Stepping out of the box at Northern Box Company: Parts A & B.

Golove, Robert ; Armandi, Barry ; Sherman, Herbert 等

CASE DESCRIPTION

The overall purpose of this case is to examine the managerial and organizational nuances associated with supervising a dysfunctional high level and loyal employee. Students obtain a "real-world" feel for the overall business setting, and, in particular, the individual forces that help shape the work environment. Students are asked to probe beyond personalities and the immediacy of the moment (Richard's resignation) and examine the broader issues posed in the case.

This case was written for two distinct audiences: students taking a human resource management course and students in a business ethics course. In terms of the human resource management course, the case places students in management's shoes. Students need to understand the ramifications associated with accusing an employee of theft from both an issue of procedural integrity and employee rights. This case (Part A and B) should be introduced after the students have read material on workplace justice and the handling of employee theft (Kleiman, 2000, Chapter 11; DeNisi and Griffin, 2002, Chapter 15), and career planning (Newman and Hodgetts, 1998, Chapter 15; Dessler, 2003, Chapter 10).

CASE SYNOPSIS

This case deals with an important issue that many students may themselves have to deal with during their own professional careers; how to deal with an employee who you believe has been dishonest with you (and perhaps stealing or planning to steal from the company) and how to deal with accusations by others of dishonesty, disloyalty and possible theft.

INTRODUCTION

"Bruce, we have a problem," stated Joe Green, President of Northern Box Company to Bruce Caesar, General Manager. "I just received irrefutable evidence that Peter Mitchell, our best salesperson, has been lying to us and is planning to take our largest accounts elsewhere. We need to deal with this situation immediately!"

COMPANY BACKGROUND

Northern Box Company (NBC) manufactured corrugated paper shipping cartons. It was a privately held, family owned corporation that was founded in 1950. Originally set up as a jobber (distributor) without any manufacturing capabilities, it shifted to manufacturing cartons in 1970. It had 12 manufacturing plants from New England down to the Carolinas. In 2001, revenues totaled over $600 million. (See Appendix A for more financial and operating information)

In 1970, the founder, Grandpa Green, gave the company to his two sons who proceeded to turn NBC into a manufacturer by opening a plant on Long Island. The older of the two sons bought the other out and then he handed the company over to his two sons, Joe and Al. In the early 90's Joe bought half of Al's shares and became the majority partner. Part of that buyout agreement was the resignation of Al from the company. Subsequently, Joe became the CEO and President of the company. Joe had two sons that worked for the company in non-managerial roles, and Al's only son worked for the company as a sales manager at the Long Island facility. (See Appendix B for a listing of the central characters and their backgrounds)

THE LONG ISLAND DIVISION

The Long Island Division consisted of two plants, a corrugated facility and a sheet plant. The management team was responsible for both plants. What follows, however, focused on the larger facility, the corrugated plant.

At the onset of this period, the general manager of this facility was Joe Green (See Appendix C for the Long Island Division's Organization Chart). He took this position three years earlier when he abruptly fired the previous general manager for doing a "poor job". In May of 1996, a new general manager was hired, Bruce Caesar. The current Sales Manager, Larry Smith, was to act as the assistant general manger. After assessing Larry's abilities for three months, Bruce decided he needed help and promoted a salesman Peter Mitchell to co-Sales Manager. His responsibilities were to work with the younger sales people, manage his account base ($3 million) and the house accounts ($8 million), and help establish a cohesive steering committee for the division. Larry did not like the move and four months later he abruptly quit. After the resignation, Peter's responsibilities included Larry's workload. In September of 1997, Bruce was promoted to Regional General Manager and would be in his Long Island office only two days a week. Peter was expected to handle Bruce's responsibilities while he was away. Bruce knew that Peter was not ready for this much responsibility and started looking for a full-time general manager. On the recommendation of the plant manager, Bruce interviewed and hired Michael Useliz for the general manager position. During the time before Mike was hired, Bruce had turned the division so that an annual six-figure profit was realized.

[ILLUSTRATION OMITTED]

The New General Manager

Peter and Mike did not get along from the beginning. Bruce met with Peter and informed him that he needed to let Mike "run the show" from now on. He wanted Peter to put all his concentration on sales. At the first sales meeting where Peter was introducing Mike to the sales force, Mike made the following statement to them:

"Everybody thinks that doing business in New York is much harder than doing it anywhere else. This is simply not true. You just do not know how to perform your jobs correctly and I am here to teach you how."

Both Bruce and Peter received a tremendous backlash of anger from the sales force regarding this statement. The salespeople had an average of 18 years of experience in the industry and did not appreciate the comment from somebody who had never sold, nor had previously worked in New York.

