Annual Advances
in Business Cases
Kenneth S. Rhee, Editor
Leigh W. Cellucci, Associate Editor
July 2010 - 2011
Volume # 30
ISSN # 1939 - 4969
The Society For Case Research
Society for Case Research
The Midwest Society for Case Research was founded in 1970 to ―develop, apply and extend
knowledge in the writing and using of cases to enhance the effectiveness of teaching through the
case method.‖ Its basic purpose now is the development and recognition of individual efforts in
the field of case writing, case teaching, and case research. To reflect the evolution in its mission,
the organization‘s name was changed in 1987 from Midwest Case Writers Association to MSCR,
and in 1993 from MSCR to the Society for Case Research (SCR).
The SCR provides a forum for the exchange of ideas and experiences from those who teach,
conduct research, and practice in both business and non-business organizations throughout the
Midwest and the nation. The association encourages a broad spectrum of membership from
academic, governmental, and business fields to ensure maximum interchange of ideas and
practices. This interchange formally takes place in the annual case workshop and in sessions
conducted at a joint annual meeting with the Midwest Business Administration Association.
The major objectives of the SCR are:
1. To promote the association of case writers and those using cases for either education or
research
2. To provide programs for exchange of ideas and improvement of case writing, teaching
and research
3. To assist in the publication of written cases or the results of research and other scholarly
work
4. To provide recognition for excellence in case writing, case teaching and case research.
This journal is the product of annual SCR Case Writers Workshop. These workshops bring
together experienced and novice case writers in intense working sessions, each of which focuses
on a case written by one or more of the session participants. These sessions result in
improvement of case writing skills as well as the cases themselves. The revision and review
process underlying this volume results in an annual contribution to the body of cases available to
both instructors and authors.
Specific advantages of membership in the SCR include:
1. Association with colleagues and practitioners who are pursuing or contributing to case
writing and related activities
2. Access to information concerning CSR‘s activities
3. Receipt of and access to a collection of current, refereed cases in a variety of subject
fields
4. Participation in the annual workshop
5. Participation in a forum for the discussion of research on the subjects of writing and
using cases at the annual meeting held in conjunction with the MBAA
6. Opportunities for formally expressing professional interests
Information concerning membership in the society may be obtained from the secretary-treasurer
or a society member. The Society‘s web sites are located at www.sfcr.org and www.bcj.org.
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Editorial Process
The Society for Case Research exists to promote case research and writing, to develop case
writers, and to make new cases available for both publication and use in business and education.
The cases in the 2010 edition of Annual Advances in Business Cases are the product of a process
developed by the SCR to advance these purposes. At the 2010 SCR Case Writers Workshop,
held in July at Hanover College cases were presented then critiqued by at least four other
workshop participants and case writers. Each of the cases was blind-reviewed by at least two
reviewers. The cases were returned to the authors for revisions. Following a second review by
the original reviewers, 20 cases were accepted for publication in Annual Advances in Business
Cases.
Kenneth S. Rhee,
Northern Kentucky University
Editor
Leigh W. Cellucci,
East Carolina University
Associate Editor
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REVIEWERS
Karen Berger, Pace University
Paul Brennan, Minnesota State University
Timothy Brotherton, Ferris State University
Leigh Cellucci, East Carolina University
Jeff Conner, Hanover College
Roy Cook, Fort Lewis College
Steven Cox, Queens University of Charlotte
Steven Ellis, Hanover College
Tracy Farnsworth, Idaho State University
Mary Foster, Towson University
Karen Foust, Tulane University
Brian Gnauck, Northern Michigan University
Lynn Hoffman, Metropolitan State College of Denver
Mark Johnson, Idaho State University
Kent Kauffman, Indiana University Purdue University – Fort Wayne
Carl Keller Jr., Missouri State University
Karen Koza, Western Connecticut State
Ed Leonard, Indiana University Purdue University – Fort Wayne
Gabriele Lingenfelter, Christopher Newport University
Billy Moates, Indiana State University
Karen Moustafa Leonard, Indiana University Purdue University – Fort Wayne
Bonalyn Nelsen, Rochester Institute of Technology
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Eric Nelson, University of Central Missouri
Cheryl Noll, Eastern Illinois University
Deni Oas, University of Central Missouri
Asbjorn Osland, San Jose State University
Cara Peters, Winthrop University
Steve Popejoy, University of Central Missouri
Craig Rabe, Luther College
Tim Redmer, Regent University
Kenneth Rhee, Northern Kentucky University
Paula Saunders, Wright State University
Britt Shirley, University of Tampa
Brad Sleeper, St. Cloud State University
Bill Stratton, Idaho State University
Joe Thomas, Middle Tennessee State University
Jeff Totten, McNeese State University
Stacy Vollmers, University of Wisconsin – River Falls
Carla Wiggins, University of Wisconsin – Milwaukee
Ralph Williams, Middle Tennessee State University
Josie Wilson, University of Alaska Anchorage
Barbara Ross Wooldridge, University of Texas at Tyler
John Veal Jr., Webster University – Fort Sill
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TABLE OF CONTENTS
A SMALL BUSINESS OWNER’S QUANDARY: KEY EMPLOYEES AND
MANAGEMENT CONTROL – PG. 9, 215
Mark A. Johnson, Idaho State University
Dennis W. Krumwiede, Idaho State University
A STING IN THE COLA WARS: A CASE STUDY IN ETHICS AND INDUSTRIAL
ESPIONAGE – PG. 19, 216
Janell M. Kurtz, St. Cloud State University
Drue K. Schuler, St. Cloud State University
Bradley J. Sleeper, St. Cloud State University
ASSESSMENT ISSUES AT SPRINGFIELD COLLEGE – PG. 24, 217
Steven L. Popejoy, University of Central Missouri
Deni Oas, University of Central Missouri
BLOGGING BOUNDARIES – PG. 35, 218
Joe G. Thomas, Middle Tennessee State University
BOB’S SUPERMARKET: COMPETING WITH THE BIG BOYS – PG. 42, 219
Jeffrey B. Conner, Hanover College
CERIDIAN LIFEWORKS: MAKING A DIFFERENCE WITH A DOSE OF
INNOVATION – PG. 57, 220
Dawn E. Bowden, University of Wisconsin – Stevens Point
EMPLOYEE MOTIVATION IN A SMALL AG FIRM – MADISON TRUCKING
COMPANY – PG. 71, 221
Neil Tocher, Idaho State University
William E. Stratton, Idaho State University
Aaron Wolfe, Idaho State University
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EVERYONE LOVES THE DUCKS! – PG. 77, 222
Edwin C. Leonard, Jr., Indiana University Purdue University Fort Wayne
Roy A. Cook, Fort Lewis College
HEALTH INFORMATION TECHONOLOGY, PATIENT FLOW, AND THE NEW
MANAGER: EVALUATION OF THREE CLINICS – PG. 82, 223
Leigh Cellucci, East Carolina University
Keith Benson, Winthrop University
Tracy Farnsworth, Idaho State University
INTEGRATIVE REHABILITATION PROGRAMS – PG. 90, 224
David L. Hoffman, Metropolitan State College of Denver
William Carnes, Metropolitan State College of Denver
Judson Faurer, Metropolitan State College of Denver
Debora Gilliard, Metropolitan State College of Denver
Rajendra Khandehar, Metropolitan State College of Denver
Nina Radojevich-Kelley, Metropolitan State College of Denver
Cynthia Sutton, Metropolitan State College of Denver
LAKE ROAD LAUNDROMAT: EVALUATION OF CUSTOMER
SATISFACTION – PG. 111, 225
Michael W. Pass, Sam Houston State University
Sanjay S. Mehta, Sam Houston State University
LEADERSHIP AND CHANGE MANAGEMENT: A NARRATIVE OF AN
ORGANIZATIONAL TURNAROUND – PG. 115, 226
Kat Lui, University of Wisconsin – Stout
PLANETHOSPITAL.COM – PG. 122, 227
Timothy Brotherton, Ferris State University
Carol Rewers, Ferris State University
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REVIVING AN ICONIC ADVERTISING CAMPAIGN: “ANOTHER REASON, I LOVE
NY” – PG. 142, 228
Timothy Brotherton, Ferris State University
Craig Davis, Ohio University
Nakato Hirakubo, Brooklyn College
Mark Stuhlfaut, University of Kentucky
ROCKVILLE LUMBER: SYSTEMS ANALYSIS AND DESIGN FOR A SMALL
SUPPLIER – PG. 151, 229
A. Kimbrough Sherman, Loyola University
Harsha Desai, Loyola University
SOUTHERN FAMILY SERVICE:
WHAT HAPPENED TO THE MONEY? – PG. 156, 230
John D. Veal, Jr., Webster University Fort Sill
Gabriele Lingenfelter, Christopher Newport University
STRATEGIC PHILANTRHROPY – DOVE AND THE GIRL SCOUTS’
UNIQUELY ME! – PG. 165, 231
Nanette Clinch, San Jose State University
Aline Dorso, San Jose State University
Asbjorn Osland, San Jose State University
THE EMAIL – PG. 184, 232
William H. Moates, Indiana State University
Dale Varble, Indiana State University
Bruce McLaren, Indiana State University
THE PURPLE TUNNEL OF DOOM – PG. 194, 233
Mary Anne Watson, The University of Tampa
Britt M. Shirley, The University of Tampa
THE SALVATION ARMY ALASKA DIVISION:
THE GREAT COMMISSION – PG. 200, 234
Josie Wilson, University of Alaska Anchorage
Carlos J. Alsua, University of Alaska Anchorage
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A SMALL BUSINESS OWNER’S QUANDARY: KEY
EMPLOYEES AND MANAGEMENT CONTROL
Mark A. Johnson and Dennis W. Krumwiede
This case was prepared and is intended to be used as a basis for class discussion. The views
represented here are those of the case author (s) and do not necessarily reflect the views of the
Society for Case Research. The views are based on professional judgment.
So What’s the Problem?
Jay Jackson, 46 year old owner of Impeller Pumps, LLC, was at his winter home in Florida,
thousands of miles away from his business. He shared with his wife some of the challenges he
was facing with his business. ―When the cat is away, the mice will play. That old saying pretty
much sums it up.‖ He paused a few seconds and then said, ―For the most part I am out of daily
operations this winter and I don‘t expect to be very involved the rest of the year. With my back
pain and the meds, I just can‘t do much of anything anymore. Hell, I can‘t even effectively work
around the shop or out in the field due to these darn ailments of mine. Mike and our new office
manager are pretty much running things now, but I still don‘t understand why Mike is so
resentful.‖ Jay rubbed his face and took a deep breath and then shared more with his wife.
―Mike is clearly unhappy with his situation at work and how he is compensated. He also seems
distracted and seems to be considering other options. I don‘t really understand what he wants; he
is well paid so I just don‘t get it. Does he want me to just turn the place over to him? On top of
all that, I get the impression that I am unwanted in my own place. Something has to change, and
soon. I‘m not exactly sure what or how just yet, but I will figure something out. I‘ve got some
pretty big decisions to make.‖
Background
Impeller Pumps is a premier provider of agricultural, industrial, municipal, and domestic (homes)
pumps which it installs and services in a small geographical area in the Mountain West. It has a
highly skilled workforce that takes great pride in doing whatever it takes to make sure customers
have water when and where they need it. It has almost 70 years of experience in the pump
system field. Impeller Pump got its name based on the physics of water pump systems. Unlike
propellers that push water back to put a boat in motion (propel), impeller pumps are stationary
and push water forward (up) through the piping system to the surface.
Impeller was purchased by Jay‘s father in the late 1960s. The primary product/service of the
firm was the sale and installation of deep well pump systems. The firm had been consistently
profitable throughout the years, providing the senior Jackson and his family with a good living.
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As a child, Jay used to hang around the shop, and as he grew older he was given more and more
tasks to perform. Jay became increasingly involved in the actual operations of the business while
he was in high school and worked full-time for his father during summers. When he finished
high school he decided to work full-time for the business rather than go to college.
During the 1980s, Jay was given more control over operations as his father transitioned himself
out of the business while remaining available to offer assistance. Jay and his father had made
arrangements for Jay to make regular payments over a number of years to purchase Impeller. A
few years later, Jay completed the payments to own Impeller outright.
Though his dad had Impeller legally organized as a C corporation, Jay changed the legal form of
organization to a Limited Liability Company (LLC) with himself as the sole member (owner).
Jay wanted to reduce the risk to his personal assets and avoid the double taxation required of a C
corporation. An LLC combines many of the benefits of a sole proprietorship/partnership and the
corporate forms of ownership. LLCs can have one or multiple owners, called member(s); they
provide the owner(s) limited liability while simultaneously avoiding double taxation required of
the corporation form of organization. All income goes to members, who pay income taxes on
their shares of net income. Similar to a partnership, an LLC permits its members to divide
income and tax liability as agreed upon by its members.
Jay worked very hard to maintain Impeller‘s good reputation and to expand the business, and he
was well liked and respected by his customers. The company was well known by all the farmers
in the area as well as many industrial, municipal, and domestic customers for its quality of
workmanship and prompt and reliable service. Timely service was a key competitive factor in
this industry. For example, if a farm‘s well system broke down but did not become operational,
a farmer had to delay field work and could ultimately lose crops. Such an event could result in
large financial losses. Therefore, quick and reliable service, which Impeller was known for, was
critically important to Jay‘s customers. Impeller benefited greatly from its strong reputation and
customer loyalty. However, these ―I need it done yesterday‖ demands of impatient farmers
could create some very large work/life balance challenges for Jay and his workers.
Jay performed many roles at Impeller. He acted as the general manager overseeing the work of
his office manager, the machinist, and the field technicians and workers. Jay also served as a
working manager in that he commonly took crews out to install well pump systems. He also ran
errands, driving back to the shop or to a pump store to get needed parts and accessories.
However, over the last year or two, he had been decreasing his involvement in the more physical
aspects of operations.
Impeller had eight employees and although the work tended to be seasonal, Jay kept his workers
on the payroll during the off months (November through February) and tried to keep them
productive. Consistent with his business mission, Jay felt it important to treat his workers well,
to maintain their loyalty, and to retain them along with their experience and skills from one
working season to next. Jay also tried to be fair to his employees and treat them with respect.
However, he could also be quite demanding at times, especially when he needed extra work and
effort to meet the needs of his customers. His goal was to provide high quality products and
services to his customers and continue to enhance the reputation and profitability of Impeller.
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Jay was married and had an18 year old son and a 16 year old daughter. His son had worked at
Impeller on occasion, and Jay hoped that he would one day slowly take over and purchase
Impeller as he had from his father. Jay‘s son, however, did not particularly care for the work,
and similar to many teenagers, he went through a rebellious stage which strained his relationship
with his parents, especially Jay.
Jay, his wife, and his children enjoyed the prosperity Impeller provided them. They had a very
nice home, late model cars, plenty of toys (dirt bikes, jet skis, a recreational vehicle, and a boat),
and they owned a second home in Florida. Financially, they were doing well.
Type of Work Performed
Impeller‘s operations were largely job shop oriented, and most of the work was performed out in
the field. The type of work that employees performed could vary greatly, depending on the job.
Workers would work in crews of two to four persons, always including one or two skilled
technicians. Whether the work involved the installation of new systems or the service of existing
equipment, the technical aspects of the work were somewhat complicated. In addition, the work
was often very physically demanding (cutting metal pipe to remove and assembling pipe to
install pump systems), often performed during poor weather, and at times quite dangerous.
Depending on whether the job involved the removal of a damaged or inoperable system to be
repaired or junked, or the installation of a new system, the work involved the lifting, movement,
and/or lowering of heavy pump systems. The pump systems included pumps, wiring, pump
casings, and piping. Operations typically required the use of large hand held tools such as
wrenches, crowbars, and other leveraging tools. In addition, many jobs required a large boom
mounted on one of the trucks to move, lower, and raise pump systems. The pump systems
installed by Impeller operated as far down in the ground as 800 feet, and a large industrial
application could cost $100,000 or more. In recent years, the systems had been installed deeper
into the ground due to the declines in mountain snow pack and the accompanying drought-like
conditions that lowered the water table. The removal and installation operations had to be
performed very carefully and precisely to prevent injury to a worker or the pump systems. Jay
had implemented very precise procedures with stringent safety requirements to avoid such
mishaps. When he was out on a job, he made sure the safety procedures were followed, and he
placed the responsibility on the senior technicians when they led the jobs.
Competitive Marketplace
Impeller controlled the well pump installation and service market within a 50 mile radius of its
shop. Fortunately, due to early entry of the initial owners and the great reputation the firm had
developed over the years, competitors had not successfully entered Impeller‘s geographical area
to obtain any substantial market share. A number of larger competitors that were located in a
town approximately 70 miles away had tried to encroach into Jay‘s market from time-to-time,
but their success was limited. Nonetheless, Jay knew he could not let his guard (or quick and
quality service) down. Though Jay did not perceive much threat from other pump installation
companies, he was concerned about the possibility that one or more of the large farms might
11
begin to develop their own pump installation and service capabilities, thereby making Jay‘s
offerings unnecessary. If this practice became widespread, Jay‘s revenues could be cut by as
much as 60 percent. How likely any of this might be, or how widespread it might become if it
happened at all, Jay did not know nor did he even want to guess. Nevertheless, the potential
threat occasionally crossed his mind and caused him to worry about the future profitability, and
even the viability, of Impeller.
Seasonal Nature of the Business
In the Mountain West region, the business of installing and repairing irrigation wells is very
seasonal with most of the work being conducted during late spring, summer, and early fall. As
noted, Jay did not want to lay off any of his workers during the offseason and instead, he would
keep them on with full pay and benefits, at substantial expense. Jay viewed this as an investment
and figured he would recoup the costs with a profit the following working season. During the
offseason, Jay would have his workers perform maintenance on the equipment and building,
provide upgrades to and clean the shop, take inventory of parts, or do whatever else they could
find to be done. With the exception of the last two offseasons, Jay was present to oversee work
activities at his shop.
Key Employees and Special Skills
Although Jay viewed all of his employees as valuable to the business, there were two workers
who were especially important to his business and who would be especially difficult to replace.
These were the Senior Technician, Mike Thompson, and the Office Manager, Tina Sanchez.
On the operations side of the business, Mike was Jay‘s right-hand-man and was his most senior
and knowledgeable field employee. Mike had substantial prior work-related experience when he
went to work for Jay and had been employed at Impeller for 15 years. His experience was in the
same field as that needed by Jay at Impeller. None of the other Impeller employees had direct
experience in the business, and it did not take Jay very much time to recognize the value Mike
brought to his business. Mike worked hard, was very competent, and for many years was
consistently the top producer.
Jay did not know Mike before he hired him. However, as time went on they became friends, but
that friendship had faced some challenges over the past year. Mike compared their relationship
to that of a marriage, ―You have your ups and downs, and the little things start adding up. It gets
to the point where you find yourself wondering how the hell you got to where you are. Is it
irreconcilable? Only time will tell.‖ Despite their differences, Mike liked Jay for the most part;
it had just become more difficult to get along with him.
Mike was quiet and reserved, but he was well-liked by his fellow field workers and Impeller‘s
customers. The only person with whom he had any difficulty was Tina. Sometimes her taskoriented, directive style bothered him. On occasion, he would complain to Jay or his fellow
workers that she was just too bossy. He also felt that Jay treated her too well compared to how
he was treated, and sometimes she acted as if she ran the place. Mike also did not like that Tina
was often the eyes and ears of Jay, telling him what went on when he was away from the shop.
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Jay outsourced the accounting function of Impeller as had his father. All other office functions
were performed by the office manager Tina. She served in that capacity for many years and she
demonstrated a lot of initiative and worked effectively with little direction from Jay. He
basically left this employee alone.
Tina had a very outgoing personality and had a lot of self-confidence, and she was not afraid to
speak her mind about things. Her activities were diverse. She did the data entry, billing, payroll,
workers compensation and unemployment; dealt with vendors and customers; and along with
other office duties, developed the schedule for the field workers. This is where she often butted
heads with Mike. Jay placed a lot of confidence in her and felt very comfortable when he was
out in the field or had to be away on business or vacation. Jay felt he was fortunate to have Tina,
especially because he found the paper side of the business to be boring, much preferring to be out
in the field with the workers and customers.
Opportunities for Mike?
When the two were on better terms, Jay learned that Mike‘s wife had a serious medical condition
that doctors could not seem to cure. Jay was a regular user of a line of vitamin products and
convinced Mike‘s wife to try them, which she did. After a short period of time, her symptoms
decreased, and the apparent success of the product elevated Mike‘s interest in the multilevel
vitamin business. (A multilevel business (also called direct selling and referral marketing)
employs a business strategy where the sales force is compensated not only for sales it personally
makes but also for sales of persons it recruits to make sales. Amway is the largest direct selling
company in the world).
On a couple of occasions, Mike had mentioned to Jay that he might be ready for a career change
and the opportunity for career advancement with the multilevel business. Jay once responded by
reminding Mike how good he had it and asking him why he would even think about risking what
he had on a long shot like the multilevel business. Nonetheless, Mike was in his mid-40s and
increasingly becoming dissatisfied with his employment at Impeller. He had more than once
stated to his fellow field workers that he was doing most of the work but the only person getting
rich was Jay. Jay became aware of this as the grapevine funneled these kinds of things to him.
He couldn‘t understand why Mike was dissatisfied given that he was well compensated and it
was Jay, not Mike, who incurred the risks associated with owning a business. Also, Mike only
had a high school diploma; it was not as if he would be lured away with some high offer to work
as a manager somewhere else. This aside, Jay felt uncomfortable with Mike‘s new interest in the
vitamin business and even the remote possibility that Mike might leave Impeller. At times like
these, Jay also wondered about the possibility of Mike leaving to work for one of the large farms
if they stopped outsourcing the well pump work to Impeller.
Jay’s Leadership Style
Jay tried to treat his workers with respect and dignity and believed he provided his employees
with a very generous compensation package. He admitted he could be very directive, demanding,
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and sometimes a bit short with his workers, but it was for their good as well as Impellers.
Unfortunately, most workers did not perceive Jay as looking out for their best interests. For
example, Mike described Jay as an autocrat and a micromanager who kept things very close to
his vest. ―Jay doesn‘t trust anybody and he is very secretive. He can be very rude and
disrespectful to workers. You wouldn‘t believe some of the things he has said to his workers.
We have a lot of turnover, and it is easy to see why. Heck, I even quit one time because Jay
made me so angry.‖ Mike continued, ―Jay is stingy, thinks his way of doing things is the only
way to do anything, and always gives us grief for doing things wrong. No wonder nobody wants
to do anything around here. You only get an earful when you do.‖
Failing Health and Decreasing Ability to Actively Participate
Jay had developed a very serious back problem that plagued him when he did anything physical.
Even simple tasks such as bending over caused him pain. Because of this, he was taking heavy
pain medications that he found adversely impacted his judgment and also affected his behavior.
Jay felt the medications were making him more tired, impatient, and irritable which negatively
impacted how he treated people. In addition to the physical and emotional changes, he was more
anxious, stressed, and concerned about his business and his increasing inability to be an active
player in it. He had told his wife on many occasions, ―It is just no fun going to work anymore.‖
Jay and his wife had vacationed many times in Florida, and two years ago they purchased a
second home there. Jay‘s doctor had suggested that the warmer weather would lessen the
discomfort of Jay‘s back pain. So last winter he and his wife spent time in Florida, and they had
returned this winter with the expectation of spending the entire offseason in Florida. Jay‘s back
felt a lot better when he was in the warm and humid weather. In addition, not having to perform
any physical work eased his back pain and reduced his need to take large dosages of his pain
medications.
While in Florida, Jay left things in the hands of Mike and Tina and expected that he would also
have to rely on them more during the next working season due to his decreasing ability to be
actively involved. Jay did not feel the need to increase Mike or Tina‘s pay while he was away.
It was the offseason and things were relatively slow at Impeller.
New Opportunity for Tina
A month into Jay‘s winter stay in Florida, Tina telephoned Jay and gave him her two weeks‘
notice. She had decided to try her luck in real estate. The news was devastating to Jay because
he relied on and trusted her on the business side of Impeller and he saw her as great help to Mike
in terms of scheduling and setting priorities. He tried to convince her to stay on and even offered
to give her a large pay raise, but he could not get her to change her mind. Her husband had his
own equipment business and her kids were grown and she just wanted to try something new and
thought real estate would be fun.
Mike thought there were other reasons for Tina‘s quitting. He believed that part of the reason
was that something had happened with Jay. Mike didn‘t know what it was but sensed there had
been a problem of some kind and that Tina had had enough. Later, Tina told Mike she had been
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offered a pay raise to stay on. When Mike heard this, he stomped out of the office and thought to
himself. ―I work my tail off in the field while she sits around the office and Jay throws money at
her. If that doesn‘t add insult to injury I don‘t know what does‖.
For Jay, the timing could not have been worse. He felt more and more stressed, and his back still
greatly limited his ability to work effectively. Tina‘s departure would, at least for a period of
time, increase the demands on Mike. Jay figured Mike would learn more about office operations,
which was a good thing from Jay‘s perspective, because Mike would be running Impeller the
next season as well. Jay did get some temporary help to help with some of the office duties until
a full-time replacement was found.
In no time at all it became clear to Jay that Mike had little interest in assuming many of Tina‘s
responsibilities, even on a temporary basis, nor was he necessarily capable of performing them
effectively. Although Mike was a very experienced and skilled technician, Jay questioned
whether he had the skills to perform the office business functions, especially the way the office
systems had been developed by Tina. Moreover, Mike was introverted, had a passive personality,
and liked having the flexibility to disappear from the business when he had errands to run.
Staying on top of the business side of Impeller was just not what he wanted, especially under the
current conditions. Mike felt he was underpaid and was frustrated that he was not receiving a
pay raise for taking on these extra duties. In addition, he felt that Jay had not given him the tools
to perform some of the office work effectively. Mike had no signature authority other than to
obtain parts related to field work for a customer‘s system. That is, he could not make purchases
without first getting Jay‘s authorization. ―Hell, I can‘t blow my nose without asking Jay,‖ he
would tell his workers. Mike was also bothered that he had never been allowed to look over
Impeller‘s financial documents.
Mike was also concerned about Jay‘s apparent waning commitment to the business. Other than
Jay and Mike‘s pickup trucks, the heavy equipment and trucks used for the business were getting
older and older. Mike believed Jay was reaping all of the benefits of ownership by paying
himself a large salary but failing to adequately reinvest in Impeller.
Jay had his own worries, and had not forgotten about Mike‘s interest in other business
opportunities. He wondered if this could be the breaking point for Mike. Might he quit as well?
Fortunately, at least for now, Jay had not seen any signs that any of the large farms were moving
to internalize their pump systems work and attempting to hire Mike to do the work.
Jay was forced to return from Florida to search for a new office manager, and he hired Linda Hill
within two weeks of Tina‘s leaving. However, he soon realized that effectively replacing Tina
was close to impossible. Tina was irreplaceable. She had served as office manager for many
years and fully understood the nuances of the business and had developed many of her own ways
of doing things. She also had the right stuff for the job – she was detail oriented, very organized,
stayed on top of things, and was great at multi-tasking. In addition, she had the ability to be firm
and demanding with workers and vendors, without being perceived as difficult and she was great
with customers. She had the knack.
15
While Jay was back at Impeller to hire the new office manager, he observed that his field
employees were not actively and productively working at the shop. In fact, he became angry
when he discovered that one of his workers was building furniture in the shop to sell on the side
and had some of the other workers helping him, while others worked on their personal hobbies or
played games. Jay talked to Mike about what he had observed but could not get a clear answer
from him. Mike kept saying that there really wasn‘t anything for them to do but ―make work.‖
Jay finally just threw up his arms in disgust, causing him great pain, and then gingerly walked
away. He did not bring the subject up with Mike again, preferring to avoid another argument
and not wanting to add to his already high level of stress. Jay returned to Florida a couple of days
later. There he told his wife about the idleness of his workers and Mike‘s resistance or even
refusal to keep them working. ―I keep them employed during these down months, and Mike does
not make them work to help keep the company profitable. Mike is acting secretively and seems
more concerned about the employees‘ loyalty to himself than serving me and watching my back.
I feel personally violated and that I have been taken advantage of.‖
The New Office Manager
Linda was a disaster. She could not figure out how to operate the systems Tina had established,
she regularly showed up late, missed too many days of work, and she was rude to some
customers and vendors. Mike kept Jay apprised of these problems and Jay was prepared to talk
to her, but, before he had a chance to do so she quit. Linda had only worked for Impeller for one
month. Jay again had to return to recruit and hire another office manager. This time he hired
Cassandra Williams who had a four-year business degree. She, too, had difficulty figuring out
the office systems and was unable to hit the ground running, but at least she seemed to be
moving forward and would likely work out well given enough time. On a more positive note,
she was able to get along tremendously with Mike and customers and had excellent telephone
skills. Mike no longer had to listen to customer and vender complaints about Linda‘s rudeness.
Mike managed the workers, and although he got along with Cassandra, he grudgingly provided
her with whatever assistance he could. As the weather improved, Impeller received more and
more orders for field work. Because Jay had been less involved in the field work the past season
and was still away in Florida, workers and customers increasingly came to see Mike as the face
of Impeller. When people talked about Impeller, it was Mike‘s name that came up, not Jay‘s.
Jay‘s status and influence appeared to be decreasing. Jay had mixed feelings about this.
Although he had liked being the ―big dog‖, he wanted Mike to fully run the business so that he
could live more freely and comfortably in Florida for the sake of his back.
Changing Behavior of Workers
Jay returned from Florida in mid-March but was unable to be actively involved in the business.
He would drop by the shop and would visit some of the pump installation sites, but he would
rarely perform any of the installation work.
Over the course of the past year or two, it was clear to Jay that a gulf had developed between he
and Mike. They just weren‘t able to see eye-to-eye on many issues.
16
When Jay was around his workers, he felt they did not look at him or treat him with the respect
they had in the past. Jay thought they treated him indignantly. With Jay away so much of the
time and of little use in the field and Mike now running the show, it was clear that the workers
looked solely to Mike for guidance and direction. Jay was concerned, although Mike was an
outstanding technician, he just didn‘t appear to have the management skills needed to delegate
the work to his employees. Mike would rather have people see him as a nice guy then have to
tell them this is the way it is whether they like it or not.
Mike’s Salary and Perks
In addition to his salary, Mike also received the usual 10% bonus at the end of each year. In
addition, Jay gave his workers health care benefits plus a 401k plan with a 3% match. The job
came with some other perks as well. Jay gave Mike the full use of a large four-wheel drive
Chevy truck to use at work and for his personal use. In addition, Jay paid for all of the fuel and
maintenance costs for the truck. Jay figured the annual value of the truck to Mike was
approximately $10,000 nontaxable. On top of that, each year Jay sent Mike and his wife on a
week-long paid vacation. The last one was to Kauai, Hawaii.
Over the past few years, Jay and Mike had a number of heart-to-heart talks about Mike‘s
compensation, but the two just could not come to an agreement. Jay never considered giving
Mike any ownership of the firm. He continued to hope that his son would become more
involved with Impeller and would someday take it over. He reasoned to himself that if he gave
any ownership to Mike it would only complicate the process if his son wanted to take over
Impeller. Whenever the two did talk about compensation, Jay would remind Mike that it was he
alone, the owner of the business, who incurred all the risk associated with running Impeller. He
would also try to convince Mike of the high value of the benefits and perks he was receiving on
top of his salary and bonus, but Mike just did not seem to buy it.
Mike never asked Jay for any ownership. He believed Jay would never consider sharing
ownership. ―Jay is a lone shark and wouldn‘t share ownership with anyone. That is just who he
is.‖ Although Mike never broached the topic of ownership, Mike had suggested to Jay that he
and his crew receive performance pay based on the number of yards of pipe installed on pump
system installations. Mike was frustrated that he could not get Jay to seriously consider his
incentive idea. Mike viewed his annual bonus more like a Christmas bonus than anything related
to performance or profitability. It was the same 10% of salary year to year.
Jay did not buy into the performance based incentive idea because he strongly believed that he
was more than generous with all he provided to Mike and his other employees. Jay would think
to himself, ―Where else could Mike make this type of money and get these kinds of benefits?‖
Jay was offended when he heard about Mike‘s complaints to others about his inadequate
compensation and that Mike had told others that ―Jay is the only one getting rich.‖ This deeply
bothered Jay, and he believed he deserved Mike‘s loyalty and respect.
Compensation aside, it was clear to Jay that Mike was not happy, and on more than one occasion
Mike was heard saying ―this is not a happy place.‖ Jay thought that Mike might be going
17
through some mid-life crisis because his life was not going in the direction he wanted it to,
whatever the heck that was. Whatever the source of Mike‘s dissatisfaction, it contributed
significantly to Jay‘s anxiety and stress. Between this and his back pain, he had many sleepless
nights.
Decision Time?
The last two years of management/ownership has been very trying for Jay. For approximately 25
years he had profitably managed the firm, and it provided well for him and his family, but he
also felt that it had done well for his employees. Despite the many years of success, he now felt
the business he loved for so many years had become a major source of pain and anxiety. He
knew something needed to change but what? Jay knew his business was worth a hefty sum, and
he might even be able to retire, though at a lower standard of living than he was currently
experiencing. Nonetheless, he just didn‘t see himself not working at his young age of 46. Jay
realized he could no longer do anything that involved heavy physical work, but there must be
something else out there for him.
What should I do he thought to himself? I can‘t run it any longer, and none of my children are
interested in the business. Should I look for a buyer? Should I sell it to Mike? If so, how could
he pay for it? Maybe I should just sell the building, equipment, inventory and supplies for what
I can get for them. What other options do I have, if any?
18
A STING IN THE COLA WARS: A CASE STUDY IN ETHICS AND INDUSTRIAL
ESPIONAGE
Janell M. Kurtz, Drue K. Schuler and Bradley J. Sleeper
This case was prepared and is intended to be used as a basis for class discussion. The views
represented here are those of the case author (s) and do not necessarily reflect the views of the
Society for Case Research. The views are based on professional judgment.
The letter, sent in a Coca-Cola business envelope, was addressed to Antonio J. Lucio, senior vice
president of Insights and Innovation for PepsiCo, Inc., and arrived at PepsiCo‘s headquarters in
Purchase, New York. Even more surprising than an envelope from Coke coming to PepsiCo,
was the letter it contained. The letter offering Coke‘s four-year marketing plan appears verbatim
in Table 1 below.
Table 1
Letter to Antonio J. Lucio
Dear Mr. Lucio,
I‘ve contemplated for weeks, exactly how best to contact you concerning the information I have,
that will be valuable to your company and its position in the world of beverages.
Simply put, I have very detailed and confidential infomration about Coca-Colas marketing
campaigns for the next 4 years. This information includes there marketing strategy for CocaCola Blak, the strategies and tools information they have for a new style bottle they plan to
release, there 2005 Global Brand contribution analysis, … and much more very confidential
information that can assure your company gains a very decisive position in the ―Cola Wars‖. I
can even provide you with specific infomration that you may want. Yes, I am employed at a
high level with Coca-Cola, but trust me; my motives for offering you this informatin are
justified.
Just think, instead of having to second-guess what your number one competitor is doing, you will
know exactly what products and marketing campaigns they are going to set into motion. What if
you knew what markets they were going to move into and what markets they were going to
move out of… and beat them to the punch?
I have studied these plans and they are attempting to move their produt into a whole different
league.
I think you get the point, so I am not going to wast anymore of your time. The bottom line is I
have the information and I am looking to deliver it to the highest bidder.
19
However, since your company can benefit from this infomration the most, I am exclusively
offering it to you for the next 2 weeks. If I don‘t hear from you within that time I will look for
another place to market this information. If you are not the decision maker, I suggest that you
get this infomration to the person who is.
I‘m sure you‘d like proof of my claims and I am willing to provide it, for free. But if I show you
I‘m for real, you had better be ready to close the deal. But time is of the essence. My name is
Dirk and I can be reached at (xxx) xxx-xxxx.
Source: U.S. Attorney‘s Office Northern District of Georgia
Mr. Lucio must have been very surprised by this apparent breach of Coca-Cola‘s security. Its
level of protection for the formula for Coca-Cola, one of the best kept secrets in the business
world, was legendary (Coca-Cola v. Coca-Cola, 1985). Mr. Lucio also had compelling reasons
to be interested in information with the potential to give PepsiCo a competitive advantage, as he
was responsible for accelerating growth across all its divisions. The information, if genuine, was
extremely valuable and the stakes huge.
The rivalry between Coca-Cola and PepsiCo had been intense for more than a century. In the
words of Roger Enrico, former president and CEO of PepsiCo, ―... our battles are very real ....
(t)ens of billions of dollars are at stake (in) … ‗market share‘ - the sales performance of a soft
drink compared to others in its category, (as well as) … something intangible, but no less
important: pride‖ (Enrico & Kornbluth, 1986, pp. 2-3). According to a consultant for PepsiCo,
every one of its employees identified Coke as the enemy (Brooker & Burke, 2006, p. 71). This
animosity bubbled into a fight between delivery truck drivers for Pepsi and Coke over shelf
space at a Wal-Mart (Miele, 2007). The drivers were accused of trying to run over each other
with pallets of soda bottles. The maneuvering by management was no less fervent. In the words
of a consultant, ―You‘ve got two very strong competitors. They hate each other equally … (a)nd
they‘re going to continue to slug it out …. I don‘t think you‘re going to see either side give an
inch‖ (Neff, 2001, p. 25).
The letter posed legal and ethical dilemmas for PepsiCo vice president Lucio and a management
dilemma for Coca-Cola. What should Lucio do with the letter, if anything? What are the
consequences of each alternative? What should Coca-Cola do to better protect its valuable trade
secrets?
Economic Espionage vs. Competitive Intelligence
The fierce competition in high-stakes corporate competition like the Cola Wars has tempted
employees to disclose information. Economic espionage is a serious threat costing U.S. business
as much as $200 billion annually, (U.S. Attorney General‘s Office, 2002) and more often than
not, the culprit is an insider (ASIS, 2007) as in this case. The intensity of business competition
and advances in technology and analytical techniques that feeds criminal espionage also has led
to a shadow industry considered legal if not ethical. Company units and a for-hire professional
20
industry have been created specifically for the purpose of uncovering competitive intelligence
(CI), meaning information providing competitive advantage. Common techniques for gathering
CI include:
Examining public information sources such as websites, databases and blogs;
Attending trade shows;
Analyzing company communications such as earning calls and SEC filings;
Researching resume and recruitment databases;
Tracking patent applications;
Monitoring social media and networks;
Mystery or secret shopping.
An estimated 60% of companies have adopted an organized system for collecting CI and in those
with revenues over $10 billion, 82% make systemized use of it (SCIP FAQ, n.d.). A study
conducted by PriceWaterhouseCoopers found that ―virtually all fast-growth CEOs surveyed view
competitor information as important to the profit growth of their company.‖ Indeed, many
schools offer courses and even programs in competitive intelligence (SCIP, Competitive
Intelligence Education, n.d.). In other words, CI has become generally accepted as a part of
doing business. Facing internal and external threats to its secrets, a strategic plan to manage and
protect trade them is essential to the success of many, if not most, businesses.
PepsiCo Background
Publicly, PepsiCo attributed its success to superior products, high standards of performance,
distinctive competitive strategies and the high level of integrity of its people (About the PepsiCola Company, n.d., para. 6). To help guide employees in their business decision making,
PepsiCo created a Mission, Values Statement and Code of Conduct. As the PepsiCo CEO stated
in a letter to employees prefacing the Code of Conduct:
PepsiCo is a great company. The values we live by and our Code of Conduct help
to keep it that way. Ethics and integrity are the foundation of our past success—
and the keys for our future. So I ask that you please read these documents
carefully and that you make a commitment to live by them—every day (PepsiCo
Worldwide Code of Conduct, n.d., p 2, para. 5).
PepsiCo‘s mission and code of conduct were equally lofty and ambitious:
(Our mission is to) be the world's premier consumer products company focused
on convenient foods and beverages. We seek to produce healthy financial
rewards to investors as we provide opportunities for growth and enrichment to our
employees, our business partners and the communities in which we operate. And
in everything we do, we strive for honesty, fairness and integrity (PepsiCo
Worldwide Code of Conduct, n.d., p. 3);
21
We are committed to the continuation of free enterprise and the legal and regulatory
frameworks that support it. Therefore, we recognize the importance of laws that prohibit
restraints of trade, predatory economic activities and unfair or unethical business
practices. In all of its business dealings with suppliers, customers and competitors,
PepsiCo will:
•
Compete vigorously and with integrity.
•
Treat all customers and suppliers honestly, fairly and objectively.
•
Avoid any unfair or deceptive practice and always present our services and
products in an honest and forthright manner. (PepsiCo Worldwide Code of
Conduct, n.d., p. 5)
22
References
ASIS International. (2007, August). Trends in proprietary information loss. Survey Report.
Retrieved from, http://www.asisonline.org/newsroom/surveys/spi2.pdf
Brooker, K. & Burke, D. (2006, February 6). The Pepsi machine. Fortune, 153(2), 68-72.
Coca-Cola Bottling Company of Shreveport v. The Coca-Cola Company, 227 U.S.P.Q.18 (D.
Del. 1985).
Coke deliberation continues Thurs, (2007, January 17). WXIA TV 11. Retrieved March 2, 2008.
Retrieved from http://11alive.com/printarticle.aspx?storyid=91437
Enrico, R., & Kornbluth, J. (1986). The other guy blinked: How pepsi won the cola wars.
Toronto; New York: Bantam.
McGonagle, J. & Vella, C. (2002). A case for competitive intelligence: 90% of the information a
company needs to understand its market and competitors and to make key decisions is
already public. Information Management Journal, 36, 35.
Miele, J (2007, October 12). Cola wars get physical as Pepsi worker attacks Coke employee.
[Video File] Retrieved from
http://www.thepittsburghchannel.com/video/14329559/index.html
Neff, J. (2001, January 1). Cola wars go un-cola (Coca-Cola Co. and Pepsi battle for market
share), Food Processing, 62(1), 25.
PepsiCo. (n.d.). About the Pepsi-Cola Company. Retrieved January 27, 2008. Retrieved from,
http://www.pepsi.com/corporate/company_info/index.php
PepsiCo. (n.d.). PepsiCo Worldwide code of conduct. Retrieved January 27, 2008. Retrieved
from,
http://www.pepsico.com/PEP_Investors/CorporateGovernance/CodeofConduct/english/i
mages/Code_of_Conduct.pdf
SCIP - Strategic and Competitive Intelligence Professionals (n.d.). Competitive Intelligence
Education. Retrieved September 1, 2010. Retrieved from,
http://www.scip.org/resources/content.cfm?itemnumber=7854&navItemNumber=7855
SCIP - Strategic and Competitive Intelligence Professionals (n.d.). FAQs. Retrieved September 1,
2010. Retrieved from,
http://www.scip.org/resources/content.cfm?itemnumber=601&navItemNumber=533
U.S. Attorney General‘s Office. (2002). The 2002 Annual Report to Congress on Foreign
Economic Espionage and Industrial Espionage. Economic Espionage and Trade Secret Theft:
Defending against the pickpockets of the new millennium. Retrieved from,
http://www.xerox.com/downloads/wpaper/x/xgs_business_insight_economic_espionage.pdf
23
ASSESSMENT ISSUES AT SPRINGFIELD COLLEGE
Steven L. Popejoy and Deni Oas
This case was prepared and is intended to be used as a basis for class discussion. The views
represented here are those of the case author (s) and do not necessarily reflect the views of the
Society for Case Research. The views are based on professional judgment.
Rob Peterson was Associate Professor of Management at Springfield College. He had returned
to the faculty of the Department of Business Administration in 2005, after a five-year foray into
the corporate world. During the 1990s, as a young assistant professor, he had become involved
in the early stages of development of the college‘s assessment program. Peterson at that time felt
that the assessment movement would potentially have a profound effect on the American
educational system, and he wanted to be in the forefront.
While Peterson realized the impact that assessment would have on an educational system that
had long been criticized as falling behind those in other industrialized countries, he was worried
that many educators would be slow to see its value or reject it entirely, as a form of radical
change. This was certainly his experience upon his return to Springfield. He found faculty
campus-wide viewing the assessment process with disinterest, much unlike a decade earlier
when Springfield College had been a national leader in the assessment movement. Assessment
had now become a major criterion of program accreditation, and to ignore it would be to risk
reaccreditation. Peterson pondered what had changed in the intervening years, and what could
be done to revive interest in assessment at his school and preserve the school‘s accredited status.
The Assessment Movement
The current drive for assessment among American colleges and universities had among its
seminal moments a 1987 pronouncement by the yet-to-be named U. S. Attorney General John
Ashcroft. Then the governor of the State of Missouri, Ashcroft spoke as chair of the National
Governors‘ Association Task Force on College Quality when he made a call for linking
assessment, accountability and resources in a ―mandate for assessment.‖ The state of Missouri
followed his lead and became one of the first states to search for ways to prove how higher
education could document that it was working in a responsible and effective manner (UCM,
2008). The race was on.
Over the next two decades, assessment would become the buzz word in American higher
education, and would take on many forms: assessment for learning, assessment as learning,
assessment of learning. While ―assessing‖ students had always existed in education, the public
demanded more tangible measures than grades; ―outcomes‖ could better indicate the knowledge
24
and skills American students acquired during their years of education. From an accountability
perspective, the public wanted evidence that their tax dollars were being well-spent, and
outcomes could provide that type of evidence. Also, more emphasis would be placed on
formative assessment; while its counterpart, summative assessment, focused on evaluation as an
end result (and was most closely related to ―traditional‖ assessment), formative assessment used
feedback at intermediate periods and was useful not only to students but also to teachers, who
could use the information to consider revised approaches to teaching. Ultimately, assessment
would transform higher education in the field of business; the Association to Advance Collegiate
Schools of Business (AACSB - International) recognized the rising prominence of assessment
and began to integrate the concept into the accreditation process of its member schools.
Beginning in 1991, the AACSB introduced the concept of ―outcomes assessment‖ as part of its
accreditation process. As such, indirect assessment of outcomes (including surveys of
graduating students, alumni, and employers) became an accepted method of assessing the various
outcomes that schools desired to measure. (This would later evolve into a new set of standards in
2003 which focused more on direct assessment, and entitled Assurance of Learning.) (AACSB,
2007).
In response to Governor Ashcroft‘s call for assessment, Springfield College, an institution of
4,500 students located in southwest Missouri, began in 1991 what would evolve into a nearlytwenty year experience in developing an assessment of outcomes program.
Early Years of Assessment at Springfield
In the early years of assessment, Peterson remembered, there was little framework to fall back on
or to give guidance. At Springfield, President Ed Eley saw this as an opportunity for his college
to make a splash on the national scene by becoming one of the early leaders of the assessment
march. Realizing that this would be an expensive proposition, in 1992 he indicated his desire to
release the purse strings by allocating $250,000 in budgeted monies to stimulate innovation in
assessment. What at that time was considered traditional standardized assessment was
encouraged in disciplines ranging from math to English to business. Included in this was a
writing program for incoming freshmen that was integrated into all of the college‘s areas of
study, entitled Writing-Across-the-Curriculum.
The college was very fortuitous in finding a ―model for assessment‖ in 1992 that would serve as
a template for assessment development in the coming years. This model, tiny Alonzo College,
was a small private liberal arts school for women located in Chicago. Called Assessment-AsLearning, this comprehensive learning model combined traditional assessment center concepts
with ideas based upon Total Quality Management (TQM) and Continuous Process Improvement
(CPI), topics long known in the business world through application in ―Japanese management,‖
and espoused by management theorists such as W. Edwards Deming in Out of the Crisis (1982)
and William Ouchi in Theory Z (1981). The basis of the movement was to make processes
visible, repeatable, and measureable, and through iteration, to utilize feedback to make
corrections in performance. These quality processes were common in the business world, but
applying them to education was considered to be an innovation.
25
A relationship was established between Springfield College and Alonzo College, allowing an
exchange of ideas on the assessment process. Initially, Springfield faculty traveled to Alonzo in
groups of four to meet with Alonzo‘s faculty, staff, and administrators, and to discuss the newlyfound model. Alonzo reciprocated by sending faculty members in groups of four to Springfield
to conduct workshops on the Springfield campus. This relationship would continue in some
form or another for the next decade, with faculty criss-crossing between the two campuses to
teach and to learn.
During this time frame, a field experiment was conducted on the Springfield campus with the
participation of virtually all faculty members, exploring the relationship between assessment and
quality-related programs (e.g., TQM). Measures used were based on an earlier AACSB (at that
time known as the American Association for Collegiate Schools of Business) study on
assessment center methodologies. From this study, the conclusion was reached that there existed
congruence between TQM and assessment where learning could be facilitated. Specifically,
percentage completion of student outcomes increased when part of a TQM process. It appeared
that Springfield was on the right track.
The Middle Years: The Maturation of Assessment
As the program began to develop and take hold, the Department of Business Administration (of
which Peterson was a newly-minted assistant professor), seemed to be particularly enthusiastic
about the program and began to take an active lead among all of the academic departments.
Whether developing from use of the AACSB data (the department was accredited by the AACSB,
and likely took ownership in the results of the field experiment) or the faculty‘s familiarity with
total quality management, in comparison to the arts and sciences departments, Business
Administration jumped wholeheartedly into the assessment process.
A model of Continuous Process Improvement (CPI) was discussed and approved by the entire
faculty of the college; Business Administration was the first department on campus to formally
adopt the model (See Figure 1). In their enthusiasm, members of the department applied for and
received a grant of $250,000 from the Fund for Improvement of Postsecondary Education
(FIPSE) in 1996, to be used to integrate the assessment model both in the department and across
the campus, and to disseminate aspects of the model to other colleges and universities around the
country. As a direct result of the grant, workshops at Alonzo College continued for Springfield
faculty, various assessment projects across campus were now funded, and an assessment timeline
was established by the Faculty Senate (See Table 1) that would point to a potential time frame of
five years in which the CPI model of assessment would be fully integrated at the school (a
planned target date of 2001). Implementation of the model began in earnest across the
Springfield campus as each department sought to develop core competencies (outcomes) that
were to be expected of Springfield College graduates. These core competencies were developed
incrementally over painstakingly long periods, ranging from eight to fifteen months. Faculty
debated methods of assessing outcomes as training in the model continued, through universitywide forums, workshops in each of the departments, numerous retreats by each department (a
happy byproduct of the FIPSE grant), and additional workshops at Alonzo.
26
In the Department of Business Administration, outcomes and criteria for measurement were
defined separately in each academic area (Accounting, Management, Marketing, Finance, and
Economics). Each area established a standing CPI Committee, which would typically meet on a
bi-monthly basis. When all academic areas were able to produce a group of outcomes/criteria, a
cross-functional team made up of two faculty members from each academic area was created to
take the five sets of area outcomes and create an integrated set of outcomes, representative of all
of the areas of business, that would serve as a general assessment matrix for the entire
department in order to effectively communicate the CPI process (See Table 2).
This same development process occurred in other departments around the College, though none
dove into the exercise with the enthusiasm exhibited by the Department of Business
Administration. In fact, some departments whose interest in assessment had waned simply used
outcomes created by other departments and made the outcomes their own. It was beginning to
appear that there were academic pockets around the campus where Assessment-as-Learning was
beginning to lose steam. That was not, however, the case with Business Administration,
sometimes derisively referred to by other departments as the ―prophets of assessment.‖
*Developed and Approved by the Springfield College Faculty (1996) to Illustrate Impact of
Continuous Process Improvement on a Traditional Assessment Model
27
The High Tide Ebbs
A full four years into the process, Peterson (now the assessment coordinator for the management
faculty) and the Department of Business Administration were moving enthusiastically toward the
end of the Faculty Senate timeline. For all of the change that had occurred due to assessment
(specific outcomes to measure, movement away from straight lecture toward more experiential
learning, standardized syllabi to reflect the CPI model), there was a surprising amount of buy-in
from a faculty that had been around for quite awhile. At least one-half of the faculty in each
academic area had been at Springfield at least fifteen years. Little turnover reflected the desire to
remain at the college for extended periods of time in the case of most faculty members. Given
that degree of seniority, it was surprising that resistance to change was not stronger. There were
a few individuals within the department that scorned the new ways, preferring their 1970‘s style
of teaching, but it was recognized that these individuals would soon be retiring, and their
complaints silenced. All in all, the faculty in the department was very supportive of the
Assessment-as-Learning.
In the spring of 1999, the department received a $20,000 award from President Eley in
recognition of the progress made by Business relative to other departments around campus. This
was a result of an open competition among all departments, but it was a foregone conclusion that
Business would win the award. Other departments could not seem to maintain the same
enthusiastic attitude carried by Business Administration.
A second FIPSE grant was awarded to the department two years later, in the amount of $180,000.
This further stoked the assessment fires in business, and the department coordinated a national
workshop in assessment, paying travel and lodging costs for faculty from Babson College, Boise
State, Northeastern University, Northwest Missouri State, Pacific Lutheran, Samford, and South
Dakota. This three-day event was further evidence of Springfield‘s acceptance of assessment
and desire to spread the idea as far as possible.
Into the Abyss
Rob Peterson was confident as the college entered the new century that assessment had
established a firm foothold among both faculty and students. Working on both a CPI committee
and the cross-functional committee, he had contributed many good ideas to the assessment model.
Soon after the awarding of the second FIPSE grant, Peterson became restless and decided it was
time to strike out on his own as a consultant. While he enjoyed the life of an academic, he
wanted more challenges in his life.
After leaving the university, he started a management consulting firm in his hometown of
Emerald Springs, which provided a comfortable living for the next three years. At that juncture
of life, he had an offer to move into a larger organization, and accepted the position of Chief
Operating Officer of RSM McGladrey‘s Kansas City network office. This, likewise, proved to
be fulfilling work, but after another four years, he began to experience desires to return to
academia. It had been seven years since departing Springfield College, and although he had kept
in contact with a few colleagues, he had not followed college news or activities during his stint in
the corporate world.
28
As it just so happened, a former colleague had announced his retirement, and his position would
have to be filled. Peterson was informed of the job opening and, in a moment of complete clarity,
immediately sent his vita to the department chair. Following a six-week hiring process, he had
his old job back in the Department of Business Administration.
As school started in the fall of 2007, Peterson noticed a distinct lack of conversation about
assessment and continuous process improvement. It must be pretty advanced at this point, he
thought to himself. Probably have been collecting outcome data for several years now. When
Peterson asked an area secretary if there were any forms available containing outcome criteria
that would be necessary as he prepped his classes, she gave him a quizzical look. ―What kind of
outcomes criteria?‖ she questioned.
―Those relating to our CPI model that we developed ten years ago. I‘m assuming that they have
probably been refined a bit since I left, and data collection has begun. I just need to know where
we currently are in the process.‖
―I have no idea what you are talking about,‖ she replied.
―You know, Assessment-as-Learning!‖
―Nada,‖ was her only response.
Peterson went across the hall to the office of the department chair. Dan Griggs had been
department chair since before Peterson had left the college, and had been a strong proponent of
the assessment model.
―Dan, what is going on with assessment? It seems like I‘m getting funny looks from people
when I bring it up. What has been happening since I left?‖
Griggs winced a little bit. ―Rob, the process just seemed to fall apart. During the seven years
you were gone, we seemed to have more and more meetings, and accomplished less and less. I
think we beat everyone to death with meetings. We just seemed to be spinning our wheels by
continually trying to redefine and fine tune outcomes. Eventually people started to tune us out. I
think that the process was dragged out for so many years that we started losing people. You can
talk about outcomes only so long. It‘s been fifteen years since we started talking with the
Alonzo people, and we still aren‘t collecting data. It‘s the same way all across the College. I‘m
going to call a faculty meeting next week to take stock of where we are right now, and to see
what we need to do get moving again. The AACSB accreditation team will be here in less than
two years, and we are going to need collected data by then, or we could risk losing our
accreditation. The AACSB is taking assessment much more seriously since issuing their new
standards in 2003. I am going to need your help to get this thing going again, because I can tell
you right now, a lot of the faculty that will be at that meeting will not want to be there.
While nothing in academia really surprised him anymore, Peterson was more than concerned that
a program that seemed to be progressing nicely was firmly in a holding pattern, and it could be
threatening the department‘s reaccreditation. The big questions on his mind at this time were
how Assessment-as-Learning had almost completely lost momentum, and what could be done to
get everyone on the bandwagon again. Peterson and Griggs would have to come up with a
feasible plan of action in a short period of time.
29
References
AACSB (2007). AACSB Assurance of Learning Standards: An Interpretation. November 20,
2007.
Deming, W. Edwards (1982). Out of the Crisis. Boston: MIT Press.
Ouchi, William (1981). Theory Z: How American Business Can Meet the Japanese Challenge.
Reading MA: Addison-Wesley Press.
UCM (2008). A History of Assessment at the University of Central Missouri. www.ucmo.edu.
30
Table 1: Assessment Timeline at Springfield College
1987
Governor Ashcroft issues call for more accountable assessment in higher
education.
1991
AACSB introduces the concept of outcomes assessment as part of the
accreditation process.
Springfield College begins development of its assessment program.
