Teaching Notes

185
186
Teaching Note
Kenworth Motors

Purpose of the Case:

1. To explore entry and contracting issues in an OD process.

2. To understand practice issues in OD consultation.

Placement in the Course:

This is the first case in the text and should be used fairly early in the course. It is
designed specifically to look at entry and contracting issues.

Overview of the Case:

The OD consultant receives a telephone call from Robert Denton, plant manager of
Kenworth Motors who was referred by a sailing friend who was a colleague of the
consultant. Denton has held his job for eight months and believes things are generally
going well, but has a sense things could be better. He invites the consultant to visit him
and discuss his situation. The consultant does a little research about the company prior
to the meeting but was thoughtful about what he wanted his emotional and professional
posture to be. During the meeting, Denton describes that his plant and its employees
get along fine, work well together and do a good job. Yet, he contends that things nag at
me that I cant put my finger on..we havent jelled together as a team quite like Id
hoped. The consultant asks more questions but the answers from Denton reveal
nothing indicating a problem. At this point the consultant offers to independently
confirm how things are going in the plant through employee interviews. He explains
that this approach in itself may impact the organization, possibly raise tensions and
even perhaps cause problems. Denton responds by asking about other options. The
consultant suggests a weekend retreat for the management team including Denton.
Denton expresses interest and the consultant quickly calculates his fees in his head and
shares them with the client. He says that the content of the retreat would be somewhat
flexible and that Bob Denton would have to trust him. Denton quickly agreed to the
retreat weekend. The OD consultant and he proceeded to select a weekend for the
event.

Teaching Strategy: (30-45 minutes questions and discussion)

1. Ask students to discuss the entry activities that occur in this case. How does the
OD consultant prepare for the first meeting? Have students think of different ways
the consultant may have prepared for the initial meeting.

2. The case describes in detail the discussions between the consultant and Denton
which were meant to clarify the organization issues. In what ways were these
Teaching Notes 187
discussions effective or ineffective for the OD practitioner? Are there other
questions that might have been asked to clarify organizational issues?

3. The case describes how the consultant and Denton determined future consulting
activities. In this contracting phase, have students discuss how mutual
expectations, time and resources and ground rules were determined for the project.
How would they have done it differently?

4. In this case, the OD consultant brings up the issue of trust with regard to retreat
design. Why is this important and what impact will it have on retreat planning
and implementation?

5. Why do you think Denton agreed so quickly to holding a retreat? What implications
might this have regarding the intervention and addressing the real issues of
Kenworth Motors.

188
Teaching Note
Peppercorn Dining

Purpose of the case:

1. Review principles of entry and contracting

2. Critique data gathering and analysis strategies

3. Practice designing feedback processes

Placement in the course:

The Peppercorn Dining case is the second of several cases at the end of Part 2 in the
text. The Part 2 chapters have described the fundamental processes of organization
development, including entry and contracting, data gathering, data feedback,
intervention design, and evaluation. The Peppercorn case is rich in detail around how a
small group of consultants began an OD process and collected a broad range of data. It
is a very action oriented case in that it ends at a natural breakpoint in the OD process
a set of data has been gathered, needs to be analyzed, and a process for feeding back the
date needs to be designed. It is a good case to give students a chance to think through
these issues, propose some alternatives, and discuss the pros and cons of different
approaches. (Note: If this type of case is appealing to the instructor, the BR Richardson
Timber case in the Integrative Case section at the end of the text has a similar
structure.)

Overview of the case:

Peppercorn Dining is a restaurant on the All American University campus and serves
students who have purchased meal plans as well as cash-paying customers. A group of
consultants from Square One Consulting was having lunch at Peppercorn when they
bump into Drew, Peppercorns manager. One of the consultants, Erica, worked at
Peppercorn as a student. Based on this chance meeting, Drew describes the situation at
Peppercorn as he sees it and they eventually reach an agreement to do some operational
auditing. After several days, the group of three consultants, Roger, Lynn, and Erica,
collect data from managers at the restaurant, representatives from the parent dining
organization for the university, and from various student, full time, and temporary
employees. Their interviews cover various operations functions, including serving, the
kitchen, cashiers, dishwashers, and supplies.

Toward the end of the first day of observations and interviews, Erica describes a new
development, the announcement that the university will be constructing a new dining
facility and that Drew will be the head of the new unit. The consultants complete their
interviews and observations and must make sense of the data collected as well as think
through the purpose and design of a feedback session where Drew will hear about their
conclusions and recommendations.
Teaching Notes 189

Teaching Plan: (60 minutes)

There are a variety of issues to sort out in discussing this case. The questions at the end
of the case ask students to a) comment on the quality and type of data collected as well
as the process used, b) think about how the data might be analyzed, and c) design a
feedback session.

Entry and Contracting (optional)

What do you think of the entry and contracting process?

Before addressing these issues specifically, it might be important to address the entry
and contracting process. This particular engagement happened through a very informal
process a chance meeting at the restaurant between the consultants and the manager.
Before they knew it, the group had a project, facilitated at least to some extent by
Ericas prior work as a student employee. The professor may want to comment on the
extent to which this process is normal (e.g., OD consulting is often gained through word-
of-mouth referrals vs. formal advertising) as opposed to unique (e.g., engagements
usually dont just land in your lap). The instructor may also want to comment on the
extent to which the consultants followed good entry and contracting processes as
outlined in Chapter 4.

On the entry side, the consultants did a rather cursory job of clarifying the
organizational issue, theres only some sense that things arent right. The relevant
client may be Drew or it may be the All-American University dining center. This idea
wasnt explored at all, and Drew hasnt even bothered thinking about whether these are
the right consultants. The whole entry process is a bit suspect, but on the other hand,
theres been no fatal errors either.

On the contracting side, theres less information in the case. There is the ethical issue of
Ericas involvement and it appears that the consultants have at least thought about her
potential bias.

Data Collection Process (15 minutes)

Are you satisfied with the quality and quantity of data collected by the consultants?

In terms of the data collection process, Chapter 7 lays out various criteria for good data
collection processes. Students can be asked about the pros/cons of the data collection
process. The tricky part will be to separate out the nature of this process with the
diagnostic/analytic process discussed next.

First, the rich case descriptions of the consultants interacting with the various
Peppercorn members suggests that they were fairly consistent in establishing a
diagnostic relationship with each person. In almost every interaction, they explain
why they were there and ask for permission to ask some questions. Theres no mention
of any confidentiality or anonymity for the participants, so thats an open issue.

190 Instructors Manual
The consultants use three of the four data collection methods interviews of various
stakeholders, observations of operations, and unobtrusive measures in the form of
mission and goal statements, printouts from the computer system, and so on. The
consultants appear to have done a good job here.

Finally, the question of analysis is up for discussion. The consultants have not been very
systematic in their observations and interviews. Other than, tell me about your job
kinds of questions, it will be difficult to aggregate the interview results in any content
analysis, for example, and there is no survey data to submit to a quantitative analysis.
That leaves other, more qualitative techniques, such as force-field analysis. In this case,
since it is a diagnostic process, the second issue of how the data might be analyzed
comes down to what diagnostic model is driving the consultants thinking?

Data Analysis (30 minutes)

How will you analyze the data collected? How will you make sense of the situation at
Peppercorn?

This should probably take a majority of the class period, since how the consultants see
the organizational issues will, in part, determine how the feedback process will be
designed.

Choosing a diagnostic/analytic model is no small issue. There is no evidence in the case
that a particular diagnostic model is driving the data collection process (a potential
problem), and there are at least two models that would work. First, the consultants
could use an individual based model such as the one described in Chapter 6. For each
job at Peppercorn, the consultants could ask what their data reveals about task identity,
skill variety, task significance, autonomy, and feedback in the context of Peppercorns
structure. But this is a more limited perspective and not as good a choice.

Second, and perhaps more relevant in this case, would be an organization-level
diagnostic model such as the one presented in Chapter 5.

Inputs: Based on their initial discussion with Drew as well as data from the
interviews, we can see that the labor market has gotten very tight. It is more and more
difficult to find workers and in particular student workers. This tightened market has
forced the dining services unit and Peppercorn to increase the pay rates twice (although
with little apparent effect). In a related category, we also know that a union represents
full-time employees. It is this labor shortage that is driving many of the dynamics of the
case.

The primary customer, students with meal plans, suggests that there is little likelihood
that price increases can be used to offset the labor scarcity. On a more general level, we
know from data in the interviews that the food-service industry is known for its low
wage levels and long and odd hours.

Design Components. The observation and interview data provides some
information on each feature of organization design. In some cases, there is much data of
high quality while in other cases the amount of data (and its credibility) is thin.
Teaching Notes 191

Strategy: The mission and goals for the universitys dining unit lays out their
purpose and operating goals. There appears to be a broad interest in providing
nutritious food, creating a good social and aesthetic atmosphere, and serving the
economic needs of the university. The goals reflect this broad interest by addressing
customer satisfaction, facilities quality, management excellence, financial management,
alignment with the universitys mission, and industry leadership. There is little in the
case suggesting that Peppercorns strategy is any different.

Peppercorn, according to Drew, is trying address the difficult labor market by providing
an enjoyable place to work although the consultants note a certain disconnect between
what is said (decentralized and participative) and what is practiced (more centralized,
less participative) based on their observations and interview data.

Technology: The overall transformation process is moderately interdependent
and fairly low on uncertainty. The key workflow issue seems to be the supply system.
Supplies, in the form of food, aprons, cookware, and so on, are ordered through a
computer system that isnt working very well and resulting in frequent outages of
different items. Since this process sits at the front end of the transformation process, its
ineffectiveness is a key source of problems for the kitchen and service staff. In some
way, the whole of Peppercorn is held hostage by this computer system.

Once the raw materials have arrived, food is prepared sometimes as much as a day in
advance according to meal plans and recipes that are well understood. [Although some
of the cooks seem proud of their recipes and interested in creating new ones, do you
really want people to be very innovative in this situation? In some ways, this conflicts
with the situation.] The prepared meals are transferred to the serving line where
customers (students) are provided with their food. One of the consultants notes that
there was no portion control at this stage and that a considerable amount of
customization existed as workers gave students a little more of some things or
accommodated specific requests. After the meal, the leftovers, utensils and plates, and
trash are fed into the dish room where plates and utensils are cleaned and recycled for
use.

Other processes also exist but are also relatively low in interdependence and
uncertainty, including order taking, cash exchange, hiring and staffing, and grievance
handling.

Structure: A formal organization chart for both the university dining services
and Peppercorn are presented in the case. Drews role is interesting because he leads
two organizations Peppercorn as well as the Salt Mill and has a professional
supervisor (Larry) that is assigned from the university dining organization. Larrys
relationship with the different employees draws some attention from the consultants
and there is a mostly negative perception of Larry and his skills.

The case also points out a rather complex set of employee relationships. There are full
time employees (union- represented), full-time temporary employees (a non-union
position that has been added to accommodate the problems associated with the
declining numbers of student workers), and student labor. The students have their own
management structure and supervise themselves as well as the full-time temporary
employees (although these employees receive their training from the permanent staff)
which has been the point of some contention. At best, it suggests that there may be two
standards of work performance at play. At worst, there could be some very divisive
resentment over preferential treatment.

Measurement Systems: There is no information presented about how employee
work is measured (goals set, performance monitored and feedback), there appears to be
no portion control on food served, and no financial information is presented. There is
mention of a grievance process, but no indication of grievance activity levels. If the
computer system problems are added into this category, there would appear to be a
pretty big hole in the sophistication of this system.

Human Resource Systems: The interview data reveals a number of complexities
in the way employees are paid through the union contract and the motivational aspects
of that system. In the initial interview between the consultants and Drew, he describes
how some workers can actually be incented to call in sick, for example. The case also
mentions that wage rates have been increased twice in recent months to address the
lack of student issues.

Alignment and Effectiveness: Roger reports that customer satisfaction is
consistently positive with the one complaint being the heat inside the facility an
apparent artifact of the dining room being built over the heating plant. There is no
financial data presented, so we cannot comment on the profitability of the unit. There is,
however, considerable data on employee satisfaction. There is a fairly consistent
downward trend across many of the employees interviewed, although there is a high
degree of tenure among many of the full-time employees. There is also fairly consistent
data with respect to tensions between the different types of employees.

Within that effectiveness assessment, can we make any inferences with respect to
alignment among the organization design features? The presenting problem in the
initial conversation between Drew and the consultants was a hiring problem and that
has certainly been confirmed, the question is why?

First, the strategy for Peppercorn does not seem clear. Other than some sense of doing
the best we can with what we have, there are no clear goals for the restaurant and no
clear sense of why people come there other than they have a meal plan. They are a fairly
captive audience and theres not much in the way of competition for Peppercorn. Does
this suggest a lack of external pressure that translates into all the things seemed
pretty relaxed comments in the case?

Second, the computer system is a big problem, and probably not under Peppercorns
control. The University dining unit probably programs and maintains the system. There
is a potential big black hole here since we dont know how the system works. The one
potential issue here is that it may not be the system; it may be Larry, so that has to be
confirmed.

Teaching Notes 193
Third, how much of the tension in the restaurant is the result of the structure where
students supervise adults. Understanding the rationale for this approach and what the
alternatives are would be a fruitful conversation.

Fourth, and related to the strategy-- There appears to be very few measurement
systems. How do employees know if they are doing well or poorly?

Data Feedback (15 minutes)

What is your plan for the feedback meeting? How will you feed back your analysis and
what outcomes do you want from the meeting?

The feedback process will depend on a) the consultants analysis of the situation at
Peppercorn, b) their objectives for the session, c) the amount of time they contract for,
and d) how they want to position the information about the new dining facility and
Drews impending departure.

One teaching tactic is to ask students for their opinions on how this session should be
designed. What goals do they have for the session? How do they want to raise and
position Drews transition vis--vis the issues at Peppercorn? A good debate of the pros
and cons of different approaches can be useful in generating practical concerns.

Certainly, clarifying the upcoming move will need to be addressed fairly early in the
process. Drews ownership of the diagnosis and any subsequent actions will depend
vitally on his role in the organization. Perhaps he began this process as a way to leave a
better legacy for the next person in his position? If so, how will he ensure a transition of
the initiatives to the next manager? Perhaps hes just interested in the consultants
opinions and plans no action? These would seem crucial to how much of the data is
discussed and presented and in what form. The consultants might even call him before
the meeting and have this clarified rather than waiting for the meeting itself.
194

Teaching Note
Sunflower Incorporated


1. To allow students to critique a planned change process.

2. To understand the value of diagnosis prior to action.


This is the third of six cases concerning the processes of planned organization change.
Unlike Its Your Turn, the Sunflower case describes a complete intervention and its
initial impact on the organization. It is suitable for both graduate and undergraduate
discussion as the issues are straightforward. It is best used after Part II has been
completed so that students can appreciate all of the factors that go into managing a
planned change process.


The case describes the background and recent performance of Sunflower Incorporated, a
distributor of snack foods and liquor. The president decides to create a new position and
hires Agnes Albanese to fill it. Ms. Albanese's responsibilities include the monitoring
and administration of purchasing and pricing decisions across Sunflower's regional
offices. Early into her job, she decides to standardize pricing and purchasing procedures
in order to control costs. The case then describes how she went about implementing her
decision and the "non" results associated with her actions.

Teaching Strategy (60 minutes):

1. Divide the students into small groups and ask them the following two questions.

A. Who can list the most mistakes made by Ms. Albanese?

B. Who can list the most reasons why she is getting no notices?

In essence, students can be allowed, under a "hindsight is 20/20" perspective, to
criticize all of the things Ms. Albanese does wrong. In addition to having some
fun, the obvious teaching point here is that organizations are complex social
systems. Making changes without first considering alternative causes and
consequences is foolhardy. Diagnosis is an essential aspect of planned change
and promotes a "do it right the first time" philosophy.

Teaching Notes 195
C. Among the things she does wrong are:

No diagnosis of:
- Size of past price changes
- Size and number of past local purchase contracts
- Decentralized/autonomous decision making practices
- Her authority over regional offices
No questioning of management belief about what's causing
profit variation across the regions
No apparent consideration of alternative monitoring procedures
No personal relationship with purchasing officers
No formal reporting relationship to purchasing officers
No participation of purchasing officers in decision
Formal, impersonal announcement of change

D. Several possible reasons she is getting no notices are:

Price changes may be less than 3%.
Purchasing officers don't write contracts for over $5000.
Purchasing officers have increased the number of contracts written so
that no contract is over $5000.
Purchasing officers simply ignored the change.
Regional directors, not knowing Mrs. Albanese or resenting her
intrusion, told purchasing directors to ignore the change.

2. In developing the above two lists, you can challenge students to identify the real
reason Albanese received no notices. In other words, there's always at least two sides to
every story. In any event, her lack of diagnosis prevents us from unraveling the causes
of the problem.

The case also provides a good opportunity to get students to distinguish between facts
and opinions. Students often read more into the case situation than the facts allow and
then draw conclusions based on these "assumed facts."

