CASE INVOLVING INTERPERSONAL CONFLICT Educational Pension Investments Educitlonat Pension finestments (EPV), locared in Now Kork, invests penston funds for eductiona insthutions. th 1988 , t employed appraxtmately 75 people, 25 of whon were responsible for actual (mrestment activites. The company managed about 51.2 bulon of assers and dentred an income of about 525 milition. The firm was incorporated in 1960 by a group of academic professionals who wanted to control the destiny of their retirement years. They solicited pension funds under the assumption that their investments would be consistent and safe. Through their nearly three decades in the business, they have weathered rapid social and technological change as well as economic volatility. Through it all, they have resisted opportunities to "make it big" and instead stayed with less profitable but relatively secure investments. Dan Richardson has an MBA from Wharton and is one of the original founders of EP1. He started out working in the research department and has worked in every department since then. The other partners, comfortable with Dan's conservative yet flexibie nature. elected him to the position of CEO in the spring of 1975. After that, Dan became known as "the ereat equalizer." He worked hard to make sure that all the partners were included in decisions and that strone relations were maintained. Over the years, he became the confidant of the other seniors and the mentor of the next generation. He took pride in his "people skills." and EPY's employees looked to Dan for leadership and direction. Dan's management philosophy is built on the concept of loyaity-loyalty to the oreaniabtion, loyalty to its members, and loyalty to triends. As he is fond of saying. "My dad was a small town banker. He told me, 'Look out for the other guys and they'll look out for you: Sounds corny. I know, but 1 firmly believe in this philosophy. Dan, bolstered by the support of the other founding mambers of EPI, continued the practice of consistent and safe investing. This meant maintaining lowrrisk investment portfolios with moderate income. However, EPIs erowth increasinely has not kept pace with other investment opportunities. As a result, Dan has reluctantly begun to. considec the merits of a more aegressive investment approach. This consideration was further strengthened by the expressions of several of the younger analysts who were beginning to refer to EPI as "stodey." Some of them were lewing EPI for positions in more aceressive firms. One evening. Dan talked about his concern with his racquetball partner and longtime friend, Mike Roth. Mike atso happened to be an investment broker, After recelving his MBA from the University of nlinois, Mike went to work for a brokeroge firm in New York, beginning his career in the research department. His accornplishments in research brought him recognition throughout the firm. Everyone respected him for his knowledge, his work ethic, and his uncanny ability to predict trends. Mike. knew what to do and when to do it. After only two years on the job, he was promoted to the position of portfolio manager. However, be left that firm for greener pastures and had spent the last fev years movine from firm to firm. When Mike heard Dan's concerns about EPl's image and need for an ageressive approach, he suggested to his friend that what EPI needed was some fresh biood. someone who could infuse enthusiasm into the organization-someone like him. He told Dan, "I can help you get things moving. In fact, I ve been developing sorne concepts that would be perfect for EPL." Dan brought up the idea of hiring Mike at the next staff meeting, but the idea was met with caution and skepticism. "Sure, he's had a brilliant career on paper," said one senior partner. "But he's never stayed in one place long enough to really validate his success. Look at his rsume.. During the past seven years, he's been with four different firms, in four different positions." "That's true," said Dan, "but his references all check out. In fact, he's been described as a rising star, aegressive, productive. He's just what we need to help us explore new opportunities." "He may have been described as a comer, but I don't feel comfortable with his apparent inability to settie down," said another. "He doesn't seem very loyal or committed to anyone or anything." Another partner added, "A frlend of mine worked with Mike a while back and said that while he is definitely good, he's a real maverick-in terms of both investment philosophy and lifestyle. Is that what we really want at EPI?" Throughout the discussion, Dan defended Mike's work record. He repeatedly pointed out Mike's impressive performance. He deflected concerns about Mike's reputation by saying that he was a loyal and trusted friend, Largely on Daris recommendation. the other partners agreed, although somewhat reluctantly, to hire Mike. When Dan olfered Mike the job, he promised Mike the freedom and flecibility to operate a segment. of the fund as he desired. Mike took the job and performed his responsibilities at EPI in a superior manner. Indeed, he was largely responsible for increasing the managed assets of the company by. 150 percent. However, a price