1992
President Eley allocates $250,000 toward assessment innovation.
Relationship with Alonzo College is established, and along with it the
adoption of Alonzo’s CPI-based assessment model.
1993
Major field study conducted at Springfield that establishes connection
between TQM and assessment, and spurs further assessment development at
Springfield.
1995
College develops its Assessment-as-Learning model.
Department of Business Administration receives AACSB accreditation.
1996
Department of Business Administration receives $250,000 grant from FIPSE
(FIPSE I).
Faculty Senate establishes 5-year timeline for full implementation of
assessment model.
1996-99
All departments develop assessment outcomes and associated criteria.
1999
Department of Business Administration receives $20,000 competitive grant
from President.
2001
Department receives $180,000 grant from FIPSE (FIPSE II).
Peterson leaves Springfield College for the private sector.
2003
AACSB issues new assessment standards, entitled Assurance of Learning.
2005
Department of Business Administration receives reaccreditation from
AACSB.
2007
Peterson returns to Springfield faculty, only to find the assessment program
on life support.
31
Table 2 - College Core Competencies
BUS ADM CORE
COMPETENCIES
BUS ADM Core Course Number
1
1
1
2
2
2
2
3
3
3
3
3
3
3
I
6
0
0
1
1
7
8
6
8
8
3
3
3
4 C
0
1
1
0
0
2
0
3
0
5
1
2
6
0 A
5
0
1
1
2
0
1
0
1
0
5
5
0
5 P
I. THINKING
1. Data/Information gathering:
Identifies and accesses data from
reliable sources and/or systematically
observes and records primary data.
A
2. Analysis: Uses data and models to
categorize and study relations, in a
variety of contexts, for the purpose of
drawing valid inferences.
3. Interpretation: Draws conclusions
and makes inferences about the
meanings of relations studied based
upon the results of analysis.
A A A A A
4. Critical thinking: Objectively
judges the merits and faults of assigned
readings
and determine the appropriateness,
relevance, reliabilities, and validities
of:
A
premises and assertions,
assumptions,
criteria
logic and reasoning,
use of authority and evidence,
operational definitions and
measures
inferences and interpretation
5. Decision making:
A
A
A
A
A
A A A A A A A A A
A
A
A
A A
A
A
A
A
A
A
A A A A A
Understands and uses decision-making
processes that result in optimal
implementation and effectiveness
32
II. COMMUNICATING
1
6
0
5
1. Listening: Receives, perceives,
and interprets meaning from oral
and nonverbal messages.
2. Speaking: Presents and receives
feedback using oral and nonverbal
communication to achieve meaning
between speaker and audience.
3. Reading/ Observing: Obtains
ideas, information, and meaning
from textual, graphical, and online
sources
4. Writing: Constructs text and
graphics to frame and initiate ideas
to create meaning between writer
and audience.
A
III. INTERACTING
1
6
0
5
1
0
1
0
1
0
1
1
2
1
0
1
2
1
0
2
2
7
2
0
3
6
3
0
3
8
0
1
3
8
5
0
3
3
1
5
3
3
2
5
3
3
6
0
3 I
4 C
0 A
5 P
A
A
A
A
A
1
0
1
0
1
0
1
1
2
1
0
1
A
A
A
2
1
0
2
2
7
2
0
1. Teams: Contributes to a variety
of work teams to accomplish tasks
effectively.
2. Meetings: Demonstrates a
variety of roles to optimize the
cooperation required to achieve
effectiveness in meetings.
3. Leadership: Analyzes leadership
as a complex, interactive and
interdependent social influence
relationship among leader,
followers, and conditions.
4. Leader Skills: Applies
appropriate leader values and skills
that fit the particular followers and
conditions.
2
8
0
1
A
A
2
8
0
1
3
6
3
0
A
A A
3
8
0
1
3
8
5
0
3
3
1
5
A
3
3
2
5
A
3
3
6
0
3 I
4 C
0 A
5 P
A
A
A
A
A
A
33
IV. VALUING
1
6
0
5
1
0
1
0
1
0
1
1
2
1
0
1
1. Concept: Balance social
morality, personal values and group
norms when making decisions, both
as a team member and as a working
professional.
2
1
0
2
2
7
2
0
2
8
0
1
3
6
3
0
3
8
0
1
3
8
5
0
A
2. Behaviors:
a. Explain the role their personal
values played in their decisions.
b. Articulate why and how different
points of view can affect personal
and group effectiveness.
c. Recognize ethical dilemmas and
articulate how their actions and
decisions can create such dilemmas
for themselves and others.
3
3
1
5
3
3
2
5
3
3
6
0
3 I
4 C
0 A
5 P
A
A
A
A A
V. DISCIPLINE-SPECIFIC
KNOWLEDGE
Course Name and #
Exceeds
Expectations
Meets
Expectations
Does Not Meet
Expectations
1.Course Outcomes
A = Core competency assessed in this course
34
BLOGGING BOUNDARIES
Joe G. Thomas
This case was prepared and is intended to be used as a basis for class discussion. The views
represented here are those of the case author (s) and do not necessarily reflect the views of the
Society for Case Research. The views are based on professional judgment.
Roger Williams was an Assistant Director of Human Resources for a large, international airline.
An employee complained that a co-worker, Ellen Simonetti, had been blogging during layovers
and at home. The employee reported that some of the blog entries were unprofessional and
reflected badly on the airline. Some of the entries were also sexually suggestive and, in the
employee‘s opinion, inappropriate.
In reading the blog, Williams found it was largely informal observations about Simonetti‘s job,
personal life, and sexcapades. For example, she talked about some of the frustrations of
commuting to work for an airline and the glamour and frustrations of layovers in various cities.
He also noted that Ellen made a number of comments about her coworkers and customers. While
he found many of the comments humorous, would others find them ―offensive‖? Were her
actions ethical? Did her actions affect the rights of others? Did the airline have the right to limit
her blogging? Did the blog create a liability for the airline?
Company Background
In reading her blog, Williams noted that the airline was not specifically identified, but referred to
as Anonymous International Airlines (AIA). AIA was a United States based airline. It was one of
the world‘s largest airlines in terms of passenger traffic and fleet size. The airline operated an
extensive domestic and international network, including destinations in North American, South
America, Europe, Asia, Africa, the Middle East, the Caribbean, and Australia. Entries made in
the blog identified many of the destinations served by AIA.
AIA was unique in the industry in that most employees were not members of a union. The only
two exceptions were the pilots and flight dispatchers. Pilots had been represented by the Air Line
Pilots Association (ALPA) since 1940. The company's approximately 180 flight dispatchers
were represented by the Professional Airline Flight Control Association (PAFCA). Being
nonunion had both good and bad points. Lack of a union contract allowed the airline and the
employees more flexibility and discretion in their behaviors. It also resulted in more direct
communication between management and employees. There was no union representative present
during discussions with most employees.
35
Background on Ellen Simonetti
Williams quickly reviewed Simonetti‘s personnel file. He found she was 29 years old and had
been with AIA for seven years. She also had prior experience as a flight attendant for a now
defunct regional carrier. Her evaluations with the airline had been satisfactory. She was also
qualified to speak Spanish on international flights to and from Spanish-speaking destinations.
In her blog entries, she often used names or abbreviations to refer to herself and others. She
typically referred to herself as Queen of Sky, Q of S, or Her Mile Highness. Most entries were
descriptions of people or events. However, she had posted pictures of herself and other airline
employees on her blog. While probably not obscene, some might consider the photos ―sexually
suggestive.‖ One of the pictures (Figure 1) showed cleavage and an undergarment. Many of the
pictures were of her in uniform, and on company owned aircraft. Williams suspected the pictures
were most likely taken on company time.
Blog Entries on AIA and the Airline Industry
Williams noted several entries pertaining to AIA and the airline industry. In one entry, Ellen
talked about airport food. While many of the names were disguised, the disguises were
superficial and readers could probably identify the actual organizations involved. For instance,
she observed that choices for food at one airport were
The greasy fried chicken from Mopeyes…or perhaps a veggie-burger flopper
from Burger Queen…or maybe a sandwich with wilted veggies and some soggy
bread from yet another five-star airport eatery? Ahh, the gourmet dining
possibilities are limitless in this airport. (Simonetti, 2006, p.187)
Figure 1: ―Suggestive‖ Photograph
Source: Simonetti, 2006. Page 196
36
She also disclosed information people within the industry used to describe some operations. The
terms were not complimentary to the customers or the airline. In one entry, she described a trip
to Rome.
Q of S had the pleasure to travel in coach last summer on a trip from BBC
(Bustling Base City, the home base for AIA) to Rome as part of a working trip.
The rest of the crew got to sit in business class, but Her Mile Highness, being the
second most junior on the crew, got stuck in CATTLE CLASS!!! That‘s nine
hours folks. It was NOT pretty! (Simonetti, 2006, p 136)
Other blogs talked about other airline employees and their behavior. She disclosed that flight
assignments were based on seniority and often resulted in older employees getting the more
desirable assignments.
Airline bidding goes by seniority. Therefore, the more senior flight attendants
(AKA Senior Mommas, or SMs) get their choice of flights before the more junior
ones like me. I have seven years of seniority, but that is a drop in the bucket at my
airline. And, of course, most flight attendants prefer to fly to Europe rather than to
some place like Shreveport, Louisiana, or Buffalo, New York, in the dead of
winter. Hence, international crews tend to be very senior (20-plus years seniority)
and OLD.… Don‘t get me wrong, some of these old bags can be a lot of fun. Plus
I have learned a lot from them over the years…. (Simonetti, 2006, p. 61-3)
One of the lessons learned included how one of these SMs prepared a drink for a complaining
passenger. After a number of attempts to appease a customer disgruntled because of flight delays
and lost baggage,
My colleague returned to the galley, carefully closing the curtain behind her, and
confided in me that she was going to make Mr. Grumpy a very special drink. She
pulled out a fresh glass, bent down to the filthy floor and gently rubbed the rim
across the surface. Then she poured gin and tonic in the glass. She then served
him the drink with a devious smile and said ―‘Looks like you‘re finally getting
what you deserve, Sir. We‘re pushing back soon.‘‖(Elliott, 2006)
Simonetti‘s blog also had many negative descriptions of the pilots. One blog described pilots as
follows.
I hate to generalize about pilots (not really), but Anonymous International
Airlines pilots tend to have ‗rich, arrogant American‘ plastered all over their faces.
Plus, they are typically the two big no-nos: married and cheap. And they often
prey upon innocent young flight attendants….
37
Here‘s their typical strategy: remove wedding ring after getting to layover (after
all, according to many pilots, your wedding vows don‘t count once you cross the
ocean or the equator); invite youngest, most innocent looking flight attendants out
for drinks/dinner; try to get young, innocent flight attendant drunk (making sure
to hide intended ring finger through course of the evening); do not pay for young
innocent flight attendants dinners (thus saving money to buy flowers for wife
when get home); and, finally, try to get young, innocent flight attendants back to
your hotel room.
If the strategy doesn‘t work with the young, innocent flight attendants, or there
are none on the crew (which is more often the case on international flights at
Anonymous Airlines), then the pilots will use the strategy on the older, divorced,
and/or horny flight attendants (Simonetti, 2006, p. 106).
Observations and Blogs about Co-workers
While many of the observations about the airline industry were not particularly positive, some of
the blogs about co-workers bordered on slanderous. A number of blogs described flight
attendants called ―Nancy‖ and ―Gloria.‖ While the names were aliases, the entries were detailed
enough that it was possible for readers familiar with the company to identify the actual people
described.
Another party-hard crewmember was one of my fellow Spanish speakers, Nancy.
Nancy is American but grew up in Mexico. Her father was an ambassador or
diplomat or something like that, so she speaks Spanish like a native. I, on the
other hand, speak Spanish like a gringo.
I‘ve flown a lot with Nancy, too. She‘s probably in her late thirties, average
looking, but keeps her bod in top shape. She has a couple of kids at home and thus
prefers to spend as little time as possible in her hotel room on the layovers.
Layovers are her only chance to go out and party. Nancy consistently out-parties
me.
The funny thing is, Nancy always ends up cozying up to some pilot by the end of
the night. And, she doesn‘t even bother to take her wedding ring off. My theories
about her domestic situation flip-flop back and forth. At times I think she is bored
in her marriage and just looking for some fun. At other times, though, I am quite
sure that she in on the prowl for husband numero dos. I have noticed that she
never brings her husband on trips with her (Simonetti, 2006, pp.17-8).
Her blog provided equal time to pilots.
The captain, Bill, was a notorious sleazebag who had once offered to be Queen of
Sky‘s sugar daddy, even though he is married to another flight attendant. Also on
the crew were the notorious lovebirds, Gloria the Hot Cuban Mama and John the
Married Pilot (Simonetti, 2006, p. 65).
38
On the flight down to Buenos Aires I was working in the back with Gloria. I
debated whether I should tell her about John‘s tryst with Nancy in Santiago a
couple of months back. I finally decided not to, since I had no hard evidence--had
only seen them dancing. Plus, Gloria was not exactly innocent. She was quite the
player herself. I had known her to juggle five guys at one time. And besides, John
had started seeing Gloria while he was still with his wife, so infidelity was already
a given in this case (Simonetti, 2006, p. 68).
Ellen also talked frequently about another co-worker, Ricky. She made frequent references to his
sexual orientation in her blogs. One entry explained:
Ricky is a tall, dark, and handsome hottie from Argentina. If he weren‘t gay he
would be totally up my alley. He normally flies with his partner in crime, a 20something Colombian diva named Consuela (nicknamed ‗Miss Colombia‘).
They‘re inseparable, like a Latin Will and Grace (Simonetti, 2006, p. 23).
Another blog mentions working with a transsexual.
Actually, I have flown with a transsexual flight attendant before. I thought he/she
was a big girl like me. It wasn‘t until after the trip that I heard what his/her
receding hairline and fake breasts were really about. (He/she always wore a scarf,
so his/her Adam‘s apple was not visible.) (Simonetti, 2006, p. 35).
Observations and Blogs about Customers
Ellen included a number of blogs discussing customers. Again, names were not used, but the
descriptions allowed readers to believe they knew the identity of the customers.
Q of A had a famous (formerly obese) American weatherman in first class going
to Orlando yesterday. He wasn‘t his normal chatty self, or maybe he was just tired,
or perhaps that just his screen persona. I wish I had some dirt on him, but he was
drinking virgin bloody Mary‘s. (Simonetti, 2006, p. 163).
Another blog described a customer who became sick on the flight.
We left about an hour late from Lima because a man in first class crapped his
pants right after we pushed back from the gate. Actually, I feel sorry for the guy
because he may have had a heart attack, since he also peed on himself and
apparently passed out briefly before going into the restroom to clean himself up.
Q of S was working the back, but the flustered flight attendant in charge (a queen
of a different sort) came back to the mid galley after the incident and asked Q of S
to come up to help translate to see if the guy was OK in the bathroom.
39
Well, turns out that the guy spoke perfect English. I tried (unsuccessfully) to
excuse myself and go back to my cabin, as there was a horrible STENCH in the
first class cabin (not to mention the brown stuff on the carpet at 2B) (Simonetti,
2006, p. 163).
Yet another blog described a flight with a group of male passengers.
On the flight home from Barcelona yesterday, Q of S was standing at the boarding
door and noticed a large number of handsome and buffed American men coming
on board. When I asked them their seat numbers, without hesitation they replied,
‗I‘m with him,’ and waved their hands rather effeminately at the gentleman in
front of them.
I guess you all see where this is going… Yes, it was a group of gay cruisers. We
had almost a whole airplane full of them. And, let me tell you, they drunk us dry!
(Which is hard to do when you are sipping your girlie cocktail through a little
coffee stir!) Q of S had to snatch a bourbon and coke out of some poor
passenger‘s hands on final approach as he tried to sip the last ounce through his
‗straw.‖ Apparently he was competing with Her Mile Highness for the title
‗Queen of Sky‘!
Anyway, among them were some interesting characters. There was the gay couple
wearing matching yellow striped shirts. (‗Are they twins?‘ Q of S and her crew
mused.) And there was a flamer in a hot pink skin-tight top.
Then there was the flight attendant in charge, a rather sassy black lady, who, upon
noting the day‘s passenger load, declared ‗There‘s only one diva on board today,
and it‘s me!‘ (Simonetti, 2006, p. 114).
The Interview
Williams subsequently interviewed Ellen to get her explanation of the blog. She explained that
she had started the blog about nine months earlier as ―therapy‖ to help her cope with the loss of
her mother and grandmother, both of whom had died within the previous year. She also noted
that other flight attendants had blogs and that there was no policy prohibiting blogging or
limiting her ―freedom of speech.‖ Besides, she argued, her blog was only read by a hundred or so
people on a regular basis.
Following the interview, Williams reexamined the blogs and found infrequent mention of Ellen‘s
mother or grandmother. Entries were mostly limited to mentioning that it was Mother‘s Day and
that Ellen missed her mother. Another entry mentioned that it was her mother‘s birthday. It
seemed the entries were more ―therapy‖ for Ellen to discuss her job and personal life than any
real grieving process.
40
Decision Time
Williams agreed with Ellen in that there was no formal policy prohibiting employees from
blogging. However, he felt that was not really the issue. Could the contents of the blog be
offensive to customers and company employees? What would their reaction be if they or
someone they knew recognized them (or THOUGHT they did) in some of the descriptions?
Were her actions ethical? Did her actions affect the rights of others? Did the airline have the
right to limit her blogging? Did the blog create a liability for the airline?
41
BOB’S SUPERMARKET: COMPETING WITH THE BIG BOYS
Jeffrey B. Conner
This case was prepared and is intended to be used as a basis for class discussion. The views
represented here are those of the case author (s) and do not necessarily reflect the views of the
Society for Case Research. The views are based on professional judgment.
As 2008 was coming to an end, Bob Thompson wondered about the direction he should take his
family-owned independent grocery store. While he and his brother were satisfied with the current
sales and profitability of their store, they had gone through some very rough times in the past
against tough competitors like Walmart. A new and serious concern was the severe recession
gripping the country. Hanover and Jefferson County, Indiana were not very prosperous before
the recession, and suffered along with the rest of the country. Several large local employers
supplied the automobile industry, which was particularly hard hit. Would his customers continue
to pay higher prices for groceries at his store, given they could shop at Wal-Mart, Aldi or Kroger
about 10 miles away? Would some of his business be cherry-picked by price-oriented stores like
Dollar General located just down the street? How could he absorb rising minimum wage costs?
Bob wondered what changes he should make to the business to survive the recession and help his
business ultimately thrive against competition from the big boys.
History
Bob‘s Supermarket was owned by Bob Thompson and his younger brother, Sam. They formed a
subchapter-S corporation in 1988 to purchase an existing supermarket in Hanover, Indiana.
Originally, there was a third partner who provided most of the financing for the business, while
the brothers supplied sweat equity.
The previous owner operated the store for 19 years, but had lost interest in running it. It had
become somewhat rundown and was only marginally profitable. By putting in a great deal of
time and attention, the brothers were able to increase store sales by 40% in the first year and
triple its profits.
The partners tried to build on their success with the Hanover store by adding a second location.
They bought a store in Westport, Indiana, about 50 miles away. The Westport store proved to be
a lot of work and was never more than marginally profitable. It was closed after two years. In
1994, they tried again to expand, purchasing an existing store in Hope, Indiana, near the larger
city of Columbus, Indiana.
The arrival of Walmart Supercenters in 1995 was a major blow to Bob‘s Supermarkets. The first
Supercenter in the area opened on the Madison hilltop about 10 miles from Hanover. Walmart‘s
arrival led to a drop in sales at the Hanover store of 20%. In 1996, Walmart added another
42
Supercenter in Columbus, Indiana, near the Hope store. The Columbus Walmart resulted in a
30% loss in sales at the Hope store, and they were forced to close it. Bob and his brother bought
out their partner to gain full control over decision-making. The two failed attempts at expansion
and a less attractive industry situation with Walmart in the market caused them to be much more
conservative in running the supermarket in Hanover.
By 2005 the Hanover store was teetering on the brink of failure. It was run down inside and out,
and was barely profitable. Over the next couple of years, the Thompsons invested a great deal of
their time and money to improve the external appearance of the store. They also invested in
technology to help them manage it more effectively. They added a new point-of-sale (POS)
system to scan and track all purchases and sales. The store improvements significantly improved
the profitability of the store to record levels.
Mission Statement
The owners viewed their mission as follows:
To provide groceries, fresh foods, and ready-to-eat food that is of the highest
quality and convenient at a fair price, while being a valued member of the
community of Hanover.
The Store
Bob‘s Supermarket was a small and rather modest store, with less than 6,000 square feet of retail
space. The outside was remodeled in 2007. The owners painted the brick front and put up a new
metal façade above the windows. They also cleaned up the look of the store by eliminating
clutter such as an old ice machine sitting in front of the store. The store still had a bit of an
industrial appearance, but looked much cleaner with the new finishes. There was a large and
accessible parking lot with a sign on a pole at the street and one painted on the façade over the
entrance. There was also a lighted sign lower on the signpost where they could put up a limited
number of letters to announce specials. The owners typically didn‘t use that sign, however.
They occasionally put hand-lettered posters in the window or at the street to announce specials.
The inside of the store received only some modest remodeling over time. The ceilings were
fairly low relative to the high ceilings of newer grocery stores. The floors, walls and ceiling
were older and, while clean, were stained or patched in places. The ceiling lights were bare
fluorescent bulbs. Some fixtures and freezer cases appeared newer, while others did not.
A rough layout of the store is shown in Appendix A. The entrance to the store was through
double doors on the side of the building. As one entered the store, they passed the two checkout
lines on the right and displays of featured items on the left. One would then proceed straight
ahead to the fresh produce that wrapped around the opposite end of the store. Continuing around
the perimeter toward the back was the dairy section. The back wall includes a small hot deli
area, a cold deli case (cold cuts and cheeses), and a fresh meat case.
There were some freestanding displays down the front aisle of the store and also from the back to
the front of the store as one neared the check-out area. The display pieces were of various
43
vintages and styles – some owned by the store and some provided by the manufacturer. Some
were simply dressed-up wooden delivery pallets. In addition to national brands, the store tended
to display a few locally-produced items (e.g., locally-made jams) in these areas.
Bob took particular pride in their meat department. They were the only local grocery that cut its
own meat fresh every day. Other stores brought in meat pre-packaged. Bob‘s on-site butcher
would do special cuts upon request. Bob and Sam believed their fresh meat brought customers
in from other communities. Meat was housed in a horizontal meat case that was clean, but didn‘t
have the modern look and special lighting chain stores use to make meat look good.
Bob was pleased his younger brother, Sam, took it upon himself to develop a line of fresh salads
and ready-to-eat (RTE) foods that were made in the store. These were sold in an upright
refrigerated case in the back corner of the store across from the deli. Items included salads
(potato, chef), coleslaw, baked beans, deviled eggs, lasagna, chili and many more. These were
packed in plastic containers with labels similar to those used on fresh meat items. Some items,
like deviled eggs, were in a black plastic tray with clear lid. Others items were in translucent
plastic tubs. Bob felt that these items were quite good. The packaging and display case,
however, were not very prominent or particularly upscale in appearance. Walmart and Kroger
also carried some RTE foods in their Madison stores, but did not have the emphasis on RTE
foods and deli one would see in more upscale, urban/suburban stores.
They sometimes offered lunch specials by combining the few hot items they carried in the deli
with their store-made RTE items. For example, they offered two pieces of deli fried chicken,
some fried potatoes and a container of their RTE coleslaw for a set price. They got some takeout lunch business that way.
Bob and Sam made a decision early that they would not sell alcoholic beverages. This was based
on input from the local community. They felt there was more to be gained in goodwill by being
a good neighbor and family market than could be gained in sales from alcoholic beverages.
Bob believed his employees were part of the reason customers kept coming back. The
employees got to know and typically greeted regular customers. With the exception of three
more long-term folks who worked full time, most employees worked part time for minimum
wage and received no benefits other than those required by the state and federal governments.
One full-time worker received medical insurance. The part-time employees were generally high
school students or housewives. It was difficult to attract committed, long-term workers paying
only minimum wage.
One major worry for Bob was a series of mandated increases in the minimum wage. The
minimum wage had been $5.15 for a number of years, but rose to $5.85 in 2007 and $6.55 in
2008. Another increase to $7.25 was mandated for mid-2009. Obviously, this had an impact on
a major cost component. While the minimum wage increase also impacted on Bob‘s
competitors, it probably had a greater impact on Bob‘s Supermarket due to its smaller size (lower
sales per employee). In addition to Bob and Sam, Bob‘s has three full-time and typically about
10 part-time employees who work a total of about 320 hours per week.
44
Reflecting the small size of the operation, there were no written policies or procedures. Training
for new employees was typically done on the job by shadowing current employees. The
employees did not wear uniform vests or name tags (or any other type of store identification)
typically found at chain supermarkets. It was sometimes difficult for patrons who were not
regulars to identify employees.
Bob‘s Supermarket recently acquired a computerized point-of-sale (POS) system that scanned all
purchases and sales, and tracked purchase and sale prices via checkout scanner similar to those in
more-sophisticated grocery retailers. The system also kept track of inventories. The POS system
was integrated with their accounting system to provide profitability information on the SKU
(stock-keeping unit) level. This also allowed them to determine shrinkage (items lost or stolen).
They could determine which items sold best and were most profitable to carry and which didn‘t
carry their weight. They were also able to use the system to determine order quantities. The
information allowed them to improve both their sales and profit margins.
The Owners
Bob and Sam were very frugal, and performed all management and many other functions
themselves. Bob Thompson had a MBA degree and felt very comfortable with the accounting
and finance side of the business. Sam worked in the store and was in charge of the ready-to-eat
foods. Bob was just not very comfortable with the marketing and human resources side of
running a business, and admitted they gave it less attention.
The owners did very little advertising or promotion. According to Bob, ―we are not particularly
comfortable tooting our own horn, and are not sure of the best way to let people know about our
store.‖ Their location in the town of Hanover and their good customer service were their
primary forms of promotion. Bob added that ―we have not done any market research on the best
way to position ourselves in the marketplace. Our work in this area has been pretty much seatof-the-pants.‖ The owners were not very visible or active in the community.
Their early experience with rapid expansion caused the Thompsons to be rather conservative in
their approach to investing in and operating the business. In addition to running the operation
themselves, they saved money by doing most of their own repairs and maintenance. They also
did much of the remodeling work. Their ―do-it-yourself‖ approach had the obvious benefit of
saving money. It did, however, take away time and energy from other aspects of managing the
business, particularly pursuing new ideas.
Retail Market Analysis
A retail marketing analysis was prepared by Marketek a few years earlier to help local businesses
better understand the Jefferson County market. While the information was several years old, this
report provided the most thorough information on the market and consumer shopping habits.
The following are some excerpts.
The report‘s overall location assessment included the following:
Jefferson County
45
Jefferson County, Indiana is located in the southeast region of the state, with the
southern edge bordering Kentucky. The Ohio River runs along the southeastern
border of the county. The county is characterized by rolling hills, valleys,
farmland and forests.
Jefferson County is predominantly rural with more than 222,000 acres. Forty-two
percent…are used for agricultural purposes.
Residential and commercial uses are concentrated in the cities of Madison and
Hanover.
Madison/Hilltop Area
There are two distinct portions of Madison. One is downtown Madison, which is
the historic gem of the county and located along the banks of the Ohio River. The
second is the Hilltop area, which sits above the downtown and has attracted
residential development as well as several national retail establishments.
Built primarily in the 19th century, the Madison Historic District covers 2,160
acres, virtually all of the downtown area. The Madison historic downtown district
includes an array of merchandise and two grocery stores… As the county seat,
downtown also hosts several institutional anchors.
Commercial development in the Hilltop area is generally a mix of strip shopping
centers, national chains (including Wal-Mart), motels, restaurants/fast food
establishments, service businesses, and auto-related businesses almost all of
which are concentrated on Highway 62. The Hilltop area is increasingly
becoming a regional shopping area, drawing customers from throughout the
county and surrounding areas.
Hanover
With approximately 10,000 acres, Hanover is primarily rural with more than
7,000 acres designated as agricultural.
Hanover‘s main commercial development is located on Highway 56 (LaGrange
Street). The corridor includes a number of businesses, eating and drinking
establishments, various service businesses and two grocery stores. Hanover
residents reportedly rely on the Hilltop area for many of their shopping needs.
Hanover is a mix of students, college related professionals, low to moderate
income households in and to the north of the center of town as well as more
upscale communities south of Highway 56…
Hanover College owns almost 2% of the land in the Town. The college is located
on the eastern border of the town and dates back to 1827. Several of the faculty
members live on campus as well as students. As such, the campus is a sort of
―town within a town.‖ (Marketek, 2002, pp. 3-6)
The report provided lifestyle profiles of the trade area:
Overall, households within the trade area are middle age and older families,
frequently with school age children but also with children that have moved out of
the house (i.e., ―empty nesters‖). As two-thirds of trade area households fall
within the Middle America (34%) and Rural Industrial Workers (30% lifestyle
groups, the characteristics of both groups should be emphasized. As the name
46
suggests, Middle America households are typical of the ―American Household‖ –
Just slightly older, more family oriented and predominantly white. Rural
Industrial Worker households are older, have low to moderate incomes and enjoy
the outdoors. (Marketek, 2002, p. 48)
Issues outlined in the report specifically for Hanover included:
Hanover has two distinct identities: as a ―low to moderate‖ income bedroom
community of about 2,900 year round residents and as home to Hanover College
adding another 1,100 to the population base nine months out of the year.
With the existence of a Super Wal-Mart just 10 miles from Hanover and the daily
out-commute of the working population, retail leakage is a significant issue.
Hanover‘s commercial district lacks a critical mass or core business center.
Situated on a curve of Highway 56 and consisting mainly of a series of
freestanding, destination businesses, it is difficult for the potential shoppers to
identify the areas as a ‗shopping district.‘ The organization is fairly random.
(Marketek, 2002, p. 10)
The report included a resident survey that shed some light on shopping patterns:
Over 700 Jefferson County residents participated in the survey, one-third (33%)
of whom reside in the rural Jefferson County, 24% in the Hilltop area, 18% in
downtown Madison, 15% in Hanover and 9% outside the county.
All respondent groups rely heavily on Wal-Mart for their grocery shopping needs.
More than one-half of Hilltop and Hanover residents (52% and 57% respectively)
surveyed do ‗most‘ of their grocery shopping at Wal-Mart. Kroger is also a
popular shopping destination among all groups surveyed. Not surprisingly, a
large share of downtown Madison residents (46%) surveyed reported that they do
most of their grocery shopping at JayC in downtown Madison.
A large percentage of each of the groups surveyed, including residents of outside
the county, do most of their non-grocery shopping in the Hilltop area. With
limited retail businesses close to home, residents of Hanover (73%) and rural
Jefferson County (59%) rely greatly on the Hilltop area for their non-grocery
shopping.
Reflecting busy schedules and limited budgets, survey respondents are generally
most concerned with selection, convenience and price in selecting a place to shop.
Small town attributes such as familiarity, service and quality are also valued, just
less so. (Marketek, 2002, pp. 29-30)
Jefferson County‘s had a population of 33,010 in 2009, having grown only 4.1% since 2000.
The residents were a bit older than average for Indiana (39.6 versus 36.8 median age), and were
less affluent (median family income $42,646 versus $48,010). (U.S. Census Bureau, U.S.
Bureau of Economic Analysis & Indiana Business Resource Center)
47
Competition
Bob and Sam were competing with both traditional grocery retailers and such non-traditional
grocers as Walmart and Aldi. There were also a number of non-grocery outlets that provided
some less direct and obvious forms of competition for consumers‘ food dollars.
In 2008, most grocery competition was on the Madison Hilltop, about 10 miles from Hanover.
Part of that drive was on a fairly congested stretch of road lined with strip malls and fast food
restaurants. The Walmart Supercenter and Kroger were right across the street from each other.
Bob‘s competition included the two largest and most sophisticated chains in the industry.
Walmart was the giant in the U.S. retail grocery business. The Walmart Supercenter
(www.walmart.com) was similar to Walmart Supercenters everywhere. It carried clothing,
general merchandise and a pharmacy in addition to a broad and deep assortment of grocery
items. While Bob‘s Supermarket is open from 7:00 a.m. to 10:00 p.m., Walmart is open 24
hours a day.
Kroger, headquartered in nearby Cincinnati, (www.kroger.com) was the second largest grocery
chain in the U.S., with sales in excess of $70 billion. The Madison Kroger was a typical chain
supermarket, with about 40,000 square feet of space. It provided a nicer shopping experience
than Walmart, with somewhat higher prices. Kroger employees were knowledgeable and
professional. The store was open 24 hours a day. A typical Kroger also had a broad and deep
assortment of grocery items, and it had a pharmacy. Kroger also had a customer loyalty card
customers could use to get discounts on advertised products, and Kroger could use to track
individual customer purchases and response to promotions.
Another grocer on the Hilltop a mile or so closer to Hanover was Aldi (www.aldifoods.com).
Aldi was a very unusual chain owned by one of Europe‘s largest retailers. The stores were small
and Spartan, with very low operating costs. The Madison is open from 8 a.m. to 9 p.m. They
typically carried only a limited selection of more popular grocery items in only one brand
(usually one of Aldi‘s own store brands) and in one size. The typical Aldi was operated by only
one or two employees. Customers had to bring their own grocery bags, pack their groceries
themselves and return their cart to the inside of the store (there was a cart dispenser that required
a $.25 deposit that was returned when the cart was returned). In return for their sacrifices,
customers received very low prices.
The only other grocery store in the area was the Jay-C Store (www.jaycfoods.com) in downtown
Madison. It was a small store, very similar to Bob‘s Supermarket in size, age and merchandise
selection. It was owned by Kroger, however, which gave it some real advantages in sourcing
groceries.
48
Figure 1
Madison Area Map
Walmart
Kroger
Aldi
62
Madison Hilltop
7
Clifty
Falls
State
Park
421
Jay-C
Madison
256
56
McDonald’s
Ohio River
Bob’s
Kentucky
Hanover
56/62
CVS
Dollar
General
Subway
421
Jendy’s Pizza
While Bob‘s Supermarket was the only true grocery store in Hanover, there were several other
retailers in Hanover that offered some grocery items. These stores carried primarily staple items
that bring customers into the store frequently, such as milk, soft drinks and snacks. CVS had just
built a new, centrally-located pharmacy very close to Bob‘s Supermarket, replacing an older
store that was farther toward the edge of town. It offered milk and some staple food and
beverage items, as well as pharmacy items.
There were also two combination gasoline/convenience stores in Hanover. Both were fairly new
and modern. In addition to selling the usual convenience-type items, one of the stores
contained a small McDonald‘s restaurant. Both of the convenience stores and the CVS sold
beer. CVS also carried wine and hard liquor.
There was also a Dollar General store in Hanover (www.dollargeneral.com). It billed itself as an
updated version of a general store, carrying a limited number of popular items across many
categories, including limited food and general merchandise items. It tended to offer very
attractive prices, often on unique sizes or configurations.
49
In addition to McDonald‘s, there was a larger pizza restaurant (Jendy‘s) and a Subway sub shop
almost directly across the street from Bob‘s. All of the retail outlets and restaurants in Hanover
were within less than a mile of each other.
With the opening of the Walmart Supercenter, the owners saw their sales mix shift. An
unusually large portion of Bob‘s sales were fresh items, meat and produce, and other items
consumers ―fill in‖ between major ―stock-up‖ trips to stores such as Walmart. Sales of items
consumers could easily stock up on at less expensive stores were lower than would be typical for
the size of the store. Bob‘s Supermarket experienced particularly low sales of larger and higherpriced items like laundry detergent and cleaning products that were easy for consumers to stock
up on at Walmart. Bob believed his customers tended to make the trip to Walmart only every
week or so, and then used the Bob‘s Supermarket to fill in between visits. As a result, Bob‘s
typically carried only a single, smaller size of those types of items (e.g., 50 oz. Liquid Tide
versus 100 oz., and single rolls of Bounty paper towels rather than 8-packs).
Pricing
Table 1 shows price comparisons with other local stores for some common items across
categories. Bob‘s Supermarket was more expensive than others on most items, with the
exception of the ready-to-eat products where Bob‘s was fairly price-competitive. Stores like the
Shell convenience store and CVS tried to be competitive on some items, like Coke, where
consumers had a clear idea of what a good price was and would shop around, but they charged
very high prices on other items. Non-traditional retailers like Dollar General often carried
unusual sizes of key items to project an image of better value.
Table 1
Price Comparisons
Bob's Walmart Kroger
JayC
CVS
2% Milk - Gallon
4.09
2.32*
2.09*
2.99
2.49
Butternut Bread
1.99
1.48
2.19
2.59
na
Bananas - Pound
0.79
0.49
0.49
0.59
na
Ground Beef - Pound
2.79
1.90
1.99
1.79
na
Coke - 2-liter
1.79
0.98
1.29**
1.79
1.99
Cheerios (14 oz.)
5.19
2.88
2.49
4.59
4.59
Campbell's Condensed Soup
1.29
0.75
0.73
1.59
1.49
Banquet Frozen Dinner
1.79
0.88 5/$5.00** 4/$5.00
na
Tide Orig. Liquid - 100 oz.
4.79 (4) 14.18
15.39
15.99
16.49
Bounty Paper Towels 8-pack 2.49 (1) 8.97 (2)
10.39
11.99 6.00 (3)
Deli Potato Salad - Pound
1.99
1.98
2.29
2.29
na
Shell
3.19
1.89
na
na
1.50
na
1.99
na
na
2.79
na
Dollar General
2.50
1.25*
na
na
1.25
2.85
1.00 (value size)
na
10.00
6.00 (3)
na
Notes
* Store brand
(1) Single roll.
** With Kroger card
(2) "Mega" 6-pack
(3) 6-pack
(4) 50 oz.
50
Part of the reason for Bob‘s generally higher prices was the higher cost structure to run a much
smaller store than Walmart or Kroger. Another reason was that Bob‘s Supermarket must buy
through and have products shipped in by wholesalers. The chains bought in large quantities
directly from producers and often shipped items to the stores on their own trucks. While not
disclosed separately, Bob believed wholesalers marked up most items 3%-4% and passed along
the higher costs of shipping small quantities to the store.
A few years ago Bob considered affiliating with a buying group, IGA, that would have lowered
their product costs, but decided the requirements were simply too onerous. IGA required a large
up-front investment in signage, an up-front fee, minimum orders quantities, and an on-going fee
as a percentage of sales.
Financials
The financial statements for Bob‘s are shown in Tables 1 through 3 (for fiscal years ending
December 31). There were some unusual features of the financial statements that reflected the
nature of the store as a small business, as well as the owners‘ other investments in real estate.
The physical store and the land it sat on were owned by the brothers in a real estate company,
which was a separate legal entity from the Supermarket. The Supermarket paid rent to the real
estate company. The fixed assets on the Supermarket‘s balance sheet were fixtures and
equipment. Most of the fixed assets were either fully depreciated or were acquired used at a
fairly low cost, often at auction. The notes and loans receivable were loans from the store to the
real estate company to fund the major exterior improvements and the POS system.
Finally, as a subchapter S corporation, Bob‘s Supermarket worked like a partnership for tax
purposes. The owners paid personal income tax on their share of operating income. They then
drew funds from the company as they chose.
51
Table 2
Balance Sheet
2007
Assets
Current Assets
Cash and cash equivalents
Accounts receivable
Loans & notes receivable (from Bob)
Inventory
Prepaid expenses and other current assets
Total current assets
Fixtures and equipment
Less accumulated depreciation
Net Fixtures and equipment
Total assets
Liabilities and shareholder's equity
Current liabilities
Accounts payable
Accrued expenses and other current liabilities
Total current liabilities
Other liabilities
Total liabilities
Shareholder's equity
Common stock
Paid-in capital
Retained earnings
Total shareholder's equity
Total liabilities and shareholder's equity
2006
2005
$6,465
2,018
75,087
92,642
7,670
183,881
155,839
148,741
7,097
$190,978
$41,979
6,602
45,973
84,287
626
179,467
134,731
132,903
1,828
$181,295
$6,689
8,591
33,818
85,296
4,111
138,505
132,854
130,802
2,052
$140,557
$24,070
10,402
34,472
4,184
38,656
$32,974
7,763
40,737
0
40,737
$38,970
7,944
46,914
4,500
51,414
900
64,242
87,180
152,322
$190,978
900
64,242
75,416
140,558
$181,295
900
64,242
24,000
89,142
$140,557
Table 3
Income Statement
Net Sales
Cost of Goods Sold
Gross Profit
Expenses:
Wages and benefits
Supplies
Rent
Utilities
Depreciation
Repairs
Other expenses
Total Expenses
Operating Income
2007
$1,312,875
894,060
418,815
2006
$1,214,107
843,230
370,877
2005
$1,319,283
943,000
376,283
183,866
16,559
27,000
31,709
15,838
14,576
41,906
331,453
$87,362
180,270
20,934
27,000
31,469
5,708
7,250
46,832
319,461
$51,416
181,490
21,508
27,000
29,977
9,676
6,960
44,679
321,290
$54,993
52
Table 4
Statement of Changes in Stockholders‘ Equity
Balance at December 31, 2004
Operating Income
Stockholders' Draws
Balance at December 31, 2005
Operating Income
Stockholders' Draws
Balance at December 31, 2006
Operating Income
Stockholders' Draws
Balance at December 31, 2007
Common
Additional
Stock
Paid-in Capital
$900
$64,242
900
64,242
900
64,242
$900
$64,242
Retained
Earnings
$9,508
54,993
40,500
24,000
51,416
0
75,416
87,362
75,598
$87,180
Total
$74,650
54,993
40,500
89,142
51,416
0
140,558
87,362
75,598
$152,322
Economic and Consumer Trends
Bob found the economic news quite distressing. A headline in the December 22, 2008
BusinessWeek magazine was pretty distressing: ―The Great American Shopper Hits a Wall,‖
with a subhead that read, ―The unprecedented falloff in spending means the consumer is leading
the economy into one of the harshest recessions in 60 years.‖ The article went on to summarize
all that was going on in the economy:
This is the classic recession pattern: Weakness in the economy feeds on itself –
as consumers retrench, companies cut back, further undercutting spending. This
time the cycle is magnified by the credit crunch and the breadth of the slump.
Households are even curbing outlays for services, such as recreation and other
discretionary activities. That‘s a factor in the record loss of service jobs in recent
months. (Cooper, 2008, p. 10)
Later on in the same issue, there were other articles that suggested the scope of the recession.
One was entitled ―Job Losses: Is the Panic Justified?‖ (Coy, 2008). Another was entitled ―Is
Housing Close to A Bottom‖ (Kalwarski, 2008).
While consumers typically cut back major discretionary purchases first in a recession, in a
serious downturn they were likely to look for ways to economize anywhere they could.
An article in the August 25, 2008 BusinessWeek highlighted a shift in consumer trends that
began fairly early in the recession.
By now, a number of the nation‘s largest supermarkets are finding that a tighter
economy is prompting some customers to look for cheaper options. Executives at
midmarket grocery giants such as Safeway, SuperValu, and Delhaize Group have
cut their growth projections recently amid slowing sales. The problem: More
Americans are buying food at Wal-Mart and deep-discount stores such as Aldi.
TNS Retail Forward, which tracks retail trends, published a study in July that
found at least one-third of consumers have switched their shopping to discounters
for food and household essentials. (McConnon, 2008, p. 72)
53
On the other hand, consumers had for many years increased the percentage of meals eaten
outside the home. As a more expensive discretionary purchase, Bob saw a ray of hope that
consumers would cut back on meals eaten outside the home in favor of less-costly meals at
home.
Conclusion
As Bob considered the future of his store, he was proud of what they had accomplished in the
face of strong competition from Walmart and others. At the same time, however, he was also
worried about the impact of the recession and the coming increase in minimum wage. He
wondered what steps he should take to strengthen the business to survive the recession and thrive
long term competing with the big boys.
54
References
Cooper, James C. (2008). The Great American Shopper Hits A Wall. BusinessWeek, 4113, 10.
Coy, Peter (2008). Job Losses: Is the Panic Justified? BusinessWeek, 4113, 22-26.
Kalwarski, Tara (2008). Is Housing Close to a Bottom? BusinessWeek, 4113, 11.
Marketek, Inc. (2002). Retail Market Analysis: Jefferson County, Indiana. Atlanta, GA.
McConnon, Aili (2008). Grocers: A Shift Toward Thrift. BusinessWeek, 4097, 72-73.
U.S. Census Bureau, U.S. Bureau of Economic Analysis, & Indiana Business Resource Center.
Jefferson County, Indiana Profile. Retrieved from http://stats.indiana.edu.
55
Appendix A
Bob‘s Supermarket Store Layout
Entrance
Pet
Office
Sodas
Dog Food
Paper
Cold Cuts/Sausage
Paper &
Cleaning
Laundry
Checkout
Drugs &
Candy
Ice Machine
Checkout
Bread
Bakery
Gum
Frozen
Snacks
&
Cereal
Baking
Canned
Goods
&
Coffee
Drinks
Cold Deli
Floor-Standing Displays
Seasonal Displays
Parking Lot
Fresh Meat
Canned
Veggies
Pasta &
Soup
RTE
Case
Produce
Produce
Dairy
Condiments
& Crackers
Hot Deli
56
CERIDIAN LIFEWORKS: MAKING A DIFFERENCE WITH A DOSE OF
INNOVATION
Dawn E. Bowden
This case was prepared and is intended to be used as a basis for class discussion. The views
represented here are those of the case author (s) and do not necessarily reflect the views of the
Society for Case Research. The views are based on professional judgment.
After two months on the job, the Ceridian LifeWorks Vice-President of Product Management,
Liz Graham, was grappling with some of the challenges that she and her team were now facing.
LifeWorks had a proven set of products that were supported by stable operations, functional
structures, and an efficiency-oriented culture. However, the business was losing its competitive
advantage in the marketplace, resulting in declining sales and market share. Despite this recent
trend, the top priority projects for the business were focused on driving efficiency into the
longstanding Employee Assistance Program (EAP) and Work-Life product offerings. She was
brought into the organization for her expertise in the health care industry (just over 10 years) and
for her proven track record in successfully launching innovation initiatives at her previous health
care company (particularly in health and wellness). The expectations were high that she would
be able to make some of the changes needed to move the company in a new direction.
Liz wondered what she should do next. How could she optimize the EAP and Work-Life
business while encouraging innovation? What types of innovation could she consider? Would
she truly be able to deliver a dose of innovation for this health care organization? The strategic
planning for the next 3 years was to start soon and she wanted to present a recommendation to
the management team for how to move the organization to a more competitive position in the
market.
Background
Ceridian Corporation is a privately-held business services company formed more than 70 years
ago. Over time, the business has provided a wide range of business solutions in the human
resources industry including: health and productivity solutions, talent acquisition and
management, human resource/payroll administration, payroll tax filing, benefits administration,
time and labor management, and web-enabled employee self-service technology platforms.
LifeWorks (LW), a business unit within Ceridian Corporation, provides businesses and their
employees health and wellness related programs. LW had been a leader in the Employee
Assistance Program and Work-Life market, which is a segment of the overall health care
industry. However, significant changes in the macroenvironment and increasing pressure from
57
clients seeking low-cost or no-cost integrated health care benefit options had demanded that the
company evaluate its strategic position in the marketplace and the assumptions that govern its
current behavior regarding innovation.
LW evolved from an internally-delivered Employee Assistance Program (EAP), or counseling
service in the 1970s and had grown to become a leader in the EAP and Work-Life market (a
segment of the overall health care industry), serving over 14 million individuals. These
individuals accessed services provided by Ceridian LW through three call centers in the U.S. The
largest call center was based in Plymouth Meeting, PA (a suburb of Philadelphia). Smaller call
centers were based in Eagan, MN (a suburb in the Minneapolis/St.Paul area) and St. Petersburg,
FL. The St. Petersburg call center provided access for Spanish-speaking individuals. All of the
call centers provided EAP and Work-Life services.
The LifeWorks Product Portfolio
The LW product portfolio contained four main product categories (see Table 1):
1.
2.
3.
4.
EAP and Work-Life
Health and Wellness
Productivity Management, and
Organizational Consulting.
58
Table 1:
Ceridian LifeWorks Product Portfolio
EAP & WorkLife
Employee
Assistance
Programs
(internally delivered)
Health &
Wellness
Life Health
Assessment
(internally delivered;
minor vendor
involvement)
Organizational
Consulting
(delivered via a
vendor)
Leave
Administration
Services
(internally delivered)
Health Coaching
(supporting
technology leased
from a vendor)
Training & ELearning
Seminars (delivered
Conflict
Resolution &
Facilitation
via a network of
trainers)
(delivered via a
network)
(delivered via a
vendor)
Work-Life
Programs
Productivity
Management
Disease Mgmt.
Programs (delivered
via a vendor)
Onsite Health
Services (delivered
Special Projects
via a vendor)
The EAP & Work-Life category was considered the primary product platform and consisted of
counseling services, Employee Assistance Programs (EAPs), and Work-Life services such as
child care, elder care, legal, and financial resources and referrals. The EAP & Work-Life product
category was delivered through all three of the call centers. LW used external partners to provide
some of the EAP & Work-Life services, but this was minimal.
The Health & Wellness product category was entirely delivered by external vendors. Employees
and members would call a central LW telephone number and then be transferred to the
appropriate vendor to deliver the services required. The services contained within this category
included Health Coaching for tobacco cessation, weight management, and stress management,
Disease Management for conditions such as asthma, back pain, diabetes, and heart disease,
Onsite Health Services such as health screenings and health fairs.
The Productivity Management product category consisted of Leave Administration Services and
Training & E-Learning Seminars. Leave Administration helped organizations manage the shortterm and long-term absences for employees including sick time, vacation/holiday time, and
Family and Medical Leave (FMLA) events such as maternity leave. Delivery of the Leave
Administration Services product was dependent upon a software system licensed from a strategic
59
partner and used by the St. Petersburg call center. The Training & E-Learning product was
delivered via a network of trainers located nationwide.
The final product category of Organizational Consulting consisted of custom consulting projects
and conflict resolution and facilitation services. The category was delivered through the
Plymouth Meeting service center as well as through virtual employees and corporate employees
in Boston, MA and Minneapolis, MN. Due to its low relative market share and growth, it was
being sunsetted (or terminated).
Each of the product categories and the associated products were at varying stages in the product
lifecycle. Liz conducted a market and product analysis to determine placement of the product
categories on the lifecycle curve and support development of a go-forward product strategy. She
learned that since 2002, there had been limited growth in sales and market share had declined for
LW.
LW had been focused on improving the performance of the existing EAP and Work-Life product
category including upgrading the call centers and information technology infrastructure. These
efforts also supported the major markets and current customers it was serving (e.g. small,
medium, and large businesses, and disability carriers). Liz learned that the EAP & Work-Life
product category had started to experience a drop in sales and profits despite achieving some cost
efficiencies in implementation and delivery. The number of competitors was also starting to
decline due to consolidation via mergers and acquisitions, resulting in fewer, yet more pricecompetitive, competitors delivering EAP & Work-Life services.
LW was able to tap a new market through some minor improvements on the existing EAP &
Work-Life capabilities. These improvements resulted in a cheaper and simpler version of the
EAP & Work-Life product that met the unique needs of UNUM, the largest disability insurance
carrier, and the corporate customers it served. This product offered convenience for the
corporate customers and changed the industry‘s business model for purchasing EAP & WorkLife products. Unfortunately, it also generated less revenue due to its appeal to a less profitable
customer base and began to cannibalize the core business.
The Health & Wellness product category was just starting to gain traction in the market with
more sales and increasing profits. In the previous 12 months, there was a significant influx of
competitors focusing on health and wellness related products. Unfortunately, innovation in this
category was difficult for LW because it was all delivered through a vendor. Consequently, the
most recent innovation for LW occurred in 2005 when the organization leveraged a software
platform via a strategic partnership to provide Leave Administration Services as part of the
Productivity Management category. Despite the launch of this new product, sales and market
share continued to decline. The Productivity Management category had produced several sales,
though the development and customer implementation costs were still quite high. Competition
was starting to enter this market as well though was limited due to the barriers to entry associated
with the development of an adequate software system to support it.
60
The Market
EAPs came into existence in the 1950s. These early programs focused on early intervention for
alcohol and drug abuse. Since the 1970s, mental health issues and services were added to help
employers deal with deaths, accidents, and other workplace incidents that distracted the
workforce and reduced employee productivity. In the 1980s, EAP services were expanded to
include home-related services, such as conducting research and providing referrals for childcare
and finding day or long-term care for elders. EAPs also began to offer legal and financial
assistance and even concierge services. In the late 1990s, health and wellness issues came to the
forefront as health care costs escalated and the U.S. population became one of the unhealthiest in
the world.
The majority of behavioral health care benefits, inclusive of EAPs, are purchased by large groups
that buy comprehensive healthcare and other insurance benefits for their covered members.
Purchasing groups include large employers, health plans, union trust and Taft-Hartley trust funds,
school districts and educational coalitions, and state and county mental health agencies supported
by public funds. Over 160 million Americans were enrolled in some type of specialty managed
behavioral health program (Jones, McClanathan, & King, 2005). Further, health care in the U.S.
had reached a trillion dollar price tag and there was increasing pressure on health care
organizations to provide services that reduced costs, improved quality, and increased access at
the same time that purchasers, primarily employers, were eliminating many benefits. EAP and
Work-Life services were typically included in these eliminations since they were not considered
critical benefits.
With an extensive history in the EAP & Work-Life industry, LW was quite successful through
the late 1990s and was considered the leader for Work-Life related services. The company
received high service and satisfaction ratings from customers, revenue and profits were steadily
increasing year-on-year, and innovation on the EAP and Work-Life platform perpetuated the
growth of the company. Beginning in the early 2000s, LW began experiencing a dramatic
decline in sales and market share due to product commoditization of its longstanding EAP and
Work-Life products. Table 2 provides the enrollment, market share, and growth data for the
Behavioral Health, EAP, and Work-Life competitive landscape.
Due to the various changes in the market, Liz found a shifting competitive landscape. The
majority of the competitors that LW was now facing in the market were not its traditional
competitors. These new competitors were devoting most of their marketing and product
development efforts to Health & Wellness products, likely due to the declining profits and
commoditization of the EAP & Work-Life products. The new competitive landscape included
companies like StayWell, Healthways. ComPsych, Health Dialog, SHPS, OptumHealth, and
CIGNA.
61
Table 2:
Behavioral Health, EAP, and Work-Life Industry Market Stats
2005
2004
2003
2006
Company
# of
Individual
s Served
(in
millions)
Market
Share
Ceridian
LifeWorks
12.04
Magellan
Health
Services
2002
%
Growth
# of
Individuals
Served
(in
millions)
Market
Share
%
Growth
5.1%
11.9%
10.50
4.6%
16.7%
68.75
29.8%
0.1%
68.70
30.3%
-3.3%
12.6%
21.31
9.2%
0.0%
21.31
9.4%
0.0%
12.4%
262.3%
6.90
3.0%
-0.3%
6.92
3.0%
12.2%
24.00
11.9%
-3.0%
24.74
10.7%
0.0%
24.73
10.9%
-0.6%
66.7%
12.00
5.9%
22.4%
9.80
4.2%
-0.2%
9.82
4.3%
18.0%
7.4%
14.3%
14.00
6.9%
-0.6%
14.09
6.1%
0.1%
14.08
6.2%
7.6%
5.1%
0.0%
11.00
5.5%
15.8%
9.50
4.1%
-3.3%
9.82
4.3%
%
Growth
# of
Individuals
Served (in
millions)
%
Growth
# of
Individuals
Served (in
millions)
%
Growth
# of
Individuals
Served (in
millions)
Market
Share
Market
Share
Market
Share
5.5%
-7.4%
13.00
6.0%
2.5%
12.68
6.3%
7.9%
11.75
43.00
19.6%
-19.5%
53.40
24.8%
-6.5%
57.10
28.3%
-16.9%
United
Behavioral
Health
43.00
19.6%
2.4%
42.00
19.5%
75.0%
24.00
11.9%
ComPsych
Corporation
25.00
11.4%
0.0%
25.00
11.6%
0.0%
25.00
Value
Options
24.00
10.9%
0.0%
24.00
11.2%
0.0%
APS
HealthCare
20.00
9.1%
104.1%
20.00
9.3%
CIGNA
Behavioral
Health
18.00
8.2%
12.5%
16.00
MHN, Inc.
11.00
5.0%
0.0%
11.00
62
4.2%
First
Mental
Health,
Inc.**
7.00
3.2%
16.7%
7.00
3.3%
0.0%
7.00
3.5%
16.7%
6.00
2.6%
-0.5%
6.03
2.7%
0.0%
WellPoint
Behavioral
Health, Inc.
