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LEADERSHIP AND CULTURE

Other Teaching Tools 6.2

Video Notes 6.3

Brief Chapter Outline and Learning Goals 6.4

Lecture Outline and Lecture Notes 6.6

Notes for End-of-Chapter Materials 6.24

REVIEW QUESTIONS 6.24DISCUSSION EXERCISE 6.1 Bertelsmann’s New Web-Friendly CEO 6.24

DISCUSSION EXERCISE 6.2 Siemens’ Culture Clash 6.25

Career Management Notes 6.27

Study Skills Notes 6.29

Lecture Links 6.30

LECTURE LINK 6-1 Why Good Employees Can Be Bad Managers 6.30 LECTURE LINK 6-2 Best Business Leaders of the 20th Century 6.30

LECTURE LINK 6-3 The Culture of the Real Rocket Scientists 6.31

Bonus Internet Exercises 6.33

BONUS INTERNET EXERCISE 6-1 The Most Powerful Women in 6.33Business

BONUS INTERNET EXERCISE 6-2 Self-Assessment for Leading 6.34as a Manager

Critical Thinking Exercises 6.35

CRITICAL THINKING EXERCISE 6-1 Traits of Leaders 6.35

CRITICAL THINKING EXERCISE 6-2 Leadership Situations 6.36CRITICAL THINKING EXERCISE 6-3 Crisis Management 6.37

Bonus Cases 6.38

BONUS CASE 6-1 Leading in a Leaderless Company 6.38

BONUS CASE 6-2 Turning Tyco Around 6.40

6.1

CH

APT

ER

6

OTHER TEACHING TOOLS

For a description of each of these valuable teaching tools, please see the Preface in this manual.

Student Learning ToolsStudent Online Learning Center (OLC) (www.mhhe.com/ghillyermanagement)Student Study GuideSpanish Translation Glossary (OLC)Spanish Translation Quizzes (OLC)

Instructor Teaching ToolsInstructor Online Learning Center (www.mhhe.com/ghillyermanagement)Annotated Instructor’s Resource ManualIRCD (Instructor’s Resource Manual, Test Bank, PowerPoints, EZtest)Asset Map PageOutPowerPoint Presentations (on IRCD and OLC)Test Bank Management at the Movies (DVD)Management Videos on DVD Enhanced Cartridge optionSpanish Translation Glossary (OLC)

6.2 MANAGEMENT: A REAL WORLD APPROACH: Instructor’s Resource Manual

VIDEO NOTES

Two video series are available for use with MANAGEMENT: A REAL-WORLD APPROACH.

Management at the Movies This innovative video collection includes video clips from twenty of the best Hollywood films.

The Video Notes section of this Instructor’s Resource Manual (beginning on page V.1) provides In-structor’s Teaching Notes for each of the video segments, along with Student Materials keyed to chapter concepts.

MOVIE 2. “Hoosiers” (“Warm Welcome”) (2:15) The video clip shows the town residents grilling the new coach about his preferences for

coaching the basketball team. It can be used to illustrate the different aspects of organizational culture.

MOVIE 16. “Jaws” (“The Town Meeting”) (1:02) This clip from the classic movie illustrates the conflict that arises due to differing agendas

and beliefs.

Management Videos on DVDAlso included are twenty videos geared to individual chapter topics. The teaching notes for these

videos are also included in the Video Notes section of this Instructor’s Resource Manual, beginning on page V.50.

VIDEO 6: “A Look at eBay CEO Meg Whitman” (2:33)Meg Whitman’s unusual approach to learning and culture contribute to the growth of the

eBay brand.

VIDEO: “Destroying a Service Culture” The poor culture exhibited by the manager suggesting that employees push pricey bever-

ages offers a counter-point to highlight poor working cultures.

CHAPTER 6: Leadership and Culture 6.3

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BRIEF CHAPTER OUTLINE AND LEARNING GOALS

CHAPTER 6

Leadership and Culture

I. POWER, AUTHORITY, AND LEADERSHIPLEARNING OBJECTIVE 1Define leadership, power, and authority.

II. LEADERSHIP AND MANAGEMENTLEARNING OBJECTIVE 2Discuss leadership as it relates to management.

III. LEADER ATTITUDESLEARNING OBJECTIVE 3Explain leadership attitudes.

LEARNING OBJECTIVE 4Describe the differences between a Theory X and Theory Y manager.

IV. FRAMEWORK FOR CLASSIFYING LEADERSHIP STUDIESA. Trait TheoryB. Basic Leadership StylesC. Ohio State StudiesD. University of Michigan StudiesE. Managerial GridF. Contingency Approach to LeadershipG. Continuum of Leader BehaviorsH. Path-Goal Theory of LeadershipI. Situational Leadership TheoryJ. Transactional, Transformational, and Charismatic Leaders

LEARNING OBJECTIVE 5Describe the difference between transactional, transformational, and charismatic leadership styles.


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V. LESSONS FROM LEADERSHIP STUDIES

VI. MANAGING CORPORATE CULTURELEARNING OBJECTIVE 6Identify strategies for effectively managing cor-porate culture.

A. Cultural Forms of ExpressionB. How Does Culture Originate?C. Strong and Weak Corporate CulturesD. Identifying CultureE. Changing Culture


LECTURE OUTLINE AND LECTURE NOTES

THE WORLD OF WORK

Tony Gets Assigned to a Project (Text pages 144-145)

Tony has been complemented for his work so far as manager of Taco Barn. Of special note was Tony’s decision to ask Kevin to write a strategic plan for Taco Barn, which was considered very creative. Tony has now been asked to participate in a company-wide project to create a leadership development program. He will need Kevin to fill- in his absence. Tony is a bit nervous to leave his store and unsure of his ability to help determine the culture and future leadership of the company.

1. From what you know of Tony so far, how would you describe his leadership style? Refer to page 150 for some suggested classifications of different leadership styles.

Tony’s first managerial experience creating and implementing a staff schedule was done in an au-tocratic style, where the leader makes decisions for the group. However, when follow-up to this exercise was necessary, Tony used a democratic style of leadership, where the manager guides and encourages a group decision. This illustrates a key concept: the best way to lead today is using situational leadership, recognizing that effective leadership must draw upon a range of skills and techniques that depend on the individual situation and not the prescribed leadership model.

2. How would you describe the organizational culture of Taco Barn?

Taco Barn hires individuals who have the ability to organize and lead in a store setting where there is a participatory management style based on a small, working environment. In keeping with this en-vironment of operation, Taco Barn looks to hire and create a culture of managers/employees that fits into its system. This culture requires hiring, retaining, and promoting people who are similar to current em-ployees in important ways. A person’s ability to fit in can be important to the process.

3. Do you think the consultants’ recommendation of an employee survey is a good idea? Why or why not?

Yes, but with some reservations. If the company is surveying employees and learning more about their leadership styles with the intent to use this information, the time and resources to accomplish this would be worthwhile. However, if the survey process becomes more of a distraction and less productive in nature, the company would be wasting valuable employee time. For the survey to be successful and useful, a written report needs to be created, outlining the findings and including a clear message about the purpose and use of the survey.

