Ineffective handling of a managerial situation

W16144
LONG-TERM ORIENTATION IN THE BENEDICTINE MONASTERY OF
ADMONT
Dietmar Sternad wrote this case solely to provide material for class discussion. The author does not intend to illustrate either
effective or ineffective handling of a managerial situation. The author may have disguised certain names and other identifying
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Copyright © 2016, Richard Ivey School of Business Foundation Version: 2016-03-21
On a cold winter’s day in February 2015, the twin towers of the abbey church were hardly visible in the
heavy snowstorm. Helmuth Neuner, long-time business director of the Benedictine monastery of Admont
in Austria, was trudging through the snow over the monastery’s main courtyard. His attention was on one
of the Admont Monastery’s businesses, the wooden panel production company STIA Holzindustrie
GmbH (STIA), which was facing a rapidly changing market environment. Chinese producers of cheap
wooden and laminate floors were putting pressure on the price levels. With its comparatively high labour
costs, STIA had a considerable cost disadvantage. For the last two years, the company had reported losses
(see Exhibits 1 and 2).
“I do not demand the same high returns from all our businesses,” thought Neuner. “But this is about the
long-term viability of the company. We do not need to take any dividends out of the business.
Nevertheless, we need to earn at least enough to be able to invest into the future.”
Neuner saw it as one of his major challenges to keep STIA afloat in a stormy market over the next
decade. He knew that the company had certain advantages: in particular, a loyal labour force — people
who had a deep attachment to the product and their employer. But was it enough to survive in the long term?
THE FIRST 871 YEARS
In 1074, based on an endowment of Saint Hemma of Gurk, the Benedictine monastery of Admont was
founded in a remote location amidst the Ennstal Alps in the northern part of the Austrian province of
Styria. Following the famous motto of their order’s founder, Saint Benedict of Nursia, “ora et labora et
lege” (“pray and work and read”), the Benedictines soon developed Admont Monastery not only into a
widely known centre of spirituality and literacy but also into an important economic base for the region
(see Exhibit 3). The original endowment had included vast forest lands. These forests and the monastery’s
vineyard estate, established in 1139 in the village of Jarenina (Slovenia), remained the main sources of
income for centuries. Timber had long been in high demand, and the monastery’s wine was highly
renowned and consumed from the Austrian royal court to England.
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Based on its strong economic basis, the monastery flourished in the 17th and 18th centuries, founded a
high school, was widely acknowledged for its school of broidery art, and created the world’s largest
monastery library room: a Baroque masterpiece that blended architecture, frescoes, sculptures, and books
into one unique, holistic piece of art.
The monastery experienced much harder times in the 1930s. Following a collapse of timber prices during
the Great Depression, Admont Monastery was unable to pay wages and bills. It had to sell precious works
from its famous art collection to survive. Just a few years later, in 1939, the monastery was expropriated
by the Nazi regime. The monks had to wait until the end of World War II to return, but parts of the
property — most notably the monastery’s vineyards — remained lost.
DIVERSIFICATION INTO INDUSTRY
After the events in the early 1930s, the convention of monks realized that it was too dangerous to rely on
agriculture and forestry as the sole economic pillars. They decided to diversify the monastery’s business
operations. Hydroelectric power stations and utilities, ski lifts, a museum, a care home, a market garden,
restaurants, real estate development, and service businesses were added to Admont Monastery’s portfolio.
In the 1970s, the monastery also started to diversify into industry. Out of a felt responsibility for the
development of the region and for providing jobs, but also as part of an overall vertical integration
strategy, it invested in timber-processing plants.
STIA was founded in 1972 with 13 employees for the industrial production of formwork panels. Soon the
company specialized in higher-quality natural wooden panels (used by furniture makers and for facades)
and triple-layered floorboards under the “Admonter Naturboden” brand name. The company established
itself well in both the domestic and international markets, especially in the years after 1990 when it
developed its widely renowned wide plank floors.
In 1973, the Admont Monastery, together with a joint venture partner, established DANA: Austria’s first
industrial producer of wooden doors. Due to the partner’s bankruptcy, the monastery took over full
ownership of DANA in 1979. In the 1980s and early 1990s, under new management headed by Neuner,
the company doubled the number of employees, tripled its revenues, and achieved a market share of over
60 per cent in its home market of Austria.
