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EXPERIENTIAL EXERCISES
Exercise 1
Plastico, Inc.:
A Strategic Decision-Making Exercise[(]
I. Introduction/Learning Objectives
Plastico is a role-play exercise designed to provide participants with a "hands-on" appreciation for important strategic management concepts such as the importance of vision, mission, and objectives; total quality management, cross-functional coordination, reward structures, and strategic leadership. Participants assume the role of managers faced with a major problem: A forthcoming Consumer Reports article contends that one of the firm's major new product lines is substandard. Immediate action is required. Further, the role play is designed to stimulate conflict caused by the characters' parochial functional area perspectives, diverse backgrounds, and hidden agendas. To aggravate the situation, Kim Johnson (Vice President and the principal character in the role play) is portrayed as an aloof, bottom-line-oriented executive, with little concern or awareness for the operation for which he/she is responsible and accountable.
This role play can be used at any point in the course. However, since issues relating to both strategy formulation and implementation are important learning objectives, we suggest that it is most effective after most of the chapters have been assigned.
Accordingly, the major learning objectives are:
1. the importance of a clearly articulated vision, mission statements, and strategic objectives,
2. why quality must be an organization-wide effort,
3. the advantages of cross-functional coordination,
4. the importance of effective reward structures, and
5. important activities essential to successful leadership.
II. Procedures: Conducting The Role Play Exercise
The following four steps are a useful approach for conducting the role play. Guidelines are provided for allocating time. If your class sessions are 50 minutes or less, conduct the role play and the "debriefing/discussion" in separate sessions.
Step 1: (5 minutes)
Distribute the two-page scenario to all participants (overview, the scenario, major players, organization chart).
Step 2: (15 minutes) Participant preparation
a. Divide participants into five equal groups. Distribute the same role to all members in each group.
b. Have each group study the role assigned to them. Encourage the participants to actively "assume the role," i.e., use the information provided to "become the character."
c. With two or three minutes to go, select one person from each group to act out the role in front of the room.
d. Select outgoing people; otherwise the role play may bog down. This is especially important for the role of Kim Johnson.
e. Suggest to the group playing Kim Johnson that they should begin the role play by asking the other characters what they perceive the problem to be—otherwise the role play may become a dialogue between two people.
Step 3: (30 minutes) Acting out the role play
Have the players take seats in a semi-circle in the front of the room. Kim Johnson should open the meeting. Approximately 10 minutes into the role play, you may consider asking the players to go back to their groups and spend about 5 minutes discussing how to complete the rest of the role play. (You can assign different people to continue their group's role—this usually piques interest/enthusiasm.)
Note: Make sure each participant is provided with a nameplate. Otherwise the exercise will become “bogged down” as the role players become confused.
Step 4: (30 minutes) Debriefing/Discussion
III. Leading The Discussion
After the role playing is completed, the discussion consists of two parts. First, the instructor may pose the three questions in (A) below to stimulate discussions. Here, class members who did not "act out" one of the roles are given the opportunity to provide insights on what they observed.
We have found that students often tend to focus more on symptoms (e.g., interpersonal conflict) than on underlying problems (e.g., lack of cross functional coordination, unclear and inconsistent strategic objectives). The students' preoccupation with symptoms can become a "strawman" which can be used by the instructor to stress the importance of a strategic management orientation. This, and other important issues, is the focus of the more in-depth discussion (B) that follows the three "lead-off" questions below.
A. Lead-off Questions: Getting the Discussion Started
Pose the following questions:
1) Is the situation depicted in the role play realistic?
The role play invariably elicits a high level of emotional involvement and some students may feel that the intensity of conflict is greater than that which occurs in the "real world." However, point out that in the "real world" practicing managers often have hidden agendas, functional area biases and perceptions of inequities. Also, emphasize that emotions would definitely run much higher if actual careers and livelihoods were at stake.
2) What are Plastico's key problems?
Students tend to focus more on symptoms than on underlying problems. Often, poor interpersonal relationships are emphasized instead of issues related to a firm's strategy and structure. For example, the resentment that many of the managers express toward Kim Johnson may actually be attributed to his personal characteristics (symptoms) instead of his being the only manager who participants in profit sharing (problem).
3) What are the sources of conflict?
