Case Study 2010 Leadership Crisis Challenge

8/8/2019 Case Study 2010 Leadership Crisis Challenge

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Published by GlobaLens, a division of The William Davidson Institute at The University of Michigan.

2010 William Davidson Institute. This Leadership Crisis Challenge was developed by Cynthia Koenig under the

supervision of Professor Susan Ashford.

Leadership Crisis Challenge:

Timora International

leadership crisis challenge1-428-930May 27, 2010

Overview:

The most important elements o leadership are very difcult to teach. Intangibles such as judgment,

courage, and integrity are difcult to broach in any real way in a classroom setting. They also can be quite

expensive to learn in the feld where there are real consequences, both fnancial and career-related. This

Leadership Crisis Challenge pushes students to integrate or trade o competing demands (thereby working

on integrity and judgment) and pushes them out o their comort zones (thereby working on courage).

This role-playing simulation presents students with a realistic business challenge that sits at the

intersection o social, environmental, and fnancial constraints. It encourages students to practice and gain

critical leadership skills such as using judgment to navigate an ambiguous crisis situation, thinking on their

eet, and persuasively articulating a point o view. It also allows aculty to guide students in a realistic high-

pressure meeting, while the aculty role-play a tough Board o Directors.


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Student Packet


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Student Packet

Leadership Crisis Challenge 2010

You and your team are executives at Timora International (Timora), a $13 billion hospitality company witha global presence. The well-established company recently became entrenched in a crisis that has thepotential to threaten its global reputation. It is up to you to determine how to deal with this crisis, bothinternally and externally. The documents included in this packet will help you analyze the situation anddetermine a path for moving forward.

Your team is composed of the following members:

1. Alex Owens: marketing and communications manager2. Blair Manzella: finance manager3. Pat Wolski: human resources manager4. Devon Delpriore: operations manager


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Profile of Timora International

Timora International (NYSE: TIO) is a leading hospitality company with a global presence. Timora hasmore than 3,000 hotels and resorts in 80 countries. Timora hotels aim to provide consistent, dependable,and genuinely caring experiences to guests. Features include:

Fully equipped fitness centers

Gift shops

Swimming pools

Concierge levels

Business centers

Meeting facilities

The company is headquartered in Miami, Florida, and had approximately 148,000 employees at 2008

year-end. It is consistently ranked as one of the lodging industry's most admired companies and one ofthe best places to work by Fortune Magazine. In fiscal year 2008, Timora International reported salesfrom continuing operations of nearly $13 billion.

Timora International's goal is to create significant value by aggressively building its brands and growingits businesses. The company is dedicated to providing exceptional service to customers, growthopportunities for associates, and attractive returns to shareholders and owners.


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From: [email protected]: [email protected], [email protected], [email protected], [email protected]: Urgent El Tigre Situation

Thanks for your time this afternoon. I cant stress enough how important this situation is for the future ofour company. As you know, competition in the tourism industry is cutthroat, but given the currenteconomic climate, business has never been tougher. Global tourist arrivals fell by 1% in 2008, down from7% growth in 2007. Experts estimate a 2% decline in 2009. Anecdotal accounts suggest that high-end

luxury travel has been hit hardest, while ecotourism has dropped off more slowly. Timoras revenues fellby 8% last year.

At the same time, our latest (and most ambitious) project to date, El Tigre -- an eco-resort located on thegrounds of the recently excavated Mayan ruin site of El Mirador in Guatemala is behind schedule andover budget. To make matters worse, weve had some major staff changes, with all four of the original ElTigre project management team members vacating their positions within the last two weeks. As our mostpromising and talented associates, you have been hand-picked to lead the new project managementteam. Thank you again for stepping up to the plate. As you are aware, this is a difficult assignment, butrest assured that getting the project back on track will put you on the fast track for advancement within thecompany.

The development of El Tigre is the pet project of Dr. J.T. Anderson, the famous archaeologist. Anderson

has not only lent his name to the project, he has proven invaluable in liaising with the Guatemalangovernment and local communities. We believe that Andersons support, combined with our exclusiveaccess to the site, its historic significance, and remote location, will give us an edge in theultracompetitive luxury tourism market.

