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IBAX Background
· Provider of Information Systems Software to health care providers
· Partnered with IBM in 1990 to spin off new company
o Rocky start with $11 million loss
o Due to same issues that company had prior to spin off
· Jeff Goodman, CEO, hired by principals in Jan. 1991
o Improve product quality
o Enhance customer satisfaction
o “Fix” the financial profile
IBAX was established in 1983 as the systems division of Baxter Health Care. ...
When the spin off occurred in 1990, it was thought by all that the combination of IBM’s credibility and the IBAX division’s market position would result in success. ... By the end of the year, however, it became apparent that the internal IBAX problems had not yet been resolved and were continuing to dramatically affect the company’s financial profile. In its first year IBAX lost $11 million. ...
In order to orient himself with the company, Goodman first performed a thorough evaluation of IBAX’s most pertinent issues.
IBAX Issues
Organization and Employee Marketing Sales Force Financial
· Discrete operating locations resulting in lack of cooperation and consistency · Weak corporate culture and lack of employee loyalty· Highly bureaucratic corporate structure· Rigid company policies and procedures· Poor communication system · Overstaffing· Lack of leadership in senior management team · Decreased market demand on Series 3000· Poor reputation with large hospitals Series 5000 customers· Declining market share· Poor reputation among trade press · Customer’s hesitation in purchasing add-on products · Unhappy customers on undeliverable customizations and services· IBAX and IBM partnership conflicts· Low sales force morale· Unfulfilled Series 4000 sales promises resulting in contract disputes · $11 million loss in 1989, $14 million in 1990· Negative cash flow resulting in borrowing from parent companies
This table illustrates the most significant issues Goodman identified during his evaluation.
Stop the Bleeding
· Halt further sales of problem products until evaluations are complete and communication problems are resolved
o Eliminate marketing to new Series 3000 clients
o Halt new sales of Series 4000 until issues are resolved
· Establish hiring freeze
· Halt all new acquisitions
· Involve “hot list” clients immediately in new Client Service Program
o Program designed to assure unhappy clients of immediate and drastic action to resolve issues
o Develop new program with client participation
o Assign one Client Contact from Product-Line Team to each client
o Initiate Client Feedback Program using weekly “Report Card”
§ Develop “Report Card” to be client-specific
§ Escalation procedures based on weekly “grade”
§ Summary Report Card results for all clients provided to CEO weekly and Principals monthly
Certain emergency procedures should be instituted immediately in order to “stop the bleeding” at IBAX. ... For instance, IBAX should eliminate the marketing of the Series 3000 product line. ...
Given the current problems with overstaffing, IBAX should establish a temporary hiring freeze. ... The Client / IBAX Team should, together, develop criteria for a new “Report Card” program (e. ... Based on the team-developed criteria, the client will report a “grade” to IBAX on a weekly basis. ... The process should facilitate strong communication among IBAX team members, senior management, and the client. ...
Organization & Employee Issues: Leadership
Tasks for Jeff Goodman
· Articulate CEO Vision
· Staff IBAX Top Management Team
· Build a Senior Leadership Team
o Include Top Management Team
o Include Top Manager of each IBAX Facility
· Establish an Open and Effective Communication Channel
· Develop the Teaching Cycle Approach to Teaching
Concurrent to the implementation of “stop the bleeding”-type measures, Goodman must also lead the organization to resolve other crucial issues. ...
Before taking the helm of IBAX, Goodman must fully develop his personal vision of how the corporation should ultimately function. Ideally, IBAX should be envisioned as both a learning and a teaching organization. ... The vision should encompass a management structured around formal teams, with the ultimate goal of each team being an integral part of the IBAX organization. IBAX should also act as a part of a larger intra-organizational team that includes suppliers, customers and an even larger world community. Such a vision would therefore take a systems view of IBAX and encourage systems thinking throughout the corporation.
Of course, Jeff Goodman cannot change IBAX alone. ... This team should be made up not only of these top executives m but also have the upper managers from each of the various IBAX facilities. ... It is important to use these channels to inform the organization of every step in the change process beginning with how the leadership is structured and how IBAX will become a great company by being both a teaching and a learning organization. ... This will clearly demonstrate top
managements commitment to fundamental change at IBAX and the inclusiveness of all associates in the process.
Tasks for Senior Leadership Team
· Assess Current State of Corporation
· Articulate Corporate Vision, Mission and Core Values
· Develop a Plan for Fundamental Change
The Senior Leadership Team of IBAX needs to assess the current state of the corporation prior to implementing any fundamental organizational changes. There are very likely some very good things about IBAX that should be recognized and encouraged as part of the change process, and these need to be known and valued by the Senior Leadership Team. ... Answering the following questions will facilitate that assessment:
1) What is the current mission of IBAX?
2) What is the current identity of IBAX?
3) What is IBAX’s relationship with key stakeholders?
4) How is the work of IBAX organized?
