Case Study 1 – Changing the Rules at Cosmo Plastics
When Alice Thornton took over as chief executive officer at Cosmo Plastics, the company was in trouble. Cosmo had started out as an innovative company, known for creating a new product just as the popularity of one of the industry’s old standbys was fading, i.e., replacing yo-yo’s with water guns. In two decades, it had become an established maker of plastics for the toy industry. Cosmo had grown from a dozen employees to four hundred, and its rules had grown haphazardly with it. Thornton’s predecessor, Willard P. Blatz, had found the company’s procedures chaotic and had instituted a uniform set of rules for all employees. Since then, both research output and manufacturing productivity had steadily declined. When the company’s board of directors hired Thornton, they emphasized the need to evaluate and revise the company’s formal procedures in an attempt to reverse the trends. First, Thornton studied the rules Blatz had implemented. She was impressed to find that the entire procedures manual was only twenty pages long. It began with the reasonable sentence “All employees of Cosmo Plastics shall be governed by the following . . .” Thornton had expected to find evidence that Blatz had been a tyrant who ran the company with an iron fist. But as she read through the manual, she found nothing to indicate this. In fact, some of the rules were rather flexible. Employees could punch in anytime between 8:00 and 10:00 a.m. and leave nine hours later, between 5:00 and 7:00 p.m. Managers were expected to keep monthly notes on the people working for them and make yearly recommendations to the human resources committee about raises, bonuses, promotions, and firings. Except for their one-hour lunch break, which they could take at any time, employees were expected to be in the building at all times. Puzzled, Thornton went down to the lounge where the research and development people gathered. She was surprised to find a time clock on the wall. Curious, she fed a time card into it and was even more flabbergasted when the machine chattered noisily, then spit it out without registering the time. Apparently R&D was none too pleased with the time clock and had found a way to rig it. When Thornton looked up in astonishment, only two of the twelve employees who had been in the room were still there. They said the others had “punched back in” when they saw the boss coming. Thornton asked the remaining pair to tell her what was wrong with company rules, and she got an earful. The researchers, mostly chemists and engineers with advanced graduate degrees, resented punching a time clock and having their work evaluated once a month, when they could not reasonably be expected to come up with something new and worth writing about more than twice a year. Before the implementation of the new rules, they had often gotten inspiration from going down to the local dime store and picking up five dollars worth of cheap toys, but now they felt they could make such trips only on their own time. And when a researcher came up with an innovative idea, it often took months for the proposal to work its way up the company hierarchy to the attention of someone who could put it into production. In short, all these sharp minds felt shackled. Concluding that maybe she had overlooked the rigidity of the rules, Thornton walked over to the manufacturing building to talk to the production supervisors. They responded to her questions with one word: anarchy. With employees drifting in between 8:00 and 10:00 and then starting to drift out again by 11:00 for lunch, the supervisors never knew if they had enough people to run a particular operation. Employee turnover was high, but not high enough in some cases; supervisors believed the rules prevented them from firing all but the most incompetent workers before the end of the yearly evaluation period. The rules were so “humane” that discipline was impossible to enforce.
1.Do you think Alice Thornton’s proposal to decentralize the rules and procedures of Cosmo Plastics will work?
2.What kinds of rules and procedures do you think the department managers will come up with? Which departments will be more formalized? Why?
3.What risks will the company face if it establishes different procedures for different areas?
Case Study 2 – Wolf Paw Apparel
Situation: Wolf Paw has traditionally sold its highly-desired outerwear at wholesale to partner retailers rather than in their own brick-and-mortar locations. Their entire business model revolved around them being business-to-business (b2b) rather than business-to-consumer (b2c). However, with changing demand and an ever-increasing outcry for better selection and more styles, Wolf Paw has decided that the only way to meet the desires of some customers is to open their own brick-and-mortar stores. Due to the inherent risks associated with opening a brick-and-mortar location, Wolf Paw wants to ensure that each store is right for its local market. Additionally, Wolf Paw has no experience in running a retail location. All the retail strategies, policies, management, staffing, inventory, supply chain, customer service, point of sale (POS), and other related matters need to be carefully planned and implemented. Yet using their first store as part of a trial-and-error method to work out the details could seriously hurt their brand image, customer loyalty, and future sales. Solution: Wolf Paw noticed that there was a short-term vacant space in the same mall where they wanted to launch their first permanent store several months later. They asked the mall leasing manager and found that the space was being held for a new international retailer but it would remain vacant for several months until construction on the new store was set to begin. Given that the location of the vacant space was close to their future flagship store, they felt that it would be an ideal place to launch a pop-up shop and work out the above-mentioned details of running a retail shop; away from the high-expectations of customers expecting a major flagship store experience. Results: The pop-up shop served several purposes: to get people interested in the brand as a new retailer, to promote awareness of the upcoming flagship launch in the same mall, to understand the intricacies of running a retail shop first hand, to plan and execute different strategies in areas like supply chain management and customer service management, to develop staffing requirements and training material, to slowly build brand loyalty at the retail level, to test out customer loyalty programs, and more. Wolf Paw successfully opened its flagship retail store several months later and used the lessons learned at the pop-up shop to ensure a smooth and efficient transition from a b2b to b2c model.
4.Why is location such an important decision for pop-up shops?
5.If the vacant space (near their eventual flagship location) was not available, what are some strategies Wolf Paw could have used if: a) they still wanted to use pop-up shops to introduce their audience to their new retail venture? b) they wanted to work out the details of running a retail location?
6.What value did the pop-up shop at the mall offer to: a) the mall and its owners? b) other retailers in the mall? c) Wolf-Paw’s retail partners?