Question: A Midsize Pharmaceutical Company Jennifer Childs is the owner and chief executive officer of a midsize global pharmaceutical company with sales offices or manufacturing plants in eight countries. At an October staff meeting she tells her managers that company profits for the year are expected to be $2,000,000 more than anticipated. She tells them she would like to reinvest this additional profit by funding projects within the company that will either increase sales or reduce costs. She asks her three key managers to get together to develop a prioritized list of potential projects and then to meet with her to "sell" her on their ideas. She mentions that they should not assume the funds will be divided equally among the three of them. She also mentions that she is willing to put all of the funds into just one project if it seems appropriate. Julie Chen, manager of product development, has had a team of scientists working on a new prescription drug. This effort has been taking much longer than expected. She is worried that larger firms are working on a similar prescription drug and that these firms might get it to the marketplace first. Her team has not made any major breakthroughs yet, and some tests are not producing the expected results. She knows this is a risky project but feels that she cannot stop it now. Julie believes the company's long-term growth depends on this new drug, which can be sold worldwide.
She has tried to be optimistic at staff meetings about progress on this development project, but she knows that Jennifer is growing impatient and that her peers believe she should have terminated the project after the initial tests were less than promising. Julie would like to use the additional funds to accelerate the development project. She would hire a highly respected scientist from a larger firm and buy more sophisticated laboratory equipment. Tyler Ripken, manager of production at the firm's largest and oldest manufacturing facility, has been with the company only six months. His early observation is that the production flow is very inefficient. He believes this is the result of poor planning when additions were made to the plant over the years as the company grew. Tyler would like to form several employee teams to implement a better layout of the equipment in the plant. He thinks this would increase plant capacity while reducing costs. When Tyler mentions this idea to some of his supervisors, they remind him that when Jennifer's father ran the business, Jennifer was in charge of production, and she was responsible for the design of the current plant layout.
They also remind Tyler that Jennifer is not a fan of using employee teams. She believes production employees are paid to do their jobs, and she expects her managers to be the ones to come up with and implement new ideas. Jeff Matthews, manager of operations, is responsible for the company's computers and information systems as well as its accounting operations. Jeff believes that the company's computer systems are outdated, and as the business has grown with locations worldwide, the older computer equipment has been unable to handle the volume of transactions. He thinks that a new computer system could keep better track of customer orders, reduce customer complaints, and issue more timely invoices, thus improving cash flow. The employees in Jeff's operation joke about their outdated computer systems and put pressure on Jeff to buy newer equipment.
Jennifer has told Jeff in the past that she is not interested in spending money on new computers just for the sake of having the latest equipment, especially if the current system is working all right. She had suggested that Jeff look into hiring an outside service to do the accounting operations and reduce his own staff. Jeff would like to use this year's excess profits to buy new computers and to hire a computer programmer to upgrade the software to run on the new computers. He feels that this would be cost-effective. After Jennifer's October staff meeting, Joe Sanchez, manager of marketing, stops by Jennifer's office. He says that although he has not been asked to come up with project ideas for the extra profits, his feeling is that she should forget this project nonsense and just give him a larger budget to hire more sales representatives in several additional countries. "That would increase sales faster than anything else," Joe tells her. "And besides, that's what your father would have done!" Joe is counting on disagreements among the other three managers in establishing priorities. He hopes that if Jennifer sees a lack of consensus, she might give him funds to hire the additional sales representatives.
CASE QUESTIONS
1. How should Jennifer go about making her decision?
2. What kind of additional data or information should she collect?
3. What exactly should Jennifer require the others to submit in the way of proposals?
4. What do you think Jennifer should do with the $2,000,000? In explaining your answer, address the concerns and positions of Julie, Tyler, Jeff, and Joe.