Based on his successful performance at DANA, the convention of monks decided to appoint Neuner as
the monastery’s business director in 1994. (The monks decided democratically on all fundamental
business matters, including the appointment of the top management or the approval of the yearly budget,
based on the principle of majority rule.) In his new role, Neuner was responsible for all of Admont
Monastery’s business activities. From this new perspective, he soon realized that DANA no longer fit into
the monastery’s portfolio:
I knew that the Admont Monastery would not be able to manage such a company well in the long
term. The industrial business is far too volatile. Moreover, DANA was becoming too big for
Austria, but at the same time, we did not want to take the investment risk involved in further
internationalizing the business.
Thus, in 2005, the monastery decided to sell DANA — which, by that time, had developed into a more
than €50 million1
business — to a U.S.-based globally active windows and doors corporation.

1 € = EUR = euro; all currency amounts are in € unless otherwise specified; €1 = US$1.13 as of February 9, 2015.
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FROM DOORS TO HOUSES
The Admont Monastery invested all the proceeds from the sale of DANA into real estate. “It was a
change of paradigm,” said Neuner, as the monastery deliberately decided against a further investment in
its traditional forestry business, in which Admont Monastery was among the top five in Austria. Neuner
explained the decision:
In forestry, the yield is well below 1 per cent. In real estate, I had a yield of 5–6 per cent from the
beginning: returns that I cannot guarantee in industry. A 0.5 per cent difference in yield will
double your assets in a century. Thus, if I invest in real estate, I have the same substance as in a
forest, but a much higher chance to accumulate property. I cannot be sure of a sustainable 4–5 per
cent rate of return over decades in industry. Also, with real estate, I do not have a full guarantee.
In the early 1900s, for example, an Austrian law set maximum house rent limits. If legislature
interferes, the returns can also diminish in real estate. The substance, however, remains intact.
Neuner was aware that entering new business segments did not come without risks:
Many others who thought that they needed to diversify failed. Their new pillars were breaking
away because they did not have the necessary skills to manage them. If you do not understand
anything about real estate, you will not be happy with it. You need to build the skills to
successfully manage a new business segment.
The Admont Monastery created its own real estate development department. Several employees
successfully graduated from a real estate academy. In the beginning, Admont Monastery entered into a
partnership with a local insurance firm that had a reputation for being a long-standing expert in real estate.
The first projects were developed together, with the monastery taking the junior partner role with a share
of 30 to 35 per cent. After the successful completion of three joint projects, the monastery started its own
projects. Sensing that closeness to customers was a key success factor in the business, it also set up a
property management department.
In the meantime, the monastery also offered its real estate development and property management
services to third parties, mainly other church-related organizations, as Neuner explained:
At first, our sister and brother organizations were quite skeptical, as they saw that we did
something in which they had not been able to proceed. We could change that perception over
the years, however. Now we help them to develop their own real estate. We never pull them
over the barrel. We are transparent, open, honest, and very correct. That’s our highest credo.
Thus, others can participate as well. Now that we have built a reputation, more and more
potential partners are asking us to cooperate with them.
Within two decades of Neuner’s tenure as a business director, Admont Monastery had invested in real
estate with a value that was equivalent to the 60,000 acres of forest land that had formed the basis of the
monastery’s prosperity for over eight centuries.
RE-ENTRY INTO THE WINE BUSINESS
In 1991, the Slovenian government passed a denationalization law that enabled the privatization of
businesses that had been in state ownership in the Communist era. The Admont Monastery saw this as an
opportunity to regain its former vineyard estate around Jarenina, although the vineyards were abandoned
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and the buildings desolate. After some years of juridical quarrels over the rightful ownership, Admont
Monastery reacquired the estate. Twelve million euros were invested in re-cultivating 170 acres of
vineyards, restoring the buildings (including a representative castle), and setting up a new production site.
Forty-three people were employed in the winemaking business in 2015.
After more than 15 years of investment, the vineyard estate was still not profitable, despite producing a
rather large quantity — 300,000 litres — of wine per year. Neuner explained the rationale behind this
unusual investment that had remained unprofitable for a long period:
It is not our intention to make profits right away. That is our most important advantage
compared to other investors who need to earn their money back in a very short time. If you
contribute to the development of a region — even if it is only a small region — for a long time,
you have a responsibility. In the time between 1139 and 1938, the monastery engaged in
regional development, built schools and roads, and made sure that the people could live and
survive. The wine brought added value to the region — value that could also be sold well to the
benefit of the Admont Monastery. We want to assume this responsibility again. In the long run,
we, of course, also want to earn something again, but at the moment, we focus on building the
substance, improving the substance, and creating value in the substance. If we would sell it
again today, we would not get anything for it. But how will it look in 200 years? I am convinced
that food staples — and I consider wine a food staple — are something that we will always
need. In the long term, when we are able to improve our name and make the wine more known
again, we will also get returns. We just need to establish our new brand — Dveri Pax. It takes
time, but we will take our time.
