The Biggest Hinders To Organizational Change

It’s a matter of common sense to change along with the times. Most organizations that fail to do this is setting itself up for failure. With certain organizations depending on change in order to survive, it’s crucial to properly identify which details may end up hindering your progress. So today, we’ll be tackling some of the biggest hinders to organizational change.

Unclear Goals

In order for change to occur, you need to understand what you’re changing from and what you’re changing into. Clarifying the reasons why change is needed is a great place to start the process from. Whenever change occurs, it can be a precarious and disconcerting time. It’s like waking up one day and being told that you need to throw pieces of your already built puzzle out the widow to make space for new ones.

In order to help all the pieces of the new puzzle to fit together, everyone needs to have a clear idea of what the overall portrait is supposed to be. To avoid losing members of your crew to uncertainty, plot out the end course and make sure everyone knows it. Keeping members in the dark is a sure way to hider the change you want to happen.

Ineffective Leadership

When change is hovering in the nearby horizon, having a trusted captain at the helm will help deliver the entire crew to their goal. When change is executed properly, the benefits can be pretty amazing.

However, when the person or persons in charge of said change bungles the job, it can mean death for an organization. As previously stated, change in an organization can be quite scary–particularly for the employees. A failure by those in managerial position to understand these fears and sensitivities is a pretty sure way of alienating the workforce and causing a divide between the different departments.

Properly providing everyone with information on what the organization as a whole stands to gain is a great way to sooth any preexisting fears or concerns.

Ineffective Communication

In any normal situation, communication is needed. In a precarious time such as a systematic and widespread organizational change, communication is crucial.

Everyone involved must be seen as a key partner to ensure a successful outcome. Clear and decisive messaging is paramount at each and every stage of the change at hand. When departments or people feel they aren’t being heard or considered in the process, it can cause some deep fissures in the system. This can mean some serious problems latter on in the implementation process.

Unnecessary Complexity Of Implementation

Change doesn’t happen overnight. It takes weeks or months of planning and gradual implementation in order to test out any issues in the process. The bigger your organization, the larger and intrinsic the process will be.

So it’s important to not overwhelm the system or the people with sudden or complicated changes in the process. For large organizations in particular, in order for change to be successful, there needs to be an unhindered perspective that ensures the correct change is applied properly and effectively.

Keeping things simple will be the best way to combat this. Small steps and gradual implementation of change is key to achieving long standing success.

The Factors That Will Dictate Organizational Change in 2017

Companies and organizations, if they wish to stay alive, cannot afford to remain stagnant in an ever changing world. Recent years have seen the rise and demise of several companies that were not able to change their business model to meet the needs of their markets. As a new year has come around, it’s a pretty sure bet that there will be new challenges that will need to be met.

Today, we discuss the factors that will most likely dictate what organizational changes need to occur.

Remote Workers

With the digital evolution of communication and accessibility, most employees prefer to work remotely. For businesses that don’t directly deal with any physical inventory, considering the possibility of remote work and remote workers is crucial.

Remote workers have a higher probability of striking a suitable work-life balance. This leads them to be happier and more productive than those who report to a brick and mortar location. Ultimately, happy workers are better for any business’ bottom line.

Changing Consumer Needs

The one thing that’s certain is that things always change. A clear example of this is the various malls that are closing down all over the US. Gone are the times when people went to malls to hang out or do their shopping. The dwindling economy marked a big change in consumer buying trends. Consumers were introduced to the concept of online shopping and online only deals.

Consumers are always known for wanting high quality products for the lowest price and online retailers met this need. As such, outlet stores in malls all over the US felt a sharp decline in their customers. Consumers have a cycle and only those who are able to anticipate and adapt to this survive.

Whatever business you have, you must always consider the current state of consumer behavior.

Data Trends

With most interactions occurring in the sphere of the online world, it has been increasingly easy for marketers and business to gather consumer data. Particularly with the blossoming concept of smart devices that aren’t limited to mobile devices, businesses would be smart to factor this in.

Smart devices will be able to map out patterns of consumer behavior and for that, maximize product recommendations. Understanding and wielding the data you gather will help any business further understand their market demographic. It is important to collate your data appropriately and ethically to fully anticipate where the trend seems to be heading.

Competition

Startups are slowly taking over the market. Any business will have competitors and it’s crucial to be ahead of the curve. So whenever new competition makes its entrance into a market, it is prudent to analyze how this will affect you.

Complacency can be the start of a pretty bad spiral.

Political Climate

With the political climate being as it is now, there’s little doubt that many businesses will be affected. Recently, we saw several large chains break ties with an already established brand. Clashing opinions often spell trouble for certain businesses.

It’s best to keep feelers out for shifting political climates. Be discerning on when it is appropriate to make a change.

