913-509

AUGUST 3, 2012

LINDA A. HILL

MARK RENNELLA

Johannes Linden:
Managing the Global Executive Committee
On February 1, 2011, Johannes Linden, Director of the Washer and Dryer Division of a Swiss
appliance company, Fluss, was alone in his Beijing hotel during a rare break in the quarterly Global
Executive Committee (GEC) meeting. As he reflected on the meeting thus far, he felt energized by
how well they had performed in 2010. The prospects next year looked even better for Fluss Washer
and Dryer (FWD). However, he had to admit some frustration that they were not reaching consensus
on the issue at hand.

Because the business planning cycle for the coming fiscal year had finished three months earlier
based on an assumption of higher material costs, the new lower steel price FWD had just negotiated
with suppliers would result in an unanticipated savings of 10%–20%. As a result of these savings, the
GEC faced some tough decisions. First, they had to decide whether or not to change the business
targets for each country to reflect the new price. If they chose to alter the targets, they had to address
the even more sensitive matter of whether country managers’ bonuses, which were based principally
on the achievement of those targets, should be based on the old or new figures.

Linden had begun the meeting by praising the team for their tireless efforts over the past few
years. He shared with them the CEO’s remarks at the last board meeting about the invaluable
contribution FWD had made to the overall corporate performance during the worst financial crisis in
generations. Thanks to their hard work and what looked like an improving world economic outlook,
FWD was in a position to restart a gradual expansion of manufacturing capacity that had been
suspended in 2010. (See Exhibit 1 for FWD’s organizational chart and Exhibits 2a and 2b for the
company’s overall and region-specific revenue figures.)

Linden had continued the meeting with an update about Fluss’s primary competitor—the Korean
appliance giant, RiverTech. Fluss and RiverTech had both made the strategic decision in the mid-
2000s to go “green” (environmentally friendly, energy-efficient, or both) with their entire product
lines. FWD had focused it’s innovations in two domains: developing “smart” washers and dryers,
and manufacturing both ventless dryers and combination washer–dryers that featured a novel “heat
pump” technology. (Exhibit 3 briefly describes these technologies.) Linden then launched into some
welcome news about which he knew the rumors had been flying:
________________________________________________________________________________________________________________

HBS Professor Linda A. Hill and writer Mark Rennella prepared this case solely as a basis for class discussion and not as an endorsement, a
source of primary data, or an illustration of effective or ineffective management. Although based on real events and despite occasional
references to actual companies, this case is fictitious and any resemblance to actual persons or entities is coincidental.

Copyright © 2012 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685,
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 913-509 | Johannes Lindstrom: Managing the Global Executive Committee

You know we have been exploring multiple ways to find an edge in this industry. An
effort, spearheaded by David, our tireless RD (regional director) from Australia, has paid off.
He finally got us to get our act together, combine our volumes across the region, and
renegotiate a single contract with our primary supplier. As you know, each of you had
handled your own purchasing, and the terms of your contracts varied considerably as David
found out. As we all know, because steel is the major raw material used to manufacture our
products, even small changes in steel prices can significantly affect our prospects. We think the
new terms will not only improve our margins, but may also give us the opportunity to
undercut RiverTech’s prices and capture market share. We project that there should be almost
immediate cost savings of 10% to 15% in most of our regions during this fiscal year.

While this was indeed encouraging news, Linden was privately concerned about whether the
GEC could steer FWD in the future. The young division (established in 2004) had been focused on
growing revenues and market share since inception. The division’s innovative products had garnered
solid profit margins, but—especially in the appliance industry—those margins would inevitably be
eroded. Reducing material costs was key—but it was only the beginning of what they needed to do
to maintain, much less grow, their market position in a slower growth environment. Linden, along
with all of Fluss’s other divisional directors, had been recently tasked by the CEO to focus on
profitable growth. He knew there were two major corporatewide initiatives in the works. Fluss’s
divisions would be asked to standardize parts where possible to allow for more global outsourcing.
And, of course, the shared services model for IT and accounting would begin implementation in the
third quarter of the coming year. Linden knew the GEC had many strategic issues and decisions with
which to grapple in the near future.

