You are Jimmy Cricket, CEO of Mudge Paper Company and Lauren’s boss. You have come into the office early on the day after the Memorial Day Holiday to find Lauren’s report on your desk explaining the events of the Friday before and her subsequent decision. You are not happy because this is the exact reason why you wanted group decisions and, as a result, you would like to bring Lauren up on the carpet ASAP. However, you decide to take a moment and collect your thoughts.You decide to ask Lauren to explain her reasoning behind making the decision solo as opposed to having the group decide. You also decide to explain why you wanted the group to make decisions of this kind.Question: Identify the CEO's bias that may have entered the decision making process? Mudge Paper CompanyLauren Becall is the top salesperson for Mudge Paper Company. She also leads the sales team thatsupports Mudge's largest client, Bart's Office Supplies. Bart's is an international office supply chain thatis growing rapidly. During the month of May, Lauren and her team members, Andy Griffith and RonnieHoward, underwent intense negotiations with Bart's purchasing agent, Jack Black and Bart's CEO, CaryGrant, to restructure the current sales contracts.The new contract spelled out Bart's yearly paper requirements (contracted sales amounts) as well aspayment and credit terms. The negotiations had been particularly hard for several reasons:1.Bart's sales had increased internationally causing shipping and custom duties to increase thecost to Mudge, resulting in an increase in sales price to Bart's.2.The volume of sales directed to Bart's required Mudge to offer a volume sales discount toremain competitive with other paper companies.3.Bart's wanted a longer time to pay on the purchases. Bart's wanted 60 days to pay on ordersinvoiced rather than the current 30 days.4.Bart's also wanted Mudge to extend its current credit line from $850,000 to $1,250,000.5.Mudge's CEO (Jimmy Cricket) was reluctant to tie so much of the company's cash flow to thesuccess of Bart's. The concern was raised because in the last six months, Bart's was payingdown the credit line every 60 days rather than in the 30 days that had been agreed to in thecurrent contract. Bart's did not appear to have credit issues, but Mudge was not able to giveinterest free loans for 60 days.This week, in time for the Memorial Day holiday vacation, the final agreement was reached betweenMudge and Bart's. Bart's would contract to purchase $1,750,000 of paper products from Mudge.Invoice payment terms were 45 days, with a 3% interest on invoices paid later than 45 days. The creditlimit was extended to $1,000,000. Lauren Becall was not completely happy with the contract, as shefelt Mudge was not protected from cash flow damage should Bart's not pay on time, not to mention thelarger line of credit. Still, the parties agreed, including her boss who was skeptical for the same reasonas Lauren. The parties were due to sign the contract on Tuesday after the Memorial Day holiday.On Friday evening, Lauren was packing her belongings readying to leave the office for the Memorial Dayholiday, when her cell phone pinged. The caller was Jack Black, the Purchasing Agent for Bart's. Itappeared that a recent deal on Bart's end with UMGC tripled its need for copy paper from Mudge. Thisdeal would raise the total contract sales to $2.5 million. Jack Black made it clear that he wanted tochange the credit limit from $1 million to $1.5 million and to extend the payment terms from 45 days to50 days. Bart's would not pay interest on late invoices until after 60 days. Black also made it clear toLauren that if the new terms were not agreed on by the end of that Friday evening, he would beprepared to look at an offer supplied to him by Bart's biggest competitor, King Paper. Black furtherstated that, while Bart's is pleased with Mudge's work, money is always the most important factor inpurchasing. Bart's president wanted an immediate answer so he could go on vacation with a clear mind.Lauren was aware that most of Jack's talk was a negotiating technique but did not doubt that there is competition waiting in the background. Images of last month's teamwork ran through Lauren's mind asshe listened to Black talk.Lauren winced at the memory of her teammate Griffith's constant posturing in front of Black and theBart's CEO. She had hoped to be able to pick her own team when she was promoted to leader but thatwas not to be. Andy Griffith is a problem on this team. All month long, he had challenged her ideas infront of Bart's CEO. Lauren knows that she was promoted over Griffith because her sales record was20% higher than his was and she could close a deal better than he could. Griffith resents her promotionand reminds Lauren, as often as possible, that he brought in the Bart's account and that he and Bart'sCEO have a great relationship. They play golf together and often go to dinner together with their wives.Lauren thinks Griffith is a good salesperson but believes he should not be on this team. The tension is attimes very thick especially during the negotiations this month. Griffith seemed to want to give away thestore.Unfortunately, Ronnie Howard seemed to be sitting on the fence when it came to the negotiations.Lauren had expected that Ronnie would support her negotiation position with the client rather thanGriffith's because it protected Mudge. Since Ronnie was the niece of Mudge's owner and CEO, Laurenbelieved she should be supportive of protecting the company's money. Still, Ronnie was the one whocame up with the idea of paying interest on the late invoices. It just seemed to Lauren that one dayRonnie was agreeing with Griffith and on another day with her. Lauren supposed that it was Ronnie'snew position at the company that made her want to please everyone, including Griffith. Laurenbelieved that pleasing people is a nice gesture but does not add to the efficiency of the team's decision-making. Lauren believed that Ronnie would be looking for the general thoughts of the group, so shecould appear to agree with the group.Overall, the month's negotiation process had been long and difficult. The thought of going over it allagain to make the changes seemed mind-numbing to Lauren. Yet, making the decision on her ownwould mean obligating the company to an even greater cash flow commitment. Her boss would not behappy with this obligation because he specifically warned her when they started that there was nothingto prevent Bart's from continuing to pay its bills every 60 days despite the new contract agreement.Lauren rationalized and thought to herself, "Bart's knows we are not likely to cut them off easily. Theyare too big a customer to us. However, the extra sales volume should offset the lost interest due for tendays on late invoices."Lauren told Black that he could tell the CEO that she would agree to the terms. When Lauren hung upthe phone, she said aloud to nobody in particular, "I supposed I should have consulted the group, but itwas worth the risk of not having to make another team decision."

Bias can represent the tendency of an individual or the strong inclination of an individual towards…

Answered: You are Jimmy Cricket, CEO of Mudge…

12th Edition

ISBN:9781259929434

Author:William Nickels

Publisher:William Nickels

Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment

Section: Chapter Questions

Problem 1CE