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Roberta arrived at the office early on Monday morning and found several employees
waiting for her. They were even more angry and upset than she had anticipated from
the phone messages.
“Let me tell you what happened,” Dolores exclaimed. “One of Hiberley’s assistants
herded Mary Jo and Eugene into your office and told them that Friday was their last
day. Eugene asked why and the jerk wouldn’t even answer his question. He just said
that the layoffs were across the board and someone had to go.”
“Eugene was a good worker, and Mary Jo was getting better,” Kent broke in. “I just
don’t understand. We’ve got the smallest staff in the company for our responsibilities,
and we are definitely the most productive. Apparently that doesn’t matter when the
chips are down. We got the same cuts as everyone else, 20 percent across the board.”
“It’s top management’s fault that we’re in this mess,” Andrea commented bitterly. “If
they hadn’t built that new plant and they hadn’t bought M.C., Inc. we would have plenty
of money to weather this slow period. They were stupid and they’re making us pay for
it.”
Amanda walked into the office while Andrea was talking. It was clear that she was
close to tears. “Roberta, can I talk to you right now in your office please?” She turned to
the other employees. “Excuse me, I need to talk to Roberta now.”
The employees looked uncomfortable and upset, and nodded understandingly as
Roberta ushered Amanda into her office. The tears started rolling down Amanda’s face,
“I’m sorry, I’m so ashamed,” said Amanda.
“There’s nothing to be embarrassed about,” Roberta said. “A good cry every now and
then is healthy and normal.” Roberta handed her a tissue, “Now, what’s the problem.”
Amanda answered. “You know that my mother has been very ill and I took last
Wednesday through Friday off to be with her. When I returned home late Friday night,
there was a message on my answering machine from someone who claimed to be an
assistant of Hiberley’s. He said that my job was eliminated. Since I was off Friday, I
needed to come by this morning to pick up my personal things. Roberta, this must be a
cruel joke. It just doesn’t seem possible. You told me just two weeks ago what a great
job I was doing. I know that I was a lot better at it, even after only 6 months, than others
who have been here for years. Since Ed got laid off last month, I really need this job.
Tell me it isn’t true. Please, tell me I have a job here at HRI.”
Roberta handed Amanda another tissue. “Amanda, I don’t know anything about this.
The other employees told me what happened to Mary Jo and Eugene – that their jobs
were eliminated. That’s what the others were telling me about when you arrived. I’ve
been out of town myself and don’t know anything about it. If you’ll sit here for a few
minutes, I’ll see what I can find out from Bob Hiberley.” As Roberta left her office, she
sent Dolores in to stay with Amanda.
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Mr. Hiberley’s secretary told Roberta that he was off-site in a meeting for the rest of the
day. “How could he be in an all-day meeting the Monday after such a huge and
unexpected layoff,” Roberta fumed. “He had to know that people would have questions
and problems.”
“The meeting had been set for several weeks,” his secretary replied. “Besides, what’s
the problem? The people who lost their jobs are gone by now.”
Roberta walked out and went to Sally’s office. Sally was the assistant director of
Human Resources and a good friend of Roberta’s. “Do you have a minute? What’s
happening around here?” Roberta asked Sally, plopping into a chair in Sally’s office and
closing the door.
Sally explained that top management decided to follow the consultants’ suggestions and
eliminated 20 percent of the workforce across the board in all departments. “They used
some goofy formula for deciding who to eliminate,” Sally explained. “It has created
problems in more than one department, but it is completely legal, so of course top
management loves it.”
“I don’t even have a list of who was eliminated in my department.” Roberta exclaimed,
frustrated. “I have one of my best employees in my office right now in tears, who found
out she lost her job through a message on her answering machine.”
“There are lots of stories like that floating around here,” Sally replied. “The decision of
top management to complete the process so quickly created lots of problems. Let me
check the master list to make sure that she was really eliminated.”
As Sally called up the list on her computer, Roberta fumed. “Top management seems
to have forgotten all the things that made working here worthwhile.”
Sally nodded, “I know what you mean. My boss argued with Mr. Michaels for over an
hour about the way they handled this layoff. Michaels is running scared, and the
company is paying for it.” She paused, hunting through the database.
“I don’t even recognize HRI anymore,” Roberta stated. “How can I keep the staff
motivated when I don’t like being here myself? This weekend was the first time I’ve slept
through the night in three months. I have a feeling I won’t be sleeping through the night
for a good long time.
“A lot of people have been feeling that way lately around here,” Sally replied. “Here it is,
you lost three people, Eugene Headley, Amanda Wakefield, and Mary Jo Watson.”
“That’s it then,” said Roberta. “I guess I have to go back and tell Amanda it’s true. I feel
terrible. She’s a terrific employee and I hate to lose her. Plus, she really needs this job.
Her husband has been out-of-work for a month, and they’re barely making ends meet
with her job and his unemployment. I’m embarrassed and upset to be a part of this
company.”
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DISCUSSION QUESTIONS
1. What is the best way for Roberta to tell Amanda that she really has lost her job?
2. Should Roberta, as a member of the management team, defend the decisions
made while she was gone? If yes, how can she do it? If no, what should she
say?