was paid for this increase. From the day he moved in, junior analysts enjoyed working with him very much. They liked his fresh, new approach, and were encouraged by the spectacular results. This caused jealousy among the other partners, who thought Mike was pushing too hard to change the tried-and-true traditions of the firm. It was not uncommon for sharp disagreements to erupt in staff meetings, with one or another partner coming close to stormine out of the room. Throughout this time, Dan tried to soothe ruffled feathers and maintain an atmosphere of trust and loyalty. Mike seemed oblivious to all the turmoil he was causing. He was optimistic about potential growth opportunities. He believed that computer chips, biotechnolozy, and laser engineering were the "waves of the future." Because of this beilef, he wanted to direct the focus of his portfolio toward these emerging technologles. "investments in small firm stocks in these industries, coupled with an aggressive market timing stratecy, should yleld a 50 peroent increase in perforinance. He rallied support for this ides not only amone the youneer members of EPI, but also with the pension lund managers who Invested with EPL. Mike championed his position and denigrated the merits of the traditional philosophy. "We should compromise on safety and achieve same real erowth while wo can," Mike argued. "If we don', we-l lose the investors" confidence and ultimately lose them." Most of the senior parmers disaereed with Mike, statine that the majority of their investors emphasiasd security above all else. They also disaereed with the projected profits, statine that 7We could go from 8 to 12 percent return on imvestmert [RO0: then aeain, we could drop to 4 percent. A lot depends on whose data you use "They reminded Mike, "The fundamental approach of the corporotion is to provide safe and moderate-income mutual funds for academic pension funds to invest in. That's the philosophy we used to solicit the imestments originally, and that's the approach we are obliaked to maintain." Mamy months passed, and dissension among the managers grow. Mike's fnustration over the lack of support among the senior parters began to undermine the day-to-day operations of EPI. He began to criticive detractors in discussions with younger EPI employties. In addition, he ascigned research department employees tasks related to technological itmestments, distracting them from imvestigating more traditional alternan tives. He graduaily implemented his ideas within his portfolio, which accounted for approximately 35 percent of EPis revenues. This disrupted the operations of other managers in EPI because the performance of their funds relied on the timely input of the researchers and other support staff. The other managers bristied when the research stalf began tracking the ROI of the various investments on a chart prominently displayed on the conlerence room wall. Amidst a rapidly spreading undercurrent of tension, one of the founding partners. Tom Watson, approached Dan one day, Conservative in his ways, Watson was the partner Who walks the office and always has time to stop and chat. He began the conversation. "Dan, I speak for most of the senior staff when I say that we are very troubled by Mike's approach. We've expressed ourselves well enough for Mike to understand, but his actions defy everything we ve said. He's a catastrophe just waiting to happen." "I can understand your concern, Tom," rephed Dan. Tm troubled, too. We have an opportunity to attract new business with some of Mike's new ideas. And the younger staff love working on his projects. But he has stifred up a lot of turmoll." Tom agreed. "The real issue is that EPI is no longer presenting a unified image. Mike is willfully defying the stated objectives of our orzanization. And some of our oldest clients don't like that." "That's true. Tom. On the other hand, some of our newer clients are really encouraged by Mike's approach-and his track record is extremely impressive" "Come on, Dan. You and I both know that many experts feel the market is overheating. Mike's paper profits could quickly be incinerated it the budget and trade deficits don't turn around. We can't stake the reputation of the firm on a few high-flying technology stocks. Dan, the other senior partners agree. Mike must either conform to the philosophy and management practices of this organizabon or else resign." Reflecting on the situation, Dan realized he baced the most difficult challenge of his career. He felt a strong personal imvestment in helping Mae succeed. Not only had he hired Mike over the objections of several colleagues he had personally helped him "learn the ropes" at EPI. Beyond that, Dan was haunted by his promise to Mike that he would have the freedom and flexibility to perform the requirements of the position as he pieased. Howtver, this flevibllity had clearfy caused problems within EPL. Finally, bowing to the pressure of his peers, Dan called Make in for a meeting. hoping to find some basis for compromise. DAN: I gather you know the kinds of concerns the senior partners have expressed reearding your approach. MiKE: I euess yourve talked with Fom. Weil, we did have a small disagreement