Case Study

RED: 1 & 2
ORANGE: 3 & 4
YELLOW: 5 & 6
GREEN: 7 & 9
BLUE: 10 & 11
VIOLET: 12 & 13
Case Incident 1
IF TWO HEADS ARE BETTER THAN ONE, ARE FOUR EVEN BETTER
Maggie Becker, 24, is a marketing manager for Kavu, a chain of coffee shops, in
eastern Ohio. Recently, Maggies wealthy uncle passed away and left to Maggie, his
only niece, INR 5 million. Maggie consider her current salary to be adequate to meet
her current living expenses, so that when she buys a house shell have a nice nest
egg on which to draw. One of Maggies neighbors, Brian, is a financial advisor. Brian
told Maggie there was a virtually endless array of investment option. She asked him
to present her with two of the best options, and this is what he came up with: 1.
A very low risk AAA municipal bond fund. With this option, based on the information
Brian provided, Maggie estimates that after 5 years she stands virtually zero chance
of losing money, with an expected gain of approximately30 percent. 2.
A moderate-risk mutual fund. Based on the information Brian provided he, Maggie
estimates that with this option she stands a 50 percent chance of making a $40,000
gain but also a 50 percent chance of losing $20,000. Maggie prides herself on being
rational and objective in her thinking. However, shes unsure of what to do in this
case. Brian refuses to help her, telling her that shes already limited herself by
asking for only two options. While driving to her parents house for the weekend,
Maggie finds herself vacillating between the two options. Her older is also visiting
the folks this weekend, so Maggie decides to gather her family around the table
after dinner, lay out the two options, and go with their decision You know the old
saying-two heads are better than one, she says to herself, so four heads should
be even better.
Queries
1. Has Maggie made a good decision about the way she is going to make the
decision?
Solution
No, Maggie has not made a good decision about the she is going to
make the decision. She wants to invest the money to buy a house in
which shell have a nice nest egg on which to draw. But the array of
investment options is virtually endless.

2. Which investment would you choose? Why?

Solution
I would choose in investing a very low-risk AAA municipal bond fund.
Because, in this fund I must be benefited after 5 years by getting
approximately $7,000. While there are zero chance of loss.
3. Which investment do you think most people would choose?
Solution
I think most people would choose in investing a very low-risk AAA
municipal bond fund as there is no chance of loss. The people will be
the beneficiary by investing in this fund. On the other hand, individual
decision always towards on conservatism.
4. Based on what you have learned about groupshift, which investment do you
think Maggies family will choose?
Solution
Based on what I have learned about groupshift, I think Maggies family
will choose to invest in a moderate- risk mutual fund in which there is a
50 percent chance of losing $20,000. Because, group decisions free any
Department of Finance Page 14
single member from accountability for the groups final choice, so
greater risks can be taken.
Case Incident 2
HERD BEHAVIOR AND THE HOUSING BUBBLE (AND COLLAPSE)
It is sometimes easy to forget that humans are not unlike other animals. Economist
John Maynard Keynes recognized this when he commented, Most, probably, of
our decisions to do something positive, the full consequences of which will be
drawn out over many days to come, can only be taken as the result of animal
spiritsa spontaneous urge to action rather than inaction, and not as the outcome
of a weighted average of quantitative benefits multiplied by quantitative
probabilities.
When such animal spirits are particularly dangerous at the collective level. One

