H 17 Ob Assessments

Assessment Reference Book
Questions from the Edinburgh Business School Course Website
Organisational Behaviour
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Organisational Behaviour Question Booklet Release of December 2012
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Assessment Reference Book: Organisational Behaviour Edinburgh Business School
Module 1A: The Basics

1
Which of the following challenges necessitates rapid or urgent changes in employee and group behaviour,
information flows, work design, team (SDT) interactions and organisational structure?
A. Challenge of managing ethical behaviour.
B. Challenge of workforce diversity.
C. Challenge of globalisation.
D. Challenge of technology change.
Executive merit performance bonuses, demanding customer expectations for service and intense global
competition suggest a corporate work environment that is represented by which of the following?
A. Bottom-up and top-down communication (expertise-based and multi-channel).
B. Highly specialised with little cross-training and no use of skill-based compensation.
C. Widespread uncertainty avoidance by managers.
D. Functional design with little need for a functioning intergroup network.
When a manager believes that a new employee has all the necessary skills to perform a job adequately and deemphasises any on-the-job training for the new worker, the manager is applying which of the following?
A. The SOBC model of human behaviour.
B. Theory Y assumptions of management.
C. A scientific management approach that matches the new employees existing skill set to the demands
of the job (a Theory X approach).
D. The employee is motivated only by terminal values.
Which of the following represents the goals to be achieved or the desired end states of ones existence?
A. Terminal values.
B. Instrumental values.
C. Critical values.
D. Principled stage of moral development.
Which of the following is a way for corporations to encourage ethical behaviour in employees?
A. Issue a code of ethics and train employees in the ethics of business practices.
B. Dictate ethical standards.
C. Classify all employees in terms of their stages of moral development.
D. Encourage criminal charges and the prosecution of unethical employees.
Which of the following defines a personal, relatively stable set of individual characteristics that influences an
employees behaviour on the job?
A. The SOBC model.
B. The employees personality.
C. Managements Theory X and Theory Y assumptions about employee behaviour.
D. The human perception process as influenced by the fight-or-flight response.
You work for a boss who demands personal loyalty from his employees; who takes credit for your colleagues
innovative suggestions and who occasionally fudges expense reports so as to pocket some extra cash. Which
combination of individual differences best represents the personality of your boss?
A. A preconventional stage of moral development, personalised need for power and high-Mach
characteristics.
B. External locus of control, extroversion and high self-efficacy.
C. High need for achievement, low need for affiliation and the principled stage of moral development.
D. Internal locus of control, personalised need for power and high tolerance for risk.
Module 1A: The Basics
You are the manager of a sales force that sells personal care products throughout the UK. In making hiring
decisions, which of the following would you emphasise in applicant personality testing?
A. Extroversion and introversion.
B. Tolerance for risk-taking behaviour.
C. Self-esteem.
D. Mach-V tendency.
Which of the following is not a likely behaviour on the part of a high-Mach executive?
A. She publicly puts the company and its needs before her personal needs.
B. She explains just enough to pacify employees so they will not question her management decisions.
C. She explains to a junior executive that hard work builds character.
D. She says I seldom question the legitimacy of the firms authority system.
10 Employees who relish the political aspects of work and throw themselves into the technical aspects of product
development and change most likely exhibit which of the following?
A. High need for socialised power, principled moral development and high need for achievement.
B. Low need for affiliation, preconventional moral development and high need for achievement.
C. High need for affiliation, conventional moral development and high need for achievement.
D. High need for personalised power, principled moral development and high need for affiliation.
Module 2A: Stress and Well-Being at Work

1
Frustration and stress emanating from the work performed by employees (appearing as dissatisfaction with the
work itself) would include all of the following except:
A. Technological change in work.
B. Supervisory leadership styles (too much like X and too little like Y).
C. Work overload.
D. Lack of personal control over work methods.
Which of the following is not an emotional or mental-state change associated with job stress?
A. Frequent physical fatigue.
B. Anxiety or apprehension.
C. Irritability and extreme short-temperedness on the job (intermittent explosive disorder).
D. Increased insomnia and restlessness (inability to rest and relax).
Which of the following would heighten a managers risk of a heart attack?

A. His job is complex and demanding, and he has high autonomy.
B. His job is simple and highly repetitive, and he has high autonomy.
C. His job is simple and repetitive, and he has no autonomy on the job.
D. His job is complex and demanding, and he has little autonomy.
A veteran software salesman is reluctant to ask a newly hired software engineer how programming defects
entered an inventory management programme. This is an example of which of the following?
A. Value inconsistency.
B. Role ambiguity.
C. Technological uncertainty.
D. Interpersonal demands.
A positive consequence of job stress could include which of the following?

A. Performance declines.
B. Functional turnover.
C. Unscheduled maintenance of equipment.
D. Employee sabotage of production equipment.
You supervise four employees, one of whom is strongly Type A and never exhibits hostility or irritability
towards you or her colleagues. Which of the following represents how you would manage her?
A. Frequently remind her of upcoming deadlines and project methods.
B. Counsel her to practise time management and to pace herself as she works through task demands.
C. Consistently underrate her performance to ensure that she raises her efforts and also sets more
ambitious and challenging work goals.
D. Remind her that promotions and merit-based rises are contingent on her higher productivity and
effort on the job.
Which of the following are valuable personal qualities for a mentor to a new non-hostile and eager Type A
employee performing a job with high role ambiguity and rapid knowledge obsolescence (perhaps a young
consultant specialising in data analytics and cloud computing)?
A. Internal locus of control and Type A behaviour.
B. External locus of control and Type A behaviour.
C. Internal locus of control and Type B behaviour.
D. High introversion, internal locus of control and Type A behaviour.
Module 2A: Stress and Well-Being at Work
Job-stress-induced absenteeism (for instance insomnia-induced mental fatigue) for an employee reflects which
of the following?
A. The alarm reaction stage of the General Adaptation Syndrome.
B. A behavioural symptom of hindrance stress on the job.
C. The exhaustion phase of the General Adaptation Syndrome.
D. A loss of control over work methods or outcomes.
Employee burnout would happen most quickly under which of the following conditions?
A. Middle management is eliminated, and remaining employees are not trained in problem-solving and
conflict-resolution skills.
B. Employees are given more responsibility for high-quality customer service, but the company is slow
to install merit-based rewards.
C. Middle managers are most focused on the technical aspects of their jobs, and their subordinates are
expected to accept delegated responsibility.
D. Employees are expected to customise service for clients, and managers have been slow to provide
guidance on best practices.
10 Which of the following company programmes is most effective in helping employees to manage their job stress
levels?
A. Track employee meeting times and the extent to which employees show up for meetings on time.
B. Reward employees for the number of their customer contacts per day and design an incentive
programme that provides an all-expenses-paid vacation to top employees.
C. Encourage employees to live by their own values at work.
D. Give employees personal time off to deal with elder care problems and allow them to make up the
work hours on a negotiated schedule.
Module 3A: Contemporary Theories of Motivation

1
Which of the following statements is most accurate about the relationship among motivation (effort), ability,
rewards and job performance?
A. All are positively related under normal work circumstances.
B. When motivation is high, ability is irrelevant regarding performance and rewards.
C. High ability can replace low motivation with respect to performance, and rewards become irrelevant.
D. Motivation and ability are unrelated either to job performance or to rewards.
Fong is a skilled software programmer who is respected by his colleagues for his creativity and ability to work
long hours without taking a break. Which of the following higher-order levels of Maslows hierarchy is
motivating his behaviour?
A. Physiological.
B. Self-esteem.
C. Safety or job security.
D. Self-actualisation.
Herzbergs two-factor theory of motivation is most strongly related to which of the following?
A. Expectancy theory.
B. Equity theory.
C. Maslows hierarchy.
D. Pathgoal theory of motivation.
According to Herzberg, which of the following is the key to motivating employees?

A. Employee stock option plans.
B. Complete satisfaction of lower-order needs.
C. Enriched job content (vertical job loading).
D. Improved co-worker relations.
Unlike Maslows or Herzbergs motivational models, equity theory emphasises which of the following?
A. Dissonance or imbalance triggered by perceptions of job outcomes and inputs.
B. The pivotal role of goal setting.
C. The determination of personal probabilities regarding performance and rewards.
D. The combined effects of job involvement and organisational commitment.
Complete the sentence from the options provided. The two key probabilities in the expectancy theory of
motivation are ____performance and performance____ probabilities.
A. effort; reward
B. ability; skills
C. ability; motivation
D. effort; results
A soccer player tells a fan: Theres a 90 per cent chance I can score a goal if Im 60 metres away and at a 20
degree angle from the net. According to expectancy theory, the player is expressing which of the following?
A. Instrumentality.
B. Expectancy.
C. Valence.
D. Goal.
Module 3A: Contemporary Theories of Motivation
According to equity theory, employees are likely to be motivated by which of the following?
A. A belief that they are being treated fairly.
B. A comparison of their inputs with their outputs on the job.
C. Experienced high job satisfaction.
D. Receiving rewards that are higher than those of their peers performing similar work.
Which of the following is an important managerial implication of expectancy theory?

A. Rewards are more important than effort on the job.
B. Motivation is more important than ability to perform well.
C. As often as possible, performance rewards should be matched to individual preferences.
D. Intrinsic rewards are more important than extrinsic rewards.
10 A manager decides to use positive reinforcement to increase the probability of a variety of employee
performance outcomes. Which of the following is not positive reinforcement?
A. The boss gives no performance feedback when employees fail to complete the job on time.
B. The boss praises two new employees when they complete their tasks successfully.
C. The boss gives his employees a bonus after they achieve a given number of successful task completions. This award is open to all employees.
D. The boss lets two consistently high-performing employees leave early while giving them credit for a
full days pay. This award is open to all employees.
Module 4A: Organisational Control and Reward Systems

1
You and another supervisor arrive at different conclusions about a subordinates performance despite the fact
that you both used the same evaluation system. Which of the following describes the evaluation system? It is:
A. Invalid.
B. Accurate.
C. Unreliable.
D. Corrupted.
Which of the following will an effective performance appraisal system not have?
A. Validity.
B. Reliability.
C. Fairness or equity.
D. Self-correcting behaviour.
Which of the following signifies high reliability in an appraisal system?

A. Employees understand the meaning of performance prior to the evaluation.
B. The most meaningful aspects of performance are measured.
C. The performance measurement tools are constructed in a reliable way.
D. Assessments at different times are captured the same way each time they are done.
Which of the following is an appraisal system that seeks a supervisors judgements about the presence or
absence of a performance dimension in an employees work?
A. Behaviour-anchored rating scales.
B. A supervisors essay narrative.
C. Graphic rating scales.
D. Journalistic tracking.
When human resources specialists determine 1) employees common skills and qualifications for jobs; 2)
coordination requirements of work tasks to support operational effectiveness; 3) external guidelines for task
groupings (forms of departmentation); and 4) the traditions of the company to define how work is done
(organisational culture), which of the following is being performed?
A. Preliminary goal-setting appraisal.
B. BMod programme.
C. Job analysis.
D. Culture analysis.
Complete the sentence from one of the options provided. If a company applied a participative management
style (Theory Y principles) and valued the input of employees, then the ____ approach to designing and
conducting performance appraisal would be most stress-reducing for employees.
A. behaviour-anchored rating scales
B. job analysis
C. absolute standards
D. graphic rating scales
When a manager establishes a desired result to guide and direct the task behaviour of his subordinates, he is
practising which of the following?
A. Goal setting.
B. Motivation.
C. Valence manipulation.
D. Herzbergs two-factor theory.
Module 4A: Organisational Control and Reward Systems
Which of the following is NOT a major result of goal setting performed in a participative fashion?
A. Containing or restricting subordinates creativity, flexibility and openness to change.
B. Increasing employees work motivation and task performance.
C. Reducing employees role stresses caused by conflicting or ambiguous expectations.
D. Improving the accuracy (validity) and reliability of performance appraisal.
You are an independent director serving on the firms executive compensation committee. The CEO and his
immediate executive team are asking the board to grant them a 10 per cent increase in their compensation
package. Which choice below would best serve the needs of the firms owners relative to managements
request?
A. Grant managements request by authorising a 10 per cent increase in all aspects of their direct,
short-term compensation.
B. Tie the 10 per cent increase in the form of stock options to the achievement of a 10 per cent gain in
net income and a reduction of 15 per cent of the firms long-term debt load.
C. Leave the annual pay of the executives unchanged but raise their bonuses by an amount that
increases their total compensation by 10 per cent if they improve the firms total market capitalisation by 10 per cent.
D. Before agreeing to managements request, authorise a salary survey to determine the size of pay
packets for executive teams running rival firms in the industry.
10 A company uses a process through which teams of employees make labour-saving suggestions that are
incorporated in their production units. If their suggestions produce labour-hour savings below a historical
quarterly average, they earn team bonuses that are equal to 50 per cent of the value of those labour-hours
saved. The bonuses are divided equally among the eligible teams. This programme is an example of ____:
A. gainsharing or cost savings.
B. profit sharing.
C. a two-tiered reward system.
D. pay at risk.
10
Module 5A: Job Design

1
Scientific management includes all but which of the following?

A. Participative involvement of employees in decisions about the methods and goals of work.
B. Time and motion studies.
C. Work simplification.
D. Job activity repetition.
Which of the following is the principal goal of scientific management?

A. Redesigning the reward system to create the lowest economical unit labour costs.
B. Simplifying and standardising the work performed by employees.
C. Identifying those job applicants who have the skill sets necessary to perform jobs with little or no
on-the-job training.
D. Creating an improved work design to balance employees worklife challenges.
Job enlargement is most likely to be an organisational response to which of the following?

A. A decrease in product and service quality experienced by customers.
B. Technology-induced job changes (rising productivity through greater capital intensity).
C. Over-specialised work that causes employees to be bored (rusting out on the job).
D. Employees frustration with their inability to satisfy their higher-order needs.
Which of the following would NOT be one of Herzbergs principles of job design?
A. Give employees as much control over the methods of task completion as possible.
B. Hold employees accountable for their performance.
C. Design jobs so employees experience accomplishment.
D. Seek input from employees about the agenda for the annual company holiday party.
As a manager of insurance specialists who input policy and claims data, you would like to find ways to
horizontally load the specialists jobs. Which of the following would accomplish that?
A. Create a new telecommuting job design for the specialists.
B. Increase the number of policy and claims tasks performed by each individual.
C. Increase their job specialisation through more training.
D. Reschedule their work into a flexitime system.
When a purchasing specialist has the authority to handle some key aspects of vendor relationships without
consulting a superior, which of the following is occurring in her job?
A. Job rotation.
B. Job enlargement.
C. Vertical job loading.
D. Job specialisation.
Job range is the variety of tasks performed by an employee while job depth is which of the following?
A. The extent to which an employee is cross-trained.
B. The extent to which the employee believes that his job can satisfy his higher-order needs.
C. The extent to which the employees job is horizontally expanded.
D. The extent to which the employees job is specialised.
Which of the following is the core job dimension in the Job Characteristics Model linked to experienced
responsibility for work outcomes?
A. Autonomy.
B. Feedback.
C. Skill variety.
D. Task significance.
11
Module 5A: Job Design
Four-day work weeks, job sharing and telecommuting would be job design trends of most interest to ____
A. employees about to retire.
B. Generation Y and Millennial employees.
C. employees with low growth-need strength.
D. employees who have been highly cross-trained.
10 The following factors have been in place for several years in a hospitals patient recovery wards: 1) a team of
nurses (case team) delivers care from the point of patient admission to patient discharge; 2) the case manager
(senior nurse) is selected on the basis of his or her medical expertise; 3) the case team members are thoroughly cross-trained; and 4) the entire case team meets with the patients attending physician to discuss the
patients physical and psychological recovery. This work design system is best characterised as a ____
A. self-directed team design.
B. traditional grouping of jobs based on medical specialisations.
C. scientific management job design without a piece-rate pay system.
D. healthcare delivery system with horizontally loaded jobs.
12
Module 6A: Work Group Dynamics

1
Which of the following describes the standards used by a group to judge the behaviour of its members?
A. Authority relationship congruence.
B. Behaviour norms.
C. Heterogeneity.
D. Cohesiveness.
Which of the following best defines a work group or a team in an organisation?

A. Two or more employees who 1) interact with each other; 2) see themselves as sharing common
interests and goals; and 3) are brought together to accomplish a meaningful work activity.
B. Two or more employees who 1) interact with each other; 2) share common career goals; and 3) are
geographically dispersed.
C. Two or more employees who 1) share similar attitudes; 2) are in face-to-face contact; and 3) exhibit
similarities in terms of economic and educational backgrounds.
D. Two or more employees who 1) enjoy the groups activities; 2) perceive extensive performance
ability among members; and 3) wish to share performance feedback with each other.
A team has these characteristics: 1) short life span; 2) voluntary membership; 3) members selected for their
problem-solving expertise; and 4) a direct link to higher management. This group is which of the following?
A. Board of directors.
B. Union organising group.
C. Project team.
D. Cross-functional work group.
Which of the following is the least likely factor to cause the formation of an informal group within a firm?
A. Common interests among members of the larger work unit.
B. Proximity of members in the larger work unit.
C. Race and gender similarity among members of the larger work unit.
D. The larger work units task complexity.
Which of the following statements about group cohesiveness is inaccurate?

A. Cohesion can raise member job satisfaction and performance.
B. Cohesion can enhance organisational commitment.
C. Cohesion raises the number of social exchanges among members outside the work setting.
D. Cohesive work groups are better able to manage the behaviour of their members.
Which of the following is the best explanation for the relationship between work group cohesiveness and
performance?
A. It is based on the extent of interpersonal attraction among group or team members.
B. It depends on the complexity of the groups task and the size of the group or team.
C. It is moderated by the extent to which a group or team accepts the firms performance standards
and goals (metrics composing operational effectiveness).
D. It is dependent on the extent to which the work group or team is homogeneous.
Several members of a highly cohesive SDT are talking in the hallway prior to a strategy session. These
individuals are heard to say: 1) The scientists down in the lab are a bunch of eggheads and they should stay
out of marketing decisions; 2) Our new app will be a category killer and the competition cannot touch us;
and 3) It is up to us to keep a lid on the cost overruns, which well recover in the first month of sales. These
perceptions shared by the team members suggest which of the following?
A. Groupthink.
B. Escalation of commitment.
C. High organisational commitment.
D. Social loafing.
13
Module 6A: Work Group Dynamics
Groupthink is most strongly associated with which of the following?

A. Extent to which an SDT or group is cohesive and its norms reflect the groups needs for conformity.
B. Members who are highly committed to the organisation and its goals.
C. Groups or SDTs that do not experience turnover in membership over time (stable membership
with high tenure).
D. SDT or group members who value team social recognition rewards and harmony more than
individual rewards.
As the number of team members increases, process losses in a work group or team do which of the following?
A. Rise.
B. Level off.
C. Decline.
D. Remain unaffected.
10 A project engineering software development team (Team 1) decides unanimously to present its newest app to
a rival team (Team 2) that claims to have developed it first. In the meeting Team 1 offers to share with Team 2
its latest version of the apps software and Team 2 offers to meet with prospective customers in order to get
the app out there as soon as possible. This meeting and the actions of the two teams are best described as
which of the following?
A. The traditional view of conflict management (Theory X principle) in the firm.
B. A compromise strategy within the traditional view of conflict management in the firm.
C. A collaborative strategy based on the contemporary (Theory Y) view of conflict management in the
firm.
D. The compromising strategy.
14
Module 7A: The Influence Process

1
Which of the following choices best completes the sentence? The legitimacy inherent in your job is ____ while
your ability to influence an employee is ____.
A. power; authority
B. influence; authority
C. authority; power
D. power; control
Which of the following choices best completes the sentence? As a subordinate you might have ____ over your
superior.
A. authority
B. control
C. influence
D. power
Which of the following choices best completes the sentence? You are a senior research engineer and a
colleague seeks you out for advice on a project design problem. This is an example of your ____ power.
A. reward
B. expert
C. referent
D. legitimate
We would expect a manager who has plateaued at the conventional stage of moral development to consider
as often as possible how her exercise of power will:
A. produce a good outcome for those affected by her decision.
B. respect everyones rights.
C. treat everyone equitably and fairly.
D. All of the above.
The principle of line of sight is most prominent in which theory of leadership?

A. Fiedlers contingency theory.
B. Consideration and initiating structure theory of leadership (Ohio State Studies).
C. Houses pathgoal theory of leadership.
D. Trait theory of leadership behaviour.
Which of the following should an ethical manager employ to examine his use of power?
A. Beneficial outcomes, individual rights and fair treatment of stakeholders.
B. Personal motive, his higher-order need satisfaction and personal consequences of his decision.
C. Personal growth opportunities, its career effects for him and whether his chances for promotion are
approved.
D. Downside danger to his reputation, chance of litigation for the firm and competitor retaliation.
You are in a department that is downsizing; to keep your job you should choose which of the following?
A. Be a knowledge worker, take risks, be creative and give excellent performance.
B. Emphasise your cooperativeness more than your job expertise.
C. Refrain from reorganising the job, and do not manipulate job rules in your favour.
D. Provide all sources of job and product information to those who ask and identify with powerful
managers who control the downsizing decision.
15
Module 7A: The Influence Process
Which of the following would make upward management more widespread?

A. The organisation uses empowerment and job enrichment.
B. Employees are cross-trained and function effectively in SDTs.
C. Managers favour the use of legitimate power and reward power.
D. A and B.
A strongly task-oriented leader (low LPC score) will be most successful when:
A. the leadership situation is either highly favourable or moderately favourable.
B. the leadership situation is highly unfavourable or moderately unfavourable.
C. the leadership situation is either highly favourable or highly unfavourable.
D. None of the above.
10 Which of the following behaviours reflects the use of entrepreneurship within the firm?
A. A manager tells one of his SDTs that it is a violation of company policy to contact outside experts
regarding software-coding problems.
B. A product development team member tells her colleague to approach a senior engineer to be her
mentor.
C. Two members of a marketing team approach a vendor-client about the possibility of developing a
co-branding promotional strategy.
D. A manager works with his units employees to set up a flexitime work schedule.
16
Module 8A: Organisational Design

1
Organisational design specifies the structural features of a firm. The design process begins with which of the
following?
A. Listing all job classifications and titles.
B. Specifying all job designs throughout the company.
C. Articulating the organisations financial and strategic goals.
D. Arranging jobs into various work units or departments.
Principles of organisational design do not include which of the following?

A. Departmentalisation.
B. Span of control.
C. Division of labour.
D. Scientific unit specialisation.
The principal contributor to marginal productivity among employees is which of the following?
A. Span of control.
B. Division of labour.
C. Organisational design.
D. Piece-rate pay system.
Span of control is defined by which of the following?

A. Number of vertical levels in a company.
B. Vertical differentiation.
C. Degree of division of labour.
D. Number of subordinates reporting to a given manager.
Designing a competitive business model based on improved service delivery includes the recognition of which
of the following?
A. Differentiating services from the physical characteristics of products is often easier and faster
because service features are more flexible.
B. Service units cannot be stored or kept in inventory.
C. Service improvements strengthen brand loyalty and erect barriers to rivals around the firms market
segments.
Increased use of delegation of authority in an organisation would be most likely after which of the following
major organisational events?
A. Change to a system 1 organisational design.
B. Re-engineering after delayering and downsizing.
C. Change to a functional organisational design.
17
Module 8A: Organisational Design
A firm has the following characteristics: 1) a strong customer service orientation among its SDTs; 2)
widespread use of SDTs with high horizontal integration; 3) a highly cross-trained workforce; 4) shortening
product and service life cycles (increasing rate of obsolescence); and 5) a management team that stresses
company-wide employee participation through internal learning communities designed to solve problems in
operational effectiveness. Given this profile, which of the following would not be an appropriate management
practice in this company?
A. Avoiding the use of time clocks to track when employees come to or depart from work.
B. Close supervision by managers who prefer to limit the authority of employees.
C. Creation of a two-tiered reward system to emphasise the importance of teams meeting or exceeding their customer service goals.
D. Giving SDTs the authority to conduct periodic customer service audits to assess current levels of
customer satisfaction with their service delivery.
An organisational design with few vertical layers would be characterised by which of the following?
A. A high ratio of employees to supervisors and managers.
B. Close supervision.
C. Slow, unresponsive communication channels that distort information.
D. Narrow spans of control.
When firms rely on internal process controls (MBO, Six Sigma, TQM), we generally expect to find which of
the following?
A. High job specialisation, more formal hierarchies of authority and widespread use of SDTs.
B. Responsive horizontal integration systems, an active and flexible inter-group (or inter-team)
network and continuous cross-training activities.
C. Productive divisional structures, use of two-tiered reward systems and low delegation of authority.
10 In a highly responsive organisational design, we would expect to find which of the following?
A. A flexible inter-group task network that undermines the power of traditional functional work units.
B. A minimised authority boundary that blurs the leaderfollower relationship so that there are fewer
impediments that prevent problem-solving expertise from flowing to where it is needed (where
problems in operational effectiveness exist).
C. Highly sophisticated employees who identify more with the company and its values than with a
particular work unit.
18
Module 9A: Managing Transitions

1
Basic assumptions that are considered by employees to be valid and that are taught to new employees as the
proper way to conduct business as well as think about the firm are known as which of the following?
A. Terminal organisational values.
B. Organisational culture.
C. Company business values.
D. Company mission statement.
Which of the following would not be an aspect of a companys culture?

A. A code that governs employee appearance.
B. Formal job titles to convey ones status or capabilities.
C. Number of units produced.
D. Exercise facilities that are open to all employees.
A firms top managers have expressed many of these opinions in private conversations: 1) We have a goldplated strategy-planning process even though we often fail to deliver results; 2) We will all get along if it kills
us!; 3) We continue to be beaten by our better-organised and more responsive rivals; 4) Our union
members want higher pay, shorter hours and free healthcare coverage for life or else we will go on strike; and
5) We have not created a significant new product design, while our main rival has launched four during the
last two years. These symptoms reflect which of the following?
A. Managements dissatisfaction with the status quo and clear indicators that the firm is in the decline
phase of its organisational life cycle.
B. The need for an immediate plan to downsize the firm and take it through the re-engineering
process.
C. A need for the companys board to step in and change the executive management team.
D. A failed job design system that exhibits Theory X qualities and has alienated the firms workforce.
The CEO can best influence and shape corporate culture through the process of socialisation by stressing
A. He hires highly qualified executives different from himself and nominates qualified outside directors
to serve on the firms board.
B. He acts quickly to lay off employees when sales decline.
C. He always shows consistency with respect to his key business values in how he expects employees
to conduct themselves on behalf of the firm (he puts the firms welfare ahead of his personal
interests).
D. He actively delegates authority to his subordinates for handling and containing any kind of crisis
(product liability claims; supply chain disruption; claims of sexual harassment by several mid-level
managers, etc.).
Which of the following is not an element of the planned change process?

