Consultex, Inc. was founded in 2012 as a small financial consulting business. The company had done reasonably well in 2012–2014 but started noticing its cash dwindle early in 2015. In January 2015, Consultex had paid $20,500 to purchase land and repaid $2,000 principal on an existing promissory note. In March, the company paid $2,900 cash for dividends and $1,000 to repurchase and eliminate Consultex stock that had previously been issued for $1,000. To improve its cash position, Consultex borrowed $5,900 by signing a new promissory note in May and also issued stock to a new private investor for $12,900 cash. Year-end comparative balance sheets and income statements are presented below. CONSULTEX, INC. Balance Sheet October 31 2015 2014 Assets Cash $ 9,570 $ 15,800 Accounts Receivable 15,800 12,900 Prepaid Rent 2,450 3,900 Land 30,500 10,000 Total Assets $ 58,320 $ 42,600 Liabilities and Stockholders’ Equity Salaries and Wages Payable $ 2,450 $ 3,900 Income Taxes Payable 1,000 1,000 Notes Payable (long-term) 16,800 12,900 Common Stock 21,800 9,900 Retained Earnings 16,270 14,900 Total Liabilities and Stockholders’ Equity $ 58,320 $ 42,600 CONSULTEX, INC. Income Statement For the Year Ended October 31 2015 2014 Sales Revenue Salaries and Wages Expense $ 162,500 $ 165,500 Rent Expense 98,900 97,900 Prepaid Rent 36,900 30,900 Utilities Expenses 20,600 20,900 Income before Income Tax Expense $ 6,100 $ 15,800 Income Tax Expense 1,830 4,740 Net Income 4,270 11,060 Required: Prepare a properly formatted Statement of Cash Flows for Consultex, Inc. for the year ended October 31, 2015 (using the indirect method). (Amounts to be deducted should be indicated with a minus sign.)
In: Accounting
Founded in 1846, Hood is a Charlestown company with more than $2 billion in annual sales. The company has 15 plants and uses filling machines for its gallon milk containers. There is some variation in the actual amount of milk that goes into the container. The machine can go out of adjustment and put a mean amount either less or more than one-gallon containers. To monitor the filling process, the production manager for the Sacramento plant selects a simple random sample of 16 gallons each day. He can test whether the machine is still in adjustment using the following steps: Set up a hypothesis Set up a suitable significance level Determine a suitable test statistic Determine the critical region Perform computations Make decision to accept or reject hypothesis
In: Statistics and Probability
Air voice Oman is a recently established
telecommunication company which was founded by Ms. Aadila. The
company is managed by the board of directors elected by the
shareholders. Corporate Governance is essential to
mitigate the conflicting interests amongst stakeholders of the
company.
Corporate governance includes the processes through which
corporations' objectives are set and pursued in the context of the
social, regulatory and market environment. These include monitoring
the actions, policies, practices, and decisions of corporations,
their agents, and affected stakeholders. It relates to the internal
means by which corporations are operated and controlled. All the
companies are required to adhere to the principles of corporate
governance codes.
Suggest and explain the principles of corporate governance
issued by OECD that should be followed by Air voice Oman with
appropriate examples.
In: Accounting
H&M is a clothing retailer founded in 1947. In the last decade, the company has exploded to $20.3 billion in annual sales. The company has 3,500 stores spread across 55 countries, and a huge warehousing and logistics to manage. While the success of H&M is mainly due to following the latest fashion trends, the secret to its success is low production cost and reduced lead times or how fast they get their products to market. H&M stores are refreshed daily with new fashion items. In addition, in-house designers ask for the opinion of buyers when creating collections. H&M manufactures 80% of its inventory in advance and waits until the last minute to prepare the remaining 20% to take advantage of current trends. It uses an “Inventory Management System” that allows it to manufacture its products in this way. This system is used by the operational managers to follow up the production process details. In addition, this system produces periodical reports (monthly and quarterly) to help middle managers control the production operations. In addition, the “Supply Chain Management System” allows H&M to collaborate with its suppliers to achieve efficiency and reduce manufacturing lead times by 15-20%. Reduced lead times reduce the risk of buying the wrong products. However, a little less than a year ago, H&M was struggling with a number of problems that decreased its revenues. Not only was it suffering from a sales decline, but the company also had unsold inventory worth $4 billion. So, what did H&M do to improve things? H&M introduced a new website and mobile application equipped with capabilities that promise to improve the customer’s experience such as live chat. In addition, they used “Scan & Find” technology at their stores. It is a feature that enables customers to find additional product information (such as available sizes) by scanning an item’s tag using their phone. These e-commerce and mobile enhancements and the new in-store technology seem to be paying off. In February 2019, H&M reported a 22% increase in online sales.
