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Read the Christian Business Faculty Association (CBFA) case study (When the Golden Rule Yield No Gold-you do not need to read the "Suggested Teaching Approaches" section) and answer the following questions listed below. You should focus on leadership traits, especially as they relate to the specific circumstances noted in the case. Post your completed document to the appropriate Moodle portal prior to the due date and time. 1. What are the business issues at stake in the case study? a. 2. What are the Christian and ethical issues at stake in the case? I a. 3. Where the business and Christian issues intersect? Where do they conflict? a. 4. What would you do if you were Zach? Explain your reasoning. 5. If you were an employee of the company, what would you expect Zach to do? a. 6. What do you think that Jesus would do? What scripture supports your conclusion? a. Case Study Tips Look at case study a couple of times over 2-3 days Do reading before writing case study Read each question and identify the sub-questions Working with others is ok or items requested in the response Take time to write and allow time for the process, Outline key points for response rather than waiting until the deadline Zuelli Page - CWhen the Golden Rule yields old Care # Case Study: When the Golden Rule Yields No Gold Next wee MICHAEL ZIGARELLI Messiah College maigarelliemessiah.edu Can GARY PAGE Page & Associates, LLC gary@gpagecpa.com "S ABSTRACT: Zach Jordan (a real person but not his real name), the owner of a small business in Connecticut, may not be able to compete any longer in the spring manufacturing industry. Overseas competition has put him at a significant cost disadvantage, and the losses continue to mount year after year. At the same time, he's deeply committed to care for his handful of employees - people who are dependent on him and who he considers "family." Now at a crossroads, he faces an apparent dilemma: (1) gamble $200,000 on rent to extend the jobs of his employee family or (2) liquidate the business while it's still worth something, sending his employees to the unemployment line during a bad economy. There may be other, more attractive options and identifying them and selecting from among them is largely what this case is about. Framed from a Christian worldview, the case comes down to this: In an intensely competitive environment, how can we faithfully serve employee needs while effectively stewarding the business? THE CASE Throughout his career, his prioritics made that abun- dantly clear. Zach had often worked from home during his Zach Jordan sat at his desk seeking the high road. It 30s and 40s, sacrificing business growth so that he could help had been his approach from day one. Now, though. on day raise his girls. He had adopted a "Golden Rule" approach to 10,001, that road was obscure. Or perhaps this time there management, paternalistically caring for his employees' needs, were two or three high roads. maintaining integrity in every deal, insisting on quality, Metaphors aside, this much was apparent. If he sold respect, and timely delivery for every customer, treating all of his ailing company, several people -- good people whom his stakeholders as he would want to be treated he had embraced as family over the years -- would lose The fruit of that management style was a fiercely loyal their jobs in a bad economy. But if he didn't sell and if workforce - hardly any turnover in twenty years of busi- business didn't improve, he could lose hundreds of thou. ness -- as well as an equally loyal customer base. One of sands of dollars in rent. Zach's cleven employees summed it up well. Zach's the He looked at the pictures adorning the walls, pictures glue that holds everything together around here. And he's a of his three girls, pictures of his employees, a photo of him great boss, too. He treats us better than anyone's ever tocated doing his magic act (Zach's favorite hobby) for mesmerized us in our other jobs. I'll give you an example: In good times school children. Zach had a zest for life and an authentic and in bad, he's always given a big Christmas bonus. One love for everyone around him. time he even had to borrow the money to do it Ja th There ancial fruit who off both the foot on your H. Now England Spring failer espany (NES) in Connecticut med en turn "And can you back the other ce the 1980. Bor international competition and "No. I'm the hook for the peach sighed sputtering en bep to take their toll, and in the offered. "You've got tout. Either that or out your ** 1990, many of Zach's customers began to import their fie salary." "I told you this before comme grudly spring primarily from man in Asia whose wese a fraction of Zach. Profit evaporated and eventually Two years ago he had cut his own pay to $30,000, tea than Zach smiled at the welcome levity- and the mony. tumed to be the pot five you had been particularly what we of his employees were coming difficult all of which culminated in red ink free Exhibit) for NES financial information), "Funny you should mention that." Zach returned with As he wiped some dust from the photo of the NES rdeem your card." prin. "The SEC is stopping by this afternoon. I thought family celebrating an employee's birthday chcom memor every employee day with card and a $50 "Remind me my friend, Charles interjected with a check), in walked his two invited for the day. Serve how you've been paring new business lady chuckle, what your product line looks like. And tell me his accountant and longtime friend, and Charles, aproce (now emeritus), from Zach's business school days. This was "We manufacture and sell several types of springs," Zach began. "everything from specialty stainless steel spring to a bittersweet occasion. Zach embraced each but then had springs for wyjets and helicopters to common springs you'd to share with the professor his reason for the invitation: He ind in a hardware store. And over the years, I've tried to grow needed advice about whether to sell his beloved company the business through a combination of in-home sales reps and Zach closed the door. "Tanks so much for coming advertising in the sandard industry newspapers, both in print you guys. I really appreciate your willingness to give me and on the web. Quite frankly, though, it's been years since some candid advice." either approach has paid off, so I've recently dropped them. His expression turned somber as did his tone. Zach Bids are so tight that a sales rep's five percent commission looked squarely at the septuagenarian professor and repented required me to bid at my cost to remain competitive. I was "Charles, this place is bleeding, and it has been for years. I'm taking jobs just to cover overhead! And the hundred grand seriously thinking about getting out rather than signing off on I dropped in advertising over the past decade has returned another two year. $200,000 lease for the building, Steve tells almost no business. So basically, I'm left with no sales force me I can get at least 5750,000 for the customers, the inven and enemially no advertising tory, the receivables, and the equipment, but the problem is "Sounds like you could use some fresh ideas," the pro- this with my financials, nobody is going to buy the business fessor observed thoughtfully. He was often brilliant, Zach itself. So if I sell, it has to be by parceling it off. But then NES thought, but now he was simply stating the obvious. won't exist anymore and my people would lose their jobs. "That would be nice." Zach was eager for a few hot tips And in this economy, they're not going to find jobs anytime from the good doctor, but he knew those were probably a soon, certainly not much beyond minimum wage. I could few days off "And there might actually be some new busi- take a chance and try to keep it afloat, but I'm on the verge ness out