University of Asia Pacific

MBA / EMBA Program – HRM 504/603 Leadership, Power and Influence

Case Study: The Fall of Quest

Note: This case study is based on the troubles (1999) of Compaq, a personal computer manufacturer.

1997 was a banner year for Quest Computer Corporation, a leading manufacturer of personal
computers. The company surpassed $15 billion in sales, nearly seven times its revenues in 1992, which
was the year John Clarke took over as CEO.

Clarke is a hard-driving, no-nonsense leader. His vision was to create a $30 billion enterprise by the year
2000, but things were slowly started to fall to pieces around him. What once had been an open and
productive atmosphere that cultured teamwork and performance; was now deteriorating under the
strains of political backbiting, cronyism, and allegations of sexual harassment.

In the center of it all was Samuel Anderson, Vice President of Human Resources. Anderson and Clarke
worked together in the 1980s at another corporation before Clarke came to Quest in 1992. Three years
later, Anderson joined Clarke at Quest. Anderson immediately started using his relationship with Clarke
to influence business decisions. Anderson also leveraged his ties to discreetly resolve two allegations of
sexual harassment against him.

Although the majority of senior executives and managers believed Clarke was an extremely determined
and good executive, they also believed he was getting bad advice from Anderson and accepting it.

Clarke, when asked about the sexual harassment complaints against Anderson, replied, “People make
things up. There is no way of knowing. People spread rumors.” This and other incidents further strained
relations between Clarke and the rest of the senior executive team. Busy with the task of running one of
the world's leading PC manufacturing organizations, Clarke began relying heavily on three senior
executives — Anderson, Senior Vice President Tim Hunt, and Chief Financial Officer Barry Lynn.

The rest of the team felt increasingly alienated. Over a three-year period, starting in 1996, 10 top
executives left the company and following them were several essential managers and supervisors. At the
center of this mass departure was the bizarre dynamics between Clarke and Anderson. Many believed
that Clarke empowered Anderson to do things way beyond his role in human resources.

For example, Anderson had significant influence on changing the organizational structure of the
company, determining what divisions ought to sell into what markets, and which products should be
sold through various departments. He also took steps to drive a wedge between senior executives,
strengthening his position with Clarke while inducing a communications breakdown throughout the
organization.

Case Study for Leadership, Power & Influence Page 1

Anderson had a list of people whom he would constantly campaign against by advocating organizational
changes to lower their profile. Once he lowered their profile, he would start a process of easing them
out of the door. As one executive put it, “Anderson was instrumental in deciding which people to bring
in and which were no longer acceptable in the company.”

Clarke's reliance on Anderson baffled and angered other executives. Anderson was very close to Clarke,
and he had a huge impact on the business. Human resource professionals usually do not play that kind
of a role, as they are supposed to bring the team together, however; all anyone saw Anderson doing was
creating divisiveness. Instead of working together to fine-tune a coherent growth strategy, Quest's
senior executive team became disjointed and increasingly detached from the rest of the company. Their
inability to lead soon had an effect on the morale of almost every employee within the company.

Two of Anderson's initiatives drove home the point of an executive team that was out of touch with its
workers. The first initiative was the building of a multimillion-dollar on-campus cafeteria that included
reserved underground parking for senior executives. Prior to that, executives shared parking space with
the rest of the company's employees.

The second initiative was the increased security on the eighth floor of the corporate building. Here the
executives and several key managers had their offices; even though every other executive objected to
the idea by arguing that it created a hierarchical environment not conducive to a free exchange of ideas
with subordinates.

Anderson was at the center of almost every bit of chaos that existed within the company. Clarke denied
that Anderson had undue influence. “Every executive has the same access to me,” Clarke said. He
continued, “I have always had an across-the-board relationship with everybody. I always maintained a
high degree of equality. There was no favoritism.”

Clarke also maintains that Anderson had “very good relations with just about everybody. Anyone who
says otherwise must have an axe to grind.” Former executives said they were reluctant to complain to
Clarke about Anderson because Clarke took personal offense, as if he were being criticized, and because
they feared winding up on Anderson's list.

The erosion of the executive team came at a very bad time. Its main competitor was starting to grab big
chunks of PC market share by proving the viability of the direct-sales model. When Clarke replaced the
former CEO in 1992, his aggressive price-cutting initiatives reversed Quest's direction and led the
company to the top of the PC market. But now, Clarke was much less decisive. As one former executive
noted, “He was paralyzed by the speed with which the market was changing, and he couldn't make the
difficult decisions.”

For example, Clarke failed to see the opportunity of the web. Its main rival was now selling over $2
million worth of products per day over the Web. In 1998, its rival surpassed Quest in desktop PC sales to
U.S. businesses for the first time.

Case Study for Leadership, Power & Influence Page 2

The high turnover in the sales divisions led to instability that caused several high profile corporate
accounts to take their business elsewhere. As people left the organization, performance of the company
started to degrade. Quest attempted to construct its own build-to-order strategy by purchasing a rival
company. This endeavor failed as it had no vision to guide its direction.

Finally, things came to a head. Quest could not significantly reduce distribution and manufacturing costs
or boost PC revenues. Huge oversupplies of inventory adversely affected Quest. While its main
competitors grew at about 55 percent from the first quarter of last year to the first quarter of this year,
Quest's business fell by 11 percent over the same period. By the end of this year's first quarter, Quest's
stock lost almost half its value, and the company's first-quarter earnings fell far short of analysts'
estimates.

Then came the kicker, the forced resignations of both Clarke and Anderson was ensured by the Board of
Directors. The new CEO, Paula White, now has the massive job of turning the infighting rank and file into
a cohesive organization. The leadership structure was severely damaged due to the large number of
people leaving Quest. Although a large number of replacements were found, it is extremely hard to
replace the collective experience of that many people leaving in such a short time. To help rebuild the
leadership structure, Paula White has charged the interim human resource vice president, Samuel
Wines, with rebuilding the leadership structure. Samuel created a leadership task force team by hiring
several new human resource specialists. You were brought on as an HR analyst to be a part of that team.

Case Questions: (5*4=20 Marks)

1. What is the leadership style of Clarke? Was it good for the organization? Justify your answer.
2. What role should the human resource department perform in an organization? Did Anderson
use the right leadership approach for his role as Head of HR?
3. What type of power and influence did Anderson have on Clarke? Was this influence good for the
organization?
4. What style of leadership should the new CEO Paula apply? What leadership strategies are
needed for this organization now?

Case Study for Leadership, Power & Influence Page 3