Mike felt that the sales force was lazy and unproductive. He proposed to Joe Green, without telling Bruce or Peter, to fire all the salespeople except the top two producers. Joe dismissed the notion. However, Mike was able to convince Joe to change the sales force's compensation plan. The current plan included a base salary ($26,000-$35,000), commissions (2-5%), expense account and a car ($450/month) and telephone ($100/month) allowance. The new plan was to be commissions (2-14%) only with an incentive for the amount of paper sold (25>/1,000 square feet of board or 25>/MSF). Since the average salesperson sold about 40 million SF yearly, the footage incentive would mean about $10,000 annually. It was Peter's job to work out the details with the salespeople individually and show them that the new plan was actually better for them. This process took about two months. The sales force was outraged with the new plan and threatened to leave. Peter convinced them all to stay because the footage incentive would help make up the monetary difference between the two plans until they learned how to best "work" the new plan.

Peter was instructed to prepare overheads for Bruce to present the new plan officially to the sales team. An hour before the meeting, Bruce, Mike and Peter met to discuss the final details. Bruce informed Peter that his overheads were completely wrong because Joe Green scrapped the footage incentive weeks earlier. Bruce asked Mike why Peter did not know about this and Mike said that he had told Peter several times about the change. This was not the case. Mike then produced overheads with the correct information and reprimanded Peter for doing "poor work". Bruce later told Peter that the fact that Mike had prepared corrected overheads was proof that Mike was lying. The meeting was a disaster due to the elimination of the footage incentive and 7 out of 18 salespeople quit within the next four weeks. Mike indicated that "the salespeople quit due to Peter's failure to properly convey the correct information to the sales team." Mike convinced Joe that Joe's nephew, Morgan, should work with Peter to learn the position. Due to this move, Peter asked Bruce that he be allowed to step down from the managerial position. Bruce agreed to allow Peter to rejoin the sales force only if he spent the next three months training Morgan, which he did.

Around the same time that Peter stepped down, Bruce's health started to fail due to his diabetes. He went into semi-retirement by moving back to California, where he used to live before coming to NBC, and agreed to come back one week every month. The next six months were the most profitable that the division had experienced with profits over $100,000 for each month. Both Mike and Morgan boasted freely about how they had turned around the company now that Bruce and Peter were "out of the way." Bruce and Peter both quipped that Mike and Morgan were going to crash back down to earth before long because the turn-around was the product of their programs, not Mike's and Morgan's.

The following year, 2000, was a disaster for the Long Island Division. They were sustaining losses of over $75,000 per month. The plant, shipping and customer service managers quit citing the poor management skills of both Mike and Morgan. By now only six of the eleven remaining salespeople were still with the company and three of the top ten customers moved their business. The company was only able to recruit one salesperson during this time. Mike started spending the majority of his time in his office with the door shut, and Morgan came into the office only two half-days a week.

The Accusation

During a conversation with Joe, Bruce discovered that Mike had been accusing Peter of stealing from the company. The allegations included moving business to a competitor and working for a customer doing non-NBC business during company time. Mike was actively trying to get Peter fired. Since Peter controlled approximately 15% of all the business that the division was currently running and was responsible for 22% of the overall profit, no action was taken. Six months later Mike was fired for doing a "poor job" and Joe decided that he would replace him as the general manager on a half-day basis (8AM-12PM, Monday through Friday).

The most profitable account in the division was a customer handled by Peter. The account had an annual gross profit of $375,000. The customer (POPCO) had a major argument with Mike a couple of months before he was terminated, and they started moving their business to a competitor of NBC. Upon learning about Mike's dismissal, POPCO started to move the business back to NBC. POPCO had $50,000 of open orders in house with NBC.

Three days before the majority of the orders were due, the production manager informed Peter that the printing and cutting dies were all returned to the customer and that Peter had to go and pick them up. Peter questioned the manager as to why they would have returned tooling dies to a customer on the brink of leaving, but the response was: "That's not my problem, I just need the dies back to run the order."

Peter drove to the customer and went through the tooling dies that were returned. Apparently, only the cutting dies were returned and only about half were there. Peter called Morgan to let him know about the situation. Morgan told him to stay with the customer and that he would call him back in 30 minutes.

