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com. Then came acquisition of Boston-based Kiva Systems. Kiva’s
automated guided robots deliver product to workers at pick stations, allowing Amazon increased efficiency (and reduced labor
costs) in its worldwide distribution centers.
Bezos as a Decision Maker
Rather than sticking to just the analytical step-by-step process,
Bezos isn’t afraid of informed intuition. He uses creativity, flexibility,
and spontaneity when making key decisions. He seems comfortable
with abstraction and lack of structure when making decisions and
also isn’t afraid to fail.
Seeming not to worry about current earnings per share, Bezos
keeps investing to make his company stronger and harder to catch.
Its millions of square feet of distribution fulfillment space keep
growing domestically and around the globe. The firm’s products
and services are continuously upgraded and expanded. Drones are
ready to fly Amazon deliveries to customers. But will these investments pay off ? Is Bezos making the right long-term choices?
Even as Amazon’s stock values fluctuate, Bezos still believes
that customer service, not the stock ticker, defines the Amazon
experience. “I think one of the things people don’t understand is
we can build more shareholder value by lowering product prices
than we can by trying to raise margins,” he says. “It’s a more patient
approach, but we think it leads to a stronger, healthier company. It
also serves customers much, much better.”
Raymond Boyd/Getty Images
CASE 4: Nordstrom—“High Touch”
with “High Tech”
How does Nordstrom stay profitable despite dips in consumer spending, changing fashion trends, and intense competition among retailers?
One answer: Acute attention to detail and well-laid plans.
What’s Next?
All in the Family
Amazon.com has quickly—not quietly—grown from a home operation
into a global e-commerce giant. By forging alliances to ensure that he
has what customers want and making astute purchases, Jeff Bezos has
made Amazon the go-to brand for online shopping. After its significant
investments in new media, services, and distribution, does the company risk losing its original appeal? Will customers continue to flock to
Amazon, making it the go-to company for their each and every need?
The fourth generation of family members that runs Nordstrom has
brought the store’s time-honored and successful retail practices
into a new era. “Nordstrom, it seems, is that rarity in American business: an enterprise run by a founding family that hasn’t wrecked it,”
says one business writer. The company provides a quality customer
experience via personalized service, a compelling merchandise
offering, a pleasant shopping environment, and ever better management of its inventory.
CASE ANALYSIS QUESTIONS
1. DISCUSSION Bezos once said: “Amazon may break even or even
lose money on the sale of its devices.” The company expects to
recoup the money later through the sale of products, with a further
boost from its annual Prime membership fee. In what ways does
this strategy show Bezos as a systematic and intuitive thinker?
2. PROBLEM SOLVING It seems like everyone is streaming these
days and there are a growing number of providers. Amazon is
a player in the digital entertainment market, but as yet they
haven’t taken a clear lead. Given the strengths of the company,
what decisions should be made to ensure that Amazon jumps
ahead and becomes the “No. 1” source for digital content
streams—with no doubt about it?
3. FURTHER RESEARCH What are the latest initiatives coming out of Amazon? How do they stack up in relation to actual
or potential competition? How have the Kiva and Zappos
acquisitions worked out? Who are the major competitors of the
moment? What about the Chinese e-commerce giant Alibaba?
Is it starting to hurt Amazon? Is Bezos making the right decisions
as he guides the firm through today’s many business and management challenges?
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Secret of Success
The secret of this company’s success lies in its strategic planning
efforts and the ability of its management team to set broad, comprehensive, and longer-term action directions, all of which are
focused on the customer experience. The current generation of
Nordstrom family members was quick to spearhead an ultramodern multi-million-dollar Web-based inventory management system.
This upgrade helped the company meet two key goals: (1) correlate
purchasing with demand to keep inventory as lean as possible, and
(2) give customers and sales associates a comprehensive view of
Nordstrom’s entire inventory, including every store and warehouse.
Demand Planning
Instead of relying on one-day sales, coupon blitzes, or marking
down entire lines of product, Nordstrom discounts only certain
items. “Markdown optimization” software assists in planning more
profitable sale prices. According to retail analyst, Patricia Edwards,
this helps Nordstrom calculate what will sell better at different discounts and forecast which single items should be marked down. If
a style is no longer in demand, the company can ship it off to its
Nordstrom Rack outlet stores. It’s all part of Nordstrom’s long-term
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investment in efficiency. “If we can identify what is not performing
and move it out to bring in fresh merchandise,” says Pete Nordstrom,
“that’s a decision we want to make.”
Inventory Planning
Although inventory naturally fluctuates, Nordstrom associates can
easily locate any item in another store or verify when it will return
to stock. Customers on their smart phones and associates behind
sales counters see the same thing—the entire inventory of Nordstrom’s stores is presented as one selection, which the company
refers to as perpetual inventory. “Customer service is not just a
friendly, helpful, knowledgeable salesperson helping you buy something,” says Robert Spector, retail expert and author of The Nordstrom Way. “Part of customer service is having the right item at the
right size at the right price at the right time. And that’s something
perpetual inventory will help with.”
The upgraded inventory management system was an immediate
hit. As of launch day, Nordstrom found that the percentage of customers who purchased products after searching the Web site for an item
doubled. It also learned that multi-channel customers—those who
shop from Nordstrom in more than one way—spend on average four
times more than one-source customers. This profit more than offsets
the cost of hiring additional shipping employees to wrap and mail
items from each store. Now Nordstrom doesn’t have to turn away the
customer who spied a red Marc Jacobs handbag but found it out of
stock in her local store. She can buy it online or at the store counter and
it will be shipped to her, even from a store located across the country.
