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When “You’re Fired” Is not an Option: A CEO’s Dilemma
Fredricka F. Joyner, Indiana University East
David W. Frantz, Indiana University East
Barbara Smolnikar, Doctoral Student, IEDC-Bled School of Management
This case was prepared by the authors and is intended to be used as a basis for class discussion.
The views presented here are those of the case authors based on their professional judgment and
do not necessarily reflect the views of the Society for Case Research. Copyright © 204 by the
Society for Case Research and the authors. No part of this work may be reproduced or used in
any form or by any means without the written permission of the Society for Case Research.
Beatrice Eibel, CEO of Clearwater Insurance Company, was sitting in her office staring out the
window and pondering her options. It had been a long day of meetings and, although Beatrice
was tired, she was staying late to gather her thoughts about a particularly complicated human
resource management dilemma involving a breach of confidentiality by one of her key managers.
While Beatrice could not conclusively prove that the breach had occurred, she was confident that
it had. She knew that if the behavior continued it could expose the company to increased risk,
reinforce undesirable aspects of the organizational culture, and undermine team dynamics. Yet,
the decision about how to proceed was not simple. Beatrice wanted to make sure that her actions
fit with European Union employment practices, the company culture and operational
considerations, as well as the approaches she studied at a recent executive development seminar
on coaching. During that seminar, Beatrice had gained deeper awareness of her own
management style and now suspected that her style may have contributed to the current situation.
Beatrice had identified several possible courses of action and now needed to weigh the pros and
cons of each in order to decide upon a recommendation for action.
Company Background
Clearwater Insurance Company was based in Slovenia, a small country in Central Europe that
had been making the transition from communism to a free market since 1991 when it gained
independence from Yugoslavia (see Appendix A for a Country Background Brief). Slovenia
became a member of the European Union in 2004. Clearwater Insurance Company was
relatively young, having been founded in 2003. Its founders and shareholders were two banks,
each holding a 50% equity stake. The insurance company was established with a view to
pursuing insurance operations and the range of products offered included traditional life
insurance, unit-linked insurance and accident insurance. Its products were distributed via branch
offices evenly dispersed across Slovenia, and through modern distribution channels (e.g., direct
mail).
The founders of Clearwater Insurance Company crafted a company vision that emphasized
responsiveness to clients and to threats from the environment, hoping that this combination
would lead to stable returns for the owners. The vision also recognized the importance of
maintaining a pleasant working environment for employees. Thinking toward the future, the
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owners were committed to pursuing sustainable growth in market share.
MANAGEMENT
BOARD
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Legal,
Personnel
and General
A f f a i r s
Internal
Audit
Risk
Managemen
t Office
Marketing and
Sales
Sales
Marketing
Departmen
Back
Finance
and
Accountin
Finance
Departmen
Accountin
g
Insurance
Case
Informatio
n
Technolog
Developmen
t
Actuary
and
Reinsuranc
Information
System
Development
Informatio
n
Technolog
Clearwater Insurance Company's key statutory bodies were the Supervisory Board, the
Management Board, and the General Meeting of Shareholders. The Supervisory Board consisted
of four members, representing the two founding banks. Daily business operations were managed
by a two-member Management Board. Beatrice served as the president of the management
board. The company was small, consisting of 38 employees, two of which represent the
Management Board. There were nine departments, each of them with its own manager. These
managers comprised the management structure of the company. Each of the departments had
from two to six employees (Figure 1).
Figure 1: Clearwater Insurance Company’s Organization Chart
The CEO’s Dilemma
Beatrice was a seasoned CEO who was devoted to the organization. She was generally
well-respected and usually struck an artful balance between personal warmth and
commitment to achieving business results. Beatrice’s dilemma involved one of the nine
managers – the manager of the Legal and Human Resource departments. This manager,
Jasna, had access to almost all company information. For example, she prepared all the
employment contracts, had salary information for each employee, and was present at the
meetings of the Supervisory Board where all key company business was discussed.
