Question

Spencer’s Outfitters: All Kinds of Clothing for All Kinds of People

Spencer’s Outfitter’s: All Kinds of Clothing for All Kinds of People is one of the largest wholesale clothing companies in the United States with headquarters in a large Eastern U.S. city. About two years ago, to help cover an area not previously represented in its chain, SO purchased a small wholesale clothing company: Ozzie’s Outfits in the South and made it a company division. The company president, Professor Mangum, dislikes cold weather; the acquisition is in a warm weather location!

Results reported by this new division have been less than great! Top management sent a team of executives from headquarters to gain better insight into the divisions operations. The president of Spencer’s is quite concerned.

The setting of this case is a conference room. Top management is listening to what the investigative team has discovered. The purpose of the meeting is to design plans for improvement of the division’s operations. The team leader is delivering the reports.

As you know, we purchased Ozzie’s two years ago. The company’s top management stayed on per our request and consists of Bob Smith, 63 years old. He blames most of Ozzie’s problems on us. He contends that if we Easterners would just leave him and his team alone, they would be doing just fine. He sees us tying his hands with our admittedly rather complete policy manual, forms, and reports, none of which he had before he sold the company to us. The balance of his team is comprised of men who have worked for him, mostly high school graduates, up from the ranks, and learned everything the hard way; plus one woman, his administrative assistant, Mrs. Jones.

Here are some specific problems we found with the division:

Sales: The sales curve of the division has started to flatten. Sales grew 27 percent in the five-year period prior to our purchase and only 14 percent in the last two years. This partly reflects heightened competition in the area.

Profits: Profits have been declining and are now in the lowest 20 percent of the industry. Last year the operation approached the break-even point. There are serious questions as to how to handle pricing.

Warehouse: The warehouse is the oldest in the company, and it is inefficient. It is a multistory building, which requires a great deal of elevator trips to fill any order. It is also 20 percent below the recommended size for the volume of business it handles. It would take $2 million to replace it.

Retail/Marketing Relations: The division has long-standing, close relations with our vendors in the area. But, it is not adding any new retail outlets. Competitors are getting a stronger hold. The division seems satisfied with its share of the market and the perception of our brand name.   We have mixed reviews on their marketing plans.

Finance/Accounting: The accounting department is only now adjusting to our accounting policies. The division is solvent, but with declining profitability. Without an addition of funds to purchase new computers and software soon, the ability for them to come on-line with our accounting system will be totally impossible.   They are utilizing book and hold; assets are in excess of liabilities. But, with declining sales there is a lower cash flow. Payroll has not been cut; thus, the net income is lower.

Relations with home office: The division resists most incentives from the East, whether they have to do with advertising, accounting, incentives or training. Professor Mangum is very socially responsible and wants to know how Ozzie’s gives back to the community. This and serious questions over pay equity for Mrs. Jones prevail. The office staff of Ozzie’s asked how often we would visit and why there would be a need for us to visit.

Overall effectiveness: In general, the division is not meeting company objectives or organizational goals, although it seems to be one of the leading, wholesalers in the South. They are as good as the competition; nothing more, nothing less. Their turnover and absenteeism rates are better than average. Each time each of the Spencer team attempted to speak with Mrs. Jones, one of Bob’s Boys about killed themselves running over to be with her to ensure that no one could meet with her alone. On the surface, everyone seems to get along and enjoy working for the Company. What is perfectly clear, they are ALL very protective of Bob.  

You are functioning as the Executive Advisor to the President of Spencer’s. The plans you compile will be implemented and will impact the future of our company, your future employment and the future employment of your colleagues.

1. In some ways, their office or inter-office relation sound cartoonish/childish. How does it affect business? How does it effect on the job performance?

2. Professor has a strong concern that there could be a whistleblower complaint. About what and why?

Answer 1

1) The Ozzie's employees do lack maturity to accept the merger. They view it as a threat, rather than as an opportunity to learn something new, to be able to innovate and venture into new global horizons. Instead they are busy being loyal to Bob. They prefer to remain in their "shell" rather than charter the unchartered seas of knowledge and professional growth. This childish nature is an hindrance to the growth of the company and is affecting both sales and profits of the organization. Thereby, stepping towards a threatening position daily.

2) Professor wants to ensure the organization is exhibiting it's social responsibilities as well as corporate growth. He wants the organization to fulfil it's duties for the community and ensure people are benefitted rather than the organization.