Toronto students face off at orgnaziational behaviour-focused competition
Five teams of business students from the University of Toronto and Toronto’s Ryerson University faced off in the first HR — The Authentic Challenge, organized in February by the Organizational Development Alliance at U of T and Ryerson’s HR Students’ Association.
The teams received a case study the night before the competition and, one hour prior to their presentation time, were given four questions focusing on organization behaviour. They had a fifteen minute presentation in which they had to answer these questions, with a proceeding question period.
The judging panel was composed of two HR professionals — Yvonne Blaszcyk and Ian Turnbull — and Ryerson University professor Pat Sniderman.
Cahill Puil, Holida Tek and David Evangelista of Ryerson won the event and took home the $1,000 prize, donated by the HR Press that also funded the rest of the event costs. The following is their case study and a transcript of their winning presentation:
CandyCo case study
Copyright Shannon Reilly 2005. Reprinted with permission.
CandyCo. has been in business since 1950, producing a wide array of candy products. At any one time, CandyCo employs 1,000-1,100 people, three quarters of whom work in manufacturing. Most of these employees work shifts, generally day or evening. In addition there is a roster of part-time employees who are called in to handle peak production requirements. The rest are employed in sales and marketing (100), building and site maintenance (20), Quality Control and Food Safety (20), Human Resources (15) and Finance (20). Current production facilities are located in Greenville, Ontario and a small neighbouring rural community. There are few other employers in the area and many local family members have found both full and part-time employment with the company. In some cases, extended families are working at CandyCo.
CandyCo.’s mission is to produce European quality candy products that exceed other locally produced ones for taste and price. The growth of product lines, distribution channels and international competition wins reflect a continued pattern of success over the long term. The last competition win was two years ago for its chocolate liqueur assortment.
The Crocker family has owned the company since the beginning. The majority shareholders are currently two members of the founder’s family whose only roles are on the board of directors. The president, George Frank, is related to them by marriage and has spent his entire career with CandyCo. working his way up to the top job from his first summer job in the shipping and receiving department. Because of stock options, he personally owns five per cent of the company stock and is eligible to purchase another five per cent before he retires.
The day-to-day running of the company is left to the executive team. As long as the company is making money and meets all legal requirements, the shareholders/Crocker family are happy with things the way they are. They do not involve themselves in executive team decisions. At each quarterly meeting of the board of directors, they generally give the leadership team “pats on the back” and tell them to keep up the good work.
A year and a half ago, the board of directors approved the allocation of funds to build a new state of the art manufacturing facility on industrial land next to the current primary production plant and head office. The building is well underway and employees have been speculating about what will happen to jobs in the new plant as well as the existing facilities. There is some concern that automation may mean fewer jobs.
CandyCo is regarded as a good corporate citizen in the community. They sponsor children’s sports teams and support local charities. Pay is competitive with other candy manufacturers, and health and dental benefits are provided for all full-time employees. Last year an incentive bonus plan was implemented for employees based on divisional results and meeting individual sales targets for those in sales. In addition, employees who have been with the company for five years are eligible to buy shares but few have done so, except for those in senior roles who have a stock-matching plan as part of their benefits.
There are four product divisions; chocolate, hard candy, chewy candy and special occasion specialties (SOS). Each has its own manufacturing, marketing and sales teams led by assistant vice presidents or directors reporting to the VP’s. The salespeople are spread across the country and come to head office once a quarter to meet with their divisional counterparts, learn about new products, review sales goals, sales results and share sales tips. These meetings are held at the local golf and country club. Most of the sales team members are only vaguely familiar with the sales representatives of the other divisions as they seldom interact, even though they visit the same group of customers. Employees in other departments view these meetings as parties for the “chosen few” and a waste of time and money: “If they can spend money on that, why can’t they send some more our way?”
The executive team is made up of people who have advanced through the ranks within the company as well as two people who were recruited from outside, the VP of SOS, Stephane Dubois and the VP of Finance, Veronica Chang. Both of the newcomers have been with the organization less than one year. They are considered industry “stars”. The president is hoping for one of them to become president when he retires in two years and is having ongoing discussions with the VP of HR, Reena Patel, about how to make the transition a smooth one. The other VP’s are somewhat aware of the succession plan but there is a lack of clarity about the details. Reena has suggested that the details be shared at the next executive team meeting to eliminate the speculation and start to build consensus about the future.
In the past three months, it has become increasingly obvious that there is conflict between the SOS division and the other product divisions. Stephane angrily walked out of the last executive team meeting. “I am not going to put up with all of the whining you are doing about my sales people stepping on your toes with the distributors as special occasions draw close. If your divisions can’t stand the heat, you should get away from the fire. My team and I are winners and intend to stay that way, whether you like it or not. In my previous organization, I had the best results and that is why I was hired here: to make a big impact on the marketplace. We’re doing that.”