1* What are the 6 strategic objectives for using information systems, and which one applies to the new introduced Website and mobile application? Support your answer. (20 points)
2* Name and explain one main business process used by H&M. (20 points)
3* To which category of systems the “Supply Chain Management System” used by H&M belongs? What are the characteristics of this category of systems? (15 points)
4* What is the type of the “Inventory Management System”, described in this case, according to the different management groups (it could be 1 or more)? Support your answer. (15 points) 5* The last paragraph of the case introducing the new solution adopted by H&M, includes a collaboration tool. Specify this tool and specify to which category of collaboration tools it belongs? (15 points)
6* What is the role of the different information systems used by “H&M”? would the company survive without using these systems? (15 points)
In: Operations Management
Lasertech is a start-up company that was founded by three college friends Mark, Mike, and Stella, right after they graduated from medical school. They had a vision of utilizing laser technology and selling it to hospitals and physicians to enable less-invasive surgeries. The company has been struggling in recent years. Sales have fluctuated and the company is often left with unsold inventory of products. Mark prepares monthly production schedules based on sales of the previous two months. The production schedule triggers the purchase of inventory. Stella monitors sales and inventory levels and plans promotions to sell slow-moving inventory. Mike monitors the cash flow and borrows against a line of credit when cash is low. The company founders brought in a consultant to assist the company in increasing sales, lowering costs, and controlling inventory. The consultant recommended implementing a formal budgeting process as the first step in improving performance.
Required:
In: Accounting
Founded in 1850. the American Express Company is a global travel financial and network services provider . Part A Find the most recent Annual Report for American Express at wwwamericanexpresscom and use the information found there to answer the following questions . 1. Read the Notes to the Financial Statements to determine the criteria for cash equivalents . 2. The internal control policy of American Express is described in the Report of Management . Summarize this policy 3. Which CPA firm conducts the external audit of American Express ? 4. Describe what internal audit is and some of the weaknesses American Express can face
In: Accounting
INTRO
Jones stormed into McMillan’s office. “I’ve had it! We’ve been here three months and nothing changes. Why aren’t they listening? Why do they keep leaving? What’s wrong?”
BACKGROUND
NewForm IT, founded in 2012 by four friends, provides IT consulting services to small businesses in the local and regional area. Three of the founders left the firm in 2014/2015, selling their interests at a handsome profit. The remaining founder and former CHRO, James Stanton, left nine months ago after clashing with the second owner, Rodney Collier, who purchased the company in 2015.
Sheila Jones and Ronnie McMillan recently purchased NewForm; Jones became its third CEO.
Three of the founders loved playing with computers and systems. While in college and in the early years of their careers, they created websites, developed computer games, played with mainframes, and made spare cash by solving individual and corporate IT problems. Systems and IT came easily for them, and they discovered that what other people feared were simple problems to them. They knew that they could make money by doing what they knew best. Their vision was to help small organizations solve their IT problems, and they discovered that they could charge exorbitant fees for doing so.
• The first founder to leave sold to her partners in 2014.
• Two founders—including the CEO—sold their shares to a group led by Collier in 2015 and left at that time.
• Stanton also sold his shares to Collier in 2015 but remained at his job.
• All four founders became multimillionaires when they sold the company.
• At the time of the 2015 sale, the company employed 53 IT consultants, most working 60-hour weeks and earning large bonuses.
Stanton and Collier had problems with each other from the outset. They differed on how to price consulting jobs, how to pay consultants, work hours, benefits (401k, leave policy, health insurance, etc.), among other things. Stanton saw little need to change what was successfully working; Collier wanted a fresh new corporate image. Corporate culture slowly began to move away from its original entrepreneurial style. Stanton and Collier continued to clash until nine months ago when Stanton walked away. Collier and his group sold NewForm six months later to a group led by Jones.
Jones is a senior executive with 23 years of industry experience, mostly with large, high- tech firms. When the founders formed the company they had asked her to join their team as a partner, but she declined. She had neither the time nor the inclination to do so. Today is different; she has made money in the industry, and her newly earned Ph.D. in leadership dynamics has given her the spirit and the insight to run the show. Because Collier wanted to sell and get out, Jones bought into NewForm at a discount and was ready to roll up her sleeves and get to work. McMillan, a long-term colleague, joined her as an equal partner and CHRO.
NewForm employs 83 people today, 61 of whom are IT consultants. These are highly skilled professionals, well paid and sought after in their field. While most have significant corporate experience, 49 have been with NewForm less than three years. Only four have been with NewForm for five years, and two have been with NewForm since its inception.
YOUR HRM CONSULTING FIRM
As a recent graduate, you have joined a 15-month-old startup HRM Consulting firm. You are excited about the opportunity this presents. Some of your team members are recent HRM graduates just like you, while others are SHRM-certified senior leaders who serve as mentors to the recent grads. The senior leaders, led by Patrick Conroy, have a financial stake in the firm and have established a plan that allows junior leaders to eventually earn the right to purchase a percentage of the firm and become a partner.
Early Monday mornings are set aside for virtual corporate meetings. This is when the partners and employees meet to focus on the firm no matter where they are in the world. These meetings are a combination of strategic think tanks, corporate planning sessions with problem analysis, mentoring, financial discussions, and discussions of any strategic decision that needs to be made. After 15 months, it is apparent that that these Monday meetings are the key that is leading to the team’s success.