4. List six questions that you think should be included in the survey.

(1) Define a leader.(2) Give examples of good leadership skills.(3) Give examples of how you have been a leader in your job.(4) Describe the leadership style of your direct boss, regional boss and any corporate leaders

you have been in contact with.(5) How would you describe each leader individually and the leadership style of the company

collectively?


(6) What do you like about the leaders you work with or for? What would you change or add to the leadership of this organization?


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LECTURE OUTLINE LECTURE NOTES

I. POWER, AUTHORITY, AND LEADERSHIP

LEARNING OBJECTIVE 1Define leadership, power, and authority. (Text page 146)

A. POWER is the ability to influence, command, or apply force; a measure of a person’s potential to get others to do what he or she wants them to do, as well as to avoid being forced by others to do what he or she does not want to do.

1. Power can have both a positive and negative form.

a. Positive power results when the exchange is voluntary and both parties feel good about the exchange.

b. Negative power results when the individual is forced to change.

2. Power in organizations can be exercised upward, downward, or horizontally.

B. AUTHORITY is legitimate exercise of power, the right to issue directives and expend resources, related to power but narrower in scope.

1. Authority is a function of position in the hierarchy, flowing from the top to the bottom on the organization.

2. An individual can have power without having formal authority.

C. LEADERSHIP is the ability to influence people to willingly follow one’s guidance or adhere to one’s decisions.

1. A LEADER is one who obtains follow-ers and influences them in setting and

POWERPOINT 6-1Chapter Title (Refers to text page 144)

POWERPOINT 6-2Learning Objectives (Refers to text page 145)

POWERPOINT 6-3Power, Authority, and Leadership (Refers to text page 146)

TEXT FIGURE 6.1Sources of Power (Text page 146)

BONUS INTERNETEXERCISE 6-1The Most Powerful Women in BusinessEach year Fortune magazine lists the most powerful women in business. This ex-ercise directs the students to research the list for the cur-rent year. See complete exer-cise on page 6.33 of this manual.


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II. LEADERSHIP AND MANAGEMENTLEARNING OBJECTIVE 2Discuss leadership as it related to manage-ment. (Text page 147)

A. Leadership and management are not necessarily the same.

B. Effective leadership creates a vision of the future.

C. Management is the process of planning, organizing, staffing, motivating, and con-trolling through the use of formal authority.

POWERPOINT 6-4Leadership and Management(Refers to text page 147)

LECTURE LINK 6-1Why Good Employees Can Be Bad ManagersGood technical employees can make good managers, of course, but many do not. See complete lecture link on page 6.30 of this manual.


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III. LEADER ATTITUDESLEARNING OBJECTIVE 3Explain leadership attitudes. (Text page 147)

A. Douglas McGregor developed THEORY X and THEORY Y attitude profiles, or assumptions, about the basic nature of people.LEARNING OBJECTIVE 4Describe the differences between a Theory X and Theory Y manager. (Text pages 147-148)

1. A Theory X leader would likely use a much more authoritarian style of leadership than a Theory Y leader.

B. McGregor identified the SELF-FULFILLING PROPHECY, the relationship between a leader’s expectations and the resulting performance of subordinates.

1. If a manager’s expectations are high, productivity is likely to be high.

2. If a manager’s expectations are low, productivity is likely to be poor.

PROGRESS CHECK QUESTIONS (Text page 148)

1. Define the terms power, authority, and leadership.2. Explain the different expectations of Theory X and

Theory Y managers.3. Would you describe yourself as a Theory X or a

Theory Y manager? Why?4. Define the self-fulfilling prophecy of management.

TEXT FIGURE 6.2Assumptions About People(Text page 147)

POWERPOINT 6-5Douglas McGregor’s Leadership Theory(Refers to text page 147)

ETHICAL MANAGEMENT (Text page 149)

The construction foreman is behind schedule on a building project and has been told by the president of the company to hire a few illegal immigrants to get the job caught up and avoid missing a deadline with the client. What action should the foreman take?

Because of the client’s impatience, the next few weeks on the project will be difficult. Your boss thinks that hiring illegal immigrants could save time and money. However, this is a very unsatisfactory solution. There is a growing backlash against illegal immigration in this country. Hiring undocumented workers is illegal in some cities and states. By the time this manual is read, there may even be a federal law with penalties that cut deep. Remember, it’s not your boss that will be hiring workers, it is YOU.


LECTURE OUTLINE LECTURE NOTESYou are the one who will face the consequences, and there is no guarantee that the owner will stand be-hind you if difficulties arise.

Probably your next step should be to discuss the problem with the client to find other ways to “catch the project up” without suffering any penalties. A discussion with your attorney wouldn’t be a bad idea, either.

IV. FRAMEWORK FOR CLASSIFYING LEADERSHIP STUDIESA. Leadership studies can be classified by

focus. 1. Focus refers to whether leadership is

studied as a set of traits or a set of behaviors.

a. Traits refer to what characteristics the leader possesses.

b. Behaviors refer to what the leader does.

2. Approach refers to whether leadership is studied from a universal or contin-gent approach.

a. The universal approach assumes there is one best way to lead regardless of the circumstances.

b. The contingent approach assumes the best approach to leadership is contingent on the sit-uation.

B. Trait Theory 1. The TRAIT THEORY stressed what

the leader was like rather than what the leader did.

2. Some traits do seem to stand out – dominance, intelligence, extroversion, and adjustment – but the differences are small.

POWERPOINT 6-6Framework for Classifying Leadership Studies(Refers to text page 148)

BONUS INTERNETEXERCISE 6-2Self-Assessment for Leading as a ManagerAn online self-assessment tool helps identify leadership strengths and weaknesses. See complete exercise on page 6.34 of this manual.

TEXT FIGURE 6.3Framework for Classifying Leadership Studies (Text page 148)

POWERPOINT 6-7Trait Theory(Refers to text page 149)

CRITICAL THINKING EXERCISE 6-1Traits of LeadersWhat traits are common to great leaders? See complete exercise on page 6.35 of this


LECTURE OUTLINE LECTURE NOTES 3. At best, traits may influence the

capacity to lead. C. Basic Leadership Styles 1. Other studies have focused on the

basic leadership styles. a. The AUTOCRATIC LEADER

makes more decisions for the group.

b. The LAISSEZ-FAIRE LEADER al-lows people within the group to make all decisions.

c. The DEMOCRATIC LEADER guides and encourages the group to make decisions.

2. At first glance, the democratic style seems the most desirable, but the evidence is unclear.

D. Ohio State Studies 1. The studies at Ohio State University

were conducted to discover the behav-ior of successful leaders.

2. These studies used the LEADER BEHAVIOR DESCRIPTION QUESTIONNAIRE (LBDQ,) a ques-tionnaire designed to determine what a successful leader does, regardless of the type of group being led.

3. Two leader behaviors appeared con-sistently.

a. CONSIDERATION refers to the leader behavior of showing con-cern for individual group members and satisfying their needs.

b. INITIATING STRUCTURE refers to the leader behavior of structur-

manual.

CRITICAL THINKING EXERCISE 6-2Leadership SituationsDifferent situations call for different leadership styles. This exercise asks students to identify specific situations. See complete exercise on page 6.36 of this manual.