animals decision to charge over a cliff is a tragedy for the animal, but it may also
lead the entire herd over the cliff.
You may be wondering how this is applicable to organizational behavior. Consider
the recent housing bubble and its subsequent and enduring collapse, or the dotcom
implosion of the turn of the century. As housing prices rose ever higher,
people discounted risk. Homeowners and investors rushed to buy properties
because everyone else was doing it. Banks rushed to provide loans with little due
diligence because, well, everyone else was doing it. Banks didnt want to get left
behind. Everybody lowered their underwriting standards, no matter who they are,
said Regions Bank executive Michael Menk. As bankers thats who we are; we
follow the herd. Similar problems led to a run up in prices for internet-based
companies during the early twenty-first century, and some wonder whether the
current valuations of social networking sites are following a similar trend of
overpricing.
Yale Economist Robert Shiller called this herd behavior and cited research
showing people often rely heavily on the behavior of groups in formulating
decisions about what they should do. A recent study in behavioral finance
confirmed herd behavior in investment decisions and showed that analysts were
especially likely to follow other analysts behavior when they had private
information that was less accurate or reliable.
Department of Finance Page 15
Solution with Queries Based on case
Queries
1. Some research suggests heard behavior increases as the size of the group
increases. Why do you think this might be the case?
Solution
Yes herd behavior increases as the size of the group increases. As the group
of the size increases group will follow certain norms. If one of the persons
find any benefits from any resources then everyone in the group try to gain
benefit from same resource. If any member added to group, he/she need

acceptance by group. Thus the member is susceptible to conforming to the

group norms. There are considerable evidence that the group can place
strong pressure on individual member to change their attitude and behavior
to conform to the group standards. Every individual try to compare with
other group members and try to be equal with them. As a result, increase
herd behavior as group increases.
2. One researcher argues that pack behavior comes about because it has
benefits. What is the upside of such behavior?
Solution
In certain ways pack behavior have benefits. Pack behavior was seen most
commonly in an exclusive circle of people with a common purpose. The
pack will be leaded by a individual in a group who can restrict the other
individuals in the group. Leader will have more responsibilities wit in the
pack and about the pack. Leader will make every one comfort in the pack.
All the members will follow the pack leader and leader will use certain
methods to keep the followers in line.
Department of Finance Page 16
2. Shiller argues that herd behavior can go both ways: It explains the housing
bubble, but it also explains the bust. As they see others bidding down home
prices to abnormally low levels. Do you agree with Shiller?
Solution
Yes I agree with Shiller. We can also observe herd behavior go both ways
in share market. For example if there was any negative news regarding a
company then people immediately begin sell off shares of the stock. In
other way if any good news about a company was reported in the news then
people start buying the company shares which will drive up the stock price.
3. How might organizations combat the problems resulting from heard behavior?
Solution
Herd behavior in organizations was mostly seen in groups. If anyone in
group is lazy or inept, then seeing them others will also reestablish equality

by reducing their effort. As if all individuals in whole group reduce their

effort, productivity will reduce. This is because group results cannot be
attributed to any single person, the relationship between an individuals
input and group output is clouded. There are several ways to prevent this
Set group goals, so the group has a common purpose to strive towards;
Increase intergroup competitions, which again focuses on the shared
outcome; 3). Engage in peer evaluation so each person evaluates each other
persons contribution;
Select members who have high motivation and prefer to work in group, and
If possible, base group rewards in part on each members unique contributions

Case Incident 1
TOYOTAS TEAM CULTURE
Many companies proudly promote their team culture. At Toyota, the promotion
seems sincere.
Teamwork is one of Toyotas core value, along with trust, continuous
improvement, long term thinking, standardization, innovation and problem
solving. The firms value statement says the following: To ensure the success of
our company, each team member has the responsibility to work together, and
communicate honestly, share ideas, and ensure team member understanding.
So how does Toyotas culture reflects its emphasis on teamwork?
First, although individualism is a prominent value in western culture, it is
deemphasized at Toyota. In its place is an emphasis on system, in which people
and products are seen as interwined valued streams and people are trained to be
problem solver so as to make the product system leaner and better.
Second, before hiring, Toyota tests candidates to ensure they are not only
competent and technically skilled but also oriented toward teamwork-able to trust
their team, be comfortable solving problems collaboratively, and motivated to
achieve collective outcomes.
Third, and not surprisingly, Toyotas structures its work around teams. Every

