--------Fatima Hopkins, the CEO of Central Adventures, is having difficulties with all three of her top management level employees. With one manager making questionable decisions, another threatening to leave, and the third likely ‘in the red’, Fatima is hoping there is a simple answer to all her difficulties, and needs some advice from her accountant on how to proceed.

Central Adventures owns and operates three amusement parks in Michigan: Central Funland, Central Waterworld, and Central Treetops. Central Adventures has a decentralized organizational structure, where each park is run as an investment center. Each park manager meets with the CEO at least once annually to review their performance, as measured by their park’s ROI. The park manager then receives a bonus equal to 10% of their base salary for every ROI percentage point above the required rate.

Central Funland is an outdoor theme park, with twelve roller coaster rides and several other attractions. This park has first opened 1965, and most of the rides have been in operation for 20+ years. Attendance at this park has been relatively stable over the past ten years. The park manager of Funland, Janet Lieberman, recently shared with Fatima a proposal to replace one of their older rides with a new roller coaster, a hybrid steel and wood rollercoaster with a 90 degree, 200 foot drop and three inversions. The proposal indicated that the ride would cost $8,000,000 with an estimated life of 20 years. In addition, this new style of coaster would require additional maintenance, costing $125,000 each year. However, it projected that this new attraction would boost attendance, earning the park an additional $1,190,000 per year in revenues. Janet ultimately decided not to invest in this new attraction.

Central Waterworld is an indoor water park, operating year-round. Run by park manager David Copperfield, Waterworld was built in 2016 and has increased attendance by 20% every year since. David recently sent you an email complaining that, based on the current bonus payout schedule, Janet Lieberman’s bonus last year was significantly higher than his. He points to the increasing attendance, and says that his park is being punished for having opened so recently (his park assets are much more recent than the roller coasters at Funland). He currently has an employment offer from another company at the same pay rate, which he says he will accept if his performance is not appropriately acknowledged.

Central Treetops includes a high ropes course and has a series of ziplines that criss-cross over the Chippewa River. For many years, it was a popular venue for corporate team-building activities, so it is equipped with a main indoor facility with cafeteria and overnight guest rooms. This park has lost popularity in recent years, and has been ‘in the red’ for the past two years. If the park is not profitable this year, you will need to decide whether to close it - permanently. Central Adventures has a $86,000 mortgage payment on the land and buildings for Treetops, which would still need to be paid if the park is closed. Incidentally, you recently had a conversation with the regional head of the YMCA, who would like to open a summer camp in the central Michigan region. If you decided to close Treetops, you are fairly certain that you could lease that land to the YMCA for $250,000 annually.

A partial report of this year’s financial results for Central Adventures shows the following:

In addition to the information above, there are $2,542,920 in corporate costs, which are currently allocated evenly between the three parks. These costs are primarily due to employee benefits costs, which are billed at the corporate level. If the Treetops park is closed, the allocated corporate costs would decrease by $12,000. Central Adventures has a required rate of return of 12 percent (set at the company’s weighted-average cost of capital) and are subject to 18% income taxes.  

Fatima needs to see this year’s performance results before she can make any decisions. Is David’s complaint about the performance evaluation metrics valid? Is that also affecting management decisions in the form of Janet’s rejection of the proposed new rollercoaster? And is the company better off without Treetops? She sets off to the company accountant’s office to help get some answers.

Required:

a.   Create a multilevel income statement for Central Adventures.

b.   Calculate the current annual ROI, residual income and EVA for the three parks.

c.   Did Janet Lieberman (the Funland park manager) make the ‘right’ decision (i.e., was it in Central Adventure’s overall best interest for Funland to reject the new rollercoaster)? Explain your answer. Provide the appropriate financial analysis(es) to support your conclusion.

d.   Is David Copperfield’s (the Waterworld park manager) complaint valid? Or would a different performance metric tell the same story?

e.   Provide a recommendation on whether to close Treetops. Provide the appropriate financial analysis to support your conclusion.

f.    Provide a recommendation on a different allocation base for corporate overhead.  

