SIYUAN

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W32455
Teaching Note
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SIYUAN ENERGY AND THE FREQUENT DEPARTURE OF
EXECUTIVES1
Xingshan Zheng and Paul Beamish wrote this teaching note as an aid to instructors in the classroom use of the case Siyuan Energy
and the Frequent Departure of Executives, No. W32454. This teaching note should not be used in any way that would prejudice the
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future use of the case.
This publication may not be transmitted, photocopied, digitized, or otherwise reproduced in any form or by any means without the
permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights
organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western
University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com. Our goal is to publish
materials of the highest quality; submit any errata to publishcases@ivey.ca. i1v2e5y5pubs
Copyright © 2023, SJTU Antai College of Economics and Management and Ivey Business School Foundation Version: 2023-04-19
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SYNOPSIS
The president of Siyuan Energy (Siyuan) was facing the long-standing problem of a very high rate of top
management turnover. By 2019, Siyuan had grown to five hundred employees and ¥170 million 2 in
revenue; however, over the past decade, the turnover rate of executives had grown dramatically. Few of the
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externally hired (external) executives lasted even a year, and now a number of long-time (internal)
executives were also leaving. Morale was declining at the same time that the company was facing growing
competition. Action was required to address the problem, but analysis was first needed to understand
whether such high turnover was due to systems or leadership, or both.
LEARNING OBJECTIVES
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By working through the case and assignment questions, students will have the opportunity to do the
following:
 Understand causes and possible solutions for excessively high management turnover.
 Understand the difficulty of working in a family business in which the founders have ongoing
disagreements that result in leadership failure.
 Understand the need for a fit between job requirements and an employee’s individual ability.
 Understand the value of utilizing a comprehensive model of executive turnover in forming a complete
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picture of the management retention challenge at hand.
1
All case facts and case research that are referenced in this teaching note are supported by the sources and information
contained in the associated case document (product no. W32453) unless otherwise specified.
2
¥ = CNY = Chinese yuan renminbi; US$1 = ¥71.7759 on December 1, 2019.
This Teaching Note is authorized for use only by Dr.S.Anjali Daisy, Bharathidasan University until Aug 2024. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu
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POSITION IN COURSE
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This case is appropriate for graduate- and postgraduate-level courses on organizational behaviour and
human resources (HR) management. Discussion can include management turnover, talent retention and
incentives, communication by senior staff, competency and performance assessment, and salary
management.
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RELEVANT READINGS
 James L. Price, “Reflections on the Determinants of Voluntary Turnover,” International Journal of

Manpower 22 no. 7 (2001): 600–624, http://dx.doi.org/10.1108/EUM0000000006233.
 Brooks C. Holtom et al., “Turnover and Retention Research: A Glance at the Past, a Closer Review of
the Present, and a Venture into the Future,” Academy of Management Annals 2, no. 1 (2008): 231–274,
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http://dx.doi.org/10.1080/19416520802211552.
 Anoopa Naraynan, S. Rajithakumar, and Manoj Menon, “Talent Management and Employee Retention:
An Integrative Research Framework,” Human Resource Development Review 18, no.2 (2019): 228–
247, https://doi.org/10.1177/1534484318812159.
SUPPLEMENTARY MATERIALS
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 Stephen Goldberg, “These Strategies will Reduce Employee Turnover,” December 6, 2016, YouTube
video, 5:08, https://www.youtube.com/watch?app=desktop&v=0qGPc9p2QAM.
 Rong Yan, “How to Reduce the Turnover Rate of Excellent Employees” [in Chinese], January 25, 2022,
BiliBili video, 4:52, https://www.bilibili.com/video/BV1pr4y1a7Qn/.
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ASSIGNMENT QUESTIONS
1. What kind of executives does Siyuan need? Is it hiring the right executives now?
2. What causes the frequent turnover of Siyuan executives? What is the most important reason?
3. What are the impacts on Siyuan of the frequent turnover of its executives?
4. What improvements should be made by Siyuan’s founder and internal management to hire executives
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that meet the company’s development needs?
TEACHING PLAN
This case is designed for a ninety-minute class discussion, with the following suggested allocation of time.
Discussion point Time (minutes)