earlier this week. DAN: The way Tom tells it, you're wilfully defying corporate objectives and being insubordinate: MiKE: Weil, it's just the Watson to see provressive chartes as an attempt to take away his power. DAN it's not quite that simple, Mike. When we lounded EP1, we all agreed that a conservative stance was bet. And right nowk with the econonic indicators lookine sokt, mary experts agree that it may siil be the best alternative MIKE: Dan, what are you going to rely on-predictions or performance? These concerns are just smokescreens to deflect attention away from the sub-par records of other portfolio managers. Old views need to be challenged and ultimately discarded. How else are we going to progress and keep up with our competitors? DAN: I agree we need to change, Mike but eradually. You have ereat ideas and terrific instincts, but you can't change a 30 -year old firm overnight. You can help me promote change, but you're pushing so fast, others are digging in their heels. The rate of change is just as important as the direction. MiKE: You're telling me. And at this rate, it doesn't make much difference which direction we're headed in. DAN: Come on, Mike. Don't be so cynical. If you'd just stop rubbing 'people's noses in your performance record and try to see things from their perspective, we could calm things down around here. Then maybe we could start building consensus. Mike's emotions betray his impatience with the pace of the organization; he becomes agitated MIKE: I've always admired your judgment, and I value your friendship, but I honestly think you're kidding yourself. You seem to think you can get this firm to look like it's progressive-shrugeing off its stodgy image-without taking any risks or ruffling any feathers. Are you interested in appearance or substance? If you want appearance, then hire a good PP person. If you want substance, then back me up and we'll rewrite the record book. Get off the fence, Dan, before your butt's full of slivers. DAN: Mike, it simply isn't that easy, 1m not EPI, Pm simply its caretaker. You know we make dedisions around here by consensus; that's the backbone of this organization. To move ahead, the confidence of the others has to be won, especially the confidence of the seniors. Frankly, your reputation as a maverick makes it hard to loster confidence in, and loyalty to, your plans. MikE: You knew my style when you hired me. Remember how you made it a point to promise me flexibility and autonomy? lm not getting that any more, Dan. Alt Im gettine is erief, even thoueh I'm running cirdes around your conservative cronies. DAN: Well, that may be true. But your flamboyance... MIKE: Oh, yeah. The sports car, the singles lifestyle, the messy office. But, again, that's appearance, Dan, not substance Performance is what counts. That's what got me this far, and that's my ticket out. You know I could walk into any firm in town and write my own plan. DAN: Well, there's no reason to be hasty. MiKE. Do you honestly believe this can be salvaged? I think not. Maybe it's time for me to be moving on. Isn't that why you called me in here anyway? Dan, feeling uncomfortable, breaks eye contact and shifts his gaze to the New York sikyline. After a long pause, he continues, still gazing out of the window. DAN: I dorit know, Mike I feel Fve talled. My erand experiment in change has polarized the office; weve eot two armies at war out there. On the other hand, you really have done a zood job here. EPI will no doubt lose a eood part of its customer base if you leave. You have a loyal following, with both customers and staft. If you no. so do they-along with our shot at chaneing our imaee MIKE It's just like you. Dan, to take this problem personally, Blast it. you take everything personally. Even when I beat you at racquetball. Your heart's in the right place-you just carit ever seem to make the cutthroat hit. You know and I know that EPI needs a change in image. But it doessit appear to be ready for it yet. And Ito cer. base if you leave. You have a loyal following, with both customers and staff. If you go, so do they-along with our shot at changing our image- MIKE: It's just like you, Dan, to take this problem personally, Blast it, you take everything personially. Even when I beat you at racquetball. Your heart's in the right place-you just can't ever seem to make the cutthroat hit. You know and I know that EPI needs a change in image. But it doesn't appear to be ready for it yet. And Im certainly not willing to move slowly. TER 7 MANAGING CONFUCT DAN: Yeah. Maybe it's just hard to give up ... llong pausel. Well, why don't we talk more about this after the reception tonight? Come on over and see Joanie and the kids. Besides, Im dying to show off my new boat. MIKE: What you see in sailing is beyond me. It's a waste of time, lazily drifting on gentle breezes DAN: Save it for later, "Speed King. "Ive got to get ready for tonight. Discussion Ouestions 1. What are the sources of confict in this case? 2. What approaches to conllict management ane used by the actors in this situadion? How effective was each? 3. Based on the behavloral guidelines for the collaborative approach, how could Dan have managed this confict more effectively? CASE