This Monday morning is no different. Last week Conroy received a message from a company called NewForm IT and spent 30 minutes on the phone with McMillan, it’s CHRO. Conroy prepared an internal memo for the firm describing NewForm’s problems, and the group is prepared to discuss the issue at length.
As the conversation begins you consider your role in the firm. You know you try to do your best for your clients, yet one of your colleagues called you in for a brief but intense conversation about a recent client. Yes, you recognize that you may have missed a few social cues, might not have found the right words and advice for the client, and did not leave the client completely satisfied. But their challenge was particularly tough, and you probably should have had help from someone else in the firm. That job had been underbid, and the fee did not leave enough room for two consultants. You begin to wonder if this is the right career for you, or whether the senior team will ask you to leave. Your mind wanders.
While you muse on this, barely hearing the conversation in the room, Conroy looks directly at you and says, “You’ve worked with IT people, what do you think about the situation?” Panic sets in.
TODAY’S ISSUES AT NEWFORM
From 2012 until 2015, NewForm IT grew to 53 consultants. It had virtually no turnover during that time; two consultants were terminated for cause, one for discipline, and two left voluntarily when their spouses received out-of-state job offers. Stability was one of NewForm’s strengths; many consultants worked numerous jobs with one client, making it easier to produce quality results because they understood their clients’ needs and nuances; clients were satisfied. Employee compensation was higher than the market, and NewForm was making money for everyone.
The 2015 sale brought shock and change. As the only remaining founder, Stanton attempted to reassure everyone that nothing would change, but consultants identified subtle variations from the beginning. In the midst of changing internal rules, Stanton tried to maintain the status quo. Yet he had no real authority, and his suggestions fell on deaf ears. Early in 2018, he commissioned the Gallup Company to do its formal twelve question engagement survey. The results confirmed what he already knew: morale was suffering, and employees were no longer engaged. He wished he had done the survey and received baseline data 3-5 years ago.
Metrics are also down. Repeat clients, one of the company’s strengths, fell from a high of 57 percent (that is, 57 percent of clients engaged NewForm for a second job) in 2014 to 31 percent in 2017. Billable hours per consultant have also dropped, from 54 to 37 hours per week. 2018 numbers are not yet available but are trending a similar direction to 2017. NewForm is barely making a profit.
Stanton did what he knows best. With 17 years of HR experience, including 10 at the senior level, he thought he had seen it all. His techie friends had known that he was the perfect one to join them when they began the company, and no one was disappointed. In the early years at NewForm, he did everything that he wanted to do without anyone looking over his shoulder. Life changed when they sold the company, but he couldn’t imagine how wrong things would go or how fast. After commissioning the Gallup Survey, he believed he had the ammunition to return to the previous climate. But Collier had other ideas and a different perspective on how to view the survey results. Nine months ago Stanton decided to leave the firm.
Six months later, Collier, willing to take a small loss, decided to sell. Jones and McMillan, long-time friends of Stanton and the other founders, became willing buyers. They opened the books, spoke to Stanton, found a strong employee base, identified initial problems and saw nothing severe. This became their opportunity of a lifetime. Opportunity? Or endless problems?
THE MEETING
When Jones stormed into McMillian’s office, they had a long conversation about what was really going on. They decided to meet with Stanton to get his perspective. Stanton was more than happy to provide his views.
Stanton: Let me reiterate what I told you when you were deciding to purchase NewForm. This is a great company. When we founded it, we hired the best of the best. I used my contacts, years of experience and friends I knew in the recruitment field to hire great talent. The other owners did the same. We brought in people who loved the work, were independent and understood clients. When we gave them a job, we left them alone to do it. And they did it well.
Jones: How did the rest of the executive team fit in?
Stanton: We all (owners/executive team) bid on contracts, sometimes individually, sometimes in pairs. Since I was in charge of staffing, they looked to me both for scheduling needs and for identifying specific talent. Many of our clients had unique needs, and we sought to find that perfect match. Whoever the key bidder was oversaw our consultant and was ultimately responsible for results. After a while, each owner had built relationships with individual consultants; these relationships made reporting and bidding easier. While this may seem like an unrealistic utopia, it really worked here. Our productivity and turnover figures bear this out.
McMillan: What happened?
Stanton: My three very close friends decided to head for new challenges— it was as simple as that. It was cost prohibitive for me to buy them out, so I decided to sell at that point. The offer was great, I would be set for life, and although I would no longer have any controlling interest, I would retain my title and the ability to do my job. I loved…I STILL love…this company, and in 2015, I couldn’t see any other place to go. I was a little concerned about how I would get along with Rodney Collier, but we had a few good meetings, and I thought he would listen and was open to keeping the company as it was. Employees met him, we vetted him and his associates as carefully as we could, and we decided to do the deal. I knew that things would change, but we didn’t really see any red flags.
