knowledge, but also a comprehensive understanding of the business environment. These cases test the student’s reasoning and comprehension skills.
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Caselet 1
South Indian Technologies had been the largest computer manufacturing company in the country for almost 15 years. Its collapse in a short span of time came as a jolt to the nation’s computer industry. Though the company had not been performing up to the mark for the last couple of years, no one quite expected such a downfall. The co-founder of the company and its Managing Director, Anil Karthikeyan (Karthikeyan), stated off the record that the company’s inability to change its organizational culture was the main reason behind the debacle.
Dr. Krishna Murthy (Murthy), a well-known personality in the Indian PC market, established South Indian Technologies. An engineer by profession, Murthy had gained 20 years of industry experience, working for numerous players in the PC market. His flair for innovation and creativity helped him to become one of the most highly paid professionals in the field. Murthy then decided to start up his own computer manufacturing company with the help of his friend, Karthikeyan. Karthikeyan too was an engineer by profession. However, while Murthy was of the opinion that innovation and creativity must be given the highest criteria, Karthikeyan was more inclined towards making profits.
Murthy upheld the core values of innovation and creativity and believed that these values would guide the organization towards the accomplishment of its goals.
Employees received encouragement and generous support from the management and their creative talents were nurtured. Every employee at the company was given an equal opportunity to innovate and each of their ideas were given serious consideration by the management. Most of the revenue generated by the company was invested in developing new products. With the passage of time, the core values of the company were absorbed by every member of the organization. This stimulating work culture led South Indian Technologies to become the country’s largest computer manufacturing firm and it stayed so for 15 years.
However, the focus on development of employees caused the management to ignore the changes in the external environment. The markets were changing and so were the needs of the customers. South Indian Technologies failed to positively adapt itself to these changes. It continued to invest heavily in the development of new products, which unfortunately failed to attract customers. It encouraged internal competition and kept investing in employee projects without analyzing the competitiveness of the end product. This resulted in a colossal wastage of investment, as many of the products did not gain market acceptance. The profits generated by a few successful products were disproportionate to the investments made in developing newer ones.
Karthikeyan tried his best to convince Murthy about the wastage of financial resources and the dire necessity of changing this attitude towards investment, in order to survive. However, the past success of the company blinded Murthy and he was convinced that the existing culture was the right recipe for success. Even the warnings of the company’s business managers that it was essential to develop financially successful products failed to convince Murthy and his followers. They were totally against changing the organization culture. In fact, the managers who suggested change were shown the way out. Some of the employees did feel the necessity to change.
However they lacked the willingness to change and ignored every signal that indicated the need for change.
Karthikeyan made his last attempt to help the company remain dynamic and respond to external market conditions. He prepared a systematic approach to change the
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organization culture. This was also rejected vehemently by Murthy and his followers.
South Indian Technologies could not strike the right balance between being innovative and being economically successful. It could not make the right cultural transition at the right time and finally fell victim to, what Karthikeyan termed “the cultural trap.” That marked the end of business for a company that had almost ruled the industry for 15 years.
Questions for Discussion:
1. The organizational culture at South Indian Technologies had become a handicap to the growth of the company. Discuss the effect of a static organizational culture on a company’s development.
2. An organization’s culture is, to a great extent, influenced by the values of its founders. Discuss Murthy’s role in shaping the basic organizational culture at South Indian Technologies. Also discuss the role he should have played in changing the organizational culture of South Indian Technologies.
Caselet 2
The recent collapse of Cosmo Energy Services Ltd. (Cosmo), one of the nation’s leading energy producers, led the Ministry of Power to set up a panel, headed by
Nirmal Mehta (Mehta), the Minister of State for Power, to probe the company’s functioning. Besides producing and marketing electricity and natural gas, Cosmo also marketed several commodities such as coal, plastics, paper and metal. The company also had interests in the field of financial and risk management services in the country.
Its customers belonged to the commercial and the industrial sectors. The company experienced a constant growth since its inception in the early 1980s and became the market leader. Cosmo was rated as the top company on the innovation front. It was also the first company to adapt to technological development. The company never faced a dearth of financial resources and hired the best talent in the industry. Every employee was given due recognition and was paid a salary commensurate with the profits generated by his/her services. What then, went wrong?
The 300-odd-page report, presented by Mehta, disclosed that ‘ethical deficit’ was the culprit. The company had failed miserably on the socio-spiritual aspect as well. Not only had the senior management been unethical in its business dealings but it had also failed to maintain a relationship of trust and openness with the employees. The report revealed that the organizational culture at Cosmo Energy Services Ltd. was prone to corruption, greed and deception. Interestingly, the report noted that the founders of Cosmo upheld the values of integrity, honesty and sincerity in all their dealings and treated every individual with respect. The founders also believed in having open channels of communication at all levels of the organization. Cosmo supposedly upheld a vision of establishing a work environment that penalized corruption and encouraged employees to report any violation of this policy. However, within a period of 20 years, Cosmo had deviated from its core values.