After reading the article, answer the below questions:

Carlos Ghosn, CEO of Nissan and Renault, is not standing still. He talks fast. He may be thinking even faster. On his appearance at the student-run "View From The Top" leadership speakers series November 16, his rapid-fire thoughts on cars, global alliances, and looking for mistakes upheld his style as a man who is looking ahead and not wasting tim Ghosn's intensity and his track record — pulling Nissan back from the edge of bankruptcy — certainly put him in the running for the business salvation stratosphere already occupied by Lee Iacocca. A longer view of automotive history will make that call. For now, even with Nissan-Renault's recent somewhat off the mark sales performance making analysts raise their eyebrows, Ghosn is confident, pressing ahead, and thinking big. And not necessarily about selling cars in the United States. Vehicle sales in the United States, Europe, and Japan are either stable or declining, said Ghosn, who is looking to new markets such as India, Russia, China, Brazil, and Africa — where sales are expanding an average 20 percent annually. For perspective, Nissan's U.S. sales so far in 2007 have risen just 5.5 percent. People in these rapidly developing markets want all kinds of cars, he said, but the biggest demand is for the most economically accessible model — a $3,000 car. Nissan-Renault is partnering with two major automotive manufacturers (Ashok Leyland and Bajaj Auto Ltd.) to make light trucks and an affordable entry-level car. Ashok Leyland will build light trucks, and Bajaj Auto will focus on that $3,000 car, planned for a late 2011 rollout. It's another cross-cultural, global alliance that Ghosn thinks is absolutely necessary now for any company. He's a perfect example of how it can work. He's a polyglot born in Brazil to Lebanese parents, educated in Beirut and Paris, and the first non Japanese to head a major Japanese corporation. And recently it looked as though he might add an American company to his jobs, although talks ultimately failed for a possible top management position at General Motors. Ghosn was asked about that and answered with an analogy that would have done him well in a stand-up comedy competition. "Suppose you want to marry somebody and the father is very favorable, but not the bride." Relationships based on that set of circumstances, he said, "you'd better not pursue because that relationship will never be happy if there is no mutual appetite." When Ghosn arrived at Nissan in 1999, a mostly welcomed chief, he began to look at relationships and culture within the company and made changes — not all of them to be found in a typical management handbook. The thing to do, he said, is to find mistakes when they're small. "Small is solvable." The worst thing a manager can do is to hide a problem and let an organization "deviate from the course too much before you make the correction." Failure is important to good management, he said. If you create an environment where people are looking for mistakes, looking for dysfunction, that's very powerful." The best management lessons, he said, "are coming from real life. If you don't know what to do, look around you." Ghosn's path continues hurtling toward the future of cars. Renault announced this week that it's talking to Shai Agassi, whose bold promise to put an electric car in every driveway has already produced big investors. At Stanford, Ghosn talked about what's on the road now — vehicles that consume too much energy and too much fuel and soon will be obsolete. In his vision, the barrier is cost. He estimated that less than one vehicle out of a thousand today is a hybrid or an electric. And while buyers want their "green" vehicles affordable, he said, economies of technology investment must be achieved. "The more car manufacturers join forces, the more you can afford the expense required," he noted. He's listening more and more to consumers, no matter what. "We used to do cars we liked. It's good that you love the car, but an engineer in the United States will imagine a very different car than the one that will be driven in Mumbai." Ask who is the target customer and design a car for that person, he said. Example: In Mexico, Nissan will continue to manufacture a particular model of car that's ancient by current standards but has become a cherished icon in the Mexican taxi trade. And he talked about working with companies such as Google, Apple, and Microsoft to add something else to the technology packages available to drivers. He figured many spend at least two hours a day commuting "where there's nothing you can do but listen to music or talk on the phone." If carmakers try to create those new products on their own, "we're not going to get very far on our own." For all consumers' talk about fuel efficiency, however, he made sure he told this story of what happened recently at a Tokyo auto industry show. On display were a tiny, low-carbon footprint concept car and the 480 horsepower — non-energy-saving — Nissan GTR. Which one drew the biggest crowds? With perfect timing, he paused, then said: "The GTR."

A Brief background Case summary

Explain the Major Issues/Problems that need to be addressed in case (Questions that are often brought up within the case itself)

CEO pay is a 'hot button' issue in many countries today. The average CEO's pay is 183 times that of the average employee. In 1965 this average was 20 times. Your book indicates this ratio is 135 in Australia and 73 for the Netherlands. Some companies have frozen executive pay and are migrating to tying pay to performance and awarding performance stock awards and bonuses.   Based on the presumption that there is a pay imbalance between CEO's and workers, how might this imbalance be addressed (made more reasonable)?

