FACULTY OF BUSINESS
JILIN UNIVERSITY OF FINANCE AND ECONOMICS
TIANJIN UNIVERSITY OF COMMERCE
MGT 386 MANAGING CHANGE INTERNATIONALLY
CASE STUDIES FOR EXAMINATION
Instructions to Candidates:
1. The examination paper consists of two case studies.
2. Each case study has three questions. You must answer all questions for both case
studies.
3. This exam is intended to measure your knowledge and comprehension and your
ability to apply your knowledge to solve challenging problems. It may be quite different
from any exam you have attempted before.
4. Only Case Study 1 is provided as Case Study 2 is very short. You are asked to read
this case study thoroughly.
5. You may research the case study using any book (the text, other text books, study
guide, lecture notes and in the library) and you may make as many notes as you like.
6. However you are not allowed to bring copies of the case study, or any notes you
have made, or any written or printed material whatsoever into the examination
room.
7. You are to rely solely on the case studies provided in the examination room; and you
are not allowed to consult with other students on the case questions once the questions
have been made available to you.
8. You are to do your own work on the exam; it is not a group exam.
NOTE: YOU CAN RETAIN THIS PAPER.
PLEASE DO NOT BRING THIS PAPER INTO THE EXAMINATION ROOM
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PART A
CASE STUDY 1 (VALUE 25%)
JUGGLING CHANGE INITIATIVES AT ADL
ADL: A Brief History
Paul and Ron are the sons of Alan, who founded the furniture manufacturer ADL. Alan began the
business as a sole trader producing wooden furniture for the growing domestic market of Ashburton - a
provincial New Zealand town near the major South Island city of Christchurch.
In 1975 he registered his business as a private company specialising in lounge furniture, dining furniture,
cabinets, coffee tables and side tables for the broader South Island market. Under his tight control, the
company continued to expand within the growing New Zealand furniture industry until 1987 when
manufacturing growth and customer demand for New Zealand-made furniture hit a plateau. In the same
year, Alan passed ownership of the family business to Paul and Ron, who had worked in the business for
fourteen and seven years respectively.
Paul, the elder son, loved making furniture. He started helping his father in the factory at age four and
by the time he took over the ownership was a “hands-on” operator. A gifted craftsman who enjoyed
working in the factory, coming up with new furniture designs and achieving production targets, he was
very much in the mould of his father. He also, like his father, took an autocratic approach to running the
company’s manufacturing operations. His style of managing staff was paternalistic in that he viewed the
company’s employees as inherently inadequate as workers, yet had a sense of immense responsibility
for their welfare. Ron, a serious and intense individual, differed from his brother. He showed no early
interest in the furniture industry and reluctantly entered the family business, initially to maintain the
company accounts. From there, he slowly built up his skills in general management and sales, but never
developed the passion for the industry held by his brother and father.
The company’s staff were, in the main, long serving. Many of them had started at ADL as apprentices. All
employees were engaged in the furniture manufacturing, which emphasized, under Paul’s directives,
high quality and cost control. Production encompassed three departments: cabinet-making,
upholstering, and sewing. Each department had a supervisor who oversaw production, which relied
heavily on skilled craftsmanship (e.g., cabinet assembly and upholstery) and expert machine operators
(e.g., upholstery sewers). However, supervisors were also expected to be hands-on workers and to
direct any matters requiring significant decisions to Paul or, in his absence, Ron. Essentially, staff were
not allowed to make decisions that could lead to mistakes, with Paul demanding hard work and
obedience rather than initiative in “his” factory. If a staff member did make a mistake, it was not
unusual for Paul to yell at them and then storm off in frustration. Everyone at ADL knew that keeping
the workplace happy meant keeping Paul happy.
Administration was Ron’s sole domain, as Paul hated paperwork or any management matters not
directly related to production or design. Ron therefore dealt with staffing issues, marketing, and
financial management. He administered the company wages system, which paid above-industry-average
rates, but he, too, expected staff to meet Paul’s expectations of loyalty, high quality and productivity.
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During the 1990s the brothers worked effectively together, looking to automate aspects of their
manufacturing operation, expand the product range, and market nationally to geographically dispersed
furniture retailers servicing the needs of New Zealand’s population of 3.5 million. Elements of the
strategy included introducing new product ranges, modernising the company’s premises and
redesigning many company administrative and operational functions. Major capital expenditure from
1987 to 1996 included the following:
1987: Introduction of the UNISYS computer system to support accounting, order processing,
databases, and the collection and analysis of management-related information.
