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SUBJECT: General Management

The Indian Institute of Business Management & Studies

Marks: 100



George David has been CEO of United Technologies Corporation (UTC) for more than a decade. During that time he has received numerous accolades and awards for his performance as a CEO. Under his leadership UTC a !"#" billion conglomerate whose operating units include manufacturers of elevators (Otis Elevator) aerospace products (including $ratt % &hitne' (et engines and )i*ors*' helicopters) air conditioning s'stems and fire and securit' s'stems has seen earnings grow at +,-+# percent annuall'.impressive numbers for an' compan' but particularl' for a manufacturing enterprise. /ccording to David a *e' to United Technologies0 success has been sustained improvements in productivit' and product 1ualit'. The stor' goes bac* to the +23,s when David was running the international operations of Otis Elevator. There he encountered a 4apanese engineer 5u6uru 7to who had been brought in to determine wh' a new elevator product was performing poorl'. David was impressed with 7to0s methods for identif'ing 1ualit' problems and improving performance. &hen he was promoted to CEO David reali6ed that he had to lower the costs and improve the 1ualit' of UTC0s products. One of the first things he did was persuade 7to to wor* for him at UTC. Under David 7to developed a program for improving product 1ualit' and productivit' *nown as /chieving Competitive E8cellence (/CE) which was subse1uentl' rolled out across UTC. The /CE program has been one of drivers of productivit' improvements at UTC ever since. Earl' in his tenure as CEO David also radicall' reorgani6ed UTC. 9e dramaticall' cut the si6e of the head office and decentrali6ed decision ma*ing to business divisions. 9e also directed his accounting staff to develop a new financial reporting s'stem that would give him good information about how well each division was doing and ma*e it easier to hold divisional general managers accountable for the performance of the units under them. 9e then gave them demanding goals for earnings and sales growth and pushed them to improve processes within their units b' implementing the /CE program. /t the same time David has alwa's stressed that management is about more than goal setting and holding people accountable. :alues are also important. David has insisted that UTC emplo'ees adhere to the highest ethical standards that the compan' produce that have minimal environmental impact and that emplo'ee safet' remain the top consideration in the wor*;place. &hen as*ed what his greatest achievement as a manager has been David refers to UTC0s worldwide emplo'ee scholarship program. 7mplemented in +22< and considered the hall;mar* of UTC0s commitment to emplo'ee development the program pa's the entire cost of an emplo'ee0s college or graduate school education allows emplo'ees to pursue an' sub(ect at an accredited school provides paid stud' time and awards UTC stoc* (up to !+, ,,, worth in the United )tates) for completing degrees. E8plaining the program David states =One of the obligations that an emplo'er has is to give emplo'ees opportunities to better themselves. /nd we feel it0s also ver' good business for us because it generates a better wor*force that sta's longer.> David states that one of his central tas*s has been to build a management team that functions smoothl' over the long term. =$eople come to rel' upon each other > he sa's. =5ou have the same trusting relationships. 5ou *now people? the' *now 'ou. 5ou can predict them? the' can predict 'ou. /ll of that *ind of begins to wor* and it accelerates over the tenure of a CEO. 7f 'ou have people bouncing in and out ever' two to three 'ears that0s not good.> +

