Reference no: EM132377395

Case Assessment: The Saddle Creek Deli Case

The Saddle Creek Deli serves fresh sandwiches and hearty salads at moderate prices to skiers in the bustling ski resort town of Vail, Colorado. The deli is known for its cozy ambiance, Western décor, and two-story stone fireplace. Catering to skiers, the Saddle Creek Deli serves fresh meals in a hurry to people taking a break from the slopes and is located 10 minutes from a popular ski lift. Large windows provide a dazzling view of the nearby mountains.

The deli's major attraction, however, is a high-quality, old-fashioned soda fountain that specializes in superior ice cream sundaes and sodas. Business has grown steadily during the seven years of operation. The deli has been so successful that Richard Purvis, owner and manager, decided to hire a manager so that he could devote more time to other business interests. After a month of quiet recruitment and interviewing, he selected Paul McCarthy, whose prior experience included the supervision of a small restaurant in a nearby resort hotel.

During the first few weeks, Paul seemed to perform his work efficiently. According to his agreement with Richard, Paul was paid a straight salary plus a percentage of the amount he saved the business monthly, based on the previous month's operating expenses. All other employees were paid a straight hourly rate. After a month on the job, Paul single-handedly decided to initiate a cost-saving program designed to increase his earnings. He changed the wholesale meat and cheese suppliers, lowering both his cost and product quality in the process. Arbitrarily, he reduced the size and portion of everything on the menu, including the fabulous sundaes and sodas. Paul then focused on reducing payroll costs by cutting back on the number of employees working a shift and reducing fringe benefits.

During a tense staff meeting to announce these changes, Paul tersely stated, "You can expect to see some changes in your hours starting next week. I see too many people sitting around with not enough to do." Next, he announced that he was discontinuing the one-dollar meals for employees working more than five hours and eliminating the 20 percent employee discount. As he concluded his announcements, he asked if anyone had any questions. No one dared speak. Paul shrugged his shoulders and quickly left the meeting.

Frustrated, the employees streamed out of the meeting and quietly grumbled about the changes. "Why tell him what we really think," some mused. Employees believed Paul had made up his mind, so they braced themselves for the fallout. Soon after, employees started noticing the negative consequences of Paul's hasty, cost-cutting decisions. During the busy lunch hour, for example, customers would storm out after waiting 20 minutes for a sandwich. Others would grumble to servers about the smaller portions and then leave a meager tip. Many employees heard customers complain about the dirt and grime collecting in the dining area and restrooms. Employees started to burn out from listening to constant complaints and trying to do the work of two people. Tension mounted and resentment toward Paul grew.

Meanwhile, Richard became aware of the overhaul Paul was undertaking at the deli. When questioned by the owner about the impact of his new practices, Paul swore up and down that there would be no negative effect on the business. Rose Sharp, an accounting major at the nearby university, had been a short-order cook on the night shift for five months prior to Paul's arrival. Conscientious and ambitious, Rose enjoyed a fine work record, and even her new boss recognized Rose's superiority over the other cooks. One day Richard saw Rose at the post office and asked how things were going. Richard was stunned to hear about the cutbacks and employee dissatisfaction. Reluctant to undercut his new manager, Richard said to himself, "I can't understand what went wrong. I wonder what I should do now."

Question #2:

Paul made sure that his team was fully aware of the need for cost cuts at the deli. He held a large meeting that all employees were expected to attend, spoke with employees in small groups, hung signs reminding employees about the importance of keeping costs low, and posted reminders on the company's intranet. Paul was using what type of leadership communication style?

Question #3

What ethical issues is Richard, the deli owner facing in this situation?