Beatrice was concerned because she had concluded that Jasna occasionally violated the
confidentiality of the information to which she had access. At the end of last year, Beatrice
was told by another manager, whom she respected, that Jasna asked this manager, “how much
longer are you going to stay in your post since you have the lowest salary of all the
managers?” Beatrice heard from another of the managers that Jasna told her that “one of the
Management Board members was in a bad mood, since she did not know whether her mandate
would be prolonged.” While Beatrice got this information from trusted sources, she did not
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have any direct evidence of these breaches of confidentiality. When Beatrice discussed these
situations with Jasna, Jasna denied them and became tearful. Beatrice urged the other
managers to participate directly in a conversation with Jasna, but they told her that they would
not be comfortable doing so. Beatrice had a private, confidential conversation with a
representative of the Supervisory Board and was asked to make a recommendation on how to
proceed.
This was the situation that left Beatrice sitting at her desk long after the end of the work day
considering her options. Beatrice had talked this situation over with several trusted colleagues in
her professional network outside of the organization, including one colleague in the United
States. This colleague shared that in the United States it would be quite common for a manger to
be terminated for this sort of breach of confidentiality. While this was an appealing thought,
Beatrice recognized that outright termination was not a viable option in her cultural context.
Slovenian law was very protective of employee rights, and even in cases where the employee’s
actions were clearly in the wrong, it had been Beatrice’s experience that the Court of Justice
usually came down on the side of the employee and required the company to take the employee
back on. From her years in management, Beatrice understood that within the European Union
there was commitment to a fundamental balance between what the European Commission
(2013b) noted was “ensuring that a high level of employment and sustained economic growth
was accompanied by continuous improvement of the living and working conditions throughout
the European Union” (What are the outcomes? section, para. 3).
Beatrice was also uncomfortable with this option because she suspected that it was quite
possible that her own management style had played a role in creating this situation. With
termination ruled out, Beatrice identified several other options to consider.
Possible Options
Take No Immediate Action
Since Beatrice had not directly observed Jasna’s breaches of confidentiality, and those who
had were unwilling to participate in a direct conversation with Beatrice and Jasna, she knew
she was on somewhat shaky ground. While, given the uncertainty and finger-pointing
dynamic that this situation created, Beatrice was tempted to take no immediate action, she also
knew that not taking action had the potential to create its own set of difficult issues related to
increased exposure to risk for the company, the creation of an organizational culture that
tolerates breaches of confidentiality, and the erosion of morale on the team.
Offer Jasna a New Contract
Beatrice knew that in Slovenia it was common practice for employers (in companies without a
trade union and less than fifty employees) to skirt the termination issue by “reorganizing” the
company and eliminating the position held by the employee with whom there was an issue. It
was possible, during this process, to completely eliminate a position. Although in these cases,
the company was not allowed to reopen the job position for two years. When a position was
eliminated, another option was to offer the employee a contract for a new position.
Companies often shaped the new contract to be undesirable to the employee in the hopes that
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the employee would refuse the new contract and resign. If the employee resigns, the position
could be refilled without a waiting period.
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Either Provide Coaching Herself, or Engage an Executive Coach to Work with Jasna
Beatrice’s recent participation in an executive education session on coaching had more than
convinced her of the valuable role that active coaching could play in changing workplace
behaviors. As she pondered options she could not help but wonder if coaching might help
Jasna realize the importance of confidentiality and lead to some changes in her behavior. She
wondered if it would be best to coach Jasna herself or to seek out and engage an executive
coach. The facilitator at the executive education session that she had attended had stressed the
connection between positive “chemistry” between the coach and the coachee and positive
outcomes of the coaching engagement. Beatrice wondered if she and Jasna had the right
chemistry to enter into a successful coach/coachee relationship.