9ow does David get things done through peopleA ". &hich managerial competencies does David seem to possesA Does he seem to lac* an'A B .he has a receive mode as well as a send mode.> Questions +.SUBJECT: General Management The Indian Institute of Business Management & Studies Marks: 100 /ccording to )and' &eill former chairman of Citicorp and a UTC board member David has the right mi8 of toughness and sensitivit'. &hat evidence can 'ou see of David0s planning and strategi6ing organi6ing controlling leading and developingA #. =&hen somebod' can@t do the (ob he0ll tr' to help? but if that person is not going to ma*e it wor* that person won@t be on the (ob forever.'E program for improved productivit and building a strong$ 4ome more writing needed B.> /t the same time &eill sa's =9e does a lot of things that emplo'ees respect him for 7 thin* he is a ver' good manager.( ot!er e)ecutives believed t!e emplo ees would take t!eir new degrees and use t!em to benefit ot!er emplo ers$ +owever( t!e evidence s!ows t!at emplo ees w!o go t!roug! t!e program !ad become more lo al to &%'( !e successfull retained !is emplo ees and raised t!e skill level of workers as t!e turnover rate for t!ese emplo ees !as been about one*!alf t!at of t!e overall workforce$ 1 2eorgani3ing &%' wit! a focus on Business e)cellence During !is tenure as 'EO( David t!oroug!l reorgani3ed &%'$ +e dramaticall cut down t!e si3e of !ead office and decentrali3ed decision making to business divisions$ +e also developed a new financial reporting s stem t!at would give !im good information about eac! division and make it easier to !old divisional general managers accountable for t!eir performance respectivel $ -n t!e ot!er !ands( !e also set demanding goals for earnings and sales growt! for t!e emplo ees and motivate t!em b implementing .ccording to David( !e said t!at t!e emplo ee sc!olars!ip program was designed to meet !is goal of !aving /t!e best educated workforce on t!e planet/$ 0!en David first proposed t!e program in "##. &hat ma*es George David such a highl' regarded managerA Best Educated Manpower One of George David's most notable good deeds was to set up a landmark of $60 million per ear emplo ee sc!olars!ip program in "##6$ %!e program !elps eac! &%' emplo ee w!o wants for education to pa s t!eir college tuition( books( fees and even time off to stud $ David also e)tended benefits for four ears to laid*off workers w!o !ad been relocated$ +e even added anot!er incentive wit! amount $.(000 wort! of compan stock to all emplo ees w!o complete associate degrees and $"0(000 wort! of compan stock to t!ose w!o complete bac!elor degrees or !ig!er$ -n t!e first t!ree ears of t!e program( &%' !as spent more t!an $"00 million on tuition( fees( and books$ . Even though David is demanding he can also listen.

percent a 'ear. percent a 'ear. percent a 'earK /lthough still large that growth rate was not nearl' large enough to fill the massive flood of fiber optic capacit' that was entering the mar*et. Odl'6*o0s careful anal'sis concluded that growth was much slower. 7n all cases the strategic plans were remar*abl' similarI Jaise lots of capital build massive fiber optic networ*s that straddled the nation (or even the globe) cut prices and get read' for the rush of business.bun*ed the assumption that demand for 7nternet traffic was growing at + . These firms included Eevel " Communications "<. This implied a growth rate of over + . Fetwor*s Global Crossing Gwest Communications &orld.Com &illiams Communications Group Genuit' 7nc. O@Dell went on to da' that there was not enough fiber optic capacit' to go around and that =demand will far outstrip suppl' for the foreseeable future.. and HO Communications. /s earl' as October +223 an 7nternet researcher at /T%T Eabs named /ndrew Odl'6*o published a paper that de.SUBJECT: General Management The Indian Institute of Business Management & Studies Marks: 100 CASE: 2 BOOM AND BUST IN TELECOMMUNICATIONS 7n +22C Dichael O@Dell the chief scientist at &orld. 7t was a gold rush and the first into the field would sta*e the best' +..Com which owned the largest networ* of =7nternet bac*bone> fiber optic cable in the world stated that data traffic over the 7nternet was doubling ever' hundred da's. 9owever there were dissenting voices.. Doreover Odl'6*o noted that new technologies were increasing the amount of data that could be sent down " . Danagers at these companies believed that surging demand would soon catch up with capacit' resulting in a profit bonan6a for those that had the foresight to build out their networ*s..> Electrified b' this potential opportunit' a number companies rushed into the business..