Here, as with question 2, students often tend to focus on interpersonal sources of conflict (e.g., the hiring of an old college friend, differences in educational background, and tenure with the company). Again, strategic issues such as poorly defined objectives, lack of coordination among functional areas, and inappropriate reward systems are seldom mentioned by role play participants.
B. Relating the Role Play to Strategic Management.
We find it useful to focus the discussion on the five issues below. These issues cover a range of topics on both strategy formulation and strategy implementation.
1) Importance of a clearly articulated vision, mission statement, and strategic objectives.
These are the three critical attributes necessary for a firm to achieve "coherence in strategic direction" (addressed in the latter part of Chapter 1). In the case of Plastico, there did not appear to be an adequate emphasis on any of these three elements. A great deal of conflict and dysfunctional behavior, as well as declining performance, can reasonably be attributed to this.
· How might "coherence in strategic direction" improve Plastico's effectiveness?
A vision, mission statement, and strategic objectives would help to reduce conflict, clarify direction, instill motivation toward common ends, and so on. Further, it should be pointed out that mission statements serve to provide standards for ethical behavior—a potentially key issue given that Plastico may have to decide what to do with "substandard" products. (Exhibit 1 provides a summary of this question.)
2) The advantages of cross-functional coordination.
Several chapters point out the benefits of cross-functional coordination, i.e., integration across value chain activities.
· How might Plastico benefit from cross-functional coordination?
(Exhibit 2 may help to structure discussion on this issue.) First, it lists some of the types of conflicts that may arise among functional departments. Here, it may be useful to ask participants for examples of such conflicts. The second part of Exhibit 2 provides three potential benefits of cross-functional coordination. Clearly, at Plastico, one department is responsible for quality control and this is a source of much of the conflict. Point out, or ask for, the potential benefits of the Quality Control Department working more directly with the other departments—Engineering and R&D, Manufacturing, and Marketing. A key point would be the greater emphasis on Total Quality Management, i.e., all departments would have greater input and the likelihood of quality being designed and built into the products would be greater.
3) The importance of reward structures.
The importance of effective reward systems is addressed in Chapter 9.
The reward system at Plastico caused resentment among the top management team, because Kim Johnson was the only manager receiving a bonus. Since the other managers' compensation was not tied to the attainment of strategic goals, motivation and morale seemed to suffer.
· How can Plastico's reward system be improved?
a. Compensation could be tied more directly to the attainment of overall organizational goals.
b. More, if not all, managers could be involved in incentive compensation programs.
c. Greater control systems could be implements to detect and monitor performance. (Recall that Plastico's quality problems that were revealed in the Consumer Reports article seemed to catch management by surprise.)
4) Successful strategic leadership.
This final issue—the central focus of Chapter 11—helps to synthesize many of the learning objectives of this exercise.
· Assess Kim Johnson's approach to leadership. How can it be improved?
(Use Exhibit 3.) At first glance, this may appear to be a relatively difficult question to address. After all, a role play implicitly provides different perspectives to each role player on a variety of issues. However, students typically find fault with Kim Johnson's leadership regarding his/her aloofness, lack of direction, favoritism (i.e., his hiring of Kerry Smith as Manger of Quality Control—an "old college friend"), too "bottom line oriented," and so on. It may be useful to use Exhibit 3 to illustrate the activities essential to successful strategic leadership when addressing the question of how Kim's leadership can be improved.
Kim Johnson might consider:
SETTING A DIRECTION.
· Focus on the "essentials" of the business, i.e., quality and efficient production. (Note: Given the strong desire of Pat Ackerman, CEO, to expand the business, this will likely involve persuading him to limit growth.)
· Developing a contingency plan to deal with problems such as the bad press associated with the upcoming Consumer Reports article. (This could include retaining a public relations firm, or assessing the quality of finished goods inventory using statistical sampling techniques.)
DESIGNING THE ORGANIZATION.
· Enhancing coordination across functional areas via committees, task forces, etc. (Addressed in issue #2 above.)
· Implementing reward systems that motivate individuals toward desired objectives. (addressing issue #3 above.)
· Providing functional managers more input into the budgeting process. (This may alleviate feelings of inequity perceived by Robin Cooper in Engineering.)
INSTILLING A CULTURE COMMITTED TO EXCELLENCE AND ETHICAL BEHAVIOR.