there. But my fresh idea' file is freshly depleted. of losing my biggest account to India - Twenty percent of my I've also thought about re-tooling as an option -- you business! If that happens, I probably couldn't survive more know, create other products that might have a niche --- but than two months, and the selling price of the business would I'd need about a quarter million for equipment, even used drop a whole lot more. But even if I keep this account, there's equipment, and I have no customer list for whatever that no guarantee that things are going to turn around. I just can't new product would be." compete with Asia's dollar-an-hour labor "Let me give the marketing piece some thought," That was a lot of information in sixty seconds, but Charles replied with characteristic circumspection. "But in Charles xeroed in on what he considered a critical issue. the meantime, tell me just how bad things are financially, "What's the chance of losing that account?" Do you have some income statements handy?" "Probably about 50/50 next year," Zach replied. Zach buzzed his secretary. "Mandy, can you please "Maybe even 60/40. India's come out with a stainless steel bring me the binder of financials?" Mandy, as always, spring that weighs fifty percent more than ours --- much responded promptly, smiling at the gentlemen on her way better quality -- for the same price, and my customer is out. As she closed the door, Zach shared with his guests genuinely considering making the switch." that Mandy, his secretary for twenty years, was recently d having poychological problems from the man SUGGESTED TEACHING APPROACHES AND "My other office ale explained. Whaking his heel ha DISCUSSION QUESTIONS di band and is the lefor a family of five And the guy when the plant has four kids, two of them For What Care and What Level getting ready for college he lose his job wagefility. I don't The case is not complicated to understand and know what hedde requires caly modest peregte business wedge to The probe made the accountant flipped up in address intelligudly, however, because of the strategy the binder. "It's mobile. Stove aid she opened the involved it may best fit upper-led undergraduate and books for Charles, but it's not tainable cichen. Wewe been carrepenuhip, and business than menghan introductory graduate courses in management, marketing losing money for you. Comes are inching pouy become of health care, workers' comp, and raw material prices cond-year, undergraduate businca students we Salaries are exactly at market - anywhere from $10-$26 for a case competition among MBA and EMBA wudents, an hour. But we've out everything close to the bare bes. And as far as sales goes, we've been flat for a long time, and we have with the actual propea (Zach) offering prize money for the best ideas. So it's a raonably versatile cam. It can no expectation for new sources of revenue." encourage students at wwwval levels to think ategically Charles adjusted his planes as he reviewed the state about a tumaround thustion, while never losing sight of ments. His grimace told Zach that there was no quick fix what's entailed by a "Chriwia worldview." forthcoming "I'm telling ya, Zach, cut and run," Steve recommend Teaching Plan ed. preempting the professor's analysis. "I know you care Grow wark (10) about these people, but they're big boys and girls now. They There are many ways to teach this case. The method can take care of themselves. Believe me, they'll be fine." typically wed by the lead author is to have students talk Zach didn't know whether to be irritated stor grate through their proposed solutions in groups of four to six) ful for the counsel. Maybe Steve's was the only rational for 10 minutes before having a plenary, instructor-led dis- response, but Steve was also ignoring the fact that Zach cussion. The group work gives the students some practice didn't want to sell our his employees. Irritation trumped presenting their ideas before being tapped to share their gratitude for the moment. ideas with the entire class. It enables brainstorming and "Would you be fine if your income were cut in half and inscills some confidence in the students, often leading to if you lost your health insurance?" Zach retorted softly but more and richer participation later in the class period. firmly. "Would your family be "fine? I know you're looking Initial Ideas (10 Minutes) out for me, Steve, but I simply can't operate that way." For the plenary discussion, this is a good case for facil All right, his accountant back-peddled with a shrug "So spend $175.000 to give them six months' severance itator to take a Socratic approach, beginning with a broad And spend another twenty-five grand to maintain their question and later funneling down to related but more health benefits. Will that help you to sleep at night?" specific questions. Posing the case question to one of the mid-level students works well to get things started mid- Zach pondered the idea, but it seemed a bit excessive. "I'm getting too old for this kind of stress," he said loan level" since a top student may solve the whole thing from ing back in his chair and rubbing his eyes. "I'm 62 now the outset precluding the opportunity for other students to wrestle and to discover). "What should Zach do?" is the Charles, which I know sounds like a spring chicken to you. But the spring business is taking all the spring out of this opener. "Roll the dice on another 200,000 bucks or wave the white flag Deep down, Zach desperately wanted his company to This framing allows the facilitator to get some initial bounce back. But that seemed unlikely without some bold solutions on the board without being too intimidat- new strategy. And he wasn't sure he had either the energy ing. After all, cach of the students was asked to prepare to pursue it or the gumption to roll the dice on another this very case question. Inviting a few more students $200,000 lease. "Cut and run" seemed like a logical course to respond to and build on the first student's ideas will of action, but what about his people? This "Golden Rule" develop these ideas further, giving the facilitator more to spring manufacturer recoiled at the thought of repaying work with (and keeping the class on its toes, if the facili- tator is cold calling) their loyalty with a trip to the unemployment line. spring chicken." Casey Whethe Golden Rules After about ten minutes, the diction may probably be openined and clarified. One approach is to rise the ideas thus far into three that point ward selling the new and there that wand developing aturarend rategy the facilitator seuld probably do this incomp cusly when chroniding the idea on the board. Scribe the ideas on spune bandes des de chembut do we yetlobe the boards selli" or "keep it. It may even be worthwhile at this point to take an informal poll once the two sets of ideas are formally labeled. That is the facili or to see where the class stands and creates a public commitment, which often encourages further participation turn to the "keep it group with a provocative devil's advo cate question liker S, are you in This is hopeless, isn't ist Why throw good money for bad. especially with you top customer to bale! Many of these students wally step up to the implicit challenge (since a few minutes ago they put themacies on record as being part of the "keep it" group), and the dam can become quite engaging, even animated. Facilitation is relatively cany at this point as the idea-peneration process accelerates. However, a pood facilitator will insist on speci finity here, as well as a defense of the assumptions underly ing each proposed solution Diging Der (20 to 25 minutes) At this point, it becomes more of a marketing and The facilitate can then begin to explore with the strategy case. Some typical student proposals, along with sell it group what Zach should do for his now.jobless some