/s it turned out Odl'6*o was right. Unable to service the debt the' had ta*en on to build out their networ*s compan' after compan' tumbled into ban*ruptc'. percent and both companies were saddled with massive debts. &orldCom was still using the + . percent figure as late as )eptember B. Eevel " and Gwest survived but their stoc* price had fallen b' 2.* %!ose managers suffered t!inking m opia and a lack of prediction on t!e s!ort term future because t!e focused t!eir efforts and t!inking skills on !ow to fulfill t!e imagined bulk demand in t!e market and not taking into consideration t!at radical discontinuous tec!nological c!anges ma occur and ruin t!eir da dreams wit!in a couple of mont!s and t!at weakness created b t!ose managers b not pa ing attention to t!e monitor role in t!e information roles w!ic! is collecting information<s about t!e market and t!e new inventions and pro=ects t!at ma enter and effect t!e market and t!ose information<s are essential for ever manager to know or at least informed about Moreover( t!e anal 3ed t!e opportunit in t!e market b overvaluing it b depending on$$$ >continues? B.. Fetwor*s failA and Bust in %elecommunications "* %!e strategic plan adopted b level 5( Global crossing and 560 networking failed due to several reasons$ 6irst( overvaluing t!e opportunit found in t!e market b wrong anal 3ing of t!e market and claiming t!at t!ere is "0007 growt! in t!e internet traffic in t!e ear t!at was found to be "007 w!ic! is wa less t!en w!at t!e t!oug!t$ 4econd( t!e !eav competition between rivalries since t!e provide t!e same commodit 86iber Optics9 and all was using almost t!e same strateg 8build massive networks( cut prices9 t!at caused t!em to focus onl on !ow to compete wit! eac! ot!er$ %!ird and Mainl ( :ot e)pecting t!e Discontinuous c!ange in tec!nological field in t!e general environment( an entr of a powerful substitute t!at can satisf t!e same need suc! as broadband and internet t!roug! satellite wit! a ver low switc!ing cost for t!e customer( t!at almost demolis!ed t!e need of t!e fiber networks w!ic! was t!e backbone of t!e companies strategies and t!eir main road to dominate t!e market( t!at appeared in ..00...SUBJECT: General Management The Indian Institute of Business Management & Studies Marks: 100 e8isting fibers reducing the need for new fiber..B less than " percent of the fiber that had been laid in the ground was actuall' being usedK &hile prices slumped the surge in volume that managers had bet on did not materiali6e. including &orldCom "<. Fetwor*s HO Communications Global Crossing. Questions +. 9ow could so man' smart people have been so wrongA # . Capacit' rapidl' outstripped demand and b' late B. w!en t!e usage diminis!ed and reac!ed 57 of fiber t!at !ave been built . The managers who ran these companies were smart successful individuals as were man' of the investors who put mone' into these businesses. Lut with investment mone' flooding into the mar*et few paid an' attention to him. Boom &h' did the strategic plans adopted b' companies li*e Eevel " Global Crossing and "<..

Mor 'ears Dow0s managers insisted that part of the credit belonged to its =matri8> organi6ation.s. 7n short the structure didn0t wor*.ma*ing biases do 'ou thin* were at wor* in this industr' during the late +22.head around the world in the chemical industr'. Dow0s organi6ational matri8 had three interacting elementsI functions (such as J%D manufacturing and mar*eting) businesses (li*e eth'lene plastics and pharmaceuticals) and geograph' (for e8ample )pain German' and Lra6il). /rea managers disagreed with managers overseeing business sectors about which plants should be built where. Thus the plastics business might be charged with minimi6ing Dow0s global plastics production costs while the )panish operation might determine how best to sell plastics in the )panish mar*et. Dow reali6ed its pharmaceutical business would never thrive if it were managed b' the same priorities as its mainstream chemical operations. / small team of senior e8ecutives at head1uarters helped set the priorities for each t'pe of business. The overlapping responsibilities resulted in turf battles and a lac* of accountabilit'.SUBJECT: General Management The Indian Institute of Business Management & Studies Marks: 100 ".. Dow Chemical was long among the cost leaders.was given primar' authorit' in decision ma*ing. /ccordingl' instead of abandoning its matri8 Dow decided to ma*e it more fle8ible to better accommodate the different businesses each with its own priorities within a single management s'stem. The barriers to the free flow of chemical products between nations largel' disappeared in the +2C.s and earl' &hat could the managers running these companies done differentl' that might have led to a different outcomeA CASE: 3 DOW CHEMICAL / handful of ma(or pla'ers compete head. 7n such an environment the compan' that wins the competitive race is the one with the lowest costs. &hen Dow introduced this structure the results were less than promisingI Dultiple reporting channels led to confusion and conflict. Danagers0 (ob titles incorporated all three elements (plastics mar*eting manager for )pain) and most managers reported to at least two bosses. The man' bosses created an unwield' bureaucrac'. This dictates establishing large plants in *e' locations from which regional or global mar*ets can be served. Lut in pharmaceuticals regulator' and mar*eting re1uirements for drugs var' so much from countr' to countr' that local needs are far more important than reducing manufacturing costs through scale economies. 7nstead of abandoning the structure however Dow decided to see if it could made more fle8ible. Dow0s decision to *eep its matri8 structure was prompted b' its move into the pharmaceuticals business is ver' different from the bul* chemicals business. /fter priorities were identified for each business sector one of the three elements of the matri8.function business or geographic area. 7n bul* chemicals the big returns come from achieving economies of scale in production. #. &hich element too* the lead varied according to the t'pe of decision and the mar*et or location in N . This along with the commodit' nature of bul* chemicals and a severe recession in the earl' +23. &hat specific decision. The plastics mar*eting manager in )pain might report to both the head of the worldwide plastics business and the head of the )panish operations. These companies are Dow Chemical and Du $ont of the United )tates Great Lritain0s 7C7 and the German trio of L/)M 9oechst /G and La'er.s ushered in a prolonged period of intense price competition. The intent of the matri8 was to ma*e Dow operations responsive to both local mar*et needs and corporate ob(ectives. / high degree of local responsiveness is essential.

