Building Community at Terra Nova
Consulting
INSTRUCTOR’S MANUAL
Ken Ogata, York University
Gary Spraakman, York University
CASE OVERVIEW
Building Community at Terra Nova Consulting describes the actual challenges faced by an engineering
and environmental services consulting firm that experienced a severe organizational crisis involving deep
internal cultural divisions. The firm was founded upon certain core values and principles of collegiality,
self–actualization, employee ownership, and technical excellence but had gradually drifted away from
these over time. Correspondingly, the junior professional staff perceived a fundamental disconnect
between Terra Nova’s professed and actual cultures, viewing Terra Nova as having an authoritarian, task
focused culture, geared towards serving the partners (as revealed by an Organizational Cultural
Inventory.)
CASE OBJECTIVES
The primary objective of this case is to introduce students to the complexity of organizational cultural
change. A secondary objective is to address the interconnectedness of organizational elements, and the
importance of alignment between structure, strategy, culture, decision–making, personnel, and
management style.
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RESEARCH METHODS
This case is based upon a mixed–methods longitudinal case study. Access was obtained through personal
contacts between the authors and members of the company (neither author has been employed by the
firm.) Terra Nova is the fictitious name of an existing, successful, international engineering and
environmental services consulting firm with over 3,000 employees and offices in more than twenty
countries. Several measures have been taken to disguise the firm’s actual identity. The firm’s name was
disguised with a pseudonym, fictitious names were given to employees, key dates were altered, and
financial data were proportionately adjusted. As this is a privately held firm, limited public information is
available on the company, thus students are unlikely to access any additional information.
COURSES AND LEVELS
This multi–faceted case can be used in a variety of ways and contexts including radical organizational
change, organizational development/transition (older to younger generation), the management of
professional/knowledge workers (Robertson and Swan, 2003), cultural based management control (clan
control—Ouchi, 1980), and cultural diagnostic tools (organizational cultural inventory—Cooke and
Szumal, 2000; competing values framework—Cameron and Quinn, 2011).
We suggest that this case can be used at the graduate level, but that it would also be suitable for an
advanced undergraduate class (as field tested). It would be best suited to an organizational change or
organizational development course as the basis for exploring various approaches to change including
different models (e.g., Lewin, 1951; Kotter, 1996; Burke, 2008; Collins, 2001), methods (e.g., T–groups,
FIELD TESTING
Previous versions were field tested with two classes of fourth–year organizational theory students during
the 2011–2012 academic year. There were about fifty students in each class. The case was used late in the
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course to illustrate the influence of culture, structure, and management style upon an organization, and
test students’ ability to integrate and apply course material. The most recent version was field–tested with
a fourth–year organizational theory class as a final exam (case distributed in advance), asking students to
consider both how to change Terra Nova, and the implications of revising organizational elements
(structure, strategy, culture, etc.).
These classes used Daft and Armstrong’s (2009) Organizational Theory and Design (First Canadian
Edition) text (instructors may also use their 2011 Second Edition). The first class used the case as an
integrative, open–book final exam, while the second class used it as an integrative, course
summary/review case. The first class was provided with the case three days in advance to the
examination, with four specific questions posed for the three–hour examination:
1. Terra Nova Consulting is part of the professional service firm industry, providing professional
assistance and technical advice to its clients. Given its operating environment and the nature of its
Student performance on the final exam did not vary significantly from previous final exams using
alternate integrative cases. Informal feedback suggested that students found the case interesting, and
could relate to the perceived gap between the junior professionals and the partners. Students did not
appear to have difficulty appreciating the need for and difficulties of cultural change; however, they were
LEARNING OBJECTIVES
The primary objective of this case is to introduce students to the complexity of organizational cultural
change. One of the key takeaways should be the lack of a simple, easy fix for the cultural divide at Terra
Nova. What should become apparent is that successful change will require a series of related,
consequential actions. Additional objectives include:
• Understanding the interaction/fit between culture and structure
• Learning about how to manage professional/knowledge workers in the absence of formal hierarchy
• Understanding how to manage with soft social controls through organizational culture
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SUGGESTED TEACHING PLAN
As an integrative case, students should have been exposed to and covered concepts related to
organizational structure, culture, strategy, decision–making, leadership, and change. The field test course
used Daft and Armstrong’s (2009) text, and covered the chapters on strategy (Ch. 2), structure (Ch. 3),
environment (Ch. 4), organizational life cycle (Ch. 9), culture (Ch. 10), change (Ch. 11), decision–making
(Ch. 12), and politics and power (Ch. 13), prior to in class discussion of the case. The following section
highlights some of the key material related to these topics, prior to outlining how a class discussion might
unfold.