6.50
3.0%
0.0%
6.50
3.0%
8.3%
6.00
3.0%
17.6%
5.10
2.2%
-0.8%
5.14
2.3%
51.6%
Family
Enterprises,
Inc.***
6.00
2.7%
0.0%
6.00
2.8%
20.0%
5.00
2.5%
6.4%
4.70
2.0%
0.6%
4.67
2.1%
27.2%
PacifiCare
Behavioral
Health,
Inc.****
4.10
1.9%
2.5%
4.00
1.9%
0.0%
4.00
2.0%
0.0%
4.00
1.7%
1.5%
3.94
1.7%
0.0%
44.36
19.2%
7.4%
41.29
18.2%
-18.6%
231.00
100.0
%
1.8%
226.95
100.0
%
-1.7%
All Other
Compet
itors
Total
unknown
219.64
unknown
100%
2.2%
214.90
unknown
100.0
%
6.5%
201.78
100.0
%
-12.6%
*2000-2001 data is reported under the name APS Healthcare, Inc.
**2000-2001,2002-2003 data is reported under the name First Health Services of Tennessee
***2000-2001,2002-2003 data is reported under the name FEI Behavioral Health
****2002-2003 PacifiCare Behavioral Health not listed in report
Source:
1998 thru 2003: Open Minds--Managed Behavioral Health Market Share in the U.S., 1998-1999; 1999-2000; 2000-2001, 2002-2003
2004 – 2006: Information found on Individual company websites.
63
The Product Management Team
The business unit hired Liz as the VP of Product Management to assess the situation and
determine how to increase business growth through product development efforts. She joined the
company after recently conducting similar product portfolio audits with two of LW‘s competitors.
Her work at those companies had resulted in successful development and launches of numerous
new products. In addition to her market and product analysis, Liz decided to conduct a baseline
assessment of the Product Management team. The organization that she inherited included a
team of eight product-focused professionals. Figure 1 shows the product
management/development organization when she joined LW.
Liz soon found that the team was struggling with the development and launches of new products,
product enhancements, and product sunsets. There had been no product sunsets, or elimination
of non-performing products, in nearly ten years. Further, the launch of the leave administration
product had taken a period of two years to develop and was still in development. She also
determined the following levels of performance in her analysis:
o Business cases were developed and financial benefits were identified for only 10% of
projects.
o Product launch dates were determined for only 30% of the projects.
o Surprisingly, 65% of projects were in ―green‖ status and identified as ―moving forward
without major risks‖ despite the low number of projects with financial benefits identified
and launch dates determined.
o Average product development cycle time was greater than 1 year (averaging 68 weeks
across the development portfolio) and above industry standards which targeted
development cycles within 9 – 12 months.
In her initial analysis, Liz also determined that nearly 45% of all product management projects
were focused on the longstanding EAP and Work-Life category. Additionally, a mere 40% of the
development projects were marketable and scalable, well below industry standards. Projects that
were not marketable and scalable were typically developed for a sole purpose or a single client
with varying profitability and client size requirements. Liz was frustrated with the lack of data
available to evaluate the performance of her team. Further, the metrics that she was able to
evaluate were below her expectations based on benchmarks from the previous competitive
companies she had worked for. The competitor companies that she had previously work with had
launched products within 6 – 12 months, determined launch dates for at least 90% of projects,
and had fully developed business cases for all projects after the initial phases of the development
cycle.
64
Figure 1
Ceridian LifeWorks Product Management Team
VP of Product Management
Director of Product
Development
Director of Product
Development (Virtual Utah)
(Boston Office)
EAP & Work-Life Products
Sr. Product Manager
Project Administrator
(Virtual - Florida)
(Boston Office)
Work-Life Produts
Product Manager
(Virtual - Massachusetts)
EAP & Work-Life Systems,
Health & Productivity
Product Manager
(Boston Office)
EAP & Work-Life Products
Product Manager
(Virtual - Massachusetts)
Online EAP & Work-Life
Products
Prouct Manager
(Virtual - Pennsylvania)
EAP Products
65
The Organizational Architecture
The LW organizational architecture was a centralized hierarchical structure with each employee
supporting multiple product category types (e.g. EAP and Work-Life, Health and Wellness,
Productivity Management, and Organizational Consulting). Employees reported to functional
heads in Product Management, Marketing, Operations, Sales and Account Management,
Information Technology, Human Resources, Quality, and Finance. For example, within the
Operations area, the delivery teams for each of the product categories reported to Directors with
responsibility for all product categories. These Directors reported to the VP of Operations,
Melissa Simmons. Decisions for investment and prioritization resided with each of the
functional leads, primarily at the VP level. They were required to prioritize between the four
product categories as well as between projects supporting operational efficiencies versus new
development.
There was significant tenure on the management team and throughout the organization as many
VPs and Directors had achieved 10 years of service. This had created an organization with
distinctive competences, extensive employee knowledge and skills, technical systems,
managerial systems, and values and norms associated with the EAP and Work-Life product
category. Performance assessment was based on the ability to achieve operational efficiencies,
sales volume, and new product launches with metrics established for the EAP and Work-Life
product category only.
Liz learned that many of the recent ―innovations‖ were actually achieved via vendors and
strategic partnerships versus internally developed efforts. The alignment of the organizational
structure, financial models, and individual performance reviews ensured that employees
maintained a high degree of confidence and comfort with delivering the longstanding EAP &
Work-Life product category, limiting their need and sense of urgency to acquire and build new
knowledge for increasing or changing capabilities in new product categories. She also learned
that Melissa had significant challenges in meeting operational performance objectives for the
EAP & Work-Life category if significant investment dollars and team members‘ time was spent
on the newly emerging product categories. Consequently, an internal battle persisted between
functional areas measured on achieving EAP & Work-Life operational efficiencies such as
Operations, Finance, and Quality and those tasked with generating new revenue and products for
the organization such as Product Management, Marketing, Sales and Account Management.
The Financial Picture
Since the business had evolved through delivery of one product category (EAP & Work-Life), all
of the financials were consolidated into one overall Profit and Loss (P&L) statement versus
individual P&Ls for each product category. The individual products contained within each of
the three product categories (EAP and Work-Life, Health and Wellness, and Productivity
Management) were counted as a single financial metric that represented the LW business unit as
a whole. Liz reviewed the available data that provided Revenue, Expenses, and Profit for the
previous 2 years (Figure 2 & Table 3). Despite the limited availability of data by product
category, she was able to perform some manual calculations. Liz determined that 90% of the
revenue was derived from the EAP and Work-Life products and 10% from products within the
other three categories.
66
Figure 2:
2006 – 2007 Year-On-Year Revenue/Expense/Profits
Financials: Year-Over-Year Comparison - REVENUE
Revenue 2006
Revenue 2007
9,000,000
8,000,000
7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Financials: Year-Over-Year Comparison - EXPENSES
Nov
Dec
Expenses 2006
Expenses 2007
9,000,000
8,000,000
7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Financials: Year-Over-Year Comparison - PROFIT
Nov
Dec
Profit 2006
Profit 2007
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
(500,000)
(1,000,000)
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
(1,500,000)
Source: Ceridian LifeWorks Product Management, 2007.
67
Table 3:
2006 – 2007 Year-On-Year Revenue/Expense/Profits
Source: Ceridian LifeWorks Product Management, 2007.
68
The Operating Rhythm
The LW business unit had no formally established product development and management
process or operating rhythm (an established cycle for design, development, pilot, and launch). A
preliminary draft of a process was being used by the Product Management Team as a guide for
next steps in the management of their respective projects. The operating rhythm, product
management projects, and prioritization were driven by opportunities brought to the organization
through Sales and Account Management. The business unit took pride in being able to meet the
unique and customizable needs of its clients and even considered this their hallmark in the
industry. Additionally, project prioritization was strongly influenced by Melissa, the VP of
Operations. Liz determined that only 10% of all projects had incremental financial benefits and
that the project portfolio contained a significant number of projects focused on operational
improvements.
A Dose of Innovation
Liz had spent a significant amount of time conducting her analysis of the market, the LW
organization, and her Product Management Team. Despite her initial success with minor
performance improvements on the Product Management Team, there were many unresolved
issues. Evolutionary innovation and change would likely not be enough to propel the LW
business unit forward.
The theme and mantra, ―Making Great Happen—I am the Difference‖ was being promoted
throughout the company. All senior management team members had read the book Good to
Great by Jim Collins and were required to develop short-range and long-range plans that aligned
with the concepts in the book (Collins, 2001). Potentially, this organizational focus on ―making
great happen‖ could drive the needed revolutionary change and innovation through practices and
policies. Liz was optimistic that she could make great things happen and be ―the difference‖ the
organization required. How could she optimize the EAP and Work-Life business while
encouraging innovation? There were several options LW could pursue to improve the business,
though not all were equally feasible. Should she abandon the current business, improve upon it,
invest in new technology, or some combination? As she reviewed her analyses, she wondered
what she should recommend to the management team at the upcoming strategic planning session.
69
References
Ceridian LifeWorks Product Management, 2007.
Collins, J. (2001). Good to Great. New York, NY: HarperCollins Publishers, Inc.
Jones, E., McClanathan, A., & King, D. (2005). Understanding Managed Behavioral Health Care
Benefits. In J. S. Rosenbloom (Ed.), The Handbook of Employee Benefits (6th ed., pp.
107-153). New York: The McGraw-Hill Companies. (Original work published 1984).
Open Minds. (1998 – 1999). Managed Behavioral Health Market Share in the U.S.
Open Minds. (1999 – 2000). Managed Behavioral Health Market Share in the U.S.
Open Minds. (2000 – 2001). Managed Behavioral Health Market Share in the U.S.
Open Minds. (2002 – 2003). Managed Behavioral Health Market Share in the U.S.
70
EMPLOYEE MOTIVATION IN A SMALL AG FIRM:
MADISON TRUCKING COMPANY
Neil Tocher, William E. Stratton and Aaron Wolfe
This case was prepared and is intended to be used as a basis for class discussion. The views
represented here are those of the case author (s) and do not necessarily reflect the views of the
Society for Case Research. The views are based on professional judgment.
Prologue
In February 2007, at 21 years of age, Adam Wade returned from serving a two year assignment
in the Fiji Islands for his church. After being back in his small home town in an agricultural area
of a western state for a week, Adam began searching for a job. Within two weeks he was offered
a job by Bob Madison, a leading member of his church, to work as a laborer at Madison
Trucking Company, located just outside of town.
On a Monday morning during the first week of March, Adam arrived on site at Madison
Trucking to begin work as a laborer and general ―gopher‖ for nine dollars an hour. The following
is Adam‘s account of operations at Madison‘s and the situations he encountered during his
employment there.
Company Background
I was aware that the Madison family members were engaged in a number of different activities
that their father had started and formed into businesses that the sons now owned and operated.
These businesses included a series of farms, a cattle ranch, a grain storage elevator, and the
trucking company.
One of the sons, Bob Madison, was responsible for Madison Trucking and the grain elevator
located on a railroad siding northwest of town in close proximity to the local airport. Madison‘s
was mainly involved in the transportation of grain from various farmers‘ fields to the grain
elevator where it was inspected for quality and weighed, after which it would be dropped into the
elevator, sorted into one of 14 grain silos with similarly graded grain, and await being trucked or
shipped by rail to various locations in California, Nevada, and Utah.
The selling price of grain was determined by the grade of the grain being sold. The grade
depended on the kernel size and the moisture content of the grain as well as how much chaff was
intermixed in it. Loads with bigger and heavier kernels and less chaff received a better grade.
The highest grade grain was usually sold to companies such as General Mills, who used the grain
in making cereals and other wheat-based products. Grain was loaded into trucks or rail cars to be
transported using spouts projecting from the top of the elevator. One spout lined up over the
71
railroad track for dumping grain into rail cars, and the other extended farther out over a stretch of
road running parallel to the tracks for loading grain into trucks.
In addition to its grain operations, Madison‘s made use of another set of railroad tracks that
branched out from those running to the elevator. This set of tracks was still on the company
property. As a way to help subsidize company costs, Madison‘s struck up a deal with Blair &
Lloyd (B&L), one of the biggest oil and fuel suppliers in the area, to use the offshoot stretch of
track to load B&L‘s fuel trucks from railroad tank cars. B&L ordered fuel out of Texas and New
Mexico that would be transported in tank cars by the railroad to the tracks at Madison‘s. This
eliminated B&L‘s fuel trucks having to wait in line at the local pipe line. In addition, B&L was
able to purchase the fuel at a better price, and its trucks saved an hour‘s drive back to the
company‘s storage tanks when transporting fuel.
The fuel was loaded directly from the railroad tank car into the fuel truck by means of a
transloader, which was a giant pump housed in a trailer parked alongside the second set of tracks
where the tank cars were parked. The fuel transferred by means of this process was of two types,
either dyed or undyed diesel fuel. Dyed fuel, which is sold free of tax, could only be sold for use
in certain situations, such as to farmers for off-road use in their agricultural machinery or for use
in stationary equipment. The regular undyed fuel was taxed and sold for normal use in highway
vehicles.
The fuel transfer process was somewhat complicated, and it could take anywhere from 15
minutes to two hours to transfer a load of fuel from the train car to the fuel truck. There were
three hoses as well as a system of valves and computers attached to the transloader. The two
main hoses were four inches in diameter and 30 feet long; the smaller one was ½ inch by one
foot long and was used to drain off fuel samples for testing. In the course of transferring fuel, one
large hose would connect the bottom of the train car to the transloader and the other went from
the transloader to the tank of the fuel truck. After attaching the hoses, the transloader operator
would punch in the number of gallons to be pumped into the truck and start the transloader.
Before, during and after pumping a load, the operator had to keep track of numerous additional
small details. For example, the operator had to ascertain what fuel type the B&L trucker needed
for his load and align the correct train car with the transloader. Then about halfway through the
process, the operator would have to stop pumping in order to take a sample of the fuel and record
its temperature and density. The operator also had to stop the flow when there were about 15
gallons yet remaining to complete the load, hook up an air compressor hose to the fuel truck‘s air
stems, hook the other end of the air hose onto a valve stem on the elbow fitting that connected
the hose to the train car, close the valve from the train car, open the valve for the compressed air,
open the flow of the pump, and then close both hose valves on the pump when the gallons were
exactly at the amount that was punched into the computer at the beginning of the process. The
operator then disconnected the hoses from the truck and train car, put caps on the hoses and
elbow fitting, and went back to the upstairs office of the grain elevator to print a receipt for the
truck driver.
Also on site at the elevator was a large shop where trucks needing oil changes, lubrication, brake
pad replacements, etc. were brought in to be worked on.
72
The Job Begins
Upon arriving for my first day of work at approximately 8:00 a.m., work was already in full
swing with trucks dropping grain at the elevator. My only instruction from Bob had been to show
up at that specified time and place to begin work. The first man I met was Roger, the elevator
operator, who advised me that, ―I don‘t know what the hell Bob hired you to do!‖ and pointed
me upstairs to a small office built on top of the elevator office and told me to go talk to Earl, the
foreman. Upon my arrival upstairs, Earl stared at me with his ―who-in-the-world-do-you-thinkyou-are‖ look, and said, ―Can I help you?‖ I explained my situation and he said he would call
Bob to figure out what was going on. After about ten minutes Earl finally managed to contact
Bob and then advised me to go to the shop and find Sam the mechanic and ask him what to do. I
went back downstairs and proceeded down the drive to where Earl had told me the shop was
located and went inside. It took a couple of minutes to find somebody, and when I did, he
appeared to be much closer to my age and I asked if he knew where Sam was? With an
enthusiastic smile, he responded, ―Well, that‘s me!‖ So I again explained my situation and what
was going on, and Sam told me that he would find something for me to do.
My first day I mainly swept and cleaned up around the shop, which seemed like it had not been
picked up for quite some time judging by the way I was sweeping up enough dirt to fill a couple
of five-gallon buckets. I spent my first week doing odd-jobs around the shop, helping Sam or
José, another hired hand and jack-of-all-trades, just trying to keep busy. I would only take a halfhour break to eat lunch and rest, and then it was back to work until quitting time, which was
anywhere from 6:00-8:00 p.m.--whenever it was that Bob called and told us we could go home.
At the start of my second week, Earl came into the shop to tell Sam that Bob wanted me to be
trained on operating the transloader.
The next time a fuel truck came in, Sam took me out to the transloader to learn the ropes. For the
next few weeks, I watched Sam load the fuel trucks. At first it seemed like a very complicated
and complex process. Along with the process there was some risk involved. Not only did you
have to know how to operate a loader (tractor) to move train cars up and down the track, but you
had to know what type of fuel was in each car. The operator also had to climb on top of the train
car to open an air flow valve (so that the train car did not crush like a pop can from suction as it
was pumped empty) and know the function of each of the many valves on the transloader. Each
step in the process had to be done in its specific order to make sure it was done safely and avoid
any accidents. Also to forestall accidents, flags and markers were placed on the tracks near the
fuel cars to prevent anyone from using that stretch of track while fuel was being pumped. There
was also a 100,000 gallon rubber coated reservoir situated between the tracks and the transloader
to contain any major fuel spill.
Settling in to the Routine
As the months passed, I became the main operator of the transloader filling the B&L trucks. This
duty also involved working with Carol, the receptionist, since I would have to print fuel receipts
in her upstairs office. I was also trained by Sam to change brakes and trailer tarps for the grain
trucks and also to help Roger by being the spout holder when filling train cars with grain. I
learned the work up to the point where I could fill a fuel truck faster and with more accuracy
73
than either Sam or Earl, the other employees who knew how to operate the transloader. I spent
my down-time between other jobs cleaning out the tumbleweeds and the inches of caked, dried
mud that filled the rubber reservoir. The other employees came to respect me as one of them, and
I began to learn more of their thoughts and feelings about their jobs.
It did not take me long to notice that the guys, with the exception of José, were taking longer and
more frequent breaks than the half hour allotted for lunch. The drama that existed between Earl,
Roger, and Sam also became very apparent when I noticed that one of them would go to
another‘s work location and start yelling about some way the other had screwed up or was not
doing his job correctly or not doing it at all. Then the other would fire back with his own
profanities and problems with the original instigator.
A few times a week, Earl would even come down on me about something that I failed to do or
something he could find wrong with what I was doing. One time he even yelled at me for saving
him from having a possible disaster on the track for the fuel cars. A fuel truck had arrived to fill
up before I came to work, and Earl started moving rail cars down the track. This operation
entailed releasing the car brakes, letting the cars coast to where they were needed, and tightening
the brakes again to keep the car situated. Since the tracks were on a slight downward slope, one
tried not to pass the desired mark, which would necessitate going to pull out the loader to move
the cars back up the track again. Earl left three cars filled with fuel connected and released all the
brakes, and the three-car train got going way too fast. When he tried to slow the train down, the
one brake that he was tightening could not sufficiently slow down the full cars because they were
too heavy.
I was on my way to drop off my things in the shop as I got to work, when I saw the cars coming
down the track and heard Earl yell for me to get on another brake. I ran to get in front of the train
to jump onto the walkway where the brake was because it was going too fast for me to mount it
from the side steps. I successfully locked down the brake and got the train stopped before it
collided with a few other cars that were at the bottom end of the track. Afterward, Earl yelled at
me because I got in front of the train instead of coming at it from the side.
In private talks with Sam and Roger, I learned that Sam had been at Madison‘s for about nine
years and that Roger, Earl, and Carol had all been there for about 13 years. Sam was making ten
dollars an hour, and Roger was making eleven dollars an hour. Both Earl and Carol were on
salary.
I also learned that Earl had been involved in a personal automobile accident a few years before
that resulted in the death of a man who was riding a bike along the side of the road. Earl was
charged with involuntary manslaughter and, as a result, was sentenced to live in a governmentowned house that he could only leave to go to work and to which he had to return immediately
afterward.
In another conversation, I heard that, when he was in his 20s, Roger had been sued by the parents
of a friend who had died after Roger crashed the car in which they were riding because he was
driving drunk. He also had other financial difficulties for which the IRS was garnishing his
wages. These deductions, in addition to wage deductions of payments to Bob, from whom he
74
was buying a house, resulted in Roger taking home almost nothing from his paycheck. He and
his family lived almost completely on his wife‘s earnings from her job.
Although Sam seemed to be the most upbeat of my fellow workers, he indicated he felt like he
was being taken for granted and that he was ―worth much more than ten dollars an hour.‖ Nearly
every day he talked about leaving Madison‘s for another job at a wrecking yard. He would say,
―I‘m gonna ask Bob for a raise, and if he don‘t give it to me, I‘m gonna say, ‗See you later,
Bob!‘‖ When I asked Sam why he never actually asked him, he would say, ―Are you kiddin‘-he‘d just tell me no!‖
Carol had never been married and was now in her early 40s. She always tried to be nice to me,
although she had her own issues with the guys and regularly got into her share of yelling matches.
I also noticed that she also spent a lot of time calling family and friends on the company phone.
I soon learned that even though all of us except Carol were working about 60 hours a week, we
were not being paid for over-time. When I asked the other workers about this, I was informed
that, ―Bob doesn‘t pay over-time‖ because our work was considered to be ―farm work.‖
After a few months I started running out of things to do once my reservoir was cleaned out and
the trucks did not need new brakes or trailer tarps. Even the fuel loading slowed down. I decided
to approach Bob about it because I did not want him to get the wrong idea about my sitting
around on the job waiting for the next fuel truck to arrive. When I told him that there was
nothing to do he said, ―There‘s never nothing to do,‖ and told me to go find things to clean up
around the elevator and shop.
So, I continued working for another month and helped Sam clean up a big pile of scrap that was
just lying around outside the shop, and I helped Roger clean up around the elevator. This is when
the guys told me, ―If we do all the work now, there won‘t be anything to do when the boss comes
around,‖ and that I should slow down and not be so busy. They had worked out a finely tuned
system of working only when a truck arrived to load or unload or when they were being watched.
Earl was known as the ―tattletale,‖ so the others tried to look busy when he was having one of his
moods, but, even so, Sam found Earl sleeping in his truck one day while he was on the clock.
Moving On
Fortunately, I was returning to college in the fall of 2007 and had a track scholarship, so I gave
Bob my two-week notice and left Madison‘s in mid-August.
Looking back at my work experience at Madison‘s, I now realize that, while I am grateful to
have had the job and the income it provided, I am also glad not to be working there anymore and
hope I do not have to do that type of work again in the future. I also realize that when I arrived at
Madison‘s, I was returning from a very service- and work-oriented two years in Fiji. I was highly
motivated and had a good attitude about my work. However, after only six months working at
Madison‘s, I was poorly motivated and had a negative attitude toward my work. Looking back, I
have to wonder why my work attitude and motivation changed so drastically in my time at
75
Madison‘s. Was it the type of work, the individuals I was working with, the transition from
serving my church to working manual labor, or something else entirely? Also, it is interesting to
note that three years have now gone by, and all the people I was working with at Madison‘s, with
the exception of José, are still working there. I think more than anything I am grateful for a
college education because I am sure glad not to have to fill fuel trucks for the rest of my life. I
also wonder what motivates my former co-workers and wonder if they will be lifers at Madison‘s?
76
EVERYONE LOVES THE DUCKS!
Edwin C. Leonard, Jr. and Roy A. Cook
This case was prepared and is intended toa be used as a basis for class discussion. The views
represented here are those of the case author (s) and do not necessarily reflect the views of the
Society for Case Research. The views are based on professional judgment.
It was the most fun we‘d had in years. Our grandkids loved it! Everyday, the Peabody Hotel
staff load the ducks in an elevator, put down a red carpet and lets the ducks waddle into the lobby
to swim around the foundation and be ogled by all the curious guests. Our grandkids loved to
watch the ducks march down the red carpet. ―It all started back in the 1930s when Frank Schutt,
general manager of the Peabody Hotel – Memphis, and a good friend, Chip Barwick, Sr., both
avid outdoorsmen, returned from a weekend hunting trip in Arkansas. It seems that they had
nipped a bit of Tennessee sippin‘ whiskey, and thought, with schoolboy prankishness, that it
would be humorous to place some of their live duck decoys (it was legal for hunters to use live
decoys) in the beautiful but barren Peabody fountain‖(Galiano). Apparently people liked it and
still do! Whoever would have thought that the hotel ducks would someday become key evidence
in an age discrimination lawsuit?
Welcome To The Peabody Little Rock Hotel
Located in the heart of downtown River Market District, The Peabody Little Rock was a fourdiamond property. The 418-room facility had everything you would expect in a grand hotel. See
http://www.peabodylittlerock.com for additional information about the hotel and services.
Exhibit 1 describes the Peabody advantage as found on their website.
EXHIBIT 1
The Peabody Advantage
Each property is positioned and managed as a unique entity to maximize
profit and market share. A regionalized corporate structure allows those
closest to the concerns of the guests and staff alike to determine and
implement effective, timely responses to whatever needs should arise.
It also gives leverage to staff in the field proactively to achieve the cash-flow
demands desired.
77
Operating successfully in several major markets is due to our vice
presidents being strategically positioned to exceed guest‘s expectations,
thereby guaranteeing an impressive rate of repeat business for all our
properties.
Peabody Hotel Group‘s base of established strengths as quality hotel
developers and operators, highly regarded hotel industry leaders, meetings
and conventions experts, and savvy marketers, has proven ideal for steady
growth and expansion across time. We expect to amplify and refine this
trend while remaining carefully attuned to new challenges and opportunities
that surely will arise as the national and international hospitality industry
continues to expand and evolve (The Peabody Advantage).
How Could It Happen Here!
In March 2002, the Peabody Hotel Little Rock hired Michael May as director of purchasing.
May was sixty-seven years old at the time. As director of purchasing, May was required to
negotiate with vendors and suppliers for a variety of hotel supplies including furniture, bed
linens, bathroom amenities, food and beverage items, cleaning materials, and other supplies and
equipment needed in the daily operation of the hotel. May also handled incoming shipments and
accessed an off-site warehouse where inventory was stored. May‘s performance evaluations
ranged from very good to excellent over the years.
On January 12, 2006, a Peabody receptionist received a call from a woman who identified
herself as Brenda Stroot. She explained that she was affiliated with BKA Property Preservation
and the company had removed property from May‘s residence after he was evicted from his
home. According to Stroot, her company had come across items that appeared to be Peabody
property.
The receptionist attempted to transfer the call to Bette Haver, the director of human resources
(HR), but she was in a meeting. James Hartman, Peabody‘s director of security was in the same
meeting. The receptionist recorded the details of the call from Stoot and left copies for both
Haver and Hartman in sealed envelopes.
Later in the day, Hartman contacted the owner of BKA Property Preservation, Norma Fletcher,
who told Hartman that her company had discovered numerous boxes of commercially packed
washcloths and towels; food items including vacuum packed steaks; assorted toiletries and
cleaning supplies; and a large number of Peabody rubber ducks. Fletcher also informed Hartman
that the non-perishable property had been moved to a storage facility, and she agreed to give
Hartman access to the facility so that he could conduct his own investigation.
On January 16th, Hartman and another Peabody employee Neil Clay, traveled to the storage
facility and examined the property. Hartman had Clay take photographs of the items and he
wrote the following report summarizing the investigation:
Upon looking over the items we found six bottles of hotel logo bathroom
amenities and numerous washcloths and hand towels that are the same brand
78
and had the same appearance as that being used by the hotel and one vacuum
cleaner which is the same brand and model number used by the hotel. We
asked Ms. Fletcher what other items could be easily seen that would have the
Peabody logos on them, to which she advised that somewhere in one of the
storage sheds was a bag of Peabody yellow ducks, a couple of cases of
Peabody logo bathroom amenities and numerous bath mats, towels and
washcloths…. Ms. Fletcher went on to state that they threw numerous
vacuum packed steaks and other items away that had the Peabody logo on
them due to the fact they were perishables and could not be stored in a
storage shed according to law.
Hartman presented his report to the general manager, Nathan Davis, the human resources
director, Bette Haver, and May‘s direct supervisor, Eric Garman. The three met with May and
informed him of their findings. Davis explained the sequence of events that led to the meeting.
May vehemently denied that he had stolen anything from the hotel. He did admit, however, that
he had received samples of some items – such as toiletries and steaks from vendors without
reporting the gifts as was required under Peabody policy. (See Exhibit 2 for disciplinary
guidelines.)
EXHIBIT 2
Disciplinary Guidelines
All disciplinary action will be determined on a case-by-case basis. The
discipline imposed will depend upon, but not be limited to, the seriousness of
the performance/behavioral issues and the impact on the organization.
The organization values its employees and believes that termination is
appropriate only in serious cases of performance/behavioral issues.
Consistent with this belief, it is the organization‘s general policy to correct
employee performance/behavioral issues before they rise to a level requiring
discharge. Accordingly, the organization generally uses the following fourstep, progressive discipline process.
Step 1: Verbal Warning
Step 2: Written Reprimand
Step 3: Suspension without Pay
Step 4: Termination of Employment
Because some performance/behavioral issues warrant skipping steps in the
process, the organization reserves the right to immediately terminate an
employee or skip any step(s) in the progressive discipline process.
79
The next day, HR director, Bette Haver, and Eric Garman met with May and informed him that
he was being terminated for unauthorized possession of hotel property. After the meeting, she
pondered what might be done differently in the hiring and training process. This was the third
employee terminated by the Peabody in the last ninety days. A twenty-three-year-old valet was
terminated for validating his own parking, and a twenty-year-old associate in housekeeping was
discharged after taking two beers from the hotel bar.
On November 13, 2006, May filed an age discrimination lawsuit in Arkansas state court, which
the Peabody Hotel Little Rock removed to federal court. The Peabody counterclaimed of
conversion, and May amended his complaint to add claims of defamation against several
Peabody employees. (See Exhibit 3 for an internal procedure for handling discrimination
complaints.
EXHIBIT 3
Discrimination Complaints
The organization is committed to addressing discrimination complaints
promptly and consistently, using procedures that are fair and effective from
the point of view of the person and the organization, and to resolving
complaints at the lowest organizational level whenever possible.
Persons bringing complaints to the attention of the organization are protected
from interference, intimidation, or reprisal in any form. Retaliation against
any person who had made a complaint is absolutely prohibited. It inhibits the
ability of the organization to address complaints and contributes to distrust of
complaint procedures.
The vice-president of Human Resources will be notified promptly of any
written complaint filed internally and/or with external agencies which alleges
discrimination on the basis of race, religion, color, sex, age, national origin or
ancestry, marital status, parental status, sexual orientation, disability, or status
as a disabled or Vietnam-era veteran.
In consultation with corporate officials and legal counsel, the vice-president
of Human Resources shall be responsible for coordination of the resolution of
all discrimination complaints filed with external agencies and oversight and
coordination of internal grievance procedures. Resolution of formal
complaints involving litigation or financial obligations of the organization
will be subject to review by cognizant corporate officers and approval by the
President.
As the dust was beginning to settle on this saga, it seemed like so many things could or should
have been done differently. How had this problem happened in the first place? What might be
done to prevent the same or similar problems in the future? Should management have done
anything differently
80
References
United States Court of Appeals, Eighth Circuit, xxx v. BG Excelsior Limited Partnership, doing
business as Peabody Little Rock, et.al. (Filed Nov. 6, 2008); Court of Appeals of
Arkansas, Division 3, No. CAO8-1111, xxx v. BG Excelsior Limited Partnership and
various employee therein (October 7, 2009 opinion delivered); and ―Termination of
Employee for Unauthorized Possession of Hotel Property was not Pretext for Age
Discrimination.‖ Ceridian Abstracts (http://www.hrcompliance.ceridian.com 11/25/2008.
Permission received from Kathi Boyd, compliance solutions manager, sales and support,
Ceridian to use the newsletter‘s content with proper citation.
Association of Certified Fraud Examiners. ―2010 Report to The Nations – Key Findings and
Highlights.‖ (http://www.acfe.com/rttn/2010-highlights.asp)
Franklin, James C. (2007, November). ―An Overview Of BLS Projections to 2016,‖
Monthly Labor Review Online, 130(11).
Galiano, Amanda. ―All Quacked Up.‖
http://www.littlerock.about.com/cs/littlerockhotels/a/aapeabody.htm.
The Age Discrimination in Employment Act of 1967. U.S. Equal Employment Opportunity
Commission. (http://www.eeoc.gov/laws/statutes/adea.cfm).
―The Peabody Advantage,‖ The Peabody Hotel Group
http://www.peabodyhotelgroup.com/corporate/peabody_advantage.cfm.
U. S. Dept. of Labor, Bureau of Labor Statistics, ―Labor Force Statistics from Current Population
Survey,‖ http://www.bls.gov and http://www.bls.gov/cps/cpsaat35.pdf.
U. S. Department of Equal Opportunity Commission, http://www.eeoc.gov.
81
HEALTH INFORMATION TECHNOLOGY, PATIENT FLOW, AND THE NEW
MANAGER: EVALUATION OF THREE CLINICS
Leigh Cellucci, Keith Benson and Tracy Farnsworth
This case was prepared and is intended to be used as a basis for class discussion. The views
represented here are those of the case author (s) and do not necessarily reflect the views of the
Society for Case Research. The views are based on professional judgment.
Introduction
Amelia Baroody, newly hired business manager and Administrator-in-Training at the Boulder
Mountain Medical Specialists (BMMS), was excited about her new position. Baroody was an
Administrator-in-Training with HealthCare Professional Consultants (HCPC), a medical
management consulting group designed to place administrators and administrators-in-training
into medical groups. BMMS contracted with HCPC for Baroody to manage three clinics Boulder
Mountain Women‘s Clinic, Boulder Mountain Pediatric Clinic, and Boulder Mountain Internal
Medicine. BMMS paid HCPC, which, in turn, paid Baroody salary and benefits. Thus, BMMS
received access to HCPC consulting services regarding healthcare business practices (e.g., clinic
operations, patient and insurance billing, and legal needs). This arrangement allowed for
continuous expert clinic management advice from HCPC to BMMS, with Baroody as the person
of contact.
The BMMS Board members had known that it needed some expert help as one of their clinics
had been underperforming, and the others could use improvement. Dr. Fornari, President of the
Board and one of its charter physicians stated:
Amelia has my total support. We have not been able to figure out why Internal
Medicine was having problems. Each of our three clinics forms BMMS, but each
clinic is run independently. The physicians are in charge of their own area, and we
as a Board, do not interfere with physician practices. We need Amelia—she is
bright, competent, and energetic. We also rely upon our relationship with HCPC
because its counsel and support helps us be the best clinic we can be. I think
Amelia, with her connection to HCPC services will turn an underperforming
clinic (Internal Medicine) around. This is our top priority. The Board has asked
Amelia to fix this clinic as well as effectively manage the other two clinics at the
same time. But, I think Amelia will be able to meet the Board‘s requests regarding
all three clinics. She has our full confidence.‖
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Baroody appreciated the support of Dr. Fornari. As a new college graduate and the newest
member of HCPC, she knew that this time was an opportunity for her to prove her worth—to
BMMS, to HCPC, and to herself. She planned to develop professionally in the field and be
promoted to Administrator of the medical group in a few years. She would then assume more
responsibilities regarding medical group operations management. As the Administrator-inTraining, Baroody knew that she needed to keep the Women‘s and Pediatrics clinics going
strong as well as identify the problems in Internal Medicine, propose and implement solutions,
all at the same time. Baroody knew she was ready to address the task, using her management
education and HCPC‘s team support.
HealthCare Professionals Consultants (HCPC)
The mission statement of HCPC is – ―creating healthcare access through clinics that work.‖ To
this end, the organization placed administrators and administrators-in-training in medical groups
and provided continual support, on and offsite. HCPC employed 16 administrators and two
administrators-in-training, all of whom were placed in 17 different medical groups in the
Northwest United States (Washington, Oregon, Idaho) as well as Alaska. The President and
Founder of HCPC, Thomas Phelps, and his team were based in Northern Idaho. These team
members included Jane Adler--the recruiter, Camille Rodriguez-- human resources director,
Abby Stoeffler--operations director, Jennifer Schmidt, coder, and Tyrone Landry--attorney. All
24 HCPC team members remained in regular contact with one another via email, phone, and
teleconferencing (Skype) and on-site visits. As Jane commented, ―Teamwork is key to our
success. With my position as recruiter, I work to make sure that HCPC‘s potential staff members
want to work in a team environment. Simply put, we work together. And we enjoy working
together.‖
At HCPC, administrators and administrators-in-training work in an established infrastructure in
which they consult with one another to intentionally and aggressively transfer information to
improve each other's performance. Specifically, Stoeffler (Operations), and Schmidt (Coder)
often conducted on-site consults to the medical groups HCPC managed. Stoeffler liked to consult
with the Alaska sites as it provided her opportunities to help others in their clinic operations as
well as the consults provided her with opportunities to hike trails by the Yukon River. ―I get to
blend my work and other interests here at HCPC. I can participate in a conference call while I am
hiking in the mountains. I don‘t have to be in one place to do work and another to enjoy my
hobbies. It is a new way to ‗do‘ work, but it works for me. Also when I need to see first-hand
operational procedures in a clinic or hospital, I get to travel to other Northwestern sites and enjoy
hiking in their locations.‖
Stoeffler continued, ―When I go on-site, I am able to follow healthcare providers and
administrative staff to see, first-hand, how they go about their day. We call this shadowing. I
literally accompany staff members as they work and look for ways to help them reduce their time
and effort with better outcomes.‖
Schmidt added, ―And, when we go on-site, you would be amazed at how many clinics we have
consulted that had engaged in work practices because ‗that is the way they have always done it.‘
Traditional approaches to work aren‘t always the best way to conduct business because their
83
same old work practices at times slowed clinic operations down. That meant patient waiting
times were longer and patient rooms were not turned over as soon as they could have been.‖
Schmidt explained, ―When I go on-site, I ask questions about their coding practices. Is the
information entered into an electronic medical record by a provider or by a coder? Is the
information handwritten or typed? Are up-to-date coding guidelines followed in a clinic? I
review their files and have often found that the same coding errors were made, which increases
their average days outstanding for account receivables. We follow Medical Group Management
Association‘s (MGMA) guidelines that recommend an average of 50 days for account
receivables. I have found that coding errors was a main factor for more than a 50 day average.‖
Phelps (Founder and President) was also a licensed pilot, and he was known to fly regularly from
one site to another. Phelps clearly served as the team leader. He said, ―Some of my trips are just
to show support for my team members and offer support where I can.‖ Thus, on-site visits were a
common consulting method for addressing issues or problems identified at medical groups. The
culture of HCPC was collegial, supportive, and positive. Helping each administrator improve
clinics allowed for increased patient access, and better healthcare outcomes. Every two weeks,
administrators and administrators-in-training held Skype conference calls so that they could ask
questions and offer advice to one another.
The collegial support and expert knowledge base created a team that worked well. Medical
groups found that their clinics simply worked better when they employed HCPC staff. And, as
Phelps often said, ―We are quietly becoming America's best medical group management
company.‖
Baroody was pleased about her employment with HCPC and BMMS, even though this
arrangement meant that she had a number of people she had to please. Her ‗bosses‘ included
Phelps at HCPC as well as the physicians at BMMS and the BMMS Board members. But,
Amelia had said, ―I am thankful that the physicians and Board members put their trust in me to
serve as an administrator-in-training. I like working in Sawtooth City, and with the BMMS
physicians and staff. I also like the patients. Sawtooth City is my hometown. And, as corny as it
sounds, I like coming home to do good work.‖ Baroody smiled, ―And Mr. Phelps only wants all
of us—the administrators and administrators-in-training—to do well. I have learned a lot from
him. He is a true mentor.‖ Baroody confided as well, ―I also am well aware that the physicians
and Board members are more likely to listen to my advice because of Mr. Phelps. They know
that if I am recommending something significant, I have already discussed it with Mr. Phelps and
the team at HCPC.‖ Baroody continued, ―I know, I know--I have more influence with BMMS
because Mr. Phelps is so well regarded in the field of clinic management. Simply put, I have
authority because he has the authority.‖
Baroody was also pleased about her employment with HCPC and BMMS because both groups
cared about their employees. She disclosed, ―They—the physicians and Mr. Phelps—encourage
us to develop our personal as well as our professional interests. For example, in addition to my
work as an administrator- in-training, I am also a golfer. I played on the golf team in college, and
I like the outdoors. Working in Sawtooth City, my dad and I get to play golf every Saturday
morning, and I often can play after work, if the weather permits. So, I have the best of the work
world—I get to do the job I love to do—and I get to spend time with family and friends, and I am
able to keep up my golf game.‖ Baroody laughed, ―In fact, Mr. Phelps has asked me for some
84
golfing tips.‖ She continued, ―But most importantly, I want to do well here—on behalf of the
patients. Many of them are my family and friends. And, my working arrangement with both
BMMS and HCPC allows me to learn more and do more. It is good, and I am fortunate to be
here.
Boulder Mountain Medical Specialists
BMMS was located in Sawtooth City, Idaho, population 28,000. The Women‘s Clinic and the
Pediatric Clinic were located next door to each other, and the clinics dominated the market share
for women and children‘s healthcare services in Sawtooth. Eleven years ago, the physicians from
each clinic decided to form a partnership and merged to create the Boulder Mountain Medical
Specialists. Two years ago, the Sawtooth Community Hospital sold the underperforming Internal
Medicine Clinic to BMMS. Thus by the time Baroody had been hired, the medical group had
three clinics in Sawtooth City: Pediatrics, Women‘s Health, and Internal Medicine. Each clinic
was housed in separate units and operated independently, but all were owned by BMMS
BMMS‘s governance structure was a Governing Board that met every two weeks. Each clinic
had one physician representative on the Board, each of whom had voting rights. Even though
three votes decided actions for BMMS, the Board members endorsed shared governance. At the
beginning of each Board meeting was the Providers meeting, during which all physicians and
mid-level providers (e.g., physician assistants, nurse midwives, and nurse practitioners) attended.
Seldom did the three physician board disagree with recommendations made during the providers
meeting. Agenda items included items such as (1) discuss the pros and cons of BMMS‘s possibly
building a new site to house the clinics altogether; (2) invite another medical group to join
BMMS; and (3) invest in information technology upgrades to maximize efficient operations and
improve quality patient care. After the nonvoting physicians and mid-level providers offered
their recommendations regarding agenda items, they left the meeting. Then, the physician Board
members voted. Overall, the Board members appreciated the input from the Providers meeting
and the physicians and mid-level providers appreciated that they were listened to regarding
BMMS business decisions. As one nonvoting physician commented, ―We are like a family here.
We listen to each other and offer advice and support to help BMMS prosper. I think that is why
we value input from HCPC. They listen to us and have our best interests at heart. I am grateful
for their support of our work.‖
Baroody’s Initial Review of Each Clinic:
When Baroody first joined BMMS, she spent time in each clinic to learn about each clinic—the
staff members, the physicians, and daily operations. She said, ―I wanted to spend time with each
clinic to see not only what work they did, but how they did the work. I was looking for what
they did well and perhaps, find ways for improvement.‖
In the Women‘s Clinic, Baroody determined that daily operations were going well, but also, she
identified areas to improve. She said, ―As I observed the staff members, I noticed that they had
experienced a rather smooth implementation of Centricity, the electronic medical record (EMR).
However, there are ways to use it more effectively than they are doing.‖
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In the Pediatric Clinic, Baroody also determined that daily operations were going well, very well
indeed. In fact, Baroody noted that she should talk about this clinic as a ―best practice‖ regarding
EMR implementation and use.
In the Internal Medicine Clinic, Baroody discovered challenges regarding the EMR
implementation, use, and daily patient flow. She stated, ―There were three primary areas of
concern regarding Internal Medicine: the EMR, patient flow, and average days of accounts
receivables. I knew Internal Medicine was my top priority!‖
Boulder Mountain Women’s Clinic
The staff consisted of two OB/GYN physicians, two full-time midwives, one part-time midwife,
one nurse practitioner, two part-time RNs, six medical assistants (five full-time and one parttime), one biller, and one full-time receptionist. Dr. Fornari described himself as a ―techie.‖ He
said, ―I saw that electronic medical records (EMRs) were our future long before my Idahoan
physician colleagues did. So, even before we merged with the pediatric clinic, I bought
Centricity. Centricity is made by General Electric, and you can‘t get better than that. Centricity is
the gold standard for EMRs.‖ Centricity is a state of the art Electronic Medical Record that
allows health-related information on an individual that can be created, gathered, managed, and
consulted by authorized clinicians and staff within BMMS. Particular features of Centricity
include the electronic ability for clinical documentation; clinical and administrative workflow
tasking; ePrescribing; referrals; lab, imaging, and therapy order entry; health maintenance
reminders, charge capture & coding; clinical practice guidelines; practice messaging; and patient
data entry.
For the EMR training, GE provided consultants for five days of on-site training. Half of the time
was spent in conference room ―mock‖ patient training. The last two days, providers used the
system with all of their patients. The EMR system went live one month later. All paper, pens and
pencils were removed from the clinic and each staff member was forced to conduct business on
computers.
While Centricity offered the ability for providers to design their own customized templates, the
physicians decided to use the existing templates. Thus, the forms were not customized for
women‘s health and the staff members found that extra time was spent searching through screens
to find the appropriate form to prescribe medications or document new labs ordered for a patient.
The existing template worked, but the providers did have to take extra time to ensure that the
correct information was entered on the correct form.
All of the providers reported that they were happy with Centricity. The medical assistants liked
that files were always available. ―Before Centricity, a doctor could have the paper file and I
would have to hunt for it or wait around until he brought it back to my station. Now, I have
immediate access to patient files and a file is never lost.‖ Nurses reported that Centricity brought
about higher quality patient care. One nurse said, ―I no longer have to try to figure out what the
doctor had written on a piece of paper. The doctor enters all his information on a notepad and it
is typed. Do you know what that means? Legibility!‖ She laughed and continued, ―Do you know
86
how to decipher a doctor‘s handwriting correctly all of the time? Thank goodness for Centricity
and EMRs. I now know that I have read correctly what the doctor wants done for the patient and
that brings about better patient care.‖
The biller also approved of Centricity. She said, ―The physician types into the notepad what
procedures were done and Centricity automatically codes the action. I receive this information
immediately and review for quality assurance.‖ The average for days for account receivables in
the clinic is 29 days.
Boulder Mountain Pediatrics
The staff consisted of three pediatricians, one physician assistant, ten part-time RNs, six parttime LPNs, one biller, and four part-time receptionists. The physicians were in their 50s and 60s,
and had not endorsed technology and Centricity as had the Women‘s Clinic. They recognized
that they needed training—a lot of training. When Boulder Mountain Pediatrics merged with
Boulder Women‘s Clinic to form BMMS, the first step planned by the pediatricians was to learn
the EMR system.
GE provided on-site training for each physician. That is, a Centricity trainer was assigned to one
physician at a time and, for ten days, assisted the physician with his last two patient
appointments for the day. Thus, each physician learned at his own pace and, as a result, increased
his comfort with the EMR. No ―live‖ date was assigned. Rather, when the three physicians
acknowledged that they were ready, the system went live. Staff was also provided intensive oneon-one training and they designed customized forms to simplify and organize the most common
orders/procedures for pediatric care.
Similar to the Women‘s Clinic, the staff members endorsed the use of the EMR. Patient records
were readily available; physicians‘ handwriting and their legibility were no longer identified to
be problems. Moreover, because the staff members customized their forms, the quality of care
improved because they have easy access to reading, for example, allergies and current
medications of the patient. The templates were organized the way the staff members wanted. The
clinic coder said, ―I own this template; I created it.‖ She continued, ―The physicians though
never got comfortable clicking onto the template for billing. So, they still use the Superbill, a
sheet of paper on which they circle the appropriate services provided. Then, I enter it into the
system. I‘m okay with this way; I conduct quality assurance as I type in the information.‖ The
average for days for account receivables in the pediatric clinic is 31 days.
Boulder Mountain Internal Medicine
The staff consisted of two physicians, two full-time LPNs, two full-time medical assistants, and
four part-time receptionists. At the current time, a new biller was due to begin working next
week as the previously biller had resigned two weeks ago. The two physicians had been working
at Internal Medicine for two years, immediately following their completed medical training.
They were familiar with health information technology and EMRs, and had used various
87
software systems throughout their education. One physician said, ―We know technology already.
We didn‘t need Centricity on-site training like the other clinics did.‖
Thus, Centricity only provided on-site training for two days and assisted physicians with one
patient visit. Staff members received one day mock training and, as a result, most of the staff
members learned informally by asking their counterparts in the other clinics for help. As a result,
the staff members did not customize templates as the pediatric staff members had done and they
expressed anxiety regarding the new system. Nonetheless, the EMR system went live two weeks
after the Centricity training ended. All paper, pens and pencils were removed from the clinic and
each staff member was forced to conduct business on computers.
Both medical assistants reported, ―Going live was not a total disaster. We knew one form so, we
use one form.‖ Consequently, the clinic physicians and staff members used the one template.
They typed in data, scrolling down pages and pages on the screen to find the appropriate line
item. The end result was Internal Medicine was two months behind in charting. Additionally,
even though the physicians had entered their coding information electronically as the physicians
in the Women‘s Clinic, billing in Internal Medicine was behind. The biller was responsible for
submitting bills to the patient and to the patient‘s insurer. On average, Internal Medicine‘s biller
should have been submitting 500 statements per month. Upon review, it was found that the
previous biller—the one no longer employed at the Clinic--had submitted 15 per month. The new
biller was due to start work the upcoming week. Currently, the average days for accounts
receivable was 200.
Clinic Operations: Patient Flow
The patient flow process was similar for each clinic. All receptionists had scheduled the patients
on a modified wave schedule. That is, two patients were scheduled at the same time and then, a
third patient was scheduled for 30 minutes later. Best practices indicated that for more routine,
anticipated physician/patient visits, the modified wave allowed for one of the first two patients to
be seen by a nurse (approximately five minutes) and then, the physician would see the patient
(about 20 minutes). With the modified wave, the physician was with the first patient while the
nurse was with the second. By the time the physician had completed the visit with the second
patient, the nurse was finishing with the third patient. Thus, the modified wave schedule allowed
for optimal physician time with the patient (i.e., three patients were seen per hour) and a
reduction in waiting time for both providers and patients regarding patient flow and room
availability. The end result is that patients experience less wait time—a quality issue, and
physicians spend less time waiting to see a patient—an efficiency of operations issue.
Patient scheduling options for more complex physician/patient appointments (e.g., diagnostic
care, renal/heart issues) were not optimized by the modified wave schedule. Primarily, the failure
of this system was because the actual physician/patient interaction in more complex cases was
longer. Hence, internal medicine patient scheduling resulted in longer wait times for patients and
longer wait times for open exam rooms for providers. Best practices for these more complex
appointments indicated that the straight 20 minute block resulted in lower wait times for the
patients and providers (i.e., three patients per hour with each patient scheduled 20 minutes apart).
88
Also in all three clinics, same day patient appointments were allocated to the last hour of daily
appointments. Patients who requested to see a provider the same day were scheduled for 4:00
p.m. and seen on a first come/first serve basis. In all three clinics, all same day patients were
accommodated. Nonetheless, patients who requested same day appointments were notified that
they would experience wait times so that all patients who requested to see a provider could do so.
For all three clinics, if a patient required lab work or shots, the patient waited in the examination
room until the appropriate provider (physician assistant, nurse) arrived to take a blood sample or
deliver the shot. As with the scheduling procedures, pediatric patients‘ shots were more routine
(e.g., allergy shots, immunizations) than internal medicine patients. Nonetheless, the practice
resulted in exam room availability delay. The time the patient spent in the internal medicine
exam room was longer for lab work and, as a result, the exam room availability was further
delayed for the next patient. Patient wait times increased as did provider wait times for
examination rooms in Internal Medicine.
Baroody as Administrator-in-Training
Baroody thought to herself, ―Now--how best to address the needs of all clinics as well as meet
my top priority—Internal Medicine? It needs help regarding its EMR, patient flow, and reducing
its average days for accounts receivables. The other clinics need to be assessed regarding patient
flow and IT management.‖ She went to her home office, sat at her desk, and looked outside the
window at the Boulder Mountain landscape. It was beautiful in Idaho. The snow capped
mountains glistened in the afternoon sun and she thought that she would enjoy playing a round of
golf at the golf course located at the foot of the mountain this weekend. Her view of the
mountains and her proximity to them were what she had called her office perks. Baroody turned
her attention from the spectacular view of the mountains and focused on her computer notepad.
She clicked to open her contact list of HCPC, then opened a new Word document to create her to
do list. ―Now,‖ she said out loud to no one but herself, ―Let‘s get to work!‖
89
INTEGRATIVE REHABILITATION PROGRAMS
Lynn Hoffman
This case was prepared and is intended to be used as a basis for class discussion. The views
represented here are those of the case author (s) and do not necessarily reflect the views of the
Society for Case Research. The views are based on professional judgment.
On July 15 Johnson, Executive Director of Integrative Rehabilitation Programs sat in the bank
office contemplating whether to personally guarantee the loans for a new for-profit venture.
During the previous week, the Board of Directors for his company had approved the purchase of
a nationally known fast-food franchise (Personal Interview Johnson, J. 2009a, 2010)1. The
organization also received approval for a Small Business Administration (SBA) guaranteed loan
through a local bank. The SBA required that they set up a for-profit entity even though the nonprofit would own the new venture. At the last minute, the local bank required a $75,000 dollar
down payment on the first loan. The bank was willing to provide a second short term loan of
$70,000 but Johnson would have to personally guarantee both loans.
Johnson thought back over the events leading to this current dilemma. In his opinion, IRP was
left wounded and depleted by the decrease in government funding for individuals with
disabilities and the battle with its funding agency; the Metropolitan Board. IRP successfully ran
janitorial crews and concessions at the football stadium, basketball stadium and airport. With this
in mind, Johnson believed that IRP had the expertise to successfully run a franchise venture with
similar job responsibilities. He felt that IRP could improve the intended franchises‘ past
performance by creating positive cash flow and at the same time provide employment for his
employees with disabilities. However, the new franchise‘s purchase price was high and he
questioned whether the benefits outweighed the risks.
In addition, his board members were split, some favored the franchise purchase and other board
members opposed it. To make matters worse, the fast-food franchise was prepared to revoke
their offer because (after six hours of negotiations) the purchase was not complete. In addition as
a little added protection, the franchisor required Johnson to personally guarantee the contract
with them. The potential repercussions of his actions were enormous. Johnson had to decide if he
was ready for potential failure, both personally and professionally. The decision was complicated
by how much risk he was personally willing to assume for IRP.
To help him decide whether the benefits were worth the risk, he asked the President of the Board
to evaluate the new venture‘s potential with respect to customers, growth rate, and time to
breakeven. The President (an Entrepreneur Professor) used a screening guide which he required
all of his entrepreneur students to use as the method to determine a new venture‘s feasibility
(Timmons and Spinelli, 2009 see Appendix 1). Would the bank agree with the professor‘s
1
All material was collected from interviews with Johnson, IRP staff, IRP Board members and Board minutes.
90
positive recommendation? Did the benefits outweigh the risks, especially the personal risks to
Johnson?
Which was preferable—a chance at long-term survival with a successful for-profit venture versus
slow financial death with the decline in federal and state funding? One thing was certain, if IRP
did nothing, the company would continue to slowly lose revenue and fail. However, if Johnson
bought the franchise there was no guarantee for success and quick failure was a possibility. One
of Johnson‘s biggest concerns was his workers with disabilities. What would they do if IRP
failed? His decision was not an easy one and unfortunately would have a domino effect on many
individuals‘ lives around him.
Description of IRP and its Sister Organizations
IRP was a non-profit, community-rehabilitation-service organization that served individuals with
intellectual disabilities. Similar community non-profit agencies served specific populations with
disabilities such as vision, hearing, and mobility impairments or very specific groups of
individuals such as those with cerebral palsy or mental illness. Many of these non-profit
organizations relied on fundraising and donations to augment the decline in government funding
for these populations. Some were more successful than others at fundraising and acquiring
donations. Unfortunately, IRP was not successful at fund raising and therefore considered a forprofit venture as a source of cash flow.
IRP provided employment and employment related services to their employees with disabilities
by using a broad range of professionals in various fields. The group (as a whole) assessed each
individual‘s employment abilities and used team and group therapies to prepare disabled
individuals for employment. The team located employment around the city and provided job
coaching for their workers with disabilities. Services included, but were not limited to, hygiene
and hygiene training, basic food preparation, reading bus schedules, finding adequate public
transportation, interviewing, and job coaching. The professionals included trained rehabilitation
counselors, nurses, behavioral specialists, job coaches, accountants, and other business
professionals.
Pilgrim Programs and the Birth of IRP, October 1987
The Executive Director of IRP (Johnson) received his bachelor‘s degree in rehabilitation
counseling and his Masters of Business Administration (MBA) from state universities. He began
his career as a counselor at a state mental hospital. He worked as a consultant for the
Commission on Accreditation for Rehabilitation Facilities (CARF) when Pilgrim Programs hired
him as a consultant to review Pilgrim‘s rehabilitation and compensation programs.
Before Johnson could implement reforms, Pilgrim‘s funding agency threatened to pull its
funding because of Pilgrim‘s compensation and rehabilitation discrepancies. In defiance, Pilgrim
shut down and fired all 135 employees with disabilities. Johnson‘s concern was that many of the
disabled individuals needed their Pilgrim wages to reduce their reliance on government funding.
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Furthermore, reliable and consistent employment made them feel needed, socially useful and
productive even if their individual productivity was lower than that of their colleagues.
