ANSWER ALL QUESTIONS:
1) What steps would you advise Bob Lewis to take so StarGlobal’s corporate culture might be changed positively?
2) What are some examples of Behavior Controls, Output Controls and Input Controls you would put in place at StarGlobal?
3) If you were building a case analysis to lobby for the controls above, why should you begin a case analysis with a financial analysis? When are other approaches appropriate?
STARUSA TO STARGLOBAL
Bob Lewis, president and CEO of StarUSA, was heading back home to the Midwest from his quarterly visit to StarEuro in Brussels, Belgium. Settling down on the plane for a long flight, he reflected on last night’s dinner conversation with Herman Wouters, general manager of the European Star subsidiary. Wouters, now in his early fifties, informed him of his desire to retire next year and pursue a more leisurely life. Financially, Wouters had done very well with his relationship with StarUSA. First, for more than ten years he was their leading independent distributor of Star products in the Benelux and then, for fourteen years, general manager of StarEURO. As Herman confided, business was not standing still and he was ready to enjoy life. He reassured Bob that he intended to stay on until a new general manager was in place and the transition was complete. Totally shocked by Wouter’s resignation and this turn of events, Bob had time to think during the eight- hour flight and sort out what all of this would mean to the company.
StarUSA, a $ 3.5 billion company headquartered in a Midwestern metropolitan area, was established in 1949 by an engineer/ entrepreneur. The company is known as a business- to- business provider of world- class customized engineering solutions. Another trademark of the company is the attention it pays to providing superior customer service. Originally named after its founder, it became a public company in 1956. The founder ran the company until the early 1980s, a period which saw the firm grow to 550 employees and attain the $ 1 billion sales mark ( in 1981). At that time, StarUSA’s customer base was mainly in the US, with 5 percent overseas sales, originating mostly from Canada and Europe. International sales were handled by local independent distributors and coordinated by international sales reps through the company’s international export division.
In the 1980s, a number of internal and external changes affected the company dramatically. In 1984, the founder of the company retired and Bob Lewis, a non-family member, was appointed president and CEO. He had experienced a meteoric rise in his career since he joined the company just a few years earlier as national sales manager. At the same time, many of StarUSA’s existing business clients started moving production outside of the US to their overseas subsidiaries. To respond to demand from their multinational company customers, StarUSA established StarEuro, a wholly owned subsidiary outside of Brussels, Belgium, to support growing European sales. Herman Wouters, a Belgian who at that time was the largest European distributor, was asked to join the company and head the European operations as general manager. He reported directly to the president of the company. Except for product and service specifications, quality assurance and financial controls, the wholly owned subsidiary was run like a local operation with limited managerial or operational controls from US headquarters. There was little interference from corporate. As Lewis said in his speech at the opening ceremony of the new European headquarters building in Belgium: “ We don’t want to meddle in the daily running of the company in Europe.” Today, the European subsidiary has 348 employees, most of them at its headquarters and manufacturing facility outside of Brussels and less than two dozen employees at sales offices in eight different European national markets.
In the early 1990s, an Asia- Pacific hub was set up in Singapore. Today, StarAsia is staffed with twenty- six local employees ( mainly sales and customer service people) scattered in key Asian markets. StarCanada is supported by sixteen Canadian employees and there are plans to open two new sales offices, one in Mexico and the other in Brazil. International sales for the company in 2001 were 14 percent of total sales and growing faster than overall revenues. Most of the international sales growth has been coming from the southern hemisphere as StarEuro sales have been slightly under plan. As many as 20 percent of the company’s 2,056 employees now work outside of the US with a physical presence in nineteen countries. This rapid worldwide growth of the company’s sales and operations put greater demands on corporate headquarters to plan and coordinate activities at a global level. Cindy Fratelli joined StarUSA in 1988 as director of human resources. During her tenure at the company, she has gained the confidence and respect of the close- knit corporate management team. Prior to joining StarUSA, she was a compensation manager for a large insurance company. She grew up near the company’s headquarters and attended college in the southern part of the US. Since she joined the company, her major accomplishments include the introduction of a performance management system, a performance- based compensation plan ( with an aggressive sales and service incentive plan for sales people), an MBO ( management by objectives) bonus plan for management, and a profit- sharing plan for staff employees. She also introduced extensive HR training and development initiatives. She worked closely with the IT team to select an HR information system that integrates with the company’s existing manufacturing control system. Bob credits her for maintaining the family- oriented corporate culture that was established by the founder despite the rapid growth of the company. In 1998, she was promoted to vice- president and became the first woman on an all- male executive team. Her attention to detail and metrics is matched by a bubbly people- oriented personality. Her HR responsibilities have been limited to the domestic market where most of the company’s employees reside. In Europe, the general manager assumes the HR task- related activities with the help of an administrative assistant. In other markets, the recruitment function is outsourced.
As Bob’s plane was pulling into the arrival gate, he had outlined a plan to “ globalize” the company to coincide with the search for a new general manager for StarEuro.
FROM STARUSA TO STARGLOBAL (continued)
Cindy Fratelli, SPHR, vice- president of human resources, had just left the meeting that Bob Lewis, president and CEO of StarUSA, called upon his return from Brussels, Belgium. For over an hour, Bob laid out his plan to search for a new general manager for StarEuro after Herman Wouters had turned in his resignation. Bob also wanted to realign his organization to take advantage of the growing internationalization of the business and its customers. The entire executive team was present at the meeting: Mike Vincent, chief finance officer and vice- president of finance; Andrew Kling, vice- president of sales and marketing, Rich Gomez, vice- president of operations, Cindy Fratelli, vice- president of human resources, and Josh Lansberger, director of IT. Bob elaborated that he wanted to use his headquarters management time to lead the effort of integrating the different functions globally while at the same time continue to be responsive to local conditions. Bob emphasized that HR would play a major role in the internationalization process as knowledge sharing of best practices and global teamwork were needed to give the company a competitive advantage. There would be more teamwork within business functions between people at headquarters and the various subsidiaries around the world. Cindy was excited at the challenge while at the same time apprehensive. Although a certified professional in her field, she had no international experience, knowledge or training whatsoever. International issues were rarely covered at the professional conferences she attended or in the professional journals she read to keep up with new developments in her field. She had vaguely heard about a new certification program called the GPHR. She was not even aware of outside management consultants that could lead her in the right direction. As she pondered what role she was to play in this change process, she went on the web site of her professional HR organization ( www. shrm. org) and searched for “ international” with the hope of getting some direction as to how to respond to the challenge. She had one week to present Bob with a detailed implementation plan on how to support this new strategic objective of StarGlobal.
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