is its cause?

3. What do you recommend to help the Donor Services Department become more

effective?

4. How might greater empowerment help the situation in the Donor Services Department? What specifically would you change to achieve greater empowerment?

DISCUSSION 21. What do you consider the major problem in this Sponsorship Agency?

In general, the major problem in the Donor Services Department of this Sponsorship Agency is a lack of managerial leadership. The official department manager is actually tasked with managing two departments, and he is so absorbed in the work related to the other department that he has left the Donor Services department to fend for itself. He has assigned a supervisor, Elena, but he has not clarified to her or anyone else in the department what her role is, other than to be the ―watchdog‖ that fills out inconclusive daily reports. Without true managerial leadership, the workloads have become uneven, and there is a backlog of work to be done while some departmental employees have plenty of free time. Newer members of the department have received appropriate training to do their jobs. Also, people with a high level of English language skills have been hired to do work that involves little translating, so they are dissatisfied with their jobs. Morale is low, and the department is not running nearly as productively and efficiently as it could be. And no one has been tasked with overseeing the quality or accuracy of their work.

22. What is the level of intergroup conflict? What is its cause?

The level of conflict in this department could probably be characterized as moderate to high. There is enough conflict to cause tension and low morale, and it is contributing to inefficiencies and backlogs in productivity, although much of the tension is apparently unspoken.

In terms of intergroup conflict, the department can be divided into two groups— the translators and the clerical workers—and there is definitely conflict between them. Of the four possible causes of intergroup conflict (goal incompatibility, differentiation, task interdependence, and limited resources), the most prominent cause is differentiation. The translators consider themselves to be superior in intellect and education, and they have different values, attitudes, and standards of behavior than the others in the department. They resent the fact that someone who they deem inferior has been given some supervisory control over them.

23. What do you recommend to help the Donor Services Department become more effective?

First and foremost, someone needs to be named the new, dedicated manager of this department. This person needs to have the right temperament and managerial skills necessary to provide the appropriate planning, goal setting,

training, and motivation for the entire group. Given this situation, this person will also need to be a skilled facilitator, ready to lead the group through significant change.

With a recognized manager in place, that person could employ many of the common tactics used to enhance collaboration among department members.

Perhaps the most important will be confrontation and negotiation, in which the team members are allowed to constructively voice their opinions and then encouraged to work together to find viable solutions that satisfy all of them. If the situation becomes untenable, the department may require third-party mediation.

Additionally, the manager could try using member rotation so that all department members develop a better understanding of the department’s functioning as a whole.

24. How might greater empowerment help the situation in the Donor Services Department? What specifically would you change to achieve greater empowerment?

A greater sense of empowerment might benefit a number of employees within this department. If Elena is to remain as the manager, she definitely needs to be empowered to exercise managerial authority and control over the rest of the department members. She needs training so that she has the knowledge and skills to do the job well, and she needs to be given decision-making authority in terms of planning, scheduling, and goal setting.

However, the translators who currently feel dissatisfied with their jobs could also benefit from greater empowerment. Perhaps if they were given some of the more challenging work that is currently being outsourced, they would feel like they were making a more significant and satisfying contribution to the organization.

And finally, all members of the department need to receive more information about their performance so that they understand how they contribute to the success of the organization.

INTEGRATIVE CASE 10.0

CISCO SYSTEMS: EVOLUTION OF STRUCTURE OVERVIEW Cisco began when husband-and-wife Stanford team Len Bosack and Sandy Lerner developed a university campus computer networking solution. From those humble beginnings, the organization has grown into a highly diversified, global technology leader always looking for the next new thing in a world of rapid change. Organizational growth has resulted in three distinct phases of organizational structure designed to meet

the management and decision-making needs of the corporate giant as it has evolved.

Will another phase be required as Cisco tries to stay competitive in an ever-changing environment?

DISCUSSION QUESTIONS TO ASSIGN 1. Draw a simple sketch of Cisco’s organization chart in both the Cisco 1 and Cisco 2 periods. Did the change to the Cisco 2 structure alleviate the problems experienced with the previous structure? Explain.