proposed follow-up queries from the facilitator, are: employees. It's usually a wise move to insist that the stu tap into new revenue streams (Which ones? Do any viable dents respond in the first person rather than in the third options really exist), outsource production/move the busi - wher/ wwuld do if I we Zach. In that way, they own ne (To where! And what about your employees?). invest the response and they must integrate their personal val. in more advertising (though this hasn't really worked in the past), form a strategic partnership with a company that ues (dealing with such issues in the third person seldom inspires this level of introspection). At this point the case sells a complementary product (Such us?). hire a sales man ager whose performance more than pays for himself (Not a is primarily an ethics and HRM Case, but this is also an bad idea, but where will you find the money?), insist on a appropriate place to interpret the condensed financial more flexible kase (How will you persuade the landlord?). statements in Exhibit 1. They paint a pretty grim picture visit that major customer who's about to walk away and do and may seem to support this well-it" approach. whatever it takes to keep it (What can you offer that India cannot Quality? On-time delivery?), cut a couple employ Here are some of the highlights: ces (Does that comport with your Christian values? And . During the past five years, sales have remained steady how does that help in the long run?). between $1.2 and $1.3 million. Stagnant sales are often a sign of an unhealthy company. Decision and Facilitator's Summary (10 to 15 minutes) Gross margin as a percentage of sales is a significant There is a plethora of alternatives for Zach, and flesh- and useful tool for evaluating a company's financial ing them out is where much of the learning takes place health. This represents the portion of each dollar of in this case - provided the facilitator makes sense of it sales remaining after paying for the cost of manufac all. Creating a laundry list of options is obviously not the turing the springs. It is troubling that gross margin objective. Neglecting to sift the now.crowded blackboard has declined from 36.1 percent (8472/$1,308) in will simply relativise the proposed solutions and possibly 2008 to 30.3 percent (5367/1,211) in 2012. frustrate the students. In general, declining gross margins may be caused by I's here that a good facilitator takes center stage for declining sales prices, increasing costs, or a combina five to ten minutes to identify the most promising options tion of the two. It is quite likely that both are factors (or, if there's time to ask the students to do so -- or if this here. Note that a significant part of the cost of sales is a longer class, to send the students back to their discus consists of salaries and wages paid to production sion groups with this task) and to communicate whatever employees, which is a root of Zach Jordan's dilemma. major takeaways that he or she wants to emphasize. Operating expenses have been cut from $479,000 in This note is not intended to be prescriptive about 2008 to $381,000 in 2012 to avoid major losses. But what those are. Connecting the dots to what the students most of this comes from cutting the owner's salary. have learned thus far in the course and the curriculum is always a good idea. But one takeaway in a Christian col- This synopsis of the financials also provides a natural lege environment should probably be genuine faith inte transition point for the discussion. The facilitator can now gration. For example, the facilitator may want to raise the in 2014 D most basic of Christian worldview questions: "What do you think Jesus might do if he were in Zach's position?" This is not intended as a "gotcha question, simply a lucid, cut-to-the-chase framing of Christian-based deci- sion-making. Such a question models for the students what we'd like them to ask habitually for themselves after gradu- ation. The more clearly we can see Jesus's likely response, the more we may pattern our own response after His. Accordingly, this is a valuable place to linger and to land, gently inviting students to explain their Christology. As is typical in a Christian business program, we are not necessarily looking for the "one right answer" to this question, but instead, cogent answers that flow from faith- fully seeking God's will. ENDNOTE This case is based on a true story, but the company name and the character names have been changed. Zielli Page - CWhen the Golden Ruleylekle gold Care # Case Study: When the Golden Rule Yields No Gold Next wee . MICHAEL ZIGARELLI Messiah College mzigarelli@messiah.edu Can GARY PAGE Page & Associates, LLC gary@gpagecpa.com "S ABSTRACT: Zach Jordan (a real person but not his real name), the owner of a small business in Connecticut may not be able to compete any longer in the spring manufacturing industry. Overseas competition has put him at a significant cost disadvantage, and the losses continue to mount year after year. At the same time, he's deeply committed to care for his handful of employees - people who are dependent on him and who he considers "family." Now at a crossroads, he faces an apparent dilemma: (1) gamble $200,000 on rent to extend the jobs of his employee family or (2) liquidate the business while it's still worth something, sending his employees to the unemployment line during a bad economy. There may be other, more attractive options and identifying them and selecting from among them is largely what this case is about. Framed from a Christian worldview, the case comes down to this: In an intensely competitive environment, how can we faithfully serve employee needs while effectively stewarding the business? THE CASE Throughout his career, his prioritics made that abun- dantly clear. Zach had often worked from home during his Zach Jordan sat at his desk seeking the high road. It 30s and 40s, sacrificing business growth so that he could help had been his approach from day one. Now, though. on day raise his girls. He had adopted a "Golden Rule" approach to 10,001, that road was obscure. Or perhaps this time there management, paternalistically caring for his employees' needs, were two or three high roads. maintaining integrity in every deal, insisting on quality, Metaphors aside, this much was apparent: If he sold respect, and timely delivery for every customer, treating all of his ailing company, several people - good people whom his stakeholders as he would want to be treated he had embraced as family over the years - would lose The fruit of that management style was a fiercely loyal their jobs in a bad economy. But if he didn't sell and if workforce -- hardly any turnover in twenty years of busi- business didn't improve, he could lose hundreds of thou- ness -- as well as an equally loyal customer base. One of sands of dollars in rent. Zach's cleven employees summed it up well: "Zach's the He looked at the pictures adorning the walls, pictures glue that holds everything together around here. And he's a of his three girls, pictures of his employees, a photo of him great boss, too. He treats us better than anyone's ever tecated doing his magic act (Zach's favorite hobby) for mesmerized us in our other jobs. I'll give you an example: In good times school children. Zach had a zest for life and an authentic and in bad, he's always given a big Christmas bonus. One love for everyone around him. time he even had to borrow the money to do id" th There inancial fruit wheeft met hoge the on you. How England Spring Company (NES) in Connecticut and a great retur "And can yow back then the ce the 1980. But international competition and "No, I'm the book for the place - puttering en begin to take their soll, and in the 1990., many of Zach's customers began to import their fire sury." "The told you this befo pelle gray offered. "You've