Leadership at Kluster

[Leadership at kluster]| Kluster needs to know if, and when the founder Ben Kaufman should resume leadership of the company. Team3 Innovations has provided a full analysis and a recommendation. | Executive Summary Kluster needs to choose a leader who can provide them with the vision to make good decisions and the maturity to attract investment capital. The company needs to know if, and when the founder Ben Kaufman should resume leadership of the company. Kluster needs a CEO who has the expertise to know the value of ideas; which ones are profitable and which ones are not.

It is critical to the success of the firm to have a leader who can separate the company from competitors by knowing how to identify opportunities and when to act. It also needs to limit the cost of its leadership search and maximize the potential for outside investment. These are the financial considerations that are critical to the success of this firm. After considering all of the relevant analyses, Team3 Innovations recommends that Kluster install Andres Arango as CEO and make Kaufman the Head of Design.

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Meanwhile the HR department should create a system for evaluating and identify the potential leaders within the Kluster and install a system for gathering customer and employee feedback so that Kluster’s leaders can make evidence-based decisions. The promotion of Arango will cost the difference between his current salary and that of the CEO’s salary. At Team3 Innovations we understand the value of choosing a leader who can motivate employees to produce excellent results and inspire confidence from investors and consumers.

After a lengthy analysis of Kluster’s position we are confident that our recommendation is congruent with its objectives and that by implementing this strategy the company can continue to succeed. Problem Statement: Kluster needs to choose a leader who can provide them with the vision to make good decisions and the maturity to attract investment capital. The company needs to know if, and when the founder Ben Kaufman should resume leadership of the company. Critical Success Factors: Like all businesses, Kluster has budgetary demands; the outcome of this exercise must be financially sound.

Usually, cost leadership revolves around a firm’s ability to limit the use of tangible resources while maintaining or improving its level of production. In this case, Kluster needs to limit the cost of its leadership search and maximize the potential for outside investment. These are the financial considerations that are critical to the success of this firm. At the same time, because Kluster operates in a highly-competitive concept brokerage market, the company needs to have a leader who is a visionary.

It is a company that uses ideas from external contributors to influence new products and marketing strategies. Because of this, leader differentiation is paramount to the success of the company. In order to distinguish themselves from other firms in the field, Kluster needs a CEO who has the expertise to know the value of ideas; which ones are profitable and which ones are not. It is critical to the success of the firm to have a leader who can separate the company from competitors by knowing how to identify opportunities and when to act.

Analysis: We have examined a number of considerations that Kluster should take into account before choosing a leader. Finance The firm’s existence relies heavily on its ability to attract outside investment. In order for the company to expand, it will need to present it as a stable enterprise with experienced leadership. When the CEO, Ben Kaufman demoted himself, he cited the need for “good management in order to get venture capital and make sales”. He “realized that other people just saw a teenage kid running amok with other people’s money”.

Even though Mr. Kaufman has the confidence to meet with high level executives, their perception of his ability may negatively impact his ability to garner investment. It may be that Mr. Kaufman could improve his sales and managerial skills through training or by completing a formal post-secondary business degree in management. According to Statistics Canada, the average Canadian four-year undergraduate degree in management costs about $5,100 (CAN) per year. Canadian-universities. net estimates that the average MBA program costs $20,000 (CAN) per year.

MBA programs at American universities can cost upward of $50,000 dollars (US) per year and $20,000 per year for undergraduate studies. The University of Vermont, located in Burlington, Vermont (the same town where Kluster has its headquarters) offers a part time MBA program. Customer Impact We recognized the existence of three sets of consumers. First, there are the contributors; those that submit their ideas to Kluster for improvement and exposure. Then there are the companies that pay for the finished products of the design process. Finally, there are the company’s investors.

Different considerations much be made for how any leadership decision would impact each one, and how their reaction could impact the company. The contributors submit their ideas because they believe that Kluster’s designers have the ability to improve them and market them effectively. Having a proven entrepreneur like Kaufman gives these consumers the confidence to submit their ideas to Kluster. It’s the brain power of the designers that will attract these consumers. The companies that buy the finished concepts are simply looking for marketable ideas.

But it will take an experienced salesperson to pitch these ideas to them successfully. Trust is a major factor in relationships, especially business relationships where the stakes are high. These end users must have faith that the leader who sells them these ideas has the experience and expertise to see an idea through to completion. Similarly, the investors need to be able to know that their money is in good hands. Perhaps someone with a lot of experience would assuage their concerns. It should be noted that while Kaufman is young, he does have a record of establishing successful start-ups that could improve his credibility.

Processes It is clear that Kaufman may need some managerial training. While employees like engineer Peter Wadsworth may trust him to make decisions on the big issues that affect the company, some of employees feel that he is a little bit crazy. Wadsworth called him a “madman”. Regularly scheduled in service for all employees may produce effective leaders for the future. By having the HR department do this training, the company would not be required to pay an outside organization. Implementing an employee feedback system would also enable the leader to understand how he is performing.

This system should be anonymous to protect employees from retribution. In addition, Kluster should cater to all of its clients by installing a customer feedback option. It should regularly ask investors, contributors and concept consumers for evaluations of its performance. Next, it would be prudent for Kluster to identify members of its staff who show the potential to move into leadership positions. Based on the company’s critical success factors, these employees should inspire customer confidence and also be good at building and marketing ideas.

Measures of performance like individual sales reports and records of successful concepts that individuals worked on should be kept so that there is a database that would make the internal leadership selection process easier. Mentoring, getting senior members of an organization to sponsor and support less-experienced employees may be appropriate in the situation. Having an experienced manager like Andres Arango, Kluster’s design team co-ordinator, mentor Kaufman might help him improve his management skills while he matures. It may be that Kluster has to look outside for a new acting CEO.