After Stephane left, the VP of Chocolate, Sandra Lewis, continued to complain about reduced sales in her division and the negative effect this could have on all of her and her employees’ quarterly bonuses. ”It seems like the only division that gets any attention around here is SOS. My clients tell me they have no time for us. They’ve already talked to SOS.” The hard candy and chewy candy VP’s, Lorne and Vern, admitted they were concerned about their employee’s bonuses as well as their own and that they were tired of playing second fiddle to SOS. George commented, “Don’t worry about it. He’s the new kid on the block and is just trying to prove himself. It will all settle down in time. He’s a good guy with great skills and a wonderful network of contacts. As a matter of fact, he introduced me to some potential clients just last week. Because he speaks excellent French he is opening up new markets for us.”
The VP Finance confirmed that lately overall sales revenues have taken a serious drop, the cost of supplies and utilities have risen and further noted that competitors are doing very well: “At the Confectionery Conference last week I spoke with the finance people from four other candy manufacturers. They said that that despite the intense competition and corporate mergers that have taken place, they’re seeing increased sales, cash flow and profits on their existing lines as well as their new sugar-free goods. All their market segments are growing. Louis, from Bon-bon Confectionery Products, said they have had to put in extra production runs for some of their lines. The other finance folks seemed to think that, despite the interest in healthy snacks, people still want to have exceptional sweet treats and are willing to pay for them. My concern is that our overall numbers don’t seem to be tracking upward the same way theirs are. As a matter of fact, ours are dropping, except for SOS, and we’ve got to do something about it.” She also added that this drop is an even greater concern since there has been money invested in the construction of the new manufacturing plant. Revenues are not meeting budgeted levels and the amounts going into the construction project have seriously affected overall cash flow, as contractors are demanding regular installment payments for work done.
Privately Veronica has spoken with Reena, VP of Human Resources, over lunch about some of her frustrations. In her previous organization, there was more discussion at the executive team level of overall concerns and trends. “I’ve got the current numbers to show the declines as well as some ideas to suggest on how we could get back on track. I need some input from the whole executive team about how we should proceed.” Reena said she needed some input also and that they should raise these concerns at the next executive team meeting.
Reena confirmed that her department has been receiving questions and complaints about the way the company is now operating from employees in many departments. “People are worried about job security once the new plant is completed and are asking what will happen to their families if there is less work because of automation. People in shipping and receiving have complained abut the number of packages of promotional items that keep arriving for the offsite meetings held for the sales teams. They want to know why the sales folks spend big bucks on golf shirts, gym bags, fancy jackets and cases of wine.”
Four long service production line employees have complained about the stock option program, asking why only the senior members of staff get company matching. ”We work harder than them, put in overtime when asked and what do we get for it? Nothing! We suggest improvements and no one listens to us. No one asked for our ideas on the set up of the new plant and we could make good suggestions. It’s all about being a boss or in sales.” They said they came to her as representatives of a larger group of employees. “We need to deal with these complaints sooner rather than later. I am concerned that if we don’t address some of these issues fast, we will have bigger problems with staff morale and productivity. George commented, “I haven’t had anybody complain to me. People tell me they liked the staff picnic your people organized. In fact, I think employees are pretty happy.” There was no agreement to investigate further.
In brief private meetings with each of the executive team members you have learned that they dread the twice monthly meetings. They don’t think these meetings are productive or deal with the “real” issues, even though only one has specifically said what the “real” issues are from his perspective. The two newest members say that they have just been left to sink or swim so they are doing the best they can to try to fit in and be productive. Stephane said, “This is such a tiny town mentality here. It drives me nuts. They think they can keep doing things the old way. If I were running this company, we’d do some overall goal setting, restructure to capitalize on the sales teams, replace some of the executives, focus on important market segments and listen to what our finance and human resources people have to say. They know the numbers, the people and how to get the best results. I’m running full steam ahead and am beating my targets. It’s been frustrating, not knowing who I can trust to actually help me out. Everyone is concerned about his own division.”
The president has said he feels like he’s refereeing a game in which he doesn’t know the rules and cannot understand why the executives can’t just get along and keep the company on track. “They are all grown-ups and I know they each know their stuff, so I don’t see what the problem is.”
Presentation
Holida: My name is Ho, this is Cahill, and this is Dave. We are here to speak to you today about CandyCo and possible problems in the company and recommendations that we have. The first thing that we are going to look at is the symptoms, as outlined by Cahill.
Cahll: The outward manifestations or the symptoms of CandyCo can be broken down to two different areas. Employee behaviour is the first one that we are going to look at. We have noticed that there are tremendous departmental accusations. We have noticed that management view meetings as very selective. They view that there are no problems going on right now. There is a low trust in management. There is a low sense of team cohesion. The President no longer understands how to run his own company. He is also quoted as saying, “I feel like I’m refereeing a game in which I do not know the rules.” That is dealing with management in terms of employee behaviour. Now in terms of the employees, they are worried about their job security. They are also worried about the stock options that they would like to receive. They are worried about not being listened to. They have been directly quoted as saying, “we have great ideas, but no one is listening to us.” They are also complaining about how the company is being run. Why is the sales team getting expensive bonuses? Why are they receiving large packages? Why are they traveling to golf courses, etc? That is dealing with the manifestations in terms of employee behaviour.