The spirit in the room became buoyant with the prospects of FWD’s rising fortunes, but the tone
of the meeting changed when Linden brought up the target issue. “I know we just went through a
pretty grueling time setting the targets for fiscal 2011 three months ago, but we need to decide
whether to adjust them to reflect the gains in sales and margins we can expect as a result of the new
steel prices?” Linden believed that both the targets and bonuses should be adjusted, although he had
kept his opinion to himself at first.

When the GEC members—the six regional directors (RD) and the four corporate staff—seemed
unwilling to engage the issue, Linden commented that they could ill afford to let the country
managers become complacent. He went on to say, “These were windfall gains for the country
managers; they had done nothing to earn them.” When the conversation seemed to be “going
nowhere,” Linden suggested a 15-minute break. He went up to his room to make a quick call to his
kids at home. He hoped the GEC members would take the time to reflect and stop thinking like
country managers and instead do what was best for the company, even if it meant giving their people
unpopular news. Given their disappointing discussion of the targets, he wondered if they were up to
the task.

Linden’s Outlook on the Washer and Dryer Industry Landscape in 2011

Linden was confident in the future growth potential at FWD—provided that the division was
ready to move decisively to adapt to the ever-changing economic landscape. As the first decade of the
twenty-first century demonstrated, economic realities could change rapidly. Since 2005, global GDP
had gone from a high of about 6% down to near zero in 2009. It was back up around 4% in 2010 and,
according to the Fluss economic forecasts, was expected to remain at that level until 2015. Fluss
predicted that the emerging economies would grow at an average 4% more than developed ones.

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Two trends that would have a long-term impact on FWD’s prospects in emerging economies were
increasing urbanization and the rise of disposable income. FWD’s green/efficient products were
well-suited to the needs of these consumers to save time, space, and energy costs. Although green
appliances were typically more expensive than conventional appliances, many consumers were
willing to pay some premium for green appliances. Besides, more governments and energy
companies were offering incentives, such as rebates, to those who bought smart appliances.

Where exactly FWD’s growth would come from was uncertain. Egypt, for example, was on the
Fluss list as a fast-growing emerging country, but recent political upheavals now made business
prospects unclear. And consumers’ evolving perceptions of climate change appeared to be having an
impact on their interest in “green” technologies. In Eastern Australia, for example, unusually long
stretches of rainy weather the previous year had caused dryer sales to climb sharply. Focus group
results showed that more Australians felt they no longer could rely on the sun as a cheap and reliable
way to dry their clothes.

But it was not enough to be prepared to respond to these long-term global or regional trends;
FWD also had to keep its eye on local preferences as well. Consumer laundering habits varied
around the world. Just consider the habits of two of FWD’s most important national markets—
Germany and Brazil. In Germany, a top priority for consumers was to eliminate bacteria from dirty
clothes. Consequently, Germans tended to wash clothes with very hot water. Water temperatures
were commonly set at 45 degrees Celsius compared with 30 degrees in the United States and 20
degrees in Japan. Brazilian laundering habits provided an even greater contrast: instead of using
very hot water or strong detergents to eliminate tough stains, Brazilians often relied on hand
washing. Would these laundering habits converge over time? No one really knew.

As Linden saw it, the economic and cultural mosaic in which FWD’s products had to fit in 2011
and the years ahead was in a state of unprecedented flux. There were great opportunities to be had,
but the challenges were as plentiful. Linden needed an agile organization led by executives with both
strategic and operational expertise.

Fluss’s Evolution
Fluss AG, the Swiss parent company of FWD, had 51,000 employees and earned $15 billion in
revenues in 2010. Since its founding in 1947, Fluss specialized in the design and manufacture of large
household appliances. From 1947 to 2004, Fluss expanded globally and established geographic
divisions: Fluss Americas, Fluss Asia, and Fluss Europe.

