CHAPTER 1

Mastering Change
New Management? Or New Age Management?

It's no secret today that firms everywhere are undergoing massive change. Hardly an issue of Fortune, Business Week, or Wall Street Journal comes out without featuring one or more stories about a layoff, a reorganization, or a new strategy by some major firm. Less familiar to the average observer, however, is a form of change that is less likely to make popular press headlines. This increasingly popular type of change has to do with what some experts call spirituality.

In this context, "spirituality" refers not to religious convictions, but to an effort to help people in an organization better understand themselves, the meaning of their work, and why the organization does what it does. The basic idea is to encourage people to reflect on the meaning of their work. In addition, spirituality creates a sense of meaning and purpose at work and a connection between an organization and the people that constitute it. Among the better-known firms currently involved with such spiritual change programs are Boeing, AT&T, and Lotus Development Corporation.

For example, over 500 top managers at Boeing recently spent three days a month for one year listening to poet David Whyte. Whyte's poems generally revolve around the themes of tranquility, peacefulness, and meaning. The goal of this program at Boeing is to help executives become more creative by thinking in different ways about their company and their lives.

AT&T's approach to spirituality revolves around the concept of values. The firm employs outside consultants to serve as coaches for managers to help them become better leaders. The method for this transformation revolves around helping them better understand their own values and personal motives. The ultimate goal, then, is for these leaders to improve employee attitudes and relationships as a result of better understanding themselves. Lotus Development has perhaps taken the quest for corporate spirituality a step further. Lotus has appointed a "soul" committee. This committee is charged with the task of reexamining the company's management practices and values. The goal is to build a strong culture so that everyone in the firm better understands its mission and its practices.

Yet another example takes place every Wednesday at 1:00 p.m. at the Washington-based World Bank. Each week at this time a group of bank employees sit in a semicircle in a conference room. Anyone is invited to attend. Common members of the audience range from senior executives to young assistants. Each meeting begins with a moment of silence, and then about an hour is devoted to talking about such things as realigning ego and soul. One recent meeting, for example, was organized around the title "Ten Strategies for Attaining Soul Consciousness."

To date, no one has determined the true value or effectiveness of these organization change initiatives. Indeed, most experts would agree that these efforts are not for everyone. Still, companies that have taken a careful approach to spiritual change have found that many employees suffering from overwork and a lack of direction report that they feel revitalized and renewed as a result of this sort of effort. sources: "Companies Hit the Road Less Traveled," Business Week, June 5, 1995, pp. 82-85; Patrick J. Spain and James R. Talbot (eds.), Hoover's Handbook of American Business 1997 (Austin, Texas: Reference Press, 1995), pp. 200-201, 272-273.

Working with Diversity
Learning from the Past

Mary Parker Follett was born in 1868 in Quincy, Massachusetts, just outside of Boston. Her father was a skilled tradesman and her grandfather a successful local merchant. Follett was the first woman in her family to go to college, graduating from Thayer Academy and then Radcliffe College. While she was receiving her college education, she taught political science at a nearby high school. During this period, she developed a strong interest in how organizations could better treat their workers. A wealthy Boston family provided her with a small stipend to enable her to pursue her intellectual interests.

Due to her reputation and social connections, Follett was soon sitting on committees in organizations to set wages for women and children. It was during this period that she developed some of her most fundamental and insightful ideas. For example, she argued that when an organization structures itself as a bureaucracy, managers become too distant from workers to actually learn from them. She became a very popular lecturer and consultant on management in the 1920s and 1930s. At the time her ideas seemed almost radical. During an era when the common wisdom called for hierarchies, bureaucracy, command and control, and tight supervision of workers, Follett argued for flatter organizations, addressed the benefit of teams and participative management, and contended that leadership should derive from ability, not hierarchical position.

Follett also had significant insights into conflict resolution. She called for cooperative conflict resolution rather than confrontation. Conflict, she asserted, can be most effectively managed when both sides are made to see that they have common problems and interests rather than adversarial ones. This strategy, she argued, encourages each side to see the other side's problems and perspective.

Follett died in 1933, and without her advocacy, her ideas ceased to play a major role in discussions of management philosophy. Even today she does not have a position in management history like those of influential writers such as Frederick Winslow Taylor, Frank and Lillian Gilbreth, or Max Weber. A recently published book, however, promises to bring her contributions to modern management theory to the forefront once again. This book, published by the Harvard Business School Press in 1995, is entitled Mary Parker Follett-Prophet of Management: A Celebration of Writings from the 1920s.

sources: "The Mother of Them All," Forbes, January 16, 1995, pp. 75-76; Daniel A. Wren, The Evolution of Management Thought, 4th ed. (New York: Wiley, 1994).

CHAPTER 2

Working with Diversity
Capitalizing on Diversity

Smart companies today are finding that capitalizing on workforce diversity gives them a considerable competitive advantage. Bringing diverse perspectives to bear on problems, opportunities, and decisions produces a wider array of alternatives and a richer and often more effective course of action.

One firm that is enjoying considerable success by taking advantage of workforce diversity is Rubbermaid. Based in Ohio, Rubbermaid manufactures a wide array of rubber- and plastic-based products, including kitchen accessories, furniture, decorations, toys, office products, and leisure items. Because its domestic market in the United States is flat, in recent years Rubbermaid has attempted to broaden its market base by expanding to international markets. For example, Rubbermaid has a joint venture in Japan, a large and active business in Canada, and several operations in France.

Although its products have been generally successful in Japan and Canada, Rubbermaid found the going much tougher in Europe. One reason is that the firm had little knowledge of the European marketplace. For example, its managers did not really understand European tastes or lifestyles and consequently were having a difficult time tailoring the company's products to the European market.

To deal with this shortcoming, Rubbermaid began a program to immediately add 300 employees from culturally diverse backgrounds in entry-level management positions. These managers were drawn from throughout Europe, with a few representatives from Asia and South America. Rather than being segregated as a separate unit devoted to European operations, however, the culturally diverse managers were integrated into existing corporations to more quickly spread their influence. Thus, every manager in Rubbermaid today has quick and easy access to expertise about local market conditions anywhere in Europe by tapping into talent within the corporation. And sure enough, shortly after this integration of new European managers, Rubbermaid's product lines in Europe changed dramatically and their sales began to increase significantly.

sources: "Can Rubbermaid Crack Foreign Markets?" Wall Street Journal, June 20, 1996, pp. B1, B5; Patrick J. Spain and James R. Talbot (eds.), Hoover's Handbook of American Business 1996 (Austin, Texas: The Reference Press, 1995), pp. 1252-1253.

Using bribes to get things done is usually considered a necessary evil when doing business globally. In spite of the strict Foreign Corrupt Practices Act, passed in the United States in 1977, many U.S. companies are still finding ways to influence people in certain foreign countries, to locate the right person to make a contract decision, or to help win a contract bid. Some are paying fines for law violation, while others shrug it all off as part of doing business. In 1995, Lockheed-Martin paid $24 million in fines (twice the profits) from a sale of three C-130H aircraft to the Egyptian government because they made a $1.5 million payment to a government official who helped them get the contract. In the United States that is illegal. In other countries it may also be illegal, technically, but government officials and the courts seem to look the other way. In 1996, Malaysia's trade minister, Rafidah Aziz, suggested that if other countries do not want to participate in bribery and other forms of corruption they could take their business elsewhere. Although all Southeast Asian countries have laws against corruption and bribery, they tend to view corruption as a normal way of life and an accepted means of doing business.

