Since 1991, you have been the chief executive officer of Specialty Components Ltd (SCL), a very successful company. The company has developed a strong market position in the development, manufacturing and sale of specialty components for the electronics industry, growing rapidly on account of a good reputation in technical and after-sales service.
Rapid growth has meant that human-resources systems have lagged behind. Human-resources matters are handled by the administration and finance manager. Employees are subject to a confidentiality agreement. There have been cases of appointments being made on the grounds of technical skills without serious consideration of the person’s ability to fit into the existing team. In general, SCL’s work environment is one that supports teamwork and trust. Morale is good.
The recruitment policy is first to seek appointments from within the company at all levels below senior management. Michael Bray was externally recruited and appointed as manager of sales and marketing three months ago. He replaced Peter Brook who was paid out in a negotiated settlement in acrimonious circumstances after his continued dissent and thinly disguised attempts to undermine your success.
Ivan Bates, assistant manager of sales, has given two months notice of resignation. He intends to expand his experience overseas. Internal recruitment policy brought forward a number of applicants including Paul Jones, Tom Apelt and Judy Dent. Dent is a long-serving employee (since 1976) who has been a close friend and associate of Peter Brook. She was ineffective as assistant manager of marketing and has been counselled for unconstructive criticism.
Management took the opportunity to appoint her as sales superintendent as part of a company reorganisation 12 months before. She is described as “extroverted, sociable, a good sports person and has a tendency to old soldier younger staff”.
Brook joined in 1975, and was considered to be a good team leader only for his own team and not supportive of the company’s directions. He has a reputation for disloyalty, even suggesting at a trade fair that one of SCL’s products was poor and over-priced, for which he was reprimanded. He also has a record of abuse of entertainment expenses, for disrupting the harmony of the company, and for undermining the authority of the chief executive. It was decided to terminate his employment as soon as possible.
Jones joined in 1991 and is considered to be a performer with vision and initiative, highly motivated, reliable and trustworthy. However, he has a tendency to make black-and-white judgments. Tom Apelt is considered to be a natural talent in sales: reliable and open, and extroverted.
Jones has just told you, the chief executive, that this morning he overheard a telephone conversation between Dent and a person he believed to be Brook in which confidential and commercially sensitive information about the new XIA and Zigfit product development had been given. XIA and Zigfit are strategically important to the company’s future. Patent attorneys have been commissioned to submit SCL’s application for patent. It is pending, and approval is expected within three months.
You expect the ramifications of the product in the market to be extensive, and you believe that it must be kept secret as a source of competitive advantage. “Crikey,” you say, “if our competitors get to know about this, it will seriously undermine any market advantage we can expect from it, and our future financial performance could be jeopardised.”
There is little doubt that a conversation occurred: an MIS Telephone printout on Dent’s phone shows an out-going call at 9:02am for four minutes to telephone number 2334X9A1. This number is listed as Direct Electronics, a competitor to SCL. Brook is now a sales representative for that company.
As chief executive you must make a decision regarding an implementation plan and to write a brief confidential report to the board chairman informing him/her of your intentions before carrying out your decisions and giving reasons for decisions made.
Statement from Paul Jones:
About 9.00am, while at the fax machine, which is outside Judy Dent’s office, I overheard a telephone conversation between Judy and a person I believed to be Peter Brook.
The conversation went something like this:
“Hi Brookie, Judy here. Thought I would give you a ring to catch up on events. How was the holiday?”
“Things haven’t changed. Still the same old drivel from Benson.”
“I’ve applied for Bates’s job. Yes, off overseas … I should be a shoo-in with my experience and knowledge. But that slime Jones is sucking up to the bosses again.”
“Well, yeah, it is confidential; but we’ve got a pretty hot item on the go. The R&D guys have made a bit of a coup on the XIA.
“It’s a globular high-tensile dunk using Zigfit, would you believe. We’ll blow the rest out of the water with it. No, it’s too early to say what the price might be, but it is going to be cheap and good.”
“Sure, I’ll keep you posted.”
“Give’em heaps. Bye.”
When the fax I was waiting for came through, I went back to my office. I thought about the edge we would lose by such an unauthorised disclosure, and decided to report to the chief executive straight away.
Statement from Judy Dent
Yes, I made a telephone call this morning to Peter Brook during my morning tea break.
The purpose of the call was personal he is still a friend and I sought his advice on making an application for Ivan Bates’s job, especially on what I should include.
Statement From Peter Brook
In a telephone interview, when asked if he had had a telephone conversation with Dent at the time in question and, if so, had it concerned company business, Brook replied: “Yes, Judy called me. The matter was personal, and it has nothing to do with you”.
Brook then abruptly terminated the call. The call was made by Michael Bray.
Proposed solution #1
Russell Buglar is the North Queensland Manager of Toyota Finance Australia and has been involved in management for the past 12 years. He is enrolled in the Australian Competent Manager Program run jointly by AIM and Deakin University.
Report to board chairman
Promotion of Tom Apelt to the position of assistant manager of sales, succeeding Ivan Bates who is expanding his experience with an overseas posting.
Apelt has distanced himself from the controversy surrounding the departure of Peter Brook and does not seem to have any problems with either of the other two protagonists, Paul Jones or Judy Dent.
He has been employed by SCL for longer than Paul Jones and has held the position of sales superintendent longer than Judy Dent.
Given that Jones, Dent and Apelt all applied for this position, the best possible outcome will still result in at least two candidates being unsuccessful.
