I. Executive Summary
A year after starting up, excellent and complete facilities drove sustained new-member gains at Workout World (WW). However, the organization had effectively become decentralized with four independently-run service groups seemingly inclined to operate as they please. Worse, service gaps had opened in point of adherence to operating hours while maintenance and cleaning were given short shift. The four service groups openly competed with one another in service offerings, pricing and membership marketing.
Confronting the prospect of patron dissatisfaction, General Manager Peter Watson worried that he had lost control of service operators protected by ten-year contracts.
On analyzing the situation and applying tenets of Organizational Behaviour, Ann needed to make Peter Watson realize that he had a five-point program to implement:
A. Accommodate some inter-group rivalry and conflict as a healthy sign of success-driven employees.
B. Intervene with more assertive leadership to turn the situation around immediately. As it turns out, employee-oriented, transformational and charismatic leadership such as he is known for may be exactly what will be effective in this situation.
C. Motivate cooperation with a clarion call to service excellence, managing change as a process of continual improvement, and offering appropriate incentives.
D. Formally recognise the stake the local government has in WW and reorganise the Board as well as the Table of Organisation.
E. Implement total quality management and team-building .
II. Facts of the Case
The international-class Workout World near Brisbane has comprehensive facilities, enabling management to market WW successfully to both locals and national teams abroad seeking suitable off-season training facilities.
General Manager Peter Watson has a track record of successfully managing and growing at least two other leisure operations before taking the helm at WW.
By virtue of donating part of the land, the local government has a stake in WW. In fact, outsourcing contractors for child care, maintenance and cleaning report to it.
On commencing operations, WW decided to tender out the four “stand-alone” operating units: the accommodation and food-service outlets, the swim centre, sports science and physiotherapy, and health spa, gym and sports centre. These tenders are covered by ten-year contracts with over eight years to run. Management retained responsibility for overall operations, sales and marketing.
Management has taken notice, however, of increasing disarray in the operation of the four units. Beyond apathy about the weekly department meetings, the more worrying signs include a relaxed attitude about operating hours, competing head to head, and launching independent advertising and promotional programs.
III. Analysis
Analysis will rely on understanding the nature of the conflict at WW, the attendant risks, appropriate modes of action and the question of leadership style.
A. The Nature of Conflict in WW
Clearly, there is conflict and it is dysfunctional. The General Manager rightly views inter-group relations as dysfunctional because animosity is present to the extent of invading each other’s turf, offering competing products and services to the detriment of the common goal.
Besides the misgivings of Peter Watson, the existence of conflict is demonstrated by the three dimensions Barki and Hartwick (2001) identified: interdependence, disagreement and interference.
WW management is dependent on the operators to run the services and interact with the members while the service operators formerly relied on the team of Peter Watson for membership marketing. That the operators now augment or override brand campaigns cannot be taken as dissatisfaction with WW management results, which are superlative, but as a sign of inter-service competition.
For now, the first signals of divergent goals vis-à-vis management exists in the form of being casual about observing designated hours and flouting “product” exclusivity and pricing standards.
All these effectively constitute interference with the broader WW goals of consistent imagery, a unified “product” and business revenue. Consequently, Peter Watson feels he really must intervene.
Happily, the nature of the conflict at WW has little to do with being interpersonal or task-based, the first two typologies put forward by Hearn and Anderson (2002). There is no sign of personality conflicts which can prove so intractable. And absent incipient, “benign” neglect of operating hours and giving the maintenance and cleaning crews time to do their jobs, there is no sign either of the “tension that stems from whether or not certain tasks” should be performed.
What prevails at WW is the third typology, “process-based” conflict because there are differences about who should properly do marketing or how such a straightforward responsibility as keeping predictable operating hours should be carried out.
B. Potential Problem Analysis
1. Member Fallout
From the point of view of members and potential WW patrons, there are already ample grounds for customer dissatisfaction. The WW “product” is a combination of modern, comprehensive facilities and service that is up to expected standards. The latter component has already weakened.
The casual attitude of the four service groups about keeping to stated operating hours creates inconvenience and frustration for customers who drive some distance and carve out time from busy academic or professional lives to indulge in leisure and health pursuits. In turn, sloppy timekeeping prevents the maintenance and cleaning staff from doing their jobs.
