Megan looked forward to her new lifestyle: being CEO of a 3,500-member organization, called CAR, operating in the car industry in Dearborn, Michigan, was a job that exceeded her life expectations. It was a dream job and paid really well. She enjoyed the accoutrements of being a CEO: the first-class flights, the beautiful loft apartment, the chauffeur-driven limousine were all things that she came to enjoy. The job offered more than that, for it gave her the creative freedom to direct a large and, she thought, well-managed company. However, after a couple of months she noticed that beneath the seemingly pleasant surface of the new job and people perhaps something was not quite right. The latest figures from the sales staff were disappointing. More worryingly, a major and long-term partner, one who used to make up about 20% of the turnover of CAR, had swapped to one of CAR’s main competitors. And this was something that had happened in Megan’s first week in her new job that she felt she had never really recovered from – even though it could not have been her responsibility.
What was going on? Meg took a cold, hard look at CAR; she looked beyond the hype which had intoxicated her when she was first headhunted for and then accepted the position. Why was it that none of the past three CEOs had stayed for longer than twelve months? In fact, Bob, the last CEO, told Meg that he tried to initiate changes but found it too hard to drive through the changes that he wanted to achieve. The basic problem was one of costs and profits. The environment around CAR had become pretty rough in the last couple of years. New competitors had popped up from China (a region that used to be no threat at all because of strict import regulations – but these had disappeared eighteen months ago). These competitors were offering similar products, at a much better price, and CAR was wondering how they managed to do so. It was not just a question of cheaper labor costs: CAR’s products were not that labor intensive and labor costs did not amount to much more than 10% of factor input costs. In the old days, CAR was supplying technical parts to over four different car brands in the USA, including Ford and Chrysler. CAR incrementally developed new technologies and the car manufacturers bought it. Period.
With the entrance of competitors, things changed dramatically. Even long-term clients stressed that they were looking globally for the best price/value package: they expected rapid changes in product style and function such that the lifetime cycle of the product was reduced. The old tried and tested certainties of CAR’s business model seemed to be somewhat out of date, as CAR’s clients expected innovative products to be able to offer something new. In this new, tough world, CAR did not really sit comfortably. What should it stand for? Where should it go? Should it strive to be a mass producer of cheap parts or a niche provider of innovative high-tech products?
Meg was called to attention by Anne entering her office and she turned to focus on the immediate context. Anne was formally Meg’s personal assistant, but in reality she was much more: Meg trusted her a lot since they had known each other and worked together for ages, before she came to CAR, in fact. Anne was bringing her the latest range of analysts’ reports that had downgraded their stock values yet again. This was not looking good – but who could she turn to discuss the problems? At CAR, Meg found it hard to make friends: most of the senior executives were male and Meg felt that it was not easy for them to accept her as their boss. Meg could feel in meetings and in less formal situations that both senior members as well as most of the other organizational members
did not really trust her. In fact, turnover of staff had increased by around 30% in the last three years at CAR. A lot of talented young engineers had gone elsewhere and some of the older staff had left as well, many going into retirement. Even more problematic, it was hard for CAR to get good people from top universities, since they did not have the reputation of a “funky” or “creative” organization. Also, business partners did not perceive CAR as first choice when it came to collaborating on a new concept for a product. Put simply, CAR was rapidly losing its knowledge base.
A recent report from a consulting company had identified the relatively high turnover of staff and the lack of motivation of the workforce as key problems. CAR depended heavily on product innovation in order to remain a profitable company. In the last two years, however, the R&D department had not come up with more than a handful of ideas, all of which had run into problems during the implementation process.
Meg thought that these problems must be related: the falling stock values, the innovation failures, the problems in attracting and retaining the right people. Somehow, she thought, it must be possible for CAR to recover its know-how leadership in its industry. Like a puzzle, it was hard to see how everything fitted together. Meg’s puzzle parts were as follows. Her gut feeling told her that she could not break the ice between her and her employees without formulating a strong, empowering vision which offered everybody buy-in. People did not feel comfortable with the challenges that the environment was presenting, and they did not know how to manage them well. Of course, such anxieties and discomfort were not a good starting point for creativity and innovation. But she also realized that she needed good people who were able to explore and exploit new ideas, and translate innovation into tangible competitive advantage, and it was not clear that these people were to be found in-house. Finally, Meg saw the global market as the ultimate challenge for CAR: instead of being tied to US manufacturers, she envisioned Europe, Asia, South America, and even Africa as future growth markets. But how was she to bring about all these changes?