cost producer. &h' did Dow change its structure again in the mid. )o we created a global divisional structure and cut out la'ers of management.SUBJECT: General Management The Indian Institute of Business Management & Studies Marks: 100 which the compan' was competing.sA &hat was Dow tr'ing to achieve this timeA Do 'ou thin* the current structure ma*es sense given the industr' in which Dow operates and the strateg' of the firmA &h'A < . The matri8 structure was (ust too comple8 and costl' to manage in the intense competitive environment of the time particularl' given the compan'0s renewed focus on its commodit' chemicals where competitive advantage often went to the low. L' the mid.level emplo'ees? now there are five. /lthough this ma' seem confusing for 'ears Dow claimed this fle8ible s'stem wor*ed well and credited much of its success to the 1ualit' of the decisions it facilitated. /s Dow0s then.s however Dow had refocused its business on the chemicals industr' divesting itself of its pharmaceutical activities where the compan'0s performance had been unsatisfactor'.+22. &hat problems emerged with this structureA 9ow did Dow tr' to deal with themA 7n retrospect do 'ou thin* those solutions were effectiveA ". Questions +. )uch fle8ibilit' that all emplo'ees understand what was occurring in the rest of the matri8. There used to be eleven la'ers of management between me and the lowest.CEO put it in a +222 interview =&e were an organi6ation that was matri8ed and depended on teamwor* but there was no one in charge. &h' did Dow Chemical first adopt a matri8 structureA &hat benefits did it hope to derive from this structureA B. &hen things went well we didn0t *now whom to reward? and when things went poorl' we didn0t *now whom to blame. Jeflecting the change in corporate strateg' in +22N Dow decided to abandon its matri8 structure in favor of a more streamlined structure based on global product divisions.+22.

> DcDonald@s also hopes the new campaign will raise emplo'ee pride and lo'alt' which would motivate the +.and prospective (ob applicants. members of the worldwide management team C.conscious societ' and the popular film Supersize Me. =&or*ing at DcDonald@s reall' helped la' the foundation for m' career > sa's ten. =7f each emplo'ee tells (ust five people something cool about wor*ing at DcDonald@s the net C . The /merican documentation points out that DcDonald@s CEO 4im )*inner began his career wor*ing the restaurant0s front lines as did #. The industr' is ta*ing a beating from an increasingl' health.time Ol'mpic trac* and field medalist and former DcDonald@s crew member Carl Eewis who is featured in the T: ad. Even the DcDonald@s application form vividl' communicates this message b' showing a group of culturall' diverse smiling emplo'ees and the caption =/t DcDonald@s 5ou Can Go /n'whereK> DcDonald@s has also distributed media *its in several countries with factoids debun*ing the Dc4ob m'th. percent of all ownerOoperators.< million staff members to recruit more friends and ac1uaintances through word of mouth. percent of the top restaurant chains DcDonald0s needs more people to fill (obs in its vast empire. / few 'ears ago it created the =70m loving it> campaign which too* aim at a positive image of the golden arches for emplo'ees as well as restaurant. =$eople do come in with a P(ob0 mentalit' but after three months or so the' become evangelists because of the leadership and communit' spirit that e8ists in stores > sa's David Mairhurst the vice president for people at DcDonald@s in the United Qingdom. DcDonald0s has tried to shore up its emplo'ment image in recent 'ears b' improving wages and adding some emplo'ee benefits.prestige dead. =Mor man' it0s not a (ob but a career. percent of all restaurant managers and #.end mindless service (ob in which the emplo'ee0s wor* is highl' regulated. The campaign0s centerpiece is a television commercial showing successful people from around the world whose first (ob was at the fast.SUBJECT: General Management The Indian Institute of Business Management & Studies Marks: 100 CASE: REBRANDING MC!OBS /s with most fast. 5et DcDonald0s e8ecutives are finding that recruiting is a tough sell.paced environment and what it means to operate as part of a team. Fow DcDonald@s is fighting bac* with a =D' Mirst> campaign to show the public. The campaign had some effect but DcDonald0s e8ecutives reali6ed that a focused effort was needed to battle the Dc4ob image.that wor*ing at DcDonald@s is a wa' to start their careers and develop valuable life s*ills. 7t doesn0t help that McJob a slang term closel' connected to DcDonald0s was recentl' added to both MerriamWebster’s Collegiate Dictionary and the Oxford Englis Dictionary as a legitimate concept meaning a'ing low. E1uall' troublesome is a further decline in the alread' drear' image of emplo'ment in a fast. =7t was the place where 7 learned the true meaning of e8celling in a restaurant. =7t0s a ver' strong message about how when 'ou start at DcDonald@s the opportunities are limitless > sa's Mloersch.> Jichard Mloersch DcDonald@s e8ecutive vice president of human resources claims that the compan'0s top management has deep talent but the campaign should help to retain current staff and hire new people further down to hierarch'.