New and ingenious ways of getting around the laws are becoming more popular. For example, foreign trips are often considered quite a nice benefit of doing business. Therefore, some U.S. firms are promising extensive and expensive training programs in the United States for managers and executives of firms in other countries who do business with them. When these foreign executives arrive in the United States, they spend some time in actual training, but they often travel around the country visiting other plants, Atlantic City and Las Vegas casinos, and Disney World.

Another way of contributing to the economy or government is to make large donations to schools, universities, and cultural institutions. For example, Boeing spent more than $100 million to train Chinese workers how to use its technology. IBM donated $25 million in hardware and software to twenty Chinese universities and funds scholarship programs as well. Are these types of contributions payments for action or buying goodwill? Although large companies can afford these types of donations, many small companies simply do not have the contacts or the money to make them work.

Many multinationals are creating joint ventures or utilizing consultants or agents in other countries to do most of the local work. Fees are paid into the joint venture or to the consultant. Where and how these fees are spent is often unknown to the U.S. firm. The venture or the consultant may be paying money in bribes that the U.S. company is unaware of. As long as the U.S. firms do not know how the money is spent, they probably will not be held liable in court.

Payment for access to a decision maker may be called a "facilitation payment" and allowed. However, payment to an official to make a decision in the favor of the company may be called a bribe and not allowed.

sources: Dana Milbank and Marcus W. Brauchli, "How U.S. Concerns Compete in Countries Where Bribes Flourish," The Wall Street Journal, September 29, 1995, pp. A1, A14; and Vijay Joshi, "Malaysian Official Defends Bribes," The Arizona Republic, April 26, 1996, p. E3.

Case:
Breaking the Glass Ceiling

Mattel is the largest toy company in the United States, with annual sales generally exceeding three billion dollars. Mattel's success rests primarily on four principal brands. These brands are Barbie dolls and related products, Fisher Price toys for younger children, Disney Entertainment-related products, and Hot Wheels car sets and related products. Together, these four brands account for about eighty percent of the company's sales. Perhaps best known for its high-profile toy lines, in 1997 Mattel became recognized for a different reason - it became only the second Fortune 500 company in the United States to be led by a female CEO, Jill Barad. Barad had joined Mattel in 1981 as a product manager. She quickly became known for her hard-driving management style and her ability to develop and implement bold new strategies and ideas. She was soon given full control over the Barbie line. At the time, Mattel thought Barbie dolls were in a period of decline. Sales were flat and customer interest seemed to be waning. Barad's charge was to squeeze as much additional life out of the venerable doll as possible.

Barad, however, thought that reports of Barbie's death were greatly exaggerated. To the contrary, she believed that considerable new opportunities existed for marketing the doll and associated accessories. Among Barad's most successful innovations were to create special holiday editions, which now routinely sell out long before Christmas, and to open Barbie boutiques in high-traffic areas such as New York City. Another recently introduced success is the Day-to-Night Barbie, a version that includes a computer and executive attire. During her tenure as product manager for Barbie, Barad built the product line to the point that it accounts for about forty percent of the corporation's total revenues.

In 1991, Barad was appointed to the Mattel board of directors. In 1992, she was made president of the company. The CEO at the time was John Amerman. In late 1996, Amerman announced his retirement and recommended promotion of Barad to the position of CEO, a post she assumed on January 1, 1997. Amerman agreed to stay on as chair of the board of directors for a transitional period, after which Barad will assume that position as well. Barad indicates that she intends to continue strategies that she and Amerman had implemented previously. In particular, she sees much of the future growth of the company as coming from abroad and anticipates aggressive expansion into Asia, Latin America, and other foreign markets. She noted for the record that only three percent of the world's children live in the United States, and thus the firm's biggest opportunities seem to be in growth outside the United States.

She also expressed surprise when informed that she would be only the second woman CEO of a Fortune 500 firm. Why have so few women made it to the top? A variety of theories have been advanced. Among the most common are that some people are still guilty of stereotyping women, that women are excluded from informal networks and other opportunities for getting inside tracks to success, and that many women lack significant managerial experience.

Indeed, the lack of upward mobility by women has led some to argue that corporations have a so-called "glass ceiling" at the upper ranks of their organizational structures. This ceiling is presumed to be almost invisible, but still strong enough to keep women from breaking through to the top. This latest breach in the glass ceiling may increase the openings and allow more opportunity for women executives to continue up the organizational hierarchy to the top ranks.

Case Questions

1. What factors do you think have led most directly to Jill Barad's success at Mattel?
2. Relate each of the organizational and environmental challenges discussed in the chapter to the job Barad faces at Mattel.
3. Do you think there is really a glass ceiling in corporations? Why or why not?

sources: "'Fortune 500' to Get Second Female CEO," USA Today, August 23, 1996, p. 1B; "Mattel Names Jill Barad Chief Executive," Wall Street Journal, August 23, 1996, p. B6; "Women Make Strides, But Men Stay Firmly in Top Company Jobs," Wall Street Journal, March 29, 1994, pp. A1, A8.

CASE:
Denny's Learns How to Deal with Diversity

With more than five hundred franchisees across the country, Denny's is one of the largest U.S. restaurant chains. It is the mainstay of its parent company, Flagstar, which also owns El Pollo Loco, Quincy's steak houses, and Hardee's. Denny's is positioned between typical fast-food restaurants such as McDonald's and Burger King with lower prices, and casual dine-in restaurants such as Chili's and Applebee's that are more expensive but offer alcohol and atmosphere. It must therefore compete as a family dining experience, with good food, low prices, and excellent service. In 1993 and 1994, its operating income and revenues were falling due to its reputation as one of the most racist companies in the country. The parent company, Flagstar, was $2.3 billion in debt and had lost money for five straight years.

Denny's reputation as racist was probably well deserved. The first racial problems occurred on the West Coast, where black patrons were routinely treated differently than whites. They were slow to be seated and served. If there were too many blacks in a restaurant, especially at night, managers called for a "blackout" and were told to "close" the restaurant. There were almost no minority vendors; indeed, black vendors were often not even allowed to bid on contracts. There were no black managers at the level of director and above, which included all vice presidents and above, and only one black franchisee out of more than five hundred. In addition, employees routinely used the word "nigger" and other derogatory racist terms.

In May 1994 Denny's settled a California lawsuit and one filed by six Secret Service agents in Baltimore, Maryland, and by December 1995 it had paid out $54 million to 295,000 aggrieved customers, the largest public settlement in history. In addition, it agreed (1) to treat all customers equally, (2) to publicize its nondiscriminatory policies, (3) to train employees in diversity issues, and (4) to submit to having a civil-rights monitor supervise its diversity programs and investigate any further discrimination charges.

It also made major changes in its top management. In late 1993, Ron Petty was hired from Burger King to turn around Denny's image. In addition, in early 1995, Jim Adamson was hired as CEO for Flagstar, replacing its owner and founder Jerry Richardson. These two top managers made it very clear that discrimination would not be tolerated in any form. Adamson announced in his first employee meeting that any employee who discriminated would be fired. Within a few months eight of the top twelve managers left. Of the replacements, one was an Hispanic man and one was an African-American woman. The new program made diversity a performance criterion for all managers, required all staff to attend workshops on racial sensitivity, and used every opportunity to spread the message about nondiscrimination. New management training programs were created to give minorities faster access to executive ranks and franchise ownership.