TEXT FIGURE 6.4Relationship Between Styles of Leadership and Group Members (Text page 150)

POWERPOINT 6-8Ohio State Studies(Refers to text pages 150-151)


LECTURE OUTLINE LECTURE NOTESing the work of group members and directing the group toward the achievement of the group’s goals.

E. University of Michigan Studies 1. The Institute for Social Research of

the University of Michigan conducted studies of group behavior at the Prudential Insurance Company in Newark, New Jersey.

2. They found that managers of high-pro-ducing work groups were more likely to:

a. receive general rather than close supervision from their superiors

b. like the amount of authority and responsibility they have in their job

c. spend more time in supervision d. give general rather than close su-

pervision to their employees e. be employee-oriented rather than

production-oriented 3. Supervisors of low-producing work

groups were production-oriented and gave close supervision.

4. The Institute director, Rensis Likert, developed four styles of leadership:

a. System 1: exploitative authoritative

b. System 2: benevolent authoritative

c. System 3: consultative d. System 4: participative 5. He concluded that System 4 was the

most effective style of management.

POWERPOINT 6-9University of Michigan Studies(Refers to text pages 151-153)


LECTURE OUTLINE LECTURE NOTESCASE INCIDENT 6.1

Changes in the Plastics Division (Text page 152)

Rusty Means is the general manager of the plastics division of Warner Manufacturing Company and has had great success in running his department. Rusty has an autocratic management style and the employees have responded well to his task-orientated operating style. Rusty’s direct boss has just retired and the new replacement, Wallace Thomas, wants to make changes. Thomas wants to develop a plan-ning committee and bring employees into the decision-making process. Rusty is not sure how he will adapt to these changes, especially with the success he enjoys under the former arrangement with his general manager.

1. What different styles of leadership are shown in this case?

Based on the comments, Ed Sullivan operated using a laissez-faire style in which he allowed people within the group to make all the decisions. He delegated decision-making power to Rusty Means. In turn, Rusty ran with an autocratic style of leadership where he made all the decisions for the group. Now, the newly hired general manager, Wallace Thomas, is trying to involve employees in the decision-making process using a democratic leadership style, which guides and encourages the group to make de-cisions.

2. What style of leadership do you think Wallace will have to use with Rusty?

The management style Rusty has been using (autocratic) is in conflict with the approach Wal-lace would like to initiate (more democratic). This creates a difference in styles. Wallace has to decide whether he wants to impose the new autocratic style of management on Rusty or allow him to continue using the approach he has previously used. This question is a good discussion starter: is there one best leadership approach? Why or why not?

3. Do you agree with Rusty? Why or why not?

Rusty has been successful using a task-orientated leadership approach. This style has been well accepted by the employees and the overall results have been positive. Rusty sees little value in changing his style of leadership. For these two individuals to operate successfully, Wallace might need to become more of a situational leader, analyzing what works in this situation. Wallace and Rusty will need to ad-just their styles to some degree, analyzing the benefits and limitations of each method, and find some middle ground that allows them to work together for the good of the company and department.

4. If “products are produced on schedule and of such quality that few customers complain,” why should there be any changes?

If the department is working well using Rusty’s autocratic approach, maybe a “if it ain’t broke, don’t fix it” mindset would be best. However, an autocratic style may be preventing employees from de-veloping or suggesting improvements. Instead of trying to force Rusty to make major changes right away, maybe Wallace should spend some time meeting with Rusty, touring the department, asking ques-tions, getting feedback, etc. Both Rusty and Wallace need to communicate more effectively.

F. The Managerial Grid 1. Robert Blake and Jane Mouton devel-


LECTURE OUTLINE LECTURE NOTESoped the MANAGERIAL GRID, a two-dimensional framework rating a leader on the basis of concern for people and concern for production.

2. The identified five basic styles of management:

a. authority-obedience (9,1 position) b. country club management (1,9 po-

sition) c. team management (9,9 position) d. impoverished management (1,1

position) e. organization man management

(5,5 position) 3. The Managerial Grid is intended to

help managers learn what their leader-ship style is and move toward a 9, 9 team management style.

G. Contingency Approach to Leadership 1. Research began to focus on the

CONTINGENCY APPROACH TO LEADERSHIP, which theorizes that different situations and conditions re-quire different management approaches.

2. An early style identified by Fred Fiedler focused on the match between the leader’s personality and the situa-tion.

3. He defined two basic leader personal-ity traits.

a. Task-motivated leaders gain satisfaction from the performance of a task.

TEXT FIGURE 6.5The Managerial Grid(Text page 154)

POWERPOINT 6-10The Managerial Grid(Refers to text pages 153-154)

TEXT REFERENCE Career Management Box: Basics of Career Planning Objectives A series of questions can help establish your career planning objectives. (Box in text on page 154.) An additional exercise and dis-cussion is available in this chapter on page 6.27.

BONUS CASE 6-1Leading in a Leaderless CompanyThe 21st century may be unfriendly to leaders who try to run their companies through sheer force of will. See complete case, discus-sion questions, and suggested answers on page 6.38 of this manual.

TEXT FIGURE 6.6Fiedler’s Classification of Situations (Text page 155)

POWERPOINT 6-11Contingency Approach to Leadership(Refers to text pages 154-155)


LECTURE OUTLINE LECTURE NOTES b. Relationship-motivated leaders

gain satisfaction from interper-sonal relationships.

4. The least preferred co-worker scale (LPC) was used to measure a per-son’s orientation.

a. Relationship-motivated leaders were presumed to be motivated to have close interpersonal relations with others.

b. Task-oriented leaders were presumed to be motivated to accomplish the task.

5. Fiedler next developed a favorable-un-favorable continuum based on three major dimensions:

a. LEADER-MEMBER RELATIONS refer to the degree others trust and respect the leader and to the leader’s friendliness.

b. TASK-STRUCTURE is the degree to which job tasks are structured.

c. POSITION POWER refers to the power and influence that go with a job.

6. These dimensions are graphed in a complex eight-celled continuum.

H. Continuum of Leader Behaviors 1. Robert Tannenbaum and Warren

Schmidt identified three forces involved in finding the most effective leadership style:

a. forces in the manager b. forces in the subordinate

TEXT FIGURE 6.7Leadership Style and Lead-ership Situations (Text page 155)

TEXT FIGURE 6.8Forces Affecting the Lead-ership Situation (Text page 156)

TEXT FIGURE 6.9Continuum of Leader Behavior (Text page 156)

POWERPOINT 6-12Continuum of Leader Behaviors(Refers to text page 156)


LECTURE OUTLINE LECTURE NOTES c. forces in the situation 2. They concluded that one style of lead-

ership is not effective in all situations.I. Path-Goal Theory of Leadership 1. The PATH-GOAL THEORY OF

LEADERSHIP attempts to define the relationships between a leader’s behavior and the subordinates’ perfor-mance and work activities.

a. Leader behavior influences the motivation of subordinates when they see it as a step toward future satisfaction.

b. Behaviors can either increase or decrease employee expectancies.

