The key issues
This case presents a number of issues, which if not well addressed, could negatively affect the Value over Time, VOT of the firm. Harvey Finley desperately needed an employee for his new firm; not just any employee, but one who would have the necessary drive and patience to see the company through great heights.
Cathy Brannen was that type of employee, and exactly what Harvey needed. Cathy accepted to be paid a lower salary than she deserved, hoping that the 2 per cent on sales incentive she had been offered by Harvey would translate into something in the future. Cathy then devoted herself fully to see the company through great success; and indeed it was realized to a great extent. The 2 per cent incentive turned out to be some good money; a good reward for her hard work over the years.
Now Harvey realizes that Cathy earns more than double what the highest paid employee of the firm earns excluding himself. He also realizes that he can hire someone else for Cathy’s services at just $20,000 and not the $127,614 that Cathy earned in the previous year. But then he attributes the firm’s success to Cathy’s efforts and finds her indispensable.
Harvey is torn between two decisions which will greatly affect the organizations VOT. The first one is to harmonize Cathy’s salary with that of the rest of his employees or fire her altogether and replace her with a cheaper employee. The second decision is to maintain keep paying Cathy her second salary, which he considers too much for her. He finds it very hard to fire Cathy because she is very valuable to the company, and worse still, he made the 2 per cent promise himself.
The opportunities
I do not see any problem in this case and instead see a lot of opportunities for all those involved. Instead of Harvey pondering on whether to fire Cathy, retain her, or harmonize her salary, he should focus on the bigger picture. By firing Cathy, he will have jeopardized the company’s VOT since this may only save the company some small amount of money- Cathy’s compensation. With time, the company may come down due to Cathy’s absence and lose a lot in terms of revenue. Firing Cathy may look like an attractive alternative, but can be very costly to the firm in the long run.
Cathy presents lots of opportunities to the company and will contribute greatly to the company’s VOT. Her past record shows that she embraces Value Driven Management and thinks long term. Harvey should therefore take up this opportunity and give Cathy even greater roles for the sake of the company’s long term prosperity. This will in the long run be beneficial to everyone in the company, including Harvey and Cathy themselves as well as all the other employees.
Taking advantage of the opportunities
To take advantage of these opportunities, Harvey will have to embrace the principle of Value over Time and Value Driven Management. The thought of hiring another person to replace Cathy is just not viable, especially in the long run. By hiring another receptionist, Harvey will just have hired an employee, who may not have the same enthusiasm and VOT strategy as Cathy. The new employee may not fit into Cathy’s big shoes at all, and will only perform her duties to keep her job (Pohlman et al, 2000).
Among the alternatives Harvey could take is to retain Cathy and instead of slashing her compensation, he should increase it as a way of appreciation for the role she plays. He should also consult her more on a number of issues affecting the firm and give her more decision making roles. He could also let Cathy have a say on the kind of employees to be hired and actually involve her in the actual recruitment.
The other alternative is to make Cathy principal partner in the company. This will work even better than the first alternative since it has a higher level of motivation. By Cathy being a principal shareholder in the company, she will have an even greater interest in it, which will lead to a rapid growth of the company. This partnership presents more opportunities to the company than the current situation. This is because Cathy has a close touch with clients and is capable of wooing new clients into the company. This will call for hiring of at least one more employee to take up some duties previously performed by Cathy.
Harvey may also explore the alternative of reviewing the company’s organizational structure so that Cathy is offered a senior position in the firm to justify her hefty compensation. He could make Cathy the firm’s vice president and broaden her role in the firm. All the employees in the firm should be junior to her, which means that some of the duties she performs at the firm may need to be reassigned to someone else. Such duties include marketing, which should be taken up by professional marketers. He will then need to allow her some independence with regard to decision-making.
Value Drivers to consider in establishing VOT maximization
There are various value drivers that boost value-added management as well as value over time maximization. These drivers include competitor values, owner values, third party values, supplier values, individual employee values, organizational cultural values and external employee values. In order to maximize on Value over Time, the company has no option but to embrace some of the drivers that lead towards that end. These include organizational culture values, individual employee values, customer values and owner values (Pohlman et al, 2000).
Organizational culture values
Organizational culture refers to a concept describing values, beliefs, experiences and attitudes of an organization. The company seems to have strong organizational culture values among a number of its employees, which have enabled it to achieve great success over the years of operation. These values are best displayed by Cathy whose values and attitudes have greatly contributed to the company’s success. On the other hand Harvey’s recent attitudes and values threaten to undermine all that the company has achieved over these years. Should this take the better of him and dismiss Cathy, then the company’s very survival is uncertain.
If the company maintains a strong organizational culture, which will positively affect the company’s Value over Time, VOT, ensuring its continued growth and good performance. On the other hand, should Harvey decide to sack Cathy, the organizational culture will weaken and negatively affect maximization of VOT.
The best action to take in order to maintain a strong organizational culture, useful to the company, is to embark on an employee motivation venture. This venture should be aimed at keeping the employees’ morale high, thus contributing positively towards the company’s success. This will involve making the employees feel valued and part of the company; and make them have a reason to come to work each morning. This will create a strong organizational culture as well as employee loyalty.
Individual employee values
The company seems to have employees with good values, as witnessed by the good performance and good relationships with their customers all through the years. Problems in individual employee values are likely to erupt should Harvey decide to dismiss Cathy. This will make these employees develop an attitude to the effect that good work is not rewarded at the company, and instead one faces the risk is being fired. This can greatly impact the morale and motivation among the employees, which in effect, affects the company’s performance.