3. What should she do now? It is helpful to get students to discuss the actions Albanese
ought to take (assuming of course that the current situation is not satisfactory). In this
way, the professor can emphasize that planned change process is cyclical. In essence,
Ms. Albanese tried something, it didn't work as expected, and we therefore have some
information upon which to proceed with the next round of planned change. This is,
admittedly, given her too much credit, but the teaching point can be made easily.
Among several possibilities, she can:

A. Perform a complete diagnosis of the regions using data supplied by the
financial reporting system.

B. Interview regional managers about why the discrepancies in regional profits
exist.

C. Solicit regional management's input regarding changes that might be made
locally or changes that might appropriately be taken over by headquarters.
Perhaps it's not controls on pricing and purchasing, but on quality standards for
example.

197
Teaching Note
Initiating Change in the Manufacturing and
Distribution Division of PolyProd


1. To apply several basic OD processes, such as diagnosis and managing change.

2. To gain a deeper understanding of an information management system, how it fits
within an organizations design, and how it contributes to organization effectiveness.


The PolyProd case comes at the end of Part II where a host of traditional OD process
have been described and discussed. The PolyProd case is well suited to the application
of material from Chapter 10 on Leading and Managing Change as well as other basic
OD processes, such as entry and contracting and diagnosis. The subject of the case,
managing an information system also lends itself to a discussion of knowledge
management and organization learning (Chapter 20) and the various plants located
around the world opens the possibility of some international OD discussion as well,
especially the subject of headquarter/subsidiary relationships.


Roberta Jackson, a project manager at PolyProd, strongly believes that the
manufacturing procedures information system can be improved. The case first describes
the manufacturing and distribution divisions background, organization, and culture. It
then goes into a fairly detailed description of the divisions documentation process how
it is structured, developed, and (ideally) used by the headquarters and remote locations.
The case concludes by providing some information about how Roberta Jackson plans to
proceed.

Teaching Strategy: (60 minutes)

1. Entry and Contracting (5 minutes)

A. The first question to address is how will Roberta position herself as the
change agent or OD practitioner in this case. This discussion can be extensive
or limited depending on the teaching objectives of the professorthe
diagnostic and managing change issues are much more substantive. The case
suggests that she will approach a division executive, Stewart Jones. Ask the
students to develop a list of pros and cons for this approach and to enumerate
the contracting issues.

Pros (+) and Cons (--)

+ Stewart Jones is a senior executive and probably has the horsepower to
champion the effort.
+ Senior sponsorship affords some political protection for Roberta.

-- Stewart Jones, like other executives, may not see the full problem.
-- It will be difficult to demonstrate the benefit/cost proportions.

B. Contracting Issues

Roberta needs to be clear about the resources she will need to conduct the effort,
including time from her regular duties as a project manager, other people to help her
diagnose the system, commitment from Stewart Jones to protect her politically and
see the effort through to the end, access to division documentation, assistance in
getting remote location managers to discuss the systems current use, assistance
from the divisions technical personnel, and perhaps some outside consulting
resources.

She also needs to think through Stewart Jones requirements. What will he want?
That will probably include some assurances of control; that nothing happens in the
diagnostic phase without his knowledge. He is also likely to want some
demonstration of the benefits of doing this work. Whats in it for him?

2. Diagnosis (25 minutes)

A. Understanding the documentation process and its relationship to the
organizations effectiveness will not be an easy task. The student must first
decide what level of analysis (organization, group, or individual job) and
scope are to be applied. The answer is that it is organizational (it involves
the headquarters organization as well as the foreign plants), but the scope is
limited to the information systemor is it? This is an important question.
The documentation system is only one part of the organizations design (and
also includes the organizations structure, reward system, work design, and
culture) and the case notes that the system has been greatly affected by
PolyProds strategy. Any of these inputs or organization design elements
could be a contributing factor to the documentation systems effectiveness. In
particular, the case notes that Roberta believes the problem will be half
cultural change and half systems improvement. However, any increase in
scope is likely, at least initially, to be resisted by Jones. The problem is
thorny enough without the increase in scope.

B. Certainly, the documentation system is the focal point of the diagnosis. Ask
students how they will go about assessing the documentation process. What
combination of interviews, questionnaires, observations, and unobtrusive
measures will they use and why?

Teaching Notes 199
C. Based on the data in the case, students can perform a number of analyses,
including a process map, political assessment, or cost/benefit.

Process Map: Take the data in the case and identify the key processes
involved in the documentation system. They should include:

Document generation process
Document retrieval process
Document updating and revision process
Documentation transfer process (moving the system from the
headquarters plant where initial production occurs to the plants
where volume production occurs)
Training and development process (teaching the plant employees
about the policies, procedures, and technical specifications that govern
a manufacturing process this may have to be tailored to fit each local
culture)

Political Assessment: Who holds power in this system?

Stakeholder What do they want?
Headquarters
Organization
Standardization and efficiency of
the system
Plants Autonomy, local control, flexible and
efficient system
Technical writers Some freedom in writing
specifications and procedures
Engineers Efficiency in the system, quick
access and retrieval
Quality control Standardization, ability to enforce
the standards at the plant level
Vendors/Suppliers Accurate orders and specifications,
timely feedback
Others?

Cost/benefit: The issue here is what is process improvement worth? If the
organization goes through the pain of revising the system, with all of the
associated cultural and systems changes, what could the organization hope to
gain? From the data in the case, it would be unreasonable to expect any
numerical estimates. However, one can lay out an argument and use that
argument (model) to drive a diagnostic process. For example, if quality is
everything at PolyProd, one could collect data about:

Reject rates and associated rework costs
Percentage of reject and rework costs associated with not following
documented procedures
Amount of time spent retrieving documents
Current cycle times in the updating and revision process
Number of times wrong parts or materials were ordered, the cost of
replacement, and the cost of lost productivity
Number of delays in customs and associated costs

3. Action planning and implementation (25 minutes)

After the diagnostic phase is completed, the data need to be fed back to the organization
and action plans formulated. Depending on your objectives for the case, it might be
worth spending some time discussing how particular types of data could be fed back to
achieve ownership of the problem. Help students to see the relationships among the way
the data is collected, the feedback process, and the likelihood of implementation.

A. Motivating change

To what extent is the PolyProd organization ready to conduct this change? What
indicators exist to suggest that the organization is ready/not ready to engage in
documentation systems improvement?

In general, the organization appears ill-prepared for change. Cultural resistance
between headquarters and the plants (autonomy, decentralization, aversion to
standardization, different cultural assumptions at foreign plants) would seem to be
the most difficult problem. Assuming that Roberta got the go ahead for the effort,
there are a number of issues to be addressed:

If data could be generated to support Robertas claim that the current
documentation system is costing the organization substantial amounts of lost
productivity that could help to create some sense of urgency.

What forms of resistance are likely to appear and how will they be addressed?

Type of Resistance Tactic to address resistance
Not invented here
(especially at the foreign
plants)
Education
Fear of lack of
incompetence
Create psychological support
Incompetence Training
Local resistance to
standardization
Flexibility in the system
Others?

Teaching Notes 201
B. Creating a vision

A clear sense of the future state is important. Creating a vision will require a
thorough understanding of the existing culture(s). Any vision that violates core
values of the organization will doom the change process to failure. Similarly, the
vision has to be compelling enough to draw people into the process.

C. Developing political support

This would seem to be a critical element in the case. Robert Jackson and Stewart
Jones each have different bases of power, but a clear assessment of the influence
bases available to the headquarters organization and the plants is critical. The
stakeholder analysis from the diagnostic section is a good starting point.

D. Managing the transition

What type of transition management process makes sense here? A steering
committee with representatives from different stakeholder groups? A pilot
process in headquarters to prove the new process and demonstrate its
effectiveness? What kind of training should be offered?

E. Sustaining momentum

The current system of rewards supports autonomous action at the plant level;
there is little incentive for the plants to cooperate or be motivated to improve the
documentation system. Implementing an organization-level productivity reward
may generate the interdependency necessary to incent the plants to help with
the documentation process.

4. Wrap up and Conclusions (5 minutes)

The PolyProd case presents difficult issues. The case for change is not that strong and
the resistance types and levels are quite high. In fact, in the actual case this is based
on, the change effort failed. Politically, it was difficult to gain and sustain senior
management support. Organizationally, the plants had enormous power vested in the
culture. Together they were able to thwart the attempts.

202
203
Teaching Note
Lincoln Hospital


1. An opportunity to contract to perform a diagnosis of human process issues at the
interpersonal and group level in a large hospital system.

2. To critique the initial steps of the intervention chosen and offer different options

3. To assess the appropriateness of the intervention chosen and propose alternative OD
interventions to address the presenting problems and the underlying issues
raised in the diagnosis.

4. To assess the effectiveness of the intervention and propose next steps.


The Lincoln Hospital case comes at the end of Part III covering a variety of Human
Process Interventions at the interpersonal, group, and organization level. The other case
is the Ben & Jerrys case. Both cases look at human process issues and lend themselves
well to contracting, diagnosing, and implementation discussions. However, the Lincoln
Hospital case is more oriented toward interpersonal intervention and the information in
Chapter 12 is most relevant.


In the first few paragraphs, you are quickly introduced to a crisis situation at Lincoln
Hospital. High turnover, scheduling issues, service delays, and a staff divided
characterize some of the issues. It is described as a classic Prima Donna doctors vs.
nurses and staff situation. It is a typical hospital (even academic) scenario of the battle
between the highly educated specialists bringing in the work and doing the work and
those supporting them. On the physicians side there is a newly appointed,
representative chief of surgery, Don, who is at war with Mary, the 13-year veteran OR
director. Mary has been working at Lincoln for 13 years, getting the job done with no
complaints and no nonsense. Not only are Don and Mary at war but their respective
staffs are described as being at odds as well.

A third party is invited in to intervene and interviews Don, Mary, and their respective
staff. The interviews reveal a lot of finger pointing and a lot of blaming the problem on
one person or one group (i.e., the physicians or the nurses). The practitioner decides the
conflict between the leaders was the root of the more systemic problem. The
intervention chosen was third party conflict resolution.

Meetings were conducted with Don and Mary separately to provide their answers to
three questions to the third party. The questions were:

1. What does he or she do well?
2. What do I think I do that bugs him or her?
3. What does he or she do that bugs me?

The mere act of answering the question seems to soften each towards understanding
their part in the problem. Then they share their answers with each other with the
practitioner present. Hearing the answer to the first question of what they did well
softens them further and paves the way to resolve their differences. The two then agree
on changes they were willing to make to their own behavior and practices and agreed on
ways to support the other to be successful. Three VPs were present along with the
practitioner and the two leaders and agreements were documented. Four periodic
meetings were scheduled after this with all six involved to assess progress. Significant
improvement was noted.

Teaching Strategy:

At the end of the case the students are assigned the following questions to direct
analysis of the case:

1. If you had been called by Lincolns president to help resolve the problems described
in the case, how would you have carried out the contracting and diagnosis stages?
What would you have done differently than the OD consultant?

2. Is third-party intervention an appropriate intervention in this case? Other possible
OD interventions?

3. How effective was the third-party intervention? Next Steps?

What is your opinion about the quality of the OD practitioners entry, contracting, and
diagnosis activities?

This is a good chance to review the contracting and diagnosis phases presented in
Chapters 4, 5, and 6. The goal of contracting is to make a good decision about how to
carry out the OD process. Three key factors should be covered in any formal or informal
contract.

a. Mutual expectations of the client relative to the outcome they are expecting and
the consultant relative to their expectations of the client. You arent given much
information here other than the focus being the two leaders and the practitioner
was given full access to interview appropriate physicians, managers, and staff.
b. The amount of time and resources allocated to the effort should also be agreed
upon. For example, how long is the engagement, how much of the clients time
will the consultant need, and how many resources will be allocated to the project.
All we know is that the work was ongoing for at least a few months.
c. Finally, ground rules should be set. There should be a statement of how the
client and OD practitioner will work together (i.e., confidentiality, involvement in
decisions, expert recommendations, etc.).

Teaching Notes 205
The situation can be diagnosed with any of the models presented in Chapters 5 and 6.
With a bias toward being relevant, the organization level model is chosen here:

Inputs: The age-old doctor vs. staff scenario is a common result of the industry
norm as to how hospitals operate. In this model, physicians are fairly independent
and are the main source of patients (income) for the hospital. This gives them power
and a degree of autonomy, however, the hospital staff also controls some of key
resources. Changing this model would put a hospital at a competitive disadvantage
relative to attracting good doctors. There is also an environmental issue. Area
hospitals have been trying to recruit someone for the OR Director position for years
with no luck. Firing the current OR Director would be very risky.

Design Components: The key element in this case is the structural systems that
specify the level of coordination required between the doctors and nurses. This sets
the context for the degree to which the conflict between the respective leaders of
each area affects the rest of the organization.

Outputs: Organization effectiveness is the presenting problem. There has been a
large turnover in the nursing staff with the new staff not being as skilled as the
previous and short seven nurses. Doctors claim they are up to 50% less productive
than before the turnover. There are major equipment, scheduling, and delay issues
as well.

The initial interviews point to a conflict between the doctors and the nursing staff.
In addition to this conflict there is a lot of buzz about the conflict between the two
leaders of the respective groups; lots of finger pointing and blame. These leaders are
in crucially interdependent roles, their relationship being the pinnacle of
collaboration for the entire system.

What other choices did the OD practitioner have besides a conflict resolution process?
(Chapter 12 describes three general types of individual and group level interventions.)

Process Consultation This intervention focuses on interpersonal relations and
social dynamics occurring in work groups. Typically, a process consultant helps
group members diagnose group functioning and devise appropriate solutions to
process problems, such as dysfunctional conflict, poor communication, and in-
effective norms. The aim is to help members gain the skills and understanding
necessary to identify and solve problems themselves. This would have been
appropriate as the problems at the hospital were affecting the whole system. With
conflict so prevalent and specifically, with the conflict being pinpointed to two
people, it seems appropriate to settle that separately before addressing the more
systemic problems.

Third-Party Interventions - Third Party interventions are a form of process
consultation aimed at dysfunctional interpersonal relations in organizations.
Interpersonal conflict may derive from substantive issues, such as disputes over
work methods, or from interpersonal issues, such as miscommunication. Third party
interveners help people resolve conflicts through such methods as problem solving,
bargaining, and conciliation. This is the intervention chosen to first resolve the
conflict between Don and Mary. It seems appropriate to address this first as it has
tainted everyones view of the organization and what it needs.

Team Building - This intervention helps work groups become more effective in
accomplishing tasks. Like process consultation, team building helps members
diagnose group processes and devise solutions to problems. It goes beyond group
processes, however, to include examination of the groups task, member roles, and
strategies for performing tasks. The consultant also may function as a resource
person offering expertise related to the groups task. This is a hard sell in the
healthcare industry where time is so precious. If the time could be allotted it could
be a helpful intervention to build trust between the two sides of the organization.

How effective do you think the third-party intervention was?

The intervention did a decent job in following the major criteria of an effective
intervention. First, an effective intervention must fit the needs of the organization. The
presenting problem was the conflict between Mary and Don and so there is a prima facie
case of relevance. Second, good interventions are based on valid information about the
organizations functioning, providing organization members with opportunities to make
free and informed choices, and then gaining members internal commitment to those
choices. In this case the practitioner interviewed a significant cross-section of the
organization and ensured that he had buy-in from the focal people. The practitioner
chose a classic OD intervention that in many ways gave the participants in the process
considerable choice about being involved at all and the level or depth of their
involvement.

Another important criteria for interventions is the extent to which the intervention
transfers competence to organization members who should be better able to carry out
planned change activities on their own following an intervention. There is probably a
case to be made that Mary and Don now have a new tool that they can use and apply in
similar circumstances. However, the overall tension between the two sides of the
organization still exist and this intervention does not go very far in helping the rest of
the organization learning to resolve their conflicts and work better together.

What should Lincoln Hospital do now?

As mentioned above, now that the conflict between the two leaders has been addressed
the focus can move to the rest of the organization. Although the modeling of resolution
at the top can have a significant effect on the rest of the organization, it is safe to say
the there will still be conflict between the two groups and still unresolved issues around
scheduling, staffing, and productivity in general.

Process consultation stands out as the most likely next step as it has more flexibility
around time commitment. Its hard to get a significant portion of hospital staff and/or
physicians to commit to lengthy teambuilding sessions. Looking ahead, students may
also be encouraged to think about techno-structural and human resource process
interventions as well.
207

Teaching Note
Ben & Jerrys


1. An opportunity to diagnose human process issues at the organizational level in a
large, publicly-owned organization with a popular brand and a chance to address
these organizational issues in the context of a highly unorganized system.

2. To assess the appropriateness of the intervention chosen and propose alternative
interventions based on the presenting problems and underlying issues uncovered in
the diagnosis.

3. To design and propose next steps.


The Ben & Jerrys case comes at the end of Part III which covers a variety of Human
Process Interventions at the interpersonal, group and organization level. The other case
is the Lincoln Hospital case. Both cases look at human process issues and lend
themselves well to contracting, diagnosis, and implementation discussions. The Ben &
Jerrys case is more oriented toward organization level interventions and the
information in Chapter 13 is most relevant.


With a startup story described as a new-age entrepreneurs dream, Ben & Jerrys is a
great springboard for discussion as people feel a familiarity with the brand and have
experience with the product and its placement in the market. The company was started
by two childhood friends, both college dropouts just wanting to make really good ice
cream. They pride themselves on their funky, fun culture and socially responsible
mission. Although they never intended to grow into a large corporation they doubled the
first few years and continued with strong profits there after. As we are introduced to the
system, the picture of an unorganized system and deteriorating productivity emerges.
The presenting problem is that the companys external image of funk, fun, and love is
out of sync with the atmosphere inside the company. Further investigation reveals poor
(at best) communication, feuding between functions and organizational units, unclear
lines of authority and responsibility, and a lack of operational control. The OD
practitioner was commissioned to work with the founders, board of directors,
management, and work force to undertake an OD effort to bring people, functions,
aspirations, and directions together.