Amazon.com

What started as an online bookstore using the founder’s garage in Bellevue, Washington as the starting warehouse boomed to be the largest internet-based retailer in the whole world. How did Amazon.com accomplish such an amazing feat? This company is arguably one of the best examples of the successes achieved because of organizational change. So today, we take a closer look at Amazon.com and how it became such a giant.

In 1994, Jeff Bezos decided to get in on the Internet business boom and build a business plan for what will be Amazon.com. The website itself went online in 1995. Bezos was not afraid that his business model would be copied by others–his logic was that corporate giants like McDonald’s had mimics yet stood at the top anyway. Bezos narrowed down the choices of what products his service would carry to compact discs, computer hardware, computer software, books, and videos. He chose books in the end as there was a large international market for literature and as the cost of acquisition would be lower than the other choices of his list,

This choice would prove to be the correct one as within two months of launch, Amazon was raking in around $20,000 a week. This was due to the fact that while physical stores and mail order catalogs could offer around 200,000 titles, an online store could offer more as its “warehouse” was digital. After five years, the internet company bubble had burst and several online companies folded. Amazon.com forged forward despite some setbacks like a lawsuit from Walmart. Walmart had claimed that Amazon had stolen trade secrets by hiring former Walmart executives. While the suit was settled out of court, Amazaon enacted changes in its internal restrictions. Amazon but in stricter measures and reassigned the former Walmart executives. The former Walmart employees named in the lawsuit were restricted in their duties which pertained to information systems.

Such a move made sure that no other such claims could be made again–which secured the company’s internal dealings and strengthened it as a whole. From there, Amazon made more changes. As soon as their online book market was steady, Amazon looked to adding more products to their service. In 2002, around eight years since it’s conception, Amazon.com now offered more than two dozen online “stores” which sold more than books. These websites carried cameras, cars, computers, tools, toys, and even travel packages.

Amazon partnered with Target and Circuit City and operated its own auction shop. Soon they also started selling clothing, movies, concert and event tickets. They continued to broke partnerships with existing brands in order to add more products to their site. The brands also gained mass exposure as Amazon.com was hosted in several countries and continents. It was safe to say that once you partner up with Amazon, you become an international brand.

On November of 2013, Amazon.com launched a partnership with the US Postal Service–enabling deliveries on Sundays. So instead of having one day where-in purchases weren’t delivered, Amazon made sure now that their customers would be able to shop and receive their orders 7 days a week. Just this year, Amazon announced convenience stores and plans to develop curbside pickup locations for food orders. A store in Seattle called “Amazon Go” was opened to Amazon employees. This store made use of sensors and automatically charges a shopper’s Amazon account as they walk out of the store. The primary objective being the elimination of checkout lines. They aim to open such stores for the general public early this year. Amazon Air’s beta-testing was also launched in 2016. This aimed to make use of drones to deliver orders directly to the homes of clients within minutes of purchase.

A great many lessons could be learned regarding the organizational changes that Amazon.com put into action. They started from a single product and diversified to meet a larger audience. Internal issues were dealt with swiftly. Amazon also continued to pioneer better partnerships and methods to better service their clients from daily deliveries, potential stores with no checkout lanes, and deliveries by drone.

While Amazon has had its share of roadblocks, Jeff Bezos learned from these and adjusted his business practices to keep their business model and services relevant.

Tips and Tricks for Organizational Change Success

The only thing constant in life is change. This is a tried and tested fact that businesses cannot afford to ignore. Whether it is because of employee performances, technological advancements, or staff turnovers—in order for a business or a company to persevere, it needs to be able to undergo and survive organizational change. Let’s look over some established tips and tricks that you can use to successfully navigate your organization’s change.

Firmly Establish Your Vision

When a business goes through an organizational change, it is important that those at the top properly convey what changes are about to happen and why. Teams and departments are able to assimilate the growth better if they understand why things and processes are evolving. The last thing you’d want to craft a culture of secrecy from your employees. Employees are the lifeblood of your company—making them partners and not just cogs in a wheel of change can better serve your purpose in the long run.

Exemplify Your Vision

If you are at the top of your organization, your employees will look to you to embody the changes that you wish to apply. As the captain of your ship, you need to provide the direction in which you want your employees or members to follow. Get your managers and those in position of leadership to showcase the changes as well. A unified front will help calm any worries that your members may already be feeling.

Clarify Short-Term Goals

While the end-goal vision is established, to better focus your organization on what needs to be done, assign goals that can be attained in the immediate foreseeable future. Don’t lay out change and expect sudden and immediate confirmation. Dole out the changes in small parts through short-term goals that your teams can strive for.

Actively Search For Feedback

In order to get your members to really feel that they’re a true part of your organization and the organizational change you’re going to enact, actively ask your employees for their feedback. As the person on top, you may not always be able to truly have a feel of what the changes are like on the ground level. Getting feedback from those that have a different view will help put things in perspective and can further enrich your ongoing changes.