The vineyard estate was named Dveri Pax instead of bearing the name of the monastery in order to enable
the people in the region to identify with their own local brand. In addition to developing the estate’s
brand, Neuner also saw the need to better position Slovenia as a wine-growing country in global markets:
It just takes time — or money. But in this respect, we are conservative. We do not want to take
too much money into our hands to push it in the short term. It will happen automatically. You
just need to take your time — and that’s what we do.
The Dveri Pax estate engaged in some marketing activities including wine presentations, a bar-showroom
in the nearby city of Maribor, and invitations to journalists. However, a stronger focus was set on
ensuring the quality of the product than on marketing, as Neuner explained:
We will build trust and credibility only with consistency and quality. Only high quality lasts. It
will become apparent. People will taste the wine and will buy it if it is good. We will provide
high quality every year, or we won’t offer the wine to the market at all. Thus, we will reach at
least a balanced business result within the next five to ten years.
INVESTMENT AND LEADERSHIP PRINCIPLES
Just like a typical corporation, the Admont Monastery also held capital assets that it invested on the stock
market. When doing so, Neuner followed some basic rules:
We try to invest as ethically as possible, although we use a wider definition about what we
consider an ethical investment. I also do not see us as a shareholder who wants to profit from
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rising share prices. I want to acquire a part of a business — a business that I understand, in
which I trust, and where I can assume that the management will work prudently to generate a
reasonable dividend yield. It is a nice side effect if the share price is also developing well.
In all investment activities, however, the monastery remained relatively risk-averse. For example, it
engaged in neither derivatives nor currency exchange transactions. “We do not enter any sphere of risks,”
said the monastery’s abbot, Bruno Hubl. “We cannot afford that for moral reasons.”2
Even the Internet
business was avoided: “We prefer real estate and forestry,” said Neuner.3

Although Neuner agreed that “a monastery is not programmed to deal with risks,” he was also convinced
about the need for courage:
The courage to make decisions is the first element of success. You need to have courage. Just
leaning back and not doing anything cannot work out well, even with a lot of substance. You
cannot win out of fear — not even if you are long-term-oriented. You need to keep the fire
burning — as they say — and not the ashes.
Keeping the fire burning over the long run was also a key principle in people management at the Admont
Monastery. Those who entered a management position in one of the monastery’s businesses usually
remained there for decades. Neuner therefore placed great emphasis on selecting the right people, as he
explained:
Personality and moral attitude are what really counts here. In conversations with employees,
attitudes, dignity, and humility are important — things that Saint Benedict also put into the
foreground. To my mind, humility is one of the most important elements of leadership — it’s
about letting the other person live, giving him or her the chance to develop, and taking delight in
how the other one is able to do something.
HIGHER PURPOSES
For the Admont Monastery, business played an important role — but as a means, not as an end. “It has a
serving function,” says Neuner. “The other tasks of the monastery have priority. Business is the bread.”4
The monastery’s other duties included pastoral care for 26 parishes; the only high school in the region
with over 550 students; a care home; a community centre; and a combined natural history, fine art, and
modern art museum with around 80,000 visitors per year. Neuner explained the importance of the
monastery’s work:
I do not serve shareholder value with my work here but purposes for which the monastery and I
take responsibility. As a farmer’s child, I had to run for miles to go to school, which makes the
monastery’s high school all the more important for me. It is the only option for getting a
secondary school leaving certificate5
around here. Or take our care home: We have just invested
€3 million for 35 care places. We will never see this money again, but that does not matter. I am

2 Klaus Höfler, “Abt Bruno Hubl: ‘Nur Schneller Gewinn – Das Kann Es Nicht Sein,’” DiePresse.com, August 13, 2009,
accessed February 13, 2015, http://diepresse.com/home/politik/innenpolitik/502019/Abt-Hubl_Nur-schneller-Gewinn-daskann-es-nicht-sein.