Jones: I know from my own experience that a lot can be hidden when you look to buy a company. What did……
Stanton: (Interrupting) I’ll say. He came in with two senior vice presidents and within a week everything was different. For the first time in my NewForm career, people came in to my office and closed the door; we NEVER had the need for a closed-door meeting. I can’t begin to describe the nature of the complaints; some were style, some were content; some were specific, some were general. I did my best to calm them down, give them platitudes of “things change, and we couldn’t have this forever,” or “we all have to get used to a new way of doing things,” and “I’ve spoken to Rodney and I can see that it’s already getting better.” Sometimes I found myself simply listening for half an hour.
And then the parade started. Slowly at first, but it was clear. Our best people started leaving. They would come into my office carrying a wrapped bottle of scotch for me. After a while they would just walk in, put my present on my desk, and sit down…. and tell me about their new opportunity. Some took pay cuts, some left the area, but it was clear. Their career here was no longer what they wanted it to be. I have a great collection of scotch…but I don’t want it.
McMillan: Is that when you went to Gallup?
Stanton: I had to do something. Collier wasn’t listening to me. He couldn’t HEAR me. When we would meet, he seemed to get angrier and angrier, wondering why I couldn’t do anything about the turnover, as if it were my fault. I know that he’s a data guy, so I thought that good information about the lack of engagement would help him see some of the issues. But by then it was too late. I didn’t want to be fired, so I left.
Jones: Thank you, this is very helpful. Ronnie and I already understood that employees suffered under the previous regime, but your insight helps clarify the situation. Ronnie, did we know what we were getting into? Maybe we want to sell it to you, James?
Stanton: Oh, I’ve moved on. But I love many of those people and can help wherever you need me.
Jones: You have already been more than kind. Ronnie, your thoughts?
McMillan: James, do you know that new HRM consulting firm across the river? They have a great group of senior and junior people. I’m thinking of contacting them. What do you think?
Stanton: Yes, I’ve known a few of them for years, and they’ve got some bright young kids working for them. I’m sure they’ll have some ideas for you.
ANSWER THE FOLLOWING:
In: Operations Management
INTRO
Jones stormed into McMillan’s office. “I’ve had it! We’ve been here three months and nothing changes. Why aren’t they listening? Why do they keep leaving? What’s wrong?”
BACKGROUND
NewForm IT, founded in 2012 by four friends, provides IT consulting services to small businesses in the local and regional area. Three of the founders left the firm in 2014/2015, selling their interests at a handsome profit. The remaining founder and former CHRO, James Stanton, left nine months ago after clashing with the second owner, Rodney Collier, who purchased the company in 2015.
Sheila Jones and Ronnie McMillan recently purchased NewForm; Jones became its third CEO.
Three of the founders loved playing with computers and systems. While in college and in the early years of their careers, they created websites, developed computer games, played with mainframes, and made spare cash by solving individual and corporate IT problems. Systems and IT came easily for them, and they discovered that what other people feared were simple problems to them. They knew that they could make money by doing what they knew best. Their vision was to help small organizations solve their IT problems, and they discovered that they could charge exorbitant fees for doing so.
• The first founder to leave sold to her partners in 2014.
• Two founders—including the CEO—sold their shares to a group led by Collier in 2015 and left at that time.
• Stanton also sold his shares to Collier in 2015 but remained at his job.
• All four founders became multimillionaires when they sold the company.
• At the time of the 2015 sale, the company employed 53 IT consultants, most working 60-hour weeks and earning large bonuses.
Stanton and Collier had problems with each other from the outset. They differed on how to price consulting jobs, how to pay consultants, work hours, benefits (401k, leave policy, health insurance, etc.), among other things. Stanton saw little need to change what was successfully working; Collier wanted a fresh new corporate image. Corporate culture slowly began to move away from its original entrepreneurial style. Stanton and Collier continued to clash until nine months ago when Stanton walked away. Collier and his group sold NewForm six months later to a group led by Jones.
Jones is a senior executive with 23 years of industry experience, mostly with large, high- tech firms. When the founders formed the company they had asked her to join their team as a partner, but she declined. She had neither the time nor the inclination to do so. Today is different; she has made money in the industry, and her newly earned Ph.D. in leadership dynamics has given her the spirit and the insight to run the show. Because Collier wanted to sell and get out, Jones bought into NewForm at a discount and was ready to roll up her sleeves and get to work. McMillan, a long-term colleague, joined her as an equal partner and CHRO.
NewForm employs 83 people today, 61 of whom are IT consultants. These are highly skilled professionals, well paid and sought after in their field. While most have significant corporate experience, 49 have been with NewForm less than three years. Only four have been with NewForm for five years, and two have been with NewForm since its inception.
YOUR HRM CONSULTING FIRM
As a recent graduate, you have joined a 15-month-old startup HRM Consulting firm. You are excited about the opportunity this presents. Some of your team members are recent HRM graduates just like you, while others are SHRM-certified senior leaders who serve as mentors to the recent grads. The senior leaders, led by Patrick Conroy, have a financial stake in the firm and have established a plan that allows junior leaders to eventually earn the right to purchase a percentage of the firm and become a partner.