5) What is the IBAX culture (i. ...
From this review of the current state of IBAX, its inconsistencies with Goodmans vision for the corporation should become evident. Perhaps the fundamental reasons for the IBAX image of low product quality, customer satisfaction, and financial performance will become clear as well. ...
Because of the immediate poor state of IBAX, the Senior Leadership Team should develop specific long and short-term goals for the organization. ... Very likely, each person on the Senior Leadership Team should become a champion for a specific goal and lead the organization in achieving that goal while clearly articulating how it fits together with a systems approach to managing and changing IBAX. ...
At every step along the way of developing and then implementing fundamental change at IBAX, three things should consistently occur. ... Focus must remain on the task and the process and all of this supports the environment where teaching and learning are central to IBAX success.
Organization & Employee Issues: Structure
· Matrix organizational structure
o Departmentalizes the organization
o Facilitates coordination within organization
· Flat reporting and team structure
o Diminishes poor communication
o Shapes organization’s culture
IBAX needs to create a formal organizational structure after the senior management team forms. Because of the nature of IBAX’s business, a matrix structure can departmentalize the company in both terms of functional and product. ... IBAX apparently has weakness in communications between departments, yet it has multiple products (i. ... Because IBAX grew mostly through acquisitions, it needs a certain degree of bureaucracy to centralize the authority, formalize the organization goals, regulate its operating policy and procedures, and therefore, shape its organization culture as a whole. ...
When we establish the matrix structure for IBAX, we also need to keep the reporting structure as simple as possible. Instead of a hierarchical structure, we encourage IBAX to shape a Flat reporting structure. This type of structure will diminish the poor communication IBAX’s currently experiencing in its highly bureaucratic corporate structure. ... Implementing specific tasks
o Managing complex problems
o Negotiating complex deals
The idea of using cross-functional teams is a highly effective method to streamline operations and define effective solutions to communication and quality problems within the IBAX organization. Departments within the IBAX organization appear to be isolated psychologically and geographically. ...
Cross-functional teams will aid the IBAX organization in leading innovation and change in the corporate culture. ...
IBAX is currently a fragmented organization with operations not centralized in a single geographic location. ...
Marketing Issues
· Eliminate marketing of the Series 3000 product
· Conduct research to consider remarketing Series 3000 to other target markets
· Build product line focus
· Halt sales of the Series 4000 product
· Design and produce upgraded Series 4000 and 5000 products
· Logo change on an improved quality version of Series 4000 and 5000
· Proactively communicate with trade press
IBAX has significant problems with its three core product lines, Series 3000, 4000 and 5000. Until these production problems are resolved, IBAX’s sales growth will diminish. ... IBAX should perform an analysis of what
products are most promising to the future of the company. ... By halting the marketing of this product, IBAX can assess whether eliminating the Series 3000 line all together would be cost effective. Also, through conducting an effective marketing research study, IBAX could find other target markets interested in purchasing the Series 3000 product line, such as nursing homes and assisted living centers. ... However, the implementation of cross-functional teams should resolve the communication challenges IBAX is facing. ... IBAX should generate a market research study to analyze the product quality issues customers have with the Series 4000 and 5000. ...
Once an improved version of the Series 4000 and 5000 product lines are developed a logo change for IBAX would be beneficial. ... A logo change would disassociate IBAX from previous conflicts with customers and in the process alleviate any conflicts brewing with IBM. Improving relations with trade press would improve IBAX’s image and exposure within the industry. Communication with trade press on a regular basis on improved developments in product quality and customer service could potentially build a positive reputation for IBAX. ... A strong sales leader should initiate improvements on sales tactics to ease the growing concerns from IBM that IBAX is impeding IBM’s hardware sales efforts. ...
Selling less problematic product lines such as department based information systems and networking systems could increase IBAX’s market share or at least offset any revenue losses IBAX may face with halting the production of the Series 3000 and 4000. ...
Financial Issues
An improvement in IBAX’s financial profile will occur once the internal problems are resolved, an effective CFO is leading the change and an aggressive sales strategy is implemented. Jeff Goodman needs an aggressive and experienced CFO to coordinate the financial turnaround of IBAX. This is a key position in IBAX’s top management team. In order to be successful, the CFO needs to conduct a thorough analysis of each IBAX facility and acquisition and find solutions to the following problems:
1. Where can IBAX cut down spending? ... How can IBAX increase its revenue annually? ... What strategies can be implemented to stop IBAX from borrowing funds from Baxter and IBM annually? ... The halting of product lines could negatively effect IBAX’s financial position. ... To cut expenses down, IBAX could establish a hiring freeze and halt all new acquisitions. ... Employees should be aware of IBAX’s corporate financial goals so that if layoffs occur the employees are not surprised and understand how the leadership at IBAX was drawn to that decision.
Approximate Word count = 8928
Approximate Pages = 35.7
(250 words per page double spaced)
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