2. In path-goal theory, there are four basic leadership behavior types:

a. role classification leadership b. supportive leadership c. participative leadership d. autocratic leadership 3. Each of these leadership behaviors re-

sults in different levels of performance and subordinate satisfaction.

J. Situational Leadership Theory 1. According to the SITUATIONAL

LEADERSHIP THEORY, as the level of maturity of followers increases, structure should be reduced while socio-emotional support should first be increased and then gradually decreased.

2. As followers progress from immaturity to maturity, the leader’s behavior

POWERPOINT 6-13Path-Goal Theory of Leadership(Refers to text pages 157-158)

TEXT FIGURE 6.10Situational Leadership Theory (Text page 158)


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LECTURE OUTLINE LECTURE NOTESshould move from:

a. high task-low relationships to → b. high task-high relationships to → c. low task-high relationships to → d. low task-low relationshipsK. Transactional, Transformational, and

Charismatic LeadersLEARNING OBJECTIVE 5Explain the differences between Transactional, Transformational, and Charismatic leadership styles. (Text pages 158-159)

1. Another approach is based on how leaders and followers influence one another.

2. Using TRANSACTIONAL LEADERSHIP, leaders engage in an unemotional bargaining relationship with their followers.

3. TRANSFORMATIONAL LEADERSHIP involves cultivating em-ployee acceptance of the group mis-sion.

4. CHARISMATIC LEADERSHIP in-volves a leader who can successfully influence employee behavior on the strength of personality or a perceived charisma, without the formal power or experience to back it up.

PROGRESS CHECK QUESTIONS (Text page 160)

5. Define the following leadership styles: autocratic, laissez-faire, and democratic.

6. Summarize the findings of both the Ohio State and University of Michigan leadership studies.

7. Explain the path-goal theory of leadership.8. Explain the differences between transactional, trans-

formational, and charismatic leadership styles.

POWERPOINT 6-14Transactional, Transfor-mational and Charismatic Leadership(Refers to text pages 158-159)

CRITICAL THINKING EXERCISE 6-3Crisis ManagementWhen a business is con-fronted by a crisis, managers must react quickly to keep the organization responsive. See complete exercise on page 6.37 of this manual.

TEXT REFERENCEStudy Skills Box: Return on My InvestmentWhat are the returns involved in improving study skills? (Box in text on page 160.) An additional exercise and dis-cussion is available in this chapter on page 6.29.



V. LESSONS FROM LEADERSHIP STUDIESA. It is hard to predict who will be a good

leader. B. There is no one best way to lead: most

leadership is situational.C. The effectiveness of a leadership style can

be seen in the atmosphere of the organiza-tion.

POWERPOINT 6-15Lessons from Leadership Studies(Refers to text page 160)

LECTURE LINK 6-2Best Business Leaders of the 20th CenturyThe top executives of the 20th

century, as chosen through a survey of executives. See complete lecture link on page 6.30 of this manual.


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VI. MANAGING CORPORATE CULTURELEARNING OBJECTIVE 6Identify strategies for effectively managing corporate culture. (Text pages 160-167)

A. The word “culture” has many meanings. 1. CULTURE is the set of important

understandings (often unstated) that members of a community share.

2. In an organization, culture is similar to a human’s personality.

3. An organization’s culture is transmitted through:

a. long-standing, unwritten rules b. shared standards c. standards for social etiquette and

demeanor d. established customers for relating

to peers, subordinates, and supe-riors

e. other traditions 4. CORPORATE CULTURE communi-

cates how people in an organization should behave by establishing a value system conveyed through rites, rituals, myths, legends, and actions.

5. Or, more simply, corporate culture means “the way we do things around here.”

B. Cultural Forms of Expression 1. Culture has two basic components; a. substance, the meanings

contained in its values, norms, and beliefs

b. forms, the practices whereby these meanings are expressed,

POWERPOINT 6-16Managing Corporate Culture(Refers to text pages 160-161)

LECTURE LINK 6-3The Culture of the Real Rocket ScientistsFor 40 years the Jet Propul-sion Laboratory has planned interplanetary missions for NASA guided by a few key rules. See complete lecture link on page 6.31 of this manual.


LECTURE OUTLINE LECTURE NOTESCASE INCIDENT 6.2

The Way We Do Things (Text page 166)

The Fitzgerald Company has been the industry leader in producing consumer products for years. However, sales and market shares have been in decline now for the past several. The company is now considering changing the company culture to redefine itself and regain the success it has enjoyed in the past.

1. Describe, in general terms, the corporate culture at Fitzgerald Company.

The corporate culture for the Fitzgerald Company has been one of work-hard-play-hard, where activity is the key to success. Rewards accrue for persistence and the ability to find a need and fill it. Be-cause of the need for volume, team players who are friendly and outgoing (sales types) thrive.

2. What’s wrong with a business philosophy based on the belief “that customer relations and a strong selling orientation are the keys to business success”?

Meeting the needs of the customer is essential to success in areas such as product design, imple-mentation, and delivery. Creating and selling products that please the customer impacts the company’s total revenue. However, revenue is not the same thing as profit. Profit is what is left after costs have been subtracted from revenue. Unless a product can be produced in a cost-effective way, more sales won’t do a thing for profit.

3. What does Valerie mean when she says Fitzgerald Company may have to change its culture? What are some of the necessary changes?

For the Fitzgerald Company, its corporate culture has been successful in the past. However, losses in sales and market shares have now prompted its president to look at how the company culture affects sales and expenses. Changing a company culture will be a difficult process for many reasons.

Based on research, the Fitzgerald Company may have to change several characteristics of the company to foster a new culture. These characteristics include individual autonomy (degree of responsi-bility/ independence for individuals in the organization), structure (rules and regulations), support (man-agers to subordinates), identification (employee identification to the organization as a whole), perfor-mance-reward (rewards for performance), conflict tolerance (willingness to hones and open about differ-ences), and risk tolerance (degree at which employees are encouraged to be aggressive/innovative and risk seeking).

4. Discuss the problems the company may encounter in attempting to implement changes.

The biggest challenge the Fitzgerald Company will face is the length of time it will take to im-plement and change its corporate culture. This process usually takes 6 to 15 years. It is also expensive. Because of the cost, time, and difficulty in changing culture, some might argue that it is easier to change the people within the organization. This assumes businesses promote people who fit their organization, and the easiest way to change the organization’s culture is to change the people. However, it makes more sense to strengthen or fine-tune the current cultural structure.

F. Changing Culture 1. It usually takes from 6 to 15 years to

POWERPOINT 6-19Changing Culture


LECTURE OUTLINE LECTURE NOTESsuccessfully change organizational culture.

2. According to Allan Kennedy, there are only five reasons to radically change organization culture.

3. It is possible to strengthen or fine-tune the current culture without wholesale cultural changes.

4. The easiest if not the only way to change an organization’s culture is to change its people.

(Refers to text pages 166-168)

BONUS CASE 6-2Turning Tyco AroundAfter Tyco’s former CEO Dennis Kozlowski’s convic-tion for looting $600 million from the company, Ed Breen was brought in to rescue the troubled company. See com-plete case, discussion ques-tions, and suggested answers on page 6.40 of this manual.