When Morgan called Peter back, he had the production and shipping managers and a plant supervisor in his office. They told Peter, via the speakerphone, that they had shipped all the dies to the customer. Peter replied that there must have been a mistake somewhere, because not all the dies were at the customer's. At that point, all four men started to accuse Peter of lying. They said that he was "going to be in big trouble unless he found the dies." Peter told them to come and find them, if they were so sure of themselves. At that point, Morgan yelled at Peter to "shut his f--ing mouth and never speak to him that way again." Peter replied that he did not deserve to be spoken to that way, and then asked Morgan to pick up the phone so they could talk one-on-one. Morgan declined but said that he would be sending somebody over to POPCO to find the dies. An hour later, the plant supervisor arrived at the customer's but was unable to locate the missing dies.

An Angry Customer

The following day, Peter told POPCO's owner about the situation regarding the dies. The owner said that he would replace the dies that he needed for the current orders but would deduct the amount from one of his bills. Morgan rejected the offer stating that the customer "lost the dies and should replace them at his own cost." The owner claimed that he never authorized the return of all of his dies and just found out about them today. The owner told Peter that "his order better be delivered by noon on Friday (two days away), or NBC would never see another order" from him again. The customer had a deadline to meet and would have to pay a substantial penalty if they were late.

With nowhere else to turn, Peter called Joe Green the following day (Thursday) to enlist his help. Much to Peter's surprise, Joe told him that "he did not want to speak to such a dishonest person," and that both "he and the customer could go to hell." Peter informed the customer of his company's decision and the customer ended the relationship with NBC on the spot.

The Trial

The following week, Bruce called Peter to inform him that there was going to be a meeting on that Wednesday between both of them, Joe and Morgan. Bruce told Peter that the Greens claimed that they had "irrefutable proof" regarding his dishonesty, and informed him to bring all of his backup paperwork. Bruce continued on to say that the Greens "knew" that Peter had requested all the dies be returned so that he could run them with a competitor to make a higher commission. Peter told Bruce that the accusation was ridiculous and unfounded, and that he looked forward to the meeting.

The meeting started promptly at 5:30 PM in the large conference room. Joe started off by saying that he was extremely disappointed with Peter's actions. He demanded a full explanation of Peter's actions and wanted to see paper documentation showing that Peter was innocent. Peter said that since the truth was on his side, he did not need any backup or explanations. He demanded to see the irrefutable proof that Bruce had told him about.

The Evidence

Joe produced two pieces of paper. One was an affidavit signed by the plant supervisor accusing Peter of harassing him to return the dies four months earlier. Peter did not ask to see the paper, but commented that he was impressed with the supervisor's professionalism even though the affidavit was a lie. The second piece of paper was a copy of an e-mail. Joe read the following from the paper: "Please return POPCO's dies to them at your next convenience."

Morgan stated that "Peter was dead in the water". Peter asked if there was anything else in the e-mail. Bruce, who had a copy, replied that there was. Peter asked Joe to read the remainder: "Also on the list are dies for two of my other customers that I do not know what the items are. Below, please find the following items in question. Please let me know the corresponding job numbers so I can have my customers inform me of their wishes."

Peter asked when the e-mail was dated. He was told that he had sent it eight months earlier. He then went on to ask if anybody knew what the e-mail meant. All replies were negative. He explained that eight months ago, production had given Morgan a list of "obsolete" dies that had not run in over two years. They wanted to know if they could either return the dies in question to the customer, or just throw them out. Peter asked Morgan to look through his desk for the list. Morgan left and returned within two minutes with the hand written list. On that list were the dies that Peter had listed on the bottom of his e-mail, as well as eight POPCO dies. Peter went on to explain that he had written formal letters to the customers asking them their wishes on what to do with these dies. Since Peter had given the completed letters to Morgan, he asked him to look through his desk for copies of the letters that he was talking about. Once again Morgan left and returned almost immediately with three such letters. The first two letters were to other customers and referenced the dies that Peter had questioned in his e-mail.

The third letter was to POPCO. The letter was initialed and dated by the owner of POPCO, requesting that the eight dies be returned. That letter was dated seven weeks earlier. Just ten days before the dies were actually returned.

The Apology

Having realized that his story did not hold water, Joe went on to say that he thought that Peter had been stealing because Mike had accused him of that many times. He went on to say that he had been "burnt many times" by unscrupulous salespeople and had made a grave mistake in error by accusing Peter. Peter reminded Joe that he had fired Mike and should always question the reliability of his source. Peter went on to say that obviously the affidavit was also a fabrication, and that he felt that the plant and shipping managers had probably coerced the supervisor into signing it. Peter asked if those managers were going to have to answer for their dishonesty. Joe said that the plant manager was a "stand-up guy", but that the shipping manager had "honesty problems". However, he was not going to address the issue with them. He thanked Peter for his "frank and honest" comments, and said that he would never rush to judgment on him again. Peter ended the meeting by stating how hurt he was by having his integrity questioned. Then the men all shook hands and left the room.

