PROBLEM-SOLVING APPLICATION CASE (PSAC) Best Buy: Trouble at the Top port states that the sedmo You could say that Best Buy hed enough problems. Com. petition is stiff in consumer electronics, even without online merchants, and margins are thin. At its height in April 2006, Best Buy was selling for over $56 a share. But its stock shined wildly with the changing market, dipping under $18 in 2008, rising to over $47 in 2010, and setting for $30 and change by the end of March 2012 Then improprieties came to light that led to the resigna tion of its CEO and the demotion of its foundee At issue was an allegedly inappropriate relationship between then CEO B Durand a female subordinate in the language of the Board of Directors' Audit Committee Report.2 At the time of the 2012 report, Dunn was married, 51, and the vas married 51 and the father of three children. The subordinate was 29. A Career Employee Most of Dunn's adult life was devoted to Best Buy, Starting as a sales clerk at the age of 24, he stayed some 28 years, working his way to the top. Even his earlier jobs were in retail, working in grocery stores since he was 14 and by passing college At Best Buy, Dunn had risen to the position of Chief Op- erating Omcor and was again promoted to Chief Executive Oficer in 2009. He was widely seen as the handpicked successor to the company's founder and Chairman of the Board, Richard Schulte, 20 years his senior 104 In 45 Interviews, the Audit Comme e spoke w rent or former employees. The report state s tionship, as it became better known, "daman morale and created unnecessary distractie place. Some employees complained that they les appeared to apply to every employee CEO Some of the employees questioned senior ment's commitment to Best Buy's stated policies and cal guidelines Matters were not helped by the female emploi Quent mentions of the enton and perks Show Such perceived favoritism by the CEO undermined pervisor's ability to manage the employee, the report Denial of Wrongdoing Both parties maintained that their relationship wassimo close friendship and not romantic. But the Audit Com found that regardless, the relationship showed extrem poor judgment by the CEO. The auditors noted the ance between the two in age, position, and power Failure to Report There was another management problem: extended lence. Schulze, the chairman, first learned of allegations about the inappropriate relationship in December 2011 The chairman confronted Dunn about the issue, who denied there were problems And then Schulze did nothing. He would have been pected to disclose such information to the Audit Comme the General Counsel, the head of Human Resources, the Chief Ethics Oncer or other Board members. The Board and Audit Committee didn't catch wind of the issue until a senior Human Resources employee became aware of the allege tors and alerted the General Counselin mid-March 2012 Failure of Judgment The report of the Board's Audit Committee noted that Dunn's close relationship with the female employee "cre ated friction and disruption in the workplace. The two were seen frequently together in his office and off by them- selves in conference rooms. They acknowledged numer ous social meetings outside the office, Including lunches and drinks, sometimes during the week and sometimes on the weekend. The female employee spoke openly about the favors she received from the CEO, which included ick ets to concerts and sporting events. The committee noted that in two trips abroad, otsing nine days in 2011, Dunn contacted the female employee by cell phone at least 224 times, including 33 phone calls. 149 text messages, and 42 picture or video messages for which was no identifiable business purpose. The CEO's cel e contained photos with messages expressing on one of which included the female employee's The Audit Report found that as CEO, Dunn hed violated company policy as to inappropriate conduct conflicts of terest, and vendor gifts the had solicited a free concert ticket for the employeelit concluded that Chair Schulze failed to appropriately report the stations lapse that risked employee retallation or other Departure in the month before the report came out in May 200. walked. He and the Act Come agreed on ration package of $6.6 million comprising bonuses stock grants already awarded compensation for vacation, and severance pay. Schulre compiled with the request to step down ing chairman, although bermain the boardin Work Environment tee report concludes that Dunced e concludes that Dunn acted The Audit and damaged the work environment. unprofess fessionally and i ck of the judgment expected of the demonstrating a lack of the most senior executive officer of the Company sted role of Chairman Emeritus PART 1 250 ees joined LinkedIn, the e Applying this knowledge should enable you to recommend realistic and effective solutions Stop 1: What is the problem? . Identify the outcomes that are im . Which of these outcomes are not being achieved in the case? . Based on considering the above two questions, what is the most important problem in this case? Employee Uncertainty local public radio news uncovered an objective mea sure of how the fallout from the scandal and the board's reaction unsettled staff employees. During the three months of the spring of 2011, nearly 1,800 Best Buy employ. med Linkedin, the employment-oriented social net sing website, Minnesota Public Radio reported. "That's linkedin members just from Best Buy than from more new LinkedIn members Carall, 3M, General Mills, Medtronic and St. Jude Medical combined." all major employers in the state.106 This surge Imolles a large number of employees losing confidence in the long-term status of their jobs and feeling the need to extend their professional networking. Aftermath Many business analysts responded favorably to the shakeup, expressing hope that the change would allow management to take a fresh look at the company's growing challenges (including competition from online retailers). 107 But the market punished the stock further, taking it to a low in the $11 range by the end of 2012. In 2013, a year after the Audit Report, the stock had climbed back to the $25 range and higher, with analysts split as to whether Best Buy was at best a buy, sell, or hold. Apply the 3-Stop Problem Solving Approach to OB Referring to Figure 7.4 and your notes, apply the knowl- edge of OB presented in this chapter to the above case. Stop 2: Use the material in this chanter to hele vou understand the problem in this case. What person factors are most relevant? What environmental characteristics are most Important to consider? Do you need to consider any processes? Which ones? . What concepts or tools discussed in this chapter are most relevant for solving the key problem in this case? Stop 3: What are your recommendations for solving the problem? Review the material in the chapter that most pertains to your proposed solution and look for practical recommendations. Use any past OB knowledge or experience to generate recommendations. . Outline your plan for solving the problem in this case