This case was prepared by Professor John Kay, under the direction of emeritus Professor Charles Dickens. It is intended as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation.
This case was prepared by Professor John Kay, Peter Moores Director of the Said Business School at the University of Oxford, under the direction of emeritus Professor Charles Dickens. It is intended as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation.
It was 24 December 1843 and Ebenezer Scrooge, President and CEO of Scrooge and Marley International Inc. (SMI) faced one of the most difficult decisions of his business career. (Prof Dickens has not advised me what business Scrooge and Marley were in, but there is no doubt of what they made: they made money). Ebenezer Scrooge and Jacob Marley were deeply committed to the bottom line. Their corporate mission statement ‘I don’t make merry myself, and I can’t afford to make idle people merry’ had inspired a generation of business school students.
Following Mr Marley’s premature demise seven years before, Mr Scrooge had taken over as CEO and had developed vigorously Mr Marley’s philosophy. Mr Scrooge was much in demand as a speaker at executive conferences, where his catch phrase ‘Bah, humbug’, had become legendary. Indeed Mr Scrooge had used it frequently that very day. He had been invited to make corporate contributions to Christmas charities and to support a programme to provide work experience for the young unemployed. Mr Scrooge had welcomed the opportunity to explain that corporate donations could only be justified by reference to directly identifiable benefits to shareholders. Through its substantial tax payments SMI had already made ample contribution to the upkeep of workhouses, prisons and other establishments for the poor.
On the night before Christmas, nothing was stirring in the executive suite of the SMI corporate headquarters except Mr Scrooge’s mouse, scrabbling on its mat. Mr Scrooge was reviewing the progress of Project Tiny Tim. The project did not meet any of the criteria Mr Marley had prescribed for the company. Although its long term potential was considerable, current sales were far from meeting Mr Marley’s requirement that SMI be number one or two in every market it served. The payback period was long and the current cash flow profile unacceptable. Bah, humbug, thought Mr Scrooge.
Mr Scrooge clicked on his mouse, expecting to see his screen saver or hear Bill Gates asking if he really wanted to shut down his computer. But instead he could discern on the screen a faint image of his dead partner, Jacob Marley. The enchained ghost was wringing his hands. ‘I wear the chain I forged in life”, he said. “Of my own free will I wore it.”
Mr Scrooge was startled by this. “But you were always a good man of business, Jacob,” he said. “Business,” cried the ghost, wringing its hands again. “Mankind was my business. The common welfare was my business; charity, mercy, forbearance and benevolence, were all my business. The dealings of my trade were but a drop of water in the comprehensive ocean of my business!”
Mr Scrooge reminded his partner of the need to focus on core competencies. The formula Mr Marley had described would not produce the EPS growth the market required. Mr Marley’s ghost explained that there was major re-engineering of strategic management going on in purgatory. Three representatives from that establishment would be visiting Mr Scrooge to explain the new thinking.
Following instructions, Mr Scrooge entered Internet Explorer with the aid of a search engine called Ghost of Business Past. (I believe Prof. Dickens to be displaying laconic English humour at this point.) The Ghost of Business Past directed him to a web-site on new business formation. It showed entrepreneurs, excited, lively, committed to their projects and their customers, developing new projects.
The Ghost of Business Past was rapidly superseded by the Ghost of Business Present. The next web-site demonstrated the wide range of Christmas celebrations planned by the employee of SMI. Group chief financial officer Bob Cratchit was at home with Mrs Cratchit, (Mrs Cratchit’s first name is not available. She was “brave in ribbons”, according to Prof. Dickens. The meaning of this archaic English phrase is unknown but may relate to payouts under the SMI long-term incentive plan). The Cratchits were toasting Mr Scrooge: only on Christmas Day, they said, could one wish for the health of such as Mr Scrooge. Others celebrated their freedom from the office in gossip about Mr Scrooge (SMI, in line with its anti-harassment policies, had strict rules against such conduct in the office). “His wealth is of no use to him. He don’t do any good with it.”, he heard them say.
Mr Scrooge found all this disconcerting. He had planned a quiet Christmas measuring the current valuation of his share options and undertaking the necessary preliminaries for filing his tax return early in the New Year. And yet there were his employees, deriving economic and social benefits from their relationships with each other, apparently satisfied by Gods other than money.
Mr Scrooge clicked the mouse again and turned to the Ghost of Business yet to come. This Ghost led him into a graveyard. He turned at once, with a chill in his heart, to his own tombstone. There it was – Sir Ebenezer Scrooge. And below it was the epitaph he had always wanted. “He created shareholder value.” Still, beside it was another tombstone. It was the kind that appears on the front page of the Financial Times. It said “The undersigned advised on the acquisition of the remaining assets of SMI by Marley (reincarnated) and Cratchit Inc.” SMI absorbed by another business! Was it to this end that he had devoted his business life? With that, the screen definition improved, and there was that familiar message, Windows 98 NT.
Some analysts held that Mr Scrooge’s insistence on shareholder value gave the business a strong sense of direction and a necessary focus. Others took the view that Scrooge’s early leadership of SMI gave insufficient emphasis to the factors that promoted entrepreneurial activity and new project development. They claimed he neglected the relationships within the company and between it and its community which are the only long term basis of business success, and ultimately destroyed the rationale for its continued existence.
What should Mr Scrooge do about Project Tiny Tim? Let it live, or let it die?
© 1998 by the President and Scholars of Hard Yard College