A. Forecasting sales figures for the next year.
B. Changing the organisations structure or design.
C. Finding ways to improve the firms operational effectiveness.
D. Basing organisational change solely on the opinions of top management.
A strong organisational culture contributes to competitive advantage when which of the following occurs in
the firm?
A. Its organisational culture reinforces the firms long-term financial and strategic goals.
B. Its organisational culture causes resistance to change among the firms board members.
C. Its organisational culture matches the firms design.
D. The firms CEO strengthens organisational culture by using team-based rewards.
19
Module 9A: Managing Transitions
A firm has just completed a programme of intergroup development designed to improve team decision-making
processes and horizontal integration among its SDTs. This description best fits which of the following?
A. T-group training.
B. The feedback component of the survey feedback OD method.
C. The second step in the Grid OD programme.
D. Alteration of the firms job design system so that SDTs have more resources to support their
decision-making processes.
The organisational life-cycle theory suggests that organisational culture is which of the following?
A. It is static during the phases of a companys life cycle.
B. It is not easily managed during the maturity phase.
C. It can and should be adjusted to meet the features of a firms particular life-cycle stage.
D. It evolves with the firms design throughout the firms life cycle.
Which of the following may delay indefinitely a firms entering the decline stage in life-cycle theory?
A. Industry products may be on the cusp of becoming more popular, and a firm in the industry invests
in capital improvements and workforce cross-training prior to a strong market-based resurgence in
product popularity.
B. A company outsources its sales (uses a telemarketing supplier) and purchasing functions (hires a
specialised logistics firm that uses cloud-computing processes to control the flow of supplies).
C. A firm vertically integrates prior to a slowing of the rate of new product introductions by all firms in
the industry.
D. A firm responds to rising production costs by increasing capital expenditures in manufacturing
(reducing its dependence on labour and increasing marginal productivity per employee).
10 A firm uses behavioural science knowledge to improve its organisational design and manufacturing process. As
these applications unfold, the company carefully measures and records improvements in its effectiveness.
These activities best describe which of the following?
A. Developing an Internet-based learning community inside the firm.
B. Planned change.
C. Adopting a company-wide Six Sigma programme.
D. Overcoming resistance to change.
20
Module 1B: The Basics

1
All but one of the following would be a concern to an engineer with a high need for achievement. Which one
would not be a concern?
A. Rising customer complaints directed towards the marketing department.
B. Project delays that threaten the cost structure of his teams work.
C. Rising failure rates in a key component of a product that is under development.
D. The engineers request for increased educational support is rejected by the firm.
The employees willingness to exert effort on behalf of the organisation is a significant feature of which of the
following?
A. Organisational commitment.
B. Job involvement.
C. Job satisfaction.
D. Emotional component of one of his work attitudes.
Which of the following is correct? Over time, job satisfaction has been shown to be related to organisational
commitment because:
A. Congruence between the employees personal values and the firms mission statement and her
accumulated positive experiences with facets of job satisfaction build the basis for her long-term
organisational commitment.
B. It is a determinant of internal locus of control.
C. It is seldom related to absenteeism.
D. It is less likely to be found among rank-and-file workers.
Which of the following describes the relationship between job satisfaction and job performance?
A. Simple and direct.
B. Indirect and complex.
C. Unimportant to managers because satisfied workers are not motivated to perform well.
D. Very important to managers because job satisfaction is a direct, short-run cause of organisational
commitment.
Just prior to hiring a promising applicant, which combination of actions would most likely produce the best
personjob fit?
A. Psychometric testing and a background check.
B. Pooled multiple interviews and a realistic job preview.
C. Realistic job preview and psychometric testing.
D. Background check and phone calls to the applicants recommended previous employers.
Which of the following aspects of OB helps managers who must improve both operational effectiveness and
the competitive advantage of their firms?
A. How a firms strategy determines its design.
B. How transaction costs influence competition between companies and their rivals.
C. How firms influence individual and group behaviour and organisational design.
D. How firms deploy resources to quickly seize market opportunities.
21
Module 1B: The Basics
For which of the following reasons does OB focus on employees attitudes and behaviour on the job?
A. Human nature in the work setting plays a permanent and significant role in operational effectiveness,
workforce resilience and creativity and the firms strategic success (a rate of return that exceeds the
industry average rate of return).
B. The long history of unionisation in industries has created this perspective in OB.
C. OB researchers like to study how employee attitudes and behaviour influence operational effectiveness.
D. Only the field of management focuses on the dynamics of how organisations should design administrative systems to accomplish their goals.
As part of a re-engineering programme, a supervisor is told that he must update his departments job
descriptions. From which of the following does his assignment originate?
A. Technical managerial work.
B. Human resources managerial work.
C. Conceptual managerial work.
D. Systems managerial work.
You value a manager in your unit because of his professional expertise, productivity and knowledge, and
personal ability to work effectively with customers. However, when he tries to motivate his subordinates he
comes off as abrasive and overbearing. As a result, several of his subordinates have quit in disgust. You know
that you have to relieve him of his managerial duties, but you do not want to lose him as an employee. Which
of the following choices should you select to handle this problem?
A. Try to shake him up by telling him that he is a bad manager and that he has failed in that role.
B. Try to convince him that he would be happier and more content in a non-managerial role.
C. Offer him a pressing challenge in another job and tell him that he must take it for the firms good.
D. Confront him with objective examples of his ineffective managerial style, assign him to a challenging
customer service improvement job that he can work on by himself for a specified period of time and
tell him that you expect to find valuable input from his staff members in his work.
10 A mid-level manager of an audit division asks his subordinate to treat maintenance costs as capital expenditure
during the current accounting period. As a member of the boards audit committee, you have learned of this
and you must take action. Which of the following actions would you select?
A. Inform the audit committee and ask it to initiate an independent inquiry once you have told the
CEO what you must do because you are an independent director.
B. Speak to the manager and his subordinate and tell them to stop the practice.
C. Warn the director of investor relations to be prepared to handle the problem if the practice is
leaked by a whistle-blower to the press.
D. Speak privately to the CEO so he can take action.
22
Module 2B: Stress and Well Being at Work

1
Which of the following sets of physiological and behavioural characteristics applies to an employee in the
advanced adaptation stage of the General Adaptation Syndrome?
A. Tardiness, work sabotage and absenteeism.
B. High blood pressure, insomnia, irritability, substance abuse and late arrivals.
C. Heart attack, severe depression, cerebral stroke.
D. Panic, anxiety and a strong urge to flee from a situation.
You are a manager and your boss has just told you that you must reduce costs by 25 per cent in your
department. You know that you must lay off three of your 20 highly qualified and capable employees to
achieve the cost reduction goal. You have agonised over this decision, and you have also postponed telling any
of them about the layoffs to come. Some of your otherwise friendly subordinates have noticed that you have
become more distant and short-tempered with them for no apparent reason. Your reactions are features of
A. Your experienced role demands and interpersonal demands.
B. Your hostile and insecure Type A personality.
C. Your psychological reactions to job stressors.
D. The adaptation stage of the General Adaptation Syndrome.
Employees are often a few minutes late for work because they want to avoid an insulting, sometimes quite
rude and temperamental manager who always takes the lift to their floor at the beginning of the work day.
Which of the following (aspects) of the stress model apply (Figure 2.2)?
A. Behavioural symptoms.
B. Psychological symptoms.
C. Type B behaviour.
D. Environmental factors.
Employee burnout that is triggered by numerous waves of downsizing is least likely to affect which of the
following?
A. The customisation of service for new clients.
B. Executive decisions about future layoffs.
C. Long-term customer satisfaction with service quality.
D. Peer relationships among employees remaining after the last layoff.
A Type B employee will perform well under which of the following circumstances?
A. She coordinates eight goals with members of her SDT and conducts mandatory goal feedback
sessions with her teammates.
B. She has the authority to set her own work pace and to inspect her own work for its defects.
C. Her boss exerts external control by telling her which goals she should pursue and the methods she
should use to achieve them.
D. She is surrounded by non-hostile Type A colleagues who exhort her to higher levels of work
achievement.
A manager feels stuck, bored and dissatisfied with her work. Despite this state of mind, she continues to
receive praise and recognition for her excellent performance on the job. Which of the following choices
reflects her best course action?
A. She should join a fitness centre and hire a personal trainer to design a physical fitness programme
for her.
B. She should realise that her sense of frustration and boredom comes from the fact that she has
accomplished all that she can in relation to her current position and its responsibilities, (she may
have hit a glass ceiling that limits her upward hierarchical mobility).
C. She should redouble her efforts in her current position and make the best of a bad situation.
D. She should seek outside-the-job activities that she finds to be personally rewarding.
23
Module 2B: Stress and Well Being at Work
Alex Preston felt he had landed his dream job when he started work as a financial analyst at the age of 23.
After 15 years in the business he experienced severe job burnout brought on by a mixture of depression and
anxiety. He was drawn to the security of a wireless telephone company job, but a careers counsellor told him
that he had an entrepreneurial streak and should start a business. Which of the following choices is best for
Alex at this point in his life?
A. Take the phone company job and stay out of the investment industry fast lane.
B. Try to find another job as an analyst in the financial services industry.
C. Start a small investment firm specialising in personal financial management for a limited number of
high-net-worth clients.
D. Put off any decision by going back to school to earn an MBA degree.
The next three questions are related.
Phillip has been an engineer at ValueSync for five years. Last year he agreed to manage a project designed to
streamline a new logistics application for his firms customer ordering systems. Lately he has been working 14hour days to de-bug the system and make it part of ValueSyncs cloud-computing offerings. One of his
problems is the nagging thought that several key higher-level managers have failed to clarify their project
expectations and they have not expressed their personal commitment to the project to him. Which of the
following choices best reflects Phillips predicament?
A. Role conflict.
B. Role ambiguity.
C. Low instrumentality.
D. Insufficient financial rewards for entrepreneurship.
This question is a continuation of Phillips dilemma illustrated in the previous question. Phillip realises that his
new customer ordering system will affect every department and business process in clients firms, from
accounting to manufacturing and marketing, and that many of the employees in those firms will have to adjust
to it. The client companies primary users have not yet been briefed on the new logistics system and how it
works from the cloud-computing base. The job of telling various departments that they are required to use the
new system has fallen on Phillips team, but upper management has yet to schedule the meetings or to make
the necessary client introductions for Phillips engineers. Which of the following choices best reflects Phillips
problem?
A. Insufficient job experience.
B. Role underload.
C. An excess of responsibility over authority.
D. Unwillingness by Phillip to assume extra, temporary responsibility to complete the project.
10 This question is the final instalment of Phillips dilemma (see the previous two questions). With respect to the
problems described, which of the following choices should Phillip make?
A. Demand to be relieved of his project duties as soon as a replacement manager has been found to
take over the logistics project.
B. Say nothing to his superiors and peers and try to meet the looming and inevitable client demands for
clarification, scheduling and training.
C. Look for a new job with another firm as quickly as possible.
D. Approach the vice president of marketing and sales and ask him to become personally involved in
setting up the post design phase of the logistics project.
24
Module 3B: Theories of Motivation

1
Which of the following is a schedule of reinforcement that produces job behaviour with the lowest
persistence, strength and durability compared with the three remaining choices?
A. Fixed interval.
B. Fixed ratio.
C. Variable interval.
D. Variable ratio.
You supervise a group of telemarketing specialists who conduct sales work over the phone. Which of the
following reinforcement schedules will produce the highest level of job performance among the employees?
A. Continuous.
B. Fixed ratio.
C. Fixed interval.
D. Variable ratio.
One of your employees is chronically late to work. Instead of punishing her, you decide to try extinction.
Which of the following would you select?
A. Ignore her tardiness for a while.
B. Criticise her in front of her peers.
C. Give her the sack.
D. Encourage her co-workers to ignore her tardiness.
A manager using behavioural shaping to raise her employees performance would do which of the following?
A. She would start by demanding extremely effective performance from them.
B. She would gradually raise performance requirements while liberally using praise and performance
feedback with them.
C. She would reward them after a given number of successful performance behaviours.
D. She would urge other more senior employees to become mentors to the newer employees.
A company has a strict policy forbidding employees to accept gifts from vendors. A specialist in purchasing
with 15 years of job experience is caught accepting bribes from a major vendor. His boss should choose which
of the following?
A. Discipline the employee and initiate an ethics training programme in purchasing.
B. Ignore the problem and hope that it goes away.
C. Give the employee the sack.
D. Give the employee a written reprimand that goes in his personnel file.
The use of employee engagement to design a BMod programme in the firms production unit represents which
of the following?
A. Creating numerous opportunities for high Machs to manipulate the behaviour of their co-workers.
B. The strengthening of employees lower-order need satisfaction.
C. Improving employees understanding of task and performance requirements and improving their line
of sight.
D. Giving employees power over basic decisions concerning work methods and outcomes.
25
Module 3B: Theories of Motivation
A manager who has a strong socialised need for power and who is widely recognised as a problem solver
would be most likely to:
A. reserve all key decisions for herself and quickly inform her subordinates once she has reached a
decision.
B. delegate to subordinates those decisions that improve the harmony and cooperativeness among her
units employees.
C. create as many goals as possible for her unit employees.
D. delegate to employees tasks (or goals) that have a high potential to lift her units operational
effectiveness and simultaneously create rewards and work assignments that boost her employees
line of sight.
After repeated downsizings in a department, the employees who are left are demoralised. Many of them
continue to visit their old co-workers at the local pub after work hours. These reactions on the part of the
employees who managed to keep their jobs are an example of which of the following?
A. Their low organisational commitment.
B. Their high dissatisfaction with co-worker relations.
C. Their dissatisfaction with company policies and work procedures.
D. The lack of fulfilment of their social and belongingness need.
A manager of a global sales division of a UK firm learns that three of his salesmen in South Africa have been
offering bribes to customers who agree to give the firms products preferential treatment. These arrangements
have significantly boosted sales. The manager is highly irritated because the three salesmen have not included
him in this scheme (he thinks he deserves a piece of the action). The manager threatens to expose the three
salesmen if they do not give him a kickback. The bosss behaviour springs from which set of principles shown
below?
A. Not understanding the hot stove rule; having socialised need for power; using too much punishment.
B. Creating ineffective mentorprotg relationships; delegating too much authority to subordinates;
an out-of-date corporate mission statement.
C. Being stuck in the preconventional stage of moral development; personalised need for power; highMach tendency; negatively reinforcing subordinates.
D. Punishing employees; Theory X practices; failing to practise employee engagement; low growth-need
strength.
10 A manager takes the time to clearly explain performance expectations and work methods to his new
employees. He also uses senior members of the department to act as on-the-job trainers to improve their skill
sets through extensive cross-training. These two actions will most quickly influence which of the following?
A. The expectancies of the new employees.
B. Satisfaction with co-worker relationships among the senior and junior members of the unit.
C. Organisational commitment of the new employees.
D. The overall quality of the units performance.
26
Module 4B: Organisational Control and Reward Systems

1
Which of the following is emphasised as the principal basis for traditional pay systems?
A. Entitlement (aspects such as tenure, experience or socio-economic class).
B. Individual performance (merit-based rewards).
C. Profit sharing based on the firms end-of-year net income.
D. Cooperative (group) rather than individual (merit) performance.
Which of the following class of rewards best links to employees having the opportunity to participate in
decision making and to perform a variety of job activities?
A. Non-financial rewards.
B. Intrinsic rewards.
C. Indirect compensation.
D. Indirect intrinsic rewards.
Which choice among the following should you use to complete the sentence? Pay systems based on ____
encourage the greatest performance improvement among the largest number of employees.
A. non-financial rewards
B. goals established through employee engagement
C. effortperformance and performancereward probabilities
D. need for achievement and intrinsic rewards
For executive compensation strategies to be most effective from a shareholder perspective, they should link
the CEOs pay (and the executive team members pay) to which of the following?
A. The firms total market capitalisation, the levels of customer satisfaction achieved, and the stocks
earnings per share relative to the industrys top-performing company.
B. No more than 12 times the average pay of the companys production-level employees.
C. Gains in the value of stock options granted by the board of directors.
D. Average compensation of CEOs in the companys industry group.
Which of the following would create the most favourable response from employees who have an internal
locus of control and a strong achievement motive?
A. Challenging work goals and merit-based rewards.
B. The all-salaried team concept.
C. Accumulating time off (with pay) for excellent performance.
D. A mix of open and closed salary information.
Shareholders should be concerned with which of the following with respect to employee compensation?
A. The extent to which the compensation plan improves the strategic and financial performance of the
company.
B. The extent to which employees understand the compensation plan.
C. The extent to which the compensation plan retains highly creative employees.
The broadest reason for conducting a timely salary survey is which of the following?
A. It is done internally by the firm to ensure that employees perceive the pay system to be fair.
B. It is done outside the company to ensure that new employees are hired at the proper entry-level
salaries and current employees are being fairly compensated for their contributions.
C. It is done to ensure that the CEOs compensation is consistent with that of his industry peers.
D. It is done to ensure that the nature of the work matches the level of compensation.
27
Module 4B: Organisational Control and Reward Systems
The successful start-up of a gainsharing programme relies most heavily on which of the following sets of
features?
A. History of effective labourmanagement relations; a pattern of openness with employees about
productivity enhancement; and employee cross-training in operating systems.
B. New product development; bonuses for entrepreneurial employees; and team-based rewards.
C. Rising earnings per share; lowered production costs and low employee turnover.
D. All-salaried work teams; participative decision making; and a history of sharing cost savings with
employees.
Profit-sharing plans differ from gainsharing plans in which of the following ways?
A. They require employees to find ways to enhance operational effectiveness.
B. They depend on increases in product prices or increases in the companys market share (greater
sales volume at a given price) to ensure that employees receive profit-sharing bonuses.
C. They produce and sustain employee line of sight.
D. They require employees to find ways to cut the costs of production.
10 Two-tiered reward systems motivate employees to achieve high individual performance as well as unit and firm
goals. In which of the following situations would a two-tiered reward system work best?
A. A team of workers perform mutually exclusive tasks that are independent of the work of other
teams.
B. A team of workers have mutual distrust of each other.
C. Work tasks are woven together and all team members must coordinate closely with their teammates as the teams work unfolds (e.g. like a team of firefighters putting out a blaze).
D. Competition among workers is encouraged and fostered.
28
Module 5B: Job Design

1
Applying the Job Characteristics Model to the task of improving individual employees job designs will have the
most long-term benefit if which of the following has occurred?
A. Higher-order needs were first addressed by increasing the availability of extrinsic rewards.
B. All six core job dimensions were built into redesigned jobs for employees who tested as having high
growth-need strength and who performed jobs with low motivating potential.
C. Employees growth-need strength was assessed after the jobs had been redesigned.
D. Task identity was assessed by outside experts.
Which of the following applies to managers who have jobs that are rich in all core job dimensions?
A. They have high growth-need strength.
B. They view their jobs as being only horizontally loaded.
C. They perceive and experience their jobs as having high motivating potential.
D. They are more satisfied than managers whose jobs have been downsized.
Two managers and their 12 subordinates have the authority to completely redesign their work processes and
duties as medical bills analysts in hospital. Which of the following principles of job redesign would these
employees be using?
A. Designing a performance feedback system to track their performance.
B. Altering unit work flow patterns and individuals work schedules.
C. Redesigning their work to fit a flexitime system.
Which of the following combination of factors will most quickly cause managers to consider the benefits of job
redesign?
A. Workforce diversity, downsizing and increased global competition.
B. More difficult union negotiations, more complex labour laws and lower retirement ages.
C. Rising technological complexity, rising job hindrance stress and more employee-initiated (voluntary)
job turnover.
D. Shareholder demands, strategic planning and migration of capital to the industrys most profitable
firms (the target firms market capitalisation is in long-term decline).
Sociotechnical systems theory STS (the Tavistock Institute) can best be thought of as which of the
following?
A. A theory of cultural integration of workforce management practices.
B. A theory based on empirical research that predicts how the interpersonal and technical aspects of
work will affect individuals as well as their work teams.
C. A theoretical refinement of scientific management.
D. A theory that extends BMod to job redesign.
An autonomous work group most closely resembles which of the following?

A. A self-directed team that is responsible for its members cross-training and other personnel
decisions (performance appraisal, work scheduling and internal decision making).
B. A group of individual workers who are being phased through a job rotation scheme.
C. Telecommuters who come into the office based on a predetermined schedule.
D. Employees who work at remote sites but who are connected by Apples iCloud and Skype.
29
Module 5B: Job Design
Which of the following choices could cause an SDT to fail?

A. A manager uses sensitivity training to improve the work climate in the SDT.
B. A team gets the authority to plan, organise and control its work system.
C. A pay system is altered so that member pay is a partial reflection of the teams performance (team
bonuses reflect a partial pay-at-risk practice in the firm).
D. An upper managers job is altered to give her responsibility for maintaining horizontal integration in
the firms inter-team network.
Which of the following responsibilities is least likely to be performed by an SDT?

A. Evaluation of each team members performance using peer appraisals.
B. Monitoring member performance and taking appropriate action.
C. Application of Six Sigma principles to all aspects of the teams work production activities.
The use of SDTs is strongly associated with firms having which of the following?
A. A responsive organisational design that stresses workforce flexibility and versatility.
B. Job designs that contain less hindrance stress for employees.
C. Elimination of jobs based on scientific management.
D. Improved worklife balance programmes for Generation X and Millennial employees.
10 A decentralised System 4 organisation most resembles which of the following?

A. A company that relies heavily on piece-rate pay systems in production.
B. A company that expands middle management to gain more control over operations.
C. A company that delayers middle management and replaces it with SDTs.
D. A company that practises cross-training and flexitime throughout its operations.
30
Module 6B: Work Group Dynamics

1
Which of the following can be de-emphasised by managers during the earliest stage of work group or SDT
development?
A. Authority.
B. Reward distribution.
C. Trustworthiness.
D. Acceptance.
Forming goals and objectives and assigning tasks to members with various skills occur during which of the
following stage of work group development?
A. Norming.
B. Performing.
C. Forming.
D. Storming.
Having all work groups remain permanently set in stage 4 (performing) in an enterprise is which of the
following?
A. A long-term solution to maintaining operational effectiveness and competitive advantage.
B. Unrealistic and probably unattainable.
C. A feature of a System 4 organisation.
D. A way for the organisation to retain its flexibility and speed in problem solving.
A work team should do all but which of the following to encourage member creativity?
A. Design a process to separate the generation of ideas from their evaluation.
B. Blame failures on individual team members.
C. Loosely supervise the work and activities of members.
D. Provide a flexible role structure in the team.
A team decision-making approach that quickly increases the number of alternatives is which of the following?
A. Brainstorming.
B. Hyperdelphi technique.
C. VroomYetton decision-making process.
D. Semi-autonomous work team.
Which of the following is not a maintenance activity in an SDT?

A. Harmonising conflicts.
B. Elaborating concepts.
C. Expressing members feelings.
D. Discussing ways to attract new members.
Which of the following actions do not help a mature SDT make a contribution to the firms competitive
advantage?
A. Emphasising task activities more than maintenance activities.
B. Eliminating the connection between the SDTs rewards and measurement of its success or failure in
helping the firm achieve its strategic goals.
C. Replacing retired or transferred team members.
D. Balancing or matching team-based rewards and individual members rewards.
31
Module 6B: Work Group Dynamics
When the quality requirement of a team decision is very important and the task is highly unstructured, the
appropriate team decision-making style (the one the team leader should use) is which of the following?
A. Participatory, with the team striving for consensus based on collaboration.
B. Consultative, with the leader making the decision alone.
C. Autocratic: the boss makes the decision without any team member input.
D. Autocratic, but the boss first solicits opinions from members before he renders a decision.
Collaborative approaches to intra-team conflict resolution should be used when which of the following occurs?
A. Team members are skilled at evaluating ideas as soon as they are suggested by other members.
B. Team members prefer to seek the best solution to a mutual problem instead of a solution that
favours one point of view.
C. No criteria are developed to measure the quality and acceptability of the teams decision.
D. A team is able to quickly jump from tentative solutions to an acceptable outcome.
10 A board of directors has advanced five zero-interest, unsecured loans to the firms CEO (who also founded
the business and handpicked the boards members). The CEO has richly rewarded his board members with
generous grants of stock options. He has repeatedly told them that all firms routinely make zero-interest loans
to their CEOs as well as other top executives. Several board members are uncomfortable with these decisions, but they fail to speak up in meetings when the loans are discussed. Their silence is most likely the result
of which of the following?
A. The board is a highly cohesive group and the members in question do not wish to jeopardise their
membership and the perquisites that they enjoy.
B. If they were to disagree with the boards decisions about the loans, it would undermine the boards
effectiveness in more important strategic decision-making areas.
C. The silent board members have no reason to feel uncomfortable because making such loans is a
widespread industry practice.
D. The CEO determines and enforces the norms that govern the behaviour of board members.
32
Module 7B: The Influence Process

1
Complete the following sentence from one of the options below. A manager who has strong professional
standards and widely recognised expertise power is more likely to ____ when she believes her superior wants
her to engage in a business practice that she believes will violate one or more of her instrumental or terminal
values.
A. defeat her boss by encouraging line and staff conflict
B. create a coalition of peer managers who also disagree with her bosss actions
C. blow the whistle on her boss
D. manage upward to gain influence with her boss
Which of the following is the best example of leaders transformational behaviour?

A. Using rewards and punishments to influence employee behaviour.
B. Exercising legitimate power to reduce the budgets of the firms worldwide productions facilities.
C. Delegating authority to subordinates to handle an emerging crisis in product liability claims.
D. Detecting a change in customer expectations and adding a breakthrough product that creates a
new industry (social networking would be an example of this).
Which of the following is not a facet of the leaders initiating structure behaviour?
A. Organising the sequence of subordinates tasks.
B. Encouraging respect and trust among subordinates by launching a series of after-work problemsolving sessions at the local pub.
C. Providing informal and regular work performance feedback to new members of her SDT.
D. Rotating new members of an SDT through all team positions to complete their cross-training.
An SDT is under time pressure, its task is ambiguous and the team has not yet set metrics to measure its
progress in designing a new web app requested by the director of engineering. Under these conditions, team
member satisfaction would be highest under which of the leadership styles shown below?
A. Initiating structure.
B. Consideration behaviour coupled with coercive power aimed at quickly creating the teams metrics.
C. Intense initiating structure behaviour from the boss followed by less intense task-oriented behaviour
once the team becomes successful.
D. A strong interpersonal role emphasis to encourage the formation of effort and performance norms
in the SDT.
Which of the following should be used to determine the appropriate leadership style according to Fiedlers
contingency theory?
A. Leaders personality.
B. Leaders dominant behavioural style.
C. Leaders locus of control.
D. Features of the situation confronting the leader.
Which of the following choices should be used to complete this sentence? The Fiedler contingency theory of
leadership would advocate ____ to preserve a favourable match between the leaders style (as indicated by
her LPC score) and the situation she faces.
A. altering the leaders personality
B. skill training for the leader
C. re-engineering the situation the leader faces
D. more consideration behaviour on the leaders part
33
Module 7B: The Influence Process
Houses pathgoal leadership theory proposes a leadership style of supporting employees when which of the
following occurs?
A. Their task is structured and they are highly skilled and experienced relative to the job at hand.
B. Their task is structured and they are unskilful (not cross-trained) and inexperienced (new on the job
or new in relation to the task at hand).
C. The task is unstructured and they are skilful and experienced.
D. The task is unstructured and they are unskilful and inexperienced.
A leader who uses non-contingent punishment and reward behaviours will:

I. increase the rate of turnover and absenteeism among employees who experience inequity in their social
comparisons.
II. lower employees instrumentalities (damage line of sight) and reduce their level of performance.
III. have no effect on employees job satisfaction.
Which of the following is correct?
A. I only.
B. II only.
C. III only.
D. Both I and II
Entrepreneurship in large companies depends on which of the following?