got tourishether or cut your were a fraction of Zach's Profit evaporated and eventually two years ago he had cut his own pay to $31.000, lean than Zach smiled at the welcome levity and the mony. tumed to be the pot five yeam had been particulely what we of his employees were coming difficult all of which culminated in red ink free Exhibit for NES financial information), "Funny you should mention that." Zach returned with As he wiped some dust from the phone of the NES Td give on your card." prin. "The SEC is stopping by this afternoon. I thought family celebrating an employee's binhday chcom memorated every employee birthday with a card and a $90 "Remind me my friend, Charles interjected with a ched), in walked his two invited for the cry. Steve how you've been pursing wow busince lundy chuckle, what your product line looks like. And tell me his accountant and longtime friend, and Charles, a profe (now emeritus), from Zach's business school days. This was "We manufacture and sell several types of springs, Zach began. "everything from specialty stainless steel spring to a bittersweet occasion. Zach embraced each but then had springs for wyjets and helicopeens to common prings you'd to share with the professor his reason for the invitation: He find in a hardware store. And over the years, I've tried to grow needed advice about whether to sell his beloved company the business through a combination of in-house sales reps and Zach dosed the door. "Tanks so much for coming advertising in the standard industry newspapers, both in print you guys. I really appreciate your willingness to give me and on the web. Quite frankly, though, it's been years since some candid advice." cither approach has paid off, so I've recently dropped them. His expression turned somber as did his tone. Zach Bids are so tight that a sales rep's five percent commission looked squarely at the septuagenarian professor and openned required me to bid at my cout to remain competitive. I was "Charles, this place is bleeding, and it has been for years. I'm taking jobs just to cover overhead! And the hundred grand seriously thinking about getting out rather than signing off on I dropped in advertising over the past decade has returned another two year. $200,000 lease for the building, Stave tells almost no business. So basically, I'm left with no sales force me I can get at least 5750,000 for the customers, the inven and enemially no advertising tory, the receivables, and the equipment, but the problem is "Sounds like you could use some fresh ideas," the pro this with may financials, nobody is going to buy the business fessor observed thoughtfully. He was often brilliant, Zach itself. So if I sell, it has to be by parceling it off. But then NES thought, but now he was simply stating the obvious. won't exist anymore and my people would lose their jobs. "That would be nice." Zach was caget for a few hot tips And in this economy, they're not going to find jobs anytime from the good doctor, but he knew those were probably a soon, certainly not much beyond minimum wage. I could few days off "And there might actually be some new busi- take a chance and try to keep it afloat, but I'm on the verge ness out there. But my fresh idea' file is freshly depleted. of losing my biggest account to India -rwenty percent of my I've also thought about re-tooling as an option -- you business! If that happens, I probably couldn't survive more know, create other products that might have a niche --- but than two months, and the selling price of the business would I'd need about a quarter-million for equipment, even used drop a whole lot more. But even if I keep this account, there's equipment, and I have no customer list for whatever that no guarantee that things are going to tum around. I just can't new product would be." compete with Asia's dollar-an-hour labor "Let me give the marketing piece some thought, That was a lot of information in sixty seconds, but Charles replied with characteristic circumspection. "But in Charles zerood in on what he considered a critical issue. the meantime, tell me just how bad things are financially, "What's the chance of losing that account?" Do you have some income statements handy!" "Probably about 50/50 next year," Zach replied. Zach buzzed his secretary. "Mandy, can you please "Maybe even 60/40. India's come out with a stainless steel bring me the binder of financials?" Mandy, as always, spring that weighs fifty percent more than ours - much responded promptly, smiling at the gentlemen on her way berter quality -- for the same price, and my customer is out. As she closed the door, Zach shared with his guests genuinely considering making the switch." that Mandy, his secretary for twenty years, was recently we having pychological problems from the same SUGGESTED TEACHING APPROACHES AND "My other office lhe explained haking his headh di bandand is the sole for a fully of five DISCUSSION QUESTIONS And the guy who the plant hus for two of them For What Care and What Love? getting ready for college. If he lose his job agility. I don't The came is not complicated to understand and know whadde requires caly modest peregte business wedge to The power the accountant flipped up in address intelligudly, however, because of the strategy the binder. "He's met terrible," Steve il pened the introductory graduate courses in management, making involved. It may best fir upper-led undergraduate and books for Charles, but it's not sinable ithet. We we been carrepeneutip and bunca chiar losing money for year. Comes are inching up my become of health care workers' comp and will prices The Icad author has used the care primarily with Salaries are exactly at market -- anywhere from $10 - $26 for a cate competition among MBA and EMBA dents, second-year, undergraduate business students as well as an hour. But we've out everything to the bune bones. And as far as sales goes, we've been flat for a long time, and we have with the actual proca (Zach) offering prise money for the best ideas. So it's a reasonably versatile can I can no expectation for new sources of revenue." Charles adjusted his planes as he reviewed the state encourage students at all levels to think ategically about a turnaround situation, while never losing sight of ments. His grimace told Zach that there was no quick fix what's entailed by a "Christian worldview." forthcoming "I'm telling ya, Zach, cur and run," Steve recommend Teaching Plan ed. preempting the professor's analysis. "I know you care Grow wark (10) about these people, but they're big boys and girls now. They There are many ways to teach this case. The method can take care of themselves. Believe me, they'll be fine." typically used by the lead author is to have students talk Zach didn't know whether to be irritated stor grate through their proposed solutions in groups of four to six) ful for the counsel. Maybe Steve's was the only rational for 10 minutes before having a plenary, instructor-led dis- response, bur Steve was also ignoring the fact that Zach cussion. The group work gives the students some practice didn't want to sell our his employees. Irritation trumped presenting their ideas before being tapped to share their gratitude for the moment. ideas with the entire class. It enables brainstorming and "Would you be fine if your income were cut in half and instills some confidence in the students, often leading to if you lost your health insurance?" Zach retorted softly but more and richer participation later in the class period. firmly. Would your family be "fine? I know you're looking Initial Ideas (10 Minutes) out for me, Steve, but I simply can't operate that way." "All right, his accountant back-peddled with a shrug. For the plenary discussion, this is a good case for facil "So spend $175,000 to give them six months' severance. itator to take a Socratic approach, beginning with a