· Restoring Plastico's commitment to excellence in quality through periodic meetings, newsletters, awards, incentives, etc.
· Developing a company credo that guides ethical behavior. (For example, without ethical guidelines to the contrary, managers may have a strong temptation to ship shoddy merchandise if they feel intense pressure to meet production quotas. Such poor quality goods would undermine the public's trust in Plastico.)
Exhibit 1
ENSURING COHERENCE IN STRATEGIC DIRECTION
VISION
· Describes aspirations for the future without specifying means to achieve ends.
· Must be inspirational
· Must be communicated through a mission statement and through persuasive leadership
MISSION STATEMENTS
· Mission statements establish boundaries to guide strategy formulation.
· Mission statements establish standards for organizational performance along multiple dimensions.
· Mission statements suggest standards for individual ethical behavior.
STRATEGIC OBJECTIVES
· Address both financial and non-financial issues
· Can be reached with a stretch
· Incorporate the dimension of time
· Facilitate reasoned tradeoffs
· Reduce conflict
· Can be measured
· Avoid unintended consequences
Exhibit 2
The Importance of cross-functional coordination
EXAMPLES OF INTERDEPARTMENTAL CONFLICTS:
· R&D versus Manufacturing
· Sales versus Logistics
· Marketing versus Quality Control
CROSS-FUNCTIONAL COORDINATION:
· Can break down barriers between functional departments
· Recognized that all departments are responsible for quality (not just a quality control department)
· Can help a firm achieve all forms of competitive advantages—differentiation, overall cost leadership, and integrated differentiation and overall cost leadership.
Exhibit 3
ThREE KEY LEADERSHIP ACTIVITIES
· Setting a direction
· Designing the organization
· Instilling a culture committed to excellence and ethical behavior
plastico, inc.: overview
It is February 15 and Kim Johnson, V.P. of The Outdoor Toys Division, has assembled the Division Management team to address an urgent problem. For the next 30 minutes, you will assume the role of either Kim Johnson or one of Kim's four managers. Immediate action has been mandated by Pat Ackerman, CEO of Plastico.
THE SCENARIO
Plastico, Inc. was started 10 years ago as a manufacturer of heavy-duty outdoor plastic toys (sandboxes, playhouses, pool toys) by Pat Ackerman, a highly driven entrepreneur with a background in marketing. To cope with the extreme seasonality of the business and to ensure its continued growth, 3 years ago Ackerman acquired two manufacturers: a producer of children's clothes and a manufacturer of children's furniture.
For the last two years, sales and profits have increased 20 percent and 10 percent respectively—a level of performance that Ackerman has come to expect. The breakdown for each of the division last year was: Outdoor Toys - $65 million; Children's Clothes - $20 million; and Children's Furniture - $10 million. However, this year's sales for the Toy Division are expected to decrease to $55 million, the first sales decrease in the company's history.
Ackerman is more concerned about the reason for the sales decrease than "just the numbers." Sales of the new line of picnic tables/patio furniture had appeared to be very promising at the Winter Trade Show where $10 million in retail orders were accepted. This trade show is particularly important because it is where manufacturers introduce new lines to major retailers who, in turn, place orders for the summer selling season. However, Ackerman has recently heard rumors about Plastico's faltering quality. Just this morning, February 15, he was stunned when he received a fax of a forthcoming Consumer Reports article stating that the new Outdoor Toys' spring product line was substandard. The timing of the Consumer Reports article could not be worse. Although no shipments have been sent to retailers, 50 percent of the initial orders have been manufactured and are in the warehouse awaiting shipments to retailers. The balance of the production is expected to be completed by the end of the month.
New product lines have always accounted for a large portion of annual sales increases, so the bad press will dramatically hurt sales and will erode Plastico's excellent quality image. Furthermore, Outdoor Toys' lower sales (and profits) will substantially reduce funds available for the growth of the other two divisions.
Kim Johnson has been summoned to report to Ackerman's office to explain the reason for decreased sales and the negative Consumer Reports rating. Ackerman has also made it clear he wants immediate solution to these problems. Johnson's four managers have been assembled and informed that "hard answers" are needed within 30 minutes. (Exhibit 1 provides an organization chart and an introduction to the major players.)