Moving along to organizational performance, we move on to other things. There is conflict between S.O.S and other departments. There are reduced sales in the chocolate departments in every department other than S.O.S. S.O.S is the only department that is currently making revenue for the company. The VP of Finance actually states that, there (are) overall decreasing sales, there is an increase in terms of supply and utilities, (and) other companies are posting profit when CandyCo is losing money. You can see this by the chart that I have made. CandyCo increased profit when they decided to open a new plant and since then there has been decreasing profit, while their competition constantly increases. There are also problems repaying construction, contractors, and the meetings are not actually addressing the real issues that are prevalent in this company. Those are the manifestations that we have noticed. Using OB theory, we can explain the problems we found in CandyCo. David will be talking about this.
David: In terms of (OB) theory, the first part we looked at was information. The theory that we focused on was the Expectancy Theory of motivation. There are three major aspects of it: effort, performance, and rewards. The most important part of this theory is how your employees perceive their effort, performance, and rewards, and how they impact each other. For example, an employee has a perception of how much their effort is going to affect performance. If they perceive (when) they put a lot of effort forth, (it) will improve their performance. That is not really a problem in this case. The problem is the area of performance and how they perceive their performance impacting what they will receive in terms of rewards. Right now, there are many employees. Basically every department outside of Special Orders (perceive) that their rewards are not up to par with the other departments. They feel that they work harder, they put (in) a higher level of performance, and receive less rewards than their counterparts. How does that affect motivation? This theory tells us that if you feel that your performance does not have a direct impact on your reward, what incentive are they going to (have)? Basically (there is) no incentive for them to increase their performance. This will lead to the symptoms that my colleague discussed. They have low trust in management and in each other. There is a lack of communication because everything just seems so unfair. Their performance, in their minds, is perceived to be higher and their rewards are perceived to be lower. The next major theory involves team dynamics.
Cahill: Looking at the team dynamics, the current situation is that we have an organizational structure that is extremely vertical. The departments within the organization all compete with each other and against each other; not working together to work towards a common goal. The team departmental issue is a problem. They are working in isolation and not together. As you can see, for example the S.O.S division, the hard candy division, and the chocolate division all compete against each other. This is a problem. On top of this, organizational structure right now is extremely hierarchical and there is no interaction between the two. It is very vertical and this is a big problem. This leads to communication. There are perceptual blinders within management and within the people that are leading this company. Looking at the perceptual blinders, they see that (in) each department the only thing that is important to them and this organization is to make the sale and make sure that it is completed. Working together, they would be able to identify possible markets and possibly increase their revenues in a better way than what they are doing right now. Next, we are going to talk about our recommendations on how to make this company better (and) how to make it more efficient. These are the things Dave will talk about.
David: The first major thing is helping to solve the problem of communication. The thing that we should focus on is opening the lines of communication and that will help in turn reach the agreement on common goals. They have to get together in their departments and reach common goals. Right now, as we have stated, they have competing goals. They are working in isolation. They are not working together. They have a lot of mistrust. They have a lot of miscommunication. Right now, everybody is saying why do they get more than we do? Why are we working so hard when we don’t get the rewards? They need to get top management to support this idea of getting common goals and getting everybody on the same page. Right now, management does not see a problem. Management does not see all the things going on or they refuse to see it. That is why we recommend a bottom-up approach. There are two VPs that, and one especially Stephane in the case, that says that they see the problems and they want management to do something about it but, they are not being heard. Managers that do see the problem recommend things such as a suggestion box and have meetings with the key stakeholders in their company, the people that are involved (who) are actually feeling this. Get those to work their way up to top management to actually force them to see what is going on because in the end it is going to come down to whether or not the top people in the company are going to accept this. If they want to continue doing things the way they are, there is very little that can be done. That is why they are going to have to be pushed from the people below them to get everyone on the same page. This will lead to an alignment of our next recommendation of the organizational strategy.
Cahill: Looking at Stephane, we realize that there are informal teams forming within the organization, trying to lead the organization in different directions and (have) different views on strategy. What we need to do and what we recommend is that you stop the departmentalization of the organization and switch it to a functional-based structure. In doing this, we have the CEO (on top), we have the manufacturing department, the sales department, HR, and finance. This solves a lot of the problems. Within the sales and marketing, we could break it up to different divisions and different markets: South, West, East, and North. In doing this, we are competing for different clients instead of the same ones. We are not fighting and eating into our own profits and revenue. This is a really big thing because it will lead to the next point that we’re going to talk about which is HR functions that are going to be addressed in this company.
