CASE STUDY 14.1:Changing Corporate Culture: The Case of B-MED

B-MED is a medical equipment distributor that sells and services General Electric Healthcare, Medtronic Corporation, Steris Corporation, and AGFA Healthcare medical equipment in the Caribbean and Latin American Region. B-MED was founded in 1984 by Bob Samuels and was run as a small family-owned business with fewer than 10 employees for 25 years. B-MED sold small medical equipment such as EKG machines, patient monitors, anesthesia machines, and defibrillators. As there were only a few products in these lines, B-MED only required a small staff that consisted of three sales persons, five administrative persons, and two engineers. The staff was mostly composed of Samuels's family members or friends of the family.

The company was a traditional vertical organization where Samuels made all decisions. As B-MED had strong financial performance, Samuels rewarded hard work with bonuses and commissions, and punished those who did not do as told. The employees were generally driven by extrinsic motives including fear of punishment and compensation, and lacked intrinsic motivation as they lacked a sense of responsibility and accomplishment. In addition, their input and suggestions were not valued by Samuels. However, the relatively small size of the company meant that B-MED's employees accepted the status quo and performed well enough to generate sufficient revenue to result in B-MED's profitability.

During the second quarter of 2010, everything changed for B-MED. Samuels received a call from the vice president of GE Healthcare informing Samuels that B-MED had been chosen to take on the full line of equipment GE Healthcare offered. B-MED would be taking the distribution rights from another company (MM Healthcare) because they were no longer meeting GE's performance goals. Samuels jumped at the opportunity without taking into account the large investment in capital, personnel, and equipment that would be required to successfully handle the entire GE line. After the call, Bob Samuels informed his son Craig about the good news. While Craig was excited, he also knew that his father's management style would have to change in order to be successful. He told Bob, "This could make us really rich, or really poor." Samuels didn't understand what his son was saying, as the potential profits blinded him of what was ahead.

The new line of GE equipment included MRI machines, CAT scanners, x-ray machines, nuclear medicine machines, and ultrasound machines, and with it, B-MED acquired an install base that consisted of hundreds of pieces of equipment. Most of the equipment carried service contracts, requiring B-MED to support a broader range of service capabilities. Eventually, B-MED started a new company in Trinidad and hired 12 new engineers to be able to service the existing customers. The majority of these engineers came from MM Healthcare. MM Healthcare was managed and organized much differently than B-MED. MM Healthcare had a modern structure that was flat with little middle management. This gave the employees of MM Healthcare a sense of ownership and had enhanced the company's culture to capitalize on employees feeling empowered and in control. When MM Healthcare's employees were hired by B-MED, they were extremely grateful and happy to have their jobs back, but these feelings of satisfaction quickly dissipated. The MM Healthcare employees found themselves in a traditional organization where their voices were not heard and their opinions did not matter. Further, B-MED's management did not have the proper tools, safety equipment, or safety procedures for these new jobs. The new employees immediately began to complain and voice their opinions to B-MED's existing employees. This caused tension between the two groups. B-MED not only grew in the amount of engineers but also hired additional sales staff and administrative staff. B-MED was now a company of more than 50 employees located in Trinidad and Miami. The original staff at B-MED began to blame the staff in Trinidad for all of the problems B-MED was facing. The staff in Trinidad would blame Samuels's bureaucratic style of management and his lack of commitment to his employees.

The tension between the two groups had a direct effect on the performance of the employees. The high level of tension created stress among the employees, creating an unpleasant work place. Samuels ignored stress levels in the company, the low job satisfaction, and the lack of intrinsic motivation in his employees. The turnover rate of employees began to increase at alarming rates, and the company's bottom line suffered substantially. Mr. Samuels was no longer able to meet commissions and bonuses that were promised, which took away his ability to extrinsically motivate the employees through compensation. All Mr. Samuels had was his coercive power over the employees. Needless to say, B-MED finds itself in a very bad financial state with unmotivated employees and unhappy customers.

Discussion Questions

1.There were a number of examples where opportunities for change existed but were not taken. Identify two different changes that were resisted. What could have been done differently to make the change happen?

2.Why were the existing B-MED employees willing to work for Mr. Samuels without any issues, yet the employees from MM Healthcare were having issues? How could Samuels have made this transition better?

3.Being that the two sets of employees came from different countries, what could have been done to ensure that both cultures (social and institutional) would mesh together?

4.What were some of the changes that you see are still needed?