THE WORLD OF WORK

Taco Barn Gets Some Surprising Feedback (Text page 167)

Tony has successfully participated in the leadership development survey and information about this survey is available for discussion with his supervisor. The reports show that some employees are very happy while others are unhappy. The results suggest that the company needs to address how leadership style impacts corporate culture.

1. Should the leadership team have been surprised by the survey results? Why or why not?

Not really. The purpose of the survey was to identify what works and what doesn’t. Identifying problem areas is the first step in solving the problem.

2. Should they be pursuing a “right” leadership style? Why or why not?

Is there really one “right” leadership style? Many experts will answer that the right style depends on the leader, the employees, and the situation. Mandating one leadership style might inadvertently de-stroy successful leadership situations. Effective leadership requires drawing on a range of skills and tech-niques, not a prescribed leadership model. However, that being said, the poor performances of the “prob-lem children” still needs to be addressed, but not with a one-size-fits-all approach.

3. If Taco Barn doesn’t have a clear sense of culture (as the survey results appear to indicate), where and how does it start to develop one?

Taco Barn culture is not clearly defined. However, culture can’t just be designed and imple-mented. It grows over time, as the organization develops a strong understanding of what is important and what has the support of management and employees.

The first step in establishing the Taco Barn culture should be defining the essence of the organi-zation. These characteristics include individual autonomy, structure, support, identification, performance-reward, conflict tolerance, and risk tolerance.

4. What should the leadership of the Taco Barn organization do now?


The leadership has begun defining its culture and communicating it to employees throughout the organization. Employees can be shown how the development of this culture can be a positive step in de-veloping a more focused, established company with leadership skills that can excel in the restaurant in-dustry, providing a good working environment for its employees. This will help employees both in the short run and long run to identify the culture of their company and allow them to associate and identify more with the company as a whole rather than just their individual store.


NOTES FOR END-OF-CHAPTER MATERIAL

REVIEW QUESTIONS

1. Discuss the following statement: Leaders are born and cannot be developed.

While some traits seem to be common among great leaders, these traits cannot assure success. In reality, a leader’s success is a complex mix of personality, education, experience, environment, and op-portunities.

2. Explain what people mean when they use this statement: “Leaders lead by example.” Do you be-lieve it? Explain your answer.

Employees throughout the organization look to leaders for examples of how to advance in the or-ganizations. The values and attitudes of a strong leader tend to be transmitted to all levels of the organiza-tion.

3. How is corporate culture originated and maintained?

An organization’s culture is transmitted through long-standing, unwritten rules; shared standards; standards for social etiquette and demeanor; established customers for relating to peers, subordinates, and superiors; and other traditions. Through these, corporate culture communicates how people in an organi-zation should behave. Or, more simply, corporate culture means “the way we do things around here.”

4. List the five reasons that justify a large-scale cultural change.

According to Allan Kennedy, there are only five reasons that justify a large-scale cultural change:

(a) The organization has strong values that do not fit into a changing environment.

(b) The industry is very competitive and moves with lightning speed.

(c) The organization is mediocre or worse.

(d) The organization is about to join the ranks of the very large companies.

(e) The organization is small but growing rapidly.

DISCUSSION EXERCISE 6.1

Bertelsmann’s New Web-Friendly CEO

Bertelsmann, a German media conglomerate, is about to promote Harmut Ostrowski to the CEO position from the printing division. The company is looking for a new corporate identity that can take on rival competition, and they feel Ostrowski is their man. However, for this happen successfully, Ostrowski has to step out of the company’s traditional conservative operating style and bring about a new cultural change throughout the company. 1. How would you describe the organizational culture at Bertelsmann? Provide examples to support

your description.

This organization has a discrete and reserved culture and expects its employees to be loyal to the organization. In fact, Ostrowski is referred to as a Bertelsmann lifer, which suggests he has shown the long-term dedication and hard work that defines the expectations and culture of the company.


2. What kind of changes does Bertelsmann have to make in order to compete against rivals like News Corp.?

The company has to draw more attention to the face of the company, which is Ostrowski. He ap-pears to have the skills and the support of the people who know him, which has fueled anticipation as to his role as the new CEO. This change at upper level management levels may have cultural implications for this conservative, modest company.

3. What challenges does Bertelsmann face in making those changes?

Bertelsmann is in an industry that is very competitive and moves with lighting speed. The organi-zation is faced with fine tuning or strengthening their current company culture, perhaps making dramatic changes, replacing existing employees with new hires. Management must communicate this new operat-ing style fully, informing and supporting employees.

4. Do you think Ostrowski has the right leadership style to be the CEO of Bertelsmann? Why or why not?

Based on the industry and peer comments, Ostrowski appears to have the skills to be the new leader of Bertelsmann following his many years of service to the company. Ostrowski has a solid under-standing of the industry and how it operates, which an important skill necessary to make top level deci-sions. Furthermore, some speculate he could be the new tonic this company needs to capture more sales and marketing share in the media industry.

DISCUSSION EXERCISE 6.2

Siemens’ Culture Clash

Siemens looks to the new CEO, Klaus Kleinfeld, to make corporate changes to help boost com-pany sales, which have been suffering. Kleinfeld brings in a new leadership style that promises to deliver results, but he has had to make significant changes to accomplish these new objectives. While this has shown bottom line results for investors, it has been a real cultural shift from the previous leadership of the company.

1. How would you describe the culture of Siemens before Kleinfeld’s appointment as CEO?

The company was considered slow and sluggish in its operating style, much like the process cul-ture in which the environment involves low risk coupled with little feedback. Employees focus on how things are done rather than on outcomes. Employees in this environment become cautious and protective.

2. How has the culture changed under his leadership? Provide examples to support your answer.

Kleinfeld woke up the company with his aggressive operating style that has little patience for non-performance. Kleinfeld has spun off non-performing divisions, and when one group of managers failed to deliver, he broke up an entire division. His announcing that “we commit to something, we de-liver” spoke volumes to his troops as to how the company would operate under his command. His mili-tary tenure may be part of his leadership style, which is direct and demanding.

3. How would you categorize Kleinfeld’s leadership style?

Kleinfeld has used an autocratic style of leadership in which the leader makes decisions for the group. He has, in the process, created a tough person/macho culture where results drive a team develop-mental approach. There is little time and patience for those who do not adapt this style.


4. Do you think Kleinfeld’s adoption of “U.S.-style management methods” was the right choice for Siemens? Why or why not?

When looking at bottom line results, Kleinfeld was probably the right medicine for a company not living up to its great potential. In a global marketplace, the Western management style is often criti-cized for being bottom line-driven, and Kleinfeld fits that mold. However, his role is to maximize eco-nomic profits for the company, and that is how his success is measured.


CAREER MANAGEMENT NOTES

Basics of Career Planning Objectives

Instructor’s Notes for Text Box Six: Objectives to consider and implement to increase students knowledge, usage and understanding of the concepts.

By now, your career objectives should be more easily understood. Putting your objectives into a usable context can be of value and the payoff worth the time invested. The following exercise is intended to help you in the career development process. Take a look at the following questions and answer them, with the understanding that a better-planned career has a better return on time and resource investments. It is also understood that this information can and will change as you and your career goals develop. All in-formation that is provided is not static and has takes on new meaning as your own career moves in new directions. Be honest and use this guide as it is intended. The payoff is worth all the energy and education that you will find in the learning process!