The case offers a good example of how OD interventions might be used to address these
issues. Its also a chance to look at the progression from the presenting problems to the
subsequent issues uncovered in assessing the organization. Discussion should address
these issues and the appropriateness of the chosen intervention, possible alternatives,
and next steps.

Teaching Strategy:

At the end of the case the students are assigned the following questions to direct
analysis of the case:

1. Team building is typically used in OD to loosen up an over-organized system that is
too rigid and bureaucratic. In this case, team building was aimed at providing
structure to an under-organized system. In doing a diagnosis, what factors are
important to consider in determining whether a company or team is over- or under-
organized? What are the implications for planning an OD intervention?

2. Is team building a good way to launch an OD effort in this case? Other approaches?

3. What next steps would you recommend?

How would you diagnose the Ben and Jerrys (B&J) organization?

The organization design model from Chapter 5 is a useful framework for this discussion.

Input General Environment and Industry Structure. B&J seems to have a unique
marketing edge that would be easy to imitate. The industry is competitive and the
threat of entry high. The threat of substitute is high also if the funk and love appeal
gives way to a different market amongst the newer generations. They allude to
possible issues fulfilling existing marketing and franchise commitments due to low
productivity.

Design Components - Technology, Strategy, HR Systems, Measurement Systems,
Structure and Culture. The B&J strategy revolves around differentiation. In trying
to make the best ice cream, supporting that with creative advertising, and a
philanthropic attitude, the organization must support this mission. The case
provides a lot of data about issues arising in both the structural and cultural areas.
The system is highly unorganized and not keeping up with the growth of the
business. Issues such as lack of clarity around structure, roles and teamwork, lack of
common mission, direction, and priorities are hampering productivity. People are
also stretched to their limit.

Output Organization Effectiveness. The organizations effectiveness is threatening
current profits and likely affecting, future profits. The deteriorating culture will
adversely affect the brand as it is dependent on the funk and love. The low
productivity of employees is hindering production of the product and the company
will not be able to meet their growth needs.

How do you determine if the business is under- or over-organized?

Teaching Notes 209
Level of Organization: When diagnosing a system for a planned change effort the level
of organization can have an affect on the intervention design.

In over-organized situations, various dimensions such as leadership styles, job designs,
organization structure, and policies and procedures are too rigid and overly defined for
effective task performance. Communication between management and employees is
typically suppressed (or are one-way only), conflicts are avoided, and employees are
apathetic.

In under-organized organizations there is too little constraint or regulation for effective
task performance. Leadership, structure, job design, and policy are poorly defined and
fail to control task behaviors effectively. Communication is fragmented, job
responsibilities are ambiguous, and employees energies are dissipated because they
lack direction.

Data Gathering at the Board meeting revealed different and even conflicting
expectations for this effort from various members. The practitioner also determined that
neither Ben, nor Jerry, nor any board member, except Chico, could provide the day-to-
day leadership needed to move development through the organization. On the contrary,
the founders wanted to hand off the responsibility to Chico and his to-be-formed
management team. The practitioner was to help bring that team into being and to
ensure that they took leadership of B&Js business and social missions. It was also to
help bring the work force together.

The data gathered supports the conclusion that the system is under-organized. It
describes a lack of clarity around structure, roles and teamwork, lack of common
mission, direction, and priorities and talk of people being stretched to their limit.
The implications of under organization in a planned change effort are that the initial
change efforts must be aimed at increasing organization effectiveness by clarifying
leadership roles, structuring communications, and specifying job and departmental
responsibilities. Rather than the traditional steps of planned change this mode requires
modifications to that process.

Identification: Identify the relevant people or groups that need to be involved.

In this case the consultant chose to start with Chico and his team. Other options could
have been the board, including Chico and the founders, the whole system at once or the
whole system via separate efforts at various levels. Starting with Chicos team keeps the
effort manageable and creates a strong, unified base from which to launch any
subsequent efforts.

Convention: Bring the relevant people and departments together.

The consultant started with Chico and his managers in a series of teambuilding
retreats. This gave the managers an opportunity to get to know each other and build
trust which allowed them to start setting goals, direction, and priorities for the larger
organization.

Organization Structure: The change effort in an unorganized system will require that
new interactions among people and departments take place. This may mean new
positions, communication channels, plans and policies.

The 20 managers under Chico had been operating fairly independently to this point.
The teambuilding brought them together as a team, taught them management and
problem solving skill, and prepared them to run the show. The could now work together
on setting direction, solving problems and developing systems for control and follow-
through. New work clusters were formed among them and each developed their own
mission statement that translated into operating goals. In addition, managers met with
their employees to get their input. A new safety committee was formed as well.

Evaluation: The activities aimed at increasing organization should be assessed along
the way to ensure that they are producing the desired outcome.

Initially there was a disconnect between the new management team and the founders
as well as other board members. The founders worried whether the funk and fun was
being lost in all of this business and they were against growth, feeling that it would
sacrifice cohesion. Managers demanded growth due to existing marketing and franchise
commitments. A strategic meeting between the managers and the board allowed them
to get aligned and resulted in several actions to address concerns: a joy committee for
the cultural aspects, a push for more employee participation in the foundation and a
new budget committee to formulate a one-year plan.

What do you think about using teambuilding as the launch for this OD effort? What
other approaches might be considered?

Among the interventions that might be considered here are:

Organization Confrontation Meeting: This change method mobilizes organization
members to identify problems, set action targets, and begin working on problems. In
this case, it would probably represent a series of meetings between two or more feuding
groups. However, the case data suggests that the organization is not ready for this type
of intervention. The lack of clarity about the strategy and the role of the senior
managers in change suggests that there is little guidance to provide the groups who
might be trying to resolve their conflicts.

Inter-group relations: These interventions are designed to improve interactions among
different groups or departments in organizations. The microcosm group intervention
involves a small group of people whose backgrounds closely match the organizational
problems being addressed. The inter-group conflict model typically involves a consultant
helping two groups understand the causes of their conflict and choose appropriate
solutions. The issues facing this company seem more along the lines of alignment, focus,
and leadership rather than a true conflict. This could have been used to address issues
amongst the founders and board members but wouldnt have addressed the under-
organized problem.

Large-group Interventions: These interventions involve getting a broad variety of
stakeholders into a large meeting to clarify important values, to develop new ways of
Teaching Notes 211
working, to articulate a new vision for the organization or to solve pressing
organizational problems. This seems like a viable option especially after team building
with the top management team. Attempting this intervention before the team building
has the same problems as the confrontation meetingtheres no sense of strategy at the
top and the large group might have difficulty getting traction on ideas that are
generated.

The practitioner chose teambuilding with the management team which could be
fully discussed here. OD is not an exact science that can be put into concise
prescriptives. Ben & Jerrys was experiencing an organization wide issue. The
practitioners point of view was that the board was not prepared to deal with its
own issues and become united to provide the leadership that the rest of the
organization needed. So the starting point became the managers. They had to
become a team before any other level of the organization could be addressed.
The outdoor techniques used in this case can be effective teambuilding activities.
They get a team outside of their work environment and by design are able to
highlight interpersonal, communication and decision making processes.
Another option could have been an intervention with the board and founders and
to confront them on their lack of leadership and their inability to deal with their
own issues.

What are the logical next steps in this organizations development?

Now that the management team has formed and they have aligned themselves with the
board and the founders, there is a good opportunity to get the rest of the workforce
aligned to and engaged in the newly clarified goals. Getting the system organized
around a common mission and goals provides bedrock for them to work on bigger issues.
They may need to work on their processes, teamwork at lower levels, communication
channels, etc.

The innovative nature of the company and commitment level of the employees suggests
a readiness for a large group intervention to take them to the next level.

213
Teaching Note
City of Carlsbad (A)


1. To examine organization-wide change processes in the city of Carlsbad.

2. To analyze data from group members about the organization redesign.

3. To formulate action plans from student interpretations of the data (e.g., large-group
interventions,intergroup relations interventions and/or organization-confrontation
meetings from the information.


This case comes after Part IV, Technostructural Interventions, and provides an
opportunity to examine large-scale change processes, including large-group
interventions. The case is unique for two reasons. First, it is a multi-part case. This
allows the instructor to work with the students in a sequence of events. Second, it
concerns a non-profit setting. A lot of OD work is occurring in the public sector and this
gives the students a chance to see a change process unfold in a government context.
This gives the Carlsbad case excellent flexibility. It has been used, for example, as a
final exam case where the students are asked a set of questions to the (A) case, then
read the (B) case and make further recommendations. Each part of the case allows the
professor to tap into different subject matter areas.

This case describes a strategic change effort for the City of Carlsbad. The city manager
first implemented a highly participative program that produced a mission statement
and set of values to guide the city in its change efforts. A number of initiatives followed
to make changes to the information and performance management systems. Following
this major effort, the city manager convened a small representative task force to design
a new structure for the city. The result was a plan to reorganize the city into five major
service areas (MSAs), such as community development safety services, and public
works (see Exhibit C in the text). The largest of the MSAs was the Public Works
department. It consisted of six previously independent departments. The case describes
the initial diagnostic data collected by the public works director and an OD consultant,
including data gathered from interviews and focus groups with a variety of stakeholders
to design an action plan to build the new structure of the Public Works department.
Teaching Strategy

(Note: If the professor wishes to cover all three parts of the case, it will be important to
manage time on this first part. The (B) case provides a wider variety of issues to discuss
and should be given more time than the (A) case. If the (A) case is given as pre-reading,
then allot about 20 minutes for discussing the (A) case, about 5-10 minutes to read the
(B) case, about 25 minutes to discuss the (B) case, and then about 5 minutes to read and
comment on the (C) case.)

1. It is important that the students get clear about the sequence of events leading up to
the public works reorganization. In essence, it is the third change effort and
students often want to talk about the first two. First, the city manager went through
an elaborate change effort resulting in the mission, vision, and several change
initiatives. Second, the city manager noticed that something was not fitting
together. In all of the major change initiatives, there had been no attention to the
structure. So he conducted a much more limited change effort that resulted in the
new organization structure. Finally, the public works director, with the blessing of
the city manager, engages in a reorganization of his department. It is this change, in
the context of the other, which is the focus of the case. Be sure students are clear
about the focus. Once that is clear, the discussion can follow the questions at the end
of the (A) case in the text quite easily.

2. What is your diagnosis of the situation in the Public Works department?

The data in the case represent a summary of the diagnostic data. There appears
to be some fairly independent groups (especially the water district group),
redundant processes, and lack of formality. Structurally, it appears to be very
differentiated, but not very integrated.

3. What interventions would you recommend and why?

Interventions that might be considered include:

A. Structural design Whats the best organization structure for this
department. They are currently organized by function. Alternatives would
include a self-contained unit structure (divide the city into quadrantsthe
northwest unit, the southeast unit, etc.). Each unit would have a complete set
of resources. The benefits would include the development of management
talent, locally responsive customer service, and the building of a stronger and
more integrated group. The disadvantages would include redundant
resources (and potentially higher costs) and the promotion of geographic
goals over departmental goals. Another alternative would be a process-based
organization. A similar set of advantages and disadvantages could be
generated.

B. Reengineering The students could recommend a reengineering process. The
diagnostic data points to redundancies in work processes and equipment that
could be addressed by looking at the way work gets done in all of the
departments. A new set of core work processes could then be identified and
implemented.

Teaching Notes 215
C. Large-group intervention More a process than an intervention, the
successful use of large-group intervention processes during the city
managers first change efforts suggests that this method may align with the
new city mission and values.

4. Develop an action plan for implementation.

Have students present an action plan for their preferred intervention. Note how
each plan matches up with the five elements of a change management process (e.g.,
motivating change, developing political support, creating a vision, and managing the
transition).

In addition, press the students to link the diagnostic data to the intervention action
plan. There should be a clear relationship to justify each element of the action plan.

5. Handout the (B) case.

216
Teaching Note
City of Carlsbad (B)


1. To understand how employee involvement affects strategic change efforts.

2. To identify techniques used to improve intergroup relations and resolve conflicts.

3. To examine the large-group meeting process and practice planning a future large-
group meeting based on the outcomes of the first meeting.


This is the second part of a case series about the restructuring of the public works
department in the city of Carlsbad. The (B) and (C) cases are NOT included in the text,
but are included in the Instructors Manual to provide the instructor with some control
over when the students read the cases and to protect from hindsight in their decision
making.


In the (B) case, the public works director has proceeded with a process to reorganize his
department. He approved a series of large-group conferences to formulate a mission and
a new structure for the Public Works organization, gave the task force a charter and
timeline, and watched the first conference, basically, fall apart. After the first
conference, a small group post-mortem occurs and they decide to regroup for the second
conference. The second conference goes much better and develops some momentum for
the change. The public works director approves another conference and the case ends
with the question of how to design the next conference.
Teaching Strategy:
1. Give the students some time to do their own post-mortem. Based on their
discussion from the (A) case and the data in the (B) case, what led to the poor outcomes
of the first meeting? What led to the turnaround in the second meeting?

A. Listen for several of the following themes regarding the first conference:

The design of the first conference did not appear to take explicit account of
the independence and coherence of the different groups (especially the water
district).
The city managers structural change process was not as participative as his
original process and left people feeling uninvolved and uniformed about the
public works reorganization. That is, task force members didnt understand
why a new Public Works MSA had been formed.
Teaching Notes 217
The consultants appeared to underestimate the amount of resistance to the
change.
The consultants appeared to push the agenda too formally. Instead of dealing
with the resistance, the conference was pressed to move forward and commit
to a structure that no one believed in.
The discussion should also focus on the things that went well. For example,
the half-day orientation did produce useful data, it did set clear boundaries
for the effort (although one might argue that the time frame was too tight),
and people were given an opportunity to see how much support there was for
the project. In addition, the small group post mortem revealed important
data about the depth of resistance and the motivation to continue. Finally,
the second conference helped the task force to regroup and focus. The
agenda included a forum for each of the six departments to talk about what
they did and discuss the differences among them. The role of the water
district in the new organization was discussed. The conference ended with
the group developing common ground around the concept of building the
ideal future structure to best serve the City of Carlsbad when its growth
and development was substantially complete.

2. Designing the Next Conference

The bulk of the time should be spent in proposing a design for the third
conference. Specifically, what agenda will help the group to produce an ideal future
structure?
Several potential agenda items are often raised:
A visible statement from the public works director supporting the effort.
A process for developing alternative structures and a process for coming to
agreement on one structure.
Pre-work or assignments to complete prior to the conference
How to share information?

Note: The actual agenda produced by the task force is provided on the next page. It can
be used to generate questions for the class.

Public Works Organization Design Task Force
Meeting #3 August, 1998

Time Activity

7:30 Pre-meeting to set agenda
8:00 Opening remarks
Review groundrules, boundaries, customer assumptions, etc.
Objective for the day: Develop a structure to fulfill buildout requirements
8:30 Home Table: Connection, Purpose, Promise
What are your hopes and fears about the day?
9:00 EXPO
Ten Tables: 4 designs from first workshop, 6 envelopes of data
The objective of this exercise is to make your home table as knowledgeable as
possible. Be sure that someone from your table goes to each of the ten
stations
10:00 Table Discussion
What are the three to five most important buildout design ideas?
Present ideas to group
10:30 Table Discussion
Create a buildout design: PW Director direct reports and titles
work tasks/responsibilities for each direct report
Present ideas to group

12:00 LUNCH

1:00 Group Discussion
What do the designs have in common?
What do the designs differ on?
2:00 Fishbowl to resolve the differences
3:00 Finalize the Buildout Design
4:00 Next Steps

3. Handout the (C) case. It describes the results of the task force and summarizes their
action plans. Highlight a few key issues from the case in a summary discussion.

A. First, an additional two conferences were scheduled, which brought the total
number to four.
B. Second, the momentum from the second conference clearly sustained the
effort. By the third and fourth conference, they task force was really
producing good work.
C. Third, the action plan shows a lot of depth, clarity, and precision. People were
being moved, buildings constructed, roles defined, and time frames specified.
They even identified key contingencies.

4. Subsequent Events:
Teaching Notes 219

A. The city manager and public works director were both delighted with the
outcomes although they were very concerned about the process. The bad
feelings from the first conference lingered for a long time.
B. Shortly after the final conference, the Carlsbad city council, in a cost cutting
effort, developed an early retirement program and several of the former
department managers took the package. This accelerated the consolidation of
the departments as specified in the action plan.
C. Within two years of the effort, the department had produced enough savings
that the public works director and city manager were praised by the Carlsbad
city council for the efforts to lower costs and improve citizen satisfaction.

221
City of Carlsbad, California
Restructuring the Public Works Department (B)

Results from the Initial Phase
Based on the results of the diagnosis and the recommendations of the OD consultant,
the Public Works director approved a series of large-group conferences to formulate a
mission and structure for the Public Works organization. An organization design task
force composed of volunteers from all levels of the MSA was selected, including all of the
department managers. Following a half-day meeting to orient the task force, the plan
was to have this group of about 40 people work together in a two-day conference with
the expectation that the new structure could be announced within a month.

