local school needs a good headmaster -by istvan szeman, 2013

Student ID number: AAAAAA

Module name: MNGT7901-Organisational Behaviour

Local School Needs a Good Headmaster – Why EAGLE-SYS Remain Unnoticed in

the Local Market

Assignment deadline: 24th of February, 2013

Effective number of words used: 3194

I confirm that I have read the University regulations on plagiarism, and that this

assignment is my own work.

Date: 24th of February, 2013- MNGT7901-Organisational Behaviour - Final Exam - Student ID: AAAAAAA

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Table of Contents

1. INTRODUCTION ........................................................................................................................................ 2

2. OUTSIDE VIEW .......................................................................................................................................... 3

3. HARD ASSETS OF THE SOFTWARE COMPANY ............................................................................... 5

4. SOFT PROBLEMS ....................................................................................................................................... 7

5. STEPS FORWARD TO TALENT FUTURE - RECOMMENDATIONS FOR CHANGE ................. 10

6. BIBLIOGRAPHY ....................................................................................................................................... 13


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1. Introduction

What institute is the local school in the title? EAGLE-SYS is the Local subsidiary of a

multinational company developing and implementing sophisticated enterprise software

applications. I faced the company by competing them for some time and ended up working

for them for 3 years until I left them in 2010. The Local subsidiary, under the leadership of

Steve Hard, has seen some years of good growth in the 90-es, but stalled after year 2000 and

has been struggling for growth ever since. There are a few reselling partners in the country as

well, who sell projects on their own right, but based on the EAGLE-SYS software package.

Clients are numerous, although quite under-represented in industries outside financial

services. The dot-com crisis unearthed some of the fundamental problems that were coming at

EAGLE-SYS. Customers began to see prices hard to justify for software and consulting work

alike. Expectations were not met for higher flexibility in services. Contribution margins were

shrinking and the reselling partners began to look for alternative software applications to work

with.

Under the pressure, the subsidiary tried to find new customers and expand reselling

partnership to grow business. Product marketing actions were launched and faded away, new

faces turned up and disappeared in different sales roles and different reselling partners started

to work with the EAGLE-SYS package and gave up partnership due to lack of success.

Efforts repeatedly failed in the last 10 years, customers and partners -both existing and

potential- observed failures. After a few cycles of such, the entire market look at the brand as

a once great, but now having fundamental problems. Customers’ loyalty has been fading and

tends to limit to those, who cannot find alternative software application to work with.

The core part of this essay is an attempt to structure external and internal problems of

EAGLE-SYS that lead to losing its position in the local market. I will line up some methods

for analysis and in Section 5, I will try to make some practical recommendations (including

organisational changes) in order for EAGLE-SYS to start winning their position back.


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2. Outside view

Since the ‘90-es customers have been using data warehouses and sophisticated business

intelligence applications of EAGLE-SYS. Most of them were sold as instruments of costly

system projects, contracted by a few reselling partners. As the EAGLE-SYS software package

was best of its categories, it was the enterprise application of choice for many years. Around

the year 2000 and onwards, EAGLE-SYS found themselves in an increasingly

competitive environment, and – from different directions - they had to face strong

challenges in the market. Database-company Oracle -from where I watched the competition

at the time- was an existing player, who expanded portfolio and began to compete as a data

warehouse provider, making significant local investment to take market share. Other players,

like Cognos and Business Objects crossed ways, due to the fact EAGLE-SYS expanded

portfolio in their core areas: management reporting and financial planning applications.

Customers and partners of EAGLE-SYS begun to look at the competitive products and very

often found what they looked for. In this game, some of the inefficiencies in past business did

serve the competition. The partners did not professionally manage some projects and

sometimes directed the blame –rightly or wrongly- on the software product. Such

complications, however, do occur in the enterprise software business elsewhere, where the

software vendor has to intervene in order to restore customer goodwill and to protect the

brand. In case of EAGLE-SYS, this was not managed efficiently, which had undermining

consequences for customer relationship and for brand image.

One additional factor made EAGLE-SYS even more vulnerable to these changes in the Local

market: their business lied in the hand of just a few partners and when partners started to

lessen their commitment, there were no other partners to shift focus. In a late effort to recruit

new application partners, the restrictive partner strategy in the past also raised doubt whether

there is real opportunity in collaborating with EAGLE-SYS. Further reaction to the situation

was competing against historic partners for project business, which just catalysed the negative

trend and further undermined trust.

Negative cycles in the market made the situation even harder for some years. On the

other hand, the EU-membership of the country raised some business opportunities as

some best practices in other EU countries and at the European Commission based on EAGLE-

SYS technology.