Keeping It Lean
By displaying stock both on its Web warehouse and in its stores,
Nordstrom has realized some very meaningful sales and customer
service results. Items don’t stay in stock very long. The chain turns
inventory about twice as fast as its competitors, thanks to strong
help from Web sales.
Fast-turning inventories are a sign a retailer is well managed,
making it more attractive to investors. “The old, classic Nordstrom
way is that if you sell more stuff, that compensates for any deficiency
you may have in terms of technology,” says Robert Spector. “They
didn’t want to replace the high touch with the high-tech,” and they
faced striking “that balance between having up-to-date systems and
giving that personal service.” “Traditional retailers have traditional
ways of doing things,” echoes Adrianne Shapira, Goldman Sachs retail
analyst, “and sometimes those barriers are hard to break down.” But
Nordstrom’s commitments to planning are paying dividends.
CASE ANALYSIS QUESTIONS
1. DISCUSSION What specific planning objectives and measures
could Nordstrom use to assess the success of its Web-based
inventory integration?
2. PROBLEM SOLVING How might Nordstrom make use of participatory planning for continuous improvements in areas such
asproduct purchasing, floor displays, and sales associates’ job
satisfaction?
3. FURTHER RESEARCH Nordstrom wants to grow in a number
of different areas. Research one of its strategies and project it
into the future. What changes, revisions, or updates would you
plan for the company? What stretch goals come to mind?
TJP/Alamy
CASE 5: Chipotle—Control Keeps
Everything Fresh
Since its humble beginnings in Denver, Colorado, Chipotle has implemented the control process with fervor. Whether reviewing sales to cost
ratios, same-store sales figures to gauge growth, payment initiatives
to speed checkout during peak lunch hours, or tracking stock performance, management control is deeply entrenched in the firm’s culture
of performance.
The First Burrito
In 1993, Steve Ells, trained in classical French cooking, opened his
first Chipotle in Denver, Colorado. He wasn’t your average chainrestaurant mogul. After spending time in San Francisco working for
famous Chef Jeremiah Tower at the once-famous Stars Restaurant,
Ells saw the need for a similar format using high-quality ingredients
and classic cooking methods he had learned in culinary school.
With a loan of $85,000 from his father and inspiration from the
vast number of taquerias found in San Francisco’s Mission district,
Ells took over an old Dolly Madison ice cream store near the University of Denver campus. He calculated his first store needed to sell 107
burritos per day to break even. After 1 month, sales of 1,000 burritos
a day far exceeded his projections and his wildest dreams. Chipotle
was an instant success, and Ells knew he was onto something big.
Culture Clash with McDonald’s
After getting 16 stores up and running in Colorado, Ells thought it
timely to bring the McDonald’s burger empire on board as a minority
owner and help fuel his company’s growth toward being a national
brand. The strategy was for Chipotle to leverage the buying power and
supplier networks enjoyed by the burger empire’s economies of scale.
During critical growth years, McDonald’s invested over $360
million into Chipotle and at one time owned more than 80% of the
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company. With McDonald’s as their partner, Chipotle’s store locations skyrocketed. But, the two companies eventually parted ways.
Thinking back on the union, Ells laments that the two cultures
could not have been more different. “We just didn’t see eye to eye,” he
said. McDonald’s wanted Chipotle to follow its growth model using
franchising. Ells wanted to grow the firm through internal expansion
and without the use of other people’s money as franchise owners.
“We wanted to own the economic model. You franchise if you want
money and people. We had plenty of money for our growth rate, and
we had great people,” he said. Chipotle went public in an initial public
offering (IPO) to settle the McDonald’s breakup.
“Fast-Casual” with a Difference
Chipotle is “fast-casual,” a fusion of a fast-food and fine dining restaurant. More and more customers have come to expect higher
food quality and service that is more in line with casual dining over
that of a fast-food experience. Chipotle is also known for its “less
is more” philosophy when it comes to its limited number of menu
items, which include burritos, burrito bowls (a burrito without the
tortilla), tacos, and salads. Another hallmark is its generous-size
burritos and all high-quality, natural, fresh, sustainable ingredients.
At some of its most efficient restaurants, Chipotle averages more
than 350 transactions during the lunch hour alone, or on average, one
transaction about every 11 seconds. Executives pay close attention to
its customers getting through the line quickly, which results in greater
sales revenues and a higher-quality customer experience. But discouragingly long lunch and dinner lines still cause problems. “We’ve come
a long way, but there is still a long line, and there are people turning
away at the end,” says a Chipotle operations executive.
raise some questions about future growth. Should Chipotle’s record
of sound management control be enough to quiet the naysayers?
CASE ANALYSIS QUESTIONS
1. DISCUSSION How did CEO Steve Ells use the control process
to move Chipotle forward with success? Explain your answer
using at least three examples based on the case.
2. PROBLEM SOLVING A balanced scorecard helps top managers
exercise strategic control. The scorecard includes customer satisfaction and internal process improvement. What do you recommend that Chipotle do to implement the scorecard approach and
consistently score high in each of these categories?