Career Objectives Worksheet

What is your ideal Career job? Explain:

______________________________________________________________________________

______________________________________________________________________________

What companies would you consider to be a good fit to the Career job you are striving for?

______________________________________________________________________________

______________________________________________________________________________

What skills do you have that are a good fit to your ideal Career job?______________________________________________________________________________

______________________________________________________________________________

What additional skills might be necessary to help get better results in the Career job that you are seeking?

______________________________________________________________________________

______________________________________________________________________________

What is your level of confidence that you can find and get this Career job?

______________________________________________________________________________

______________________________________________________________________________

What is the desired salary and benefits you would expect from obtaining this Career job?

______________________________________________________________________________

______________________________________________________________________________

Are you willing to relocate for this career job?

______________________________________________________________________________

______________________________________________________________________________

What is keeping you from obtaining this Career job? Explain:

______________________________________________________________________________

______________________________________________________________________________


STUDY SKILLS NOTES

Return on My Investment

Instructor’s Notes for Text Box Six: Objectives to consider and implement to increase students knowledge, usage and understanding of the concepts.

Where can this list lead me? This question is better asked as: what is my return on my invest-ment? If I spend more time on studying, what can this do for my overall improvement in my study effec-tiveness and grade point average? To best answer these questions, you must look at the work you have done to this point. More time studying might help, but if you are not aware of your shortcomings and de-ficiencies, then more time doing the same thing incorrectly will not help you arrive at a better outcome. As a result, only through personal assessment and learning to develop new strategies will you find a changed outcome. Go back to your list and focus on where are truly your weak areas and learn to develop new strategies to get better results. You will be amazed at the transformation that can happen. Develop strategies for staying on track; otherwise, falling back on old habits can set you back and create new frus-trations that might be even larger challenges to overcome!

STUDENT EXERCISES:

1. Discuss the benefits of improved study skills. Ask students to add further “improvements” that might be in addition to the list above. Like a good advertisement, the focus is always on the bene-fits; and in the same manner students must see the benefits before they invest more time and en-ergy on improving their study skills.

2. Explain to the students the concept, as used in the business world, “return on investment” (a per-formance measure used to evaluate the efficiency of an investment). Make the comparison of their own investments to improve their study skills and the expected improved outcome.

3. Finally, explain the focus needed to keep the change of behavior of the newly improved skills, i.e., the staying on track. Otherwise, falling back on old habits can bring greater challenges and higher levels of frustrations that might be more difficult to overcome.


LECTURE LINKS

LECTURE LINK 6-1

Why Good Employees Can Be Bad Managers

You have a good employee – a hard worker, technically proficient. You promote him and it turns out to be a bad decision. You have promoted your best technical employee, and in the process lose a good employee and gain a poor manager. How does this happen?

Good technical employees can make good managers, of course, but many do not. Good technical specialists – engineers, accountants, computer gurus, financial analysts, statistical experts – are more likely to have introvert personalities. Introverts prefer to work alone. They revel in painstaking details, meaningful paperwork, tedious activities, and precision. They can focus for hours on extracting meaning-ful data from mounds of information. The presence of ambiguity and clutter motivates them to find the “perfect solution.”

The traits that make technical experts successful actually get in the way of managing others. The world of the worker encourages them to seek precision and order. By contract, the management role is messy, complicated, and ambiguous. Additionally, the sense of pride and reward for completing a task is missing.

Relationship complexities are more dynamic than task complexities. Management analysis must account for distasteful political elements, egos, pride, insecurities, envy, hurt feelings, and petty conflicts.

To make the successful transition to leadership, technical experts learn to rely more upon their in-stincts, insights, intuitions, tolerance for human equations, underlying values, and their “feel” for things. Rational analysis is still important; it just is not sufficient.

LECTURE LINK 6-2

Best Business Leaders of the 20th Century

Fast Company magazine recently published a listing of the greatest business leaders of the 20th century, based on a survey of 7,000 executives by Harvard Business School. Classic entrepreneurs who built companies from scratch dominate the list of the best. Only one woman – Estee Lauder – made the top 25.i

1. Samuel M. Walton (Wal-Mart)2. Walter E. Disney (Walt Disney) 3. William H. Gates III (Microsoft) 4. Henry Ford (Ford Motor) 5. John P. Morgan (J. P. Morgan Chase) 6. Alfred P. Sloan Jr. (General Motors) 7. John F. Welch Jr. (General Electric) 8. Raymond A. Kroc (McDonald’s) 9. William R. Hewlett (Hewlett-Packard) 10. David Packard (Hewlett-Packard) 11. Andrew S. Grove (Intel)


12. Milton S. Hershey (The Hershey Co.)13. John D. Rockefeller Sr. (Standard Oil) 14. Thomas J. Watson Jr. (IBM) 15. Henry R. Luce (Time-Life Publications) 16. Will K. Kellogg (Kellogg) 17. Warren E. Buffett (Berkshire Hathaway) 18. Harland Sanders (Kentucky Fried Chicken) 19. William C. Procter (Procter & Gamble) 20. Thomas J. Watson Sr. (IBM) 21. Asa G. Candler (Coca-Cola) 22. Estee Lauder (Estee Lauder) 23. Henry J. Heinz (H. J. Heinz) 24. Daniel F. Gerber Jr. (Gerber Products) 25. James L. Kraft (Kraft Foods)

LECTURE LINK 6-3

The Culture of the Real Rocket Scientists

Celebrations at the Jet Propulsion Laboratory (JPL) in Pasadena, California, have come virtually back-to-back in recent years. The Pathfinder Lander successfully landed on Mars in 1997, then the Spirit and Opportunity rovers followed in 2004. Later that year, the Cassini probe went into orbit around Saturn.

In the four decades it has been affiliated with NASA, the Lab has dispatched probes to seven of the planets and dozens of their moons. According to the deputy director of Mars exploration Pete Theisenger, “We do interplanetary…We’re not the only people who can do it, but we’re the only ones who have done it for 40 years.”

JPL is not owned by NASA, but rather is a non-profit, federally-funded research center managed by the California Institute of Technology and does its work for NASA under contract. What is responsible for this success? One reason: a handful of straightforward rules that JPL has always taken care to follow.

Culture of Critique. For big businesses, research and development is a secretive thing. JPL sci-entists come from the academic field and live by peer review, in which even theoretical work isn’t consid-ered sound until a lot of objective eyes have looked at it. When smart people ask questions of other smart people, they often receive smart answers.

Pie-in-the-Sky Thinking. The Lab has a fondness for wild ideas, going back to the 1960s, when the Lab established an office to dream up plans for future missions. An engineer crunching numbers one day happened to notice that in 1977, Jupiter, Saturn, Uranus, and Neptune would fall into a rare planetary line up. This insight set the stage for the four-planet Voyager flights during the 1970s and 1980s. Today this blue-sky thinking has become institutionalized with a 20-person group called the Advanced Projects Design Team – or Team X. Scientists with a suggestion for a future mission book time with Team X and pay for it out of their own operations budget. In a given year, 70 or more missions come before Team X, and only one or two are recommended to NASA. The group technique assures that those two missions are well thought out.