Were six months away from opening, and some difficult decisions need to be made in order to get theproject done on time and within budget. My team has compiled a list of time and cost saving measures foryou to use as you develop a plan. My assistant, Stephen, has been tasked with gathering additionalinformation that will help inform your plans. Look out for an e-mail from him. Remember, we need to cutcosts by $2,125,000 and save 22 work-days.

Please be prepared to present your strategy to the board of directors. You will only have five minutes tomake your case, and they will want to know every detail of your plan.

Thank you.

Yvonne TolleCEOTimora International


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From: [email protected]: [email protected], [email protected], [email protected], [email protected]: Background InformationAttachments: Competitive Landscape.doc, Competitors.doc, BoDprofiles.doc, Financials.doc,TravelNewsexcerpt.doc, ElTigrePromotionalMaterials.doc, 2008AnnualReport.doc,HumanRightsGuatemala.doc

Hello all,

Yvonne has asked me to send you the attached documents to help you prepare for your meeting. Shesaid that you should prepare no more than five slides because your presentation is a last-minute additionto the meeting, and she wants to make sure that there is enough time for questions.

I pulled together some information from various reports, strategy documents, presentations and websitesto bring you up to speed on the project. Ive also included a list of the people you can expect to see at themeeting. As Yvonne probably mentioned, the group includes a mix of board members and specialadvisors to the project. Ill update you if there are any changes to the list.

At Yvonnes request, I also did some of the legwork on cost-saving measures, based on information leftbehind by the former project management team and conversations with colleagues in various divisionshere at Timora. Youll see my comments on a few of the documents. I hope it helps!

Also keep in mind that Yvonne is looking to fill the position of VP of New Projects, and she will likelyselect a member of your team!

These sites provide good background information on the region and trends in the tourism industry:http://www.sacredland.org/index.php/tikal/ www.peopleandplanet.net/doc.php?id=1110

Regards,Stephen

P.S. Watch out for Robin Reddick. Robin has been opposed to the project from the start, and has an axeto grind with Yvonne!

Stephen WrightExecutive Assistant, Office of Yvonne TolleTimora International


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Competitive Landscape

The 2009-2010 period finds the travel industry continuing to face challenging times. Consumers budgetsare tight, and they are cutting down on unnecessary expenses. When the middle class does take avacation, it is on a reduced budget. Meanwhile, corporate and business travel budgets are tight as well.The travel industry is acutely aware of this problem. Most airlines have cut routes and reduced the totalnumber of seats available. Travel providers of nearly all types are competing fiercely on price or areoffering their customers special inducements and packages.

According to the World Travel & Tourism Council (WTTC), the global travel and tourism industrysupported 77.2 million jobs on a direct basis in 2009 (a 1.9% decline from 2008), generating $1.87 trillionin direct global revenues (a 3.5% decline from 2008, and an amount representing about 3.2% of totalglobal GDP).

Hotels throughout the world enjoyed a major boom through mid-2007, with high occupancy levels, risingroom rates and strong levels of both business and leisure travelers. However, the global financial crisisput a damper on hotel occupancy that continued into 2008 and 2009. Many major hotel constructionprojects have been cancelled or put on hold.

The profitability of hospitality companies depends on efficient marketing and, because many costs arefixed, on effective operations. Large companies have advantages in economies of scale in operations,

can more easily raise capital, and have strong name recognition. Small companies, such as boutiquehotels, can compete effectively in favorable locations and by providing specialty services. Increasingly,large hotel chains are looking to leverage the benefits of their size with the customization more oftenassociated with smaller properties. To this end, large hotel chains are beginning to embrace industrytrends like ecotourism, nature tourism, cultural tourism and geotourism, in the hopes of capturing a largershare of the fastest growing sector of the tourism industry. According to The Center for SustainableDestinations, these terms all describe tourism that sustains or enhances the character of a placeitsenvironment, culture, aesthetics, heritage, and the well-being of its residents.