3. There will be a strong residue of ill will against both HRI and Roberta because of
the layoffs and how they were handled. How can Roberta best manage this
situation, and keep the productivity and customer-focus of her department at
close to its pre-layoff levels?
4. What should Roberta say to Mr. Hiberley tomorrow? Based on his behavior and
the behavior of his secretary, what type of culture is Hiberley creating?
5. Lately, Roberta has been having problems motivating and managing herself.
She finds that the actions of Hiberley and HRI are making her mad, and she finds
it increasingly difficult to support the decisions of upper management. She
knows that she cannot in good conscience support this layoff process. What can
Roberta do to motivate and manage herself?
6. What could the top management at HRI have done, to ensure that HRI as a
company did not lose sight of the importance of its people?
SUPPLEMENTAL LECTURETTE 1:WHAT’S WRONG WITH REENGINEERING?4
APPLICATION
This lecturette may be used to supplement the chapter’s coverage of organizational
decline.
* * *
Reengineering: Do’s and Don’ts.
Truly successful reengineering attempts are few and far between. So why do so many
reengineering endeavors fail? Here’s a major reason:
4 Adapted and excerpted from R. Manganelli and S. Raspa, “Why Reengineering Has Failed,” Management Review,
July 1995, Vol. 84 No. 7, pp. 39-43.
Chapter 17 – Organizational Design, Effectiveness, and Innovation
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The typical reengineering effort is implemented tactically, far removed from company
strategy. Existing only as a stand-alone program, reengineering can provide few
substantive business results. To be successful, it must be deployed strategically and
supported by the highest managerial levels. The differences between tactical and
strategic implementation are numerous:
Tactical implementation is narrowly focused on a single process within a function. It
typically targets process workflow, with the goal of reducing expenses, headcount, and
required office space.
In contrast, when reengineering takes place strategically, the scope is the entire
business unit. All critical core processes receive focus. The team in charge takes a
holistic view of change, including workflow, systems, structure, incentive systems, and
organizational culture. Successfully implementing sweeping changes requires
extensive communication from top management. Widespread communication is
necessary to receive commitment from both managerial and other employees.
Additionally, the reengineering team should consider testing the new plan in a small
number of sites before implementing the program company-wide.
It is commonly believed that reengineering necessitates downsizing, decentralization,
and automation. However, when implemented strategically, reengineering may or may
not include these aspects.
Reengineering: A Case Example. Shown below is a description of the situation facing
AT&T Capital Leasing Service, a nation-wide provider of leasing and financing for
vendors that distribute, manufacture, and sell medical, office and manufacturing
equipment.
In the early 1980s, AT&T Capital Leasing Services…was growing rapidly. Within just a
few years, Leasing Services had opened 18 offices around the country, expanding its
staff to nearly 500 and enjoying a 40 percent to 80 percent annual growth rate. By the
mid-‘80s, however, the company was facing more demanding customers, increased
domestic and international competition, and general consolidation in the leasing
industry, … resulting in fewer, but more powerful, leasing firms.
These weren’t the only competitive issues Leasing Services faced. Benchmarking
showed that Leasing Services had a higher cost of doing business than its competitors
– this at a time when customers were demanding increasingly competitive leasing rates.
Internally, the company faced additional problems: Each of Leasing Services’ … offices
acted independently and had its own pyramid of arrangement, creating redundancies
and inhibiting operational performance. To make matters worse, customer contact
personnel lacked the decision-making authority to provide satisfactory service.
Chapter 17 – Organizational Design, Effectiveness, and Innovation
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DISCUSSION QUESTIONS:
1. Is Leasing Services a candidate for reengineering?
2. What factors (internal and external) at Leasing Services need to be considered
when formulating a reengineering plan?
3. How would you go about implementing such a plan?
SUPPLEMENTAL LECTURETTE 2: ORGANIZATIONAL GROWTH5
APPLICATION
This lecturette supplements the chapter’s coverage of organizational effectiveness.
* * *
Unchecked and uncontrolled growth has caused the demise of a number of promising
companies, including People Express, Victor Technologies, and Osborne Computers.
Entrepreneurial firms in particular reach a point where they have to restructure and adjust
or they will be overwhelmed by their own growth.
To help determine when an organization has grown past its ability to function well, here
are nine symptoms of problematic growth drawn from Healthco, a growing firm which
manufactures disposable medical products.
Many employees were unaware of what other people were doing. A substantial
number of employees were unclear about what their actual jobs were, what other
employees’ jobs were, how they fit in with the overall operations of the firm. This made it
easy to avoid responsibility and caused duplication of efforts.
There didn’t seem to be enough time to accomplish the work. Overtime was
common, and managers felt that they had too heavy a workload and unrealistic
deadlines.
Employees became “fire fighters.” Much of each employee’s time was spent on short–
term problems, indicating lack of planning. A standard company joke was “At Healthco,
long- range planning means what I am going to do after lunch.” Operating in a crisis
began to be the norm.
5 Adapted from E. Flamholtz and Y. Randel, “How To Avoid Choking On Growth,” Management Review, May 1987,
pp. 25-29.
