Meg Whitman at eBay Inc.
Since its inception in 1998, eBay has enjoyed a phenomenal rise to success and a
brand that is universally recognized. Its rapid growth has generated many ongoing
challenges, which revolve around eBay’s vision to be the largest online person-to-person
trading company. Founder, Pierre Omidyar, attributes eBay’s success to its strong sense
of community, its culture of honesty and respect, and its transaction based business
model. Omidyar’s appointment of Whitman as eBay’s new Chief Executive Officer in
1999 has assured continued growth because Whitman has employed effective strategies
in order to attract new users, retain existing users, and appeal to eBay investors. In order
to understand eBay’s success, it is necessary to examine the following: the culture of its
organization and online community and the importance of that culture relative to its past
and future success, the challenges and solutions brought about by its dramatic and rapid
growth, Meg Whitman’s leadership style, affect the decision to proceed with or reject the
proposed acquisition of Kruse International.
In the case of eBay, the culture was one of the key ingredients to its success. The
external culture created through the company’s online patrons was directly related to the
culture on the inside. Omidyar believed that honesty and respect are important factors
when creating an online market. “eBay’s community had a distinct culture, based on
trust, respect, autonomy, empowerment, and equality” (Hill & Farkas, 2005, p.1). It is
believed by some analysts that eBay’s “quirky but highly community-oriented culture
had led to its surge in popularity” (Hill & Farkas, 2005, p.1). The site was easy to use
enabling the average person to buy, sell, and trade worldwide, something that had never
been done before. Omidyar found that the market for person-to-person trading was
1
extremely lucrative because prior trades were localized to classified ads, garage sales, and
flea markets. Omidyar’s idea broadened the market and changed the way people
interacted with one another. His goal was to create an online community where members
could share information and form relationships based on trust and common interests.
Because of the way the company was designed, buyers and sellers handled all
transactions, and eBay took a back seat approach to the way it conducted business
allowing the consumer to feel as though they had complete control over the events that
took place. eBay also provided message boards that acted as forums, chat rooms, bulletin
boards, email services, monthly newsletter, and the opportunity to create personal home
pages that provided users which encouraged its users to provide feedback about other
users with whom they interacted. The feedback forum allowed users to regulate
themselves and encourage positive behavior further nurturing the strong sense of
community within the site. Whitman stated that part of her reasoning behind joining eBay
was “the emotional connection between eBay users and the site” (Hill & Farkas, 2005,
p.4).
The internal culture of the company mirrored the external, online culture. At the start
of the company eBay had only 35 employees as a startup and had a flat structure where
employees were encouraged to make mistakes and learn from them. When hiring new
employees, the company focused on experience and cultural unity. It was important to
eBay that all of its employees, even when newly hired shared the values on which the
company was founded. An example of this hiring process was exemplified in a statement
made by Robert Kagle director of eBay. When recalling what made him believes that
Whitman was the right person for the job he recalled her saying, “Pierre’s not going
2
anywhere is he?”(Hill & Farkas, 2005, p5). This statement showed her commitment to
keeping the good members of the company instead of making her own mark on the
company.
When Whitman was hired, she began setting up meetings with employees to get a
clearer idea of where the company was and in what areas the employees believed
improvements could be made. For example, when attempting to schedule meeting with
employees, she discovered that none of them had calendars. This seemed to pose a
problem because the employees saw having a calendar as outside of their cultural norm.
Eventually, those employees who had worked for larger companies, signed up; however,
those who had only worked for small start up companies, resisted and did not sign up at
all. Therefore Whitman mandated weakly meetings to ensuring that the management
team remained a united front and was continuously on the same page. As the company
evolved and grew larger, Whitman had to come up with ways to stay true to the culture
and at the same time she had to attempt to integrate new, more structured ideals
eBay’s culture internally and externally has had a major effect on the success of the
company. It could be said that eBay’s success is directly related to the way in which the
company took a backseat to their customers and allowed them to buy and sell on their
own terms. With few regulations, low cost to the consumer, and the encouragement of
consumers to post feedback, the company excelled and allowed the customers to feel
empowered.