". The compan'0s measure of emplo'ee pride has increased b' +# percent lo'alt' scores are up b' < percent and 2. The Mamil' Contract is potentiall' a recruiting tool because famil' members can now share the same (ob and ta*e responsibilit' for scheduling which famil' member ta*es each shift.it0s a complementar' (ob > sa's Denis 9enne1uin the $aris. The arrangement e8tends to cohabiting partners and same.SUBJECT: General Management The Indian Institute of Business Management & Studies Marks: 100 effect is huge > e8plains DcDonald@s global chief mar*eting officer.da' emplo'ee turnover for hourl' staff has dropped b' N percent.based e8ecutive vice president for DcDonald@s Europe. Lut DcDonald@s isn@t betting on its new campaign to attract enough new emplo'ees.level positions are not a =lifest'le> (ob. Discuss DcDonald@s current situation from a human resource planning perspective. )o far the campaign is having the desired effect.se8 partners. The most recent innovation at DcDonald@s UQ called the Mamil' Contract allows wives husbands grandparents and children over the age of +< to swap shifts without notif'ing management. B. Questions +. =Dost of the wor*ers we have are students. Mor man' 'ears it has been an innovator in recruiting retirees and people with disabilities. 7s DcDonald@s ta*ing the best approach to improving its emplo'er brandA &h' or wh' notA 7f 'ou were in charge of developing the DcDonald@s emplo'er brand what would 'ou do differentl'A &ould =guerrilla> recruiting tactics help DcDonald@s attract more applicantsA &h' or wh' notA 7f so what tactics might be effectiveA 3 . Even with these campaigns and human resource changes some senior DcDonald@s e8ecutives ac*nowledge that the entr'..