3. FURTHER RESEARCH Go online to find and analyze Chipotle’s
most recent annual report. Check and critique the company’s
recent financial performance. Review reports from competitors—
e.g., Rubio, Baja Fresh, Qdoba, or Moe’s Southwest Grill. How are
they doing, and what threats, if any, do they pose to Chipotle?
How about product extensions? Could the Chipotle model be
copied with Indian or Caribbean food, for example?
Sustainable Sourcing
Chipotle’s vision and mission statement reads: “to change the way
people think about and eat fast food.” A threefold value philosophy,
called “Food with Integrity,” includes “finding and sourcing the very
best ingredients raised with respect for the animals, the environment and the farmers.”
Whenever possible, the company uses meat from animals raised
without the use of added hormones or antibiotics and dairy from
cows raised without the use of synthetic hormones or recombinant
bovine growth hormone (rBGH). As an advocate of animal rights,
Steve Ells has tirelessly committed himself to change the way pork
is raised in the United States. He learned of the horrific conditions
to which pigs were subjected in factory farm settings, and that
approximately 99% of the pork consumed in the United States was
produced in “confined animal feeding operations.”
As a big enough buyer of pork, Ells knew he was in a position to
create change, saying: “I knew at that moment I did not want my
success to be based on this kind of exploitation, so we started buying all naturally raised meat.” His initial curiosity about the meat
supply was actually prompted by the fact that he was unimpressed
with the quality. By switching sources, he wound up with a product
produced by humane animal treatment and tasting better to customers. Despite a price increase, Ells happily reports: “We started
selling twice as many carnitas as before.”
Fickle Industry
Chipotle is a company that commits itself to constantly seeking
new ways to improve performance. But its high stock price and
the increasingly competitive nature of the fast casual food industry
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JESSICA RINALDI/REUTERS/Newscom
CASE 6: Dunkin’ Donuts—Growth
Feeds a Sweet Tooth
This java giant is opening hundreds of stores and entering new markets appealing to a new generation of customers. But, can Dunkin’
Donuts stay on course with its rapid growth?
Donuts with Passports
Dunkin’ Donut’s present global travels are a long step from its first
coffee shops opened in the Boston, Massachusetts, area in 1950.
Now it’s an international brand with a reputation for quality that
has earned the trust of many loyal customers. Company executives
are hoping that careful strategic planning will keep consumers
worldwide “Runnin’ on Dunkin’.”
Part of Dunkin’ Donuts’ strategic plan of action includes focusing
on the sale of its core products—coffee and donuts. With 500 billion
cups consumed every year, coffee is the most popular global beverage,
and estimates are that Americans drink 400 million cups a day. Dunkin’
Donuts serves close to 3 million of them. That equates to about 30
cups per second—and 65% of the company’s annual store revenue.
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Finding the Sweet Spot
Most Americans have had an encounter with the Dunkin’ Donuts
brand through its almost 11,000 outlets. The Dunkin’s brand has
managed to carve out an international niche, not only in expected
markets such as Canada and Brazil, but also in some unexpected
ones like India, Brazil, Qatar, South Korea, Pakistan, and the
Philippines.
The company is betting big on emerging economies. “Emerging markets are attractive because they are growing very quickly,
they’ve a fast-growing middle-class [eating out more], and they love
American brands,” says CEO, Nigel Travis. The company’s growth
plans include opening between 80 and 100 outlets in India—with
500 stores there within 15 years. “The company plans to locate in
Asia a ‘disproportionate’ number of the 350–450 outlets that it plans
to open outside the U.S. this year,” Travis said.
If Dunkin’ Donuts can find the “sweet spot” by being within most
consumers’ reach without creating the feel of a mass-retail-like
omnipresence, the company’s growth strategy may prove fruitful.
But this strategy has risks. Offering too many original products in
too many locations could dilute the essential brand appeal and
alienate longtime customers who respect its history of simplicity.
Potential new customers and a younger demographic might view
Dunkin’ Donuts as an uncool “yesterday’s brand.” Then too, some
older franchises seem long overdue for a makeover, especially when
compared to the trendy Italian feel of a nearby Starbucks café. Will
Dunkin’ Donuts strike the right balance of products and placement
needed to outserve its fierce competition?
New Products
For most of its existence, Dunkin’ Donuts’ main product focus has
been expressed by its name: donuts and coffee in which to dunk
them. Since Stan Frankenthaler became executive chef and vice
president, Dunkin’ has launched about 25 new products annually
as a new product innovation initiative. It has stepped up to competition by offering a variety of espresso-based drinks complemented
with a broad number of sugar-free flavorings, including caramel,
vanilla, and mocha swirl.
Its strategy now includes breakfast sandwich combinations of
eggs, cheese, ham, and sausage on Texas toast, as well as English
muffins, croissants, bagel sandwiches, and burritos. If plans prove
successful, more customers than ever may flock to the shops. However, it may take a while to convince them that Dunkin’ Donuts is
the place to go to for a big breakfast.
CASE ANALYSIS QUESTIONS
1. DISCUSSION What does a Porter’s Five Forces analysis suggest about the attractiveness of competing in same industry
with Starbuck’s? What are the strategic implications for Dunkin’
Donuts?
2. PROBLEM SOLVING Complete an up-to-date SWOT analysis
for Dunkin’ Donuts. If you were the CEO of the firm, what would
you consider to be the strategic management implications of
this SWOT analysis, and why?