Introduction 5
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Assignment Question 1 15
Conclusion 5
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ANALYSIS
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1. What kind of executives does Siyuan need? Is it hiring the right executives now?
Hai Hao needs people with all-around talent, which is extremely rare. Even if such talent exists, it is
extremely difficult to retain them at Siyuan. In addition, it is difficult for Hao to describe what kind of
executives he wants. He does not have a specific job description for the candidates and only focuses on the
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explicit background, such as educational background and previous working experience and titles.
The talent recruited by Hao may not be suitable for Siyuan. On the one hand, there are major problems with
Hao’s role in the recruitment process of executives. He pays too much attention to the candidates’
educational background and experience but neglects the fit between their personalities and management
styles and Siyuan’s management situation. For example, Hao should have communicated with Daisy Ding
about the desired management style for the company before hiring her. In addition, there is a strong
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psychological effect in the interviews. Those employees who recognize and praise the company are more
likely to be hired. On the other hand, the job descriptions for the executives recruited by Hao are not clear,
and there are cases where candidates do not meet the job requirements. For example, Alex Wei, who came
with an HR background, had no previous experience in operations but was assigned to the post of operations
director simply on the basis of his communication with Hao and his enthusiasm, which resulted in a misfit
between the person and the job.
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Based on the case content, the talent that Siyuan really needs is people with the abilities, qualities, and
strong motivation required to address the organization’s current quagmire through effectively developing
and implementing strategy and building an effective management system. In response to Siyuan’s diverse
business problems, the company should recruit executives with the abilities required by the different
positions as set out in job descriptions. For example, for the position of director of operations, a manager
or director with real operational experience should have been selected to manage the business after Lance
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Zhang left, rather than appointing Wei, the HR director, to the role. In addition, Siyuan’s recruitment should
be competency based, rather than solely based on academic qualifications and past working experience.
Siyuan needs executives who have a strong motivation to help Siyuan effectively solve problems. Several
external executives either chose to copy strategies from their work experience or to directly implement
Hao’s orders without problem-solving based on the company’s actual situation. A possible solution would
be to promote and cultivate executives from within. Moreover, the building of organizational capabilities
depends not only on the capabilities of employees but also on organizational systems. Siyuan needs
executives who can translate its corporate strategy into management systems and practices to truly provide
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fundamental organizational support for the company’s development.
2. What causes the frequent turnover of Siyuan executives? What is the most important reason?
Based on the case content, the case authors have developed a turnover model to assist students in analyzing
the reasons for Siyuan’s executive turnover (see Exhibit TN-1). The model discusses and analyzes the
possible reasons from three levels: team, individual, and organization.
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The model includes the role of the top management team’s leadership style; the interaction and matching
process between executives and jobs, people, and organizations; and the role of organizational climate. The
model also provides intermediary mechanisms (psychological safety and job satisfaction) that could
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improve executive turnover. The model builds on the theories of leadership, person-job (P-J) fit, person-
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organization (P-O) fit, psychological contract, equity theory, organizational climate, and so on.3
This case provides only a theoretical perspective for students, but students can also consider additional
reasons for executive turnover based on actual cases from their work experience. The focus for the most
important reason should be the team level, specifically Hao and the governance structure between Hao and
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Ling Liu.
To support the instructor and students in better understanding the illustrative framework of Exhibit TN-1,
its variables are further explained below. Whether the instructor uses the framework presented here or
another one of their own, the primary conclusions are likely to be broadly similar.
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For the Team—Founder
Authoritarian Leadership
Authoritarian leadership is a distinct style of leadership for corporate managers in China.4 This leadership
style typically demands to maintain authority, keep a high-power distance, and use tough control measures
