Reference no: EM131816452

Yikes! Bikes

Suppose you are an operations manager for Yikes! Bikes, a manufacturer of high-end mountain bicycles with $20 million in annual sales. Yikes! has been in business over 25 years, and the founder and sole owner recently sold the business to an investment group, Major Capital. You know nothing about the sale until your boss introduces you to Andrea Parks, a partner at Major Capital, who is in charge of the acquisition. Parks explains to you that Yikes! has been sold to Major Capital and that she will be the temporary general manager.

She explains that the new owners see great potential in you, and they want to enlist your cooperation during the transition. She hints that if your potential is what she thinks it is, you will be made general manager of Yikes! Parks explains that the new owners decided there are too many players in the high-end mountain bike business, and they plan to change the competitive strategy of Yikes! from high-end differentiation to lowest-cost vendor.

Accordingly, they will eliminate local manufacturing, fire most of the manufacturing department, and import bikes from China. Further, Major Capital sees a need to reduce expenses and plans a 10 percent across-the-board staff reduction and a cut of two-thirds of the customer support department. The new bikes will be of lesser quality than current Yikes! bikes, but the price will be substantially less.

The new ownership group believes it will take a few years for the market to realize that Yikes! bikes are not the same quality as they were. Finally, Parks asks you to attend an all-employee meeting with the founder and her. At the meeting, the founder explains that due to his age and personal situation, he decided to sell Yikes! to Major Capital and that starting today Andrea Parks is the general manager.

He thanks the employees for their many years of service, wishes them well, and leaves the building. Parks introduces herself to the employees and states that Major Capital is very excited to own such a great company with a strong, quality brand. She says she will take a few weeks to orient herself to the business and its environment and plans no major changes to the company.

You are reeling from all this news when Parks calls you into her office and explains that she needs you to prepare two reports. In one, she wants a list of all the employees in the manufacturing department, sorted by their salary (or wage for hourly employees). She explains that she intends to cut the most costly employees first. "I don't want to be inflexible about this, though," she says. "If there is someone whom you think we should keep, let me know, and we can talk about it."

She also wants a list of the employees in the customer support department, sorted by the average amount of time each support rep spends with customers. She explains, "I'm not so concerned with payroll expense in customer support. It's not how much we're paying someone; it's how much time they're wasting with customers. We're going to have a bare-bones support department, and we want to get rid of the gabby chatters first." You are, understandably, shocked and surprised... not only at the speed with which the transition has occurred, but also because you wouldn't think the founder would do this to the employees. You call him at home and tell him what is going on.

"Look," he explains, "when I sold the company, I asked them to be sure to take care of the employees. They said they would. I'll call Andrea, but there's really nothing I can do at this point; they own the show." In a black mood of depression, you realize you don't want to work for Yikes! anymore, but your wife is 6 months' pregnant with your first child.

You need medical insurance for her at least until the baby is born. But what miserable tasks are you going to be asked to do before then? And you suspect that if you balk at any task, Parks won't hesitate to fire you, too. As you leave that night you run into Lori, the most popular customer support representative and one of your favorite employees. "Hey," Lori asks you, "what did you think of that meeting? Do you believe Andrea? Do you think they'll let us continue to make great bikes?

Discussion Questions

1. In your opinion, did the new owners take any illegal action? Is there evidence of a crime in this scenario?

2. Was the statement that Parks made to all of the employees unethical? Why or why not? If you questioned her about the ethics of her statement, how do you think she would justify herself?

3. What do you think Parks will tell the founder if he calls as a result of your conversation with him? Does he have any legal recourse? Is Major Capital's behavior toward him unethical? Why or why not?

4. Parks is going to use information to perform staff cuts. What do you think about her rationale? Ethically, should she consider other factors, such as number of years of service, past employee reviews, or other criteria?

5. How do you respond to Lori? What are the consequences if you tell her what you know? What are the consequences of lying to her? What are the consequences of saying something noncommittal?

6. If you actually were in this situation, would you leave the company? Why or why not?

7. In business school, we talk of principles like competitive strategy as interesting academic topics. But, as you can see from the Yikes! case, competitive strategy decisions have human consequences. How do you plan to resolve conflicts between human needs and tough business decisions?

8. How do you define job security?