David: We are recommending that there should be a change in organizational structure. One of the key areas that we have to focus on in terms of HR, is HR planning because people are going to be moved around. People are going to be structured in a different way. It is up to HR planners to reorganized and help who is going to work in each department. What teams are going to be organized and in what kind of manner? That is what the HR planner should be doing. It is key to point throughout this entire process; communication is going to be extremely vital. Before you undertake any of these recommendations, HR should be the facilitator and help management devise corporate-wide letters and have meetings with the key people. This is a way they can communicate what top management wants as common goals, we will get everyone underneath the corporation to actually get on the same page, and understand that these are the common goals that they are going to be working toward. They are not going to be working in isolation. In order to do that, another functional area would be training and development. The supervisors are going to have to be trained and understand that the way things are being done right now is not the way they should be doing it. Right now, they get pats on the back for feedback. Right now, the manager is content with closing (his/her) eyes and focusing on sales. HR should train supervisors and managers in the areas of giving 360 degree feedback, getting multiple sources of feedback, and not just giving a pat on the back. It should be specific feedback and it should be relevant. It should not be subjective feedback. Management by walking around: there needs to be more observation going on between the management and the employees. Be more active in the way that they manage by walking around. Performance appraisals and equity again, HR has to communicate why their compensation is the way it is and this way it will help facilitate a more equitable feeling in the eyes of the employees. They won’t be asking the same questions and stirring up the same possible scenarios as to why they are not getting fair treatment (and) why they should be speculating about this. Finally, just a main point to cover everything, HR should act as a consultant. It is the intermediary between managers and the employees. Communication is going to (lie) heavily on their hands throughout this entire process.
Cahill: Now the current situation at the CandyCo company is they are currently in a position where the organizational structure (has) not changed, these plans have not been put into action, and the HR functions that we just talked about needs to actually (be) implemented in the company. Now in order to do this, we have to focus on three main things: unfreezing the current organizational culture, the current organizational structure, and the way they are actually doing their procedures and carrying out their business. From here, we move them into the change. What is the change? What kind of goals are we implementing? What do we want to happen in the future? Then we have to refreeze the actual mentalities of the management, the mentalities of the employees, and refreeze the functions that are going into this organization. We realize that in our HR functions that we presented, it is never clear cut. There are always problems. We are always going to have resistance to change. We think that by implementing a structure like this for the HR functions, we can start to combat this resistance to change and develop a proper organizational structure.
Holida: Realistically, communication is the biggest idea in between this whole structure. From movement to refreezing, you have to have policies and procedures to ensure that the new regulation, the new rules, and new way of operating this company stays within the company and does not revere back to the old (way). We would like to thank you very much for this opportunity and I hope that you enjoyed our presentation.
Mrs. Sniderman: You mentioned some issues around motivation and the breakdown between perceptions, performance, and rewards. (On your list of recommendations), you had compensation as a recommendation but I don’t know if I missed it but did you talk about your recommendation? Can you just tell us a little bit about what you recommend?
David: It is not so much a problem with the way that their compensation system is set up. We found that communication is the problem. People are perceiving it to be unfair because their performance does not match their rewards in terms of the people in other departments. What we recommend is they should work with their employees to communicate with them. This is what you do (and) this is what your pay is. Here are your benefits (and) explain the benefits. Explain why certain people get stock options and why you get yours.
Cahill: With that, if they don’t perceive that they are being treated fairly, it may be an opportunity for them to consider a different performance compensation. Find out what employees actually value in terms of compensation. Maybe stock options (are) the only thing that they value. Maybe it is getting a profit share or a gain share in terms of savings. We have to really look at what they value as effective compensation. Right now, we think they are being paid fairly. But as David said, they do not actually perceive that.
Mrs. Sniderman: One other question, any suggestions on how you would unfreeze the organization?
Holida: Realistically the first step would be changing the structure.
Cahill: Creating a sense of urgency would be a main factor. You can see that the company is losing profits. Eventually with them losing profits and not being able to fund their new development, which is their new factory, jobs will be lost and the company may go under. They are going to start to lose market share. This is going to affect everyone in the organization; not just top management (but) the lower employees as well. Because this is a small town, this is a small town mentality; they can’t afford to do that. A sense of urgency is there but it is not being communicated right now. That is how we think we can do that. Communicate to the employees and say this is happening, we are actually losing money, we need your help, we are here for you, we want you to be part of us, and we want to continue on with this operation.
Mr. Turnbull: Would your recommendations change if you are making your recommendations to the Board instead of the President?
David: We would try to explain it in a different way. We would start off with the bottom line. Because the (Board) is typically concerned with the bottom line. We would explain that these recommendations will start from the bottom. The benefits will first be seen at the bottom in terms of motivation (and) morale. By working together and facilitating our environment, people can work together. That will prevent the problems and improve their sales.
Cahill: I think the only difference that we might put in is getting them to actually come together as a unit. We know that the top levels in the organization are family-oriented. They (is) obviously a predisposition to think a certain way and like George said, “I don’t perceive any problems. No body is coming to me with any problems. So nothing is wrong.” He makes the decisions. We would recommend for them to come together and start to implement this communication so that the top levels, the CEO, can actually see what is going on. We might focus more emphasis on communication and actually coming together as a team.
Holida: Another idea is that we would have to put a lot of emphasis on financial issues when speaking to the Board. They look at the bottom line as David talked about, realistically what it is, is that they have to make profits (and) this is the way we can do it. We would really highlight those financial issues in the company.
Mr. Turnbull: If you could do everything but we tell you, you can only do one of them now, which one would it be?
Holida: Realistically, the structure of the organization is the one thing that we would really work on. Shifting away from the departmental structure and shifting into the functional structure instead. This facilitates a lot more communication. This creates an atmosphere where the departments are not necessarily just competing with each other, but they are working with each other. It is even worse that they are competing with each other for the exact same customers. This is a big problem. Although it is one of the biggest changes within the organization, I think this one would be the best to facilitate any possible changes within this organization.
