ShugartIn the early 1980s Shugart was the leading maker of disk
drives. One of its major divisions was producing products
that, for the most part, had reached the mature stage. Eager
once again to have a product that it perceived to be exciting
and new, the firm invested heavily in what it perceived
would be a high-volume, highly profitable project. Unfortunately for Shugart’s managers, the project,
dubbed Project Golden, encountered serious technical difficulties.
About a year and a half into the project, the controller
and vice president for finance at Shugart proposed
terminating the project. However, they were unsuccessful.
Here is the controller’s description of the situation. The V.P. of Finance and I presented an economic justification
for eliminating this product in August of 1982. We felt very
strongly about it. We presented the analysis at the Executive
Staff Meeting. The V.P. of the Division immediately championed
the product and signed up for lower costs. He also
argued the asset recovery issue. I find that if any champion is
willing to stick up for a project, then the financial analysis is
rejected. Personalities are very important around here. The vice president for another Shugart division described
his view about losing projects. You can make a program look any way you want on paper for
Business Plans. Another problem is that nobody wants to
destroy the P&L. I really believe it’s true that we are very risk
taking with negative outcomes. Project Golden was eventually terminated in August
1983, when costs were well over target and competitors
had captured what market there was. The vice president
for the division that ran Project Golden made the following
comments: We lacked enforced milestones, reviews, and plans. Our business
review meetings are not “meat and potatoes.” You can’t
have a “meat and potatoes” meeting with thirty people. We
should have progress reviews, and if need be force Marketing
to stop taking orders and force Manufacturing to stop producing
until the problems are resolved. One problem we have is
frequent management turnover. Nobody ends up responsible
for the problems at the project level.
Case Analysis Questions- A Shugart vice president made a remark about being
risk taking with negative outcomes. Discuss this remark
in the context of the concepts described in the chapter.
- Discuss the comments made by the vice president for
the division that ran Project Golden in the context of
group process.
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