Training was very powerful. All employees were required to attend, to participate fully, and to get the message, personally. The intent of the training was to change the attitudes, the perspectives, and the behaviors of employees, from the corporate office to the store employee. Training showed the right and the wrong ways to seat and serve all customers. Employees who resisted the training are fired! By 1996 all of the more than fifty thousand Denny's employees had completed the initial phases of training, and some were starting the second phase. Equally strong measures were developed for customers who do not want to be served by minorities. Such customers are kindly asked to leave the restaurant!

By mid-1996, the results were positive. The officers, vice president and above, were 11 percent minority, and of the directors at the next level below vice president, 20 percent were minorities. In addition, there were twenty-seven African-American franchisees. Financial performance has started to bounce back, too. Although forty-five company-owned franchises have been closed, revenues dropped only slightly in 1995. Store traffic is on the rise again, and sales per store are increasing. Purchasing contracts with minority firms total more than $80 million. Denny's, once a company in which racial discrimination was deeply entrenched, is now a model of multicultural sensitivity. Adamson expects that by 1998, this new organization will pay off financially.

Case Questions

1. In what what ways is Denny's changing its management style to create a multicultural organization?
2. What is it changing to increase its competitive advantage?
3. Given that many Denny's restaurants are located in small towns and rural areas, how do you expect customers to react to the changes?

sources: Faye Rice, "Denny's Changes Its Spots," Fortune, May 13, 1996, pp. 133-142; "Denny's Contributes $625,000 to United Negro College Fund," PR Newswire, January 16, 1997, p. 1165FTH035.

CHAPTER 3

Working with Diversity
Chubb Embraces Diversity in the Workplace

The Chubb Group is one of the largest insurance companies in the United States. Like many firms, Chubb offered one basic employment relationship to all employees. This relationship included standardized work schedules, benefit programs, and so forth. But like many corporations, Chubb has become interested in ways to more easily and more effectively provide for other needs of its employees.

The company conducted a survey of its employees in 1991 and found that 60 percent were in dual-career families. About 50 percent had either child or elder care responsibilities, and another 20 percent predicted that they would have such responsibilities within three years. Moreover, almost a third of all employees who left Chubb did so because they wanted a better balance between work and family.

Based on these survey results, Chubb became concerned about its ability to continue to recruit and retain high-performing employees. Given that it costs 97 percent of salary to replace an average insurance industry employee, careful management of turnover is a vital concern to managers. The cost for replacing managers is even higher, the average replacement cost running 150 percent of salary. Chubb had lost 50 managers in 1992 and 1993 for child-care reasons, at a cost of more than $3 million.

Recognizing that its workforce has become extremely diverse, Chubb decided to replace the standardized employment relationship with a variable one that provides ample opportunity for people to accommodate their own individual needs and situations. Among the first things the company did was to establish flextime working arrangements, shorter-work-week options, job sharing, and telecommuting programs. These changes represented a good first step, but Chubb investigated what other kinds of benefits employees might want. Two of the more recent ones they have added are greater flexibility regarding paid time off and a snowy day child care program.

The paid time off policy involves placing all of an employee's paid days off into one annual account. The time included vacation time, sick time, and personal days that can be taken for family illnesses, inclement weather, or other reasons. Employees can now choose to use these days however they feel necessary without having to differentiate between a day at the beach and a day at home with a sick child.

The snowy day child care program has also paid dividends for the company. Chubb's major operation is in the northeast, an area often hit by severe weather, especially in the winter. The snowy day child care program allows parents to bring children aged five to twelve to work when schools are closed. Professional caregivers are on staff to supervise the children from 8:00 a.m. to 5:00 p.m. in training and conference rooms. Activities provided for the children include arts and crafts, reading, physical play in the company's fitness center, and board games. Parents pay a one-time registration fee of $25 plus $15 per day per child. The fee includes morning and afternoon snacks. This cost essentially covers all the expenses of the program, so the company has no extra expenses for itself. Parents, meanwhile, report that they enjoy being able to bring their children to work when schools are closed and save their paid time off for other uses.

sources: Baxter W. Graham, "The Business Argument for Flexibility," HRMagazine, May 1996, pp. 104-110; Patrick J. Spain and James R. Talbot (eds.), Hoover's Handbook of American Business 1997 (Austin, Texas: The Reference Press, 1996), pp. 348-349.

Case:
Attitude Change at Delta

For years, Delta Airlines has been one of the flagships of the U.S. air industry. Delta's image has been one of clean planes, plush amenities, and distinctly warm and highly personalized service. Its employees have been treated exceptionally well, paid wages among the highest in the industry, and provided high levels of job security. As a result, the firm has had a proud and stable workforce, which was pleased to deliver high-quality service to Delta passengers.

Over the last few years, however, circumstances have changed dramatically. Low-cost competitors such as Valujet and Southwest Airlines have moved aggressively into the southeastern part of the United States, a region that Delta once dominated. Because these airlines have a very low cost base, they can charge significantly lower fares than those offered by Delta. As a result, cost-conscious travelers began to choose Valujet or Southwest, and Delta saw its market share begin to decline steadily. In 1994, executives at Delta launched a dramatic three-year cost-cutting program that they called "Leadership 7.5." The name of the program referred to the firm's goal of cutting operating expenses by a total of $2 billion a year. This would give the firm a cost basis of 7.5 cents per available seat mile. For comparison purposes, Southwest's cost basis is 7.07 cents.

One area of the organization that received major cost-cutting attention was the workforce. Delta reduced its workforce by approximately 80,000 employees. Many of these employees had 25 years or more experience with the organization. Their exit was facilitated through early retirement programs, extended leaves, and layoffs. At the same time, the airline hired outside contractors to replace many of the permanent employees. These contractors were expected to handle such things as airplane cleaning, maintenance and ground support, equipment, and baggage loading.

As a consequence of Leadership 7.5, Delta's profit picture has improved immensely. At the same time, however, its image has been tarnished and many employees feel resentful and bitter. For example, prior to Leadership 7.5, Delta maintained a full-time mechanic at each gate, ready to immediately solve any routine problem on an arriving aircraft. Now, the firm has one mechanic for every three or four gates. Thus, the individual mechanic must often move quickly between gates, and as a result, some flights are delayed and some problems go uncorrected.

To make matters worse, many of the new contract employees do not have the level of dedication and commitment to the organization of their full-time predecessors. For example, during the East Coast winter storms in 1995, many newly hired contract workers at the Atlanta airport, Delta's primary hub, simply didn't show up for work. To make matters worse, the airline's reduced staff of baggage handlers was totally overwhelmed by their job. At one point, over 5,000 bags were sitting in Atlanta but needed to be somewhere else. Meanwhile, in the airport itself, long lines of angry passengers stood impatiently waiting for someone to help them. In the old days, seasoned, loyal Delta employees would have gone out of their way to make these passengers feel better. At the new Delta, part-time employees who had no understanding of the organization's heritage stood in their place and often made curt or incorrect suggestions to people.

Even the on-flight service has been diminished. Delta has eliminated one flight attendant from virtually every aircraft it flies. The standard staffing for coach on a Boeing 727 is now two flight attendants, the Federal Aeronautics Administration minimum. Previously, Delta staffed the same airplane with three flight attendants. Similarly, in earlier times, cabin cleaning was performed by in-house crews who earned almost $8 an hour and who enjoyed full health benefits and travel privileges. Outside contractors now do the work, and many customers have started to complain about poor-quality cleaning, soiled carpets, and sticky tray tables.