The teams received a case study the night before the competition and, one hour prior to their presentation time, were given four questions focusing on organization behaviour. They had a fifteen minute presentation in which they had to answer these questions, with a proceeding question period.
The judging panel was composed of two HR professionals — Yvonne Blaszcyk and Ian Turnbull — and Ryerson University professor Pat Sniderman.
Cahill Puil, Holida Tek and David Evangelista of Ryerson won the event and took home the $1,000 prize, donated by the HR Press that also funded the rest of the event costs. The following is their case study and a transcript of their winning presentation:
CandyCo case study
Copyright Shannon Reilly 2005. Reprinted with permission.
CandyCo. has been in business since 1950, producing a wide array of candy products. At any one time, CandyCo employs 1,000-1,100 people, three quarters of whom work in manufacturing. Most of these employees work shifts, generally day or evening. In addition there is a roster of part-time employees who are called in to handle peak production requirements. The rest are employed in sales and marketing (100), building and site maintenance (20), Quality Control and Food Safety (20), Human Resources (15) and Finance (20). Current production facilities are located in Greenville, Ontario and a small neighbouring rural community. There are few other employers in the area and many local family members have found both full and part-time employment with the company. In some cases, extended families are working at CandyCo.
CandyCo.’s mission is to produce European quality candy products that exceed other locally produced ones for taste and price. The growth of product lines, distribution channels and international competition wins reflect a continued pattern of success over the long term. The last competition win was two years ago for its chocolate liqueur assortment.
The Crocker family has owned the company since the beginning. The majority shareholders are currently two members of the founder’s family whose only roles are on the board of directors. The president, George Frank, is related to them by marriage and has spent his entire career with CandyCo. working his way up to the top job from his first summer job in the shipping and receiving department. Because of stock options, he personally owns five per cent of the company stock and is eligible to purchase another five per cent before he retires.
The day-to-day running of the company is left to the executive team. As long as the company is making money and meets all legal requirements, the shareholders/Crocker family are happy with things the way they are. They do not involve themselves in executive team decisions. At each quarterly meeting of the board of directors, they generally give the leadership team “pats on the back” and tell them to keep up the good work.
A year and a half ago, the board of directors approved the allocation of funds to build a new state of the art manufacturing facility on industrial land next to the current primary production plant and head office. The building is well underway and employees have been speculating about what will happen to jobs in the new plant as well as the existing facilities. There is some concern that automation may mean fewer jobs.
CandyCo is regarded as a good corporate citizen in the community. They sponsor children’s sports teams and support local charities. Pay is competitive with other candy manufacturers, and health and dental benefits are provided for all full-time employees. Last year an incentive bonus plan was implemented for employees based on divisional results and meeting individual sales targets for those in sales. In addition, employees who have been with the company for five years are eligible to buy shares but few have done so, except for those in senior roles who have a stock-matching plan as part of their benefits.
There are four product divisions; chocolate, hard candy, chewy candy and special occasion specialties (SOS). Each has its own manufacturing, marketing and sales teams led by assistant vice presidents or directors reporting to the VP’s. The salespeople are spread across the country and come to head office once a quarter to meet with their divisional counterparts, learn about new products, review sales goals, sales results and share sales tips. These meetings are held at the local golf and country club. Most of the sales team members are only vaguely familiar with the sales representatives of the other divisions as they seldom interact, even though they visit the same group of customers. Employees in other departments view these meetings as parties for the “chosen few” and a waste of time and money: “If they can spend money on that, why can’t they send some more our way?”
The executive team is made up of people who have advanced through the ranks within the company as well as two people who were recruited from outside, the VP of SOS, Stephane Dubois and the VP of Finance, Veronica Chang. Both of the newcomers have been with the organization less than one year. They are considered industry “stars”. The president is hoping for one of them to become president when he retires in two years and is having ongoing discussions with the VP of HR, Reena Patel, about how to make the transition a smooth one. The other VP’s are somewhat aware of the succession plan but there is a lack of clarity about the details. Reena has suggested that the details be shared at the next executive team meeting to eliminate the speculation and start to build consensus about the future.
In the past three months, it has become increasingly obvious that there is conflict between the SOS division and the other product divisions. Stephane angrily walked out of the last executive team meeting. “I am not going to put up with all of the whining you are doing about my sales people stepping on your toes with the distributors as special occasions draw close. If your divisions can’t stand the heat, you should get away from the fire. My team and I are winners and intend to stay that way, whether you like it or not. In my previous organization, I had the best results and that is why I was hired here: to make a big impact on the marketplace. We’re doing that.”
After Stephane left, the VP of Chocolate, Sandra Lewis, continued to complain about reduced sales in her division and the negative effect this could have on all of her and her employees’ quarterly bonuses. ”It seems like the only division that gets any attention around here is SOS. My clients tell me they have no time for us. They’ve already talked to SOS.” The hard candy and chewy candy VP’s, Lorne and Vern, admitted they were concerned about their employee’s bonuses as well as their own and that they were tired of playing second fiddle to SOS. George commented, “Don’t worry about it. He’s the new kid on the block and is just trying to prove himself. It will all settle down in time. He’s a good guy with great skills and a wonderful network of contacts. As a matter of fact, he introduced me to some potential clients just last week. Because he speaks excellent French he is opening up new markets for us.”