3. FURTHER RESEARCH Research the latest moves by Starbucks
and other Dunkin’ Donuts’ competitors. What is each doing that
seems similar to and different from the approach of the other?
Can you say that Dunkin’ is on the right track? Is it carving out
new market share? Or, is it going to be more of a copycat player
in the industry?
Customer Appeal
Sometimes called the “anti-Starbucks,” Dunkin’ Donuts has a rich
history of offering simple and straightforward morning snacks—
earnest and without pretense—to the everyday working class. The
company appeals to modest, cost-conscious customers.
Selective Partnerships
Dunkin’ Donuts is banking on strategic partnerships to help fuel
growth. But “selectivity” rules the partnership decisions. Although
it often partners with grocery retailers to create a store-withina-store concept, the company is very choosy about where it sets
up shop.
“We want to be situated in supermarkets that provide a superior
overall customer experience,” says a Dunkin business developer. “Of
course, we also want to ensure that the supermarket is large enough
to allow us to provide the full expression of our brand . . . which
includes hot and iced coffee, our line of high-quality espresso beverages, donuts, bagels, muffins, and even our breakfast sandwiches.”
Furthermore, the outlet’s location within the supermarket is critical for a successful relationship. “We want to be accessible and visible to customers, because we feel that gives us the best chance to
increase incremental traffic and help the supermarket to enhance
their overall performance.”
© Richard Clement/Reuters/Corbis
CASE 7: Nike: Spreading Out
to Win the Race
Nike is indisputably a giant in the athletics industry. The Portland,
Oregon, company is known worldwide for its products, none of which
it actually makes. It has thrived by knowing how to stay small, focusing
on core competencies, and outsourcing manufacturing.
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Target on Emerging Markets
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But if you don’t make anything, what do you actually do? If you
outsource everything, what’s left? A lot of brand recognition, as it
turns out.
Behind the Swoosh
Nike continues to outpace the athletic shoe competition while
spreading its brand through an ever-widening universe of sports
equipment, apparel, and paraphernalia. The ever-present Swoosh
graces everything from bumper stickers to sunglasses to high
school sports uniforms. Nike products embody a love of sport,
discipline, ambition, practice, and all other desirable traits of
athleticism.
The company has cleverly kept its advertising agency nestled
close to home, but has relied extensively on outsourcing many nonexecutive and back office responsibilities to reduce overhead. Nike
is structured around its core competency in product design—not
manufacturing. It has taken outsourcing to a new level, with subcontractors producing all of its shoes.
Whoops
Although outsourcing production hasn’t hurt product quality, it
has challenged Nike’s reputation for social responsibility, especially regarding work conditions and labor practices at some
suppliers. In a move designed to turn critics into converts, Nike
posts information on its Web site detailing every one of the
hundreds of factories that it uses to make shoes, apparel, and
other sporting goods. It released the data in conjunction with a
comprehensive corporate responsibility report summarizing the
environmental impact and the labor situations of its contract
factories.
Nike also encourages designers to develop environmentally sustainable designs like the Nike Free, a lightweight running shoe that
boosted sales dramatically. And Nike’s Sustainable Business & Innovation Lab funds outside startups focused on alternative energies,
more efficient approaches to manufacturing, and the promotion of
healthy lifestyles.
that fulfills the evolving needs of today’s athletes and athletes-atheart. Will Nike continue to profit from its organization structure,
or will it spread itself so thin that its competition has a chance to
overtake it?
CASE ANALYSIS QUESTIONS
1. DISCUSSION What factors drive Nike’s decision to stick with
some form of network organizational structure rather than own
its manufacturing operations?
2. PROBLEM SOLVING Draw a diagram that shows what you
believe Nike’s present organizational structure looks like. Be
sure to include all possible components. Next look at the diagram as an organization design consultant. Ask: How can this
structure be improved? How can Nike gain even more operating efficiency without losing its performance edge in terms of
continually coming up with innovative, high-quality, top-design
shoes?
3. FURTHER RESEARCH What is the current state of competition in this industry? Is Nike continuing to pull away from
rivals, or are they catching up? Are new, sleek, and faster rivals
starting to get into the picture? What moves has Nike made
in regard to how it handles the vast amount of subcontracting
used in its supply chain? Does it still have problems keeping
control of this supply chain? Is Nike’s organizational structure
still a major strength that contributes to its success, or is it creating problems that will call for organizational design changes
in the future?
Pesky Competition
Pressure is mounting from outside Nike’s Beaverton, Oregon,
headquarters. German rival Adidas drew a few strides closer to
Nike when it purchased Reebok. The new supergroup of shoes
isn’t far off from Nike’s market size. But when faced with such
challenges, Nike simply knocks its bat against its cleats and steps
up to the plate. Says Nike spokesman Alan Marks: “Of course we’re
in a competitive business, but we win by staying focused on our
strategies and our consumers. And from that perspective nothing
has changed.”
Ann Hermes/The Christian Science Monitor/Getty Images
Putting It Together
Nike has so far balanced size and pressure to remain successful by
leveraging a decentralized and networked organization structure.
Individual business centers—such as research, production, and
marketing—are free to focus on their core competencies without
worrying about the effects of corporate bloat.
This company has found continued marketplace success by
positioning itself not simply as a sneaker company but as a brand
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CASE 8: Gamification—Games Join
the Corporate Culture
Would you be surprised if you approached a co-worker only to realize that he was playing a video game, and the boss didn’t care?