3 Anke Henrich, “Admont-Wirtschaftsdirektor Neuner: ‘Es Geht Auch Anders,’” Wirtschafts Woche, accessed April 2, 2015,
www.wiwo.de/unternehmen/interview-admont-wirtschaftsdirektor-neuner-es-geht-auch-anders-seite-2/5525220.html. 4 Andreas Kump, “Am Boden Bleiben,” Adoro – Your Admonter Magazine 2 (2012): 15. 5 Comparable to a high school diploma in the United States.
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convinced — as are the Benedictine monks — that you can lead a company both in a humane
and a sustainably successful way.6
Abbot Bruno added another important purpose of the monastery’s businesses: “Not least, it is also about
creating jobs. Earned profits are also serving the common good.”7
He recognized the importance of
profitability for keeping a business alive: “Of course, we need enough to reinvest and renew. But the
thinking always needs to be sustainability-oriented. Only short-term profits — that is not the right way.”8
Admont Monastery’s monks, along with Business Director Neuner, always tried to keep the well-being of
the region in mind when making decisions about the monastery’s businesses, which provided close to 600
jobs in and around a small and relatively remote village of only 2,500 inhabitants. “It has been our
aspiration to develop the region around the monastery for almost a thousand years,” said Neuner. “Only if
the region is functioning, can we preserve education, jobs, or regional energy supply. The financial crisis
will throw the spotlight on the development of regions again.”9
STIA HOLZINDUSTRIE GMBH
After the sale of DANA, STIA (which stands for “Stift Admont,” the German name of the monastery)
remained the monastery’s single largest business unit in terms of revenues (€50 million in 2014) and
employees (over 330). The main markets for its wooden panels and floorboard products were Austria (33
per cent of total revenues in 2013) and neighbouring countries Germany (24 per cent), Italy (17 per cent),
and Switzerland (9 per cent), but STIA also exported to overseas markets such as China and Japan.10
The village of Admont was STIA’s only production location. The company sourced its raw wood
exclusively from forestry operations that were certified according to high international sustainability
standards. Following a general approach of using geographically close sources of raw materials (71 per
cent of the raw wood was sourced domestically, 15 per cent was from Scandinavia, 6 per cent was from
Russia, 3 per cent was from Germany, and 5 per cent was from other countries),11 STIA did not use any
tropical wood, as managing director Ewald Fuchs explained:
We never asked for a price quote for low-grade timber. Even if it is certainly an everyday
disadvantage for our sales representatives. But using dubious materials or producing somewhere
else than in Admont: that’s just not us.12
For coatings, STIA preferred materials that were close to nature (e.g., plant oils). The company used
modern, energy-efficient manufacturing technologies that kept emissions to a minimum, and it processed
all waste wood to produce electrical energy and heat. Thus, STIA supplied both the monastery and the
municipality of Admont with electricity and heat, while almost achieving carbon neutrality.
In 2005, following Japanese examples, STIA introduced a continuous improvement process. It was
launched with three keywords: cleanliness, order, and safety. First, all machines went through a basic
cleaning. Working places were optimized regarding both functionality and appearance. Major

6 Henrich, op. cit.
7 Kump, “Am Boden Bleiben,” op. cit., 17.
8 Höfler, op. cit.
9 Henrich, op. cit.
10 Andreas Kump, “Die Longseller,” Adoro – Your Admonter Magazine 1 (2012): 12. 11 Kump, “Am Boden Bleiben,” op. cit.
12 Kump, “Am Boden Bleiben,” op. cit., 11.
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maintenance-based and productivity-related figures were regularly tracked with the aim to shorten cycle
times, improve quality, and decrease costs. Employees could use “idea cards” to suggest improvements
and received financial bonuses if these improvements led to positive outcomes for the company.
Although the company had thrived for more than four decades, it faced considerable challenges. It
experienced a strong decline in demand in one of its main foreign markets, Italy, following the 2008–09
financial and economic crisis. The market situation was generally characterized by a volatile demand that
varied from quarter to quarter. Orders were increasingly placed at short notice, which made production
planning and resource management more difficult. At the same time, competition from Asia in parquet
floors was strongly increasing, with the effect that the whole market was shifting toward lower-margin
products. As a result, even STIA as a high-quality producer was not able to enforce higher price levels to
match the increase in labour, raw materials, consumables (e.g., glue or packaging materials), and energy
costs. Fortunately, the whole plant had been modernized just before the 2008–09 global financial crisis;
thus, it currently did not require high investments.