broad And spend another twenty-five grand to maintain their question and later funneling down to related but more health benefits. Will that help you to sleep at night?" specific questions. Posing the case question to one of the mid-level students works well to get things started (mid- Zach pondered the idea, but it seemed a bit excessive. "I'm getting too old for this kind of stress," he said lan level" since a top student may solve the whole thing from ing back in his chair and rubbing his eyes. "I'm 62 now the outset, precluding the opportunity for other students to wrestle and to discover). "What should Zach do?" is the Charles, which I know sounds like a spring chicken to you. Bur the spring business is taking all the spring out of this opener. "Roll the dice on another 200,000 bucks or wave the white flag Deep down, Zach desperately wanted his company to This framing allows the facilitator to get some initial bounce back. But that seemed unlikely without some bold solutions on the board without being too intimidat- ing. After all, cach of the students was asked to prepare now strategy. And he wasn't sure he had either the energy to pursue it or the gumption to roll the dice on another this very case question. Inviting a few more students $200,000 lease. "Cut and run" seemed like a logical course to respond to and build on the first student's ideas will of action, but what about his people? This "Golden Rule" develop these ideas further, giving the facilitator more to spring manufacturer recoiled at the thought of repaying work with (and keeping the class on its toes, if the facili- tator is cold calling) their loyalty with a trip to the unemployment line. spring chicken." Case wady When the Golden Rules After about ten minutes, the dinio may probably berpanied and clarified. One approach is to raise the ideas the fat into the the point ward willing the new and there that point and developing a turard strategy the facilitator seld probably do this incompic cusly when chronising the idea on the board. Scribe the ideas on separate bandes des de chem. but do not yet labd the boards and keep it). It may even be worthwhile at this point to take an informal poll once the two sets of ideas are formally labeled. That permits the facili or to see where the class stands and crepublic commitment, which often encourages further participation turn to the "keep it group with a provocative devil's-avo cate question like S, are you in This is hopeless, isn't it why throw good money after bad, especially with you top customer to bole! Many of these students wally step up to the implicit challenge (since a few minutes ago they put themacies on record as being part of the "keep it" group), and the dam can become quite engaging, even animated. Facilitation is relatively easy at this point as the idea generation process accelerates. However, a pood facilitator will insist on speci finity here, as well as a defense of the assumptions underly ing each proposed solution Degering Dep (20 to 25 minutes) At this point, it becomes more of a marketing and The facilitate can then begin to explore with the strategy case. Some typical student proposals, along with sell it" group what Zach should do for his now jobless some proposed follow-up queries from the facilitator, are: employees. It's usually a wise move to insist that the stu- tap into new revenue streams (Which ones? Do any viable dents respond in the first person rather than in the third options really exist), outsource production/move the busi -wr / wwwld do if we Zach. In that way, they own ne (To where? And what about your employees!), invest the response and they must integrate their personal val. in more advertising (though this hasn't really worked in the past. form a strategic partnership with a company that ues (dealing with such issues in the third person seldom inspires this level of introspection). At this point the cae sells a complementary product (Such us?). hire a sales man aper whose performance more than pays for himself (Not a is primarily an ethics and HRM case, but this is also an bad idea, but where will you find the money?), insist on a appropriate place to interpeet the condensed financial more flexible lase (How will you persuade the landlord?). statements in Exhibit 1. They paint a pretty grim picture visit that major customer who's about to walk away and do and may seem to support this well-it" approach. whatever it takes to keep it (What can you offer that India cannor Quality? On-time delivery?). cut a couple employ Here are some of the highlights: ces (Does that comport with your Christian values? And . During the past five years, sales have remained steady how does that help in the long run?). between $1.2 and $1.3 million. Stagnant sales are often a sign of an unhealthy company. Decision and Facilitator's Summary (10 to 15 minutes) Gross margin as a percentage of sales is a significant There is a plethora of alternatives for Zach, and flesh- and useful tool for evaluating a company's financial ing them out is where much of the learning takes place health. This represents the portion of each dollar of in this case provided the facilitator makes sense of it sales remaining after paying for the cost of manufac all. Creating a laundry list of options is obviously not the turing the springs. It is troubling that gross margin objective. Neglecting to sift the now.crowded blackboard has declined from 36.1 percent (3472/51,308) in will simply relativize the proposed solutions and possibly 2008 to 30.3 percent (5367/81,211) in 2012. frustrate the students. In general, declining gross margins may be caused by I's here that a good facilitator takes center stage for declining sales prices, increasing costs, or a combina five to ten minutes to identify the most promising options tion of the two. It is quite likely that both are factors (or, if there's time to ask the students to do so -- or if this here. Note that a significant part of the cost of sales is a longer class, to send the students back to their discus- consists of salaries and wages paid to production sion groups with this task) and to communicate whatever employees, which is a root of Zach Jordan's dilemma. major takeaways that he or she wants to emphasize. Operating expenses have been cut from $479,000 in This note is not intended to be prescriptive about 2008 to $381,000 in 2012 to avoid major losses. But what those are. Connecting the dots to what the students most of this comes from cutting the owner's salary. have learned thus far in the course and the curriculum is always a good idea. But one takeaway in a Christian col- This synopsis of the financials also provides a natural lege environment should probably be genuine faith inte- transition point for the discussion. The facilitator can now gration. For example, the facilitator may want to raise the D most basic of Christian worldview questions: "What do you think Jesus might do if he were in Zach's position?" This is not intended as a "gotcha question, simply a lucid, cut-to-the-chase framing of Christian-based deci- sion-making. Such a question models for the students what we'd like them to ask habitually for themselves after gradu- ation. The more clearly we can see Jesus's likely response, the more we may pattern our own response after His. Accordingly, this is a valuable place to linger and to land, gently inviting students to explain their Christology. As is typical in a Christian business program, we are not necessarily looking for the "one right answer" to this question, but instead, cogent answers that flow from faith- fully seeking God's will. ENDNOTE This case is based on a true story, but the company name and the character names have been changed. Read the Christian Business Faculty Association (CBFA) case study (When the Golden Rule Yield No Gold-you do not need to read the "Suggested Teaching Approaches" section) and answer the following questions listed below. You should focus on leadership traits, especially as they relate to the specific circumstances noted in the case. Post your completed document to the appropriate Moodle portal prior to the due date and time. 1. What are the business issues at stake in the case study? a. 2. What are the Christian and ethical issues at stake in the case? I a. 3. Where the business and Christian issues intersect? Where do they conflict? a. 4. What would you do if you were Zach? Explain your reasoning. 