Assignment

Lost its Sparkle

A Transformational Leadership and Change Case Study

Pat Smith, the CEOof the Kent Notions Company (KNC), is facing a dilemma. The company is downsizing due to a change in company strategy. KNC manufactures novelty items in five different states in the US and factories in China and Brazil. They market their products globally through a distribution system of independent novelty retailers and some large chain stores. In past years they have been very successful anticipating market trends and in some cases creating fads. KNC has always been a very nimble company knowing just the right time to jump into a market and when to leave before the market crashes. KNC was not successful in its last venture.

KNC pioneered the Fantasy Bracelet. This was a plastic bracelet with imbedded multi-colored lights which lit up and sparkled as someone moved their arm. It was a hot ticket for several years and was projected to continue selling for many more years to come. What KNC missed was the growth of the affinity bracelet market. Those silicone bracelets that promote causes such as cures for cancer became the rage. Everyone wants to affiliate with a cause. Suddenly the sparkle went out of the Fantasy bracelet and KNCs shelves were full of bracelets that no one wanted. In a serious financial condition, the company has decided to downsize and to concentrate its efforts on novelties that never go out of fashion, such as clown noses, bouncy balls, and kazoos, etc.

Pat first communicated his concerns to the employees about the deteriorating market conditions in an inspirational memo sent to all employees. The memo was intended to curb the rumor mill that the company was in trouble, while at the same time reassuring employees that they would weather this storm and the company would have a different but bright future. There seemed to be no immediate reaction to the memo at all. Pat came into the office one day and looked around and it seemed to be business as usual. From what he could tell there was no discussion going on with regards to KNC and its future or so Pat thought.

Sheila Banks, the Chief Human Resources Officer came into Pat's office about two weeks later. She had just seen the quarterly turnover report and she was alarmed. The turnover rate had spiked and it was coming from all areas and not just the novelty department. What really concerned her is that a large percentage of the people leaving were there most talented employees. Pat was mystified why had turnover increased and why were people leaving the company even in the areas like finance and operations that would not be effected by any pending changes. Pat called a meeting with his senior staff and the communications people. They had to stop the hemorrhaging or the company would really be in trouble.

The communications group worked with Pat to create a video outlining Pat's vision of the bright future at KNC that could be shown at employee staff meetings.

The Fad area was eliminated. All of those crazy people running around coming up with the next irresistible doodad are being laid off. Pat Smith, KNCs CEO has said the company must focus on expense reduction and process efficiency.

KNC is in the process of hiring lots of accountants, process efficiency experts, and IT people charged with implementing automation throughout the company. Unfortunately a lot of the hires are for replacement for people that already left the company. Employees' initial reaction to these changes has not been favorable. There are rumors that the manufacturing employees are planning to unionize. The whole climate of the company has changed from one of joy and fun to a climate of sadness and despair. Pat feels it is necessary that the culture change but was not prepared for the degree of resistance and negativity these changes have created.

Questions:

At a recent Rotary Club meeting Pat was surprised about how much private company information seemed to be leaked to the community.

How did his business associates know about many of the internal problems going on during this transition?

The company had been very careful not to release published materials to employees and had warned employees about the importance of not sharing any information outside the company until they were ready to go public. If the local businesses seemed to know so much about KNC, Pat wondered what proprietary information their competitors must know?

Using what you have learned about Transformational Leadership and your own good sense. What communication barriers do you think are occurring? What steps can Pat take to help make employees more optimistic and more accepting of the changes? Based on the material from Bernard Bass's model of the components of Transformational Leadership what does Pat really need to display if the change is to be successful.