In 1995, Omidyar was successful in countering his first challenge of granting users
interested in trading personal information while simultaneously maintaining company
and user integrity. For instance eBay’s nonhierarchical and democratic organizational
3
structure empowered its employees to develop solutions, make recommendations, and
solve problems as a team. This ‘bottoms up’ approach was effective because it mirrors
eBay’s external community culture, and allows management to openly provide feedback
without fear of reproach. Omidyar’s decision to work as a team yields many advantages
because (1) teams have tendency of outperforming individuals; (2) the talents of team
members are often diverse and can yield a democratic workplace; (3) teams are more
flexible and responsive; and (4) teams can be quickly modified, created, disbanded,
refocused and deployed (Robbins, 2005).
The future challenge that eBay faces is to create services that continue to appeal to its
users. Because of its ability to remain in constant contact with its customers, eBay can
reinvent itself everyday since it knows precisely what its clientele wants (Hoff, 2001).
Though eBay continued use of its mediums to solicit ideas from its users, eBay should
independently explore proactive techniques by meeting quarterly for brain-storming
sessions to determine whether or not a particular service is still needed, or whether a
proposed service is beneficial.
In response to eBay’s steady and rapid growth, Omidyar decided to make
organizational changes by first soliciting venture capital banking in 1997 for the purpose
of acquiring sponsorship benefits and management contacts. Subsequently, he hired
Whitman as the new Chief Executive Officer (CEO) in 1999. Upon hiring Whitman,
Omidyar was challenged with convincing eBay employees and its executive staff that this
transition is necessary. Omidyar began by introducing Whitman as a more experienced
CEO with exceptional leadership skills, who shared the company’s cultural values. His
idea to remain present with the company also helped transition Whitman into the
4
organizational culture and structure. As stated by David Boan (2006), the organizational
culture is the shared beliefs, perceptions, and expectations of individuals in organizations.
Whitman sought to build by employee meeting and concluded that the organization
lacked sufficient expertise, marketing was nonexistent, system’s capacity, and the
company needed to prepare for its initial public offering (IPO). The meetings also
contained brainstorming sessions designed to generate ideas for developing and
implementing strategies conducive to the organization’s growth.
Whitman’s first challenge and priority was addressing the system’s frequent
shutdowns which posed a problem for the users and the organization. After Whitman
met with Mike Wilson, the Senior Vice President of product development and Site
Operations, she decided to increase the company’s ongoing investment in system
capacity by ten times the capacity needed. Her solution reinforced the existing users’
confidence in eBay services, and allowed for further expansion of the eBay community.
eBay will need to continue to develop strategies for preventing systems shut downs in
the future by ensuring that the system’s capacity more than exceeds the amount used at
all times. This solution will ensure continued growth and satisfied community users.
Whitman next tackled eBay’s nonexistent marketing status. Whitman concluded that
marketing is needed to assist in the preparation of eBay’s first initial public offering
(IPO), and to attract new users to compete with other online auction sites. The focus
groups were used in developing the marketing strategy, and contained an eclectic group
of participants who were solicited from eBay’s external community. Off-site meetings
were also conducted to measure the user segments and define eBay’s brand positioning
statement. After it was discovered that 20 % of eBay were heavy users or “bay traders”
5
tended to be collectors, a marketing plan was developed to target the collector population
through print advertising and vertical publications. As an incentive, Whitman
incorporated eBay’s PowerSellers Program, which gave special benefits and privileges to
heavy users, as long as certain criteria were met.
eBay’s future marketing strategy should continue to include focus groups, but the
marketing targets should expand user segments. Instead focusing on one segment, as
mentioned in this study, eBay should consider targeting the top three or top five user
segments. Also the advertisement mediums should be expanded to include internet
portals.