Build New Avenues for Communication

Whenever changes are proposed, there will be a lot of questions that may arise. Building new channels for communication is always a good idea in order to further fortify your teams. Maintaining visibility, being more accessible for conversations, and keeping all members routinely updated will help stem any issues that can come up.

Maintain a Positive Attitude

Another old adage is that “attitude is everything”—and this is quite true. It wouldn’t matter if your plans for change are incredible, if you present it in a manner that isn’t positive, it will fail. Change is often a stressful and confusing time for everyone involved. You and the other leaders will need to keep the tone and climate as positive as possible in order to keep the ship on its proper path.

These are just a few tips that you can apply in your company as it goes through organizational change. If you have any more, we’d love to hear from you. We’ll keep the tips and topics coming along so be sure to check our blog for more organizational change discussions.

Boston Beer Co.: Light Beer Decision

Boston Beer Co.: Light Beer Decision

 

Introduction

Boston Beer Company (BBC) was founded by Jim Koch in 1984.  Koch’s vision for BBC was to lead the craft-brewed beer market by creating and offering a wide selection of high-quality, full-flavored beers.  Over the past twenty-five years, this vision has become a reality because of BBC’s strategic focus on high quality standards, contract brewing, sales and marketing, and product innovation.  BBC’s flagship product was the Samuel Adams Boston Lager, which amounted to 60% of the company’s production volume and the majority of its revenue.   In 1987, BBC introduced its second product, a light beer called Boston Lightship.  Although the sales of Boston Lightship reached 12,000 cases a month, it contributed minimal revenues to BBC.  Unfortunately, this tremendous growth did not last, despite a rising light beer market; by 1998, Boston Lightship was selling fewer than 3,000 cases a month.  In addition, growth rates in the craft segment had slowed from above 40% per year to single digit percentages for the first time ever.  BBC’s current strategy has proven ineffective in a market with shifting consumer demand and an increasing number of competitors.  In order to increase its market share and profitability, BBC must reposition Boston Lightship, cut back on beer varieties, and revamp its reputation among distributors.

 

Strategic Issue #1

The new global, social trend emphasizing physical health has shifted consumer demand from premium beer to light beer.  Boston Beer Company’s light beer, Boston Lightship, is poorly positioned within the light beer market, which is hurting sales.

“The technology for light beers had been around since the 1960s, but it was not until Miller took Miller Lite national in 1975 that a brewer had introduced a light beer with broad success in the marketplace” (7).  In the late 1970s and early 1980s, changes in consumer demand began to occur.  Consumers were looking for an alternative to premium beers; this alternative turned out to be light beer.  The light beer market was growing at a rate of 13% in 1980.  By 1997, the light beer market was growing at a whopping rate of 40%.  The following year, the light beer segment became the largest beer segment in the entire industry.  At the same time, growth in the craft-beer segment was slowing down.  Between 1996 and 1997, the craft beer segment grew only 0.1%.

The main cause of these rapid changes in beer preference seemed to be the result of a new world-wide, social trend that stressed the importance of staying healthy.  Another possible cause was the fact that light beer was beginning to be more commonly associated with having a good time.  Many people live active life styles, and want to drink beer for its refreshing qualities.  People also like the social aspect of drinking light beer; light beer has a lower alcohol content, which allows people to drink some and still remain in control.  The higher alcohol content and full-bodied flavor of craft and premium beers causes consumers to avoid it, choosing to drink light beer instead.

When Boston Lightship was first introduced in 1987, the light beer market was growing rapidly.  In order to gain exposure for Boston Lightship and promote the newly-added brand, Jim Koch, founder and Chief Executive Officer of Boston Beer Company, invited one hundred members of the media to join in a taste testing that included Heineken, Miller Lite, Amstel Light, Becks, and other successful brands from BBC’s main competitors.  The event was a tremendous success, with ninety people out of one hundred voting Boston Lightship as their favorite.  It was very clear to Jim Koch that he had the right recipe to compete against other companies that offered light beer.  Although Boston Lightship’s taste was voted the best, consumers continued to purchase other brands instead; in April of 1998, Boston Lightship was selling less than 3,000 cases per month.  These facts are evidence of a disconnect between Boston Lightship and the consumers of light beer.

Jim Koch believed that Boston Lightship was struggling because light beer drinkers were not willing to pay a craft-beer price for a light beer.  This statement has some merit because Boston Lightship is sold at a higher price than competing light beers, but price is not the key problem.  The marketing and promotion for Boston Lightship describes the beer as being thick and full-bodied; this is the exact opposite of what light beer consumers are looking for.  Also, Boston Lightship is not associated with the Sam Adams brand which potentially harms its appeal to consumers.  Someone who wants a high-quality light beer may not purchase Boston Lightship if he or she cannot affiliate the name with Samuel Adams, which is known for that high quality.  Countless potential sales are lost because there is no connection between the two brand names.  As history has proven, products without proper brand recognition do not succeed in the marketplace.  Overall, Boston Lightship is a great product; it just has poor brand awareness.