Toyota employee knows the Adage All of us are smarter than any of us. Teams
are used not only in the production process but also at every level and in every
function: In sales and marketing, in finance, in engineering, in design and at the
executive level.
Fourth, Toyota considers the team to be the power center of the organizations. The
leader serves the team, not the other way around. When asked whether he would
feature himself in advertisements the way other automakers had (most famously,
Dr. A, Daimlers CEO Dieter Zetshce), Toyota USAs CEO, Yuki Funo, said,
No. We want to show everybody in the company. The heroes. Not one single
person.
Department of Finance Page 20
Solution with Queries Based on case
Queries
1. Do you think Toyota has succeed because of its team oriented culture, or do you
think it would have succeed without it?
Solution
Yes, I think Toyota has succeeded because of its tam-oriented culture. We can
say that on the basis of their statement Which is to ensure the success of our
company, each team member has the responsibility to work together and
communicate honestly, share ideas, and ensure team-member understanding.
From the above lines, we can say that team-oriented culture is mainly
responsible for their success.
2. Do you think you would be comfortable working in Toyotas culture? Why or
Why not?
Solution
Yes, of course. Not only I think but believe I would be comfortable working
in Toyotas culture. Because they practice teamwork. Teamwork is one of
Toyotas core values. Along with trust, continuous improvement, long term
thinking, standardization, innovation and problem solving. It becomes very
easy if a team perform a work or task which is followed by the Toyotas. So, I

prefer that it will be very comfortable for me to work in Toyotas culture.

3. In response to the recession and the firms first ever quarterly loss, Toyotas
managers accepted a 10% pay cut in 2009 to avoid employee layoffs. Do you
think such a response is a good means of promoting camaraderie? What are the
risks in such a plan?
Solution
No, I do not think that such a response is a good means of promoting
camaraderie. For the reason of pay cut, there are some risks involved in
such a plan which are
Department of Finance Page 21
Firstly, for the pay cut during recession and the firms first
ever quarterly loss, the employees can be dissatisfied. And as
a result, their performance will be gradually lower.
Secondly, if managers accepted a 10 percent pay cut, skilled
employee leave the organization for doing better jobs on other
organization.
Finally as a reason of pay cut employees dislike work,
become lazy and do not want to take responsibility.
4. Recently, DCH Group, a company comprised of 33 auto dealerships,
decided to adapt Toyotas culture to its own, particularly its emphasis on
teamwork. DCHs CEO Susan Scarola said, Trying to bring it down to
day-to-day operations is tough. It was not something that everybody
immediately embraced, even at the senior level. Do you think the culture
will work in what is typically the dog-eat-dog world of auto dealerships?
Why or why not?
5.
Solution
Yes, I think the team culture will work in what is typically the dogeatdog world of auto dealers. There are some reasons
*Team culture is a culture in which people and products are seen as

interwined value streams and people are trained to be problem

solvers so as to make the product system learner and better.
In teamwork culture people can be able to trust their team, solve
problem collaboratively and motivated to achieve collective
outcomes.
Teams are used not only in the production process but also at every
level and in every function in sales and markets, in finance.

Case Incident 2
IBM's MULTICULTURAL MULTINATIONAL TEAMS
Historically, IBM was one of the most tradition-bound companies on the planet. It
was famous for its written and unwritten rules%u2014such as its no-layoff policy,
its focus on individual promotions and achievement, the expectation of lifetime
service at the company, and its requirement of suits and white shirts at work.
How times have changed.
IBM has clients in 170 countries and now does two-thirds of its business outside
the United States. As a result it has overturned virtually all aspects of its old
culture. On relatively new focus is in the teamwork area. While IBM, like almost
all large organizations, uses work teams extensively, the way it does so is unique.
To instill in its managers an appreciation of local culture, and as a means of
opening up emerging markets, IBM send hundreds of its employees to month-long
volunteer project teams in regions of the world where most big companies don't do
business. Al Chakra, a software development manager located in Raleigh, North
Carolina, was sent to join Green Forest, a furniture manufacturing team in
Timisoara, Romania. With Chakra were IBM employees from five other countries.
Together, the tea helped Green Forest become more computer savvy to help its
business. In return for the IBM team's assistance, Green Forest was charged, well,
nothing.
This is hardly pure altruism at work. IB calculates these multicultural,
multinational teams are good investments for several reasons. First, they help lay

