Please read the case study and answer the questions at the end. Complete the case analysis sheet as part of your preparations.

Baileys Office Supply D. Wesley Balderson University of Lethbridge

In 1956, John Bailey left a major department store chain where he worked as the hardware department manager to open his own office supply store. John had worked for the chain for over fifteen (15) years and had become very knowledgeable about the business. He felt, however, that he could develop a successful business by offering more personalized customer service than the larger stores could. By 1966 the firm, Baileys Office Supply, had become a large and well-known establishment in Toronto with three outlets. The firm had no particular specialties but did carry a very extensive line of all basic office supplies, typewriters, and adding machines and a limited line of office furniture. Its strength was, as John Bailey had intended, its superior customer service. John was careful to properly train his employees to not only know their products but also their customers needs. In 1976, John Baileys son, Marty, was finishing college in business administration and had decided to join his father in the business. Marty had worked from time to time for his father and thought that he might enjoy the business. John had told Marty, however, to get an education first and that if he decided to work at Baileys he would have a job. Although John had made this offer to Marty he was concerned because he had a younger son and an older daughter and wondered how they would react to Marty being brought into the company. Marty joined Baileys as assistant sales manager with the understanding that he would be given the job of sales manager upon the retirement of Kenneth Harker, which was due to take place in another three years. At the same time Martys brother and sister, along with Marty, were placed on the board of directors for Baileys. Although the board met only sporadically, it did have the authority to ratify major management decisions. During the late 1970s both Baileys observed the phenomenal growth and development of the high- technology firms that occupied the Golden Triangle area in and around Toronto, Ottawa, and Montreal. This boom not only spawned the creation of many successful firms, but it signalled the introduction of many strong competitors for Baileys. Some of these were warehouse stores which offered a large assortment of office merchandise at very low prices. John Bailey still maintained that if Baileys continued to offer its personal down home service this new competition would not seriously affect Baileys.

Having known several persons who were a part of the technology boom, it was tempting for the Baileys to invest in newly created firms, knowing that the investments of several of their friends had been very successful. John Bailey, however, was fairly conservative, and having built the business to a success was now looking forward to enjoying the fruits of his hard work by playing more golf and travelling with his wife for a month or two every year. He still retained controlling interest in the business as opposed to making any outside investments. Marty on the other hand was anxious to take advantage of some of these opportunities and felt strongly that by adding lines of computer hardware and software to their merchandise line Baileys could increase sales. He felt, in fact, that Baileys would have a difficult time competing with the office supply warehouses if they didnt move into this area. As this would require a rather major reinvestment of earnings back into the firm, John and his other son and daughter were reluctant to move in this direction. These disagreements were a source of frustration for Marty and he contemplated leaving the family business and starting his own high-tech office supply store. By 1985, the effects of the high interest rates and a cutback in building construction had reduced the total income of business and the profit of Baileys by some twenty percent (20%). It was a sobering turn of events for a firm that had experienced a long, steady expansion. In thinking about this, John Bailey felt that it might be wise to turn the management of the business over to Marty along with some of his ownership interest. Under Johns proposal he would retain majority ownership of the company, and still come in to work part-time but Marty would be responsible for the day-to-day operations. When John approached Marty with the proposal he was shocked to hear that Marty had decided to leave the firm. John felt that he had given Marty a tremendous opportunity to learn about and then take over the business which he had built into a success and could not understand why Marty could turn down such an offer.

Case Questions

1. What could John have done that might have helped to lessen the problem he now faces with respect to succession? Explain why your suggestions are valid. 2. What did Marty do right, and what more could he have done to better facilitate his succession in his fathers business? 3. Assuming Marty would stay if the right arrangement could be worked out, what might that arrangement look like? Remember, the concerns of all family members will likely need to be considered, but especially John and Martys