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The stakeholder structure of the firm is quite simple; therefore fighting the situation was

the responsibility of only a few players. Being essentially sales and customer service branch

of a privately owned multinational organisation (virtually no external stakeholders, size

around 30 people), the responsibility lays with the local decision-makers and the sales

management the country manager reports to. The global organisation was so de-layered that

the country manager (and more than 20 others) directly reported to the VP of Europe, Middle-

East, Africa and Asia-Pacific Region, based at headquarters in the United States. The success

of these stakeholders primarily measured based on the contribution margin in their

respective area. The success of the direct reports to the country manager were measured

against a complex set of indicators, such as new license revenue, license support revenue and

some had extra indicators, like customer satisfaction, etc.

While working at different levels of the organisation, all employees have a long-time

superordinate goal on their agenda: EAGLE-SYS is the company who brings innovation so

that customers can make data become their asset. This kind of pride in innovation combined

with a certain obsession about quality was very well observable throughout the organisation.

During the hard years, a number of (essentially functional sales) strategies formulated at the

subsidiary level. Numerous SWOT analyses made, even the company’s own Strategy

Management software application used, but none proved to be the instrument of change.

Now, not part of the problem anymore, I would like to attempt to summarize a relevant

SWOT (Harvard Business School Press, 2006) for EAGLE-SYS (Figure 1)


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As seen in the “Threats” quadrant, some of the challenges of EAGLE-SYS came directly from

the competition and some were created by their own mistakes. These should have not hit the

business so hard if the organisation was stronger in some areas (see “Weaknesses” quadrant)

and –while the parent company provided multiple strengths-, the team potential and advantage

of a small local organisation remained unused. In summary, there are a number of strengths,

both local and international level, yet insufficient to restore growth. To analyse the problem

further, we need to look at the organisation from different angles in the following sections.

3. Hard assets of the software company

For a more complex investigation, I will use the Modified McKinsey 7-S Model, (Weber,

1998) which suggests a set of “hard” dimensions and set of “soft” dimensions for

organisational analysis. The so-called “Hard Triangle” in the model consists of Strategy,

Structure and Systems.

The strategy of the Local subsidiary is essentially a sales strategy. Everything else, from

product to pricing and even distribution is subject to headquarters decision. There is guided

freedom, however, in market segmentation, product priorities, partnering and competency

Figure 1

SWOT analysis for the Local subsidiary of EAGLE-SYS in the Local market


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decisions at the subsidiary level. These sales strategies always based on high product/price

position, emphasizing product value and innovation. As some of the industries are historically

under-represented in the Local clientele, strategies often directed to expanding to new market

segments. Due to the expert capacity constraints, the product portfolio was always represented

selectively in any of these strategies. In the years of my service, EAGLE-SYS was in such

expansion cycle, even had the mandate to work on new market in other Eastern-European

countries. In some other cycles, more focused sales strategies formulated, with fewer market

segments and target accounts.

The organisational structure followed the cycles as much as possible. Across the global

company, the organisation is quite stable; there are a large proportion of employees with very

long service years. This is the case to some extent locally; it is not true, however, for a

substantial part of the organisation. Figure 2 provides a typical structure of the Local

subsidiary in these years.

The chart shows a quite flat matrix organisation (Robbins & Judge, 2008), in reality, the

dotted line directions work through the managing director; therefore it is rather a functional

organisation. The local organisation shrunk and expanded in different cycles (the dotted line

boxes are positions of fluctuation). What is visible: turnover was the nature of sales jobs, and

Figure 2

Organisation structure and matrix reporting lines in the Local subsidiary of EAGLE-SYS before

the proposed changes


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-to some extent- product expert jobs. Although sales is usually an area of high turnover, in our

case five people out of six in every 3-4 years replaced or left without replacement in sales,

which is way above usual. The layout of the organisation, however, is quite stable over time.

In addition, –quite surprisingly- there were strong signs of functional silos in this small

organisation, to which I try to give an explanation in Section 4.

There is no shortage of formalised procedures and systems in the organisation. At

EAGLE-SYS, sales controlling and technical support systems are key in managing the

business. CRM systems for relationship management and legal procedures to protect the

intellectual property are also fundamental. These systems function in proper order, any

shortfall related to the ever-recurring data ownership problem, due to people turnover. Sales

controlling is methodically detailed, it goes as deep as monthly customer visit analysis by

sales representative, based on the electronic calendar. These major systems complemented

with further sales management processes and consulting methodologies and the like, therefore

- in my view- EAGLE-SYS is in possession of all “hard” systems necessary to make the

desired turnaround. In looking for the real reasons of failure, this work will go on assuming

that local functional strategies were reasonably founded and the following section will study

“soft” parts of the organisational life (Weber, 1998), such as organisational skills, people,

styles and finally shared values and other cultural elements.

4. Soft problems

Coming to the “Soft Quadrant” (Weber, 1998) by the Modified McKinsey 7-S Model (Shared

Values, Skills, Staff and Styles), we need to start with core values of the global EAGLE-SYS

organisation.