Theoretical Background
As noted above, we expect that students will have covered a variety of theories and concepts related to
organizational theory, change, and management prior to attempting this case, either as part of this course,
or in their overall program of study. More specifically, students should have received instruction on
organizational structure, culture, strategy, and change. Background in human resource management,
leadership, organizational behavior, organizational development (Cummings and Worley, 2005), financial
and management accounting would also be helpful, but are not essential.
• In terms of structure, students should be familiar with the basic organizational design structures (e.g.,
functional, divisional—Daft and Armstrong, 2009), and/or Mintzberg’s (1981; 1983) archetypes (e.g.,
professional bureaucracy, adhocracy). Given the professional nature of this firm, Mintzberg’s
archetypes are recommended as models for ways of organizing work and employees.
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Structure – Terra Nova does not fit the typical machine bureaucracy or product–oriented firm model
addressed in many textbooks, but rather is reflective of Mintzberg’s (1983) adhocracy form, comprising
teams of professionals from across the firm, who come together as needed to complete various projects,
and are then disbanded upon completion. Thus, while employees may be physically located in adjacent
managing employees and organizational performance.
Strategy – Two key approaches to describing organizational strategy involve industry position vis-à-vis
competitors, and strategic orientation. Porter (1980) discusses positioning in light of a niche versus
industry–wide perspective, and low–cost vs. differentiated strategy. One of the challenges firms will
experience as they grow involves evaluating transitioning from a niche to a more industry–wide position,
versus the relative merits of staying within their current market space. Miles and Snow’s typologies
Culture – Clan culture organizations (Ouchi, 1980) are characterized as having a community orientation,
reflective of a natural system. Within natural system organizations, there is greater attention to human
relations and a collective consciousness, necessary to achieve a shared purpose among members.
Discussion of how such organizations function and the importance of corporate culture, can be related to
Collins and Porras’ (1994) Built to Last, and Collins’ (2001) Good to Great, to address the importance of
Professionals – This case involves the management and control of professionals engaged in knowledge
work (Hinings, Brown, and Greenwood, 1991; Robertson and Swan, 2003), which involves a different
approach from more top–down managerial directed and task oriented organizations. Professional
autonomy (Leicht, 2005; Leicht and Fennell, 2001), values and norms are important, and may “conflict”
with organizational goals and objectives. Soft management controls are better suited to managing
professionals than traditional forms of control (e.g., bureaucratic rules, financial incentives).
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Change – If Demers (2007) or Burke’s (2008) summary books on organizational change are used as
course texts, students could be asked to consider which of the various approaches described would be
appropriate. If the focus is upon organizational development or change, approaches such as Lewin’s
three–stage model, Kotter’s (1996) eight–step model, Collins (2001) Good to Great, or Cameron and
Class Discussion
Three factors will be important in shaping how students respond. First, do students believe Terra Nova is
in financial difficulty? This is likely to affect their perception as to the urgency of change, and
corresponding timing of actions.
Second, do students agree that maintaining the current employee ownership model is critical as suggested
by the senior partners? Moving towards public ownership has certain implications for a professional
service firm such as a greater focus upon shareholder returns and meeting financial targets that may
compromise a focus on quality. Key from the partners’ perspective is that a reduction in employee
Potential topics for discussion include:
• How do clan cultures work (Ouchi, 1980)?
• How does one manage when there is a lack of formal structure (Mintzberg, 1983)?
• How do various organizational structures affect organizational dynamics (power and politics)?
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POSSIBLE DISCUSSION QUESTIONS AND ANSWERS
Several questions may be posed to students to facilitate discussion and/or test their understanding of the
issues addressed by the case.
1. What is the need for change at Terra Nova?
a) Finances are in trouble (see case Exhibits 2 and 3).
b) The culture is in trouble as shown by:
i. Low job satisfaction among junior staff.
ii. The unwillingness to invest in the company.
iii. The OCI data.
2. What are the barriers to change?
a) The lack of negative financial performance. Revenues are increasing, reducing urgency to change
(though profitability is declining).
b) Senior partners are happy and think things are fine.
c) O’Reilly has lost credibility with the partners by focusing on rebranding without building
advance support for his ideas.
3. What alternatives does O’Reilly face?
a) Adopt a more formal organizational structure and increase management control through explicit
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POSSIBLE DISCUSSION POINTS
1. What is the need for change at Terra Nova?
a) Finances are in trouble (see case Exhibits 2 and 3).