Will Delta be able to overcome these problems? The firm's CEO acknowledges that the transition to Leadership 7.5 has been anything but smooth. Moreover, he acknowledges that the firm may have cut too deeply and eliminated people that it would have been better off retaining. Nevertheless, he says, the old days of high-cost benevolent operations are past. The firm has to remain cost-focused and bottom-line oriented if it is to survive.

Case Questions

1. Delta has apparently attempted to change the psychological contract it has with its workers. Critique Delta's performance vis-a-vis this process.
2. What role do you think that attitudes and perceptions may have played at Delta?
3. What workplace behaviors seem to have been most affected at Delta?

sources: "Cost Cutting at Delta Raises the Stock Price But Lowers the Service," Wall Street Journal, June 20, 1996, pp. A1, A8; Patrick J. Spain and James R. Talbot (eds.), Hoover's Handbook of American Business 1997 (Austin, Texas: The Reference Press, 1996), pp. 464-465.

CHAPTER 4

Mastering Change
Motivating Temporary Workers

One of the most significant changes sweeping American industry today is the dramatic increase in the number of temporary workers in many organizations. Interestingly, however, little is known about how the motivational profiles of temporary workers compare with those of permanent workers in an organization. Permanent workers apparently have a reasonably strong need for security, and they attempt to fill this need, at least in part, by seeking and then keeping a permanent job.

Temporary workers, on the other hand, appear to have a different motivational foundation. It is true that some temporary workers want a permanent job and only take temporary positions as a short-term measure, but some workers intentionally choose temporary employment over more stable, permanent jobs. Some workers attracted to temporary jobs think the additional flexibility of such positions outweighs the loss of job security. Some temporary employment agencies give workers considerable discretion over when they make themselves available to work. Of course, people who aren't available enough may lose their standing with the agency. But as long as a person can work reasonably often, he or she might very comfortably work three or four days a week and thus have more leisure time.

Some workers are also attracted to temporary work because it offers them variety. When people work permanently for a single employer, their job context may change very slowly or not at all. They go to the same place and do much the same work every day. But temporary workers get a wider variety of job experiences. They may spend three weeks in one company, two months in another, one day in another, and six months in another. In each organization the individual may be doing very different kinds of work.

Finally, temporary employment gives people a chance to balance personal requirements with work. For example, a single parent may need to work to support family, but want some time off to spend with the children. Again, temporary employment may offer greater flexibility than a permanent full-time job.

sources: Lucy A. Newton, "Stiff Competition for Talented Temps," HRMagazine, May 1996, pp. 91-94; "An Odd Time Clock at Time, Inc.," Business Week, June 17, 1996, pp. 95-96.

Working with Diversity
Motivating a Diverse Workforce

More and more companies are beginning to recognize the value of a diversified workforce. As outlined earlier in Chapter 3, companies that effectively manage diversity can achieve a number of strategic advantages over firms that don't. One key to the successful management of diversity is to retain and motivate qualified minorities that the firm presently employs. Given that different people are motivated by different things, it follows that the more diverse the organization's workforce is, the wider the array of motivating needs and processes will be. Three companies that have an especially good reputation for managing diversity are Polaroid, Dow Chemical, and Ameritech. Polaroid, for example, tries to ensure that qualified minorities are given jobs with high visibility and responsibility. The firm has also created an advocacy committee of senior black managers. This committee is charged with helping advance the career prospects of minorities in the firm.

Dow Chemical has implemented plans to establish ties with minorities as early as high school. They believe this will enable them to attract these students to their organization when their education is complete and make them more loyal employees who are likely to remain in the organization. Ameritech, like Polaroid, also has an inside group of managers whose responsibility is to monitor corporate policies and to work with community groups to both attract and retain minority employees.

sources: "Diversity: Beyond the Numbers Game," Business Week, August 14, 1995, pp. 60-61; Patrick J. Spain and James R. Talbot (eds.), Hoover's Handbook of American Business 1997 (Austin, Texas: The Reference Press, 1996), pp. 150-151, 502-503, 1176-1177.

Case:
Motivating High-Tech Employees

Some observers stereotype people from California as being somehow different from those in the rest of the world. This stereotype is totally inaccurate in most ways, but it is true that at least one segment of the population of California is distinctive. That segment is the people who work in the so-called Silicon Valley area, in the high-tech companies that push the frontiers of technological and information breakthroughs. Consider the typical day of one such worker, Collette Michaud. After a recent twelve-hour day at work, Michaud treated herself to a 9:00 p.m. workoutùand then went back to work. This is her normal routine, six days a week, for months at a time. Michaud works as a project manager for Lucas Arts Entertainment, overseeing the creation of CD-ROM computer games. All told, her typical workweek is around 100 hours. Like most of her high-tech comrades in the Silicon Valley, she doesn't punch a time clock. She simply works when she wants to, which appears to be most of the time.

What could conceivably motivate a person to live this sort of a lifestyle? A number of unique opportunities converge in Silicon Valley to provide a useful motivational framework for people with certain inclinations. One common motivator for people in this industry seems to be money. Today, over a third of all high-tech companies give stock options to employees, compared to less than a twentieth of all other companies. Thus, more than in any other industry, the potential exists to make a lot of money in a relatively short time. And even if a person doesn't get rich, the basic compensation package is very attractive. For example, software and semiconductor workers in the Silicon Valley average around $70,000 a year, compared to $27,000 a year for the average U.S. worker.

Another important motivator for people in this industry may be pure love of what they do. Although the money is no doubt important, these employees acknowledge that they would not work as hard as they do solely for money. Indeed, many equate high-tech work with that of a musicianùthey derive so much intrinsic pleasure from the work that the job itself is the primary attraction.

A third motivator in the industry seems to be the chance for high visibility. These employees have a much higher chance than others of becoming well-known to customers. For example, when Lucas Arts releases the CD-ROM game that Collette Michaud is supervising, tens of thousands of consumers will be buying the game and playing it on their computers. And her name will be featured prominently in the credits, in much the way that a movie producer's name is shown in theaters.

Peer pressure and acceptance are also important motivators. Everyone in the industry works a lot of hours, so that sort of work schedule has become the norm for the entire industry. When people go to work they know that they are going to work long hours; it is simply accepted, and they do it because everyone else does. Those who don't may be ridiculed and scorned by their peers.

Finally, these jobs offer autonomy. Indeed, many current management fads, such as empowerment, were really born in the Silicon Valley. Companies such as Hewlett Packard and Apple Computer have basically thrown away most of the command-and-control orientation of traditional organizations. Employees don't punch a time clock, they don't have to maintain a certain prescribed schedule, and they don't have to adhere to corporate dress codes. Instead, they can come and go as they like; they can bring their pets to work; they can work out of their home. In short, they have considerable autonomy to work where, when, and how they choose. To many workers today, this flexibility is very attractive.

Case Questions

1. How does Maslow's theory of motivation explain the behavior of Silicon Valley workers?
2. How does Herzberg's dual-structure theory explain it?
3. Do the needs for achievement, affiliation, and power play a role in motivating these workers?

sources: "Sleep and a Social Life Take a Back Seat," USA Today, April 3, 1996, pp. 1A, 2A; "Young and Tech-Savvy Bypass Madison Avenue," USA Today, June 10, 1996, pp. 1B, 2B.