Whitman’s streamlining and strengthening eBay’s internal organization from a
strictly engineering-driven company to be subdivided into groups for the purpose of
specialization. Whitman’s organizational changes were three-fold: preserving eBay’s
internal culture, taking eBay public, and addressing community safety issues. Whitman
provided an in-depth discussion on corporate strategies and initiatives for restructuring
the eBay engineering functions. She also created a forum and held consecutive meetings
to ensure the communication of eBay’s organizational changes. A handful of executives
were added to the company’s management team/board that was equipped with marketing,
legal, customer service expertise.
eBay’s future challenges of changing the organizations structure related to there
selection practices. The benefits of good selection include lowered training costs,
absenteeism and turnovers which generates higher productivity, increased quality, and
employee morale. The future generation, the Nexters under the age 30, for example, are
not as loyal to their jobs and careers as their predecessors (Robbins, 2005). So when
6
hiring eBay employees, the recruiters should make sure that the values, loyalty, and
ethical behaviors agree with eBay’s organizational culture.
In order to maintain eBay’s internal culture, as the company grew Whitman found that
she needed to meet with each new hire to explain eBay’s values and set expectations that
each employee was to act with a high degree of professionalism and respect. In the
future Whitman will still need to personalize her relationship with management, but it
will be helpful to develop an orientation program that will explain the organization and
its culture. This program should also reduce the time needed for the new employees to
acclimate. Whitman forbade “screamers” or “table ponders”, but she encouraged
openness to differences, tolerated mistakes ,as long as the employee learned from them,
and endorsed debates the majority rule.
Whitman’s organizational structure reflected transformational changes deliberately
driven by goals with the consideration of internal and external forces (e.g., economic
conditions, technological changes, competition, labor-market conditions, and the status of
laws and regulations) (Robbins, 2005).
The challenge of addressing community safety issues, which included illegal items,
user fraud, deadbeat bidding, and “shill” bidding, was counterproductive and problematic
for eBay. “However, almost without exception respondents felt that the benefits of using
the online auction system far outweigh the potential threat of fraud” (Cameron and
Galloway, 2005). Because eBay does not pre-screen every item, Whitman and
management established three solutions to deter fraud: (1) victim of user fraud must
report the incident to law enforcement, (2) eBay will follow up reports of fraud to the
7
Safe Harbor group for further investigation, and (3) explain that all users that violations
will lead to user termination from site either permanently or temporarily.
The company never took responsibility for fraudulent transactions because they never
take possession of any items traded and they never dealt directly with the trade
transaction itself. However, eBay instituted an insurance program for trade items for
specific amounts in response to complaints received by the National Consumer league.
eBay’s future challenges was the continuous countering fraud should include
establishing relationships with the law enforcement agencies, amending eBay’s
policy/procedures to include law enforcement access to fraudulent transactions, and
making judgment calls to accept some liability in the event of fraud. The proposed
solutions for the future will instill confidence in eBay’s users and its investors.
eBay was successful in its IPO because of addressing and/or enhancing the
organizational structure, marketing, customer support capabilities, and community safety
issues. Although the IPO was contingent on the market conditions, Whitman was
successfully making effective presentations to over 200 investors in 21 cities. As a result,
eBay almost quadrupled its market value by the end of a nine-month period. Since the
IPO eBay’s challenge of appealing to their investors in the future primarily depends on
the continued success of the organization and community structure. eBay should hire an
Economist and a Chief Information Officer who are capable of strategic planning for
unpredictable outcomes relating to market conditions, technological advances, and social
trends that may impact investors trust.
Although eBay’s and its competitors are vigilant in dominating the personal trading
market, Whitman chooses to channel eBay’s activities on ways of attracting new users, as
8
well as retaining existing users. Because Whitman and the management team decided to
follow the actions of eBay’s competitors and carry out the solutions to the previous
challenges, it had an effect on the competition. A strategy included an alliance with
AOL, which enabled eBay to pursue international and local auction growth. Further,
eBay’s successful acquisition of Butterfield & Butterfield enabled eBay to attract affluent
customers, thereby increasing the organization’s revenue appeal to its investors. The
potential acquisition of Kruse International was also under consideration.
The proposed solutions to addressing competition include the disbandment of the (1)
disbandment of the ‘no advertisement’ policy, (2) consideration for the use of portals to
advertise eBay services, and (3) continuation of acquisitions and alliances with
compatible companies. These actions will ensure vast exposure and counter the
competitive efforts.