On all of the blind taste tests performed by the HBS students, the majority of woman preferred Boston Lightship over the competing light beers.  It should also be noted that Boston Lightship has only 98 calories, which seems to appeal to women more than men (as explained later).  Also, Boston Lightship was voted World Championship Reduced Calorie Lager at the World Beer Championships in 1994, 1995, 1996, and 1998.   This information reveals a pattern among the comments made about Boston Lightship.  Both men and woman say that Boston Lightship needs better brand recognition (Exhibit 7).

BAVC Recommendation

Recommendation

BAVC currently attains its competitive advantage through a niche, best cost provider strategy.

The company’s sole arena is the Bay Area, which it serves by providing access to video equipment and offering technical assistance with video production for non-commercial purposes.  This key arena has served the company well in the past because of its tight-knit community of independent media and artistic talent.  Over the years, BAVC has grown through internal development by expanding its services and adding new services.  We recommend that BAVC continues to execute its current strategy, with a few proposed changes.  Our recommendations will focus on the internal development of the human resources department and the MediaLink Progam, and foster overall company growth through external development.

Implementation

In brief, we have made three recommendations that we believe will support your company’s current strategy.  First, we recommend that your company expands into the Silicon Valley region.  Second, we recommend that your company institutes an evaluation process for all applicants seeking employment at BAVC, whether they are recruited or otherwise.  Third, we recommend that your company increases the web-design training in the MediaLink program.  The sections below outline the implementation of each recommendation and the reasoning behind them as well.

Continued growth for the company is crucial to guarantee that BAVC maintains its position at the forefront of the non-commercial media field.  For this reason, we recommend that BAVC expand into the Silicon Valley area.  BAVC must gradually begin to shift back to its’ 1992 state of having more earned income than support revenue.  It is extremely risky and detrimental to the company to have the majority of total income come from support revenue.  In order to reach this goal, we believe it would be beneficial for your company to expand the geographical reach of its services into the Los Angeles area.  Los Angeles has a much larger population than the Bay area with nearly ten million inhabitants.  This is a mostly untapped market where BAVC can offer its services, and have a much greater chance of being successful.  Over time, the expansion into Los Angeles will increase our earned income, which means there will be less dependence on support revenue.

In a perfect world, your company’s income would double immediately from the expansion into Los Angeles.  Realistically however, it could take up to five years before your company can generate the same level of revenues in this new location.  Although BAVC will offer the same amount of classes it has in the past, it will take time to build up a customer base and establish brand awareness in the new market.  What will double almost immediately however, are your company’s expenses.  Some of these expenses include: renting or buying a new building in Silicon Valley, utilities, new equipment, marketing and promotion, and the salaries of the new technicians and trainers that would need to be hired.  Although the expenses are high, Silicon Valley offers a lot of service potential because of its’ large and diverse population.  Along with increasing our earned income by offering classes and training, there also will be many new donors that can be sought out for support revenue.  When donors choose to financially support a certain service or program that BAVC provides, your company has an ethical responsibility to use those support funds only as the donor intended.  Another option that BAVC should consider is checking to see if it qualifies for any government funding.  The move to this new location requires a heavy financial investment early on, but it will pay for itself in the long run.

In order for your company to financially support our recommendations, we estimate that you will need to grow at a rate of $1.1 million annually; this number represents BAVC’s financial growth from 1999 to 2000.  Exhibit 1 in the appendix shows our five-year projected income statement for BAVC.  This increase of $1.1 million annually is essential to paying for the new Silicon Valley location and offering BAVC’s wide array of media services in that area.  Exhibit 2 in the appendix shows our proposed shift in income, which would allow BAVC to depend less on support revenue and more on earned income.  Realistically, BAVC could simultaneously shift its’ income dependence by five percent per year in favor of earned income.  For example, in 2001, BAVC’s total income will be roughly $4.6 million, assuming the company grows at the specified rate.  Instead of having sixty percent of the $4.6 million come from support revenue, only fifty-five percent will.  Your company’s overall revenue will continue to increase at a rate of $1.1 million per year.  The only change will be where the revenue comes from.  Relying more heavily on earned income is better for BAVC because of the variability of support revenue.

BAVC’s trouble with retaining employees is partly because of the low salary it offers and partly because of inefficient human resource management.  We believe BAVC is losing their employees to the private sector because they are hiring people whose number one concern is money.  When it comes to salary amounts, there is absolutely no way BAVC can compete with organizations in the private sector.  The solution is to hire people who have the same ideals, values, and ethics as BAVC in addition to the correct skills.  We recommend that BAVC’s human resources department institutes an evaluation process for all applicants seeking employment at BAVC, whether they are recruited or otherwise.  Candidates will be chosen based on both skill and how closely their values, ideals, and ethics align with the values, ideals, and ethics of BAVC.  The evaluation process could include pre-screening, followed by structured interviews and situational testing, both of which have high criterion validity.  The costs of initiating this recommendation include the costs of making the test and having managers prescreen and interview employees, and the time and effort it takes to grade and rank applicants.  In doing this, BAVC has a better chance of retaining quality employees because the people it hires will not only be qualified, but they will be more likely to fit in with the company’s culture and be satisfied with their jobs.

