SEPTEMBER 2011 PEOPLE IN ORGANISATIONS Instructions to candidates: You are required to produce a formal report in no more than 4,000

words excluding charts, diagrams etc. Case Study: Jacobs decline Karen Jacobs is the typical hands-on CEO and the founder of the ice-cream company that bears her name. As part of her management routine, she makes unannounced visits to her stores where she quickly assesses the effectiveness of the operations and quizzes the manager about their sales figures and store expenditures. Since she has an extremely high need for achievement, she also has demanding expectations for her store managers and their adherence to company management practices. While some management experts might judge her to be a very demanding task master, others who are familiar with her methods say: If shes not satisfied with the way the stores are being run, she simply rolls up her sleeves and does the job herself. According to her friend and business colleague, Mike Varsity, She can go into any store and name all the staff, but expects full commitment from all her workers. She is also somewhat of a business icon and writes management articles for leading management journals and speaks at wellknown business schools across Europe. She has also coproduced a self-help DVD and has been a guest on many TV programmes on how to do well in business. She is also an aspiration for many young women business entrepreneurs and carries out business surgeries to help young women enter the cut-throat world of business. By 1995, 10 years after she started the company, it had grown to 400 retail stores in five countries. While the debt load grew so did sales and the company hit $100 million and earnings of $16 million in 2004? By 2009 the strain was beginning to show due

to the rapid growth. The expansion of Stores had proven costly as many stores were weighed down by expensive long-term leases which placed a huge burden on profit margins. continued overleaf The onset of the recession made once-loyal customers think twice about purchasing this type of product; also Karen was aware of the strains of trying to personally control all aspects of the business and be able to make good decisions which would lead to stable and continued growth. By the end of 2009 Karens bankers were concerned over stagnant sales, rising costs and the companys inability to service its debts. Her bankers pushed her to off-load 80 of her stores which would reduce the growing debt, but would result in huge redundancies which she was loath to do. The pressure from the bank persisted and three months later 80 stores were closed. It was clear to Karen that this experience had allowed her to reflect on her business strategy and her own ability to manage the business. She felt there was an urgent need to delegate authority and to begin to employ professional managers to key positions in the company. With the help of a marketing specialist she repositioned the business to focus on the high end of the business and to move into the on-line catering business area which was emerging as a likely growth area. The focus was for premium convenience foods, and to exploit the growth in on-line premium foods delivered right to the customers door. Doing this would broaden the market base for her companys products, and licensing agreements with well-known hotel chains and food retailers were signed. This not only allowed her to market the on-line part of the business, but also gave her access to other markets in the premier fast food market. Although Karen was willing to bring new management into the business at the request of the bank, she found it hard to let go of the business she grew from nothing. Over the next few months there were many occasions where Karen came into conflict with many of the new managers over the speed and direction of the new business. Her need to think about the future and her tendency to be hands-on were causing friction in many quarters. In a meeting arranged by the bank in early 2010, the bank forced Karen out of her position as CEO and president of the company. The bank was clearly concerned that this new venture

might founder if Karen was allowed to carry on as she had done before. Although she has shares in the business, she no longer has operational control of the business. TASKS 1. What type of power was evident in this case and how was it used? 2. Would you consider Karen to be a leader and, if so, what was the prevalent style? 3. Using the ideas in your module, how would you describe Karens use of power?

INSTITUTE OF COMMERCIAL MANAGEMENT