Each One Teach One. The greatest resource JPL has is not good ideas as much as the people who generate them. Having Caltech next door provides a steady stream of smart people. The first thing young engineers who come to work at the Lab must do is learn the culture of JPL as an institution. The


Lab uses the concept of “each one teach one,” in which senior members of any team are charged with the responsibility of bringing at least one junior member along, assuring institutional memory.

Tolerance for Flops. The true test of the Lab’s business model comes when something goes wrong. Every mission means billions of dollars and decades of planning are at risk. JPL not only accepts the likelihood of the occasional costly flop, but also expects it. JPL’s first director, William Pickering, headed the moon probe missions in the 1960s. Pickering’s moon probes flopped six times before Ranger 7 succeeded. The Lab encourages employees to push the limits in a thoughtful way.

In JPL’s future are more missions to Mars and possibly to Pluto.ii


BONUS INTERNET EXERCISES

BONUS INTERNET EXERCISE 6-1III

The Most Powerful Women in Business

Each year Fortune magazine ranks the 50 most powerful women in business. Visit the Fortune website (www.fortune.com) and use the listing for the current year to answer the questions below. (Some-times the web address for a location changes. You might need to search to find the exact location men-tioned.)

1. List the top five most powerful women in business for the latest year. Also give the company for which they work.

Name Company

(1) ________________________________ _________________________________

(2) ________________________________ _________________________________

(3) ________________________________ _________________________________

(4) ________________________________ _________________________________

(5) ________________________________ _________________________________

2. Which of the women earns the highest pay? How much?

3. Choose one of the women in the top ten to further research. Give a brief biography.

i Source: Bill Breen, “The Three Ways of Great Leaders,” Fast Company, September 2005.

ii Sources: Jeffrey Kluger and Dan Cray, “Management Tips from the Real Rocket Scientists,” Time Business, No-vember 2005; Hutchinson, Harry, “Another Arm for Mars,” Mechanical Engineering; November 1, 2006; and Markels, Alex, “Guiding the Path to Mars,” U.S. News & World Report, Oct 30, 2006.

iii The Internet is a dynamic, changing information source. Web links noted in this manual were checked at the time of publication, but content may change over time. Please review the website before recommending it to your stu-dents.


BONUS INTERNET EXERCISE 6-2

Self-Assessment for Leading as a Manager

Knowing yourself, your strengths, and your needs for development form the foundation of effective leadership. A self-assessment tool is provided on the Massachusetts Institute of Technology’s online edu-cation site (http://web.mit.edu/hr/oed/learn/leading/tool_assessment.html.) (Sometimes the web address for a location changes. You might need to search to find the exact location mentioned.)

After completing the self-assessment, answer the following questions:

1. Which skills and competencies did you think you exhibited “frequently” or “nearly always?”

2. Which skills and competencies did you think you “almost never do” or “seldom do?”

3. What can you do to develop skills to balance your leadership effectiveness?


CRITICAL THINKING EXERCISES

CRITICAL THINKING EXERCISE 6-1

Traits of Leaders

Leaders possess traits and skills that make them successful. They are effective communicators, skillful planners, successful motivators. Leaders can be villains or heroes. This exercise examines the skills displayed by famous leaders and gives students the opportunity to use this knowledge to improve their leadership skills.

Groups of five to six people brainstorm a list of famous leaders, and then pick two leaders to compare and contrast. Then the groups should profile them in terms of their skills and traits.

Questions for Discussion:

1. What criteria did your group use to determine which two leaders you would profile? Describe.

2. In what ways are the leadership styles of these leaders similar? In what ways are they different? Explain.

3. Were you surprised at the similarity or dissimilarity between these leaders? Discuss.

4. Which one of these leaders would you want to work for? Explain your rationale.



Leadership Situations

Under the situational approach to leadership, different situations call for different leadership styles. Outline specific situations in which you would employ each of the following styles. Autocratic

Laissez-Faire

Democratic



Crisis Management

This exercise explores management reaction to rapid, unexpected change. Divide the class into groups of 5-6. Each group will act as a management team for a large national company faced with a crisis. Have the groups quickly analyze the situation (5-6 minutes,) decide on an appropriate strategy for coping with the situation, and prepare a brief statement outlining how the company should manage the crisis. A. A national consumer foods company has discovered that several batches of their salad dressing

have been contaminated with toxic industrial solvent. One person has died and the media is de-manding a statement.

B. At the construction site for a new corporate headquarters, the top floors of the building have col-lapsed, killing 16 people, including the head of the local union. The cause of the collapse has not been determined, but a television station has reported that substandard materials have been used in construction.

C. A hurricane has come ashore near your largest distribution facility days before your marketing department is scheduled to launch the new fall line of clothing. Communications have been cut off to the area and you have not been able to contact anyone at the facility. News media are re-porting large-scale damage and loss of life. Your retail managers across the country are worried that the loss of this distribution facility will disrupt deliveries at this critical point.

D. There has been a massive explosion at a chemical plant, centered in the storage area. The result-ing fire is threatening a building where dozens of workers have taken refuge. There are rumors that a terrorist bomb was involved. Casualties are unknown. Extent of damage is unknown.

E. A gunman has invaded a large metropolitan bank, killing four people and taking 20 employees hostage. He has demanded that bank executives publicly apologize for “crimes against African-Americans” or he will blow up the bank. No one knows what weapons he has.


BONUS CASES

BONUS CASE 6-1

Leading in a Leaderless CompanyIn a recent issue of Business Week magazine John Byrne speculated about the future of leader-

ship. Byrne said that the 21st century would be unfriendly to leaders who try to run their companies by the sheer force of will. He said that success would come, instead, to companies that are “leaderless” – or companies whose leadership is so widely shared that they resemble ant colonies or beehives. In a world that is becoming more dependent on brainpower, teams at the top will make more sense than a single top manager.

The Internet enables companies to act more like beehives because information can be shared hori-zontally rather than sent up to the top manager’s office and then back down again. The best people equipped to make them can make decisions instantly. In the past, uniform thinking from the top could cripple an organization.

Today, however, team leadership is ideally suited for the new reality of fast-changing markets. Many urgent projects require the coordinated contribution of many talented people working together. Such thinking does not happen at the top of the organization; it takes place down among the workers.

In the future, therefore, managers are more likely to be chosen for their team experience and their ability to delegate than to make all key decisions themselves. Companies in the future, it is said, “will be ‘led’ by people who understand that in business, as in nature, no one person can be really in control.”

DISCUSSION QUESTIONS FOR BONUS CASE 6-1

1. What would you look for on a résumé that would indicate that a candidate for work was a self-motivated team player? Are you that type? How do you know?

2. Given your experience with managers in the past, what problems do you see some managers hav-ing with letting employees decide for themselves the best way to do things and giving them the power to obtain needed equipment?

3. What would happen if all the businesses in your area had their employees mix with customers to hear their comments and complaints? Would that be a good or bad thing? Why?