After reading the article, answer the below questions: Carlos Ghosn, CEO of Nissan and Renault, is not standing still. He talks fast. He may be thinking even faster. On his appearance at the student-run "View From The Top" leadership speakers series November 16, his rapid-fire thoughts on cars, global alliances, and looking for mistakes upheld his style as a man who is looking ahead and not wasting tim Ghosn's intensity and his track record — pulling Nissan back from the edge of bankruptcy — certainly put him in the running for the business salvation stratosphere already occupied by Lee Iacocca. A longer view of automotive history will make that call. For now, even with Nissan-Renault's recent somewhat off the mark sales performance making analysts raise their eyebrows, Ghosn is confident, pressing ahead, and thinking big. And not necessarily about selling cars in the United States. Vehicle sales in the United States, Europe, and Japan are either stable or declining, said Ghosn, who is looking to new markets such as India, Russia, China, Brazil, and Africa — where sales are expanding an average 20 percent annually. For perspective, Nissan's U.S. sales so far in 2007 have risen just 5.5 percent. People in these rapidly developing markets want all kinds of cars, he said, but the biggest demand is for the most economically accessible model — a $3,000 car. Nissan-Renault is partnering with two major automotive manufacturers (Ashok Leyland and Bajaj Auto Ltd.) to make light trucks and an affordable entry-level car. Ashok Leyland will build light trucks, and Bajaj Auto will focus on that $3,000 car, planned for a late 2011 rollout. It's another cross-cultural, global alliance that Ghosn thinks is absolutely necessary now for any company. He's a perfect example of how it can work. He's a polyglot born in Brazil to Lebanese parents, educated in Beirut and Paris, and the first non Japanese to head a major Japanese corporation. And recently it looked as though he might add an American company to his jobs, although talks ultimately failed for a possible top management position at General Motors. Ghosn was asked about that and answered with an analogy that would have done him well in a stand-up comedy competition. "Suppose you want to marry somebody and the father is very favorable, but not the bride." Relationships based on that set of circumstances, he said, "you'd better not pursue because that relationship will never be happy if there is no mutual appetite." When Ghosn arrived at Nissan in 1999, a mostly welcomed chief, he began to look at relationships and culture within the company and made changes — not all of them to be found in a typical management handbook. The thing to do, he said, is to find mistakes when they're small. "Small is solvable." The worst thing a manager can do is to hide a problem and let an organization "deviate from the course too much before you make the correction." Failure is important to good management, he said. If you create an environment where people are looking for mistakes, looking for dysfunction, that's very powerful." The best management lessons, he said, "are coming from real life. If you don't know what to do, look around you." Ghosn's path continues hurtling toward the future of cars. Renault announced this week that it's talking to Shai Agassi, whose bold promise to put an electric car in every driveway has already produced big investors. At Stanford, Ghosn talked about what's on the road now — vehicles that consume too much energy and too much fuel and soon will be obsolete. In his vision, the barrier is cost. He estimated that less than one vehicle out of a thousand today is a hybrid or an electric. And while buyers want their "green" vehicles affordable, he said, economies of technology investment must be achieved. "The more car manufacturers join forces, the more you can afford the expense required," he noted. He's listening more and more to consumers, no matter what. "We used to do cars we liked. It's good that you love the car, but an engineer in the United States will imagine a very different car than the one that will be driven in Mumbai." Ask who is the target customer and design a car for that person, he said. Example: In Mexico, Nissan will continue to manufacture a particular model of car that's ancient by current standards but has become a cherished icon in the Mexican taxi trade. And he talked about working with companies such as Google, Apple, and Microsoft to add something else to the technology packages available to drivers. He figured many spend at least two hours a day commuting "where there's nothing you can do but listen to music or talk on the phone." If carmakers try to create those new products on their own, "we're not going to get very far on our own." For all consumers' talk about fuel efficiency, however, he made sure he told this story of what happened recently at a Tokyo auto industry show. On display were a tiny, low-carbon footprint concept car and the 480 horsepower — non-energy-saving — Nissan GTR. Which one drew the biggest crowds? With perfect timing, he paused, then said: "The GTR."

Two or Three main points that you found most useful to know and understand?

What did you learn from this case/chapter that could help you to lead Organizational Change?

Chua Chang & Wu Inc. is planning its operations for next year, and the CEO wants you to forecast the firm's additional funds needed (AFN). Data for use in your forecast are shown below. Based on the AFN equation, what is the AFN for the coming year?

​

Scenario: You are the Chief Executive Officer [CEO] of a health services organization. This organization has inpatient and outpatient facilities, home healthcare services, and other services that meet your patient population’s needs. It also has a world-renowned AIDS treatment center. The organization has always enjoyed an excellent reputation and its quality of care is known to be excellent. Unfortunately, your organization has recently been featured in every media vehicle known to man. The reason: Someone downloaded the names of 4,000 HIV+ patients seen in your HIV clinic and posted the list on the Internet. The Board of Trustees is furious and wants to fire you. You have been able to convince them that they need to keep you as CEO to fix this major crisis. You hire a computer security consultant who comes into your organization, disguised as a nurse manager. After three days, she comes to you with the following report.