Whitman also looked at ways of addressing the needs of the external community users
by expanding eBay’s customer support capabilities. Initially, using the “remote”
customer service model, which included eBay’s own users, were cost effective and
offered 24/7 customer support service. However, due to the company’s significant
growth Whitman decided to expand this model by installing eBay’s own customer service
cadre with its own employees. This decision not only appealed to eBay users and its
investors, but it enabled the company the ability to supervise its remote representatives
and stay informed of customer support issues. The company also subsequently installed
its first customer service support center in Salt Lake City. Whitman appointed Bannick,
to oversee the customer support operation, and decided to recruit the assistance from a
9
temporarily agency to hire several hundred employees. Furthermore, eBay hired a temp
agency to hire several hundred employees become permanently employed after 90 days.
The future challenge of addressing the needs of external community users includes
developing incentives, such as waiving of trade fees on certain items for specific
amounts. The company can also incorporate a point system, for example, for all frequent
users on certain items or transactions. Because the visibility of eBay is important to its
vitality and longevity, eBay can expand its advertisement through portals, conferences,
and forums.
In order to explain Whitman’s leadership style, one must understand the
organizational behavior theories. In today’s society, there are many people who are
considered to be leaders. People such as Presidents Kennedy and Reagan, Colin Powell,
Oprah Winfrey, Michael Jordan, and many others have been given the title of leader.
How did they get into this description/role?
First, you must understand the true definition of a leader. Lussier & Achua (2004), in
their book Leadership Theory, Application, Skill Development define it as follows:
“Leadership is the influencing process of leaders and followers to achieve organizational
objectives through change.”
What makes a true and effective leader? Stephen Covey (1989) states that there are “7
Habits to Highly Effective People”. These habits are as follows:
“Proactive – More than merely taking initiative but being responsible
for our own lives.
Begin with the End in Mind – Basic principle that all things are created twice –
Define what you’re trying to accomplish before you begin.
10
Put First Things First -What is most important?
Think Win/Win – Total philosophy of human interaction –Character,
Relationships, and Agreements - Cooperation
Seek First to Understand, Then to be Understood – Communication, Listening,
Diagnose.
Synergize – Catalyst, unity, and unleashing the greatest powers within people
– the whole is greater than the sum of its parts.
Sharpen the Saw – Personal Care - Preserving and enhancing the greatest asset
you have – you. Physical (Exercise, Nutrition, Stress Management); Mental –
(reading, visualizing, planning, writing); Social/Emotional (Service, Empathy,
Synergy, Intrinsic Security); Spiritual (value clarification and commitment, study
and meditation).”
Whitman personifies the true meaning of a leader as defined by Lussier and Achua.
First, her academic credentials are impeccable: B. A. in Economics from Princeton Un
iversity and an M. B. A. from Harvard Business School. She first showed this by her
previous successes such as graduating from Princeton University and Harvard Business
School. Second, her career achievements at Proctor & Gamble, Bain & Co., and Walt
Disney Co. and others have been stellar. She also realized that while at Florist
Transworld Delivery (FTD) that she couldn’t solve the problems there so she moved on,
thus proving her realistic assessment of situations and her ability to deal with them so she
took a “proactive” (Covey, 1989) approach and resigned. Her leadership abilities also
proved successful at Hasbro Inc. “where she presided over a marketing overhaul and
layoffs to revive the Preschool Division” (Hill & Farkas, 2000, p.4).
11
Whitman started her leadership experience at eBay by opening the lines of
communication within the company by “creating a well defined corporate vision
facilitated rapid decision making, streamlined the organization and strengthening the
senior management team” (Hill & Farkas, 2000, p.9). Whitman demonstrated the traits
of a leader according to Covey’s model. She used the “Think Win/Win and Seek First to
Understand, Then to be Understood” (Covey, 1989) mentality when she first arrived at
eBay. She listened to what eBay was all about, the problems they were facing, and their
culture.