To help answer this question for herself, Beatrice pulled out the Insights Discovery Profile
reports that she and her managerial staff had received the year before as a part of a consulting
engagement with Insights Learning and Development Ltd. The Insights Discovery model is
based on the work of Swiss psychologist Carl Jung and the subsequent work of Jolande Jacobi,
one of his leading students. The model uses four colors to represent observable behavioral
patterns which are measured by the Discovery evaluator; a 25-frame questionnaire of statements
from 100 word pairs, which, when completed, produces the Insights Discovery Profile.
(Insights.com, n.d., paras. 1-2).
The Insight Profile for Jasna revealed the following:
Material dominance, social standing and status are important.
She tends to overlook other people’s feelings.
She has little awareness of how much some of her actions may impact others.
She is ambitious.
It is difficult for her to hear others’ objections because her own position seems
unquestionable to her.
Beatrice’s Insight Profile revealed that:
She is very open and sharing. She proactively connects with others.
She is inquisitive about the world around her.
She is collaborative and generally works well with others.
She is direct and quick thinking.
She is intuitive and optimistic.
If Beatrice determined that she and Jasna would not have a good coach/coaches fit, she knew
that she could always engage an executive coach. If she went this route, she knew that she
would need to do more research on how to select an appropriate coach and effectively
structure the resulting coaching engagement.
Engage an Executive Coach to Work with Herself
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Beatrice enjoyed and had participated in a variety of executive development sessions. She
had learned enough in these sessions to understand that her behaviors may be a contributing
factor in the situation with Jasna. She wondered if perhaps an executive coach could help her
make some changes in her management style that would increase her effectiveness in dealing
with situations such as the one she faced with Jasna.
As an effective CEO, Beatrice had many times used a SWOT (Strengths, Weaknesses,
Opportunities, Threats) analysis to better understand the internal and external operating
environments. Developed in the 1960s and generally credited to Albert S. Humphrey, a
SWOT analysis could be used to identify internal strengths and weaknesses and external
opportunities and threats (Mindtools.com, n.d., para. 5). The information generated supported
the development of a unique business strategy designed to build on internal and external
points of potential while minimizing sources of internal and external liability. Beatrice knew
that individuals often completed a “personal SWOT analysis” as the foundation for the
creation of a personal development plan. To help with her preliminary thinking about how
she might have contributed to the situation with Jasna (and perhaps other similar situations),
she organized the information from her Insights Discovery Profile into the SWOT analysis
categories. This information was now ready for further analysis (Appendix B).
Summary
With these options laid out, Beatrice decided that her next step was to look at each option
carefully and identify the associated pros and cons. She knew that the analysis must take into
account the EU employment practices, the individuals involved as well as the cultural context
of the organization. Gaining a fuller understanding of the pros and cons would help her shape
a recommendation to take back to the Supervisory Board.
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References
ANSA. (2013, July 4). Slovenia, Ernst & Young sees two years of recession. Retrieved from
http://www.ansa.it/nuova_europa/en/news/sections/news/2013/07/03/Slovenia-ErnstYoung-forecasts-2-years-recession_8968880.html
BBC News. (2012, April 17). Slovenia country profile. Retrieved from
http://news.bbc.co.uk/2/hi/europe/country_profiles/1097296.stm
CIA. (2013, August 22). World factbook. Retrieved from https://www.cia.gov/
library/publications/the-world-factbook/geos/si.html
European Commission's DG for Employment, Social Affairs Inclusion. (2013, April). Labour
market information. Retrieved from https://ec.europa.eu/eures/main.jsp?
lang=en&acro=lmi&catId=2815&countryId=SI&r egionId=SI0&langChanged=true
European Commission's DG for Employment, Social Affairs Inclusion. (2013, July 26).