In 2004, CEO Hans Kehrer faced two conflicting goals: finding efficiencies whenever possible by
pooling resources globally, and tailoring their products and operations for the local consumer and
competitive landscape. After much deliberation, Kehrer and the board reorganized Fluss; the
company went from a geographic to a product-oriented structure. Specifically, they established
divisions, each of which focused on a particular appliance product line (e.g., refrigeration, stoves,
dishwashers, washers, and dryers). In this new structure, each strategic business unit could develop
deep expertise in its particular market segment, as well as capitalize on sharing best practices across
the globe.

Fluss Washer and Dryer: Johannes Linden at the Helm

Linden, age 40, became director of FWD in 2004 with the reorganization after four years as COO
of Fluss’s European division. As a director, he now reported directly to CEO Hans Kehrer. The son of
a world-traveling Swiss journalist, Linden had earned an MBA from a prominent European business

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 913-509 | Johannes Lindstrom: Managing the Global Executive Committee

school. He was excited about his new responsibilities as a general manager running a global business
with 3,000 employees. The Fluss culture was one of decentralization and accountability. Although
he had enjoyed his role as COO, Linden had felt constrained by his boss’s tendency for “conservative
and slow decision making.” Of course, his boss had accused Linden on more than one occasion of
being “too impatient.” Linden was eager to try out his own leadership ideas and drive the business
to new heights. His intention was to foster a more open, collaborative, yet aggressive culture.

Linden was careful to recruit other high-energy executives to his executive team. His COO was an
American who had worked for a German appliance company. The other three principal executives—
the Chief Human Resources Officer (CHRO), the Chief Financial Officer (CFO), and the Chief
Marketing Officer (CMO)—had worked previously with Linden at Fluss Europe.

When Linden took over FWD in 2004, the division was divided into three geographic regions:
Asia, Europe, and the Americas. The country managers in each region reported to an RD who had
profit-and-loss responsibility for the region. Country managers were expected to run their countries
the way they saw fit as long as they did so in alignment with the division strategy and mutually
agreed upon business targets.

To keep “his finger on the pulse of the organization,” Linden traveled 50% of the time. He liked to
visit RDs and country managers alike to have face-to-face, “eyeball-to-eyeball” discussions about the
business. He asked tough questions to get “behind their ideas” and “hear what they were really
thinking.” He participated very actively in the discussions and development of the annual business
plans for most country managers. These plans in turn became the foundation of regional plans and
budgets. “My personal visits give me a great chance to connect with every country manager and
every national market,” Linden commented. “Inevitably the bonus program is important to both me
and my staff. It’s a carrot I use to motivate the country managers to stretch. It also helps me to
understand exactly how they plan to make the targets in their respective markets. How solid are their
forecasts? Have they got good contingency plans?”

In the spirit of open communication, Linden tried to encourage the RDs and their country
managers to feel free to approach him about any topic on their minds. “Everybody knows that none
of this information is considered in confidence,” Linden explained. “If a country manager, for
instance, brings up a question to me, I am likely to share it with his RD. And they are free to share
anything I say to any of them with their RD and others.”

Reflecting on Linden’s leadership style, his CFO remarked: “Johannes is open to ideas and
suggestions, but he knows how to wield a stick, too. Any country manager who resists his vision or
hands-on approach usually has one chance to get with the program. If they don’t, they’ll be out of a
job. Johannes is polite, but very firm.”

Refining the Regional Structure and Responsibilities in 2006

Linden enjoyed his personal interactions with RDs and country managers around the world, but
his travel schedule at times threatened to overwhelm him. Given the dynamism of the markets, he
knew he had to delegate more oversight and management responsibilities to his RDs. In response to
the growth of the emerging economies, in early 2006, Linden concluded they should increase the
number of FWD regions from three to six.

Linden decided to ask the RDs to work together and offer a recommendation about how to
reconfigure the regions. He was pleased with how they worked through the issues. He explained:

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We split the Americas into two regions, reflecting the growing strength of South America. I
had to do some convincing to get the North American RD to agree to share the American
region with somebody else, but it was the practical thing to do. Europe was slowing, so we
added North Africa to that region’s business. The geographic arrangements the RDs created
(like dividing Asia between mature and developing economies) made sense. It was something
I wouldn’t have thought of on my own. I had always viewed territories in terms of continents
or subcontinents.