The CEO of the company was affluent and influential and had immense political support. The report provided evidence that the CEO had influenced the power policy framed by the previous government. Cosmo was backed by political support that quelled whatever doubts about its integrity and credibility were raised in public.
The management was involved in illegal activities like fraud and insider trading. The top management satisfied their own interests at the expense of the company’s shareholders. The Chief Financial Officer, Raj Agarwal, manipulated the financial statements to inflate the company’s profits, during its last financial year. A report submitted by an independent consulting firm rated the company high in terms of its financial performance and recommended investments in the company. This misled the general public and the company’s competitors. It was reported that these consultants were also paid immensely to manipulate the accounts of the company and overstate its earnings.
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Besides, Cosmo’s senior management did not have open channels of communication with the employees. Any opposition to the decisions of the top management was ignored or brushed aside. An atmosphere of mistrust and suspicion prevailed throughout the organization. The panel’s report also revealed that while top executives were earning in millions, lower level employees were losing their pensions and jobs.
This was because the employees’ money was invested in their own company’s stock which had plummeted so low that it never recovered.
The probe panel concluded that the toxic culture at Cosmo Energy Services Ltd. had led to its collapse and that the people who had to bear the brunt of this were its own employees and the general public who had invested money in it. Cosmo thus stands as an example of corporate failure to develop a strong and ethical culture.
Questions for Discussion:
1. Explain the importance of ethics in sustaining a strong organizational culture, using Cosmo Energy Services Ltd. as an example.
2. Cosmo Energy Services Ltd. had adequate financial and technological backup.
Despite acquiring the best talent in the industry, it failed to develop its soci0-spiritual capital. Discuss how the effective management of this factor would have prevented the company’s downfall.
Caselet 3
We Care, one of the leading manufacturers of health care products in the country, has to its credit a list of 56 healthcare products in the consumer and pharmaceutical market. Its products cover a range of health care areas like infant care, child care, women’s care, toiletries, skin care, etc. Ravi Chandran (Chandran) and Srikanth Verma (Verma) had founded. We Care eighteen years ago and serve as CEO and the Managing Director respectively.
Chandran fondly recollected that We Care was established with a vision of becoming a globally acknowledged health care organization, propelled by constant innovation and development. It aimed to achieve this by attracting and retaining the right talent and focus on product innovation and people development. We Care believed that a global presence could be sustained by being sensitive to the ever changing needs of its customers. The core values of the company include manufacturing high quality products, continuous employee development, and respect for every individual within the organizational framework. While emphasizing high quality performance by employees, the company initiated a variety of people-oriented activities to motivate employees to perform better. The most striking among these initiatives is the involvement and participation of employees in modification and betterment of existing practices in the organization. The organization has an open feedback system.
Employees are invited to give their opinions on any issue relating to organizational processes. The feedback, based on various parameters, is used by the company to rate its overall performance. These ratings reflect employee perception on a variety of factors like organizational processes, policies, procedures, quality of work life and, the managerial decision making abilities and its effectiveness. The top management proposed to use this feedback to decide on future courses of action required for better organizational performance. These attempts to generate customer delight and at the same time being sensitive to the needs of employees have resulted in the exceptional performance of We Care in the highly competitive healthcare industry.
However, the analysis of the recent annual feedback conducted in the company caused serious concern to Chandran and Verma. Analysis of the feedback highlighted that the company was rated very low on innovation. It was realized that the R&D department was not coming up with new ideas of product development or any revolutionary concepts in the area of healthcare. Chandran called for an immediate meeting of the top management to identify the cause and come up with possible solutions to the
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problem. Verma suggested that Amit Das Gupta (Gupta), a newly appointed marketing manager, also be invited to attend the meeting. Gupta, a relatively less-experienced but creative individual, was middle level manager at one of the important branches in the country.
“Gupta is a management graduate from a premier business school and has proved to be a prudent problem solver. I’m sure that despite the little exposure that he has, he can come up with bright ideas to solve the problem on hand,” said Verma.
Chandran agreed, though he was not quite convinced. The meeting was attended by the Marketing Head, the Personnel Manager, the Head of the R&D department, the Financial Advisor and the new marketing manager, Gupta.
“The agenda of the meeting is to share the results of the recent annual feedback. The analysis of feedback has highlighted the potential strengths of the company in terms of providing excellent quality of work life. However, there are other crucial areas where our company seems to be lagging,” said Chandran.
Verma added, “Employees have rated the company low on the innovation front.”
“It is very sad to note that the number of patents we had applied for during the last year is considerably lower than that of the previous years. The importance of creativity and innovation for survival in this industry cannot be undermined. Our dismal performance in this crucial aspect may simply put us out of business,”
continued Chandran.