Early Monday mornings are set aside for virtual corporate meetings. This is when the partners and employees meet to focus on the firm no matter where they are in the world. These meetings are a combination of strategic think tanks, corporate planning sessions with problem analysis, mentoring, financial discussions, and discussions of any strategic decision that needs to be made. After 15 months, it is apparent that that these Monday meetings are the key that is leading to the team’s success.
This Monday morning is no different. Last week Conroy received a message from a company called NewForm IT and spent 30 minutes on the phone with McMillan, it’s CHRO. Conroy prepared an internal memo for the firm describing NewForm’s problems, and the group is prepared to discuss the issue at length.
As the conversation begins you consider your role in the firm. You know you try to do your best for your clients, yet one of your colleagues called you in for a brief but intense conversation about a recent client. Yes, you recognize that you may have missed a few social cues, might not have found the right words and advice for the client, and did not leave the client completely satisfied. But their challenge was particularly tough, and you probably should have had help from someone else in the firm. That job had been underbid, and the fee did not leave enough room for two consultants. You begin to wonder if this is the right career for you, or whether the senior team will ask you to leave. Your mind wanders.
While you muse on this, barely hearing the conversation in the room, Conroy looks directly at you and says, “You’ve worked with IT people, what do you think about the situation?” Panic sets in.
TODAY’S ISSUES AT NEWFORM
From 2012 until 2015, NewForm IT grew to 53 consultants. It had virtually no turnover during that time; two consultants were terminated for cause, one for discipline, and two left voluntarily when their spouses received out-of-state job offers. Stability was one of NewForm’s strengths; many consultants worked numerous jobs with one client, making it easier to produce quality results because they understood their clients’ needs and nuances; clients were satisfied. Employee compensation was higher than the market, and NewForm was making money for everyone.
The 2015 sale brought shock and change. As the only remaining founder, Stanton attempted to reassure everyone that nothing would change, but consultants identified subtle variations from the beginning. In the midst of changing internal rules, Stanton tried to maintain the status quo. Yet he had no real authority, and his suggestions fell on deaf ears. Early in 2018, he commissioned the Gallup Company to do its formal twelve question engagement survey. The results confirmed what he already knew: morale was suffering, and employees were no longer engaged. He wished he had done the survey and received baseline data 3-5 years ago.
Metrics are also down. Repeat clients, one of the company’s strengths, fell from a high of 57 percent (that is, 57 percent of clients engaged NewForm for a second job) in 2014 to 31 percent in 2017. Billable hours per consultant have also dropped, from 54 to 37 hours per week. 2018 numbers are not yet available but are trending a similar direction to 2017. NewForm is barely making a profit.
Stanton did what he knows best. With 17 years of HR experience, including 10 at the senior level, he thought he had seen it all. His techie friends had known that he was the perfect one to join them when they began the company, and no one was disappointed. In the early years at NewForm, he did everything that he wanted to do without anyone looking over his shoulder. Life changed when they sold the company, but he couldn’t imagine how wrong things would go or how fast. After commissioning the Gallup Survey, he believed he had the ammunition to return to the previous climate. But Collier had other ideas and a different perspective on how to view the survey results. Nine months ago Stanton decided to leave the firm.
Six months later, Collier, willing to take a small loss, decided to sell. Jones and McMillan, long-time friends of Stanton and the other founders, became willing buyers. They opened the books, spoke to Stanton, found a strong employee base, identified initial problems and saw nothing severe. This became their opportunity of a lifetime. Opportunity? Or endless problems?
THE MEETING
When Jones stormed into McMillian’s office, they had a long conversation about what was really going on. They decided to meet with Stanton to get his perspective. Stanton was more than happy to provide his views.
Stanton: Let me reiterate what I told you when you were deciding to purchase NewForm. This is a great company. When we founded it, we hired the best of the best. I used my contacts, years of experience and friends I knew in the recruitment field to hire great talent. The other owners did the same. We brought in people who loved the work, were independent and understood clients. When we gave them a job, we left them alone to do it. And they did it well.
Jones: How did the rest of the executive team fit in?
Stanton: We all (owners/executive team) bid on contracts, sometimes individually, sometimes in pairs. Since I was in charge of staffing, they looked to me both for scheduling needs and for identifying specific talent. Many of our clients had unique needs, and we sought to find that perfect match. Whoever the key bidder was oversaw our consultant and was ultimately responsible for results. After a while, each owner had built relationships with individual consultants; these relationships made reporting and bidding easier. While this may seem like an unrealistic utopia, it really worked here. Our productivity and turnover figures bear this out.
McMillan: What happened?
Stanton: My three very close friends decided to head for new challenges— it was as simple as that. It was cost prohibitive for me to buy them out, so I decided to sell at that point. The offer was great, I would be set for life, and although I would no longer have any controlling interest, I would retain my title and the ability to do my job. I loved…I STILL love…this company, and in 2015, I couldn’t see any other place to go. I was a little concerned about how I would get along with Rodney Collier, but we had a few good meetings, and I thought he would listen and was open to keeping the company as it was. Employees met him, we vetted him and his associates as carefully as we could, and we decided to do the deal. I knew that things would change, but we didn’t really see any red flags.