The European RD recalled: “That initial work on geographic structure was exciting—it helped to
get us all aligned with the strategic vision for FWD. As a result, Johannes seemed more comfortable
with our principle that not only operations, but also, acquisitions would remain largely the
responsibility of RDs working in concert with their country managers. Of course, he would still get
very engaged when he thought it was necessary.”

These changes also resulted in the RDs “driving more deeply” the business planning process in
their regions, which focused on projecting (and defending) targets for revenues, market share, and
profits for each national market. The business-planning process for the fiscal year starting in 2007, for
example, followed this schedule:
• October 2006: Country managers prepare their business plans.
• Early November 2006: Country managers meet with RDs to review the business plans.
• Late November 2006: RDs meet with Linden and the CFO to review national and regional
goals.
• December 2006: RDs meet with country managers to discuss final plans and targets with
either the CFO or Linden present.

At the final December meetings, country managers were encouraged to offer any last objections or
concerns they had. After some give and take, the parties in attendance were to reach consensus. The
CFO described their practice in this way: “Because bonuses are tied to revenues, discussing the
revenue numbers often becomes a focus of the meetings. Johannes allows country managers to have
their say. But the group always leaves these December meetings with a firm agreement on revenue
and profit targets and bonus percentages.” The bonus structure was generous for the industry. “I
believe in an aggressive bonus plan,” Linden had once remarked. “It usually pays off in terms of
productivity and profits.”

One country manager commented: “When we’re at a meeting and Johannes brings all of his
knowledge of the business to bear on your national plan, it can be pretty intimidating. It’s more than
agreeing on the terms of a contract; it’s like taking a solemn vow.”

FWD’s executives agreed that Linden’s grasp of the business was impressive and recognized that
he often used his knowledge to push agreement between RDs and country managers when they
seemed at odds. Linden felt that his high level of participation was an important part of executing his
strategy: “Effective strategy requires communicating with people about strategic goals. Sometimes a
leader must communicate with a little extra emphasis. It’s one method I use to run a regional
organization while maintaining a global vision.”

The GEC Begins

After implementing the new FWD regional structure, Linden created the GEC, which consisted of
his corporate staff and the six regional directors with himself at the helm. “The world is too big for
me to run by myself,” Linden sometimes quipped to his staff. “It is my hope that GEC will be our

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 913-509 | Johannes Lindstrom: Managing the Global Executive Committee

forum for making strategic and major investment decisions. We have to be responsive to local
conditions, but unless executive management discusses the world frequently, the company can’t
accurately perceive, much less exploit, opportunities for global synergy.” The GEC agreed to meet
three times a year in Basel to focus on operational matters and important initiatives, and once a year
they would hold the meeting at a regional headquarters to discuss long-term strategy.

A week before the first GEC meeting in September 2006, Linden solicited questions and concerns
from the RDs, vetted them with the corporate staff, and sent out an agenda. The most pressing issues
for the first meeting included clarifying the authority and decision-making rights between RDs and
country managers and RDs and the corporate staff.

It did not take long for the GEC to agree on some guidelines concerning the roles and
responsibilities of the RDs and country managers. (Exhibit 4 describes a partial list the GEC
generated as a result of their deliberations about the roles and responsibilities of FWD’s RDs and
country managers.) The conversation about the line versus staff relationships was more complicated
and heated. Linden emphasized that the corporate staff were not there to dictate to the RDs how to
run their businesses, but rather to provide support and expertise to help them execute the divisional
strategy and look for regional synergies. He reminded them that they all reported to him directly.

The South American RD expressed the views of many RDs when he remarked that RDs had little
or no role during the first meetings of the GEC: “The corporate staff, like the CMO and CFO, and
Johannes had a point of view on regionwide issues, it seemed, but we weren’t sure how we were
supposed to work with them at these meetings.” Another RD characterized these early meetings as a
bit overwhelming: “It would have been nice for the RDs to work together more like we did in early
2006, when we planned out the six regions. But we were so busy getting our own regions in order
when the GEC first met that we mainly deferred to Johannes on global questions. Johannes certainly
wanted the meetings to be livelier. ‘What’s the point of getting together if I’m not learning from you
all?’ he asked us at the meeting in June 2007.”