The decreasing placement rate of the MediaLink program is BAVC’s third largest problem.  In order to increase the placement rate of the MediaLink program, the program needs to be made more relevant.  After an analysis of the current market we have found that web-design is the most needed skill set currently in demand in the Bay Area market.  For this reason, we recommend that your company increases web-design training; internet training will remain the same.  This initiative would require BAVC to hire additional training personnel, which would result in an increase in salary expense depending on how many new employees were hired.  Also, there would be costs associated with offering more classes.  This initiative is socially responsible and has the potential to greatly benefit the MediaLink program.  If BAVC is able to provide more training in web-design as a part of its MediaLink program, its’ graduates will have obtained the newest and most relevant skills required to find a job in the changing economy.  Companies will then be more likely to hire from our pool of graduates because they will have the same skills as the laid-off talent, but will not have to be paid as much.  Potentially, BAVC could also see an increase in the overall enrollment number for the MediaLink program because of its high relevancy to what media companies are currently looking for regarding the skills of new employees.

Conclusion

In closing, we have recommended three changes for your company: (1) Move into Silicon Valley and open a new building, (2) Implement an evaluation process for all applicants based on both skill and how closely an applicant’s values and ethics align to those of BAVC, (3) Increase web-design training.  These recommendations have been tailored specifically to maintain your company’s current competitive advantage while ensuring that BAVC remains socially responsible.  The first recommendation will improve BAVC’s performance by generating a greater percentage of earned income which can then be reinvested back into the company.  The second recommendation will ensure that BAVC has a qualified staff of trainers and technicians that will stay with the company; this will save BAVC money because new employees will not need to be hired as often as they currently are.  The final recommendation will reenergize the MediaLink program by making it more relevant to the current job market; this will result in an increased job placement percentage of your graduates, and should encourage more students to join the program.  It is imperative that these changes be implemented now so that your company can begin building a more solid financial base for its’ future growth.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BAVC Strategic Issue 2 & 3

Bay Area Video Coalition Strategic Issue 2

BAVC is finding it hard to retain experienced technicians and trainers due to the low salary it offers in comparison to organizations in the private sector.

BAVC’s mission is to provide access to video equipment and offer technical assistance with video production for non-commercial purposes.  BAVC accomplishes this by training low income individuals in various high-tech job skills, and by teaching its customers how they can utilize different skills and technologies in their future careers.  BAVC’s status as a non-profit organization limits its ability to charge for services, which results in a limited amount of capital.  Consequently, BAVC is unable to provide its workers with salaries that are large enough to be competitive among for-profit organizations.  Another compounding factor is that much of BAVC’s working capital must be used to support its high-end services and invest in the new technologies that are needed for the organization to succeed and expand into the future.  BAVC’s first priority is keeping the organization afloat; competitive salaries are not a high priority.

BAVC’s inability to provide competitive salaries makes recruiting qualified technicians and trainers very difficult.  In addition, it is tough for BAVC to keep its current employees because at any moment, they can leave BAVC for a similar job at a for-profit organization, which has the ability to offer a higher salary.  This problem was caused in part by the Internet boom; BAVC is directly competing with many dot-coms for talent.  This is a huge disadvantage for BAVC because the company simply does not have enough capital to pay its workers such high salaries.  This means that BAVC must find another way to entice people to join the organization.

Because technological change occurs so rapidly, there is always demand for training in new media technologies.  Now more than ever, it is crucial to keep BAVC’s current employees and attract new qualified individuals to the organization.  Without having qualified technicians and trainers, BAVC cannot effectively provide its services and may hurt its reputation; BAVC’s strong, socially responsible reputation is one of the reasons that people choose it over the competition.  If BAVC is unable to find a way to improve its employee retention and attract new qualified applicants, the organization will not be able to continue providing its services in the non-profit sector.

Bay Area Video Coalition Strategic Issue 3

BAVC’s job placement for its MediaLink program has decreased substantially as of late because of the increase in laid-off talent in the Bay Area market.

MediaLink is a new workforce development program created by BAVC to train low-income individuals in new media technologies.  The program was backed financially by the city government.  The main goal of the program is to provide its students with marketable skills that are relevant to finding a job in the current market, where barriers to entry are high.  Specifically, MediaLink aims to serve students with existing proficiencies in computer and internet basics by offering more advanced skills, which are required for entry-level positions in the media field.  The program was an immediate success; sixty percent of the program’s first graduates were hired by media companies within three months of completing the program.  The following year, the placement rate of graduates increased to seventy percent.

