Reference no: EM133251252

Today, SEEK Limited, as an ASX/S&P 200 indexed company (an index of the leading 200 listed companies in Australia), is a leading service provider in the online employment and training market in Australia and New Zealand. SEEK is best known by its leading job searching engine, seek.com, which has over 150,000 jobs online and is visited 14.7 million times each month. SEEK has expanded its global businesses by its rapid internationalisation process in the last 17 years. By observing the trajectory of this process, it is evident that the company has a clear strategy to focus on emerging markets. To date, SEEK has acquired interests in five online employment websites that operate in countries across South-East Asia, China, Brazil, and Mexico, with exposure to over 2 billion people and approximately 20 per cent of the global gross domestic product (GDP). Overall, SEEK has received over 375 million visits to its global products every month and has over 3 million job opportunities available at any given time and over 100 million jobseeker profiles. Similar to many multinational enterprises (MNEs) in their early stage of international expansion, SEEK also experienced management crisis together with a mismatch between its rapid internationalisation and cross-culture management incompetence. Although in its organisational culture statement SEEK claims that it aims to promote a culture of excellence and acceptance in the workplace and celebrate the diversity of employees who contribute to the success of the organisation, the statement does not accord well with the story of how it managed its Chinese subsidiary.

In October 2006, SEEK acquired an initial 24 per cent interest in one of the three leading online employment sites in China, Zhaopin Ltd (Zhaopin, hereafter), whose website received a larger number of unique visitors each month than the number of people living in Australia. The Zhaopin investment represented SEEK's first investment in an online employment site outside Australia and New Zealand. Since 2008, with the Australian investment bank Macquarie, SEEK had further invested US$110 million (A$120 million) in Zhaopin. From 2008 to 2010, SEEK had increased its investment in Zhaopin to around 58.6 per cent.3 Along with the increase of ownership interest, SEEK faced more challenges of cross-culture management. These challenges were to do with the extent to which SEEK's headquarters should intervene in the daily business running of its foreign subsidiary and how to manage the top management team (TMT) in its subsidiary. Over a period of 12 consecutive years, Zhaopin changed chief executive officers (CEOs) and their associated TMT members four times and adjusted a number of marketing plans. Under the leadership of the new CEO, Peng Zhao - who joined Zhaopin in 2005 as a director of marketing and was soon promoted to chief operating officer (COO) then to his CEO position - the fourth quarter of 2009 was the first occasion on which Zhaopin achieved profitability, according to its official disclosure of financial information. Employees were pleased about Zhaopin's capability to maintain its positive financial performance in the first quarter of 2010 and they felt their strategic goal of having their company listed on the New York Exchange was one step closer, but most of them could not foresee a forthcoming, unprecedented crisis. Although it seemed at the time that the crisis started with four dramatic corporate public emails, conflicts between the subsidiary's CEO and SEEK headquarters were deeply rooted in the past several years.

On 23 July 2010, Daniel Phillips, a senior executive of Macquarie Bank's Shanghai office, and his business partner, a director of SEEK headquarters, turned up for boardroom duties at Zhaopin's Beijing office, but they found that the Zhaopin Beijing office had locked them out. Following that drama, Zhaopin employees received four emails from two factions of their senior management team from 23 to 26 July 2010. In the first email, CEO Peng Zhao, on behalf of his "core" TMT, including the COO and two other executives, announced the decision to dismiss four other executives: the chief technology officer (CTO), the chief financial officer (CFO), the vice president, and the director of technology, who were recruited by SEEK's headquarters and mainly worked in Zhaopin's Shanghai office. More importantly, compared with the CEO and other TMT members, who are located in Zhaopin's main
office in Beijing, CTO Yongtong Yu and his core team were believed to have a closer relationship with SEEK's headquarters. Two hours later, the second email appeared in all employees' mail boxes, stating that the last email sent by the CEO's office was not authorised by the SEEK Board of Directors (BoD), and therefore the announcement was invalid. As a result, the four "dismissed" executives, the CTO, the CFO, the vice president, and the director of technology, would remain in office, while the CEO, Mr Zhao, and his core team members were in turn dismissed.