The VP Finance confirmed that lately overall sales revenues have taken a serious drop, the cost of supplies and utilities have risen and further noted that competitors are doing very well: “At the Confectionery Conference last week I spoke with the finance people from four other candy manufacturers. They said that that despite the intense competition and corporate mergers that have taken place, they’re seeing increased sales, cash flow and profits on their existing lines as well as their new sugar-free goods. All their market segments are growing. Louis, from Bon-bon Confectionery Products, said they have had to put in extra production runs for some of their lines. The other finance folks seemed to think that, despite the interest in healthy snacks, people still want to have exceptional sweet treats and are willing to pay for them. My concern is that our overall numbers don’t seem to be tracking upward the same way theirs are. As a matter of fact, ours are dropping, except for SOS, and we’ve got to do something about it.” She also added that this drop is an even greater concern since there has been money invested in the construction of the new manufacturing plant. Revenues are not meeting budgeted levels and the amounts going into the construction project have seriously affected overall cash flow, as contractors are demanding regular installment payments for work done.
Privately Veronica has spoken with Reena, VP of Human Resources, over lunch about some of her frustrations. In her previous organization, there was more discussion at the executive team level of overall concerns and trends. “I’ve got the current numbers to show the declines as well as some ideas to suggest on how we could get back on track. I need some input from the whole executive team about how we should proceed.” Reena said she needed some input also and that they should raise these concerns at the next executive team meeting.
Reena confirmed that her department has been receiving questions and complaints about the way the company is now operating from employees in many departments. “People are worried about job security once the new plant is completed and are asking what will happen to their families if there is less work because of automation. People in shipping and receiving have complained abut the number of packages of promotional items that keep arriving for the offsite meetings held for the sales teams. They want to know why the sales folks spend big bucks on golf shirts, gym bags, fancy jackets and cases of wine.”
Four long service production line employees have complained about the stock option program, asking why only the senior members of staff get company matching. ”We work harder than them, put in overtime when asked and what do we get for it? Nothing! We suggest improvements and no one listens to us. No one asked for our ideas on the set up of the new plant and we could make good suggestions. It’s all about being a boss or in sales.” They said they came to her as representatives of a larger group of employees. “We need to deal with these complaints sooner rather than later. I am concerned that if we don’t address some of these issues fast, we will have bigger problems with staff morale and productivity. George commented, “I haven’t had anybody complain to me. People tell me they liked the staff picnic your people organized. In fact, I think employees are pretty happy.” There was no agreement to investigate further.
In brief private meetings with each of the executive team members you have learned that they dread the twice monthly meetings. They don’t think these meetings are productive or deal with the “real” issues, even though only one has specifically said what the “real” issues are from his perspective. The two newest members say that they have just been left to sink or swim so they are doing the best they can to try to fit in and be productive. Stephane said, “This is such a tiny town mentality here. It drives me nuts. They think they can keep doing things the old way. If I were running this company, we’d do some overall goal setting, restructure to capitalize on the sales teams, replace some of the executives, focus on important market segments and listen to what our finance and human resources people have to say. They know the numbers, the people and how to get the best results. I’m running full steam ahead and am beating my targets. It’s been frustrating, not knowing who I can trust to actually help me out. Everyone is concerned about his own division.”
The president has said he feels like he’s refereeing a game in which he doesn’t know the rules and cannot understand why the executives can’t just get along and keep the company on track. “They are all grown-ups and I know they each know their stuff, so I don’t see what the problem is.”
Presentation
Holida: My name is Ho, this is Cahill, and this is Dave. We are here to speak to you today about CandyCo and possible problems in the company and recommendations that we have. The first thing that we are going to look at is the symptoms, as outlined by Cahill.
Cahll: The outward manifestations or the symptoms of CandyCo can be broken down to two different areas. Employee behaviour is the first one that we are going to look at. We have noticed that there are tremendous departmental accusations. We have noticed that management view meetings as very selective. They view that there are no problems going on right now. There is a low trust in management. There is a low sense of team cohesion. The President no longer understands how to run his own company. He is also quoted as saying, “I feel like I’m refereeing a game in which I do not know the rules.” That is dealing with management in terms of employee behaviour. Now in terms of the employees, they are worried about their job security. They are also worried about the stock options that they would like to receive. They are worried about not being listened to. They have been directly quoted as saying, “we have great ideas, but no one is listening to us.” They are also complaining about how the company is being run. Why is the sales team getting expensive bonuses? Why are they receiving large packages? Why are they traveling to golf courses, etc? That is dealing with the manifestations in terms of employee behaviour.