By early 2008, the RDs were becoming more comfortable working through problems together, and
they began to contribute more ideas in the quarterly gatherings. Ernst Martin, the RD for North
America, noted: “After we became more familiar with our territories and had some early successes in
our regions—making successful acquisitions on our own, for example—we got the confidence to
speak up more about our experiences and our views on where the company should be going. When
we knew our regions were doing well, we could then think a little more about working as the ‘FWD
team.’”

Working Together
By 2010, the GEC had been functioning for more than three years. They had fallen into a routine.
Each GEC meeting began with the CFO’s discussion of the state of the business and where they were
with regard to financial targets and the CMO’s review of the latest developments in the washer and
dryer product category. Linden then discussed important competitive and economic trends and they
talked about their potential impact on their plans. The meeting ended with updates from RDs about
developments in their regional operations. “Even though regional markets are very different,”
Linden commented, “RDs have a lot to learn from one another. Learning about other parts of the
corporation encourages them to get involved in global strategy.”

Outside the GEC meetings, Linden kept in close contact with the RDs, but it was his sense the RDs
did not interact with one another frequently with one exception. The RDs for China/Southeast Asia
and India/Indonesia—Vinata Das and Achir Sharma—had both grown up in northern India and

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 Johannes Lindstrom: Managing the Global Executive Committee | 913-509

were now in charge of neighboring regions. Recently, they had proposed a new joint recruitment
strategy to FWD’s corporate human resources manager. Attracting and retaining talent was a major
business challenge in their regions.

The GEC members began to adopt different roles in the group. Das and Sharma were the “experts
on developing countries”; Martin, a Swiss expatriate and former operations manager for a retail chain
in Canada, was the “go-to-person” on supply chain issues; and King, the Australian RD, was the one
they turned to for the latest on sourcing and materials matters. (See Exhibit 5 for short biographies of
the GEC members.)

Over time, the formal and informal meetings of the RDs fostered a sense of camaraderie among
them—and competition. At one GEC meeting in Bangalore, Sharma delighted the other members of
the GEC with a surprise visit from one of India’s premier classical musicians. The RD responsible for
hosting the next meeting tried to show up Sharma with his own surprise activity. At one Basel
meeting, Linden stole the show by daring members of the GEC to play drums with him at a
prominent club with a local band. According to the CFO, this was all part of “the healthy
combination of competition and friendship we have among the members of the GEC. We’re all
ambitious individually, of course, but we respect each other a lot. There’s no jealousy among us.”

Competition between the GEC members also had another source, as one senior staff member
explained: “Johannes is only 40. Although he was happy with directing FWD after the re-org,
somebody like him always has his sights set on the C-level positions in the parent corporation.
Everybody senses his ambition.”

GEC members varied in their opinions about the meetings themselves and Linden’s role in them.
The CHRO remarked: “Johannes is always looking for consensus. He seems genuinely pleased when
we get to a decision after a good debate. But in the end, especially when he firmly believes in a course
of action, he can be what I might call a smooth dictator. Very likable, very persuasive, but very
determined to get where he wants to go. That has to happen sometimes in a big organization.”

An RD from Asia observed: “There are some difficulties getting through to Johannes at these
meetings. If you speak about another region, like the Americas, you probably won’t get his attention.
And if you do get his attention, you’ve got to back up your idea in detail. It makes it hard to be
creative sometimes. I find it much easier to talk to him one-on-one. I get more done with him that
way.”

Martin said: “Since we’re investing a lot of resources in these GEC meetings, I feel an obligation to
offer my point of view about where the whole company is going. It seems like some people at the
GEC appreciate that, and some good conversations have developed at these meetings. Whether or not
the whole GEC agrees with me is another matter.”

