Case for Management and Leadership Program

Version 1.2 The Blue Sky Software Consulting Firm


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The Blue Sky is a fifteen-year old software-consulting firm. It was founded by Max Blue, who was until last year its CEO and Chairman of the Board. Blue has stepped down from the CEO role, but remains Board Chairman. The new CEO is Jim Willis, who joined the company as VP for the HR software division five years ago. Before coming to Blue Sky Willis was an executive with a major accounting/consulting firm.

Blue Sky is divided into three divisions:

This division develops used in the auto industry. Some of the software is utilized by the major manufacturing companies, but mostly they serve suppliers of parts and components.

HR Software- This division has developed Human Resource Management software to be used in the retail industry. Their major client has been the Best Dollar Retail Chain, which sells upscale style, but affordable clothes for teenagers. They have retail locations in most parts of the country, except for the mid Atlantic and New England states. Most of their stores are in medium to small cities.

Heath Payment Software- This division has developed software for state governments to help manage their Medicaid provider payment systems. They provide this software for 15 states scattered across the country.

Each division is headed by a Vice President:

Machine ToolMichael James- was one of the founders of the company, and has been with Blue Sky since the beginning as VP for Machine Tool Software. This was the first business line for Blue Sky.

HR Software- Mary Garrison- she has just started with Blue Sky, and replaced Willis when he became CEO. She had previously been an Associate VP for HR Technology at Best Dollar, and was the major point of contact with them. Thus, she was very familiar with the HR software produced for Best Dollar. She was a computer science major at State University.

Health Payment- Jeff Roberts has been with Blue Sky for seven years and VP of the health payment division for the last two years. Before joining Blue Sky he was a hospital administrator responsible for the hospital IT system.

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The CFO is Karl Counts, who has worked in the finance department since the beginning of the company. He has been CFO for the last ten year.

The newest member of the Executive team is Susy Hubres, who last year assumed the position of Director of Planning and Marketing. She graduated from Harvards MBA program the previous year. She was hired by Max Blue shortly before he retired as CEO. Susy is the daughter of a long-time friend of Blue.

Blue Sky also has five regional offices: North, South, Central, West and East.

Forty percent of the Blue Sky employees work in the regional offices. The rest work at the corporate headquarters in Cleveland Ohio.

All those who work in the Machine Tool division are located in Cleveland. Three of the largest Medicaid accounts are run from the Cleveland HQ. The other health payment cli- ents are served from the regional offices.

The regional offices were set up originally to serve the Best Dollar chain client. About 80% of the HR software work is performed in the various regions. Only a few centralized design functions are at the Cleveland headquarters.

Each regional office has a director, who is responsible for technical output and client service in that region. Service is an important part of the business, and the regional direc- tors have all come from the service side of the business rather than the technical side.

As you read the case issues below you will be asked to assume the role of a consultant who has been hired by Willis to write a critical analysis of the issues facing Blue Sky. Willis has told you he wants an honest critique and recommendations and has not indi- cated any personal preferences to you. But, Willis does want you to draw on the Man- agement literature in your report.

Problems and Issues

In the last few months CEO Willis has become concerned about several issues with a po- tential impact on Blue Sky. Susy Hubres is pressing him to institute a strategic planning process. Max Blue never liked to have meetings, and thought planning was a waste of time. Thus, Blue Sky never had a formal strategic plan.

Susy has written a memo to Willis proposing a three-day retreat for Blue Sky executives. The main agenda for the meeting would be the development of a . In her memo Susy relates how she took three courses in planning at Harvard, and believes she is the best person to conduct the planning retreat and process. In the memo she asks

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for authority to hire two new people in her office. Both would be planning analysts, who would develop planning models using corporate and industry data.

In her memo Susy cites several issues of concern. First, the decline of the American auto industry because of the current economic environment. Blue Sky has been the major source of machine tool software in the industry. Secondly, some client companies have recently cut back on contracts with Blue Sky in favor of outsourcing work to India at 20% of what they would need to pay Blue Sky for the same work

Jeff Roberts, VP of the Health Payment Division, has recently informed Willis that there is an ongoing federal grand jury investigation with a focus on the Southern Regional of- fice. The U.S. Attorney is investigating allegations of illegal contributions made to the Governor as a quid pro quo for state contracts. Also, the Western regional office made a serious coding error that nearly cost Blue Sky the whole HR software line of business with Best Dollar. Mary Garrison is making the argument that more control centralization at HQ is essential for the continued viability of this division. She is proposing the closure of two of the five regional offices with a transfer of about half the professional employees in the HR software division to the Cleveland office. Garrison argues this will allow her to more personally supervise this activity. Since she has come from Best Dollar, Garrison believes she has a clear sense of their needs.

Susy has concluded the HR line of business is too narrow in its focus on one client, and has suggested aggressive pursuit of new clients in the retail field. Garrison has resisted this approach with the argument that the whole HR software system is tailored for Best Dollar, and they would resist essentially sharing their HR software with competitors.

If the HR software business were centralized in Cleveland, the rationale for the system of regional offices would be weakened. T

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