The two conflicting corporate messages shocked most employees. Although it is quite common to see personnel changes for a foreign invested enterprise (FIE) in China,
such a sudden occurrence of TMT infighting, in particular executives' infighting between a subsidiary and the foreign headquarters, is unusual. After a long and exhausting day, when Mr Zhao left his office, he undertook a brief interview with China Business News reporters outside the gates at midnight. He commented that the crisis that he and seven of the top managers had sacked each other or been sacked by the Australian directors "can be viewed as a corporate bloodbath, replete with imagery of World War II. When Pearl Harbour has been attacked, how could I wear a swallow-tailed coat to face the media and the public?"

After the weekend, Daniel Phillips and a SEEK director returned with their lawyers and around 10 newly employed security officers to Zhaopin's Beijing office on the morning of 26 July 2010. Soon, the third email appeared in employees' inboxes.The email confirmed the dismissal of Mr Zhao's team and explained the BoD's decision as arising from the former CEO and the other three executives having damaged the company's daily operations, threatened Zhaopin's future initial public offering (IPO) in the international capital markets, and having sought to increase their own personal gain by sacrificing other employees' interests within the company. To defend his rights and reputation, Mr Zhao, in his own name, sent the fourth public email to staff, and stated that all these accusations were neither reasonable nor acceptable. In his letter, he argued that, as an executive and CEO, who owns the most options of the company, he would not do anything to block the corporate IPO plan, simply because the future IPO would bring more benefits to himself rather than to other
TMT members. He stated that, in order to protect the common interests of the company, he would not disclose more details of TMT conflict, especially conflict related to investors (that is, SEEK). Further, Mr Zhao emphasised, "since we don't speak the same language, I had already prepared to resign from the company"; but he was sorry that SEEK's biased decision was made on the basis of their differing views and communication incompetence. Since the dismissal had become a firm decision from the SEEK BoD, Mr Zhao maintained his calm and undertook a long interview with reporters from China Business News. He reflected on the entire drama and his career with Zhaopin, and commented:

"Zhaopin is just like a child, but Chinese and Westerners treat their child in different ways. I used to have a chat with SEEK's BoD chairman. He told me that,
when he was a CEO, he spent 30% of his time communicating with his BoD members, while 70% of his time was used on running businesses. However, in the past, I could only spend 10% of my time communicating with the BoD. Think about it: we could only have one telephone meeting per month, and one face-to-face meeting per quarter. I was still very unfamiliar with these BoD members after a year".

Mr Zhao felt he was strongly distrusted by investors and the BoD. He provided an example. Back in December 2009, he made a decision that Zhaopin's Shanghai office,
which is mainly in charge of technology development, must be merged with its Beijing main office, and employees who were in the Shanghai office could be relocated to the
Beijing office. He explained to all TMT members:

"I always believe that our technology department plays a role like a heart to the human body, but the main office should work like the human brain. To function well, brain and heart should stay together. To be specific, Zhaopin has a technology team of 90 employees, of which some stayed in the Beijing main office while the others worked in the Shanghai office. This caused significant problems for our daily management, but I knew the barrier to implementing my decision was from our CTO Mr Yu, because his family is in Shanghai."

As anticipated, Mr Yu immediately denied this, explaining his reasons to the reporter in another interview:

"There were some historical issues in this company history. I used to lead my own software company. Zhaopin was just one of my clients. Several years ago, when the former CEO, Mr Liu, invited me to join Zhaopin, I took all my core technology team members with me. I was promised by the former CEO that I would be allowed to stay in Zhaopin's Shanghai office. It was a pity that the former CEO resigned from Zhaopin in August 2009. When the new CEO, Mr Zhao, took power, he started to dismiss my team members, including my key technology assistant."

Two weeks later, Paul Basset, the co-founder of SEEK in Melbourne, Australia, who was one of Zhaopin's BoD members, formally undertook an interview with reporters from the Sydney Morning Herald, and concluded: "peace had been restored ... We've resolved our differences with the particular executives on an amicable basis... The business achieved profitability and cash flow profitability this year and we're happy with the trajectory".

After another four years, on 12 June 2014 Zhaopin eventually went public on the New York Stock Exchange. The successful IPO raised US$75.7 million with a market capitalisation of US$674 million at a price range midpoint of US$13.50 per share on the day.14 However, people wonder whether the IPO would have come much earlier if there had not been such infighting among the TMT and BoD members. After all, profitability started in 2009 under former CEO Zhao's leadership.

Question 1.) Might this conflict have played out any differently if the parties had come from other countries? Explain.

Question 2.) Overall, what does this case teach us about conflict management? Explain.