The RD from South America commented: “On the one hand, it’s hard to argue with his success.
We’ve been doing pretty well despite the crazy economy. On the other hand, Linden can be stubborn
sometimes. Although we like working together in the GEC, we mainly focus on getting things done
in our regions. It’s obvious who the company strategist is. Once strategic decisions are finally set by
Johannes, the RDs have wide latitude on how they can execute on them. FWD is too global to be
micromanaged.” He continued with a chuckle, “If only I could argue with him in Spanish maybe I’d
win more often.”

Another committee member expressed that the GEC was not a place where hard decisions had
been made: “If it is really a sensitive matter, Linden often meets with us each one-by-one. The
decision is made before we come to the meeting, although we still might talk about it together. You
know, FWD has been growing pretty steadily and done better than the competition, especially

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 913-509 | Johannes Lindstrom: Managing the Global Executive Committee

through the financial crisis. So all the GEC members are usually content. But have we run into a
situation in which very difficult trade-offs had to be made? Not yet.”

Linden was aware of the team members’ ambivalence about the value of the GEC meetings and
how he used them. But he insisted that the meetings were part of a long and careful decision-making
process. On any important issue, he would solicit lots of opinions from GEC members on a one-to-
one basis to inform his own views. While admitting that he sometimes forcefully advocated for his
own point of view, Linden expressed some disappointment about the lack of initiative by members of
the GEC to help shape FWD’s strategy and openly debate issues. “On the other hand,” Linden
reflected, “the personalities are so varied in the GEC that it may make it easier for me to get my
agenda through than for the members of the GEC to formulate their own. But given that the last few
years have been pretty good, it’s hard to think about altering my approach too much.”

The February 2011 GEC Meeting

After their brief break, Linden and the GEC returned to their small conference room. Linden
began with a short message from the CEO stating that FWD, along with all of Fluss’s divisions,
should have solid contingency plans in place given the continued signs of economic volatility. He
also reminded them of the company initiative to look for opportunities to outsource parts used in
building appliances that did not contribute to Fluss’s “green” differentiation strategy. “We need to
come up with our recommendations about what can be outsourced and develop the required parts’
specifications. Anybody want to take charge of getting this done?”

Linden noticed that they all seemed to be avoiding the pressing issue at hand. The GEC needed
seriously to consider not only adjusting the business targets, but also the bonus basis. They needed
to decide whether or not to adjust budget and bonus targets. Members of the GEC began to talk about
how geopolitical factors were making it difficult to forecast demand. The political upheaval in the
Middle East and Thailand were topics of concern, impacting FWD’s supply chains, energy costs, and
consumer spending in the area. And extreme weather patterns were having a noticeable impact on
consumer habits. David King commented: “Perceived climate change in Australia is pretty severe in
some areas of the country. It’s a new variable that makes running things in this region even harder. I
was happy that my recent petition to ramp up manufacturing of dryers for the Australian market was
approved by Johannes last year—it turned out to be a good move.”

During a pause, Linden remarked, “I am worried. I think we should change the business and
bonus targets. We’ve done some homework,” Linden told the group, “that costs in the regions should
fall between 10% and 15%. We can pass some of the savings on to our consumers, and make our
products even more attractive to a broader base of consumers. Our sales could increase by as much
as 10% in some regions according to our initial calculations. Besides, keeping the bar high for
everybody sends the right message and will encourage us all to continue to work together to find
creative ways to cut costs.”

Before the meeting Linden had asked the CMO to work out both the “conservative and optimistic
scenarios” of the impact of the lower steel costs on sales. He had then asked the CMO to work with
the CFO to figure out expected revenues and margins under both scenarios. (They both had been
surprised when Linden had requested the further step of recalculating the business and bonus targets
as well.) During the meeting, the CFO looked down at the numbers on his spreadsheet. “Yes,” he
said, “even with conservative assumptions there would be a substantial surplus.” The CMO went on
to suggest that they put any “surplus” in an investment fund for the entire company. Sharma
countered that that would just add another layer of bureaucracy. He added, “The country managers
always have to justify their investments; RDs should just exercise their usual discretion before

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 Johannes Lindstrom: Managing the Global Executive Committee | 913-509

signing off on major investments.” The others nodded and the CFO withdrew his proposal for
creating a separate fund.