A. Encouraging employees to exploit opportunities; assuring employees that they will not be punished
for failure; keeping salaries (and perhaps bonuses too) in line with innovative successes; and making
quick decisions to implement employees innovative ideas.
B. Paying all employees in technical jobs the same; designing a team-based approach to innovation; and
assigning senior executives as mentors to new employees.
C. Emphasising customer service; small production teams and good labourmanagement relations
(Theory Y practices).
D. Providing rewards to employees for their innovations; rotating employees among jobs; and training
leaders to exhibit consideration behaviour.
10 Two second-generation owners of a 20 million maker of medical-device components forced out their
recently hired, non-family member CEO because they opposed his growth strategy for the firm. The brothers
had told the outsider CEO that they favoured his approach when they hired him on a handshake three years
ago. Which of the following was most likely the mistake made by the outsider CEO?
A. He should have involved the brothers in the development of his growth strategy for their firm.
B. He should have tried to appoint more outsiders to the board of directors as soon as he was hired.
C. He should have negotiated a formal, written contract that specified his duties and outlined his
growth strategy.
D. He should have insisted on a specific organisational structure to operationalise his growth strategy
before he took the job.
34
Module 8B: Organisational Design

1
Which of the following is correct? A firm has a product divisional design with geographic (territory) emphasis
to reflect variations in customer preferences caused by geographic and cultural differences. The best way for
this company to ensure a stream of continued product and service successes without changing its business
model would be to____.
A. create SDTs throughout the company
B. set up selected matrix-based units designed to build/create new product characteristics and service
offerings that match changes in customer expectations
C. require all production-level employees to work under a piece-rate pay system
D. install an MBO programme in the firm
A firm outsourced the manufacturing of several products and the field repair work that goes with them. At the
same time it pulled back under corporate headquarters control the formerly outsourced functions of management information systems and human resources. These two actions reflect which of the following?
A. Decentralisation followed by recentralisation.
B. Functional design embedded in a service improvement orientation.
C. Increased goal focus and management by objectives.
D. Specialisation and division of labour.
Shortening product and company life cycles place considerable emphasis on which of the following?
A. More formalisation in hierarchical control.
B. Creating an organisational design that emphasises flexibility and responsiveness.
C. Designing the organisation to be mechanistic.
D. More specialisation and standardisation in job designs.
Data analytics and cloud-based firms operating on the Internet as virtual organisations should meet which of
the following sets of demands?
A. Lower client demands for horizontal and vertical coordination than bricks-and-mortar rivals.
B. Lower client demands for customer service than their bricks-and-mortar rivals.
C. Higher client demands for extremely responsive and effective horizontal and vertical integration (the
business environment is extremely unstable due to very short product and service life cycles; e.g.
clients demand nearly instantaneous improvements due to data analytics products).
D. Higher client demands for vertical coordination but low demands for horizontal coordination.
Which of the following sets of conditions would decrease the need for vertical coordination?
A. A business environment is not turbulent, product life cycles are long and customers are satisfied
with a stable (and highly useful) set of product characteristics.
B. A business environment is stable and the firm has standardised and formalised coordination
mechanisms.
C. An industry is not protected from lower-cost foreign rivals and it has few domestic competitors in
its highly profitable industry.
D. A company makes little use of liaison positions and task forces.
A company-wide MBO system is an example of which of the following?

A. Process-oriented control.
B. Strategic planning that is participative.
C. Results-oriented control.
D. Process theory of motivation.
35
Module 8B: Organisational Design
We find that a firms externally based process controls reflect which of the following?
A. A business environment containing demanding repeat buyers; shortening product life cycles, and
aggressive global competition in domestic markets.
B. Product and service improvements based on Six Sigma and total quality management.
C. A complex hierarchy that relies on the functional design.
D. A highly successful MBO programme.
Shrinking and reducing the number of vertical layers, reassigning support staff to field operations and widening
management spans would all occur in a firm that is ____.
A. moving to a product divisional structure
B. installing a matrix design
C. recentralising its structure
D. moving towards a Y-oriented responsive design
A firm that adopts the boundaryless organisation design is likely to do which of the following?
A. Undo vertical complexity and avoid the entanglements of strategic alliances.
B. Improve customer service by using cloud-based applications specifically designed to monitor realtime indicators of operational effectiveness (e.g. such things as inventory levels, real-time retail sales
and customer traffic in retail outlets).
C. Raise vertical complexity by using more data analytics in a cloud-based format.
D. Move into a highly regulated industry that is well protected from intense global competition.
10 Sustaining a service quality improvement programme requires which of the following?

A. Alteration of job descriptions to emphasise customer satisfaction.
B. Data analytics to produce real-time unit performance data to show employees and managers how
they are doing in the moment.
C. An empowerment-driven employee suggestion system to improve service quality.
36
Module 9B: Managing Transition

1
A multi-method, multi-level diagnosis would be least likely to occur in which of the following?
A. Team building.
B. Survey feedback.
C. Pre-packaged, system-wide change.
D. Structural redesign.
The carry-over problem to the work setting is which of the following?

A. Resistance to change.
B. A defect in institutionalisation of change solutions throughout the firm.
C. The erosion (or degradation) of new knowledge and behaviour that causes employees to fall back
into their old work patterns.
D. The transfer of organisational change programmes from one company unit to another.
Evaluation of a change programme entails which of the following?

A. Measurement of the degree of positive change relative to employee reactions (the affective component
of their attitudes about the change in question), learning (cognitive component of employee attitudes
reflecting their newly acquired skills), new employee behaviours (third component of employees
change attitudes; intention to work in new and different ways), and key organisational metrics.
B. The extent to which a change programme includes all units in the organisation and contains
customised change metrics that reflect the units progress in meeting the goals of organisational
change.
C. The extent to which organisational change becomes a permanent part of a companys systems (the
firms culture changes in ways that support the improvement initiative).
Resistance to change is which of the following?

A. A potential problem during any phase of planned change.
B. An obstacle to the early stages of planned change.
C. Directly proportional to the ease of unfreezing the firm.
D. Less likely in firms with highly differentiated functional designs.
Which of the following is least likely to be a target of diagnosis in organisational development?

A. Leadership and managerial styles throughout the firm.
B. Goals and objectives from the top to the bottom of the firm.
C. Customers beliefs about the most effective way to display products in a retail outlet.
D. The quality of the fit between the firms design and the metrics composing operational effectiveness.
When an outside change agent provides an SDT with problem-solving help by using realistic business cases and
valid (meaningful) performance problems to lower its process losses, which of the following is being used?
A. Team building.
B. Sensitivity training.
C. Data analytics.
D. T-group training
In general, T-group methods lead to which of the following?

A. Improvements to organisational culture.
B. Rising discomfort among team members with existing work relationships and negative interpersonal feedback about various personal characteristics of team members.
C. Documented improvements to group decision-making methods (falling process losses).
D. Transfer of learning from the T-group setting to the work setting (minimisation of the carry-over
problem).
37
Module 9B: Managing Transition
Which of the options below best completes the following sentence? If a change agent failed to ____, then it is
likely that the results of survey feedback would not be sufficiently compelling to employees to overcome their
resistance to change.
A. obtain a high response rate to a company-wide employee survey
B. administer an employee survey within a two-month period
C. establish a working connection with each member of the companys board of directors
D. use focus groups of employees during the diagnosis phase
Which of the options below best complete the following sentence? Grid OD is a two-stage change method
that first emphasises ____ and then focuses on ____.
A. removal of communication barriers; better planning and goal setting in the organisation
B. removing resistance to change; leadership style
C. reduction in employee job stress; widespread training and development
D. executive leadership roles; management spans of control
10 Which of the following sets of metrics should be used to track the effectiveness of an OD programme
designed to make an equipment repair company more responsive to clients needs?
A. Measurement of employees mastery of new skill sets and the number of new mentorprotg
arrangements created in the firms field operations.
B. Measurement of declines in SDT process losses by tracking teams achievement of quality and
performance milestones in their project work.
C. Monitoring customer satisfaction by measuring the time necessary for repair teams to resolve their
equipment problems, perform routine maintenance and respond to clients equipment emergencies.
38
Final Exam 1
1
Which of the following components of a managers job are most often rewarded by the enterprise?
A. Human and conceptual.
B. Technical and human.
C. Technical and conceptual.
D. Organisational and conceptual.
Which of the following most improves job satisfaction once basic maintenance needs for employees are
satisfied?
A. Challenging, demanding jobs.
B. Increased clarity in job descriptions.
C. Lengthening time delays between documented performance and feedback about performance.
D. Improved employment benefits.
Which of the following is most realistic?

A. High job satisfaction causes high job performance.
B. High job performance causes high job satisfaction.
C. The relationship between job performance and job satisfaction is mediated by intrinsic and extrinsic
rewards and perceived equity.
D. High job performance cannot occur in conjunction with low job satisfaction.
Which of the following is correct? Managers can develop organisational commitment by all of the following
EXCEPT:
A. supervising closely and requiring the employee to focus on the task at hand.
B. creating work designs that emphasise teamwork.
C. acknowledging performance with meaningful rewards and prompt performance feedback.
D. participatively creating goals that achieve important organisational outcomes and simultaneously
develop the employees skill sets.
Which of the following is correct? A company policy that all employees are given uniforms free of charge that
must be worn on the job is a:
A. motivational factor.
B. high-content factor.
C. hygiene factor.
D. job-centred factor.
In the short run, which factor is LEAST related to the need for achievement?
A. Taking moderate risks in completing the job.
B. Requesting immediate feedback about performance.
C. Needing a promotion or a pay rise.
D. Pursuing meaningful goals at work.
Which of the following is correct? Expectancy is:

A. a subjective belief that some level of effort on the job will lead to a given level of performance.
B. a subjective belief that a given level of effort will lead to a desirable reward.
C. a subjective belief that a given level of performance will lead to a particular set of rewards.
D. the degree to which an employee believes that his superior will provide clear task instructions.
39
Final Exam 1
Which of the following is correct? Helping an employee improve his performance one step at a time by
positively reinforcing those behaviours that successfully move closer to the desired performance goal is called:
A. scheduling behaviour.
B. extinguishing behaviour.
C. behavioural shaping.
D. stretching the ratio of reinforcement.
A football player, threatened with suspension from the game, stops using foul language with the games
referees. He therefore avoids any unpleasant consequence. What is this an example of?
A. Positive extinction.
B. Negative reinforcement.
C. Punishment.
D. Shaping behaviour.
10 Which of the following statements does not support behaviour modification theory?
A. The theory focuses on changes in psychological states.
B. The theory emphasises the importance of providing timely feedback to employees about their
performance.
C. The theory stresses the measurement and analysis of observable employee behaviour.
D. The theory relates to employees beliefs about the connection between performance and rewards.
11 Which of the following is correct? Skill-based compensation:
A. discourages employees from seeking training.
B. is used to make part of the employees compensation contingent on his acquisition of new and
documented job-related skills.
C. ranks positions in the firm relative to their difficulty and educational requirements.
D. ties the acquisition of new job-related skills to increases in the cost of living.
12 Which of the following is correct? Gainsharing programmes:
A. attempt to control labour costs through a formal system that helps employees install labour-saving
innovations and pays them a bonus when they find ways to produce more output with the same or
fewer labour inputs.
B. tend to work only when an enterprise is benefiting from expanding sales.
C. do not require employees to achieve better understanding of how their work units contribute to
the cost of goods sold.
D. do not require a history of good labour management relations in companies to be successful.
13 An employee has just designed a new piece of software and completed the debugging process on it. Which
core job dimension is MOST related to the above statement?
A. Task identity.
B. Feedback.
C. Skill variety.
D. Task significance.
14 If employees receive feedback about their performance by completing various steps in their work, which of the
following should they experience?
A. Responsibility for task completion.
B. Meaningfulness of work outcomes.
C. Knowledge of results.
D. Job satisfaction.
40
Final Exam 1
15 A characteristic of a self-directed team (SDT) is that::

I. it makes decisions about changes in work methods.
II. it negotiates production schedules with the manager.
III. it is for cross-training its members.
A. I only.
B. II only.
C. I, II and III.
16 Which of the following is correct? All of the following are properties of group norms EXCEPT:
A. a member may privately disagree with some aspect of work methods in the group.
B. the leader spends more time supervising the group if it has strong, focused norms.
C. norms develop for central and important beliefs of the groups members.
D. some members of a group have more rights to deviate from established group norms than do other
members.
17 Which of the following is correct? When members of an SDT assume that all other members are in favour of
its course of action, we say that the SDT is suffering from::
A. mindguarding.
B. self-censorship.
C. the illusion of unanimity.
D. the illusion of invulnerability.
18 Nominal groups:
I. are highly structured.
II. focus on personalities of group members.
III. pressure members to reach consensus in decision making.
A. I only.
B. I and II only.
C. I, II and III.
D. I and III only.
19 Which of the following activities resolves interpersonal conflict among group members?
A. Process.
B. Task.
C. Job.
D. Maintenance.
20 Employees comply with authority because they assume that people in a position of power have a right to
exercise that positions authority. Which of the following types of authority best reflects that right?
A. Ethical.
B. Personal.
C. Legitimate.
D. Logical.
21 Which of the following is correct? Developing a network, limiting access to information, taking risks and being
creative, and creating obligation in others are examples of:
A. how employees gain power.
B. expert power.
C. need for achievement.
D. creating role conflict.
41
Final Exam 1
22 Which of the following is correct? Leadership consideration behaviour is most closely related to:
A. initiating structure behaviour.
B. building strong relationships with subordinates.
C. having employees participate in decision making.
D. entrepreneurial behaviour.
23 According to the pathgoal theory of leadership behaviour, a leaders job is to:
I. clarify the employees path to work goals.
II. reduce or remove obstacles in the path of employees who are trying to perform well enough to obtain
valued rewards.
III. where appropriate, involve employees in decisions.
A. I only.
B. III only.
C. I and II only.
D. I, II and III.
24 Neutralisers of the effectiveness of the leaders initiating structure behaviour are:
I. subordinates expertise and job knowledge.
II. task confusion and conflicting work expectations.
III. flexible rules and non-routine work demands.
A. I only.
B. I and II only.
C. II and III only.
25 Which of the following forms of departmentalisation helps develop specialists or experts?
A. Product.
B. Matrix.
C. Functional.
D. Territory.
26 Which of the following is NOT true of territorial organisational designs?
A. Attention is focused on regional operations.
B. Regional managers are probably responsible for the profitability of their operations (they run profit
centres).
C. It is good for the centralised control of business operations.
D. It helps managers develop a broad and flexible skill set.
27 Which of the following is correct? The matrix design would be least effective when:
A. special projects need to be done.
B. the enterprise needs to energised.
C. the firms market is stable and unchanging over time.
D. coordination needs are complex in the company.
28 Which of the following is correct? If employees are unaware of a companys values and beliefs, the company:
A. develops enduring standards of production.
B. has top managers who are unaware of their roles in formulating and transmitting organisational
culture to employees.
C. uses informal groups to explain company practices to new employees.
D. fails to use informal groups to explain policy to new employees.
42
Final Exam 1
29 Diagnosis in organisational development is

I. expensive.
II. time-consuming.
III. vulnerable to managements desire for quick action.
A. I only.
B. I and III only.
C. II and III only.
D. I, II and III.
30 Which of the following groups help members understand how they are perceived by their fellow members?
A. T-groups.
B. Six Sigma teams.
C. Project groups.
D. Team-building groups.
43
Profiler Case Study Questions

A Founder Says Thank You to His Employees
This case study emphasises Theory Y workforce management principles; succession management in family
businesses; principles of leadership; sustaining competitive advantage through workforce management practices; the psychological contract; adjusting organisational culture to accommodate technology change and
ownership change; and the importance of hygiene and motivator factors in the work setting.
Most employees and managers would not think that working for a company that makes elegant garden
accessories and decorations would somehow bring to them the perk of a lifetime. On 31 May Alex Burton, 78,
the chairman and founder of family-owned Garden Products (GP, Ltd) in Newcastle, England, handed out
bonus cheques totalling 20 million to his 295 employees, a substantial part of the sale price he received for
selling his company the day before. Paul McCartney, the companys CEO, said: Some of those big, strong
machine operators choked up, their eyes filled with tears, and all they could do was give him a silent, British
nod of gratitude.
Fiona Jameson, 48, a GP office worker for over 20 years, refused to reveal the size of her cheque as she
described how all of the cheques were weighted by seniority and salary. She estimated that all current
employees received at least 1.65 for every hour that they had worked over the years in GP. That produced
an average bonus cheque of 355000. Alex believed in his hourly employees, and he really wanted to help
them because of all of their years of loyal service, she said.
For quite a while GP employees had nervously discussed the impending sale of the company. They had heard
rumours that they might all receive a bonus, and they were cautiously optimistic in their conversations with
each other. Despite their efforts to learn more, the size of the bonuses remained a mystery and none of them
dreamed that their cheques would exceed a years salary until Alex and his wife showed up to pass them out
on 31 May.
Sarah Leach, 44, worked on GPs production line for 23 years, and she was numbed by her windfall. I was
speechless, she said. I just walked up and shook hands with Alex and I hugged his wife. I could not find the
right words; I was so shaky and nervous, she said. She regained her stability and speech the next day at the
Vauxhall dealership where she handed over a cheque for a new blue sedan that she had coveted for some
time. That afternoon she drove her daughter in their new car to the furniture store and bought all of the
bedroom furniture that she had promised her 15-year-old daughter. Soon after she was spotted in the
appliance store with her husband and they both sported broad smiles as they purchased all new appliances for
their kitchen.
Mr Burton is no stranger to writing bonus cheques. He does admit that these are the biggest ones he has ever
written. For years he has adhered to the belief that high employee morale has been a significant component of
GPs competitive advantage. He proudly states that GPs workforce is the most productive in the industry. He
continues:
Since I founded this business in 1982, we have implemented starting salaries that are 15 per cent higher than the
industry average; flexitime work schedules; and a job bidding system to allow ambitious employees to move to
more challenging jobs. As our reputation for having fair work practices spread throughout the region, we have
attracted more qualified applicants and we have grown. From a competitive standpoint, we lead the industry in
product innovations, better relationships with customers and higher workforce stability. All of these aspects of
high performance and productivity stem directly from the high morale of our workforce.
Mr Charles Rankin, a sales manager, has worked for GP for 18 years, and he says that Mr Burton always
encouraged employees to come up with new product ideas and tracked the development of those products as
they made their way through production start-up and eventual distribution. Mr Rankin says:
He would show up at sales meetings and describe the reactions of customers to our new products. It was pretty
clear that he had been out there speaking to our best customers as we developed those new product ideas. He
was so enthusiastic about new products and how they could enhance the gardens of our corporate and private
customers. We always caught his enthusiasm, and the new products would just roll out on their own.
44
Mr Burton took a less active role in day-to-day business decisions once he reached 70. He and his wife, Regina,
became interested in charitable causes, so they created a philanthropic trust to support prenatal education
programmes for unmarried mothers in northern England. As the educational programmes of the trust
expanded, the Burtons became more active in its day-to-day management. All of GPs upper managers
understand why Mr Burton and his wife want to emphasise philanthropic work at this stage in their lives. Mr
McCartney serves on the board of the trust and he observes that Alex takes the same interests in the lives of
the young women helped by the trust as he took in the lives and interests of GPs employees.
For several years it had become increasingly obvious to Mr Burton that launching a stock flotation was
inconsistent with his management style and the needs of GPs workforce, despite his growing realisation that
the production equipment on GPs assembly line was becoming outdated. He abandoned a stock flotation
because stockholders would judge some of our work policies as being too costly.
Mr Burton also ruled out selling the company to a large conglomerate because he worried that GPs workforce and innovative practices would get lost in the labyrinth of corporate politics. As the various avenues
narrowed for updating the firms production system, Mr Burton realised that he would have to find a buyer
within the industry who would have to agree to his unusual terms in a contract to sell the business. To find
such a buyer in the industry, Mr Burton offered the company for a price that was 8 per cent below its
appraised value. He reasoned that such an attractive price would make it easier for him to win the concessions
that he wanted on behalf of GPs workforce. His conditions to the terms of sale are briefly noted below.
1. No changes among upper managers for three years (stability of organisational culture).
2. A working plan for production equipment upgrades prior to the sale of the business (planned technological
change designed to improve operational effectiveness).
3. A complete plan for employee training to operate new production equipment (match employees skill sets
to work requirements set by new technology; preserve line of sight; and control employee stress levels).
4. GP operates as a stand-alone subsidiary for three years based on profit projections and new product
introductions (continuity of psychological contract and lower financial insecurity for GPs workforce).
5. No layoffs (maintain levels of hygiene factors).
6. Work policies in existence prior to the sale remain in force for three years (sustain workforce morale and
maintain line of sight).
7. Create a task force to manage the merger. The task force is to be composed of GP managers and employees and their counterparts from the acquiring firm (manage transition to new ownership and incrementally
adjust organisational culture to minimise the gap between realised and intended strategic outcomes).
Soon after he had made his desire to sell the company known, a family-owned German firm approached Mr
Rankins broker with an attractive offer. In the quick and cordial negotiations, executives from the German
firm indicated that they could accept Mr Rankins terms if he could agree in principle to their requirement to
create a joint task force charged with evaluating employee ideas for product and process innovations. Mr
Rankin said that a cross-companies task force could be created for that purpose and his executives would be
interested in helping executives from the acquiring firm to set up the task force and its mission.
Passing the Ownership Torch
On the day that Mr Burton passed out the bonus cheques, 20 employees and managers from the German firm
were on hand for the ceremony to honour GPs employees. At the ceremony, the German employees passed
out beautiful baskets containing several of GPs newest garden products. Also in the basket was a savoury
selection of German chocolates. Once the ceremony was completed, executives from both firms and the
German employees broke up into small groups containing GPs employees. During that 90-minute session, the
employees and their guests shared ideas about how to smoothly integrate the new production equipment into
GPs operations.
Guiding OB Concepts for the Case Questions
1. One of the most important challenges facing the founder of a firm is to create an orderly ownership
change. This may be particularly difficult for the founder/owner who is well liked and respected throughout
the firm and the industry. Such wide acclaim is seductive in the sense that it convinces the founder that he
or she is simply irreplaceable and to stay in the saddle regardless of health or age-related matters. This
self-centred decision most certainly sets the stage for some turnover among high level executives who
rightly conclude that they will never win the nod to be promoted to the top job. More ominously it sets
the stage for turmoil in the business when the founder dies unexpectedly without a clear succession plan in
place. Therefore, part of a good competitive strategy is an operational exit plan that is approved by the
45
board and followed by the founder and CEO. This was recently a significant challenge for Apple Computer
in the wake of the untimely death of its founder, Steve Jobs (see the timely and absorbing biography of
Steve Jobs written by Walter Isaacson).
2. Transformational leadership is multifaceted and flexible. Fundamentally it is the capacity to create a vision
for a firms sustainable competitive advantage and then to energise the workforce to operationalise that
vision in the form of sustained improvements in operational effectiveness. Mr Rankins version of transformational leadership (a very strong Y orientation) is clearly focused on the centrality of the workforce and
its crucial role in sustaining the firms competitive advantage. He exhibits a consistent relations-oriented
leadership style (see Fiedlers contingency theory of leadership in Module 7). It is also evident that he believes in the long-term value of providing adequate hygiene factors (Herzbergs two-factor theory) and the
role of higher-order need satisfaction in sustaining workforce morale, organisational commitment and motivational line of sight. All of his actions to encourage product development and his steps to create an
engaged and adaptable workforce suggest that he is highly competitive and that he wants his firm to be the
industrys standard bearer in product development and customer service. His consistent focus on these
core competencies of the firm from the standpoint of Theory Y practices show how competitive advantage
can be built and sustained through excellent workforce management practices. It is also highly revealing
that he wants GP to be able to select new employees from a pool of excellent applicants. He is able to
sustain his competition-beating successes precisely because everyone knows that he values his employees
and that he will treat them well (maintenance of high trust in the workforce). The fact that he gave them all
huge bonuses when the firm was sold did not really surprise those people who knew him well.
1
Use the Ohio State Leadership Studies to characterise Mr Burtons leadership style. How does his leadership
style reinforce the firms competitive advantage?
What recommendations would you make to the German firm to ensure that GPs competitive advantage is
sustained during the merger of the two firms?
Bulldog Hits the Brakes