Moving along to organizational performance, we move on to other things. There is conflict between S.O.S and other departments. There are reduced sales in the chocolate departments in every department other than S.O.S. S.O.S is the only department that is currently making revenue for the company. The VP of Finance actually states that, there (are) overall decreasing sales, there is an increase in terms of supply and utilities, (and) other companies are posting profit when CandyCo is losing money. You can see this by the chart that I have made. CandyCo increased profit when they decided to open a new plant and since then there has been decreasing profit, while their competition constantly increases. There are also problems repaying construction, contractors, and the meetings are not actually addressing the real issues that are prevalent in this company. Those are the manifestations that we have noticed. Using OB theory, we can explain the problems we found in CandyCo. David will be talking about this.
David: In terms of (OB) theory, the first part we looked at was information. The theory that we focused on was the Expectancy Theory of motivation. There are three major aspects of it: effort, performance, and rewards. The most important part of this theory is how your employees perceive their effort, performance, and rewards, and how they impact each other. For example, an employee has a perception of how much their effort is going to affect performance. If they perceive (when) they put a lot of effort forth, (it) will improve their performance. That is not really a problem in this case. The problem is the area of performance and how they perceive their performance impacting what they will receive in terms of rewards. Right now, there are many employees. Basically every department outside of Special Orders (perceive) that their rewards are not up to par with the other departments. They feel that they work harder, they put (in) a higher level of performance, and receive less rewards than their counterparts. How does that affect motivation? This theory tells us that if you feel that your performance does not have a direct impact on your reward, what incentive are they going to (have)? Basically (there is) no incentive for them to increase their performance. This will lead to the symptoms that my colleague discussed. They have low trust in management and in each other. There is a lack of communication because everything just seems so unfair. Their performance, in their minds, is perceived to be higher and their rewards are perceived to be lower. The next major theory involves team dynamics.
Cahill: Looking at the team dynamics, the current situation is that we have an organizational structure that is extremely vertical. The departments within the organization all compete with each other and against each other; not working together to work towards a common goal. The team departmental issue is a problem. They are working in isolation and not together. As you can see, for example the S.O.S division, the hard candy division, and the chocolate division all compete against each other. This is a problem. On top of this, organizational structure right now is extremely hierarchical and there is no interaction between the two. It is very vertical and this is a big problem. This leads to communication. There are perceptual blinders within management and within the people that are leading this company. Looking at the perceptual blinders, they see that (in) each department the only thing that is important to them and this organization is to make the sale and make sure that it is completed. Working together, they would be able to identify possible markets and possibly increase their revenues in a better way than what they are doing right now. Next, we are going to talk about our recommendations on how to make this company better (and) how to make it more efficient. These are the things Dave will talk about.
David: The first major thing is helping to solve the problem of communication. The thing that we should focus on is opening the lines of communication and that will help in turn reach the agreement on common goals. They have to get together in their departments and reach common goals. Right now, as we have stated, they have competing goals. They are working in isolation. They are not working together. They have a lot of mistrust. They have a lot of miscommunication. Right now, everybody is saying why do they get more than we do? Why are we working so hard when we don’t get the rewards? They need to get top management to support this idea of getting common goals and getting everybody on the same page. Right now, management does not see a problem. Management does not see all the things going on or they refuse to see it. That is why we recommend a bottom-up approach. There are two VPs that, and one especially Stephane in the case, that says that they see the problems and they want management to do something about it but, they are not being heard. Managers that do see the problem recommend things such as a suggestion box and have meetings with the key stakeholders in their company, the people that are involved (who) are actually feeling this. Get those to work their way up to top management to actually force them to see what is going on because in the end it is going to come down to whether or not the top people in the company are going to accept this. If they want to continue doing things the way they are, there is very little that can be done. That is why they are going to have to be pushed from the people below them to get everyone on the same page. This will lead to an alignment of our next recommendation of the organizational strategy.
Cahill: Looking at Stephane, we realize that there are informal teams forming within the organization, trying to lead the organization in different directions and (have) different views on strategy. What we need to do and what we recommend is that you stop the departmentalization of the organization and switch it to a functional-based structure. In doing this, we have the CEO (on top), we have the manufacturing department, the sales department, HR, and finance. This solves a lot of the problems. Within the sales and marketing, we could break it up to different divisions and different markets: South, West, East, and North. In doing this, we are competing for different clients instead of the same ones. We are not fighting and eating into our own profits and revenue. This is a really big thing because it will lead to the next point that we’re going to talk about which is HR functions that are going to be addressed in this company.
David: We are recommending that there should be a change in organizational structure. One of the key areas that we have to focus on in terms of HR, is HR planning because people are going to be moved around. People are going to be structured in a different way. It is up to HR planners to reorganized and help who is going to work in each department. What teams are going to be organized and in what kind of manner? That is what the HR planner should be doing. It is key to point throughout this entire process; communication is going to be extremely vital. Before you undertake any of these recommendations, HR should be the facilitator and help management devise corporate-wide letters and have meetings with the key people. This is a way they can communicate what top management wants as common goals, we will get everyone underneath the corporation to actually get on the same page, and understand that these are the common goals that they are going to be working toward. They are not going to be working in isolation. In order to do that, another functional area would be training and development. The supervisors are going to have to be trained and understand that the way things are being done right now is not the way they should be doing it. Right now, they get pats on the back for feedback. Right now, the manager is content with closing (his/her) eyes and focusing on sales. HR should train supervisors and managers in the areas of giving 360 degree feedback, getting multiple sources of feedback, and not just giving a pat on the back. It should be specific feedback and it should be relevant. It should not be subjective feedback. Management by walking around: there needs to be more observation going on between the management and the employees. Be more active in the way that they manage by walking around. Performance appraisals and equity again, HR has to communicate why their compensation is the way it is and this way it will help facilitate a more equitable feeling in the eyes of the employees. They won’t be asking the same questions and stirring up the same possible scenarios as to why they are not getting fair treatment (and) why they should be speculating about this. Finally, just a main point to cover everything, HR should act as a consultant. It is the intermediary between managers and the employees. Communication is going to (lie) heavily on their hands throughout this entire process.