Labour law. Retrieved from http://ec.europa.eu/social/main.jsp?catId=157&langId=en
Geoghegan, P. (2013, May 31). Slovenia prepares for summer of discontent. Retrieved from
http://www.aljazeera.com/indepth/features/2013/05/20135311252828810.html
Infoplease.com. (n.d.). Slovenia: Government. Retrieved from http://
www.infoplease.com/encyclopedia/world/slovenia-government.html
Infoplease.com. (2012). Slovenia. Retrieved from http://www.infoplease.com/country/
slovenia.html
Insights.com. (n.d.). Insights Discovery. Retrieved from https://www.insights.com/564/insightsdiscovery.html
Mindtools.com. (n.d.). SWOT Analysis. Retrieved from http://
www.mindtools.com/pages/article/newTMC_05.htm
New York Times. (2013, May 5). Slovenia falls from economic grace, struggling to avert a
bailout. Retrieved from http://www.nytimes.com/2013/05/06/business/global/06ihtslovenia06.html?pagewanted=2&_r=2&ref=slovenia
Sanati, C. (2013, June 7). Forget Latvia. Slovenia is the next euro domino. Retrieved from
http://finance.fortune.cnn.com/2013/06/07/forget-latvia-slovenia-is-the-next-eurodomino/
Slovenia.SI. (n.d.). Geography. Retrieved from http://www.slovenia.si/slovenia/country/
geography/
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S.
Commercial Service. (2010). Doing business in SLOVENIA: 2013 Country commercial
country guide for U.S. Companies. Retrieved from http://www.buyusainfo.net/docs/
x_7345899.pdf
White, G. (2013). Compare U.S. labor laws and European labor laws. Retrieved from http://
smallbusiness.chron.com/compare-us-labor-laws-european-labor-laws-62420.html
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Appendix A
Slovenia Background Brief – Excerpts compiled August 2013.
Independence in 1991
The Slovene lands were part of the Austro-Hungarian Empire until the latter's dissolution
at the end of World War I. In 1918, the Slovenes joined the Serbs and Croats in
forming a new multinational state, which was named Yugoslavia in 1929. After
World War II, Slovenia became a republic of the renewed Yugoslavia, which
though communist, distanced itself from Moscow's rule. Dissatisfied with the
exercise of power by the majority Serbs, the Slovenes succeeded in establishing
their independence in 1991 after a short 10-day war. Historical ties to Western
Europe, a strong economy, and a stable democracy have assisted in Slovenia's
transformation to a modern state. (CIA, 2013, Introduction: Background section,
para. 1)
Unlike Croatia or Bosnia-Hercegovina, Slovenia's independence from Yugoslavia was
almost bloodless. The move was undoubtedly aided by Western European
recognition of the Slovenes' aspirations and the low proportion of other ethnic
groups in the country. Slovenia had always been the most prosperous region of
the former Yugoslavia and found the transition from a state economy to the free
market easier than most. On 1 January 2007, it became the first of the new EU
member states to join the eurozone. A year later, it became the first former
communist state to take on the EU presidency. Politically, Slovenia was the most
liberal republic within Yugoslavia. Throughout the 1980s there was pressure from
Slovenia for greater political freedom and pluralism in the federation. (BBC
News, 2012, Overview section, paras. 1-5)
After gaining independence in 1991, Slovenia — conditioned by centuries of foreign
subjugation — was determined to retain local control of its prized assets. It
embarked on a spree of management buyouts of partially state-owned companies,
overseen by executives who in many cases were uncomfortably close to people
running the government and the state banks. “After the transition in Slovenia, the
state retained a stranglehold over the economy,” Mr. Rahman said, “and the
country today is suffering the consequences.” (New York Times, 2013, p. 2)
Geography
“Slovenia occupies an area about the size of the state of Massachusetts. It is largely a
mountainous republic and almost half of the land is forested, with hilly plains spread across the
central and eastern regions” (Infoplease.com, 2012, p. 1).