In 2004, ecotourism and nature tourism were growing three times faster than the global tourism industryas a whole. According to Travel Weekly, sustainable tourism could grow to 25% of the worlds travelmarket by 2012, taking the value of the sector to approximately $473 billion a year.According to the 2008Travel Monitor, 47% of respondents were willing to pay higher fees to travel suppliers who demonstrate

environmental concern; 53% were not. Overall, 85% considered themselves to be environmentallyconscious.


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Competitors

Hilton WorldwideIf you need a bed for the night, Hilton Worldwide (formerly Hilton Hotels) has a few hundred thousand ofthem. The company is one of the world's largest hoteliers with a lodging empire that includes about 3,200hotels and resorts in nearly 80 countries operating under such names as Doubletree, Embassy Suites,and Hampton, as well as its flagship Hilton brand. Many of its hotels serve the mid-market segment,though its Hilton and Conrad hotels offer full-service, upscale lodging. In addition, its Homewood Suites

chain offers extended-stay services.

InterContinental Hotels GroupInterContinental Hotels Group (ICH) is the world's largest hotel company by room count, with more than4,000 properties in nearly 100 countries. Its mainstay chain, Holiday Inn, offers mid-marketaccommodations at nearly 1,400 locations in the US, Europe, and Asia, along with some 1,900 limited-service locations operated under the Holiday Inn Express brand. ICH also serves the upscale market withits Crowne Plaza and InterContinental chains, while its Staybridge Suites and Candlewood Suites brandsoffer extended stay services mostly in the US. The company's newest brand, Hotel Indigo, targets mid-market travelers with upscale appointments.

Ritz-Carlton Hotel CompanyThe Ritz-Carlton Hotel Company operates 70 luxury hotels in more than 20 countries offering premium

accommodations and amenities for both business and leisure travelers. Its hotels can be found in primedestinations and are consistently rated among the best in the world. The company also manages fourRitz-Carlton Destination Club time-share properties (Aspen, Colorado; St. Thomas, US Virgin Islands;San Francisco; and Jupiter, Florida). Ritz-Carlton was established in 1983 when real estate mogul andformer CEO William Johnson acquired the rights to the name made famous by Swiss hotelier Csar Ritz.


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Profiles of Board of Directors and Special Advisors in Attendance

1. Dana Barron's (board of directors) last name is synonymous with the word "hotel." As thechild of Taylor Barron, one of the founders of the modern US hotel tradition, Barron assumedcontrol of the family-owned Timora Corporation in 1979, after the death of Taylor Barron,ushering in a new era of prosperity for the company. Barron is a graduate of the Hillcrest Schoolin New Hampshire, and earned a BA in art and architecture from the Sorbonne. Barron is anactive member of numerous philanthropic and community organizations.

2. Jesse Willis (board of directors) is the president and CEO of TransFair USA, a 501c3nonprofit that audits transactions between US companies offering Fair Trade Certified productsand the international suppliers from whom they source, in order to guarantee that the farmers andfarm workers behind Fair Trade Certified goods are paid a fair, above-market price. Previously,Willis served as the executive vice president of College Summit. Prior to moving to the nonprofitworld, Willis held management positions at Coca-Cola and Microsoft. Willis earned a BA ineconomics from Williams College and an MBA in marketing and entrepreneurial studies from theUniversity of South Florida.

3. Chris Heredia (special advisor) was born in La Antigua, Guatemala, on October 9, 1951, andgraduated from Universidad del Valle de Guatemala with honors, receiving a BA from theTourism and Hospitality Program. Heredia began a political career when elected to the position of

mayor of Antigua in March of 1974, and has held various positions over the years, includingmayor of Guatemala City (1992-1998). Heredia has also served in numerous governmentdepartments and held a number of management positions. On February 21, 1999, Heredia wasofficially announced as the minister of Tourism and Civil Aviation by the prime minister ofGuatemala. Since then, Heredia has strived to push the limits and increase the growth of tourismby expanding economic opportunities for all stakeholders. By building a strong relationship withthe private sector, Minister Heredia strives to introduce the rest of the world to the home countryof Guatemala.