Whitman followed the Behavioral Theory prior to making the decision to accept the
position at eBay; she discussed the opportunity with her family to make sure that they
were on board with this move. Some people would have just made the decision on their
own and not consulted with others who might be affected by the decision.
Another instance where she displayed Behavioral Leadership was during the interview
process. “She made sure that Pierre wasn’t going anywhere” (Hill & Farkas, 2000, p.5).
This showed her “concern for her people and production as depicted in Blake’s and
Mouton’s Managerial Grid Theory” (Robbins, 2005). Whitman showed concern because
she knew that to be affective in her role she would need a good support person behind
her. Moreover, Omidyar’s knowledge of the company would help her to build on his
achievements.
Whitman showed these leaderships skills during her first two weeks in her new role at
eBay where “she learned the primary culture is a respect for our community” (Hill &
Farkas, 2000, p. 4). “Whitman also spent time meeting with each Senior Executive to
understand their responsibilities and priorities and listen to their thoughts on where the
12
business was going” (Hill, & Farkas, 2000, p.5). This shows her “consideration” under
Behavioral Theories for “mutual trust, respect for subordinates’ ideas, and regard for their
feelings” (Robbins, 2005, p. 159).
Whitman has displayed charismatic leadership behavior throughout her tenure at eBay
all the qualities of “transformational leadership” (Robbins, 2005, p.166). With the help
of Mike Wilson, her decisions to “streamline and strengthen the organization by changing
the engineers into specialized categories would transform the company into the next
generation” (Hill & Farkas, 2000, p. 9). She met with Wilson to obtain his input and reevaluated the structure as it exists today. Then Wilson proposed a new organizational
chart which Whitman classified as “better than Pierre and I could have done on our own”
(Hill & Farkas, 2000, p.9). This showed that she didn’t force her opinions and decisions
on her senior management team but worked with them to determine the best solution for
the problem.
Whitman hired additional experienced and knowledgeable senior management such as
“Brian Swette from Pepsi-Cola and Gary Bengier from Cooley Godward LLP to work
alongside her on general management issues” (Hill & Farkas, 2000, p.10). In addition,
she added “Scott Cook, the founder of Intuit, Inc., and Howard Schultz, the founder of
Starbucks Corporation, to join the board of directors” (Hill & Farkas, 2000, p.10).
Whitman surrounded herself with people who could enhance the culture and be role
models and mentors.
Whitman’s charismatic influence was evident when she showed up at the Monday
morning meetings to personally introduce herself and explain what the organization is all
about. Today, she continues to remain active in the recruiting process. She wanted to
13
instill in employees the eBay culture and values before they accepted the position or
started to work.
Although, Whitman wasn’t a heavy-handed leader, she was proactive in her decision
making. She received support from the board as well as from her management team
when they received reports of fraud on the eBay site. She took immediate action. Policy
changes and new protection services for customers were put into place to ensure the
company would survive into the future.
The eBay team’s next challenge was competition – On Sale, Amazon, Excite, and
Yahoo. The team "expanded customer service support capabilities and partnered with
AOL” (Hill & Farkas, 2000, p.16). “Whitman made the decision to open a remote
support site in Utah which offered cost advantages over the current San Jose base as well
as a highly bilingual population” (Hill & Farkas, 2000, p.15). The decision to enter into a
partnership with AOL, “was a joint marketing and development deal to create a
prominent presence; give eBay a broad exposure to AOL’s 16 million members, the
biggest pool of internet users; and advertising” (Hill & Farkas, 2000, p.16). “It also
provided access to international experience and community Web sites to pursue its
international and local auction growth strategy” (Hill & Farkas, 2000, p.16). Both of
these initiatives helped to enhance eBay’s and AOL’s strategic growth in an ever
changing environment. With Whitman at the helm, in her charismatic leadership role, the
company’s culture here continued to grow eBay into what it is today – highly used,
worldwide internet “auctioneer”.
