Case 3: The Grayson Chemical Company
The Grayson Chemical Co. manufactured industrial chemicals for sale to other industrial companies. The company was about 40 years old and had been run by a stable management under only two presidents. Within the past few years, however, declining earnings and sales had brought pressure from the board of directors, investment bankers, and stockholder groups to name a new president. The company had grown increasingly stagnant – although at Grayson they refer to it as conservative – and had steadily lost market standing and profitability. Finally, the board decided to go outside the company to find a new CEO and was able to recruit a dynamic manager from another major corporation, Tom Baker. Baker is 47, an MBA, and had helped build his prior company into a leadership position. However, when another executive was chosen for the top job, Baker decided to accept the position with Grayson.
Baker was clear about what he needed to do. He knew that he needed to develop a top management team that could provide the leadership to turn the company around. Unfortunately, the situation at Grayson was not very favorable.
Decisions were made by the book, or taken to the next higher level. Things were done because “they have always been done this way,” and incompetent managers were often promoted to high-level jobs.
In a meeting with three members of the board, Robert Temple (chairman), James Allen, and Hartley Ashford, each had a different bit of advice to offer.
Robert Temple said: “Look, Tom, you can’t just get rid of the old organization if you want to maintain any semblance of morale. Your existing people are all fairly competent technically, but it’s up to you to develop performance goals and motivate them to achieve these standards. Make it clear that achievement will be rewarded and that those who can’t hack it will have to go.”
James Allen, puffing on his pipe, noted: “Let’s face it, Tom, you...
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