1988: The building of a 500 square metre warehousing facility adjacent to the existing 1,300 square
metre manufacturing plant.
1996: The purchase of a “CNC router” with CAD design software.
These acquisitions, which were financed through retained profits and increased borrowing, brought
about production efficiencies to specific work centres within the company. Unfortunately for the
brothers and their staff, by the late 1990s sales growth had stagnated, with profits not showing the
anticipated growth. Furthermore, inventory levels had risen alarmingly, delivery times were being
extended to the point of creating customer dissatisfaction, and expenses were increasing in relation to
throughput. Ron found it difficult to determine the reasons for these events. Frustrated, he began to
question his long-term commitment to the company as he struggled with cash flow difficulties,
production hold-ups, delivery headaches, and growing staff apprehension brought about by the
deteriorating situation. Paul’s response to the situation was to work harder and for more hours, which
led to him becoming irritated, stressed and overly fatigued. He blamed the company’s problems on the
New Zealand Government’s free-market reforms and on what he saw as changing consumer spending
habits, incompetent staff, and unrealistic customer expectations.
In April 2000, Ron and Paul initiated a review of how the company operated and whether it was still
heading in the right direction. The brothers decided that Ron would look at the attitudes and behaviours
of staff and management within the company, how they interacted and the extent to which they
accepted or avoided risk-taking and change. From the review Ron and Paul concluded that the
organisation had, in fact, used good judgement in deciding to compete nationally and invest in a modern
high-tech manufacturing plant, but that many of ADL’s old structures, attitudes and ways of doing things
were no longer compatible with the company’s strategic direction or the competitive market in which it
now operated. Paul was rather sceptical about Ron’s assertion that there was something wrong with the
way the company operated, as everyone worked hard and certainly no one worked harder than he did.
However, he tentatively agreed that Ron should examine ADL’s performance both as a standalone
organisation and within the context of the environment in which the New Zealand Furniture
Manufacturing Industry (NZFMI) was operating. Ron’s eventual conclusions are documented below.
A New Culture for ADL
Ron concluded from his review of the performance of ADL and the furniture manufacturing industry
within New Zealand that the reason for the problems within his and Paul’s company had more to do
with the culture that had evolved within ADL than the present economic environment. His conclusion,
he said, had arisen out of his observation that although trading was difficult and business had never
been so competitive, other companies were still making good profits, even though many of them were
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not as well capitalised or as technologically advanced as ADL. He therefore had looked inward at ADL’s
culture and decided that the entrenched behaviours and attitudes of staff and management appeared
to be at the heart of the problem. This culture, he went on, was very much a product of the fact that
ADL had been established during the protectionist era, and so had absorbed the values and behaviours
of that time. Moreover, the autocratic management and leadership styles held by the family owners of
the business had established a climate that limited opportunities for critically examining and, where
necessary, changing the established practices. Staff-held values like “Don’t rock the boat”, “Quality and
quantity are paramount”, “Don’t take risks” and “Don’t try anything new unless it is sanctioned by
management” along with management’s expectations of staff loyalty, respect and obedience were, Ron
felt, no longer suitable in the economic environment now governing the furniture manufacturing
industry.
To try and arrest this situation, Ron, using tools he had acquired while completing an MBA, set out to
examine more closely the values, assumptions and behaviours by which ADL was operating. This process
confirmed his initial supposition that the company’s culture needed to change if ADL was to improve its
performance. He then developed, with the aid of Lewin’s (1947) three-step change model, a prescription
of changes designed to do just this.
Ron later confessed that he was nervous about suggesting changes that would alter the company’s
culture. He was unsure if his suggested changes were the right ones, and he certainly did not want to
upset Paul. Nevertheless, he strongly felt that ADL could not become an effective organisation within
the current economic climate unless staff and management alike were able to embrace, and embrace
quickly at that, a culture characterized by innovation, self-responsibility and responsiveness to change.
One of Ron’s main change objectives was to have management move away from its autocratic,
paternalistic way of operating, which had so stifled innovation, expression of ideas and personal
development within the company. He wished to move towards delegating responsibility to staff and
allowing them to make mistakes as long as these provided a learning process for themselves and the
company. He wanted to institute a culture where staff would feel empowered to make decisions and to
take responsibility for their actions. He also believed that the organisation needed to focus its
production less on the need to maintain cost efficiencies and more on meeting consumer requirements
and satisfaction. He also maintained that ADL’s new culture needed to be imbued with a good dollop of
common sense.