This case emphasises industry and company life cycles; driving forces; strategic vision of CEO (transformational
leadership); basis for competitive advantage (differentiation); investments in product development; sustaining
service quality and relations with customers; leadership style and building reliable improvements in operational
effectiveness.
Ottawa, Canada, is the home of Bulldog, Ltd, Canadas one remaining independent builder of heavy-duty trucks
for the freight hauling companies of North America. Rene Treadman, chief executive of Bulldog, has embraced
high technology in his quest to make his company the number one supplier to North Americas most lucrative
market sector: transportation companies with big fleets of large, 18-wheel, semi-trailer tractors.
Mr Treadman is enthusiastic about building more driver-friendly technology into Bulldog trucks. Soon he will
roll off the assembly line vehicles that have Big Rig PCs, which are a joint venture with Dell Computer
Company. The PC fits in the trucks dashboard and allows drivers to play computer games, get on the Internet,
communicate directly with their company dispatchers by using voice commands, and send and receive email.
Along with GPS, the dashboard PC also transmits 40 pieces of engine performance data, average truck speed
and brake condition directly to the fleets command centres across Canada and America. Mr Treadman
expects that the adaptation of high tech to his trucks will make them the most productive and cost-effective in
the industry.
Mr Treadman tries to keep his customers happy in other ways. He has made his biggest customers quite happy
by offering to buy back their used trucks as his company sells them new ones packed with all the latest bells
and whistles that high tech has to offer. Lately his lofty sales hopes have stumbled in Canadian and American
dealer showrooms. During the past two years, his industrys sales have slumped by 50 per cent, and rises in
fuel prices have contributed to the industrys gloomy sales outlook for next year. Industry analysts blame the
still unfolding economic slowdown across North America for significantly lower freight transport demand. His
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newest computer-equipped, GPS-positioned, large trucks can cost more than $250000 (Canadian), and he
worries that the market for these premium rigs will vanish if the United States heads back into recession.
Until about three years ago, the truck industry had forged ahead with massive additions to capacity as the
demand for heavy trucks grew. For Bulldog, the enthusiastic over-building lead to a large inventory overhang
despite the companys current market share of 36 per cent (18 per cent figure in 2008). During this time
period, Bulldog has produced more new and refurbished trucks than the companys markets can absorb. On
their lots in mid-2009, Bulldog dealers held 60 days of unsold inventory. By the same date in 2011 the figure
had zoomed to a stunning 140 days!
Theyve [Bulldog] bought a significant amount of market share, says Dieter Dotter, an industry analyst at Credit
Suisse in Toronto. Mr Dotter cites Bulldogs practices of undercutting competitors prices and agreeing to buy
back customers used rigs at attractive prices as the prime reasons for the firms significant gains in market share.
Mr Dotter says: They are one of the industrys biggest producers and they will take the hardest fall.
For 32 years trucking has been Mr Treadmans life. During his college days he drove trucks to earn extra
money, and his first job after college was to sell fire trucks to cities across Canada. After a stint at owning a
truck dealership in Vancouver, he joined TransCanada Trucking, Ltd., where he rose through the executive
ranks to chief operating officer. In 1998 he joined Bulldog as its fifth CEO in its 50-year history. He boasts that
he still knows how to build and drive what he sells. I can still back a 72-foot rig up to a loading dock, and I can
still work any job on our assembly line, he says proudly.
Mr Treadman exhibits his pride and competitiveness in all of his business decisions. Recently one of Bulldogs
key parts suppliers, Globex, Ltd., of Calgary, B.C., announced plans to help launch an Internet truck parts
exchange. Concerned that it might compete with Bulldogs own truck parts business, Mr Treadman threatened
to switch his business to Globexs main rival if Globex failed to abandon its Internet venture. Globex folded
and pulled the plug on its e-commerce venture. Mr Treadman, through a spokeswoman, declined to comment
on the episodes details.
In spite of the currently sluggish market, Mr Treadman is pressing ahead with efforts to further boost market
share in what appears to be a deteriorating market. Last month he told his North American dealer network
that Bulldog was moving forward with a plan to build a company facility designed to refurbish used trucks in a
former US Army truck maintenance depot in northern Montana. The facility will rebuild used trucks that
Bulldog has bought from its customers and who have agreed to buy its new high-tech rigs. The refurbishing
facility is a gamble that Mr Treadman is willing to take, despite the fact that some shareholders have expressed
concerns about its costs. Mr Treadman, to counter his critics, argues that newly developing oil shale deposits
in Canada and the northern tier of the US will drive down demand for large-truck sales for years to come.
Despite shareholders trepidations, Mr Treadman has earned the loyalty of the CEOs of Americas and
Canadas big trucking fleets, who say that Bulldog has taken significant risks and made investments to produce
trucks that are more efficient and less costly to operate (their reliability reduces maintenance costs). For
instance, a big issue in the freight forwarding business is the fact that large trucks only get about two kilometres per litre of diesel fuel. Bulldogs new top-of-the-line truck, the Millennium Turbo Max gets about 5 per
cent better fuel economy that its predecessor, according to company tests. This can be worth as much as $7
11 million in annual fuel savings to Bulldogs big-fleet customers.
No longer an unusual feature, many big tractors now have bedrooms behind the cabs seating area. These cosy
quarters are roomy enough to accommodate two people, a microwave oven, a flat-screen TV with Internet
streaming capabilities, a coffee pot and a compact piece of exercise equipment. Bulldogs new Millennium tractors
will have these amenities and a global positioning satellite system that will monitor trucks via satellite and guide
their drivers to the petrol station with the best fuel price or to a customer who suddenly needs to ship a load.
Bulldogs new tractors will contain safety devices to alert drivers when their rigs are in danger of tipping, and
the device will automatically apply the brakes if their drivers fail to respond. A companion safety device sounds
an alarm in the cab when a camera mounted on the front of the vehicle detects that the truck is straying from
its lane. In a down market, Mr Treadman believes that these innovations and technological improvements help
Bulldog differentiate its vehicles from competitors products. These devices will also cut down on accidents,
which in turn reduces the insurance premiums paid by the large fleet companies.
Bulldog owes much of its current market share to Mr Treadmans aggressive repurchasing of used Bulldog rigs.
The arrangement works this way. Bulldog guarantees certain customers that three years in the future it will
buy back their trucks at a predetermined price if the customer replaces its used models with new Bulldogs.
Most of Bulldogs competitors offer similar deals to their customers, but Bulldog has been the most aggressive
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in the use of the tactic. Last year, one-third of the companys sales of 140000 units were made under the
terms of the trade-back agreement.
When the industry is booming, trade-backs are simply good business practice because the demand for used
trucks tracks right along with demand for new rigs. If the market tanks, new trucks start piling up on dealers
lots and the price of used trucks falls. Not surprisingly, due to the recent build-up of new and used trucks on
dealers sales lots, Bulldog dealers have begun to unload their inventory by offering steep discounts and by
giving away extra options on both new and used trucks at no charge. Over the next two years, this practice
will pressure Bulldogs profit margins.
One of Bulldogs largest customers, which has participated in the trade-back arrangement, says that Bulldog is
paying about $90000 each to buy back one of his three-year-old trucks. Those trucks would only fetch about
$55000 in todays depressed resale market. The glut of used rigs is pulling down the prices of new trucks at
the very time when Bulldog is trying to recover its costs for creating technological engine efficiency and safety
improvements.
Despite these sobering trends noted above, Mr Treadman understands the industrys driving forces and
believes that Bulldogs Montana refurbishing facility will be able to overhaul about 8000 used trucks per year,
or approximately half of the trucks that he buys back annually. As the used trucks enter the facility, they are
torn apart and workers replace the cabs interior components, the electrical system and the exterior sheet
metal if necessary. The engine, transmission and rear axle are kept and the truck is repainted. The refitted rigs
are then sold for 6575 per cent of their former new price. Mr Treadman contends that there should be a
ready market for them and he believes that pushing these units into the used-truck market will not depress the
prices of his new rigs (despite some compelling evidence to the contrary). Mr Treadman says: For the
moment were in a declining market and weve got lots of used trucks coming back. Were not going to panic
and were confident that we know this business. As I have said before, the growing levels of proven reserves of
oil shale and natural gas deposits in Canada and the US will shape the demand for Bulldogs products for years
to come.
1. Sustaining competitive advantage in the face of a declining market is the acid test of the CEOs strategic vision
and leadership style. The number of profit-making opportunities drops in a declining market, so the CEO
must emphasise more opportunities to reduce costs. If a company has a few large buyers, the CEO will try to
lock in future sales by guaranteeing prices and product characteristics. On the input side, the chief executive
will probably have to demand price reductions from suppliers. These actions are most effectively implemented
by a strong, task-oriented CEO who thoroughly understands his industrys driving forces. Apparently Mr
Treadman sees a building market turnaround and he is adding to Bulldogs capacity to refurbish used trucks
that he can resell through the firms network of dealers. This is not a cost reduction strategy because he
believes he is positioning his firm to take advantage of future growth opportunities.
2. In mature industries, life-cycle theory indicates that when firms enter the maturity phase product innovations become more costly to create and they are often easily copied by rivals. In the mature phase, industry
rivals thoroughly understand the nature of the product production process (especially in industries with a
few large rivals that control a large portion of the product or service marketplace; i.e. high concentration
ratio). In this phase, only rivals with efficient production and distribution systems remain competitive because virtually all customers are repeat buyers who possess thorough knowledge of product and service
characteristics and the industrys cost of production. These conditions favour risk-reducing buyerseller
contracts that guarantee future prices and product characteristics. This makes particular sense in the truck
manufacturing industry, which has a high concentration ratio. In effect, the contractual arrangements erect
an entry barrier around the industry to help preserve profits by locking big customers into repurchase agreements with the industrys large producers. The preservation of profits ensures
a competitive seat at the table for the industrys large producers (a kind of collaborative
sharing or dividing of the market to ensure the survival of its large firms). It also prods
the industrys producers to search for ways to reduce the costs of production. Over time,
the industry creates managed competition (those collaborative arrangements again) that
guarantees a steady flow of incremental product innovations to please customers and furthers production cost reductions to ensure the survival of the industrys largest producers.
With no significant change to its driving forces it is possible for the mature industry to
remain profitable indefinitely.
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What recommendations would you make to Mr Treadman if the demand for his firms tractors continues to
decline and the refurbishing facility is only capable of refitting 6000 trucks per year?
Given the business conditions confronting Bulldog, what steps should Mr Treadman take to convince the
companys workforce that Bulldog will emerge as a stronger company after the industry downturn ends?
The Digital Divide

This case emphasises the effects of corporate mergers on organisational culture. It also examines the problems
associated with a rigid business model in a mature industry composed of a few large global rivals (high
concentration ratio), and shows the risks of acquiring a rival and paying a high premium that may not be
quickly recovered (a poor use of scarce capital; e.g. a low return to capital). It also shows the strain created in
a firm when a CEO believes growth in the size (economies of scale) of the company can revive flagging profit
margins (caused by excess capacity in the industry).
By January 2002 Compubox was the worlds largest computer maker. The US-headquartered company had
overtaken Dell as the worlds largest full-range manufacturer of computers. For the previous five years,
Compubox had posted a 30 per cent annual growth rate in its sales, more than double the industrys average
during the same period. Compubox had become a colossus, and its economic effect in its home town of San
Antonio, Texas, was quite evident. In its surrounding suburbs, several upscale housing developments were
dubbed Compuboxland because so many homeowners in the developments were millionaire employees of
the firm. Numerous influential American business magazines had singled out the company for its success, and
its chief executive officer, Byron Bytemore, was cited in those articles as a visionary executive who tirelessly
championed product and service innovations across his industry.
In early 2002, to further his reputation and to increase Compuboxs future revenues, Mr Bytemore announced
his intention to acquire Intersync, a server manufacturer and data analytics firm (with more employees than
Compubox), for a then industry-record of $18 billion. In the February joint press conference with Intersyncs
CEO, Mr Bytemore claimed that the merger would reshape the landscape of the computer industry and
dislodge the hegemony of the Wintel duopoly (Windows operating systems coupled with Intels vast array of
computer chips).
By March 2006, Compubox was a company with a serious acquisition hangover. Since October 2005, its share
price has plunged from $160 to $20. This breathtaking freefall wiped out over $20 billion in shareholder value,
a full $2 billion more than the price paid for Intersync. Compubox lost its top spot as Americas premier
computer maker. By mid-2006 it had handed over that title to Dell. And, to rub more salt into the wound,
stodgy old Hewlett-Packard also raced ahead of Compubox. The merger turmoil produced another bombshell.
Mr Bytemore was fired by the Compubox board, and with absolutely no fanfare a little-known company insider
named Jeremy Bytebegone became his successor.
An Evolving Industry Business Model
Since the firms inception in the early 1990s, Compuboxs business model emphasised the production of PCs
and laptops based on three- and six-month sales forecasts. Once built, the units were sold by the firms
aggressive sales force to its sprawling network of retailers, systems integrators and regional distributors. By
2000, with the rise of the sub-$1000 PC, the company could not sustain its 30 per cent gross margins, nor
could it slow the spread of defections and some bankruptcies among the dealers in its sales network. At the
same time Compubox missed the earnings forecasts of industry analysts, prompting institutional shareholders
(large mutual funds, pension funds and public employee retirement plans) to begin dumping their Compubox
stock.
Throughout the late 1990s and into the next millennium, Dell Computer Company had created and seized the
new industry standard for producing and selling a full range of computers. Its direct-to-consumer model meant
that it manufactured a computer only once it had a customers order in hand. This eliminated unsold computer
stock, which was the bane of the industry because it depreciated about 1 per cent of value for each week that
it went unsold. Dells customers loved designing their own computers via the Dell model, and investors loved
Dell too, as they gave it the same market capitalisation as Compubox on 50 per cent of its (Compuboxs)
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sales. Sharper differences grew between the two firms channel distribution strategies. By the mid-2000s all of
the major Wintel computer manufacturers product margins were under extreme pressure from Apples lineup of sleek, easy-to-use laptops. Little did they know that Steve Jobs was going to roll out the insanely great
iPad in a few years.
Compubox began wrestling with a wrenching channel of distribution conflict since it could not easily match the
Dell claim of made to order and delivered next week without alienating its 11 000 partners in its sales and
distribution network. PC demand dipped soon after the acquisition, and Compubox was caught flat-footed
despite its revamped sales and distribution forecasts, which were supposed to fine-tune its manufacturing
system to eliminate unsold inventory. During this slow sales period, Dell struggled with a new set of global
producers (IBM had exited the PC business by selling off its manufacturing division to Chinas Lenovo). At the
same time, IBM rebuilt its competitive model to stress client services in the form of data analytics and cloud
computing. Compubox watched helplessly as inventory stacked up in its warehouses and retailers slashed their
pricing strategies and returned unsold inventory to the company.
Compubox wrestled with a tough decision to abandon the less and less profitable desktop market (laptops
were now cheap, portable and extremely powerful), so, late in the game, the company eyed partially copying
the IBM strategy by moving into the more profitable corporate computer services market (the nearly
forgotten services and data analytics component of Intersync). Low-cost global competitors that competed on
the basis of cost were forcing US high-tech firms to find new sources of competitive advantage, and Compubox was desperate to make something good happen from its widely panned failed acquisition. Increasingly large
corporate clients (airlines, energy companies and public utilities) were abandoning their highly centralised
mainframe computer operations and migrating to decentralised networks of linked PCs tied together with
integrated, cloud-based software. Compubox executives believed that all they needed was to fully develop
Intersyncs worldwide computer services and data analytics capabilities that were so important to the firms
large and complex global clients.
In 2008, Compubox executives had fully embraced the grow your own services division concept as a major
component of its business model. The firm launched a number of well-received staffing and logistics applications. Compubox management believed the firm would need a virtual organisation design to move the global
data analytics strategy forward, and so management began the roll out of the new design. The launch of this
initiative breathed new life into the formerly moribund services division of Intersync. Software engineers began
inquiring about job opportunities, and soon the division had a backlog of contract consulting business in both
the private and public sectors.
By 2010 (coincidentally about the time that Apple launched the iPad), Compubox was consistently beating
analysts earnings forecasts (the stock had reached a low P/E ratio of 8 in 2008 and had risen steadily to a
more healthy 20.5 in 2011). The entire rise in market cap was attributed by analysts to the growth in the data
analytics portion of the business. The mid-2011 news that Compubox was selling its PC and server manufacturing business to a major hardware maker in Taiwan was applauded by investors who drove the companys
stock to multi-year highs. Compubox had seen a very bleak future for itself as a maker of low-margin PC,
laptops and servers. Those products had become commodities, and customers with no product loyalty
shopped only on the basis of price. Intersyncs computer services and consulting division was renamed Cloud
Analytics, and its profit margins were envied throughout the industry. Its highly skilled software specialists and
analytics teams could descend on a client anywhere in the world within 24 hours. Gross profits margins on
consulting contracts were the highest in the industry, and its sales staff reported very high levels of client
satisfaction.
1. A merger goes down a very hard road indeed when executives in the acquiring firm busy themselves only
with its financial details at the expense of clearly communicating to employees how organisational cultures
will be integrated and how a newly acquired business will be assimilated. Most mergers involve a substantial
premium that is paid by the acquiring firms shareholders. These premiums can be as high as 50 per cent if
a bidding war erupts between several potential buyers. If the details of swift and effective culture integration are left to chance, the premium paid by shareholders of the acquiring firm is jeopardised. A recent
example of this phenomenon is Daimlers acquisition of the Chrysler Corporation. Two years after the
acquisition, Daimler was worth less than it was before it purchased Chrysler. In effect, Daimlers dithering
ineffectiveness at organisational culture integration robbed its shareholders of the entire acquisition cost
(Chryslers market cap at the time it was acquired by Daimler).
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2. Transformational leadership entails a balance between a new corporate vision, the implementation of that
vision, new strategy formulation and the pressing need for managerial flexibility if the new business model
becomes unworkable (as in the case of Compuboxs original plan to expand its manufacturing capacity at a
time when computers were becoming commodities). The leader who expands the business when gross
profit margins are declining must swallow his pride and make a swift change to the business model, or
investors will dump the companys stock (the very low P/E ratio for Compubox stock was an example of
this disturbing trend). Successful transformational leadership endures its most strenuous tests during the
merger of corporate cultures and the rapid redesign of the firms business model. When it comes to mergers, the CEO whose firm does the acquiring is often preoccupied with pressing deadlines, the financial
aspects of the merger, and with defending the merger on financial and strategic grounds. As you can see,
driving forces in an industry can quickly undo this focus if rival firms are forced to compete solely on the
basis of price within a short period of time (the weaker, less cost-effective firms become very vulnerable to
price wars). Work on the integration of corporate cultures will quickly take a back seat if the firms business model is suddenly obsolete. In the case of Compubox, the firm actually benefitted when the PC
industrys products became commodities. This abrupt change in driving forces magnified the value of the
services division within Intersync. The Compubox executive team correctly identified the new profitmaking opportunities in the explosion of the computer industrys service offerings. They rebuilt the companys competitive model on the basis of data analytics (computer services) and dumped the firms ageing
and unprofitable manufacturing businesses. In the final analysis, those engineers and technical personnel
who stuck it out in the services division of Intersync no doubt did quite well.
1
What major mistakes did Mr Bytemore make as he guided the acquisition of Intersync?
Explain four action steps that you would suggest to Mr Bytebegone to solidify and strengthen Compuboxs
competitive advantage.
Balancing the Demands of Home and Work

This case emphasises job stress; responses to job stress; job design; flexitime; alternative work schedules; and
the demands of telecommuting
Maxine Capca knew something was wrong when she developed severe chest pains 19 months ago. The 43year-old middle manager linked those pains to job-induced anxiety and stress. I knew I was broken inside and I
had to do something about it, she said. For the past five years, she had been working 80-hour weeks as she
struggled to ascend the ladder at Digilinc, a maker of Internet switching equipment.
Home life was also adding to Maxines stress overload. Donald, her husband, was worn out because he too
worked long hours as they both struggled to raise their three-year-old twin daughters. One night, Kara, one of
her twins, threw two of her Teletubby dolls against the wall and proclaimed: Thats the mum and the dad;
they are always working. At that moment Maxine knew that she had to somehow rein in her work schedule.
She realised that such a decision would be difficult because she felt personally responsible for the success of
her business unit and knew that her 15 subordinates depended heavily on her. She asked for a horizontal move
in Digilinc to a less demanding department, and she forced herself to leave work by 6 pm each evening so that
she could be home to prepare dinner for her twins. Now Maxine thinks she has more control over her life
when she says: I usually work no more than 55 hours a week, and Im more tuned in to the needs of my
daughters.
Donald is a corporate lawyer, and he continues to work 75 hours a week in his high-pressure job managing
patent disputes for his firm. He believes that he must continue to work those long hours if he hopes to achieve
his career goal of becoming a general corporate counsel. He does acknowledge that some of his peers are
beginning to buck the trend to work 7080 hours per week when he says, Several lawyers are trying to trim
back their schedules to reduce the stress of trying to balance their home and work life, but the jury is still out
for them and their careers. A corporate recruiter who Donald knows says there is a growing trend toward
better worklife balance when she notes: A growing part of the recruiting business is answering new college
51
graduates GenXers and Millennials questions about the availability of jobs with part-time, job-sharing and
flexitime options.
Both Maxine and Donald claim that they want to cut back further on their work hours, but Donald claims that
he cannot do it now because hes a fast-track candidate for his companys general counsel position. He says
emphatically: When you try to cut back your hours, you cut back your future promotions and career opportunities. He goes on to say:
Im not willing to reduce my work hours because I know it would hurt my relationships with my colleagues and
Ill get shoved to the side to work on less meaningful assignments. I feel that if I wanted to cut back on my work
hours Id have to fight the whole system of corporate expectations about policies, procedures and the way people do their work. If I wanted to work fewer hours Id have to work it out under the table with my boss.
It is interesting to note that Donald did not elaborate on any details of how his boss would go about making
and managing such an arrangement or how it would appear to his co-workers.
Maxine was well aware that her work was suffering due to the long hours that she was working. I wasnt
focusing on my strengths because I was preoccupied with how I was failing to meet my daughters needs, she
says. Despite this realisation, she knows that working fewer hours has required her to make adjustments. I
stick to my limit of working 55 hours per week by cutting back on the time that I spend discussing projects
with my co-workers, she says. She notes that limiting her time in these discussions causes her to feel less like
the go-to person with all the answers. She also expresses some guilt when she says: I wish I didnt have to
leave work with so many items still on my to-do list.
Some of the effects of a shorter work week have been very beneficial for Maxine. Aside from cooking and
serving dinner to her twins each evening (Donald still frequently misses the familys evening meal), Maxine has
renewed several friendships that had lapsed over the last five years. She has also found time to volunteer in
her daughters church youth group and has made several new friends who also volunteer at her church.
Another sign of an improving balance between work and life occurred during her last dental appointment,
when her dentist told her that she had stopped grinding her teeth at night. That evening Maxine happily
assigned her teeth guard to the top shelf of her medicine cabinet.
There are other tell-tale signs that Maxine is developing more responsive and flexible reactions towards her
job demands. At a recent departmental conference several of her project managers expressed concerns that
their projects were not among her priorities, and they mentioned that she was not always available to help
them over project hurdles. In the past, she would have responded to these criticisms by working longer hours.
Now, she reinforces her commitment to their projects with regular phone calls and by scheduling working
lunches with them. For now she continues to draw the line at 55 hours per week. I dont have to defend my
decision to want to have balance, she says. While he recognises that his long hours work a hardship on his
family, Donald remains silent when Maxine asks him if hes going to soon cut back on his work hours.
1. The General Adaptation Syndrome suggests that as careers progress and job stress accumulates unabated
for employees, they experience diseases of adaptation that erode their quality of life in terms of physical
health, satisfaction with work and satisfaction with home life (ability to easily relax and to set aside the
emotional effects of lingering challenges and frustrations at work). The number and intensity of these diseases of adaptation are aggravated by the extent to which an employee has a Type A personality that rests
on fears of inadequacy and ensuing hostility directed towards other in social settings (see intermittent explosive disorder). Rising job stress is often met with increased irritability and aggressiveness by employees
and managers who experience the inner sentiments just described (secure and confident Type As exhibit
demanding approaches towards their work but do no exhibit the ongoing hostility and inadequacy of insecure Type As).
2. Ambitious and hard-working professional employees who mention to their bosses the negative health
effects of the badly tilted imbalance between their home and work life may get a creative and flexible response to their predicaments. Creative employeremployee compromises designed to restore balance
between employees home and work lives are sensible because they can help maintain competitive advantage, especially in firms that offer complex customer or client services that can only be delivered by
energised and enthusiastic professional employees. Some of these creative responses include job sharing,
telecommuting, alternative work schedules (flexitime) and policies that ease job stress by allowing employees to move to other jobs in different departments.
52
Suppose for a moment that aspects of Maxines job become more demanding, she responds by returning to a
work schedule of 75 hours per week and her boss becomes demanding and irritable. Suppose further that she
begins to exhibit flashes of anger and frustration toward her children and her husband. As an expert in work
life balance, what advice can you give to Maxine and her husband to cope with her rekindled frustrations and
anger?
Discuss some of the motives and individual differences (aspects of personality) that are influencing Maxine and
Donald as they wrestle with the problem of balancing their work and family demands.
Where Stress Is Never on Hold

This case emphasises the importance of employee training in a service-driven business model; why employees
need to have the freedom (and training) to customise the customers service experience; how rigid work rules
set employees up to experience chronic job stress and perhaps some moments of panic; Theory X performance measurement and surveillance systems; and the problems of job designs based on scientific
management.
On a hot summer afternoon, Ronald Dundee, a customer service representative, takes a routine customer call
in Auszerion Communications Ltds sprawling service centre in Sydney, Australia. Talking into a headset while
he taps information into a customers account, the 20-year employee tries to sell a 4G smartphone maintenance plan to the customer. Pasted to the corner of his computers monitor is a smiley-faced note that says:
Put a smile in your voice. You can hear it and so can your customer. After some coaxing and an offer of a
discount, the customer agrees to buy the plan and Ronalds face lights up. Before he rings off, he closes the call
with this titbit of company-required conversation: We always try to offer the best service. Have I met that
goal with you? His customer agrees, and Ronald offers a final pleasantry and rings off.
Ronald only wishes that every customer contact could proceed as smoothly as that one. He earns about $23
an hour and says that Auszerions employment benefits are excellent. He estimates that for every 100 calls
that he answers, 35 are highly stressful for these reasons: 1) the customer is livid about a service problem; 2)
the transaction is too complex and confusing; 3) he realises that his training has failed to provide to him a clear
approach to remove his and the customers confusion.
Auszerions customer service representatives not only have to smooth ruffled customer feathers but must also
handle billing and maintenance complaints as they rattle off to the customer all of Auszerions numerous
products and services. As they describe products and services to customers, reps have to confidently quote a
price for each product and service. They have to do this despite the mood of the customer when he calls the
centre. Ronald says: Its a tough job on any particular day, and its getting tougher in our slowing economy.
Ms Ellen Barkin, Auszerions vice president of consumer sales and services, acknowledges that employees jobs
are getting tougher in Australias highly competitive smartphone market. She oversees 800 of Ronalds coworkers, and she sighs when she says:
Wed love to promote more job flexibility and hire more workers to reduce the employees workload, but my
budget does not allow for any new hiring. Besides, each call must be handled in terms of rigorous requirements
that call for selling new products and not just answering complaints and solving problems. This takes a highly
trained professional who has excellent knowledge of our products and services.
Ronald points out that a major stressor for him and all of his co-workers is the conversation audit, which
occurs at least three times each week. In an audit, a manager listens to a call to check whether or not the rep
has touched on all of the points that are required in each customer contact. There are 12 points alone in the
greeting, and there are 15 points in the reps effort to sell the companys products and services during the
call.
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Ms Barkin weighs in as she defends the conversation audit:

Our audit is about ensuring consistency and providing a dependable level of service to our customers. Our managers are trained to listen to our reps calls and to certify that they are reading government-mandated, legal
statements to protect our customers rights and to ensure that our competitors are not being damaged in any
way. If we do not keep total consistency in our telephone contacts with customers, then we could be fined by
the authorities and lose our license to provide services across the country. We have developed our 95-point
checklist with these requirements in mind.
Ronald and his seasoned co-workers see the conversation audit in radically different terms. Sitting around their
lunch table talking about the audit produced quick agreement about its dark side. One of his co-workers
pointed out that an audit can create a panic situation particularly for the less experienced reps. Fiona Fissel,
one of the lunchers, says: I begin to sweat profusely because I know when the manager is listening to my call.
Marybell Outback chimes in, saying: The stress of the audit becomes unbearable when you know the manager
is listening and you still have to make a sale and try to overcome a customers refusal to buy before you recap
the conversation and ask him whether or not he has received outstanding service. The employees around the
table agree that a combustible mixture is created when the manager is listening in, the customer is irately
trying to hang up, and the rep is trying to sell more products and services. Ronald sums up this stressful
circumstance by saying: You are worried that before you let the customer go, you must offer him something,
no matter how upset he is, because the manager may mark you down on the checklist. After three markdowns managers double the number of your conversation audits each week.
Last October in Ronalds unit, a rep had a breakdown during a routine conversation audit. Ronald said he
stood up and started screaming and totally lost his mind right there in the service centre. He was college
educated and quiet and he never raised his voice in a conversation according to the lunchers around the table.
Ronalds peer added: His manager and the six team leaders observed his work and listened to his conversations for over a month. They would fly out of their offices while he was on a call and say: Are you doing this?
You need to do this. While no one could confirm it, its rumoured that the employee is seeking his old job
with the help of the employees union. Company officials remain mute on the matter. A representative from
human resources was heard to say: At times you are going to see an employee have a bad day. This probably
happened to this person.
Ronald also discussed the efficiency programme that kept the service centre running at peak efficiency. He
says the programme is run by a force manager who tracks a battery of vital centre business signs. These
performance indicators include keeping all phones open 92 per cent of the time and not allowing customers to
be on hold for more than two minutes. Reps who consistently violate these standards can be put on probation, suspended or dismissed. Ronald and his co-workers recalled a recent episode in which a union
representative intervened when one of Ronalds co-workers was unfairly disciplined under the terms of the
efficiency programme. Ronald summed up the groups recollections when he said:
He had stepped away from his phone after he punched in the code that allowed him to take his authorised work
break. Just then a customer called. Because he did not cover the call, the force manager fired him. We thought
the rep got a very shabby deal. Eventually he got his job back, but only because the union rep threatened to go
over the force managers head. We think the force manager was wrong. He never admitted it, however. He
clings to the company doctrine by saying that the worst thing we can do is to mistreat a customer. Apparently
there isnt any room in the programme to eliminate bad employee treatment.
Company officials claim that a new workers employment contract will create some relief for the centres reps.
In two months, the overall performance of the reps can no longer be tied strictly to sales effectiveness. The
contract also calls for reps to be guaranteed 15 minutes off the phone each day and for them to receive 15
minutes more to complete paperwork at their desks. The contract boosts the content of the training programme, and Auszerion has agreed to institute flexitime for reps who have successfully completed their six
months of probationary employment. The contract will limit forced overtime to no more than 7.5 hours per
week, which must be spread over four consecutive work days. Reps think that the centres managers will have
to become much better at planning and scheduling work. The old system, with no upper limit on overtime
hours, allowed managers to simply demand that reps work overtime or risk termination.
Despite the new contract conditions, Ronald and his peers believe that their job stress will not soon diminish.
They point to the work performance standards in the programme and say that their stress will linger until
those standards are made more flexible and realistic.
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Ronald sums up the answer to the unasked question of why they come to work on Mondays if the job is so
terrible: It is the human connection that we have with our customers. As he looks at his co-workers he says:
It is a customer whose wife of 50 years just died, an elderly woman who cried because she couldnt pay a
small bill, or the father whose young child was dying from leukaemia. Ronald says quietly: When I can make a
personal connection or offer a little comfort to them, then I can get by. We keep coming back to this job for
those little things.
1. Firms now have an unlimited capacity to monitor the work behaviour of employees who are tethered to
computers. The integration of conventional and cellular telephone communications and computer-controlled
customer account data management (instant data analytics) provides firms with limitless ways to track employeecustomer encounters. Customers uses of products and services can be monitored and analysed to
predict their future product and service needs. This information can be easily arranged in the customers
account, and when he contacts the firm a sales opportunity presents itself to the rep who handles his call.
Recordings of customers calls and the quality of the reps sales and service techniques can be parsed for
crucial features that are related to higher revenue and levels of customer satisfaction. Once the most profitable and customer-satisfaction-inducing features of interactions between reps and customers have been
identified, then the scripted routines followed by reps can be adjusted to maximise revenues. These adjusted
scripts can be taught to seasoned reps and to new service reps who are completing the firms sales and service training schemes. It follows that the scripted profit points and customer satisfaction points become
permanent aspects of the performance appraisal system used to direct and channel the on-phone behaviour of
the firms sales and service reps. In all of its splendour, this is the application of scientific management and the
efficiency of the manufacturing model to the delivery of customer service and the selling of additional goods
and services over the phone (a thoroughly Theory X thing to do). Customers are not receiving individualised
service, rather they are being pushed along the companys product and service line by hopeful (and skilful)
telemarketers who are trying to meet or exceed ambitious sales goals while they know they are being monitored by management for adherence to strict on-the-phone performance standards.
2. Using intense telemarketing in the context of customers service calls does present a viable sales opportunity to companies operating in service-driven, highly competitive industries. These industries are all forms
of financial services, wireless communications, computer sales and distribution, household and appliance
services, cable-based entertainment services and recreational cruises and vacation packages. The integration of computer-driven, managed customer accounts, the Internet and telemarketing creates a tempting
opportunity for firms to standardise (and incorrectly merge) both their telephone- and Internet-based
customer services and sales. Companies are tempted to apply the manufacturing model to the creation of a
telemechanised sales and service system designed to standardise each customer contact without losing
sales or jeopardising customer satisfaction. The burden for achieving this delicate balance falls squarely on
the shoulders of the telemarketers and service reps. These employees know that all aspects of their customer encounters are monitored, analysed, controlled, altered and guided towards the related targets of:
1) maximising sales; 2) raising customer satisfaction; 3) reducing the cost per customer contact; 4) creating
rapport and brand loyalty; and 5) adhering to consumer credit and product liability laws. None of these five
targets ever remain stationary because managers relentlessly search for incremental improvements in ways
to achieve each target. Employees who cannot cope with close, electronic surveillance and constant pressure to achieve higher levels of sales and customer satisfaction will not thrive in this work environment.
Managers and supervisors who are under immense pressure to deliver gains in the target areas become
unsympathetic to their employees needs and experienced levels of hindrance stress (overwhelming reliance on Theory X managerial principles hardens management). The inevitable consequence of the
application of the manufacturing model to telephonic sales and service work is a workforce that will be
treated as replaceable and expendable by management.
1
Develop a model to show the stressors that affect the Auszerion reps. Suggest some possible behavioural
reactions of reps to the stressors in your model.
Describe how the delivery of customer services by Auszerion reps reflects the application of the manufacturing model of service delivery.
55
Is There Any Limit to Size, or Is Bigger Always Better?