4. What are the various ways you can think of for companies to pay bonuses to team members? One way is to divide the money equally. What are other ways? Which would you prefer as a team member?

ANSWERS TO DISCUSSION QUESTIONS FOR BONUS CASE 6-1

1. What would you look for on a résumé that would indicate that a candidate for work was a self-motivated team player? Are you that type? How do you know?This calls for creative answers. One possibility is to look for someone who was on a swimming

team or some other team that called for lots of self-motivation. Someone who runs marathons would also be clearly self-motivated. Team players would come from groups at work, at church, or at some other or-ganization. You know you’re the type if you have been a member of a team and get along well with oth-


ers. Teamwork is not the same as leadership. One has to be cooperative, friendly, and a good listener. Anything that shows these traits is good for the résumé.

2. Given your experience with managers in the past, what problems do you see some managers hav-ing with letting employees decide for themselves the best way to do things and giving them the power to obtain needed equipment? Some managers, mostly senior ones, are used to having control over others. They may have had

experience in the military or in other businesses where such behavior was not only acceptable, but re-warded and demanded of them. At times, it is hard for such managers to give up their power and decision-making authority by groups or employees. Often, training doesn’t help and such managers may have to be fired. But some can be retrained to be members of teams. It takes time.

3. What would happen if all the businesses in your area had their employees mix with customers to hear their comments and complaints? Would that be a good or bad thing? Why? Having employees mingle with customers lets them hear both positive and negative comments.

Employees then know what the company must do to please customers in the future. Another positive: re-lationship building with customers. It is also a good thing to have employees mingle with each other to learn more about each other’s skills and wants and needs. Together, as a team, employees can accomplish more than as individuals.

4. What are the various ways you can think of for companies to pay bonuses to team members? One way is to divide the money equally. What are other ways? Which would you prefer as a team member? One way to spread the money among team members is to have them all vote for who should get

the most and so on. Another way is to give members more money for spending more time on a project than the others. If possible, the contributions of the various members could be evaluated (for example, they could all write a summary of what they’ve done). In any case, such distribution is not easy. Good workers would want the pay to be distributed by contribution; others may prefer it to be distributed equally.


BONUS CASE 6-2

Turning Tyco Around

Former Tyco CEO Dennis Kozlowski and a former Tyco chief financial officer went to prison af-ter being convicted of looting the company of $600 million through extravagant overspending and divert-ing company funds for personal uses. After Kozlowski’s resignation in 2002, the $37 billion conglomer-ate was left with $24 billion debt and an image as the poster child of corporate greed. To turn the com-pany around the board of directors looked to former Motorola president Ed Breen.

Breen faced a monumental challenge – turning around a company on the verge of bankruptcy and restoring investor faith. He started with a whole lot of firing. In his first six moths he replaced Tyco’s board of directors wholesale, fired the entire top corporate team, and hired 80 executives to fill their spots. He set about restructuring the company’s debt and moved the corporate headquarters from an ex-pensive Manhattan office to a nondescript commercial complex in Princeton, New Jersey.

From the beginning, Breen took the long view of what would be required to resuscitate Tyco. Breen inherited more than 2,000 individual businesses involved in everything from health care to plastics to fire alarms. He determined which units needed rebuilding and which just needed a little push. Breen in-troduced a new system of financial checks and balances and drew up long-term plans for each division, something completely new to some Tyco units.

Rich Meelia, president of Tyco Healthcare, met with Breen six weeks after Breen arrived. Meelia told the CEO that the health-case group would need to take $50 million from earnings and plow it back into the business. Because he knew the company was strapped for cash, he expected resistance. To Meelia’s surprise, Breen gave the go ahead. Meelia recalls that this was an “attitudinal switch from ‘How’s the quarter looking?’ to ‘How are you going to continue to grow this business?’” Meelia used the money for marketing new products. By 2003 health care generated 23% of Tyco’s revenue and almost 60% of its operating income.

Breen didn’t just want to turn Tyco into a stronger, more ethical version of its old self. He wanted to make Tyco a “world-class operating company” instead of the holding company it had been under Ko-zlowski. To do so, he pumped up R&D spending to produce organic growth, in contrast to Tyco’s old pursuit of growth through relentless acquisitions.

Tyco’s restructuring was not without pain. Breen closed 227 facilities, fired 8,100 people, and sold 27 segments. The company made decisions based on meeting the business’s long-term strategy. In con-sidering which businesses fell into the strategic definition, Breen identified businesses that fit in one of the four core segments that Tyco wanted to grow long term. “Our core segments are fire and security; health care; electronics; and what I would call engineered products or infrastructure services. They are great industries to be in; they have great growth dynamics,” explains Breen.iv

DISCUSSION QUESTIONS FOR BONUS CASE 6-2

1. What does this case tell you about the issue of executive pay? How much is a new leader, like Breen, worth?

iv Sources: Scott Kirsner, “One Tough Assignment,” Fast Company, September 2004 pp. 76-77; Jyoti Thottam, “Can This Man Save Tyco?” Time, February 9, 2004, pp. 48-50; John S. McClenahen, “Restoring Credibility: Ed Breen, Tyco International’s Chairman and CEO, Works to Gain the Trust of Investors, Customers, Government Regulators and Employees,” Penton Industry Week, February 1, 2005; Rachel Layne and Matthew Keenan, “Expect-ing a Revival, Firm Buys Tyco Marketplace by Bloomberg,” International Herald Tribune, May 15, 2006; and “Tyco Reports Second Quarter Earnings from Continuing Operations of $0.52 per share,” PR Newswire, May 4, 2006.


2. What evidence does this case present for the fact that Breen has a long-term leadership perspec-tive rather than a shorter-term managerial perspective?

3. What steps can the company take now to restore its image among the general population?


ANSWERS TO DISCUSSION QUESTIONS FOR BONUS CASE 6-2:

1. What does this case tell you about the issue of executive pay? How much is a new leader, like Breen, worth?

There are very few people available and willing to accept a leadership position in a firm that ap-pears to be sinking. Furthermore, the scandals associated with the firm are likely to carry over to the new leader. Therefore, the compensation package to win a new leader from industry would have to be quite generous. Would the leader be worth the pay? The proof is in the results. Executive pay needs to be more closely aligned with results. And stock options should not be the only way to do that. Bonuses tied to re-sults might be better. This case is a great opening for discussing executive pay and the difficulty of run-ning a major corporation.

2. What evidence does this case present for the fact that Breen has a long-term leadership perspec-tive rather than a shorter-term managerial perspective?

The evidence shows in the fact that Breen kept the health-care group even though it was in need of more money. Also, his statement that he was no longer interested in quarterly results, but the long-term growth of the company. The subsequent results proved him right. Students may be interested in seeing how the stock has done over time. Was it a good investment when the transition took place?

3. What steps can the company take now to restore its image among the general population?

The best way to prove a company’s worth is to build up sales and profits and let the numbers speak for themselves. Too much publicity would only remind the public of the company’s past.

Breen’s team also considered changing the company’s name to distance it even more from the bad old days, but discarded the idea for the time being. “You can’t hide from a problem,” he says. “We wanted to prove that we can be a model of a company that works its way out of a crisis.”


ENDNOTES


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