The first part of 2 . )uddenl' Jeuters was losing customers to a cheaper and increasingl' ubi1uitous alternative.s its emplo'ee base had swelled to +2 ..s the compan' used a proprietar' computer s'stem and a dedicated telecommunications networ* to deliver real." Glocer launched a three. Then in B.based s'stem but he 1uic*l' recogni6ed that Jeuters0 problems ran deeper.. he was put in charge of rolling out such a s'stem across Jeuters but met significant resistance. million and Glocer described the business as =fighting for survival.which in +3N.based s'stem Jeuters0 customers would defect in droves.+ the stoc* mar*et bubble of the +22.. Mirst came the 7nternet which allowed newer companies such as Thompson Minancial )ervices and Lloomberg to provide real.b' the late +22. The first non(ournalist CEO in the compan'0s histor' Glocer an /merican in a Lritish.s finall' bro*e? thousands of people in financial services lost their (obs? and Jeuters lost +3 percent of its contracts for terminals in a single 'ear.language data services man' of which used diverse and sometimes incompatible computer deliver' s'stems. During this period of head' growth Jeuters amassed some + .based deliver' s'stem..s the compan' had developed into one of the largest providers of information in the world. percent of Jeuters0 revenues are generated b' providing information to traders in financial mar*ets. /lthough Jeuters is *nown best to the public for its independent unbiased news reporting 2.+ it had been e8tremel' profitable. 7t was designed to return Jeuters to profitabilit' b' streamlining its product offering prioriti6ing what the compan' focused on and changing its culture. &hen Jeuters entered the financial data business in the earl' +2C..> Glocer had long advocated that Jeuters move to an 7nternet. and devoted to delivering information around the world b' the fastest means available.. Two shoc*s to Jeuters0 business put the compan' in a tailspin. Dan' managers were therefore reluctant to move toward a &eb..devices that an' self. 7n B.B the compan' registered its first annual loss in histor' R#3.respecting financial trader could not function without. )uddenl' a compan' that had alwa's been profitable was losing mone'.> Jeali6ing that dramatic action was needed in Mebruar' B..based s'stem that commoditi6ed information and had lower profit margins. The late +22. The old proprietor' s'stem had wor*ed well and until B.'ear strategic and organi6ational transformation program called Mast Morward. products often through ac1uisitions such as foreign..s were the high point for Jeuters.. The 7nternet was commoditi6ing the asset on which Jeuters had built its businessI information.SUBJECT: General Management The Indian Institute of Business Management & Studies Marks: 100 CASE: " TRANS#ORMING REUTERS Eondon. most of whom were on the financial and technical side. The' were worried about product cannibali6ation.time financial information to an' computer with an 7nternet connection.+ his prediction seemed to be coming true.dominated firm was described as =not part of the old bo's0 networ*. meant a fleet of #N carrier pigeons..time 1uotes and financial information to Jeuters terminals . emplo'ees most of them (ournalists.. Established in +3N. Glocer0s message was that if the compan' didn0t roll out a &eb. 7n the +22.. L' the late +22.s it had B #. 7n B. 7n B.+ Jeuters appointed Tom Glocer as CEO. Once in charge Glocer again pushed an 7nternet. 7n B.based Jeuters is a venerable compan'.

To change its culture Jeuters added an element to its Mast Morward program *nown as =Eiving Mast > which defined *e' values such as passionate and urgent wor*ing accountabilit' and commitment to customer service and team. L' B. *e' strategic products all delivered over the &eb. emplo'ees (nearl' B. percent of the wor*force) would be laid off.. 7n B. The earl' results of these changes were encouraging." the compan' had + ". L' the end of B..SUBJECT: General Management The Indian Institute of Business Management & Studies Marks: 100 the program was an announcement that " . Dan' emplo'ee groups came up with ideas that could be rapidl' implemented. . products.functional groups addressing challenges outlined b' Glocer and proposing concrete solutions. / two.based technolog'A &h' do 'ou thin* Tom Glocer was pic*ed as CEOA &hat assets did he bring to the leadership (obA &hat do 'ou thin* of Glocer0s attempts to change the strateg' and organi6ational culture at JeutersA &as he on the right trac*A &ould 'ou do things differentl'A +.and were... This led to the development of a follow. Mollowing a video message from Glocer and a brief summar' of the goals of the program emplo'ees spent the rest of the da' in + ". Each group chose one of =Tom0s challenges> to address. B. Dore generall' the emplo'ees as*ed for greater clarit' in product offerings less bureaucrac' and more accountabilit'. &ith this mandate managers launched a program to rationali6e the product line and streamline the compan'0s management structure.sA 9ow did that paradigm shift change the competitive pla'ing fieldA &h' was Jeuters slow to adopt 7nternet. cross. ".. #.N Jeuters was focusing on N.time low.up conferenceI a one. &hat technological paradigm shift did Jeuters face in the +22.da' conference of +#..# the compan' recorded a R"3.. /t the end of the two da's the managers collectivel' pledged to bu' half a million shares in the compan' which at the time were trading at all.da' event that included all compan' emplo'ees. Questions +. million profit and the stoc* price had more than doubled. /fter the conference the managers were fired up? but going bac* to their regular (obs the' found it difficult to conve' that sense of urgenc' confidence and passion to their emplo'ees. managers selected for their positions of influence and business understanding rather than their seniorit' launched the program.