This case emphasises the problems of matching a global firms size to its various markets; keeping up with all
forms of productivity-enhancing technology; the evolving nature of the CEOs job; managing change and
adjustments to organisational culture throughout the firm; the importance of risk management through crisis
planning; and finding ways to quickly adjust aspects of operational effectiveness to support changes in the firms
business strategy.
Twenty-four years ago Evan Bane, then 28 years old and a newly graduated MBA from the London Business
School, joined Midland Energy PLC, one of the UKs largest companies. His new employer had an imposing 10.5
billion in annual sales, 77000 employees, and oil fields, refineries and petrol stations in 38 countries. Today, Mr
Bane is the chief executive of Midland, now the UKs seventh-largest company. It has 84 billion in annual sales,
128000 employees and operations in 72 countries. Compared to the company he worked for 24 years ago, Mr
Bane says this one is an amazingly diverse, much more culturally different, and truly global company.
As recently as 2006, Midland Energy (ME) faced an organisational crisis, as its share price was sinking, the board
had halved dividends and the company had to sack thousands of employees. During this turbulent time, Mr Bane
was MEs COO and he vowed to 1) transform MEs corporate culture to support rapid adjustment to change; 2)
roll out a new, highly competitive strategy; and 3) reduce greatly the time taken to explore new fields and to
bring to market new products and services. Mr Bane thoroughly analysed MEs operating systems and organisational culture, and he concluded that the company was too slow, indifferent to shareholders, inefficient and
generally unmanageable, especially in the nimble, computer-driven, globally driven new millennium.
The companys performance by 2006 was so dismal that it had to jettison its way of doing business to survive.
A reorganisation led by then-CEO Kelvin Therm shifted authority to local levels to make middle managers
more accountable for their own results. In exchange for a three-year pay freeze, managers were able to earn
larger bonuses if they succeeded in achieving more ambitious performance goals in the third category noted
above. Instead of referring problems up the chain of command, managers turned inward or to each other to
solve problems and hatch opportunities. Traditional management rites such as meetings and formal memos
were scrapped for a faster, fresher, more confrontational decision making.
By early 2008, MEs effort to reorganise started to pay off. The company boasted an improving profit picture,
posting annual after-tax profits of 2.5 billion. Cited as reasons for the positive profit report was the companys new business in Eastern Europe and Asias Pacific Rim and the continued development of its top managers.
The companys dramatic turnaround was credited to Mr Bane, and in 2008 a grateful board of directors named
him to become MEs seventh CEO.
While ME was a transformed company, Mr Bane was not complacent. He said there are numerous forces
working against big companies in the world of today. He pointed out that the rise of the Internet and social
networking (Facebook, Twitter and Google) has put increasing power in the hands of individuals (as we saw in
the case of the Arab Spring). He stated that these two complementary forces fuelled a surge in small-business
start-ups. He argued that some of these small enterprises would quickly become globally competitive because
they are highly innovative and they grow in a low-cost manner. In his industry, Mr Bane cited the explosive
growth in start-ups that provided data analytics services in global energy exploration. Mr Bane believed that
the main challenge that ME faced was not to become hidebound, muscle-bound, rule-bound and bureaucracybound and lose touch with whats going on in the world and in MEs markets.
Since the firms most recent reorganisation, Mr Bane has focused on setting goals to ensure that its subsidiaries were the right size to retain their status as number one or number two in their respective markets. When
this has proven to not be the case, Mr Bane has quickly cut MEs losses and exited those industries. In
industries where its subsidiaries do possess the dominant market share, he uses their size to wring concessions from suppliers and he taps the deep pockets of his corporation to subsidise acquisitions and to purchase
new technologies (horizontal drilling methodologies and fracturing technologies are two of the newest driving
forces reshaping the industry). Mr Bane believes that MEs size has not become a liability when he says: At this
stage in the companys growth, I really dont think the rules of size apply to ME.
A few managers in MEs far-flung subsidiaries did not agree with Mr Bane on the matter of growth and size.
For instance, Mr Ahani, a regional engineering manager in Malaysia, said the company has become too selfsatisfied and has lost touch. Too often, he added, big is slow. A consultant who wished to remain anonymous underscored Mr Ahanis point when he said: In the last year MEs vaunted product and process
development capability has bogged down, and it is taking far too long for the company to get innovative
products and services to market. To make matters worse: The new products that have been developed by
56
the company have too often not met customer expectations and some of them have been very costly failures.
Mr Bane countered the opinions of these observers by saying that, even though new product decision making
may be slow in the early stages, it is necessary to maintain stability in employment and to ensure that key
managers were not jerked off one project and assigned to another with little planning or warning. He believed
that managerial employment stability was essential to preserve the new decision-making culture that was
established after the wrenching changes to organisational culture that really began in 2006. He still believes
that bigness has plenty of virtues. While he was running the companys Asia operations in the late 1990s, the
earthquake in Indonesia knocked out a key plant and displaced the families of 1000 workers. Within hours, Mr
Bane undertook a massive operation to lease new space, move workers, find housing and raise money for
victims while other ME divisions shipped in goods from around the world. I could not have made that happen
if I had not been part of a big, global, capable company, he said.
Throughout MEs worldwide operations, Mr Bane has made improved communications a priority. Where
overseas units once were more like free-standing islands largely left alone, he regularly keeps tabs on Brazils
expanding, energy-based economy, South Koreas political situation, the EUs currency problems and the
widening spread of sovereign debt yields that vex its politicians and bureaucrats. He adopted the suggestion by
one of his vice presidents to broadcast a quarterly report of earnings and new product developments throughout
the company. He has also fast-tracked a streaming flow of totally encrypted key company metrics (looking much
like the dashboard dials in an automobile) that can be translated into 30 different languages with the press of a
computer or smartphone key. He plans to roll out the system so it can be accessed by all authorised company
employees. He also plans to make the system totally interactive so that he can build what he calls ME learning
and knowledge communities that will link employees skill sets to ongoing operational problems in the firm.
Mr Bane has also shaken up his 20 subordinate executives by conducting regular Skype conferences in which
he expects them to have coordinated strategic matters such as global petrochemical demand, supply chain
bottlenecks, deregulation and governmental affairs. He has required each executive to create a crisis management plan for his subsidiary. Teams of three executives have evaluated each plan to ensure thorough plan
vetting prior to its reaching his desk (Mr Bane plans to avoid BPs Gulf of Mexico rig explosion and oil leak
disaster). He took a similar approach to developing a coordinated response to managing the careers of
expatriate managers throughout ME.
Mr Bane now requires managers in MEs London headquarters to follow an inclusive approach to planning and
decision making. The empowering effects of this change have inspired so much loyalty in MEs HQ workforce
that the company has done away with confidentiality agreements. Its when people dont understand or know
the importance of an issue that you get gossip and leaks, says Alec Michelson, a l
ead manager of
corporate joint ventures. He squarely credits the new work atmosphere at HQ for the timely demise of the
nettlesome confidentiality agreements. He says emphatically: Losing the trust of colleagues is a much more
powerful deterrent than putting a confidentiality agreement in the safe.
As Mr Bane sits in his 30th-floor office that offers a panoramic view of London, he keeps his dashboard
streaming on all day, reads six daily newspapers and skims dozens of magazines from around the world. His
secretary, Allison Chambers, says of him: He just has to know what is going on in the world each day. He says
if he has a problem in China, he has to fix it and make sure it stays fixed. Hes on top of the business, and he
knows where the problems and the opportunities lie.
Despite his demand for greater involvement and collaboration among his 20 key executives, Mr Bane has
pressed for more lateral decision making throughout ME. While his chain of command is strongly intact, Mr
Bane refuses to let it be a drag on decision making. He uses computer-driven communication networks to fuse
MEs once-scattered European offices into a consolidated European exploration (rock fracturing is the next big
thing), refining and marketing operation. These highly integrated networks smooth day-to-day operations and
catch and solve problems before they trigger disaster planning. For instance, the problem of the oil tanker that
is leaking off the coast of Italy gets solved by the Australian technical team that handled a similar problem last
month in his country. In the past, the first person to be called would have been the boss in Italy.
Executives and managers throughout ME say that Mr Bane has winnowed his strategic message down to a few
simple-to-understand themes. As he tours the companys facilities, Mr Bane stresses running healthy core
businesses, leveraging the strengths of its subsidiaries and developing new products and processes. He uses the
same stump speech over and over again: In every talk that I give to ME groups I try to use the same words and
concepts. I do this to avoid a lot of Last time you said this; this time you said that. You have got to say the
same thing over and over and over, says an energised Mr Bane.
During the last year, ME has launched a programme to train all of its engineering and managerial staffs to use
technological systems tools that link customers, employees and suppliers. Technology specialists are planning
57
to merge the multi-language capability of the streamed company metrics with MEs information system tools so
that sales, number of workers, profit margins and employee productivity can be monitored on an ongoing
basis. Using the language translation capability in these core areas of performance will allow the engineering
and managerial staffs to greatly reduce such weighty factors as inventory costs, shipping and transportation
delays, currency hedging losses and market share on a product-by-product basis.
Mr Bane acknowledges that the CEOs job of running a far-flung conglomerate like ME is simply becoming too
large. Last year he added two vice chairmen to handle most of the companys day-to-day tasks. Increasingly,
Mr Bane is on the road meeting with customers, large shareholders, groups of employees, creditors and MEs
strategic partners. He uses these encounters to craft strategic goals that he then bounces off his vice chairmen.
At the end of the day, if we say who did this, the only right answer is we all did. Three heads are better than
one, points out an animated Mr Bane.
Due to MEs growth in global markets and due to several large acquisitions, Mr Banes decision to spread the
load to two vice chairmen looks like a good one. As his enterprise of networked businesses grows, the rate of
information growth and need for timely decision making grows exponentially. Mr Bane says: Growth in a
global business is the most difficult type of growth to contend with. You have to make the elephant dance,
and that is never easy. You have to develop a tightly coordinated marketing and sales effort to sell branded
products on a regional basis. For instance, you cant just look at Italy; you have to consider all of Europe in
your marketing and sales planning.
Mr Bane believes that hell soon have to refocus his role as CEO. For the time being he plans to maintain his
frenetic travel schedule, which covered 160000 miles last year. He realised that changing his job was inevitable
when he found himself, on the first day of a 20-day swing through Asia, in bed at 1 am, unable to sleep,
munching on a fortune cookie. It was then that he realised that eventually he would have to narrow his role to
emphasise investor relations. He plans to add another vice chairman in the next six months. The new executive will be groomed to handle customer and supplier relations. This means that he will inherit a large chunk of
Mr Banes current travel schedule. Mr Bane will keep his other two vice chairmen concentrating on internal
operations. Seeming bemused by the change he contemplates, Mr Bane says:
When I became CEO I probably spent one day a month on investor relations. Now its one day a week. Thats a
function of what appears to be a building bull market in energy prices, TV networks (being a guest host on
CNBC, a New York-based global business network) and investor expectations. Large investors want permanent
access. It has become accepted that you must give access and that you will talk to major shareholders. I can only
hope that I will always find competent executives to whom I can hand pieces of my job.

1. At some point, all firms must grapple with the problem of slowing growth as their new product development process slows, their channels of distribution fill up with rival products, their product line extensions
become mundane and their domestic market segments saturate. In the quest for greater market capitalisation and growth in share price, firms turn to globalisation of their operations, expansions of their markets,
strategic alliances with rivals or with firms in the supply chain, and acquisitions of other firms in related or
unrelated industries. To a significant degree, these arrangements all require the subordination of future
earnings streams to the problem of managing a larger, more complex company.
2. Because current and future profits (and perhaps debt too) must be used to fuel growth through acquisition,
alliance and globalisation, shareholders nervously second-guess all executive decisions and demand the
attention of the CEO, who must show them that the premiums he has paid for acquisitions and alliances
will increase the firms market capitalisation. The mounting pressure to raise shareholder value ensures
that the CEO who runs a conglomerate will experience rising fragmentation of his job. Demands for access
to the CEO and his management team will rise from large, institutional investors who expect to know how
the company is performing on a continuous basis.
1
Using concepts from OD, evaluate the changes at ME. Pay particular attention to the changes to organisational
culture that you think are permanent.
What are the factors that the CEO of a global conglomerate must keep in mind to ensure that shareholder
value rises?
58
Household Products, Ltd.; the Zephyr Programme

This case emphasises transformational leadership; instant design of customer service and retail sales strategies
on a store-by-store basis; providing intense training followed by delegation of authority to newly hired
employees; and building creativity into the firm at the retail sales level.
Adrian Moffit just finished his degree at New South Wales University and has returned to Sydney to be one of
300 recent college graduates currently working in Household Products two-year-old Zephyr programme.
Zephyr is the brainchild of Ean Dundee, Households new CEO. A zephyr is a pleasant breeze, and Ean
appreciates the analogy because his Zephyrs are highly mobile employees who are trained to deliver on-thespot marketing, organisational culture make-over, customer relationship management, and management and
employee training in the hyper-competitive world of retailing. During the past year, Zephyrs have breezed
into Households major big box stores across Australia. Once they are in retail stores, they stir up everything
from organising and stocking shelves to demonstrating new non-spilling paint containers to leading customers
in store scavenger hunts.
The highly motivated Zephyrs create, on average, double-digit same-store sales gains (refers to sales increases
in stores that have been open for one year or more). Some pairs of Zephyrs have achieved mythic status in
Household. For instance, one pair increased a stores sales of paper-towel holders by 1100 per cent in just
seven days. Zephyrs echo their CEOs words when they describe their programme as an all-out effort to
improve relationships with Households retail and business customers. Next year Household will double its
Zephyr budget to $100 million, add 400 more Zephyrs and expand the programme to its affiliates in the UK.
Ean Dundee has plenty of experience in the competitive world of retail sales. As division president, he turned
around the ailing hand-tools division of Sandvik, Inc. Sandviks products were languishing on retailers shelves
while Bosch and Freund tools became the favourites of professional builders and home craftsmen across
Europe and North America. Growing tired of overseeing the now-successful division, he sought a new
challenge and accepted the CEOs job at Household. Once on the job, he quickly set up the Zephyr programme to strengthen the companys tattered reputation among retail and business customers. He expects it
to help turn around Households sales in Australia because he believes that his Zephyrs will carry his version
of guerrilla and viral marketing to the front lines of retailing.
There is growing evidence that Zephyr is working in Australia. Last year, six consecutive quarters of sales
declines were reversed. This year they are on track to grow by 11 per cent. Among Households six key
Australian accounts, sales are projected to grow by 19 per cent for next year. Shareholders have taken note,
and Households shares are up 40 per cent while the overall market is up six per cent since last January.
The Zephyr programme was just the tonic that Household needed. The company had watched its inventory
turnover slow to 75 per cent of the industry average. Business customers were complaining about its ho hum
product designs and languid delivery schedules. When Mr Dundee first visited his sales staff, he was horrified
to hear his salesmen say: We hardly ever visit customers because they might ask us to do something for
them. By the time he came on the job in January 2010, Households sales had been eclipsed by Shopright and
Builders Square, two of Australias biggest do-it-yourself companies. After a whirlwind schedule of factory
visits, sales staff meetings and customer skull sessions, Mr Dundee found so many bad business practices that
he reasoned that he had to hire front-line service employees who had not yet acquired any bad habits. Thus,
the Zephyr programme was born.
Mr Dundee instructed his recruiters to scour Australian universities for 300 go-getters who had excelled in
competitive sports and school leadership positions. Grade point average and college major were not on the
list of desirable qualities for Zephyr recruits. The programme is no easy assignment, despite its starting salary
of $54000. After 10 intensive days of platoon-like training, the Zephyrs are handed the keys to a new Subaru
Outback and sent to the front lines of retailing in their snappy-looking Household jumpsuits. Each Zephyr is
assigned to five stores. The travelling is lonely, and the hours can be brutal; 20 straight hours of hustling down
the aisles of a four-acre store will exhaust anybody. Some can handle it and some cant, says Mr Dundee. The
attrition rate seems to be settling at about 15 per cent. Those who make it speak of a common purpose and
sense of mission that drives them to trade retailing ideas (with accompanying photos) over the Internet and
through their smartphones.
Those who succeed as Zephyrs create ingenious marketing tactics to encourage customers to walk out of
stores with several Household products. When Mr Dundee pulled up in front of a huge store, he was greeted
by a smiling store manager who told him that he was amazed at the ability of his Zephyr to quickly sell nearly
all of his stock of Households indelible markers. Mr Dundee and the store manager are both pleased because
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they know that those markers carry a 50 per cent margin at the retail level. Another Zephyr developed a
rolling cart that contained 25 Household products. In two months cart sales of Household products rose 250
per cent in his five stores. Six months later, to the delight of those five store managers, the concept was rolled
out nationally and it will be launched in the UK. Having store managers who embrace the programme is crucial
to the success of Household because virtually all of them have the freedom to choose the products that sell
best in their stores.
Recently, Mr Dundee was found ploughing through a newly opened store with two swirling Zephyrs in his
wake. They dutifully scribble notes as he points out that a long set of shelves should have an end cap marketing display holding Household products. A wide-eyed Zephyr named Josey says: He really does see things that
we dont. He really encourages us to do our best thinking on the retail floor while we work directly with
customers.
Mr Dundee does not want the Zephyr programme locked at the retail level. He encourages Zephyrs to send
ideas up the hierarchy. Some top Zephyrs are invited to make presentations to the executive committee.
When she was asked about this practice, Josey said: Not many companies pay attention to their 23 year olds.
But that is the Dundee style. If you deliver results, the sky is the limit for you.
1. If a firm wants to make service improvement a core feature of its competitive advantage, then it must scrap
its old way of working with its customers. The firms first step is to recognise that it is far easier and faster
to differentiate services than it is to differentiate products by changing their physical characteristics. If the
firm has solid proof that its customers are demanding better service quality (they are threatening to find
another retailer), then it must launch an ambitious programme to repersonalise the relationship between
the firm and its customers. Repersonalisation of the customerfirm relationship requires the creation and
delivery of individualised services that fit the customers needs.
2. The reconfiguration of customer relationships must be linked to a long-term effort to strengthen customers
store loyalty and to erect an entry barrier around the firms retailing market segment. Brand loyalty and entry
barriers can only be created by newly configured customer relationships that are built by a sales staff that is
trained to solve problems for their customers. In most cases, this means that the sales staff is willing, able and
encouraged to deliver creative improvements to their clients customers shopping experiences.
3. The principles that managers can use to build trust and cooperation with their workforces are the same
ones that sales staffs can use to create satisfying shopping experiences for retail and business customers.
These are basic motivation principles like expectancy and instrumentality in employee performance. If a
firm can influence the expectancies and instrumentalities of its customers, then it can manage or change the
moments of truth in customers shopping experiences. A firm must individualise the shopping experience
of its customers if it wants them to be loyal to the firms stores and brands.
1
How do the Zephyr reps break the grip of manufacturing assumptions in the delivery of customer service?
Use at least four OB concepts to show why the Zephyr programme is a huge success in Households stores.
XYZ Research Facility

This case emphasises the importance of sustaining a strong focus on task activities in SDTs that are stage 4
teams (quickly detect and correct process losses); the sustained benefit of high-quality hygiene factors as a
durable platform to flexible job designs that integrate the work of SDTs; and why firms in the growth stage
must develop a professional managerial hierarchy to ensure future growth.
At XYZ Corporations new 70m research facility the visitor is struck by the outdoor art gallery, Japanese
gardens and lighted walking paths that evoke the country charm of a shady, Zen-like, tranquil hillside path. In
this setting high-tech employees contemplate new ways to string together complex software programs into
cloud-based applications for client firms (mostly defence contractors) that build avionics components for
surveillance drones used by NATO in Yemen and Afghanistan.
60
Alex Scott, XYZs CEO, believes that he has created the ideal work environment at the facility because it weds
his beliefs in extreme, minimalist simplicity to the design of workspaces as a physical platform for SDT product
development. So, workers (and surprised visitors) marvel at the charcoal-coloured dyed-concrete floors that
spread to walls covered by spare and somewhat out-of-focus images of flowers, sunsets, sunrises and calm
water scenes. All exits and entrances blend seamlessly with the outdoor landscaping in such a way that a
visitor does not notice that he is inside or outside of the companys facility nestled next to Sonoma County in
Northern Californias wine district.
Prior to building the technology complex, Alex studied research facilities and their support systems at leadingedge European and Japanese firms and universities. He concluded that research productivity rested on
designing support systems and physical work facilities that blurred the line between work and creativity. He
insisted on installing methods to integrate cutting-edge engineering software obtained by stealing the best
designers from his top rivals. Alex also insisted on reviewing the development of all new software architecture
at various stages of development, and his reviews were simultaneously awesome and frightening to the
software SDTs. Alex knew that his principal skill set was in software design, development and assessment, so
he hired professional managers who built the companys managerial systems so he could stay focused on
rolling out a string of insanely great products. Lately his management staff has developed a company-wide
employee assessment system to track employees capacity to accept delegated responsibility, their levels of job
involvement and their comfort with ongoing change and uncertainty in all aspects of product development
activities.
Prior to setting up the research facility, XYZ had been hampered by high R&D overhead, project delays,
political in-fighting among software development SDTs, and a drumbeat of dissatisfaction among the applied
scientists and engineers working for XYZ. Defence contractors (customers) were dissatisfied because avionics
software prototypes did not work as planned and deadlines for systems ramp-ups and field testing were
delayed. Alexs approach to the problems noted was the new applied research facility, and it seemed to be
working despite its rather high costs.
In addition to the new facility, Alex authorised his management team to perform some emergency surgery on
the companys reward and motivational systems. For instance, all the software engineers working on various
project teams were granted stock options in the firm. The number of options received by each engineer was
tied to their projects success. The success parameters included 1) avionics software control systems simplicity
and reliability in relation to client performance requirements; 2) project delivery and testing metrics (field
testing); 3) client satisfaction with cost and quality control; 4) documented increases in the degree of crosstraining of team members; and 5) detailed project timing milestones to include creation of a working prototype, removing all software bugs in relation to performance data from realistic field tests (full field operating
conditions) and full integration and back-up services in client avionics systems. Alex also authorised the
granting of stock options to eligible employees (five years or more with the firm) who worked on teams that
beat performance metrics set by a joint committee composed of XYZ managers and key client representatives.
OB Guides for the Case Question
1. Changes in organisations alter the managers conceptual, technical and human resources work. In highly
responsive organisations that emphasise creativity and short product development cycles, the three aspects
of managerial work are not the exclusive domain of managers. The widespread use of SDTs to speed product development builds a wider and deeper base of intellectual capital throughout the workforce. New
software development by SDTs relies heavily on widely distributed conceptual and technical problemsolving skills among team members who are able to stay focused on task activities while keeping any group
in a stage 4 status
2. When executives and organisations create a new approach to work, employees may experience sharply
lowered beliefs about their job security. Their levels of organisational commitment may plunge and the
company may find that the benefits of the new approach to work are never realised in the form of improved competitive advantage. To head off this problem, companies applying new work methods must
begin with the basics and ensure the availability of high-quality hygiene factors: the beginning point for improving competitive advantage. Also, any new business model must create new roles for managers who will
be expected to manage differently in any new job design (usually more Theory Y and less Theory X to
make the firm more responsive). Managerial work does not disappear in the responsive organisation driven
by customer service. It still exists and it has to be taken over by the workforce.
3. During periods of organisational change, managers must focus on the relationship between job satisfaction,
performance and organisational commitment. Firms trying to improve their responsiveness to customers
demands for service must make a commitment to the employees in two ways. First, some measure of job
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security must be provided (the above point about quality hygienes). Second, the employees must be trained
in all phases of customer service innovation. Together, these two actions ensure that the firm builds a
competitive advantage that is based on service innovation by a workforce that is committed, satisfied and
secure in its work (the firm will have to become much more Y in its orientation). Service-driven firms must
put their employees first if they hope to reap a competitive advantage based on enhanced customer service.
1
How does XYZ address the relationship between performance and job satisfaction?
Process Controls in CloudApps

