CASE STUDY

Ralph Lorean International (RLI) owner of several house dcor and furniture manufacturers recently purchased a controlling interest in a medium-size firm, House of Cloth (HOC), which employs 6,644 people worldwide. HOC has been considered a premier manufacturer of cloth since 1964. Revenues over the last four years have been flat and costs are rising steadily. RLI purchases an interest in the company despite the flat sales because of its reputation and loyal customer base. RLI has a history of turning troubled companies around and they think they can do the same with HOC.

RLI has to date allowed HOC to operate independently while they examine closely the causes of the recent poor performance of the company. Areama Cantros, was recently promoted to senior management analyst because of her superb work with Izzy's Bed Emporium. RLI has decided to send Areama to HOC on a fact-finding mission. She is to discover the challenges facing the management at HOC and make recommendations that will improve and grow significantly HOC's financial performance.

Areama's, first meeting with HOC's management team after arriving at their headquarters seemed to go well. The first thing Areama noticed about the team was that while they seemed to be personally different in obvious ways, beneath the surface they were quite alike. Of the seven members who compose the team, three have been with the company since its inception. The remaining four are much younger and came to the company after its international expansion in 2010. Two of the team members have worked with HOC in India and came to headquarters as part of a promotion plan. The other two team members come from Guatemala and Romania where they were employed in local branches of HOC. The team membership is predominately male with only two women. Despite the differences in age, gender, company tenure, and their functional and industry background, the members seem like they are cut from the same cloth in that each is very businesslike, analytical, competitive, and results-driven.

In your discussion regarding the company's expansion five years ago, Henry Smythe, one of the founders, remarked, "The expansion was tough for us because of all the pressure and uncertainty, and to be honest, we really didn't jell together at first-I thought it was a big mistake to bring new people on board to manage the ship-but now we're past all that, we're very cohesive, and we share the same vision of how we do business. This is a good thing because when I retire in a few years, I'll know the company is in good hands." Everyone in the room seemed to be a nod in agreement. Another founder, Russell "Rusty" Gee, then looked squarely into Areama's eyes and added, "I'm not exactly sure what you are doing here, but we have weathered storms together and while I admit the last years haven't been stellar, I know we can handle things ourselves. This was part of the deal, wasn't it? We know this place better than anyone, so I can't imagine we'll seriously consider any recommendations that will upset the apple cart." Rusty made the statement in a friendly way with a smile on his face, yet Areama knew he was serious.

Although the meeting told Areama many things two things stood out to her as real problems. The first turnover among the creative team associates is high: thirty-five percent each year for the last two years, and thirty percent the year before that. The industry average is twenty percent. HOC's creative team is integral to its competitive edge in the industry. New patterns, cloth fabrics, and uses are essential to the firm's livelihood. Although the top management team is aware of the problem, they seem to rationalize it. As "Jamie Wagner, VP of human resources noted, "We hire the best and the brightest, so it's only natural that they occasionally get poached by other firms. We try our best to keep them, but we haven't been able to match salaries with our competitors in recent years. Once things turn around the numbers will go down."

Besides the turnover issue, Areama also learned that the company had been sued three times recently. The cases all involved associates who were passed over for a promotion and who claimed the work environment was so filled with stress that it made them ill and unable to work. Areama was aware of the first case because it was highly publicized and HOC was forced to settle the case to get out of the public eye. Afraid of the similar problems with the first case HOC settled both suits out of court quickly and managed to keep them out of the eye of the press. Senior management seemed to be proud of this fact. Before you had a chance to ask Jamie if she thought the suits and turnover may be related, Jamie volunteers the following. "We were really unlucky during this period. We hired three associates who didn't possess the right capabilities for the job, and each had trouble coping in their own way. Most everyone that comes to our design team at HOC is drawn to our reputation for quality and success. We just have to find a better way of finding people who fit."

Areama's conversation with the design team members revealed nothing too far out of the industry norm. Workload and time pressure are high, but not atypical. The design teams are put together by fabric use and usually, their members are led by a senior client manager, who has the final design approval. Jamie told Areama that the teams were self-managed but that appeared not to be the case. The senior lead assigned tasks to each associate member during the projects. Because the support staff is reduced team members had to assume a lot of administrative duties.

Creative teams have the autonomy to work wherever and whenever they need to. This arrangement gives employees a lot of flexibility and working odd hours in strange locations is not unusual. Areama heard one story that a creative dinner was held in the private room of a local restaurant. The team paid the owner $1,000 to keep the room available to them for as long as they needed it. The team stayed overnight and left just before lunch the next day. While all the members were on board with the idea, one of the female designers had to leave early because of a family obligation. The team produced a successful product for a big client. Bursting with pride over the story the senior manager who revealed the story remarked," fantastic team-building experience for those that chose to tough it out" and it perfectly reflects the company's 'work-hard, play-hard mentality'." Areama, had to wonder if a young woman who had to leave early was now considered "not the right fit".

Areama's inquiry as to how the design team's job performance is managed, she learned that towards the end of the calendar year, senior client managers get together and spend an entire day on the evaluation process. The evaluations focus on the extent to which the member contributed to the designs of the team they worked on the previous year. All members are given scores and listed. Using the member's job performance score, their names are placed in one of three categories. The top ten percent will receive a bonus of up to fifty percent of their base pay and are fast-tracked for senior client managers. The next thirty percent will receive a twenty-five percent bonus and are consider on track for promotion. The last group gets 2-3 percent of their salary as a bonus. The bonus checks are mailed to the members home before the winter holidays to "avoid bad feelings and conflict, that can naturally come about among teams" Jamie remarks.

Lunch with the senior client managers told Areama that the subject of turnover and the lawsuits is touchy. One manager said "Around here, you're rewarded for paying your dues, for doing whatever is thrown your way. Yes, it is demanding, and requires sacrifice, but how else can we find out if people have what it takes? Those of us sitting at this table has been through it and we know it works look how successful we have been. Hires who claim they can't take it or that it's abusive just can't be tolerated." Areama seemed to notice that all the senior managers seem to male, American, and considerably older than the associates.

After lunch, Areama met with a group of associates who seem to shed yet another perspective about life in the design department. As an example, the young associate who left work dinner, Areama couldn't help but search her out, said, "I learned a lot from dealing with the pressure at the beginning, but the work is non-stop. They say it's 'work-hard, play-hard, but even the play feels like work. The projects are great, but I never really feel like I'm fully involved. I'm always trying to get a chance to be heard." Another member agreed and added "It's okay I guess if you get plugged into the right manager from the outset, but I've never seemed to gain favor no matter how many hours I work. To top it off, the crazy hours are creating a lot of conflict at home and the strains are adding up."

Source: Adapted from a Case entitled "Managing Commitment in Demanding Jobs" found in "Organizing Behavior: Improving Performance and Commitment in the Workplace" by Jason A. Colquitt, Jeffery A. Lepine, Michael J. Wesson McGraw-Hill/Irwin New York NY 10020, 2013. Page 551

Questions:

• Examine how key managers act to enhance efficiency and effectiveness in an organization, identifying aspects of HoC's management. Include key facts from the case study listed below.
• Examine management of human capital and how it supports strategic thinking (ST) and the learning organization (LO). Apply these concepts to the case study situation.
• Analyze the impact structure and culture have on the creation and maintenance of ST/LO organizations as it relates to the case situation
• Formulate an inclusion and relationship-building strategy for managers within the HoC organization.
• Taking into consideration what you have learned this term (Organizational Structure, Culture, Behavior, etc.) provide at least three strategies that would help the organization move toward the future.