Cahill: Now the current situation at the CandyCo company is they are currently in a position where the organizational structure (has) not changed, these plans have not been put into action, and the HR functions that we just talked about needs to actually (be) implemented in the company. Now in order to do this, we have to focus on three main things: unfreezing the current organizational culture, the current organizational structure, and the way they are actually doing their procedures and carrying out their business. From here, we move them into the change. What is the change? What kind of goals are we implementing? What do we want to happen in the future? Then we have to refreeze the actual mentalities of the management, the mentalities of the employees, and refreeze the functions that are going into this organization. We realize that in our HR functions that we presented, it is never clear cut. There are always problems. We are always going to have resistance to change. We think that by implementing a structure like this for the HR functions, we can start to combat this resistance to change and develop a proper organizational structure.
Holida: Realistically, communication is the biggest idea in between this whole structure. From movement to refreezing, you have to have policies and procedures to ensure that the new regulation, the new rules, and new way of operating this company stays within the company and does not revere back to the old (way). We would like to thank you very much for this opportunity and I hope that you enjoyed our presentation.
Mrs. Sniderman: You mentioned some issues around motivation and the breakdown between perceptions, performance, and rewards. (On your list of recommendations), you had compensation as a recommendation but I don’t know if I missed it but did you talk about your recommendation? Can you just tell us a little bit about what you recommend?
David: It is not so much a problem with the way that their compensation system is set up. We found that communication is the problem. People are perceiving it to be unfair because their performance does not match their rewards in terms of the people in other departments. What we recommend is they should work with their employees to communicate with them. This is what you do (and) this is what your pay is. Here are your benefits (and) explain the benefits. Explain why certain people get stock options and why you get yours.
Cahill: With that, if they don’t perceive that they are being treated fairly, it may be an opportunity for them to consider a different performance compensation. Find out what employees actually value in terms of compensation. Maybe stock options (are) the only thing that they value. Maybe it is getting a profit share or a gain share in terms of savings. We have to really look at what they value as effective compensation. Right now, we think they are being paid fairly. But as David said, they do not actually perceive that.
Mrs. Sniderman: One other question, any suggestions on how you would unfreeze the organization?
Holida: Realistically the first step would be changing the structure.
Cahill: Creating a sense of urgency would be a main factor. You can see that the company is losing profits. Eventually with them losing profits and not being able to fund their new development, which is their new factory, jobs will be lost and the company may go under. They are going to start to lose market share. This is going to affect everyone in the organization; not just top management (but) the lower employees as well. Because this is a small town, this is a small town mentality; they can’t afford to do that. A sense of urgency is there but it is not being communicated right now. That is how we think we can do that. Communicate to the employees and say this is happening, we are actually losing money, we need your help, we are here for you, we want you to be part of us, and we want to continue on with this operation.
Mr. Turnbull: Would your recommendations change if you are making your recommendations to the Board instead of the President?
David: We would try to explain it in a different way. We would start off with the bottom line. Because the (Board) is typically concerned with the bottom line. We would explain that these recommendations will start from the bottom. The benefits will first be seen at the bottom in terms of motivation (and) morale. By working together and facilitating our environment, people can work together. That will prevent the problems and improve their sales.
Cahill: I think the only difference that we might put in is getting them to actually come together as a unit. We know that the top levels in the organization are family-oriented. They (is) obviously a predisposition to think a certain way and like George said, “I don’t perceive any problems. No body is coming to me with any problems. So nothing is wrong.” He makes the decisions. We would recommend for them to come together and start to implement this communication so that the top levels, the CEO, can actually see what is going on. We might focus more emphasis on communication and actually coming together as a team.
Holida: Another idea is that we would have to put a lot of emphasis on financial issues when speaking to the Board. They look at the bottom line as David talked about, realistically what it is, is that they have to make profits (and) this is the way we can do it. We would really highlight those financial issues in the company.
Mr. Turnbull: If you could do everything but we tell you, you can only do one of them now, which one would it be?
Holida: Realistically, the structure of the organization is the one thing that we would really work on. Shifting away from the departmental structure and shifting into the functional structure instead. This facilitates a lot more communication. This creates an atmosphere where the departments are not necessarily just competing with each other, but they are working with each other. It is even worse that they are competing with each other for the exact same customers. This is a big problem. Although it is one of the biggest changes within the organization, I think this one would be the best to facilitate any possible changes within this organization.