The fourth and final idea which sheds light on eBay’s organizational theory and
behaviors is its proposed acquisition of Kruse International. In May of 1999, Meg
14
Whitman was contemplating eBay’s purchase of Kruse International, which was founded
in 1952 by Russell Kruse and his father-in-law, Lester Boger. Today it is “one of the
world’s leading auction firms and the largest collector car auction company, selling more
vintage cars than all over firms combined” (Kruse International, 2001-2006). In making
this decision, Whitman had many factors to consider.
Whitman believed in the power of a well-defined corporate vision. She felt it
enhanced the speed with which decisions could be made be giving “everyone…a clear
yardstick against which to assess a wide variety of strategic options” (Hill & Farkas,
2000, p. 9). Both eBay and Kruse International had similar corporate visions. eBay’s is
“to be the world’s largest online person-to-person trading community” (Hill & Farkas,
2000, p.9); while Kruse International worked “to enhance the customer experience to
further our position as the world’s leading auctioneer” (Kruse International, 2001-2006).
Since both companies are working toward the same goal, the meshing of the two
companies should be easier than for those with vastly different agendas.
Another reason for the acquisition is sheer profit. Explained in simplest terms, eBay
makes its money by charging a percentage of an item’s listing price. The “average
auction closes at only about $47, of which eBay’s cut is $3; the average Butterfield &
Butterfield auction closes at $1400, of which the house’s share is almost $400” (Roth,
1999, p. 82). Kruse International “auctions more than 13,000 cars in more than 30 events
and dozens of real estate properties each year” (Kruse International, 2001-2006).
Additionally, “the Kruse family has broken more than 250 world record prices in the
collector car industry” (Kruse International, 2001-2006). From a strict accounting
standpoint, the Kruse acquisition should put eBay in place for tremendous profit growth.
15
Others would disagree with this reasoning. According to Philip Anderson, an associate
professor of Internet strategy at Dartmouth’s Tuck School of Business, eBay “needs to
have a brand that doesn’t just say, ‘We have a bunch of cool stuff for sale,’ but one that
says, ‘We deliver perfect transactions.’ eBay’s brand doesn’t’ say that right now. For
eBay to go on a buying spree isn’t smart. "They need to build their brand first” (Roth,
1999, p.87).
Whitman also favored the acquisition “because it would strengthen eBay’s positions in
the auction market for high-end goods” (Hill & Farkas, 2000, p.1) and according to Levy,
et al (1999) she is also trying to expand eBay beyond its core model of collectibles.
Additionally, as stated the previous paragraph, increased profits was one of the strongest
components of that reasoning. But according to Whitman herself, what she does
“everyday is try to build the business for the long haul…” (Riedman, 1999, p. 4). In
Whitman’s eyes, acquiring Kruse would do just that. “But as eBay abandons the smalltown market in favor of the bloodless, high-end mall, it risks creating a site no different
from Amazon, uBid, or any of the 1,000 other online auction sites. Whitman is gambling
with the raw appeal and personality that got the company this far” (Roth, 1999, p. 87).
For her part, Whitman is not overly concerned with retaining existing users. According
to her, “Our rate of retention is superb. Consequently, it’s all about the battle for new
customers. That’s why we have to grow faster than our competitors and get people to
come to eBay first” (Hill & Farkas, 2000, p. 14).
Is eBay’s internal structure prepared for the Kruse acquisition? According to Hill &
Farkas, the acquisition of Kruse, partnered with the recent AOL alliance and the
Butterfield and Butterfield acquisition, will put even more pressure on the company’s
16
technical systems, which have already failed several times over the past year. In eBay’s
Second Quarter 1999 Financial Results press release, it states “In order to support this
new level of activity, the Company made significant investments in personnel,
infrastructure and marketing programs…” (eBay Inc, 1999). Further, Whitman herself is
quoted as saying, “During the second quarter, we made unparalleled investments in
infrastructure while taking bold moves in several new business areas…” (eBay Inc,
1999). Others disagree with the investments eBay has made. Roth (1998) states
“instead of worrying about quick-fix revenue streams like Butterfield & Butterfield, eBay
should be trying to perfect its computer systems.”