The Dinner

After the meeting, Bruce and Peter went out to dinner. Peter told Bruce that he did not think that he could work for NBC any longer. Bruce reminded Peter about how much money he was making, and implored him to consider the company's best interest as well. Peter told Bruce that he could not put a price on his reputation and stated that something would have to change. Peter said to Bruce "After eight years of being a loyal employee, how could they think of me as anything less. Besides, why aren't they going to question the (plant and shipping) managers' integrity?" Bruce responded by saying that "Money cures all. You need to consider your financial situation and taking care of your family. Forget about your pride. Besides those guys are a bunch of a-holes and you shouldn't let them get to you." Peter said thanks for the advice and they both left the restaurant.

The Decision

Peter went home that night and discussed the situation with his wife. Having a toddler and a newborn at home, and a wife who did not earn a salary, a decision to leave could not be easily made. To compound the decision further, Peter had just entered an MBA program that would take considerable financial resources, since he was paying for it personally. Leaving his high-paying job may jeopardize the ability to complete the schooling

Appendix A Financial and Operational Background

As an economic indicator, the corrugated industry normally tracks paper usage. This is because the industry's pricing is a direct product of the paper market, which is a commodity. NBC, like most companies in their industry, measures usage in units of MMSF (million square feet of corrugated paper). As a guide for this study, $40 per MSF can be used to help the reader understand the economic values. Using this ratio every MMSF will equal $40,000. Remember that this equation is only an average extrapolation and does not reflect the actual fluctuations in market pricing during the timeframe we are looking at.

In 1995, the year before Bruce was hired, the local plant manufactured and shipped around 830 MMSF. The plant has the yearly capacity to manufacture and ship over 1,200 MMSF. On the quality charts, their parts per million (PPM) returned was around 5,500. This was about four times higher than the industry standard. These factors helped the plant to realize a loss of approximately $1,000,000. In 1997, the first full year for both Bruce and Peter as managers at NBC, the plant shipped 985 MMSF and had a PPM rate of 3,700. In 1998, the plant shipped 1,070 MMSF and had a PPM of 1,900. In 1999, the first year with Mike and Morgan leading the division, the plant shipped 955 MMSF and had a PPM of 4,200. Currently (2001), the plant is on a pace to ship 880 MMSF and have a PPM of 6,700.

NOTE: For the reader who is not familiar with the corrugated paper industry, a normal truckload of finished product can hold 140 MSF of product. Thus 830 MMSF equates to approximately 24 truckloads each day, and 1,070 MMSF equates to approximately 31 truckloads daily.

Appendix B
Personnel Backgrounds

Joe Green: 62 year old small framed man with balding gray
 hair. Usually soft spoken, unless angered. Known
 to have a quick temper. Wore wire rimmed glasses
 that he peered over when he disagreed with
 someone. He was extremely wealthy. Had a private
 leer jet, an 80-foot yacht with three full-time
 employees, and several homes located in some of
 the wealthiest parts of the United States and
 the Caribbean. Normally dressed casual. Almost
 never wore a jacket or tie.

Bruce Caesar: 59 year old distinguished looking man with an
 athletic build and natural strawberry blond hair
 with white highlights. He had blue-green eyes and
 a perfect smile. An avid golfer, who enjoyed
 Broadway shows and wine tasting. Started in the
 industry as an hourly laborer at the age of 19,
 and worked his way up the chain to the regional
 vice president's position at the world's largest
 corrugated paper company by age 52. Heavily
 invested in the stock market, where he made most
 of his money. Always dressed to impress. Retired
 at age 56, before coming to NBC three years later.

Larry Smith: 55 year old tall thin man who wore thick horned
 rimmed glasses, and had thick salt and pepper
 hair. A nine to fiver, who was meek and soft-
 spoken. A secretive person who kept to himself.

Michael Useliz: 50 year old tall thin man with dyed dark comb-over
 hair. Not well groomed. A New Englander who was
 verbal about his distain for how New Yorkers do
 business. A Naval Academy graduate, who received
 his MBA from Wharton. Spent a large amount of time
 playing Solitaire on his computer. Liked holding
 long meetings, but always left work at 5:30 PM no
 matter what the circumstance. Recently fired from
 his past job, but it was unknown until well after
 he was hired.

Peter Mitchell: 31 year old husky man with thick auburn hair. A
 positive energy person, who always has a smile on
 his face. Formally trained salesperson (Xerox
 PSSIII) program. with a quick whit and a
 professional air. Worked long hours and was always
 on call. Highest grossing salesperson in the
 division for three years straight. Generates
 nearly twice as much profit as the second highest
 selling salesperson. Considered a company-man.

