"As the new managing director, you will begin the job with automatic respect for the role. You can then either add to this respect by your own actions, or lose it altogether." Listening to his site manager, Batista, describing the problem that had occurred at the plant, Eugenio Ricci recalled these final words of his predecessor on handing over the leadership of the Panama Pharmaceuticals Company (PPC) a while ago. In reality it had been only two weeks, although to Eugenio it seemed more like two months. As he considered what action to take Eugenio realized that he had already reached his first turning point, from where he could either increase or diminish that precious store of respect.

Eugenio had arrived in Panama City to take over as managing director of PPC, a subsidiary of Pharma-ItaliaS.p.A.(PI), a global Italian pharmaceutical group headquartered in Milan. He had been working as a business manager with PI for the last five years, having been recruited from a British pharmaceutical company, where he had worked as marketing manager since graduating in English Literature. Eugenio had been excited by the challenge offered by the PPC appointment but already, only ten days into his three-year stint, he felt overwhelmed by the demands of this new and unfamiliar environment. Whilst he had anticipated the effort required to absorb an enormous amount of information in the brief period allotted for the handover, he had not been prepared for the intense cultural shock of finding himself working and managing in Central America for the first time.

Eugenio had decided to accept the promotion and move to Panama on the basis of an exciting four-day visit to PPC, together with Elisabetta his university professor wife, a few months earlier. His wife continued to work in Milan whilst he took up his new position alone. Now, he wondered what he had done. The books on Panamanian culture he had read were of little help in a country that had undergone rapid social and economic transformation and he quickly realised they were totally out of date and websites seemed to only focus on tourists' needs. During a conversation with a group of expatriate managers at a welcome party a few days ago, he had learned that only the fittest survived a three-year posting to Central America and after only a fortnight, he understood why.

His working days were long, but he had expected this. What he had not anticipated was the way his days were lengthened by the three to four hours return journey to the industrial site outside the capital, Panama City, where PPC was situated. The exhausting heat, heavy rain and interminable wait in an unbroken series of traffic jams were quite outside his previous experience. During the first week he had struggled to learn as much as he could about PPC, its history and the evolution of the businesses, the company's most recent results and the strategies currently being implemented. He had also met his exclusively Panamanian staff, and been relieved to find that his senior managers all spoke Spanish. He had found the Spanish language easy to pick up as it was similar to his native Italian, but he quickly discovered that Panamanian Spanish had some colloquial peculiarities and both staff and managers frequently used the nativeNgberelanguage in his presence, which he found impossible to comprehend.

At the end of his first week, Eugenio had sorted out his impressions and decided on a list of priorities for the businesses. PPC had a workforce of 100 people and supplied South and Central American countries. It was clear from the latest results and future projections that the business was doing well and was in markets that would remain profitable for the immediate future. The commercial side looked as if it would be fairly straightforward, so he decided that he would keep a close eye on the bottom line and let his managers implement the agreed strategy until he was more knowledgeable about the market and the customer bases. Having settled this, he decided that he would focus on two main activities; learning how to manage in this new environment and improving safety standards throughout the company.

Eugenio realised that learning how to manage here would be a long process. In the first two weeks, communications had been difficult as his ear became attuned to Panamanian Spanish and the odd phrasing used by his managers. He was also taken aback by the discovery that his staff considered him to be the head of the PPC "family", and so treated him with a deference he found rather embarrassing. Their habit of smiling broadly when they saw him but not speaking until spoken to, of opening doors for him and bringing him gifts, and the knowledge that his staff watched his every expression to interpret his mood, was disconcerting to someone used to managing in the relatively open and democratic European business environment.

Eugenio was similarly unprepared for the extent of the power and authority vested in him by his position as MD. Worse, he found that the strict attention to hierarchy that characterised Panamanian culture put him at a huge distance from his staff. Their polite way of deferring to him as "El Jefe" (the boss), and of evading making any direct judgements, formed barrier that he found difficult to overcome and it was clear that they were being careful not to put their superior into any sort of difficulty.

As he was fast discovering, this concern for his well-being meant that subordinates were extremely reluctant to give him any bad news, such as the loss of a customer or the resignation of a manager. In this culture, the boss was expected to perceive and know what was happening without having to be told. It was, therefore, hard for Eugenio to tell when things were going wrong or to estimate the seriousness of a problem, since no one would discuss such things with him directly. It was not that they were trying wilfully to deceive him or to cover up mistakes; they were simply obeying their instinct to avoid conflict and make "El Jefe" feel entirely comfortable. Eugenio realised that in order to get around these problems, he would have to develop a completely new management style.