The Half-day Orientation
The half-day orientation meeting consisted of several presentations and exercises. The
City Manager described how the General Plan was going to guide the development of
the citys infrastructure and the role Public Works would play in that buildout. The
Public Works Director provided the task force with its charter. They were to come up
with a mission statement for the department and to propose a new structure for the
department. The director announced that he believed there were enough redundancies
in the organization that $500,000 in cost savings could be achieved over several years
time. He pledged his support to the project by announcing that no layoffs would result
because of the new structure. In fact, he believed that the citys growth virtually
guaranteed that additional employees would be needed. Finally, the task force engaged
in an exercise to identify the work processes in each organization. These processes
would then be used in the two-day meeting to identify opportunities for consolidation
and reorganization.

The First Conference
The agenda for the first conference is outlined in the table below:

Time Day 1 Day 2
Morning Opening exercise
Ground rules and agenda setting
Mission statement formulation
exercise

Redesigning the structure
Noon Lunch Lunch
Afternoon Making commitments to the
mission
Diagnosis of the current
structure

Action planning
Next steps

The change effort was over almost before it began. Shortly after lunch, the member of
the task began to challenge the process. While everyone on the task force was aware of
the citywide reorganization and the new MSA called the Public Works department, no
one understood the reason for the change. Most importantly, the Public Works task
force had no clear sense of why they were there, why they should change, or what was
so urgent. Resistance and defensiveness from the previously independent departments
dominated the balance of the conference. This was especially true of the water district
employees. As the meeting proceeded, they began to sit together and for every proposal
that argued for integration, they created arguments against it. In addition, public
arguments of long-standing differences and problems between different departments
surfaced, and complaints emerged that the whole process was a sham since
management already had the answer.

Next Steps
Following the first conference, the consultants, in collaboration with the Director of
Public Works, convened a short, four-hour meeting with a small group of task force
members. The purpose of the meeting was to debrief the first conference and think
about how to proceed. The conversations suggested that most people were frustrated
about what had happened. Although a structure had been proposed by the end of the
meeting, there was no commitment to the design. Most people confessed that they had
agreed to the structure under duress (some people actually told of being threatened to
go along), because of time pressure, or out of compromise. In short, they agreed to it for
all the wrong reasons. The small group agreed that it was best to acknowledge that
reality and start fresh. It made little sense to go forward with a structure that had not
been thoroughly discussed or approved. The consultants suggested setting the proposed
structure aside and taking another run at it.

The conversations also pointed out that there was a very large interest in continuing.
People continued to have ideas about how the structure could be different, that there
were a large number of opportunities for improved efficiencies, that they saw this as an
important opportunity to design something the right way, and so on. In short, there
was still momentum for change.

A second conference was designed to regroup and focus. The agenda included
identifying and prioritizing the key customers of the new department, defining their
demands of the public works organization, and clarifying a mission. A forum was
provided for departments to talk about what they did and to discuss the differences
among them. The most important discussion centered on the role of the water district in
the buildout organization, the perceived defensiveness and resistance of their group to
defining a structure, and what they were willing to do to support the redesign effort.

Finally, the group brainstormed answers to six questions:
How can jobs/work be combined?
How can costs be reduced?
How can time be saved?
How can the structure be simplified?
How can developers be served better?
How can the public be served better?

The defining moment in the daylong meeting was the realization that the key to
success was defining the future state in its own terms. That is, the problems and issues
Teaching Notes 223
that existed now would not exist in 10 years. This freed the group to think about an
ideal structure that would best serve the city when its growth and development was
substantially complete. They decided that their first output would be an ideal structure.
An important base of common ground had been established.

Going Forward
Based on the outputs of the meeting, the Public Works Director authorized two more
days for the task force to meet.

What kind of designs would you propose? That is, what objectives do you think
are appropriate?
How will you get the group to agree on an ideal structure and produce an
action plan to implement it?

224
City of Carlsbad, California
Restructuring the Public Works Department (C)

Once the task force successfully refocused the effort and found common ground, they
were ready to design the organization and plan its implementation. Two additional
conferences were planned. Before the next conference, several subgroups were formed to
develop and describe different structures. The next conference had as its objective the
development and commitment to the departments buildout structure. To get there,
the agenda involved a review of the data and four different organization structures that
had been developed by the subgroups. Based on the similarities and differences of these
structures, and the alignment of the structures to the mission of the department, a
buildout design was created.

The last conference identified the changes that would be necessary (including the
assumptions that would guide the transition), a timetable for implementation, and the
creation of a set of recommendations to the public works director. Selected outputs from
the task forces work are provided below:
Immediate Structural Actions
The Organization Design Task Force recommends that the Public Works MSA adopt a
structure that reflects its current operations, but also begins to develop a first class
engineering organization. The proposed structure is shown below in Exhibit D.

Figure D -- Public Works MSA (Proposed Current Structure)

Although similar to organization charts currently in use, there are two important
changes implied by this structure. First, and most importantly, the task force
recommends that the engineering department begin to develop a clear identity by
naming one individual to head the engineering function. At the present time, the Public
Works Director (PWD) is serving as City Engineer and manager of all engineering
functions as well as public works representative to the Leadership Team, the
community, and other stakeholders. To be a fully-functioning and effective MSA, the
PWD must focus his attention on the broader issues associated with being on the
Leadership Team of the City and the broader political and environmental issues that go
with building a new organization.

The proposed initial structure leaves, in tact, the existing Carlsbad Municipal Water
District (CMWD) (see Task Forces below for one exception). Although the Water
Engineers would report to the new Engineering Superintendent, they would remain in

Public Works Director

Special Projects

Administration

Engineering

Parks

CMWD

Facilities

Fleet

Streets

Teaching Notes 225
the water district building until the new buildings are completed. Organizationally, the
task force believes that, in the short run, it is better for customer service, department
morale, and operating costs to appoint a Superintendent and begin team building
activities than to make any physical move of the water engineering staff. Practically,
theres no real physical space to relocate them.
The Transition to Buildout
In general, movement to the buildout structure, shown in Exhibit E, should proceed as
quickly as possible. The task force believes that the basic buildout organization chart
could be in place as early as 2001. Three important forces or opportunities should be
leveraged to implement change. The first force, and the key issue in the transition from
a growth city to a maintenance city, is the increasing and then decreasing prominence of
the engineering organization. Over the next 5-7 years, the engineering organization
must receive attention and resources (hence the Task Forces recommendation to first
consolidate engineering under one Superintendent).

Figure 2 -- Buildout Structure

The second most important force facilitating the move to the buildout structure is the
attrition or retirement of current managers and superintendents. As these individuals
leave the organization, the appropriate functions should be consolidated. The
consolidations include:

Moving certain Park functions to Street Maintenance
Merging Fleet, Facilities, and Park Functions into an Internal Services
Department
Moving all below ground maintenance functions to an Utilities Department

The third force that can be used to facilitate the movement of the public works
organization to its desired buildout structure is the completion of new buildings. The
new administration building provides an opportunity to develop the one-stop
shopping counter services idea, and the more clarity around the Public Works Yard
building will also determine what can and cannot be accomplished. The task forces
preferred option is to have a public works building where nearly all members can be
housed under one roof. If that option proves unfeasible, then a second option is also
outlined in the transition plan.
Utilities Streets Internal
Services
Special Projects
Engineering
Support
Administrative
Support
Public Works Director

The proposed activities can be formed into a preliminary transition plan.

Activity/Area 1998 1999 2000 2001
Preferred
Building
Scenario
Specific
engineers move
to new
Administration
Building (AB)

One stop
Counter
Services moves
to AB
Move all Public
Works
employees,
except Counter
Services and
Land Use
Engineering, to
new yard

Backup
Building
Scenario
Move all of
Engineering,
except
Inspectors to
new AB

One stop
Counter
Services moves
to AB
Move Inspectors
and
maintenance
functions to new
Public Works
Yard.

Move selected
engineering
functions to PW
Yard

Structure Initiate Counter
Services, Work
Consolidation,
and Buildings
Task Forces
Implement
consolidations
as possible
Implement
consolidations
as possible
Goal: Get to
Buildout
structure by
2001
Career
Development
Initiate Career
Development
Task Force

Communications
Plans
Communications Task Force to
Meet next Tuesday
Meet with superintendents
Meet with PWD
Meet with Departments

Implementation progress to
become part of each Public Works
management team meeting agenda
Six-month updates on:
Structural changes
Building progress
Action plans
Consolidation studies
Cost savings
Cost Savings Implement
Costs Savings
Task Force

Implement cost
savings
programs
Implement cost
savings
programs

Teaching Notes 227

228
Teaching Note
C&S Grocers: Self Managed Teams


1. To explore problems of organizational growth and how OD might be helpful in
facilitating these changes

2. To allow students to explore the pros and cons of using self-managed teams as a
techno-structural and productivity intervention

3. To allow students to develop an implementation plan to transition from the current
warehouse operation to the new form of work

Placement of the case:

The C&S case comes in Part IV of the text and is specifically concerned with self-
managed teams, a popular socio-technical systems work design intervention. It is also
generally within the class of interventions known as employee involvement. As a result,
this is a great case to discuss the pros and cons of self-managed teams, the appropriate
conditions for such an intervention, and the implementation issues associated with the
transition. The one thing the instructor might consider is discussing this case after
reading Chapter 17 on Performance Management. There are a number of reward system
and measurement issues in the case and the students may not have enough information
to fully critique this aspect of the intervention.

Case Overview:

The C&S case focuses on the decision to change the work design and organizational
structure within a wholesale grocery distribution warehouse. The change involves shift
from an individual work design that rewards individual performance to a self-managed
team focus.

C&S was founded in 1918 to serve retail grocers by providing warehousing services and
has grown partly because of its reputation for innovation, efficiency, operational
excellence, and customer service. In October of 1988, and as a result of adding a large
client (A&P stores), annual sales had grown from $450 million to $650 million. As the
busiest holiday season ever was approaching, Rick Cohen (CEO) was worried that this
large new client had severely stressed the operations of the warehouse and sent hiring,
turnover, quality, safety, and morale in the wrong direction.

As a way to stem these problems, Cohen had heard about self-managed teams and set
up an experiment, believing that making a team accountable for selecting, loading,
clerking, and other duties within the warehouse would promote productivity and
accountability. The experiment increased order accuracy and efficiency, and Cohen was
considering how to implement the new program.

Teaching Notes 229
Cohen must evaluate if the potential benefits outweigh the risk of change throughout
the warehouse in the context of a busy holiday season, and the willingness of his staff to
embrace this change. Further, he must decide whether or not this experiment can be
successfully implemented with hundreds of employees.

Class discussion:

In the context of the chapters on employee involvement and work design, the students
should be led through a series of discussions about the situation at C&S. Among the
topics described below are diagnosing the work flow, specifying the new design, and
implementing the design. A good way to kick off the discussion is to set the context.

What is the current situation at C&S?

There are several reasons for Cohen to be worried about his organization:

Rising operational costs, shrinking margins, quality control problems, customer
management issues
Increased employee hiring, inexperienced personnel, more supervisors
Overcrowded workspace, congested aisles, misplaced pallets of material
Low employee morale, increased injuries, increased turnover (selector turnover
90%)
Lack of employee accountability for customer orders
Order accuracy not insured, resulting in emergency van loads being shipped to
customers and an inability to verify the source of the mistake
A busy holiday season approaching

Optional: Cohen believes that forming into teams will be both more motivating and
more productive. What is your experience in working in teams? What processes and
systems in a team push you and other members to do great work? Several topics
usually emerge, including

Clear goals
Shared rewards
Strong norms and expectations for performance and quality (where do those
come from?)
Compelling vision
Interesting work

From here, applying the material from Chapter 16 makes the most sense from a
diagnostic perspective.

How would you describe the work at C&S? Is this a situation that favors self-managed
teams?

The case provides some good detail about the work flow at C&S. At the highest level,
the core work processes can be represented as follows:

Selecting
& Packing
hipping
Shipping Receiving
Chapter 16 suggests that workflows can be diagnosed along two dimensions social and
technical. For the technical workflow, the two key variables are interdependence and
uncertainty. Technical interdependence between the major processes in the warehouse
is moderate to low. Once goods are received, they can sit on the shelves until an order is
placed and they are put through to the shipping process, thus lowering interdependence.
However, in the case of food and perishables, the interdependence goes up because food
left in the warehouse too long will spoil.

Between the selecting and packing and shipping core processes, and within each of the
core processes however, the interdependence is higher. For example, the existing system
chose selectors largely at random to fill an order and paid them on the basis of the
number of cases selected. The selectors then provided picked items to loaders who would
load goods onto an outbound truck while a clerk prepared the necessary documentation.
Although there was a great deal of interdependence between the various tasks, the
volume of daily orders made order accuracy difficult to track without adding immense
supervision. The people involved in selecting and packing the orders must work together
to insure that the order is completed quickly and quality of the order maintained, and
they must coordinate carefully with forklift drivers and the outbound trucks to maintain
timely delivery.

Overall, there is little technical uncertainty in the process. Many of the behaviors and
activities can be pre-specified in advance of task execution.

When technical interdependence is high and task uncertainty is low, the text suggests
that a traditional work group is optimal. The proposed self-managed teams
interventions assumes more task uncertainty.

With respect the social dimension, achievement orientation and social needs are the key
variables. There is not much data provided on these two variables in the case and so it
is speculative as to the workers preferences. Under the current work design an
individually-based approach the ideal situation is one of moderate achievement
orientation and, given the amount of communication that has to take place across all
three core processes, high social needs. The proposed movement to self-managed teams
would increase the expectation for high needs for growth.

As the specifics of the workflow and task requirements get clear, the students should
begin to see the inter-relatedness of the tasks, the lack of accountability between tasks
(especially between core processes), and the lack of common goals.

Finally, the choice about moving to self-managed teams must be viewed against
alternatives. Highly motivating, satisfying, and productive work can exist through
individualized designs. The current work design viewed through the job
characteristics model suggest that there is a moderate amount of skill variety and
task identity, but a relatively low amount of task significance. Most workers only get a
sense of how their work quality affects the customer through complaints after the fact.
The amount of autonomy is pretty low as well; most employees work to a set schedule
and plan.

Teaching Notes 231
Since moving to a team-based design will require high levels of skill variety, the current
design would support the shift. The new design is also likely to increase autonomy and
task significance of the work, both positive changes if the workers growth need strength
is sufficiently high. Given the current levels of low autonomy (high levels of employee
supervision), however, the shift to team-based work is likely to be trickier. The research
on supervisors who micromanage supposedly team-based work clearly suggests a
conflict and C&S will have to worry about this if they implement self-managed teams.

Optional: Do the benefits from shifting to self-managed teams outweigh the costs and
risks?

The case permits students to consider the risks and potential rewards of change and
whether this shift to self-managed teams makes sense in what has traditionally been a
heavily supervised operation at a time when operations are about to get very busy.

Potential benefits include:

Decreased error rates for customer orders
Increased efficiency
Increased creativity through the diversity of the work team
Increased accountability for performance both by the team and individually
Decreased need for supervision through self-management
Increased performance, better decisions, and members motivated to perform

Risks include:

Big cultural shift from close supervision to self-management
Unknown changes to cash flow with new reward system
Orchestrating a large change at same time organization is under stress
A change in working style would likely promote fears of pay changes, worries
about carrying freeloading teammates, loss of job status, safety concerns, and a
general fear of change.
Employees may react negatively to managements implementation of what they
may perceive as a new way to exploit them, or carry resentment towards other
shifts/facilities that may not implement this plan. In addition, the impact of the
shift to self-managed teams depends significantly on ones role in the company.
What role does one of the 30 supervisors at C&S now play if teams manage
themselves?
While a small, experimental crew seemed to demonstrate the viability of self-
managed teams, the process of training and transitioning a labor force of 690
employees will be time and labor intensive and potentially lead to a slow and
difficult transition period, just when maximum productivity is needed.

One way to get the students to think about the implications of the change on the
employees would be to ask:

How do you think supervisors will react to the announcement? (5 minutes)

Responses are likely to include emotional (fear, anxiety, resentment) or behavioral
(speaking to colleagues negatively about the plan, trying to undermined team
performance with hopes of reverting to the old system). With these reactions, the
instructor can point out that change is a choice; that all organizational change begins
with a personal choice and that OD practitioners need to think about how to align
personal motivation with organizational necessity.

How would you announce the decision to your employees? Whats your action plan for
going forward? (20 minutes)

My preference is to ask two or three students or student teams to present their action
plans. This sets up a friendly debate about why did you do that? and I never thought
of that conversations. Asking the students to think about the announcement focuses
attention on communications for change and how to construct a message given the
different motivations in the warehouse.

