Question

Case 2: Going to The X-Stream

Gil Reihana is the chief executive officer of X-Stream, an Auckland-based company that assembles personal computers for the New Zealand and Australian markets, and sells them through a number of chain stores and independent retailers. He started the company six years ago, at the age of 25, after graduating from university with a Bachelor’s degree in Information Technology and Management. To establish the company, Reihana invested $300 000 he had inherited and persuaded various family members to invest additional money. The company soon developed a reputation for quality hardware, customized products and excellent delivery times and after-sales service. Six months ago it started a software division, specializing in web design and consulting on various applications for the development of electronic business.

Gil Reihana is driven by a desire to succeed. At the age of 16 he started working part-time at an electronics retailer, and in his spare time he took apart old computers in his garage to see how they were made. He is extroverted, energetic and enthusiastic, often arriving at work before 5 am and seldom leaving before 7 pm. He feels that work should be challenging but also fun. Initially, he had picked a young senior management team that he thought shared his outlook. A casual, almost irreverent atmosphere developed. However, a poorly organized accounting department led to the resignation of the first accountant after two years. Reihana believes that major decisions should be made by consensus and that individuals should then be empowered to implement these decisions in their own way. In the beginning, he met with each staff member in January to discuss their level of satisfaction in their jobs, their ambitions and their plans for the coming year in terms of their professional development. As the company grew, this became more difficult, so Reihana left each member of his senior management team to do this with their own staff but did not monitor whether they were doing it and how well it worked. Now he tries to keep in touch with staff by having lunch with them in the cafeteria occasionally. Denise Commins (affectionately known to all staff as ‘Dot Com’) is X-Stream’s chief financial officer. She and Reihana could not be more different. Commins is quiet, methodical and very patient. Her superb interpersonal skills complement a highly analytical mind. At 55, she is considerably older than most of the employees and often shows a strong maternal side. Many of her team (and several from other departments as well) frequently consult her on work issues and also personal problems. She enjoys the informal relationships she has built up but is now finding that the technical aspects of her role are becoming less rewarding. Don Head, the marketing manager, is considered to be a rather ruthless operator, often undercutting the competition in terms of price and, on more than one occasion, by circulating false rumors of defects in competitors’ products. He refers to himself as ‘a ladies’ man’ and has been known to flirt with anumber of the staff. A case of sexual harassment was dropped after a 22-year-old secretary was paid a sizeable sum of money. Reihana and the members of the senior management team were furious with Head, who had denied any wrongdoing, claiming that the young woman had ‘led him on’. Head attended university with Reihana, and over the years they have spent many hours after work at a pub around the corner from the factory. With sales rising year after year, Head’s marketing expertise and cunning are regarded as essential to the company’s continuing growth. He has a department of eight staff, all ambitious self-starters, whom he carefully selected based on those qualities. They are required to set and achieve their own targets, as long as those targets are ‘big, hairy, ambitious goals’—a phrase Head once heard at a seminar. Jason Palu, the production manager, is a softly spoken man who started as a supervisor and quickly worked his way to the top position. He sets extremely high standards for the production staff and is considered to be a perfectionist, but is highly regarded by his colleagues for his efficiency and reliability. There are very few occasions when an order cannot be filled on time, and Palu’s goal is to have zero defects. He tends to be autocratic, however, and some employees have complained that he never listens to them, allocates work hours that do not suit his staff, and often insists on (paid) overtime at very short notice. When one production worker complained, he tersely remarked, ‘We have a job to do and we just have to get on with it. The company depends on us’. Heather Berkowitz is the chief web designer. She has blue hair and a ring through her nose, and dresses in a variety of exotic clothes that she sources from second-hand shops. She seldom arrives at work much before 11 am and often leaves before 4 pm. She says that she does her best work at home, often at night, so why should she ‘punch the clock like the drones on the assembly line’? Reihana and others often receive emails from her that have been sent at all hours of the night. She has established a reputation as a top web designer, and although her physical appearance does not go down too well with some of the company’s clients (or staff), the quality and quantity of her work are extremely high.

Every Tuesday at 9 am, X-Stream’s senior staff meet to discuss weekly plans and any significant issues that have arisen. All employees are invited to the meeting, an opportunity that some take advantage of by attending. Reihana trusts all staff to keep confidential matters within the company. He believes that if the organization shares information with employees they are more likely to support management decisions. The meetings lack formality and usually start with some jokes, usually at the expense of particular members of staff. By and large, the jokes are meant to be inoffensive but are not always taken that way. Nicknames are often assigned to staff, mostly by Don Head; although some are quite derogatory, any employee who objects is thought to be a ‘wet blanket’. Head seems oblivious to his own unflattering nickname, preferring to call himself ‘Braveheart’—sometimes even signing memos in this fashion. Although employment agreements refer to a 40-hour week, there is an expectation that staff will put in substantially more than that. Only the assembly-line workers have to clock in and out but this, Jason Palu has explained, is due to the overtime that assembly staff is required to work in order to meet deadlines. The overtime pay was welcomed by some production staff but resented by some employees in other departments who believed that they should be entitled to the same benefits. Now a conflict has arisen between Jason Palu and Don Head. For some time, X-Stream has been developing a top-of-the-range laptop, the X-MH, which is scheduled for launching in two weeks time. Palu, however, has been urging senior management to delay the introduction of the X-MH until some hitches have been sorted out. A batch of chips acquired overseas contains some defective features, and Palu wants to postpone the new model until these problems have been ironed out—a process he believes will take another month. Head has found this to be unacceptable. A former All-Blacks captain has already been contracted to attend the launch and market the new model on a roadshow that will travel to all major cities in New Zealand and Australia, but he will not be available at the time Palu is prepared to release the X-MH. At a heated staff meeting, some of the senior staff backed Head, while others agreed with Palu. Head had urged all of his department to attend the meeting, to present a united front and convey an image of power. Heather Berkowitz arrived halfway through the meeting and, with a mouthful of muffin, proclaimed that there was no rush to get out the ‘new toy’ because the company had plenty of other issues to which it could devote its energy. She said that she had met the head of information technology of a chain of fast-food restaurants that wanted to revitalize its website, and maintained that she needed three extra staff members to get this up and running. She exited the meeting five minutes later. Head fumed at the interruption and demanded that Reihana sticks to the original launch date of the X-MH. Reihana calmly replied that he understood Head’s frustration but that more consultation was necessary. He said that it would be discussed by the parties concerned during the week and a final decision would be made at the following Tuesday’s staff meeting. Head spent the rest of that day lobbying other senior staff members. He offered Denise Commins the use of his beach cottage if she backed him and promised to support her on the acquisition of expensive new accounting software. She just laughed and said that she was convinced the senior management team would approve the new software. She also informed Head that a member of her staff had seen one of his sales representatives entering a strip club the previous week, at a time when the sales force had been engaged in a staff meeting.