4. Parker LaForgia (special advisor) became the president and CEO of The NatureConservancy in April 2001. Previously, LaForgia was a managing director at Goldman Sachs,and responsible for the firms Center for Environmental Markets and its Environmental StrategyGroup. At Goldman Sachs, LaForgia played a major role in designing and implementing the firms

environmental strategy. LaForgia is a member of the Council on Foreign Relations and serves onits independent task force on climate change. LaForgia is also a member of the steering group onthe Princes Rainforest Project, which was launched last year by his royal highness the Prince ofWales. LaForgia is also a frequent public speaker on topics connected to business and theenvironment. LaForgia has recently lectured at events sponsored by the Council on ForeignRelations, World Wildlife Fund, Columbia University, New York University, National Conferenceon Science, Policy and the Environment, Ceres, Business for Social Responsibility, and FortuneMagazine. LaForgia is an adjunct professor at Georgetown University, with appointments in boththe school's finance and its management and organization departments.

5. Robin Reddick (special advisor) is the director of the Smithsonian Institution, the worldslargest combined museum and research complex. From 1991 until 2004, Reddick served aspresident and chief operating officer of Continental Airlines. Prior to joining Continental, Reddickserved as vice chairman and chairman of the executive committee of the boards of directors of

Citicorp and Citibank, N.A. Reddick serves on the board of directors of the Woodrow WilsonInternational Center for Scholars and the Museo Popol Vuh, which is home to one of the mostcomprehensive collections of Mayan art and artifacts in the world.


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El Mirador: A New Direction for Hospitality Leader TimoraExcerpted from: Travel and Tourism Industry News, October 23, 2009

The massive Mayan city of El Mirador was rediscovered in 1926, but has only recently become the focusof ongoing excavations. It holds great promise both as a tourism destination rivaling the magnitude ofTikal, and as an important piece in the puzzle concerning the advancements of Preclassic Maya society.El Mirador flourished between 200 BC and 150 AD, much earlier than Tikal, and has revealed a greaterlevel of sophistication than once thought concerning early Mayan society. It is thought to have been hometo 80,000 people at the height of its occupation.

The site sits on a series of limestone hills at an altitude of just over 240 meters (800 feet) and occupiesabout 16 square kilometers. El Mirador is dominated by two large pyramid complexes. The architecture ischaracterized by triadic structures composed of one large temple pyramid flanked on either side by twosmaller pyramids, a pattern that is repeated elsewhere in the Preclassic sites of the El Mirador basin.Jaguar and vulture heads are built into the sides of El Miradors smaller temples and the spectacularviews from the top of the pyramid provide views of nearby Mayan sites, including Nakb and Calakmul.

Excavations of El Mirador are being conducted under the direction of Dr. J.T. Anderson, who has led theEl Mirador project for the past 12 years. The preservation of its delicate monuments is being aided bytechnological advances, including covering structures with polycarbonate roofs designed to protect themfrom rain and ultraviolet light. Critics have suggested that the Mirador / Timora partnership was simply a

way for the cash-strapped archaeologist to continue funding his (expensive) pet project, but in reality, theEl Tigre Jungle Resort emerged out of the decades-long friendship between Anderson and TimorasCEO, Yvonne Tolle. Regardless, Anderson has been instrumental in bringing Timora Internationals visionof a luxury ecotourism property to fruition. Without J.T., El Tigre would still be a dream, said Tolle a fewmonths ago, With his help, Timora is bringing the wonders of El Mirador to the world. Without his help inthe future, our prospects are clearly weakened.

The El Tigre project will cost $75 million and will consist of 60 jungle chalets and 20 luxury villas withprivate plunge pools.


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El Tigre Jungle Resort Promotional Materials

Cool garden waterfalls. Elegant thatch-roofed villas nestled in Guatemalas most remotejungle. Centuries of history around every turn. The El Tigre Jungle Resort is a hideawaylike no other.

A completely carbon-neutral property, El TigreJungle Resort hotel in Petn, Guatemala blendscasual elegance with the coveted seclusion of a lushgarden retreat. Eighty guestrooms and suites affordstunning jungle views and unparalleled access to therecently opened El Mirador archaeological site aswell as the J.T Anderson Museum, a local effort toshowcase the art and artifacts of the site. Relaxed

contentment is made complete with award-winning fusion cuisine, three swimmingpools, an intimate spa and superb service. Experience the ultimate vacation getaway.