to manage subordinates. In this case, Hao thinks that the original internal executives of the enterprise mainly
rely on the personal rule approach, domineering, and their experience to manage the company. Hao scoffs
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at their approach. When Zhang proposed to keep the production department running for another two
months, Hao asked the former executives to solve the problem and bypassed the company’s processes to
give them immediate salary increases, using his own critical domineering and personal rule approach.
Narcissism
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Hao shows some narcissism in the case. He believes that the internal executives derive their value from
Siyuan and that they are nothing without the company. On the contrary, he thinks that his management
work is good enough and that all the problems lie in executives’ lack of ability. In fact, after leaving Siyuan,
some internal executives established their own companies, which developed very well and even became
competitors of Siyuan.
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3
Jilng-Lih Farh and Bor-Shiuan Cheng, “A Cultural Analysis of Paternalistic Leadership in Chinese Organizations,” chap. 4 in
Management and Organizations in the Chinese Context, eds. J. T. Li, Anne S. Tsui, and Elizabeth Weldon (London: Palgrave
Macmillan, 2000), 84–127; David F. Caldwell and Charles F O’Reilly III, “Measuring Person-Job Fit with a Profile-Comparison
Process,” Journal of Applied Psychology 75, no. 6 (1990): 648–657, https://psycnet.apa.org/doi/10.1037/0021-9010.75.6.648;
Amy L. Kristof, “Person–Organization Fit: An Integrative Review of Its Conceptualizations, Measurement, and Implications,”
Personnel Psychology 49, no. 1 (1996): 1–49, https://doi.org/10.1111/j.1744-6570.1996.tb01790.x; Carlos-Maria Alcover et
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al., “Understanding the Changing Nature of Psychological Contracts in 21st Century Organizations: A Multiple-Foci Exchange
Relationships Approach and Proposed Framework,” Organizational Psychology Review 7, no. 1 (2017): 4–35,
http://dx.doi.org/10.1177/2041386616628333; J. Stacy Adams, “Towards an Understanding of Inequity,” Journal of Abnormal
and Social Psychology 67, no. 5 (1963): 422–436; Joo Hun Han et al., “Narcissism and Empowerment: How Narcissism
Influences the Trickle-Down Effects of Organizational Empowerment Climate on Performance,” Journal of Management
Studies 57, no. 6 (2020): 1217–1245, http://dx.doi.org/10.1111/joms.12533.
4
Lei Wang, Meng-Yu Cheng, and Song Wang, “Carrot or Stick? The Role of In-Group/Out-Group on the Multilevel Relationship
between Authoritarian and Differential leadership and Employee Turnover Intention,” Journal of Business Ethics 152, no. 4
(2018): 1069–1084, https://psycnet.apa.org/doi/10.1007/s10551-016-3299-z.
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Supervisory Trust
Hao’s distrust of both internal and external executives is reflected in many instances. He thinks that the
internal executives are outdated and highly inadequate, and lack foresight. As for the external executives,
Hao listens to them but inquires into them privately. For example, Hao inquired into Zhang’s actions
through his old subordinates and asked Zhang for an explanation based on the feedback he had received.
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For the Individual—Top Management
Person-Job Fit
P-J fit refers to whether an employee’s individual ability matches their work requirements, or whether their
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wishes and needs match their work satisfaction. In some cases, the individual capabilities of some
executives could not effectively meet the work requirements. For example, although Wei was actually not
competent to manage the operations department, he was asked to concurrently manage both the HR and
operations departments, which ultimately resulted in low-quality performance in both. In addition, the new
executives often did not have the abilities required by their positions; they relied on their past experience
and did not solve problems according to Siyuan’s actual situation.
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Person-Organization Fit
P-O fit reflects the consistency and compatibility of values between individuals and organizations. As a
private enterprise, Siyuan’s organizational culture and values are highly unique to it. Therefore, for
executives who have worked in foreign-funded or state-owned enterprises for a long time, their original
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management concepts that emphasized work processes and basic systems conflict with Siyuan’s
organizational values. For example, Zhang, who was from a foreign company, stressed the importance of
workflow and made great efforts to promote its optimization. However, Siyuan was focused on quick and
short-term solutions to its problems.
Work Stress
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In an interview with a Siyuan executive (see case Exhibit 5), the individual mentioned that the founder
always hopes to find an “all-rounder.” Once Hao hands the management work over to the new executives,
he puts pressure on them and waits for the profits. When there are many tasks, they naturally cannot keep
up. This kind of management method brings great work pressure to internal and external executives under
complex task situations.
Psychological Contract Breach