CHAPTER 5

Case:
New Work Schedules at Xerox

Like many large and successful companies, Xerox Corporation has traditionally managed itself in a relatively bureaucratic fashion. One indication of the company's bureaucracy was its rigid adherence to a traditional eight-to-five work schedule. Employees had often made overtures to management about creating more flexible work schedules and letting some employees work alterna- tive hours, but most managers refused. Recently, however, Xerox has changed its stance and aggressively examined work schedule flexibility. Interestingly, Xerox changed not in response to employee request, but because managers saw it as a way to improve productivity.

To combat foreign competition, Xerox recently adopted a comprehensive set of very tough productivity standards and goals. To meet them, managers recognized that they needed to look for new, radical, and fundamentally different ways of operating. They concluded that one key to success was to create flexibility in the workforce while simultaneously enhancing workforce motivation and energy. And they saw alternative work schedules as an important ingredient of the prescription.

One test site for the new program was Xerox's administrative center in Dallas. The center is headed by Jim Edwards, who was once one of the most outspoken critics of flexible work schedule and a firm proponent of the standard eight-to-five work schedule.

But like other managers at the company, Edwards recognized that bold new steps were necessary for Xerox to remain productive, and he bought into the work schedule flexibility plan wholeheartedly. In announcing the plan, he called a facility-wide meeting and told all the workers that they could henceforth set their own hours. A high proportion of the workers at the Dallas facility were single parents and dual-career couples who had child-care and family scheduling difficulties. They were very receptive to the new strategy. Within days almost half of the workforce in Dallas had communicated to their boss that they wanted to go onto the flexible plan. Not surprisingly, the program had some rough edges at first. Many middle managers and first-line supervisors were uncomfortable with their employees' new flexibility. Some were also concerned about coordination issues. Indeed, some managers began to meet once a week or more simply to discuss problems and share solutions regarding the new arrangements.

About a year after the plan was implemented, a number of criterion variables were assessed to evaluate the plan's effectiveness. To Xerox's pleasant surprise, the plan was a resounding success. Employees were performing at a higher level than before and coordination problems had been minimized. Absences had dropped by a third, and workers' surveys demonstrated that teamwork had improved and job satisfaction had increased. An interview program with a number of employees underscored the positive feelings people had about both the company and the program. Xerox has declined to make public its performance concerning the original productivity goals that set the program in motion. However, the company feels so positive about the flexibility program itself that it has systematically extended it to virtually every facility it operates. On that basis alone, it appears that the new approach to work scheduling at Xerox has been a clear success.

Case Questions

1. Why do you think the new work arrangements at Xerox have been so successful?
2. Why does a firm have to be cautious and move slowly during a transition from a traditional to a flexible work schedule arrangement?
3. Why do you think so many firms still adhere to traditional work schedules?

sources: "More Companies Experiment with Workers' Schedules," Wall Street Journal, January 13, 1994, pp. B1, B6; Patrick J. Spain and James R. Talbot (eds.), Hoover's Handbook of American Business 1996 (Austin, Texas: The Reference Press, 1995), pp. 1566-1567.

CHAPTER 6

The Most Stressful Jobs in the U.S.

How selected occupations ranked in an evaluation of 250 jobs*

*Among the criteria used in the rankings: overtime, quotas, deadlines, competitiveness, physical demands, environmental conditions, hazards encountered, initiative required, stamina required, win-lose situations, and working in the public eye.

source: Reprinted by permission of Wall Street Journal, - 1996 Dow Jones & Company, Inc. All rights reserved worldwide.

Working With Diversity
Fighting Harassment at Smith Barney

One of the most stressful situations people can find themselves in is to be the target of some form of harassment at work. A recent scandal at Smith Barney brings to light the effects this sort of problem can have on people. The scandal broke in May of 1996, when a group of current and former female Smith Barney employees filed a class action lawsuit in U.S. District Court of New York against Smith Barney and a former Smith Barney branch manager named Nicholas Cuneo.

The women alleged that the firm was guilty of widespread discrimination and harassment against women. Specific charges included paying women less than male counterparts, denying them promotions, and demoting them after they returned from maternity leave. The former branch manager, Cuneo, allegedly kept a gun in his desk that he occasionally took out and used to intimidate employees. The result of these actions, according to the complainants, was that the Smith Barney office maintained an atmosphere hostile to women. Cuneo, in particular, was characterized by the complainants as a bully who specialized in intimidation, retaliation, and humiliation.

One of the complainants, Pamela Martens, described how Cuneo created and maintained an office climate resembling a "fraternity house" environment. For example, Cuneo allegedly routinely took male brokers on golf outings while systematically excluding women brokers. He also hosted numerous drinking parties in a basement office. Cuneo was also said to have routinely used vulgar and foul language in meetings, often referring to women in the office in derogatory terms.

Martens kept her mouth shut for ten years and developed a thriving practice at Smith Barney. But in August 1994, she felt that she could take no more. Cuneo had called a meeting of twenty-four female sales assistants and exhorted them to volunteer for his favorite charity. He suggested that the women who refused to do so could not expect raises or be granted time off for sick relatives or funerals. Martens protested and wrote a letter to the company's CEO. After she hired an attorney, the firm placed Cuneo on a leave of absence and shortly thereafter announced his retirement. Two days later, Martens herself was fired for failing to attend a meeting. As she discussed her situation with other women in the firm, she discovered that they too had felt intimidated and harassed, and they agreed to participate in the class action lawsuit.

sources: "Smith Barney's Woman Problem," Business Week, June 3, 1996, pp. 102-106; "Bias Lawsuit Spotlights Brokerages," USA Today, November 18, 1996, p. 6B; "Smith Barney Served Amended Lawsuit," Los Angeles Times, October 19, 1996, p. D2.

TALKING TECHNOLOGY
Cell Phones Create Stress

One of the most ubiquitous devices in organizations today is the cellular telephone. Only a few years ago, cell phones were a rarity. Now, however, walking through any large airport or business center, the observer sees dozens of people sitting in chairs, leaning against the wall, or strolling around as they conduct business on their cell phones.

The advent of cell phones has given many managers an opportunity to become considerably more productive. It's easier for them to make telephone calls on the road, to stay in touch with clients and customers, and to maintain contact with their offices. At the same time, cell phones pose certain problems for many busy executives. Specifically, because these executives are always available for contact, they have less "down time" and less opportunity to "disconnect" from their work.

In the past, for example, managers had free time when they were traveling to and from work or when they were away from their offices at lunch. Now, many are readily accessible during these times because of their cell phones. Thus, what might have once been a nice one-hour break for lunch in the middle of the day may be a continuation of work as the individual makes and receives telephone calls while at the corner deli.

The astute manager who wants to regain some control over this aspect of his or her work life really has more control than might be expected. Simply put, all the manager has to do is turn the cell phone off. Obviously, if the individual is expecting an urgent telephone call, taking the cellular phone to lunch might not be a bad idea. But if nothing pressing is on the horizon, perhaps the manager should simply leave the phone behind and have a few minutes of rest from the ongoing demands of the executive's life.

sources: "Stress Busters for Busy Execs," Fortune, July 8, 1996, p. 37; "Breaking Point," Newsweek, March 6, 1995, pp. 56-61.

CHAPTER 7

The Business of Ethics
Finding New Ways to Say, "You're Fired"

How many ways can you say, "You're fired"? Companies all over the United States are laying off employees to reduce the cost of doing business. How to lay employees off is a problem; so is deciding what to call it. In addition to the common term "downsizing," euphemisms currently in use in U.S. businesses for the systematic dismissal of employees include force management program, release of resources, involuntary separation from payroll, career-change opportunity, involuntary severance, career-transition program, right sizing, reshaping, reduction in force, elimination of employment security policy, repositioning, schedule of adjustments, focused reduction, normal payroll adjustment, and strengthening of global effectiveness.