During the next week, the President of the Metropolitan Board and Johnson leased a building,
hired staff, and Integrative Rehabilitation Programs (IRP) was born. Unfortunately, within a year
the new company lost money because of the gap between government funding and the true cost
of serving the disabled population. Disabled employees, especially the more severely disabled,
required high staff to employee ratios which resulted in higher expenses for IRP.
IRP’s Environment
Current research provided by the Rehabilitation Manager found that approximately 40% of all
American families have at least one family member with a disability (Mulligan, 2009). A
disability has a lasting and significant effect on that individual and his or her family‘s education,
income, asset generation, and poverty levels. Most individuals born with a disability have little
access to assets, remain in poverty, and never fully integrate into the workforce. Families with a
member with disabilities usually have lower incomes than families without a member with a
disability. Disabilities disproportionately affect African American, American Indian, and Alaska
Native families (National Council on Disabilities, 2002; National Council on Disabilities, 2008).
At the time, IRP staff stated that many of the individuals with disabilities in the state were either
unemployed or underemployed. As the severity of the disability increased so did their
unemployment rates. In fact, as many as 20,000 individuals with disabilities in the state were
waiting for services. IRP and its sister organizations found that there were more individuals with
disabilities available than they could employ.
The breadth of the problem and the lack of funding gave rise to many activist or advocate
organizations who advocated for their specific interest group or disabilities. In the first years
after passage of the Americans with Disabilities Act, many groups refined their national
advocacy skills by embarrassing companies into compliance. One paraplegic stated to the case
writers that he forced national organizations and politicians to negotiate with his group by
chaining his wheelchair to a McDonald‘s front door (Stuart, 2009). Enhanced by their success
many of these activists desired additional and sweeping changes in legislation, taxation, and
funding for disability groups. Some specifically targeted agencies similar to IRP (Novak, 2009).
Another, more immediate threat to IRP was not the activist groups, but the steady decline in
federal and state funding. Johnson stated that IRP‘s government funding covered only 60 to 80
percent of the total costs, including hidden costs, of serving this population, with no decrease in
regulation (Johnson, 2009b).
There was no competition from other agencies in the for-profit sense. There were sister agencies
in the city but they served other disabilities such as blindness, cerebral palsy, and mental illness.
Agencies similar to IRP served individuals with disabilities in other counties throughout the state.
An example of a nationwide organization serving the intellectually disabled was ARC (formerly
the Association of Retarded Citizens).
92
IRP Board of Directors
Similar to many smaller non-profit organizations, the board members were all unpaid volunteers,
who contributed their time, talent, and expertise to IRP. Many had been with the agency for a
number of years. The president of the board was a professor of entrepreneurship, the vice
president was a lawyer with a prestigious law firm in town, two board members had children
with disabilities who worked in the workshop, and another owned several McDonald‘s
franchises. A marketing consultant, a former engineer, and an insurance person comprised the
remainder of the board (IRP Board Minutes).
IRP Staff
The staff consisted of an Executive Director, an Assistant Executive Director, a Nurse, a
Supervisor and two staff members. The Assistant Executive Director had been with the agency
for 20 years. The nurse ensured that the agency was fulfilling all the health care needs and the
required documentation. A supervisor and two staff members ran the sheltered workshop of
about 40 to 60 individuals with disabilities. The marketing manager brought a steady flow of
contracts into the workshop from small businesses that needed light manufacturing, assembly,
and packaging.
The next management level included the supervisors responsible for work teams of eight to
twenty individuals with disabilities. Their projects included concessions at football and
basketball stadiums, and at the airport. In addition, two janitorial crews worked in separate NISH
(National Institute for the Severely Handicapped) government set aside contracts in federal
government buildings (see page 7 below for a description of NISH). Lastly, the agency had two
shelf stocking and warehouse crews at military commissaries.
History Repeated: IRP and its Philosophical Battle with Metropolitan Board
Another environmental threat came from the activists pursuing integration of individuals with
disabilities. While the actual start of the integration philosophy is uncertain, it gained national
prominence when President Reagan appointed the parent of an individual with disabilities to his
cabinet. In this capacity, the parent oversaw all of the national rehabilitation programs and
brought strongly held beliefs that every individual with disabilities (regardless of the severity of
the disability) should be out in society gainfully employed and integrated. Johnson stated that,
―Academicians influenced the next generations of incoming rehabilitation counselors and the
families of persons with disabilities by spreading the gospel that all individuals with disabilities
could and should be gainfully employed outside of sheltered workshops‖ (Johnson, 2009a).
Local and national advocates targeted agencies like IRP‗s sheltered workshops and large groups
of individuals with disabilities working together. They believed that meaningful integration
happened when every individual with disabilities worked, socialized and lived in the real world.
―Natural supports‖ would develop by the people around them bringing them into their own
93
personal lives by taking them to lunch, socializing with them, and helping them. The issue
centered on what is meaningful integration, ―mainstreaming‖ and meaningful employment?
What is the size of a group that allows integration? What if an individual works in a large group
but has significant interaction with the public—is that integration?
With mixed success, many agencies (such as IRP) succeeded in helping the higher functioning
employees with disabilities find and keep gainful employment. Some of the higher functioning
individuals flourished in the outside world. Others faltered or missed their social connections in
larger groups of individuals. In summarizing this issue, the Rehabilitation Manager stated that,
―The difficulty arose with those who did not have the behavioral, hygiene, personal, social, other
skills or motivation to succeed outside the agency‖ (Mulligan, 2008).
The Battle between IRP and the Metropolitan Board
The philosophical battle came to a head between the Metropolitan Board and IRP. IRP‘s Board
of Directors maintained that their agency provided a rich mix of options for their employees with
disabilities. The mix included a ―sheltered workshop‖ consisting of a large group of individuals
with disabilities working on light assembling, packaging, and mailing for national and local
manufacturers. IRP had crews working at two separate military commissaries, a microfilm
division, the football stadium, the basketball stadium, an integrated seniors program in a local
community center, and in several janitorial locations.
In IRP‘s opinion (Johnson‘s, the Board‘s and IRP‘s staff), this mix served the true needs of the
individuals with disabilities and was the ―correct philosophy.‖ Individuals with disabilities could
choose for themselves what type of employment situation suited them best. IRP did not believe
that they should force disabled individuals who felt comfortable and wanted a sheltered
environment out into the outside world (Johnson, 2009b).
Metropolitan‘s philosophy was that any work environment of more than eight individuals with
disabilities was too many regardless of whether they were placed in sheltered workshops or
surrounded by large numbers of the general public. The natural supports from the general public
would not occur with groups of more than eight because individuals without disabilities might
feel intimidated by the group sizes and not attempt to socialize. This meant that most of IRP‘s
programs were inadequately integrated because most of the IRP work groups were larger than
eight—significant public interaction was not the point—size of the groups was Metropolitan‘s
issue.
Unable to resolve the issue, IRP‘s Board of Directors voted to keep the sheltered workshop open
as one of the employment choices for individuals with disabilities. The Metropolitan Board
countered by withholding grants, and pulling all 150 of its individuals with disabilities and their
associated funding from IRP. This caused IRP‘s gross revenue to drop from approximately
$720,000 to $125,000. The Governor‘s office entered the fray and ordered Metropolitan to
continue as IRP‘s contracting agency. However, the damage was done; the workers were still
unemployed and sued both parties. IRP received a set aside contract and survived but added
approximately $40,000 to $80,000 to its negative fund balance.
94
The battle between IRP and Metropolitan is a microcosm of the ongoing debate in the U.S. about
what is meaningful integration (National Council, 2002; National Council 2008, Novak, 2008).
The conflict, both nationwide and locally, is still unresolved. Unfortunately, many of IRP‘s
former workers with disabilities remained unemployed. Without supports, one individual
(lacking transportation) was killed crossing a street, another was raped and killed, and a third
died of pneumonia from the lack of supervision.
IRP’s Current Situation
Fund Raising
In the prior year and the current year, IRP hosted an elegant dinner with silent and oral auctions.
The staff did all of the planning, invitations, meal planning, and decorating. In the prior year, the
auction netted $13,909.97 ($18,939.38-$5,029.41 Tables 1 and 2). In the current year, the
auction netted $9,596.44 ($17,946.82-$8,350.38). The staff felt that although they raised money,
the amount of money was small relative to the inordinate amount of time it consumed.
The sheltered workshop
For years, IRP‘s marketing manager obtained numerous contracts from small businesses in the
city. One of his successful strategies was obtaining leads from the local inventors and
entrepreneurs club. His marketing pitch was that IRP could do all of the light assembly,
packaging, labeling, and mailing for them at fair and good prices. He bid all of the contracts just
like any other private for-profit entity based on quality of service and price. At the height of
operations, the workshop employed 60 to 100 individuals with disabilities on four to five
contracts at a time in a 23,000 square foot facility. It averaged $100,000 to $400,000 gross
revenue per year.
IRP’s Board Concerns
Over the last several years, various IRP Board members voiced their concern about the agency
relying too heavily on government funding, especially their funding from Metropolitan. Several
believed that the agency‘s long-term strategy should include other funding sources, especially
for-profit ventures. In anticipation of pursuing other sources of funding, the IRP Board changed
its mission statement from serving just individuals with intellectual disabilities to include any
individual with a disability. The new mission included individuals with epilepsy, brain injuries,
dyslexia and other populations with disabilities. This change allowed IRP to staff more jobs with
higher functioning individuals.
The Football and Basketball Concessions
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IRP managed retail concessions at the football and basketball stadiums for ten years. IRP
subcontracted with the stadiums and provided supervisors and individuals with disabilities to run
the concessions. IRP staff maintained responsibility for staffing, training, motivation, and
leadership.
The Airport Concession
Based on its success with concessions and with Board encouragement, IRP began a profit
oriented snack or fast-food concession at the new airport2. The intent was that the concession
would provide another employment opportunity for its employees with disabilities and cash flow.
In the first year, the concession covered its costs and provided a small income stream. However,
in subsequent years it lost approximately $9,000 per year after the airport moved its security
screening next to the concession. Few passengers wanted to carry an extra bag of snacks through
heightened security. In addition, the small square footage (370 square feet) limited the
employment of individuals with disabilities to one and three at a maximum.
The NISH and JWOD Contracts
The Javits Wagner O‘Day Act (Javits Wagner O‘Day Act, 1938) set up the system of
government set asides with NISH (NISH, 2010) (formerly the National Institute for the Severely
Handicapped) as the intermediary between agencies serving individuals with disabilities and
government agencies needing products and services. The Act required that a certain portion of all
government contracts be set aside for agencies like IRP to bid. IRP had to bid competitively
against other agencies and perform ‗like a business‘ or lose the contract.
IRP had two successful NISH contracts with the military performing warehousing and shelf
stocking. In each location, their warehouse crews received and stored the supplies. IRP‘s shelf
stocking crews continually stocked the shelves. The operations were so efficient that the
military‘s general manager removed ordering from the military and turned it over to IRP‘s crews.
The error rate of over or under ordering was less than 5% in a year; in comparison to the 20-30%
error rate by a comparable military order clerk using a sophisticated computer system.
In addition to the above, IRP had NISH contracts including a microfilm unit and three janitorial
contracts. IRP‘s staff became proficient in running janitorial teams and considered going into the
private market against private janitorial companies.
IRP’s Financial Situation
IRP‘s financial situation showed considerable cash flow but as the balance sheets show it carried
considerable debt.
2
The actual type of snack food is disguised because it would reveal the identity of IRP.
96
Table 1 Financial Statements3
IRP INCOME PRIOR YEAR AND CURRENT YEAR
INCOME
Prior Year
Prior Year
Current Year
Current
Year
Income
Percent
Income
Percent
Fundraising
18,939.38
0.55%
17,946.82
0.47%
Grants
19,500.00
0.56%
86,693.81
2.26%
2,246.40
0.06%
4,336.86
0.11%
Metropolitan
206,222.63
5.95%
117,882.40
3.07%
Fast-food sales
126,135.27
3.64%
161,080.72
4.19%
9,612.71
0.28%
336,604.66
9.71%
471,057.98
12.25%
Administrative BU
0.00
0.00%
222,619.09
5.79%
Equip. usage
0.00
0.00%
40,372.80
1.05%
Contract income
0.00
0.00%
843.82
0.02%
17,381.94
0.50%
0.00%
117,578.50
3.39%
0.00%
2,602,322.45
75.04%
0.00
0.00%
0.00%
11,561.20
0.33%
0.00%
0.00
0.00%
Donations
Misc. income
Workshop
Transportation DO
Voc Rehab.
All NISH Contracts
Workshop contract
Supportive Emp.
Service fee allocation
0.00%
2,473,205.57
247,867.45
64.34%
6.45%
3
The financial statements were disguised to protect the original organization by multiplying each number by the
same factor to retain relationships between the numbers.
97
TOTAL INCOME
3,468,105.14
100.00%
3,843,907.32
100.00%
COST OF SALES
Discounts
28,699.79
0.00
Supplies
33,462.00
TOTAL COST OF
SALES
GROSS PROFIT(LOSS)
28,699.79
33,462.00
3,439,405.35
3,810,445.32
Table 2 IRP Expenses Prior and Current Year
EXPENSES
Salaries
Prior Year
Prior Year
Current Year
Current Yr
Expenses
Percent
Expenses
Percent
763,177.04
22.59%
1,774,603.74
47.16%
1,470,095.45
43.52%
477,334.16
12.69%
FICA/Medicare/SUTA
179,068.59
5.30%
176,533.71
4.69%
Health, Dental, Life Insurance
186,130.64
5.51%
174,083.55
4.63%
Health & Welfare
125,346.00
3.71%
100,629.01
2.67%
0.00
0.00%
19,397.92
0.52%
199,864.52
5.92%
257,448.02
6.84%
34,348.08
1.02%
41,664.72
1.11%
Salaries Hourly
401K Plan
Occupancy-building rent
Payments to outside
professionals
98
Supplies
129,238.58
3.83%
94,988.78
2.52%
8,251.33
0.24%
61,861.11
1.64%
31,002.05
0.92%
57,310.32
1.52%
Employ/ads/tests/immunizations
2,191.71
0.06%
4,608.01
0.12%
Postage & Delivery
4,385.94
0.13%
5,878.24
0.16%
Dues & Subscriptions
(1,275.30)
-0.04%
184.36
0.00%
Staff Development & Travel
19,188.15
0.57%
37,210.90
0.99%
Bus Pass Transport
16,347.50
0.48%
2,593.33
0.07%
Marketing & Promotion
9,054.15
0.27%
8,107.36
0.22%
Miscellaneous
9,432.07
0.28%
1,973.22
0.05%
0.00
0.00%
222,619.09
5.92%
Nish Comm. Exp
49,513.02
1.47%
94,636.69
2.51%
Fundraising exp
5,029.41
0.15%
8,350.38
0.22%
24,128.30
0.71%
22,513.07
0.60%
5,801.71
0.17%
14,867.82
0.40%
585.00
0.02%
283.64
0.01%
Insurance: general
31,638.92
0.94%
25,230.73
0.67%
Insurance: workmen
75,184.20
2.23%
78,000.00
2.07%
3,377,727.06
100.00%
3,762,911.88
100.00%
Vehicles, tools, equipment
Subcontractors
Administrative BU
Interest Exp
Bank Fees, charges
401K administrative
TOTAL EXPENSES
NET PROFIT(LOSS)
61,678.29
47,533.44
99
Table 3 IRP Balance Sheets
Prior Year
Current Yr
Prior Year
ASSETS
LIABILITIES
CURRENT
ASSETS
CURRENT
LIABILITIES
Cash
(55,108.93)
(98,507.70)
Fast Food Cash
(5,060.60)
2,438.07
Taxes payable
Accts. Rec.
Employment
65,568.98
22,366.02
Other payable
Accounts Receivable
Accounts Payable
Current
Year
108,241.07
151,489.88
935.52
(5.75)
10,914.70
168,629.51
190,361.53
401k payable
4,019.91
Accrued payroll
TOTAL CURRENT
ASSETS
174,028.96
116,657.92
Payroll clearing & line of
credit
Accrued vacation &
expenses
FIXED ASSETS
Leasehold
improvement
163,691.85
Off. Furniture &
Fixtures
133,254.91
119,325.91
97,686.63
101,136.63
LONG TERM
LIABILITIES
129,127.17
168,908.82
Notes payable SBA
Lease improve. Fast
food
Capital Leases
Accumulated Dep.
TOTA. FIXED
ASSETS
171,419.31
(259,429.32) (371,314.32)
264,331.24
189,476.35
TOTAL CURRENT
LIABILITIES
58,595.00
14,374.08
102,685.63
61,480.09
48,870.28
300,867.91
260,732.50
113,674.40
97,607.36
Notes payable all Banks
66,458.27
60,945.67
Notes payable NISH
20,766.40
1,504.19
Notes payable Goodwill
4,141.00
4,141.00
100
Leases payable
Health & Welfare past 5
years
OTHER ASSETS
Deposits
22,110.83
11,335.63
LONG TERM
LIABILITIES
13,403.74
16,037.49
244,889.88
285,878.24
463,333.69
466,113.95
724,066.19
766,981.86
TOTAL LIABILITIES
TOTAL ASSETS
460,471.83
317,469.90
CAPITAL
YTD earnings
47,474.89
9,570.96
Fund Balance prior years
(311,070.25) (459,083.00)
TOTAL CAPITAL
(263,595.36) (449,512.04)
TOTAL LIAB. &
CAPITAL
460,470.83
317,469.82
The New Franchise Venture
IRP did not seek the next opportunity; it found IRP. Airport management informed Johnson that
a national fast food franchisor had a company-owned store for sale. This opportunity fit the
board‘s new strategic direction.
IRP contacted the franchisor and explained its mission of serving persons with disabilities. At
first, the company was reluctant that IRP employed individuals with disabilities. However,
Johnson convinced them that IRP staff would supervise the employees and that IRP had a strict
procedure for interviewing, screening and training the persons with disabilities.
Johnson‘s pitch to the airport emphasized that they were a non-profit organization providing
services to persons with disabilities and would be the only non-profit entity at the airport. To
enhance its appeal, IRP guaranteed that 60 percent of the workers would be persons with
disabilities giving the city some public relations appeal.
In conversations with the national franchisor Johnson discovered that the current franchise for
sale was owned by the franchisor and run by a relative of the founding couple. The relative
running the franchise wanted to relocate, was frequently absent, did not monitor his employees,
did not monitor the cash register or his cash flow, and did not order correctly. Although the store
was profitable, its sales and profits had been stagnant. Johnson believed that this was a great
opportunity for IRP and that the franchise would provide another employment choice for IRP‘s
101
workers with disabilities. He could also use the store to transition workers with disabilities into
other retail outlets. Johnson stated to the Board that even at the same level of sales, they could be
more profitable than the current owner by carefully monitoring the cash register, the cash, and
inventories. The board was hopeful that the franchise would provide employment and retail
training for its workers with disabilities and provide positive cash flow to IRP.
The current franchise for sale had grossed $880,000 last year, despite being run by the
unmotivated relative who lacked initiative for the business. Johnson believed that by purchasing
and instigating some simple control mechanism the franchise venture would be profitable for
IRP and have positive revenue for the company (see pro formas tables 4 through 8).
Table 4 Cash Flow from the Proposed Venture
11% Rate
Start
up
Origi
nal
Leas
e
Perio
d
Costs
Year
1
Year
2
Year
3
Purchase
675,0
00
Bank Loan
675,0
00
Grant/Dona
150,0
00
Principal
Reduction
Cash on
Hand
Year
4
Leas
e
Exten
ded
Year 8 Year
9
Year
5
Year
6
Year
7
591,0 497,1 392,0 275,2 144,9
00
89
00
21
29
0
0
0
Perio
d
0
84,00 93,81 105,1 116,7 130,2 144,9
0
1
89
79
92
29
675,0
00
0 1,824 61,64 125,4 118,2 115,1 116,9
8
72
96
20
44
282,30 457,5
4
86
Grant/Donation
Inflows
97,50 75,00 75,00
0
0
0
Net Income
131,0 139,0 143,0 147,0 151,0 156,0 165,3
00
00
00
00
00
00
60
175,28 185,7
2
98
228,5 215,8 279,6 272,4 269,2 271,1 282,3
00
24
48
72
96
20
04
457,58 643,3
6
84
Total Cash
Available
675,0
00
102
Working
Capital
72,50
0
Loan
payment Prin
0
84,00 93,81 105,1 116,7 130,2 144,9
0
1
89
79
92
29
0
0
0
Loan
payment
interest
0
70,17 60,36 48,98 37,39 23,88 9,247
6
5
7
7
4
0
0
0
Capital
Purchases
675,0
00
Cash from
operations
Total Cash
Paid on Loan
1,824 61,64 125,4 118,2 115,1 116,9 282,3
8
72
96
20
44
04
675,0
00
Cash
Position
0
Loan Of
$675,
000
For this no.
of years
154,1 154,1 154,1 154,1 154,1
76
76
76
76
76
0
1,824 61,64 125,4 118,2 115,1 116,9 282,3
8
72
96
20
44
04
457,58 643,3
6
84
0
0
457,58 643,3
6
84
6
At an interest
rate of
11.00
%
Is a yearly
payment of
$154,
176
$12,848 per
month
Total
Projections:
725,0
00
IRP
Contribution:
72,50
0
SBA
Funding
Request:
675,0
00
103
Table 5 Venture Pro Forma Profit and Loss
First
Second
Third
Year
Year
Year
REVEUNUES
Gross Revenue
884589
918662
947908
Cost of Goods
Sold
176917.8
183732.4
189581.6
Gross Profit
707671.2
734929.6
758326.4
220000
233200
247192
Payroll Tax and
Benefits
33000
34980
37079
Administrative
overhead
12000
12720
13483
53075.34
55119.72
56874.48
Amortization and
Depreciation
28000
29680
31461
Insurance Expense
6000
6360
6742
70176
60365
48987
Maintenance
Expense
6000
6360
6742
Office Expenses
2400
2544
2697
Professional Fees
2500
2650
2809
126720
134323
142383
36000
38160
40450
OPERATING
EXPENSES
Salaries
Royalty Fee,
advertising
Interest Expense
Rent
Utilities Expense
104
Total Expenses
595871.34
616461.72
636899.48
Net Earnings
111799.86
118467.88
121426.92
19200
20532
21573
130999.86
138999.88
142999.92
Vocational
Rehabilitation
Payments
Net Earnings
Table 6 Present Value of the Proposed Venture (From IRP’s Accountant’s Table)
PRESENT VALUE
Number Year
1 1999 131000 117245
2 2000 139000 104934
3 2001 143000
93916
4 2002 147000
84055
5 2003 151000
75229
6 2004 156000
67330
Present value of 6 years
is
542709
Depreciated value of
leasehold
169000
711709
Dep. Calculated at 6 years of nine
years remaining straight line
105
The New International Airport
The new airport offered numerous business opportunities. Its advanced features allowed it to
become an all weather airport intended to unclog a portion of the nation‘s air traffic system.
Covering 53 square miles, it was the largest international airport in the United States (U.S.) and
the second largest in the world. It was also one of the busiest in the U.S. system with nonstop
service to more than 130 international and domestic locations. All but one or two of the major
airlines flew into the airport with some regional or express flights to shorter destinations. The
economy was good with airlines expanding and airline traffic increasing. The city‘s location
made it a destination for winter and summer outdoor enthusiasts. Business travelers came from
all over the world to conduct commerce with international, regional, and local businesses.
The new location affected ground transportation, hotels, and ancillary services. The remote
location gave the airport‘s retail locations a captive audience. The tenants in the airport were
restaurants and snack shops, but no other outlets similar to the franchise IRP wanted to purchase
were present.
The National Fast Food Franchisor
The national franchisor had established a culture with strong values based on the original
founder‘s beliefs. The humble beginnings started in a farmers‘ market stand selling handmade
food items. Word of mouth advertising from the first store turned into a franchising opportunity
resulting in 420 franchises and additional stores in two other countries.
The franchisor offered a complete and informative circular that detailed average costs, revenues,
and contract arrangements. The company would offer national advertising with an established
name, required training on preparing the food items, established storefronts, and standard
operating procedures. This particular location made money but had not met expectations.
The franchisor originally asked for $870,000. However, the founder of the franchise personally
intervened and lowered the purchase price to $675,000. The SBA loan for $675,000 was for 2%
over New York prime for 10 years (approximately 5.5%). The franchisor required 7% of the
gross revenue for the royalty fee and 1% for advertising.
A student team from the Small Business Institute provided the business plan and recommended
that IRP purchase the store. Discussions inside the Board of Directors were thorough and intense.
While IRP had successfully operated a for-profit venture in a previous concession, some board
members had concerns about the price and size of the loans. While five of the eight Board
Members recommend pursuing the venture, three remained in opposition. After final discussions,
the three acquiesced with reservations and authorized a negotiating committee to pursue and
finalize the venture.
The Six Hour Ordeal
With the IRP Board, the SBA, a local bank loan, and airport management‘s approvals, the IRP
negotiating committee and the national franchisor‘s Vice President met at the bank to finalize the
loan and sign the franchisor‘s contracts.
106
The first obstacle was the bank‘s last minute insistence that IRP provide $75,000 of down
payment as part of the $675,000 financing. Fortunately, the commercial loan officer offered to
set up a second loan based on her signature. She offered a 90-day loan for $70,000 with 2% over
New York prime (5%) for ten years, or about $8,000 per month. IRP had $5,000 of its own
money to invest. However, negotiations with the franchisor created a second obstacle.
This franchisor had always dealt with for-profit entities and required someone‘s personal
guarantee such as the owner, the board, or someone on the board. In explaining that they were a
non-profit entity, the committee offered to have Johnson sign as IRP Executive Director.
Therefore, in the case of a failure, the non-profit corporation would hold the liability and not
Johnson. However, intense phone conversations between IRP‘s Board Vice President who was a
lawyer, the franchise lawyer, and the founder were unsuccessful. The franchisor insisted on
someone signing a personal guarantee. The negotiating committee recommended that Johnson
not sign a personal guarantee, but it would be his choice to do so.
The parties agreed to remove all Board members from liability but neither the bank nor the
franchisor would remove the requirement of a personal guarantee from someone. Six hours later
the franchise founder, frustrated that the negotiations have taken all afternoon, informed Johnson
that he had fifteen minutes to sign the documents or she would rescind her offer that lowered the
price from $800,000 to $675,000.
Decision Time
Johnson is now over 50-years-old and with modest assets. For him, the issue is that he would
become personally liable for a $675,000 fast food franchise. The bank wanted his personal
signature on both loans and the franchisor wanted a personal guarantee that Johnson would make
up any deficits in monies owed to them. Should Johnson sign these guarantees? Is IRP‘s goal to
have a for-profit business important enough for Johnson to incur this personal risk? Is this forprofit venture in the best interest of IRP? Is this opportunity better than continuing as-is which
would result in a slow financial death for IRP and cause their disabled employees to be without
jobs and possibly homeless (Johnson, 2010)?
107
Appendix 1 The Relevant Portion of Timmons Opportunity Screening Guide for IRP*
Criterion
High to low Potential
Further Explanation
Market need
Reachable customers
Growth rate
Cost Structure
Profit after taxes
ROI
Asset intensity
Gross margins
Time to breakeven cash flow
Time to breakeven profits
Harvest: exit strategy
Competitive issues: costs
Barriers to entry for other
firms
Contractual advantage
Team and Staff
Fatal flaws?
Degree of fit
Team
Room for error
This is a portion of the complete guide filled out by the President of the Board. For the
complete source see: Timmons, J.A. & Spinelli, S. (2009). New venture creation:
Entrepreneurship for the 21st century. 8the ed. McGraw-Hill, Irwin: Boston
108
Appendix 2 IRP’s Mission, Goals and Values
Mission
Our organization‘s mission is to create market-based employment opportunities that will provide
individuals with moderate to severe disabilities the opportunity to participate productively in the
economy of their community.
Goals
To maximize independence and productivity according to each individual‘s needs and
capabilities
Values
We know that the intrinsic value of work takes place in an individual‘s mind. It comes from selfesteem gained by achieving personal goals as well as from having a real stake in the broader
organizational goals that exist in the workplace. We believe that an authentic work experience
(real effort for fair wages) enhances the quality of life for IRP client employees and our staff. We
believe in the right of all people to choose their own work. We believe that in assessing,
knowing, and understanding the abilities and desires of each of our clients, we can help realize
the highest potential in each individual‘s effort. We are committed to fair compensation,
Including wages and benefits, for our staff and our client employees. We value self-reliance and
independence and believe strongly in our collective and individual ability to overcome obstacles
and to succeed. IRP is the people who work here.
109
References
Dess, G., Lumpkin, G., & Eisner, A. (2008). Strategic Management (4th Ed.). Boston: McGrawHill. (Provides material on strategy).
Javits- Wagner O‘Day Act. 1938. 41 U.S.C. sec.s 46 et seq.
Mulligan, T. (2009). Personal Interview, November 16, 2009. (Long time member of IRP and
current Rehabilitation Manager and Second on organizational chart under James Johnson).
National Council on Disability (2002). Update on the UN Convention on the rights of people
with disabilities. Retrieved January 25, 2009, from: www.ncd.gov. (Provides current
state of individuals with disabilities).
National Council on Disabilities. ((2008). The State of 21st Century Financial Incentives for
Americans with Disabilities. Retrieved January 27, 2009, from: www.ncd.gov.
(Background on individuals with disabilities).
NISH, 2010. www.nish.org/ Retrieved May 14, 2010.
Novak, C. (2009). Comments of a National Council on Disabilities Board Member to the
Council. National Council on Disabilities. Retrieved January 25, 2009, from:
www.ncd.gov. (Comments of an activist).
Thompson, A., Gambel, J., & Strickland, A.J. (2006). Strategy: Winning in the Market Place (2nd
Ed.). Boston: McGraw-Hill, Irwin. (Strategy textbook).
Timmons, J.A. & Spinelli, S. (2009). New venture creation: Entrepreneurship for the 21st
Century (8th Ed.). McGraw-Hill, Irwin: Boston. (Provides opportunity screening guide
used by the IRP Board President and a Small Business Consulting Team. This is the
form recommended to analyze this opportunity).
Personal Interviews
Goodfellow, S. (2009). Personal Interview, March 19, 2009.(Current Board Member).
Johnson, J. (2009a). Personal Interviews. November 16, 2009. Executive Director of IRP, IRP
offices.
Johnson, J. (2009b). Personal Interviews. March 19,2009, Executive Director of IRP, IRP offices.
Johnson, J. (2010). Personal Interviews. May 2010. (Executive Director of IRP).
Stuart, C. (2010). Personal Interview January 31, 2010). Training class for directors of
independent living centers, Denver, CO).
110
LAKE ROAD LAUNDROMAT: EVALUATION OF CUSTOMER SATISFACTION
Michael W. Pass and Sanjay S. Mehta
This case was prepared and is intended to be used as a basis for class discussion. The views
represented here are those of the case author (s) and do not necessarily reflect the views of the
Society for Case Research. The views are based on professional judgment.
Alex Fox’s main goal for Lake Road Laundromat is to build repeat business by satisfying
customers. Three customers led him to question whether he was achieving this goal. One
complained about black marks on a dry-cleaned sweater. Another customer said that no
attendants were on duty to explain how to work a new style of coin-operated washer. A third
customer said the wash-fold service gave her clothes to the wrong person! After these complaints,
Alex wondered how satisfied his customers are with the laundromat services. He said, “I know
that problems occur from time to time with any service but I thought we had everything working
fine. Maybe that’s not true.”
Lake Road Laundromat is located in Huntsville, TX which is north of Houston, TX and home to
Sam Houston State University. Alex Fox acquired the laundromat in 2006 after recognizing
potential for increasing business with the growing student population, university employees and
nearby operations of the Texas Department of Criminal Justice. The laundromat is doing well so
the possibility exists to expand services to other nearby college towns. Alex stressed that ―his
goal has always been to satisfy customers in order to build repeat business. If they are not
satisfied, then sales could decline as they go to a competitor. It‘s also risky to expand using the
same business format to another location if it is not working here.‖ Before looking at new
locations, Alex said he ―would have to be sure that customers at the Huntsville location are
satisfied with the laundromat services.‖ He also wanted to learn about the media, such as
newspapers, they use so that advertising could be done to attract new customers and inform
current ones about any service changes.
Alex sought help from a consultant with the local Small Business Development Center (SBDC).
They met once by phone and twice at the laundromat. During the meetings, the consultant asked
numerous questions about the business and customers to determine: (1) what questions to ask
customers to determine their level of satisfaction and the media they use, and (2) the best way to
obtain answers to these questions from different laundromat customers. The consultant first
spoke with Alex by phone to learn more about the laundromat. It has been open for fourteen
years at the same location in a 3,700 square-foot building within a strip mall that is located on a
well traveled street in Huntsville. Different types of customers use three laundromat services:
coin-operated washers and dryers, a dry-cleaning service and a wash-fold service. In terms of
self-full service levels, these represent a self-service operation (coin-operated washers and dryers)
and a full-service operation (dry cleaning and wash-fold services).
111
Alex reiterated that he wanted to know how satisfied customers are with the services and where
he should advertise. He also said he wanted to know how far away customers lived and worked.
The consultant added: ―It would also be good to ask customers how often they visit, how much
they spend, if they visit your competitors and how they feel about the prices.‖ Alex agreed with
this direction and said, ―I am very concerned about the cost of this research and how long it will
take to get the information. I need it quickly and inexpensively so I‘m willing to accept results
that may not be the most accurate but will suggest areas where I could make changes for my
current customers.‖ In addition, he said that he wanted more than just the opinions of a few
customers because he could get those when walking around the business. He said, "What I need
is feedback from as many customers as possible, as quickly as possible and without spending a
lot of money." Alex's comments about research costs, his sense of urgency, the need for many
opinions and the level of acceptable accuracy suggest the method for obtaining information from
customers.
Consultant Notes
The SBDC consultant met twice with Alex at the laundromat and summary notes indicating
attributes that customers consider when determining their satisfaction with laundromat services
are below. When asked about prices for the laundromat services, Alex said they are similar to
those of competitors and the dry-cleaning prices are the lowest in town. He felt that prices for the
wash-fold part of the business are also competitive and said that discounts are offered to the
university and government employees. To build repeat business, discount cards are also given to
repeat coin machine customers. Even though Alex knows that prices are similar or lower than
ones of competitors, the consultant said that customer perceptions of value need to be considered.
The consultant explained that when customers think about value they consider prices paid for the
quality of service received. To determine if the laundromat is providing services at prices that
customers perceive as good value, he recommended asking customers if the prices are
competitive.
Self-Service Operation: Coin-Operated Washers and Dryers
Alex describes the self-service operation customers as individuals that cannot afford to purchase
a washer or dryer or they are students using the service while attending Sam Houston State
University. There are also Hispanic customers that work at construction sites and local services.
Alex added, ―I‘m not sure if the Hispanic customers are happy with the laundromat so it would
be good to get their opinions.‖
When asked about complaints with the self-service part of the laundromat, Alex said "the biggest
complaint I used to hear was that the coin-operated machines are broken, so customers could not
run multiple loads. I purchased ten new washers which helped this situation but I don‘t know if
the problem is really solved. At times, a machine may be broken when all the other ones are
being used.‖
Alex also said that the older washers and dryers may not be acceptable to customers. He said that
upgrading the equipment ―can be expensive so I have to continue using the older style machines
that do not offer customers the new technology, such as payment card systems and different
pricing choices.‖ He added, ―I‘ve been slowly adding machines with a larger load capacity that
112
are much faster and provide a higher quality wash," Alex admitted uncertainty about his
customers‘ satisfaction with the self-service operation and whether he needed to continue slowly
upgrading equipment or make other changes to the business.
To explore additional attributes, Alex was asked to describe what customers might think about if
asked how satisfied they are with the operation. He pointed out several things based on his
knowledge of laundry operations and his interactions with customers. In addition to availability
of washers and dryers, he explained that customers expect to have supplies readily on-hand
instead of having to buy them elsewhere. This meant that he always had to make sure that a
small selection of detergents and fabric sheets, as well as snacks and cold drinks, were always
available.
When looking around the laundromat waiting area, several students were seen using the free WiFi service to pass the time. Other customers had little to do other than play a couple of arcade
games located in the corner of the facility. Alex said that some customers would probably like to
watch television while waiting and want to come by at anytime, day or night. He explained that
customers might be more satisfied if a television was added, but said, ―We had a television once
and the customers argued over which channel to watch.‖ He also said that some customers
wanted the laundromat to remain open 24 hours. He explained, ―We have an attendant on duty
for customer service, such as showing customers how to operate the machines. Being open 24
hours would require having an attendant on duty all the time and I am concerned about employee
safety during nighttime hours.‖
Full-Service Operation: Dry Cleaning and Wash-Fold Services
Alex said the dry cleaning service is offered because of the demand from customers taking care
of their finer clothes and certain work clothes. The cleaning is outsourced to a firm because as
Alex explained, ―I didn‘t have the physical space or financial resources to purchase the required
equipment, so when I added this service; I selected an outside vendor from Houston, TX with
which to outsource the actual process.‖ Outsourcing made this service very lucrative in relation
to the amount of work, time and financial resources required.
When asked about potential problems that could lead to customer dissatisfaction, Alex said that
outsourcing meant he gave up some control so he is concerned about what customers think about
the quality. He is so concerned about quality that a policy was set stating that any damages (e.g.
stains, broken buttons) would be fixed without charge to the customer. He added that he is not
sure if his dry cleaning customers are aware of this policy.
Wash-fold services are successful at some large universities such as University of Texas and
Harvard so Alex thought it would work well in Huntsville. Alex said that ―students, such as ones,
living in this college town are very interested in the service because of the time it saves and it is
convenient.‖ He said that it would be good to obtain more business from fraternities and
sororities at Sam Houston State University. Unfortunately, he is having difficulty finding ways to
get the word out to more of the student body. When asked about customers being satisfied with
the wash-fold service, Alex explained that they are probably satisfied with the way the clothes
are folded because it is done the same way he learned from a luxury hotel. Also, free pick-up and
113
delivery is offered. Nevertheless, he expressed concern about their satisfaction because of the
customer having clothes delivered to the wrong person.
Next Steps
Alex agrees to meet with the consultant again to review questions that would be asked of
customers. They also discuss the best way to obtain customer opinions. Alex reiterated the need
to do this as quickly as possible, with as many customers as possible and without spending a lot
of money. The consultant confirmed that he would consider these things and how to reach the
different types of customers that may, or may not, use all three of the laundromat services. He
said that he would also have to consider language differences with Hispanic customers to obtain
their opinions.
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LEADERSHIP AND CHANGE MANAGEMENT:
A NARRATIVE OF AN ORGANIZATIONAL TURNAROUND
Kat Lui
This case was prepared and is intended to be used as a basis for class discussion. The views
represented here are those of the case author (s) and do not necessarily reflect the views of the
Society for Case Research. The views are based on professional judgment.
Sheila was hopeful. As the newly appointed Chief Executive Officer (CEO) of Precision
Manufacturing, she was charged with turning this once profitable company around. Based upon
the three-day off-site meeting with her Senior Leadership Team, Sheila established a long-term
strategy. All short-term actions had to now be viewed through the long-term vision of where
Precision Manufacturing wanted to be in three years. Core values were modified and employees
were asked for their commitment. Now all she had to do was convince the Board of Directors
that her plan could lead to profitability.
Precision Manufacturing
Precision Manufacturing, Inc. was established in 1994 by a small group of colleagues from
Hewlett-Packard to provide contract manufacturing outsourcing services. They provided
engineering, product design, automation and testing, manufacturing, and fulfillment services to
industrial equipment, medical, computing and data storage, and communications industries
worldwide. Their engineering services included new product design, prototype testing, and
related engineering solutions such as custom testing and automation equipment design. Printed
circuit board assembly, sub-systems circuitry, and component reliability were typical of activities
at Precision Manufacturing.
Although contract manufacturing on the ―electrical‖ side was a well established market,
Precision Manufacturing founders strategically targeted manufacturing services for ―electromechanical‖ devices. The core of their mission statement was in contract manufacturing,
combining electro-mechanical manufacturing and engineering. As a result, Precision
Manufacturing was positioned in a different niche than the majority of the industry. Its combined
electro-mechanical mission provided a unique appeal and filled a gap in the industry. Also,
Precision Manufacturing products were lower to medium volume ―industrial‖ products rather
than high volume ―consumer‖ products. These ―industrial‖ product types typically yielded higher
profit margins.
In addition to outsourcing manufacturing, Precision Manufacturing also offered product
development services. They could take a concept from a customer, develop it, launch it into
manufacturing, and produce it globally. Their vision, ―CONCEPT TO CUSTOMER‖, not only
reinforced their service, but it also differentiated them in the marketplace from other contract
manufacturers. Product development was more lucrative financially than, the low margins
associated with the production only side of the industry. As a result, Precision Manufacturing
115
earned higher profit margins from its customers who had products both developed and
manufactured by Precision.
In the early years, 1994-2000, gross margins were in the 10% range, net profits averaged three
percent, and growth was rapid. Fourteen global manufacturing sites were established in the US,
Mexico, Europe, and Asia. Annual revenues grew to well over $600 million dollars. Precision
Manufacturing traded publically on the NASDAQ exchange and in 2000 its stock hit its high of
$25 per share.
By 2001, Precision Manufacturing employed 4,000 people, with sales and revenues estimated at
over $700 million. Then the ―tech downturn‖ hit the industry. Although Precision Manufacturing
was able to maintain revenue growth for a while, it was unsustainable and ultimately began
showing quarterly losses. In fact, during 2001-2004, Precision Manufacturing only had one
quarter of profitability that was barely above break even. Stock prices fell from the $25 high to
$5 then to $2. Finally, at $0.75 per share, the stock price reached its lowest point after some
―accounting irregularities‖ surfaced in its Mexico facility. Consequently, Precision
Manufacturing had to restate quarterly earnings for FY 2003, and was delisted from NASDAQ
until earnings were corrected.
Problems that Created Unprofitability
Leadership. Precision Manufacturing lost key management personnel in the product
development business. As a result, revenues from this line of business dropped in the U.S. and
Asia. The CEO, who started the company and was key to the high growth years, was
entrepreneurial. He was driven by financial growth and felt this growth could remedy
profitability issues. Part of his strategy was keeping all manufacturing sites in tact even if they
were unprofitable. Geographic presence (growth) in all regions was more important than
profitability. Lacking strong operations skills, he failed to take decisive action on
underperforming locations and problem customers. He was incapable of managing the current
size and scope of the company.
The Board was performing its oversight role as defined in the Charter of the Governance
Committee, which was to make certain that the company maintained the proper leadership to
ensure company viability in the best interest of the shareholders. They liked the CEO and
thought they could develop and train him to be successful. After allowing the CEO three years to
get back to profitability, the Board decided to make a change. Although they had difficulty
gaining consensus, a change of leadership was made and he was replaced in 2004.
Customers. Precision Manufacturing had grown its global sites faster than its customer base.
Consequently, there was a combination of underutilized sites, and a few sites that had a history
of underperforming by delivering inconsistent quality and not meeting costs and schedules.
During their high growth years (mid 1990‘s - 2000), Precision Manufacturing‘s customer
portfolio included optical technology start-up companies. By 2001, when the downturn occurred,
the optical market was greatly impacted; leaving many of these start-up companies in financial
distress with some filing for bankruptcy. This left Precision Manufacturing with large amounts of
the customers‘ products it had contract manufactured and that the customers could not pay for. In
addition, many of its customers could not pay for products they had received which increased
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Precision‘s uncollectable accounts receivables. Both the undelivered products and the bad
accounts receivables had to be written off as business losses.
Precision Manufacturing had lost sight of its core business of precision electro-mechanical
device development and manufacturing. It had a number of large ―consumer‖ electronics
companies for which it was manufacturing high volume products but at thin margins.
In late 2004, Precision Manufacturing, Inc. was negotiating bankruptcy. After three years of
quarterly losses, a Chapter 11 plan was on the table. Because cash flow was a problem, paying
suppliers was, too. As a result, suppliers delayed shipments until payment was received. In some
cases, suppliers demanded payment in advance of building and shipping parts. Managing cash
flow was a daily challenge for the senior executive team and lending institutions.
Leadership Change
In late 2004, a new Board member with industry experience, decided to make significant changes
in the management structure. As chair of the Governance Committee, he influenced the move of
the Chief Operating Officer (COO), Sheila Lambert, to Chief Executive Office. Sheila was
tasked with Finance, Human Resources (HR), Information Technology (IT), Product
Development, and Sales & Marketing, as well as Manufacturing (which she had managed as
COO). Her charge was to ‗return Precision Manufacturing to a profitable company‘. In addition
to her promotion to CEO, the Governance Committee appointed Lambert to be Chairwoman of
the Board. Lambert had all the resources required for operating the company under her
management responsibility.
Sheila Lambert’s Background. Sheila had a reputation for success and was a known
commodity with the Board of Directors, many of whom had worked together and with her at
Hewlett-Packard (HP). During her tenure at HP, Sheila never backed down from a challenge.
She accepted risky assignments (risky to her career if she failed), and delivered on expectations
through hard work, dedication, and competence. When she made mistakes, she acknowledged
them and changed what was in her power to change. She may have lost some small battles but
she had won the big wars. In her years at HP and Precision Manufacturing, she was recognized
for her ability to motivate people. Getting people rallied around a cause came easy. Her
management style was to treat everyone fairly, motivate them by giving them responsibilities and
opportunities, surround herself with effective people, and set an example by participating with
them, being involved and engaged, and not expecting more of them than she was willing to give
herself. People recognized that Sheila demanded a lot of her staff, rewarded them and did not
tolerate people who were non-performers. As a result, good people rallied around her. Nonperformers did not want to work for her because they knew she would fire them.
Sheila surrounded herself with talent. She hired people who had the capability to be better than
she was. The reasons she did this were: to drive her to be better, as they could step into her job if
she left or fell over dead, and lastly, she could delegate multiple tasks that would be completed.
This allowed her to accelerate the pace of change and improvement. Her goal was always having
at least two people who could step into her job at any time. She once stated, ―Some managers
lead by controlling those underneath them and making them loyal to the leader. I lead by having
strength around me and having loyalty to the goals of the organization, then having trust among
us.‖
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Most importantly, Sheila felt that trust was the foundation from which she led her teams. She
thought that it was critical to have effective communications and organizational agility, and that
if a leader did not have the trust and confidence of the team its members were likely to play
political games. Instead of working together, they would worry about positioning among the
team and they would worry about who to trust. All of these were non-productive issues that
Sheila could not allow. She believed that with trust she could act with speed and resolve to make
decisions. Furthermore, if her team members had issues that affected another, they were
encouraged to work them out before the issues came to her office. If they could not resolve an
issue, then they would come to her office together to discuss it. Those types of meetings,
however, were rare.
In Sheila‘s world, there was no substitute for hard work and dedication. She believed that if a
person spent more time working than the average, that person would gain more knowledge and
experience, and become more valuable to the organization. In essence, that person became the
‗go to‘ person in the organization. Although Sheila tried to keep work and personal life in
balance, there were times when it was a problem and the scale tipped in favor of work.
Sheila‘s father taught her to treat people with respect at all levels. He was a highly successful
business man, the founder of Lambert Built Tires. He was equally comfortable talking and
dealing with Harvey Firestone (of Firestone Tires) and other high level executives as he was
talking with local farmers. This impressed her and she carried that with her. She loved being on
the shop floor having coffee with some assembly people, talking with them about the company,
their jobs, or her job and its issues. When she became CEO, she met not only with her
management team but also with the front line production workers to enlist their ideas and help.
She spent lots of time walking around talking with people at all levels believing that when one
respects what each person does, that reflects on the entire organization.
Sheila always erred on the side of honesty no matter what the situation was. She was direct, clear,
and honest. She realized that her decisions and actions were always under scrutiny by others and
that she needed to be careful. Both the Chief Financial Officer and original CEO wanted her job.
In fact, the original CEO continued to use his calling cards with the CEO title.
Sheila’s Strategic Plan
In January 2005, now that Lambert was CEO and had all the resources and authority required for
operating the company, she took a number of actions. First, she convened a three-day off site
management meeting of the Senior Leadership Team. As part of that meeting there were three
major action items:
1. Reorganized the structure with three regional Vice President‘s (VP) of Manufacturing:
one for Americas, one for Asia, one for Europe (product development in Europe
reported to this person). Put a new person in charge of product development in the US
and Asia. Combined HR and IT under an experienced VP.
2. Reaffirmed agreement to the mission, vision and core values of the company. Agreed
to ―get back to basics‖- contained within those guiding principles.
3. Established a plan to turn the company around in six to nine months and outlined how
a profit could be sustained each successive quarter.
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The most important thing Precision Manufacturing did during this three-day meeting was
establish a long-term strategy. Prior to the off-site meeting, there was no planning process or
long-term vision for growth and strategic direction. Lambert provided the lens through which to
view short-term actions. Everything had to be viewed through the long-term vision of where
Precision Manufacturing wanted to be in two to three years.
Included in this turn-around plan were eight action tactics that served as a guiding compass:
1.
2.
3.
4.
5.
6.
7.
Eliminate consistently underperforming locations;
Eliminate those locations that were not contributing to the vision/mission;
Identify overhead costs that could be eliminated to reduce Sales, General and
Administrative expenses;
Evaluate the customer portfolio and determine what customers should be:
a. Re-priced,
b. Eliminated because they did not fit the business model, or
c. Eliminated because they were not a strategic fit;
Restructure the sales team and incentives to refocus on selling product
development services that flowed into manufacturing opportunities;
Identify the most critical customers, suppliers, and other stakeholders (investors,
analysts) and target communications to each of these groups;
Put together an employee communication package to enlist their help and support;
AND
8.
Build a financial model based on the above action plans that predicted when
Precision Manufacturing could be turned around.
Outcomes
During 2005 Precision Manufacturing closed four of their 14 global sites. Layoffs were
minimized but necessary. Employees were told up front that sites would be closed. A placement
firm was hired at those locations to assist in finding jobs for displaced employees. Where
products were transferred out of Precision Manufacturing, employees followed. Sheila was open
and honest with employees, yet she had to make many tough decisions. The location closure
decisions were based upon the goal to strategically eliminate as much as possible those
customers who were unprofitable for Precision Manufacturing. Precision Manufacturing helped
those customers transition to different suppliers. Precision used their resources to help them
move to a competitor and maintained strong relationships with those customers as they assisted
in moving all process documents to a reputable competitor. Ultimately, this was fortuitous as
some customers came back to Precision Manufacturing for the more lucrative product
development and manufacturing work.
Precision had 250 product development employees worldwide. The Senior Leadership Team
analyzed each of them from a ―best practices‖ perspective and discovered that developers in
Europe were highly successful. They talked with these employees and realized that in addition to
developing products they were also engaged in selling these products. They had the discipline
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and know how to turn around business resulting in high 17% gross margins. European product
developers were then matched with product developers in other parts of the world to share their
successes.
During this same period, the Chief Financial Officer (CFO) tried to convince Sheila that product
development needed to be eliminated because it was losing money. Sheila did not agree and held
strong to the course, arguing that product development was mission specific and strategic and
would ultimately prove profitable. She maintained that without product development Precision
Manufacturing would be back to earning only razor-thin high volume manufacturing margins.
Ultimately the exchange between global product developers was highly successful for Precision
Manufacturing resulting in the restructuring of the sales team and incentives based upon the
European model. Only time would tell whether Sheila‘s decision to hold the course on product
development would prove to be correct.
Throughout the process, communication with employees was critical. Sheila webcasted with
direct manufacturing employees worldwide. Her message and the message of the Senior
Leadership Team was simple: ―Here‘s what‘s happening, here‘s what we‘re doing as leaders,
here‘s what I need you to do…keep producing with high quality on time.‖ The message was
easily understood by all and proved effective. In addition, Sheila asked for everyone‘s input,
listened, and was able to put many of their ideas into action. She was steadfast in her belief that
things could be turned around quickly if employees were actively engaged. Sheila also knew it
was crucial to emphasize the importance of making the mission/vision/values practical, so that
everyone understood their part. Seeing, hearing and understanding the vision were keys to
making the turn-around work.
Of Precision Manufacturing‘s five core values (Financial Growth, Customer, People, Quality,
and Shareholder Return), the first three: Financial Growth, Customer, and People were modified
and a sixth one was added. Financial Growth was changed to Profitable Growth. Previously
Precision was driven by ―revenue‖ growth which enabled them to sell business with large
revenue but no profit. This was a major reason why they were losing money. With regard to the
core value of Customer, part of Precision‘s customer portfolio included consumer electronics
which was inconsistent with their Mission statement of ―precision electro-mechanical‖ business.
Sales were now limited to the industrial side. Finally, the core value, People, was changed to
Employee Engagement. The added value was Integrity. It was added because of some past
financial reporting irregularities and the need to ensure that all actions and reporting had to be
done with the highest integrity for customers, shareholders, lenders, and auditors.
Deciding on Future Directions
Sheila believed Precision Manufacturing finally appeared to have its house in order. Goals were
clear, action plans defined, and the Senior Leadership Team was carrying out actions
expeditiously. Frequent weekly and bi-weekly communications of progress and status were
provided to employees in an effort to create transparency and buy-in. Keeping everyone in the
loop helped maintain morale and provide employees with confidence that Precision
Manufacturing had rounded the bend and was on its way toward sustained profitability. Although
these communications were also provided to outside stakeholders, it was not enough to ward off
negative press. Like a sail boat, the need to adjust sails to shifting winds was key to forward
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momentum. The Senior Leadership Team met quarterly to make modifications where needed.
Although, Precision Manufacturing was on course in its restructuring actions, the firm was still
unprofitable. In six months, Precision Manufacturing had:
Added two new sites for strategic purposes (one in the US, one in Eastern Europe);
Eliminated $20 million in overhead expenses;
Eliminated over 30 unprofitable or non-strategic customers; and
Re-priced certain customers who were strategic but unprofitable.
In mid-year 2005 (July), the Senior Leadership Team identified a gap between projected and
actual profits/ losses. While the month to month results stabilized, the gap relative to what was
projected was troubling. They implemented another round of cost cutting measures but to their
dismay, September 30 quarterly results showed no profit.
Over the course of the last half year while Sheila was developing and implementing her strategic
plan, she was also working with a consultant. The two of them had developed a financial model
of Sheila‘s turn-around plan that reinforced Precision Manufacturing‘s internal model.
Due to the slow returns to profitability, the Board of Directors had been talking with a Banking
Consultant organization (BCO). They were convincing in their initial presentation about how
they could help Precision return to profitability and the Board hired them.
In October, at a highly charged board meeting BCO presented their analysis and solution
suggesting the current path the Senior Leadership Team was pursuing was leading Precision to
unprofitability. Their presentation extrapolated historical trends into the future. Their models
showed that Precision Manufacturing would get to a five percent gross margin by year end and
asserted that a five percent gross margin would result in further losses.
In response, Sheila presented her case for profitability clearly showing how Precision could
expect to see a profit in the current month and show its first profitable quarter (Q4) in December
with a nine percent gross margin which would lead to net profits. The historical extrapolation
model presented by BCO did not assume anything more than driving continuous improvement in
the current operations.
The Board was now in a predicament. Who should they believe the banking consultants or their
Senior Leadership Team? Both were convincing in their arguments and passionate about their
directions. Both believed fervently they had the correct solution.
In a highly contentious vote (five-four), the Board sided with the Senior Leadership Team. The
team was given permission to pursue its plan for the next fiscal quarter.
Three weeks later, October results showed a profit consistent with what Lambert had shared with
the Board. At the end of the quarter, Precision Manufacturing announced its first quarterly profit
in three years followed by five additional profitable quarters. Precision Manufacturing‘s margins
catapulted them to second in the industry. Product development achieved growth and
profitability and Precision Manufacturing maintained its global presence.
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PLANETHOSPITAL.COM
Timothy Brotherton and Carol Rewers
This case was prepared and is intended to be used as a basis for class discussion. The views
represented here are those of the case author (s) and do not necessarily reflect the views of the
Society for Case Research. The views are based on professional judgment.
In 2002, while visiting Thailand with her fiancé, Valerie Capeloto suffered from an attack of
Lupus, a debilitating autoimmune disease. She was so lethargic from her Lupus that she could
barely move. She felt so sick, that she needed a doctor. But her doctors were over 8000 miles
away in California. What a way to wreck a vacation, sick in a Third World country!
Concerned for her health, Valerie‘s fiancé, Rudy Rupak Acharya, took her to a local hospital,
Bumrungrad International Hospital in Bangkok, Thailand. Valerie was reluctant to seek medical
care in Thailand, concerned that conditions would be so primitive in the Bangkok hospital that
she would leave in worse shape than when she came in.
Expecting a Third World hospital experience, Valerie was surprised at the quality of the
Thailand doctors and hospital facilities. Valerie actually felt that she got better care in Thailand
than available at the American hospitals she normally used. In Thailand, she received 24
hour/day care with a private nurse and a personal chef for the three days she was hospitalized, all
for a fraction of the cost of an American hospital (PlanetHospital.com, 2010).
