CASE 4: GOING TO THE X-STREAM

By Roy Smollan, Auckland University of Technology, New Zealand

Gil Reihana was the chief executive officer of X-Stream, a company he launched in Auckland, New Zealand, six years ago at the age of 25, after graduating with a bachelor’s degree in information technology and management. He had inherited $300,000 and had persuaded various family members to invest additional money. X-Stream assembled personal computers for the New Zealand and Australian markets and sold them through a number of chain stores and independent retailers. The company had soon established a reputation for quality hardware, customized products, excellent delivery times and after-sales service.Six months ago it had started a software division, specializing in webpage design and consulting on various applications for the development of electronic business.

Gil was driven by a desire to succeed. He had started working part-time at an electronics retailer at age 16 and in his spare time took apart old computers in his garage to see how they were made. He was extroverted, energetic, and enthusiastic, often arriving at work by 5 a.m. and seldom leaving before 7 p.m. He felt that work should be challenging but fun too. He had initially picked a young senior management team that he thought shared his outlook. A casual, almost irreverent atmosphere developed. However, a poorly organized accounting department led to the replacement of the first accountant after two years. Gil believed that major decisions should be made by consensus and that individuals should then be empowered to implement these decisions in their own way. In the beginning he had met with each staff member in January to discuss with them how happy they were in their jobs, what their ambitions were, and what plans they would like to make for the coming year in terms of their own professional development. These one-on-one meetings became more difficult as the company grew, so senior management team members were eventually delegated the task of conducting reviews with their own staff.

However, Gil was unsure whether every manager was actually performing the reviews or how well they were working. Now he tried to keep in touch with staff by having lunch with them in the cafeteria occasionally. Denise Commins (affectionately known to all staff as Dot Com) was the chief financial officer. She and Gil could not be more different. Denise was quiet, methodical, and very patient. Her superb interpersonal skills complemented a highly analytical mind. At 55, she was considerably older than most of the employees and often showed a strong maternal side. Many of her team (and several from other departments as well) frequently consulted her on work issues and personal problems too. She enjoyed the informal relationships she had built up but found that the technical aspects of her role were becoming less rewarding.

Don Head, the marketing manager, was considered to be a rather ruthless operator, often undercutting the competition in terms of price, and, on more than one occasion, by circulating false rumors of defects in their products. He deemed himself “a ladies’ man” and was known to flirt with a number of the staff. A case of sexual harassment had been dropped after a 22-year-old secretary had been paid a sizeable sum of money. Gil and the members of the senior management team had been furious but Don had denied any wrongdoing, claiming that she had “led him on.” Don had been at university with Gil and they spent many hours after work at a pub around the corner from the factory. With sales rising year after year, his marketing expertise and cunning were regarded as essential to the company’s continuing growth. He had a department of eight whom he had carefully screened as ambitious self-starters. They were required to set and achieve their own targets, as long as they were “big hairy ambitious goals,” a phrase he had heard at a seminar.

Jason Palu, the production manager, was a soft spoken man who had started as a supervisor and who had quickly worked his way to the top position. He set extremely high standards for the production staff and was considered to be a perfectionist. He was highly regarded by his colleagues for his efficiency and reliability. There were very few occasions when an order could not be fulfilled on time and his goal was zero defects. He tended to be autocratic and some people complained that he never listened to them, allocated work hours that did not suit people, and often required staff to work (paid) overtime on very short notice. When one production worker complained, he tersely remarked that “we have a job to carry out and we just have to get on with it. The company depends on us.”

Heather Berkowitz was the chief webpage designer. She had blue hair, a ring through her nose, and she dressed in exotic clothes that had been sourced from a number of secondhand stores. She seldom arrived at work much before 11 a.m. and often left before 4 p.m. She said she did her best work at home, often at night, so why should she “punch the clock like the drones on the assembly line”? Gil and others had often received e-mails from her that had been sent at all hours of the night. She had established a reputation as a top webpage designer, and although her physical appearance did not go down too well with some of the company’s clients (or staff) the quality and quantity of her work was extremely high.

On Tuesdays at 9 a.m. the senior staff met to discuss weekly plans and any significant issues that had arisen. All employees were invited to the meeting, and some accepted this opportunity to attend. Gil trusted all staff to keep confidential matters within the company. He believed that if the organization shared information with employees they would be more likely to support management decisions. The meetings lacked formality and usually started with some jokes, usually at the expense of some members of staff. By and large the jokes were meant to be inoffensive, but were not always taken that way. Nicknames were often assigned to staff, mostly by Don Head, some quite derogatory. You were thought to be a “wet blanket” if you objected. Don seemed oblivious to the unflattering nickname he had been given, preferring to call himself Braveheart, sometimes even signing memos in this fashion.