• Nurses log in to the computer system with their passwords and then walk away, leaving the system open and running.

• Dr. Jones leaves his password taped to his PC on a piece of paper.

• Fax machines and printers are in open rooms without locks.

• One password can access the entire database in the hospital including human resources.

• There are no programs reminding staff to change their passwords on a regular basis.

• She pretended to forget her password and other nurses gave her their password.

• She requested sensitive patient files and staff provided her with the files without question

You must address the following:

• A brief assessment of the problems that your organization faces from a ‘big picture’ health care management point of view. This should be a high-level overview of the category/categories of problems that your organization currently faces. (1-page maximum)

• An overview of key laws, regulations, and guidelines that are relevant to the scenario. Be sure to support your assessment with examples of why you believe each law, regulation, and/or guideline is relevant. (1-page maximum)

• The identification of 2 similar situations that have occurred within the health care industry in recent years. A brief explanation of how the identified organizations handled the crisis and an assessment of whether this approach would work for your organization. (1-page maximum)

• An explanation of how your organization could best handle this crisis. (1-page maximum)

RUBRIC: Sources, Management issues, Legal issues, Two situations, Recommended actions.

1. You are a consultant to Twinkle Teeth Corporation producing titanium dental implants. The CEO insists that effectiveness must be evaluated by an increase in stock price to satisfy stockholders. The marketing vice president insists that the main goal is to reduce the time to bring products to the customer. The manufacturing vice president states that production costs should be the key focus of the organization. What approach is each manager using to evaluate organizational effectiveness, and What can this organization do to ensure that effectiveness is properly evaluated?

Case 13.2

Ralph O’Riley is a dynamic CEO of a large for-profit system. He is well known in the community. He is a brilliant businessman, and he is highly rewarded for it, enjoying various perks such as a beautifully appointed office suite, a company car, and a parking spot right outside of the hos- pital entrance.

He rarely attends employee-related functions, and he only occa- sionally visits the other facilities in the system, let alone the units on his own campus. He is a mythical figure among employees and intimidates his own leadership team. He shows up to meetings late, relies on hischief executives to “fill him in on the agenda,” and does not know all of his staff’s names and their positions. He does not participate in oper- ational discussions, but he gives orders that affect operations, some- thing that confounds his team and angers employees.

Once during a retreat, he was overheard by some of his team members boasting about his golf game and his power: “This is a waste of my time,” he complained over his cell phone. “It’s not PC to say it, but I own these people. They do what I tell them to do. I made a lot of money for this system. Now they should give me a break.”

Questions

Obviously, everything Ralph is seems to run counter with the practices that build and enhance trust.

1.          What long-term effects does Ralph’s behavior have on the team, the employees, and the organization as a whole? Are these effects irre- versible?
2.          Ralph is clearly a financial wizard and has great business instincts. How should he leverage these competencies to create a better cul- ture? To make himself even more powerful by being approachable and trustworthy?
3.          What role does power play in Ralph’s success?

Assume that you are the chief financial officer at Porter Memorial Hospital. The CEO has asked you to analyze 2 proposed capital investments--Project X and Project Y. Each project requires a net investment layout of $10,000 and the cost for each project is 12%. The projects expected net cash flows are as follows?

Calculate each project's payback period, net present value, and internal rate of return

Calculate each project's payback period, net present value, and internal rate of return

You are the CEO of an industrial chemical plant named Johnson Chemicals. You manufacture the inert chemicals for more than 100 different manufacturers. They range from the military to paint companies. Fifty percent of your gross revenue comes from one company that manufactures fuel for military and commercial aircraft: this is 30 percent of your bottom line. Your second-largest customer manufactures fuel additives and it represents five percent of your bottom line. That company is also a wholly-owned subsidiary of your number one customer.

You have found out that your number one customer has been dumping millions of gallons of waste products into a local small river that feeds into the Mississippi River. If you “blow the whistle” you could be responsible for losing 30 to 50 percent of your bottom line revenue. This would result in the unemployment of nearly half of your 5,000 employee workforce. Also, there could be a backlash among your 98 remaining customers. Your reputation could be ruined if you are deemed to be a “whistleblower” or “rat.” Still, you know that people unaware of the dumping will use the water for fishing, drinking, etc. You also know that people will die from too much exposure to the kinds of chemicals being dumped.

1. What on earth are you to do? Please write two paragraphs. The first paragraph should show how you would justify exposing the dumping. The second paragraph should address justifications for you not exposing your number one client. The two paragraphs should each be at least six sentences long and not more than twelve sentences long. Use at least two of the theories on moral problems you learned about earlier in this chapter to justify your position as proponent or opponent of blowing the whistle or remaining silent.