Instructors may require students to undertake an analysis of the financial statements to
understand Terra Nova’s financial condition. Analysis of the financial statements (see IM
Exhibits 1 and 2) does not indicate any imminent bankruptcy. However, it does indicate that
Terra Nova requires some serious changes to reverse the recent shortcomings that have
negatively affected profitability. Each attachment will be discussed in turn.
IM Exhibit 1 shows the trends for the income statement and the balance sheet by dividing the
respective 2007 line item by its 2001 counterpart. On average the number is 1.7, indicating a 70
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IM EXHIBIT 1: FINANCIAL STATEMENT ANALYSES (CHANGE 2001 TO 2007)
Income Statement:
2007/2001
Gross revenue
1.7
Subcontracts
2.2
Fee revenue
1.7
Direct labor
1.7
Gross profit
1.7
Allocated overhead
2.0
General overhead
2.1
Charge backs
1.3
0.9
Net income
0.9
Balance Sheet:
2007/2001
Assets
Current assets
Cash, investments
1.2
Accounts receivable
1.6
Work in progress
2.0
Prepaid expenses
NA
Other assets
1.6
1.7
Liabilities and Shareholders’ Equity
Current liabilities
Bank overdrafts
9.2
Accounts payable
1.4
NA
Deferred revenue
NA
0.9
Shareholders’ equity
Capital stock
1.9
Retained earnings
1.9
1.9
1.7
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IM EXHIBIT 2: FINANCIAL STATEMENT ANALYSES (%)
Income Statement:
2001
2002
2003
2004
2005
2006
2007
100.0
100.0
100.0
100.0
100.0
100.0
100.0
–40.2
–40.7
–40.6
–40.7
–39.5
–39.1
–39.3
59.8
59.3
59.4
59.3
60.5
60.9
60.7
–27.2
–31.1
–30.3
–31.4
–32.2
–33.0
–32.3
Balance Sheet:
2001
2002
2003
2004
2005
2006
2007
Asset
Current assets
Cash, investments
15.0
13.9
12.3
11.9
11.1
12.3
10.8
36.0
33.3
30.9
30.0
32.4
31.1
33.6
Work in progress
30.6
35.7
41.3
43.1
41.5
40.1
36.1
0.3
0.0
0.0
0.1
0.0
0.0
0.8
81.9
82.9
84.5
85.1
85.0
83.5
81.3
0.1
0.1
0.1
0.1
1.5
2.7
4.8
Net fixed assets
15.9
15.0
13.6
13.2
12.0
12.3
11.9
Other assets
2.1
2.0
1.8
1.6
1.5
1.5
2.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
Liabilities and Shareholders’ Equity
Current liabilities
Bank overdrafts
0.4
0.2
0.9
1.1
1.6
3.8
2.0
Accounts payable
22.4
19.7
18.1
19.0
24.3
23.3
18.3
LT debt due
0.0
0.0
0.0
0.0
0.0
0.0
1.1
Deferred revenue
0.1
0.2
0.0
0.3
0.0
0.0
0.8
22.9
20.1
19.0
20.4
25.9
27.1
22.2
16.8
15.0
13.0
12.0
10.5
10.2
9.1
Shareholders’ equity
Capital stock
10.1
9.1
9.0
8.2
8.6
9.7
11.4
Retained earnings
50.2
55.8
59.0
59.4
54.9
53.0
57.3
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b) The culture is in trouble as shown by:
i. Low job satisfaction among junior staff
ii. The unwillingness to invest in the company
iii. The OCI data
i. Case Exhibit 6 (employee satisfaction survey results) illustrates that newer
employees are less satisfied than long–tenured staff with the conditions at Terra
Nova. Many of the junior professionals do not foresee a long–term future with the
company, citing a lack of adequate financial compensation, recognition, and/or
opportunity for advancement (see quotes by Mark Davis and Chris Barker). Several
chargeability.
ii. As noted in the case, there is a lack of new investment in the firm by both junior
professionals and senior partners (see Doug Hunter), though for different reasons. For
junior professionals, the issue is one of a less than ideal work environment, combined
with a lack of desire to spend their career with the firm. This lack of investment is
important for two reasons. First, according to Meyer and Allen (1991), the highest
level of affective commitment (strongest form of organizational commitment),
iii. The Organizational Cultural Inventory (OCI) utilizes a self–administered paper
questionnaire containing 96 items with a five–point Likert scale (1 = not at all, 5 = to
a very great extent) to measure the company’s culture according to twelve sets of
behavioral norms. These twelve styles (see Appendix B, middle column) describe
how members are expected to work and interact with others. The styles are divided
along two dimensions representing concern for people versus tasks, and fulfilling