Although employment agreements referred to a 40-hour week there was an expectation that staff would put in substantially more than that. Only the assembly line workers had to clock in and out, but this, Jason had explained, was due to the overtime that assembly staff were required to work to meet deadlines. The overtime pay was welcomed by some production staff and resented by some employees in other departments who believed they should be entitled to the same benefits. Recently a conflict had arisen between Jason and Don. The company had been developing for some time a top-of-the-range laptop which was scheduled for launching in two weeks’ time. Jason had been urging senior management to delay the introduction of the new X-MH until some glitches had been sorted out. A batch of chips acquired from abroad had contained some defective features. Jason wanted to postpone the new model until these problems had been completely sorted out, a process which he believed would take another month. Don found this to be unacceptable.

A former New Zealand rugby team (All Blacks) captain had been contracted to attend the launch and market the new model on a roadshow that would travel to New Zealand and Australia’s main cities. He would not be available at the time Jason was prepared to release the X-MH. At a heated staff meeting, some of the senior staff backed Don, while others agreed with Jason. Don had urged all of his department to attend the meeting, to present a united front and convey an image of power.

Heather Berkowitz had arrived halfway through the meeting and with a mouthful of muffin proclaimed that there was no rush to get out the “new toy.” The company had plenty of other issues to which it could devote its energy. She said she had met the head of information technology of a chain of fast-food restaurants that wanted to revitalize its website. She maintained she needed three extra staff to get this up and running. She left the meeting five minutes later. Don was fuming at the interruption and demanded that Gil should stick to the original launch date of the X-MH. Gil calmly replied that he understood Don’s frustration but that more consultation was necessary. He said that it would be discussed by the parties concerned during the week and a final decision would be made at the following Tuesday’s staff meeting. Don spent the rest of the day lobbying other members of the senior staff. He offered Dorothy the use of his beach cottage if she backed him and promised to support her on the acquisition of expensive new accounting software. She just laughed and said that she was convinced the senior management team would approve the new software. She also informed Don that a member of her staff had seen one of his sales representatives entering a strip joint the previous week at a time when the sales force had been engaged in a staff meeting.

Other problems had arisen in recent months. Ramesh Patel, the newly recruited head of e-business applications had, with help from a personal contact, developed a software program that would help hotels and restaurants source products and services over the Internet. It was beginning to generate useful revenue. His contact had now billed X-Stream for $25,000 in consultancy fees and development costs. Ramesh claimed that his contact had owed him a favor and that no mention of money had ever been made. X-Stream had referred the matter to its legal counsel. Les Kong, the research and development manager (hardware), had complained to Gil that he could no longer work under Jason Palu. While he considered him a very pleasant man, and a very capable production manager, he could no longer tolerate his strict control style. “You can’t do creative work on command!” was his lament. He loved his job and had spent hours over several weekends developing and refining a new product. There was considerable resentment from Jason and Don about the resources that had been invested in the software division, partly because they did not see the need for the company to diversify and partly because they claimed that money was being diverted from their departments to fund the new ventures.

Ramesh claimed that “a good e-business starts at home—we should open up all our procurement via the Internet.” His suggestion did not go down well with Jason and Don. Gil had been pondering the structure of X-Stream for some time. The old functional structure no longer seemed appropriate. “Silo” mentality and departmental interests seemed to predominate and turf wars took place. The company had grown to 64 staff in New Zealand and 8 in Australia. The ongoing development of new hardware and the introduction of the software side of the business had made management tasks somewhat complicated. He missed the old days when he knew every member of staff. The informal decision-making that was characteristic of the business might have to give way to more formal processes. Yet he did not want to lose the creativity that underpinned its success. Despite the open invitation to attend the management meetings, many staff complained that they never knew what was going on. He expected all senior managers to keep their departmental staff informed of developments. Some had done this admirably, while others had virtually ignored his wishes.

A human resources manager, Alkina Bennelong, had been appointed a month previously and reported to Denise Commins. She had been reviewing the company’s loosely worded job descriptions and person specifications and the recruitment and selection systems and had suggested more professional but more elaborate approaches. She had also suggested the introduction of a performance management system, including feedback from peers, direct reports and outsiders, such as suppliers and customers. “Over my dead body!” was the retort of Don Head. “How can you allow subordinates to tell you how to do your job?” queried Jason Palu. “Can’t see what the fuss is all about,” said Heather Berkowitz. “Everybody keeps telling me what to do anyway, even though they don’t understand the first thing about my job! But it doesn’t worry me.”

Discuss, and examine the implications of the following questions:

• What is your diagnosis of the situation in the company and the accounting department? Use 4 theories from chapters 1-4 in the textbook to diagnose the situation.
• What interventions would you recommend and why?
• For your preferred intervention, develop an action plan

Reference to Organizational Behavior By Mcshane 7th edition and other 3 scholarly references

Required questions should serve as headings. This paper will contain a minimum of four scholarly sources, one reference may be the textbook. 

-12-point Font; New Times Roman; Double Spaced; 1” Margins

-APA Format with regard to citations; Reference page required. APA Running Head or Abstract are not required. 

-Development of Main Points – Quality of Writing 

5 pages including reference page, use (MS Word)