It is getting more common to see people playing games at work
and being praised—not criticized—for doing it. Companies are
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increasingly using “gamification” to increase productivity, creativity, and satisfaction.
Games Hit the Bottom Line
Games are being seen as a way to promote a culture of learning, individualism, and fun, while also focusing attention on the
company’s bottom-line performance goals. Jesse Schell, CEO of
Schell Games, says: “We are shifting into an enjoyment-based
economy. And who knows more about making enjoyment than
game developers?”
The commercial contexts for gamification range from customer
engagement to employee performance to training, to innovation
management, to personal development, to sustainability. Gamespecific problem solving can enhance critical thinking and analytical abilities, as well as develop desirable personal attributes such
as persistence, creativity, and resilience. An IBM executive says the
firm’s use of gaming for employees that spend lots of time working
from home or traveling is a “way to help colleagues connect and
stay engaged.”
Playing by the Rules
Experts claim that gaming is a great motivator that can
increase employees’ enthusiasm for their daily activities and the
energy they bring to work. But, there’s also fear that gaming can
breed unhealthy competition and hurt relationships within
organizations.
For sure, gamification has to be well integrated with business
needs and objectives. “To achieve success for companies starting
in gamification,” says industry analyst Brian Burke, “the first design
point is to motivate players to achieve their goals—and those goals
should overlap with the business goals.” Kris Duggan, chief executive of game-maker Badgeville, cautions: “Adding gamification to
the workplace drives performance but it doesn’t make up for bad
management.”
CASE ANALYSIS QUESTIONS
1. DISCUSSION What arguments can you make that support
making gamification part of an organization’s culture? What are
the arguments against it? What logic or examples can you offer
in support of your arguments?
2. PROBLEM SOLVING Consider yourself the go-to “idea person”
for friends who head two local organizations—a fire department
and a public library. Both complain about morale problems and
ask you for advice on creating a positive organizational culture.
They want to know how your interest in gaming can be used to
improve staff morale and performance. What will you suggest
and why?
3. FURTHER RESEARCH Review how organizations, including
major corporations, nonprofits, and the military, are using
gaming. What role is gaming taking on in these settings, and
how does its use affect the organizational cultures? What
does the evidence suggest—is gamification merely a passing
trend, or is it here to stay and may even grow in use in the
future?
Andreas Gebert/DPA/Zuma Press
CASE 9: Two-Tier Wages—Same
Job, Different Pay
When domestic auto manufacturers were hit hard by recession and
foreign competition, they struggled to control costs and maintain
profitability. One response was a two-tier wage system that pays new
workers significantly less than existing ones doing the same job. What
is the future for such two-tier wage systems?
A New Labor Contract
In Ford, General Motors, and Chrysler manufacturing plants across
the United States, newly hired workers are earning an hourly wage
that may be half that of their more experienced co-workers who
perform identical tasks, roughly $19 versus $28 per hour. Their
benefits—health insurance, paid time off, and retirement funding—are also less than those received by experienced workers.
These differences are the result of two-tier contracts in which labor
unions permit corporations to hire new workers with wage and
benefit packages below those earned by veteran employees in the
same jobs.
At first the two-tier contracts were viewed as stop-gap measures, likely to disappear once the economy picked up again. Now
they appear to be here to stay, and it’s easy to see why. Th e auto
firms had long paid unionized workers a comfortable salary and
a healthy pension. But as labor and pension costs rose, the Big
Three needed to restructure labor costs to match wages offered
by foreign manufacturers with American plants. The United Auto
Workers (UAW) negotiators conceded to two-tier contracts in
order to prevent layoffs and protect the union’s presence in the
auto plants.
Here to Stay?
“This is not going away,” said Kristin Dziczek, a labor analyst at Ann
Arbor’s Center for Automotive Research. “It has allowed the Big
Three to reduce labor costs without cutting the pay of incumbent
workers. Is it good for the health and competitiveness of the companies? Yes. And is that good for job security? Yes.”
“If you know you’re going to get to the top wage eventually, the
[two-tier] system can work,” says Peter Cappelli, a professor at
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the University of Pennsylvania’s Wharton School. “The big problem is when you think you’ll never get there.” Although lower tier
workers can move up to the higher one, there’s a lot of uncertainty
about how long it takes. The United Auto Workers union wants to
shorten and clarify the time to jump tiers and close the pay gap
between them.
a report that summarizes for the reader or listener the current
status of two-tier plans and what we know about how they work
and what direction we can expect from them in the future.
Mixed Reactions
Labor’s reaction to the two-tier wages has been mixed. Although
no one relishes the thought of earning 50% as much as the worker
across the aisle, “Everybody is appreciative of a job and glad to be
working,” said Derrick Chatman, a new hire at Chrysler’s Jefferson
North plant. Before joining Chrysler for $14.65 per hour, he was
laid off from Home Depot, worked the odd construction job, and
collected unemployment. Gary Wurtz, a line worker at GM’s Orion
Township, MI, plant, where 40% of his fellow workers receive lowertier wages, said: “In order to get those guys up, we’ll take a signing
bonus or profit sharing instead.”
