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CA 5E 5-3 Ra dioShack:Corporation:You’ve Got MaU!

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Julian Day was brought on as CEO of RadioShack to tum the company around fol­ lowing years of financial decay and instabil­ ity in upper management. The British executive had been part of the turnaround of

, other U.S. corporations including K-Mart, now owned by Sears, and Safeway, Inc.1 Day wanted to waste no time implementing the turnaround plan that the executives and Board had agreed upon prior to his arrival.

RadioShack Corporation
RadioShack is a consumer eiectronics goods and services retailer that operates more than

years,. Roberts retired from his chief executive· ‘ position in favor of a seat on RadioShack’s· · Board of Directors.3 Edmondson, however, left his position after making the scandalous reve­ lation that he had fal ified his resume by claim ing to hold two academic degrees he had never

camed.4 Day was brought in at the beginning – . of July 2006 to help tum RadioShack around _ · because of his positive record in revivmg financially unstable retail oompanie..,.

Financial Tro-nbles and Tumaround Plan· :- ·.

The change in management and the intense

c,ompetit.ion in the marketplace have not ·

4.460 retail stores in the United States, Puerto

Rico, and the Vu-gin Islands. In addition to the RadioShack retail store chain. the company also operates nearly 800 nonbrandcd kiosks, offering wireless handsets and accessories. They also manage direct-to-home satellite services through 1,500 dealer outlets offering both RadioShack and third-party products and services to consumers who Jive in smaller markets, and an e-comm.erce Web site, www. radioshack.com. The electronics goods indus . try is highly co mpetitiv,e and RadioShack is currently third in the U.S. market behind big box stores Best Buy and Circuit City. The company is headquartered in Fort Worth,

Texas, and had approximately 40,000 employ-

ees at the end of 2006.2· ·

· tilbili.t-y in Upper Management

Over the past several years, RadioShack has undergone a series of executive management changes including ten new appointments to vice presidential and c-suite level positions

gone unnoticed in the company’s financials. . RadloShack’s stock price bad been unde rper ._ forming and both its 2005 and 2006 annual repons contain letters to shareholders that arc apologetic in nature. As the values below showt stock prices were down from 2004 and RadioShack lagged its major competitors in, revenues and eaming;s. .: –

Addi.tionaUyt total stockholder ,equity· .· _­ had deteriorated from 922,100,000 in 2004 to : -. 653,800,000 in 2006.5 Management has real- . ized its obligation to increase the firm’s, financial performance and has laid out a turn– – around plan with the following three objec- : . – tives: increase average unit sales volume, rationalize the firm’s cost structure, and grow profitable square footage of retail space. In describing how the goals would be attai ned;.·. management addressed the consolidation of distribution centers. reallocation of resources among RadioShack stores to reflect prof­ itability, updating the inventory and product

line offerings . and reducing overhead costs.6

since 2004. The most significant change in the

executivelevel shuffle of employees is the
Overhead Costs= Hundreds

I

of Jobs

-· .. ·._ ‘ 1., … . ‘

instability in the CEO position : Leonard
Robens, David Edmondson, and Julian Day

ha¥e all reported for the position in the last two

The public”s initial,response to Day’s appoint-

ment CEO and turnaround plan – –

as

ita”ve and RadioS wa-s gimi th e confidenc.e ·

,.. … .. . –

to m,ove forward with the plan. One month after assumjng the chief executive’s position, J?ay issued the following press release:

·· – Employee Perceptions
I

· RadioShack corporate headquarters employ.. ees were unprepared for the sudden announce­ ment as recent communications had praised their talents as RadioShack’s principal enabling factor in turning the- compnny

,. around. Managers approached their teams

· soon after the press relea e to inform them that
the workforce reduction would be a swift

· _ process enabled by the companY-s intranet. Employees soon began losing confidence in many of the company”s public claims., includ.. ing the following, used on the corporate careers Web site: ”It begins by celebrating

_: diversity and passion in every department and at every level. Our professional development. programs, workflow and communication

_ processes make great thinking possible. Our..

people make great things happen: ..

You’ve Got Mail!

Employees and investors awaited the impending layoffs in September of 2006 and, on an otherwise uneventful autumn day. nearly 400 employees were given their termi­ nation notice with the following words:

”The workforce reduction notification · is currently in progress . Unfo:nunately your position is one that has been eliminated.” If these words seem stark. then consider their me.th od of delivery: this message was sent out to the affected employees via their com• pany e-mail account. .

The press and professional O£gani7Jltions·· . of communications and human resources pro­ fessionals baJked at the communication method used in the layoffs. A Fort Wonh Star· Tribune reporter wrote the original story which · made AP news and appeared in nationaJ publi­ cations such as USA Today and The New York Thnes and Web logs popped up as seemingly : , evecyone on the Internet was talking about the .

e-m ailed termination notices. – ·

DISCUSSION QUESTIONS

1. AdditionaJ layoffs, distribution center and retail location closings. and the redistnl>ution of resources throughout the organii.arioo continue co loom on the horizon as Day puts Radio­ Shack’s tumaround plan imo action. What can be done by RadioShack. to ensure future com munications are handled appropriately?

2. Who is responsible for the communications decision and should there be action· take.n against the individual(s)?

3. What should RadioShack have done in res­

_·: – . – ponsc to the negative publicity?

. .,

· WRITING ASSIGNMENT

Please respond in writing to the .issues presented in this case by pre:µaring two documents;_! f O!!}- tions strate memo and a professional business letter. Yo-ll shou assume the role of a

·- ……

4C.an you identify the stakeholders in _ this

for

case on.d specify what•s t stake each f
.· them?

S. Whi.c h issues • nre most critical for RadioShack corporate management at thi:s point? Can you rank order tbose iss.ues. according to urgency?

6. Does the company have sufficient inte al : expertise and staff to manage this issue:on their own. o.r will they require dte assistance – ‘­

-of a communica.tions consultant? ·

senior level task force member from· eitber human resources or corporate communications. The task force has been· put together to ad ss the issues presented by the case. Th-.e strategy