By themselves, these two observations may seem minor irritants. However, they could also be straws in the wind, harbingers of deepening user dissatisfaction. Unless systematically measured and fed back to the operating groups, more service gaps could yawn wide. Deepening customer dissatisfaction would lead to an erosion of the membership base.
2. Overall Profitability
Neglecting to monitor and address customer dissatisfaction leaves WW vulnerable to revenue leakage out the back door. This obviously defeats the purpose of driving incremental revenue with a branding campaign and other marketing elements.
3. Hierarchy or Turf Battles
There is an even more significant threat to financial viability in the propensity of the four service groups to communicate with members and potential members directly, to embark on competing product offerings, for preferring to play up their own identity rather than WW, and for uncoordinated product and pricing strategy. This is a destructive “I win, you lose” situation, a perfect recipe for more conflict in future.
4. Legal Disputes
Were Peter Watson to take an autocratic approach to resolving conflict and breaking the current impasse, there is the prospect of the service groups resisting vigorously on the grounds that they are protected by long-term contracts anyway. The General Manager evidently does not want the situation to deteriorate to the extent of facing lawsuits.
5. Leadership Drift, Resistance to Change and Potential for More Conflict
Peter Watson recognizes that there are problems but is uncertain that he has the leadership style or authority to reverse the situation.
The central fact of this whole case is that granting the four service operators great autonomy for an extended period proved no hindrance in the beginning. Initially, the operators cooperated well and made good use of the weekly breakfast meetings.
C. Leadership Style and Strategy
Peter Watson wonders how he might exercise leadership within the “constraints” of his charismatic style. There is no question that he must act since successful conflict management is the foundation for more effective teams and organizations (Thomas, 1992).
As to leadership style, a review of the Organizational Behaviour literature does hold out the promise of successful, transaction-based leadership coupled with an appropriate success strategy for the organization.
Managing and leadership are different dimensions of the job. Kotter (1990) asserted that management may be about coping with complexity but leadership grapples with change. By developing a vision for WW and communicating this to all groups, Peter Watson prepares to align everyone behind it and inspire cooperation.
Consequently, one school of thought (Robbins, 2003) puts more weight on “the ability (of a leader) to influence a group toward the achievement of goals.” In the case of WW, the General Manager would exercise leadership by announcing that the status quo is unacceptable, asserting what it should move towards and subsequently inspiring all toward achieving it.
Putting forward the cognitive resource theory, Fielder and Garcia (1987) suggested that a competent but relaxed leader like Peter Watson reaps the most dividends for performance effectiveness when he decides to direct a new vision, set of values, policy or workplace standards. It is also required that he have extensive experience (true in this case) and support, which will doubtless be at a peak when he reorganises WW and can count on the backing of a grateful government representative.
Even better, other evidence (Conger and Kanungo, 1998) suggests that Peter Watson qualifies as a “transformational leader” by virtue of his charisma and the attention he gives individuals on his staff.
A transformational leader such as Andrea Jung at Avon and Richard Branson of the Virgin Group, is important to WW at this juncture. Such a leader is characterised by raising the aspirations of the staff beyond petty group concerns and eliciting acceptance of the WW goal and vision.
A truly charismatic leader (Conger and Kanungo, op cit.) is valued in this situation because he can formulate and articulate an inspiring vision for WW and the corollary goals the staff should work for. In doing so, he imbues the staff with pride and respect.
At the end of the day, the most important facet of the transformational leader is the capacity for showing HOW the vision he paints can be achieved. This, in essence, is what separates successful leaders like Peter Watson from mere visionaries and dreamers.
D. Managing Conflict: A Framework for Action
The question remains: how to act given the affirmation that his leadership style is entirely appropriate and that he should articulate a vision?
In their five-stage view of the conflict process, Robbins & Judge (2005) maintain that one blends assertiveness and cooperation at the third stage of the process, when intentions must be decided. Peter Watson may then opt to go into action in stage four with one of five combinations of those two dimensions: avoiding (unassertive and uncooperative), competing (assertive and uncooperative), accommodating (unassertive and cooperative), compromising (midrange on both assertiveness and cooperativeness), and collaborating (assertive and cooperative).
This presentation recommends the collaboration style because both the General Manager and the service group heads gain “access to (each) other’s perceptions of incompatible goals, thereby enabling them to find a solution that integrates the goals and needs of both parties” (Gross & Guerro, 2000).