With the operators and unskilled workers, Eugenio had as yet had little chance to communicate. During the first week, he had made daily tours of the site, the operating areas, storerooms, workshop and laboratories and noted several, to him elementary, safety precaution that were being ignored. However, he was relieved to see, judging by the little knot of process workers huddled with their cigarettes outside the gatehouse, that the ban on smoking in all parts of the site was strictly observed and that most people wore safety goggles, even if they were not properly fastened. He was initially pleased to note a member of one work team, engaged in the construction of a new storehouse, wearing a safety harness as he hung high above the gantry. Unfortunately, his pleasure dissipated with the realisation that the safety harness was not actually attached to anything.

Safety standards, Eugenio realised, were very poor compared to Europe. This was one area where there was a wide divergence between Central America and Europe and, as safety was one of the most heavily emphasised parts of the PI culture, was something he would have to tighten up. The pharmaceutical industry had a high profile in Europe, where pressure groups were quick to demonise any multinational thought to be neglecting safety or damaging the environment. For all pharmaceutical companies these were potentially highly damaging, and therefore very sensitive, issues. PI, always extremely nervous about bad publicity, had invested heavily in these areas and built up a strong image as a responsible, environmentally concerned multinational with a good safety record. With this in mind, Eugenio decided to make it his other priority to encourage the PPC workforce to be more safety conscious. During his time as managing director, he would aim to enforce safety and anti-pollution rules, and raise standards nearer to those of the parent company.

These resolutions came to Eugenio's mind as he listened to Batista, who was relaying the phone message he had received from one of the supervisors left in charge at the PPC site. Eugenio and his top managers were all in central Panama City attending a training course. According to the supervisor, in their absence there had been a poisonous leak from one of the chemical storage tanks. However, it was not serious and had not been caused by any major breakdown or crisis.

In fact, it had occurred because an operator, who had been with the company only a few months, had taken a short cut when carrying out a manoeuvre instead of following the procedure laid down in standing instructions. This procedure had recently been altered in order to avoid just such an eventuality but the operator had ignored the change. Luckily, the state-of the-art western technology installed in the plant had triggered an automatic shutdown at the first sign of trouble. Consequently, of the 15 tons of highly toxic gas stored on the site, only one kilo had leaked out. According to the supervisor on the spot, this low concentration of escaped gas meant that there was absolutely no danger to personnel. Indeed, he believed that everyone on the site that day had been accounted for. He added that it was the first time anyone remembered such a thing occurring at PPC.

As Batista noted down the details, Eugenio rapidly went through a mental checklist of possible danger points. As PPC was situated in an industrial complex, there were no houses in the immediate vicinity, so there was no danger to the ordinary civilian population. What about the local press? Green gas hung over the site at the moment but luckily, observed the supervisor, the favourable wind conditions would ensure that this was quickly dispersed. This meant that, supposing the local media heard about the problem, by the time they reached the plant the gas would have cleared. In the short term, there would be some effect on the vegetation, the foliage would die down and change colour, but it would grow back later.

For those working on the site, the smoke would be an irritant and make breathing difficult. If they were close enough to the source of the leak then this might be potentially hazardous, but the site manager reported that everyone had been evacuated and was being kept well away from the problem area. There had been some panic at first, but calm had now been restored. What about Escelia, one of the secretaries, whom Eugenio knew to be pregnant? She had proudly told him this when they were first introduced, a new arrival in a Panamanian family being a very big event. He resolved to arrange for her to go to hospital immediately for a check-up.

Although Eugenio had enough of a theoretical knowledge of the short-term effects of such an incident to work through this checklist, his lack of engineering training meant that he had no direct experience on which to base any further decisions. He therefore found it difficult to judge exactly how serious the situation was, and how he should react in the immediate future. Meanwhile, Batista was emphasising that qualified engineers on the site had now taken complete charge, and that all would shortly be well.

Should he leave the course at once and return to the site, or should he stay and leave it to the professionals? In Europe, it was automatically understood that a manager should rely on the professionals to do their job, and not get in their way. "Don't try to do my job for me," would have been their attitude if he had tried to interfere in a similar situation in Milan. But what rule should he apply in Panama? In a flash, Eugenio realised he was completely alone and he wondered if he had time to call Elisabetta in Milan to get her academic opinion.

However, Batista was preparing to leave and return to the plant, so Eugenio asked, "Shall I come with you?" "No, please don't worry," replied Batista. "It was a very small incident and is already under control. I can deal with it." As Eugenio accompanied him to the door, he still could not decide what to do. Should he leave Batista to return alone and so demonstrate his confidence in him, or should he himself go and take charge? Was there anything else he could do to help the situation? And how should he manage the follow-up to the incident?