Jones: I know from my own experience that a lot can be hidden when you look to buy a company. What did……
Stanton: (Interrupting) I’ll say. He came in with two senior vice presidents and within a week everything was different. For the first time in my NewForm career, people came in to my office and closed the door; we NEVER had the need for a closed-door meeting. I can’t begin to describe the nature of the complaints; some were style, some were content; some were specific, some were general. I did my best to calm them down, give them platitudes of “things change, and we couldn’t have this forever,” or “we all have to get used to a new way of doing things,” and “I’ve spoken to Rodney and I can see that it’s already getting better.” Sometimes I found myself simply listening for half an hour.
And then the parade started. Slowly at first, but it was clear. Our best people started leaving. They would come into my office carrying a wrapped bottle of scotch for me. After a while they would just walk in, put my present on my desk, and sit down…. and tell me about their new opportunity. Some took pay cuts, some left the area, but it was clear. Their career here was no longer what they wanted it to be. I have a great collection of scotch…but I don’t want it.
McMillan: Is that when you went to Gallup?
Stanton: I had to do something. Collier wasn’t listening to me. He couldn’t HEAR me. When we would meet, he seemed to get angrier and angrier, wondering why I couldn’t do anything about the turnover, as if it were my fault. I know that he’s a data guy, so I thought that good information about the lack of engagement would help him see some of the issues. But by then it was too late. I didn’t want to be fired, so I left.
Jones: Thank you, this is very helpful. Ronnie and I already understood that employees suffered under the previous regime, but your insight helps clarify the situation. Ronnie, did we know what we were getting into? Maybe we want to sell it to you, James?
Stanton: Oh, I’ve moved on. But I love many of those people and can help wherever you need me.
Jones: You have already been more than kind. Ronnie, your thoughts?
McMillan: James, do you know that new HRM consulting firm across the river? They have a great group of senior and junior people. I’m thinking of contacting them. What do you think?
Stanton: Yes, I’ve known a few of them for years, and they’ve got some bright young kids working for them. I’m sure they’ll have some ideas for you.
ANSWER THE FOLLOWING:
In: Operations Management
INTRO
Jones stormed into McMillan’s office. “I’ve had it! We’ve been here three months and nothing changes. Why aren’t they listening? Why do they keep leaving? What’s wrong?”
BACKGROUND
NewForm IT, founded in 2012 by four friends, provides IT consulting services to small businesses in the local and regional area. Three of the founders left the firm in 2014/2015, selling their interests at a handsome profit. The remaining founder and former CHRO, James Stanton, left nine months ago after clashing with the second owner, Rodney Collier, who purchased the company in 2015.
Sheila Jones and Ronnie McMillan recently purchased NewForm; Jones became its third CEO.
Three of the founders loved playing with computers and systems. While in college and in the early years of their careers, they created websites, developed computer games, played with mainframes, and made spare cash by solving individual and corporate IT problems. Systems and IT came easily for them, and they discovered that what other people feared were simple problems to them. They knew that they could make money by doing what they knew best. Their vision was to help small organizations solve their IT problems, and they discovered that they could charge exorbitant fees for doing so.
• The first founder to leave sold to her partners in 2014.
• Two founders—including the CEO—sold their shares to a group led by Collier in 2015 and left at that time.
• Stanton also sold his shares to Collier in 2015 but remained at his job.
• All four founders became multimillionaires when they sold the company.
• At the time of the 2015 sale, the company employed 53 IT consultants, most working 60-hour weeks and earning large bonuses.
Stanton and Collier had problems with each other from the outset. They differed on how to price consulting jobs, how to pay consultants, work hours, benefits (401k, leave policy, health insurance, etc.), among other things. Stanton saw little need to change what was successfully working; Collier wanted a fresh new corporate image. Corporate culture slowly began to move away from its original entrepreneurial style. Stanton and Collier continued to clash until nine months ago when Stanton walked away. Collier and his group sold NewForm six months later to a group led by Jones.
Jones is a senior executive with 23 years of industry experience, mostly with large, high- tech firms. When the founders formed the company they had asked her to join their team as a partner, but she declined. She had neither the time nor the inclination to do so. Today is different; she has made money in the industry, and her newly earned Ph.D. in leadership dynamics has given her the spirit and the insight to run the show. Because Collier wanted to sell and get out, Jones bought into NewForm at a discount and was ready to roll up her sleeves and get to work. McMillan, a long-term colleague, joined her as an equal partner and CHRO.
NewForm employs 83 people today, 61 of whom are IT consultants. These are highly skilled professionals, well paid and sought after in their field. While most have significant corporate experience, 49 have been with NewForm less than three years. Only four have been with NewForm for five years, and two have been with NewForm since its inception.