2. What new challenges would you expect to arise with the change to the Cisco 3 Structure?

3. How does Cisco’s corporate culture align with and support the Cisco 3 structure?

Discuss where you see alignment and misalignment.

4. What is the value for a high technology Cisco to have such a strong emphasis on sustainability? Explain.

DISCUSSION 25. Draw a simple sketch of Cisco’s organization chart in both the Cisco 1 and Cisco 2 periods. Did the change to the Cisco 2 structure alleviate the problems experienced with the previous structure?

Student sketches should look similar to the following examples from Chapter 3 of the text.

Cisco 1:

Cisco 2

Cisco 1’s divisional structure resulted in a great deal of wasted resources due to overlap. The poor communication across the three divisions created a lack of awareness and cooperation necessary for finding shared solutions, avoiding repetition, and speeding the process time required to introduce a new product.

Likewise, the complete independence and separation of each division resulted in a glut of separate vendors and suppliers, which also added to company costs.

The move to Cisco 3 eliminated these overlaps and dramatically reduced the number of vendors and suppliers. However, it also resulted in the loss of 8,000 employees. These dramatic changes increased efficiency and reduced costs.

26. What new challenges would you expect to arise with the change to the Cisco 3 Structure?

The Cisco 3 Structure is a matrix structure, which is appropriate given that both technical expertise and product innovation and change are important for meeting organizational goals. The matrix structure was the obvious choice when the functional, divisional, and geographic structures combined with horizontal linkage mechanisms no longer worked. One common disadvantage of the matrix structure, however, is that some employees experience dual authority, reporting to two bosses and sometimes juggling conflicting demands. This can be frustrating and confusing, especially if roles and responsibilities are not clearly defined by top managers. The matrix also forces managers to spend a great deal of time in meetings, and if managers do not adapt to the information and power sharing required by the matrix, the system will not work. Managers must collaborate with one another rather than rely on vertical authority in decision making. Cisco certainly experienced these issues after the transition to Cisco 3, and it is estimated that approximately 20% of Cisco’s top managers left the organization rather than attempt to adapt to it.

27. How does Cisco’s corporate culture align with and support the Cisco 3 structure? Discuss where you see alignment and misalignment.

In many ways, Cisco’s structure and corporate culture are well aligned. Perhaps one of the most desired and expected outcomes of the transition to the Cisco 3 matrix structure is a new emphasis on collaboration. This is supported by aspects of Cisco’s values statement, such as ―win together,‖ ―respect and care for each other,‖ and especially ―make innovation happen‖ and ―change the world.‖ Cisco 3’s continuing focus on growth and performance targets is supported by the value of ―focusing intensely on customers.‖ However, it’s possible that performance targets may occasionally drive employees to violate the value ―always do the right thing.‖ Another possible area of misalignment relates to management. Under the new structure, higher-level managers spend most of their time in meetings, making it challenging to demonstrate leadership in collaborative activities that result in innovation.

28. What is the value for a high technology Cisco to have such a strong emphasis on sustainability?

One of Cisco’s top priorities is to be one of the ―most trusted‖ business and technology advisors. The organization has worked very hard to establish itself as a model corporation for others, and these efforts have been recognized with awards. Among many other distinctions, Cisco has been on the Forbes Best Companies to Work For list for decades, and it has scored 100 percent on the Human Rights Campaign’s Corporate Equality Index. A significant factor in

earning these accolades has been Cisco’s commitment to CSR. The organization strives to use the power of technology combined with the efforts of its people to address global issues like unemployment, hunger, poverty, climate change, and income equality. Not only do these noble characteristics contribute to an esteemed reputation among consumers, it enables the organization to attract the best and brightest employees.

INTEGRATIVE CASE 11.0

TOOLTOPIA.COM OVERVIEW In 2001, Troy Stubblefield, the owner of Shreveport Air Tools, a company that sold equipment for the petroleum, automotive, and construction industries, was prompted to create an online business when he lost one of his major customers to an early online retailer. Online retailing was a new and risky prospect at the time, but Troy was an early adopter of the business model. Lacking the necessary technical skills to create an ecommerce website, he turned to his son Ryan, who set up the first ToolTopia.com site.