E. Motivation
Incentives and material rewards aside, taking a collaborative stance to conflict resolution requires motivating the staff with shared goals and visions. In the case of WW, the common goal is to maximize revenue and profits by gaining new members and satisfying present users to the degree the latter desire.
To those at the forefront of WW service delivery, defining organizational goals in dollars and cents or market share, for instance, may be rather more abstract than a clarion call to evolving into a high-performance team. Given the nature of the business, high performance must be defined in terms of service excellence. The latter has been defined as “…behavioural change in organisations…as much changing hearts and minds as putting the correct processes in place” (Gilthorpe, 2006).
Change in the way WW operates is inevitable but it does seem counterproductive to reverse the situation abruptly, mandated from the top down. Gaining commitment to continual organization improvement and implementing total quality (TQ) management controls could ultimately be more effective. Certainly, change through continuous improvement seems to be particularly well-suited to WW which is already decentralized and ready for participative management.
Having earned the approval of the service groups with attractive goals and empowering them in a total quality management process, the General Manager should then proceed to fashion the third component: a well thought-out scheme of rewards.
F. Structure
In the short term, the General Manager must seriously consider taking back a significant degree of operational control and modifying the structure of WW.
Re-affirming lines of authority and making the service group heads responsible for their actions to the larger organization is essential to optimizing his leadership style for WW. He needs to make it clear that all present practices affecting the WW brand, scope of services, pricing, customer acquisition, retention and satisfaction require his approval, given that he has final say on all matters in the organizational charter. As a concession to consensus, he tables performance and business reviews in the departmental meetings.
This move will be facilitated by precedent: it is simply a return to the procedures that prevailed early on. Taking a collaborative approach will prevent the conflict from deteriorating to the point where the option of cancelling a contract proves attractive.
Of greater impact, obviously, is change in senior management and ownership structure. There is empirical evidence (Rogers, 1998) that, for Australian companies at least, these two factors have had the greatest bearing on bringing about changes in the workplace. In the case of WW, “management restructuring” can take the form of formally recognising the stake the local government has in WW. A “Consultant” position might initially serve to both familiarize the partner with operations and establish a mutually-respectful relationship with Peter Watson. Subsequently, the representative can be invited to take a seat on the board and join operational management of the centre.
This not only gives equity where it is due but, an even more important consideration, also paves the way for re-engineering WW and for adherence to re-strengthened policy.
This transition to a “resolving structure” (Coe, 1997) has the added advantage of avoiding the risk WW will digress to “oscillating” between transient stability and new crises in future.
G. Culture and Change
The crowning touch in the agenda of the General Manager is to ensure that a culture of unity and service excellence takes shape and is sustained through time.
Consistent with his inclination for participative management and the vision of a shared sense of purpose, Peter Watson should initiate a team building programme. Since he is already aware of the problem, as well as the opportunity for better cross-department teamwork, he can immediately proceed to convene internal focus groups that will gather more information and analyse the implications.
At the same, these baseline sessions become the initial workshops for the continuous improvement program. Training even the small number of WW staff this way takes time, patience and resources. But the process itself of training for effective participation can be its own reward. After all, the crux of any quality management program is “a high level of communication and contact…coordination and sequencing…in short, superior work teams” (Kinlaw, 1995). Over time, the department managers and supervisors will take on more responsibility both for team-building and continually working toward the new, shared vision.
IV. Options and Recommendations
A. Opportunities
· Maximally satisfy patrons and preserve customer marketing gains
· Greater revenue sharing
· International prestige
· Higher morale
B. Recomendations
· Articulate organization goal and vision
· Institutionalize collaborative stance with team-building and quality management program
· Reorganize with new role for partner as consultant then Operations.
V. Recap/Presentation Outline
Objectives
Rationale for Action/Operations Review
Potential Problem Analysis
Member dissatisfaction, erosion of user base
Profit and Loss Review
Customer satisfaction feedback
Vision
Consensus-building
New Operating Targets
Centralized brand campaign and member promotions
Service exclusivity
Pricing consistency
Operating hours
Options
Indifference
Autocratic
Supportive/Collaborative
Recommendation
Take supportive/collaborative stance
Team-building
Reinstating Program Reviews
New Consultant
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