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What are two key organizational behavior issues in the following case? What can be done to remedy them?


The Anderson Corporation was started in 1962 as a small consumer products company.

During the first 20 years the company's R&D staff developed a series of new products that

proved to be very popular in the marketplace. Things went so well that the company had to

add a second production shift just to keep up with the demand. During this time period the

firm expanded its plant on three separate occasions. During an interview with a national

magazine, the firm's founder, Paul Anderson, said, "We don't sell our products. We allocate

them." This comment was in reference to the fact that the firm had only 24 salespeople and

was able to garner annual revenues in excess of $62 million.

Three years ago Anderson suffered its first financial setback. The company had a net

operating loss of $1.2 million. Two years ago the loss was $2.8 million, and last year it was

$4.7 million. The accountant estimates that this year the firm will lose approximately $10


Alarmed by this information, Citizen's Bank, the company's largest creditor, insisted that

the firm make some changes and start turning things around. In response to this request, Paul

Anderson agreed to step aside. The board of directors replaced him with Mary Hartmann,

head of the marketing division of one of the country's largest consumer products firms.

After making an analysis of the situation, Mary has come to the conclusion that there are a

number of changes that must be made if the firm is to be turned around. The three most

important are as follows:

More attention must be given to the marketing side of the business. The most vital

factor for success in the sale of the consumer goods produced by Anderson is an

effective sales force.

There must be an improvement in product quality. Currently, 2% of Anderson's output

is defective, as against 0.5% for the average firm in the industry. In the past the

demand for Anderson's output was so great that quality control was not an important

factor. Now it is proving to be a very costly area.

There must be a reduction in the number of people in the operation. Anderson can get

by with two-thirds of its current production personnel and only half of its

administrative staff.

Mary has not shared these ideas with the board of directors, but she intends to do so. For

the moment she is considering the steps that will have to be taken in making these changes

and the effect that all of this might have on the employees and the overall operation.

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