YOUR HRM CONSULTING FIRM
As a recent graduate, you have joined a 15-month-old startup HRM Consulting firm. You are excited about the opportunity this presents. Some of your team members are recent HRM graduates just like you, while others are SHRM-certified senior leaders who serve as mentors to the recent grads. The senior leaders, led by Patrick Conroy, have a financial stake in the firm and have established a plan that allows junior leaders to eventually earn the right to purchase a percentage of the firm and become a partner.
Early Monday mornings are set aside for virtual corporate meetings. This is when the partners and employees meet to focus on the firm no matter where they are in the world. These meetings are a combination of strategic think tanks, corporate planning sessions with problem analysis, mentoring, financial discussions, and discussions of any strategic decision that needs to be made. After 15 months, it is apparent that that these Monday meetings are the key that is leading to the team’s success.
This Monday morning is no different. Last week Conroy received a message from a company called NewForm IT and spent 30 minutes on the phone with McMillan, it’s CHRO. Conroy prepared an internal memo for the firm describing NewForm’s problems, and the group is prepared to discuss the issue at length.
As the conversation begins you consider your role in the firm. You know you try to do your best for your clients, yet one of your colleagues called you in for a brief but intense conversation about a recent client. Yes, you recognize that you may have missed a few social cues, might not have found the right words and advice for the client, and did not leave the client completely satisfied. But their challenge was particularly tough, and you probably should have had help from someone else in the firm. That job had been underbid, and the fee did not leave enough room for two consultants. You begin to wonder if this is the right career for you, or whether the senior team will ask you to leave. Your mind wanders.
While you muse on this, barely hearing the conversation in the room, Conroy looks directly at you and says, “You’ve worked with IT people, what do you think about the situation?” Panic sets in.
TODAY’S ISSUES AT NEWFORM
From 2012 until 2015, NewForm IT grew to 53 consultants. It had virtually no turnover during that time; two consultants were terminated for cause, one for discipline, and two left voluntarily when their spouses received out-of-state job offers. Stability was one of NewForm’s strengths; many consultants worked numerous jobs with one client, making it easier to produce quality results because they understood their clients’ needs and nuances; clients were satisfied. Employee compensation was higher than the market, and NewForm was making money for everyone.
The 2015 sale brought shock and change. As the only remaining founder, Stanton attempted to reassure everyone that nothing would change, but consultants identified subtle variations from the beginning. In the midst of changing internal rules, Stanton tried to maintain the status quo. Yet he had no real authority, and his suggestions fell on deaf ears. Early in 2018, he commissioned the Gallup Company to do its formal twelve question engagement survey. The results confirmed what he already knew: morale was suffering, and employees were no longer engaged. He wished he had done the survey and received baseline data 3-5 years ago.
Metrics are also down. Repeat clients, one of the company’s strengths, fell from a high of 57 percent (that is, 57 percent of clients engaged NewForm for a second job) in 2014 to 31 percent in 2017. Billable hours per consultant have also dropped, from 54 to 37 hours per week. 2018 numbers are not yet available but are trending a similar direction to 2017. NewForm is barely making a profit.
Stanton did what he knows best. With 17 years of HR experience, including 10 at the senior level, he thought he had seen it all. His techie friends had known that he was the perfect one to join them when they began the company, and no one was disappointed. In the early years at NewForm, he did everything that he wanted to do without anyone looking over his shoulder. Life changed when they sold the company, but he couldn’t imagine how wrong things would go or how fast. After commissioning the Gallup Survey, he believed he had the ammunition to return to the previous climate. But Collier had other ideas and a different perspective on how to view the survey results. Nine months ago Stanton decided to leave the firm.
Six months later, Collier, willing to take a small loss, decided to sell. Jones and McMillan, long-time friends of Stanton and the other founders, became willing buyers. They opened the books, spoke to Stanton, found a strong employee base, identified initial problems and saw nothing severe. This became their opportunity of a lifetime. Opportunity? Or endless problems?
THE MEETING
When Jones stormed into McMillian’s office, they had a long conversation about what was really going on. They decided to meet with Stanton to get his perspective. Stanton was more than happy to provide his views.
Stanton: Let me reiterate what I told you when you were deciding to purchase NewForm. This is a great company. When we founded it, we hired the best of the best. I used my contacts, years of experience and friends I knew in the recruitment field to hire great talent. The other owners did the same. We brought in people who loved the work, were independent and understood clients. When we gave them a job, we left them alone to do it. And they did it well.
Jones: How did the rest of the executive team fit in?
Stanton: We all (owners/executive team) bid on contracts, sometimes individually, sometimes in pairs. Since I was in charge of staffing, they looked to me both for scheduling needs and for identifying specific talent. Many of our clients had unique needs, and we sought to find that perfect match. Whoever the key bidder was oversaw our consultant and was ultimately responsible for results. After a while, each owner had built relationships with individual consultants; these relationships made reporting and bidding easier. While this may seem like an unrealistic utopia, it really worked here. Our productivity and turnover figures bear this out.
McMillan: What happened?