the groundwork for opening up business in emerging economies, many of which

might be expected to enjoy greater future growth than mature markets. Stanley
Litow, the IBM VP who oversees the program, also thinks it helps IBMers
develop multicultural team skills and an appreciation of local markets. He notes,
"We want to build a leadership cadre that learns about these places and also learns
to exchange their diverse backgrounds and skills." Among the countries where
IBM has sent its multicultural teams are Turkey, Tanzania, Vietnam, Ghana, and
the Philippines.
As for Chakra, he was thrilled to be selected for the team. "I felt like I won the
lottery," he said. He advised Green Forest on how to become a paperless company
in 3 years a recommended computer systems to boost productivity and increase
exports to western Europe.
Department of Finance Page 23
Another team member, Bronwyn Grantham, an Australian who works at IBM in
London, advised Green Forest about sales strategies. Describing her team
experience, Grantham said, "I've never worked so closely with a team of IBMers
from such a wide range of competencies."
Solution with Queries Based on case
Queries
1. If you calculate the person-hours devoted to IBMs team projects, they
amount to more than one 180,000 hours of management time each year. Do
you think this is a wise investment of IBMs human resources? Why or
Why not?
Solution
I think this is a wise investment because of several reasonsa.
It builds a leadership cadre that leans about various places and also
learns to exchange their diverse backgrounds and skills.
b. They help lay the ground work for opening up businesses in emerging
economies
2. Why do you think IBMs culture changed from formal, stable, and

individualistic to informal, impermanent and team oriented?

Solution
IBM has clients in 170 countries and now does two-thirds of its business
outside the United States. As a result, it has overturned virtually all aspects
of its old culture to cope with multicultural working environment.
3. Would you like to work on one of IBMs multicultural, multinational
project teams? Why or Why not?
Solution
Yes I would like to work on one of IBMs multicultural, multinational
project teams for the following reasonsDepartment
of Finance Page 24
a. It will enable to work closely with a team of IBMers from such a wide
range of competencies.
b. The company brand name increases the weight of our CV.
c. It will build a leadership cadre that helps leans about various places and
also learns to exchange their diverse backgrounds and skills.
4. Multicultural project teams often face problems with communication,
expectations and values. How do you think some of these challenges can be
overcome?
Solution
The Challenges can be overcome by following the several stepsStep 1
Run meetings to expose the working team to other cultures. Introducing
working team who will be working together in a non-threatening
environment enables a good working relationship long term. Learning
about another culture's language, rules and norms for acceptable behavior
helps prepare the team to deal with situations as they arise. Changing
preconceptions can lead to more conducive working relationships.
Step 2
Conducting activities to demonstrate how dependent we are on language.

For example, dedicate a day to being silent. Have each employee develop a
contract stating what they hope to learn, how long they will remain silent
(what exceptions can be made) and how they plan to cope without speaking
all day. After experiencing a day with limited communication, participants
can typically relate to being in a foreign environment more easily.
Step 3
Providing workshops, tips and techniques for communicating effectively in
multi-cultural work environments. People act according to the values of
their own culture. Others from another culture might interpret behavior
differently. Practicing such strategies as active listening (paraphrasing what
is said to ensure understanding can be achieved) and using multiple forms
of communication, such as written, audio and visual, can enhance employee
involvement in assuring that conflicts do not arise because of cultural
misunderstandings due to lack of awareness.
Step 4
Coach work team to mediate conflicts related to cultural
misunderstandings. Provide opportunities for employees to respond to
situations from viewpoints different than their own. Divide a group of
people into pairs to conduct role-playing exercises that allow participants to
acknowledge culture difference exist. Encourage each pair to think about a
conflict they have experienced recently due to cultural differences. Have
each participant describe what they might find offensive or unusual. Let
each participant suggest how the problem would be handled in their own
culture. Together, have the participants develop a resolution to the problem.
Have each pair report to the larger group on their experiences.
CASE APPLICATION
Aiming Higher
B
ancolombia is Colombias biggest bank.69 At its sleek new
headquarters in Medellin, there are no plush executive chairs.