Relatively soon afterward, they realized their best option was to function as an affiliate, which meant they processed orders and asked their suppliers to actually fill the orders.

The Stubblefields needed people with technology and sales skills to grow ToolTopia.com, and eventually they replaced their part-time help with a combination of full-time and part-time employees. As the company grew, it also became a virtual workplace, with employees working from various locations and communicating electronically. Some of the early employees did not fare well in this telecommuting work environment, but eventually ToolTopia found the right mix of employees. Six years into the operation of the business, having built up a strong customer base through effective online marketing, Troy and Ryan received an offer to sell the business to a supplier.

DISCUSSION QUESTIONS TO ASSIGN 1. How has the public perception of online retailing changed since ToolTopia first started in business in 2002? Explain.

2. What technical and personnel hurdles did Troy Stubblefield face when he decided to take the company online? If you were an employee, how would you have responded to Troy’s announcement?

3. Compare and contrast ToolTopia’s virtual workplace with the concept of a virtual network structure.

4. How, according to Troy, was managing millennial generation workers different from managing his traditional workforce?

DISCUSSION 29. How has the public perception of online retailing changed since ToolTopia first started in business in 2002?

In the early days of online retailing, it was considered a high-risk, ―renegade‖ mode of business. Few people saw the potential for Internet selling and thus

many did not expect it to succeed. Of course, we now know that many people in developed nations have embraced online shopping as their primary means of researching and purchasing products and services. Online shoppers are attracted to the convenience and appreciate the ability to obtain information and comparison shop with ease. Online retailers have invested heavily in making the process easy, secure, and convenient. As of 2018, online sales accounted for approximately 15% of all retail sales.

30. What technical and personnel hurdles did Troy Stubblefield face when he decided to take the company online? If you were an employee, how would you have responded to Troy’s announcement?

Troy Stubblefield, the owner of Shreveport Air Tools, was motivated to create an online business when he lost one of his major customers to an early online retailer. Troy lacked the necessary technical skills to create an e-commerce website, so he turned to his son Ryan, who soon found an e-commerce platform that he used to set up the first ToolTopia.com website. Shreveport Air Tools employees were skilled in producing the actual tools, so the Stubblefields needed people with technology and sales skills to grow ToolTopia.com. Initially, they thought the business would be relatively small, manageable with just a few parttime employees. The business grew steadily, however, and Ryan, who was managing the day-to-day operations, soon realized that he needed full-time employees to handle administrative tasks related to website sales.

Given that many people did not appreciate the potential of online retailing at this time, and that Troy Stubblefield did not close down his existing business, many of his Shreveport Air employees probably did not feel threatened when ToolTopia.com was founded. However, as the business grew, they probably began to wonder if Stubblefield would eventually shut down the more traditional Shreveport Air Tools, thus eliminating many jobs. They may have also experienced concerns that their skills were becoming obsolete in a technologically advancing world.

31. Compare and contrast ToolTopia’s virtual workplace with the concept of a virtual network structure.

In a virtual network structure, the organization subcontracts most of its major functions or processes to separate companies and coordinates their activities from a small headquarters organization. ToolTopia could be considered somewhat of a virtual network because it did not maintain an inventory of products in a warehouse, nor did it have an order fulfillment/shipping department.

Instead, the organization, operating from headquarters with a small staff, negotiated agreements with its suppliers to drop-ship products directly from the manufacturers to the customers. In a sense, ToolTopia outsourced warehousing and order fulfillment. ToolTopia can also be considered a virtual workplace because the core, full-time employees each worked from a different location and

communicated and coordinated their efforts electronically.

32. How, according to Troy, was managing millennial generation workers different from managing his traditional workforce?

Troy described the employees of Shreveport Air Tools as skilled, blue-collar workers. Skilled in production, these employees were accustomed to hands-on manufacturing work in an industrial production environment. The employees hired to work at ToolTopia were quite different. Most of them were younger college graduates. Not only did they expect perks like an in-house coffee bar, they expected to be empowered and to play a larger role in the overall strategic operation of the company. The implication is that the skilled, blue-collar workers were accustomed to a more bureaucratic and hierarchical work environment than the millennials.