INVOLVING INTERPERSONAL CONFLICT Educational Pension Investments Educitlonat Pension finestments (EPV), locared in Now Kork, invests penston funds for eductiona insthutions. th 1988 , t employed appraxtmately 75 people, 25 of whon were responsible for actual (mrestment activites. The company managed about 51.2 bulon of assers and dentred an income of about 525 milition. The firm was incorporated in 1960 by a group of academic professionals who wanted to control the destiny of their retirement years. They solicited pension funds under the assumption that their investments would be consistent and safe. Through their nearly three decades in the business, they have weathered rapid social and technological change as well as economic volatility. Through it all, they have resisted opportunities to "make it big" and instead stayed with less profitable but relatively secure investments. Dan Richardson has an MBA from Wharton and is one of the original founders of EP1. He started out working in the research department and has worked in every department since then. The other partners, comfortable with Dan's conservative yet flexibie nature. elected him to the position of CEO in the spring of 1975. After that, Dan became known as "the ereat equalizer." He worked hard to make sure that all the partners were included in decisions and that strone relations were maintained. Over the years, he became the confidant of the other seniors and the mentor of the next generation. He took pride in his "people skills." and EPY's employees looked to Dan for leadership and direction. Dan's management philosophy is built on the concept of loyaity-loyalty to the oreaniabtion, loyalty to its members, and loyalty to triends. As he is fond of saying. "My dad was a small town banker. He told me, 'Look out for the other guys and they'll look out for you: Sounds corny. I know, but 1 firmly believe in this philosophy. Dan, bolstered by the support of the other founding mambers of EPI, continued the practice of consistent and safe investing. This meant maintaining lowrrisk investment portfolios with moderate income. However, EPIs erowth increasinely has not kept pace with other investment opportunities. As a result, Dan has reluctantly begun to. considec the merits of a more aegressive investment approach. This consideration was further strengthened by the expressions of several of the younger analysts who were beginning to refer to EPI as "stodey." Some of them were lewing EPI for positions in more aceressive firms. One evening. Dan talked about his concern with his racquetball partner and longtime friend, Mike Roth. Mike atso happened to be an investment broker, After recelving his MBA from the University of nlinois, Mike went to work for a brokeroge firm in New York, beginning his career in the research department. His accornplishments in research brought him recognition throughout the firm. Everyone respected him for his knowledge, his work ethic, and his uncanny ability to predict trends. Mike. knew what to do and when to do it. After only two years on the job, he was promoted to the position of portfolio manager. However, be left that firm for greener pastures and had spent the last fev years movine from firm to firm. When Mike heard Dan's concerns about EPl's image and need for an ageressive approach, he suggested to his friend that what EPI needed was some fresh biood. someone who could infuse enthusiasm into the organization-someone like him. He told Dan, "I can help you get things moving. In fact, I ve been developing sorne concepts that would be perfect for EPL." Dan brought up the idea of hiring Mike at the next staff meeting, but the idea was met with caution and skepticism. "Sure, he's had a brilliant career on paper," said one senior partner. "But he's never stayed in one place long enough to really validate his success. Look at his rsume.. During the past seven years, he's been with four different firms, in four different positions." "That's true," said Dan, "but his references all check out. In fact, he's been described as a rising star, aegressive, productive. He's just what we need to help us explore new opportunities." "He may have been described as a comer, but I don't feel comfortable with his apparent inability to settie down," said another. "He doesn't seem very loyal or committed to anyone or anything." Another partner added, "A frlend of mine worked with Mike a while back and said that while he is definitely good, he's a real maverick-in terms of both investment philosophy and lifestyle. Is that what we really want at EPI?" Throughout the discussion, Dan defended Mike's work record. He repeatedly pointed out Mike's impressive performance. He deflected concerns about Mike's reputation by saying that he was a loyal and trusted friend, Largely on Daris recommendation. the other partners agreed, although somewhat reluctantly, to hire Mike. When Dan olfered Mike the job, he promised Mike the freedom and flecibility to operate a segment. of the fund as he desired. Mike took the job and performed his responsibilities at EPI in a superior manner. Indeed, he was largely responsible for increasing the managed assets of the company by. 150 percent. However, a price