CASE15_SwordstoPloughshares - From Swords to Ploughshares...

From Swords to Ploughshares: Three Generations
INTRODUCTION
The case study, which is a detailed history of the McNeely family business, sheds light
on a variety of strategic leadership issues and imparts an inside look at the mechanics of
corporate governance. It presents an interesting opportunity to discuss the following
topics.

How successful has the business been at recognizing and satisfying stakeholder
interests?

What mechanisms are available to manage relationships with stakeholders and
to influence the strategic direction and performance of the company?

Was the board of directors for Space Center Enterprises successful in fulfilling
its governance role and in meeting the challenges it faced?

Based on strategic leadership responsibilities, was Paddy qualified to fill in his
father's footsteps as CEO of the newly-merged Meritex organization?
ANALYSIS
Stakeholder Interests
Stakeholders are affected by the strategic outcomes achieved by the organization
and have enforceable claims on the firm's performance. Of course, different parties have
their own sets of expectations and levels of influence over the commitments, decisions,
and actions of the company. Balancing stakeholder interests is challenging and is often
managed by prioritizing interests which have the most power or are the most urgent. In
the management of the McNeely enterprises, two major stakeholder groups experienced
inadequate satisfaction with the company: the minority shareholders and the professional
managers.
Capital market stakeholders expect the firm to preserve and enhance the wealth
they have entrusted to it. Together holding a 22% interest in the company, the minority
stakeholders (the sisters), were frustrated by their lack of influence in planning and
decision making. Without representation on board, they believed that they did not have
full access to relevant information. In addition, they were critical of the executives'
misuse of assets and failure to distribute profits in the form of dividends.
On the other hand, organizational stakeholders expect the firm to provide a
dynamic, stimulating, and rewarding work environment. In this case, the emphasis was
on "rewarding". The success of Space Center depended upon the talent and performance
of an important group of professional managers. Although the retention and attraction of
these key managers was a clear priority, the company's compensation and organizational
structure did not lead to the equity interest coveted by this group. In fact, the
mechanisms used to motivate members of the management team promoted behavior
Space Center - 1

From Swords to Ploughshares: Three Generations
which could be at odds with McNeely interests. In addition, the independent negotiation
of each new business deal created ongoing uncertainty for the managers and an endless
source of intraorganizational conflict.