5. If you were an employee of the company, what would you expect Zach to do? a. 6. What do you think that Jesus would do? What scripture supports your conclusion? a. Case Study Tips Look at case study a couple of times over 2-3 days Do reading before writing case study Read each question and identify the sub-questions Working with others is ok or items requested in the response Take time to write and allow time for the process, Outline key points for response rather than waiting until the deadline Zuelli Page - CWhen the Golden Rule yields old Care # Case Study: When the Golden Rule Yields No Gold Next wee MICHAEL ZIGARELLI Messiah College maigarelliemessiah.edu Can GARY PAGE Page & Associates, LLC gary@gpagecpa.com "S ABSTRACT: Zach Jordan (a real person but not his real name), the owner of a small business in Connecticut, may not be able to compete any longer in the spring manufacturing industry. Overseas competition has put him at a significant cost disadvantage, and the losses continue to mount year after year. At the same time, he's deeply committed to care for his handful of employees - people who are dependent on him and who he considers "family." Now at a crossroads, he faces an apparent dilemma: (1) gamble $200,000 on rent to extend the jobs of his employee family or (2) liquidate the business while it's still worth something, sending his employees to the unemployment line during a bad economy. There may be other, more attractive options and identifying them and selecting from among them is largely what this case is about. Framed from a Christian worldview, the case comes down to this: In an intensely competitive environment, how can we faithfully serve employee needs while effectively stewarding the business? THE CASE Throughout his career, his prioritics made that abun- dantly clear. Zach had often worked from home during his Zach Jordan sat at his desk seeking the high road. It 30s and 40s, sacrificing business growth so that he could help had been his approach from day one. Now, though. on day raise his girls. He had adopted a "Golden Rule" approach to 10,001, that road was obscure. Or perhaps this time there management, paternalistically caring for his employees' needs, were two or three high roads. maintaining integrity in every deal, insisting on quality, Metaphors aside, this much was apparent. If he sold respect, and timely delivery for every customer, treating all of his ailing company, several people -- good people whom his stakeholders as he would want to be treated he had embraced as family over the years -- would lose The fruit of that management style was a fiercely loyal their jobs in a bad economy. But if he didn't sell and if workforce - hardly any turnover in twenty years of busi- business didn't improve, he could lose hundreds of thou. ness -- as well as an equally loyal customer base. One of sands of dollars in rent. Zach's cleven employees summed it up well. Zach's the He looked at the pictures adorning the walls, pictures glue that holds everything together around here. And he's a of his three girls, pictures of his employees, a photo of him great boss, too. He treats us better than anyone's ever tocated doing his magic act (Zach's favorite hobby) for mesmerized us in our other jobs. I'll give you an example: In good times school children. Zach had a zest for life and an authentic and in bad, he's always given a big Christmas bonus. One love for everyone around him. time he even had to borrow the money to do it Ja th There ancial fruit who off both the foot on your H. Now England Spring failer espany (NES) in Connecticut med en turn "And can you back the other ce the 1980. Bor international competition and "No. I'm the hook for the peach sighed sputtering en bep to take their toll, and in the offered. "You've got tout. Either that or out your ** 1990, many of Zach's customers began to import their fie salary." "I told you this before comme grudly spring primarily from man in Asia whose wese a fraction of Zach. Profit evaporated and eventually Two years ago he had cut his own pay to $30,000, tea than Zach smiled at the welcome levity- and the mony. tumed to be the pot five you had been particularly what we of his employees were coming difficult all of which culminated in red ink free Exhibit) for NES financial information), "Funny you should mention that." Zach returned with As he wiped some dust from the photo of the NES rdeem your card." prin. "The SEC is stopping by this afternoon. I thought family celebrating an employee's birthday chcom memor every employee day with card and a $50 "Remind me my friend, Charles interjected with a check), in walked his two invited for the day. Serve how you've been paring new business lady chuckle, what your product line looks like. And tell me his accountant and longtime friend, and Charles, aproce (now emeritus), from Zach's business school days. This was "We manufacture and sell several types of springs," Zach began. "everything from specialty stainless steel spring to a bittersweet occasion. Zach embraced each but then had springs for wyjets and helicopters to common springs you'd to share with the professor his reason for the invitation: He ind in a hardware store. And over the years, I've tried to grow needed advice about whether to sell his beloved company the business through a combination of in-home sales reps and Zach closed the door. "Tanks so much for coming advertising in the sandard industry newspapers, both in print you guys. I really appreciate your willingness to give me and on the web. Quite frankly, though, it's been years since some candid advice." either approach has paid off, so I've recently dropped them. His expression turned somber as did his tone. Zach Bids are so tight that a sales rep's five percent commission looked squarely at the septuagenarian professor and repented required me to bid at my cost to remain competitive. I was "Charles, this place is bleeding, and it has been for years. I'm taking jobs just to cover overhead! And the hundred grand seriously thinking about getting out rather than signing off on I dropped in advertising over the past decade has returned another two year. $200,000 lease for the building, Steve tells almost no business. So basically, I'm left with no sales force me I can get at least 5750,000 for the customers, the inven and enemially no advertising tory, the receivables, and the equipment, but the problem is "Sounds like you could use some fresh ideas," the pro- this with my financials, nobody is going to buy the business fessor observed thoughtfully. He was often brilliant, Zach itself. So if I sell, it has to be by parceling it off. But then NES thought, but now he was simply stating the obvious. won't exist anymore and my people would lose their jobs. "That would be nice." Zach was eager for a few hot tips And in this economy, they're not going to find jobs anytime from the good doctor, but he knew those were probably a soon, certainly not much beyond minimum wage. I could few days off "And there might actually be some new busi- take a chance and try to keep it afloat, but I'm on the verge ness out there. But my fresh idea' file is freshly depleted. of losing my biggest account to India - Twenty percent of my I've also thought about re-tooling as an option -- you business! If that happens, I probably