The instructor can look for themes to draw out of the discussion, including

Whole system at once vs. in pieces at a time and fast vs. slow
The processes proposed for implementation should highlight the
difficulties in finding a balance here. For example, changing everything at
once has the benefit of allaying fears of inequity and squelching the rumor
mill vs. implementing the change on a shift by shift basis, which may
result in decreased operational risk but also result in information
asymmetries between employees.
It is also important to ensure that the students see the whole picture.
While the focus is on the work design, C&S is also changing the reward
system, management roles and responsibilities, decision making
processes, hiring practices, and so on.
How should the transition process be handled vis--vis the upcoming
holiday season?
Amount and type of involvement in different phases of the change
Role of training
How should teams be formed by management or by employees?
Cohen and Harris suggested that the teams should be formed based upon
the following principles: The team (1) should be self selecting rather than
assigned, (2) should have the power to remove any member for any
performance-related reason, (3) should earn compensation based on total
team productivity and split the pay equally among members, and (4)
should be paid bonuses for quality (accuracy) and receive deductions from
pay for errors in shipments.
What considerations are given to team membership relative amount of new vs.
experienced employees
How should the reward system change be implemented?
The material in Chapter 17 on performance management makes the case
that team-based work designs require team-based reward systems. In
C&S, an objective of 9,000 cases per five man shift is given to teams, with
a compensation of $0.08 per case, a quarter cent for a correct case, and
Teaching Notes 233
the loss of a dollar for the wrong case per team. Some back of the napkin
calculations will suggest that such a scheme provides a clear incentive for
teamwork and collaboration.
How will the supervisors role be defined in the new system and how will that
transition be supported?

*******************

The following information about actions and results is adapted from the Harvard
Business School Teaching Note on this case:

Cohens actions and results

On a Monday morning in late October, Cohen gathered the entire work force (400
employees) of the Brattleboro facility and announced that a change would be made to
self-managing teams. They were given until the end of the week to form a team, with
the following guidelines:

Selectors should group with other selectors in teams of 5-8. Likewise, forklift
operators should form groups of 2-4.
Senior teams, as defined by cumulative number of years worked, would have first
choice of shifts.
Teams should be formed without the help of management.
Those employees who had not found a team by the end of the week would be paid
an hourly rate of $9-11 and perform other warehouse tasks until they joined a
team.

Results

Most teams were assembled based on personal compatibility and complementary though
not necessarily the same paces of work. For example, two C&S veterans with 7 or 8
years of experience were likely to pick three-to-four younger guys, who were physically
able to handle more work, to be on their team with the goal of good pay and an
attractive work schedule.

By all measures, the change was a success. Two weeks after implementing the change,
productivity had increased, although the overall migration took eight weeks. Over that
time period, the 18-20 supervisors in the facility were reduced to three, with a third of
the remaining 15-17 joining teams, a third working within C&S as project managers,
and a third ultimately leaving the company. The warehouse employee count dropped
from 600 to 400 through this period, resulting in less congestion, fewer injuries, and
increased attendance. Further, overall compensation per employee increased while
productivity gains were strong enough to lower the cost per unit of output for C&S.

The issue of order accuracy was confirmed by conducting random audits together with
representatives of the customer. The frequency and number of audits was determined
by the customer, with the self-managing teams allowing errors to easily be traced and
create the appropriate impact on team compensation. The first few months of self-
management showed significant variance (up to 30%) in performance between teams as
groups sought the most efficient method of completing their tasks. However, C&S began
publicizing team performance metrics, which not only provided bragging rights for the
most effective teams, but over time allowed savvy teams to learn from those who were
most effective.

The transparency of performance metrics meant that each team member had to pull
their weight or risk being fired from their team. A majority vote of teammates was
necessary to fire an individual (and this could only be done for performance reasons),
however the employee was not fired from the company and was free to join another
team or form a new team with new employees.

Implementation Issues

The following issues surfaced through the implementation process:

The need to have difficult conversations with supervisors about their role in
C&S, a company that had historically promoted from within.
The occasional lack of adequate work for junior teams, which was a function of
the ability of senior teams to choose shifts, often leaving junior teams with
substandard income.
The variance in performance of the self-managed teams made overall warehouse
management challenging.
Inefficiency in large teams of eight or more members, smaller was better.
New employees, who tended to be on new and thus low performing teams, often
found their performance incentives less compelling.

Long Term Results

The transition to teams proved tremendously successful in the long term:

Total volume shipped increased by 35%, while labor costs decreased by 20% in
the first six months.
In 2001, C&S experimented with operations in South Hatfield, creating a self-
managing warehouse. Although smaller than other facilities, at South Hatfield
a top performing team can perform at 350 cases per hour vs. 240-250 cases per
hour at another facility. Costs per case are 60% lower than what they would be
at a union shop.
By 2003 C&S owned 19 large warehouses, was the 11th largest private company
in the US according to Forbes magazine, and had $11 billion in sales.
By the start of 2003, 75% of employees at C&S were either on incentive pay or
part of a self-managed team.

235

Teaching Note
Employee Benefits at HealthCo


1. To apply basic OD processes, such as diagnosis and change management, to issues
related to employee and organizational work-life issues, benefits, and programs.

2. To understand and appreciate some of the issues related to individual work-life
balance, and related organizational support for it.


The case comes at the end of Section 5, Human Resources Management Interventions,
in which the focus is more individual and combines developing and assisting individual
employees with assessing their performance. Work-life balance is becoming more and
more critical to individual effectiveness and performance. The case blends issues of
performance management with work-life balance, and how work-life balance is
impacted by individual and organizational diversity. Work-life balance likely will
continue to grow as an area of OD and organizational focus, and the case can be linked
to change and transformation (Chapter 20) and OD in the global context (Chapter 21).
For a company to develop a culture with authentic appreciation of work-life balance is
major change, and work-life issues vary significantly by major areas of the globe.


HealthCo is a non-profit, fully integrated healthcare company. Background and an
overview of the company are given in the case. The case provides three scenarios
involving an employee and their immediate supervisor. In each scenario, work-life
balance or conflict is the key issue. The scenarios raise issues of the role of immediate
supervisor in supporting work-life balance or not, future issues in work-life balance, and
the role of organization-wide programs and benefits.

Teaching Strategy

The case should be read before class. A great deal of literature exists in the business
press on work-life balance and related issues. The dialogue can be significantly
deepened by having students bring an article about work-life, or by also having students
read the Fortune annual Best Companies to Work For article.

1. Diagnosis of the Situation

This case provides a situation in which the approach to and process of diagnosis is
crucial. Ask students to identify issues in and the method of diagnosis.

A. The case notes that external researchers have surveyed female employees, which
provides some initial data. The case also notes differences in concerns and
approaches to work-life balance by department/area of the hospital, and, in
particular, the difference between 24/7 and 9-to-5 departments. Students should
be asked to develop a list of issues impacting the diagnosis.

B. The methods of diagnosis should be a key focus. While a survey or quantitative
instrument could provide some key information, effective diagnosis would likely
involve both quantitative and qualitative data. Qualitative approaches would
include focus groups or interviews. Quantitative data could show average or
mean support by department managers for an issue like flexible scheduling, but
would not begin to explore the issues of flexible scheduling in critical care areas
versus the legal department.

C. Work-life issues vary significantly by age, gender, family status, and life stage.
They also vary by position in the organization, the nature of specific jobs, and by
department-level leadership and culture. These issues should be recognized in
considering how to diagnosis the situation.

2. Personal Diagnosis of the Situation

The personal diagnosis of the situation will highlight differing assumptions and views of
work-life benefits. Students thinking about the case should shift from the how of
diagnosis to the key issues.

Ask students to prioritize the top three issues in the diagnosis.

Key issues include:

Using the researchers survey and other survey, focus group, or interview data to
identify the most important work-life issues and concerns for HealthCo
employees.
Identifying the concerns of supervisors and managers regarding HealthCo
becoming more supportive of work-life balance.
Clearly identifying the status of work-life programs and benefits at HealthCo.
Benchmarking against best practices or best companies in terms of work-life
balance.
Identifying the impact of immediate supervisors and managers on work-life
balance of individual employees.
Noting how work-life varies by individual and organizational diversity.
Identifying that work-life is not just an issue for individuals with children.
Noting that a move to be more supportive of work-life balance likely represents
major, second-order change for HealthCo.
Linking the case to related ideas in Chapter 18, specifically, that work-life
balance is linked to job satisfaction, organizational commitment, motivation, and
life satisfaction.

3. Key Issues in HealthCo Becoming a Top Work-Life Company
Teaching Notes 237
This case provides an opportunity to link a current OD issue, work-life balance, to a
number of OD processes. A variety of issues can be identified here. Four key issues are
as follows.

A. Work-life balance and organizational change

For the majority of companies, creating a culture that truly appreciate and supports
individual work-life balance represents major change. The case and the three scenarios
can be used to discuss various aspects of the change process including motivating
change, developing political support, managing the transition, and sustaining
momentum.

B. Work-life balance highlights the impact of diversity in organizations

Work-life balance varies significantly, for example, by gender. As noted in Chapter 18,
women still carry significantly more of responsibility for home and family, thus
impacting how they juggle work and life. Age also impacts work-life balance, as the
specific issues shift over lifes stages. Often key leaders, because of their greater
autonomy, have significantly more flexibility, and may not appreciate the issues of
work-life balance for front-line employees.

C. Work-like balance and human resource management programs and policies

For HealthCo to become a top work-life company will require major change in their
human resource management benefits and processes. New or additional benefits would
likely be added. In addition, work-life is often dependent upon issues like job design
and scheduling. Further, support of work-life balance should be included in performance
appraisal and reward systems.

D. The role of line manager and supervisors

Line managers and supervisors can make or break work-life balance for individual
employees as seen in the three scenarios. Organizations can have the best benefits and
programs, but if they are not supported by line managers and supervisors, individual
employees likely will be adversely impacted. An example of this is flex-time. Numerous
organizations have flex-time, but individual departments do not respect the core hours,
for example, scheduling critical meetings outside of core hours. Thus, employees are
forced to choose between being at the meetings and balancing work and life as they
would like. Often if employees question the practice, they are told they are not
committed, a la Pat in Scenario 1.

Conclusion:

The HealthCo case and work-life balance portrays the intersection between employees
individual and work lives. It incorporates a number of OD issues and can be linked to
several other chapters in the book. The case is based on two health-care companies, both
of which participated in the researchers survey mentioned in the case. Both continue to
develop their work-life programs and benefits, and to try to find solutions to the issues
raised in the case.

239
Teaching Note
Sharpe BMW


1. To provide an opportunity to apply performance management interventions,
specifically a reward systems change

2. To diagnose and apply design criteria to a reward systems intervention

3. To design a change management process


The Sharpe BMW case is at the end of Part 5, Human Resources Management. Along
with the HealthCo case, the Sharpe BMW case gives students an opportunity to apply
OD processes to human resource issues. In the Sharpe BMW case, the issue is a reward
system intervention and therefore the material in Chapter 18 is most relevant.
Although the focus of the case is the reward system, the case can also be used as an
opportunity to explore generic change management issues. That is, how should the new
reward system be implemented?


In an effort to stem declining service department revenues and low customer
satisfaction index (CSI) ratings, Bob Deshane, the Service Director of Sharpe BMW had
devised a new plan that changes the way service technicians are compensated. The
plan calls for a bonus to be paid to service technicians when they perform a repair job
that is covered by manufacturers warranty. Because warranty jobs pay a technician
less than repair jobs paid for by the customer, Deshane hopes that the bonus plan will
motivate technicians to perform warranty jobs well so that the dealerships CSI ratings
will go up. The task of implementing the bonus plan falls to Tom Dunn, the newly
appointed Service Manager. Dunn has to come up with a detailed plan to implement
this organizational change.

The cases setting a small automobile dealership provides both familiarity (most
students would have either serviced a car at a dealership or accompanied someone who
did), as well as empathy, with the task faced by Tom Dunn. There are two primary
purposes here. First, has the new reward system been designed in an appropriate
manner and does the new process make sense? Second, what are the intricacies of the
task faced by a manager who has to implement a change in his department? The
instructor should emphasize that students have to come up with a plan of
implementation that describes the specific steps that Dunn should take to ensure that
Deshanes plan is successfully implemented.

Teaching Plan:

At the end of the case, the students were assigned the following two discussion
questions:

What do you see as the pros and cons of the proposed bonus plan?

Based on the information in the case, prepare an implementation plan for
Dunne to follow.

1. Diagnose the Current Reward System

Before delving into these important questions, its worth putting the case situation into
a planned change process context. Specifically, how did Dunne find himself in this
situation and does that raise concerns? The professor can ask, What diagnostic efforts
have taken place and what have they indicated?

The case provides a variety of information about the current reward system as well as a
few pieces of information about how the diagnosis (albeit informal) was conducted.

The current reward system exists in a larger performance management system context.
In particular the current system of warranty pay and customer pay is closely tied to the
customer satisfaction index (CSI) system. We can borrow and adapt the criteria for an
effective performance appraisal system as well as the criteria for an effective reward
system to assess the alignment of these two processes.

A. What are the pros and cons of the current CSI system?

The CSI system can be assessed as follows:

Timeliness the CSI system scores well on timeliness as scores are reported to
the dealership monthly.
Accuracy The accuracy of the CSI scores can be challenged. They are composed
of survey responses. Only one of eight questions relates to technician behaviors
and a four (out of five) results in a score of 80%. A customer bringing their car in
for a warranty repair, in the best case, cannot be a happy customer and so the
likelihood of rating the overall service experience as perfect (5 out of 5) cannot
be high no matter how good the technician performs.
Acceptance There is little acceptance of the CSI system as a valid measure.
Under the current system, employees are not rewarded at all for CSI
performance, so theres little chance they would accept being governed by it.
Understanding There is little data in the case about the extent to which
technicians understand the CSI scores. The managers understand the system
very well and their own description of it strongly support they both understand
and accept it.
Focus on critical control points As with the acceptance criteria, the technicians
have no reason to care about the CSI score. Managers, on the other hand,
recognize the importance of this score on a variety of dimensions. CSI would
seem to be an important element of dealer performance.
Teaching Notes 241
Economic Feasibility Again, there is little data here. The CSI scores are
collected by an outside vendor and no information about the cost of collecting the
data is available.

Overall, the CSI system does not have a lot of motivating potential as a performance
feedback system, especially for the technicians.

B. What are the pros/cons of the current reward system?

The current pay system can be assessed as follows:

Available here the question is whether rewards are available. Under the old
system, the answer is that there are no additional rewards or recognition
available beyond the current hourly pay rates. Not to be ignored, however, is the
real threat that qualified technicians are scarce in supply and there are lots of
opportunities for them in other service businesses.
Timeliness although no specific information is available, it is probably fair to
assume that under the current system, technicians are paid on a bi-weekly basis.
Timeliness of the reward is therefore moderate.
Performance contingency is there any connection between good repair work
and pay. The answer here is no. Technicians under the current system are
simply paid by the type of work they perform (customer pay vs. warranty pay).
Durability A bi-weekly paycheck reward is not durable. The value of the
reward is gone almost as soon as it is received (if not before).
Equity The system appears to be fair in terms of both internal and external
equity.
Visibility The current system lacks any visibility. On the other hand, it is
probably reasonable to assume that an informal system within the service
department exists. Technicians probably know who gets what work and whether
or not somebody is getting a higher proportion of customer vs. warranty pay
work.

Overall, the current pay system is probably average in its motivating potential. The
weakest points are availability and performance contingency.

The alignment between the two systems is not good. In essence, the information system
measures the employee behavior that is not being rewarded but for which senior
managers are being recognized. Its no wonder the management at Sharpe BMW have
chosen the reward system as the key lever for change. It is unlikely that they would be
able to change BMWs corporate system.

In terms of the diagnostic process, the case leaves the strong impression that the
diagnosis was carried out almost entirely by Bob DeShane. As a result, we can predict
that the technicians will likely be suspicious and demonstrate at least some resistance
to the implementation of the new reward system. The senior technicians comments in
the case are indicative of such resistance.

2. Implementing the new reward system

Given the pros and cons of the current performance management system and the way
the diagnostic steps were conducted, we can turn to the question of implementation.

A. Dunns role in implementation

As a service manager in an automobile dealership, Tom Dunn is a middle manager
(organization chart in case Exhibit 3). For Dunn, upper management wants high CSI
ratings, while his employees are looking to be equitably compensated for their skills.
Dunns job is to find a middle ground, to get technicians to understand the need for a
pay change plan (or the importance of correctly implementing Bob Deshanes plan)
and, at the same time, insure that the new plan achieves managements goal of
higher CSI ratings. Dunn is the change implementor whose has to balance the needs
of the change strategists (Deshane) as well as the expectations of the change
recipients (the technicians).

B. Implementation Design

There are two ways of thinking about the development of an implementation plan. In
the first case, Dunn can perform a force-field analysis and create a change strategy
based on that analysis. Alternatively, he can follow the steps from Chapter 10 in
creating a change management plan.