The Change Process
Ron began the change process in June 2000 with a series of staff meetings outlining the negative impact
that ADL’s traditional modus operandi was having on the company’s long-term viability. Over several
weeks of these meetings he discussed, in his customarily intense and serious manner, the need for
change. He soberly highlighted the company’s present shortcomings and the risks these posed to the
company’s survival. As part of his strategy, Ron also presented examples of successful manufacturers,
emphasizing their new ways of operating and their clear focus on staff empowerment and customer
satisfaction. Throughout the meetings, he asked staff for their views of and concerns regarding the
company’s present practices. Staff comments tended to be limited and guarded, but Ron hoped that his
message was getting through. As for Paul, he sat in on most of the meetings, listening as Ron described
the changes he wanted to introduce, and he did agree, rather begrudgingly, to relinquish some of his
authority so that staff could make more decisions themselves and take responsibility for those decisions.
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Within the factory, Ron was quick to introduce some of the operational changes he had outlined in the
meetings. He redesigned jobs to allow staff greater responsibility and accountability, thus reducing the
need for all decisions to be directed through Paul. He invited ADL’s furniture retailers into the factory to
meet staff and to encourage them to think of customer needs in their actions. He used praise and
recognition of initiative to encourage staff to continually review the quality of their activities and to
effect improvements whenever necessary. Ron also invited his employees to enrol in a company-funded
programme that offered not only training specifically related to the furniture industry but also personal
development courses. He reconstituted staff meetings as forums wherein staff could question Ron and
Paul about old practices and the new initiatives, and where suggestions for better ways of doing things
in the future could be discussed. Finally, as part of his commitment to praise and acknowledge creativity
and performance, Ron released a proposal to reward staff through a profit-sharing scheme that would
be introduced within 18 months.
The Outcome, 12 Months On
Although Ron’s recommendations were implemented, they failed to significantly alter ADL’s
organisational culture for the better. Twelve months on, staff forums had become infrequent and poorly
attended, with staff viewing them as ineffective because Paul dismissed out of hand many of the ideas
put forward for improvements. Staff still seemed to be adhering to ADL’s long-term paternalistic culture.
It was Paul, they felt, who was responsible for running the business and who set the tone of how the
business was run, so why, then, was Ron suggesting all this change? As one long-standing staff member
commented to Ron after one of the first meetings back in June 2000, “Paul has always got us through
the tough times in the past, and I’m sure Paul will do it again this time.”
Moreover, all the staff knew it was safer not to take risks or do things differently, regardless of what Ron
said. Sure, he was a nice guy and had some good ideas, but it was Paul who ran the company, and it was
Paul who would come down hard on you if you made mistakes. One thing was for certain, you couldn’t
rely on Ron to stick up for you when Paul was being unreasonable.
These attitudes were reinforced by the fact that attempts to change the company’s culture had
inevitably created some initial operational difficulties, which had led to some staff making wrong
decisions or errors, for which Paul castigated them. This situation naturally made staff even more
reluctant to take risks. They much preferred leaving decisions to Paul; that had always been the safest
way in the past. Paul still tended to dictate to staff rather than communicate with them, and Ron,
acquiescing to Paul’s status as the elder brother and dominant personality in the company, was
unwilling (or unable) to force him to change his ways. Also, Ron’s acute awareness that Paul was far
more capable in furniture manufacturing than he was undermined his confidence to press for changes
to the way that ADL operated.
Ron became increasingly frustrated with the whole process, and felt very much alone when making
difficult decisions. He could see that the culture was not changing. While his efforts had met with some
success in altering behaviours during the first few months of his change programme, he now realised
that the company had reverted to its old ways. If anything, the autocratic, paternalistic and low-risk
culture had become further entrenched. The staff considered that in trying to take on the values of a
new culture, they had simply exposed themselves to greater criticism from management and so were
even warier of taking chances. Paul was pleased to be back in control and felt vindicated in his belief
that this “empowerment and responsibility stuff” was nothing but nonsense. The problems the company
had encountered trying to implement this new thinking had proved his point that “tough” management
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and good control was what had really been needed all along. He had run the business for 20 years and
did not need to rely on the latest MBA fad to do so.
Eventually, Ron, quite disillusioned, lost the energy and enthusiasm to continue on in the business. His
profit-sharing scheme was no closer to implementation and staff had become suspicious of his
intentions and his ability to lead. When the opportunity arose for Ron to take a change of career, he
immediately decided to leave the family business.
“Are you sure that’s what you want Ron?” Paul asked more in resignation than questioning.
“Yes,” confirmed Ron. “I no longer see my future here. I’m keen to take on a new career direction, and I
need some different challenges in life.”
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