Reference no: EM133108680

Case Study:

2017 was a banner year for Chesswick Computer Corporation, a leading manufacturer of personal computers. The company surpassed $50 billion in sales, nearly seven times its revenues in 2012, and the year John Clarke took over as CEO. 

Clarke is a hard-driving, no-nonsense leader. His vision was to create a $100 billion enterprise by the year 2020, but things were slowly started to crumble around him. What once had been an open and productive atmosphere that cultured teamwork, was now deteriorating under the strains of political infighting, cronyism, and allegations of sexual harassment. 

In the eye of the storm was Samuel Anderson, vice president of human resources. Anderson and Clarke worked together in the nineties at another corporation before Clarke came to Chesswick in 2012. Three years later Anderson followed. Anderson immediately started using his relationship with Clarke to influence business decisions. Anderson also leveraged his ties to discreetly resolve two allegations of sexual harassment against him. 

Although the majority of senior executives and managers believed Clarke was an extremely tenacious and good executive, they also believed he was getting bad advice and accepting it. Clarke, when asked about the sexual harassment complaints against Anderson, replied, "People make things up. There is no way of knowing. People spread rumors". This and other incidents further strained relations between Clarke and the rest of the senior executive team. Busy with the task of running one of the world's leading PC manufacturing organizations, Clarke began relying heavily on three senior executives; Anderson, Senior Vice President Tim Hunt, and Chief Financial Officer Barry Lynn. 

The rest of the team felt increasingly alienated. Over a three-year period, starting in 2016, 10 top executives left the company and following them were several essential managers and supervisors. At the center of this exodus was the bizarre dynamics between Clarke and Anderson. Many believed that Clarke empowered Anderson to do things way beyond his role in human resources. For example, Anderson had significant influence on changing the organizational structure of the company, determining what divisions ought to sell into what markets, and which products should be sold through various departments. He also took steps to drive a wedge between senior executives, strengthening his position with Clarke while inducing a communications breakdown throughout the organization. Anderson had a list of people whom he would constantly campaign against by advocating organizational changes to lower their profile. Once he lowered their profile, he would start a process of easing them out of the door. As one executive put it, Anderson was instrumental in deciding which people to bring in and which were no longer acceptable in the company.

Clarke's reliance on Anderson baffled, and angered, other executives. Anderson was very close to Clarke, and he had a huge impact on the business. Human resource professionals usually do not play that kind of a role, as they are supposed to try to bring the team together, but all anyone saw Anderson doing was creating divisiveness. Instead of working together to fine-tune a coherent growth strategy, Chesswick's senior executive team became disjointed and increasingly detached from the rest of the company. Their inability to lead soon had an effect on the morale of almost every employee within the company. 

Two of Anderson's initiatives drove home the point of an executive team that was out of touch with its workers. The first initiative was the building of a multimillion-dollar on-campus cafeteria that included reserved underground parking for senior executives. Prior to that, executives shared parking space with the rest of the company's employees. The second initiative was the increased security on the eighth floor of the corporate building. Here the executives and several key managers had their offices; even though every other executive objected to the idea by arguing that it created a hierarchical environment not conducive to a free exchange of ideas with subordinates.

Anderson was at the center of almost every bit of chaos that existed within the company. Clarke denied that Anderson had undue influence. "Every executive has the same access to me", Clarke said. He continued, "I have always had an across-the-board relationship with everybody. I always maintained a high degree of equality. There was no favoritism." Clarke also maintains that Anderson had very good relations with just about everybody. Anyone who says otherwise, Clarke added, must have some ulterior motives. Many former executives said they were reluctant to complain to Clarke about Anderson because Clarke took personal offense, as if he were being criticized, and because they feared winding up on Anderson's list. 

The erosion of the executive team came at a very bad time. Its main competitor was starting to grab big chunks of PC market share by proving the viability of the direct-sales model. When Clarke replaced the former CEO in 2012, his aggressive price-cutting initiatives reversed Chesswick's direction and led the company to the top of the PC market. But now, Clarke was much less decisive. As one former executive noted, he was paralyzed by the speed with which the market was changing, and he couldn't make the difficult decisions. Clarke failed to see the opportunity of the web. Its main rival was now selling over $2 million worth of products per day over the Web. In 2018, its rival surpassed Chesswick in desktop PC sales to U.S. businesses for the first time.

The high turnover in the sales divisions led to instability that caused several high-profile corporate accounts to take their business elsewhere. As people left, the performance of the company started to degrade. Chesswick attempted to construct its own build-to-order strategy by purchasing a rival company. This failed as it had no vision to guide its direction. 

Finally, things came to a head. Chesswick could not significantly reduce distribution and manufacturing costs or boost PC revenues. Huge oversupplies of inventory adversely affected Chesswick. While its main competitors grew at about 55% from the first quarter of last year to the first quarter of this year, Chesswick's business fell by 11% over the same period. By the end of this year's first quarter, Chesswick's stock lost almost half its value, and the company's first-quarter earnings fell far short of analysts' estimates. 

Then came the kicker, the forced resignations of both Clarke and Anderson. The new CEO, Paula White, now has the massive job of turning a lot of infighting rank and file into a cohesive organization. The leadership structure was severely damaged due to the large number of people leaving Chesswick. Although a large number of replacements were found, it is extremely hard to replace the collective experience of that many people leaving in such a short time. To help rebuild the leadership structure, Paula White has charged the interim human resource vice president, Samuel Wines, with rebuilding the leadership structure. Samuel then got straight to work by creating a special leadership task force team. The team's first decision is a long-term strategy of implementing a competency based performance appraisal system.

Please answer the following questions:

1. Based on the case study, discuss the main issues that led to the downfall of Chesswick Computer Corporation. Relate your answers to issues concerning to Leadership, Organizational Behavior or Human Resource Management.
2. The special leadership task force has decided to implement a competency based performance appraisal as its long-term strategy to improve the situation in Chesswick.
   • What are competencies and how are they related to performance?
   • What is leadership and how do competencies fit in with it?
3. How can implementing a competency based performance model help Cheswick? Please elaborate your answers.
4. In your opinion, what are the five (5) leadership competencies that you believe are the most important for Chesswick's leaders to have in order to ensure its survival?