Case Study: Managing in a Foreign Land

Spumonti, Inc., is a small manufacturer of furniture. The company was founded in 1987 by Joe Spumonti, who had been employed as a cabinetmaker in a large firm before he decided to open his own shop in the town of Colorado Springs. He soon found that some of his customers were interested in special furniture that could be built to complement their cabinets. Joe found their requests easy to accommodate. In fact, it wasn't long before their requests for custom furniture increased to the point that Joe no longer had time to build cabinets. Joe visited a banker, obtained a loan, and opened a larger shop. He hired several craftspeople, purchased more equipment, and obtained exclusive rights to manufacture a special line of furniture. By 1997, the business had grown considerably. He then expanded the shop by purchasing adjoining buildings and converting them into production facilities. Because of the high noise level, he also opened a sales and administrative office several blocks away, in the more exclusive downtown business district. Morale was very good among all associates.

The workers often commented on Joe Spumonti's dynamic enthusiasm, as he shared his dreams and aspirations with them and made them feel like members of a big but close-knit family. Associates viewed the future with optimism and anticipated the growth of the company along with associated growth in their own responsibilities. Although their pay was competitive with that provided by other local businesses, it was not exceptional. Still, associates and others in the community viewed jobs with Spumonti as prestigious and desirable. The training, open sharing of information, and individual autonomy were noteworthy. By 2009, business volume had grown to the extent that Joe found it necessary to hire a chief operating officer (COO) and to incorporate the business. Although incorporation posed no problem, the COO did. Joe wanted someone well acquainted with modern management techniques who could monitor internal operations and help computerize many of the procedures. Although he preferred to promote one of his loyal associates, none of them seemed interested in management at that time. Ultimately, he hired Wolfgang Schmidt, a visa holder from Germany who had recently completed his MBA at a German university. Joe thought Wolfgang was the most qualified among the applicants, especially with his experience in his family's furniture company in Germany.

Almost immediately after Wolfgang was hired, Joe began to spend most of his time on strategic planning and building external relationships with key constituents. Joe had neglected these functions for a long time and felt they demanded his immediate attention. Wolfgang did not object to being left on his own because he was enthusiastic about his duties. It was his fi rst leadership opportunity. Wolfgang was more conservative in his approach than Joe had been. He did not like to leave things to chance or to the gut feel of the associates, so he tried to intervene in many decisions the associates previously had been making for themselves. It wasn't that Wolfgang didn't trust the associates; rather, he simply felt the need to be in control. Nonetheless, his approach was not popular. Dissatisfaction soon spread to most associates in the shop, who began to complain about lack of opportunity, noise, and low pay. Morale was now poor, and productivity was low among all associates. Absenteeism increased, and several longtime associates expressed their intention to fi nd other jobs. Wolfgang's approach had not been successful, but he attributed its failure to the lack of employee openness to new management methods. He suggested to Joe that they give a pay raise to all associates "across the board" to improve their morale and reestablish their commitment. The pay raise would cost the company $120,000 annually, but Joe approved it as a necessary expense. Morale and satisfaction did not improve, however. Shortly after the pay raise was announced, two of Spumonti's senior associates accepted jobs at other companies and announced their resignations. Wolfgang was bewildered and was considering recommending a second pay increase.

Discussion Questions

1. What weaknesses do you see in Joe's handling of Wolfgang?

2. Could Joe have anticipated Wolfgang's approach?

3. Can Wolfgang's career at Spumonti be saved?