Force-field analysis

Forces For Change

Forces Resisting

Declining CSI scores
Managers
opportunity for
increased bonuses

Curren
t
Reward
System

Technicians current way of
thinking about pay
Understanding of the need for
change
New system doesnt increase
pay that much
Link between effort and CSI
score not clear
Relationship between
performance and pay not under
control of technician
The potential increase is not
worth the effort

New
Reward
System

Dunn can lower the resisting forces by 1) explaining the reason for the change, 2)
making the link between effort and increased pay clearer (they will be paid for increases
in question #8, not just the whole CSI index), and 3) offer that a little extra money is
better than none (since warranty pay work is not likely to go away). The relationship
between performance and pay is going to be difficult. The new system introduces an
additional criterion CSI ratings that affects a technicians pay (in the form of a
bonus), and that rating is not under their control. As a result, its likely that technicians
would resist.
Teaching Notes 243
The professor can use expectancy theory to help explain this more clearly. Here,
technicians can control effort and performance (a repair job done correctly), but since
their reward (or at least the bonus part of it) depends upon how customers perceive
their service to be (as reflected in CSI ratings), technicians may feel they do not have
complete control all the way. In a hypothetical situation, what if the customer had a
particularly bad day prior to coming to the dealership? It is likely that this precondition
affects how the customer responds on the CSI survey and the survey responses may
reflect more than just how they felt about the service received. In addition, customer
expectations for those with a new vehicle are very high. If I buy a new BMW (and paid a
steep price for it), my belief is that nothing should go wrong, at least initially. When I
bring it in to a dealership for warranty repairs, I am very likely to be upset because this
belief has been challenged!! Since the technician does not have control over this
precondition, he may feel that even a job well done is not equitably rewarded (in the
form of a bonus).

Finally, the size of the increase could be a problem as well. The bonus amounts to 2-3%
of pay and even Deshane admits that the amount is not substantial. According to the
data in Exhibit 4 of the case, the most a technician could make in bonuses is a little
under $10 per week. If the technicians do not perceive the value of the rewards highly,
then the bonus plan cannot be expected to motivate them to change their behavior.

On the forces for change side of the equation, the dealership appears to fully support the
proposed pay system. Since it has had the blessing of the owner, Dunn can feel
reassured that the forces driving the change are quite strong. The dealership does need
to maintain its good standing with BMW. It also has to respond to the competitive
market for BMW vehicle's service in its market area. It makes sense, then, to attempt
to improve its CSI ratings.

Overall then, the new pay system is better in design than the old one. But how much
better? There is more money available than before, but not much. The system is more
performance contingent but the technicians could do great work without a
corresponding perfect rating. Unfortunately, there has been no change in the
characteristics of the CSI information system and that doesnt help the situation.

Managing Change

The second way to look at change strategy is to outline the effort in terms of the five
major steps outlined in Chapter 10. Most of these have been covered above, and so only
the key issues are outlined here.

Motivating Change how will Dunn address resistance? Whats in it for the
technicians?
Creating a Vision what is the future state of the service department and how
can it be made compelling to others
Developing Political Support Dunn seems to be in good shape here
Managing the Transition The professor should spend the most time here.
Whats the first step? Who should Dunn meet with and what should he say?
What are the other key activities and how should they be sequenced?
Sustaining Momentum how could Dunn institutionalize the change once it is in
place?

Once Dunn has understood the context of the change through a force field analysis, he
has to craft an implementation plan. He may have to decide if he is going to do a pilot
implementation (involving, say one technician) or a full fledged implementation
involving all technicians. He then has to come up with an effective way to communicate
this plan to his technicians. Technicians have to clearly understand the rationale for
the change, what they have to do to get the bonus, what kind of changed behaviors are
expected of them, etc. It may make sense for Dunn to make up actual numbers and
show how a technician can increase his current wages by improving his CSI scores. Any
plan of implementation that Dunn uses should emphasize these two key elements

a. Communication: Dunn has to explain the new plan fully in a way that the
technicians can understand its impact on them. He has to begin by explaining what
motivated the organization to adopt the bonus system and the results that the
organization expects once the plan is implemented. He has to stress the benefits
(albeit small) that would accrue to the technicians from the plan. He also has to be
specific in explaining what is expected of them, i.e. greater attention to warranty
jobs. Dunn has to understand that clear communication is vital to the success of the
implementation.
b. Monitoring and feedback: Once the bonus plan is set in motion, Dunn has to
monitor it to see its effect and provide feedback to the technicians. It may motivate
the technicians if Dunn can publicize success stories (in the form of improved CSI
scores) as well as the bonuses that some technicians have got because of more
attention to warranty work.

Despite the pay systems marginally better design, implementing this change may not
really help the company in the long run. The key is to maintain CSI scores at a level
acceptable to top management and to BMW. Only one question out of 8 (in the CSI
survey) related to the performance of the technician doing the repair. Increasing the
score on this question alone may not lead to high overall CSI scores.
Epilogue:

Dunns implementation of the bonus plan succeeded in increasing the dealerships CSI
score to an average of 93 in the first 3 months. However, the tight labor market affected
the service department adversely. One senior technician left and Dunn couldnt find a
replacement for the next six months. That meant that during the departments peak
activity period, three technicians performed the work of four. The schedule backed up
such that customers had to wait 1-2 weeks for service. This affected the dealerships
CSI score adversely. Dunn finally went to BMWs technician training facility in Florida
and hired 2 level 1 (the highest level) technicians. This eased the dealerships work load
and reduced the wait time for customers. The service departments most recent CSI
scores averaged an acceptable 92.7. As of mid-2002, Tom Dunn continued to be service
manager at Sharpe BMW.

245
Teaching Note
Fourwinds Marina


1. Analyze an organization from a strategic management perspective

2. Perform various strategic level analyses

3. Develop strategic planning processes and construct action plans


The Fourwinds Marina is a classic case in the strategic management literature. It is one
of two cases, along with the Rondell Data Corporation case, following Part VI on
Strategic Interventions. We wanted to include it in the text because it describes a
situation that many OD practitioners will find themselves (small, service oriented
business, meddlesome owner, and cash strapped). It also serves to reinforce why mission
statements, strategies, and goals are so fundamental.


Fourwinds Marina operates a marina and several ancillary businesses located on the
shore of Lake Monroe, a manmade reservoir. With only three weeks left until season's
end, Jack Keltner, the new general manager, is considering a number of changes to
avoid yet another loss and possible bankruptcy in the coming period.

The corporation has neither a basic purpose nor any formal planning for the future.
Taggart, the owner, has failed to provide the corporation with a mission, and the lack of
planning is revealed by a rapid turnover of general managers, recurring annual losses,
and the very real possibility of total failure in the next fiscal year.

The various plans formulated by Keltner (e.g., addition of prime slips, new inventory)
are not supported by any enterprise objectives, goals, or strategic alternatives. These
proposed activities act on the symptoms, not the causes of the firm's problems. Typical
of many organizations, the case thus provides an opportunity to show how ODs
diagnostic processes can add value.

There is no formal reporting system and Taggart's insistence on involvement in daily
operations is an awkward, disruptive feedback mechanism. The organization is
arranged in an inefficient manner. The financial situation, which is directly related to
management style, can be considered a separate major issue for analysis.

This case provides a clear-cut scenario in which management has failed from the
beginning to define explicitly the nature of the business enterprise. The student should
perceive the causal connection between the lack of a strategic approach to managing
Fourwinds and the historic lack of success and current problems. The next step is to do
a thorough analysis of both the external and internal environment to determine the
most appropriate set of actions to be taken.

Teaching Strategy:

The preparation questions at the end of the case ask the student to perform a SWOT
analysis, describe the marinas strategy and critique Keltners action plan, and think
about conducting an OD process with Keltner as the client. The SWOT analysis is an
excellent place to begin the discussion because it provides good diagnostic data and
gives the students a chance to apply this venerable technique.

1. What does your SWOT analysis reveal of Fourwinds Marinas situation?

(Note: Another really good question that could be asked is, how would you go about
conducting this analysis with the client? Students can often be quite creative about
involving a variety of people (see the large-group intervention designs in Chapter 13)
and collecting data in a variety of ways that helps the client build capability. This
would seem to be a real need in this organization.)

A partial SWOT analysis is shown below:

Strengths Weaknesses

No other marina at Lake Monroe

No other Indiana sales outlet stocks the
very large boats

No other marina can dock the large boats
and big slips are fully rented
Consistent losses have drained financial
reserves good chance they wont be able
to meet expenses next year
Insufficient capacity in the marina for
large boats
Capacity for large boats conflicts with
sales goal to sell large boats
Rental facilities operating at 50% of
capacity
Neither Keltner nor Taggart have any
marina management experience
Opportunities Threats

No other developer can get in without
government approval and would have to
operate with the same constraints

National/local demographics and the
Pointe development are leading to
demand increases

Complementary assets in the hotel have
some promotional benefits

Rising gasoline prices and shortages
mean lessened demand for big boats or
recreation activities

Indiana Department of Natural
Resources exercises total control over
rates
Teaching Notes 247

A few key issues are worth highlighting:

a. The Pointe Condominium development may eventually house 2800 to 3800 people.
Without considerable expansion, the marina could not support this nearby
population, a large part of which would be attracted by the presence of the marina.
b. Boat sales are linked to the availability of slip rentals.
c. Rising gasoline prices will have an impact on travel and boat sales. Forecasts in the
areas of travel, population demographics, oil availability, and boat sales are needed.
d. There is considerable doubt as to Keltner's qualifications for the general manager's
position. His background is quantitative and systems-oriented, while the job
requires an individual with good public and employee relations skills.
e. Sandy Taggart, a baker by trade, lacks experience in marina management, yet he
continues to interfere with his general managers, who also have none. Taggart has
exhibited poor judgment on several occasions. He allowed the Marina to operate for
five years with inadequate accounting procedures, and his involvement with daily
affairs indicates a lack of trust in his officers--thereby interfering with the general
manager's time schedule and performance.
f. The firm's accounting system is poor. Every part of the business shows profitability
yet the company is losing money. High interest costs lie at the heart of the
company's problems. While the individual parts of the business appear to be profit-
able, the very thin equity base and the amount of debt prove to be crippling. "Notes
to Stockholders" on the balance sheet represents the infusion of funds by Taggart
Corp. to keep the firm above water.

At this point I think there are two ways to approach the case. The most straightforward
process is to analyze the marinas strategy, critique Keltners plan, and discuss
implementation issues. A second way is to ask directly about Keltners plan and go into
implementation. This second approach has the teaching advantage of demonstrating
why a conscious strategic planning process is so important. In brief, when you apply this
second approach, the students end up arguing over which action items can and cant be
done, should and shouldnt be done, and you can ask them to justify their decisions and
choices. It turns out to be quite frustrating because (the punch line) there is no rule for
decision making. The basic elements of strategy mission, goals, intent, and policies
are missing. Ill follow this second plan because its proved itself in the classroom.

Keltners Recommendations and Their Justification

Keltner has proposed seven changes to be implemented over the next 12 months,
including dock repair, hiring new people, reorganizing the parts department, and other
actions. Have the students discuss the pros and cons of his list.

Which of the items do they believe should have highest priority?
How should the items be paid for?
What other changes are not mentioned that need to be brought forward?

Some pros/cons of the list include:

a. Fourwinds Marina is nearly bankrupt, limiting the available actions.
Probably the best alternative is to retrench in a number of areas and to
concentrate on renting and selling boats.

b. The company is in immediate need of recapitalization. Taggart must realize
that he may have to part with some ownership interest to save the company.

c. An adequate accounting system must be installed immediately to ensure
proper reporting of the profitability of the different lines of business.

d. Implement Keltner's seven proposed changes except for the first. The first
item can only be undertaken after the necessary funds have been secured.
One alternative would be to require a large prepayment (e.g., first year's
rent) from interested boat owners.

e. Instead of building new large slips, the company should consider whether
some of the unused smaller slips could be converted to accommodate larger
boats.

f. Keltner should be offered a share of the business and an incentive to make
the new business profitable.

Plan of Action

a. The grocery store, the snack bar, the gasoline station, and the boat and motor
rental operation should be sold to individual owners as soon as possible.

b. The owners and the general manager should meet immediately to determine
a plan for the future of Fourwinds Marina. The owners must be advised that
they must finance the operation properly or lose it altogether.

c. Keltner's plans should be implemented at once. A decision on his first item
will require additional analysis.

d. Taggart's part in running the organization should be minimized by clearly
defining the responsibility of management and owners. Give Keltner a share
in the company to increase his commitment to profitability.

The discussion of the above is often lively and people try to defend their choices and you
can bring the discussion to a transition point by noting the good arguments but asking,
How will Taggart or Keltner decide? The answer is they cant because there is no
strategy.

2. What is the marinas strategy?

This question gives the students leeway to figure out the organizations strategy. Using
the model in the text, a strategy can be defined in terms of its mission, goals and
objectives, intent, and policies. On almost all counts, Fourwinds Marina falls short on
these criteria.
Teaching Notes 249

First, there seems to have been very little internal or external assessment made of the
corporation's mission. Is the firm primarily a resort motel operation, a marina
operation, or a combination? Which format maximizes profit? The students can
retrospectively identify what business(es) they are in and perhaps the markets to be
served, but there is not sense of the firms character. These would seem to be
straightforward issues, but clearly lacking.

Second, and maybe even more important than a mission statement in the short run,
there are no operational goals. How much revenue do they hope to achieve, for example?
Given that level of revenue what would the projected profits (loss) be and is that
acceptable? Given the high levels of debt being carried, it would seem irresponsible not
to have an objective around lowering interest expense (and an associated plan for doing
so). Although an important area for discussion, dont let this conversation drag on too
long. Be sure that key areas are covered revenue, interest, costs, etc. but move along
to the discussion of intent, which will test the students understanding of strategy
concepts.

Third, there is no strategic intent. Does Fourwinds intend to be a high quality, full
service marina or a low cost, efficient deliverer of the basic services? These represent,
admittedly, two extremes and other options are possible. But it forces the student to
reconcile the SWOT analysis with an intention. For example, since many fees are set by
the state, theres little opportunity to generate the large margins necessary to support
the high quality vision. On the other hand, the upcoming condominium development
will no doubt generate strong demand. Any alternative strategic intents are likely to
have strong pros and cons. Students must understand that the essence of strategy is
making choices under uncertainty.

Finally, given the choice of goals and strategy, what operational policies will be most
helpful in setting up and supporting an implementation plan? What will the human
resources policies be about pay, benefits, and hiring? What financial policies around
expenses and investment will be set? What types of marketing and advertising
emphases will be supported?

With the outlines of a strategy in place, return to the question of what should Keltner
do? The specification of a mission, goals, and intent should provide the criteria and
constraints necessary to make some tough decisions about which of the action items
make most sense. That point can be used to emphasize and reinforce the importance of
strategy.

250
Teaching Note
Leading Strategic Change at Davita:
The Integration of the Gambro Acquisition


1. To provide an opportunity to design a merger integration process

2. To discuss the features of a successful transformation process

3. To examine how one organization compares to the Built to Change principles


The Davita case comes at the end of Part 6 in support of strategic interventions. It is a
very interesting strategy case that has a strong human resources and culture them
running through it. But it is also a generic case that can be used for at least three
purposes. First, it invites the students to design the integration activities associated
with a large acquisition. Davita is acquiring the Gambro organization which will more
than double the size of Davita. Second, the case can also be used to discuss the
transformation cultural and organizational of the Davita organization from Total
Renal Care. Finally, Davita has put into place many of the features associated with a
Built to Change organization and there is a good opportunity to see how those principles
might look in practice.


Davita is the second largest kidney dialysis treatment services organization in the US.
It is important to understand the work they do and the instructor might want to go the
Internet and get pictures of a treatment center to show the students what this
organization is up against. A dialysis patient must come into one of these centers 2-3
times per week, and sit for 4 hours at a dialysis machine with needles poked in them to
get their blood cleaned. One quarter of the patients die within a few years of beginning
treatments. Its a tough place to work in the best of circumstances.

The case opens with a summary of the current challenges facing Davita, including the
integration of Gambro, continuing to grow the organization, and handling
organizational issues such as compensation. It then overviews the history of the
organization and its transformation from Total Renal Care to Davita. Total Renal Care
was within days of not meeting its payroll and the transformation is an impressive one.
Finally, the Gambro acquisition is described and the challenges associated with this
change are summarized, leaving open the task of how to integrate the two, very
different, organizations.

Teaching Notes 251

Teaching Strategy:

It is important that the instructor be clear about the purpose of the case for class
discussion. If the purpose is to focus on the design of an integration process, then a
shorter discussion of the transformation is probably in order so that student suggestions
for designing the integration process can be fully presented and debated. If the purpose
is on the transformation and the extent to which Davita is a built to change
organization, more time should be allocated to the transformation with follow up
discussions about the organizations Built to Change features. The teaching plan below
outlines all three areas.

The Davita Transformation

What was the situation facing Kent Thiry when he took over as CEO of Total Renal
Care?

Total Renal Care (TRC) was hurting badly
o Being investigated by the SEC and sued by shareholders
o Turnover was twice the levels in 2005
o In default on their loan convenants
o Stock price had fallen from $50 to $2 per share
o There were few systems in place (a legacy from having built the company
through acquisition)
o Morale was awful and they were within days of not being able to make
payroll
In some ways, there was no place to go but up.

What were the purposes of the transformation? Do those purposes differ from other
transformations you have experienced or heard of?

Given the situation, Thiry and his team simply needed to do better than before,
not a hard decision or action to take. Yet they decided on a two pronged
approach:
o Fix the business and operations see the key success factors
o Establish a new culture
The equally strong focus on establishing an agile and adaptable
culture is what distinguishes this turnaround and transformation
from others

Why focus so heavily on values and culture in the turnaround?

Thiry and his muskateers seem to profess and live by a particular set of values
(building a successful company is the means to the end of building a healthy
community)
Hes done it before (at Vivra)
You gotta love the name change Total Renal Care? Davita to give life.
It turns out to be a key value driver of patient and clinical outcomes

What was the Davitas strategy and what did they do to reinforce that strategy in their
culture and values?