This case emphasises strategies for service improvement; application of Theory Y and BMod principles;
forming problem-solving alliances with client specialists (boundary spanning); achieving excellent integration in
an intergroup network of SDTs; and developing a sustained system of profit sharing for SDTs.
CloudApps is an Internet-based data analytics start-up that builds cloud-based software systems for logistics
firms. CloudApps has recently gone public, and its first 50 employees (the firm now employs about 1000
specialists and software engineers) are instant millionaires on paper. CloudApps designs and sells secure
Internet software that smooths vendor relations between e-commerce companies such as Amazon.com,
eBay.com and Priceline.com and their suppliers. Since the initial public offering (IPO), the Customer Support
Group (CSG) of CloudApps has been on a customer-oriented mission. Winston Salem, CloudAppss VP of
Customer Fulfilment and Problem Solving, describes his units activities:
1. A two-way (with clients) quality improvement process is under way to help management identify opportunities for customer service improvement. Teams of marketing and programming employees address areas
for improvement using 1) customers and their product requirements; 2) existing customer service systems;
3) field operations; and 4) customers vendor inventory management systems.
2. A management of values programme is being implemented to coordinate the firms business goals with the
values of strong work ethic, risk taking and customer orientation. All business goals were linked to employee cross-training and rewards for managers as well as SDTs.
3. A new company programme called Customer Interface (CI) will create a new relationship between
CloudApps and its clients. It sets challenging but realistic quality improvement goals for clients systems
based on:
a. real-time analysis of processing delays and market expansion;
b. documentation (to show that effective changes in software reduce service defects for clients);
c. productivity improvement (to show that data analytics costs have declined as a percentage of clients
cost of goods sold);
d. awards and recognition for SDTs that quickly solve clients technical problems. Consistent winners will
be named Senior Logistics Champions and they will share in the profits generated by their solutions;
e. embedding senior programming specialists (formal liaison troubleshooters) in client firms. These individuals will be on a separate incentive system based on the client firms satisfaction with the specialists
work; and
f. as part of their training, newly hired software engineers are attached for two months to Senior Logistics Champions.
4. CloudAppss Vendor of Choice System (VOCS) gathers information from key clients on what they think
the firm should concentrate on in terms of new cloud-based data analytics products.
Through the VOCS programme, CSG launched a number of internal programmes to improve all aspects of
CSG operations. For example, the Perfect Design Quality, Pretty Darn Quick Program (PDQ Squared) helps
CloudApps bring products and services to market more quickly by improving coordination between design,
production and marketing teams with parallel activities development (facilitation of integration in the firms
intergroup network). To support the programme, CSG developed the Achieving Excellence Award (AEA),
which is given each year to up to three services development teams in CSG. The teams winning the AEA must
demonstrate excellence through 1) high responsiveness to formal liaison troubleshooters (embedded in client
firms); 2) consistently achieving customer satisfaction ratings in the top 10 per cent; 3) gaining approval to
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develop two or more new cloud-based apps each year; and 4) being recognised by the cloud-computing and
data analytics industries for outstanding design at least once every five years.
OB Guides for the Case Question
1. Company effectiveness in competitive industries rests on an operational effectiveness and a competitive
advantage that harness the productivity and creativity of company workforces and their SDTs. A central
problem confronting a company in the Internet-based cloud-computing industry is sustaining profitability in
a labour-intensive endeavour (software design and testing). To do this, the firm must create a flexible and
highly trained workforce that goes so far as to have specialists who work directly in client firms to ensure
rapid problem solving (formal liaison troubleshooters in the current case). A firm can ensure its competitiveness by hiring achievement-oriented employees who quickly succeed when they are part of senior
product and service development teams (the importance of identifying high-quality intellectual capital in a
Theory Y-oriented firm).
2. Motivating employees in highly competitive, service-driven firms requires managers to pay close attention
to the need for meaningful rewards for teams that produce creative solutions for clients logistics problems. The wider these rewards can be (including those for industry recognition), the better. Non-financial
compensation such as internal and external recognition must be matched by extrinsic rewards (profit sharing linked to programming) with the power to focus intellectual capital on excellent programming
outcomes (Senior Logistics Champions is a great example).
1
How do the changes at CloudApps underscore a contemporary view of the importance of operational
effectiveness in a highly competitive industry?
How do the SDT performance standards described in the case reflect BMod principles described in the text?
Be sure to give concrete examples to back up your assertions.
CEOs View on Managing a Stressful Career

This case emphasises career stages; personalising ones job and its rewards; personal risk taking in ones
career; managerial philosophy and style; and building human capital within the firm.
Few people ever get a chance to be a corporate CEO. John Johnson is on his third go-round. He left behind
the fast track at Goodmetrics to run a global charitable organisation that provides relief assistance to natural
disaster and accident victims and their families. His London-based agency provides support services to families
who have suffered personal losses from fires, crimes, natural disasters and political upheaval. Prior to taking
this position, he had been CEO of a major investment bank and CEO of an influential economic consultancy
(often quoted by writers at The Economist).
Mr Johnson clearly knows about the bruising personal journey to the corporate boardroom. He has distilled
his vision of his challenging and demanding personal career journey into several basic lessons shown below.
Lesson #1: Learn the defining issues of your time. When Mr Johnson was CEO of the consulting
company, he concluded that emerging global expansion raised new issues for the next generation of corporate CEOs. He learned all he could about falling trade barriers, and he developed special consulting services
to explain to clients how to pick strategic business partners in recently deregulated foreign markets.
Lesson #2: Attach yourself to the right people. Grasping the future importance of fully integrated
and responsive technology, Mr Johnson immersed himself in technological applications of Internet communications and Internet-based smart software that could be applied to a full range of business challenges and
problems. While running Goodmetrics, his staff introduced innovative business-to-business products that
streamlined product development, inventory management, currency and foreign exchange hedging strategies, site selection for new plants and shipping centres, and software models designed to predict central
bank interest rate policies. As these services and products built market share, he kept ahead of changes in
technology by recruiting fast-track managers and software engineers who were willing to leave careers in
more stable hardware companies for equity stakes in his rapidly expanding consultancy and software development firm.
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Lesson #3: Learn to manage people who know more than you do. According to Mr Johnson, most
people rise to the top by mastering technical job features. He goes on to say: But how do you manage 500
raging techies when you arent one? I learned to listen, how to use incentives, how to get them the feedback they needed right away and how to make our technology always serve our clients.
Lesson #4: Look for positions where you can make a difference. Why did he leave lucrative corporate positions to run a family services enterprise? Some said if I had stuck around I could have ended up as
a professional corporate director in 15 years, he recalls. Theres your answer. I was not prepared to
spend another 15 years making more money for myself or for other people. I had all the resources I needed so I decided it was time to give back to people who were less fortunate than I was. I suppose I could
have stayed motivated for another five years. But life is too short so I took a new direction.
Lesson #5: Dont hire managers to run the organisation you have; hire those who can run the
organisation you want to create. Mr Johnson believes that CEOs have to hire antibureaucrats who dont
seek guaranteed compensation. He also wanted managers who were used to running start-up operations that
were long on flexibility but short on resources. You dont always have to spend a ton of money to find people who are good at running things. Find people who will run hard for an equity stake in the business.
Lesson #6: Take some time off to help you define what you really want out of life. Unless
youre doing enjoyable work, he says, you can burn out. Before he took his current position, he was sure
that his past job at Goodmetrics was no longer exciting or challenging. At the age of 48 he cashed in 8m
in stock options and quit. For the next two years, he spent time with his kids, travelled, read, learned to
read and speak German and took up tae kwon do. He also explored career options: teaching at the Edinburgh Business School and doing some research on mergers and acquisitions for Scottish Power.
After six months, however, he came down with the volunteerism itch. I talked to people who had got fat
payouts from stock options, and they all said the same thing, he says. The first four to six months, youll be
free as a bird and dazzled by your personal options. Then some anxiety will set in and youll ask. Who am I?
Am I still important? What do I want to do with the rest of my life?
OB Guides for the Case Questions
1. Our work experiences continue to shape our natures and personalities long after we have left college and
advanced well into our careers. If a person experiences declining challenge and meaningfulness in her work
(despite its financial rewards), she will opt for a career change (lawyers might become bakers and engineers
become ministers). What were once abundant eustressors in ones career can transform into distressors if
challenge and meaningfulness vanish from ones work. Some resilient (stress hardy) individuals tend to
interpret changes in life, career and job demands as eustressors (challenge stressors) and then make dramatic changes in their work habits and interests to remain open to life-enhancing challenges in new areas of
their lives. Such resilience in the face of uncertainty is enhanced by a strong achievement motive that exists
in an executive or employee as a personal belief that his capacity for success exceeds his risk of failure.
These aspects of personality, coupled with an internal locus of control, encourage an individual to take
responsibility for his own choices. These individuals will set a prudent course of action to emphasise satisfaction based on achievement, challenge and new skill acquisition (and it may be a course of action that is
completely unrelated to work in which they previously excelled). This is a resilient and flexible outlook that
combats the accumulating effects of job stress and encourages the individual to dump a job that is no longer rewarding and try something entirely new and different.
2. Being able to perform an honest and clear self-appraisal and then act on its features is a hallmark of mature
flexibility. When this quality exists in a leader or business founder, we find that these individuals exhibit a
Theory-Y managerial philosophy one that emphasises respect for employees, trust in the capability of the
workforce and an abiding interest and satisfaction in developing employees to the fullest extent possible.
1
Discuss Mr Johnsons management lessons and views with respect to new employees who hope to enter highly
competitive industries and achieve fast-track career success. Pay particular attention to 1) the importance of
higher-order needs; 2) need for achievement; 3) stress management; and 4) how these employees can quickly
add value to their firms.
Explain the relationship between Herzbergs two-factor theory and the motivational factors at work in Mr
Johnsons career changes.
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A Career Slowdown
This case emphasises internal indicators of a firms shift from maturity to decline (organisational life cycle);
aggressive career management strategies that hold promise to realign higher-order needs and professional job
challenges; (for those with a high growth-need strength); how undesirable changes in elements of an employees job (see the Job Characteristics Model) quickly create psychological withdrawal from work; and how fluid
(unrestricted) labour markets quickly create opportunities for skilled professionals (of any sort) to add value
to the competitive advantage of their new employers (restoration of a balanced set of factors in the Job
Characteristics Model).
Alex Jorgenson, Chief Technology Officer (CTO), works for Deltonics, a maker of optical disc drives, which are
crucial components of integrated large server farms used by Facebook and Google. The firm produces optical
disc drives that use laser light or electromagnetic waves near the light spectrum as part of the process of reading
or writing data to or from optical discs at extremely high speeds.
In 2008 Mr Jorgenson was portrayed in the firms global newsletter as a young, aggressive executive on the
move. In the article he was described as a fast-tracker who excelled at identifying strategic partners and sites for
foreign operations for his firms expanding global manufacturing capability. Recently he designed and started
strategic alliances with three foreign manufacturers in their home countries. Deltonics forged these alliances to
constrain labour costs while retaining in its US operations its higher-valued product development and research,
marketing and distribution activities for all its global channels.
Alex was recruited as a high-school student in Sweden to play college basketball in America. He selected Stanford
University (Alex was an excellent student in science and maths), and he excelled as both a player and a student.
He was a starting forward on the team and earned Academic All-America honours after his junior and senior
years. After graduating in 2003, he began his career with Deltonics, and for the past five years he has jumped at
various global assignments that were related to Deltonicss expanding foreign operations. In 2009 he supervised
the launch of a product distribution system for all the firms European clients. He was responsible for hiring all
the key managers that staffed the headquarters office in Stockholm.
Despite Mr Jorgensons successes in his global assignments, Deltonics found that its promotion and distribution
costs were rising too much as a percentage of sales. Other costs began to rise suddenly during 2010. The costs of
global expansion and increased R&D expenditures forced Deltonics to downsize its global workforce by 15 per
cent towards the end of 2010. The company took a substantial charge to earnings to cover the costs of downsizing, and Mr Jorgensons ambitious growth plans for the companys European distribution system were put on the
shelf. The 2011 calendar year started off no better for the firm. In a proxy fight, Deltonicss board of directors
was forced to accept a hostile takeover bid from a consortium of investors that held 33 per cent of the firms
stock. The consortium was displeased with the companys performance (its P/E ratio had declined from 25 to an
anaemic 11 over a four-month period!). The consortium won the proxy fight (investors sold enough shares to
give the consortium control). By December 2011, My Jorgenson found himself working for a new executive team
with much different ideas about how to run the renamed company, Alpha Optical Systems (AOS).
Once AOSs executives and managers were fully in control, they initiated sweeping changes in operations and
company structure. AOSs management assured him that his work was important and that he would have a
challenging job with AOS. Nonetheless, he was asked to take a position with less responsibility and no global
assignments in his area of expertise (and success). His pay and benefits package did not change, and AOS agreed
to roll over his Deltonics stock options to new AOS stock options at a very favourable rate. He no longer
reported to the director of global operations, as he had in Deltonics. In Alpha his new boss was the newly hired
vice president of marketing who had no experience in global strategic alliances or global start-up operations. His
bosss global experience consisted of distribution and promotional work for a consumer products company
(mens razors and shaving cream products), which differed sharply from Mr Jorgensons experience in global
manufacturing operations and designing strategic alliances with capable technology firms located in or close to
promising new markets.
During the middle of the following year, Mr Jorgenson realised that his career was slowing and that AOS had no
immediate plans for new strategic alliances (the new management team was still preoccupied with controlling the
firms cost structure). This was deeply disturbing to Mr Jorgenson as he tried to stay focused on humdrum
reports detailing delivery schedules and customer orders. He considered his options and decided to approach his
boss with a buyout offer. In a meeting with his boss, he told him that if the company would spread a year of his
salary over two years, pay for two years of group health insurance and make a flat payment of $250000 for his
stock options he would leave the company and agree not to work in the industry for five years. By 5 p.m. that
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evening he had a yes from his boss. By June 2012, Mr Jorgenson was interviewing with the Reebok Athletic Shoe
Corporation. Two days after his interview Reebok made a very attractive offer that was quite appealing because
it leveraged both his business skill set and his athletic background at Stanford. Reebok named him its new Hong
Kong-based director of strategic partner relations for the companys Asian operations. At Reebok he would
handle relationship management with the firms Asian partners that composed every segment of the firms supply
chain. He would receive a 50 per cent salary increase and proportional increases in his employment benefits. His
family was delighted with his opportunity and he accepted the position and started working in Reeboks Hong
Kong office during the summer of 2012.
Guiding OB Concepts for the Case Question
1. Organisational events beyond the employees control set the stage for accumulating job stress that can
precipitate job change. The most resilient (and valuable) employees are those who are easily mobile and have
the ability to quickly add value to competitive advantage held by firms in totally different industries. This principle reflects the portability of intellectual capital, and executive recruiters are always looking for restless
professionals who possess it. They realise that they can add value to a companys competitive advantage regardless of the industry in which it competes. Being able to act on this realisation gives a professional a
powerful antidote to hindrance stress that is activated by job and career changes.
2. Organisational commitment is highly desired by companies as they try to build flexible and responsive
workforces. However, firms cannot expect to reap the benefits of employees organisational commitment
unless they are willing to make some job security guarantees for those employees who add value to competitive advantage. Neglecting the lower-order needs of these valuable employees is a recipe for losing
competitive advantage: these are the employees who are hardest to replace if they quit because they come
to believe that their employer does not value their contributions and loyalty.
1
How did corporate decisions made by AOS and Deltonics alter Mr Jorgensons higher-order need satisfaction?
Rebuilding Incentives at Intermodal Transport

This case emphasises how firms can rebuild competitive advantage after a wrenching layoff and pay freeze; how
employee involvement snowballs and builds on itself; what happens when workforces are trusted by management to become full partners in strategic success (Theory Y principles); and how cost-savings plans often
build a base for profit-sharing (bonuses) and employee stock ownership in highly competitive firms that believe
their workforces are the key to competitive advantage.
By 2009, Intermodal Transport was experiencing lower profits and declining customer satisfaction. Intermodals CEO, Regis Philburn, decided to fix the staggering business or sell it. That same year Regis instituted a
cost-cutting scheme and asked his executives to forgo their bonuses and take a 10 per cent pay cut. He
followed his own directive by giving up his bonus and cutting his own pay by 20 per cent. He vowed not to
increase any executives salary or bonus until Intermodal was out of the woods. Regis laid off 200 employees
(10 per cent of the firms workforce), and he announced a pay freeze that would stay in effect until net profit
was 10 per cent of net sales. He knew that the layoff and cost cutting were only temporary solutions to the
sagging revenue problem and the industrys acute over-capacity problems. He pondered the best way to
rebuild Intermodals competitive advantage in the rough-and-tumble long-haul trucking business.
He had read about gainsharing programmes, so he decided to bring in a consultant to look at the operation to
see if it might be possible to simultaneously raise performance and rebuild the companys competitive advantage based on the companys signature service of safely hauling hazardous materials at reasonable prices.
The gainsharing consultant proposed the Intermodal Success Plan (ISP) to help Intermodal to profitability and
leadership in its market niche.
Regis wanted to build an entirely new relationship between the company and its workforce. He wanted
extensive driver and employee involvement in productivity enhancement and cost control. He was taken by
the idea of gaining better cost control, avoiding future layoffs and involving employees in a company-wide cost
savings effort. He reasoned that these steps, if they were successful, would allow Intermodal to maintain its
market share, hold the line on raising freight rates and undo some of the negative effects of the wage freeze
for non-salaried (hourly) employees by giving them a chance to earn savings-linked bonuses. He believed this
was all possible if the ISP programme could be implemented. The bottom line for Regis was eliminating the
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wage freeze for all hourly employees and hiring back those employees he had to lay off.
Regis and his ISP consultants hit a rough patch during implementation. At the firms transportation terminals,
managers were reluctant to adopt the employee involvement portion of the ISP programme. They argued that
the programme was too novel for the industry and Intermodal should not take on unnecessary risks in a
business that was already hypercompetitive. Other more enthusiastic managers thought that since the
company had adopted GPS to monitor the efficiency, timeliness and safety of all surface carrier functions,
employee involvement needed to be enhanced. GPS produced numerous real-time data streams that were
monitored by terminal specialists. Regis believed that he could encourage positive change by building on the
views of his positive and supoprtive managers who believed in the team approach to managing carrier operations. He and the consultant worked on a sweeping design that would involve employees in finding ways to
control costs, improve productivity and safety and strengthen customer relations. Over some managers
objections, all of the involvement initiatives were adopted after employees had been trained in TQM and SPC
(statistical process control).
The incentive portion of the ISP programme created a quarterly bonus for teams that was based on the
Rucker plan concept. It included special one-time bonuses that could be earned by what was called an ITT
(Intermodal Transportation Team). This team consisted of two drivers, two loaders, a logistics and customer
relations specialist, and a maintenance man responsible for all scheduled truck repairs (brakes, oil changes,
engine tune-ups, etc.). If an ITTs profits rose above a given historical level for any of 10 different freight
forwarding jobs, then the team earned a share (in the form of a bonus) of its contributions to quarterly profits
based on a pre-established formula developed by management. The employee-involvement portion of ISP was
based on the idea that the ITT teams had the most first-hand knowledge about the value of productivity and
service improvement suggestions. The first major suggestion to improve customer service was the introduction of a wireless software programme for customers to allow them to track the exact location and status of
their shipments via the Internet. The programme was a huge success with customers and at this writing it is
being widely copied throughout the industry. Currently 20 ITT teams are competing for a one-time team
award for the best set of logistics and delivery efficiency software available in a cloud-based system. Four
other teams have launched an internal learning and experience website where employees can share their
productivity improvement suggestions for any ITT that posts a query.
The ISP programme has been operating for one year, and driver teams say it has helped them to improve
service, reduce downtime and cut by 35 per cent the number of dead hauls: return trips with no loads. The
logistics specialists note that ISP has helped them to find ways to work more effectively with clients, and
complaints have dropped by more than 70 per cent (while repeat business is up 22 per cent). Several logistics
experts note that clients have become so loyal to certain ITTs that they only want to work with those SDTs.
Brand, customer, company, and team loyalty; there is no better way to protect markets, claims a beaming
Regis. The company recently announced the rehiring of 100 laid-off employees, and Regis believes that all wage
and executive pay freezes will be eliminated in the next three months. This is a very positive development that
has energised the workforce. The surface transportation industry has experienced about a 5 per cent decline
in demand during the past 12 months, and Regis has not raised freight rates. Regis claims that maintaining
market share is much more important than trying to raise prices when customers are under profit margin
pressure. We will raise rates when our customers businesses strengthen. Until then, we will concentrate on
running an efficient business, controlling our costs, and rehiring every employee that we had to lay off, says a
determined Regis.
Recently, ITTs have made some suggestions for ISP improvements. Soon, all driver teams will co-ordinate with
a new cross-functional ISP team composed of 10 employees elected by their peers (Regis and his executive
team are very excited by employees willingness to be permanently involved in making improvements to
operational effectiveness). Led by an employee who does not need to be a driver, the ISP team has the
authority to discuss, modify and accept ideas. Without management approval, the ISP can implement any idea
that it judges to be useful (improve operational effectiveness) after a suitable analysis. Managers and terminal
specialists all have the same status on the ISP. Everyones contributions carry the same weight. The ISP team
leader, along with the team, makes a presentation to Intermodals executive team each month. In its presentation the ISP reviews implemented improvements and provides the executives with a detailed costbenefit
analysis. Regis and his team plan to fold the ITT system into a company-wide profit-sharing plan, but he has not
yet made the announcement (more details to be worked out).
Due to the companys effort to improve its core business and to greatly strengthen its customer service with
improved technology, Intermodal expects to be profitable in 2012. If this reasonable (and highly likely) goal is
achieved, Regis plans to announce a new incentive programme that makes employees with more than five
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years of service eligible for the companys individual stock option programme (ISOP). Regis knows that this
programme will be very popular with employees, and he plans to use it as a recruiting tool once Intermodal is
able to add capacity. Regis expects this programme to boost its position in the industry, and it will give
employees another reason to stay focused on the firms strategic goals. Regis believes that these interlocking
programmes of cost control, employee involvement and rising customer loyalty will greatly boost Intermodals
market capitalisation. If the stock rises 22 per cent from its present level, Regis plans a two-for-one stock split
(always viewed as a very bullish signal by investors).
1. Sustaining competitive advantage during an industry downturn requires a responsive, well-trained and
motivated workforce. Management must link the workforce to rigorous cost control by implementing a
gainsharing plan that covers employees organised as SDTs. SDTs must have authority to improve customer
service as they look for ways to control their costs. Keeping gainsharing systems simple and responsive to
SDT cost control will quickly convince employees that they will personally benefit when they help their
teams become more efficient.
2. Cost-sharing bonus programmes for teams must possess line of sight to sustain their long-run benefits to
the firm and its workforce. Once employees are convinced that the programmes are here to stay and
some bonuses begin to flow, they find all sorts of ways to make improvement suggestions. In turn, these
suggestions spread and more employees benefit as the firm becomes more financially stable. A Y-oriented
executive team can harness this momentum and channel it toward the firms competitive advantage.
3. Employees find new ways to contribute to operational effectiveness, and knowledge sharing expands in the
firm in lock step with managements effort to reward a workforce organised and based on collaborative
SDTs. It is a chicken or egg issue. More creative pay at risk programmes trigger more employee involvement or more employee involvement triggers more pay at risk programmes. Which one comes first? Well,
it really does not matter if the programmes are permanent and competitive advantage strengthens.
1
What are the features of the reward system management practices in Intermodal?
What are the effects of team-based bonuses on Intermodals employee motivation and performance?
McTavish Industries
This case emphasises product performance variability, which results from a poorly designed work system and
rigid Theory X principles that prevent the creation of a responsive work system design linking SDTs and
customers (poor horizontal integration).
Despite its new 180 million facility for overhauling and rebuilding complex industrial controls, McTavish
Industries is having trouble meeting its production and quality goals. The morale of the workforce is low, and
absenteeism and tardiness are major problems across the firms three plants in Scotland. Customers have
complained about installation delays and unacceptable (and sometimes dangerous) variances in the performance of revamped control systems. This has led to a number of liability claims that have raised costs
unexpectedly for the company.
The main plant is located near Edinburgh, Scotland. Approximately 70 per cent of the 2000 employees are
Scottish, and most are graduates of trade schools in the metropolitan area. Managers and supervisors are few
in number, and some have spans in excess of 65 production workers. The plant is managed by a former
colonel from the British military. He has only limited experience in a high-tech remanufacturing firm. His
military career consisted of a series of field assignments, the most recent of which was a two-year deployment
in Afghanistan.
The controls reman (remanufacturing) facility uses the most up-to-date technology in controls repair and
overhaul. Out-dated control modules enter at one end of the 350-yard facility. Each one is placed on the
proper conveyor belt that will quickly deliver it to a specialised work unit to repair, replace and clean all the
elements in a huge array of solid-state pressure switches, light sensors (fibre-optic devices) and temperature-
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control modules. The highly specialised work teams are made up of 10 to 15 workers and a team leader
(usually a more senior employee who is not a formal supervisor). The volume of incoming controls determines
the teams workloads. After a team has performed its functions, the refurbished control is sent to a testing
group and then on to the next team for combination with other parts into a subassembly to match customer
specifications. The completed subassemblies are sent to the testing department for an operational check. Any
problems with the subassembly are corrected here prior to packing and shipping. Once the subassemblies
arrive at the clients facilities, a McTavish team configures the rebuilt controls to the clients operating systems.
More testing is done onsite by a team of McTavish engineers and industrial process control specialists.
The colonel closely controls his facility and his employees. They punch time clocks and take breaks only when
a bell rings. Management limits employees job mobility (no job bidding or intra-plant transfers), and the
company seldom offers training courses. New employees are expected to learn their jobs from their more
senior co-workers (on-the-job training would describe this process). Management and labour have their own
washrooms and separate dining facilities. Managers have been known to take credit for productivity improvement ideas that have occasionally been submitted by lower level employees. Lately the company has
experienced some delays in meeting customer systems requirements and installation schedules. Also, units that
have passed inspection have been found to be faulty once they were installed and tested at various client
facilities. (A very disturbing moment of truth and of speechlessness for the installation teams!)
The colonel finds the above problems to be extremely vexing. As a consultant, you must address the colonels
two key questions shown below.
1. A firm needs a work design (perhaps team based in McTavishs case) that links a highly trained workforce
with field operatives who understand the product performance requirements of customers. A good work
design to meet these requirements is team based with full integration between production teams and their
counterpart teams in the field, who install the firms products. Production teams should have full control of
assembly and testing, and they need real-time communication with installation teams. A firm should look at
both teams as a functioning unit with a need for a high degree of horizontal integration. Thus delegation of
authority to cross-trained production teams is essential in a service-driven business where product performance must be highly reliable.
2. Not all production teams need formal supervisors (leaders), but all team members need to be thoroughly
cross-trained and capable of applying skilful assembly and product-testing procedures. They also need experience in the kind of demands faced by the field teams who install the products they create. All
production team members should have a thorough understanding of the kinds of installation problems that
crop up for field teams (another aspect of horizontal integration).
1
How can the company minimise the problems associated with production variability in its remanufactured
industrial control products?
How can team performance and morale in the Edinburgh reman facility be improved?
A Suite of Examples of Corporate Boards