Hiring a recruiting firm to complete this process is one option. According to About. com’s Alison Doyle, they are usually paid for their expenses, plus a portion of the employee’s salary. It could be costly for the company to take this option. Behaviour We have looked at a variety of leadership behaviours that the company should consider. First we sought to identify what the differences are between leadership and management. We have included a chart in our appendix for your convenience (see 1. 1) Next we analyzed the styles of leadership:

We determined that there are transactional, transformational, charismatic, Level 5, and authentic leaders. “Transactional leaders guide or motivate employees in the direction of established goals by clarifying role requirements. ” Transactional leaders inspire followers to go beyond their own self-interests for the good of the company and have a profound effect on their employees. Charismatic leaders examine the status quo with a view to expressing future goals inspiring their followers to achieve these goals by empowering them. Level 5 leaders are highly motivated and they are driven to achieve success for their companies.

Authentic leaders “know who they are, know what they believe in and value, and act on those values and beliefs openly and candidly. Their followers would consider them to be ethical people” (Fundamentals of Organizational Behaviour, pg. 278-289). We suggest that a level 5, transactional, authentic leader would be the optimal choice for this position. Kaufman seems to have many of these qualities already. “He does not hesitate when he makes decisions, and he is prepared to live with the consequences of his decisions” and “he thinks everyone is equal. He knows what his skills and limitations are and he will not tell others what to do with theirs (pg. 299). However, “his communication ability is not always the best, and he does not often praise employees for good work. ” The training that we suggested earlier could help to remedy this. Alternatives 1. If Kluster created a Chairperson position and promoted Ben Kaufman to that position, he could focus on the long-term strategies of the company while he studies business management part-time at the nearby University of Vermont. The day to day management would be carried out by the newly promoted CEO Andres Arango.

As the former coordinator of the design team, he has both product knowledge and management expertise. Consumers, employees and investors would value his experience and welcome him as a stable leader. Apple employed this strategy to great success. Steve Jobs became chairperson of Apple’s Board and left the day to day management to other executives while designed the firm’s future. Apple, like Kluster, relies on product innovation, vision and creativity. It could work just as well for Kluster. The costs would include potentially sizeable increases in salary for Arango and Kaufman.

A four year undergraduate degree would cost Kluster more than $80,000 (US). The promotions would also cause a ripple effect. The design department would need a new designer and new coordinator. The HR department would need to fill those vacancies and the company would incur the costs of subsequent promotions or external recruitment. The company would also have to contend with the loss of productivity that may result from the loss of Kaufman’s fulltime input as he studies part-time. In the meantime, Kluster would institute the leadership identification system mentioned in the process analysis.

An excel database would be used to compile information that could be used identify promising employees. 2. In this scenario, Kaufman would become the head of design and Arango would take over as CEO. Arango would mentor Kaufman about leadership until Kaufman was mature enough to assume the CEO role again. Kluster would have regularly scheduled in service training conducted by Human Resources department that focused on effective management techniques. The same database mentioned in Alternative 1 would be implemented to evaluate the development of all potential executives, including Kaufman.

If he improved significantly as a manager and salesperson, he would be eligible to resume CEO duties in two years. Using another database, Kluster should compile all feedback from all of its clients: contributors, investors and consumers. This would allow Kaufman to continue providing direction for the company on a fulltime basis. And he could focus on his area of expertise without having to deal with the day-to-day management of his company. Investors would be impressed by Arango’s management experience and Kluster would retain the confidence of its contributors by having creativity of Kaufman at their disposal.

This promotion of Arango would cost the company the difference between his current salary and his new one. All of the processes would be completed internally. By rotating just two employees, Kluster would avoid a major disruption. Recommendation We recommend that Kluster chose Alternative 2. It is the one most congruent with its critical success factors. It provides with an effective leader who can attract outside investment without losing the vision of one of its primary assets: Ben Kaufman. It also improves internal training and evaluation processes and allows Kaufman to receive training.

Implementation * Have HR create employee monitoring database. It should include performance indicators such as sales, completed concepts, co-worker, supervisor and self-evaluations and other major accomplishments specific to each department. * Have HR create feedback database and periodically distribute feedback forms to clients and employees. Maintain and open feedback option in the “Contact Us” section of the website * Promote Arango to CEO * Install Kaufman as Head of Design * Evaluate Kaufman’s improvement as a manager every six months based on the databases and his evaluations Allow for his eventual transition by into the CEO position when he is ready. The first eligibility period will be in two years Conclusion At Team3 Innovations we understand the value of choosing a leader who can motivate employees to produce excellent results and inspire confidence from investors and consumers. After a lengthy analysis of Kluster’s position we are confident that our recommendation is congruent with its objectives and that by implementing this strategy the company can continue to succeed. Appendix Management versus Leadership Chart 1. 1 Management| Leadership|

Engages in day-to-day caretaker activities: Maintains and allocates resources| Formulates long term objectives| Exhibits supervisory behaviour| Exhibits leadership behaviour: acts to bring about change congruent with long term objectives| Administers subsystems within organizations| Innovates for the entire organization| Asks how and when to engage in standard practice| Asks what and why to change standard practice| Acts within established culture of the organization| Creates vision and meaning| Uses transactional influence: Induces compliance in manifest behaviour using rewards, sanctions, and formal authority| Uses transformational influence: Induces change in values, attitudes and behaviour using personal examples and expertise| Relies on control strategies to get things done by subordinates| Uses empowering strategies to make followers internalize values| Status quo supporter and stabilizer| Status quo challenger and change creator| Source: R. N. Kanungo, “Leadership in Organizations: Looking Ahead to the 21st Century. ” Canadian Psychology 39, no. 1-2 (1998), p. 77.