Curtis Simpson sat staring out the window of his office. What would he say to Tom Lawrence when they met this afternoon? Tom had clearly met the challenge Simpson set for him when he hired him as president of Midwest Controls, Inc. a little more than a year ago, but the company seemed to be coming apart at the seams. As chairman and CEO of Simpson Industries, which had bought Midwest several years ago, Simpson was faced with the task of understanding the problem and clearly communicating his ideas and beliefs to Lawrence.

Midwest Controls, Inc. (Midwest) is a medium-sized producer of mechanical seals, valves, pumps, and other flow-control products. When Simpson Industries acquired the company, it was under the leadership of Jim Carpenter, who had been CEO for almost three decades and was very well liked by employees. Carpenter had always treated his employees like family. He knew most of them by name, often visited them in their homes if they were ill, and spent part of each day just chatting with workers on the factory floor. Midwest sponsored an annual holiday party for its workers as well as company picnics and other social events several times a year, and Carpenter was always in attendance. He considered these activities to be just as important as his visits with customers or negotiations with suppliers. Carpenter believed it was important to treat people right so they would have a sense of loyalty to the company. If business was slow, he would find something else for workers to do, even if it was just sweeping the parking lot, rather than lay people off. He figured the company couldn't afford to lose skilled workers who were so difficult to replace. "If you treat people right," he said, "they'll do a good job for you without your having to push them."

Carpenter had never set performance objectives and standards for the various departments, and he trusted his managers to run their departments as they saw fit. He offered training programs in communications and HR for managers and team leaders several times each year. Carpenter's approach had seemed to work quite well for much of Midwest's history. Employees were very loyal to Carpenter and the company, and there were many instances in which workers had gone above and beyond the call of duty. For example, when two Midwest pumps that supplied water to a U.S. Navy ship failed on a Saturday night just before the ship's scheduled departure, two employees worked throughout the night to make new seals and deliver them for installation before the ship left port. Most managers and employees had been with the company for many years, and Midwest boasted the lowest turnover rate in the industry.

However, as the industry began to change in recent years, Midwest's competitiveness began to decline. Four of Midwest's major rivals had recently merged into two large companies that were better able to meet customer needs, which was one factor that led to Midwest being acquired by Simpson Industries. Following the acquisition, Midwest's sales and profits had continued to decline, while costs kept going up. In addition, Simpson Industries' top executives were concerned about low productivity at Midwest. Although they had been happy to have Carpenter stay on through the transition, within a year they had gently pressured him into early retirement. Some of the top managers believed Carpenter tolerated poor performance and low productivity in order to maintain a friendly atmosphere. "In today's world, you just can't do that," one had said. "We've got to bring in someone who can implement change and turn this company around in a hurry, or Midwest's going to go bankrupt." That's when Tom Lawrence was brought on board, with a mandate to cut costs and improve productivity and profits.

Lawrence had a growing reputation as a young, dynamic manager who could get things done fast. He quickly began making changes at Midwest. First, he cut costs by discontinuing the company-sponsored social activities, and he even refused to allow the impromptu birthday celebrations that had once been a regular part of life at Midwest. He cut the training programs in communications and HR, arguing that they were a waste of time and money. "We're not here to make people feel good," he told his managers. "If people don't want to work, get rid of them and find someone else who does." He often referred to workers who complained about the changes at Midwest as "cry-babies."

Lawrence established strict performance standards for his vice presidents and department managers and ordered them to do the same for their employees. He held weekly meetings with each manager to review department performance and discuss problems. All employees were now subject to regular performance reviews. Any worker who had substandard performance was to be given one warning and then fired if performance did not improve within two weeks. Moreover, whereas managers and sales representatives had once been paid on a straight salary basis, with seniority being the sole criterion for advancement, Lawrence implemented a revised system that rewarded them for meeting productivity, sales, and profit goals. For those who met the standards, rewards were generous, including large bonuses and perks such as company cars and first-class air travel to industry meetings. Those who fell behind were often chided in front of their colleagues to set an example, and if they didn't shape up soon, Lawrence didn't hesitate to fire them.

By the end of Lawrence's first year as president of Midwest, production costs had been reduced by nearly 20 percent, while output was up 10 percent and sales increased by nearly 10 percent as well. However, three experienced and well-respected Midwest managers had left the company for jobs with competitors, and turnover among production workers had increased alarmingly. In the tight labor market, replacements were not easily found. Most disturbing to Simpson were the results of a survey he had commissioned by an outside consultant. The survey indicated that morale at Midwest was in the pits. Workers viewed their supervisors with antagonism and a touch of fear. They expressed the belief that managers were obsessed with profits and quotas and cared nothing about workers' needs and feelings. They also noted that the collegial, friendly atmosphere that had made Midwest a great place to work had been replaced by an environment of aggressive internal competition and distrust.

Simpson was pleased that Lawrence has brought Midwest's profits and productivity up to the standards Simpson Industries expects. However, he was concerned that the low morale and high turnover would seriously damage the company in the long run. Was Lawrence correct that many of the employees at Midwest are just being "cry-babies"? Were they so accustomed to being coddled by Carpenter that they weren't willing to make the changes necessary to keep the company competitive? Finally, Simpson wondered if a spirit of competition can exist in an atmosphere of collegiality and cooperativeness such as that fostered by Carpenter.

Questions Which of the four types of culture in Exhibit 11.4 would you say best describes Midwest's corporate culture under the

leadership of Carpenter? Under that of Lawrence? Which culture is more appropriate for Midwest?

Within the culture established by Tom Lawrence, is it possible to return to high morale and lower turnover?How might Lawrence do that?

In which quadrant of Exhibit 11.5 would you place Lawrence? If you were Curtis Simpson, what would you say to Tom Lawrence in your upcoming meeting with him?