Case- On a June day in 2009, Frank Calveta, president and chief executive officer of Calveta Dining Services, Inc., struggled as he prepared to present growth strategies to his father, founder and former CEO Antonio Calveta. Calveta was a $2 billion, privately held firm that managed food service operations for nearly 1,000 senior living facilities (SLFs) in the United States. When Antonio retired in 2007 after 35 years of leadership, he named his eldest son, Frank, CEO and told him to double the company’s revenues within five years. Two years in, Frank confided, “I can’t let my father down. I can’t abandon the special company culture we have or risk our reputation for quality food service. But after two years in this job I still don’t have a credible strategy for meeting those two promises and also growing the business as aggressively as my father wants.”
Calveta Dining Services, Inc.: A Recipe for Growth HBS Case study Solution-
- Core issues related to the case
- Analysis of data for the root cause/s of the problem
- Probable solutions based on the root cause to solve the problem
Core issues related to the case:
·
To maintain the reputation it had earned
over a period of time and a Fear of losing Calveta’s solid reputation as a
leader in the health-care sector due to expansion of business into different
segments.
·
Conflicting objectives of preserving the
company culture and achieving aggressive growth simultaneously.
·
To have well versed employees in the
organisation who can strongly follow the Antonio way of doing things in the
organisation.
·
Conflicts and a sense of confusions in
decisions related to expansion and diversification of business into other
segments and acquisition of GSD. Financial Problems in Expansion of business
beyond the SLF segment to hospital segment in order to double the revenue of
the organisation.
·
Financial Problems in Expansion of
business beyond the SLF segment to hospital segment in order to double the
revenue of the organisation.
· Losing of contracts and rising of Customers’ dissatisfaction due to frequent changes in management and account managers at different facility centers.
Analysis of data for the root cause/s of the problem
Preserving the company
culture and achieving aggressive growth were conflicting objectives Frank knew
that organization already showed signs of strain, “and his sister and more than
one of her colleagues on Calveta’s executive team agreed that would rather save the culture than spread
themselves too rapidly into new businesses.
Despite the growth of
an aging population, and despite Calveta’s impressive business growth, it
seemed highly unlikely to Frank and the executive team that the company could
double its revenues in five years unless it branched out beyond the SLF
segment.
And despite growth in
the hospital sector, Hospitals were, in the aftermath of the 2008–2009
recession, facing cutbacks in equipment and service due to decreases in
charitable donations, reduced government assistance, and declining patient-stay
lengths. Calveta expected such cutbacks to result in hospital closings,
possibly reducing the potential market size.
Frank feared that
Calveta’s solid reputation as a leader in the health-care sector might become
threatened as its relative size shrank versus the competition.
Considering the
financial challenges of getting into the hospital segment, the upbeat angles
seemed a bit pie-in-the-sky as Calveta shouldered little debt. Because the
company had been able to fuel its growth through prudent cash flow management,
it did not need to rely on debt to finance kitchen equipment and renovations.
If Calveta chose to pursue growth through acquisition, however, its no-debt
philosophy would almost certainly need to be set aside. Calveta’s unique
culture also served as an impediment to growth through acquisition.
Lost contracts
typically resulted from changes in management at an SLF; only rarely did an SLF
drop Calveta citing poor performance. For several years, Frank Calveta had
heard about such defections, and he believed that the vice president of account
management had been dealing with them effectively. But when he’d begun reading
the company’s annual client satisfaction survey results from the perspective of
the CEO’s chair, Frank recognized that client frustrations with employee
progression policies had worsened.
Frank felt that the
organizational structure of the firm was partly to blame for the customer
dissatisfaction. While he’d been CFO, Frank had expressed concern that the
design of the organization might have gotten knocked out of alignment as the
company grew, but little had been done as Jennifer, speaking as COO, had
disagreed with Frank. But Upon reading the latest surveys, Frank decided to
have another look at the company’s organizational chart.
Frank also worried
about a rising diversity in the skills of area and account managers. It was
becoming harder to find operations managers who fully embraced Antonio’s Way
which can pose a problem in maintaining core values of the organisation. Recent
development in the organisation has posed a rising diversity in the skills of
area and account managers and new joinees lacked the industry experience.
As per Jenifer, GSD from
Great Southwest don’t have the best reputation. They’ve had labor problems and
substantial turnover in their management ranks. However, Frank was confident that maybe
Calveta’s best managers could slowly move GSD’s culture toward Antonio’s Way.
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Probable solutions based on the root cause to solve the problems:-
Looking into scenario
and objectives of the organisation, Calveta must opt for expansion of its
business in different business segments particularly hospital segment as they
are leaders in health segments. As the statistical data also proved that there
is a sharp increase in aging population and 75 % market remained untapped. So
Calveta must exploit this opportunity and target to achieve the goal of
doubling its revenue in five years. Though Company have had no debt in its
financial structure but in order to ensure its growth and expansion plan they
must lever its financial structure and take advantage of reputation of company
in getting debts from the market. Instead of hiring fresh graduates, company
should focus on hiring those candidates who are ready to work in ANTONIO’s way,
a work culture set by the founder of the company and the company should train
them accordingly in order to maintain in reputation in the market. The company
should go for acquisition of GSD as this company can help in expansion of the
business in great southwest, the place where Calveta is not operational. The
problems of labor problems can be sorted out by hiring competent employees and
training them to cater the needs of company.
