Academic journal article Journal of the International Academy for Case Studies

Roofs of Distinction

Academic journal article Journal of the International Academy for Case Studies

Roofs of Distinction

Article excerpt

INSTRUCTORS' NOTES

Case Analysis and Discussion

To begin the case discussion, students can be asked what would they do if they were Tom. Students can formulate individual decisions and then the instructor could form teams in class and ask students to share their decisions. Each team could report some of the decisions that were shared and discussed. At the current decision-point, it seems Tom has at least five viable options:

1. Stay with ROD under the current situation

2. Quit and look for work elsewhere

3. Quit and try to start a competing business

4. Push harder for major changes in his compensation to reflect his new role

5. Attempt to buy the business from Anne

Given Tom's present unhappiness and the imbalance between the work he's doing and the rewards he's getting, retaining the status quo does not seem to be a reasonable long-term option for him. He feels some sympathy for Anne's position but has no great liking or respect for her, and thus feels aggrieved when he compares his own $55,000 paycheck to her $170-200,000 annual compensation, especially when she is unlikely to contribute anything substantial to the company. This inequity wasn't a problem when Rod ran the business because Tom could appreciate the obvious value of Rod's contributions, and Rod was helping him by giving him an education in the specialty roofing business.

Quitting to work elsewhere or starting a competing business are viable alternatives, but the first requires him to abandon an industry in which he has developed expertise and contacts, while the second requires significant capital (see Exhibit 3). Tom views ROD as an excellent business opportunity with growth potential that he would hate to abandon. Also to a great extent Tom feels that his leaving ROD would probably kill it, since the business depends greatly on the constant attention of a well-trained, devoted manager, and it does not have the financial resources needed to support it while a new manager is hired and trained. As someone who has spent his work life building things, Tom hates the thought of being responsible for destroying a strong business that represents Rod Evans's legacy.

Fighting for increased compensation to remain as ROD's manager is a reasonable alternative which, although it has failed so far, could well be successful later when Anne is thinking more coherently or Tom's persuasiveness improves. However, Anne's total lack of involvement with ROD would appear to be a continual problem for Tom, both operationally and psychologically.

Even if he gets a substantial raise, he will continue to do all the work while Anne receives $120-200,000 of annual compensation for doing nothing except to interfere with his operation whenever she wants. Buying the business from Anne seems to be the most desirable alternative, since it:

* satisfies his desire to be a continuing part of ROD

* satisfies his desire to "call the shots without interference," as he phrases it

* gives him eventual rewards commensurate with his efforts and accomplishments

* gives her fair compensation for her ownership rights

* saves her from worrying about the future of ROD

ROD Profitability

For advanced groups, the profitability of ROD is obvious, but for beginning students who tend to focus only on the "bottom line," a quick exercise in recasting profit under Tom's ownership is worthwhile. A worksheet such as Exhibit 2 could be developed in class or handed out by the instructor for discussion. As the Exhibit shows, Tom would have the potential to earn about $340,000 in annual salary and/or profit from ROD without making any improvements in the business. Thus he has great motivation to make a deal with Anne, if at all possible. If he owned the business and was content to make about $275,000 per year, he could even hire an assistant to reduce his workload, much as Rod had done.

Negotiation Strategy

The Parameters

While students can readily see that Tom's buying the business from Anne is the best solution to the case from Tom's point of view, a much harder problem is to figure out HOW to get her to sell it to him. …

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