The first problem with the MediaLink program arose between 1999 and 2000, when BAVC was unable to find enough qualified trainers in the labor market to continue expanding the program.  At its’ peak in 2000, the placement rate for graduates of the MediaLink program was ninety-five percent.  In early 2001, the market began to tighten, and many highly skilled workers were laid off.  This caused a flood of talent to saturate the Bay Area market.  This presented a problem for BAVC because the graduates of MediaLink had less training than many of the laid-off workers.  As a result, MediaLink’s job placement rate for graduates plummeted to sixty-eight percent.  The local press in the Bay Area publicized the drastic change in the placement rate and made a big deal of the challenges that BAVC would face in reenergizing the program.  The underlying issue is that people will not join the MediaLink program unless they believe it will help them get a job after graduation.  If this problem is not remedied soon, BAVC could see a substantial drop in program enrollment.

BAVC Intro & Strategic Issue 1

Introduction

Bay Area Video Coalition (BAVC) was founded in 1976 as a non-profit media service organization.  Its’ mission was to serve the Bay Area by providing access to video equipment and offering technical assistance with video production for non-commercial purposes.  BAVC currently employs a best-cost provider strategy in the niche Bay Area market.  Its’ goal as an organization is to keep up with the rapid changes in technology and provide media services at reasonable prices.  The difficulty with holding this market position is attaining the funding required to maintain it.

Strategic Issues

We have performed a thorough analysis of your company and have identified three issues that need to be dealt with immediately in order to ensure BAVC’s long-term success.  The first issue is that your company is overly reliant on donors for funding.  The second issue is that your company’s employee retention rate is low in comparison to for-profit organizations because you are unable to offer salaries of the same caliber.  The final issue facing your company is the rapidly decreasing job placement rate of your MediaLink program graduates because of the recent swell of laid-off talent in the Bay Area Market.  The following sections will provide detailed information about each of these critical issues.

Strategic Issue #1

BAVC is currently relying too heavily on funding from donors, which is dangerous due to the shrinking number of donors and the short life-span of donor relationships.

BAVC was established with seed money from the Rockefeller Foundation, which offered five years of full monetary support.  This money was used up very quickly in an attempt to keep up with rapid technological advancements in the mid to late 1980s.  By the early 1990s, BAVC needed to decide whether or not to position itself at the forefront of technological change; in essence, this meant choosing what market position to occupy.  This choice would greatly affect the amount of capital requirements that would be necessary for the organization to continue running effectively.  Sally Fifer, Executive Director of BAVC, decided that her company would pursue the high-end market by continuing to offer the newest technologies.

Since BAVC is a non-profit organization, there are no sales.  BAVC’s revenue comes from earned income and contributed income.  Earned income represents revenue generated by BAVC’s services.  Support income is revenue given to BAVC by outside organizations, such as corporate sponsors, businesses, and the government.  In the early 1990s, BAVC’s earned income was eighty percent, as compared to its contributed income of twenty percent.  This was great because it meant that BAVC was supporting more than three quarters of its services by its own means.  Between 1992 and 2000, BAVC’s earned income declined from eighty percent to forty percent, forcing the company to rely more heavily on outside support.  As a result, BAVC increased support income from twenty percent to sixty percent of total revenue.  This change represented a dangerous shift away from self-reliance.

BAVC’s strategy requires a tremendous amount of capital because the company must constantly have the newest technology available.  BAVC cannot continue to rely as heavily as it does on support income because it is highly variable from year to year.  BAVC has remained in the Bay Area of San Francisco since its foundation in 1976.  Aside from a few potential donors moving into the Bay Area each year, the number of donors is limited because the majority of them have already contributed to your company.  Donors typically invest in one particular program or technology that your company offers.  For example, in 1997, the Mayor’s Office granted BAVC $200,000 to begin its MediaLink program; although the grant was helpful, it lasted only one year.  This means that in order for donors to grant BAVC more money, existing programs would have to be expanded or new programs would have to be created.

In regard to the life-span of donor relationships, the average foundation grant to a non-profit organization lasts less than three years.  Even worse, more than fifty percent of those grants last only one year.  This means that BAVC loses at least fifty percent of its support income at the end of each year and must then search for new donors, which are becoming increasingly scarce.  If your company continues to rely so heavily on support from donors, it will fail, because eventually there will be no donors left in the Bay Area.

How BAVC Handled Strategic Change

Introduction

BAVC was founded as an ethical, non-profit media service organization with the mission serving the Bay Area by providing access to video equipment and offering technical assistance with video production for non-commercial purposes.  BAVC currently employs a best-cost provider strategy in the niche Bay Area market, which makes it difficult to attain the funding required to live up to its mission.  We have identified three strategic issues that you company must face in order to remain successful in the future.