One company that is really having trouble communicating about layoffs is AT&T. In January 1996, AT&T announced plans to cut 40,000 jobs, in addition to the 8,500 announced earlier. Considering that they employ almost 300,000 people worldwide, this represents about 16 percent of its workforce. The normal attrition rate averages 8 to 10 percent per year. The stock market seemed pleased with the cost-cutting announcement, and the company's stock price increased. However, negative publicity about the layoffs soon brought the price back down.

The communication problem arose because what the company called "voluntary" differed from what the laid-off employees called "voluntary." Evidently, the company termed it "voluntary" when an employee accepted a buyout that included several months' worth of severance pay and a bridge payout for up to two years until normal pension benefits would take over. Initially, the company said that as many as 30,000 of the layoffs would be involuntary. Later, the company said that only 18,000 would be involuntary and that as many as 12,000 of the job losses would be "voluntary" via buyout. But consider the managers' procedure: They would call people into their offices and urge them to accept the buyout or risk getting nothing in the upcoming layoff. Is that voluntary? Others were told they were not among the employees that AT&T company was going to invest in in the future. And thousands were not given the chance of taking the buyout; they were just laid off. Another 4,000 jobs were lost by selling or scrapping certain business areas. Employees in those business areas would not be retained by the company, although they might have jobs if buyers were found. Is that voluntary? In addition, the company said that perhaps up to 6,000 jobs could be found for those laid off if the company really looked hard. How promising does that sound? And how does an employee reconcile the layoffs with the fact that the company usually hires 20,000 new employees each year?

sources: John J. Keller, "AT&T Tries to Put New Spin on Big Job Cuts," Wall Street Journal, March 18, 1996, pp. B1, B6; Rose DeWolf, "Book Condemns Deceptive Doublespeak of 'Rightsizing' Businesses," Knight-Ridder/Tribune Business News, July 24, 1996, p. 7240305; Richard A. Kuehn, "Industry Doublespeak," Business Communications Review, April 1995, p. 80.

CHAPTER 8

WORKING WITH DIVERSITY
Building a Team of Women May Be Different from Building a Team of Men

The women's soccer team at the University of North Carolina at Chapel Hill has compiled a record that most athletic teams in any sport at any level would be jealous of. Since 1979 their record is 348-10-10 with nine straight NCAA championships. The coach, Anson Dorrance, was an outstanding soccer player during his playing days at North Carolina, but his knowledge of the techniques of the game is not the reason for the team's outstanding success. Knowing that motivation is the key to building a winning team, at first he tried traditional motivational techniques, which he expected to work based on his experiences with men. The traditional "rah-rah" stuff and macho monologues that great coaches are known for seemed to fall on deaf ears and were met with blank stares from his first women's team in 1979.

Over the years he has found that women respond to efforts to build their self-confidence and to developing relationships with their fellow players and the coach. He builds players' self- confidence by putting the team through grueling practices and keeping statistics on player performance on each drill during every practice session. He wants the players to know that no opponent could possibly have outtrained them.

In his experience, women's teams want to know the leader on a human and personal level, whereas male teams respond to a leader's competence and strength. Women's competitiveness differs from men's in that men's teams will strive to beat any opponent, whereas women may not compete as hard against someone they like. In other words, the internal bonds among the team members must be extremely strong so that the women will go to any length to avoid a loss for their friends, their teammates. In addition, women's teams seem to work hardest when they have a personal relationship with the coach. Therefore, in addition to drills on technical skills and conditioning, Dorrance spends a lot of time building the personal relationships among the team members and the coach. The tight relationships enable the team to achieve at record levels.

sources: Kenneth Labich, "Elite Teams," Fortune, February 19, 1996, pp. 90-99; "Football Comes to Notre Dame," Sports Illustrated, October 14, 1996, p. 14; "Brought to Heel," Sports Illustrated, October 10, 1994, p. 16.

A General Model of Group Dynamics

This model serves as the framework for this chapter. In phase one, the reasons for group formation determine what type of group it will be. In the second phase, groups evolve through four stages under the influence of four performance factors. Finally, a mature group emerges that interacts with other groups and can pursue organizational goals; con- flicts with other groups sometimes occur.

Task Variables and Group Composition

source: Based on discussion in Bernard M. Bass and Edward C. Ryterband, Organizational Psychology, 2nd ed. (Boston: Allyn and Bacon, 1979). Reprinted by permission.

Phases of Team Implementation

Implementation of teams in organizations is a long and arduous process. After the decision is made to initiate teams, the steering committee develops the plans for the design team, which plans the entire process. The goal is for teams to become self-managing. The time it takes for each stage varies with the organization.

CHAPTER 9

The Business of Ethics
Decisions at The Limited, Inc. Go Awry

Pamela McConathy's career was an unqualified success story. She had risen to the near top of the corporate ladder at The Limited, Inc., the nation's largest specialty apparel retailer, through a combination of hard work and being at the right place at the right time. At age forty she was the protégée of Vice Chairman Michael Weiss, president of the Lerner New York division of The Limited, Inc., and was making more than $1 million a year. At age forty-one she was out of a job.

How did this happen? Let's follow the chronology of events.

In the early 1990s, Pamela McConathy had been the general merchandising manager at the Columbus, Ohio, headquarters of Express, one of The Limited, Inc.'s four divisions, and was working directly for Weiss. In 1993, Weiss moved to New York to become the vice chairman of The Limited, Inc., and McConathy became head of Express. Also in 1993, McConathy began dating Barry Goodman, president of Channel, a large New York supplier of fabric to the apparel industry. Goodman was also a good friend and neighbor of Weiss. Both men lived on the same floor of a Manhattan apartment building. For years, before Weiss headed Express, the company bought fabric from Channel. During Weiss's tenure at the helm, however, the percentage of fabric that Express bought from Channel increased significantly. This continued while McConathy ran Express-and while she dated Goodman.

In 1994, McConathy and Goodman decided that they would marry and that after the wedding McConathy would leave her job at Express and move to New York. The Limited, Inc. did not want to lose a top executive. So when Weiss became vice chairman of The Limited, Inc. McConathy was made head of the Lerner of New York division, a post she assumed in January 1995, the same month she and Goodman were married. McConathy was successful at the Lerner of New York division, as she had been at Express. She took credit for turning around the division's operations, which prior to her arrival had been experiencing falling profits. In the fall of 1995, Express needed to acquire more than 1 million yards of rayon-wool crepe. Express chose to purchase the material from Channel instead of one of Channel's competitors, even though the competitor could have provided Express with the same quality material and the same delivery date as Channel, but at a $0.50 per yard cheaper rate. In another transaction, Channel provided millions of yards of "mystery crepe" to Express for the inflated rates of $5.00, and more, per yard. One garment worker called the material "the worst fabric I've ever seen in my life," and others had additional unflattering comments about it. At this time, as Express was increasing its purchases from Channel, The Limited, Inc. was cutting back on Channel merchandise. The low-quality Channel fabric had caused problems for The Limited stores. At this time also, two Express financial officers questioned the purchases from Channel.

In July 1995, the company initiated a review of the company's code of business conduct and certain conflict of interest issues arising from McConathy's marriage to Goodman. Leslie Wexner, chairman of The Limited, Inc., reported that no misconduct had occurred and that there was no adverse impact on the business resulting from McConathy's relationship with Goodman. Nevertheless, on January 11, 1996, Wexner an- nounced that McConathy had resigned.