Other factors to consider are the inevitable reactions from both Wall Street and the
eBay community.
“Whitman has learned hosting an Internet community is like leading a tiger by the tail.
When you let your users down…you hear their pain instantly. If you decide to raise a
fee, as eBay did recently, the attacks will come with the passion of a Balkan conflict”
(Levy et all, 1999, p. 42).
After the recent acquisition of Butterfield and Butterfield “the reaction was split.
Stock traders applauded, sending eBay stock up 4%, but Internet message boards lit up
with protests” (Roth, 1999, p. 83). Opinions on whether Whitman’s management
decisions are good or bad for eBay vary greatly.
According to Roth, increasingly it seems eBay is a company at war with itself. The
swap fest that endlessly touted as the Internet’s happiest marketplace is fast evolving into
something rather different. While Whitman continues to hype eBay’s touchy-feely
communitarians, she’s quietly and rapidly overhauling the company in service of a goal
17
the staunchest capitalist would understand: pleasing Wall Street (Roth, D., 1999, p. 82).
Others, such as Patricia Sellers (1999), see it differently:
When Whitman plays strategist by taking eBay upscale or centralizing customer
service, the users often flame her via e-mail. When she plays disciplinarian by
suspending hundreds of eBay users weekly for fraud or for selling items they
shouldn’t, (firearms, body parts, teen virginity), she’s scorned as an
overprotective mother (p. 97).
Whitman struggles with this conflict, “How do I build on what they are doing right? And
how do I ease the organization into new ways for doing things in a really positive way as
opposed to a negative way?” (Hill & Farkas, 2000, p. 9)
The Six-Step Rational Decision-Making model is one model used for decision
making. As its name indicates, this model uses six steps to come to a decision. They are
as follows: 1) define the problem, 2) identify decision criteria, 3) weight the criteria, 4)
generate alternatives, 5) rate each alternative on each criterion, and 6) compute the
optimal decision (Robbins, 2005). On paper this model would lead one to better
decisions; however, it makes several large assumptions regarding the decision maker’s
access to information. The main assumption, and the most flawed, is that the problem to
be solved is both clear and unambiguous with the decision maker having complete
information. This almost never happens in the real world. Decision makers are not
equipped with crystal balls allowing them complete access to any and all information
requested.
When considering the ramifications of the Kruse acquisition, Whitman should be
aware of several biases which may affect her decision making. Most notable are the
18
confirmation bias, the availability bias, and the representative bias. The confirmation
bias suggests decision makers will seek out information that reaffirms past choices. With
the Butterfield & Butterfield acquisition fresh in her mind, Whitman needs to be aware
this may influence her thought process. The availability bias is the tendency for people to
base their judgments on information that is readily available to them. With the onslaught
of response from the eBay community, Whitman may make decisions which give their
feedback too much weight. The representative bias says decision makers tend to figure
out the chance of an occurrence by trying to match it with a preexisting category. Wall
Street has responded favorably to each of Whitman’s previous business moves. Whitman
cannot assume that it will automatically happen again.
In the end, Whitman did decide to purchase Kruse International, and it was a smart
move considering all the pros and cons. In today’s business world, companies cannot
survive by standing still. While eBay may lose some of its community, the growth of the
network will attract new ones. Hill & Farkas (2000) stated it this way, “…a broader
selection of items brought more buyers, which in turn attracted more sellers-the ultimate
network effect” (p.17). As an interesting side note, the partnership of Kruse and eBay did
not last long. In 2003, Whitman sold Kruse International back to Dean Kruse.
According to Kruse, Whitman was true to eBay’s culture to the end. “Kruse said the
eBay’s chief executive officer, Meg Whitman, told him that she would ‘give me a shot at
it’ if they ever sold it. ‘She was true to her word’” (Hartzell, 2003, p.1).
19
Meg Whitman at eBay, Inc. (A)
Katie Selby, Allison Smith, Dorothy Mackey,
Sara Richards, and Susan Killian
McDaniel College
HRD 501 – Organizational Theory and Behavior
Professor Dyer-Gear
December 9, 2006
20
21