INTEGRATIVE CASE 12.0

SOMETIMES A SIMPLE CHANGE ISN’T SO SIMPLE OVERVIEW At Central Hospital, hospital administrators have recognized a strong need for a computerized medical administration record (MAR) system. Art Baxter, the chief information officer, who has almost no technology skills, delegated the design, creation, and implementation of the new system to Kate Cohen, giving her one year to complete the project. Although Kate assembled a team of representatives to assist her in the process, requested input from the various groups (doctors, nurses, pharmacists) who would be using the system, tested the new system in advance, and organized training for users, the launch of the new MAR system was an utter disaster. Kate now has to explain to the hospital administrators what went wrong.

DISCUSSION QUESTIONS TO ASSIGN 1. What caused the implementation of MAR to fail?

2. Why do you think the nurses resisted the MAR project?

3. What techniques should managers use to overcome the resistance to change?

4. What impact do you think the changes in organization structure and responsibilities had on the implementation of MAR? Why? DISCUSSION 33. What caused the implementation of MAR to fail?

Quite a few different factors contributed to the failure of the MAR implementation.

First, the initial one-year deadline was overly ambitious, but the person who set

the deadline refused to change it—even when numerous team members explained why they needed more time—because he believed a quick delivery would reflect well on his leadership. Second, Kate Cohen, the team leader did not insist on getting input from one of the major user groups (the doctors) and then did not listen to or implement the suggestions made by one of the other major user groups (the nurses) due to time and capability constraints. The nurses, incidentally, are under the leadership of Jane Ritchie, who did not support or understand the change to the new system, and she may have negatively influenced the entire nursing staff. Third, testing was insufficient and not conducted under real-world conditions, and fourth, training also appears to have been insufficient. As a result, the system is poorly designed, which frustrated users, who were also hampered by a lack of training, and ultimately, the entire system crashed. All involved were deeply concerned about the system’s possible harmful effects on patients.

34. Why do you think the nurses resisted the MAR project?

There are three main reasons why the nurses resisted the switch to the MAR project. First, the director of nursing, Jane Ritchie, did not buy in to the project from the beginning. She is generally resistant to change, and in this case, she did not understand the purpose of the new system and thus could not see the benefits of it. Her attitude probably influenced the entire nursing staff. Second, during the system design and development stages, the nurses were invited to provide input, but it’s obvious that their concerns were not addressed and their questions went unanswered, most probably due to the unreasonably tight timeframe set by the chief information officer, Art Baxter. And finally, nurses were given relatively little training—conducted in large groups, which probably discouraged people from voicing their concerns—prior to the launch. No doubt, when they saw the poorly designed system, they must have been both frustrated and nervous that they might not be able to adapt.

35. What techniques should managers use to overcome the resistance to change?

Kate Cohen and her team could have used a number of helpful techniques for overcoming resistance to change. For example, given the large number of people involved, Kate could have required all members of the user groups to participate in a large group intervention. Periodic meetings could have been held in which ―the whole system in the room‖ could discuss the project, voice their concerns, and work collaboratively on creating a realistic, useful system. Through this process, they would all be able to understand the need for and benefits of the new system, and they would have developed a sense of ownership of the project.

In addition, smaller work groups involving just a few representatives from the three user groups could have been invited to more frequent development meetings. This would have built up the sense of collaborative team effort, and it

would have created opportunities to better understand the interdepartmental relationships between the user groups and the system itself.

36. What impact do you think the changes in organization structure and responsibilities had on the implementation of MAR? Why? During the course of the one-year project, Central Hospital underwent several key changes at the highest level of management. The vice president of operations, who was no doubt instrumental in launching this project, was moved to an even higher level position. Meanwhile, several other key positions were consolidated, and a new person took the helm as vice president of patient care services. It is easy to imagine that all of these people, who are now managing far more than they should be, became focused on other priorities and probably did not check in on the progress of the project often, if at all. Perhaps if they had, they might have noticed that several problems were developing and key steps were being skipped, and above all, they should have seen that the project needed more time to be done properly.