FY10 payouts had reflected the steady success of FWD. The division had exceeded the FY10 plan
targets by 15%, and accordingly the bonuses paid to eligible executives and managers ranged from
15% to 25%. FY11 promised to be a different story. Without a substantial unforeseen downturn in
business by December 31, the bonuses for every eligible executive and manager would rise—some
dramatically.

After a pause, one RD said that revising business targets at this point seemed strange: “I was a
little surprised when Johannes mentioned changing business targets. I’ve been very supportive of
working together for corporate goals, but we’ve never changed business targets, either up or down,
due to any external changes in the marketplace or internal developments.”

Martin asked to review the spreadsheet. He commented, “Housing construction in North America
is not picking up as much as we had projected a few months ago. Lower prices might not have a big
impact on our market if people aren’t buying new houses with new appliances. Maybe we can do
this: if we’re going to make a big change that affects all of the regions, why can’t we come up with a
way for bonuses to reflect, at least in part, some measure of the division’s overall performance?”

Linden paused briefly. “That’s an interesting idea we should think about. But for now, we have to
focus on how we are going to keep everybody working hard. If we don’t do something, some guys
will have achieved their bonuses before the third quarter. Shouldn’t the country managers be held
accountable for the savings from the reduced costs?”

Linden continued, “Each country manager may have his or her own unique challenges, but we
should use this opportunity to make further gains in the market worldwide. In any case, most
country managers won’t have to work too hard to make their adjusted sales and revenue targets,” he
argued. “We believe sales of our green applications will continue to grow. Making no changes in
business targets will make people happy this year, but what about the company’s prospects next
year? We need to keep our managers aiming high. How are easy targets going to help that?”

Linden glanced around the room. He was disappointed in the GEC members. Things had turned
out a little different than he had imagined; he had hoped the group would interface on strategic
matters. He had hoped they would contribute to problems beyond their regional responsibility.
Linden wondered if he should drop the issue for now or provoke them by saying what was on his
mind: “I suspect you are all just taking the path of least resistance. You don’t want to have to sell
your teams on a change.”

HARVARD BUSINESS SCHOOL | BRIEFCASES 9

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 913-509 -10-

Exhibit 1 FWD’s Organizational Chart

Hans Kehrer
CEO, Fluss

Johannes Linden
Director, FWD

Sharma, King, RD: Das, RD: Martin, RD: South RD: CMO CFO COO CHRO
RD: India Japan, China & RD: North America Europe &
& Korea & SE Asia America N. Africa
Indonesia Australia

Country Country Country Country Country Country

Managers: Managers: Managers: Managers: Managers: Managers:
India & Japan, China, Mexico, Brazil, Sweden,
Indonesia Korea & Vietnam & United Peru, Chile Norway,
Australia Hong Kong States & & Germany,
Canada Argentina Spain,
Switzerland
Italy, France, Members of
Morocco, the GEC
Egypt &
Algeria

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 913-509 -11-

Exhibit 2a
2 FWD’s Reveenues, 2005–2010

Revenue
es
1000
0
800
0
600
0
Reevenues (in
400
0 $m
millions)
200
0
0
2005 2006 2007 2008 200
09 2010

Exhibit 2b
2 Percentage of
o FWD’s Revenu
ues by Region, 200
06 and 2010

2006
6 201
10
40 40
30 30
20 20
10 10
0 0

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 913-509 | Johannes Lindstrom: Managing the Global Executive Committee

Exhibit 3 FWD’s Innovations in Laundry Appliances

Johannes Linden concentrated on two kinds of innovations to differentiate FWD’s laundry

equipment:

1) “Smart” washers and dryers. These appliances use sensors to monitor laundry systems and
notify owners when a unit is no longer running at peak efficiency and maintenance is required,
thus reducing water and electricity consumption. Also, timely maintenance was associated with
appliance longevity. FWD also held patents for smart grid technology, for example, sensors that
connect appliances to the internet—an emerging technology that the company hoped to
commercialize in the next five years.