Slovenia is situated in Central Europe and shares borders with Italy, Austria, Croatia and
Hungary, only a couple hours from Venice or Vienna. Outside the coastal area, its
terrain consists largely of karstic plateaus and ridges, magnificently precipitous
Alpine peaks, basins and valleys…[omitted by authors] Slovenia has 46,6 km of
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coastline- one inch per inhabitant, 26.000 kilometers of rivers and streams and
some 7.500 springs of drinking water, including several hundred of first class
therapeutic mineral springs. (Slovenia.SI, Landscape section, paras. 1, 4)
Government
Slovenia is governed under the constitution of 1991. The president, who is the head of
state, is elected by popular vote for a five-year term and is eligible for a second
term. The government is headed by the prime minister, who is nominated by the
president and elected by the National Assembly. (Infoplease.com, n.d., para. 1)
Chief of state: President Borut Pahor (since 22 December 2012)...[omitted by authors] On
February 27, 2013 a no-confidence vote in Parliament resulted in Alenka Bratusek
becoming prime minister designate; Bratusek became Prime Minister (Slovenia's
first female prime minister) on 20 March 2013 after her cabinet was approved.
(CIA, 2013, Government: Executive Branch section, paras. 1, 5)
Economy
Bratusek’s government – a five-party center-left coalition- pledged to continue with the
reforms initiated under the previous government despite internal divisions and
public skepticism. Following speculation that Slovenia could be the Euozone’s
“next Cyprus” and possibly in need of an international bailout, the GoS released a
National Reform Plan, calling for the implementation of a “bad bank” to rid bank
balance sheets of non-performing loans and continued economic reforms. On May
29, the European Commission largely embraced the Plan, giving Slovenia a twoyear extension (until 2015) to bring their deficit under 3% of GDP. (U.S.
Commercial Service, 2010, p. 3)
Agency Ernst & Young has published forecasts on Slovenian crisis, and according to
forward-looking indicators in 2013, GDP is expected to fall by 4.9%, and there
will be a new recession of 2.9% in 2014. An initial growth could occur in 2015,
and it is expected to be 1, 1%. Despite these data, Ernst & Young says that
Slovenia ''can get out of the crisis without external aid''. The sectors that will
suffer the most are investments (11.1% in 2013, 5.5% in 2014) and private
spending (6.7% in 2013, 2.5% in 2014). (ANSA, 2013, paras. 1-3)
In the early 1990s Slovenia’s first generation of post-independence leaders looked to
consolidate the country’s economic strength within its borders, rather than follow
the privatisation drive in much of Eastern Europe. "For the first time in our
history we were the masters of our own property. We thought ‘let’s not waste it,
let’s privatise slowly," said Cirman. The roots of Slovenia’s current crisis lie in
this uneasy transition from socialism to the free market. Many of Slovenia’s best
companies remained in the hands of the state and a new generation of ‘managers’.
Many of these managerial executives took out huge loans to buy controlling
stakes in the businesses they ran. (Geoghegan, 2013, Difficult Transition section,
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paras. 5-6)
While Slovenia broke free of communism at pretty much the same time as the rest of its
neighbors, its economy boomed to such a degree that it was able to skip many of
the painful steps a country must go through when moving from a socialist to a
capitalist state. For example, the state still controls much of the means of
production, around 50% of the economy. Cronyism and bad management at the
state-run firms have led to an inefficient economy. Corruption is rampant. For
example, a recent study conducted by Ernst and Young found that 94% of
Slovenes think bribes are a normal business practice. (Sanati, 2013, para. 8)
Market Challenges
• Slovenia has a small domestic market of 2 million people.
• Slovenia has been slow to privatize, has an opaque and bureaucratic public
procurement system, and is relatively unfriendly to foreign direct investment.
• Slovenia has a highly skilled, but rigid workforce due to the labor laws and stationary
character of the population.
• High level of social contributions and personal income taxes coupled with a lack of
predictability.
• Judicial backlog preventing cases from being resolved in a timely manner
Market Opportunities
• Transparent, stable, rule of law based democracy and market economy.
• Excellent and fully modernized communication and transportation infrastructure with
a major port on the Adriatic Sea.
• A highly educated work force and innovative technology firms.
• Geostrategic position that gives Slovenia access to the European Union as well as
Central and Southeastern European markets.