This is a good transition question. It either sets up the conversation for the
integration design discussion or the Built to Change option
Given the key success factors and the healthcare environment, it is clear that
Davita must watch costs. It would be a true inference if the students believed
that Davita lost money on most patientsa small percentage of patients with
certain types of insurance account for most of the profits. Within that
overarching concern, however, there must be a strong patient care focus, and this
is where the culture and values come into play.
The management team uses a strong measurement and analytics system to keep
track of costs, but a variety of awards, symbols, physical setting characteristics,
communications, training, and management practices to make working at Davita
a preference among nurses. The list of things is pretty long Davita Star,
attendance awards, philanthropy, and so on and many people who look at this
organization say, Is this for real? (It is.)

The Gambro Acquisition Integration

While there is not a lot of information about Gambro or the acquisition, there is enough
to have a good, overarching conversation about what to do. First a few factsyou might
ask what do we know about Gambro and the acquisition?

1. It will pretty much double the size of Davita
2. Gambro, previously acquired Vivra which had been turned around by Thiry in
the 1990s, is much more hierarchical, formal, and a much less people-oriented
culture (which implies that Gambro has pretty much undone any of the culture
building that Thiry did)
3. Inside Gambro, there are rumors of trash talking about Davita and Thiry
4. Thiry has stated that during the acquisition, he wants to honor Gambros people
and capabilities but also maintain Davitas culture and management style.

Given the stage of the acquisition, we are well past the precombination phase. Well
have to live with whatever business case and due diligence activities have taken place.
We can reasonably assume that a merger team has been established but not a merger
integration plan.

What would you list as the integration objectives?

Thirys quote above can be interpreted in several different ways
o Will there be a full integration of the two companies? All indications
would be yes, hes not likely to give up the culture he helped to create.
How will this objective be phrased so as not to raise too much resistance
in Gambro employees and executives?
o How fast do you want the integration to occur?
Teaching Notes 253
o Will there be any layoffs? (One wouldnt think so given the tight nursing
labor market, however, if there are any overlaps in geographic coverage,
theres a chance people may be let go. How will that be decided?)

What operational systems will be put in place?
o Given the key success factors given in the case, there will need to be
considerable planning here
o Gambro gets Davitas systems, right? Depends, are there any systems
that Davita doesnt have that Gambro could have? Might be able to
throw them a bone.

What are the scope and timing of integration activities, including Day 1 activities,
operational and technical integration, and cultural integration?

Among the things students might consider are:
o Announce key executive placements, responsibilities.
o Change the names/signs of all the Gambro centers to Davita
o Announce closing of any redundant centers be sure to retain key
employees, plan for closure, communicate to patients, how to set up
appointments, directions to new location, move and install equipment, etc.
o Transfer patient records, communicate with insurance and other health
care providers

How will Gambro learn about Davitas culture, values, rewards, decision making
practices?

Should every Gambro employee be put through the DaVita Academy. Isnt that
going to be expensive?
o This is what they didthe question the students must answer is why?
Whats the benefit? How does it fit with the integration objectives and
align with Davitas strategy and culture? The answers are a) its fast, b) it
allowed Davita to control the conditions under which people learned the
academy is over two days and c) bringing people together is the way
Davita operates, so they can model this for the new members.
o How should the Academy curriculum be adapted for this purpose?
What rewards can be used to recognize Gambro employees for contributing to the
implementation of the integration?

Is Davita Built to Change?

What are the characteristics of a Built to Change organization?

This simply serves as an orienting question and allows the instructor to get the
boundaries of the discussion established.

What are the key aspects of Davitas strategizing processes?

The three key issues in the strategizing process are a strong focus on the future
through scenario planning and other environmental scanning techniques, a
change-friendly identity, and a robust strategy. There is very little in the case
about Davitas future focus. In terms of the robustness of the strategy, what
would happen if an alternative treatment or cure for diabetes emerged? Theres
certainly an Achilles heel in the strategy as it is highly focused at the moment.
Thats the source of their success and could be a weakness in the future setting
up the future focused processes (if they dont exist) would seem to be an
important action item.
There is a great deal of information about Davitas identity and all the
information points to a very flexible, change-friendly feature.
o Externally, Davita is seen by customers as an amazing friendly place. Ask
students, if you were a dialysis patient, where would you want to go? In
addition, the analysts, while probably suspicious at first, must be
favorable at this point.
o Internally, the list of values provides a starting point for the conversation.
Are these aspirational values (yes) or are they values-in-use (yes)?
Davita had the luxury of being able to restart the organization and build
the culture around the values they wanted.
o The difficult part of this discussion is deciding, So, what is Davitas
identity? This is a conversation that they are still having, but some of the
candidates include, What would a village do? and New, Ours, Special.
In both cases, there is a strong underlying driver for change. A village not
only take care of its own, it is concerned about the community around it;
asking the question implies an action. Similarly, the mantra of new,
ours, special in response to the questions, What is this company?
Whose company is this? and What can it be? suggest constant renewal.

What are the characteristics of the designing process?

The designing process is a broad category that includes maximum surface area
structures, flexible reward systems, no job descriptions or budgets but lots of
accountabilities, transparency in information flows, and so on. Ill comment on a
few of the features that I think are particularly interesting.
Maximum surface area structure and no job descriptions, only accountabilities
o What do you think Davitas organization chart/structure looks like?
Since there is no organization chart in the case, this is a great
question for students to ponder given their culture, strategy, etc.
Most students propose a functional structure with operations
having a regional structure underneath it. It has certain
maximum surface area features, for sure.
When I had Joe Mello make a presentation on the Davita
transformation, I asked him to be sure to include an organization
chart so that people could see how Davita was organized. During
his presentation, he included a slide that had as its title Davita
Organization Chart and below the title, the slide was blank. He
noted that Davita had no organization chart, but then did put up a
slide showing the accountabilities of each of the senior managers of
Teaching Notes 255
the organization and the other key roles in the organization.
Davita, in essence, has no job descriptions or organization
structure, just a set of accountabilities that evolve over time.
Flexible reward systems
o Walking through each of the reward and recognition programs at Davita
allows the conclusion that things are very flexible. The awards can be
given out almost any time (performance contingent and timely) and they
are quite visible (you can imagine the pomp and circumstance associated
with Star Awards at large gatherings, for example).
Transparent information with the focus on measurements, a lot of information
is available to any member of the Davita organization. They score very high on
this dimension

How does Davita score on its ability to create value over time, share leadership, and
learn and change?

Davita does a really good job of viewing leadership as an organizational capacity
vs an individual trait. Sure, Thiry and Mello and the other members of the senior
leadership team do a good job of being visible, walking the talk (do what you said
you would do, GSD (e.g., get stuff done) and so on, but through the Davita
leadership training, they push a of responsibility and accountability for results
deep into the organization.
Davitas continuous improvement processes and measurement systems provide a
simple change capability. Because the process is organization wide, there is a
shared language around change. Information about turnover rates is widely
available and so if a center manager wants to find out new ways of thinking
about retention, there is a built in way to find best practices and learn. Other
organizations, such as Capital One, the Limited Brands, and Microsoft, have
much more sophisticated change capabilities, but this process seems quite
reasonable for Davita. If they decide to grow or diversify, they may need more
complexity.
Their continuous improvement and data-based management processes also
speak to an improving, learning-oriented system of value add.

Davita is not your typical organization. Its culture is unique (some say silly) but
theres little doubt that they have built a very flexible and adaptable organization. They
are not perfect, but they have laid some important groundwork.
256

Teaching Note
B.R. Richardson Timber Products Corporation


1. To allow the students to compile raw data into a diagnosis of the problems at an
organization

2. To use the diagnosis to develop a feedback plan to senior managers


This is the first integrative case at the end of the text. It represents an excellent
opportunity for students to dig into the OD process, especially the diagnostic phase.
The case can be used as a discussion case to explore the process issues associated with
gathering, analyzing, and feeding back data. The case has also been used to test
students on the diagnosis and data feedback processes.

The case is fairly long and detailed. It is probably better suited for graduate students or
advanced undergraduates. Organizing the different tidbits of information can be
frustrating for some students but provides good exposure to what it's really like when
one begins an OD process.


Jack Lawler, a professor at a local business school, is asked to work with a local
manufacturer of timber products. The case briefly describes the initial contact, entry,
and contracting phases. Then, in considerable detail, the case outlines various pieces of
information collected by Jack and two graduate students during a diagnostic visit to the
B.R. Richardson Timber Company. The case ends with Jack deciding that he had better
collate the data in order to develop a feedback presentation to the client system.

Teaching Strategy (60 minutes):

1. Describe the entry and contracting process associated with Jack Lawler's initiation of
an OD process with the organization. (10 minutes) (Depending on your own
inclinations, this section could be dropped if you want to spend more time organizing
and understanding the data.)

A. Like many consulting projects, the laminating job came from out of nowhere.
Jack was recommended by another consultant.

B. The presenting problem, in this case, is that Bowman was looking for a
"motivation course" for blue-collar employees.
Teaching Notes 257

C. Ask students to describe and evaluate the contracting process. "What do you
think Richardson and Bowman were thinking during the process?"

2. Ask students how they went about organizing all this information. (must move
quickly; 30 minutes)

A. Usually, students are overwhelmed by the amount of data. This provides the
instructor with the opportunity to reinforce how important "diagnostic models"
are to managers, consultants, and students.

It is quite common, when early entry or diagnostic phases are in progress to be
confronted with this kind of data. Students need models to help them decide
what data is relevant and what is not, and more importantly, provide a way to
categorize the data in a meaningful, organized fashion.

B. Quickly list the problems at the laminating plant as seen by Richardson and
Bowman:

Safety
Low morale, high turnover
Union organizing potential
Cost increases (overtime, scheduling)
Production goals not being met

C. In general, the open systems framework presented in the text can be used to
sort the information into useful categories.

Outputs:
Laminated roof trusses and beams
Six to seven week delivery time
See also the problems listed in B above

Inputs:
Lumber (two-by-fours, two-by-sixes, etc.)
70% of lumber purchased from outside firms

Design Components: This is where the bulk of the information applies. Students
should be encouraged to talk about the following issues (examples are
illustrative, not exhaustive).

Structure:
Functional within laminating plant
Poor integration across departments

Technology:
Inefficient, assembly line production process
Each truss made to customer "specs"
Equipment is obsolete

Measurement systems:
Daily production reports
Daily quality control reports

Human resource systems:
No career development/promotion policies
Most supervisors have low tenure in their jobs and lack training
Few incentives/rewards for performance

Culture:
Style of "BR" and Bamford is autocratic
Workers see plant as a "sweat shop"
Communication and decision making seen as arbitrary and secretive

3. Now discuss how these different design components fit together. Does current
technology fit with reward systems? Does culture support production efficiency? Does
structure compliment measurement systems? In general, the organization is poorly
constructed. Be sure that students connect poor organizational design with poor
outputs such as productivity, morale, and satisfaction. (10 minutes)

4. Finally, how would you present this information to Richardson and Bowman? Get
students to be specific about how the information should be fed back. Who will be
involved in the meeting? Should Richardson and Bowman get a "sneak peak" at the
data prior to the formal presentation? How will students describe what they did in
order to get this information (issues of confidentiality)? How do you think Richardson,
Bowman, and others will react to the data? How can you anticipate these reactions and
diffuse them? (10 minutes)

259
Teaching Note
Building the Cuyahoga River Valley
Organization

Purpose

1. To provide an opportunity to apply the principles of transorganization
development

2. To apply the principles of organization design in a transorganization system
environment

3. To explore the role of an OD practitioner in transorganization development cases

4. To look at the future of OD especially in regards to sustainability


The CRVO case is one of the integrative cases at the end of the text but its primary
purpose is to provide a real-world example of transorganization development, a multi-
organization OD intervention described in Chapter 22. It can also be used as a case
depicting many of the trends associated with the future of OD (Chapter 25) including
more networked organizations and an increased focus on ecological sustainability.

It is very complex case with complex issues. Students without a lot of business or other
real-world experience may have relatively nave views and answers; the instructor may
need to pressure test some of their opinions. This case is probably best used in a
masters degree program or in public administration courses where students are
familiar with government organizations.


The Cuyahoga River Valley is a historically relevant area south of Cleveland, OH. Sally
Parker, an OD consultant with her own practice, is in the middle of a change process
involving a variety of organizations with different purposes and motivations. The case
traces the evolution of an idea and the Cuyahoga River Valley region through economic,
social, and environmental lenses. The ups and downs of this evolution mostly up
economically and down ecologically in the early stages results in a mostly down
situation in 2000. The local economy is flat (or worse), social conditions are not great,
and the ecology is having a tough time rebounding. A local newspaper article sparks a
conversation within the region and the case describes the efforts of the county to focus
attention on restoring the ecology and at the same time improving the economic
development potential of the region.

After reviewing the history and some data collected by Sallys team, a decision is made
to go forward with the Cuyahoga Valley Initiative (CVI) and create a Cuyahoga River
Valley Organization (CRVO). This is a new organization and must be designed. The
questions are what should the design be? and how should Sally go about
implementing the design?

Teaching Strategy

It is important somewhere in the case discussion to recognize that the
transorganization system is in place and functioning, albeit not very well. That is, there
are a variety of organizations that are working, mostly independently, to improve the
ecology, strengthen the economy, and get the region turned around socially. But in the
true sense of the term, the system is underorganized. The overall purpose of the series
of interventions is to decide how best to develop the relationships among the different
stakeholders to improve the multiple objectives of economic, social, and environmental
outcomes.

It is also important to recognize that the questions at the end of the case are fairly
generic. Some of the questions and discussions described below ask for a level of detail
that the students may not be prepared for. This is a very complex case of a very complex
issue. The instructor may have to patiently draw out perspectives and issues as the
discussion proceeds.

Using the transorganization development (TD) framework is perfect for this situation,
and the instructor can easily walk through the processes of identification, convention,
organization, and evaluation. The case provides considerable and rich detail on the first
two phases, and then outlines some of the issues associated with specifying the
organization phase. Alternatively, the instructor might want to look at the case from an
action research perspective and ask about how entering/contracting, diagnosing, and
action planning are occurring. Since this is the only case length discussion of
transorganization development, well use the TD process framework here.

From a class discussion perspective, about a third of the time should be spent gaining a
clear understanding of the identification and convention processes. These are the
diagnostic pieces. Then a solid block of time must be devoted to what should Sally do
and how should she do it? This is, in essence, the organizing phase.

How would you describe the evolution of the Cuyahoga River Valley?
How would you describe the evolution of the Cuyahoga River Valley Initiative (CVI)?

The first question should generate a brief discussion of the place. The second question
should generate a discussion of the identification and convention processes.

Identification. This phase is conducted both formally and informally. Paul
Alsenas, as the formal head of the Cuyahoga Valley Initiative (CVI), initially funds the
program out of the county budget and conceives of the CVI as a standards setting or
policy-making project. But he also soon recognizes the need to bring a variety of
stakeholders together if any concerted action is to take place. There is an implicit
Teaching Notes 261
assumption here that Paul sees the multistakeholder nature of the problem, but there is
no evidence of any formal identification process.

He expands the planning group to include Sally Parker, and together they set up some
guiding principles and organizing ideas to help think through the project. The group
formalizes the conclusion that there is not enough capacity to get things done and then
interviews individuals representing a variety of stakeholders to conduct an initial
diagnosis of the interest and perspectives relating to the system. They make several
observations based on the data and a few conclusions. An important observation is the
extent to which participants in the interview worry that the wrong answer is to create
another organization. The interviewees view such an effort with suspicion and worry
that there are already too many organizations trying to address the health of the valley.
Paul and Sally are stuck with the perception that there are many organizations working
on the problem, none of them are effective at it, and the last thing people want is yet
another group to contend with. It is this tension that best characterizes the need and
the problem of TD.

It is interesting to stop here and ask what options Paul and Sally have. The two obvious
ones are a) building the CVI into formal governmental organization and b) identifying
the most powerful, credible, effective existing organization and trying to support its
efforts.

They also conclude that to really get traction on the issues, they will need to broaden
their scope. This is an important decision and realization. It will certainly add to the
complexity of whatever solution they create.

In sum, the identification phase is not very systematic or formal as described. Thats
true in practice as well; participants often have to wade into the problems and
opportunities. The outcomes are easy to see (poor economics, poor social conditions, poor
environmental record), the solution is not. The instructor may want to ask for a
brainstormed or refined list of stakeholders so that everyone sees the complexity. The
list would, at this point, include large and small businesses, citizens, at least two county
governments, city governments, non-profit/NGO groups, federal regulators, tourists and
potential tourists, potential businesses who might be interested in relocating to the
region, and so on.

Convention. Asking students when the convention phase starts is an interesting
question. In fact, identification and convention cycle around a couple of times before the
organization phase is considered.

The initial, formal convention process is associated with a set of interviews to identity a
group of 14 to design the necessary capacity. Again, Paul and Sally have chosen, in their
minds, to go for the new organization option, and students may question that. It is the
instructors prerogative but theres not much data in the case on this issue.

Instead of getting resistance, they find a lot of support. This would be a good place to
ask about the motivation to comply. Sally and the team expected resistancedo you
trust the intentions of the organizations? Why would they want to get involved? Almost
everyone is for a better quality environment but none of these stakeholders,
individually, caused the problem. Why would they want to invest time and energy?