Morgan Green: 27 year old small framed man with long curly dark
 hair and a perpetual tan. He was the nephew of Joe
 Green. Always wore collared shirt that was un-
 buttoned down to chest. Received Associates Degree
 from local college two years earlier. Born
 wealthy, this was his first full-time job. Known
 to date models and frequent strip clubs.

Appendix C Organization Chart Northern Box Company's Long Island Division

STEPPING OUT OF THE BOX AT NORTHERN BOX COMPANY: PART B

After hours of careful consideration, Peter and his wife agreed on what needed to be done and sent Bruce the following e-mail:

Subject: My Resignation and Continuing Service to NBC Date: 8/30/01 1:09;14 AM Eastern Daylight Time From: Peter Mitchell To: Bruce Caesar@NBContainer.com

GOOD MORNING!

Thank you for having dinner with me and your words of advice. You have always afforded me your knowledge and experience, and it is truly appreciated.

As discussed, I no longer want to work for Northern Box Corp. It is not in my best interest to have my family's livelihood in the hands of people whom I can no longer trust. Given my age I will no doubt work for perhaps another 25 years, therefore I will find a place where my talents and dedication are fully appreciated and utilized. I have not yet sought out other means of employment, but it is obvious to me that NBC is not my future any more. The latest disaster with POPCO is inexcusable, and I cannot forgive the people who caused it or allowed it to occur. There is no accountability for their malfeasance, and therefore no hope that it will not occur over and over again. I would rather face an unknown future then watch my extensive efforts and hard earned customer relationships be wasted in the years to come.

I concur with your assessment regarding the well being of NBC, and I am even more concerned about my customers. If I were to leave today, NBC would lose a great deal of volume from the Megasource accounts, because they are depending on me to help them through this critical transition time for them. NBC would likewise have a hard time bringing Jay's new company, the ABC Company, on board and would surely fail when Wyatt Fruit Company's goes to renew their contract this year.

I do not wish to hurt my customers who have been so good to me over the years, and I would like to leave NBC with minimal damage. I resign from NBC effective at the end of the current period (September 7th). I propose to become an Independent Agent for NBC until year's end. This way I can help solidify NBC's positioning at the accounts I mentioned above, and have an income while I create my future. The details would need to be worked out this week, and we could revisit any plan at year's end. Please bring this to Joe Green's earliest attention so I can get his immediate feedback and commitment.

Thank you again for all your help.

The resignation email was a complete surprise to Bruce. He could not believe that the "company guy" was actually quitting. After calling Peter and trying to change his decision, Bruce reluctantly forwarded the email to Joe. Joe called a meeting with Bruce, Morgan, and Peter to discuss the resignation. No matter what points the managers tried to convey to Peter, his answer was basically the same; "I need to work for a company where I am appreciated for what I do and respected for who I am." Peter went on to say that the once the bond of trust had been breeched, that it could never be repaired. The meeting left all parties feeling uneasy.

Peter proposed a plan for his leaving the company to Joe, Morgan, and the executive vice president who was there in Bruce's place. Since Peter did not want to leave the Division in financial ruins by taking his business elsewhere, he created a program where he would teach another salesperson how to best handle his accounts. For this, he asked for a 1% commission to be paid to him for the business he would leave behind for the following year. His goal was to move out of the field and into another industry. Since he had not started looking for another job, he would need this 1% to help supplement his income for the first year. He asked for a quick decision so he could move on with his life and start looking for a job.

It had been over a month since Peter presented his plan and he still had not been given an answer. Morgan called Peter and told him that he needed to speak with him right away. Peter thought that he was finally getting a response to his proposal. When he arrived at Morgan's office, he was greeted with a second accusation. Morgan told him that he "knew" that Peter had tried to hire a truck driver, recently let go by NBC due to the drop in business, to work as a salesperson for POPCO. Dumbfounded by the allegation, Peter asked why anybody would hire a truck driver to do a sales job. Morgan stated that the driver would know all of NBC's customers. Peter, still not fully understanding the charge, stated that as the ex-sales manager he also knew all the customers and none of them utilized POPCO's products. Morgan clarified his claim by telling Peter that he "knew" that they were out to sell corrugated cartons (NBC's products) to "his" customers behind his back. Peter informed Morgan that POPCO did not have any carton making capabilities, and that he was just embarrassing himself at this point. Morgan apologized for his misinformation. The next day Peter found out that Morgan was told about the accusation from the shipping manager. The same one that Joe claimed had "honesty issues."

Robert Golove, Long Island University

Barry Armandi, SUNY-Old Westbury

Herbert Sherman, LIU-Southampton College