That said, two-tier plans still have the potential to divide workers across salary lines. Gary Chaison, a professor of industrial relations at Clark University, points out, “[Lower-tier workers] might
even feel sufficiently aggrieved to someday negotiate away the
benefits of retired higher-tier workers.” A higher-tier autoworker
observed: “After we retire, the next generation may ask, ‘Why
should we defend your pensions? You didn’t defend our pay when
we were young.’ ”
Bridging the Gap
For many union members the rallying cry is “No more tiers!” They
would like to eliminate the two tiers and move to a higher uniform
wage rate for all. The new UAW president Dennis Williams says: “It’s
time to bridge the gap.” But Chrysler CEO Sergio Marchione takes
a very different position. He would prefer to eliminate the higher
wage tier altogether as senior workers retire.
CASE ANALYSIS QUESTIONS
1. DISCUSSION How do Employee Value Propositions differ for
those being paid at different levels in two-tier wage plans? What
are the implications of these differences for each phase in the
human resource management process—attracting, developing,
and maintaining a talented workforce?
2. PROBLEM SOLVING If you were a negotiator for the United
Auto Workers Union, what would be your “union” position management proposal to eliminate the highest tier in the existing
two-tier pay system as senior workers retire? How would you
expect the management negotiators to respond to your position? Do you see any room or way to negotiate a compromise or
trade-offs that could protect the union’s desire for higher wages
and meet management desires to control labor costs? Is there
any way to forge a shared agreement in this situation?
3. FURTHER RESEARCH Dig into current events, scholarly
research, and even financial analysts’ reports for information on
two-tier wage systems and their outcomes in various industries.
Find the pros and cons from both management and union points
of view. Look for interviews with workers who express their real
feelings about being on each side of the two-tier system. Create
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Noah Berger/Bloomberg/Getty Images, Inc.
CASE 10: Zappos—They Do It
with Humor
When Zappos CEO Tony Hsieh was the featured guest on The Colbert
Report, host Stephen Colbert grilled him about the company’s success
and customer loyalty. Hsieh replied that it’s Zappos’s goal to deliver
“WOW” in every shoe or clothing box. The company is consistently
ranked highly as one of Fortune’s “Best Companies to Work For.”
Amazon’s Jeff Bezos liked Zappos so much he bought the company.
Customers First
Zappos’s relentless pursuit of the ultimate customer experience
is the stuff of legend. The company offers fast shipping at no cost
and covers return shipping if you are dissatisfied for any reason
at any time. The Zappos brand is less about a particular type of
product and more about providing good customer service. Hsieh
has said, “We could be in any industry that we can differentiate
ourselves through better customer service and better customer
experience.”
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Next Laugh?
Success at Zappos begins with the company’s culture and the unusual
amount of openness Hsieh encourages among employees, vendors,
and other businesses. “If we get the culture right,” he says, “most of the
other stuff, like the brand and the customer service will just happen. . .
. We want the culture to grow stronger and stronger as we grow.”
Named “The Smartest Dude in Town” by business magazine Vegas
Inc., Hsieh believes employees have to be free to be themselves. That
means no call times or scripts for customer service representatives,
regular costume parties, and parades and decorations in each department. Customer service reps are given a lot of leeway to make sure
every customer is an enthusiastic customer.
Hsieh shares the Zappos culture with anyone who will listen. In
a program called Zappos Insights, “Company Evangelists” lead tour
groups of 20 around the Las Vegas headquarters. Office cubicles often
overflow with kitschy action figures and brightly colored balloons,
giving participants a glimpse of a workplace that prizes individuality and fun as much as satisfied customers. Staffers blow horns and
ring cowbells to greet participants in the 16 weekly tours, and each
department tries to offer a more outlandish welcome than the last.
“The original idea was to add a little fun,” Hsieh says, but it grew into
a friendly competition “as the next aisle said, ‘We can do it better’.”
Those who want to learn Zappos’s secrets without venturing to Las
Vegas can subscribe to a members-only community that grants access
to video interviews and chats with Zappos management. Ask nicely
and the company will send you a free copy of their Zappos Family Culture Book, a compilation of employee’s ideas about Zappos’s mission
and core values. Hsieh has his own tome, too—Delivering Happiness.
So, what does the future hold? As Zappos lives within the Amazon
umbrella and as Hsieh devotes more time to community service,
can the Zappos culture survive growth and a possible leadership
transition? Will Zappos continue to be the home of fashion-forward
practices like Holacracy? Is Hsieh’s unique brand of leadership so
built into the firm’s practices that Zappos will stay the same even
under a new CEO? Will this company continue to remain prosperous and keep its reputation as a great employer far into the future?
Enter Holacracy
CASE ANALYSIS QUESTIONS
1. DISCUSSION What leadership traits and style does Tony Hsieh demonstrate at Zappos? What aspects of his leadership can you criticize,
if any? Is his leadership approach transferable to other leaders and
other organizations, or is it person and situation specific?
2. PROBLEM SOLVING Tony Hsieh is a big thinker, and Zappos is
clearly his baby. But he’s also into philanthropy and community
development activities that are taking up more of his time. Perhaps he’ll come up with other new business ideas as well. As a
leadership coach, what steps would you recommend that he
take now to ensure that his leadership style and vision live on at
Zappos long after his departure? What can a strong and secure
leader like Hsieh do to ensure a positive leadership legacy?
3. FURTHER RESEARCH Check the latest on Zappos and Tony
Hsieh. How and what are each doing at the present time? Do
some research to compare and contrast the leadership style and
characteristics of Tony Hsieh with those of his boss at Amazon,
Jeff Bezos. How are the leadership styles of the two CEOs alike?