Using Channel as a vendor may have been acceptable when McConathy was at Express but was it less acceptable once she was head of the Lerner New York division? What was the difference? Was there a conflict of interest? Many questions surround her rapid departure.

sources: Thomas Jaffe and Esther Wachs Book, "A Thin Coat of Whitewash?" Forbes, April 8, 1996, pp. 44-47; Thomas Jaffe and Esther Wachs Book, "Garmentality," Forbes, April 8, 1996, pp. 45-46; and Sharon Edelson, "The Limited Juggles Three Division Heads," Women's Wear Daily, January 25, 1995, p. 8.

CHAPTER 10

World View
International Ownership Feuds Between Airlines

Northwest Airlines almost went bankrupt in 1989, but two Americans, Alfred A. Checchi and Gary L. Wilson, got together a group of investors who put up $40 million and recruited KLM Royal Dutch Airlines to put up $400 million to rescue it. The two airlines began operating in a cooperative fashion by combining routes, capitalizing on Northwest's strengths in the upper Midwest of the United States with routes in the Pacific region, and KLM's strength in Europe, based in Amsterdam. After nearly going bankrupt again in 1992, the cooperation continued and both sets of investors have made millions. Northwest reported 1995 profits to be $392 million. The two carriers merged their logos in a single seal on all of their airplanes and promotional material.

In 1996, however, KLM sued Northwest because Northwest adopted a plan that would prevent KLM from increasing its 20 percent holding. KLM is also suing to block a change in the stockholder's agreement that eliminates its veto power over major sales of assets. Wilson and Checchi claim that KLM is slowly trying to take over the American carrier. (Foreign ownership is expressly limited to 25 percent by U.S. law.) In addition, KLM's management has tried (unsuccessfully) to get Checchi and Wilson to resign. In many ways this represents a typical clash of cultures. The Dutch are characterized as unpretentious, plodding bureaucrats who collect modest salaries and stay out of the media spotlight. The Dutch emphasize operating expertise rather than financial wheeling and dealing, and they consider themselves experts in the airlines business with prudent long-term investments.

Checchi and Wilson, on the other hand, live plush, public lives in Southern California, associate with glamorous movie stars, and are regularly in the news. KLM President Pieter Bouw claims that Wilson and Checchi are not really airline people and do not know what it takes to run an international airline. He claims they are simply investors who move from industry to industry buying and selling to make money, rather than investing for the best future of the airline.

This culture clash may not continue for long. Bouw still wants Checchi and Wilson out but might sell the shares that KLM owns of Northwest. Checchi and Wilson do not seem ready to sell or step out of the picture as long as the airline is making money.

sources: Shawn Tully, "The Alliance from Hell," Fortune, June 24, 1996, pp. 64-72; Susan Chandler, "KLM and Northwest: Rumble in the Cockpit," Business Week, March 11, 1996, p. 47; James Ott, "KLM/Northwest Alliance Productive but Troubled," Aviation Week & Space Technology, June 10, 1996, pp. 27-28; Adam Bryant, "Is Turbulence on Horizon at Northwest?" New York Times, April 9, 1996, p. C1.

CHAPTER 11

Working with Diversity
Tough Decisions at Beatrice

Back in 1987 Reginald Lewis made headlines when he became the first African-American to head a major corporation. Lewis was the leader of a group that bought Beatrice International for $1 billion through a leveraged buyout. Beatrice is relatively unknown in the United States, but it is a worldwide competitor in the food and food services businesses. For example, Beatrice is the leading seller of potato chips in Ireland and one of the top sellers of ice cream in Spain. The company also owns the largest supermarket chain in Paris. During his years at the helm of Beatrice, Lewis guided the firm toward ever higher levels of growth and international success. While doing so, he himself enjoyed the perks of high-flying corporate success. For example, he maintained an office in Paris simply as a place to work from when he traveled there for short periods on business. He also maintained a fleet of limousines and a private jet and enjoyed dozens of other perks reserved for the corporate elite. These practices were not criticized because of the successes he enjoyed while at the helm.

In 1993, Lewis died unexpectedly. Ownership of the firm fell to his wife, Loida Lewis. Loida Lewis, a Filipino, had no management experience; her expertise was in immigration law. Most people at the firm expected her to remain on the sidelines and to leave the day-to-day management of Beatrice to its current executive team. But she had different plans: She announced that she was stepping in and would run the firm herself. Most observers expected her to fail miserably, and many of the top managers remaining with Beatrice thought it was only a matter of time before she saw the folly of her ways and decided to step aside. But Lewis was savvy enough to recognize that Beatrice was not in as good shape as people imagined. Its sales and market share were growing, but so was its debt, and the firm's profit margins were not nearly what they should have been. When she took over, she immediately signaled that there would be dramatic changes in the way the company was managed. One foundation of her strategy was a new emphasis on cost-cutting and tighter operations. Among her first actions was to sell Beatrice's jet and fleet of limousines and to move the company into a smaller and less expensive office space. She also fired many of Reggie Lewis's deal-making friends and took over the day-to-day reins of the company's operations herself.

In perhaps her most controversial move, Loida Lewis also suspended most corporate giving. Reggie Lewis had been a big supporter of dozens of African-American charities and cultural groups and made lavish donations to most of them. Loida Lewis, on the other hand, felt that these actions were not good business, at least in the short term, and eliminated most of them.

It's too early to know whether this dramatic change in leadership style will pay dividends in the long run, but Wall Street experts have begun to take notice of Loida Lewis, and many now believe that she's doing things that Reggie Lewis should have done years before. Indeed, the same experts have come to acknowledge, perhaps grudgingly, that Loida Lewis knows what she's doing and is the right person for the job.

sources: "A Woman's Touch," Time, October 28, 1996, pp. 60-62; "Women at Top Still Are Distant from CEO Jobs," Wall Street Journal, February 28, 1996, pp. B1, B8.

CHAPTER 12

Mastering Change
New Man at the Top of BankAmerica Corporation

David Coulter was named chief executive of BankAmerica Corporation effective on January 1, 1996, and he wasted little time delivering a message to the troops: team work and 100 percent commitment. The change in style was what the board expected from the new manager, who was known for his personality and people-oriented style. The selection of Coulter as the new CEO was something of a surprise, though, as the expected successor was passed over. This shift in the executive suite may reflect the need for a corporate shift toward more emphasis on customer service. It was quite a transformation for a bank previously known for its ponderous style, slowness to change, and its bureaucracy, which was often blamed for its inability to react as quickly to market developments as its smaller, more nimble competitors. This was not an emergency change critical to the bank's survival. On the contrary, Bank America is the second largest bank in the United States and has recently been regarded as one of the best banking operations in the country. The bank's profits were up by 24 percent from 1994 to 1995 and it had over $230 billion in assets in 1995. However, during 1995 its earnings were only $1.15 per $100 of assets, compared to $1.59 and $1.83 for its closest rivals.

In addition to a teamwork orientation, major changes are in store for the retail banking operation, where delivering financial service to customers is so important. With automated tellers, computers, and telephone systems revolutionizing the industry, retail banking had been split into two divisions, product development and branches (sales), each with its own vice chairman reporting to the CEO. This arrangement restricted collaboration between the product staff and the sales staff.