Shared Values or Superordinate Goals used as substitutes in management literature

(Weber, 1998). Further to their Superordinate Goal described in Section 3, the company is

very consistent in its communication and decisions about their commitment to innovation,

quality and talents. This can be observed throughout the organisation (running bookstore, to

R&D reinvestment multiple of the industry average, strong relationship to the Academic

sector, investment in sustainable development) and there is a noticeable intention of EAGLE-


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SYS leadership to shape the company to be a respected and very human, likeable

organisation.

The local organisation has many skills and there is pride in the expertise of their people and

in their products. In addition, the culture of great attention to details provides high quality to

any outward presentation, should that be a lecture, a letter or a brochure, etc. Due to the

“historical greatness” in the local market, people are mostly used to taking acceptance for

granted when making suggestions on working methods and solutions. This becomes

problematic since customers have choices, not only between software products but between

approaches and styles as well. Most customers reward flexibility and responsiveness to

requests, even to controversial ones. The cultural heritage of educating the other party has

clearly become a skill-limiting disadvantage, which is viewed from the outside as

inflexibility and even arrogance.

The desire for detailed control had developed a local feature with its implications and

disadvantages. The exercised leadership style formulated an informal, star-shape topology

of accountability, communication and decision-making behind the formal organisational

structure, as visualised in Figure 3. Culturally driven, the decision making process is always

as rational as possible, exactly as described in the Rational Decision-Making Model (Robbins

& Judge, 2008). In this informal system, “managers” are rather leading experts and

information providers or professional mentor to others at best within their team, while the

only decision-maker in the organisation is the managing director. This proves to be a

bottleneck in stressful situations, when no progress made without an approval from the central

point in the star-schema, which means getting approval for action, with a note: “keep me

informed”. This bottleneck is limiting a key organisational skill, the capacity of the local

organisation for actions.


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Figure 3

The informal structure behind the organisation chart in the Local subsidiary of EAGLE-SYS

The style exercised by Steve Hard combine strong leadership with micro-management, which

inhibit lateral collaboration, simply because “managers” are discouraged to make even low-

profile decisions on their own, they are rather supposed to provide the necessary information

for the single decision-maker. From thereon “managers” find that whatever they agree would

be subject to review with Steve anyway, therefore they cannot come to joint decision. The

style of daily work thereby becomes an interesting mixture of obsession with details

combined with the culture of internal proposals. This manifests in Steve being on the .cc line

of almost all emails as well as the obligatory question in internal discussions; “did Steve say

anything about it ?”, which question serves both ways, either as a checkpoint or an excuse for

avoiding engagement. The central point in the star-schema functions as a control point

regarding corporate values, methodologies, templates and formal processes.

People (Staff) in this small community are falling into two categories: the ones, who serve

long and the ones who appear for a few years. Consultants and back-office people tend to

serve long years, while sales and marketing people usually turn around. Although this is not a

unique feature of EAGLE-SYS, the magnitude of turnover is outstanding. It is actually

difficult to judge, whether the repeated failure in making growth is a cause or a consequence

of people turnover. The answer might lie somewhere within the culture and the socialisation

process. Many in organisational science view (Robbins & Judge, 2008) that culture has a self-

maintaining mechanism. Anyone joining the organisation with traits such as high intelligence,


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attention to details, timeliness, and orderly conduct of working life, considerate

communication, professional experience and tolerance of frustration find it very easy to

socialise. To a different degree, but most of the people with software expertise or financial

administration background find their ways to fit in EAGLE-SYS. For people with sales or

marketing career plan, it can be a more challenging socialisation. The typical character of a

sales representative possess high risk-tolerance, attention mostly to the commercial details,

result orientation, good interpersonal skills, a certain level of aggressiveness, high tolerance

for changing circumstances and various degree of teamwork-orientation. Some of these traits

of the typical sales person are completely against the culture of the EAGLE-SYS

subsidiary. If the sales person is particularly risk-taking and aggressively challenging the

boundaries of current practices, may face resistance and are directed to the centre of the star-

schema (see Figure 3). Although the organisation is quite people-oriented and only mildly

aggressive, this environment causes sales and marketing people recurring frustration that the

organisation not mobilising and not taking risk enough to achieve sales targets. The fatal fact

is that many strategies in the last ten years have been setting the right direction, but the

EAGLE-SYS organisation had not responded successfully and it is far from the desired

outcome.

5. Steps forward to talent future - recommendations for change

EAGLE-SYS is, nevertheless, a talented organisation with much strength (see Figure 1) and

chances are there is a strategy in place, thoughtfully prepared worked out in proper details,

addressing growth. Assuming that, I would examine, whether all other elements of

organisational life are aligned to the success of strategy and whether it requires changes in the

organisation structure. The case established in Section 4 certainly calls for cultural changes.

