TerraCog Global Positioning Systems:Conflict and Communication on

Project Aerial TerraCog, a successful privately held high-tech firm that develops GPS (global positioning system) and similar products for consumer markets, has been caught off-guard by a competitor's new product that makes novel use of satellite imagery. When TerraCog pursues development of a directly competing product, dubbed Aerial, the projected costs threaten to scuttle the project. The key unit managers gather in contentious meetings that feature anger, blame, and bewilderment, but produce no effective conclusion. At the end, it falls to Emma Richardson, a newly-promoted executive vice-president, to push the group toward a go/no-go decision.

Learning Objectives1.To examine conflict and communication

within groups.

2. More specifically, to understand how organizational decision making can be affected by the personal style, departmental allegiances, and other characteristics and situational factors of participants, as well as by group processes.

3.To analyze a tense managerial situation that demands a tactful but decisive leadership response.

Key Facts & Issues of the Case Emma Richardson has been tasked with

overseeing the launch of the Aerial GPS, which TerraCog hopes will help it regain market share lost to competitor Posthaste. However, TerraCog managers are unable to agree on the price point for the Aerial GPS.

Project Aerial Decision

• The decision to incorporate satellite imagery into the GPS was initially rejected, giving the competition a head start.

• The eventual decision to begin Project Aerial and use satellite imagery was made solely by the president, Richard Fiero, and the vice president of sales, Ed Pryor.

• The design & development team was not enthusiastic about Project Aerial.

Aerial Product Development

• The design & development team has designed the Aerial prototype according to the specifications of Fiero and Pryor.

• The Aerial does not represent a technological advance over competing products; by incorporating satellite imagery. It merely matches competitor performance.

Price Point Conflict• The production cost of Aerial is considerably higher than expected, due to its more expensive components.• Meeting the TerraCog CFO’s profit-margin requirement would make it impossible to meet thecompetitor price point.

At the end of the case, Emma Richardson must lead TerraCog to choose one of the following options:1. Launch Aerial at full price (~$475) to maintain the standard margin requirement.2. Launch Aerial at a competitive price (~$425) at zero profit, while simultaneously working on redesigning to cut cost.3. Delay Aerial launch while working on a lower-cost redesign.4. Abandon Aerial.

Focus areas How have departmental and

Individual Objectives led to the current situation?

What is the current decision making process?

What are the strategic and organizational implications for each of the company’s options?

What should Emma Richardson do?

Case Analysis Three general causes of the conflict/

dilemma: departmental and individual objectives, group structure, and the decision-making process.

Objectives—Departmental and Individual

Conflicting objectives among the stakeholders due to departmental affiliation. The managers are right to advocate for departmental interests, since they can provide valuable perspectives on issues that are particular to their function. However, the TerraCog managers appear to have such limited vision that they cannot act for the greater good of the organization.

Seemingly, each manager is attempting to improve his position, vis-à-vis the Aerial product, so that in subsequent evaluations of performance, his department will appear favorably.

• Sales: The overriding goal of the sales team is to have the right product to boost volume. It appears that sales representatives are compensated on top-line sales revenues only, and not on profitability. Thus they are willing to squeeze margin to hit a competitive price point.

• Production: Goal is to estimate costs at a “safe” enough level so that production can meet cost, scheduling, and quality goals; these factors represent the criteria by which the department is evaluated and rewarded.

•Design & development: The greatest concern for the design & development department is to avoid a forced redesign of the Aerial product. By convincing the rest of the organization that they have designed exactly to specification, the team maintains its internal credibility and protects the opportunity to pursue projects of greater technical interest to them.

Individual objectives are an additional source of conflict. These relate to departmental concerns, but provide additional issues that further complicates the discussion and make a resolution more difficult to achieve.

Ed Pryor, vice president of sales: is concerned not only with his compensation, but with his reputation. He doesn't want to disappoint his sales team, and he may have promised a product that he now feels compelled to force TerraCog to deliver.

Tony Barren, director of production: The case alludes to a recent production problem for which Barren is held responsible. Job insecurity and perhaps resentment at having been blamed for prior problem cause him to be conservative in his commitments.

Allen Roth, director of design & development: is interested in promotion to Harold Whistler’s position as vice president of design & development, and believes that having a new product he can call his own will be important. The Aerial product has been a distraction, and Whistler’s suggested redesign undermines Roth’s credibility.