In what ways do they differ? For whom would you rather work?
Is one style better than the other in its situational context?
Hsieh’s latest move to shake up the world of organization cultures
is to embrace a fashion-forward concept called Holacracy. Trademarked HolacracyOne, it is described as an approach that “replaces
today’s top-down predict-and-control paradigm with a new way of
achieving control by distributing power.”
In Zappos’s holacracy, employees are partners and managers
don’t exist. Partners hold power distributed by the Holacracy Constitution. They constitutionally agree to things like creating and
acting on projects to fulfill roles, tracking progress, helping one
another, and spotting tensions indicating things could be better.
When Zappos adopted Holacracy, Hsieh justified the shift this
way: “There’s the org chart on paper, and then the one that is exactly
how the company operates for real, and then there’s the org chart
that it would like to have in order to operate more efficiently. . . .
[With Holacracy] the idea is to process tensions so that the three
org charts are pretty close together.”
Wait a Minute
When the switch to Holacracy kicked in, Hsieh faced an unanticipated resistance by some employees, including “ex” managers.
About 14% of Zappos “partners” decided that Holacracy wasn’t for
them and chose to leave the company. One said: “There’s a lot of
things that haven’t been figured out yet . . . people don’t know what
is going to be in the books for them a year down the line.”
Hsieh defends Holacracy and argues that patience is needed.
And on the positive side, a partner says that meetings under Holacracy are more efficient and “end with an opportunity for employees to say whatever is on their minds.”
© AP/Wide World Photos
CASE 11: Panera Bread—
A Company with Personality
Panera Bread is in the business of satisfying customers. With freshbaked breads, gourmet soups, and efficient service, the franchise has
surpassed all expectations for success. How did a start-up food company
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CASES FOR CRITICAL THINKING
Culture to Thrive In
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grow so fast and so successfully? To answer this question, you have to
study founder Ron Shaich and appreciate his personality.
Bread and Soup?
What’s so exciting about bread and soup? Lots, as it turns out.
At Panera Bread, artisan-style bread served with deli sandwiches
and soups is a combination proven to please the hungry masses.
The company’s roots go back to 1981, when Louis Kane and
Ron Shaich founded Au Bon Pain Company Inc. In a 1993 expansion move Au Bon Pain purchased the Saint Louis Bread Company,
a Missouri-based chain of about 20 bakery-cafés. It renovated
the stores and renamed them Panera Bread. Sales skyrocketed. In 1999, Panera Bread was spun off as a separate company
that takes great pride that its loaves are handmade and baked
fresh daily.
Can Do Personality
According to Ron Shaich, former CEO and now executive chairman of the board of Panera, “Real success never comes by simply
responding to the day-to-day pressures; in fact, most of that is
simply noise. The key to leading an organization is understanding
the long-term trends at play and getting the organization ready to
respond.”
Growing up in Livingston, New Jersey, Shaich wasn’t set on being a
bread magnate. He wanted to be a public servant, working in government on public policy. As a high school student he even interned for a
congressman from his home state.
Shaich’s entrepreneurial spark was ignited during his sophomore year at Clark University when the owner of a local convenience store that didn’t cater to students threw him and his friends
out. It was at that point when he had the inspiration for the student
government at his college—he was the treasurer—to open a store
for students, run by students. The store was a huge success at Clark.
Shaich went on to become an impassioned advocate of student governments opening their own stores, speaking on the topic across
the country.
think of Panera as a fast-food restaurant, or has the company
managed to distinguish itself from this industry segment?
2. PROBLEM SOLVING You are a leadership succession consultant
called in to help hire a new CEO. What personality characteristics
of Panera’s founder Ron Shaich contributed to his success, and that
of the company? How good of a fit are these characteristics with
Panera at its post-entrepreneurial stage of operations? What would
you identify as the three or four most important of Shaich’s personal
qualities that should be sought after in the next CEO, and why?
3. FURTHER RESEARCH Find data reporting on Panera’s recent
sales and product initiatives. Find out more about Shaich and
how his values and personality affect the company, its mission,
and its strategies. Is Panera on the leading edge of its industry,
or are other competitors—especially new entrants—starting to
nip away at its traditional customers and markets? Does Panera
seem to have what it takes to deal with shifting customer values
and perceptions of the fast-food industry?
David Paul Morris/Bloomberg/Getty Images
Belief in People
Shaich’s personal transformation from a government–public service focus to a retailing–market focus emerged from the recognition that a store for the people, run by the people, could be a
success. Following college, he matriculated to Harvard’s business
school, where after graduation he went to work for the Original
Cookie Company. With a desire to start his own cookie business, he
was ultimately able to find a tiny retail location, opening the Cookie
Jar in 1980. This first taste of entrepreneurialism ultimately led to
a license agreement with Au Bon Pain, and to the story that has
become famous with the explosion of Panera Bread Co.
Changing Times
Under Shaich’s leadership Panera has demonstrated that sticking
to company ideals while staying in the lead on industry trends will
please customers time and time again. But can this company continue to navigate the changing dietary trends and concerns about
fast food in today’s unstable market?