The sworn statements of Jones and Dent present different scenarios on the acknowledged conversation that took place between Dent and former staff member Brook. The only reasonable conclusion that may be drawn from these statements is that one or other of the deponents falsified their statements. Jones possibly acted to discredit Dent and render her ineligible for consideration for the position. Dent possibly was motivated by a desire to make it look as though Jones was exaggerating the relationship between Dent and Brook to further his own claims to the position.
To take the side of either Jones or Dent is to risk rupturing the fabric of trust that binds employees together, because the perception will exist that either or both of the employees in question have “won” or “lost”.
The solution is to appoint Paul Jones to a newly created position of human resources manager reporting directly to the chief executive. The failure of the administration and finance department to handle human-resources issues has been amply demonstrated by the problems faced with Brook. The disciplinary meetings with Brook were allowed to continue far too long after evidence of unsatisfactory and unacceptable conduct first came to light. Brook’s transgressions were allowed to continue longer than would be considered healthy or productive by an organisation with clearly defined human-resources policies.
Jones is known to have aspirations and ability for higher appointments, and this promotion may give him the opportunity to utilise his further education. Additionally, this role, not being sales based, may provide increased time to attend to night classes in order to complete the degree.
Dent has been in the sales role for the shortest time of the three, having been re-appointed 12 months ago. Dent retains a close friendship with Brook, which may be undesirable. She will need to be advised that she has now renewed her position of trust, requiring her to sign anew the SCL confidentiality agreement.
Proposed solution #2
Christine Fitzherbert is director of the Human Resource Management Group at RMIT University in Melbourne, and has wide experience in human resources and related fields
To achieve the best solution for SCL, given the needs of the company and, in particular, the need to recruit according to our organisational capability, I propose to implement the following strategy to deal with the problems highlighted through this incident.
The internal applicants for position of assistant manager of sales should be counselled.
Because the potential for continuing conflict is significant, it is proposed to override company policy and advertise externally to fill this position.
Each applicant should be informed of this decision. Paul Jones and Judy Dent will be informed that their recent conflict has emphasised the need to consider external applicants.
Dent should be asked if she provided Brook with commercially sensitive information. If the answer is yes, immediate disciplinary action is necessary. If she denies the allegation, her word must be accepted; but she must be advised that a contrary statement has been made. She will need to be counselled about contacting Brook, and made aware of the consequences should any information be provided to any competitor whatsoever.
Both Dent and Jones must be advised that difficulties would arise if either were successful in the appointment, there being considerable potential for conflict within the reporting relationship.
All internal applicants are to be strongly reminded of their employment confidentiality agreements.
I propose that SCL appoint an external recruitment consultant and advertise the position and fill it as soon as possible. As an opportunity for development and interview experience, the current applicants may be short-listed for interview if they meet the key selection criteria for the position
It is clear that to further its strategic directions, SCL will need to be more focused on human-resources procedures and systems that keep pace with product and market growth.
It would be wise to conduct an external review of SCL human-resources systems, policies and procedures so that they may be in alignment with the company’s strategic directions. This review should evaluate the effectiveness of the company’s recruitment and selection processes.
The company’s organisational capabilities need to be identified and developed in order to inform continuing skills needs.
It is recommended that you endorse the actions proposed in the implementation plan and that you consider the issues raised in this report.
Proposed solution #3
Tim Hantke is the Chief Executive Officer of Snap Franchising, one of Australia’s leading franchise groups. He has a long-term relationship with AIM, having been president of the WA Division.
I wish to share my thoughts with respect to the release to the market of our XIA Product. This breakthrough will give us a significant competitive advantage for at least two years.
The next three months is a very vulnerable time for the company, as it is expected that it will take this time to gain vital patent approvals. Such approval is a necessary prerequisite to an effective product release.
Other areas of vulnerability are those of organisational change in the sales department and a reported leakage of information about the XIA product.
You will be aware that in the time since our decision to move Peter Brook out of the company and replace him with an external appointment, Michael Bray, the assistant manager, Ivan Bates, has decided to leave in two months and expand his experience overseas.
The three regional sales superintendents, Paul Jones, Tom Apelt and Judy Dent, have all applied to fill the position. There is an understandable degree of competitiveness among them.
Recently I received a note from Jones claiming that he had overheard a phone conversation between Dent and most likely Brook (who is now a sales representative for a competitor, Direct Electronics). If the report is accurate, Dent has revealed confidential elements of our new product. Dent and Brook have confirmed that a conversation took place, but say it was of a personal nature. I would need legal advice before pursuing this matter and I feel it could cause greater problems in our three-month patent time frame.
My recommendations on this issue follow.
We must push hard to gain patent approvals as soon as possible. Security must be increased with respect to the XIA product. All planning for the launching of the product should be undertaken by Michael Bray and me.
We ought not to appoint a replacement for Bates until after receipt of the patent and until some upgraded human-resources procedures are implemented.
We must set specific goals and targets for the three applicants for the role of assistant manager of sales. We can use as criteria in making the appointment previous success in such areas as teamwork and confidentiality
All activities by Bates, Jones, Apelt and Dent should be focused on our existing product range and not on the XIA product.
The need for overall confidentiality by all staff must be reinforced, with specific instructions for there to be no contact with competitors.
We should appoint suitably qualified human-resources consultants to undertake an exercise to establish the underlying corporate cultures for SCL and specific competencies for the role of assistant sales manager. Competencies for other roles can be developed in the future. The use of such measures will give us objective techniques for selecting staff with relevant competencies, and inherent organisational values that will provide a more cohesive organisation. Testing for these elements can be outsourced.
The above actions are designed to maximise the successful launching of the XIA product while providing a more objective and competent organisation for the long term.
Any precipitous action against Dent could seriously undermine our competitive advantage and cause further staff instability, and might even result in unproductive legal action.