Example A: Ineffectiveness Knows No Limits.
This case emphasises stages of group development; sources of interpersonal attraction that lead to high group
homogeneity and cohesiveness; factors influencing process losses in command groups; and useful strategies for
avoiding groupthink.
Frothy, Hyper and Associates is a large, US-based financial services and brokerage firm with a very large board
of directors composed of 35 members, eight of whom are outsiders. Its 27 insiders are senior managing
directors or senior corporate executives. In 2011 the full board met six times, while its executive committee,
made up of seven insiders and chaired by the CEO, met 53 times. The executive compensation committee,
comprising three outsiders and charged with policy issues, met eight times to set the pay packages for the
CEO and his chief lieutenants. The management and compensation subcommittee, consisting of seven insiders,
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met 61 times to set the pay packages for senior managing directors and their subordinate managers. The audit
committee consists of two outside directors and it met five times. The board has no other committees.
Director compensation is a $20000 retainer and $800 per meeting. Audit committee members receive an
additional $6000 per year. Compensation committee members receive an additional $1500 per meeting.
Executive compensation is based on several complex plans that have been developed by senior management
and consultants to the board. Bonuses and incentives make up the largest portion of senior managements pay.
All base salaries are limited to $200000 annually, and total packages often run into the millions with the
addition of bonuses and deferred compensation (stock options). The executive committee provides detailed,
confidential guidance to the compensation committee to help it determine executives compensation. Incentive
compensation is a major motivator in investment banking. In fact, 10 pages of the 28-page corporate proxy,
plus 42 pages of appendices, detail revisions to three key management compensation plans. One of these plans
could increase the CEOs bonus by several million dollars.
Example B: An Out-of-Touch Leader.
Octopus Commodities is a very large, diversified agricultural and food products company. Its board has been
widely assailed for its cronyism and passivity under the iron rule of its 78-year-old chairman, Reginald Cornborer. Institutional investors have watched Octopus writhe in the spotlight of a US government price-fixing
investigation over the past year, and the boards defects are quite apparent. Most of the companys large
investors believe that board members have been co-opted by family ties, business links and long-standing
friendships, and have put shareholder interests well behind Mr Cornborers. On October 15, 2011, the $13.3
billion company pleaded guilty to two government price-fixing charges and paid a record $100 million fine.
Throughout the crisis, Octopuss confused and erratic public reactions gaffes only sealed the boards image as
poster children for bad governance. Their response to shareholders has been abysmal, says Peter Rockets,
general counsel for the Investor Services Division of the American Management Council
Even recent clumsy efforts to downsize and revamp Octopuss board to give it a majority of outsiders have
drawn heavy criticism. Three newly appointed directors resemble many of the boards current members: They
either have political ties to key figures in Washington or they represent big family shareholdings. Notably
missing are any heavy-weight CEOs to counterbalance Cornborer. Theyre trying to carry on as in the past,
with minimum concessions to investors and to public relations, sniffs Roland Headrest, director of the
Corporate Governance Institute.
Example C: Growing Effectiveness.
The Tepid Soup Companys board was branded as being a lacklustre, rubber-stamping, family-dominated
sleeper. In 2010, Tepids board hired Robust Ribloin as the firms new CEO. Mr Ribloin launched an outside
search process to find the best possible person to chair the board. With the boards approval, Winston Jones,
a retired CEO of a large food products firm, was hired to chair Tepids board. He moved quickly and through
a unanimous vote had the board adopt and publish a set of very progressive governance guidelines to ensure
that the board would play an active role in Tepids strategic planning and goal setting. Robert Smedley, a
corporate board governance expert, comments: There are a number of companies that have established
boardroom principles but have not acted on them. Tepid is trying to follow its new governance and strategic
planning policies to the letter. One of Mr Jones key requirements (and a new board policy) ties the pay of top
managers to company performance (market share in key product areas and total market capitalisation). The
performance measures require the firm to outperform its closest competitors with respect to net income for
executives to earn their bonuses. Mr Jones has also acted to make the Tepid board more decisive in its
decision making by reducing its size from 18 to 13 members. At the same time, he has increased the number
of outside directors from two to eight. Five new board members are current or retired CEOs and now no
Tepid director is authorised to serve on more than two corporate boards. The boards five new directors are
all independents and new board policies require that directors are paid in company shares only and are
required to own 3000 shares of company stock by the time they have been on the board for three years.
Senior managers are required to hold shares worth three times their annual salary and Tepids CEO cannot
serve as a director of any other firm. The firm refuses to have any poison pills or anti-takeover devices. Mr
Jones requires the board to complete an annual self -evaluation in which it reviews its own performance and
the performance of its committees. The independent directors talk often to institutional shareholders
(managers of pension funds and directors of large mutual funds that hold significant positions in Tepids stock).
Tepids board is completely familiar with Mr Ribloins new strategy for the company. Since January 2010, the
board helps Mr Ribloin set strategic goals. The latest strategic plan has goals which include: 1) financing a $2.5
billion stock buyback; 2) retraining 650 middle managers in production and distribution software managed by a
cloud computing supplier and 3) paying $210 million for a German soup maker. Commenting on these
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meetings, outside director Philippe Escargot says: There was vigorous and challenging discussion in the
boardroom over all these issues. Mr Ribloin was not surprised by his boards active involvement in developing
and setting strategic direction for Tepid. After all, when he took the CEO job from his position at Global Baby
Products Inc. in 2010, he knew that he had to win the directors support and confidence because they need to
feel this guy knows his nappies and his soup. Mr Jones was confident that the board would hold Mr Ribloin to
the goals in the firms strategic plan. He believes that the boards newfound independence ensures that
shareholders are well-represented in discussions about Tepids performance.
The new Tepid board has broken with its passive past. In the old days, the board simply signed off on the
CEOs strategic plan. For the past three years, by being actively involved in shaping the companys strategy
around its core soup business, the CEO and the board have succeeded in nearly tripling the companys market
value to $25.9 billion.
Mr Ribloin wants to leverage this success to build one of the worlds top consumer-goods companies, with the
kind of P/E ratio enjoyed by shareholders of Proctor & Gamble, Smith-Kline Glaxo and Johnson & Johnson. In
meeting after meeting, he polished and refined his plan with the board. The plans most controversial aspect
was to use debt to pay for the stock buyback plan. The board retained its own investment banker and legal
counsel to appraise the strategys potential impact. Ribloin recalls, Probing, searing questions on every area
was the order of the day. They helped me by asking the right questions, and we often had to go back to get
more information. It forced more precision.
The debate simmered through the last four full board meetings and four sessions with subcommittees. Charles
Condensate, a director said: The discussion was always open, and the tenor was always collegial. People can
and do confront management and each other when there are differences of opinion. On June 4, 2012, Tepids
15 directors gathered in Philadelphia and approved the plan in a three-hour meeting.
1. Highly cohesive groups that are headed by leaders with high need for power are likely to exhibit process
losses such as groupthink. CEOs and their key subordinates occupy central organisational positions and
they control the data flows stemming from the firms internal performance information systems. If they
filter the information given to their boards of directors (consisting of handpicked members) to maximise
personal gain, (executives that game the boards pay package decisions for their benefit), then such boards
must exhibit groupthink. In the worst cases of board groupthink, business ethics are ignored by biased
board members as they make decisions to enrich the core management team. In extreme cases like the
Bernie Madoff Ponzi scheme scandal and MF Globals collapse (a commodities and securities hedge fund)
we can see the results of these extreme crony capitalism decisions. Employees lose their jobs and pensions,
and shareholders lose their entire investments in the firms. In still broader consequences, investors come
to doubt the fairness of equity and debt markets and they distrust the numbers in corporate financial
statements. Investors avoid buying equities and market liquidity and volume declines. Governments (and
regulators) over-react with new requirements (too big to fail is an example) that inject moral hazard into
these markets. More dead weight portfolio losses are created and investors react to poor investment opportunities to accumulate cash. These trends are always long-term and extremely hard to reverse because
investors conclude that markets are rigged against the little guy.
2. When corporate command groups exhibit groupthink, the workforce is usually a secondary or neglected
factor in relation to the firms competitive advantage. Groupthink at the board level always reflects the
personal agenda of the firms executive leaders. Over the long term, corporate board groupthink threatens
the firms competitive advantage (it always undermines operational effectiveness) because top executives
exploit the business and its assets for their personal needs. In extreme cases (Bernie Madoff and MF Global) top executives, to hold their schemes together, must enter a long-term and persistent conspiracy. (We
have to generate these phony statements to hold our system together). The elaboration of these deceptions
reflects a group of executives who have not progressed past the preconventional stage of ethical development (see Module 1). These fearful and easily threatened executives (scoundrels) would label potential
whistle-blowers as disgruntled employees that have to be fired because they have an axe to grind. These
schemes require increasingly elaborate fabrications of financial results designed to mislead regulators and
investors alike. Often the last people to detect an impending financial collapse of a significant financial player
are the honest employees who try to perform their jobs up to a high standard.
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What are the symptoms of groupthink that you notice in the descriptions of the Frothy and Hyper and
Octopus boards?
Use principles of: 1) group structure and 2) group development and decision making, to explain why Tepids
board works effectively with its CEO, Mr Ribloin.
Memo Waiting
This case emphasises new forms of communication and decision making; improving horizontal integration and
coordination in the firm, making the firm more responsive, flattening the firms decision-making structure
without re-engineering; how communications technology can support Theory Y management principles; and
new forms of technology-based employee involvement.
TO: Joe :)
FROM: Liz ;)
SUBJECT: 5-year plan :(
Theres another darned meeting. This group has no leader and no vision, says one frustrated participant. Why
are you being so aggressive and hostile? asks another. Someone snaps: Ive had enough Im looking for another
job. Rough stuff if these people were talking face to face. But they are not. They are sitting side-by-side in
silence before wireless laptops, typing anonymous messages that flash on a projection screen for all to see.
Electronic encounter groups like this are often the meeting place of employees in corporations. During
electronic meetings, employees can be brutally honest because of the anonymity of communicating in this way
(see Hyperdelphi groups in Module 6). Odell Pea, president of Flash Frozen Foods, Inc., of Gardenland, Illinois,
says: Talking through computers makes shy people powerful. For over five years, his company has used
electronic meetings of middle- and upper-level managers to hammer out aspects of its annual strategic plan.
While the delivery may be bruising, honest answers provide valuable, undistorted information. Priscilla Sleekly,
President of Fast Growth Financial, asked 20 staff members at a recent electronic meeting to rate their bosses.
The results? One manager enrolled in a management-improvement session, and another immediately signed
up for a strategic-planning course, says Ms Sleekly.
Outwardly, electronic meetings are simple: up to 50 people sit around a horseshoe-shaped table, empty except
for laptops on the table. A 'hot spot' creates an instant, cloud-computing-based network containing software
that tracks and sorts by topic and order of response every sentence typed in by participants. All of these
inputs also contain emoticons that suggest the authors reactions to the unfolding public content of the
meetings deliberations, which are displayed on the rooms projection screen. When participants want to vote
on an issue, the cloud-based software tallies the results and displays them for all to see. At the end of the
meeting, everyone gets a printed synopsis.
GlobalCloud, Inc. is one of the biggest boosters of electronic meetings. In 2011, it gave Drowsy State University $2 million to perfect proprietary software contained in the firms encrypted cloud-computing servers that
link the firms 20 electronic meeting rooms at company sites worldwide. Eighty employees at GlobalClouds
Software Solutions subsidiary are promoting the concept to Procter & Gamble and GlaxoSmithKline. All
GlobalClouds employees, including its CEO, have taken part in numerous electronic meetings. These sessions,
says GlobalClouds project manager, Ian Pansey, have brought people together who traditionally argued, like
the folks in product development, who used to go toe to toe with the folks from marketing.
Even managers who wince when electronic meetings make peers out of subordinates give the format high
marks for efficiency. Chitchat is eliminated and discussions do not digress. A study by GlobalCloud and
Drowsy State claims that electronic meetings are as much as 55 per cent faster than traditional ones. Deephole Mining Company of SlagHill, California, has proof. Last year it held its planning meeting electronically.
Usually this session takes days, says Robert Shaft, Deepholes director of research and business development.
This time it lasted 12 hours, a big plus. A lot of people were able to talk at once without stepping on each
others toes, he says.
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Electronic meetings attract diverse groups: last year, political leaders and local county administrators were
among dozens of organisations using them in the Hyperdelphi format. But they do have some drawbacks.
While anonymity prevents hurt feelings and bloody noses, it makes it impossible for people to get credit for a
good idea, says GlobalClouds CEO John Wavemaker. Also, computer-shy participants (those with poor
Twitter and texting skills) may have trouble keeping up with those who can pound out messages rapidly. And
even though texting shorthand mimics human touches (emoticons) like facial expressions (see below) many
participants find the process to be a bit unnatural and sometimes immature.
Making Faces During Electronic Meetings
:) = a smile
;) = a wink
:0 = bored
:D = laughter
:( = a frown
:X = anger
Critics say that cloud-managed and -analysed digital meetings are no substitute for oral communication. A
naysayer at a recent managerial conference in Las Vegas noted: Its sad that we cant talk without staring at
laptop screens. Similar sentiments are hardly new and have been heard before. In the 1890s, people said the
bane of human interaction would be a new invention: the telephone.
Guiding Concepts for the Case Question
1. As the cost of in-house communication technology drops and communications software improves, firms
develop a powerful tool to neutralise some significant process losses in group problem solving and decision
making. These technologies provide ways to eliminate the negative effects of rumours and other forms of
communication distortion (what engineers call noise in a sensing system). Information technologies and
wireless network clouds give firms a powerful new tool to aid planning sessions and to involve more employees with expertise in solving the firms operational problems.
2. Highly structured computer-based communication systems can be used to tackle complex, recurring
discussion tasks that are unwieldy and time-consuming. Efforts to improve 1) strategic planning, 2) aspects
of customer service and 3) technology-induced changes in job design can be started more smoothly and
efficiently in electronic meetings like Hyperdelphis. These technology-based communication systems are
consistent with increased decentralisation in companies that have rising horizontal integration requirements. These meetings need not be formal (they can be opportunistic), and they can be focused on a
particular problem that needs immediate attention.
3. The effectiveness of team problem solving can be enhanced by electronic communications. Process losses
and groupthink are greatly reduced by the use of these tools. Thoughtful managers see the benefits of
these technologies. However, they will also wisely use face-to-face communications to ensure that the firm
remains cohesive and participants make the on-the-ground changes that sustain operational effectiveness
(it is one thing to agree on changes in a meeting and another to sustain employee commitment to a new
procedure or policy).
1
Develop a model to show how electronic meetings may be used to prevent process losses caused by
groupthink. Be sure to explain the components of your model.
CEO-Corporate Board Relations

This case emphasises leadership style; process losses in command groups; matters of group composition and
cohesiveness; sources of CEOs interpersonal power; politics and political behaviour in the firm; and how (and
why) corporate boards come to reflect the CEOs personal values.
Preston Danielss ears are ringing these days with other peoples theories about management and board
relations. The chairman and chief executive officer of Worldwide Entertainment isnt impressed. I dont think
mutual fund managers and business school professors know how this company is run, he says. I never went to
business school so I didnt have the benefit of two years of intensive training in this area, he adds facetiously.
But what I read about what these experts expect for Worldwide I find quite counterintuitive for me and for
this company.
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Mr Danielss intuition has consistently won big returns for shareholders during his 15 years at the helm. But
nowadays his way of doing things is getting him something much less appealing: shareholder pressure to reform
his hand-picked board that some corporate governance experts say is far too willing to rubber-stamp his
orders. Worldwide counts 12 of its 16 directors as independent, but most of them have several close personal
or professional ties to Mr Daniels or to his company. They include his personal lawyer, his childrens former
elementary-school teacher, his wifes long-time tennis coach, an architect who has done work for the firm and
three retired company executives.
Some shareholders are also upset about two cases of executive pay: the contract the board recently gave Mr
Daniels to stay another 10 years that includes $8 million of stock options, and a $137 million payout the board
made to terminate Rene Clamshells failed 14-month stint as company president. Some executive compensation experts estimate that Mr Danielss package is one of the largest options grant ever awarded to a sitting
chief executive. The level of dissatisfaction among institutional investors was apparent on 25 February 2011, at
the companys annual meeting in California. Twenty-four of 103 institutional mutual funds belonging to the
Council of Institutional Investors representing 22 million of Worldwides more than 680 million shares
outstanding vetoed his rich options pay package and nixed his proposal for the re-election of five of his handpicked directors. The shareholder revolt was not sufficient to change the boards decisions. But it was a clear
shot across the bow for a cosy corporate governance group that was used to being unchallenged.
While a number of major corporations have felt heat from shareholder activists in recent years, Worldwide
has until now been protected from such critics by its strong returns. As Mr Daniels likes to point out,
Worldwides market capitalisation has soared to $62 billion from $2 billion under his leadership. Critics
acknowledge Worldwides impressive track record, but counter that the companys overall success has left it
dangerously dependent on just one man. His detractors believe that his weaknesses include his propensity to
micromanage all decisions, his history of heart trouble and his implacable resistance to finding and developing a
successor. His critics believe that these weaknesses threaten the effectiveness of the firms diverse and wellknown product line. They also fret that talented division heads may be lured away by cash-rich rivals. Mr
Daniels counters his critics by saying: My health is fine and I would step down for the good of the firm if I
thought we were headed in the wrong direction.
I would say Worldwides board is living in the Dark Ages of good CEO-board relations, says John Nash, a
consultant and expert on corporate governance. It would not meet the standard thats being demanded by
institutional shareholders and corporate governance authorities. Its too beholden to Daniels. There are too
many conflicts of interest. There are too many business relationships that cloud independent thinking on behalf
of the shareholders.
Adds Anne Henderson, deputy director of the Council of Institutional Shareholders in Washington, D.C.: The
whole purpose of a board is to monitor and advise management. Worldwide directors obviously havent done
that.
Performance Matters Most

Worldwide directors say Mr Clamshells ouster is proof they dont shy away from action, and insist that the
companys performance, rather than bureaucratic flowcharts, matter most. Running the company is not a
study in Jeffersonian democracy says Sandy OGrady, Worldwide senior executive vice president and a board
member. It is a study in what works.
Mr Daniels defends the boards independence and promises: When this CEO stops performing, they should
get rid of me and they will. He scathingly dismisses his critics: Theres one group that has a name that tries
to make itself sound like the official spokesperson for Worldwides investors, and its not, he says. (Mr Daniels
is referring to a large public employee pension plan that has a $1 billion investment in Worldwide.) He adds: If
any pension plan is unhappy with my results, then I will buy back their shares at current market prices.
The 56-year-old Mr Daniels says he doesnt look for answers to Worldwides problems in the management
textbooks that he believes rule MBA programmes and corporate America. He believes strongly that his board
should be composed of individuals who understand the family entertainment industry and its products. I dont
have any great desire to have an old-boy crony network of CEOs that rehashes the same old war stories, he
says. Most CEOs dont understand the entertainment business. They dont understand our problems, Mr
Daniels says. If they have so much time to spend on our company, what are they doing at their company? I
dont see that as an asset. He adds: Id rather have my kids kindergarten school teacher on the board to
remind us about the importance of kids in the entertainment business. Mr Daniels does have his childrens
former kindergarten teacher, now an elementary-school principal, on the board. Ramona Rivera, the principal,
became a director in 1993.
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College Connection
Another director is the Rev. Leonard Skypilot, president of Middletown University in Drowsy, Idaho, a school
attended by Mr Danielss son. Mr Daniels has donated more than $1 million to the school since 1989. Father
Skypilot defends his board membership by saying: I do not work for Worldwide and Worldwide does not
work for me. I wasnt asked to be a board member because we are friends.
Then there is Robert Goodbeam, a New York architect who designed Mr Danielss Sun Valley, Idaho, ski
retreat a decade ago. He has designed several theme park hotels, helped create the master plan for Suspense
Land, Worldwides newly opened amusement park near Tan Land, Florida, and created the companys
landmark Future World Building in Burbank, California. As a director, Mr Goodbeam critiques crucial design
elements of big company projects, such as Worldwides venture in the cruise ship business. The fact that I
know my directors personally is an asset, Mr Daniels says.
Besides directors links to Mr Daniels, critics say there are other signs that the boards practices havent kept
up with evolving standards. Board members own few shares of stock and four directors own no shares at all.
As a Jesuit priest, Father Skypilot isnt allowed to own any. Though Mr Daniels floods members with memoranda, the board does not hold a regular strategic planning retreat. Outside directors do not meet regularly in
the absence of company executives such as Mr Daniels. So far, the board has resisted calls for it to give Mr
Daniels an annual written assessment of his performance.
The Worldwide board recently showed signs of responding to investor concerns, without admitting to any
shortcomings. Its new corporate governance guidelines, just passed by the board, say ownership of $15000
worth of stock by board members is highly desirable. The guidelines also offer a broad definition of director
independence and call for an annual review of each board members status. These reforms fall well short of
recommendations by board governance experts who say that directors cannot be labelled as independent if
they are former employees or if they have any professional or consulting relationship with the company or its
executives.
A Serious Bonus Question

The complaints surfaced in the wake of recent, back-to-back blockbuster announcements: Mr Clam-shells
firing and Mr Danielss new contract. In the latter case, Mr Daniels, not the board, selected executive pay
expert Dirk Fleecem to provide advice on executive compensation to the board as a favour, Mr Fleecem says.
Mr Fleecem advised the board to keep some of the old and add some new wrinkles to Mr Danielss pay
package. For instance, Mr Danielss new contract kept his old, relatively low annual salary of $750000. A new
wrinkle included a clause that ties his bonus to the growth of Worldwides earnings per share. It also allows
the board wide discretion to grant Mr Danielss a bonus in those years when earnings per share remain
stubbornly unchanged.
The contract negotiations were marked by a bizarre circumstance involving Durnbury Cheatem, who is simultaneously chairman of Worldwides board, chairman of its executive compensation committee and Mr Danielss
personal lawyer. Mr Cheatem relinquished his compensation committee chairmanship role during the discussion
because he needed to represent Mr Danielss personal interests. Other directors admitted that it is an unusual
arrangement, but said it worked because of Mr Cheatems integrity. I agree its not a profile you would normally
want to see, says Raymond L. Yesman, a compensation-committee member who stepped in as chairman for the
duration of Mr Cheatems recusal. Mr Yesman says Mr Cheatems unflinching fairness made it very difficult to tell
during the discussion who he represented. At times, I said there were certain things I was willing to concede that
Durnbury nixed by saying, No he shouldnt get that. Mr Fleecem concurs that Mr Cheatems straddled role
might have cost Mr Daniels money. Mr Cheatem says: I would never do anything that I thought wasnt appropriate. I have a very, very high standard of behaviour, both for myself and for others.
Following its 2008 acquisition of a television broadcasting company (MetroCities/XYZ), Worldwides operations have grown far more complex. While the company trumpets its management depth, Mr Daniels remains
the all-powerful figure at its core. Board member Thomas S. Wavelength, who sold MetroCities/XYZ to
Worldwide, says replacing Mr Daniels is way down my worry list, but he acknowledges that, the only way I
would have made a bad deal for MetroCities/XYZ is if something happens to Daniels.
The board has once before been pressed into grooming a possible successor Mr Clamshell with disastrous
results. Now, says Worldwides vice chairman Raymond Pansey, the board is saying: Lets go back to letting
the cream rise.
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Mr Daniels says he takes the succession question seriously and he tries to communicate regularly with the
board on the matter. The format he chooses is an open-ended memo to Mr Cheatem to evaluate Worldwides executive team strength on a continuing basis. In a stream-of-consciousness style, Mr Daniels ruminates
on who I think is overrated. He often begins: I know I cant dictate this from my grave. But in case anybody
wanted to know what I thought, just after the funeral, heres a memo you can read to the board.
Urgent Memo
A few months after Worldwide hired Mr Clamshell as president in 2006, Mr Daniels filed an urgent addendum
to his open-ended memo musings. I had made an error in judgment in who I brought into the company, he
recalls, and therefore I made it very clear to Durnbury and a few other people that if I should get hit by this
truck, he should not expand my error and continue it. They should deal with it. I made it very clear I had made
a mistake, way before it became clear to the public and way before I acted. I knew that it was not going to
work and I did not want to make a legacy out of my mistake.
Under fire recently over the Clamshell exit package this included a $138.8 million payment and three million
stock options Mr Daniels and his directors point to their decisive action as proof that the board identifies
problems quickly and acts. Daniels was sharing with board members his concerns, Cheatem recalls. By late
summer 2006, even as Mr Daniels publicly denied talk of a rift with Clamshell, then Worldwides president, as
baloney, he was telling the board to give Clamshell the sack. I can tell you that my main shareholders were
very happy that I was doing it, Mr Daniels said. They recognised the economic reality that we would be better
off financially by paying off Clamshell and giving him the sack. If you dont have a president of the company who
is working, its a liability, says Mr Daniels.
Mr Daniels now believes his eventual successor will come from inside the company. Theres a list of 40, and it
could be any one of those 40 depending on when I get hit by the truck. In the meantime, the board is nudging
Mr Daniels to show them his current management team in action. Hes on a real campaign to expose the
board to the various executives at that company, Mr Cheatem said.
But Mr Daniels doesnt plan on going anywhere. He feels no need to apologise for doing little community
service or for not serving on other corporate boards. He says: Those are worthy and interesting activities and
someday Ill have time to do them both. But its not the job of the CEO in one of these kinds of companies.
1. Upward management takes on new meaning when the subordinate is the firms CEO and the superior is
the firms board of directors. When the CEO is a power-oriented high achiever who thrives on gaining
total control, we often find the mirror image in a passive, accepting and homogenous board of directors.
More than any other employee, the CEO exercises extraordinary upward influence, especially when he is
the founder or majority shareholder of the firm. The result of this upward influence is often a passive or
non-activist board made up of trusted insiders and outside directors who are carefully selected to maintain
a loyal, personal tie to the CEO. In the language of leadership theory, the CEO manages and controls situational favourableness to suit his needs. When a leader is strongly task oriented and exhibits strong referent
and expertise power, the group under his influence may become extremely passive. If the group is a board
of directors, such boards can be expected simply to rubber-stamp the CEOs decisions. As more professional CEOs (as opposed to founders or entrepreneurial CEOs) acquire greater personal stakes (stock
options) in the firms they manage, they will seek greater power and control over their boards of directors.
They will exercise their influence over their boards to dampen the effects of market-based risk (as it affects
the company) on their personal net worth as well as their job tenure.
2. The trend of boards to become more active and independent is due more to the influence of large,
institutional investors than it is due to the employee empowerment trend. Employee empowerment is
most often the result of downsizing, which forces the firm and its employees to accomplish more work
with fewer people (raising operational effectiveness). Also, empowerment usually has a specific focus such
as improving customer satisfaction by enhancing service customisation. Empowerment also targets process
improvements through mechanisms like statistical process control, Six Sigma and TQM (Kaizen). Employee
empowerment fades into the background when a passive corporate board turns its attention to executive
compensation and stock options. Some boards and CEOs cloak these decisions in secrecy and favour top
management and board insiders over lower-level employees and managers (tilting compensation decisions
so executives can game the system).
3. Effective and proper power balance between a board and the firms CEO is best maintained by having a
majority of outside directors who have no personal ties to the CEO. It is also reinforced by the existence
of annual reviews of the firms and the CEOs performance. This version of corporate governance is most
likely to sustain the firms competitive advantage and its market value while it lessens the risk of groupthink
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at the board level in firms. It will also develop, over the long term, a strong organisational culture. In the
wake of current corporate scandals and bankruptcies, CEOs and boards must repair their reputations for
honesty or small investors will doubt their integrity and the truthfulness of their corporate financial statements. A big part of the job of repairing corporate reputations requires boards to be more independent
and more willing to blow the whistle on self-serving CEOs.
4. The tendency for directors to stay on boards long after the traditional retirement age may be a factor that
encourages board passivity. Some doddering directors may value their board membership more than the
boards capacity for critical decision making. Highly cohesive, geriatric boards may be more prone to
groupthink.
1
Summarise the OB challenges facing Worldwide.
Use the concept of situational favourableness from Fiedlers Contingency theory to diagnose the leadership
situation confronting Mr Daniels.
Service Delivery at GEIC