Instead, everyone from the bank president to assistants use

identical leather and steel ergonomic chairs. The subtle message:
no one here has special privileges. The chairs, the open-space offices,
and a contemporary design reflect the companys organizational
culture that recognizes individual contributions but heavily emphasizes
teamwork. Gonzlez Bacci, Bancolombias director of human
resources, says that this culture developed out of the need to integrate
employees from the banks many acquisitions and forge a single
identity among employees and in the eyes of customers. We want to
reinforce the idea with our workers that achieving the group vision
depends on everyone, not just on management, and we want to give
Following the acquisition of many
different banks, Bancolombia built
new headquarters where all design
elements, from open-space offices to
furniture, reflect the banks emphasis
on teamwork for the purpose of
projecting a single corporate identity
for employees and customers.
CHAPTER 13 | MANAGING TEAMS 369
clients the feeling that they are dealing with just one company, so they see no
difference between the different
companies in the banking group.
Teamwork is crucial to the success of this approach. Managers are asked to foster
cooperation and collaboration.
All employees have both individual and collective goals. Anyone who wants to
become a supervisor
must meet the evaluation criteria thats heavily weighted toward people skills
instead of technical skills.
Whatever Bancolombia is doing, it must be working. It was named by Latin Trade
magazine as one of the

best workplaces in Colombia. And it was named as one of the country award
winners for best banks by The
Banker magazine.
Discussion Questions
1. What challenges would there be to creating an effective team in an organization
that
was growing by acquiring other companies? How could managers deal with these
challenges?
2. Why do you think teamwork is crucial to Bancolombias efforts to forge a single
identity?
3. How do identical office chairs and an open-space office contribute to the
emphasis on
teamwork? How important is the physical workplace environment to the
development of a
teamwork atmosphere?
Making Order Out of Chaos
I
magine the scene. A FedEx 727 jet and a giant U.S. Air Force cargo jet at an
impasse on the taxiway, another
jet trying to reach a parking spot at the terminal, another headed for a runway, U.S.
Navy and Canadian helicopters
swarming overhead, a Bolivian DC-10 just landing, and a Boeing 757 carrying
former President Bill
Clinton just landing. What a nightmare! In the first few days after the devastating
earthquake in Haiti, the airport
in the capital city, Port-Au-Prince, was a chaotic free-for-all.70 Aid planes were
jostling for space on the single
open runway and landing randomly. Then, the evening after the earthquake, a small
team of U.S. Air Force
special-operations troops whose job is to control air traffic set up to do what theyve
been trained to do.
The airports control tower was too badly damaged to be used. So, operating from a
folding table on a patch
of dirt, the team worked to safely bring in much-needed supply-laden cargo jets.

It didnt take long to establish a system. Haitian aviation officials, assisted by

American and Canadian air
traffic controllers, contacted planes 30 or 40 miles out and kept order as the aircraft
headed toward Portau-Prince.
When the planes got within 10 or 20 miles, the Air Force team of controllers took
over and guided
the aircraft onto the lone runway. Despite the system, the team of controllers found
themselves in conflict with
arriving pilots and their governments. For instance, one argument arose with a
French crew over who got to
land first and stay parked the longest. Despite the challenges, the small team safely
directed traffic in the
crowded skies. Over the days and weeks, planes were able to take off and land
every five minutes, bringing
in 4 million pounds of supplies.
Discussion Questions
1. As this story illustrated, sometimes teams have to move quickly. How do you get
a team up
and running quickly?
2. In a crisis situation such as this, what role does a team leader need to play?
Explain.
3. Using Exhibit 13-10, what characteristics of effective teams would this team
need? Explain