Property Map

Region Map

Stephen Wright 12/18/09 4:33 PM

Comment:

Compliance with building codes entailsmaking the site completely handicapaccessible. In reality, we arent likely toreceive visitors who would require specaccess. If we find this not to be the caswe can always retrofit the property.Eliminating handicap access would sav$650,000 and 14 days. However, it will20% more expensive if it turns out that have to retrofit

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Trends in International Resort Development: 2008 Timora Annual Report

In recent years, sophisticated developers have increasingly been gravitating to lower-density, more environmentally-sensitive destinations and projects while large-scaleresorts are increasingly perceived as sterile and inappropriate. In addition to seeking outdramatic natural environments, high-end developers are seeking a private sanctuarywith a distinctive sense of place amidst an increasingly crowded world. Timoras ownexperience bears this trend out, as we have been moving away from the mega-resortparadigm toward smaller, more exclusive destinations.

Our newest project, which is currently under development in Guatemala, epitomizes thistrend: The El Tigre Jungle Resort is located in the remote department of Petn, on thegrounds of the magnificent (and historically significant) Mayan ruin site of El Mirador. ElTigre is entirely contained within a 2,000-acre natural preserve and a wellness centerspa focusing on ancient Guatemalan healing arts. The property will be 100% carbonneutral, and certified as a sustainable resort both firsts for Timora!

Resort trends are changing globally, and creative new project concepts are essential ifwe are to limit our financial exposure and attract sophisticated guests who have manyalternatives. Our claims must be credible and our evidence transparent. Integratingmarketing and sales into that process at the earliest possible stage of the developmentprocess has been an important part of achieving this goal.

Our research is pointing to the need for more creative amenities at our properties. Forexample, by focusing on a sites historical associations, emphasizing extraordinaryarchitectural design, providing a higher level of personal service, or simply providing anauthentic regional experience for residents. In all cases, these alternative emphasesposition the projects as contrasts to conventional competitors.


Comment: Our VP of Sustainability sathere are more than 100 sustainabletourism certification programs for theindustry! We would save $175,000 bychoosing the least expensive (lessreputable) option. Alternatively, we wousave $295,000 and 5 days by not pursucertification at all.

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2008 Human Rights Report: Guatemala

Guatemalan law sets national minimum wages for agricultural and nonagricultural workand work in garment factories. The daily minimum wage was 52 quetzales ($6.73) perday for agricultural and nonagricultural work and 47.75 quetzales ($6.18) per day forwork in garment factories.

According to the US Department of State, the minimum wage did not provide a decentstandard of living for a worker and family. The National Statistics Institute estimated thatthe minimum food budget for a family of five was 1,976.05 quetzales ($256) per month,18.85% higher than in 2007. Labor representatives noted that even where both parentsworked, the minimum wage did not allow the family to meet its basic needs.

Noncompliance with minimum wage provisions in the informal sector was widespread.The Ministry of Labor conducted inspections to monitor compliance with minimum wageprovisions, but the government allocated inadequate resources to enable inspectors toenforce the minimum wage law adequately, especially in the very large informal sector.Advocacy groups focused on rural sector matters estimated that more than half ofworkers in rural areas who engaged in day-long employment did not receive the wages,benefits, and social security allocations required by law. According to credibleestimates, between 65% and 75% of the workforce continued to work in the informalsector and outside basic protections afforded by the law.

The legal workweek is 48 hours with at least one paid 24-hour rest period, although in

certain economic sectors workers continued to operate under a tradition of longer workhours. Daily and weekly maximum hour limits did not apply to domestic workers. Time-and-a-half pay was required for overtime work. Although the law prohibits excessivecompulsory overtime, trade union leaders and human rights groups charged thatemployers forced workers to work overtime without legally mandated premium pay.

Labor courts have responsibility for sanctioning employers found violating labor laws.Labor inspectors are not empowered to adopt administrative measures or to imposefines for labor violations. The labor courts received 1,619 cases from the LaborInspectorate and ruled in favor of reinstatement of the worker in 571 cases. Courtdecisions favorable to workers were rarely enforced due to frequent refusals byemployers to honor these decisions. Management or persons hired by managementreportedly continued to harass and make death threats against workers who did notaccept employer dismissals or refused to forfeit their right to reinstatement.