$411…That was what it cost the founder of planethospital.com, Ms. Valerie Capeloto, for her
three day hospital stay in Bangkok Thailand. Valerie left with a new perspective of ―Third World
Medicine.‖ "I got excellent medical treatment! I didn't feel like it was a Third World country!"
(Greenberg 2006).
Valerie and her fiancé returned to California and shared her story with their family, friends, and
members of her Lupus support group. She quickly realized that plenty of people seemed willing
to travel abroad to get quality care at reasonable prices (Greenberg 2006).
Working out of a spare bedroom she and Rudy, her new husband, created PlanetHospital. Her
goal was to help interested patients find qualified doctors in other countries that could provide
care at a reasonable price. As a frequent patient, Valarie felt she could understand patient
concerns and knew what services patients expected. Valarie‘s husband, Rudy Rupak Acharya,
who happened to be a medical school drop-out, was able to contribute to the company, by being
able to communicate with medical providers. Rudy eventually helped Valarie connect with
doctors from multiple countries and they referred dozens of people to hospitals all over the world.
PlanetHospital operated on a fee for service business model (charged for each service). Initially,
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generating their income/ revenue from referring patients to healthcare providers located in
foreign hospitals. In August 2005, the couple started PlanetHospital.com‘s website to reach
more people. By November of 2005, Valerie felt overwhelmed trying to run the business, so
Rudy took over (PlanetHospital.com, 2010).
Rudy quickly took over the daily management of their website (PlanetHospital.com 2010). In
the first year PlanetHospital.com began, 2005, their company helped more than 500 Americans
get medical procedures in Belgium, Brazil, Costa Rica, India, Mexico, Poland, Singapore, and
Thailand (Greenberg 2006).
Rudy described PlanetHospital.com‘s mission as, "People are discovering going overseas is a
viable option. However, they don't know a good doctor from a bad doctor, a good hospital from
a bad hospital. Our job is to create a corridor of safety" (Greenberg 2006). Clearly there were
other people who agreed with Rudy. PlanetHospital.com got more than 45,000 unique visitors a
month (Cooperman 2007).
The Medical Tourism marketplace is a crowded one. Some of the reputable on-line firms
include: PlanetHospital.com, MedRetreat.com, WorldMedAssist.com,
BridgeHealthInternational.com, and CompanionGlobalHealthcare.com (PlanetHospital.com
2010). Each of these firms offer similar services but might have unique hospital/doctor
relationships not available to the others. The casual, first time medical tourist, however, was
unlikely to be able to judge the differences in quality of the product offerings. See the Industry
Note for a fuller description of the medical tourism industry.
Valerie and Rudy saw their new online firm as something completely different than the other
medical tourism businesses that competed in the relatively new world of discount medical care.
Rudy had to constantly explain, "We're not a travel agency‖ (Cooperman 2007). He added, "Our
reliance upon doctors and nurses to deliver and coordinate services clearly positions the
PlanetHospital platform as a safer alternative to other medical tourism companies that perform a
purely travel agency function" (PlanetHospital strengthens leadership, 2006).
Valerie and Rudy also became members of the Better Business Bureau (BBB). They were proud
of their commitment to good business practices and to date have had zero unresolved complaints
(PlanetHospital.com 2010). Valarie‘s service-oriented philosophy quickly gained the company a
reputation for providing quality medical tourism services. PlanetHospital.com was also proud of
its success with their relationships with over 70 doctors in 13 countries. They provided medical
tourism services, insurance, and concierge services for their web clients (PlanetHospital.com,
2010).
Despite some success at the retail level primarily targeting the uninsured, Rudy was faced with
the next challenge, ramping up the business from their current 100‘s of clients a month to
10,000‘s of clients per month. By 2012 there is expected to be over 1.6 million American
medical tourists per year, up from the 750,000 seen in 2007 (Deloitte Center for Health Solutions
2009). PlanetHospital.com wanted to be in a position to capture its share of that growth.
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Growth Strategies
PlanetHospital.com was not the only new kid on the playground. Dozens of similar firms started
popping up on the internet. In May of 2006, PlanetHospital merged with Medical Tours
International (MTI) another competitor to form a stronger, larger medical tourism company
(Merger creates medical, 2006).
According to Rudy, "This is an ideal fit that brings together PlanetHospital's infrastructure and
expertise for sending patients to the Far East and Mexico with MTI's leadership in providing
services in Central America, especially the key destination of Costa Rica." Rudy became the
CEO of the new company (Merger creates medical, 2006). The merger created what was
believed to be the largest company of its kind. Analysts felt that it (PlanetHospital) was poised
to capture the lion's share of what was estimated to be a $20B worldwide market in 2006 and
would grow to $40B by 2010 (Merger creates medical, 2006).
"Consumer spending for medical services outside their own countries is skyrocketing, with high
standards of safety meeting patient expectations," adds Stephanie Sulger, RN. Stephanie was the
former chief executive of MTI and had 35 years' experience in healthcare. As the new Director
of International Medical Services, Stephanie was proud of the new advances the merged
company could now pursue and explained, "Our Corridor of Safety program ensures end-to-end
quality and safety when traveling for healthcare" (Merger creates medical, 2006).
The new PlanetHospital International, maintained offices in California and New York. In
addition to providing global medical tourism opportunities for consumers, the
PlanetHospital.com started to develop insurance products for medical tourism (Merger creates
medical, 2006).
Reaching the Next Level
PlanetHospital, Inc. had relied on word of mouth and the strength of their reputation to generate
clients. However, that wasn‘t enough for Rudy. Soon after the merger, Rudy hired a marketing
firm, CPR Strategic Marketing Communications (CPR), to help PlanetHospital recruit more
clients (PlanetHospital, Inc. selects, 2006).
CPR was founded in 1981 and specialized in delivering strategically guided public relations,
advertising, and interactive services to its clients. CPR also had a great deal of experience in the
healthcare market. CPR was hired develop and implement a patient origination campaign, as
well as international business-to-business public relations and marketing communications
outreach (PlanetHospital, Inc. selects, 2006).
Rudy was very pleased with the new arrangement:
"CPR's groundbreaking growth strategies and innovative healthcare campaigns
aligned perfectly with our corporate goals and ideals. Operating in today's everchanging, rapidly growing healthcare sector, PlanetHospital's collaboration with
CPR will not only revolutionize the way healthcare campaigns are approached,
but also generate a substantial patient market for our company. In addition to a
variety of public relations and marketing services, CPR will utilize its 25-years of
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experience and expertise in the healthcare industry to provide PlanetHospital with
creative patient growth initiatives, strategic counsel, targeted media relations
activities and online communications. CPR will also assist in developing and
sustaining international business relations between PlanetHospital, and potential,
as well as current, clientele‖ (PlanetHospital, Inc. selects, 2006).
According to the CEO of CPR, Joseph H. Carabello, the warm feelings were mutual:
"PlanetHospital has established strong relationships with superior medical
facilities and providers around the globe. We will leverage the quality and costeffectiveness of PlanetHospital's array of available medical procedures abroad to
drive patient volume, particularly in the United States, Canada, Western Europe,
Australia, and New Zealand. To sustain growth in this healthcare market sector,
CPR will help PlanetHospital forge new relationships within the international
business-to-business community" (PlanetHospital, Inc. selects, 2006).
Services offered by PlanetHospital
PlanetHospital.com offers access to a number of doctors, locations, and procedures to their
clients. Table 1 lists the surgical procedures for which PlanetHospital has established
relationships with doctors or hospitals. New clients can click on their needed procedures and
PlanetHospital will show them the locations and hospitals that specialize in those procedures.
Table 2 lists the destinations and hospitals where PlanetHospital.com has existing relationships.
According to Rudy, some of the most important benefits of PlanetHospital.com‘s medical
tourism services include the fundamental understanding and recognition that:
―US health care is the best in the world. It has the best doctors, the best
equipment, and the best researchers, but it‘s only available to those that can afford
it. Other countries provide much better access (Americans going overseas, 2006).
Our ongoing quest to identify locations outside the United States for quality,
lower cost healthcare services has led us to destinations that meet our stringent
criteria. Today, international travel is easy and affordable, and many countries
offer advanced technology accompanied by high standards of care. As
individuals as well as employers who are underwriting the cost of medical care
weigh their options, they are turning to these less expensive settings
(PlanetHospital strengthens leadership, 2006). I really believe that health care is
really the only industry in America that's never really had competition before, and
competition is healthy (Sreenivasen 2006).
People could do this by themselves, but you‘re basically throwing darts. We‘ve
visited these doctors, we‘ve interviewed the doctors we‘ve checked their
background, we‘ve physically inspected the hospitals (Palmer 2006).
We‘re going for almost the superstars of foreign doctors. Most of the doctors we
used are either trained in the U.S. or some of them are even board-certified in the
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U.S., and the hospitals are some of the most amazing hospitals you‘ve ever seen
(10News 2008). Our responsibility is to find the best and most suitable hospitals
and doctors to give them the care that they are looking for immediately and
affordably. For some people the thought of going overseas just gives them the
heeby jeebies and there‘s no way to battle that (Mack 2006).
Table 1: Surgery Procedures Available
Procedures
Obesity
Post Bariatric
Ortho/Neuro
Hip Surgery
Knee Surgery
Shoulder
Spine
Dental
Cosmetic
Oral Surgery
Elective
Cancer
Eye and Vision
Gynecological
Kidney/Liver/Pancreas
Other Elective
Heart
Cardio Testing
Heart Procedures
Lung Procedures
Cancer
Cancer
Radiation/Proton Beam
Surgical Oncology
Cosmetic
Breasts
Butt/Thigh Lift
Face
Genitals
Liposuction
Other Cosmetic
Post Bariatric
Sex Change
Total Makeover
Tummy Tuck
Medicine of Tomorrow
Knee Cartilage Replacement
Stem Cell Therapies
Fertility
IVF & Surrogacy
Vasectomy/Tube Ligation Reversal
Other
Other Procedures Not listed
Planethospital.com (2010), accessed 4/22/2010, 11:00 pm
Specialization
Obesity
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Table 2, Planethospital.com Surgery Destinations
Country
Argentina
Belgium
Brazil
Costa Rica
El Salvador
Greece
India
Mexico
Panama
Philippines
Singapore
South Korea
Thailand
Hospitals
FLENI
Zaldivar Institute (Argentina)
Jan Palfijn Hospital
Albert Einstein Hospital
Hospital CIMA
Hospital Clinica Biblica
Cinca Diagnostico
Dr Lorenzana Dental Clinic
Zaldivar Institute (El Salvador)
Fertility Crete Centre
Akshkansa Fertility Center
Apollo Chennai
Fortis Hospital Group
Hirandanani Hospital
MAX Hospital
Rotunda-The Center for Human Reproduction
Wockhardt
Kiran Infertility Clinic
ABC Medical Center
Amerimed Hospital
Cornerstone Hospital, Puerto Vallarta
Hospital Angeles
Quintanilla Dental Clinic
Medica Sur Hospital
Hospital de la Mujer
Progencell Clinic
Punta Pacifica – Johns Hopkins
Beverly Hills Cosmetic Surgery
Medical City
St Luke‘s Hospital
Mount Elizabeth Hospital
National University Hospital (NUH)
Parkway Group Hospitals
Piayavate Hospital
Samitivej Sukhumvit
Bumrungrad
Planethospital.com (2010), accessed 4/22/2010, 11:00 pm
This is not something that you go and lie in the sun about; this is not something, you get a
surgery and go out trekking in the wilderness. This is all about getting your surgery done,
and getting a lot of rest and relaxation and recovery; and enough so that you come back
with a healed mind, body, and spirit. There are some people who are not that
adventurous and they‘ll say no, we have to get medical care here. It‘s the best in the
world, and I don‘t argue with them, America does have the best in the world, if you have
the money to pay for it (Palmer 2006).
127
We take care of everything, from their hospital, the airlines, their hotels. When
they arrive in the country of their choice, one of our team members is there to
greet them. We take them to their hotel or hospital. We take them to the doctor.
We act as their advocate in the country so that if they're not happy with the doctor
or the surgeon or the hospital, we'll take them to another place. If there's a dispute
with the bill, we stand on the patient's side to fight on behalf of the patient to get
satisfaction in their ways‖ (Sreenivasen 2006).
PlanetHospital had adopted a "no sales" approach because clients will buy when they are ready.
When customers call PlanetHospital, the first point of contact at PlanetHospital is a real doctor.
Although the doctor won‘t provide them with medical advice, they will answer questions at no
additional charge. The PlanetHospital doctor was tasked with making sure that the client was
safe enough to travel for the medical procedure and had a reasonable expectation of a successful
outcome. Once the confidential Medical Form was completed a fee of $100 was charged to book
and confirm the surgery with the foreign surgeons (and forward the necessary records), this fee
was later deducted from the overall cost of surgery (PlanetHospital.com 2010).
Dedicated Travel Desk and Concierge Services
PlanetHospital had in-house travel experts who took care of the rest of the travel arrangements
for a fee, these included arranging flights and hotel bookings, preparing itineraries and
communicating special needs to the airlines and hotels (wheelchair, oxygen, etc.). They would
also adjust return arrangements if clients needed to stay longer. In addition, if clients booked
their airfare through PlanetHospital, ticket changes were made without penalties or change fees
(PlanetHospital.com 2010).
At some locations and for an additional cost, Planet Hospital would provide in-country or
―concierge‖ support. The concierge service rates started at $75/day for the first 4 days and then
$60/day thereafter. When the client arrived at the airport overseas they had a real, live person
who lived near the hospital to help them during your stay (PlanetHospital.com 2010).
Some of the duties of the concierge were as follows: (PlanetHospital.com 2010).
Contact client prior to arrival to discuss the country they are visiting
Arrange pick up from airport (and special transport if required)
Meet client at the hospitals, take care of client's companion
Intervene in the event of any dispute with hospital
Contact family members in case of emergency and arrange their transport
Arrange for aftercare while in country
Arrange to drop off at airport
Liaise between the countries and PlanetHospital
Shopping and site-seeing arrangements can be made as needed for additional fees.
Frequent visits to the hospital to check up on you and your companion
Provide you with a cell phone for your use while you are in a foreign country
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PlanetHospital‘s customers are generally happy with the services PlanetHospital provides. In a
recent survey conducted by PlanetHospital, the top five reasons why patients come to
PlanetHospital are:
1.
2.
3.
4.
5.
the A rating with the Better Business Bureau since 2002
outstanding media coverage and credibility
high degree of patient satisfaction and testimonials
use of doctors instead of salespersons to assist clients
wide network of dedicated and on staff concierges in the destination countries
Best Of Both Worlds Network®
For those clients unsure about using foreign doctors or overseas facilities, PlanetHospital had
another option available. A client could elect to use a US surgeon, travel with the surgeon to
overseas destination, and have the surgery performed by that US surgeon. Once home any
follow up care would be provided by the same surgeon. Although it sounded like something
Donald Trump or Paris Hilton would do, it was still affordable to many of their clients
(PlanetHospital.com 2010).
Patients receive care from a world class surgeon from start to finish, only the geography of their
surgery changes. The program is available directly to consumers, via an employer's cafeteria
plan, as well as through PPOs.
The current physician network is based in California, with surgeons across the country now
joining the plan. When compared to domestic healthcare, this plan provides significant savings
without compromising the quality of care or physician. Physicians and patient schedules are
coordinated, with special consideration given to those patients requiring immediate attention.
American board certified surgeons who carry malpractice insurance are available for cardiology,
orthopedics, neurology, urology, gynecology, radio or surgical oncology, and general surgeries‖
(PlanetHospital launches best, 2006).
Here is an example of the potential savings for a heart valve replacement performed by a senior
cardiothoracic surgeon: (PlanetHospital launches best, 2006).
Leading U.S. hospital: $47,000
Cost includes pre- and post-op care, tests, surgery, anesthesia, operating room, nursing,
and two day hospital stay. Price does not include cost of medications or prosthesis.
Best of Both Worlds Plan: $20,500
Cost includes surgeon's fees, pre-op testing, all medications and prosthesis, two economy
class tickets (client and friend), one business class seat (doctor), operating room, 5 day
hospital stay, 5 day hotel stay, post-op testing,and travel insurance.
Rudy pointed out, "with a direct savings of $26,500, it is up to the employer or PPO to
decide how much of an incentive will be offered to the patient."
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PlanetHospital Insurance Offerings
CATA Insurance
In medical tourism, there are four essential risks:
Complication Risk (you spend more time in the OR and ICU than you had paid for)
Accidental Death and Dismemberment (caused by negligence or simple human error)
Travel (everything from lost bags, canceled flights, road accidents while in a foreign
country, and more.
Aftercare (what if something goes wrong after surgery, then what?
CATA is a PlanetHospital designed product that protected clients from the above risks. All
CATA insurance sales were provided by PlanetHospital ―affiliates‖ and were offered to nonclients as well (PlanetHospital.com 2010).
DIASPORA
PlanetHospital, the first medical tourism company to do so, developed its own insurance product
- DIASPORA. As Rudy said, ―"I quickly realized if I waited for the insurance companies to
work with me, I'd be waiting forever.‖ DIASPORA, was offered to foreign nationals or visitors
to the US. They would receive accident and emergency care in the US, but for everything else,
the policy would pay for the procedure at a hospital in one of PlanetHospitals network hospitals
(PlanetHospital.com 2010).
SIMPOL
PlanetHospital had also worked with insurance providers to provide insurance coverage for their
enrollees to get medical care while abroad, and PlanetHospital was the first company to enable
self insured US employers to outsource their employees' medical care with its SIMPOL program
(Self Insured Medical Plan Overseas for Less).
New Focus, the Corporate Marketplace/Insurance
Initially PlanetHospital targeted the uninsured individuals that could not afford medical
treatment in the United States, but still wanted world-class health care. More recently, they
categorize their customers into four markets (PlanetHospital.com 2010).
1. their traditional target market of uninsured and underinsured individuals.
2. immigrants and guest workers who need affordable healthcare while working in
the U.S. (DIASPORA)
3. self-insured companies looking to minimize the direct healthcare costs for their
employees.
4. healthcare insurance plans that need to control expenses.
It was the new focus on the self-insured companies and large insurance plans that offered the
best growth opportunities for PlanetHospital.com. Many major employers in the US are selfinsured, which means they cover the costs of their employee‘s medical care (Hynton et al. 2006).
130
Major health insurers UnitedHealth Group Inc. (UNH), WellPoint Inc. (WLP) and Cigna Corp.
(CI) were exploring the possibility of offering medical travel programs, as their employer
customers had expressed interest (Brin 2008).
A number of insurance companies had piloted medical tourism programs for their local enrollees.
These insurance companies included: Anthem Blue Cross and Blue Shield of Wisconsin, United
Group Program of Florida, Blue Shield and Health Net of Florida, and Blue Cross Blue Shield of
South Carolina. These insurance companies were primarily interested in medical tourism in
order to reduce the overall costs for enrollee treatments and capture higher margins. (Deloitte
Center for Health Solutions 2009). Likewise, PlanetHospital.com was interested in expanding
their web based services to address the particular needs of additional insurers and/or employers
that could expand their customer market base by thousands. As a fee for service firm,
PlanetHospital.com could directly bill the corporate accounts thereby simplifying their billing
practices and lowering some of their costs.
"Employers are looking for ways to both manage their medical costs and provide their
employees with high-quality health care," said Charles Cutler, a medical director for Aetna
Insurance. These firms are as frustrated by medical cost increases as individuals are and they are
looking abroad for cheaper alternatives (Brin 2008).
Rudy had tried to sell his corporate services to companies large and small. Prior to their
bankruptcy, he had spoken directly to executives of General Motors (GM) (Gustafson 2009).
Even state governments had expressed some interest in using medical tourism. In 2006, Rudy
had met with Govenor Joe Manchin of West Virginia, but nothing ultimately came of the
meeting (Smerd 2006b).
Corporate Resistance
Employers wanted to offer medical tourism benefits to employees must first overcome their
negative assumptions of overseas healthcare (Third World quality). In addition, there were other
potential health and legal risks. Employers had to discover whether these benefits would violate
ERISA standards (Employee Retirement Income Security Act – federal act that sets standards for
employee benefits). Also, employers were concerned whether they would be liable if something
went wrong in the operating room; how an out-of-country network would be administered; and
whether the employee or employer would have to pay taxes on items not traditionally exempt,
such as airline travel and hotels (Smerd 2006a).
For the lucrative corporate market to open up, employers would need indemnity against
employee lawsuits or medical malpractice claims. PlanetHospital may offer a liability policy
that protects employers from lawsuits to reduce corporate resistance to medical tourism. In
addition, employers would need to integrate PlanetHospital‘s overseas option into existing
benefit plans. The successful development of the insurance market would depend on whether
major health insurance carriers enter the market. These companies would already have the
resources to handle the legal and administrative hurdles of medical tourism. (Smerd 2006a)
Ultimately, the biggest roadblock to corporate and insurance company acceptance may be
employer resistance, not a lack of interest from employees to go abroad. If the incentives were
131
right (low co-insurance fees, free trips for companions, or savings passed on to employees)
employees would likely be willing to pursue medical tourism. Employers would need to be won
over (Smerd 2006a).
Union resistance
PlanetHospital saw an opportunity selling their services to the United Auto Workers (UAW).
Due to recent changes in the American automobile market, the UAW was managing auto worker
retiree health benefits. The UAW covered the retirees from union-run trust funds and had to
carefully watch costs (Gustafson 2009). In addition to providing savings to employers for their
active employee populations, PlanetHospital advocated the use of medical tourism to reduce the
cost of retiree health benefits. Rudy told union leaders, ―I feel that by allowing the option for
retirees to go overseas for medical care, we will be able to lower the costs and save benefit
administrators the risk of fund depletion‖ (Wojcik 2006).
Not all major union leaders were sympathetic to medical tourism. United Steelworkers,
America‘s largest union, had expressed strong commitment against medical tourism plans. ―We
don‘t want to expose our members to the risks associated with providing health care in the Third
World,‖ said Stan Johnson, a union spokesman (Foster and Mason 2006). United Steelworkers
president Leo Gerard listed a number of reasons why traveling overseas for health care was a
benefit with an image problem:
"No U.S. citizen should be exposed to the risks involved in international travel,
possible exposure to less than sanitary conditions, lack of oversight, forfeiture of
legal rights and little, if any, recourse in the event of problems. These are all
unwarranted risks to which Americans should not be subjected. The willingness
of employers to offer incentives for assuming these risks is frightening. The right
to safe, secure and dependable health care in one's own country should not be
surrendered for any reason.'' (Smerd 2006a)
The decision
Rudy was faced with a tough challenge. He wanted his company to grow, but the best areas of
growth might detract from their current business model. He had put a lot of effort into the
corporate market by talking to GM executives, the UAW, and even the governor of West
Virginia to solicit corporate accounts, but it still hadn‘t paid off yet. He and Valerie got into the
business trying to help uninsured individuals, but now he was venturing into the larger volume
corporate accounts. Would this new path destroy what he had built up over the last eight years?
PlanetHospital understood the individual ―retail‖ market. Rudy had helped plenty of people
searching for medical alternatives. He understood their search process (Table 3) and how they
made decisions, but corporate accounts were a completely different animal. Should he continue
to focus on selling ―retail‖ services to hundreds of individual customers and charging fees for
individual services provided or should he spend additional effort trying to overcome the
resistance of corporate accounts and reach thousands of customers and charge their employers
the service fees. What will be his next step?
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Table 3: Patient search checklist for those interested in medical tourism
1.Research doctors who specialize in the procedure you're interested in. Big hospitals
catering to medical tourists have Web sites listing physicians with their biographies and
contact information and some even offer virtual patient visits. Also, a quick search of
databases like http://www.pubmed.gov, run by the U.S. National Library of Medicine, will
tell you whether your doctor has published anything in a peer-reviewed medical journal.
2.Check with the international arm of the Chicago-based Joint Commission on Accreditation
of Healthcare Organizations (http://www.jointcommissioninternational.com/) to see which
overseas hospitals have been accredited. Also, check to see which ones have been
accredited domestically.
3.Talk to people who have undergone surgery overseas both at the hospital you're interested
in visiting and with the doctor you're considering. Everything from blogs to discussion lists
and Podcasts can be found online about medical tourism.
4.Check to see where your doctor was educated and trained and if he or she is board certified.
The American Board of Medical Specialties (http://www.abms.org/) is a helpful resource.
5.Medical tourism facilitators like PlanetHospital (http://www.planethospital.com/) and
IndUShealth (http://www.Indushealth.com) can help guide patients through the process by
putting them in touch with doctors and former patients. They can also arrange passports,
schedule flights, book hotels and handle all the logistics once the patient arrives overseas.
6.Check to see how widely English is spoken by doctors and nurses at the hospital you're
considering and the availability of translators.
7.Look into how medical malpractice is handled in the country you're visiting. Research how
cases are typically handled if something goes wrong and ask the hospital what rights you
have as a patient.
AFX EUROPE, How to choose healthcare abroad, 11/2/06.
133
References
AFX EUROPE, How to choose healthcare abroad, 11/2/06.
―Americans going overseas for vital health care‖, The Arizona Star, 10/21/06.
Brin, D. W. (2008), ―Insurers, employers explore medical travel,‖ Dow Jones Newswires,
(4/22/2008).
Cooperman, S. (2007), ―Patient Travelers‖, Forbes Magazine (10/29/07),
http://www.forbes.com/forbes-life-magazine/2007/1029/095.html accessed 5/01/10
Deloitte Center for Health Solutions (2009), ―Medical Tourism: Update and Implications‖,
Washington, DC.
Foster, M. & Mason, M. (2006). ―Get this patient to Singapore, stat!‖, Associated Press, Sunday
Nov 12., 2006.
Greenberg, B. (2006). Healing Journey: More Americans Go Abroad for Cheaper Health Care‖,
LA Daily News (8/10/2006)
Gustafson, S. (2009). ―PlanetHospital plans to open Detroit-area call center in 2010‖,
Annarbor.com (8/6/09), Accessed at www.annarbor.com/business-review/planethospital-plansto-open-detroit-area-call-center-in-2010/
Hylton, H., Daniels C., Baker, A., Montlake,S., & Holmes, J. (2006), ―Cutting-edge Vacations,‖
Time, May 2006.
Mack, K. (2006). NBC4-Los Angeles TV story on Planet Hospital transcript, 7/11/2006.
―Merger creates medical tourism powerhouse: PlanetHospital, Inc,‖ PR Newswire (5/30/06).
Palmer, P. (2006). ―A Journey Through Medical Tourism‖, KABC, (11/28/06), Accessed at
www.planethospital.com/manager/press/9.pdf, 5/10/10.
PlanetHospital.com (2010). http://planethospital.com, accessed 4/22/2010, 11:00 pm
―PlanetHospital launches Best Of Both Worlds: Top US Surgeons now within reach of all
Americans,‖ PR Newswire (11/20/06).
―PlanetHospital, Inc. selects CPR Strategic Marketing Communications for patient origination
initiatives and public relations strategies,‖ PR Newswire (6/26/06).
―PlanetHospital strengthens leadership in medical tourism with expansion into Panama and
Costa Rica,‖ Medical News Today (8/2/06). Article URL:
http://www.medicalnewstoday.com/articles/48535.php
134
Smerd, J. (2006). ―A ticket to lower care costs:a (long) trip to the doctor; Medical Tourism has
drawn much employer interest, but liability fears keep many from getting aboard,‖ Workforce
Management, (11/20/06).
Smerd, J. (2006b). ―Overseas Care becomes Option for US Firms,‖ Workforce Management,
(11/6/06).
Sreenivasen, H. (2006). ―Passage to India for Surgery‖ ABC News Nightline (10/19/06)
http://abcnews.go.com/Nightline/story?id=2587670&page=1
10 News (2008), ―10 News Investigates overseas surgeries‖,
http://www.10news.com/news/10967778/detail.html, February 8, 2008
Wojcik, J. (2006). Vendors target self-insureds, Business Insurance, 7/17/06,
http://www.businessinsurance.com/cgi-bin/article.pl?articleId=19328
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Industry Note - Medical Tourism
Medical tourism is the practice of traveling across international borders for medical treatments.
These treatments include cancer treatments and surgical procedures, such as: cosmetic, cardiac,
kidney, hip, shoulder, knee, and bariatric surgeries. Medical Tourism is a $40 billion-dollar
industry (Crawford 2006). The reason why patients risk leaving their home and traveling abroad
for medical treatment varies. U.S. medical tourists, for example, are often seeking medical
treatments at a fraction of the costs they can incur at home (CBC News Online 2004). Medical
tourism is not a new phenomenon. The ancient Greeks, for instance, came from all around the
Mediterranean to use the hot springs at Epidauria -the sanctuary of the healing god Asklepios
(Cooperman 2007).
However, U.S. patients exploring surgeries abroad is a relatively recent phenomenon. As U.S.
health care expenses have risen over the past thirty years, patients without sufficient insurance or
those denied coverage have looked for cheaper alternatives elsewhere. Increased interest by
patients to pursue medical care overseas created a brand new business opportunity: medical
tourism facilitators. These companies act as middlemen between patients and foreign physicians.
They also facilitate finding hospitals, schedule surgeries, reserving airline tickets and hotel
rooms, and even plan sightseeing tours for recovering patients and their companions. Most
importantly, facilitators reassure patients that inexpensive medical care in foreign countries does
not necessarily mean poor quality of care (Crawford 2006).
Medical Tourism facilitators have played an important role in promoting the growth of medical
tourism. Hundreds of these agencies have gone on-line in recent years, usually incorporating
words like health and travel in their names (MedicalTourism.com 2010). Barriers to setting up a
medical tourism agency are minimal: there are no licensing requirements, either in the United
States or overseas (Crawford 2006).
The benefits of using a reputable medical tourism facilitator include: 1) one-stop medical tourism
shopping with access to numerous destinations and hospitals, 2) established relationships with
accredited international providers, 3) convenient transfer of medical information with necessary
translations, and 4) language and cultural barriers have already been dealt with
(MedicalTourism.com 2010).
The risks of using a medical tourism agency include: 1) quality of service may vary from one
agency to the next, 2) bias towards certain hospitals and destinations may not lead you to the
―best‖ choice for you, 3) a third party may increase miscommunication risk and important
medical information could be misdirected, 4) you are paying the agency fees, commissions, or
both on top of the doctors and hospitals charge, and 5) some agencies want you to pay them
directly while others want you to pay the hospital when you get there (MedicalTourism.com
2010).
Safety Concerns
Many physicians working in facilities targeting medical tourists are well-trained, often in the US
or Europe (Foster and Mason 2006). These trained physicians work at accredited hospitals with
136
the same standards as American hospitals. However, not all physicians, nor facilities in which
they practice conform to such high standards. As a result, in June 2008, the American Medical
Association introduced a set of guidelines for medical tourism. The AMA advocates that
insurance companies, employers, and others involved in the medical tourism field provide proper
follow-up care, tell patients of their rights and legal recourse, use only accredited facilities, and
inform patients of "the potential risks of combining surgical procedures with long flights and
vacation activities" (Pickert 2008).
Joint Commission International
One precaution Americans can easily take is to choose a hospital accredited by the Joint
Commission International (JCI), the global arm of the Joint Commission, which makes sure U.S.
hospitals meet specific standards (Comarow 2008). The JCI, a non-profit that certifies the safety
record of hospitals, has accredited some 200 foreign medical facilities, many in Asia, Europe,
South America, and the Middle East (Pickert 2008).
According to Karen Timmons, president and CEO of the JCI, ―accreditation does not ensure
good care, but it does offer important evidence of safety.‖ Ms. Timmons also alleges,‖ going to
an accredited hospital is essentially a risk-reduction activity. Physicians must be adequately
credentialed and their patient data examined at least once a year to pick up a spike in deaths,
complications, or longer hospital stays.‖ Miss Timmon further noted, ―as a patient moves
through the hospital, a formal system must track him to avoid treatment mix-ups. A transfer from
or to the intensive care, for example, is documented with a written transfer statement and verbal
confirmation by a physician and compiled into an ongoing summary‖ (Comarow 2008). These
tracking systems and reported results, based on JCI accreditation standards, try to provide
medical tourism clients with a minimum baseline of acceptable healthcare.
JCI standards also call for various means of minimizing infections, including collection and
review of infection statistics and any necessary corrections. At some hospitals, water used in
surgery and laboratories is filtered and regularly tested. Dispensers of disinfectant alcohol gel at
the foot of each bed for hand cleaning are hard to miss (Comarow 2008). Additionally, medical
tourism clients must be aware, ―a safe blood supply cannot be assumed—especially in a
developing nation‖ (Comarow 2008). According to Karen Lipton, CEO of the AABB, the
association that represents American blood banks, ―We started watching the development of
medical tourism and asked ourselves, ―Where is the blood coming from? How well do they
screen donors? Who's making the judgment about the safety of these products?‖ (Comarow
2008). According to Ms. Lipton, ―Patients can and should ask a hospital representative these
questions, but there is no way to verify the answers. On the other hand, says Lipton, the hospitals
"don't want to do anything bad—the last thing they want is for people to go back home and have
problems" (Comarow 2008).
The Downsides of Medical Tourism
Foster and Mason (2006) observed, ―… even with growing interest in overseas surgeries, key
questions needed to be asked by patients getting procedures abroad. Despite the fancy facades in
some of the international hospitals; fountains, white marble floors, and fast food restaurants
inside their lobbies, patients should consider the comfort of having major surgeries closer to their
137
home and shared with their families at their bedside versus enduring travel in the developing
world. Culture shock alone can be stressful but adding in jet lag, traveler‘s diarrhea, and strange,
exotic foods can wreck any voyage. Plus, horrible pollution, crushing poverty, and insane traffic
can overwhelm patients when visiting hospitals in places like India.‖
Medical tourists should also consider why services are inexpensive: Is it a more favorable
exchange rate or a lack of malpractice insurance that accounts for the discount? Hospital
oversight rules vary in each country and post procedure care is limited to phone calls and e-mails
once you return home. Frustrated patients have little recourse to sue foreign doctors from the
U.S. (Cooperman 2007).
Based on a CBC News Online report (2004), experts have identified a number of problems with
medical tourism, including the following:
Government and basic medical insurance, and sometimes extended medical insurance,
often does not pay for the medical procedure, meaning the patient has to pay cash.
There is little follow-up care. The patient usually is in hospital for only a few days, and
then goes on the vacation portion of the trip or returns home. Complications, side-effects
and post-operative care are then the responsibility of the medical care system in the
patients' home country.
Most of the countries that offer medical tourism have weak malpractice laws, so the
patient has little recourse to local courts or medical boards if something goes wrong.
There are growing accusations that profitable, private-sector medical tourism is drawing
medical resources and personnel away from the local population, although some medical
organizations that market to outside tourists are taking steps to improve local service.
(CBC News Online, 2004)
Future Growth of Medical Tourism:
As noted by Cooperman (2007), ―As medical costs continue to soar along with the numbers of
uninsured, underinsured and those with skyrocketing deductibles, so too will the demand for
medical tourism. Foreign hospitals are more than happy to welcome American patients and their
dollars, and will continue to roll out the red carpet, offering quick testing, a broad range of
procedures, and extraordinary savings. Even so, doctors in the U.S. shouldn't worry about empty
waiting rooms anytime soon. Insurance companies offer few incentives for Americans to gather
their medical records and cross time zones for treatment. Most won't reimburse patients for
overseas procedures, and there aren't many promising signs that they will on a grand scale
anytime soon. "The U.S. spends $2 trillion on health care, and insurance companies keep five
percent of that. You do the math," said Uwe Reinhardt, a health-care economist at Princeton
University. Medical tourism seems to be a growing niche-but still a niche...for the time being‖
(Cooperman 2007).
According to Ori Karev (2007), CEO of UnitedHealth International, factors limiting the growth
of medical travel from a U.S. perspective, include the lack of:
a) Integration between global healthcare providers and the US healthcare system, particularly
when non-cash transactions are involved.
138
b) Availability of common clinical data standards, generation, recording, and analytics.
c) Integrated legal framework which addresses the needs of patients, payers and providers.
d) The existence of case management systems within individual countries that have the
ability to coordinate an individual's complete episode of care regardless of the country in
which the treatment begins or ends.
Consumer Surveys:
Still, understanding consumer expectations pertaining to healthcare provides medical tourism
companies, like PlanetHospital, an opportunity to tailor products and services to the rapidly
changing needs of their clients. The following Deloitte survey entitled, Deloitte 2010 Survey of
Health Care Consumers (Keckley & Hoffman, p.6-19) provides medical tourism companies with
valuable client information related to potential growth in customer base, willingness of clients to
travel, and type of resources clients use to access healthcare related information:
• 40%
of consumers reported they decided not to seek treatment either because of cost or
insurance coverage, comparable to 2009 (38%).
• 4 in 5 uninsured consumers cite cost as a reason for foregoing care compared to 1 in 3
employer-based enrollees and 7% of military subscribers.
•Insurance coverage (74%), physician referral (61%) and reputation (60%) are the most
important factors consumers consider when selecting a hospital
•The uninsured have different priorities when choosing a hospital: They consider cost of services
(52%) and proximity to home (50%) when selecting a hospital.
• Older consumers are more likely to travel for treatment if a physician recommends it: Almost
half of Seniors (47%) and Baby Boomers (44%) say they would be willing to travel based on a
physician‘s advice compared with 2 in 5 Generation Y (35%) and Generation X (38%).
• In 2010, more than half of consumers (55%) say they looked online for information about
treatment options, a figure comparable to the 57% who used the Internet for this purpose in 2009.
• Consumers of all ages use the Internet to find treatment information: 53% of Seniors, 55% of
Baby Boomers, 57% of Generation X and 56% of Generation Y report looking up treatment
information.
• 1 in 4 reports that they searched online for physician quality-of-care information and 12% used
the Internet to find information on provider costs, similar to 27% and 13%, respectively, who
reported doing so in 2009.
• 1 in 10 uses web sites to compare hospital treatment options.
• A small number of consumers (5%) use social networking sites to look for information about
prescription drugs, communicate with a physician (3%) and communicate with their health plan
(3%).
• Consumers most trust safety and effectiveness information from medical associations (45%)
and academic medical centers (41%); they least trust health plans, employers and manufacturers
(10% or less trust these sources)
Environmental Conditions:
A significant shift is under way, it is one that could put greater competitive pressure on US
hospitals as some of their most lucrative patients are siphoned off. Elective surgeries are key
moneymakers for hospitals, and even a small drop-off can cut deep into their profits. The
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calculus behind this interest isn‘t complicated. Many major employers are self-insured, which
means they pick up the tab for much of their employees‘ medical care. The bottom line: if more
private payers sent patients abroad for uncomplicated elective surgeries, the savings could be
enormous. The ingrained inefficiency of most hospitals doesn‘t help. ―A lot of them still don‘t
know how to schedule their operating rooms efficiently, says Uwe Reinhardt (Princeton
University health care economist), ―They‘ve never had to. They always get paid, no matter how
sloppy they are (Kher and Unmesh, 2006).
The potential effects of Obamacare on medical tourism are still uncertain. It is unknown how
many firms might drop their existing insurance coverage for their employees and pay the noinsurance tax/fee instead. The individual insurance requirement could dry up the number of
uninsured that is the basis for the individual medical tourism market, but the new insurance
exchanges may offer coverage for overseas medical tourism. Also, if the planned savings on
healthcare spending are derived from some form of rationing, the need for other healthcare
procedures alternatives might further grow the overseas medical tourism market.
140
References
CBC News Online (2004) Tourism:Need Surgery, Will Travel‖ (6/18/04)
http://www.cbc.ca/news/background/healthcare/medicaltourism.html
Comarow, A. (2008), Saving on Surgery by Going Abroad. U.S. News & World Report (5/1/08).
Cooperman, S. (2007), Patient Travelers. Forbes Magazine (10/29/07),
http://www.forbes.com/forbes-life-magazine/2007/1029/095.html accessed 5/01/10
Crawford, K. (2006), Medical tourism agencies take operations overseas. Business 2.0 Magazine,
8/3/06.
Foster, M. & Mason M. (2006). Get this patient to Singapore, stat! Associated Press, Sunday
Nov 12., 2006.
Karev, O. (2007). Medical Travel Taking Off: Enablers and Impediments to a Growing Health
Care Phenomenon. UnitedHealth International, 11/28/2007,
http://www.uhgi.com/global/dox/MedicalTravelTakingOff_Nov2007.pdf , accessed 5/10/2010.
Keckley, P. H. & Hoffman, M. (2010). Deloitte 2010 Survey of Health Care Consumers Key
Findings, Strategic Implications. Deloitte Center for Health Solutions. 555 12th Street N.W.
Washington, DC 20004.
Kher, U. (2006). Outsourcing Your Heart. Time Magazine, (5/21/06).
MedicalTourism.com (2010), http://medicaltourism.com/facilitator.php?lang=en, accessed
5/5/10, 1:00 pm.
Pickert, K. (2008) A Brief History of Medical Tourism, Time Magazine. (11/25/08):
http://www.time.com/time/health/article/0,8599,1861919,00.html#ixzz0o5hnGddW
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REVIVING AN ICONIC ADVERTISING CAMPAIGN:
“ANOTHER REASON, I LOVE NY”
Timothy Brotherton, Craig Davis, Nakato Hirakubo and Mark Stuhlfaut
This case was prepared and is intended to be used as a basis for class discussion. The views
represented here are those of the case author (s) and do not necessarily reflect the views of the
Society for Case Research. The views are based on professional judgment.
Is new always better? Every day, advertisers and agencies spend valuable resources in an attempt
to develop the newest, latest and greatest attractive advertising campaigns. But from strategic
and economic perspectives, returning to a previous advertising campaign may make more sense.
What are the real advantages and disadvantages of this marketing approach, and how important
of a role does strategy and consumer perception play in the decision?
The recent New York State campaign, ―Another Reason, I Love NY‖ was developed to restore a
previous campaign idea -- the idea of ―loving‖ New York, an idea that was ironic given the
context and the time it was launched over 30 years ago (Sauer, 2010).
How was the ―I Love NY‖ campaign idea revived in 2007? What was the purpose of the revived
campaign? How did the goals and strategies of these two similar but different campaigns differ?
I Love NY Revival
The ―I Love NY‖ Campaign, which began in 1977, went through various permutations in its 30plus-year history, each reflecting the nature of the times. Although Empire State Development
Corporation, the agency that encourages economic investment and prosperity in New York
oversaw the campaign, almost a dozen advertising agencies managed the campaign since its
inception.
In May 2007, the Empire State Development retained a top New York City advertising agency to
expand the campaign and increase the awareness of New York‘s reputation as a tourist
destination. Part of the agency‘s mission was to continue Empire State Development‘s
commitment to increasing the campaign‘s web presence and expanding the campaign to
encompass the entire state (Largo, 2010).
A year later in May 2008, Governor David A. Paterson, along with officials from New York‘s
Department of Economic Development, officially re-launched the campaign with the goal of
targeting 80-million consumers within a three-to-five hour driving distance from New York State
(Largo, 2010). By targeting tourists relatively close to the state, the revived campaign responded
142
to the downturn in the economy during 2008 and to the reality of higher prices for gasoline,
which in many areas was more than $3.50 per gallon.
Governor Paterson‘s aim was growth: ―I have challenged Empire State Development and its
Division of Tourism to grow tourism to 200 million visitors and $60 billion in annual visitor
spending by 2020,‖ he said. In addition to targeting people living in the Northeast and Canada,
the campaign also hoped to attract tourism dollars from European tourists who visit New York
City but never leave the city‘s five boroughs (Largo, 2010). One strategy for the campaign was
to leverage favorable exchange rates with the United Kingdom and Germany, two countries that
provided a significant number of visitors to New York.
Before developing the campaign, market research was conducted throughout the state with travel
partners and consumers. This research indicated that consumers were not familiar with the travel
and tourism destinations across the state. When it came to New York travel, consumers
considered only New York City and Niagara Falls. Consumers associated ―I Love NY‖ with the
city, not with the state (Largo, 2010).
The strategy behind the new campaign was to repackage the energy of the ―I Love NY‖
campaign that was associated with New York City, making it more contemporary and relevant to
tourists. The revived campaign was titled, ―Another reason, I Love NY‖ and it focused on the
variety of travel experiences throughout the state that were unique to New York.
Because of the equity established with the previous campaign, the creative partner and
advertising agency of record developed design enhancements to the original iconic brand and
logo. The new campaign included a number of new logo treatments that represented strategic
tourism segments shown in Figure 1 (Largo, 2010).
Figure 1: Logo treatments for I [heart] New York
Line 1: Wine & Food, Adventure, Cultural History, Fine Art, History, Heritage, and Military
History. Line 2: Culture, Family, Shopping, Scenic Drives, Water, Spas & Retreats, and Sports.
The familiar ―I [heart] NY‖ logo continued to play a major part in the campaign, and the
challenge was to use the powerful appeal of New York City to lure tourists to destinations across
the state. The campaign reemphasized the commitment of the agency to promote the entire state
by suggesting New York State had the pulsating heart and soul of New York (Largo, 2010).
143
An ad for the campaign, for example, led with the headline: ―Go ahead and stare. We‘re used to
it.‖ This ad shown in Figure 2, illustrates how advertisers played off the current consumer
perception of New Yorkers as aggressive. Instead of featuring busy New Yorkers walking down
Madison Avenue, however, the ad featured the waterfalls and mountains of the New York
countryside. Advertising mixed typical New York City iconography with allusions to the state as
a whole, with phrases such as, ―The state with the heart of the city,‖ and a Park Avenue sign
shrouded in a thicket of bushes (Largo, 2010). Other ads featured Radio City Music Hall and the
Apollo Theater around a waterfall, skyscrapers within a waterfall and surrounded by forests, and
pretzel shapes embedded in a New York vineyard.
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Figure 2: Go ahead and stare. We‘re used to it.
When you’re the state with the heart of the city, people want a closer look. Throughout our 400
year history, New York’s spectacular waterfalls, sandy beaches, scenic vineyards, and millions
of acres of parkland have given travelers a reason to crane their necks. And that’s another
reason, I love New York.
The campaign focused on the use of digital media, including online advertising. The media plan
eliminated television advertising completely and instead focused on print and online advertising
and partnerships with sites like Travelocity and Orbitz according to the government report.
A newly designed website www.iloveny.com was developed into a tool for vacation planning.
The web site was modernized with new features and a new look and feel. The navigation was
improved so that consumers could better see the many features and the site could be customized
145
for users by region of state and activities. The ―I Love NY‖ travel guide was downloadable and
available to consumers as well (Largo, 2010).
The public relations strategy was to generate positive brand associations to the ―Another Reason,
I Love New York‖ campaign and to promote New York State as a year-round destination (Largo,
2010). Public Relations strived to get New York destinations into travel sections of magazines,
newspapers, TV and the internet. A few of the media outlets in which stories about New York
state destinations appeared included: CBS Early Show, Fox Business News Happy Hour, WNBC,
WABC, New York Times, USA Today, Washington Post, Philadelphia Inquirer, Gannet
Newspapers, CNN.com, MSNBC.com, NYTimes.com, Yahoo.com, Todayshow.com, and
budgettravel.com
Campaign Revival Strategy
One of the advantages of re-launching a previous campaign was that it had already developed
positive associations among consumers and was less risky. Advertising campaigns go off course
when they are considered offensive, hard to understand, contain inappropriate sexual
representation or questionable ethics (Bergman and Blakeman, 2009).
Re-launching a popular tagline is a marketing move that has been commonly used in the
advertising industry. Gregory Solman of Adweek wrote, ―Whether an attempt to burnish one's
image by hearkening back to better days, capitalize on boomer nostalgia, or tacitly admit to
diminishing creativity, the dusting off of old taglines has accelerated in recent years.‖ Table 1
shows the number of taglines that have been re-launched since 1991.
Company
Coca Cola (Diet Coke)
Nationwide Insurance
MillerCoors LLC
Citigroup
Sprint
The New York Times
Media Group
Unilever
Table 1: Revived Campaign Ideas
Revived Old Taglines
Tagline
Just for the taste of it
Nationwide Is On Your Side
Great Taste, less Filling
Citi never sleeps
Spring ahead
These times demand the Times
Year relaunched
2009
2009
2008
2008
2007
2006
Sometimes you need a little Finesse.
2006
Sometimes you need a lot.
Red Lobster
For the seafood lover in you
2004
Burger King
Have it your way
2004
Memorax
Is it live, or is it Memorex?
2001
Ace Hardware
The helpful place
2001
Avis
We try harder
1999
http://promomagazine.com/eventmarketing/news/diet-coke-revives-tagline-0202/
http://www.msnbc.msn.com/id/26300598/
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http://www.adweek.com/aw/content_display/creative/news/e3i1751753614c1db7755935f78a850
69c5?pn=1
http://www.businessweek.com/magazine/content/09_15/c4126btw026680.htm?chan=magazine+
channel_the+business+week
For example, the tagline for Citibank ―Citi Never Sleeps‖ was developed in 1977 by the bank‘s
former agency, Wells, Rich, Green, that was long gone when the decision was made to bring the
slogan out of retirement. Solman wrote, ―the reason for its resurrection, according to sources,
was straightforward: to remind consumers of more robust economic times and distance the bank
from the recent spate of credit-crunch related bad news -- most notably, its declining revenue.‖
The ―City Never Sleeps‖ tagline heralded a return to the brand's core value of customer service,
and testing of the message confirmed its strong recall and favorability (Solman, 2008).
While Citibank re-launched the campaign to move the brand forward into the future, campaigns
are often reused to appeal to consumers who yearn for the past. ―The sheer pace of modern life,
where everyone is expected to keep up, keep moving, keep ahead of the cutthroat game, is
accompanied by a countervailing yearning to kick back, hang loose, slowdown and look back to
seemingly happier days if only for a moment. People pined for the times -- and the products -when life was simpler safer and much less stressful.‖ (Brown, Kozinets and Sherry, 2003).
Nick Nahn, managing director at New York marketing consultancy, Vivaldi Partners, which has
created nostalgia-filled campaigns for Coca-Cola and Johnson & Johnson, thought that placing
the product in the past was comforting to consumers. ―It grounded them in a time when things
were better.‖ However nostalgic ads also may make a product look outdated. ―The trick is to
evoke a brand heritage in a contemporary way,‖ said Dave Melbourne, senior vice president of
consumer marketing at Bumble Bee tuna in San Diego (Solman, 2008).
Jeff Goodby, cochairman of Goodby, Silverstein and Partners, San Francisco, said he
consistently returned to classic taglines -- even those developed by other shops -- when he
thought the client would benefit. ―We believe great taglines are things that people connect with,‖
says Goodby. ―And I think it takes a certain amount of selflessness to think this out and figure
what is best for your client. People could say we're just being lazy and opportunistic - which of
course we are - but we‘re also smart enough to know a great piece of equity when we see it.‖
The recent ―Another Reason, I Love NY‖ campaign had not been the only case of bringing back
a previously popular tourism campaign. In 2009, Puerto Rico revived its 50-year-old
communication program that was one of the best-known campaigns from advertising great David
Ogilvy who founded the agency of Ogilvy & Mather. The campaign ran in the 1950s and
presented beautiful Puerto Rican scenes shot by photographer Elliott Erwitt. The campaign was
rejuvenated for modern-day use by incorporating contemporary layouts and fresh typefaces;
however, similar to the original campaign, the new campaign relied more upon text more than
did typical print ads. The Puerto Rico campaign ran in magazines, newspapers, and cable
channels aimed at affluent travelers (Elliot, 2009).
This campaign reprise strategy also was used by the City of Las Vegas, Nevada, in 2009, when it
revived the ―What happens here‖ campaign, which replaced the ―Crazy times call for crazy fun‖
147
campaign developed to address a tight economy. The revived ―What Happens Here‖ campaign,
created by R&R partners, positioned Las Vegas as a different experience from other vacation
destinations that recently had legalized the expansion of casino gambling. The Las Vegas
campaign became so popular that the slogan was rated as one of the all-time slogans by Digg
users in 2008, alongside such classics as, ―Pardon me, do you have any Grey Poupon?‖ and ―Got
milk?‖ (Picchi, 2010).
Rationale
When budgets are tight, bringing back an advertising icon can generate target levels of
awareness and revitalize brand equity without the investment of starting over entirely from
scratch. Reusing former advertising campaigns also may be attributed to people having
affections for nostalgia (Stern, 1992). Logically, reusing advertising makes sense if a slogan is
well-known.
If associations generated from revived campaigns are positive, they may work because they
stimulate people‘s memories of the original campaign. Distinctive slogans are more likely to be
recalled and recognized in an incidental learning context (Pick, Sweeney, and Clay 1991). If
people have memories of the campaign, these memories would indicate some level of
involvement. Consumers who have experienced involvement in processing information should
have a greater motivation to attend and process additional information (Petty, Cacioppo, and
Schumann 1983).
An informal and experiential theory on why revived campaigns may work also could be found in
the creative message. The original campaign, assuming it was successful, most likely tapped
some essential truth about the brand. Subsequent campaigns may have stepped away from that
truth, as managers sought new strategies and approaches for the sake of being different.
Resurrecting a past campaign that had been successful, much like Avis has done with its ―We
Try Harder‖ campaign, would return the brand to the truth in core values with which people most
identify.
The danger of relying on nostalgic memories, however, is that the old campaign may reinforce
the image of the brand as old and out of touch. Two additional reasons for not recycling a
campaign may be that any positive effect could be only temporary, and that consumers and the
trade might perceive the brand as out of fresh ideas and on its last legs.
The Lee Company, manufacturer of Lee Jeans, however, showed the way to avoid
misperceptions of being out of touch when it brought back its advertising icon (Fallon and Senn,
2006), Buddy Lee, from the 1920 era to star in its advertising campaign that ran from 1998 to the
mid 2000s. The Lee Company and its agency, Fallon McElligott, recast the cowboy-doll
character in a campy but heroic fashion as the man of action. The Buddy Lee icon appeared to be
new, because a long time had passed since it was last used in 1962. The Lee campaign also
reprised the company‘s slogan, ―Can‘t Bust‘em‖ from the 1940s.
148
Evaluation
Evaluations assess how customers perceive the campaign, as well as how the media plan
achieved efficiencies and growth of the market. Marketing campaigns may be evaluated based on
cognitive outcomes such as awareness measurements, affective outcomes such as perception
measures, and behavioral outcomes such as purchase intent measures (Dickinson, 2010). These
measurements may be applied to the end consumer, the retail channel, the creative messaging
and the to the revenue generated. To assess success of the ―Another Reason, I Love NY‖ tourism
campaign, a return on investment study was conducted by Oxford Economics Corporation. The
study looked at all the elements of the communication program and made the following
conclusions.
Based on consumer interviews, consumers associated ―Another Reason, I Love NY‖ with the
entire state, and more people were considering visiting than before. Since the re-launch of the
website, Iloveny.com, traffic was up 62% and the site averaged 269,000 unique visitors per
month.
While the branding was important in helping consumers think about New York State as a travel
destination, giving consumers a reason to visit was also important. Three seasonal promotions
were created in the summer, fall, and winter that filled more than 11,000 room nights at
approximately 500 properties (Oxford Economics Company, 2010). This resulted in an estimated
$9.2 million increase in consumer spending. In order to extend credibility of the brand, travel
partners played a key role. Partners such as Travelocity, Orbitz, and Amtrak helped to leverage
$1 million in private sector funds that amplified the campaign reach (Oxford Economics
Company, 2010). Public relations played a key role in getting the message out by generating
more than 3.5 million earned-media-coverage impressions across print, radio, television and the
Internet. This campaign also reached tour operators that resulted in over 400 sales meetings
taking place in New York (Oxford Economics Company, 2010).
At the macro level, in 2008, visitors spent $53 billion in the local New York economy, an
increase of 4% over 2007. More than 678,000 jobs were sustained by visitors to New York State
with a total associated impact of $27 billion, and 6.1% of all jobs in this state were sustained by
tourism. Tourism in New York State generated $7 billion in state and local taxes and $7.3 billion
in federal taxes in 2008 (Oxford Economics Company, 2010).
A return-on-investment study assessed the real returns of the campaign in 2008 and 2009 on the
basis of incremental new visitors and the spending generated by the marketing efforts. The study
concluded that an advertising budget of over $8 million drove incremental tourism visits of 5.5
million persons (Oxford Economics Company, 2010). These trips yielded $1.2 billion in new
visitor spending from the beginning of 2008 through summer of 2009. These results indicated an
average return on investment of $143 for every dollar spent on advertising, helping to create jobs,
raise income, and boost tax revenues. More than 8,600 jobs were sustained as a result of the
program in 2008. More than $41 million in state tax revenues and $46 million and local tax
revenues were generated by the campaign in 2008 (Oxford Economics Company, 2010).
149
References
Bergman, M. & Blakeman, R. ―The Brains Behind Great Ad Campaigns‖ Creative
Collaboration between Copywriters and Art Directors. New York: Rowman and
Littlefield Publishers, (2009) 143-157
Brown, S. Kozinets, R & Sherry, J. ―Sell me the Old, Old Story: Retromarketing Management
and the Art of Brand Revival, Journal of Customer Behavior, June (2003) 85-89
Dickinson, Don, "Bring Clarity and Direction to Advertising ROI: A Conceptual Model for
Practical Application" 2010. Presented at AEJMC Annual Convention.