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A psychological contract is a kind of belief created by an organization that involves the exchange of various
terms of an agreement between individuals and the organization. The psychological contract specifies the
responsibilities and obligations that employees think they should have toward the organization, as well as
the corresponding rewards that they think they should receive. A psychological contract breach reflects the
staff’s cognition of the extent to which the organization fails to fulfill its commitments and obligations. In
this case, Siyuan does not increase the salary of the long-term and outstanding employees in the company,
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never praises the employees, and even uses educational background and other factors to belittle the long-
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standing employees. This makes the original staff feel deeply that the psychological contract is breached,
and they choose to leave Siyuan.
Perceived Organizational Justice
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Apart from the sales team, Siyuan does not have an effective performance management system. The
company’s remuneration system is quite imperfect, with great differences in remuneration between
different employees, and standards are mainly set by the founders. This potential pay gap creates a sense of
unfairness for employees. The founder’s differentiated treatment of internal and external executives also
strengthens employees’ perception of organizational unfairness.
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Perceived Organizational Support
Due to the long-term “introduction-dismissal” cycle for new top management at Siyuan, internal staff show
indifference to personnel changes and are no longer willing to provide enough support for new executives.
To a certain extent, this weakens the new executives’ perceived organizational support. As noted in case
Exhibit 5, frequent departures also make employees less trusting and supportive of new executives.
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For the Organization
Organizational Empowerment Climate
The empowerment climate of the firm is somewhat weak. On one hand, one of the company’s important
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powers—financial control—is in the hands of Liu, so important capital expenditures can only be achieved
with her approval. On the other hand, even if the founder authorizes the employees, it is only a formality.
As noted in the director interview, Hao’s authorization is inadequate and superficial (see case Exhibit 5).
The real salary and personnel authority is not in the hands of the executives. They have no way to exert
their power, and even if they have an idea, it is difficult to implement it.
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Error Management Climate
An organization’s error management climate influences the working environment. At Siyuan, when an
employee makes a mistake, they will be criticized or required to take corresponding responsibilities. When
the employee is later found to have been wronged, they are expected not to complain about it. In such an
organizational climate, low tolerance for employees’ mistakes may increase their psychological insecurity.
Mediators
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Psychological Safety
Psychological safety is the subjective perception that individuals can express themselves freely without
worrying that such behaviour will have a negative impact on their own image and status. At Siyuan, employees
often experience a sense of insecurity due to factors such as the founders’ and executives’ own abilities as well
as the climate of the organization itself. For example, when an employee does not demonstrate their value,
Hao will express disgust or dissatisfaction, thus causing insecurity and a sense of crisis.
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Job Satisfaction
In the existing academic research, job satisfaction is an important antecedent of turnover intention. In this
case, the founder’s authoritarian leadership style and public criticism of subordinates, along with executives’
inability to effectively perform their jobs, lack of effective support, and ineffective organizational
delegation, make it difficult to tolerate mistakes, which may reduce the staff's job satisfaction and further
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increase their turnover intention.
3. What are the impacts on Siyuan of the frequent turnover of its executives?
The frequent turnover of Siyuan’s executives results in mistrust among employees, executives, and the
organization. The frequent turnover of executives is partly due to the fact that the company has not built an
atmosphere of respect. Hao took the lead in creating mistrust by listening to the external executives blindly,
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and then quickly reducing his trust in and making inquiries about them after they made mistakes. This
behaviour not only makes employees see that the leaders violate trust but also increases employees’ distrust
of and negative attitude toward the organization.
The corporate system has been unable to take shape, and organizational stability has declined. Frequent
turnover of executives has caused the company’s original systems and procedures to be passively suspended
or abolished, resulting in poor continuity of the internal management systems and insufficient
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organizational knowledge. The reconstruction of the management system after a new executive takes office
brings about the phenomenon of repeated construction and investment, which dampens the enthusiasm of
the staff. At the same time, frequent handover also make the management of remaining problems chaotic
and obscures where responsibility lies; business matters cannot be connected and resolved, which directly
affects organizational performance.
The morale of the company is declining, and it is difficult to promote change. The frequent turnover of
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executives means employees no longer pay attention to newly hired executives. They question the abilities
of new executives, and their willingness to support and co-operate with decision-making executives has