Roundwood prices had remained at very high levels in Austria (especially for fir and larch, the main
varieties used by STIA) for years (see Exhibit 4). Imports from more distant supply markets like Russia,
Romania, and Ukraine (where roundwood was available at 20–40 per cent below the Central European
price levels) were not economical due to the high share of transport costs. As a result of the political crisis
in Ukraine, the key production country of oak slats, STIA also faced price increases and supply shortages
of this important raw material.
In many European markets, the wood-flooring demand was declining (see Exhibit 5). At the same time,
Austrian and German producers were losing export market share to Eastern European, Scandinavian, and
Chinese competitors (see Exhibit 6). STIA’s management also found it difficult to assess future demand,
as the macroeconomic outlook for the main markets within the eurozone (and specifically the key market
Italy) remained uncertain. European construction activities in the residential sector decreased by 4 per
cent in 2013 and stagnated in 2014.13 Industry experts were a bit more optimistic about the growth of the
housing construction market for 2015–2017.14
In recent years, in an effort to increase sales volumes, STIA had put a stronger emphasis on sales and
marketing activities. It employed new sales representatives in its core markets. In 2013, the “Admonter”
brand identity was revamped with an even stronger emphasis on the natural and sustainable origin of the
products and on the timelessness and beauty of their design. “Nature’s favourite designer” became the
new promotional slogan of the brand, which was positioned in the premium segment. In addition to
addressing the main customer groups of wholesalers, architects, and planners, STIA also started to
become more strongly engaged in raising brand awareness among consumers — for example, through
radio and magazine advertising.
FACING THE CHALLENGE
Neuner reached his office after his short walk through the snow-covered courtyard. The office door
directly faced Abbot Bruno’s. Both doors often remained open, and the two men frequently exchanged

13 “2015: Towards a New Cycle for the European Construction Industry? The Risk of German Slackening in Growth,”
Euroconstruct, December 4, 2015, accessed April 3, 2015, www.euroconstruct.org/pressinfo/pressinfo.php. 14 Ibid.
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ideas. Neuner therefore also knew what Abbot Bruno thought when one of the monastery’s businesses
faced a crisis situation: “We generally try to exhaust all possibilities to hold the jobs.”15
Neuner knew that he had to address the ongoing problems in the monastery’s industrial business. STIA’s
management had already tried to tackle the challenges in several ways. Cost optimization projects had
been initiated, also with external help. A tight stock management system helped to considerably decrease
inventory levels of both raw materials and finished goods compared to previous years. The company also
worked with temporary employment agencies to achieve faster reaction times to changes in order levels.
However, these measures had not yet brought STIA back to profitability.
Neuner weighed his options. He would never want to lower quality levels. “Passion for the product has
top priority,” he thought. “We want to create something in which we take pleasure ourselves, combining
functionality and good design — and that’s only possible with quality.” STIA prided itself on providing
“stability in value” for its customers. Neuner saw this as a key competitive advantage. And he was
convinced that the trend toward sustainable and authentic products would work in STIA’s favour — at
least in the long run.
Neuner was of the opinion that the company had to invest more in product development: “We need a
product with a unique selling proposition again — something that is hard to imitate.” STIA had already
started to diversify and offer not just wooden floors but also wooden panel solutions for walls. At the
moment, a development team worked on special acoustic panels that could be used in concert halls as
well as in homes. The product was still too expensive to be widely marketable. Neuner was convinced,
however, that it would find a market in the future.
Neuner’s thoughts turned to the reasons why he had first accepted the job at Admont Monastery as a
young man. He had been fascinated by the monastery’s social commitment and its regional development
function. During all the years of his tenure as Admont Monastery’s business director (the modern and
secular equivalent of the cellarer: the monk responsible for the monastery’s provisions), he had always
held The Rule of Saint Benedict, the founder’s famous precepts for his order’s monastic communities, in high
esteem (see Exhibit 7). He wondered what Saint Benedict would advise him to do in the current situation.