The government sets occupational health and safety standards, which were inadequateand poorly enforced. When serious or fatal industrial accidents occurred, the authoritiesoften failed to investigate fully or assign responsibility for negligence. Employers rarelywere sanctioned for failing to provide a safe workplace. Legislation requiring companieswith more than 50 employees to provide onsite medical facilities for their workers wasnot enforced. Workers have the legal right to remove themselves from dangerous worksituations without reprisal. Few workers, however, were willing to jeopardize their jobsby complaining about unsafe working conditions.




Comment: Former teams notes say tthere are 302 local laborers employed othe job site at $40.00 per day. Given thfact that there are few job opportunitiesthe area, Yvonne is confident that a 75

pay cut would be tolerated - its still welabove the minimum wage! This wouldsave us $1,163,000.

Comment: I just got off the phone withthe project manager in Guatemala.Working hours are 7am 4 pm, 5 daysweek. If we add a night shift and work 6days a week, well be able to finishconstruction sooner. However, this willmean working in the dark, which willincrease the risk of accidents (and add$1.1 million to the final budget), but itwould save 30 days. If we dont pay timand-a-half, and instead pay $15 / day, will only cost $290,000 (and will still sa30 days).

Comment: The project manager wantme to emphasize to you that seriousaccidents at the site will likely increase we begin working at night, even withadditional lighting and safety precaution

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From: Anya ValezTo: [email protected], [email protected], [email protected], [email protected]: El Tigre Project Completion Options

Hello Team-

Yvonne has asked me to share my insights about the options for completing the El Tigre project. Unfortunately,Im about to get on a flight to Australia for the opening of our new hotel in Sydney, and will be out of touch for

the next 21 hours. I hope this information helps.

At the rate were going, the project will be 22 days behind schedule and $2,125,000 over budget. Based on myreview of the information left by the former project management team, it appears that there are several areaswhere we can save time and money.

As a gesture of goodwill, Timora pledged to construct a school in the community. However, we haverecently learned that there is already a school with sufficient capacity for all the students (I sawfirsthand that the school is large enough to fit all the students). Therefore, construction of a secondschool is unnecessary, and not building one would save us $345,000 and 5 days.

Timoras original plan was to hire local staff for 90% of the positions. However, we didnt anticipate thelocal populations low levels of literacy and lack of experience in the service industry. If we revise ourtraining program to eliminate the need for written materials (a cost of $51,500) we think we can

successfully complete the training we have begun with the current group, although it will take 5 extradays. Bringing in trained staff to make sure things run smoothly will save us $212,000 and will not addtime to the project. However, Dr. Anderson suggests that we stick to the plan. He feels that it will allcome together, and that its important to show the community that we trust them and value theirinvolvement.

Cancel commitment to make property carbon neutral (through the purchase of carbon offsets). Thismay impact our ability to be certified as a green property, but the savings are substantial - $1,119,000.

The original plans call for the use of forest-certified wood throughout the site. However, more treeshave been felled than we thought necessary, and the foreman proposes using local timber that is notcertified. This would save $1,320,000 but add 10 days.

The nesting site for a species of snake is located on the future site of the spa. The site manager

ensures me that no one else knows about this, and is recommending that we move ahead withconstruction as planned (this would have no effect on the budget, but construction on the spa hasalready begun and the site manager believes it will be completed 5 days ahead of schedule). I askedhim how much it would cost to relocate the spa, and he estimated the cost at $422,000 and 10 days oflabor.

I know this is a lot of information to digest, but Im confident that youll be able to develop a plan to get theproject back on track! Im sure youre planning a site visit soon I dont know if any of you have visitedGuatemala before. If not, you should take a look at the information available from the US State Department:http://travel.state.gov/travel/cis_pa_tw/cis/cis_1129.html

All the best,

Anya

Anya VelezV.P. Special ProjectsTimora International


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Case Study 2010 Leadership Crisis Challenge

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