declined. On the other hand, it also makes internal executives change frequently. Decisions made by internal
executives are often overturned and rebuilt. Potential conflicts between new executives and former
executives have intensified. The support of internal executives regarding new executives is also weakened,
and their willingness to change is reduced. Both employees and internal executives have brought huge
resistance to the implementation of new executives' decisions, making it difficult to promote and implement
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new executives’ decisions, and they often fail.
4. What improvements should be made by Siyuan’s founder and internal management to acquire
executives that meet the company’s development needs?
For Hao
Hao needs to reflect on his problems in executive management. He has always believed that the fundamental
reason for the frequent turnover of the executives lies in the insufficient ability of external executives to
meet Siyuan’s needs. However, his personal authoritarian leadership style, insufficient authorization of
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executives, unreasonable expectations of executives’ goals, and lack of incentives for subordinates all make
it difficult for internal and external executives to stay at Siyuan. To this end, the founders should start by
looking at themselves. Hao should reflect on whether their leadership role in the company’s mission, vision,
and values are appropriate and whether they have played a real leading role. It is also necessary to consider
whether the power and responsibility of executives are properly set up and fully delegated to them so that
subordinates can give full play to their skills.
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For Siyuan’s Management System
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Siyuan has a great need to improve the governance structure, recruitment and selection of executives,
performance management, and the compensation system.
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Governance Structure
The company’s dual governance structure prevents executives from gaining personnel and financial power,
making it extremely difficult for them to mobilize resources to promote business development.
Recruitment and Selection of Executives
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The executive recruitment process is arbitrary, and selection criteria are not clear. The job description,
qualifications, and competency requirements of each position should be clarified before recruitment, and
candidates should be judged scientifically and reasonably in the recruitment process. After recruitment, the
original executives and new executives should be fully connected, and the team should be coordinated.
Performance Management
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Siyuan is seriously short of a systematic performance management system in most departments except for
sales. The absence of performance appraisal, follow-up incentives, and a reward system makes it difficult
to motivate high-performance employees. To support Siyuan in reaching its objectives, the company needs
to establish and improve the performance management system for different positions based on its goals.
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Compensation Management
Siyuan lacks a systematic salary management system, and salary inversion and unfairness exist. A salary
system that includes a basic salary, incentive salary, and non-financial rewards is required.
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WHAT HAPPENED
After experiencing frequent changes in executives, the company suffered a setback in morale, and business
growth slowed down. Siyuan then sought new growth points and worked on digitization and supply chain
transformation. In addition, Liu returned to front-line management in the role of marketing director after
her child went to college. She was responsible for not only the company’s financial work but also its
marketing business. She communicated with the newly promoted internal executives, drew a clear line of
authority and responsibility, and arranged for herself to be responsible for the supply chain business. Liu
had financial power at the same time, which enabled management decisions to be quickly implemented and
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for business development to be improved again.
When it came to executives, the internal executives proposed that an external consulting company should advise
on (a) the company’s leadership; (b) redefining the company’s mission, vision, values, and corporate strategy;
(c) clarifying the executives’ rights and responsibilities; and (d) formulating the goals and implementation
strategy after a new member of executives takes office. However, internal discussions about this are still ongoing.
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EXHIBIT TN-1: ANALYSIS MODEL OF EXECUTIVE TURNOVER FOR SIYUAN ENERGY
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Team—leader/founder
 Authoritarian leadership
 CEO narcissism
 Supervisory trust
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Individual—top management
 Person-job fit
 Person-organization fit Mediator Outcome
 Work stress
 Psychological  Executive

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Psychological contract breach
safety turnover
 Perceived organizational justice
 Perceived organizational support  Job satisfaction
Organization
 Organizational error
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management climate
 Organizational empowerment
climate
Note: CEO = chief executive officer.

Source: Created by the authors based on analysis of the case.
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picture of the management retention challenge at hand.

 James L. Price, “Reflections on the Determinants of Voluntary Turnover,” International Journal of

that meet the company’s development needs?

Discussion point Time (minutes)

fundamental organizational support for the company’s development.

Psychological Contract Breach

Perceived Organizational Justice

Organizational Empowerment Climate

Error Management Climate

new executives’ decisions, and they often fail.

Recruitment and Selection of Executives

for business development to be improved again.

Note: CEO = chief executive officer.

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