TUTORIAL 7 TOPIC 7: DECISION MAKING \& CREATIVITY Case Study: Good Decisions That Went Bad? Raymond Stubbs was a baker who operated a bakery in Idaho for close to 10 years. Just adjacent to his bakery, a taxi franchise, known as Yellow Cab had just started operations for the past 2 years. However, due to stiff competition and a declining customer base, Yellow Cabs was performing only marginally above average. Stubbs however felt that Yellow Cabs had "untapped market potential. One night, while having a drink with some buddies, he claimed that he had a 'gut feeling' that Yellow Cabs would revolutionize the transportation industry, and mark a new era in efficient transportation services. Stubbs even made a bet with his friends that we would be able to turn the franchise around within 3 years. Some of them laughed at him, while others nudged him to take the challenge. In 1995, Stubbs borrowed a $320,000 loan under his name, and bought the Yellow Cab franchise. At that time, the company had about two dozen taxis, representing roughly half of Idaho's total cabs on the street. Most were owned by drivers who paid Stubbs about $200 a week per vehicle for dispatch service. Stubbs personally was a strong believer in "customer service'. Thus, he decided to make that a key element of his new business. "If you don't have the service, you aren't going to make it, I he says. Stubbs urged his drivers to cultivate "personals", or regular customers who request the same driver each time. And responding to Stubbs's motto of treating passengers "as good as gold," his drivers bought their own cell phones to answer passengers' calls directly and distributed business cards listing their individual cell-phone numbers. Despite minor opposition from some drivers, Stubbs vehemently insisted that his was the 'right way'. In the short term, profits seem to be raking in, as regulars liked this form of personalized service. However, some drivers that had opposed this method refused to comply with the new regulations, and continued to stick to their old method of servicing random customers. Thus, half the fleet complied with the new regulation, while the other half stuck to the old routine. Meanwhile, to increase business further, Stubbs started selling "discounted vouchers' to customers. Unfortunately, he failed to do the math. Both he and his drivers lost money on the voucher system. This created animosities toward Stubbs by the drivers. Prior to handing out the discounted vouchers, it was learned that some drivers had opposed the move, claiming that the vouchers would be counterproductive due to soaring operating costs. Some drivers also claimed that the short distances some passengers travel would be unable to break even their profits. Stubbs however kept a deaf ear to their plea. He insisted that his gut feeling was correct, and told them to comply without questioning him. As time went by, Stubbs formed a reputation as someone who would not consult or get inputs from the grassroots when implementing new ideas or policies. Despite constructive criticism and advice given by others to him, Stubbs continually kept a deaf ear whenever anything said to him contrasted with his own personal views. Many drivers had requested Stubbs to scrape the personalized service' idea and 'discount vouchers', and instead to replace it with policies that boosts efficiency and lower operating costs. Stubbs however refused to heed their advice, despite early signs that the grassroots were demoralized. The final blow came in April 1997. To cut costs, Stubbs ceased offering his dispatch service to those Yellow Cabs he didn't own. In response, exiled drivers went solo, joined rivals, or expanded their fleets and split off to create their own separate firms. And having followed Stubbs's dictate to build strong loyalties with their passenger, most customers went with the renegade drivers. However, despite all the warning signals that something was wrong with his management style, Stubbs still persevered on, and held on firmly to the belief that only he would be able to turn the company around. Facing greater competition and a decimated fleet, Stubbs now found it harder to deliver his firstrate service. 'He ruined the customer relationship," said one knowledgeable observer. 'The name Yellow Cab become a dirty name." In October 1997, faced with soaring fixed costs and a decimated fleet, Stubbs finally had not choice but to dissolve the company and filed for bankruptcy. (Adapted and re-edited from: M. Hofman, -Taxi Company's Zeal for Service Backfires" INC., December 1998, p.29.) 1. From the case, decisions made by Stubbs led to consequences. How many decisions made by Stubbs can you find in this case? Identify the decisions that had adverse consequences