Strategic Issues

BAVC is currently relying too heavily on funding from donors, which is dangerous due to the shrinking number of donors and the short life-span of donor relationships.  BAVC’s revenue comes from either earned or contributed income.  Between 1992 and 2000, BAVC’s support income shifted from 20% of total revenue to 60%, forcing the organization to more heavily on support income.  This is a dangerous shift because donors typically invest in only one program or technology, and more than 50% of foundation grants last only one year.  If BAVC continues to rely so highly on support income, it will fail because eventually there will be not be enough donors left in the Bay Area to financially support the organization.

BAVC is finding it hard to retain experienced technicians and trainers due to the low salary it offers in comparison to organizations in the private sector.  BAVC’s inability to provide competitive salaries makes recruiting qualified technicians and trainers very difficult.  In addition, it is tough for BAVC to keep its’ current employees because at any moment, they can leave BAVC for a similar job at a for-profit organization, which has the ability to offer a higher salary.  BAVC must find a way to retain its’ current employees and attract new qualified applicants in order to continue providing low-cost media services.

BAVC’s job placement for its MediaLink program has decreased substantially as of late because of the increase in laid-off talent in the Bay Area market.  At its’ peak in 2000, the placement rate for graduates of the program was 95%.  The market tightening in 2001 saturated the Bay Area market with laid-off talent, causing MediaLink’s placement rate of its’ graduates to drop to 68%.  People will not enroll in the MediaLink program unless they believe it will help them find a job.

Recommendation/Implementation

BAVC currently performs its’ ethical mission by using a niche, best cost provider strategy.

Its’ key arena is the Bay Area, which it serves by providing low cost media services.  We have made three recommendations that we believe will support your company’s current strategy if implemented now: (1) Expand into the Silicon Valley region, (2) Institutes an evaluation process for all applicants seeking employment at BAVC, (3) Increase web-design training in the MediaLink program.  These changes require hiring new personnel, renting a building in Silicon Valley, and increasing classes in web-design, which is very costly.  In order to pay for these changes, BAVC must increase its’ earned income very quickly in the next few years.

Conclusion

These recommendations support BAVC’s current strategy of rapid expansion, while maintaining its’ ethical character.  It requires a heavy financial investment early on, but will pay for itself in the next five years by allowing the organization to expand its’ services and continue future growth

Big thanks to the owner at www.banishpestcontrol.com for the financial support to keep our site going.

Change Leader Needed: Exploding Ford Pinto

Exploding Ford Pinto

In the textbook Business and Society, by Anne T. Lawrence and James Weber, a crisis is defined as any event with the potential to negatively impact the health, reputation, or credibility of an organization.  More specifically, a corporate crisis is a significant business disruption that generates extensive news media coverage (423).  Ford Motor Company faced a corporate crisis in 1970, shortly after the introduction of its newest vehicle, the Ford Pinto (“Ford Pinto Fuel-Fed Fires” 1).

exploding ford pinto

Lee Iacocca, the President of Ford Motor Company at the time, decided that in order to keep up with the increasing demand for foreign, imported cars, his company needed to create a small vehicle that was very inexpensive.  His specifications for the soon to be called Ford Pinto were later known as the “Rule of 2,000.”  Iacocca stated that the new car had to weigh less than 2,000 pounds and cost less than $2,000 (Hearit 22-23).  Ford’s car designers began building the Pinto, but in order to keep its weight under 2,000 pounds, they positioned the gas tank above the car’s rear axle.  This meant that a rear-end collision could rupture the gas tank, causing it to explode (“The Ford Pinto Case” 1).

Iacocca suggested the use of cost-benefit analysis to determine whether or not to fix the gas tank, which would be hazardous to not only the driver and the passengers of the Pinto, but to surrounding vehicles as well.  The chart on page three was taken from a Ford inter-office memo dated September 19, 1973.  It was published by the popular magazine, Mother Jones, and was used in the prosecution of Ford Motor Company.

This chart shows that it would cost $137.5 million to fix the gas tank in the cars and light trucks, and only $49.5 million to leave the vehicles as they were and pay any law suits that arose from burned vehicles, serious burn injuries, and burn deaths.  This analysis suggests that the cost of repairing the vehicles significantly outweighs the benefit of their improved safety features; as a result, the design change was not approved (Viscusi 570).  The decision to not make design changes to the vehicles was Ford Motor Company’s biggest mistake.  Not only did this analysis represent an extreme lack of social responsibility, but it also demonstrated the company’s lack of ethics; Ford Motor Company had put a price on the value of human life.

The first problems with the Ford Pinto appeared in April of 1974, when several attorneys reported three deaths and four serious injuries resulting from explosions and the resulting fires (“Ford Pinto Fuel-Fed Fires” 1).  These reports prompted the Center for Auto Safety to petition the National Highway Traffic Safety Administration to recall Ford Pintos due design defects in the gas tanks that allowed gas seepage and fires in low to moderate speed collisions.  According to The Center for Autosafety, the petition reached the NHTSA office, but faded into the background, remaining untouched until 1977 (1).