Positive employee values, as has been observed among the company’s employees, will be good for the company’s maximization of Value over Time. However, any slight shift will cause negative employee values, which will not do the company any good in terms of VOT maximization (Pohlman, et al (2000).
To tackle this problem, the company needs to embrace and implement what is commonly referred to as Hertzberg’s Two-Factor theory. Hertzberg discovered that factors that cause motivation and job satisfaction are different from those causing job dissatisfaction. According to this theory, the satisfiers are known as motivators while the dissatisfiers are known as hygiene factors, since they are mainly maintenance factors required to avoid dissatisfaction but cannot provide satisfaction by themselves.
The company must offer its employees the top factors that may lead to job satisfaction, which are growth, advancement, responsibility, work itself and achievement. On the other hand, the company should address the factors leading to job dissatisfaction such as salary, work conditions, relationship with the boss, supervision, relationship with peers and company policy (Miner, 2007).
Customer values
The customers seem to be happy with the firm and have developed good relationships. This is because of Harvey’s long working relationships with them and Cathy’s unique drive and enthusiasm towards marketing the company’s products. These customers have full confidence in the firm at the moment. The decision Harvey makes will greatly determine whether these customer trends continue or take a new turn. They will take the worst twist if Cathy is fired or de-motivated since the already existing customers-company relationships are important for the company.
The present goodwill of the company among the customers is a great asset since it will greatly contribute towards long term success and VOT maximization. However, this hangs in the balance since the company owner may makes some drastic decisions that may affect the long term growth of the company and thus its VOT maximization (Pohlman et al, 2000).
Owner values
The owner has great values that have greatly contributed to the company’s success since its establishment. He has great patience and believes in himself as witnessed from his initial days as a service technician, and steadily rising through the ranks before finally starting his own company. He has a great drive and is a risk taker since he left the security of his job to venture into something he was not even sure of, but hoped it would work out. He also makes good relationships with his suppliers and customers, a quality that is very essentials for any successful business venture.
However, his attitude of late is likely to negatively affect the good performance the company has enjoyed over the years. He seems to forget that the success of the company was as a result of a collective effort of the employees, especially Cathy and himself. He seems to forget the contributions made by Cathy and instead of rewarding her, he is considering dismissing her. Should he make this move, many problems will befall the company such as lack of motivation among the employees and reduced sales revenue, which could be the beginning of its downfall.
If the owner continues with his present positive values, he will greatly create a positive impact on VOT maximization. On the other hand, a slight deviation will spell doom for the company and deny it an opportunity to properly maximize its VOT.
Interactive effect of the drivers
The various value drivers in an organization have an interactive effect on one another, which may either be positive or negative. For instance, the organizational culture values in any organization auger well with the employee values. A well motivated workforce in an organization is more likely to have a strong organizational culture as compared to a less motivated one. On the other hand some of the drivers have a negative impact on each other to the effect that should one aspect have positive values, it affects the other aspect negatively. For instance when an organizations competitor has all the positive values, it threatens the organizations market share and competitiveness (Pohlman et al, 2000).
Value Drivers and action that maximize Value over Time
There are eight value drivers in any organization, most of which interrelate and overlap each other. These value drivers if properly addressed and harmonized can go a long way in maximizing Value over Time in an organization.
Value Driven Management, VDM, if conscientiously and faithfully followed over a period of time, can greatly help in maximizing value over time, VOT. Value Driven Management looks at improvement of shareholders’ wealth and profitability as just among the outcomes of applying the eight value drivers properly in leading and managing an organization. According to Collins and Porras (1994), the notion that successful companies achieve their status by first maximizing on their profits is a myth and the opposite is the real truth.
Contrary to what business schools advocate for, maximizing profit is not what has brought visionary corporations to their current status. Instead, these corporations have pursued numerous objectives; shareholder wealth maximization not necessarily being the main one. This is not to say that these organizations are not interested in profits or maximizing their shareholders’ wealth; as a matter of fact, they are (Pohlman et al 2000). However, their money making venture is guided by a sense of purpose and values, beyond just profit maximization. That is why they end up making more money than the other companies whose objectives are purely to make money.
VDM is of the view that success of many corporations is not an accident but a deliberate consideration of various values when making decisions with regard to development of new products and planning strategy. In short, these companies achieve their status because they are value-driven as opposed to profit maximization, which has only short term benefits (Pohlman et al, 2000).
Implementation plan
Troupville Business Systems needs to embrace Value Driven Management as soon as they can, if not immediately. They could start by incorporating all the eight value drivers into their leadership and management. This requires a change of a few aspects of management style and structure as well as the organizational culture. This is likely to take some time, six to nine months for instance, for it to fully take root. Once the organizational culture has been changed for the better, the company will find it easier to implement Value Driven Management. From here henceforth, everything else will easily fall into place. Generally, the whole process should take roughly a year and a half to be fully implemented.
References
Collins, J and Porras, J (1994) Built to Last, ESENSI
Miner, J (2007) Organizational Behavior: From Theory to Practice, ME Sharpe
Pohlman, R et al (2000) Value Driven Management: How to Create and Maximize Value over Time for Organizational Success, AMACOM Div American Mgmt Assn