couldn't survive more know, create other products that might have a niche --- but than two months, and the selling price of the business would I'd need about a quarter million for equipment, even used drop a whole lot more. But even if I keep this account, there's equipment, and I have no customer list for whatever that no guarantee that things are going to turn around. I just can't new product would be." compete with Asia's dollar-an-hour labor "Let me give the marketing piece some thought," That was a lot of information in sixty seconds, but Charles replied with characteristic circumspection. "But in Charles xeroed in on what he considered a critical issue. the meantime, tell me just how bad things are financially, "What's the chance of losing that account?" Do you have some income statements handy?" "Probably about 50/50 next year," Zach replied. Zach buzzed his secretary. "Mandy, can you please "Maybe even 60/40. India's come out with a stainless steel bring me the binder of financials?" Mandy, as always, spring that weighs fifty percent more than ours --- much responded promptly, smiling at the gentlemen on her way better quality -- for the same price, and my customer is out. As she closed the door, Zach shared with his guests genuinely considering making the switch." that Mandy, his secretary for twenty years, was recently d having poychological problems from the man SUGGESTED TEACHING APPROACHES AND "My other office ale explained. Whaking his heel ha DISCUSSION QUESTIONS di band and is the lefor a family of five And the guy when the plant has four kids, two of them For What Care and What Level getting ready for college he lose his job wagefility. I don't The case is not complicated to understand and know what hedde requires caly modest peregte business wedge to The probe made the accountant flipped up in address intelligudly, however, because of the strategy the binder. "It's mobile. Stove aid she opened the involved it may best fit upper-led undergraduate and books for Charles, but it's not tainable cichen. Wewe been carrepenuhip, and business than menghan introductory graduate courses in management, marketing losing money for you. Comes are inching pouy become of health care, workers' comp, and raw material prices cond-year, undergraduate businca students we Salaries are exactly at market - anywhere from $10-$26 for a case competition among MBA and EMBA wudents, an hour. But we've out everything close to the bare bes. And as far as sales goes, we've been flat for a long time, and we have with the actual propea (Zach) offering prize money for the best ideas. So it's a raonably versatile cam. It can no expectation for new sources of revenue." encourage students at wwwval levels to think ategically Charles adjusted his planes as he reviewed the state about a tumaround thustion, while never losing sight of ments. His grimace told Zach that there was no quick fix what's entailed by a "Chriwia worldview." forthcoming "I'm telling ya, Zach, cut and run," Steve recommend Teaching Plan ed. preempting the professor's analysis. "I know you care Grow wark (10) about these people, but they're big boys and girls now. They There are many ways to teach this case. The method can take care of themselves. Believe me, they'll be fine." typically wed by the lead author is to have students talk Zach didn't know whether to be irritated stor grate through their proposed solutions in groups of four to six) ful for the counsel. Maybe Steve's was the only rational for 10 minutes before having a plenary, instructor-led dis- response, but Steve was also ignoring the fact that Zach cussion. The group work gives the students some practice didn't want to sell our his employees. Irritation trumped presenting their ideas before being tapped to share their gratitude for the moment. ideas with the entire class. It enables brainstorming and "Would you be fine if your income were cut in half and inscills some confidence in the students, often leading to if you lost your health insurance?" Zach retorted softly but more and richer participation later in the class period. firmly. "Would your family be "fine? I know you're looking Initial Ideas (10 Minutes) out for me, Steve, but I simply can't operate that way." For the plenary discussion, this is a good case for facil All right, his accountant back-peddled with a shrug "So spend $175.000 to give them six months' severance itator to take a Socratic approach, beginning with a broad And spend another twenty-five grand to maintain their question and later funneling down to related but more health benefits. Will that help you to sleep at night?" specific questions. Posing the case question to one of the mid-level students works well to get things started mid- Zach pondered the idea, but it seemed a bit excessive. "I'm getting too old for this kind of stress," he said loan level" since a top student may solve the whole thing from ing back in his chair and rubbing his eyes. "I'm 62 now the outset precluding the opportunity for other students to wrestle and to discover). "What should Zach do?" is the Charles, which I know sounds like a spring chicken to you. But the spring business is taking all the spring out of this opener. "Roll the dice on another 200,000 bucks or wave the white flag Deep down, Zach desperately wanted his company to This framing allows the facilitator to get some initial bounce back. But that seemed unlikely without some bold solutions on the board without being too intimidat- new strategy. And he wasn't sure he had either the energy ing. After all, cach of the students was asked to prepare to pursue it or the gumption to roll the dice on another this very case question. Inviting a few more students $200,000 lease. "Cut and run" seemed like a logical course to respond to and build on the first student's ideas will of action, but what about his people? This "Golden Rule" develop these ideas further, giving the facilitator more to spring manufacturer recoiled at the thought of repaying work with (and keeping the class on its toes, if the facili- tator is cold calling) their loyalty with a trip to the unemployment line. spring chicken." Casey Whethe Golden Rules After about ten minutes, the diction may probably be openined and clarified. One approach is to rise the ideas thus far into three that point ward selling the new and there that wand developing aturarend rategy the facilitator seuld probably do this incomp cusly when chroniding the idea on the board. Scribe the ideas on spune bandes des de chembut do we yetlobe the boards selli" or "keep it. It may even be worthwhile at this point to take an informal poll once the two sets of ideas are formally labeled. That is the facili or to see where the class stands and creates a public commitment, which often encourages further participation turn to the "keep it group with a provocative devil's advo cate question liker S, are you in This is hopeless, isn't ist Why throw good money for bad. especially with you top customer to bale! Many of these students wally step up to the implicit challenge (since a few minutes ago they put themacies on record as being part of the "keep it" group), and the dam can become quite engaging, even animated. Facilitation is relatively cany at this point as the idea-peneration process accelerates. However, a pood facilitator will insist on speci finity here, as well as a defense of the assumptions underly ing each proposed solution Diging Der (20 to 25 minutes) At this point, it becomes more of a marketing and The facilitate can then begin to explore with the strategy case. Some typical student proposals, along with sell it group what Zach should do for his now.jobless some proposed follow-up queries from the facilitator, are: employees. It's usually a wise move to insist that the stu tap into new revenue streams (Which ones? Do any viable dents respond in the first person