A Midsize Pharmaceutical Company

Jennifer Childs is the owner and chief executive officer of a midsize global pharmaceutical

company with sales offices or manufacturing plants in eight countries.

At an October staff meeting she tells her managers that company profits for the

year are expected to be $2,000,000 more than anticipated. She tells them she would

like to reinvest this additional profit by funding projects within the company that

will either increase sales or reduce costs. She asks her three key managers to get

together to develop a prioritized list of potential projects and then to meet with her

to"sell"her on their ideas. She mentions that they should not assume the funds

will be divided equally among the three of them. She also mentions that she is

willing to put all of the funds into just one project if it seems appropriate.

Julie Chen, manager of product development, has had a team of scientists working

on a new prescription drug. This effort has been taking much longer than

expected. She is worried that larger firms are working on a similar prescription

drug and that these firms might get it to the marketplace first. Her team has not

made any major breakthroughs yet, and some tests are not producing the expected

results. She knows this is a risky project but feels that she cannot stop it now. Julie

believes the company's long-term growth depends on this new drug, which can be

sold worldwide. She has tried to be optimistic at staff meetings about progress on

this development project, but she knows that Jennifer is growing impatient and

that her peers believe she should have terminated the project after the initial tests

were less than promising. Julie would like to use the additional funds to accelerate

the development project. She would hire a highly respected scientist from a larger

firm and buy more sophisticated laboratory equipment.

Tyler Ripken, manager of production at the firm's largest and oldest

manufacturing facility, has been with the company only six months. His early

observation is that the production flow is very inefficient. He believes this is the

result of poor planning when additions were made to the plant over the years as

the company grew. Tyler would like to form several employee teams to implement

a better layout of the equipment in the plant. He thinks this would increase plant

capacity while reducing costs. When Tyler mentions this idea to some of his supervisors,

they remind him that when Jennifer's father ran the business, Jennifer was

in charge of production, and she was responsible for the design of the current

plant layout. They also remind Tyler that Jennifer is not a fan of using employee

teams. She believes production employees are paid to do their jobs, and she

expects her managers to be the ones to come up with and implement new ideas.

Jeff Matthews, manager of operations, is responsible for the company's computers

and information systems as well as its accounting operations. Jeff believesthat the company's computer systems are outdated, and as the business has

grown with locations worldwide, the older computer equipment has been

unable to handle the volume of transactions. He thinks that a new computer

system could keep better track of customer orders, reduce customer complaints,

and issue more timely invoices, thus improving cash flow. The employees

in Jeff's operation joke about their outdated computer systems and put

pressure on Jeff to buy newer equipment. Jennifer has told Jeff in the past

that she is not interested in spending money on new computers just for the

sake of having the latest equipment, especially if the current system is working

all right. She had suggested that Jeff look into hiring an outside service to do

the accounting operations and reduce his own staff. Jeff would like to use this

year's excess profits to buy new computers and to hire a computer programmer

to upgrade the software to run on the new computers. He feels that this would

be cost-effective.

After Jennifer's October staff meeting, Joe Sanchez, manager of marketing,

stops by Jennifer's office. He says that although he has not been asked to come

up with project ideas for the extra profits, his feeling is that she should forget this

project nonsense and just give him a larger budget to hire more sales representatives

in several additional countries."That would increase sales faster than anything

else,"Joe tells her."And besides, that's what your father would have done!"

Joe is counting on disagreements among the other three managers in establishing

priorities. He hopes that if Jennifer sees a lack of consensus, she might give him

funds to hire the additional sales representatives.

CASE QUESTIONS

1. How should Jennifer go about making her decision?

2. What kind of additional data or information should she collect?

3. What exactly should Jennifer require the others to submit in the way of

proposals?

4. What do you think Jennifer should do with the $2,000,000? In explaining

your answer, address the concerns and positions of Julie, Tyler, Jeff, and Joe.