Growing Pains

Executive summary

Cyrus Maher, CEO of Waterway Industries, catches a telephone conversation as passing by the office of Lee Carter, director of marketing. It points to the assumption that Lee may think of leaving the company for a better position and pay. That means the company a trouble, since having joined Waterway right after her MBA graduation, she revived the marketing and sales, not only in the core canoe making but also in its newly launched, high-impact kayak business. Unprecedented growth, steadily increasing sales, brand awareness and reputation that the company can be eventually grateful for this talent lady.

Well aware of that, Maher intends to explore what’s behind, what could lead to this position.

Cyrus Maher is facing several problems within his organization because several employees have been asking for better salary conditions. Among these employees there is the director of the Marketing Department, Lee Carter, who seems to be receiving a proposal for a better package. Maher faces the dilemma to change or not her salary conditions, with all the implications of such a decision.

What problems could Maher identify?

Maher was wondering on the prevailing informal work style of his staff, in contrast to the formally born Marketing Department represented by Lee Carter, the new director. He found a cultural contradiction here.

Further investigating, Maher considered ongoing material issues within the company: the lucrative packages that similar businesses can provide for top managers somewhat differed from theirs; Upon his conversation with his business partner, he needed to reconsider his reward system.

Maher faced confronted himself when applying for a credit line extension at his bank, namely, the outstanding sales figures are accompanied by the same movement in related expenses. He concluded that a well established performance measurement could eliminate the misaligned strategies.

Lastly, Moher considered the top management as catalysts of the company, how they could contribute to the situation arised. When he explored the fact that could lead to this situation, he admitted that various measures should have been taken on corporate level as well.

1. Waterway’s Culture

Problem Statement

In our opinion, Waterway’s culture is also a problem that Maher should have in consideration. He assumed the “informal work style” that rules inside the company, as a positive characteristic for the working environment. Probably, this easygoing culture was appropriate during the first steps of the business, but now the company is growing at a fast peace, and a more organized work style should be followed, in order to guarantee that Waterway is serving its customers needs in an efficient way. Should Mahler consider a change in the company’s culture?

Another important problem is presented at the end of the case, when Maher says that he “never thought until now that the cutting edge was where he wanted Waterway to be”. If the CEO of the company doesn’t know what he wants to do, we can infer that the company is not following any kind of strategy (if it really exists!). As we are going to develop later in this report, a company that don’t have a strategy will also have problems in defining its “personality” - its culture, or will have a culture that reflects the lack of orientation towards the future. Shouldn’t the CEO have a clear strategy for the company?

Analysis of the problem (with possible solutions)

As we said at the beginning of this analysis, the problem of the culture is also related with the problem of the lack of strategy. Along the case, there are significant evidences that the company was more like floating on the sea, than on the edge of the front wave. It was only because of the “insistence of a Friend that Mahler decided to venture into kayaks. (…) “Until 1990, Waterway’s sales and revenues had increased with the market, and Maher hadn’t been motivated to push any harder (…) …there had never been a formal, structured marketing department in Waterway.”

These citations from the case support our assumption that company is not being managed in order to maximize the value creation that the business can offer. They also illustrate the complete lack of corporate strategy that we have identified before. A company without strategy is like a company without future, especially to people like Carter, which normally need challenging projects and strategies to maintain their motivation (as Maher recognized:”…she would leave when the kayak boom eventually played out.”). In this way, Maher should focus on getting a strategy for Waterway’s future business; he must try to go ahead and see new opportunities, establishing objectives that challenge its employees.

He should also consider another important aspect. Waterway started as a small specialized canoe maker, characterized with a culture of avid outdoor employees and informal work style. At the beginning this culture was very important to the development of the company, since it enabled the share of new ideas, and the improvement of design and processes. However, the entrance in the kayak segment, and the increasing base of clients generated the expansion of the company to another dimension, where the initial easygoing culture is not fitting so well.

2. When we started reading the case, Waterway’s informal work style seamed a positive aspect of the company, since it kept the employees happy with their jobs, and the work was always completed on time. However, from the talk between the CEO and its banker, we can understand that the real picture of the company is not as good as we can expect form a company that has been growing in sales. The operating expenses, especially travel and entertainment, are increasing and the company is spending much more with commissions to sales and marketing expenses. In fact, the loose culture that had worked in previous stages of the company seams to leave a lot of space to the generation of inefficiencies, and the consequent rise of costs.

Facing this type of problems, we tend to put all our attentions in the design of an incentive plan which rewards the decrease of costs. However, we will start our approach by Waterway’s culture, in order to understand its power in articulating a new strategy, and only then, we will focus into more