Lakeland Wonders Case Study

1. CEO Cheryl Hailstrom wants her company, Lakeland Wonders, to make two significant changes – enter the mid-market retail segment and establish manufacturing capabilities offshore. Using the Beer model of change, do you believe that Cheryl will be able to achieve these two changes at Lakeland Wonders? If yes, explain why. If not, explain why not.

Michael Beer’s change formula:

Amount of change = (Dissatisfaction x Model x Process) > Cost of change

In Michael Beer’s change formula, dissatisfaction, model, and process must be in sufficient strength to overcome the cost of change. I would like to divide Cheryl Hailstorm’s case into four parts to analysis whether she can achieve those changes or not.

First, Dissatisfaction. In the organization, changing processes will happened when people feel dissatisfied with the current situation. In Lakeland Wonders’ case, I didn’t find out any significant evidences showed people were dissatisfaction with company’s current situation, beside Hailstorm. Hailstorm knew the company’s annual growth target would come from Hastings, Curtiss’s pressure. However, Hailstorm failed to establish a sense of urgency to let management or employees know company’s marketing position need expend to earn more revenue. Hailstorm wanted to establish the offshore manufacture lines to lower producing cost and increase products competitiveness, to enter the mid-market retail segment. However, there were a disagreement and arguments between Hailstorm and senior managements about set up offshore manufacture lines. Lakeland Wonder’s labor union also question about Hailstorm’s offshore plan would be the first step of future massive lay off. There were no disagreements about enter the mid-market retail segment. However, senior managers question about the new products would no longer “Made in USA.” Hailstorm didn’t create enough dissatisfaction about current manufacture procedures to let senior managements accept her new changing plan.

Second, Model. A clear vision of the future model will be needed for the change. Hailstorm did draw a vision for Lakeland Wonders’ future. However, at the current situation, Hailstorm failed to share her vision with senior management and Swensen family board members. To let Lakeland Wonders, keep growing up to meet board’s annual target, company need to step into the middle of the nonelectronic toy market. In Hailstorm’s plan, to let Lakeland Wonders products acquire a strong competitiveness to enter the middle toy market, Lakeland Wonders needed to lower its cost and Hailstorm choose to set up offshore production line. Hailstorm didn’t provide enough evidence to let Mark Dawson, the senior vice president or union to believe this model was workable. The other major conflict point was the branding issue. Before, every package and every delivery truck from Lakeland Wonders was emblazoned with “Handcrafted with pride in the USA.” Hailstorm didn’t clearly explain how she can work on this issue. Hailstorm wanted to use a newer and more famous packaging company (Sampsen Design) to replace the current local packaging company.

Third, Process. A well-planned process was needed for the change. Hailstorm made some processes to achieve her goal-achieve company’s annual target. However, I didn’t see company’s senior managers involved or participated with Hailstorm’s making process. The offshore manufacture lines, new packaging company, and new person (Cecil Flemming) to take over new-product development. However, senior vice president and union were question about the offshore manufacture lines, the design director unwilling to work with the new packaging company, and retired CEO/one of the board member not interesting in taking new person to charge the new-product development. Hailstorm didn’t try to understand what were the reasons that made her senior managers resist to support her plan. It’s clearly can find out that Hailstorm’s plan already caused conflicts with Lakeland Wonders’ traditional organization culture.

Last, Cost of changes. In Michael Beer’s article, there were couple costs were brought by changes, such as power, competence, relationship, rewards, and identity. Hailstorm’s offshore manufacture lines will let union workers lost job opportunities. If Hailstorm let design director (Barry Quince) work with the new packaging company, Barry will lose negotiate power and working relationship from previously work experience. The company’s traditional brand identity- “Handcrafted with pride in the USA” will be another challenge once Hailstorm’s plan be practiced. It may cause the relationship between Lakeland Wonders and Kids & Company. If Hailstorm keep offshore manufacture lines plan, she will lose the support power from Swensen family which include three members of the seven-people’s board.

From the previous analysis, I think Hailstorm will face lots of resistance about her changing plan and she won’t able to accomplish it if she keeps using the same management way. In most of Lakeland Wonders managements and workers’ point, Hailstorm just want to change the company culture and everything without communication and negotiate.

2. What has been Cheryl Hailstrom’s approach to leading these two change efforts? Is it the right approach to change for this situation? If yes, explain why. If not, explain why not and describe the approach that you would recommend.

In the Lakeland Wonders case, Cheryl Hailstorm used Theory E type to leading offshore manufacture lines and enter mid-market retail segment changes. In my opinion, this was not the appropriate approach to achieve her targets. Hailstorm’s change plans were more company’s structure and direction changing. It also conflicts with traditional organization culture. Through the entire case, I didn’t find out Hailstorm want to do anything to let herself blend into this company which had a long history of organization culture. The former retired CEO (Walter Swensen) tried to let Hailstorm understand this issue, but she didn’t take the advice. The table 1 shows the difference aspects between the two different theories. I would like to use the 4-change dimension to analysis Hailstorm’s behaviors and provide combined suggestions of each dimension.

<Table 1> Theory E Theory O

Goals Maximize Economic Value Develop Organizational Capabilities

Leaderships Top to down Participative

Focus Structure & Systems Culture & behavior & employee attitude

Process Programmatic Evolutionary & Emergent

a. Goal: Hailstorm’s goal focus on