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successful the business has been at recognizing and satisfying stakeholder interests.
Paul Terminal Warehouse was originally a start-up business founded in 1916 by Harry McNeely Jr. To him, the nascent business was doing well, providing above-average income for him and his family, and making their lives in the twin cities area opulent by turn-of-the-century standards. Concepts of governance, stakeholder management, and development of plans for managing take-over attempts by his family never most likely entered his mind. He was too busy working to create a business that would outlast his own life, creating a legacy and stable source of income for future generations of the McNeely family. CEOs who are founding members of companies rarely have the ability to step away from the vision of the business and the many demands on their time to create stakeholder models, frameworks and criterion for success, which is why the majority of them fail (Ng, Thorpe, 2010).
Even after a generation of success, the McNeely family ignored the need to define accountability, levels of ownership and performance, and consider the requirements of primary, secondary and key stakeholders in their business plans. As a result, the management team enjoyed a tremendous false sense of security that would later be shattered by bitter family conflict and greed. Studies indicate that founder's families often battle years, even decades, for control of corporate assets when a stable and reliable stakeholder and succeed plan both have been defined and are enforced through wills and trusts (Puri, 2010). Not only has this business grown to a significant size without either of these to vital strategies in place, the stakeholder plans also neglect the critical ecosystem of the business that serves as the foundation of its value chain. These stakeholders include the employees, customers, stockholders (from private investment), suppliers, the local government entities who rely on taxes from this business, and the many ancillary businesses this one feeds with cash from transactions. Too often, it takes the most desperate and challenging of circumstances to bring a company to the realization that they need to have very definite plans about the future, both from a stakeholder as well as a succession planning standpoint. This family business exhibits a rigidity of organizational structure and lack of focus on the future, and instead seems to be looking the organization as a blend of family loyalties and business opportunities. As a result, the company is mediocre to failing at recognizing and satisfying stakeholder interest in the first decades of its existence. Only after a massive legal battle does the company management teams have the ability to separate out the loyalties to the family and the needs of the business.
Describe the mechanisms that are available to manage relationships with stakeholders and to influence the strategic direction and performance of the company.
There is plain and simple not enough communication going on about how stakeholders can be managed to consistent levels of performance with accountability defined in key metrics and expectations. The most fundamental strategy the company can take it so create an internal and external stakeholder framework by which they can accurately interpret and gauge how effective they are in meeting expectations and needs. The focus on creating a balanced and unified external and internal stakeholder model provides businesses with the necessary foundation for creating more value over the long-term by partnering with, not fighting, stakeholders (Ho, 2010).
By taking into account the previous agreements and many expectations, defining stakeholder feedback and initiatives-based expectations, and then interviewing stakeholders can a foundation be created for future growth (Epstein, Widener, 2011). Often it is only through litigation that family-run businesses wake up and realize that prudent and focused stakeholder management can avert massive drains on company resources, from the time of senior management of the cash they have saved for future growth. The development of Space Center Enterprises as an over-arching business unit to control the two divisions of Space Center business segments follows this pattern. Even this approach however did not entirely work, as the brothers chose to move in their own direction. Only after a balanced, thoroughly defined stakeholder plan had been put into place and a board of directors with strong focus on result were put in charge did the stakeholder plans begin to gain momentum and fuel the next generation of growth for Meritex.
Explain why you think the board of directors for Space Center Enterprises was or was not successful in fulfilling its governance role and in meeting the challenges it faced.
To put in bluntly, the board of directors for Space Center Enterprises failed miserably. There are many factors that contribute to this, with the greatest being the lack of consistency of strategy, lack of listening to stakeholder interests and initiatives, and a lack of coordinated planning to ensure a higher level of performance across the combined business units. All of these factors, in addition to the lack of integrated planning that would synchronize services plans across all three divisions of Space Center Enterprises.
In addition to the lack of stakeholder planning and execution, the company also lacked significant insight into how best to manage the shared goals and objectives of all three companies. There was no galvanizing or unifying force that brought and kept all three companies together. As a result, they each began to divert their attention to their own direction and strategies, and the three-part company eventually fell apart. In the absence of a strong stakeholder plan, the vision of a board of directors or governing body is critical to keeping a corporation unified and moving in the same direction (Soh, Chua, Singh, 2011). This is what the Space Center Enterprises board of directors most lacked. The brother as a result had more compelling visions on their own of where they wanted their businesses to grow. Lacking a consistent and clear stakeholder plan, Space Center Enterprises was actually doomed to fail. This example in the case illustrates how critical it is to have both a consistent stakeholder plan and a unified vision of where the business is going for the long-term. Even after a major lawsuit that led to the eventual development of Space Center Enterprises, the family was still not entirely seeing the value of creating a stakeholder mode that would be strong enough to guide their business yet flexible enough to respond to significant changes in both the market and the broader global economy.
Explain why you think Paddy was or was not qualified to fill in his father's footsteps as CEO of the newly merged Meritex organization, based on strategic leadership responsibilities.
One of the worst ways to attain control of a business is through purely paternalistic means. No one trusts a family heir who comes into a company based on relationships with the founders alone and takes control. Paddy wisely does not play this card; in fact, he delves into the worst and most challenging situations to earn trust and credibility. Paddy is ironically the only member of the family for nearly four generations to concentrate on stakeholders and create a winning compromise for them. He takes into account the pains they have had and financial losses of moving to St. Paul only to find that commitment not delivering the financial reward they were expecting. He also proves to have an exceptionally calm demeanor in the midst of very tense situations and shows that the attainment of shared outcomes with stakeholders, many openly hostile to the family and company. He does all of these activities while also managing a larger part of the company than ever before. He strikes a balance of compromise and empathy to stakeholders who had been ignored in the past. In this way, Paddy emerges as a transformational leader, among many family members who were locked in…[continue]
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