2) “Heat-pump” technology for ventless dryers and combination washer-dryers. Instead of

pushing hot wet air through a vent to the outdoors, ventless dryers use a water-extraction device
that diverts and cools hot air within a dryer, condensing and collecting the water while recycling
the heated air. (In contrast to conventional venting to the outdoors, a ventless dryer conserves
some heat—and the energy required to create that heat.) The water is then expelled through a
drainpipe or stored in a container in the dryer. This enclosed design also allows the appliances to
fit into small spaces. When a “heat-pump” is added to a ventless dryer, the drying efficiency
increases considerably, saving consumers up to 60% on the energy used to dry clothes. Ventless
dryers were sold mainly in Europe and Asia.

Exhibit 4 Notes from the Flip Chart Outlining the Roles of RDs and Country Managers

Each RD and his or her country managers will work closely together to implement the division
strategy, but their roles are distinct.

The country manager generally performs the following functions in a local/national context:
• Develop business strategy and plan for the country.
• Maintain relationships and oversee negotiations with unions and labor.
• Sustain relationships with local financial institutions.
• Conduct regular meetings with government officials and regulatory agencies.
• Administer business dealings with national distributors and large retailers.
• Implement advertising campaigns and marketing initiatives customized to the local market.
• Share news and information with adjacent country managers.
• Performance management of country staff.

The RD generally performs the following functions for the region:

• Develop business strategy and plan for the region
• Allocate resources among countries within a region, usually directing resources where the
opportunity for growth is strongest.
• Oversee futures contracts for materials needed for manufacturing in the region.
• Conduct macroeconomic risk assessments across multiple countries.
• Coordinate regional brand management, advertising, and marketing.
• Monitor distribution networks for FWD’s goods, and search for efficiencies across the region.
• Performance management of country mangers.

12 BRIEFCASES | HARVARD BUSINESS SCHOOL

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 Johannes Lindstrom: Managing the Global Executive Committee | 913-509

Exhibit 5 Global Executive Committee Members

Basel Staff Regional Directors

Chief Marketing Officer Regional Director, Europe and North Africa
• Swiss, 44 years old • Swiss, 52 years old
• Marketing for Fluss, 10 years • Head of electronic sales for a Scandinavian
• Consultant for a global consulting firm retailer, 20 years
specializing in branding, 8 years • J.D., specializing in corporate law
• MBA, specialty in Marketing

Chief Financial Officer Regional Director, South America

• German, 50 years old • Swiss, 37 years old
• M&A, European subsidiary of Fluss, 8 years • VP Marketing for an Argentinean agribusiness
• Financial analyst for a mutual fund company, 12 firm, 7 years
years • Assistant to the Swiss Minister for Trade, 5 years
• MBA, specialty in Finance • M.A. in International Relations
Chief Human Resources Officer Ernst Martin
• Turkish, 35 years old Regional Director, North America
• Human Resources officer, Fluss, 6 years • Swiss, 48 years old
• Chief Student Recruiter for a major European • COO for a Canadian retailer, 7 years
business school, 5 years • Head of IT security, Fluss, 5 years
• MBA • B.A. in Computer Science and an MBA
Chief Operating Officer Vinata Das
• American, 43 years old Regional Director, China and Southeast Asia
• COO for a small German appliance company, 10 • Indian, 40 years old
years • Head of R&D for a small medical technology
• Supply chain manager for an American retailer, 7 company in Hong Kong, 6 years
years • 9 years’ experience as project manager for large
• B.A. in Math and an MBA nonprofit foundation
• M.A. in Political Science
Achir Sharma
Regional Director, India and Indonesia
• Indian, 41 years old
• Venture capital firm in India, 3 years
• Built three start-ups in California, 3 years
• MBA, specialty in Finance
David King
Regional Director, Japan/Korea/Australia
• Australian, 52 years old
• Director of Alliance Management for a Korean
steel firm, 10 years
• Director of Asian Government Relations with an
Australian bank, 4 years

HARVARD BUSINESS SCHOOL | BRIEFCASES 13

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