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Not enough good managers. Healthco had management problems for two reasons.
One was the promotion of good technical people who didn’t have adequate preparation
for management. Consequently, these people still focused on their technical roles, didn’t
delegate, and ignored their managerial responsibilities. The other problem was the
strength of Healthco’s founder. His inability to delegate and his need to control things
caused strong managers to leave. The remaining managers had little authority and no
real power. This is a common problem in entrepreneurial firms.
Plans had minimal follow-up. Consequently, a number of things just didn’t get done.
There were no monitoring systems in place, and no accountability.
Employees didn‘t understand where the company was going. Healthco‘s
management was unable to present its future plans to the employees. Employees felt
anxious about all the unexplained changes, and many left.
There were too many useless meetings. Meetings were scheduled unexpectedly, had
no agendas, and were much too long. They were commonly described by employees as
“free- for-alls.”
Employees became insecure about their positions within the firms. A number of the
“founding members” of the organization were fired, and many other changes occurred.
Employees were spending more and more time protecting their own interests.
Sales grew, but not profits. This is a common problem with entrepreneurial firms. With
a focus on revenue, there was an assumption that more sales meant more profits.
However, costs were climbing, so profits were the same, despite rapidly increasing sales.
Fortunately for Healthco its founder, Tony Fletcher, recognized the company’s problems.
He commissioned an organizational audit to analyze the situation. This revealed the
problems outlined above. To solve these concerns, the company’s management worked
to design and implement a program that would provide the infrastructure needed to
support its pattern of rapid growth. The plan was initiated at a management retreat, and
reviewed and evaluated at monthly managerial meetings.
There were four key steps to the plan:
1. Developing and implementing a strategic management plan throughout the
organization.
2. Designing a program of management development to help overcome the problems
experienced by technical people who move into management.
3. Recruiting new professionals from outside the firm to provide needed expertise.
Chapter 17 – Organizational Design, Effectiveness, and Innovation
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4. Developing a formal system of job descriptions coupled with an effective performance
appraisal plan.
The plan was a success. Eighteen months after its implementation, a comparison of
“organizational growing pain” survey results moved the company from a “danger zone” of
32 to a more moderate average of 21. In addition, as operational efficiencies were
straightened out, profitability significantly increased. All of this occurred in spite of the fact
that Healthco continued to grow. Due to a careful organizational analysis, and
subsequent changes, Healthco transformed itself from a firm choking on its own growth to
one able to cope well with its growth pattern.
SUPPLEMENTAL LECTURETTE 3: CREATING A LEARNING ORGANIZATION6
APPLICATION
This lecturette may be used to supplement the chapter’s coverage of organizational
learning.
* * *
Organizational learning provides the foundation for all organizational change attempts
(e.g., reengineering or total quality management). Learning is much more than training
and development. Learning is a mentality that permeates the process and procedures
of the organization. The ultimate goal of the learning experience is to provide the best
possible product or service for the consumer. Authors Calhoun Wick and Lu Leon have
developed a formula for creating a learning organization. It is:
LEARNING ORGANIZATION = Leader with Vision x (Plan/Metrics) x Information x
Inventiveness x Implementation
In other words, a learning organization includes “(1) a leader with a clearly defined
vision; (2) a detailed, measurable action plan; (3) the rapid sharing of information; (4)
inventiveness; and (5) the ability to implement it” (p. 300).
A leader committed to learning is essential for success. The leader is in the best
position to discern the performance gap between the organization’s current state of
being and desired future state of being. However, in order for the organization to
achieve the desired vision, it must first be clearly communicated to those who must
enact it. A clear vision allows employees to focus their efforts on the keys to success.
The most effective corporate visions are usually simple and direct.
6 Adapted from C. Wick and L. Leon, “From Ideas to Action: Creating a Learning Organization,” Human Resource
Management, Summer 1995, Vol. 34 No. 2, pp. 299-311.
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A leader and a vision aren’t enough, however. The next step involves developing a plan
of action with detailed metrics. The larger plan must be broken into specific and
measurable action steps. “Planning and a system of measurement keep the vision
grounded in reality and prevent it from becoming an esoteric exercise.”
Sources of information come from both outside and inside the organization. A lack of
information makes the organization vulnerable to threats existing outside the company
and miss opportunities inside the company. A learning organization feeds upon
knowledge. External sources of knowledge include customers themselves.
Additionally, leaders and managers should realize that it’s not necessary to “reinvent
wheel.” Companies today are more willing to share their organizational discoveries and
processes. So, steal shamelessly! Finally, check out the competition and be prepared
to act on the new information.
Internal sources of information are present in your own organization. In other words,
know who you are. Don’t practice double talk. Information is to be shared quickly and
accurately with those who are in the best position to use it for the benefit of the
organization. Information should flow freely throughout the organization.
Organizational structure is a tool that can either foster or impede the sharing of
information. Finally, don’t hoard information for personal power or gain. Cultural norms
valuing honesty and the good of the entire company help put information into the hands
of those who can use it for the most good. Finally, the company must be inventive and
able to implement action plans.