CASE ANALYSIS QUESTIONS
1. DISCUSSION Describe how stereotypes about the fast-food
industry might positively and negatively affect Panera. Do you
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CASE 12: Salesforce.com: Instant
Praise, Instant Criticism
Instead of waiting a year for your annual performance review, how
would you like to know where you stand by getting immediate feedback about how you’re doing? After all, the once-a-year version might
be little more than a boss-administered exercise in unhelpful feedback.
The typical annual review can present information overload for
many—including past performance, goal setting, pay, and improvement needs. For goals accomplished today, how valuable and motivating is recognition and feedback 6 months from now? What if you
were able to get real-time feedback and coaching by asking
colleagues, managers, and peers pointed questions like: “What did
you think of my presentation?” or “What can be done better?”
Meaningful Recognition
In today’s business environment of rapid speed, employers are beginning to realize the true value of real-time feedback for employee
recognition, control, performance, and motivation. When Salesforce bought Rypple, a maker of performance management social
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software, CEO Mark Benioff, said that “the next generation of HCM
[human capital management] is not just about a cloud delivery
model; it’s about a fundamentally better way to recruit, manage and
empower employees in a social world.”
Rypple’s top management pitched their software this way: “Performance management has become disconnected from real performance. Today, we move faster. We’re more connected. This requires
a new approach to performance.” Rather than waiting a year to learn
what managers think of them, employees using Rypple’s platform
send out a quick (50 words or less) pointed question to folks ranging from managers to peers to customers to suppliers. Some call this
just-in-time performance improvement. Benioff called it a winner.
Enter Work.com
Rebranded within Salesforce as Work.com, the Rypple product
provides a real-time snapshot of employee performance in a single
place, on completion of a goal, project, or quarter. Benefits include
the ability to give public thanks and solicit meaningful feedback
in a timely manner. A coaching interface allows workers to build
coaching networks to spot needed improvements. This helps resolve
problems and issues as they arise rather than after the fact. It also
means quicker implementation of needed changes.
More or Less Motivation?
Some ask if too much feedback becomes a bad thing. Reliance on
so much feedback and what other people say can be a detriment
to learning the hard way—by making mistakes. Others believe that
people are motivated to work hard when their efforts are recognized in a public way.
Are you willing to wait a year until your next performance review
to get some of that much-needed positive feedback? Or would you
like to work in an environment where real-time report cards of your
progress are common?
CASE ANALYSIS QUESTIONS
1. DISCUSSION Is the annual performance review past its “sell by”
date, or just in need of some revisions? If real-time reviews are
available using software like Salesforce’s Work.com, is there a
need for an annual performance review?
2. PROBLEM SOLVING You’ve just taken a new job in human
resource management, and the organization’s president gave you
this high-priority task: Give us a plan that can make performance
reviews motivating to the recipients and their bosses alike. “I’m
tired,” she says, “of hearing everyone complain that annual reviews
are demotivating. We need to review performance. Surely there are
ways that we can make ours more valuable.” As you sit down to
think about this assignment, make a few notes on what you believe
the major issues are and the types of things you might recommend.
Use insights from motivation theories to justify what’s on your list.
3. FURTHER RESEARCH How about the real-time and Web-based
approach to performance reviews offered by Salesforce? Do
some research and identify the latest developments with it and
others like it. Is this online approach to performance assessment the right pathway to a more motivated workforce? What
does the evidence say about benefits? What downsides are
users reporting? Overall, what’s the current verdict on Work.
com and similar products—good for bosses, good for employers, good for employees?
CRYSTAL ALISONMACLEOD/CSM /Landov LLC
CASE 13: Auto Racing—When the
Driver Takes a Back Seat
When you think of auto racing, do you first think of drivers . . . or teamwork? The majority of camera time, fame, and rewards goes to the drivers. But, they are simply one member of a larger team that works together
to achieve maximum performance. When the driver wins, the team wins
as well. And the really great drivers are the first to thank them.
Start Your Engines!
In the world of competitive auto racing, the drivers are the sport’s
rock stars. They’re courted by sponsors, adored by fans, and
made the subject of interview after interview by the racing press.
Although it goes without saying that drivers are absolutely essential
to earning a trophy, racing enthusiasts, teammates, and especially
drivers will tell you that they can’t win the race by themselves—it
takes a successful team to win a race.
Although three of the major forms of professional auto racing—NASCAR, Formula One, and rally car racing—each use different vehicles, rules, and team structures, teamwork is the common
denominator among them. Ray Evernham, former crew chief and
team manager for Hendrick Motorsports’ DuPont car, describes
teamwork this way: “We’re all spark plugs. If one doesn’t fire just right,
we can’t win the race. So no matter whether you are the guy that’s
doing the fabricating or changing tires on Sundays and that’s the only
job responsibility you have, if you don’t do your job then we’re not
going to win. And no one is more or less important than you.”
What are the qualities of successful racing teams? Let’s take a look.
NASCAR Leads the Pack
NASCAR is the most widely known and watched racing sport in the
United States, and the popularity and success of Jeff Gordon has more
than a little to do with that. Gordon has the most wins in NASCAR’s
modern era, has the third-most all-time wins, and has become a
spokesperson for the importance of teamwork in NASCAR racing. “My
job to communicate is probably the most important thing,” Gordon has
said. “Because I’ve got to send a message from the race car and the race
track back to the team so that they can make the proper adjustments.”
Cars running in NASCAR races hit speeds over 200 miles per
hour. But winning or losing can be decided by tenths of a second.
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