EAGLE-SYS need to mobilise all people resources in order take position in the market from

the competition. Doing it right we would be seeing EAGLE-SYS people effectively driving

sales outside the comfortable existing sales territories, including customers of the competition.

The starting point here obviously is having the right sales people; however, it would be a key

for the entire organisation to absorb the growth attitude and start behaving as a team. It would

require to raise energy level and to remove the barriers within the local organisation. Key

characteristics of the culture of growth need to be:

- Seeking innovative ways to sell and to co-work with customers and reselling partners


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- Taking risk in order to win business from competition

- Respect cultural diversity, including attitude of outward aggressiveness in order to fight

competition on their turf

- Re-defined teamwork culture, acceptance of constructive conflict, fostered

“championing”

This change is significant and has to be (both the need and the nature of it) communicated

openly. Key message is a mandatory journey outside comfort zone for everyone. Driving the

cultural change manifest in

- applying Superordinate Goals rigorously to the local subsidiary

- encouraging leaving the comfort zone

- empowerment and clear expectations from people

- creating “holding environment” where conflicts do not de-socialise people

- expecting participation and discouraging avoidance

- encouraging taking responsibility and making decision

- striving for improvement in flexibility and proactivity

The cultural change requires a turnaround in leadership style from the managing director

himself. Driving the change, he would have to combine tradition with new culture and

formulate a productive synthesis in a high-energy, adaptive culture, guiding the team through

constructive conflicts (Heifetz, et al., 2009). He would make a great effort to change, letting

go micro-management and trusting other means of influence, such as empowering, coaching

and leading by example.

In order to do the cultural changes successfully, there are some upfront practical changes in

job designs and in the organisational structure, for the following reasons:

-according to some authors (Simons, 2005) a job design is a major source of job

satisfaction as well as a key starting point for having people in the right position

-changes in job designs –coupled with adequate role model behaviour- is a clear message

to the people that the change is not just a communication campaign from management


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The changes in job design should reconsider and in many cases widen…

-the span of control over resources

-the span of accountability

-the span of influence

-the span of support

The changes in job design should increase mutual dependencies between people working in

sales, sales support and technical support roles, should serve as a foundation to unleash the

potential in the local organisation, which should work like a small business with global

qualities. This would place special emphasis on creating an employee stakeholder culture

(Lövey & Nadkarni, 2007).

The revised structure supporting the changes depicted in Figure 4.

Figure 4

The organisation structure of the Local subsidiary of EAGLE-SYS after the proposed changes

Apart from simplicity, key principles in this design were Market Advantage and Flexibility

(Goold & Campbell, 2002). In the new structure, there would be a team of managers in their

full functions. For momentum, it is a key how fast managers become role models in driving

the changes. It would also be instrumental to convince at least one new local reselling partner

with aggressive sales force to start working with the EAGLE-SYS software product. This

would demonstrate the new direction of the organisation and send an important message

for customers that business is done different at the local EAGLE-SYS subsidiary.


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6. Bibliography

Clawson, J. G., 2001. Leading Organizational Design. Darden Business Publishing, Volume UVA-

OB-0657, pp. 1-19.

Goold, M. & Campbell, A., 2002. Do You Have a Well-Designed Organization?. Harvard Business

Review, Volume Reprint R0203K, pp. 1-12.

Harder, J., 1999. Primer on Organizational Culture. Darden Business Publishing, University of

Virginia, Volume UVA-OB-0675, pp. 1-6.

Harvard Business School Press, 2006. SWOT Analysis I: Looking Outside for Threats and

Opportunities, Excerpted from Strategy: Create and Implement the Best Strategy for Your Business.

pp. 1-27.

Heifetz, R., Grashow, A. & Linsky, M., 2009. Orchestrate Conflict, Leading Adaptive Change by

Surfacing and Managing Conflict. Harvard Business Press, Volume Excerpted from The Practice of

Adaptive Leadership: Tools and Tactics for Changing Your Organization and the World, pp. 1-22.

Lövey, I. & Nadkarni, M. S., 2007. How Healthy is Your Organization? The Leader's Guide to Curing

Diseases and Promoting Joyful Cultures. 2 ed. s.l.:Praeger Publisher.

Robbins, S. P. & Judge, T. A., 2008. Organizational Behavior. 13 ed. New Jersey: Pearsons

Education, Inc..

Simons, R., 2005. Designing High Performance Jobs. Harvard Business Review, Volume Reprint

R0507D, pp. 1-12.

Weber, J., 1998. A Leader's Guide to Understanding Complex Organizations: An Expanded "7-S"

Perspective. Darden Business Publishing, Volume UVA-OB-0659, pp. 1-22.

local school needs a good headmaster -by istvan szeman, 2013

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