Other problems had also arisen in recent months. Ramesh Patel, the newly recruited head of e-business applications, had—with help from a personal contact—developed a software program that would help hotels and restaurants to source products and services over the internet. It was beginning to generate useful revenue. His contact has now billed X-Stream for $25 000 in consultancy fees and development costs. Patel claims that his contact owed him a favor and that no mention of money was ever made. XStream has referred the matter to its legal counsel. Les Kong, the research, and development manager (hardware), has also complained to Reihana that he can no longer work under Jason Palu. While he considers him a very pleasant man and a very capable production manager, he claims that he can no longer tolerate Palu’s strict control style. ‘You can’t do creative work on command!’ is his lament. He loves his job and has spent hours over several weekends developing and refining a new product. There is considerable resentment from Palu and Head about the resources that have been invested in the software division, partly because they do not see the need for the company to diversify, and partly because they claim that money is being diverted from their departments to fund the new ventures. Patel claims that ‘a good e-business starts at home—we should open up all our procurement via the internet’. His suggestion does not go down well with Palu and Head.

In fact, Reihana has been pondering the structure of X-Stream for some time. He thinks that the old functional structure no longer seems appropriate. ‘Silo’ mentality and departmental interests seem to predominate, and turf wars are taking place. The company has grown to 64 staff in New Zealand and eight in Australia. The ongoing development of new hardware and the introduction of the software side of the business have made management somewhat complicated. He misses the old days when he knew every member of staff. The informal decision making that was characteristic of the business may have to give way to more formal processes. Yet he does not want to lose the creativity that underpinned its success. Despite the open invitation to attend the management meetings, many staff have complained that they never knew what was going on. He expects all senior managers to keep their departmental staff informed of developments. Some have done this admirably, while others have virtually ignored his wishes. A human resources manager, Alkina Bennelong, has now been appointed, reporting to Denise Commins. She has been reviewing the company’s loosely worded job descriptions and person specifications, and the recruitment and selection systems, and has suggested more professional but more elaborate approaches. She has also suggested the introduction of a performance management system, including feedback from peers, direct reports and outsiders, such as suppliers and customers. ‘Over my dead body!’ was the retort of Don Head. ‘How can you allow subordinates to tell you how to do your job?’ queried Jason Palu. ‘Can’t see what the fuss is all about’, offered Heather Berkowitz. ‘Everybody keeps telling me what to do anyway, even though they don’t understand the first thing about my job! But it doesn’t worry me.’

Questions:

1 Identify the strengths and weaknesses of X-Stream’s organizational culture.

2 Analyze the sources of the resistance to the proposed changes by Gil and Alkina and discuss how the company could deal with the resistance.

Answer 1

1. Qualities: One of the key qualities of the hierarchical culture at X-Stream is that significant choices are made by accord. The CEO, Gil Reihana, unequivocally trusts that representatives ought to be engaged to actualize the choices in their own specific manner. There is a casual connection between the senior administration and the workers of the organization and this aides in quicker and unhindered correspondence. All these confer higher adaptability and dexterity to the association.

Shortcomings: Silo mindset has begun happening in the association and now departmental interests prevail inside the association. The organization has been developing quickly and with this the administration has turned out to be more convoluted. This is mostly because of nonattendance of a formal structure. In the event that a formal association structure were set up overseeing higher number of workers would not have been an issue.

2. The proposed changes are being opposed by Jason Palu, Don Head and Heather. Purposes behind opposition are immediate costs, dread of obscure and nearness of incongruent group elements. The estimations of the association combined with the identity and view of the workers (the senior administration specifically) are managing their inspiration, capacity and additionally job observations. Every one of these prompts advancement of situational variables and this influence singular practices of the senior administration.

The organization can manage the opposition by imparting the need and the earnestness of the changes. The administration must teach workers that the progressions will be to support the association and every one of its representatives as long as possible. The administration can likewise consult with the workers who are setting up an obstruction. Openness is absolutely vital while establishing change the executives philosophy. The workers ought to be given an unmistakable, compact and true message. Representatives ought to be included. Representative cooperation is an unquestionable requirement in the change procedure. It helps in lessening the dread of obscure.