Stanton: My three very close friends decided to head for new challenges— it was as simple as that. It was cost prohibitive for me to buy them out, so I decided to sell at that point. The offer was great, I would be set for life, and although I would no longer have any controlling interest, I would retain my title and the ability to do my job. I loved…I STILL love…this company, and in 2015, I couldn’t see any other place to go. I was a little concerned about how I would get along with Rodney Collier, but we had a few good meetings, and I thought he would listen and was open to keeping the company as it was. Employees met him, we vetted him and his associates as carefully as we could, and we decided to do the deal. I knew that things would change, but we didn’t really see any red flags.
Jones: I know from my own experience that a lot can be hidden when you look to buy a company. What did……
Stanton: (Interrupting) I’ll say. He came in with two senior vice presidents and within a week everything was different. For the first time in my NewForm career, people came in to my office and closed the door; we NEVER had the need for a closed-door meeting. I can’t begin to describe the nature of the complaints; some were style, some were content; some were specific, some were general. I did my best to calm them down, give them platitudes of “things change, and we couldn’t have this forever,” or “we all have to get used to a new way of doing things,” and “I’ve spoken to Rodney and I can see that it’s already getting better.” Sometimes I found myself simply listening for half an hour.
And then the parade started. Slowly at first, but it was clear. Our best people started leaving. They would come into my office carrying a wrapped bottle of scotch for me. After a while they would just walk in, put my present on my desk, and sit down…. and tell me about their new opportunity. Some took pay cuts, some left the area, but it was clear. Their career here was no longer what they wanted it to be. I have a great collection of scotch…but I don’t want it.
McMillan: Is that when you went to Gallup?
Stanton: I had to do something. Collier wasn’t listening to me. He couldn’t HEAR me. When we would meet, he seemed to get angrier and angrier, wondering why I couldn’t do anything about the turnover, as if it were my fault. I know that he’s a data guy, so I thought that good information about the lack of engagement would help him see some of the issues. But by then it was too late. I didn’t want to be fired, so I left.
Jones: Thank you, this is very helpful. Ronnie and I already understood that employees suffered under the previous regime, but your insight helps clarify the situation. Ronnie, did we know what we were getting into? Maybe we want to sell it to you, James?
Stanton: Oh, I’ve moved on. But I love many of those people and can help wherever you need me.
Jones: You have already been more than kind. Ronnie, your thoughts?
McMillan: James, do you know that new HRM consulting firm across the river? They have a great group of senior and junior people. I’m thinking of contacting them. What do you think?
Stanton: Yes, I’ve known a few of them for years, and they’ve got some bright young kids working for them. I’m sure they’ll have some ideas for you.
ANSWER THE FOLLOWING:
In: Operations Management
Read the following scenario:
Webmasters was an Internet start-up company founded in 2016. One of the largest problems for Webmasters was developing the technological systems necessary to support its rapidly expanding user base. Furthermore, due to the rapid expansion in recent years, many of its systems had been added hastily, resulting in poor integration and questionable data integrity. As a result, the CEO of Webmasters announced an initiative to integrate all systems and increase the quality of internal data. In compliance with this initiative, Webmasters purchased an expensive and complex billing system called BillPro, which would automate the billing for thousands of Internet accounts via credit cards.
During the integration, BillPro, in collaboration with Visa, created a phony credit card number that could be used by developers and programmers to test the functionality and integration of the BillPro system. Moreover, this credit card number was fully functional in “live” environments, so testers and developers could ensure functionality without being required to use actual personal or company credit card numbers. The activity on this card was not monitored. The integration went smoothly; however, it created thousands of corrupt accounts that required fixing.
Tyler, the manager of the Operations Department, was responsible for the resolution of all data integrity issues. His team was tasked with fixing all corrupt accounts created by the launch and integration of the BillPro system. As a result, Tyler was given the phony credit card number, which was kept on a Post-it Note in his drawer.
One of the top performers on the Operations team was a 29-year-old male named Ethan. Ethan had worked in Operations for more than a year and was making $15 per hour, the same salary as when he was hired. He was an introvert working to support a family and put himself through school. Ethan was the most technologically savvy individual on the team, and his overall systems knowledge exceeded that of his manager, Tyler. Ethan was brilliant in creating more efficient tools and methods to repair corrupted accounts. Therefore, Ethan was tasked with conducting training for new employees and updating team members on new processes and tools that he had created. As a result, he quickly became a trusted and valuable team member. Tyler gave him, and the other team members, the phony credit card number to increase the productivity of the team.
However, after six months of working at Webmasters, Ethan received an official reprimand from the company for using the company system to access websites containing pirated software and music. The FBI attended the investigation and determined that Ethan had not been a major player in the piracy. Therefore, Ethan was quietly warned and placed on a short-term probation. Tyler was asked to write a warning letter for the action; however, after a brief conversation with Ethan, Tyler determined that Ethan’s intentions were good and Tyler never officially submitted the letter because Ethan was a trusted employee and elevated the overall performance of the team.
A few months after the piracy incident, Tyler noticed some changes in Ethan’s behavior:
Prepare a detailed analysis of the scenario by incorporating your responses to the following in well-developed paragraphs (do not use a question-answer format):
In: Accounting