Cory Wu, software & firmware design: argues that his modest “tweaking” of firmware was an appropriate response to the requirements stated by the sales manager. Wu’s most acute concern may be the suggestion from the sales team that the product is sub-par. Being present at the meeting, he seems compelled to defend his competence as a designer.

Harold Whistler, vice president of design & development: Whistler is no longer fully involved in the company he cofounded. However, his unexpected participation in the second meeting suggests that he enjoys hands-on involvement.

Emma Richardson, executive vice president: Richardson is in an awkward role, having recently been promoted and finding herself in the middle of a problem she did not create. The Aerial conflict is a test of her leadership abilities, and she must reach a solution that helps TerraCog and does not hurt her working relationship with the other managers.

Group Structure

The group that has formed to launch Project Aerial seems poorly designed.

Richard Hackman argues that group performance depends on a well-structured group, which requires five conditions: the team must be a real team, have a compelling direction, have an enabling structure, operate within a supportive organizational context, and have expert team coaching. In Terracog, at least the first two conditions are absent.

• A real team: It is an ad hoc group attempting to set a price point for Aerial. Historically, product launches have been guided closely by President Richard Fiero and Harold Whistler. However, there is no clarity around who should be on the new team and the nature of each individual’s role. The group makeup varies somewhat in the second or “resumed” prelaunch meeting: the inconsistency of participation in the two meetings suggests that this is not a dedicated team, but rather an unavoidable meeting of individuals forced to complete a task.

Compelling direction: While the goal of getting Aerial into the market is clear, the group lacks a sufficiently clear purpose. Has it gathered merely to set a price point on Aerial? Should it discuss the appropriate positioning and overall marketing plan for the product? Does it have a responsibility to consider broader strategic implications of its decisions? The lack of focus in the meetings reflects this absence of a clear, compelling direction.

Decision-Making Process TerraCog suffers from a flawed decision-

making process that limits input when it might be most helpful. Involvement in decision making can range from input and recommendations to veto and decision rights. Well-managed organizations assign the appropriate roles for each key decision.

There were several points during Project Aerial when TerraCog would have benefited from a more thoughtful process.

• Ignoring the Posthaste BirdsI product: TerraCog’s management was quick to dismiss the satellite imagery feature. Greater and faster input from sales reps in the field, who saw their accounts’ reaction to the new product, could have led TerraCog to move more decisively. Instead, a decision was made that did not incorporate all available insight, and TerraCog lost valuable time.

•

Starting Project Aerial: The design & development team provided virtually no input when TerraCog finally decided to pursue Aerial. They could have raised two valuable questions: What is the opportunity cost of allocating resources to Aerial rather than other projects? What are the costs and benefits of keeping the current product platform versus designing an entirely new platform for Aerial?

Developing the Aerial product: Once the design of Aerial began, TerraCog operated with a “silo” mentality. The sales team did not have further input into the product, nor was the production team given a chance to review the design and offer recommendations on managing product cost. The “handoff” approach – from design & development to production to sales – meant that the problem was not discovered until the launch date was at risk of being missed.

While there is a lack of cross-functional involvement during product development, there is a lack of clear roles in the pricing discussion. Multiple views are presented, but it is unclear who has the final decision and who has approval or veto rights. As the executive vice president, Richardson is tasked with leading the group, but the behavior of the other managers indicates that they believe they can veto any decision. While Richardson prepares to push the group to a resolution at the end of the case, the absence of clear decision roles may make it difficult for her to assert and enforce a decision.

Other Issues Two other issues that merit discussion: the

lack of a transition plan and poor meeting tactics.

Transition plan: President Richard Fiero and cofounder Harold Whistler have not effectively transitioned their responsibilities to the other managers. The same tasks remain, but the exact process and the “owners” of the process have not been clearly thought through. Indeed, the poorly designed group structure is a reflection of their failure to develop team processes that will enable others to succeed.

Meeting tactics: As executive vice president, Emma Richardson needs to manage the Aerial meetings. 3 mistakes are evident.

First, the initial report from Tony Barren, director of production, catches everyone by surprise. “Pre-wiring,” or an earlier conversation with Barren about his findings, could have prepared Richardson for how to set an agenda; instead, the group quickly reaches an impasse & Richardson has to cut the meeting short.

Second, Richardson does not lay out a clear agenda. The meetings seem to develop organically, with each participant raising topics as they see fit.

Finally, the seating chart suggests that no thought was given to where the participants would sit and how this might affect group dynamics. The breakdown of the second meeting into separate conversations reflects the effect of physical proximity in a contentious meeting without a strong leader.