was paid for this increase. From the day he moved in, junior analysts enjoyed working with him very much. They liked his fresh, new approach, and were encouraged by the spectacular results. This caused jealousy among the other partners, who thought Mike was pushing too hard to change the tried-and-true traditions of the firm. It was not uncommon for sharp disagreements to erupt in staff meetings, with one or another partner coming close to stormine out of the room. Throughout this time, Dan tried to soothe ruffled feathers and maintain an atmosphere of trust and loyalty. Mike seemed oblivious to all the turmoil he was causing. He was optimistic about potential growth opportunities. He believed that computer chips, biotechnolozy, and laser engineering were the "waves of the future." Because of this beilef, he wanted to direct the focus of his portfolio toward these emerging technologles. "investments in small firm stocks in these industries, coupled with an aggressive market timing stratecy, should yleld a 50 peroent increase in perforinance. He rallied support for this ides not only amone the youneer members of EPI, but also with the pension lund managers who Invested with EPL. Mike championed his position and denigrated the merits of the traditional philosophy. "We should compromise on safety and achieve same real erowth while wo can," Mike argued. "If we don', we-l lose the investors" confidence and ultimately lose them." Most of the senior parmers disaereed with Mike, statine that the majority of their investors emphasiasd security above all else. They also disaereed with the projected profits, statine that 7We could go from 8 to 12 percent return on imvestmert [RO0: then aeain, we could drop to 4 percent. A lot depends on whose data you use "They reminded Mike, "The fundamental approach of the corporotion is to provide safe and moderate-income mutual funds for academic pension funds to invest in. That's the philosophy we used to solicit the imestments originally, and that's the approach we are obliaked to maintain." Mamy months passed, and dissension among the managers grow. Mike's fnustration over the lack of support among the senior parters began to undermine the day-to-day operations of EPI. He began to criticive detractors in discussions with younger EPI employties. In addition, he ascigned research department employees tasks related to technological itmestments, distracting them from imvestigating more traditional alternan tives. He graduaily implemented his ideas within his portfolio, which accounted for approximately 35 percent of EPis revenues. This disrupted the operations of other managers in EPI because the performance of their funds relied on the timely input of the researchers and other support staff. The other managers bristied when the research stalf began tracking the ROI of the various investments on a chart prominently displayed on the conlerence room wall. Amidst a rapidly spreading undercurrent of tension, one of the founding partners. Tom Watson, approached Dan one day, Conservative in his ways, Watson was the partner Who walks the office and always has time to stop and chat. He began the conversation. "Dan, I speak for most of the senior staff when I say that we are very troubled by Mike's approach. We've expressed ourselves well enough for Mike to understand, but his actions defy everything we ve said. He's a catastrophe just waiting to happen." "I can understand your concern, Tom," rephed Dan. Tm troubled, too. We have an opportunity to attract new business with some of Mike's new ideas. And the younger staff love working on his projects. But he has stifred up a lot of turmoll." Tom agreed. "The real issue is that EPI is no longer presenting a unified image. Mike is willfully defying the stated objectives of our orzanization. And some of our oldest clients don't like that." "That's true. Tom. On the other hand, some of our newer clients are really encouraged by Mike's approach-and his track record is extremely impressive" "Come on, Dan. You and I both know that many experts feel the market is overheating. Mike's paper profits could quickly be incinerated it the budget and trade deficits don't turn around. We can't stake the reputation of the firm on a few high-flying technology stocks. Dan, the other senior partners agree. Mike must either conform to the philosophy and management practices of this organizabon or else resign." Reflecting on the situation, Dan realized he baced the most difficult challenge of his career. He felt a strong personal imvestment in helping Mae succeed. Not only had he hired Mike over the objections of several colleagues he had personally helped him "learn the ropes" at EPI. Beyond that, Dan was haunted by his promise to Mike that he would have the freedom and flexibility to perform the requirements of the position as he pieased. Howtver, this flevibllity had clearfy caused problems within EPL. Finally, bowing to the pressure of his peers, Dan called Make in for a meeting. hoping to find some basis for compromise. DAN: I gather you know the kinds of concerns the senior partners have expressed reearding your approach. MiKE: I euess yourve talked with Fom. Weil, we did have a small disagreement