Recently Coulter combined the two divisions into a single unit, with the former branch (sales) groups reporting to the former head of the product development group. This single unit should enable the retail banking operation to focus on developing new products with technology for its expanding customer base in an increasingly competitive marketplace. Putting the two together will require everyone involved to focus on the team and on commitment to the customer, as Coulter has suggested is necessary if the bank is going to overcome the laggard customer service that resulted from its tremendous growth in the early 1990s.

sources: Sam Zuckerman, "New Man Atop the Pyramid," Business Week, January 22, 1996, pp. 76-77; John Authers, "BankAmerica to Restructure," Financial Times, December 13, 1996, p. 29; Saul Hansell, "BankAmerica to Cut Jobs and Shut California Offices," New York Times, December 13, 1996, p. C2.

CASE:
Boeing Becomes a New Company

Since 1994, Boeing began the process of remaking the company for the next round of aircraft purchases. Every part of the company is involved, from engineering to manufacturing. The focus of the change is that Boeing is a manufacturing company rather than an engineering and technology company. Due to changes in the air travel business, the major commercial airlines are demanding lower airplane prices and significantly lower operating costs. Airbus continues to be a fierce competitor, so Boeing must meet the competition early and on every front. (Boeing bought McDonnell Douglas in 1997.)

It is not as if the company is in financial trouble. Its new model 777 is generating lots of orders, plans are in the works for a new supersonic and another jumbo jet for commercial sales, and several new project possibilities exist for the defense division. The new 777 was designed completely on the computer so that designs went straight from the designers' computers to the machine tools for manufacturing. It can carry as many as four hundred passengers, fifty more than the comparable Airbus 330. It is 15 percent more fuel efficient, and can fly over eight thousand miles nonstop. Orders are coming in faster than for any other new plane, although its price is pretty steep: $120-$150 million, depending on interior layout.

Boeing's new CEO, Philip Condit, must continue the reductions in cycle time and cost cutting started by his predecessor, Frank Shrontz, because airlines are making their purchase decisions differently than in the past, even choosing in some cases to refurbish older planes rather than buy expensive new ones. The changes started with Condit and his team of presidents of the divisions of commercial planes, defense and space, and computer services. This group differs notably from its predecessors in that they have met together for several years to discuss the good and bad things about each other's divisions and the future of the company. They all embrace the new togetherness theme as the primary means through which the company will be able to reduce cycle times, improve delivery times, cut product development time, and reduce total costs.

In the former structure the design and manufacturing groups were separate. Design and engineering groups would design the planes and then give the plans to manufacturing to build. When problems existed in the design, they would be sent through the hierarchy back to engineering for correction. Under the new structure, comprehensive design-and-build teams include members of all groups involved. Therefore, planes are originally designed to meet customers' needs, are easier to build, and corrections are made faster. For example, previously when tool builder Tony Russell had a problem with an engineering design or specification, he would have to go to his supervisor and the problem would be shuffled through to engineering. Now he goes directly to the engineering and design group, gets the problem solved, and gets back to work with the correct design. This type of revision in the process has helped reduce the product delivery time from eighteen to ten months. The team approach and working-together ideas were used extensively on the 777. Some teams included tool makers, designers, manufacturing workers, suppliers, and even customer represen- tatives. Contrary to past procedures, workers on the line were allowed to change how planes were built, which has significantly decreased costs. Condit has instituted 360-degree performance reviews in which managers are evaluated by their subor- dinates, their peers, and their own supervisors to improve understanding of how they are doing from all perspectives. Employee empowerment is increasing at all levels. Condit and his team are having quite an impact throughout the company.

Case Questions

1. The new way of organizing at Boeing most resembles which of the classical types of organizing?
2. How have responsibility and authority been altered under Condit's new approach?
3. Describe the new ways of organizing at Boeing in terms of the configurational and operational aspects of structure. Draw an organization chart for Boeing.

sources: Kelley Holland, "New Hands on Boeing's Controls," Business Week, March 11, 1996, p. 40; Michael J. Parks, "How Boeing Hatched Its High-Tech Bird," Business Week, January 22, 1996, pp. 18-19; Seth Lubove, "Destroying the Old Hierarchies," Forbes, June 3, 1996, pp. 62-71; Alex Taylor, "Boeing: Sleepy in Seattle," Fortune, August 7, 1995, pp. 92-98; Dori Jones Yang, "When the Going Gets Tough, Boeing Gets Touchy-Feely," Business Week, January 17, 1994, pp. 65-67.

CHAPTER 13

The Business of Ethics
The "Astra Way" in Astra USA

Astra USA is the U.S. subsidiary of the Swedish Astra AB, one of the world's largest pharmaceutical companies, with 1995 sales of $5.3 billion. Astra USA sales have been growing steadily, to $323 million in 1995; it has 1,500 employees, with headquarters in Massachusetts. Its products include Xylocaine, a local anesthetic, and Rhino- cort, an allergy medication. The head of the U.S. subsidiary, until recently, was President and Chief Executive Officer Lars Bildman, a Swedish-born, twenty-two-year veteran of Astra.

Astra USA was in the news in the spring of 1996 when it faced numerous charges of sexual harassment. Business Week reported more than a dozen cases of women who claimed unwelcome sexual advances or expectations of sexual favors from middle managers and executives, including those in top management. As disturbing as these revelations are regarding the treatment of women within the company, it is also interesting to understand how this type of culture was created and maintained throughout the organization.

The cultural training started at the hiring process. Attractiveness was one of the female hiring criteria. If hiring managers could not visualize having drinks and partying with a potential employee, she probably would not be hired. Once hired to the high-paying sales positions, recruits were put through a rigorous nine-week training program at a hotel near company headquarters where trainees learned the "Astra Way," which included courses in sales instruction, anatomy and physiology, and memorization of sales presentations. Rules regarding dress and dinner etiquette were communicated and strictly enforced. The program has been described as militaristic, demanding, and domineering. In addition, the trainees were told about the importance of working hard and playing hard, especially when it comes to socializing with customers. On open-bar nights at the hotel, managers would join the students, paying special attention to the females. Evidently, the managers' expectations were made quite clear to the female students and reinforced at sales meetings three times a year.

Employees who complained about the unwanted attention, both males and females, were not promoted or were fired for "poor performance." Some formal complaints were filed against the company but settled out of court, the complainants promising silence. Offended employees feared for their jobs both with Astra and with other companies in the industry. They feared that if other companies heard they had been troublemakers, they might not be hired anywhere. Male managers throughout the company were intimidated into altering their behavior toward certain employees favored by top management. Others seemed to go along with top management and began acting the same way. The attitude permeated the company. The cultural training had been effective. Three top managers, including Mr. Bildman, have been fired or suspended and many lawsuits are pending. The company is pursuing its own investigation, too.

The company is trying to remake the company's culture after the scandal, using sexual harassment training programs, new initiatives by the human resource department, and a newly created work-family task force designed to help employees balance their work and family lives. One major focus is to redefine the "Astra Way" that was at the heart of the earlier problems. The company is also developing programs aimed at moving women and minorities into more senior positions. Managers and employees agree that the culture of harassment must be changed and that significant cultural change will not arrive overnight.

sources: Mark Maremont, "Abuse of Power," Business Week, May 13, 1996, pp. 86-98; Mark Maremont, "Aftershocks Are Rumbling Through Astra," Business Week, May 20, 1996, p. 35; "The Cult of Astra," Business Week, May 13, 1996, p. 166; Diane E. Lewis, "Sex-Harassment Lawsuits Push Astra Officials to Change Firm's Culture," Knight-Ridder/Tribune Business News, December 4, 1996, p. 1204B0944, - The Boston Globe.

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