The members present were then asked to give their suggestions.
“Pay them more,” was the suggestion of the Personnel Manager. This invited opposition from the Financial Advisor. Heated arguments were about to begin.
However they were interrupted by Gupta, who suggested that a high level committee be formed to study consumer behavior, to better understand the market and to find out how effectively the company was serving the market.
Gupta said, “The committee will focus on exploring the expectations of target customers and how responsive the company can be to their changing needs.” All the members agreed to this suggestion and a small committee, headed by Gupta, was formed. In two months time, the committee reported the findings of its study and briefed the R&D team on the customer expectations. Chandran and Verma held another meeting with the Personnel and the R&D Heads. The outcome of this meeting was discussed during a general meeting with the members of the R&D team.
Chandran made it clear that the management was willing to enhance the R&D spend the following year. This was meant to encourage innovation among the members of the organization. The management promised a culture that would encourage employees to come out with their ideas, however weird or absurd they might seem initially. This decision of the company helped employees present their opinions without any inhibitions. Thus We Care introduced a culture that fostered creativity among its employees. It also decided to reward employees whose ideas would bring in considerable revenues for the company.
Within a year, the company had more than one reason to celebrate. We Care was rated No.5 in the ‘Best Companies to Work For’ survey conducted by a well-regarded consultancy in association with a reputed business magazine. Besides the company saw its profits shoot up by 25% as compared to an 8% increase in the previous year.
Questions for Discussion:
1. Discuss the importance of innovation as a characteristic of organizational culture.
Also discuss how the organizational culture at We Care helped foster innovation among its employees.
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2. “Organizational culture, to a great extent, is influenced by the founding fathers of the organization.” Taking the example of We Care, discuss how the culture of an organization is influenced by its founders.
Caselet 4
The new CEO of Symphony Technologies (Symphony), Anish Vaidya (Vaidya), found himself confronted with the most challenging phase of his 26-year-old career in the industry. The liberalization of the Indian economy and the resultant increase in competition from foreign companies had hit the company’s sales and revenue badly.
The early 1990s saw Symphony’s profits plummeting to an all-time low since its establishment about three decades earlier.
Established in 1956, Symphony began as a manufacturer of a variety of electrical appliances, and gradually spread its operations into various other industries such as consumer products, power generation, automobiles and insurance. Within four decades, it grew to become a global company serving customers across the world.
In his first meeting as CEO of the company, Vaidya invited employees from the middle and top management level to pool their ideas to address a comprehensive list of problems faced by the organization. The meeting brought to the forefront the following areas of concern:
• The bureaucratic and hierarchical structure of the organization was stifling the creativity of its employees as a result of which they were no longer motivated to come up with ideas pertaining to new products or improvements in the existing organizational practices.
• Competition from multinational companies was eating into Symphony’s market share as the technology of these companies was far better than that of Symphony.
• Symphony’s very survival was at stake as most of its subsidiaries were facing serious financial crises and increasing losses.
• The productivity of these subsidiaries was disproportionate to the number of employees they had.
• The inability of Symphony’s generic products to effectively penetrate the highly competitive market eventually resulted in blocking capital.
• Most important of all, Symphony failed to adapt to the changes in the external environment. Because of this, it not only lost market leadership in various sectors, but also failed to maintain a decent market share in the industry.
Realizing that change management was lacking in the organization, Vaidya, in consultation with his team members introduced the following measures to pull Symphony out of a probable debacle:
• Areas with new and substantial market potential were explored and strategies to implement them were developed.
• Vaidya endeavored to change the bureaucratic style of management in the organization to enable easier and faster decision making. This resulted in the formation of a lean and effective organizational structure and helped enhance employee participation, and thereby improve employee productivity.
• All the subsidiaries and business units that were making losses were shut down so that the company could compete only in those areas in which it had proved and tested competence. This helped it tap the capital that was being invested in units that were not productive.
• Vaidya also took the difficult decision of cutting down on excess staff, with a view to cutting down on operational costs. Excess but efficient staff were retrained and deployed suitably.
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• Employees at Symphony were asked to undergo numerous training programs at regular intervals to remain updated with the latest developments in the external environment, so that they could adapt to technological changes and remain competitive.
Initially, there was stiff resistance in the company to the tough measures taken by the new CEO. However, Vaidya was able to gradually persuade the employees to accept the changes and within a short period of time, a sea change was noticed in the organizational processes. These revolutionary changes brought about a dramatic rise in Symphony’s profits, and soon, Vaidya’s bold decisions made Symphony a market leader in various fields of business.
Questions for Discussion:
1. Taking the example of Symphony Technologies, describe the importance of change management in organizations.
2. Briefly outline the role played by the management and employees in bringing
2. Briefly outline the role played by the management and employees in bringing