In 1972, Lilly Gray was driving with Richard Grimshaw when her Ford Pinto suddenly stalled in the middle of a highway.  The Pinto was hit from behind by another vehicle, causing the gas tank to rupture and explode.  Lilly Gray was killed in the crash, and Richard Grimshaw suffered very severe burns (Viscusi 569).  This case did not appear in court until late 1977.  In the meantime, Mark Dowie of Mother Jones Magazine published an article exposing the design defects in the Ford Pinto gas tanks and shedding light on a number of internal documents from Ford Motor Company that showed the cost-benefit analysis that had been performed (“Ford Pinto Fuel-Fed Fires” 1).  Soon after the publication of the article, Grimshaw was awarded $2.5 million in compensatory damages and also received $3.5 million as a punitive award in court (Viscusi 569).  The publication of the article drove the Center for Auto Safety to resubmit its claim against the Ford Pinto.  Finally, the NHTSA had tests done on the Ford Pintos created between 1971 and 1976; the tests proved that the gas tanks were unsafe (“Ford Pinto Fuel-Fed Fires” 1).  In May of 1978, after an incredible amount of press coverage and a drastic decrease in Ford’s sales, the Department of Transportation announced that the Pinto fuel system was unsafe and called for a recall (“Ford Pinto”).

On June 9, 1978, Ford Motor Company recalled 1.5 million Pintos.  Unfortunately, the company’s reputation had already been shattered, and many of its key people in the creation of the Pinto were brought up on criminal charges.  Ford Motor Company did absolutely nothing right during this disastrous chain of events.  Many experts in the field of crisis management recommend that companies create a crisis management plan in case of an unforeseen crisis (Lawrence, Weber 434).  Ford Motor Company had no such plan in place, and therefore, was completely and utterly unprepared for what would happen next.

The way that Ford Motor Company handled the Pinto crisis is a perfect example of what not to do.  The crisis could have been avoided very early on in the production of the Pinto.  First, Iacocca made a mistake in creating “The Rule of 2,000” because rules are not meant to be broken.  Instead of telling his employees that the car absolutely needed to weigh less than 2,000 pounds and cost less than $2,000, Iacocca should have used his “rule” as a goal.  That way, if the car designers exceeded the weight limit or cost by a small margin, modifications could have been made and there would not have been any problems.

The second mistake was made when Iacocca neglected common sense and ethics, and allowed his company to use cost-benefit analysis to determine whether or not to make critical safety changes to the vehicles.  The safety of a vehicle’s passengers is the most important aspect to consider during its creation; if the vehicle is not safe, changes must be made.  This was not the only issue though.  The true issue lied within the cost-benefit analysis.  The employees who drew up the analysis placed a value on human life.  Even more disconcerting is the fact that no one in the company who looked at the analysis criticized it.  When all was said and done, the analysis suggested that the most profitable choice would be to not make changes to the vehicles and just sell them as they were.

Ford Motor Company’s final mistake was not recalling the Pinto soon enough.  When Ford heard about the first death related to the Pinto, the company should have immediately ordered a recall of all Ford Pintos between the year 1971 and 1976.  Instead, Ford did nothing because profits were still steadily increasing from Pinto sales.  The recall did not come until the National Highway Traffic Safety Administration’s test results of the Ford Pinto hit the news.  The results caused a great deal of negative publicity, which led to a severe drop in Ford Motor Company’s sales (“The Ford Pinto Case” 1).  By this time, more than fifty people had been killed in accidents involving a Ford Pinto.  It seemed that Ford was more interested in making profits than protecting its customers.

The Ford Pinto crisis serves as a great example of why companies should institute crisis management plans.  The idea of these plans is to be prepared for the worst, so that if something occurs, everyone in the company knows what to do.  The first step in creating a crisis management plan is establishing an internal communication system; key employees need to be alerted and be ready to address any issues that arise (Lawrence, Weber 434).  The next step is to communicate quickly, but accurately; this means that the company should tell the truth about what has happened and how they are going to remedy the situation.  The third step is to let the public know what they company is doing about the problem through mediums like the internet.  The fourth step is to do the right thing, meaning that the company needs to take responsibility for its actions and work towards a solution to the problem.  The final step in a crisis management plan is to follow up and help anyone affected by the crisis.

Ford Motor Company did not follow any of the steps of a crisis management plan.  Ford did fix the gas tanks on the cars that had been recalled, but did not willingly give any kind of compensation to those parties affected by the Pinto-related accidents (“The Ford Pinto Case” 2).  On August 27, 2009, the Ford Pinto was mentioned on National Public Radio.  A drag racer, Mike Willmon, was quoted as saying, “I tore it all down, took the engine – the infamous exploding gas tank is gone” (“Scalding A Quarter-Mile In An Electric Ford Pinto”).  More than thirty years after the Pinto crisis occurred, Ford remains infamous because of its management team’s poor decisions and lack of a plan.

What Could Ford Motor Company Have Done Better?