• The major growth industries in Slovenia are the high-tech sector, especially
information and communication technology (ICT), energy, financial services, and
logistics/transport. Unfortunately, given the government’s focus on fiscal austerity, no
major infrastructure projects are planned for 2013. (U.S. Commercial Service, 2010,
p. 3)
Labor Market
Owing to its small size, the Slovenian economy is oriented towards exports to developed
Western markets. A greater level of technological development, leading to greater
export competitiveness on global markets, is essential for its growth. The
processes of economic restructuring are reflected in the decline in the agricultural
and non-agricultural sectors, particularly mining and manufacturing, and in the
growth of the service sector. Commerce, construction and business services are,
alongside manufacturing, important activities and an important source of
employment in the country…[omitted by authors]
From 1993 to 2008 economic results in Slovenia were good, but economic conditions
began to decline rapidly in Slovenia at the end of 2008 under the pressure of the global
financial and economic crisis. Companies began to be faced with a fall in orders, aPage 74
shortfall in financial resources and a protracted implementation of certain key reforms, all
of which are still hindering economic activity. The crisis hit manufacturing companies
the hardest, construction and the banking sector the hardest. Conditions remain very
uncertain, exacerbated among other things by the fact that Slovenia is oriented towards
exports and there has been a lack of incentives coming from the international
environment, as well as a lack of investment and a fall in domestic consumption. The
reorientation from labour-intensive to more technologically complex industries is
proceeding too slowly; Slovenia is therefore becoming less competitive than other
countries…[omitted by authors]
In December 2012, the national registered unemployment rate was 13%, a rise of 0.9
percentage points on December 2011. (European Commission, 2013a, paras. 2-3, 7)
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Appendix B
Differences Between Labor Laws in the United States and the European Union
Employment Contract
In the United States labor laws, there is no requirement for an explicit contract of
employment. Most employment is on an at-will basis, meaning that the employer
or the employee can terminate the working relationship at any time, as long as the
reasons are lawful. In Europe, the employment contract, derived from common
law, is the basis of all employer-employee relations. Employment-at-will doctrine
does not apply, notes High Street Partners, a leading international business service
provider; the employer is required to follow due process in terminating an
employee; if he fails to do so, he can be liable for wrongful termination.
Wrongful Termination
American federal laws and the U.S. Fair Labor Standards Act do not require that
employers notify their employees before termination. An employer can terminate the
working relationship for any reason other than discrimination, retaliation, defamation,
breach of explicit contract or fraud. According to the HG Global Legal Resources, just
because an employee feels he has been treated unfairly, he may not be able to claim
wrongful termination. Under European labor laws, an employee can claim wrongful
dismissal or termination if the employer breaches the employment contract. For example,
if the employer dismisses the employee without any notice or fails to follow disciplinary
measures as stipulated in the contract before dismissal, the employee could claim
wrongful termination. (White, 2013, paras. 2-3)
The Social Affairs and Inclusion section of the European Commission (2013b) website is a
source for specific information about European Union labor laws.
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Appendix C
Personal SWOT Analysis Prepared by Beatrice Eibel
Strengths
Displays humor and optimism
Intuitive and optimistic
Direct and quick thinking
Unconventional in approach and enjoys
motivating others to exceed in what is
accepted and expected Enthusiastic and
spontaneous
Opportunities
Really listening to the views of others.
Making a special effort to show
appreciation and to acknowledge
others’ contributions.
Become more patient and less
restless.
Reflect on an analysis of past
experiences.
Realize that others may have a different
agenda.
Take more account of the needs of
others.
Reduce the number of assumptions she
has a tendency to make
Weaknesses
May not actively listen to (or hear) other`s
point of view
Unclear interpretation of negative
messages to employees
Impatient with others, especially with those
she sees as having lower standards
Knows the answer before the questions is
asked
Upset by errors made by others Vocally
judgmental and critical Protects her ego
against all comers Sometimes dismiss
others` opinions Hates routine, may get
bored quickly
Threats
She relates to colleagues who appreciate
her outgoing, talkative, matter of fact
manner.
She tends to ignore significant details in
her desire to move on to more exciting
things.
Based on Insights Personal Profile
0
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