Elliot, Stewart, ―Puerto Rico Revives and 50-Year-Old Campaign‖ New York Times, December
2009; p 1- 24
Fallon, P. & Senn, F. (2006). Juicing the orange: How to turn creativity into a powerful business
advantage. Boston: Harvard Business School Press.
Knight, Judson, ―Empire State Development Corporation: I Love New York campaign‖
Encyclopedia of Major Marketing Campaigns, Tompson Gale. Retrieved from,
www.galegroup.com on April 28, 2010
Largo, Marisa, I Love New York, A Year in Review 2008-2009. Report published by the
Empire State Development, in 2009.
Oxford Economic Company, Tourism Economics, ―The Economic Impact of Tourism in New
York State,‖ March 2009. Tourism Economics, Summary: The Return on Investment of
the I Love NY Marketing Campaign, April 26, 2010
Petty, Richard E., John T. Cacioppo, and David Schumann (1983), "Central and Peripheral
Routes lo Advertising Effectiveness: The Moderating Role of Involvement," Journal of
Consumer Research. 10 (September), 135-144
Picchi, Aimee, ―Amid Tourism bust, Las Vegas revives, ―What happens here.‘‖ Retrieved from
Daily Finance.com in May 7, 2010
Pick, David F., John Sweeney, and Jennifer A. Clay (1991), ―Creative Advertising and the Von
Restorff Effect,‖ Psychological Reports, 69 (3), 923–926.
Sauer, Abram, ―I love NY stately,‖ Brand Channel, Retrieved from www.brandchannel.com, on
July 20, 2010
Solman, Gregory, ―These Tags are It: Can a return to popular taglines help restore a brand‘s
luster?‖ Retrieved from www.adweek.com on August 24, 2010
Stern, Barbara B., ―Historical and Personal Nostalgia in Advertising Text: The Fin de siècle
Effect,‖ Journal of Advertising, 21 (4), 11-22
150
ROCKVILLE LUMBER
SYSTEMS ANALYSIS AND DESIGN FOR A SMALL SUPPLIER
A. Kimbrough Sherman
This case was prepared and is intended to be used as a basis for class discussion. The views
represented here are those of the case author (s) and do not necessarily reflect the views of the
Society for Case Research. The views are based on professional judgment.
Aaron Stone looked at his watch and at the pile of papers on his desk. He realized that for the
third time this week he would not be able to make it home for dinner. He called his wife and
asked her to bring some lemon grass shrimp soup and Pad Thai, and they could eat at the table in
the conference room. After dinner, she left and he worked for about an hour and went home. He
was happy to be overloaded with work in 2009, when the construction businesses were still
suffering from the financial crisis of 2008. He knew then, as he had known for years, that his
failure to adopt current office technology had limited his business to what he could keep in his
head, on his desk, and in his ten filing cabinets. There was no computer on his desk, and he did
not own a digital device of any kind except for the cell phone that he kept in his car for personal
calls and emergencies.
Aaron Stone speculated that his office would run much more smoothly if he incorporated some
kind of technology to manage his transactions, estimates, records, and job milestones. He also
recognized that he had not taken advantage of any opportunities to do so in the seven years he
had been in business.
Background
Stone was 56 years old, an engineering graduate of the University of Maryland, and an avid fan
of their soccer and lacrosse teams. He had been the general manager for Montgomery Lumber, a
retail lumber yard in Rockville, Maryland for twenty years, before it went out of business in
2002. He borrowed from a local bank and bought the smaller of Montgomery Lumber‘s two
warehouses and added offices on the second floor of part of the 20,000 square foot building.
There was also about the same amount of outdoor space under roof outside the warehouse on a
half acre of land where a residential street dead-ended at the CSX railroad and Metro subway
tracks. The building and site were too small and too isolated to serve as a retail lumber business,
and Stone had no intention of serving as either a lumber retailer or a supplier to the building
trades. The business consisted of finding and delivering (or having delivered) small quantities of
building materials, and these activities were usually begun by winning a bid from a government
agency or business. On occasion, Stone‘s expertise on appropriate materials or design was
sought, but most contracts were specified to sufficient detail that Rockville Lumber had only to
find the material and get it to a site.
151
In a normal business day, Aaron Stone would be at his desk all day, receiving phone calls and
working up quotes in response to requests for quotation (RFQ‘s) that his assistant found on the
internet or received via Email. To work up a quote Stone either pulled files from former
contracts or asked his assistant to check prices for items from one of several quote books they
had on hand. Once a bid was composed and priced, it would be submitted to the customer, and
an acceptance (or rejection) would come any time from the next hour to two months later. Bids
that were won started the process of 1) creating a bill of materials to phone, fax, or mail to each
of the materials suppliers involved, 2) scheduling deliveries either to Rockville Lumber or
directly to the customer‘s work site, 3) assembling those items received or on hand, and 4)
delivering the order to the customer as close to their use time as possible. In addition to his desk
work, he would leave his desk from time to time to check a truckload of lumber coming in or to
supervise the loading of a truck for delivery to a customer. The phone would generally stop
ringing completely by 3:00 PM, and Stone could work without interruption until he chose to go
home.
Rockville Lumber supplied lumber on contract to agencies or companies that wanted a small
delivery ($1,000 to $10,000) anywhere in the nation and had chosen Rockville Lumber‘s bid as
the lowest or sole-sourced (chose without competitive bidding) the contract to Stone, having
come to trust Stone as (by his description) a low cost, dependable dealer, who was very easy to
deal with. They did not sell lumber to the general public. Rockville Lumber had a very small
inventory. They kept a stock of standard dimensional lumber (2-by-4‘s to 2-by-12‘s), various
grades of plywood, and sundries, such as pre-mixed concrete in bags on site. Most of their
business was conducted by securing prices from mills and manufacturers and either receiving the
items just in time to ship them to the buyer or arranging direct delivery to the site, especially
when the site was more than half a day‘s drive from the yard.
Aaron Stone thought that there were four principal characteristics on which Rockville Lumber
could compete. They included personal relationships with him, low price, time-flexibility, and
dependability. He was quite sure that people who dealt with him felt comfortable, appreciated
his honesty, and felt that he would find the best combination of price and quality for them. He
stated that often contract administrators needed flexibility in delivery times that he would offer,
including delays when their projects were running behind and acceleration of delivery when they
had misgauged their use rates. Stone reported that he was one of the few suppliers in this market
who would tolerate the high ratio of paperwork to profit on the smaller orders, and he viewed
himself as adept at fulfilling detailed government requirements and pursuing payments when
contract payments were tied up in bureaucracy or budget problems.
Before he submitted a bid to a customer, Stone generally locked-in his prices with his suppliers
or had already purchased materials at good prices. On occasion, however, he found himself
taking a loss on a contract because he had experienced a price rise between contract settlement
and the date of his materials purchase. He also felt that his overhead was much lower than that
of his competitors because of his small yard, his small staff, and the use of direct shipment from
mill to site on some contracts.
152
The contracting officers he dealt with sometimes had to order materials well in advance of their
use and other times on very short notice. Aaron Stone cited his ability to delay delivery until
items were needed or, in some cases, to get materials to sites quickly. This, he said, prevented
damage from materials exposed too long to the elements or projects delayed when last minute
orders did not arrive in time. Stone personally monitored every contract-- calling suppliers and
checking on shipments as part of his normal workload.
The Organization
The staff of Rockville Lumber included two full-time employees and a few part time staff
members. All of them reported directly to Stone, except for the workers in the yard, who were
employed as needed and supervised by the driver/warehouseman. The employees included:
1. A full-time ―inside assistant‖ who searched known websites for RFQ‘s and also received
inquiries by fax or Email to place on Mr. Stone‘s desk. He also researched the catalogues
for hardware specifications and prices when contracts included, for example, hinges,
locks or fasteners, in addition to lumber,
2. An ―outside assistant,‖ who worked part time attending trade shows and conferences
making and keeping friends among their potential customers and suppliers, but not taking
orders or responding to RFQ‘s,
3. A part-time bookkeeper, who maintained records and entered transactions into
QuickBooks™ from multi-part forms that the company used for purchase orders and bills
of lading,
4. A part-time administrative assistant, who handled formal correspondence and filed the
various transactional papers of the organization, and
5. A full-time driver/warehouseman, who managed the inventory, directed activities in the
warehouse, and sometimes drove the company‘s truck on deliveries.
On a typical day, the offices were quiet and there was fairly little business or social talk. The
inside assistant made occasional trips from the large area where he and the part-time staffers
worked to Mr. Stone‘s office, where he deposited RFQ‘s or discussed with Stone incidentals
such as prices of items or what to look for in potential contracts. Stone‘s primary source of
social conversation was with his customers and suppliers, and phone conversations with them
were peppered with personal conversation and dry humor about the economy or sports. He
had little social contact with his customers outside of the office.
Student Consultants
Aaron Stone had recently talked with a neighbor at a cocktail party and remembered that the
neighbor had made several references to the use of information technology in business. He
called this friend, who connected him with the dean of a local business school and, after a little
time was contacted by a professor who offered the services of his undergraduate class in
Information Systems Analysis and Design to provide some guidance in the development of an
information system.
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In February of 2010, a team of three students came with their professor and interviewed Mr.
Stone. He was immediately delighted to be talking with the students and the interview began
largely with conversations about business schools, the economy, and college life and continued
with repartee between Mr. Stone and the one team member who was a star lacrosse player. The
professor and the students got a good outline of the nature of the business and a ten-minute tour
of the warehouse and yard before returning to campus. A meeting was scheduled for one week
later, in spite of the hour drive that such a meeting would require, with the promise that the
students would compose a model of how they thought the business was currently operating and
present it to Mr. Stone to see if they had made a good analysis of the business before they
proceeded to create a plan for how it should be automated.
As they rode back to Baltimore with the professor the students reported their shock at the lack of
current technology and piles of paper that were the environment of their client. They were also
struck by his recall of the status of projects each time he was interrupted by a call from a client or
supplier, and how reassuring he was to each caller. One student remarked that he had a shy
demeanor in conversation, but a confident tone when dates and numbers were in play.
The professor left time at the end of the class session between meetings with Rockville Lumber
for them to work together, and they used it to construct a flow diagram of the business (See
Figure 1 Rockville Lumber Process Flow) to go with their written presentation to Mr. Stone.
The three students returned for their second visit to Rockville Lumber and spoke with Mr. Stone.
He asked the students what the next steps were. The students proposed to Mr. Stone that they
create a project network diagram that would outline their work and send it to him for his
approval. They said that they expected to come up with a design for a data base that would
provide him with the information that he needed to conduct his business, speculating that that
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would involve managing all of the transactions of the business from tracking jobs from RFQ to
completion, managing finances, and creating customer and supplier relationship systems and
material price and availability information that he could pull up as needed. They posited that this
could all be linked to a company website that could be the interface for his customers and his
suppliers to do business with him. The professor congratulated them for their progress and then
asked ―What is special about Rockville Lumber‘s business model, and what will your system do
to enhance or inhibit it?‖ He also suggested that they report their progress to the class at the next
meeting. Indeed, at the next class session, they presented their progress report just as they had to
the professor, and the class applauded their effort.
The professor posed a question to the class. Consider Mr. Stone‘s difficulties with technology
and the special characteristics that he brought to the business. ―What steps can Mr. Stone take
to transform his processes to the more efficient model the students have designed?‖
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SOUTHERN FAMILY SERVICE: WHAT HAPPENED TO THE MONEY?
John D. Veal, Jr. and Gabriele Lingenfelter
This case was prepared and is intended to be used as a basis for class discussion. The views
represented here are those of the case author (s) and do not necessarily reflect the views of the
Society for Case Research. The views are based on professional judgment.
―Debt for Southern Family Services Could Top $1 Million‖ was the latest headline that Jackson
Stone read in the paper about the financial issues facing the local family services organization.
Stone served as the Chairman of the Board for the Southern Family Services Center (SFS) and
had served in that capacity for the previous two years. As he studied the article, he wondered
how things could have gotten so bad in a six month period.
At the January 2003 board meeting Patrick Sullivan, Executive Director of SFS, and David
Henderson, Staff Accountant for SFS, delivered the monthly briefing on the status of SFS‘s
financial status to Stone and the rest of the board. The board was presented with glowing reports
and supporting documents that showed the organization to be in a good financial position. The
latest independent audit found no shortcomings in the organization‘s finances. The board left
this meeting pleased with the performance of the agency.
The agency was sitting on the top of the world. The agency was in the middle of a major capital
campaign, the financial reports that were presented to the board gave a solid financial picture,
and community support was stronger than ever. Now the headlines about the agency were
negative, the agency received a negative review from the Department of Human Services citing
financial improprieties, and a special committee appointed by Stone uncovered questionable
financial practices by the agency.
In August 2003, Stone contemplated a newspaper article and a letter that Stone had received at
the latest board meeting. It was a letter from the Department of Health and Human Services
citing the agency for financial mismanagement. Stone also had in front of him the report from
the special committee that he appointed to research the findings in the letter. Not only did the
committee confirm many of the items in the letter, but it also uncovered additional issues that
suggested problems with the financial management of the agency. As Stone looked back over
the last few months he asked himself ―Who was to blame for these problems?‖, ―Did the board
fulfill its obligation to the agency?‖, ―Were we getting accurate financial reports at the board
meetings?‖, ―Was Sullivan or Henderson hiding information from the board?‖
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Organization
SFS offered a variety of services to address the needs of the community. As the agency had
grown, it adopted the following mission statement:
“To provide a continuum of care for the children, youth and families of our community. Early
childhood education, prevention, diversion, protective and treatment services establish the
cornerstone of intervention. Additionally, we will advocate on behalf of children, youth and
families on issues impacting our community.”
SFS was established in August 1971 as a shelter and detention center operated by the county
government. Ms. Anne Southern was a supervisor in Child Welfare Services in the 1960‘s and
1970‘s. She was aware of the problems that the local youth was facing and sought out solutions.
Ms. Southern had a lifelong involvement in helping others overcome difficulties. During her
30-year career in public welfare, Ms. Southern pushed for a serious change in how women were
seen in leadership roles, how children were cared for in society, and how a community
responded to its most vulnerable citizens.
As a result of her work in the community, she was selected to chair a committee established to
address the needs of delinquent youth. One recommendation of the committee was to establish a
facility to keep teenagers with problems out of the adult jail. After years of planning,
construction plans were developed for this facility in 1970. The committee recommended
naming the facility after Ms. Southern. The County Commissioners agreed and designated
naming the agency after her. In August 1971 the facility was completed and SFS Center started
its operations.
Over the years the agency continued to grow. In 1979 detention services were deleted from the
agency‘s offerings. In December 1980 SFS became a private, non-profit organization. Since
1980 SFS Center offered a variety of family, individual, and group services. Later years saw the
addition of the Early Head Start Program, a group home for youth, and other family and youth
based services. In 1999 SFS became the first youth and family service agency in the state to
achieve Commission on Accreditation of Rehabilitation Facilities (CARF) national accreditation.
This accreditation positioned the agency to be able to answer the call for needed services.
SFS was a community-based agency. It provided equal opportunity both to clients and staff
without regard to race, color, religion, sex, national origin, or handicap. Initially, SFS's primary
purpose was to provide an emergency shelter for youth ranging in age from 12 to 17. Eventually,
a variety of services was offered to the local community and surrounding area. Programs and
services were designed to respond to the needs of the community as a whole. It was the goal of
this agency to reach out to those most vulnerable or in need and to provide them with a
continuum of care.
SFS had over 300 employees and operated on an annual budget of $8.8 million. Services were
provided to over 13,000 clients annually through programs offered through one of its six
divisions: Assessment and Referral Services, Residential Treatment Services, Outpatient
Treatment Services, Early Childhood Education Services, Prevention Services, and
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Administration. Administration handled the day-to-day business operations for the agency in the
areas of Human Resources, Finance, Purchasing, and other support functions. (See Table 1 for a
detailed explanation of services provided by the agency).
Key Executives and Agency Governance
Patrick Sullivan had been the Executive Director of SFS for over fifteen years. In this capacity,
he was responsible for providing supervision and guidance to the various divisions. He had been
empowered to make any and all decisions necessary for the continued operation of the agency.
The Executive Director was assisted by an Assistant Executive Director and supervisors of the
major service areas. While having complete autonomy in the performance of his duties, the
Board of Directors had the final approval on major decisions. However, the board relied on the
Executive Director to provide the background and accurate information on the course of action to
support any decision being made.
David Henderson, the staff accountant, was a Certified Public Accountant (CPA) and a member
of the American Institute of Certified Public Accountants (AICPA). He had been an employee
of SFS for five years. As the staff accountant, he reported directly to the Executive Director and
was responsible for the day-to-day accounting, preparation of financial statements, and filing of
payroll as well as the yearly tax returns. As a licensed CPA, he complied with the continuing
professional education requirements of the State Board of Accountancy including its ethics
requirement. As a member of the AICPA, he was also required to abide by the AICPA Code of
Professional Conduct.
Governance of the agency was through a Board of Directors. The Board of Directors was a
diverse group of community members who provided guidance to the Executive Director.
Members were selected based on nominations from other Board Members. While it was the goal
of the Board to have members with various backgrounds, this was not a mandatory criterion for
selection of new board members. This board met on a monthly basis to review actions taken by
the Executive Director and to establish policies and goals for the agency. The board members
were assigned to committees that were responsible to oversee and review functional areas of the
agency and report their findings and observations at the meetings of the full Board of Directors.
The committees were Community Relations, Finance, Fund Raising, Governmental Relations,
Nominating, Personnel, Policy, and Quality Assurance. (See Table 2 for a description of the
roles of the committees and Figure 1 for an organization chart of the agency).
Sources of Agency Funding
The various programs obtained funding from a variety of sources. Funding was acquired from
governmental sources at the federal, state, county, and local levels. SFS also received funds
from insurance companies when clients had insurance coverage. SFS also obtained funding from
donations through the United Way program and direct donations to the agency.
Some of the funds received by SFS were restricted and had to be used as identified in the funding
document. The majority of the SFS government grants fell into this category. Proceeds received
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from insurance proceeds and client fees were less restrictive and could be used where the agency
needed the money.
A key source of funding for SFS during this period was a grant for the Early Childcare program
from the Department of Health and Human Services. This type of funding was an award of
financial assistance from a federal agency to a recipient to carry out a public purpose of support
or stimulation authorized by a law of the United States. Federal grants were not federal
assistance or loans to individuals. The Department of Health and Human Services (DHHS) was
the federal government‘s principal agency for protecting the health of all Americans and
providing essential human services, especially to those who were least able to help themselves.
A federal grant was used to fund the Early Childhood Head Start program.
SFS’s Head Start Operation
The Head Start program was one of the largest programs operated by SFS. This program also
provided a major amount of the funding that the agency received. SFS applied as a private nonprofit organization for funding to continue a Head Start program previously operated by another
agency which lost its certification through the DHHS.
Head Start grants funded comprehensive and high quality services designed to foster healthy
development in low-income children, including individualized services promoting education and
early childhood development; medical, dental, and mental health; nutrition; and parent
involvement. Grants typically ranged from $500,000 to $2,000,000 per year. Federal
requirements entailed that 20% of the funding came from non-federal sources. The non-federal
share was allowed to be in cash or in-kind, including facilities, equipment or volunteer services.
These grants were made to local public and private non-profit and for-profit agencies which, in
turn, offered a variety of child development services with an emphasis on helping preschoolers
develop reading and math skills. Periodically, the DHHS reviewed the grantee agencies for
compliance with program and fiscal requirements.
Capital Campaign
The agency recently kicked off a Capital Campaign program that was separate from its other
fundraising activities. The agency had offices throughout the city which made coordination of
its various services to clients difficult. The goal of the Capital Campaign program was to raise
funds so the agency could establish a campus that housed all of its programs, instead of having
its programs scattered in buildings throughout the city. The agency could then provide ―onestop shopping‖ for its clients. The agency used funds to host various fundraising activities,
publish campaign materials, and obtain outside assistance in developing the campaign. Funds
were expended prior to any donations being received to assist with the campaign.
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Critical Infractions
The board received a letter from the DHHS that cited SFS for a number of critical infractions in
using the grant funding. As a result of this letter, Stone appointed a special committee to review
the financial status of the organization. The committee‘s task was to review the items cited in
the DHHS letter, as well as look for any other items that could cause concern and indicate
problems with the agency‘s finances.
The committee presented its findings at a Special Meeting of the Board of Directors. The
committee concluded that there were some acts that needed the board‘s immediate attention and
resolution. Its findings concluded that:
1.
It appeared that grant funds were being used for purposes other than allowed by the
granting agency and included the Christmas bonuses paid to employees and using the
grant funds for other operational expenses (furniture purchase, etc.).
2.
The agency had a contract to receive goods/services from a firm in which the Executive
Director had a financial interest. The committee was concerned that this represented a
conflict of interest since the contract was not a result of a bid process, but a direct
agreement with no competition.
3.
The DHHS letter also indicated that the agency requested payment for expenses that had
not been paid. The committee reminded the board that items covered by the grant must be
prepaid before reimbursement could be requested.
4.
The committee also looked at the funds received as a result of the agency's capital
campaign. It found some instances where funds from the capital campaign were
transferred to the general fund. When asked about this, the Executive Director responded
that those funds were paying the general fund back for campaign expenses that were
incurred prior to money coming in for the capital campaign. These expenses included
printing, donor meals, presentation expenses and payments to the firm that assisted in the
development of the capital campaign marketing plan.
5.
The committee informed the board that there was a tax liability that needed to be paid
immediately. However, the only liquid funds the agency had available were funds from
the capital campaign. This presented the board with a decision on whether to use or not
use restricted funds to pay a liability.
The committee expressed concern about how these infractions could exist without the board
being informed. The committee discussed the responsibilities of the Executive Director and
more importantly the Staff Accountant. Items discussed included undue pressure on the Staff
Accountant from the Executive Director to improperly report items and the sufficiency of a
direct channel of communication from the Staff Accountant to the board. The committee also
wondered if these acts were committed intentionally or if this was just a case of bad judgment.
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The board spent time discussing how these infractions could impact the agency and the services
that it provided to over 13,000 members of the community. The biggest impact would be the
loss of money needed to fund various services. Losing the money could result in the agency
having to deny services to families and individuals in need. Further, if the agency improperly
used funds, the agency would have to pay back money to DHHS, putting a strain on an already
stretched budget. Finally, the public backlash could result in reduced donations which could put
the capital campaign project in jeopardy and would reduce the funding for the other programs
offered by the agency.
Stone thanked the committee for its hard work and quick report. He then turned to the board
members and said ―Ladies and Gentlemen, we have been presented with some alarming news.
From the looks of the things in front of us, we have some hard decisions to make. In situations
like this, board members need to respond with strong leadership. I ask each of you to suggest
measures that will help to prevent these problems in the future. We will discuss our options and
start developing a strategy to resolve this situation at our next meeting.‖
Table 1
Overview of Services Offered
SFS offers an array of services. These services fall in the categories of 1) Assessment and
Referral Services; 2) Prevention Services; 3) Outpatient Services; and 4) Residential Services.
The Early Childhood Head Start program is also operated under the umbrella of SFS.
There are two areas in the Assessment and Referral Services. The Community Intervention
Center (CIC) involves a partnership with local city and county governments. These entities
provide funding to SFS for intake, assessment services, and supervision to juveniles arrested by
local law enforcement officials for various reasons (curfew violations, runaway, shoplifting,
fighting, etc.). The Assessment and Referral Services program also provides Resource Family
Assessments. Resource Family Assessments are home study assessments for referrals from the
DHHS. All work is conducted in the client's home. Home study results determine if a home will
be considered as a placement for youth.
There are a number of programs offered in the Prevention Services program area. SFS offers
prevention classes focusing on parenting and anger management. These are group classes to
address anger management and parenting issues. Each class consists of five consecutive sessions.
When finished, the participant receives a certificate of completion. The First Time Offender
program involves juveniles and their parents in 12 or more hours of skill development classes
which focus on communication, socialization skills, anger management, problem solving,
decision making, values, and understanding the consequences of their negative behavior, all in a
group setting. The program curriculum is designed to intervene and prevent juveniles from
further involvement in delinquent behavior.
Another program offered as a part of Prevention Services is the Center for Advocating and
Reintegrating Youth in Education (CARE). This program provides a medium where referred
students can learn to function in a school setting by improving self-concept and self-control,
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correction of behavior, and receiving assistance in academic subjects. This program assists
truant students, the public school system, and the community as a whole by holding these
students accountable for their actions. The Choice program is offered as an alternative program
in lieu of public school suspension. The program is for juveniles who have been identified as
having committed acts that indicate a need for early intervention to prevent further delinquency.
A parent or legal guardian must also attend and be involved in this process. Finally, the Gang
Intervention Grant program works with at-risk youth and their families to prevent gang violence,
promote positive social interaction, and address educational goals. There are two phases to this
program, street outreach and family counseling.
Focusing on the entire needs of the family, SFS offers a variety of Outpatient Service programs.
The Outpatient Counseling addresses all levels of counseling. Individual, group, and family
counseling are provided by professional counselors. Services through outpatient counseling are
individually planned and designed to meet the needs of the client. Each client is assessed and a
treatment plan is developed which contains measurable goals and objectives. The Substance
Abuse Services program is geared toward helping those with drug and alcohol issues to
overcome the addictions and to improve their quality of life. Certified and licensed behavioral
health and substance abuse professionals provide individual and group outpatient substance
abuse counseling, intensive outpatient substance abuse counseling, DUI assessments, and
inpatient referrals to help substance abusers learn about their addiction and to encourage sobriety.
SFS also offers a home based counseling service to delinquent juveniles called Community AtRisk Services (CARS). This program focuses on the needs of the delinquent juveniles and their
families who have been referred by the Office of Juvenile Affairs (OJA) and the County Juvenile
Bureau. The CARS counselors provide individual, family, group, substance abuse, and sex
offender counseling. Mentoring and tutoring services are also available.
Realizing that additional services may be needed SFS established its Residential Services
program. The Emergency Youth Shelter provides supervised care 24 hours a day, 7 days per
week. The youth shelter houses males and females between the ages of 12 to 17 that are in need
of temporary emergency care. Counseling services, case management, health screenings,
recreation, crisis intervention, and daily living skills are provided. The youth also attend public
school. Responding to the community‘s need for a haven for battered women SFS established
the Care-4-U Women's Shelter. This shelter provides a safe haven for women and their children
who are escaping the trauma of domestic violence or sexual assault. Families are given the
opportunity to heal physically and gain the strength they need to take back control of their lives.
Counseling services, case management, 24 hour on-call crisis support, assistance with housing
and employment, advocacy, and sexual assault services are provided. The latest addition to the
residential services is the Girls' Group Home. This is a 24 bed group home for long-term care
and treatment for girls who are victims of abuse and neglect. These girls are in the state's
custody and are placed by the DHHS. Counseling services, case management, independent
living skills, recreational activities, and educational services are provided.
SFS also offers care for children through the Early Childhood Head Start program. Through this
program SFS is able to offer daycare services for pre-school and school age children while their
parents are working.
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Table 2
Roles of Committees
The roles of the committees for SFS were:
1. Community Relations Committee. This committee focused on publicity for the agency.
This committee was responsible for news releases and public programs designed to
highlight the services offered by the agency.
2. Finance Committee. This committee was tasked with the responsibility of reviewing the
monthly finance reports and providing the board with feedback of any irregularities. This
committee also reviewed and made recommendations on any projects that had an impact on
the finances of the agency.
3. Fundraising Committee. This committee was responsible for coordinating any fund raising
activity of the agency. This committee was very active in the agency‘s capital campaign.
4. Governmental Relations Committee. This committee worked with legislators on issues that
were being considered that would impact groups served by the agency. This was the
―lobbying‖ arm of the agency.
5. Nominating Committee. This committee made recommendations and prepared a slate of
individuals to be considered for officer positions on the Board of Directors. This committee
also reviewed and made recommendations for new board members.
6. Personnel Committee. The Personnel Committee reviewed the personnel actions of the
agency. This committee was specifically tasked to review any terminations to ensure that
the employee‘s rights were protected. The Personnel Committee conducted the annual
evaluation of the Executive Director. The final charge of the Personnel Committee was to
take action on any grievance received from employees.
7. Policy Committee. This committee ensured that policies of the agency met the requirements
of the various funding sources that funded the agency. This committee also had input on all
internal policies developed for the agency.
8. Quality Assurance Committee. Operational reviews of the agency were the responsibility of
the Quality Assurance Committee. These operational reviews included ensuring the agency
met all state regulations for Human Services Agencies, but also conducted reviews to ensure
that the agency programs were operating within policies and regulations.
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Figure 1
Organization Chart – Southern Family Services
Southern Family Services
Board of Directors
Executive Director
Assistant Executive Director
Administration
Assessment and Referral
Services
Residential Treatment Services
Outpatient Treatment Services
Early Childhood Services
Prevention Services
Community Intervention
Center
Shelter Services
Outpatient Counseling
Head Start
Parent Aide Program
Psychological Testing and
Assessments
Independent Living Home
Home Based Svcs CHBS
Taft Alternative Day Care
First Offender Program
EAP-Fresh Horizons
DHS Group Home
Community At-Risk Services
(CARS)
First Start Child
Development Center
ROOTS Challenge ROPES
Course
New Directions Battered
Women's Shelter
Steps Toward a Better Life
(STABLE)
Parenting Classes
Project Safe Place
Foster Care Support Group
Kids are Special
164
STRATEGIC PHILANTHROPY – DOVE AND THE GIRL SCOUTS’ UNIQUELY ME!
Nanette Clinch, Aline Dorso and Asbjørn Osland
This case was prepared and is intended to be used as a basis for class discussion. The views
represented here are those of the case author (s) and do not necessarily reflect the views of the
Society for Case Research. The views are based on professional judgment.
Dove launched its Campaign for Real Beauty (discussed below) and found that the Girl Scouts
provided an effective partner. Dove‘s foundation contributed funds to uniquely ME! that in turn
worked on building self esteem among girls. The relationship was a mutually beneficial one in
that uniquely ME! (and other programs) offered Dove a channel to carry out its Campaign for
Real Beauty without having to develop its own infrastructure. The Girl Scouts benefited through
the financial support it received. This example of strategic philanthropy involved more than
simply providing money in that Dove and the Girl Scouts worked closely together to meet the
needs of both entities. One dilemma, however, concerns evidence that Dove‘s parent company,
Unilever is not realizing the potential benefits of the Dove Campaign for Real Beauty; indeed,
other Unilever products outside of Dove might even be undermining the goals of the Campaign.
Does this dilemma illustrate how easily strategic philanthropy can be misunderstood in a manner
that compromises a company‘s economic and social goals? Is such inability to grasp the
significance of this Campaign telling evidence that beauty itself is not appreciated as an
indispensable good in human life, still misunderstood along with the potential benefits that
beauty, and in some instances beauty alone, can bestow on the world?
In the following case study, we will discuss the following:
1.
2.
3.
4.
5.
6.
7.
8.
9.
Dove‘s Campaign for Real Beauty
uniquely ME!
Background information on Unilever and Dove
Beauty Campaign Strategy and the Business Success
Dove Campaigns – The Study & Results - The Real Truth About Beauty
Self-Esteem Campaign
Advertising Influence in Women‘s lives - Identity, Body Image and the Media
Strategic Philanthropy, Sustainability and Corporate Challenges
Beauty and Sustainability
Dove’s Campaign for Real Beauty
Ogilvy & Mather London, a leading advertiser for the large corporations such as Unilever
(Dove‘s parent), refers to itself as the ―home of the big ideal.‖ Ogilvy asserts that its clients don‘t
work with Ogilvy to solve the world‘s problems but brand owners, such as Dove, thrive on big
ideals and consequently become more successful commercially (Ogilvy UK, 2010). The
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Campaign for Real Beauty was part of Dove‘s brand communication, giving Dove ―an
overarching aspirational thought.‖ The ensuing discussion of the concept of beauty resonated
deeply with women frustrated with Madison Avenue‘s portrayal of perfect physical beauty in
distorted and unattainable, literally inhuman, images, ―inhuman‖ in that the ads portray women
whose appearance has been altered after having been expertly made-up and styled. The message
of the campaign was captured in a succession of brief videos:
Dove: Campaign for Real Beauty (February 5, 2006) shows images of girls that wished
they looked differently. The ad was aired during the 2006 Super Bowl.
Dove Evolution (October 6, 2006) shows a woman converted to perfection through
make-up, hair styling and technical gimmickry.
Onslaught (also referred to as Beauty Pressure, October 2, 2007) shows the beauty
industry‘s pressure on girls. The message is to talk to your daughter rather let her be
excessively influenced by the ever-present beauty industry.
―Amy,‖ though less dramatic than the previous three, shows a boy standing outside a
girl‘s home unsuccessfully trying to get her attention. The ad states that she knows of 12
reasons why she‘s unattractive whereas the boy knows of none.
Dove routes funds generated from sales to its Dove Self Esteem Foundation, which funds three
groups in the US: Girl Scouts, Boys and Girls Clubs of America and Girls Inc. The Girl Scouts‘
program is called uniquely ME!
Uniquely ME!
The program‘s website is www.girlscouts.org/uniquelyme. Though the Girl Scouts national
office supports the uniquely ME! program, adoption of the program and subsequent
implementation depend on the local councils throughout the US and Puerto Rico. The target
populations are girls ages 8 to 17. Between 2002 and 2009 uniquely ME! had touched over
500,000 girls. Four activity booklets, available in English and bilingual English/Spanish,
comprise the core of the program. The targeted segments and age appropriate booklets follow:
uniquely ME! The Way To Be/Nadie Como yo! Una manera de ser for 8 to 10 year-olds;
uniquely ME! The Real Deal and uniquely ME! Inside & Out for 11 to 14 year-olds, and Mirror,
Mirror: Discover Your Inner Beauty for 14 to 17 year-olds.
Caring adult volunteers lead the exercises focused on recognizing one‘s strengths and best
attributes, handling peer pressure, thinking critically about the influence of the media and
redefining beauty on their own terms, developing a positive body image and healthy habits to
take care of one‘s body and mind and identifying core values and personal interests. Additional
discussions for age appropriate groups could include eating disorders, positive thinking,
relationships and stress.
When implementing the uniquely ME! the Girl Scouts found the cost of purchasing books to be
prohibitive for the local troops and girls. The solution was the development of the uniquely ME!
Guide for Facilitators, available online at no cost. The guide was versatile enough to serve varied
audiences and age groups, as the Girl Scouts serves a highly diverse population with differing
needs reflective of the US; instructional materials often had to be contextualized for the setting,
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given the diversity of the US in terms of ethnicity and socio-economic status. Success can be
measured in part through the popularity of the service and its resources; there are an average of
20,000 downloads/month. Activities are carried out by local councils but the national council
carries out numerous research and assessment projects, develops resources for local councils and
in general serves as a resource and guide to local groups. One such service was its leadership
institute, described here to exemplify the kinds of things offered by the national level to the local
councils with specific reference to uniquely ME!
Descriptions of uniquely ME! Programs
An external program evaluation (the ImproveGroup, September 19, 2008) included descriptions
of the programs (identified as case studies) conducted by uniquely ME! through local councils in
different US locations.
Case 1 offered 49 girls aged 8-11 a five-day theatre day camp to build self-esteem and selfconfidence. Teams of students designed puppets, wrote and rehearsed puppet skits, and then
performed in front of an audience. The students then converted the puppet skits to live skits done
by the girls in front of an audience. The desired outcomes included building self-confidence,
self-esteem, and positive relationships with adults and peers. Other process skills included
conflict resolution, stress management and team building. Fifty-seven percent were
Latina/Hispanic. Staff and the girls reported that the girls liked the camp and experienced the
desired outcomes.
Case 2 provided year-long, weekly programming to sixth and eighth graders within area schools.
The program served 824 girls from September 2005 to August 2006. Eighty-five percent were
from low-income families and 87% were African American. The girls reported that they liked
going camping, on field trips and meeting other girls. The desired outcomes reported by the girls
included ―increased self-esteem and self-awareness, improved relationships and respect for
others; increased ability to manage anger; and increased understanding that they can make
positive decisions for their future and help others‖ (p. 53). Abstract concepts such as self-esteem
were inferred from students‘ statements such as the following:
―I learned how to carry myself,‖ ―I learned that no matter what people say about you, you
will always be beautiful on the inside,‖ ―Be confident with how you look. Don‘t be upset
if someone calls you ugly, just know you are a beautiful person,‖ and ―It doesn‘t matter
how beautiful or not beautiful you are, you should go out looking the best you can.‖
Additional girls‘ comments reflected: improved relationships and understanding of healthy
relationships (e.g., ―Me being nicer to people.‖), respect for teachers and parents (e.g., ―Ever
since I have been in this program I have had more self-control in the classroom.‖), and increased
ability to manage their anger (e.g., ―I changed because I lowered my attitude down a little bit,
because if someone says something smart to me I got a high temper and I say some bad things. I
have lowered my attitude.‖).
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Case 3 activities included discussion (e.g., self-esteem, impact of the media on self-concept,
personal hygiene and grooming), community service (e.g., food drive), arts and crafts. The
discussions used Girl Scout uniquely ME! books (i.e., Inside and Out, The Way to Be, The Real
Deal, and Looking in and Reaching Out). Arts and crafts projects included bird feeders and bath
salts. One session involved girls visiting various booths in a gymnasium: healthy snacks, Mary
Kay representative spoke of make-up and skin care, popular books, information about smoking
and other drugs, abstinence and an area for group discussion and reflection.
To avoid redundancy participants‘ quotes from several of the remaining cases from a wide range
of locations and age groups, and mention of other popular activities, are provided below to show
the range of activities. ―I liked the Brazilian Jiu Jitsu because I learned to protect myself‖ (p.
106). ―When we the yoga exercises it‘s a body and mind thing so we strengthened our mind
when did the yoga exercises which is a good thing because the mind is a wonderful thing and so
if you let something affect your mind it affects everything you do. So it helped us build our selfesteem by working our minds and exercising‖ (p. 107). ―And the scrap-booking too because I am
horrible at art and most of the time I have to have (my sister) draw something for me. And for
the scrap-booking we had to make our own pages and a lot of people liked mine and I realized
that I could do art and it helped build my self-esteem‖ (p. 107). Karaoke, involving performing
in front of others, and a climbing wall, which was personally challenging, were the favored
activities at one council (p. 140). Another popular activity was a simulated relationship talk
show (p. 147).
Background information on Unilever and Dove
Unilever is a multinational corporation that was formed in 1930 through the merger of two
companies, Lever Brothers (a British soap maker company) and Margarine Unie (a Dutch
margarine producer). Unilever‘s mission was ―to meet the everyday needs of people all around
the world for nutrition, hygiene and personal care‖ (Sustainable Development 2008: An
Overview. Adding Validity to Life, 2008). Unilever had over 400 brands, including personal care,
home and food products. Some of these brands included Dove, AXE, LUX, Suave, Comfort,
Lipton, and Ben and Jerry’s. With its worldwide market, Unilever‘s products could be found in
almost everyone‘s home. The company had thirteen € 1bn brands, including Dove (Unilever at a
glance: Key facts). Unilever did not spend money promoting its corporate brand; instead, the
brands under the Unilever umbrella created their own marketing tactics appropriate to their
market segment. As one of Unilever‘s largest beauty brands, Dove‘s mission is ―to make more
women feel beautiful every day by widening stereotypical views of beauty‖ (Campaign for Real
Beauty Mission, 2008). Dove products have been positioned in the market as a ―beauty bar‖ that
moisturize and softens the skin unlike any other soap. Dove offers products ranging from
Bar/Body Wash, Lotions, Hair Care, Facial Care, Deodorant and Male Care products.
Dove established its brand identity and distinguished itself from competition by calling its
products a moisturizing bar and not soap. Soft colors like white, pink and light green were
carefully selected to represent its products‘ attributes as calming, rejuvenating, unscented and
exfoliating, serving also as a means to appeal to the target demographic and represent Dove‘s
unique selling proposition.
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Simplicity and femininity can be seen in every aspect of Dove‘s marketing products. Starting
with the company‘s name, logo and taglines, Dove started voicing self-acceptance and promoting
confidence through its campaigns, which focused on allowing women to celebrate the real inner
beauty at every age despite the refuted stereotypes.
In 2002, Dove decided to change its integrated marketing communications strategy and launched
the ―Campaign for Real Beauty.‖ Patrick Cescau, who became CEO of Unilever in 2005, and
other Unilever directors watched a 2003 Dove presentation that included their own daughters
discussing the pressure to look perfect and their disappointment with how they looked. He
reacted (―Taking a Hard Line,‖ 2008):
―It suddenly becomes personal. You realize your own children are impacted by the
beauty industry, how stressed they are by this image of unattainable beauty which is
imposed on them every day – and the loss of self-esteem and other trouble going with it,
anorexia and all of that.‖
The popularity of the campaign - both positive and negative - got the public‘s attention
generating a global buzz on the approach taken by Dove to differentiate itself from competitors.
The controversy arose from the images used, which go against the normal advertising images of
extremely attractive women; sexy, symmetric, beautiful and perfect body shapes of super models
were replaced by ―real‖ models. The goal of the campaign was to ―challenge the stereotypes set
by the beauty industry over the years‖ (Purkayastha, Fernando, & Meenakshisundaram, 2006). In
2005, the company launched another campaign in a similar context, but going a step further
touching the emotional side of women, naming it Self-Esteem Campaign. The 3-year-old
campaign became viral and was one of the most downloaded videos on YouTube. A call to
action message was included at the end of every commercial for the campaign saying: ―Let‘s
change their minds. We‘ve created the Dove Self-Esteem Fund because every girl deserves to
feel good about herself‖ (Wentz, 2007).
Beauty Campaign Strategy and the Business Success
In the beauty industry, consumers purchase cosmetic products because they feel a need to fit in
and believe that the consumed products will help them to achieve the desired looks and social
identity already set by the media through unreal ideal models. The goal of the Dove campaign
was to act as a catalyst to help the population redefine the meaning of beauty and encourage
women to fight against the ideal, yet unreal, female image portrayed by the media. After the
campaign was launched, the Dove brand became a topic of conversation and media talk shows.
The campaign raised awareness about the Dove brand, which consequently boosted the sales
allowing the company to record phenomenal sales growth (Purkayastha, Fernando, &
Meenakshisundaram, 2006). ―It was reported that after the campaign, the sale of Firming Lotion
in the UK rose by 700 percent‖ (Purkayastha, Fernando, & Meenakshisundaram, 2006, p. 2).
Prior to the campaign in 2003, the sales of the Firming Lotion were approximately 280,000
bottles; after the campaign, sales reached 2.3 million bottles in 2004 (Purkayastha, Fernando, &
Meenakshisundaram, 2006).
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The campaign was divided into phases and at first, no product was involved. Only five images of
women of different ages, shape and sizes were released to the public in high traffic locations and
media, and the ―public were asked to make a judgment about the looks of the women‖
(Purkayastha, Fernando, & Meenakshisundaram, 2006, p. 2).
At the second phase, Dove used the real models to advertise its new cellulite firming cream with
ads named ―Let‘s celebrate curves‖ (Purkayastha, Fernando, & Meenakshisundaram, 2006, p. 2)..
The campaign featured six real women in their underwear who were not embarrassed showing
their ―imperfect‖ bodies. The images for the campaign were not retouched nor edited in any
shape or form (Purkayastha, Fernando, & Meenakshisundaram, 2006).
The campaign broke the golden rules of the beauty business advertising and was able to prove
that not only sexy models can attract the public‘s attention towards a brand and a product. The
campaign was a success and gave Dove a lot of free publicity. Dove was able to raise awareness
for its brand and gained the sympathy of many consumers. The company took a huge marketing
risk by going totally against the normality in beauty advertising. However, many others ―felt that
the campaign was contradictory in nature‖ (Purkayastha, Fernando, & Meenakshisundaram,
2006, p. 2). Critics felt that even the real models were beautiful in their ―own way,‖ since they
had no skin marks, and that the images did not reflect the true image of the United States female
population. Such arguments were made due to the fact that ―even the largest woman in the ads
was slimmer than the average American women‖ (Purkayastha, Fernando, &
Meenakshisundaram, 2006, p. 13).
Dove Campaigns – The Study & Results - The Real Truth about Beauty
―We want to challenge the definition of beauty. We believe that beauty has become too narrow in
definition. We want to defy the stereotype that only the young, blond and tall are beautiful.” -Philippe Harousseau, Dove‘s marketing director (Sewing, 2004, para. 10).
Dove decided to launch the campaign for real beauty in 2004 with an attempt to better
understand this so complex, frustrating, yet inspiring and illusive relationship females have with
beauty (Etcoff, Orbach, Scott, & D'Agostino, 2004). Since its launch, the campaign has been
enormous both in its reach and in its impact. The campaign included real women as models with
short taglines such as, ―Wrinkled? Wonderful?‖ followed by a question, ―Will society ever
accept that old can be beautiful?‖ ―Gray? Gorgeous?‖ followed by the question, ―Why aren‘t
women glad to be gray?‖ ―Oversized? Outstanding?‖ followed by the question, ―Does true
beauty only squeeze into a size 6?‖ (Purkayastha, Fernando, & Meenakshisundaram, 2006, p. 7).
The public were invited to the campaign‘s website to vote on the ads. Interactive billboards were
also placed in cities, such as New York City and Los Angeles, and the public was provided with
a code to participate in the campaign. ―The responses were tabulated and almost immediately put
in the interactive billboard‖ of the major cities giving the public instant feedback on the success
of the campaign (Purkayastha, Fernando, & Meenakshisundaram, 2006, p. 8).
The study was conducted by the research firm, StrategyOne, in conjunction with the help of two
other experts in the field: Dr. Nancy Etcoff from the Harvard Medical School and Dr. Susie
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Orbach from the London School of Economics. The research was conducted globally across ten
countries and had a sample size of 3,200 women, ages 18 to 64, between February 27 and March
26 of 2004. Furthermore, in order to avoid biased results, Dove took care to not make reference
to its own brand nor to its parent, Unilever, leaving participants of the study ―unaware of their
sponsorship of the study‖ (Etcoff, Orbach, Scott, & D'Agostino, 2004, p. 3). The study was
conducted through phone interviews in the following countries: U.S., Canada, Great Britain,
Italy, France, Portugal, Netherlands, Brazil, Argentina and Japan. A total of 300 females were
interviewed in each country, except in the U.S., where 500 females were interviewed. In
marketing research, phone interviews are considered to be ―blind‖ interviews because it reduces
the bias and possible formation of stereotypes that could potentially influence the results of a
study (Mobius & Rosenblat, 2006).
The goal of the study was to determine ―how comfortable women are with using the word to
describe themselves; their level of satisfaction with their own beauty; its impact on their sense of
well-being; and, how important it is to them‖ (Etcoff, Orbach, Scott, & D'Agostino, 2004, p. 9).
No sample of the questions asked, nor specifications to where the respondents were located at the
moment of the interview were provided. In addition, no information on how the respondents
were selected to participate in the research was provided. Furthermore, no demographic data
regarding the respondents‘ financial status or previous history of chronic depression, or current
emotional stage were identified by the study.
According to the findings presented in a report titled ―The Real Truth about Beauty: A Global
Report‖, ―women are least satisfied with their physical attractiveness, body weight and shape,
beauty and financial success‖ (Etcoff, Orbach, Scott, & D'Agostino, 2004, p. 22). In addition,
only 2% of the women considered and described themselves as beautiful, ―while only 9% felt
comfortable describing themselves as ‗attractive‘. Most of the women used words like ‘natural‘
(31%) and ‘average‘ (29%) to describe their looks‖ (Purkayastha, Fernando, &
Meenakshisundaram, 2006).
The study also provided evidence that for many women beauty is not only having a perfect body
or symmetry of the left and right halves of a face, found to be more attractive then asymmetric
faces. Being beautiful and feeling beautiful can be circumstantial and depends on the person‘s
qualities (Etcoff, Orbach, Scott, & D'Agostino, 2004). So, for many women, being and feeling
beautiful depend on: ―being loved, being engaged in activities that one wants to do, having a
close relationship, being happy, being kind, having confidence, exuding dignity and humor‖
(Etcoff, Orbach, Scott, & D'Agostino, 2004, p. 5).
The study also revealed the media impact on how women tend to view themselves and describe
their physical appearance. Today, beauty is visual and has been changed from an idea to an ideal
set by the media that most women will never be able to attain. ―Almost half of all the women
(47%) rate their body weight as ‘too high‘… [and] this is particularly the case in [countries like]
the U.S. (60%), Great Britain (57%) and Canada (54%)‖ (Etcoff, Orbach, Scott, & D'Agostino,
2004, p. 16).
The results of the research allowed Dove to better understand the beauty stereotype and pressure
set by the beauty industry, which has always used models perfected by technological gimmickry
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and inspirational messages to get users to adopt a product hoping to look like or feel like the
models portrayed in the ads. The real women identified as beautiful in the Dove campaign
―strove to challenge stereotypes set by the beauty industry‖ (Purkayastha, Fernando, &
Meenakshisundaram, 2006, p. 16).
Confidence regarding their physical appearance was also one of the areas of the study. The
results indicated that 48% of the females agreed with the statement that: ―When I feel less
beautiful, I feel worse about myself in general‖ (Etcoff, Orbach, Scott, & D'Agostino, 2004, p.
18).
Media and culture are also great influencers on how women feel and view themselves. For
instance, the study shows that women have embraced the mass media ideas and popular culture,
and have begun to see beauty and physical attractiveness as a synonymous of each other (Etcoff,
Orbach, Scott, & D'Agostino, 2004).
Almost half of the women - 45% - also reported that beautiful women have more and better
opportunities in life, and 59% of the women felt that ―physically attractive women are more
valued by men‖(Etcoff, Orbach, Scott, & D'Agostino, 2004, p. 25). Such results show that
beauty and physical appearance can influence how well and how long marriages or relationships
last. Such results also show that ―given the high value placed on marriage and romantic
relationships by women . . . this perception [of male preference for beautiful women] can
negatively impact life satisfaction and well-being—especially among younger women‖ (Etcoff,
Orbach, Scott, & D‘Agostino, p. 25).
Self-Esteem Campaign
In February of 2006, Dove aired a Super Bowl commercial with images of young girls who were
not satisfied with their looks ending with the message that ―every girl deserves to feel good about
herself‖ (Postrel, 2007, para. 13). For instance, a brunette girl ―wishes she were blond‖, ―a thin
girl was ―afraid she‘s fat?‖ (Purkayastha, Fernando, & Meenakshisundaram, 2006, p. 10).
The campaign was created based on results found by previous studies which indicated that ―only
56% of seventh graders say they like the way they look‖ and ―one-third of all the girls in grades
nine to 12 think they are overweight, and 60% are trying to lose weight‖ (Purkayastha, Fernando,
& Meenakshisundaram, 2006, p. 10). In the attempt to change this situation, Dove started to
provide materials on its website to help mothers and young girls fight the battle against this ideal
beauty standard. The Campaign for Real Beauty‘s website offers various tools for young girls
and mothers with information on how to gain self-esteem, and help on how to own and start
claiming their inner beauty.
What is Self-Esteem?
What is self-esteem? According to Baumeister and colleagues, self-esteem is defined ―by how
much value people place on themselves‖ (Baumeister, Campbell, Krueger, & Vohs, 2003, p. 2).
High self-esteem ―refers to a highly favorable global evaluation of the self‖ (Baumeister,
Campbell, Krueger, & Vohs, 2003, p. 2); on the other hand, low self-esteem ―refers to an
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unfavorable definition of the self‖ (Baumeister, Campbell, Krueger, & Vohs, 2003, p. 2), both
evaluations of perception are measured by self-report.
When analyzing the correlation between self-esteem and physical attractiveness, Baumeister and
colleagues found that ―people who speak well of themselves in general would rate their physical
attractiveness more highly than others‖ (Baumeister, Campbell, Krueger, & Vohs, 2003, p. 7).
Though the correlation between self-esteem and happiness is strong, causation is unclear
(Baumeister, Campbell, Krueger, & Vohs, 2003). The authors continued: ―High self-esteem does
not prevent children from smoking, drinking, taking drugs, or engaging in early sex. If anything,
high self-esteem fosters experimentation, which may increase early sexual activity or drinking,
but in general, effects of self-esteem are negligible. Women with high self-esteem have a
reduced incidence of bulimia‖ (Baumeister, Campbell, Krueger, & Vohs, 2003, Summary, p. 1).
Advertising Influence in Women’s lives - Identity, Body Image and the Media
Research has shown that beautiful and attractive models can not only influence the consumer‘s
attitude towards an ad, but also influence the buying behavior and even modify a consumer‘s
opinion and perceptions of a product (Stephens, Hill, & Han, 1994). However, the intensity of
such an ideal image by the media has created an adverse psychological effect in the human
population. Advertising can ―create diverse personal needs, attitudes, cognition, self-image, and
personal preferences‖ (Lin & Yeh, 2009, p. 61).
Advertising studies have shown that exposure to campaigns with attractive models can influence
a woman‘s self-esteem and ―can temporarily raise comparison standards for physical
attractiveness‖ (Eisend & Möller, 2006). In the public health perspective, the overwhelming use
of thin top models and Photoshop touch-ups are impacting the perceptions and beliefs regarding
body shapes on young girls, leading many of them to develop eating disorders and depression.
For instance, research has shown that ―biased media images of the ideal female beauty seem to
contribute to the fact that one woman out of every two is dissatisfied with her body‖ (Eisend &
Möller, 2006, p. 103).
The pressure to conform to the distorted reality portrayed by advertising media has been altering
the female self-esteem and idea of beauty. For example, ―results of a content analysis of
characters in television shows reveal that 69.1% of the female characters are rated as thin
compared to 17.5% of the males (Eisend & Möller, 2006, p. 103). Furthermore, ―content analysis
of prime time situation comedies found out that 33% of female characters were below average
weight and the thinner the female character, the more positive comments the character received
from males‖ (Eisend & Möller, 2006, p. 103). Such results correspond only to a research
conducted to explain how television influences ―body-related perceptions, beliefs, and behavior
patterns of consumption‖ (Eisend & Möller, 2006, p. 102). But we all know that in addition to
the TV, we – the consumers - are constantly inundated with ideal body images through the
Internet, magazines, and product labels. The publicity preceding the 2010 Miss USA pageant
sparked controversy; photos of the contestants showed them in lingerie in poses designed to be
sexually attractive. One popular Google search term was ―Miss USA scandal pictures.‖ The
pageant is owned by Donald Trump.
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These messages alter the feminine identity since advertising depicts an image of ideal objects
rather than emphasizing the qualities and characteristics of the real women - a human being with
feelings, imperfections, yet able to love, cry and have emotions like any other capable specie.
Therefore, the portrayal of the ideal female body and character could potentially ―affect gender
recognition [and] also force women to hide good personal characteristics in order to adjust their
social behavior to satisfy men‘s expectation‖ (Lin & Yeh, 2009, p. 62), which lately has been
developed and defined by the constant exposure to the ideal, sexy and attractive women.
The current portrayal of the female gender by the media could be dangerously misleading to girls
and women because it could create an identity conflict ―allowing them to unquestioningly
believe that sexualization and objectification can bring power and social success‖ (Lin & Yeh,
2009, p. 62).
Do I Look Good?
Women are always worried about their physical appearance and what people may think about
them. Heavier bodies are ―seen as unattractive and unappealing sexually‖ (Owen & Laurel-Seller,
2000. p. 980). Furthermore, ―heavier body sizes are [often] associated with negative personality
characteristics such as laziness and lack of self-control‖ (Owen & Laurel-Seller, 2000, p. 980).
The beauty ideal is transmitted from generation to generation. Already at an early stage, through
observation, girls learn from their mothers the importance of external beauty. When going out,
girls are overwhelmed with flashy colors and designer clothing. In kindergarten, girls have
already formed the perception of beauty and know what they want to look like once they grow
up. We live in an appearance-obsessed society and form opinions based on appearance,
demeanor, body language and dressing style. ―The impact of faces [and body shape are] shown
in our impressions of people as well as in our behavior towards them, such as whom we help,
whom we hire, or whom we ask for a date‖ (Zebrowitz & Montepare, 2008, p. 2). That is why
women feel without a choice and are always asking themselves: do I look good?
A study done by the Unilever Corporation found out that ―two features stand out when people
indicate what is important for them to look good: having an optimal body weight and shape, and
having beautiful skin‖ (Unilever Corporation, 2007, p. 8). Such perception of the perfect look is
influenced by the media where models get placed on the covers of magazines and beauty
products, giving the public the illusion of an image that has been created by one of a kind model
and edited with Photoshop.
Women observe themselves in a mirror and wonder what to change to look similar to models
used in most of today‘s advertisement. The alternatives for a change are often handy due to
marketing strategies and media used to reach the targeted population. It is common today to hear
young females striving for plastic surgery such as lifts, breast augmentation, liposuction and
liposculpture. For instance, the research conducted by Dove revealed that 1 out of 4 women says
that she would consider cosmetic surgery to achieve their desired look (Etcoff, Orbach, Scott, &
D'Agostino, 2004).