This case emphasises customising service delivery; the role of workforce creativity in service delivery; supporting service delivery with highly complementary company systems and processes; and the importance of
measuring and tracking employees service delivery work in ways that make sense to employees (content
validity; see Module 4).
GEIC is a large, diversified insurer that offers a wide range of insurance products to families and businesses. The
firm prides itself on finding unique ways to customise service in what many experts call a commodity business.
GEICs leaders believe that it is possible to create service differentiation that sets its offerings apart from those of
its rivals. This case describes several aspects of the firms systems that are designed to achieve that differentiation.
GEIC uses multiple tools to track employee performance and productivity. Supervisors make annual performance evaluations of all of their subordinates on key job activities and behavioural skills. They assess how well
employees know their job, how they relate to others and the way they organise their work, and they rate
qualities like judgement and initiative. For employees performing more discretionary work, a goal-setting
discussion and periodic reviews supplement the annual evaluation. The company uses these evaluations to
determine performance-based (merit) pay increases and to help establish promotion eligibility. Also, GEIC has
developed a tool called the Group of Measures (GOM) to track the quality of individual and unit performance
to answer a different basic question: Is this person or group showing improvement, and, if not, what areas
need training and attention? Since GEICs strategic goal is continuous service improvement (Kaizen), the GOMs
measure progress rather than give grades. Individual and group results are compared only with themselves
over time, never with other units or individuals.
GOM is based on the belief that judging individual and group performance is an indispensable first step to learning
and improvement. The company believes that people want an ongoing picture of how they are doing and that
they want to be measured against standards that they helped to set. GEIC also believes that its employees value
the opportunity to improve their performance without a simultaneous emphasis on their compensation. Thus
they believe that they should get the job done right and then the rewards will follow (line of sight).
GOM is a flexible, continuous evaluation process rather than a static inventory of numbers such as sales
volumes or customer contacts. Its results are not used to determine pay. And workers themselves have
developed the grading formulas, determined the relative difficulty of the tasks that they perform, and agreed on
how to weight each score in accordance with each individual employees experience level.
Each monthly GOM report tracks five areas: work quality, work quantity, service timeliness, resource utilisation (the per cent of available hours that the group actually spends working), and customer satisfaction. GOM
tracks individual performance in some categories and overall group performance in others. Employees receive
an individual report each month that shows their monthly and year-to-date results. GEIC is preparing to take
GOM to the cloud and make it a real-time system that operates continuously.
77
The GOM for each work unit is developed by a representative group of employees who decide which key
aspects of the job they should track and who ask themselves four questions about each potential measure: Is the
activity under our control? Is it significant? Does it involve some form of data that we can collect? Can we easily
analyse the results? They vote on which measures to include and on their relative weight in the system. Finally,
they pass these recommendations along to managers, who do their own fine-tuning before implementation.
GEIC has no agents in the field; policy service representatives are the people who deal with customers, by
letter or phone, on all issues not involving claims. To see how GOM operates in practice, we can look at the
policy service function for property and casualty insurance. To measure quality, managers audit telephone calls,
correspondence and computerised business transactions in order to identify both exceptional performance
and areas for potential improvement. The focus is on communication, accuracy and knowledge. GOM defines
quantity as the number of telephone and business transactions handled (GEIC does 90 per cent of its business
by phone). The different kinds of policies car, RV, home, umbrella, and so on are weighted by difficulty,
with the result that umbrella transactions count for five times as much as car transactions in GOM reports.
These two measures, quality and quantity, are then weighted for the particular unit (policy service weights
quality as 60 per cent, quantity as 40 per cent). Individual quantity standards vary by grade level and experience. GEIC expects both quality and quantity to improve over time. The company gives special recognition to
employees whose performance shows significant improvement and provides coaching and additional training
for those who show little or none.
Service, timeliness, resource utilisation, and customer satisfaction are all monitored and analysed by the work
team (soon these and the above measures will be tracked by proprietary cloud-based software and employees
will have total access to their units critical performance measures). The current measure for timeliness is the
per cent of calls answered within 20 seconds. Resource utilisation measures the ratio of hours worked to
hours paid. Customer satisfaction is culled from questionnaires mailed to a random sample of customers after
they have dealt with a policy service representative.
1. As service complexity increases, firms must have front-line employees who can create unique responses to
customer demands that satisfy customers and keep them coming back for more. These front-line employees must be trained and rewarded with service-contingent incentives. Creating a bond of client/customer
loyalty builds a meaningful job for the employee and a problem-solving insurance expert, who can greatly
reduce the anxiety experienced by clients when they have to make an insurance claim.
2. An approach that may be more effective in the long-run than downsizing and delayering may be to guarantee employees their jobs in exchange for their full participation in rebuilding the firms competitive
advantage based on an enhanced service delivery model. Eliminating the threat to job security (lower-order
needs; see Module 1 and Module 3) may make the employees more responsive to the needs for wall-towall training and the design and installation of service tracking systems. The firm moving to service enhancement requires a secure workforce because the employees sense of job security is connected to the
quality of services delivered to and experienced by customers.
3. Manufacturing assumptions originate from firms emphasis on cost control as a source of competitive
advantage. In such firms the goal is to seal off operating systems from the effects of external uncertainty.
These cost cutter firms then concentrate on reducing costs in the flow of inputs through their production
processes. However, a major and less manageable source of external uncertainty is customers demand for
service. (Remember how units of service are radically different from discrete, physical product units; see
Module 8.) To make service a profit source, the firm must abandon the management and process assumptions that spring from the cost reduction mentality.
4. Job designs in the responsive, service-driven firm require empowered employees to be trained to recognise
sales opportunities in a customised service episode. A customised service episode (based on the analysis of
moments of truth) requires that teams of employees have the authority and training to understand and
operate systems that measure customer satisfaction, response times and cost effectiveness in service delivery. Service employee empowerment must be at the centre of the firms attempt to give front-line service
employees the authority and training to deliver high-quality service.
1
How has GEIC avoided the pursuit of manufacturing efficiencies in its phone-based insurance business?
Has institutionalisation of service quality measurement occurred in GEIC? Please explain your reasoning.
78
Features of Stock Option Plans: A Corporate Perspective

This case emphasises companies use of stock options to retain top talent; the continuing motivational aspects of
ISOPs; and the effects of worthless stock options on employee motivation.
As a companys share price rises, top executives and managers who own options begin to exercise them by
buying stock from the company at below-market prices. Typically they owe a capital gain tax on the difference
between the value of the stock and the options exercise price. In the United States, this gain is taxed at a flat 15
per cent rate since most options are held for more than a 12-month period. At the time a company issues stock
options to employees it can declare a tax deduction because the value of the options is a form of employee
compensation, which is a deductible expense.
Companies get the deduction despite the fact that they have not spent any money to provide the option and they
are not obliged to show the total value of these options in their earnings reports. In its tax effect, the use of stock
options has a highly favourable effect on net income, causing it to be overstated in the short run.
Google, headquartered in Mountain View, California, has a share price above $625 per share and the companys
board has never authorised a stock split (issuing one or more shares for an existing share). The firms current
market value exceeds $200 billion, making it one of the worlds most valuable corporations. Over the years, by
treating stock options as a current expense, the company reduced its tax liability by several hundred million
dollars. During the last five years, deductions for granted stock options have reduced Googles tax obligations by
55 per cent. The CEOs of other high-flying Internet companies (those with very high valuations) compare the tax
savings to a social policy that rewards successful companies, noting that this only occurs when the stock has
done well. At the same time, Roger McNamee, a venture capitalist with Integral Capital Partners in Menlo Park,
California, added: I am delighted to know that these companies are able to shelter a little income.
Not all experts on corporate tax policies and stock option plans seem them in such favourable, value-adding
light. Lee Sheppard, editor of Tax Notes, says other taxpayers should not have to subsidise corporate option
programmes. The taxes companies dont have to pay are, economically, the same as getting money from the
government, she says. Critics note that companies get relief from taxes through treatment of options as
employee compensation without spending cash. Stephen Wise, chief financial officer of software maker Legato
Systems Inc. in Palo Alto, California, has this to say: Instead of having a cash outflow of salary, [the options
handed out] turn around and becomes a cash inflow [when employees exercise options to buy stock at belowmarket-prices]. Lately (since the recession of 2008), that inflow has declined from a flood to a dismal trickle.
During this period, the state of California has had to plug repeated (and gigantic) holes in its budget because it
had imprudently relied on a rising tide of capital gains taxes paid by new millionaires minted by the states hightech IPOs.
In one particular way options do represent a cost to companies. The cost comes in having to issue stock at the
lower option price, after the market price of the stock may have risen substantially. This often forces some
companies to buy back stock in the open market to prevent existing shares from being diluted by those newly
issued shares. Suppose, for instance, a company with 10 million shares grants its employees one million stock
options exercisable at $10. When the stock rises to $25, the employees pay the company $10 million to cash in
their options and reap a profit of $15 million. In taxes they will pay a flat $2.53 million capital gains tax and the
company will get a tax benefit for roughly the same amount. If the company buys back stock to keep steady the
number of shares outstanding, it incurs a cash outlay to provide that benefit at a cost of $25 per share.
In reporting their tax saving, companies differ in the place where they show it in their financial statements.
Currently no clear guidelines exist. For instance, while one company may account for it in cash flow from
operations, another shows it in cash flow from financing activity.
Until the explosion in the use of stock options by companies, the tax savings were insignificant. The proliferation
and generosity of options plans accompanied by the long stock market surge of the 1990s gave those lucky (and
now far less common) employees vast gains that they are eligible to cash in. At the time, this created a windfall of
tax benefit for their employers. In the wake of corporate reporting scandals and fraudulent accounting activities
that have surfaced during the past 10 years, large, well-established firms like PepsiCo and Coca Cola are considering the bold move to not treat options grants as an expense (Microsoft recently enacted this policy). This
would depress net income when the options are granted, but it would also present a less distorted picture of
company earnings.
For the last 40 years, technology companies have relied heavily on options to recruit employees to build their
businesses. Until it changed its policy as noted above, Microsoft gave options to every employee. The firm is now
squarely in its maturity phase, and its employees know that the firms stock price is unlikely to exhibit the giant
79
surges of years past. This means that highly competitive salaries and annual bonuses are now much more valued
by Microsofts employees, and so the firm has moved away from the options game. Technology companies,
which rely most heavily on options to recruit employees to build their businesses, realise the biggest benefits (this
will certainly be the case when Facebook launches its IPO). Many established firms continue to rely on options as
an important element in their compensation plans. Numerous FTSE and Fortune 500 firms continue to use
options to generate savings on corporate taxes. Intel Corporations CEO strongly opposes any changes in the
tax rules governing the use of stock options, saying: The entrepreneurial culture of US high technology industries
would be dealt a serious blow if any change in the status quo were to occur.
Intels executives and managers have not been exercising their options. Intels share price has fallen since 2008.
This means that millions of options are worthless and they will certainly expire before they can be exercised by
their holders for a capital gain. Intels options holders have lots of company across several industries. Aside from
corporate scandals, market forces will make those options worthless for years to come. The two main drivers
that will keep those options worthless until they expire are tremendous over-capacity gluts in dozens of industries and a related depression in business investment in high technology (with the notable exception of Apple and
those firms in the social-networking industry). No sane high-tech executive expects their equity markets ever to
return to the price levels that they enjoyed during the Internet mania (bubble) of 19982000.
1. Despite the recent decline in new high-tech IPOs, there are still sound reasons why large and small companies
will use ISOs to fuel their growth. These programmes will be likely to retain their tax benefits so firms will
continue to use them to attract and to retain top talent. If the companys share price is rising for sound economic reasons, then talented employees will stay on board in exchange for the future benefits of stock
ownership. It seems to be true now that ISOPs are not viewed by talented employees as a reason to job hop
among newly launched firms. Talented employees now place more emphasis on stable pay packages that include cash and bonuses (a lingering effect of the deep recession). These costs have a direct effect on earnings,
and companies must reveal those effects in their public financial statements. The emphasis on ISOPs has declined significantly, but the economic reasons for using them remain valid.
2. ISOP programmes may do little to improve employees line of sight compared with cost savings and gainsharing programmes. This is because an ocean of unexpired stock options continues to be worthless and the hightech employees who hold them have no reason to think that they will ever return to profitability. Therefore,
employees who hold worthless options must find another reason to work hard to make their company profitable. Gainsharing and cost-savings programmes are not dependent on share price, and they trigger bonuses
for employees if they can find ways to enhance their productivity or to cut production costs
1
Develop an argument to show how the tax treatment of stock options programmes subsidises entrepreneurship and company expansion in terms of the organisation life cycle.
Joshua Mickels, Senior Product Development Manager

This case emphasises leadership situational favourability; sources of interpersonal power; the relationship
between effective leadership and stage 4 teams; and leadership as a solution to process losses.
Joshua Mickels is a senior product development team manager for a company that makes a variety of electronic controls for industrial applications. These controls improve the productivity and reduce the waste of
machines that automatically shape and polish carbon steel-cutting tools. Joshua has risen from machine
operator to his current position over his 20-year career with the firm. Along the way, he earned his engineering degree, patented several products, and built a series of products that helped his company expand nationally
beyond its Syracuse, New York, home. Joshuas achievements and reputation make him a natural leader who is
respected by his subordinates. The firms customers often ask if their product request can be handled by
Joshua, and they are delighted when they learn that one of his design teams has taken up their work. Perhaps
some of the most revealing facts about Joshuas team management style come from employees who have
worked with him. Below are some of their summarised comments.
Brad R., Product Designer. Joshua never walks around thinking everything is fine. He can detect a design
problem faster than anyone I know. He doesnt keep these problems to himself. Instead, he sits down with the
design team and speaks to us in his totally candid fashion. He never threatens anybody if they raise a problem.
80
Instead, he calmly tells us that well tackle it and move on. Its hard not to like and respect a boss who takes
that approach.
Shirley P., Engineering Technician. Joshua never plays favourites. When he gives you feedback on your
performance, he really knows what he is talking about. Some other managers just go through the motions and
tell their employees very general things about their performance. It makes you wonder if they ever had any
hands-on experience with the computer-driven lathes that we are supposed to make more efficient for our
clients. Joshua knows those machines inside and out. He knows how to fix them and rebuild them, and our
clients know that. Its not surprising that they want him to head the design team that works on their projects.
Andrew W., Lead Engineer. When something about a project is bothering Josh, you know it wont be
long before he calls the team together to tackle his concern. Once he has us together, he never sugarcoats
anything. He lays his cards on the table and says what he thinks. You can tell when he feels strongly about an
issue, but he never gets personal or passes around blame. He doesnt hold anybodys hand, but he is always
available to answer questions and to work with impatient clients.
Phil. J., Vice President, Product Design. Josh is hands down our best project manager. He controls his
projects, his teams performance and our clients expectations. I have never known him to play one of those
aspects against another. Hes a straight shooter who is the very best at his job in our industry. If you could get
him to sit down and reflect for a minute, I bet he would tell you that his most important job is developing
more product designers. He wouldnt point to a given project or one of his many personal accomplishments.
He would tell you about how creative some of his people are. Thats the kind of guy that he is. Were lucky to
have him.
Monty H., Senior Product Development Team Manager. Ive known Josh for 15 years. We go back to
the factory floor together. I doubt if I would be in this position if it wasnt for Josh. When he first told me that
he wanted to go to night school to get his engineering degree, I thought: No way can he do that and meet all
of his family responsibilities. Before I know it, hes talked me into going back to school too! Over the years,
Ive come to realise that Joshs principal concern is developing his people, knowing that if he develops great
designers then great products will follow. He uses projects and product development to bring out the best in
people. Josh could choose any line of work and he would approach it the same way. He would get the job
done by developing the people around him.
1. A key factor that holds a group in stage 4 development is the steadiness and maturity of its leader.
Therefore, a mature group very much depends on having a mature leader or manager. Perhaps more than
any other feature, the maturity and professionalism of the leader sustains and holds together a group of
employees who expect to be treated as professionals. In addition, a leader with expertise and referent
power tends to maintain situational favourability (Fiedlers theory; Module 7), which is another indicator of
stage 4 status. Mature leaders who have the ability to move easily from one managerial task to another (the
three features of the managers job), can overcome many of the process losses that have the potential to
dislodge a group from its stage 4 position. Likewise, a leader who has vast experience and who is respected
and well liked need not be an unknowing source of groupthink in any of his or her task groups.
2. If a group has a mature leader, members have problem-solving skills and its tasks are challenging, then the
conditions for high performance and minimum process losses are in place. Such well-balanced, mature
groups have members who see themselves as professionals and think of their peers in the same way. In this
atmosphere, achievement of team goals is prized by members and they believe that team achievement is a
productive pathway to career success. High cohesiveness is a feature of such teams. The norms of these
groups emphasise task activities and cross-training, and there is no need or interest for the leader (or his
team) to suppress individuality or creativity. Team member integration is high, and communications are
distortion free and task focused in most cases. What we have in such groups is a consistent pattern of
adult-to-adult relations that are promoted by their mature leaders.
1
Explain the most important aspects of Joshs project team management style and why you think they are
important in terms of the firms competitive advantage
81
Profiler Final Examination Case Study Questions

The Randall Group
The Randall Group (RG), makers of high-quality furniture, was founded by Edwin Randall 32 years ago. As he
built his company, Mr Randall used participative management, and he established a reputation for effective
workforce management practices. Three years ago he took the position of Chairman of the Board, and his son,
Adam, was promoted from COO to CEO. When Adam took over as CEO, he quickly put his personal stamp
on the job and on the company. He changed its structure to a product divisional design made up of six units
that were responsible for discrete segments of the firms product line. The six general managers reported to
him, and he received daily performance reports from each unit. Corporate headquarters also contained a small
legal staff and a human resources division with 12 employees.
Currently, Adam is poring over manufacturing details from the dining room furniture unit. It employs 500
workers, and its output accounts for about 25 per cent of the companys revenues. Overseeing the unit is
Devon Barks, a seasoned general manager who has been with RG for 12 years. Devon and Adam both believe
that technological advances in production make it possible to turn out low-cost and high-quality products.
Some of the units key retail customers have been complaining that the furniture sometimes arrives late, which
creates significant problems for them with their customers, who then demand discounts or simply refuse to
take delivery of the furniture. The retailers are reluctant to drop RGs products because customers value their
excellent styling and high durability. At the moment, Adam and Devon attribute much of the problem to sales
personnel who promise delivery dates that in some cases are impossible for Devons unit to meet. No
retailers have yet defected, but Adam is clearly worried that this may happen.
To address the customer satisfaction problem, Adam formed a team of corporate and plant personnel who
must create a customer satisfaction tracking and audit procedure. He wants the mechanism to integrate the
work of sales, marketing and unit production. The team meets today to establish a timeline for its project.
Adam chose to stay away from the meeting, but he finds it impossible not to meddle. For instance, he has
made sure that his VP of sales has a clear idea of the timeline he would like the project team to follow.
Adam has given the customer satisfaction problem a lot of thought, and he believes that the integration team
will have to tackle some significant weaknesses in the firms organisational design and core operating systems.
He still believes strongly in the product divisional design. Since introducing the design, the firm has increased
revenues 45 per cent while rises in expenses have been held to 15 per cent. The company is now more
profitable than at any point in its history, and Adam wants to ensure that it stays that way in the future.
1
What forces are at work on Adam and what changes must he ponder and why?
If you were asked to advise Adam on a strategy for change for the Randall Group, what would you include in
your submission?
82
Profiler Final Examination Case Study Questions
Re-engineering at European Cars USA

George Baxter, president of European Cars Credit Corporation (ECCC), the US finance unit of Teutonic
Motors, reasoned that the first step in rebuilding operational effectiveness in the firms United States operations was to delegate to his employees responsibility for finding operating improvements. His next and highly
unusual step was to promise that each employee bold enough to eliminate his own job would receive a new,
and probably better, job helping the company to create a new model for sustained growth. Mr Baxter knew
that establishing a no fear element was necessary to release the objectivity and creativity of employees as
they redesigned the business from the ground up.
Mr Baxter believed that the companys emphasis on product excellence was not aligned with American
customers demands for sincerity and efficiency in product delivery and post-purchase services. As a result, Mr
Baxter launched an employee-driven effort to centralise customer service operations. Employees suggested an
overhaul of customer service that attached a service partner to each customer until his or her credit
application was fully processed. This front to back service programme was based on moments of truth that
defined service from the customers perspective. Each service partner had the authority to adjust any part of
the customers service experience according to broad guidelines. To support the companys service partners,
ECCCs employees and their managers, to the shock of their bosses in Milan, Italy, suggested reducing or
eliminating their own departments through cloud-based data analytics and restructuring (many employees
accepted Mr Baxters challenge to train for new jobs while abandoning their old ones).
Rather rapidly the eight layers of bureaucracy were slimmed to four as eager employees assigned themselves
to SDTs with the authority to execute (and expedite) major credit decisions for fleet sales (car rental companies that leased large numbers of luxury vehicles), government sales (federal, state and municipalities) and fire
and police department sales.
At first the process was a bit rocky as some teams erroneously referred decisions to higher levels in the chain
of command. Several managers who lost positional power due to the organisational changes nursed their
career disappointments or simply quit. Soon enough people saw that information was travelling along shorter
pathways and new, satisfied customers were being won by the company. New business lines were created, and
sales rose 31 per cent to $9.7 billion from 2010 to 2012. A leading automotive industry publication recently
ranked European Credit as first in customer satisfaction among import car financing operations.
1
How does the European Cars Credit Corporation example stand up as a model for planned change?
How does the Job Characteristics Model (job enrichment) link to the planned change programme at European
Credit?
83
Profiler Final Examination Essay Questions

Exam 1: Barometer
1
Describe the causes and consequences of job satisfaction. Why is it a barometer of the well-being of the
workforce?
Exam 1: Japanese Keiretsu

1
Discuss the economic pressures that may force the Japanese keiretsu to modify their traditional business
practices.
Exam 1: Employee Participation

1
Identify the important psychological features in employee participation in decision making. Discuss the
assumptions that managers must make if they wish to use participation to strengthen operational effectiveness
and competitive advantage.
Exam 2: XYZ Credit Services

1
Employees in XYZ Credit Services, Ltd. were delighted five years ago when they learned that the firms
management was giving up performance reviews because they just did not seem to work. The company
eliminated formal performance reviews, and it did not replace them with another clear-cut performance
feedback system. According to Lisa Gibbons, Director of Human Resources: No one liked giving them; no one
liked receiving them. Managers looked at each other and asked, Why are we doing this? If you were a
consultant hired by XYZ, what recommendations would you make to ensure that employees actions and
efforts stayed focused on outcomes that improved the firms operational effectiveness, knowing that management does not wish to return to a traditional performance appraisal process?
84
Profiler Final Examination Essay Questions
Exam 2: Multiple Strategies

1
Organisations have to meet the challenge of change by adopting multiple strategies. Describe these strategies.
Consider what qualities a good planned change programme has, and outline the steps in the planned change
process.
Exam 2: Job Satisfaction

1
You have just been promoted to the position of general manager of a service division that provides in-flight
meals for six large, global airlines. You have deep knowledge of all aspects of this work including supplier
relations, food preparation and packaging, and sales fulfilment (maintaining excellent relationships with all client
airlines). Lately you have noticed rising voluntary turnover in units of your delivery staff (workers who stock
planes with meals prior to departure). In addition to staff turnover, you are now aware of some dissatisfaction
among flight crews with respect to your staffs meal delivery and stocking work prior to departures. You have
not fully diagnosed the problem, but from exit interview information you suspect that aspects of job satisfaction are low among these key employees. You also suspect that loading meals prior to departures has become
quite rushed at times going on as passengers are boarding. Develop the key elements of a plan to systematically address these problems in an integrated fashion before both begin to raise the companys sales fulfilment
costs.
Exam 3: Managerial Scenario

1
Construct a managerial scenario based on the interaction among locus of control, high need for achievement
and extroversion. For instance, you might cast your example in terms of a mentorprotg relationship, a
performance feedback session in which a manager is seeking input about goals from her subordinate, or
another of your own choosing.
Exam 3: Organisational Scenario

1
Develop an organisational scenario that links the concepts of stages of group development, team performance
measurement, team cohesiveness, and organisational goals.
Exam 3: Future Growth

1
Explain why some firms that refrain from cutting jobs may or may not position themselves for future growth.
85

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Assessment Reference Book

Questions from the Edinburgh Business School Course Website

Assessment Reference Book: Organisational Behaviour Edinburgh Business School

Module 1A: The Basics

Assessment Reference Book: Organisational Behaviour Edinburgh Business School

Module 1A: The Basics

Assessment Reference Book: Organisational Behaviour Edinburgh Business School

Module 2A: Stress and Well-Being at Work

Which of the following would heighten a managers risk of a heart attack?

A positive consequence of job stress could include which of the following?

Assessment Reference Book: Organisational Behaviour Edinburgh Business School

Module 2A: Stress and Well-Being at Work

Assessment Reference Book: Organisational Behaviour Edinburgh Business School

Module 3A: Contemporary Theories of Motivation

According to Herzberg, which of the following is the key to motivating employees?

Assessment Reference Book: Organisational Behaviour Edinburgh Business School

Module 3A: Contemporary Theories of Motivation

Which of the following is an important managerial implication of expectancy theory?

Assessment Reference Book: Organisational Behaviour Edinburgh Business School

Module 4A: Organisational Control and Reward Systems

Which of the following signifies high reliability in an appraisal system?

Assessment Reference Book: Organisational Behaviour Edinburgh Business School

Module 4A: Organisational Control and Reward Systems

Assessment Reference Book: Organisational Behaviour Edinburgh Business School

Module 5A: Job Design

Scientific management includes all but which of the following?

Which of the following is the principal goal of scientific management?

Job enlargement is most likely to be an organisational response to which of the following?

Assessment Reference Book: Organisational Behaviour Edinburgh Business School

Module 5A: Job Design

Assessment Reference Book: Organisational Behaviour Edinburgh Business School

Module 6A: Work Group Dynamics

Which of the following best defines a work group or a team in an organisation?

Which of the following statements about group cohesiveness is inaccurate?

Assessment Reference Book: Organisational Behaviour Edinburgh Business School

Module 6A: Work Group Dynamics

Groupthink is most strongly associated with which of the following?

Assessment Reference Book: Organisational Behaviour Edinburgh Business School

Module 7A: The Influence Process

The principle of line of sight is most prominent in which theory of leadership?

Assessment Reference Book: Organisational Behaviour Edinburgh Business School

Module 7A: The Influence Process

Which of the following would make upward management more widespread?

Assessment Reference Book: Organisational Behaviour Edinburgh Business School

Module 8A: Organisational Design

Principles of organisational design do not include which of the following?

Span of control is defined by which of the following?

Assessment Reference Book: Organisational Behaviour Edinburgh Business School

Module 8A: Organisational Design

Assessment Reference Book: Organisational Behaviour Edinburgh Business School

Module 9A: Managing Transitions

Which of the following would not be an aspect of a companys culture?

Which of the following is not an element of the planned change process?

Assessment Reference Book: Organisational Behaviour Edinburgh Business School

Module 9A: Managing Transitions

Assessment Reference Book: Organisational Behaviour Edinburgh Business School

Module 1B: The Basics

Assessment Reference Book: Organisational Behaviour Edinburgh Business School

Module 1B: The Basics

Assessment Reference Book: Organisational Behaviour Edinburgh Business School

Module 2B: Stress and Well Being at Work

Assessment Reference Book: Organisational Behaviour Edinburgh Business School

Module 2B: Stress and Well Being at Work