earlier this week. DAN: The way Tom tells it, you're wilfully defying corporate objectives and being insubordinate: MiKE: Weil, it's just the Watson to see provressive chartes as an attempt to take away his power. DAN it's not quite that simple, Mike. When we lounded EP1, we all agreed that a conservative stance was bet. And right nowk with the econonic indicators lookine sokt, mary experts agree that it may siil be the best alternative MIKE: Dan, what are you going to rely on-predictions or performance? These concerns are just smokescreens to deflect attention away from the sub-par records of other portfolio managers. Old views need to be challenged and ultimately discarded. How else are we going to progress and keep up with our competitors? DAN: I agree we need to change, Mike but eradually. You have ereat ideas and terrific instincts, but you can't change a 30 -year old firm overnight. You can help me promote change, but you're pushing so fast, others are digging in their heels. The rate of change is just as important as the direction. MiKE: You're telling me. And at this rate, it doesn't make much difference which direction we're headed in. DAN: Come on, Mike. Don't be so cynical. If you'd just stop rubbing 'people's noses in your performance record and try to see things from their perspective, we could calm things down around here. Then maybe we could start building consensus. Mike's emotions betray his impatience with the pace of the organization; he becomes agitated MIKE: I've always admired your judgment, and I value your friendship, but I honestly think you're kidding yourself. You seem to think you can get this firm to look like it's progressive-shrugeing off its stodgy image-without taking any risks or ruffling any feathers. Are you interested in appearance or substance? If you want appearance, then hire a good PP person. If you want substance, then back me up and we'll rewrite the record book. Get off the fence, Dan, before your butt's full of slivers. DAN: Mike, it simply isn't that easy, 1m not EPI, Pm simply its caretaker. You know we make dedisions around here by consensus; that's the backbone of this organization. To move ahead, the confidence of the others has to be won, especially the confidence of the seniors. Frankly, your reputation as a maverick makes it hard to loster confidence in, and loyalty to, your plans. MikE: You knew my style when you hired me. Remember how you made it a point to promise me flexibility and autonomy? lm not getting that any more, Dan. Alt Im gettine is erief, even thoueh I'm running cirdes around your conservative cronies. DAN: Well, that may be true. But your flamboyance... MIKE: Oh, yeah. The sports car, the singles lifestyle, the messy office. But, again, that's appearance, Dan, not substance Performance is what counts. That's what got me this far, and that's my ticket out. You know I could walk into any firm in town and write my own plan. DAN: Well, there's no reason to be hasty. MiKE. Do you honestly believe this can be salvaged? I think not. Maybe it's time for me to be moving on. Isn't that why you called me in here anyway? Dan, feeling uncomfortable, breaks eye contact and shifts his gaze to the New York sikyline. After a long pause, he continues, still gazing out of the window. DAN: I dorit know, Mike I feel Fve talled. My erand experiment in change has polarized the office; weve eot two armies at war out there. On the other hand, you really have done a zood job here. EPI will no doubt lose a eood part of its customer base if you leave. You have a loyal following, with both customers and staft. If you no. so do they-along with our shot at chaneing our imaee MIKE It's just like you. Dan, to take this problem personally, Blast it. you take everything personally. Even when I beat you at racquetball. Your heart's in the right place-you just carit ever seem to make the cutthroat hit. You know and I know that EPI needs a change in image. But it doessit appear to be ready for it yet. And Ito cer. base if you leave. You have a loyal following, with both customers and staff. If you go, so do they-along with our shot at changing our image- MIKE: It's just like you, Dan, to take this problem personally, Blast it, you take everything personially. Even when I beat you at racquetball. Your heart's in the right place-you just can't ever seem to make the cutthroat hit. You know and I know that EPI needs a change in image. But it doesn't appear to be ready for it yet. And Im certainly not willing to move slowly. TER 7 MANAGING CONFUCT DAN: Yeah. Maybe it's just hard to give up ... llong pausel. Well, why don't we talk more about this after the reception tonight? Come on over and see Joanie and the kids. Besides, Im dying to show off my new boat. MIKE: What you see in sailing is beyond me. It's a waste of time, lazily drifting on gentle breezes DAN: Save it for later, "Speed King. "Ive got to get ready for tonight. Discussion Ouestions 1. What are the sources of confict in this case? 2. What approaches to conllict management ane used by the actors in this situadion? How effective was each? 3. Based on the behavloral guidelines for the collaborative approach, how could Dan have managed this confict more effectively