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Strategic Philanthropy, Sustainability and Corporate Challenges
Strategic Philanthropy
Porter and Kramer (2002, p. 6) explain that while strategic philanthropy could describe any
charitable contribution driven by a plan, ―in the corporate context, it generally means that there is
some connection . . . between the charitable contribution and the company‘s business.‖ Strategic
philanthropy should be distinguished from corporate donations to social programs and from
―cause-related marketing, through which a company concentrates its giving on a single cause or
admired organization‖ and focuses on ―enhanced goodwill, not improvement in a company‘s
ability to compete. . . . True strategic giving, by contrast, addresses important social and
economic goals simultaneously, targeting areas of competitive context where the company and
society both benefit because the firm brings unique assets and expertise.‖ (Porter & Kramer, p. 6).
Understanding strategic philanthropy can empower a company to unleash benefits over the longterm while being admired by many for good works. The goal is to ensure economic and social
benefits rise from that the corporate investment of time, money, effort, not to mention what
might be most challenging: being open to changing direction and even building a greater ethical
ethos. Such a change might entail restraint in the development of products and services not well
aligned with or actually undermining the targeted social interests. (Porter & Kramer, 2002). Such
a change might also enlighten a corporation about human needs and new desires, leading to
increased innovation (Halme & Laurila, 2009).
Porter and Kramer (2002) argue that a successful strategic philanthropy approach demands
analysis of ―competitive context‖ where a company, assessing its products, services, and goals,
analyzes where and in what geographical locations or social dimension it can exert the greatest
influence in a manner that increases marketplace and social improvements. How this can work is
illustrated in Cisco‘s creation and oversight of its Cisco Systems‘ Networking Academy, which
began by seeking to expand knowledge of networking at high schools by training teachers and
donating equipment, a direction that allowed the Academy to expand, attracting complementary
donations from related technology companies. The curriculum benefited from Cisco‘s technical
expertise and over time, the endeavor ―increased the sophistication of its customers‖, increased
market share, and ―attracted international recognition‖ (pp. 12-13). Porter and Kramer assert,
―The acid test of good corporate philanthropy is whether the desired social change is so
beneficial to the company that the organization would pursue the change even if no one ever
knew about it.‖ (p. 15)
Sustainability
A good corporate strategy where companies contribute assets to communities to further progress
related to goods and services has the power to contribute to an increasingly sustainable planet.
Sustainability and corporate sustainability (CS) are relatively new concepts in the realm of
corporate social responsibility (CSR).
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In spite of the pervasiveness of social and environmental issues, some managers may
remain confused about the meaning of social responsibility or sustainability. Definitions
and key constructs for CSR and corporate sustainability (CS) have proliferated during the
past decade, and this only adds to managers‘ uncertainty (Bansal, 2005; Carroll,
1999).Ambiguous definitions and constructs may prevent managers from identifying
CSR and CS goals for their companies. (Monteil, 2009, p. 246).
Yet Monteil concludes that there may be a convergence:
Current research seems to show that, because of their shared environmental and social
concerns, CSR and CS are converging, despite their paradigmatic differences. In CSR,
environmental issues are a subset of a broader social performance dimensions. In the CS
field, the social dimension has become an increasingly important part of the sustainability
paradigm. Contemporary businesses must address economic prosperity, social equity, and
environmental integrity before they can lay claim to socially responsible behavior or
sustainable practices. Indeed, the conceptualization of CSR that integrates economic,
social , and environmental dimensions and the triple bottom line conceptualization of CS,
which comprises economic, social, and environmental dimensions, are very similar. Both
show that firms must balance the three elements of the triple bottom line to achieve longterm sustainability and social responsibility. Both CSR and CS aim to balance economic
prosperity, social integrity, and environmental responsibility, regardless of whether they
conceptualize environmental issues as a subset of social issues or as the third element of
sustainability (2009, p. 260).
Dove‘s parent, Unilever, has declared its determination to develop a partnership with consumers
and efficient products in order to conserve water as part of a global sustainability effort. In its
Unilever ―Sustainable Development Overview 2009 Report, Unilever asserts its determination to
work with partners across the value chain to reduce environmental impact, support fair trade, and
educate consumers about resource-efficiency. The Unilever Sustainable Development Report
(March 2010) includes a section on ‗Health and Well-Being‘, addressing nutrition and hygiene,
where hand washing fits in well with Dove‘s skin care product line.
http://www.unilever.com/sustainability/wellbeing/. What is not clear is whether Unilever is even
remotely committed to the quest for real beauty and supports Dove‘s efforts primarily to increase
market share of skincare and related products.
Corporate Challenges
Evidence that there is a direct correlation between CSR and profits remains sufficiently
ambiguous to cause business leaders to pause and falter in pursuit of goals not immediately
related to quantifiable economic achievement. (See Lee, 2007, p. 64; see also Halme & Laurila,
2009, p. 333)). If the strategy is prompted by satisfying stakeholders, then maintaining
advertisements that please the men identifying with the Axe brand becomes justifiable, even
though such advertisements under the concept that real beauty is not dependent on sexual appeal
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or a man‘s entranced gaze. If the strategy is ―performance driven‖ (Basu & Palazzo, 2008, p.
122), then the success will depend on quantifiable effectiveness. Quantifiable results would not
be expected to the same degree; however, if the strategy is driven by moral conviction in the
rightness of the contribution and its social impact over the long term (see Maak, 2008).
Another issue is whether the social cause is worth launching if there is not adequate social
interest. Whether society is ready for the kind of good a corporation wants to deliver might be a
questionable assumption: ―As Vogel (2005) argued, the assumption is true only under certain
conditions where there are coherent institutional supports and a big enough market for virtues.‖
(Lee, p. 65). If the quest for beauty is limited to giving women a positive outlook, then however
valuable self-esteem may be, the cause would not attract the same kind of interest as education,
elimination of poverty, or other causes.
Environmental sustainability clearly matters to Unilever. In the Unilever Sustainable
Development Overview 2009, approximately 36 pages long, there admirable emphasis on issues
concerning water and poverty without much emphasis on self-esteem or beauty.
http://www.unilever.com/images/sd_UnileverSDReport170310_amended_tcm13-212972.pdf. p.
16.
Even more grating for those seeking restoration of real beauty is the Axe brand. Although Dove
is participating in advocating rejection of beauty ideals for women, Unilever has adopted a
stereotypical framework for the products for men sold under its Axe brand. The Axe
advertisements present male images suited to machismo club-hopping (and club-wielding), and
may be fitting securely into a marketing trend that Paul Harris has dubbed the ―Menaissance‖
(July 9, 2006) (http://www.guardian.co.uk/world/2006/jul/09/paulharris.theobserver
Beauty and Sustainability
In 1990, Naomi Wolf, in her book The Beauty Myth, stated that ―women were underpaid, and not
judged by the quality of their work, but by their looks‖ (Shoemaker, 2004). Women are
concerned about their physical appearance and many seem to view their beauty as a boost to
achieve their life success. The media have helped create a general consensus that thinness has
become the beauty standard, and women must exercise daily and stay in shape in order to be able
to fit within society norms. The Campaign for Real Beauty attempted to break this idea by
showing the distorted beauty ideal that has been constructed by our erroneous beliefs and
perceptions.
Freeing beauty from the constraints of the distorted ideal becomes the challenge. Behind the
Campaign for Real Beauty is the idea that beauty exists beyond looks and appearance. We live in
a society driven by looks and appearance. A research paper published by the American
Economic Association reveals that ―workers of above-average beauty earn about 10 to 15
percent more than workers of below-average beauty‖ (Mobius & Rosenblat, 2006). Along with
this unconscious wrongdoing, there are also stereotypes at the workplace affecting workers
because often ―employers (wrongly) expect good-looking workers to perform better than their
less attractive counterparts‖ (Mobius & Rosenblat, 2006).
177
Often, beauty is also mistakenly correlated to intelligence, capabilities, social-skills, health and
success (Mobius & Rosenblat, 2006). Such examples can be clearly seen at schools where
attractive students are bound to receive more privileges, are treated differently and are often
under higher pressure because professors often expect more from them (Mobius & Rosenblat,
2006). However, according to Mobius and Rosenblat, such preferential treatment can be
beneficial in education because it can boost the students‘ confidence, as well as their public
speaking abilities, which later could be considered key factors to their professional success.
How women and children can be exploited through the media is a significant aspect of the
Campaign for Real Beauty. It is important for advertisers and consumers to recognize the
impacts of the gender role endorsements and push marketers to create campaigns that will escape
from the sexual ideal female portrayal currently stamped in the advertising industry. Sex appeal
attracts public attention; however, it is not the only alternative that can be used to achieve
massive brand recognition and profitability. Dove‘s Campaign for Real Beauty and Self-Esteem
Campaign are examples of an alternative strategy. The campaigns brought a new perspective to
the advertising industry showing that real women can be used in advertising as real human
beings instead of the ideally created Photoshoped dolls.
Exploitation of women and children endorsed by any media is nothing less than social injustice.
Girls Scouts USA advocates for interests of women on issues impacting women:
http://www.girlscouts.org/who_we_are/advocacy/. The Healthy Media for Youth Act, resulting,
in part, from advocacy by the Girl Scouts, was introduced in the House on March 24, 2010. The
Act would offer grants to nonprofit organizations creating programs that would increase media
literacy for girls and boys as well as supporting research on healthy development of the young. It
would further require the Federal Communications Commission ―to convene a task force, to be
known as the National Task Force National Task Force on Girls and Women in the Media, to
develop voluntary steps and goals for promoting healthy and positive depictions of girls and
women in the media for the benefit of all youth. (Congressional Research Service, GovTrack,
http://www.govtrack.us/congress/bill.xpd?bill=h111-4925&tab=summary
Results of the Campaign for Real Beauty prove that girls and women gain confidence, happiness
and poise when empowered by a sense of inner beauty. That alone should raise curiosity about
the nature of beauty and what it can contribute to benefit human life. Given all the emotional
damage brought about by cultural standards of unattainable beauty, it might seem that the last
thing to value would be the contemplation of beauty. The assumption that beauty is a cultural or
political creation designed to suppress women, suggests that the sooner the word, with all its
associations, leaves the language, the better off humanity will be. Yet if beauty can be so
consistently damaging, is it beauty after all? Is beauty assaulted in the criticism of these
damaging images or is the assault actually on manufactured counterfeits of beauty?
Determining whether beauty exists and its purpose calls for examining some of the common
approaches to evaluating beauty: social, evolutionary, aesthetic, and philosophical. A prevalent
idea is that beauty is a social and cultural construction, influenced by politics, economics, and
community standards, capable of manipulation for good or ill. This approach explains
marketplace production of beauty in America as an outgrowth of the political patriarchal regime
178
where women possessed no true identity without male approval (see Wolf, 2002). This approach
also suggests that altering the political consciousness of women can reform ideas about beauty to
advance political, economic and social equality. Thus, Johnston and Taylor (2008) criticize the
Dove Campaign for appealing to consumer interests, encouraging acceptance of social norms,
and failing to radically challenge beauty ideology, preferring a grassroots raising of
consciousness aimed at social and political institutions. The evolutionary approach views
attention to and appreciation of beauty as biologically natural and universal, arising from natural
needs, identifying appropriate mates for reproduction being one example (see Rhodes, 2006;
Gottschall, 2008). This approach explains that the business interest in generating sex appeal is
motivated by an awareness of a basic biological desire.
The final two approaches are aesthetic and philosophical. Aesthetics offers one mode of pursuing
serious inquiry into the nature of beauty itself. The definition in the Columbia Electronic
Encyclopedia provides in part, that aesthetics is ―the branch of philosophy that is concerned with
the nature of art and the criteria of artistic judgment. . . .Generally speaking there are two basic
approaches to the problem of beauty—the objective, which asserts that beauty inheres in the
object and that judgments concerning it may have objective validity, and the subjective, which
tends to identify the beautiful with that which pleases the observer‖ (―Aesthetics,‖ 2009).
Philosophical or metaphysical approaches to beauty offer approaches to beauty that seek to
explain the kind of contribution beauty makes to human life: enhancing enjoyment, improving
powers of good judgment, inspiring virtuous actions benefiting others while improving the self.
Inner beauty, then, may emanate not from self-satisfaction but from recognition that real beauty
has been glimpsed: in the wonders of the natural world, in the joy that springs from good
relationships, in the profundity and reflection stimulated by art, in one‘s own moral virtues and
the fruits of the same. Without beauty to guide humanity, can any society truly be sustainable?
179
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THE EMAIL
William H. Moates, Dale Varble and Bruce McLaren
This case was prepared and is intended to be used as a basis for class discussion. The views
represented here are those of the case author (s) and do not necessarily reflect the views of the
Society for Case Research. The views are based on professional judgment.
―The University takes such matters very seriously,‖ thought Dr. Mel Carnahan, a professor of
Management Information Systems (MIS) who sat in his office contemplating what the university
administration would decide to do in response to an occurrence the previous night. A student
named Bob Smith, responding to a challenge from Dr. Carnahan to try to hack into the
professor‘s home computer system, had violated university computing policies by pretending to
be another student and in the process triggered a false alarm regarding a possible computer virus
that was communicated to University Information Technology Services. (See the Appendix for
an explanation of computer virus and other technical terms used in the case.) Dr. Carnahan was
concerned with how the university administration would react to Bob‘s actions and to his
challenge to Bob. Any decisions would have to be made expeditiously, since Bob was scheduled
to graduate in a few weeks.
The Challenge
During the fall semester, Bob Smith, a senior MIS major, listened to Dr. Carnahan, the professor
in his telecommunications course, describe the computer network that he had installed in his
home. The network included a server, six client computers and wireless router. The network
was Web-accessible, including the printer, which was attached to a client computer on the
network. This arrangement made it possible him to login from a remote site and print documents
on the printer.
Bob raised his hand. Grinning, he said, ―Then I can use your printer to print my homework.‖
Carnahan chuckled and said, ―If you can get past my firewall and get to my printer to print your
homework, I‘ll not only bring it to class to show them, but I‘ll buy you dinner.‖ Bob laughed
along with the rest of the class, but, unlike some of the other students, he remembered the
incident and took it as a challenge.
The Plan
During the following spring semester, Bob enrolled in Dr. Carnahan‘s course in network
administration and in an information security course taught by Dr. David Mitchell. Required
reading in the information security course included a book on social engineering titled The Art of
184
Deception, co-authored by Kevin Mitnick, a well-known hacker who had used his skills in
manipulating people along with his technical computer and telecommunications skills to break
into computers of numerous corporations and government installations (Mitnick & Simon, 2002).
Mitnick served jail time for his crimes and, following his release from custody, had started his
own information security company. Mitnick‘s book provided examples of the use of his social
and technical skills to compromise computer systems in order to emphasize the need for training
and awareness programs in companies interested in preventing such illicit access to their systems.
During the networking course, Dr. Carnahan again discussed his home network, describing how
someone could use an Internet URL to access a remote printer, provided that the printer is
configured to allow such access and the user has proper means of authentication and
authorization. Bob was again reminded of the challenge that Carnahan had made the previous
semester. Near the end of the semester, Bob began to think of approaches that he might employ
to print a document on the professor‘s home network. The fact that Dr. Carnahan had already
agreed to take him to dinner to thank him for ―using him as an example all semester‖ did not
diminish the desire to accomplish the deed.
Bob concluded quickly that he did not have the technical hacking skills to break through the
firewall. On the other hand, he thought, there might be other ways to achieve his goal by getting
Dr. Carnahan‘s home login ID and password. The first idea he considered was to put a key
logger on the classroom computer. Sometimes during class discussions Dr. Carnahan would log
on to his home server from the classroom and act as administrator for his server. Bob thought ―If
I could get that password, I could be the administrator on his server myself, and hopefully print
my homework‖ He knew that if he could get a key logger program on the classroom computer
that would copy Dr. Carnahan‘s keystrokes, then he would have the needed login information.
The problem was that computers on campus had ―re-born‖ cards in them that return the
computers‘ hard drives to their original state after each restart. There seemed be no way, Bob
thought, that he could store his program on that classroom computer without it being erased
when the computer was shut down.
As the end of the spring semester approached, it was time for student presentations in Dr.
Carnahan‘s class. To assist students, Dr. Carnahan discussed how disks can fail when you really
need them to work and showed the class how to save presentations on the second partition of the
hard drive of the classroom computer so they would not be affected by a shut down. As he
listened, Bob wondered if this technique would give him a way around the re-born card. Now, all
he needed to do was find a program to use on the machine. He did some searching on the Web,
found the shareware key logger program needed, and then downloaded it for free. It was a great
program, too. All he had to do was pre-configure it on his home machine. It required an e-mail
address, which was used to send the log-file to the recipient every 1024 characters, and some
other little options that were all part of the configuration process. The program would also run
invisibly, not showing in the Windows Task Manager. Then, once it was configured, he could
deploy a stripped out version to a floppy disk, copy two very small files to the class computer,
and by watching his e-mail he would discover Carnahan's password.
Bob decided to test the key logger on a friend and her roommates. His e-mail immediately
received log-files, many of them. He opened the log files and they showed everything his
girlfriend and her roommates had typed--all their passwords to their online and email accounts,
all their homework or chatting, everything. He realized that if he put the key logger on the
185
campus classroom machine, he might get Carnahan's password, but the log file would show
every password of every professor who logged on to the classroom computer. He thought about
that and decided that might be a little too risky. If something unforeseen happened and all the
professors‘ information got out, he would feel really bad. In addition, causing such an occurrence
would be an obvious violation of university policy. Bob was not at all comfortable with the
possible consequences for himself and the faculty members if the passwords were somehow
made public.
As a result, Bob started looking for other ways to get to Dr. Carnahan‘s home computer network.
He had developed considerable skill using Excel, Microsoft‘s spreadsheet package, including
how to write macros to accomplish non-standard tasks with the spreadsheet package. Further
thought about the problem led him to formulate a strategy: if he could get the professor to open a
spreadsheet file at home and run a macro that would cause the document to print to the home
printer, he would have accomplished his purpose. Furthermore, if he sent Dr. Carnahan an email
when the professor was at home in the evening, he would be likely to read the message there.
Creating the spreadsheet containing the macro was not the problem. Getting Dr. Carnahan to
open the spreadsheet and run the macro, given that he also might remember the challenge,
presented a real obstacle. If Bob emailed the spreadsheet under his own name, he felt sure that
Dr. Carnahan would immediately be suspicious and not open the spreadsheet and its embedded
macro. Furthermore, as he had learned in Dr. Mitchell‘s security class, macros were sometimes
used to spread computer viruses, so security settings on individual computers, Web browsers,
and Excel often blocked the execution of macros or warned the recipient that a file contained a
macro. Also, if the University‘s email firewall or virus scanner was set to detect and eliminate
macros, which was a common network security practice, the macro would not even be available
when the spreadsheet file was opened.
The Exploit
Bob had an email account on Networks.com, one of many Web portals and services that offered
free email services to those who registered with the site. He logged into his account and created
the alias email handle, [email protected]. Alice was a student in the MIS program
who had a very high GPA and had established a solid reputation with other students and with the
faculty of the program. He then created the spreadsheet file with the macro, attached the file to
the following email, and sent it to Dr. Carnahan:
Dr. Carnahan,
I am currently working on a project for Dr. Mitchell's information security class. I am trying to
make a program in Excel that calculates a forecast for annual loss expectancy within an
organization. This is just a simple version of it that shouldn't take long to look over, but I was
wondering if you could look to see if my assumptions are correct so far.
Thanks, Alice
186
P.S. I am using macros (written in the lab so they couldn't be certified yet) to toggle pages and to
do the calculations. Before you open my program you will have to go in Excel and lower the
macro security to LOW for it to work properly. This can be done at TOOLS, OPTIONS,
SECURITY, and set the macro security to LOW.
As soon as he had sent the message to Dr. Carnahan‘s campus email address, Bob realized that
he had made a mistake. In his desire to determine if the University‘s virus scanner would detect
the macro and block the message and/or its attachment from reaching the professor, he had also
used the carbon copy (CC:) line in the header to send a copy of the email to his campus email
account. This would allow him to check his campus email account and be certain the file with
the macro had not triggered an alert or caused the offending attachment to be stripped out. It
suddenly dawned on Bob that he should have tested whether the macro would go through by
simply sending a copy to his own campus account prior to sending the email to Carnahan.
However, Bob now realized that Carnahan might notice that his name was in the CC: address
line in the message header if he checked the message header closely before opening the file.
This might make Carnahan suspicious since he wouldn‘t understand why the message had been
copied to Bob.
Bob decided that he might be able to cover his mistake by pretending that he did not understand
why the message had been sent to him. He sent the following message to Alice via her campus
account:
Hey Alice,
I got your E-mail tonight. I don't really know what it was about. Why did you send it
me?
Bob
Alice quickly responded:
What e-mail?!? I did not send you any email... from what account did the msg come
from?
Bob replied as follows:
It came from a Networks account: [email protected].
The response from Alice came back:
I do not have an account by that name! Whoa! I see a security issue here :)
what did the email say... and I apologize if it said anything crude !!!
Bob then sent the following:
Looks like to me somebody in class is playing a joke.
187
Alice responded:
Yup! It does... I wonder whom all they sent the email to!
Bob wrote:
In the original message it was to Dr. Carnahan and me.
This made Alice a little worried. She wrote the following:
do not delete the original message, i am hoping that we could see the header of the email to
trace its origin.
Alice then wrote Dr. Carnahan:
Hello,
Bob sent me an email this morning, which he said was supposedly sent by me. It has my
name but it is from an email account that I do not use. The content of the message had your
name in it. Whoever wrote it, wrote it to you from me. It talks about some macros that I am
doing for Dr. Mitchell‘s class. It asks you to decrease the security level of the macros. I was
wondering if you received any email of that sort. I did not send any email of that kind, and
am guessing that it is somebody from class that is playing a prank using my name. I just
thought that you should know especially since it was addressed to you, and had my name on
it.
Sincerely,
Alice
The response came back from Dr. Carnahan. In addition to a copy of the original text sent by
Bob, the message added the following:
Fascinating! I received ―your‖ email and responded as follows:
===
Alice,
It is really inappropriate for me to comment on a project for another professor. It's not that I
don't want to help, but I would not expect you to ask another professor about work that you
were turning in for my class.
Dr. Carnahan
===.
188
Obviously, I did not open nor run your spreadsheet which might contain a virus of some
sort. I wonder if it is so infected. I might contact Technical Services just to see.
Alice, of course, had not seen Dr. Carnahan‘s initial response since it had been sent to Bob‘s
alias address. She responded to Dr. Carnahan as follows:
Yes, I‘m sure you would not open it especially since it spoke about decreasing security
levels. Probably Technical Services could trace where the email came from by looking at the
header. Although, I do not know what the possibilities are since the email was from a
Networks account.
Alice
P.S: I'm sure your email response was not something the sender of that email expected :)
Dr. Carnahan then sent the following message to Louise McMillan, the Head of University
Technical Services, copying it to Dr. Mitchell:
Louise,
I wonder if you could have Mike or Chris, your security personnel, look at this. Someone
sent me an email with someone else's name on it, asking me to check the attachment. I
suspect it contains a Trojan horse of some sort, possibly one to track keystrokes and report
passwords, etc.
The student says she did not send it. I did not open the attachment, which is an Excel
spreadsheet.
One of my colleagues, a computer security course teacher, has wanted to set up a honey pot
machine to lure hackers. Is this the opportunity? It would be interesting to track to see who
is doing it. I suspect this is not a practical joke, but rather a deliberate attempt to do damage
of some sort. I also wonder what the university policies say about this sort of behavior.
Mel
PS: If the attachments did not come through, let me know and I will resend the email with
the embedded attachment to you.
The Outcome
Dr. Mitchell read Dr. Carnahan‘s email with interest, right before he went to his information
security class at 11 a.m. He, too, wondered if the spreadsheet file might contain a virus or Trojan
horse. He wondered who might have sent the message and why. Dr. Carnahan had written
several books about Microsoft Office, so who would send him a spreadsheet with a macro virus
and expect him to be fooled by it? The situation did suggest to him that the sender had a certain
amount of technical sophistication, at least enough to integrate a macro into the spreadsheet.
Also, why pick Alice, unless the sender had some knowledge of the MIS program and its
students and faculty. He was willing to bet that someone in the networking course, security
course, or both had sent the email. He also wondered if the situation could be used as a teaching
189
opportunity in his security class.
When Alice walked into the security class, Dr. Mitchell said, ―I hear from Dr. Carnahan that you
had an interesting experience with an email this morning.‖ He then asked if she would be willing
to share the experience with the rest of the class, saying that it had some real security
implications. She agreed, and when class began, Mitchell briefly explained that Alice had had an
interesting experience with a bogus email that was sent to Dr. Carnahan from an account that had
her name on it, yet wasn‘t hers. He then asked Alice to relate the details of the incident to the
class. She did so, and the ensuing discussion included some speculation by other students as to
why the message was also sent to Bob. Bob suggested that whoever had sent the message was
probably a student in Dr. Carnahan‘s networking class as well as the security class and was
aware of the challenge that Carnahan had made to Bob in the earlier course. The message may
have been sent to Bob because someone wanted Bob to know that he had accomplished what Dr.
Carnahan had challenged Bob to do.
Dr. Mitchell then went on to discuss other more significant considerations in the incident. He
stated that Dr. Carnahan suspected that the email might contain a Trojan horse or macro virus
and had sent the message to University Technical Services to be examined by their personnel.
The person sending the email had obviously violated university policy, and if a student was
involved, they could possibly lose computer privileges or even be expelled. University
Technical Services and perhaps even the University Police would no doubt follow up on the
incident.
Emphasizing that he was not a lawyer, Dr. Mitchell wondered if state laws might also have been
violated. Furthermore, there were laws dealing with identity theft and virus transmission at state
and possibly federal levels that might come into play in the matter. In addition, Alice had
obviously suffered some stressful moments because someone may have engaged in identity theft
at her expense. Civil litigation might also be a consequence.
As he listened, Bob‘s palms began to sweat. He knew the macro did not contain a virus, but
neither the professors nor the Technical Services staff knew that the file was clean. And what
about Alice: was he really guilty of stealing her identity? Could she sue him? He wondered
again if he could be expelled three weeks before he was scheduled to graduate, as Dr. Mitchell
had suggested. The situation had gotten way out of hand. He had not given enough
consideration to the possible consequences of his actions for Alice or himself.
The Conclusion
After leaving the information security course classroom, Bob headed for Dr. Carnahan‘s office.
Getting on the elevator, he pushed the button of the floor for the department office. Alice had
also gotten on the elevator. Noticing what button he had pushed, she turned to him. ―Are you
going to see Dr. Carnahan?‖ she asked. Bob said, ―Yes. I want to talk to him about the email.‖
Alice replied, ―Me, too. I want to find out if he was able to determine where it came from.‖
Both students got off the elevator and walked to the department office. Dr. Carnahan was in the
office foyer talking to his secretary when they entered. Half-jokingly, he pointed at Bob and said,
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―Did you send that email?‖ ―Yeah, I sent it,‖ replied Bob, wearing a sheepish grin. ―You sent it?‖
Alice looked at him with an accusing expression on her face. ―You really did send it,‖ she said,
shaking her head at his audacity.
After this confession and some discussion, including apologies by Bob, the students left Dr.
Carnahan‘s office. The professor sat at his desk and reviewed the situation. Dr. Mitchell had
heard the exchange between the students and Dr. Carnahan. He stuck his head in the door and
said, ―What about that one, huh?‖
Mitchell then said. ―It occurred to me that Bob might be involved when I read your email,
especially after Alice said that Bob had gotten a copy as well. I spent a little time looking for the
university policies on the use of computing resources, and I noticed that they were not as easy to
find as I thought they would be. I wound up having to use the search function to find them. I
seriously doubt that most students are aware of them. Also, they don‘t have to sign an
acknowledgement that they have read the policy like most companies would require. Given that
the Student Handbook states that students are expected to be aware of policies that affect them, I
would think that they would be more readily accessible.‖
Carnahan stated,
There are certainly questions regarding ethical violations and the misuse of university
computing resources, not to mention the fact that Bob involved another student. I need to
reread the university policies on the use of computing resources to see what they say, and I
remember that I had to search to find the policies. There is also the question of the challenge
that I made last semester. Anyway, determining what to do about Bob will immediately
start through the university disciplinary review processes especially since he is scheduled to
graduate in a few weeks.
What about Bob? What should be done? Should he be expelled or subjected to other punishment?
Was his pretending to be Alice Jones really a case of identity theft? Should Bob‘s test of a key
logger program on a computer used by his friend and her roommates be considered in what
happens to him? And since Dr. Carnahan himself may have been the actual catalyst for Bob‘s
actions, how much responsibility should he assume? Should he be punished?
191
References
Mitnick, K. D., & Simon, W. L. (2002). The Art of Deception. Indianapolis: Wiley Publishing.
Appendix
Glossary of Security-Related Terms
Authentication – The act of proving that a person who accesses a computer system is who he
says he is. This is often done with a user ID and password (something only the person being
authenticated should know).
Authorization – Giving an individual permission to access a computer or computer network at
some level by providing means of authentication, such as a user ID and password. Such an
individual may be able use an account on the computer or network, but not access other accounts.
Other possible authorizations might be to assign administrative access to computer service
personnel while assigning user access to members of a department.
CC: Address Line – Indicates ―carbon copy‖, a commonly used feature in email that is used to
send copies of email to parties other than the primary addressee. Other address fields in an email
include the ―To‖, ―From‖, ―Subject‖, ―Date‖, and ―BB‖ (blind copy) fields. The latter field
serves the same purpose as CC, but is hidden from the main recipient(s) of the message.
Computer Virus – Software that is written to perform a particular action on a computer. Such
software may be harmless, but most viruses have devious purposes, such as collecting
information or disrupting computer/network operations. Harmful viruses are also known as
malware.
Email Alias – An email address that is different from a primary address, but links to the primary
address. Email sent to the alias address is forwarded to the primary address. An alias is often
used to filter unwanted email because email sent to the alias can be screened on the destination
address.
Firewall – Hardware or software that is used to filter header information for email and other
communications entering or being sent from a network or computer. Firewalls may be
programmed to examine the header information on each information packet and reject any
information coming from a particular Website. More sophisticated firewalls may be programmed
to examine the flow patterns of data packets and statistical analysis to screen out potentially
harmful data flows.
Honey Pot – A stand-alone computer that is programmed to simulate a machine or network used
for standard production functions but lacking in proper security precautions. The purpose of the
system is to attract the attention of hackers so that their tools, methods, and behaviors may be
studied.
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Identity Theft – A growing area of white collar crime in which an individual obtains and illicitly
uses the personal or confidential information of an individual to assume the identity of that
individual. The perpetrator can then obtain credit cards, bank accounts, and other financial tools
and use them to commit fraud or other crime.
Key logger – A piece of software that records all key stokes entered on a computer keyboard.
The key logger may generate a simple text log file or may periodically access a network to send
the log file to another computer. Hackers often use such files to collect passwords and other
confidential information.
Macro Security – Macros are short key board sequences that abbreviate a longer sequence of
key strokes, which may take several seconds to enter. Some macros that are embedded in
documents actually perform destructive actions not related to the document. Such macros
execute upon opening a document, for example. Hence, Excel and other software may be set to
prohibit the execution of macros.
Social Engineering – The use of generally non-technical deceptive means to obtain confidential
information. Charm and persuasion are significant social engineering tools. For example, a social
engineer might call an employee pretending to be a computer services employee. Such an
employee could be told that due to a computer malfunction, his computer ID and password
needed to be reset. The perpetrator might then offer to reset the ID and password for the
employee if the employee would provide the information. Far more sophisticated techniques may
be used as well.
Trojan Horse – A virus that appears to be a legitimate application or file. When the user opens
the application or file, the virus application is activated in the background, hidden from the user.
Virus Scanner – Hardware or software programmed to examine information entering or leaving
a network or computer to determine if known computer viruses are contained in the information.
If found, viruses may then be quarantined, removed, or otherwise rendered harmless. Many virus
scanning tools scan for known sequences of computer code to identify viruses, which make them
ineffective against new viruses.
193
THE PURPLE TUNNEL OF DOOM
Mary Anne Watson and Britt M. Shirley
This case was prepared and is intended to be used as a basis for class discussion. The views
represented here are those of the case author (s) and do not necessarily reflect the views of the
Society for Case Research. The views are based on professional judgment.
Out of the corner of his eye, Walter Thierry saw the man in the black vest with the large letters,
―SECRET SERVICE,‖ walk down the exit ramp into the freeway tunnel. Walter‘s heart
dropped as he saw the expression on the agent‘s face as he got a full view of the thousands of
people in the tunnel and read his lips as he uttered an expletive. As the agent turned and walked
back up the ramp, Walter turned to his wife. ―We‘re in trouble,‖ he told her. ―They don‘t even
know we‘re all down here!‖
Walter Thierry had looked forward to this day since the night of November 4, 2008. He could
hardly believe how far the candidate he had supported had come in the last thirteen months—
from a long shot for the nomination of the Democratic Party to the Presidency of the United
States. Senator Barack Obama of Illinois had been elected the forty-fourth President of the
United States, and today was the day he would be sworn into the office.
Like many others who had worked for President-elect Obama, Walter had received tickets for the
inauguration. He and his wife Angela had traveled from their home in Florida to be a part of this
historic event. Also, like many others who had volunteered for the Obama campaign, Walter‘s
tickets for the inauguration were for the ―purple‖ section, one of the closest sections to the
ceremony.
Walter never imagined that he and Angela would spend the morning of inauguration huddled in a
freeway tunnel underneath the National Mall with several thousand other supporters of
President-elect Obama. Having been warned that the subways would be crowded, Walter and
Angela left their hotel across the river from Georgetown at 5 a.m. and walked to the nearest
Metro station in the 15-degree weather. The trains were already full of people, but they had no
trouble getting onto one. By 5:30 a.m. they had made it to the gate area where they had been
instructed to go for entry into the purple section. At the gate area they found a long line had
already formed, and they were instructed by a police officer to follow the line into the tunnel
leading under the Mall area. As they walked further and further, they were astonished to find so
many people already in line; it seemed like they walked for blocks without coming to the end.
Between 5:30 a.m. and 10:30 a.m., Walter and Angela waited patiently in line, talking with other
people around them and watching more and more people entering the tunnel and going past them
to the end of the line. Occasionally, an emergency vehicle would come through the tunnel,
parting the crowds and deafening them with its loud sirens. At times the line would inch forward
slowly, enough to convince them that they were making progress. Then, less than an hour before
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the ceremony was to begin, they saw the Secret Service person walking down the empty exit
ramp that was closed to the public. At that moment, Walter realized that he and the others in the
tunnel probably ended up there by mistake. He also realized that when the others in the tunnel
came to the same conclusion, things could get ugly.
The Inauguration
The inauguration of Senator Barack Obama as President of the United States was an historic
event, because Senator Obama was the first African-American to be elected President of the
United States. Due to the significance of the occasion, well over one million people were
expected to attend the inauguration and the festivities that occurred before and after.
The inauguration was scheduled for Tuesday, January 20, 2009 in Washington, DC. The entire
weekend would be filled with parties celebrating the inauguration, and Monday, January 19 was
a national holiday celebrating the birthday of Dr. Martin Luther King, Jr. Because of Dr. King‘s
role in the struggle for civil rights for African-Americans, the fact that the holiday celebrating his
birthday coincided with the inauguration of the first African-American President of the United
States added even more significance to the event.
Due to the large crowd expected, the National Mall was cordoned off into sections. The sections
closest to the Capital Building where the inauguration would take place required tickets to enter.
Each section was designated by color, and tickets issued for the event indicated the color of the
section. Walter and Angela had stood in line for several hours the day before the inauguration to
pick up their tickets at their Congresswoman‘s office. The mood of the people in line for the
tickets was euphoric. In spite of the bitterly cold weather, everyone there was happy that they
were getting a much-sought-after ticket. Strangers smiled at each other and discussed the roles
they had played in getting Obama elected. This was the mood that permeated the entire city the
afternoon before the inauguration.
Ticket holders were given detailed instructions along with their tickets asking them to arrive
early and to leave backpacks or large bags at home in order to speed up the security scanning
process. They would be in some of the closest sections to the actual ceremony and thus security
would be tight. Tall chain-link fences had been set up to delineate sections and maps were
given to the ticket-holders telling them the gate locations for their sections.
Walter Thierry and the Obama Campaign
Walter Thierry, a corporate training and development consultant, had spent the last year
volunteering almost full time for the Obama campaign and led the largest grassroots organization
in the state of Florida, the ―Tampa Bay O-Train." His motivation to do so was rooted in his
history. As a college student in the late 1960s, he had briefly considered interrupting his
education to work for Robert Kennedy‘s campaign for the Democratic nomination for President
in 1968. He had always regretted not taking that path. When Obama gave his speech at the 2004
Democratic Convention, he was impressed with the young Illinois legislator and began reading
more about him. When Obama declared his candidacy for the Democratic nomination for the
Presidency on February 10, 2007, Walter was an enthusiastic supporter.
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After Senator Obama announced his candidacy for his party‘s nomination, he launched a
campaign that grew into a ―social movement‖ (Scherer, 2009). According to Michael Froman, a
friend who had attended law school at Harvard with Obama (Smith, 2007):
―He laid out his theory that, if he ran, he wanted to have a campaign with a relatively tight-knit
group of people. No matter how chaotic the campaign got that there‘d be—he used the words—
‗an island of tranquility‘.‖
Walter‘s role in the campaign had been unique as a volunteer in that he had been responsible for
all campaign activity for Obama in the Tampa – St. Petersburg – Clearwater, Florida
metropolitan area up until the actual Democratic Convention in August 2008. Normally
Presidential campaigns would have staff in a state for primary election campaigns long before
the actual nomination at the convention. However, Florida had scheduled its Presidential
primaries before New Hampshire, traditionally the first state to hold these primaries. Therefore,
all Democratic candidates had agreed that they would not campaign in Florida until after the
primaries were over and the party‘s nominee was known. It was not until just before the
convention that Obama was determined to have secured enough delegates to win the nomination.
Until then, grassroots volunteer groups such as the ―O-Train‖ were the only ones in the state of
Florida working for the candidates. They had to develop their own marketing materials, organize
and pay for their own events, and plan activities supporting Obama‘s campaign both in Florida as
well as other states. By the time the actual campaign staff rolled into Florida, Walter‘s ―O-Train‖
organization had over 2000 names of supporters in the area to hand over to the campaign.
Why did Walter devote so much time and effort to the campaign, especially in the beginning
when political experts gave his candidate little, if any, chance of winning his nomination? The
major reason was that he believed in the candidate, but another important reason was that
Senator Obama and his wife, Michelle, went out of their way to thank Walter and other
volunteers for their hard work when one of the Obamas attended an event.
Walter was impressed by Obama‘s always-calm demeanor. Some of the workers referred to
their candidate as ―No Drama Obama,‖ a nickname that carried over into blog entries and even
some news stories. When faced with adversity, whether it was a poorer than expected showing
in a state‘s primary, a negative attack from an opponent, or an unflattering news story, Obama‘s
public response was almost always measured and non-confrontational. Walter sensed this same
behavior in people closely connected with the campaign—there was rarely a sense of panic
among campaign workers, even when planning events, scheduling meetings, or coordinating
visits by Senator Obama left little margin for error.
The Purple Tunnel
Walter and Angela were representative of most of the people in the tunnel. Every person there
had a story to tell about their involvement in the campaign and their support of Obama‘s
candidacy. Everyone in the tunnel had gone to extraordinary measures to get their ―purple
tickets‖—sometimes standing in long lines for hours at their congressional offices, writing their
Senators, or doing whatever they needed to do to get their hands on tickets. Even people like
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Walter and Angela, who had spent countless hours volunteering for the campaign, had to work
hard to get tickets.
It was not a homogenous crowd—there were people of every age, color, and economic
background from every section of the country. For example, in front of Walter and Angela was a
young Caucasian couple from Idaho. They were graduate students at the Massachusetts Institute
of Technology where they were studying energy conservation. Behind them was a middle-aged
African-American couple from Connecticut. The city councilman and his wife had been
involved in the Obama campaign since before their state‘s Democratic Presidential Primary in
February 2008. What they all had in common was their admiration for the charismatic leader
they had just helped become the President and a keen sense that they were a part of the history
that was being made on this day. Because of this, the mood in the tunnel that morning was
celebratory, in spite of the fact that many of them had arrived before 5 a.m. and had spent several
hours waiting in the bitter sub-freezing temperatures. As the morning wore on, ―waves‖ would
travel up and down the line and people would sing inspirational songs to entertain themselves.
Many of those in the tunnel made videos of their experiences, which they would later place on
YouTube. The only security or police presence in the tunnel all morning was the occasional
emergency vehicle slowly coming through the crowds with sirens blaring—and the Secret
Service person arriving half an hour before the ceremony was to begin. As time neared for the
ceremony and people began to realize that they were not going to get anywhere near the security
entrance if they stayed in the tunnel, people began walking toward the outside.
Outside the Tunnel
Inside the tunnel, the line had been six to eight people wide for most of its length. When Walter
and Angela exited the tunnel, they realized that the line had dissolved into a mass of people who
were pressing their way toward the gates for the section reserved for purple ticket holders. There
were screening personnel beyond the gates, but there was no apparent security presence of any
kind to keep the crowd outside the gates in order.
Walter and Angela made their way through the crowd to get as close as they could to the locked
security gates, hoping to at least hear the ceremony, even if they could not enter. People were
packed into the small area at the closed security gates. Some people in the crowd started
chanting, ―Let us in!‖ and shoving towards the gates. Their chants were drowned out by others
chanting ―O-BA-MA!‖ and other chants from campaign rallies, such as ―Yes we can!‖ It seemed
as if there were a determined effort from many people in the crowd to keep tempers under
control and not create any incidents. As the newly sworn-in President began his Inaugural
Address, an amazing phenomenon occurred in the crowd. People started to gather in small
groups around individuals with various audio devices. When possible, these devices were played
for surrounding people to hear, but when that was not possible the individuals with the devices
listened to the speech and repeated the words to the people standing around them. Walter and
Angela listened to most of President Obama‘s speech through the voice of a beautiful young
black woman sharing the moment with those around her. It helped somewhat to ease the
crushing disappointment of not seeing and hearing the address firsthand.
The Aftermath
197
When Walter realized that he was going to miss the inauguration, he was bitterly disappointed.
Like many others who were trapped with him, he posted how let down he was on Facebook.
Walter and Angela returned to Florida and went on with their lives. They discovered that many
of the people they had spent inauguration day with had posted comments about their experiences
in the tunnel on Facebook as well. A few of them had even started Facebook groups for
―survivors‖ of the purple tunnel. The freeway tunnel under the National Mall was dubbed with a
new name, ―The Purple Tunnel of Doom!‖ Bloggers chronicled their experiences and those of
friends who had been in the tunnel. News outlets reported about the people who missed the
inauguration because they had ended up in the wrong place with the right tickets. A few of the
―survivors‖ even documented their experiences with videos that they had taken during the day
and placed them on YouTube.
A couple of days after his and Angela‘s experience in the tunnel, it struck Walter that everything
he read online mirrored his frustrations. Yet, it was relatively good-natured. Many of those
writing about their experiences wanted an explanation about how or why they missed the
swearing in ceremony. But Walter did not find anyone who wanted to take action against the
Washington, DC police department, the Secret Service, or anyone else charged with making sure
the inauguration happened without a hitch. Especially remarkable to him was that in such a
litigious society, the word ―lawsuit‖ never came up. Why would it? Who could they sue? What
grounds could they have? And even if they ―won,‖ the moment would never be recreated.
Walter read that over one million people attended the inauguration, and there were no arrests
(Thomas, Date, Ryan, & Cook, 2009). He had not even witnessed any minor scuffles or
confrontations, nor had he read reports of any. It hurt Walter that he had not been able to see
Senator Obama sworn in as President of the United States, and he imagined the others trapped in
the freeway tunnel with him were still experiencing the same disappointment. He remembered
that he had briefly felt the urge to vent his frustrations at one of the Washington, DC policemen
after he exited the tunnel. He never did, because he did not want to do anything or be a part of
anything that would reflect negatively upon the day and those who were there.
These were people of all ages, races, and ethnic and socio-economic backgrounds. Many of
them had worked hard, making personal sacrifices along the way, to help their candidate become
the President of the United States. They had traveled to the nation‘s capital from all parts of the
country to see him be inaugurated, because they believed in him and what he stood for.
Walter knew how frustrated and disappointed he was that he had missed the inauguration.
Everything he read suggested that others who had been in the purple tunnel felt the same way.
Why did this group of people who had worked so hard and traveled so far to celebrate their
victory remain calm and well behaved, especially when faced with the realization that they
would not get to witness the event?
198
References
Bennis, W., & Zelleke, A. (28 February 2008). Barack Obama and the case for charisma.
Christian Science Monitor, Retrieved from
http://www.csmonitor.com/Commentary/Opinion/2008/0228/p09s01-coop.html.
Scherer, M. (2009, January 15). Obama‘s permanent grass-roots campaign. Time, Retrieved
from http://www.time.com/time/politics/article/0,8599,1871767,00.html.
Smith, B. (2007, December 27). Obama runs tight campaign ship. Politico, Retrieved from
http://www.politico.com/news/stories/1207/7508.html.
Thomas, P., Date, J., Ryan, J., & Cook, T. (2009, January 20). ―Zero‖ arrests, secured Obama
inauguration rolls on. Retrieved from
http://abcnews.go.com/TheLaw/Inauguration/story?id=6683899&page=1.
199
THE SALVATION ARMY ALASKA DIVISION: THE GREAT COMMISSION
Josie Wilson and Carlos J. Alsua
This case was prepared and is intended to be used as a basis for class discussion. The views
represented here are those of the case author (s) and do not necessarily reflect the views of the
Society for Case Research. The views are based on professional judgment.
Major Greg wondered what would happen if he broke the rules. Divisional Commanders for The
Salvation Army were expected to uphold all the policies, procedures, and informal norms of the
organization. However, the upcoming ―officer moves‖ decision meant breaking at least one of
the generally accepted rules. As the Alaska Divisional Commander for The Salvation Army,
Major Greg Smith was responsible for deciding which officers should stay in the Alaska
Division and which officers should be transferred into another geographic division (comparable
to a promotion or demotion depending on the responsibility level of the new position).
Similar to military organizations, officers in The Salvation Army get transferred in and out of
geographic areas based upon their job effectiveness, length of service, and organizational staffing
needs. Major Greg was concerned because all of the officers currently serving at the
headquarters of the Alaska Division were in one or more of the ―ideal to transfer‖ categories.
This meant that Major Greg would either break rules and keep certain officers or transfer out his
entire team from Alaska to different geographic divisions. Major Greg was troubled about the
massive amount of organizational change that would take place if he did move everyone in the
division. Making the decision even more difficult was the fact that Major Greg had only been the
Alaska Divisional Commander for six months. This gave him little time to assess the strategic
visions and capabilities of his division. Plus, he knew that his final recommendation would be
important to the overall success or failure of The Salvation Army programs and services in
Alaska.
The Salvation Army is considered a longstanding, multinational, faith-based, non-profit
organization with special traditions and a distinctive culture. In the unique Salvation Army
tradition of officer placement called ―appointments‖ or ―moves,‖ several unwritten rules have
been generally accepted as the norm for the decision making process. These rules include: officer
effectiveness, staffing needs of the organization, standard appointment length of service, and
conflicts (such as family reporting relationships). Major Greg Smith was expected to adhere to
all of these unwritten norms when deciding which officers to transfer out of his division. Major
Greg did not want to break any of the unwritten norms but he wanted what was best for The
Salvation Army in Alaska.
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Background on informal rules:
The Salvation Army appointment and commissioning process
The commissioning process has been an integral part of the organization‘s culture since its
inception in the 19th century. William Booth, founder of The Salvation Army, believed in the
biblical idea that sending his ―soldiers‖ into different parts of the world would further The
Salvation Army movement to ―save souls, grow saints, and serve suffering humanity‖ (Gowans,
n.d.). The idea of commissioning is not a new one. The term ―commissioning‖ comes from
familiar biblical reference in Matthew 28 entitled, ―The Great Commission‖ (―The Great
Commission – The Great Adventure,‖ n.d., para.1).
Over the years, The Salvation Army has institutionalized the informal rules and cultural norms of
the appointment and decision making process.
1) There have been no formal guidelines on the length of stay for an officer, but the average
appointment has typically lasted three to five years long depending on the officer‘s
effectiveness and the staffing needs of the organization. Rarely has an officer been appointed
to a new location or responsibility after only one year of service because the learning curve
for most positions is considered twelve months or longer. An officer in an appointment over
five years is generally thought to be ready for a new opportunity or geographic location;
especially if the officer has been effective in the previous role.
2) The Salvation Army has discouraged direct reporting relationships of immediate family
members. However, due to nature of the work, the close family culture, and the fact that
many families served in The Salvation Army for generations, there was a high probability
that officers would be somehow related to each other.
3) Utilizing the best fit of officers and staff possible has also been a high priority for The
Salvation Army. Therefore, any officer that has struggled in a role or appointment after
numerous attempts of coaching and mentoring has been recommended for a more appropriate
appointment. Just as a family member can never be fired from his or her family, Salvation
Army officers are rarely fired except in extreme or special circumstances.
Major Greg knew all of these informal rules when trying to decide if he should break any
of them. As a long time officer, he had extensive experience with this process and knew
how it typically worked. However, he had never experienced a situation when all of his
team would have to be transferred to a different Salvation Army division. Major Greg
found reassurance in knowing that all of his officers had high organizational commitment
and would accept whichever decision he made. He, himself, had faith in the organization
and in the appointment decision process but seriously doubted he should move everyone.
It seemed like too much change for the overall good of the organization.
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Human Resources
Personnel
The organization personnel consist of soldiers, officers, employees and volunteers.
Soldiers are described as persons who consider The Salvation Army their church home and have
subscribed to the religious doctrines. Soldiers who have served in the church for more than six
months may apply to the College for Officers' Training and, if accepted, enroll as cadets. Cadets
are given lengthy instruction in a variety of areas including: clergy, disaster preparedness,
financial management, human resources, risk management, property upkeep, fund-raising, as
well as human and social services. Upon graduation from college, cadets become fully ordained
ministers and ―commissioned‖ officers.
The first rank of an officer called ―Lieutenant,‖ is earned after successful graduation from
college. Lieutenants become ―Captains‖ after five years of service. After an additional fifteen
years of service, Captains are promoted to the rank of ―Major‖ and remain a Major until
retirement unless they are given a special rank. The ranks of Lieutenant Colonel, Colonel,
Commissioner, Commander, and General are given only to officers who have achieved a specific
level of responsibility regardless of length of service.
Salvation Army officers have been cross trained in a variety of functional areas so they can be
ready to serve wherever the organization needs them. Officers have served as ministers,
administrators, teachers, social workers, counselors, youth leaders, and musicians. These men
and women have dedicated their lives, skills, and services completely to the work of The
Salvation Army.
Unlike other organizations, officers in The Salvation Army have not received merit
compensation. Salaries have been standardized by household size and cost of living. The
organization has provided officers' living quarters, furnishings, and official transportation as part
of the employment package to help offset the living costs for officers. In early 2000,
compensation ranged from $5,000 to $15,000 annually per person depending on family size,
length of service, and cost of living. Indeed:
“On average, officers earn less than the minimum wage, even after the imputed value of
housing, furnishings and transportation are added to their "allowance" of $7,500 a
year”(Lee, 1998).
Promotion has been based on length of service, character, efficiency, capacity for increased
responsibility, and devotion to duty. New graduates from the College for Officers' Training are
given minimal amounts of responsibility in a position in order to gain experience. Typically,
these new officers are appointed to a corps community center in a small city with close
mentorship from senior officers. As promotion occurs, officers move to larger corps community
centers and eventually divisional headquarters or territorial headquarters. The Salvation Army
has rewarded productive employees with additional responsibility and upward mobility.
Unsuccessful employees have been further trained or relocated to a role more suitable for their
abilities. Only in extreme or rare circumstances are Salvation Officers terminated. Very few
officers have defected or considered leaving the organization. Sixty-five is the retirement age
(The Salvation Army, n.d.).
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In 2006, officers represented a significant portion of the functional responsibilities of the
organization. Due to the nature of the mission, personal religious beliefs, and close family
culture, officers tend to spend their entire lives serving in The Salvation Army. They are noted
for their high organizational commitment and belief in the mission above all else.
Non-officer employees are also considered a significant resource in The Salvation Army. There
were over 60,000 non-officer employees of The Salvation Army in the United States as of 2006
(The General of The Salvation Army, 2006). Employees perform clerical work, social service
programs, youth programs, boys and girls clubs, and in specialized fields such as accounting,
public relations, development, addiction counseling, alcohol treatment, and property
management. Employees receive regular compensation and are not part of the ranking system or
appointment process.
Volunteers from all walks of life have supported the organization in nearly all of its activities.
Their time and commitment have been essential to its success. In 2006, there were approximately
3.5 million volunteers registered with The Salvation Army in the United States (The General of
The Salvation Army, 2006).
Major Greg considered all of these different human resources when reviewing his officer move
decision. He paid attention to whether they were Majors or Captains and how much experience
and knowledge they contributed to the division. He noted how many volunteers or non-officer
employees were being supervised by each of the officers. Major Greg wanted to minimize the
negative impacts of his decision as much as possible. With any decision he would make, relying
heavily upon the training and mentoring procedures in place as well as the non-officer employees,
advisory board members, and volunteers would be important.
Training/Mentoring
The extensive two year training during the College for Officers' Training prepares an officer for
a majority of the responsibilities that he or she may need in at any given appointment.
Additionally, the unique talents and abilities of each officer were taken into consideration and
often determined the type of work an officer was appointed to do. Then, as an officer progresses
in responsibility and gains experience, he or she will utilize the knowledge learned in previous
appointments for each future position, location, or responsibility.
Officers have also been given a tool for each new position by the preceding officer called a
―brief.‖ The brief is described as a comprehensive notebook of sample documents, details, and
narratives all relating to the position. Although there is no formal training or time overlap
between the predecessor and incoming officer, this brief provides the stop gap of information
and is considered a key resource to the transition and acclimation of an incoming officer.
To aid in the transition between officers, non-officer employees, advisory council members,
advisory board members, and key volunteers also provide a significant amount of support and
historical experience for entrant officers. In many cases, incoming officers will meet with
respective advisory board members and employees to gain insight into any job specifics or
questions that are not easily answered in the brief. However, a majority of the training for
officers in each of their positions is considered ―on the job‖ and is gained as the officer continues
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in their respective role. A common saying shared by officers of The Salvation Army is: God
doesn‘t call the qualified, He qualifies the called. This philosophy has helped to encourage
officers in new appointments or who may have little experience.
Although there has been no formal training for officer entrants into their new positions, the
Divisional Commander oversees the overall success of the division which includes training
incoming officers into any respective position. If Major Greg transferred his entire officer team
from the Alaska Divisional Headquarters, he would then be responsible to train all of the
incoming officers.
Mentoring has been encouraged throughout The Salvation Army in all officer ranks no matter the
appointment location. Since its inception, The Salvation Army has relied upon officer
mentorship to provide a safety net of support to less experienced officers and considers it critical
for success in every appointment. Senior officers at each respective divisional headquarters or
territorial headquarters have made themselves easily accessible to provide guidance and support
for transitioning or less experienced officers.
Major Greg is known as a novice senior officer because he has been the Divisional Commander
for only six months. He has had plenty of support from the leaders at the territorial level and
could have asked the Commissioner, his supervisor, for advice and training support. However, in
this dilemma of deciding who should stay in Alaska and who should be transferred to a different
Salvation Army division, Major Greg wanted to be autonomous and make this decision without
help. Major Greg felt that these decisions have been made since the early beginnings of The
Salvation Army and could be made without mentoring from the Commissioner. Besides, he
wanted to show the territorial leaders that he was capable of making this difficult decision on his
own.
The Salvation Army:
An overview of the organization
Early Beginnings
The Salvation Army was founded in 1865 by William Booth who began a mission in the
poverty-stricken east end of London. In 1878, the name was changed from the ―Christian
Mission‖ to ―The Salvation Army‖ symbolizing its non-governmental, quasi-military structure
and religious mission. The idea of a religious army in the colonial-militaristic mindset of the 19th
century captured the public imagination and the movement spread throughout the British Isles
and eventually the entire world.
Booth‘s movement recognized the interdependence of material, emotional, and spiritual needs. In
addition to preaching, Booth became involved in providing food and shelter for the hungry and
homeless, as well as alcohol rehabilitation for the addicted. In each community, William Booth‘s
famous quote guides the principles of service delivery:
“While women weep, as they do now, I'll fight; while little children go hungry, as they do
now, I'll fight; while men go to prison, in and out, in and out, as they do now, I'll fight;
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while there is a drunkard left, while there is a poor lost girl upon the streets, while there
remains one dark soul without the light of God, I'll fight-I'll fight to the very end!” (Smith,
1949).