rather than in the third options really exist), outsource production/move the busi - wher/ wwuld do if I we Zach. In that way, they own ne (To where! And what about your employees?). invest the response and they must integrate their personal val. in more advertising (though this hasn't really worked in the past), form a strategic partnership with a company that ues (dealing with such issues in the third person seldom inspires this level of introspection). At this point the case sells a complementary product (Such us?). hire a sales man ager whose performance more than pays for himself (Not a is primarily an ethics and HRM Case, but this is also an bad idea, but where will you find the money?), insist on a appropriate place to interpret the condensed financial more flexible kase (How will you persuade the landlord?). statements in Exhibit 1. They paint a pretty grim picture visit that major customer who's about to walk away and do and may seem to support this well-it" approach. whatever it takes to keep it (What can you offer that India cannot Quality? On-time delivery?), cut a couple employ Here are some of the highlights: ces (Does that comport with your Christian values? And . During the past five years, sales have remained steady how does that help in the long run?). between $1.2 and $1.3 million. Stagnant sales are often a sign of an unhealthy company. Decision and Facilitator's Summary (10 to 15 minutes) Gross margin as a percentage of sales is a significant There is a plethora of alternatives for Zach, and flesh- and useful tool for evaluating a company's financial ing them out is where much of the learning takes place health. This represents the portion of each dollar of in this case - provided the facilitator makes sense of it sales remaining after paying for the cost of manufac all. Creating a laundry list of options is obviously not the turing the springs. It is troubling that gross margin objective. Neglecting to sift the now.crowded blackboard has declined from 36.1 percent (8472/$1,308) in will simply relativise the proposed solutions and possibly 2008 to 30.3 percent (5367/1,211) in 2012. frustrate the students. In general, declining gross margins may be caused by I's here that a good facilitator takes center stage for declining sales prices, increasing costs, or a combina five to ten minutes to identify the most promising options tion of the two. It is quite likely that both are factors (or, if there's time to ask the students to do so -- or if this here. Note that a significant part of the cost of sales is a longer class, to send the students back to their discus consists of salaries and wages paid to production sion groups with this task) and to communicate whatever employees, which is a root of Zach Jordan's dilemma. major takeaways that he or she wants to emphasize. Operating expenses have been cut from $479,000 in This note is not intended to be prescriptive about 2008 to $381,000 in 2012 to avoid major losses. But what those are. Connecting the dots to what the students most of this comes from cutting the owner's salary. have learned thus far in the course and the curriculum is always a good idea. But one takeaway in a Christian col- This synopsis of the financials also provides a natural lege environment should probably be genuine faith inte transition point for the discussion. The facilitator can now gration. For example, the facilitator may want to raise the in 2014 D most basic of Christian worldview questions: "What do you think Jesus might do if he were in Zach's position?" This is not intended as a "gotcha question, simply a lucid, cut-to-the-chase framing of Christian-based deci- sion-making. Such a question models for the students what we'd like them to ask habitually for themselves after gradu- ation. The more clearly we can see Jesus's likely response, the more we may pattern our own response after His. Accordingly, this is a valuable place to linger and to land, gently inviting students to explain their Christology. As is typical in a Christian business program, we are not necessarily looking for the "one right answer" to this question, but instead, cogent answers that flow from faith- fully seeking God's will. ENDNOTE This case is based on a true story, but the company name and the character names have been changed. Zielli Page - CWhen the Golden Ruleylekle gold Care # Case Study: When the Golden Rule Yields No Gold Next wee . MICHAEL ZIGARELLI Messiah College mzigarelli@messiah.edu Can GARY PAGE Page & Associates, LLC gary@gpagecpa.com "S ABSTRACT: Zach Jordan (a real person but not his real name), the owner of a small business in Connecticut may not be able to compete any longer in the spring manufacturing industry. Overseas competition has put him at a significant cost disadvantage, and the losses continue to mount year after year. At the same time, he's deeply committed to care for his handful of employees - people who are dependent on him and who he considers "family." Now at a crossroads, he faces an apparent dilemma: (1) gamble $200,000 on rent to extend the jobs of his employee family or (2) liquidate the business while it's still worth something, sending his employees to the unemployment line during a bad economy. There may be other, more attractive options and identifying them and selecting from among them is largely what this case is about. Framed from a Christian worldview, the case comes down to this: In an intensely competitive environment, how can we faithfully serve employee needs while effectively stewarding the business? THE CASE Throughout his career, his prioritics made that abun- dantly clear. Zach had often worked from home during his Zach Jordan sat at his desk seeking the high road. It 30s and 40s, sacrificing business growth so that he could help had been his approach from day one. Now, though. on day raise his girls. He had adopted a "Golden Rule" approach to 10,001, that road was obscure. Or perhaps this time there management, paternalistically caring for his employees' needs, were two or three high roads. maintaining integrity in every deal, insisting on quality, Metaphors aside, this much was apparent: If he sold respect, and timely delivery for every customer, treating all of his ailing company, several people - good people whom his stakeholders as he would want to be treated he had embraced as family over the years - would lose The fruit of that management style was a fiercely loyal their jobs in a bad economy. But if he didn't sell and if workforce -- hardly any turnover in twenty years of busi- business didn't improve, he could lose hundreds of thou- ness -- as well as an equally loyal customer base. One of sands of dollars in rent. Zach's cleven employees summed it up well: "Zach's the He looked at the pictures adorning the walls, pictures glue that holds everything together around here. And he's a of his three girls, pictures of his employees, a photo of him great boss, too. He treats us better than anyone's ever tecated doing his magic act (Zach's favorite hobby) for mesmerized us in our other jobs. I'll give you an example: In good times school children. Zach had a zest for life and an authentic and in bad, he's always given a big Christmas bonus. One love for everyone around him. time he even had to borrow the money to do id" th There inancial fruit wheeft met hoge the on you. How England Spring Company (NES) in Connecticut and a great retur "And can yow back then the ce the 1980. But international competition and "No, I'm the book for the place - puttering en begin to take their soll, and in the 1990., many of Zach's customers began to import their fire sury." "The told you this befo pelle gray offered. "You've got tourishether or cut your were a fraction of Zach's Profit evaporated and eventually two years ago he had cut his own pay to $31.000, lean than Zach smiled at the welcome levity and the mony. tu