After the team is chartered, they spend the next several months educating the team
very much in the tradition of the self-design process described in Chapter 21 under the
laying the foundation. The group, in essence, is acquiring knowledge about the
complexity and scope of the problem, visiting projects that are working, mostly
independently, to improve valley conditions, and discussing options for action.

A key insight at this point is the realization that capacity has to be viewed from a
network perspective.they have to see the whole. A key conclusion is the recognition
that the county is the wrong perspectivethat the CVI cannot be successful without a
broader range of involvement, including another county to the south, citizens,
governments, economic development agencies, environmental groups, and others.

A good discussion question at this point is, What other options did Sally and the CVI
team have to convene the stakeholders? There are at least two that should be
considered. The first is a large group intervention. That is, the CVI could have
sponsored a future search conference or other similar technology to assemble the
stakeholders, explore interest and options for organizing, and create action plans. (Pros:
inclusive, transparent, motivating/Cons: lots of preparation, scheduling, design) A
second option was to look for a large, single business who would be willing partly out
of economic potential and partly out of public relations to sponsor the new
organization and the CVI. Under the firms sponsorship, other stakeholders could be
brought on board. (Pros: funding, visibility/ Cons: suspicion, less inclusive) Ask students
to list the pros and cons of Sallys approach, the large group intervention, and the
corporate sponsorship options.

Once the instructor is satisfied that the facts of the case are laid out, the discussion can
move to action.

What should Sally Parker do now? What organization design would you recommend for
the CVRO and how would you go about getting it started?

Organization. This is the action section of the case. The case, in Figure 3, provides a
good picture of how the design team saw the problem and the initial roles of the
different parts of the network. But these initial roles and responsibilities must get
fleshed out in some detail. The Triad, the network partners, and the projects form the
relevant task environment for the CVRO and are the source of the design criteria.

1. What are the more detailed roles and responsibilities of the triad, the network
partners, projects, and the CRVO? This question gets quickly to the issue of
motivation, and if it hasnt been discussed in the identification and convention
stages, it must be raised here. Why would any of these members want to
contribute time, energy, resources, people, or money to the effort? This discussion
must go beyond the its a nice thing to do discussion.
2. What decisions need to be made by the network and what are the respective roles
of the different parts in these decisions (students should think in terms of a
RACI chart or other decision-rights matrix tool)? This is the guts of the protocol
Teaching Notes 263
Sally thinks is necessary. For example, which projects should get funding from
the CRVO? How will multiple projects with overlapping goals be managed?
3. What is Sallys role in all this? How much should she be an advocate for the
CRVO? Who is her client?
4. What organization structure would you recommend for the CRVO? Who should
lead the organization and what kinds of skills, knowledge, and competence do
they need to have?
5. How should the CRVO be funded and evaluated? Where should money come
from? If the class thinks that foundation money and grants is the key source of
funds, then the organization must develop this capability and supporting
structure, which may divert attention away from identifying, launching, and
coordinating the projects. If government funding is the answer, then a whole
different set of problems emerge in terms of oversight, political shifts, and budget
cutbacks. This question also lends itself to the evaluation stage which the
instructor may or may not want to have separately.

This is a broad range of questions and give the instructor plenty of options. I prefer to
give equal weight to content (what should the design be?) and process (how should the
design be created and implemented and who should be involved?) On the content side,
we provide below a set of things that Sally was thinking about as she contemplated the
design of the organization. On the process side, one of the things I like to point out is
how Sally worked. She instilled the idea that the way the project was managed and
executed had to reflect a new way of working. She did a great job of making decisions
collaboratively. She represented the voice of the place in its economic, social, and
ecological terms and so had the credibility to bring different stakeholders together.

With regard to some of the organization design options, weve compiled a list of features
that Sally was thinking about:

Work Processes

For the CRVO, three work process assessment and vetting, network development and
orchestration, and support processes - were proposed to support two primary objectives:

1. Establish the vision and thought leadership for the Cuyahoga River Valley
transformation as a top regional priority

2. Build, direct, and coordinate the overall network capacity to accomplish the
transformation.

Assessment and Vetting was concerned with ensuring that the right projects and
initiatives were chosen and that each effort and use of resources resulted in a
high return on investment for the organization, the community, and the region.

Network Development and Orchestration was concerned with identifying the
services, processes, and capacities that will support and accelerate the
development of the Network and provide value to projects. This includes
creating the space or platform where Network participants come together to
work.

Support Processes were the essential information and accounting systems,
human resources support, and other infrastructure necessary to support the
projects, develop the network, and fulfill the CRVOs role as network
orchestrator.

Structure

The biggest single structural problem was not the fundamental, core structure. Core
units such as project support or project consulting, network development, or a set of
functional units would all work. What the CRVO required was the capability to work
laterallybetween functions or units of the CRVO itself but also with the Triad, the
Network Partners, and with Projects. This lateral structure will most likely support an
open network of organizations and individuals working on projects that cross
organizational and sector boundaries.

The structure will need to support the Organization in orchestrating the network and in
delivering its core services to the members of the network. It will integrate internal
expert teams with cross functional network teams organized around endeavors and
charged with project execution. It is envisioned that the organization staff will work
utilizing a team format, where expertise is assembled as needed for different projects.

The CRVO should be organized to support and orchestrate the projects and initiatives
that advance the transformation and regeneration of the Valley. Focusing organization
structure on project support was an important strategy for two reasons. One, the
physical, social, and economic transformation and regeneration of the Valley will take
place through concrete and discreet actions and projects in the Valley. Two, each project
provides opportunity for people (individually and within their organizations) to
experience the CRVO Protocol to truly practice collaboration and cooperation and to
apply principles of sustainability (triple bottom line) on the very real projects that
transform the Valley. This experience serves to expand participants capacity to perform
optimally in increasingly complex scenarios with a variety of fellow participants.

People & Talent

In order to support and accelerate the development of the network and the effectiveness
of project execution, the CRVO will need to be able to provide services, expertise,
resources, etc. to projects and initiatives that will require broad capacity and expertise,
including:
Economic Development
Sustainable real estate and land planning, management and development
Ecological remediation and regeneration
Identity development and awareness (the CRVO must be distinguished from the
rest of the system given its unique role)
Funding
Leadership
Governmental agency relations and liaison management (federal, state, county,
municipal)
Teaching Notes 265
Strategic Management
Program and project management and implementation
Metrics development and monitoring and feedback loops (quantitative and
qualitative)
Organizational and individual development
Knowledge creation and management
Collaboration and cooperation
Trans-organizational and trans-sector network development and management

Incentives & Rewards

In designing the CRVO, it is essential to identify and define an incentive structure and
system that will support and ensure a highly functioning and adaptive network. An
effective incentive / reward system for CRVO will need to acknowledge and reward
behaviors, activities, and results that are critical to its success. Important
considerations will be how and to what degree the CRVO hub can incentivize and
reward:
Actions and behaviors that abide by the organizing principles of the Cuyahoga
Valley Initiative;
The initiation and completion of strategic projects that will advance the vision of
the Valley;
Implementation of strategy, collaboration and cooperation, team performance,
individual performance, organizational performance, etc.
Value and impact at project level, Valley level and regional level

Incentives and rewards will be especially important given the fact that the CRVO will
be working through a network of organizations and interests over which it has little if
any authority or formal control.

266
Teaching Note
Black & Decker International Case


1. Apply principles of worldwide OD and strategy

2. How can managers leverage people-resources to capitalize on strategic worldwide
opportunities

3. Develop strategic planning processes and construct action plans


The Black and Decker international case is one of the integrative cases at the end of the
text. As such, it can serve several different purposes, including strategic management,
structural change, or merger and acquisition integration, but its primary purpose is to
give students a chance to work with a company that has a worldwide presence. Black
and Decker has a strong brand image and a relatively complex product line. There are
cross cultural issues, strategic issues, structure and organizational issues, and process
issues to address.


As the VP of Product and Market Development of Black and Deckers (B&D)
International Division in early 1990, Fred Grunewald is concerned about how to
transform the newly acquired Emhart Corporation from a set of loosely bound, mostly
inwardly focused hardware companies into an integrated world player that
complements B&D's corporate and business strategies. Grunewald hopes to use his
recommendations for Emhart as a model for helping B&D think about expanding its
already impressive efforts to think and act globally.

Following from the efforts of a new CEO in 1985, the organization has embarked on the
implementation of a global strategy. The product road process had helped to
homogenize the product lines, build operational efficiencies, generate marketing
economies, and so on. This has been helped by the nature of the products. The unspoken
and unidentified issues in the case is whether the lock businesses acquired as part of
the Emhart organization can be approached in the same way.

The focus of the case is the lock business, although considerable space and information
is dedicated to the broader B&D business issues and Power Tools and Home
Improvement Group. Be sure students dont get confused on this point.

Teaching Notes 267
Teaching Strategy:

The preparation questions in the text ask students to analyze Grunewalds plan for
creating a global lock business, to think about the organizational implications of the
plan, and to place themselves in the role of Grunewalds coach.

Before diving into the guts of Grunewalds plan and how to implement it, some
diagnostic and historical discussion would seem prudent to set the context for the
students suggestions.

1. What is the source of Black and Deckers recent performance improvements?

This question asks students to think about B&Ds recent changes and to make some
attributions about their effectiveness. The important, overarching issue is whether or
not the students can identify the strategic orientation B&D is implementing. There is
considerable evidence to support the conclusion that B&D is implementing a global
orientation. The new CEO in 1985, Nolan Archibald, saw the organization as having 1)
disjointed international product lines and policies (so Grunewalds plan fits), 2)
dissatisfied customers, and 3) tarnished reputation. His responses develop a
worldwide view of the markets and reduce the number of models sounds very global-
like. B&D is cutting the number of products, looking for marketing and operational
efficiencies, standardizing parts and products as much as possible, and centralizing
much of the decision making.

Thus, one possible discussion, depending on the professors objectives for this case, is to
be fairly directive about B&D's strategy. The discussion can focus on matching concepts
in Chapter 21 of the text with the details of the case. For example, where would
students put the power tools and home improvement business on the integration and
responsiveness framework? In general, the business has high opportunities for
integration, but low needs for local responsiveness. Similarly, B&D seems to believe
that the world is one large, homogenous market and that its products can be
standardized. All of this points to a global strategy.
Some students will want to argue that B&D is more transnational than global, noting
the design centers around the world and the differences in the markets served. That
certainly supports the opportunities for integration dimension, but ignores whether
these different markets really need specialized product features. In addition, the
students can be asked if they really want B&D to implement a very complex and costly
structure to support relatively low margin product portfolio.
Turning to the question about whats driving current performance, then, at least two
issues are bound to get raised:
A. Structure the current organization structure is confusing. Students often
complain about this and they should be encouraged to specify why, including
unclear reporting relationships and unclear geographic responsibilities.
When Nolan Archibald came on board in 1985, he noted that there were
disjointed international product lines and policies. The current structure
seems to reflect that. But its also important to point out that this is a
structure in transition. The organization is clearly moving and the confusing
structure gives students an opportunity to see how complex and frustrating a
large-scale transition can be. Be sure to challenge any assumption that this is
the end state structure B&D is trying to achieveit isnt.

B. Global Product Planning and Review Process the case does a decent job of
describing the three types of communication processes that help to integrate
the global markets. The quarterly strategic meetings set capital budgets,
approve new product ideas, and review existing ones. There is broad
participation from across the groups and surely contribute to a global
mindset within B&D senior management. The quarterly managerial
meetings held in local design centers get engineering and marketing talent
together and also contribute to cross-market communication. Finally, the ad-
hoc operational product-road bashing meetings allow direct participation by
the managers in driving cost out of the system, standardizing on product
features, and sharing best practices.

Clearly, the structure cant be helping performance that much, so one has to look at the
product-road process as an important contributor. This allows the student to see how
powerful a good strategy can be, even if it is not very well implemented yet.

1. What are the strengths and weaknesses of Grunewalds proposal? With some history
and background to work from, we can begin to examine more closely what
Grunewald is proposing.

Broadly, Grunewalds proposal is to create a global lock business by restructuring the
way products are brought to market and integrating various parts of the business on a
global scale. His plan calls for establishing an on the ground structure in the field as
part of the International Group and a local champion structure in the plants. He also
specifies a communications process to organize information flows, but stops short of an
intercompany organization plan. His plan seems to fit nicely with the organizations
drive toward a global strategic orientation.

An opening question might be, How many of you think, overall, the plan is a good one?
That way, the professor can see whether a debate can be established to discuss pros and
cons or whether the discussion should proceed directly to an analysis of the plans
likelihood of success.
That is, the students need to look carefully at the nature of the business to be sure of
their support. In essence, the question boils down to this: Is the lock business the same
as the power tools business?

The following table summarizes a comparison between the power tools/home
improvement business and the lock business

Teaching Notes 269
Dimension
Power tools and
Home Improvement
Lock Business
Worldwide markets
Large and homogenous
Buyer: End consumer, do-it-
yourselfer
Channels: Retail outlets;
standardized distribution
Large and homogenous, BUT
Buyer: Remodeler, Builder

Channels: OEMs and
relationships
Products Standardized
Opportunities for
standardization
Opportunities for
Worldwide Integration
High High
Demand for local
responsiveness
Low High at the moment

The product-road process doesnt work very well if there were few opportunities to
standardize the product line or if the markets are not that homogenous. The case
describes enough detail to create the table above and ask the question about how
similar these two businesses are. With respect to the worldwide market, both are large
and relatively homogenous and therefore favor a standardized product. Emhart,
however, has chosen a much more multinational strategy apparently in response to
some subtle differences in the markets. First, power tools and small kitchen appliances
are, for the most part, bought by the end consumer a homeowner or do-it-yourselfer.
With good marketing, efficient distribution, and low cost/high volume operations, a set
of standardized products would fit well with a global mindset. It doesnt matter much
whether the buyer is in Europe, the US, or Asia.

The information on the hardware and locks business is a little different. First, the
information on the architectural hardware business suggests that the purchaser is more
likely to be a builder or remodeler, implying that the ultimate consumer might be less
involved in the purchase decision than they are for power tools or kitchen appliances.
There is a strong suggestion that sales are influenced by old-fashioned distributors with
long memories for favorite brands, and the inherited distribution systems might be
much weaker. The case suggests that many of the Emhart companies are very tied into
these local distributors. The case for standardized markets and, therefore, for
developing a set of product roads, is less clear in the lock business. Grunewalds plan
assumes (and its important to get the students to understand this) that the lock
business can be standardized.

Moreover, his plan assumes that the acquired companies in the Emhart purchase will
culturally support such a system. There is some evidence to suggest they will resist. The
different Emhart companies focus on their local markets and operations, suggesting a
more multinational orientation that is philosophically opposite of the global
orientation. This would be a good place to transition to a discuss of the implementation
challenges

1. How should he proceed through implementation? Here the student gets to act as
coach or consultant to Grunewald. How will they transfer knowledge and skill to
him as a client? What are the specific changes that need to be made? How will he
measure success?

If the students believe that there is a real misfit between Grunewalds intention to build
a global lockset business and the fundamental marketplace dynamics, then their
coaching and implementation plan must address two key issues:
How to help Grunewald thoroughly analyze the assumptions of his plan,
and if successful.
Either adjust the plan to move the Emhart business from a multinational
orientation to a global orientation (assuming the markets structure is
more an artifact of Emharts culture) or figure out how to integrate
Emharts business with the traditional power tools and home
improvement business (assuming the markets structure is relatively
fixed and different enough).

Both of those options are very complex and should test the students abilities to craft a
large-scale implementation plan. The material in Chapter 21 provides several areas to
look at from structural, human resource, reward system, and information system points
of view.

If the students think the lock business is really not that different, then the discussion
moves to a set of issues about how to get it done. The items below represent several of
the key issues that need to be addressed:

How will Grunewald staff the on-the-ground or local marketing managers and the
globalization champions? Do these people exist internally? Do they have the senior-
level clout he is looking for? To whom will they report and how will he get them to
follow his communication pattern? If they are not to be found internally, how will he
go about hiring and developing any newcomers?

Grunewalds plan lacks any sequential orientation about what should be done first,
second and third. Get the students to prioritize any particular set of action. Whats
most important?

Any action plan is going to have to acknowledge the likely differences in culture
between B&D and the Emhart companies. How will Grunewalds plan be crafted to
involve Emhart managers and employees? How will differences in culture be raised
and resolved? How will the implementation proceed such that key managers at
Emhart are not alienated and given an excuse to leave? Integration implies they will
have to give up something.

Grunewalds plan does not acknowledge his lack of control. He has no control over
the new president of the locks business, but hes developing a pretty full blown
business plan. What if the new president decides to organize the business
Teaching Notes 271
differently? How should Grunewald go about selling his ideas?

Grunewald feels some urgency in wanting to do this in a year. What problems and
opportunities does that create? People are often divided on whether Grunewald is
trying too much too fast. On the one hand, the pro faction argues that since he is
close to the marketing organization, his concern that the competition has sensed
similar opportunities and is moving along these lines supports the sense of urgency.
And given the scope of the plan, he needs to push for approval of the whole thing. On
the other hand, the con faction says look for a pilot project. Find one of the Emhart
lock companies and model the organization he has in mind and bringing other
companies along as the success of the project gains momentum.

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