Worldwide Presence
The Salvation Army worldwide has worked 365 days a year, in over 112 countries, and in over
sixty languages. In 2006, it operated 1,312 corps community centers assisting 34.5 million
individuals throughout the year in the United States alone (The General of The Salvation Army,
2006). The Salvation Army is considered one of the most recognized and respected international,
faith-based, non-profit organizations. The Salvation Army movement is motivated by the love of
God with a mission to meet human needs without discrimination. The mission statement reads:
“The Salvation Army, an international movement, is an evangelical part of the universal
Christian Church. Its message is based on the Bible. Its ministry is motivated by the love
of God. Its mission is to preach the gospel of Jesus Christ and to meet human needs in
His name without discrimination” (―About Us,‖ n.d.).
Organizational Structure
Even during William Booth‘s era, The Salvation Army has imitated a quasi-military
organizational structure by incorporating ranks and uniforms although it has never been an
official branch of any government. It is considered an international organization which utilizes a
considerable amount of national, territorial, and local autonomy. While the chain of command
extends from the General through the hierarchy of staff into overseas departments, actual
administration and governance has been empowered to the territories within each country, to the
divisions within each territory, and then to the individual community units called corps
community centers. This structure has permitted local leadership in order to respond to
conditions and needs in each community while still maintaining unity on overall policies.
The Salvation Army in the United States has been divided into four territories: Eastern, Central,
Southern and Western. In the western territory ten divisions have been established: Northwest,
Cascade, Del Oro, Golden State, Sothern California, Sierra Del Mar, Intermountain, Southwest,
Hawaii/Pacific Islands, and Alaska.
The organizational structure of The Salvation Army is not defined as entirely hierarchical
because local leaders have been given a considerable amount of autonomy within each individual
unit called a corps community center and provide programs that address the specific needs of the
specific community. The customized programming for the corps community center and overall
administrative support for overall governing policies have allowed the organization to be highly
regarded in each community in which they are located. Peter Drucker calls The Salvation Army,
“By far the most effective organization in the U.S. No one even comes close to it in
respect to clarity of mission, ability to innovate, measurable results, dedication and
putting money to maximum use”(Drucker, 2001).
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Religious in nature; The Salvation Army organizational culture is described like a family. In the
late 1800s William Booth had his entire family serving in the international movement and
mission. Furthermore, his daughter succeeded him as General upon his passing. Salvation Army
officers and personnel have continued to treat each other like family mimicking the heritage that
William Booth left behind.
The Salvation Army Alaska Division
Financial Profile
In 2007, The Salvation Army Alaska Division had a twenty five million dollar budget with a
strong financial position. Federal and state grants represented 35% of the total income and
budget.
Major Greg’s Officer Team
Major Greg Smith, the Divisional Commander for The Salvation Army in Alaska, was
responsible for all The Salvation Army activity within the division which spans the entire state of
Alaska including the Aleutian chain. He empowered officers in each community to conduct
business and provide pastoral care. In 2007, there were sixteen Salvation Army corps community
centers and one outpost geographically dispersed throughout Alaska. In addition to oversight of
each Corps Officer, the Divisional Commander directed all divisional staff and employees who
supported the programs and services in the major metropolitan area of Anchorage.
The Salvation Army Alaska Division Headquarters (DHQ) located in Anchorage, Alaska was
comprised of approximately 25 officers and non-officer employees. The figure below shows the
organizational chart for The Salvation Army Alaska Division in 2007.
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The Salvation Army – Alaska Division Organizational Chart
Divisional Commander
Major Greg Smith
Alaska Corps
Community Centers
Anchorage, Korean, Cordova,
Fairbanks, Gateway, Haines,
Homer, Hoonah, Juneau,
Kake, Klawock, Kenai, Kodiak,
Mat-Su Valley, Petersburg,
Sitka, Wrangell
Administrative
Assistant
Other Departments/Personnel
to oversee:
Community Relations Director
Public Relations Director
Donor Management Director
Major Greg
Smith
Divisional Business
Secretary (Director)
Major Don Bradley
Major Greg Smith
Other Departments/Personnel to
oversee:
Emergency Disasters Coordinator
Human Resources Director
Finance Director
Information Technology Director
Divisional Guard &
Sunbeam Director
Envoy Yvonne Bell
Divisional Youth &
Candidates Secretary
(Director)
Captain Jim Benson
Divisional Director of
Women’s Ministries
Major Terry Smith
Administrative
Assistant
Other
Department/
Personnel
to oversee:
Camp Director
Major Greg
Smith
Divisional Social
Services Secretary
(Director)
Major Julie O’Conner
Women’s Ministries
Major Rebecca
Bradley
Statistician &
Community Cares
Ministries
Captain Constance
Benson
Other
Departments/Personnel
to oversee:
Adult Rehabilitation Director
Booth Director
Cares for Kids Director
Clitheroe Center Director
Eagle Crest Director
McKinnell House Director
Older Alaskans Program
Director
Serendipity Director
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Unique Challenges for The Salvation Army in the State of Alaska
Major Greg had other unique challenges to consider besides the informal norms of The Salvation
Army when making his officer transfer decision. Here are a few of the unique challenges Major
Greg also has to consider for his officer moves:
1) Geographic connectivity - The highway system in Alaska did not connect every city.
Juneau, Ketchikan and other Southeast communities have been accessible only by air and
water. Vast areas of interior and northern Alaska are also only reached by air. The high
cost of air travel and supplies shipped by air has had dramatic impacts on the cost of
living (―Finding Work in Alaska,‖ n.d.).
2) Cost of living - Alaska has ranked 20th among the states in per capita income. One cost
of living study ranked Kodiak, Juneau, Fairbanks and Anchorage among the survey's ten
most expensive cities in which to live. Unemployment in Alaska has been consistently
above the national average. (―Finding Work in Alaska,‖ n.d.).
3) Limited industries for employment – Alaska has predominantly three industries for
employment: petroleum, mining, and government. Due to falling production, oil and gas
industry employers have been laying off workers. Employment in state and local
government is in a downward trend. Mining companies have been curtailing operations
and the fishing industry has experienced dramatic declines in harvests in some species
and areas. ―It's no longer the wide open market of pipeline days‖ (―Finding Work in
Alaska,‖ n.d.).
4) Funding limitations – Alaska‘s per-capita gross state product for 2006 was $43,748 or 5th
in the nation primarily because of the petroleum industry. The oil and gas industry has
dominated the Alaskan economy with more than 80% of the state's revenues derived from
petroleum extraction. Federal subsidies have been an important part of the state‘s
economy. For many non-profits like The Salvation Army, the petroleum industry has
provided a significant source of funding.
5) Non-profit saturation – With approximately 6,000 registered non-profit organizations in
Alaska: more per capita than any other state. Alaska is considered highly saturated with
non-profit organizations (McMillian, 2009).
6) Disorders and effects of long winter months in Alaska - Several effects and disorders
have been caused by the lack of sunlight during the fall and winter months in Alaska
including: lack of vitamin D, cabin fever, and Seasonal Affective Disorder (SAD).
Approximately 20% of the population in Alaska is estimated to suffer from Seasonal
Affective Disorder (Stapleton, n.d.).
7) Culture in villages - With no running water, plumbing, sewage or waste management
facilities, health and disease control are a serious concern in many Alaska Native Villages
(Hopkins, 2010).
8) Language barriers - As of November of 2008, there were 94 different languages spoken
by the students in the Anchorage School District who were receiving services through the
English Language Learners Program (―Languages Our Students Speak,‖ n.d.).
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Officer Indecision
Major Greg looked at his organizational chart and noted his seven officers at The Salvation
Army Alaska Divisional Headquarters. His wife was one of the seven officers and was not part
of his decision. That left six officers to evaluate and recommend for a transfer from Alaska to a
different geographic division in the western territory: Majors Don and Rebecca Bradley,
Captains Constance and Jim Benson, Major Julie O‘Connor, and Envoy Yvonne Bell.
Unfortunately, all of them were ideal candidates to be ―moved‖ because of the informal norms of
the appointment process and a few of the unique challenges of working in Alaska.
Majors Don and Rebecca Bradley
Majors Don and Rebecca Bradley have been officers for over twenty years. They have served all
over the Western Territory. Their favorite appointments have been in California where most of
their family resides. Major Rebecca‘s family has been officers in The Salvation Army for at least
five generations. They were appointed to Alaska because of their experience and skills for
running rehabilitation centers. Both Majors Don and Rebecca Bradley have a heart for drug and
alcohol rehabilitation. Additionally, they have the business knowledge to effectively oversee the
thrift store component of the rehabilitation program.
Major Don Bradley is considered a favorite officer among the employees of the Alaska Division
because of his gentle and kind demeanor. He tended to make each employee feel valued and
appreciated. He door stayed open and was available anytime someone at DHQ needed a listing
ear. Yet, it appeared as if Major Don might be suffering from seasonal affective disorder. The
lack of sunlight during the winter in Alaska made it difficult for Major Don to keep his energy
level up enough to work the extra hours needed in his position.
Major Don Bradley‘s title was the Secretary for Business and was responsible for the functional
areas of The Salvation Army in Alaska including: emergency disaster services, human resources,
finance, and information technology. He was also the second in command next to the Divisional
Commander. His main priority was to help the social services director with the Adult
Rehabilitation Program. Major Don was appointed to this position approximately six months ago
from California.
Major Rebecca Bradley worked in the Women‘s Ministries Department and reported to Major
Terry Smith. She assisted with Women‘s Auxiliary and other Women‘s Ministry Programs.
Already, it was apparent that the Alaska climate did not agree with Major Rebecca. She often
wore ―long underwear‖ under her nylon stockings. More than the cold, the lack of geographic
connectivity made seeing her family difficult and Major Rebecca missed her two daughters very
much. Her eldest daughter was soon to be married. All of Major Rebecca‘s family lived in the
―lower 48‖ which was too far away according to her. Nevertheless, Major Rebecca had already
made a significant impact in the division with her creative ideas and ―can do‖ attitude.
Major Greg felt it would be difficult to transfer Majors Don and Rebecca out of the division at
this time because they had been appointed into the Alaska Division just a few months ago. If
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Major Greg transferred them now, with less than a year of service, it might appear as if he was
trying to get rid of them.
Major Julie O’Conner
Major Julie O‘Conner, a single woman in her late sixties, has lived in Alaska most of her life. A
pioneer to the core, Major Julie did not know the meaning of the word, ―no.‖ She had a rough
and tough personality often creating ―ruffled feathers‖ throughout the DHQ departments.
However, she was the hardest working person in the division. From early morning until late into
the evening, Major Julie made sure that the needs of the people served by The Salvation Army
were always top priority.
Major Julie has been in her role as Secretary for Social Services for over six years and
was considered ready for additional responsibility. She was responsible for bringing in
thirty-five to sixty percent of the total funding in the division with her talented grant
writing abilities. With the numerous competing non profits, Major Julie was a key officer
for the Alaska Division‘s financial strength. Even more important than that, she was the
only divisional officer with a Masters Degree in Social Work.
Major Greg knew that Major Julie was a top candidate for a new appointment because of her
current length of stay, effectiveness in the role, and readiness for growth. However, replacing
Major Julie would be difficult and could significantly impact the division‘s finances and
effectiveness. Nevertheless, Major Greg believed she needed the promotion and challenge of a
new appointment. Yet he wondered how the division would prosper if he transferred Major Julie
out of Alaska.
Captains Jim and Constance Benson
Captains Jim and Constance Benson have been officers for more than ten years although only in
their late twenties. Their family consisted of three young children.
Captains Jim and Constance were transferred to Alaska from Denver four years ago. Since their
time in Alaska, The Bensons have brought a peaceful and positive working environment.
Captain Jim, Director for Youth Programs and Captain Constance, Community Cares Secretary,
have both been doing a wonderful job in their roles this past four years. However, they were top
priorities for a transfer because Captain Jim Benson is Major Greg‘s brother-in-law (the brother
of his wife, Major Terry). Major Greg knew the importance of mitigating direct reporting of
immediate family members and this was definitely a direct reporting family relationship.
However, Major Greg did not want to recommend either Captain Constance Benson or Captain
Jim for a transfer. First of all, Captain Constance was the only officer in the division who knew
the internal statistics program. Secondly, Captain Jim had been using his skills and experience
with the youth services and camp programs in an exceptional way. And above all, Captain Jim
and Constance had a special connection with the people being served by The Salvation Army.
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―Encouraging‖ and ―supportive‖ were just a few of the words used to describe The Bensons by
the clients of The Salvation Army and residents in Alaska.
Envoy Yvonne Bell
Envoy Yvonne Bell had the special rank of Envoy. Officers with the rank of Envoy were not
transferred out of a division because they are married to someone who is not a Salvation Army
officer. Therefore, officers with the rank of Envoy were appointed to one division and continued
to serve only there in various roles or positions. Envoy Yvonne has been in her appointment as
the Divisional Guard and Sunbeam Director for three years and was under the direction of
Captain Jim. Major Greg noted that she seems very happy and content in her current position
overseeing youth programs and was not requesting upward mobility. However, the positive
results in her current position indicated she was also ready to be given additional responsibility.
Conclusion
Major Greg believed he was going to have to break the informal rules of appointments or risk
potential negative consequences from significant organizational change. What would the
Commissioner say if he broke any of the norms? Would it be nepotism if he kept Captain Jim?
Was Captain Jim more of a priority to move than Majors Don and Rebecca? Major Don‘s quality
of life was being hindered in Alaska, not to mention that they missed their daughters very much.
Would the rest of the organization (and their peers) understand about transferring them so soon?
Would it embarrass them? Major Greg wondered if he should keep both Majors Don and
Rebecca Bradley and Captains Jim and Constance Benson and just move Major Julie. She was
already overdue for a promotion. Plus, all of the divisional headquarters employees would
appreciate the reprieve. Major Greg did not think he could maintain the division‘s financial
strength without Major Julie on board considering the high per capita of nonprofits in the state.
There were so many factors to consider with his decision.
Major Greg thought about moving everyone. He knew it would be a radical change and might
cause substantial negative consequences within the divisional headquarters. Yes, the people of
Alaska might suffer for a time but maybe it would work itself out for the best. However, that
decision seemed like too much organizational change all at once. Could he really train and
mentor the divisional headquarters officers himself if they were all new? The option of giving
the organization a fresh start and moving everyone sounded appealing but daunting too.
Major Greg even considered a surprising, nontraditional approach of transferring all of the
officers at different times of the year instead of the standard yearly timeframe. How out of the
ordinary he could go with his decision making without being labeled a troublemaker? Ultimately,
the family reporting relationship really plagued him. But he sincerely cared about Majors Don
and Rebecca Bradley and wondered if they could withstand another Alaska winter.
Major Greg wanted to make the best decision for The Salvation Army Alaska Division, but he
vacillated on who should stay and who should be transferred to a different Salvation Army
division in the western territory. For some of the officers it might be viewed as a promotion and
211
for others, a demotion. It all depended on the officer‘s point of view. The only comfort Major
Greg had was in knowing that every officer was truly committed to the mission of The Salvation
Army. As officers, they were always ready to preach, pray, and pass away no matter where they
served or were transferred.
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References
About Us. (n.d.). Retrieved May 22, 2010, from The Salvation Army USA:
http://www.salvationarmyusa.org/usn/www_usn_2.nsf/vw-dynamicarrays/EA1C8C6E5D02E0C385257435004EF5AE?openDocument&charset=utf-8
Finding Work in Alaska. (n.d.). Retrieved May 27, 2010, from State of Alaska, Department of
Labor and Workforce Development: http://labor.alaska.gov/esd_alaska_jobs/ak_over.htm
Drucker, P. (2001). In R. Watson, & J. B. Brown, The Most Effective Organization in the U.S.:
Leadership Secrets of the Salvation Army. Cahners Business Information, Inc.
Gariepy, H. (1998). The Great Land. In H. Gariepy, A Century of Service in Alaska: The Story &
Saga of The Salvation Army in 'The Last Frontier' (p. 7). Rancho Palos Verdes: Wm. B.
Eerdmans Publishing Co.
Gariepy, H. (1998). The Klondike Expedition. In H. Gariepy, A Century of Service In Alaska:
The Story & Saga of The Salvation Army in 'The Last Frontier' (pp. 16-17). Rancho Palos
Verdes: Wm. B. Eerdmans Publishing Co.
Gowans, J. (n.d.). History. Retrieved May 22, 2010, from Heilsarmee Museu Basel:
http://www.heilsarmeemuseum-basel.ch/E/history.php
Hopkins, K. (2010). Village Diseases Linked to Lack of Plumbing. Retrieved May 27, 2010, from
Anchorage Daily News: http://registration.adn.com/2010/04/11/1221851/diseases-linked-tovillage-lack.html
Languages Our Student Speak. (n.d.). Retrieved May 28, 2010, from Anchorage School District:
http://www.asdk12.org/aboutasd/languages.asp
Lee, S. (1998). Can you top this for cost-efficient management? Retrieved May 22, 2010, from
Forbes.com: http://www.forbes.com/forbes/1998/0420/6108206a_2.html
McMillian, D. (2009). Alaska's Nonprofit Sector - A Major Participant in the State's Economy.
Retrieved May 23, 2010, from The Foraker Group:
http://www.forakergroup.org/index.cfm?section=Resources&page=President'sLetter&viewpost=2&ContentId=676
History. (n.d.). Retrieved May 22, 2010, from Salvation Army Museum Basel:
http://www.heilsarmeemuseum-basel.ch/E/history.php
Organizational structure. (2010). Retrieved September 5, 2010, from Wikipedia, the free
encyclopedia: http://en.wikipedia.org/wiki/Organizational_structure#Bureaucratic_structures
Quick Facts Data, Alaska. (2009). Retrieved May 22, 2010, from US Census Bureau:
http://quickfacts.census.gov/qfd/states/02000.html
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Smith, J. E. (1949). BOOTH THE BELOVED. In J. E. Smith, BOOTH THE BELOVED (pp.
123-124). Oxford University Press.
Stapleton, R. (n.d.). Alaska Mental Health Association: Cabin Fever. Retrieved May 27, 2010,
from MHAA Home Page: http://www.alaska.net/~mhaa/
The General of The Salvation Army. (2006). The Salvation Army Year Book 2006. Great Britain:
Page Bros (Norwich).
The Great Commission - The Great Adventure. (n.d.). Retrieved May 22, 2010, from All About
Jesus Christ.org: http://www.allaboutjesuschrist.org/the-great-commission.htm
The Salvation Army. (n.d.). The Salvation Army: Salvation Army Officer. Retrieved May 27,
2010, from The Salvation Army USA:
http://www.salvationarmyusa.org/usn/www_usn_2.nsf/vw-dynamicarrays/74BBD587C6A63FF585257435005C7EF0?openDocument&charset=utf-8
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A SMALL BUSINESS OWNER’S QUANDARY: KEY
EMPLOYEES AND MANAGEMENT CONTROL
Mark A. Johnson, Idaho State University
Dennis W. Krumwiede, Idaho State University
SYNOPSIS
Jay, the owner and general manager of a small business had to spend another winter in Florida, far away
from his business in the Mountain West due to severe back problems. The medications he took to ease the
pain impacted his ability to concentrate and made him irritable. As a result, he did not expect to be
actively involved with the operations of his business in the future. His long-time senior technician and
operations manager, Mike had been running the business with the help of the office manager, Tina, but
she left the firm. Jay now realized how indispensable she had been and that Mike did not care for the
business side of operations, was dissatisfied with his compensation, seemed to be considering other
employment, acted resentful of the owner, and did not seem to care about the business as he had in the
past. The owner was very concerned about these changes and challenges and was prepared to make some
decisions and changes at his business.
LEARNING OBJECTIVES
1. Students learn to recognize the impact that absentee ownership can cause especially when the owner
had worked in and managed the small business using a command-and-control management style.
2. Students learn to recognize that employees who are effective workers may not have or may not be
perceived as having the interest and/or skills to be effective business managers.
3. Students learn to analyze why a fairly compensated worker would feel and act as if he had been used
by the owner and lose interest in his employer‘s business.
4. Students learn to identify and recommend alternative forms of compensation, rewards, and incentives
that might motivate a key employee.
5. Students learn to identify and apply sources of power.
6. Students learn to identify and apply relevant antecedents of conflict.
7. Students learn to analyze the situation, to identify options, and to propose possible solutions the
owner could implement to rectify the problems he faced.
APPLICATION
This case can be used in an upper level Organizational Behavior (OB) or Principles of Management
course. In these courses, it should be used after coverage of topics including motivation and
rewards/incentives, conflict, power, and leadership. Some instructors may find the case useful in a
Compensation or Small Business Management course. The questions for this case were developed for an
OB or Principles course but a few of them could also be used in a Compensation or Small Business
Management course.
KEY WORDS
Small Business Management, Key Employees, Management Control, Sources of Power, Motivation and
Incentives, Management/Leadership Style, Organizational Culture, and Succession Planning.
CONTACT
Mark A. Johnson, College of Business, Idaho State University, Pocatello ID, 83209-8020, 208-282-2155,
[email protected].
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A STING IN THE COLA WARS: A CASE STUDY IN ETHICS AND INDUSTRIAL ESPIONAGE
Janell M. Kurtz, St. Cloud State University
Drue K. Schuler, St. Cloud State University
Bradley J. Sleeper, St. Cloud State University
SYNOPSIS
The senior vice president of Insights and Innovation for PepsiCo, Inc. must have been stunned by the
letter offering to sell the company highly confidential trade secret information on its bitter rival CocaCola. The detailed marketing plans and description of a new drink under development claimed to be
available would have given PepsiCo a tremendous marketing advantage in the multi-billion dollar
competition between the two beverage heavyweights.
This case challenges students to examine the legalities of him agreeing to acquire the information under
state laws punishing misappropriation of trade secrets. More broadly, in asking students to critically think
through the ethics of accepting the offer or choosing other options, it gives instructors a context for
vigorous debate on the proposition assumed by many students that in business competition, winning is the
only ethic. The case also asks students to examine the practical management issues facing Coca-Cola to
prevent such a potentially crippling loss from happening again.
LEARNING OBJECTIVES
The learning objectives of this case are for students to:
1. Apply the law of misappropriation to an actual situation;
2. Choose and defend a course of ethical conduct in a situation with intense competitive pressure.
3. Create and evaluate management strategies for guarding trade secrets from misappropriation.
APPLICATION
The case can be used in a variety of undergraduate and graduate courses dealing with business law and
multiple marketing courses. In law courses, the case would complement material on intellectual property.
It also can be incorporated into the discussion of ethics, business crimes, and criminal law. In marketing
courses, the cases can be made part of a discussion on ethical decision-making in the contexts of
environmental scanning and situation analysis, promotion campaigns, or marketing research methods.
KEY WORDS
Ethics; Policy/Strategy; Business Law
CONTACT: Janell M. Kurtz, St. Cloud State University, 720 Fourth Avenue South, St. Cloud, MN
56301-4498. Phone 320.308.4148. Email [email protected]
216
ASSESSMENT ISSUES AT SPRINGFIELD COLLEGE
Steven Lance Popejoy, University of Central Missouri
Deni Oas, University of Central Missouri
SYNOPSIS
This case concerns the development and implementation of an Assessment-as-Learning program at a
small Missouri college. The college was one of the early movers in the assessment movement that spread
though out higher education in the early 1990s. The case follows the issues that are created from the
changing environment, including the impact of assessment on both the college and its faculty, and also
how the college‘s reaccreditation becomes intertwined in the situation.
LEARNING OBJECTIVES
The objectives of this case are:
1. Describe the dynamics of experiencing change in an organization.
2. Discuss how change can be negatively affected by improper implementation.
3. Analyze organizational actions that can be taken in order to either properly or improperly
implement change.
4. Propose a possible plan that can deal with issues in organizational change.
APPLICATION
The case is designed to generate discussion on 1) how to handle organizational change, particularly
frame-breaking change, and 2) how to deal with the human factor in organizational behavior problems.
The case is appropriate for undergraduate courses in organizational behavior as well as master‘s level
courses dealing with organizational change and organizational theory.
KEY WORDS
Organizational change, assessment, continuous process improvement, total quality management,
transformational leadership.
CONTACT
Dr. Steven Lance Popejoy, 200 Dockery Building, University of Central Missouri, Warrensburg MO
64093, 660-543-8563, [email protected].
217
BLOGGING BOUNDARIES
Joe G. Thomas, Middle Tennessee State University
SYNOPSIS
Roger Williams was an Assistant Director of Human Resources for a large, international airline. An
employee had complained that a co-worker, Ellen Simonetti, had been blogging during layovers and at
home. Some of the entries were also sexually suggestive and, in the employee‘s opinion, inappropriate.
The employee also reported that some of the blog entries were unprofessional and reflected badly on the
airline. For example, Simonetti talked about some of the frustrations of commuting to work for an airline
and the glamour and frustrations of layovers in various cities. Williams also noted that Simonetti made a
number of comments about her coworkers and customers. While he found many of the comments
humorous, would others find them ―offensive‖? He needed to reflect on the airline‘s rights and
obligations in this situation versus Simonetti‘s rights and responsibilities. Were her actions ethical? Did
her actions affect the rights of others? Did the airline have the right to limit her blogging? Did the blog
create a liability for the airline?
LEARNING OBJECTIVES
After reading this case, students should be able to:
Explain how social media may create issues related to balancing company and employee rights.
Compare and contrast company‘s rights versus employee‘s rights.
Evaluate employee confidentiality obligations to various stakeholders.
AUDIENCE AND APPLICATION
This case provides professors the opportunity to discuss social networking. It is a good entry for
a discussion of what employees should or should not say about various stakeholders (e.g.,
employees, customers, and employers) associated with their jobs. It is most suited for classes
dealing with employee ethics, whether as part of an ethics, communications, or human relations
class.
CONTACT
Dr. Joe G. Thomas, Jennings A. Jones College of Business, Middle Tennessee State University1301 East
Main Street, Murfreesboro, TN 37132, [email protected]
218
BOB’S SUPERMARKET: COMPETING WITH THE BIG BOYS
Jeffrey B. Conner, Hanover College
SYNOPSIS
Bob‘s Supermarket was a small, independent grocery store in a small, relatively rural market dominated
by large grocery chains such as Walmart Supercenter, Kroger and Aldi. They also competed with other
chain retailers such as Dollar General and CVS. The economy was in the midst of a severe and what
appears likely to be protracted recession. The owners also faced increases in minimum wage rates in a
market that was not very prosperous before the economic downturn. The owners were considering what
actions to take to strengthen their position to weather the tough economic and competitive situation.
LEARNING OBJECTIVES
In completing this case, student will be able to:
1. Analyze the external environment by applying the PEST (Political-Legal, Economic, SocioCultural and Technological) framework and Porter‘s Five Forces.
2. Evaluate the firm‘s internal resources and capabilities using Barney‘s VRIO framework.
3. Develop an effective strategy for a small player to thrive competing with large, sophisticated
competitors using Porter‘s Generic Strategies.
APPLICATION
This case is suitable for a business strategy course at the undergraduate or graduate level. It provides
students the opportunity to do a complete analysis of the strategic situation and consider ways a small
player can successfully differentiate itself from its large and well-heeled competitors.
KEY WORDS: Strategy, small business, entrepreneurship, niche, grocery
CONTACT: Jeffrey B. Conner, Hanover College, Post Office Box 890, Hanover, IN 47243. Phone:
812-866-7355. E-mail: [email protected]
219
CERIDIAN LIFEWORKS: MAKING A DIFFERENCE WITH A DOSE OF INNOVATION
Dawn E. Bowden, University of Wisconsin – Stevens Point
SYNOPSIS
Ceridian Corporation is a privately-held business services company that provides human resource and
benefit services, health and wellness programs, and payroll software systems and administration.
LifeWorks (LW), a business unit within Ceridian Corporation, had been a leader in its respective market.
However, significant changes in the macroenvironment and increasing pressure from clients seeking lowcost or no-cost integrated health care benefit options had demanded that the company evaluate its
strategic position in the marketplace and the assumptions that govern its current behavior regarding
innovation.
The case begins two months after the new Vice-President (VP) of Product Management (Liz Graham) had
joined LW. It explores the fundamental conflicts between the successful longstanding core competences
of the business versus the need for emerging new technology and innovation. The primary subject matter
of this case concerns organizational ambidexterity, or the ability of an organization to align and manage
the business demands of the present while simultaneously adapting to the needs of the future. Secondary
issues examined include strategic management of a balanced portfolio of innovation projects, or
innovation streams, and organizational architectures.
LEARNING OBJECTIVES
The objectives of this case are:
1. Analyze the current state of the LifeWorks‘ product portfolio, the performance levels of the
Product Management team, and the types of innovation evident at the company.
2. Evaluate LifeWorks‘ capacity to innovate to effectively manage through innovation cycles.
3. Recognize the challenges of achieving sustainable competitive advantage through both
competence-destroying and competence-enhancing innovations.
4. Recommend a course of action that is supported by syntheses and thorough analysis of
quantitative and qualitative information provided in the case.
APPLICATION
The case was developed for use in advanced undergraduate and graduate level courses in strategic
management, strategic marketing, product development and management, innovation management,
human resources management, and organizational development.
KEY WORDS
Strategy, competitive advantage, innovation, product management, organizational ambidexterity
CONTACT
D.E. Bowden, University of Wisconsin – Stevens Point, School of Business & Economics, 10634 Sundial
Rim Road, Highlands Ranch, CO 80126; [email protected]
220
EMPLOYEE MOTIVATION IN A SMALL AG FIRM
MADISON TRUCKING COMPANY
Neil Tocher, Idaho State University
William E. Stratton, Idaho State University
Aaron Wolfe, Idaho State University
SYNOPSIS
This case was written in conjunction with a student in his early twenties who recounted his six-month
experience as a general laborer in a trucking company owned by a family friend.
Madison Trucking was one of several businesses owned by the Madison family. Its main job was to
transport grain from area farms to its elevator (storage facility) and then load the grain into rail cars or
trucks for transportation to market in neighboring states. The facility also served as a truck fueling depot
for a large fuel distributor and performed various mechanical services on the trucks. The company was
owned by Bob Madison and operated by four key employees including Earl (foreman), Sam (mechanic),
Roger (elevator operator), and Carol (administrative assistant).
The company was operated in ways that gave the owner Bob a high degree of power over the employees
by taking advantage of their personal situations. For example, Earl was on house arrest and only able to
leave home to go to and from work. Roger was purchasing a house from Bob, which left him with little if
any take home pay. All employees were also working about 60 hours per week and receiving no overtime
pay. The major issues in the case are the owner‘s ethics, motivation of the workers, and group dynamics
among the employees.
LEARNING OBJECTIVES
The objectives of this case are:
1.
Students will analyze the ethical implications of Bob Madison‘s business practices as presented in
the case.
2.
Students will develop an awareness of the factors affecting motivation and productivity for
employees working in seemingly dead-end jobs.
3.
Students will develop an understanding of group norms and group dynamics in the context of a lowskilled work environment.
APPLICATION
This case involves both ethical and organizational behavior issues and can thus be used in a variety of
courses with different learning objectives. It is suitable for use in organization behavior
courses, family/small business and entrepreneurship courses, and business and society or legal
environment courses.
KEY WORDS
Motivation, Ethics, Small Group Behavior
CONTACT
Neil Tocher, College of Business, Idaho State University, Pocatello, ID 83209-8020, 208-282-3588,
[email protected].
221
EVERYONE LOVES THE DUCKS!
Edwin C. Leonard, Jr., Indiana University Purdue University Fort Wayne
Roy A. Cook, Fort Lewis College
SYNOPSIS
Some students will be astonished by this case because they will find it difficult to believe that an older
employee with a ―good job‖ in a ―great organization‖ would put his job in jeopardy by transferring
company property to his home. At the time of this case, Michael May, the director of purchasing for the
Peabody Hotel Little Rock was over seventy-years old. His performance evaluation and over-all job
performance was very good. Then one day a phone call changed all of that. He was terminated for
unauthorized possession of hotel property. May filed charges of age discrimination against the hotel and
made claims of defamation against several hotel employees.
LEARNING OBJECTIVES
1. Identify and discuss the issues associated with the employment discrimination law particularly as it
applies to age discrimination.
2. Evaluate and discuss the process the organization used to investigate the allegation of stolen or
misappropriated company property.
3. Discuss ways that the organization can minimize the likelihood of employee theft.
4. Explain the importance of having company policies and procedures for dealing with employee theft.
Critique and evaluate the Human Resources Manager‘s handling of the situation.
APPLICATION
The case was designed for use in graduate or undergraduate human resource management courses, hotel
and hospitality management courses, general management or supervisory management courses, and in
business/government/society courses that focus on employee rights/responsibilities and employment
discrimination issues. Practicing supervisors in non-credit courses like to experience real-world cases in
which they can analyze and prescribe remedial actions and where the leaders can share the end-result with
them and the rationale for the court‘s decision(s).
KEY WORDS
Age discrimination, employee theft, employment discrimination law
CONTACT
Roy A. Cook, Fort Lewis College, 1104 Oak Drive, Durango, CO 81301; 970.946.9612,
[email protected]
222
HEALTH INFORMATION TECHNOLOGY, PATIENT FLOW, AND THE NEW MANAGER:
EVALUATION OF THREE CLINICS
Leigh Cellucci, Ph.D., East Carolina University
Keith Benson, Ph.D., Winthrop University
Tracy Farnsworth, MHSA, MBA, Idaho State University
SYNOPSIS
Amelia Baroody, newly hired business manager and administrator in training at the Boulder Mountain
Medical Specialists (BMMS) has been charged by the BMMS Board members to ―fix‖ the problems in
Internal Medicine regarding patient flow and health information technology as well as assess operations
in the Pediatrics and Women‘s clinics. Baroody is a new college graduate and the newest member of
HealthCare Professional Consultants HCPC, a medical management organization designed to place
administrators and administrators in training into medical groups. BMMS contracted with HCPC for
Baroody to manage three clinics Boulder Mountain Women‘s Clinic, Boulder Mountain Pediatric Clinic,
and Boulder Mountain Internal Medicine. BMMS paid HCPC, which, in turn, paid Baroody‘s salary and
benefits. Thus, BMMS received access to HCPC consulting services regarding healthcare business
practices (e.g., clinic operations, patient and insurance billing, and legal needs). Baroody knew that this
was also an opportunity for her to prove her worth—to BMMS, to HCPC, and to herself. Working with
the team of HCPC, she must identify the problems in Internal Medicine and propose solutions to allow for
more efficient and effective use of health information technology and improve patient flow.
LEARNING OBJECTIVES
The objectives of this case are:
1. Identify and analyze the characteristics and competencies that made HealthCare Professional
Consultants an excellent resource/support for Baroody and for Boulder Mountain Medical
Specialists.
2. Analyze how a patient moves through the practice, using tools such as value stream analysis
and throughput yield to identify waste, control costs, and increase efficiencies in operations.
3. Propose and defend a course of action to increase efficiencies based upon the analyses.
4. Recognize the importance of each clinic‘s history and culture in health information
technology (HIT) implementation and usage.
5. Propose and defend a course of action regarding current health information technology usage.
APPLICATION
This is a decision case that may be used in Health Information Systems, Healthcare Management, and
Organizational Behavior courses as well as serving as an example for effective IT implementation in a
health organizational setting.
KEY WORDS
Operations improvement, health information technology, IT implementation, ambulatory care,
organizational behavior.
CONTACT
Leigh W. Cellucci, PhD, Associate Professor, Department of Health Services and Information
Management, 600 Moye Blvd., 4340H Health Sciences Building, Stop 668, East Carolina University.
Greenville, NC 27858. 252-744-6072 (0); 252-702-3480 (c); 252-744-6179 (f)
223
INTEGRATIVE REHABILITATION PROGRAMS
David Lynn Hoffman, Metropolitan State College of Denver
William Carnes, Metropolitan State College of Denver
Judson Faurer, Metropolitan State College of Denver
Debora Gilliard, Metropolitan State College of Denver
Rajendra Khandehar, Metropolitan State College of Denver
Nina Radojevich-Kelley, Metropolitan State College of Denver
Cynthia Sutton, Metropolitan State College of Denver
SYNOPIS
Johnson, Executive Director of Integrative Rehabilitation Program (IRP)--a non-profit, communityrehabilitation-service organization-- is convinced that he must find predictable and stable sources of non
government income or the organization will slowly die. The Board and Executive Director have been
searching for a for-profit venture to employ some of their workers with disabilities and to provide positive
cash flow to the non-profit. IRP has the opportunity to purchase a franchise that has been neglected by its
owner and believe they have the expertise to turn it around into a profitable venture. However, both the
banks and the franchisor selling the franchise require Johnson to personally guarantee the loans and
payments to the franchisor.
LEARNING OBJECTIVES
The objectives of this case are:
1.
2.
3.
4.
5.
Illustrate social entrepreneurship and potential mission conflicts.
Analyze and assess an entrepreneurial opportunity.
Analyze IRP‘s internal operations and evaluate its ability to pursue this opportunity.
Evaluate the risks and benefits of social entrepreneurship.
Evaluate alternatives for IRP and recommend a course of action for Johnson and the company.
APPLICATION
This case is a comprehensive case suitable for an entrepreneurial business planning course or a strategic
management course. It could also be used in entrepreneurial courses using cases to teach entrepreneurship.
It is also possible to use the case in an introductory entrepreneurship course to discuss what is an
entrepreneur or social entrepreneur.
KEY WORDS
Non-Profits, New Venture Analysis, Social Entrepreneur
CONTACT
David Lynn Hoffman, Metropolitan State College of Denver, Box 78, Denver, CO 80204, 303-556- 3061,
[email protected]
224
LAKE ROAD LAUNDROMAT: EVALUATION OF CUSTOMER SATISFACTION
Michael W. Pass, Ph.D., Sam Houston State University
Sanjay S. Mehta, Ph.D., Sam Houston State University
SYNOPSIS
Alex Fox, owner of Lake Road Laundromat, wants to know how satisfied customers are with three
laundromat services: (1) coin-operated washers and dryers, (2) a dry-cleaning service, and (3) a wash-fold
service. He meets with a consultant from the Small Business Development Center (SBDC) to discuss
what questions to ask customers to determine their satisfaction and the media (e.g., newspapers, radio
stations) used by them. Alex also wants to know how to obtain answers to these customer focused
questions. Students may adopt the consultant‘s role when answering case questions that guide them
through achievement of the learning objectives.
LEARNING OBJECTIVES
The objectives of this case are:
1. Explain when it is appropriate to use survey research.
2. Explain how to select a specific survey research method and demonstrate the ability to
select one for a particular situation.
3. Describe sampling methods, the differences between them, and select one to use for a
particular situation.
4. Demonstrate the ability to conceive how survey research will be conducted for a
particular situation.
5. Demonstrate the ability to assess a situation, choose salient factors to analyze, and design
questions that will obtain respondent evaluations of the factors.
6. Demonstrate the ability to design a questionnaire.
7. Evaluate a questionnaire to assess whether or not it will accomplish its intended purpose.
APPLICATION
This case is suitable for an undergraduate research course. Case questions carry students through
decisions culminating in the design and evaluation of survey questionnaires. The case may be introduced
at the beginning of a course with students answering questions as the instructor covers the associated
research concepts. Alternatively, all of the case questions may be answered at one time, thus using the
case as a comprehensive project near the end of a research course.
KEY WORDS
Customer Research, Customer Satisfaction, Services Research, Service Evaluation
CONTACT
Michael W. Pass, Ph.D., Department of Management and Marketing, College of Business Administration,
Sam Houston State University, Huntsville, TX 77340-2056, (936) 294-1294,
[email protected]
225
LEADERSHIP AND CHANGE MANAGEMENT: A NARRATIVE OF AN ORGANIZATIONAL
TURNAROUND
Kat Lui, University of Wisconsin – Stout
SYNOPSIS
Sheila was hopeful. As the newly appointed Chief Executive Officer (CEO) of Precision Manufacturing,
she was charged with turning this once profitable company around. Based upon the three-day off-site
meeting with her Senior Leadership Team, Sheila established a long-term strategy. All short-term actions
had to now be viewed through the long-term vision of where Precision Manufacturing wanted to be in
three years. Core values were modified and employees were asked for their commitment. Now all she had
to do was convince the Board of Directors that her plan could lead to profitability.
LEARNING OBJECTIVES
The objectives of this case are:
1. Students should be able to explain the role of leadership in managing organizational change;
2. Students should be able to identify the activities contributing to effective change management;
3. Students should be able to analyze core values and diagnose how they can be used to get business
back on track;
4. Students should be able to judge the value of employee engagement.
APPLICATION
Change management, leadership; graduate & upper level undergraduate courses (Organizational Behavior
/ Organization Development)
KEY WORDS
Leadership; change management; core values; employee engagement
CONTACT
Kat Lui; 410 10th Ave. E, JHTW 248, Menomonie, WI 54751; 715.232.5634; [email protected]
226
PLANETHOSPITAL.COM
Timothy Brotherton*, Ferris State University
Carol Rewers, Ferris State University
SYNOPSIS
This decision based case study, looks at the Medical Tourism website PlanetHospital.com.
PlanetHospital.com started in 2005 as a small, online website that connected individuals needing cheaper
surgery alternatives with overseas doctors and hospitals. Initially, PlanetHospital.com focused on
facilitating overseas medical procedures for uninsured or underinsured individuals and charging fees for
each service provided. PlanetHospital.com has developed arrangements with dozens of doctors in 36
hospitals in 13 countries.
However, the company has decided to expand from delivering ―retail services‖ for individual customers
or private citizens to expanding their market into ―corporate sales,‖ which would include dealing directly
with insurance companies and self-insured businesses. The firm hopes that this expansion will allow
them to tap into more of the $2 trillion health care market and could greatly expand PlanetHospital.com‘s
growth opportunities.
LEARNING OBJECTIVES
Students should be able to….
1.
2.
3.
4.
Analyze the competitive environment in the medical tourism industry.
Analyze the internal environment of a firm in the medical tourism industry
Assess the potential of the individual and corporate medical tourism markets.
Propose a strategy that PlanetHospital should pursue in its medical business.
APPLICATIONS
This decision case study provides students an opportunity to analyze the competitive environment
associated with the rapidly expanding medical tourism industry. This case is appropriate for
undergraduate courses, including: marketing strategy, marketing management, strategic management,
healthcare administration, or healthcare marketing. Because the case focuses on deciding between two
different market segments it might be best used when discussing market segmentation issues.
KEY WORDS
Medical Tourism, Healthcare, Healthcare Costs, and Marketing Strategy
CONTACT*
Timothy Brotherton, Ferris State University, 119 South St., BUS 337, Big Rapids, MI 49307
231-591-2471, [email protected]
227
REVIVING AN ICONIC ADVERTISING CAMPAIGN:
“ANOTHER REASON, I LOVE NY”
Timothy Brotherton, Ferris State University
Craig Davis, Ohio University
Nakato Hirakubo, Brooklyn College
Mark Stuhlfaut, University of Kentucky
SYNOPSIS
This case can be used to study the way marketers and advertisers create strategic communication
programs.
The challenge that Empire State Development and NYS Department of Economic Development
faced in 2008 was how to grow tourism to 200 million visitors and $60 billion in annual visitor spending
by 2020. The solution was to leverage the equity of the I Love New York campaign of the 70s and 80s.
The tourism officials in New York State decided that the best way to achieve their goal was to rejuvenate
this campaign and use it once again to promote tourism not only in New York City but throughout the
state of New York.
LEARNING OBJECTIVES
1.
2.
3.
4.
5.
Introduce students to brand identity.
Illustrate the strategic role of brand identity in advertising campaigns.
Analyze the communication strategies of the ―I Love New York‖ campaigns.
Evaluate the wisdom of reviving the ―I Love New York‖ campaign.
Assess the impact of the ―Another Reason, I Love New York‖ campaign.
APPLICATION
This case may be used in upper-level advertising, marketing, copywriting, creative strategy, advertising
campaigns courses.
KEY WORDS
Advertising, research, campaign, creative, strategy
CONTACT
Craig Davis, Ohio University, 202 Scripps Hall, Athens, OH 45701
[email protected], 740-593-2605
Note: The authors are listed in alphabetical order as all contributed equally to the writing of this case
study and teaching note.
228
ROCKVILLE LUMBER
SYSTEMS ANALYSIS AND DESIGN FOR A SMALL SUPPLIER
A.Kimbrough Sherman, Loyola University Maryland
Harsha Desai, Loyola University Maryland
SYNPOSIS
Aaron Stone owned Rockville Lumber, a small lumber yard that did business by bidding on contracts for
lumber supplies and delivering or having lumber delivered to sites. The contracts were with federal and
local government agencies, not-for-profits, and some other companies. Rockville Lumber had only
minimal plant, equipment, and inventory – relying on a broker-type business model. Stone used personal
phone relationships to develop trust, and he built his business on dependability, low price, and timeflexibility. He worked from a desk cluttered with bids and contracts that lacked a personal computer and
the business ran on paper records and his memory and business acumen. He had a small staff, including
an assistant to locate contract opportunities via the Web, and to field inquiries by Email and fax. He
managed the contracts personally and assured timely delivery, including time adjustments requested by
his customers. On his own, Stone realized that he needed to automate his office.
Stone enlisted help from a professor and his Systems Analysis and Design class and they created a flow
diagram and a data structure, and were concerned as to how to create an automated system that would be
technologically efficient without reducing the personal characteristics that made Rockville Lumber a
moderately successful business.
LEARNING OBJECTIVES
The objectives of this case are:
1.
Students will use the systems development life cycle as a framework for systems analysis
and design.
2.
Students will be able to analyze a company‘s current processes.
3.
Students can design a system that increases the effectiveness of an operation.
APPLICATION
The case can be used in an undergraduate Systems Analysis and Design course or in a graduate
Information Systems core course. The case provides a setting for systems analysis and design in the
context of critical human elements.
KEY WORDS
Systems Analysis and Design, Information Systems, Process Automation
CONTACT
Allan Kimbrough Sherman, Department of Information Systems and Operations Management, Loyola
University Maryland, 4501 North Charles Street, Baltimore, MD 21210; Tel: 410-617-2460, Email:
[email protected]
229
SOUTHERN FAMILY SERVICE: WHAT HAPPENED TO THE MONEY?
John D. Veal, Jr., Webster University, Fort Sill
Gabriele Lingenfelter, Christopher Newport University
SYNOPSIS
The case describes the financial problems of a local nonprofit agency providing social services to
numerous constituents. The agency‘s staff accountant faces a potential conflict of interest and the Board
of Directors is unaware of the situation. Grant funds and money from a capital campaign appear to be
used inappropriately. The agency enters into a contract with a firm in which the Executive Director has a
financial interest.
The students are asked review the American Institute of Certified Public Accountants‘ (AICPA) Code of
Professional Conduct and the governance of non-profits.
LEARNING OBJECTIVES
After reading and studying this case, students should be able to
1. Defend the application of Rule 102 of the Code of Professional Conduct of the AICPA to
Certified Public Accountants (CPAs) not in public practice.
2. Formulate suggestions for improving the governance of non-profit organizations by
encouraging communication between the Board of Directors and employees.
3. Describe how to compose an effective Board of Directors to avoid a similar situation at SFS.
4. Evaluate the case and determine if an improper situation exists (i.e., conflict of interest,
mismanagement of funds, etc.)
APPLICATION
The case should be assigned during the discussion of the professional responsibility chapters or when
discussing the role of Board of Directors in an undergraduate auditing class.
The case can be used for an in-class discussion, or an out-of-class writing assignment. If the case is used
for an in-class discussion, students should read the material prior to class.
KEY WORDS
AICPA Code of Professional Conduct, Non profit Board of Directors, Conflict of Interest
CONTACT
John D. Veal, Jr., School of Business and Technology, Management Department, Webster University,
3281 Sheridan Road, Fort Sill, OK 73503, (580)695
230
STRATEGIC PHILANTHROPY – DOVE AND THE GIRL SCOUTS’ UNIQUELY ME!
Nanette Clinch, San Jose State University
Aline Dorso, San Jose State University
Asbjørn Osland, San José State University
SYNOPSIS
Strategic Philanthropy demands that a business engage in long-term pursuit of social goods by identifying
the complementary intersection between a particular cause and the business. The financial support from
Dove to a non-profit organization, the Girl Scouts, enhancing their effort to raise self-esteem in girls and
young women, suited the promotion of Dove products for women seeking to reclaim their unique beauty.
Overthrowing beauty stereotypes for the promotion of beauty as an experience of wonder and delight,
within reach of all women, resonated with the Girl Scouts and beauty product consumers. Yet the
Unilever commitment to real beauty as a social good appears to falter in the face of a long-term
investment that would require some change within Unilever to advance appreciation of real beauty.
LEARNING OBJECTIVES
The objectives of this case are:
1.
2.
3.
4.
To distinguish strategic philanthropy from other forms of corporate social responsibility
and describe how strategic philanthropy contributes to sustainability in ways unavailable
through CSR alone.
To analyze how the social and ethical value of beauty can be illuminated or suppressed
by advertising and marketing while identifying ways in which false constructions of
beauty can undermine sustainability
To explain how socially responsible actions of corporations can be positively influenced
not only by external stakeholders but even more decisively by the moral convictions of
their leaders and employees
To employ strategic philanthropy in designing programs that seek alignment of corporate
and charitable resources and goals.
APPLICATION
This case can is best suited for business ethics, marketing ethics and non-profit management courses at
the undergraduate level.
KEY WORDS
Dove, strategic philanthropy, ethics, non-profit, beauty.
CONTACT
Nanette Clinch, Ph.D., J.D. , Organization and Management, College of Business, San José State
University, San José, CA 95192-0070, 408-924-3515 (office), [email protected].
231
THE EMAIL
William H. Moates, Indiana State University
Dale Varble, Indiana State University
Bruce McLaren, Indiana State University
SYNOPSIS
The case describes an incident in a university setting. A student, reacting to a challenge to students in a
computer networking class by a professor, attempted to print a document on the professor‘s home printer
by using an Excel macro in a spreadsheet. In order to conceal his intent, the student pretended to be
another student by using a false email account created for that purpose. In an attempt to conceal a mistake
made when the document was sent, he further involved the second student by sending her an email in
which he claimed she had sent him the same email that was sent to the professor and wondered why she
included him. Alarmed that someone was using her identity in a manner that would harm her reputation,
she contacted the professor. The professor, suspecting that he has been sent a virus, contacted the
university computing personnel regarding the matter. The perpetrating student is now faced with
potentially serious consequences.
LEARNING OBJECTIVES
The objectives of this case are:
1. Identify how Bob‘s actions in using information technology constituted a violation of university
policy.
2. Consider any extenuating considerations to take into account in determining the extent of the
punishment appropriate for the violation.
3. Apply your university or school‘s computer policies to Bob‘s situation to determine possible
penalties applicable to Bob for his actions.
4. Summarize the ethical lapses in the use of information technology exposed in the case, especially
with regard to the impact Bob‘s actions may have on other individuals in the case.
5. Identify and evaluate behavior that reveal personal value structures, in the case Bob‘s personal
value structure.
6. Understand the concept of identity theft and its application with regard to Alice Jones.
APPLICATION
The case could be used in courses covering computer ethics (introductory MIS, management of
information systems, or general ethics courses that include ethical computing. A lecture discussing the
technical issues and terms may be necessary with non-technical students.
KEY WORDS
computer ethics, information systems policy, punitive measures.
CONTACT:
Dr. Dale Varble; Scott College of Business; Indiana State University; Terre Haute, IN 47809
Phone: 812-237-2034; Email: [email protected]
232
THE PURPLE TUNNEL OF DOOM
Mary Anne Watson, Ph.D., The University of Tampa
Britt M. Shirley, Ph.D., The University of Tampa
SYNOPSIS
Walter Thierry volunteered for Senator Barack Obama‘s successful campaign for the presidency of the
United States. He and his wife Angela traveled from their home in Florida to Washington, DC to attend
the presidential inauguration on January 20, 2009. Along with thousands of others attending the
inauguration, they had tickets for the ―purple‖ seating section. A mix-up resulted in many of these ticket
holders being led into a freeway tunnel and missing the inauguration. This case examines the situation
from Walter‘s viewpoint. Students have the opportunity to consider the factors that affected the behavior
of those in the tunnel and the possible impact of Barack Obama‘s leadership style on their behavior.
LEARNING OBJECTIVES
The objectives of this case are:
1.
To identify the factors that positively affected the group dynamics in the tunnel and perhaps
prevented a dangerous situation.
2.
To identify the factors that could have led to dysfunctional group behaviors for the people
in the tunnel.
3.
To evaluate the effects of charismatic leaders on their followers‘ behaviors.
APPLICATION
This case is intended for undergraduate classes in organizational behavior, where the focus would be on
the dynamics of the group in the freeway tunnel. In addition, it could be used in introductory leadership
classes. For these classes, the focus would be on how the behavior of the group of people in the tunnel
was possibly affected by that of their leader, President-elect Barack Obama.
KEY WORDS
Organizational behavior, leadership, charismatic leadership
CONTACT
Mary Anne Watson, The University of Tampa, 401 West Kennedy Boulevard, Box O, Tampa, FL 33606,
[email protected], (813) 257-3431.
233
THE SALVATION ARMY ALASKA DIVISION: THE GREAT COMMISSION
Josie Wilson, MBA, University of Alaska Anchorage
Carlos J. Alsua, PhD, University of Alaska Anchorage
SYNOPSIS
Major Greg Smith, Divisional Commander for the Alaska Division of The Salvation Army, has to decide
which officers from his team will be transferred out of the Alaska Division and, therefore, into another
geographic division of The Salvation Army (comparable to a promotion or demotion depending on the
new position). Major Greg has the added difficulty to consider the challenges of the living environment in
Alaska and the consequences of breaking cultural norms and informal rules of the organization with a
family reporting relationship.
The geographic setting in Alaska provides a unique perspective for the instructional elements. And
although The Salvation Army is an internationally recognized non-profit organization, there is little
knowledge of the culture and structure of this powerhouse social service and faith-based organization.
LEARNING OBJECTIVES
The objectives of this case are:
1. Define, explain, and apply organizational behavior theories that a leader must consider to run an
organization.
2. Develop key managerial decision making skills by analyzing a complex set of interrelated factors
of a nonprofit organization.
3. Differentiate motivational theories and defend reasoning with appropriate terminology.
4. Analyze the organizational structure of The Salvation Army and synthesize a conclusion with
supporting information.
APPLICATION
This case has an extensive list of classroom applications and supporting theories depending on the
instructor‘s objectives. Interesting and distinctive elements to this case include: a quasi-military structure,
specialized family culture, religious commitment, ―appointment‖ process, and institutionalized norms.
KEY WORDS
Organizational Behavior, Organizational Commitment, Organizational Structure, Organizational Culture,
Non-Profit
CONTACT
Josie Wilson, 2430 Sentry Drive #B306, Anchorage, AK 99507, (907) 230-8179, [email protected]
234
Index
Alsua, Carlos J.
PG. 200, 234
Benson, Keith
PG. 82, 223
Bowden, Dawn E.
PG. 57, 220
Brotherton, Timothy
PG. 122, 142, 227, 228
Carnes, William
PG. 90, 224
Cellucci, Leigh
PG. 82, 223
Clinch, Nanette
PG. 165, 231
Conner, Jeffrey B.
PG. 42, 219
Cook, Roy A.
PG. 77, 222
Davis, Craig
PG. 142, 228
Desai, Harsha
PG. 151, 229
Dorso, Aline
PG. 165, 231
Farnsworth, Tracy
PG. 82, 223
Faurer, Judson
PG. 90, 224
Gilliard, Debora
PG. 90, 224
Hirakubo, Nakato
PG. 142, 228
Hoffman, David L.
PG. 90, 224
Johnson, Mark A.
PG. 9, 215
Khandehar, Rajendra
PG. 90, 224
Krumwiede, Dennis W.
PG. 9, 215
Kurtz, Janell M.
PG. 19, 216
Leonard, Jr., Edwin C.
PG. 77, 222
Lingenfelter, Gabriele
PG. 156, 230
Lui, Kat
PG. 115, 226
235
McLaren, Bruce
PG. 184, 232
Mehta, Sanjay S.
PG. 111, 225
Moates, William H.
PG. 184, 232
Oas, Deni
PG. 24, 217
Osland, Asbjorn
PG. 165, 231
Pass, Michael W.
PG. 111, 225
Popejoy, Steven L.
PG. 24, 217
Radojevich-Kelley, Nina
PG. 90, 224
Rewers, Carol
Schuler, Drue K.
PG. 122, 227
PG. 19, 216
Sherman, A. Kimbrough
PG. 151, 229
Shirley, Britt M.
PG. 194, 233
Sleeper, Bradley J.
PG. 19, 216
Stratton, William E.
PG. 71, 221
Stuhlfaut, Mark
PG. 142, 228
Sutton, Cynthia
PG. 90, 224
Thomas, Joe G.
PG. 35, 218
Tocher, Neil
PG. 71, 221
Varble, Dale
PG. 184, 232
Veal, Jr., John D.
PG. 156, 230
Watson, Mary Anne
PG. 194, 231
Wilson, Josie
PG. 200, 234
Wolfe, Aaron
PG. 71, 221
236
Copyright © 2011 by the Society of Case Research and the Author (s). No part of this work may be
reproduced in any form or by any means without written permission of the Society for Case Research.
237