15 Höfler, op. cit.
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EXHIBIT 1: STIA HOLZINDUSTRIE GMBH BALANCE SHEET (STRUCTURED AS REQUIRED BY
AUSTRIAN ACCOUNTING STANDARDS, IN MILLIONS OF EUROS)
31/12/2013 31/12/2012
Long-term intangible assets 2.4 2.6
Long-term tangible assets 10.2 12.0
Financial assets 0.4 0.3
Fixed assets 13.0 14.9
Inventory 19.4 21.1
Accounts receivable 2.7a 3.1
Cash/bank 0.8 0.1
Current assets 22.9 24.3
Prepaid expenses 0.9 0.8
TOTAL ASSETS 36.8 40.0
Share capital 2.1 2.1
Accumulated profits 4.5 6.5
Own funds 6.6 8.6
Subsidies 0 0.5
Provisions/accruals 2.8 2.5
Bank debt 4.2b 10.8
Accounts payable 0.7c 0.5
Liabilities toward affiliated companies 21.8d 16.4
Other liabilities 0.7 0.8
Total liabilities 27.4 28.5
TOTAL EQUITY AND LIABILITIES 36.8 40.0 a 100% of accounts receivable are short term (< 1 year)
b 100% of bank debts are short-term loans (< 1 year)
c
100% of accounts payable are short term (< 1 year)
d 11.9% of liabilities toward affiliated companies are short term (< 1 year)
Source: Austrian Commercial Register (figures summarized by the author).
EXHIBIT 2: STIA HOLZINDUSTRIE GMBH INCOME STATEMENT (STRUCTURED AS REQUIRED BY
AUSTRIAN ACCOUNTING STANDARDS)
2013 2012
Revenues 47.1 48.5
Changes in inventory -0.1 0.7
– Cost of goods sold (including cost of external
services used)
-26.2 -26.8
Net margin 20.8 22.4
Non-operating income 1.1 0.9
– HR expenses -12.3 -11.9
– Depreciation -3.3 -3.2
– Other operating expenses -7.8 -7.7
Net financial income or expenses -0.5 -0.6
Profit from ordinary activities (earnings
before taxes)
-2.0 -0.1
Source: Austrian Commercial Register (figures summarized by the author).
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EXHIBIT 3: MILESTONES IN THE DEVELOPMENT OF THE ADMONT MONASTERY AND ITS
BUSINESSES
Year Milestone
Around
529
Saint Benedict of Nursia writes Regula Benedicti: the famous
monastic rules of the Benedictine order that he founded
1074 Foundation of the Benedictine Abbey of Admont by
Archbishop Gebhard of Salzburg based on an endowment by
Saint Hemma of Gurk
1139 Establishment of the monastery’s vineyard estate in the village
of Jarenina (in today’s Slovenia)
1644 Establishment of the monastery’s high school
1776 Completion of the Baroque library of Admont Monastery
1865 A fire that sweeps through the whole monastery, with the
exception of the library
1906 Opening of the Bosruck railway tunnel near Admont, creating
a new direct connection through the Alps
1911 Opening of the monastery’s first electrical power plant
1930s Severe economic difficulties; the monastery needs to sell part
of its art collection to survive
1939 Expropriation of the monastery by the Nazi regime; the monks
are forced to leave
1945 Return of the monks to Admont after the end of World War II
1972 Establishment of STIA Holzindustrie GmbH (with 13
employees)
1973 Establishment of DANA Türenindustrie GmbH together with a
joint venture partner
1989 Development of STIA’s bestselling wide plank floors
1994 Beginning of the tenure of Helmuth Neuner as Admont
Monastery’s business director
1996 Beginning of the tenure of Abbot Bruno Hubl
2003 Opening of Admont Monastery’s new universal museum
2005 Sale of DANA Türenindustrie GmbH to the Danish Vest-Wood
Group
2005 Start of STIA’s continuous improvement initiative, focusing on
cleanliness, order, and safety
2010 Purchase of11 apartment buildings, with 276 apartments, by
the monastery
2013 Relaunch of STIA’s “Admonter” brand with a new focus on the
end consumer
Source: Created by the author based on interview data and the websites of the Admont Monastery and STIA Holzindustrie.
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EXHIBIT 4: ROUNDWOOD PRICES IN EUROS PER SOLID CUBIC METRE IN AUSTRIA (ANNUAL
AVERAGE 2006–2014)
Source: Created by the author based on the average of product categories 911, 912, 913, and 914 (long timber spruce/fir
[cat. B]) in “Preise, Preisindex: Land- und Forstwirtschaftliche Erzeugerpreise 2008 bis 2014,” Statistik Austria, accessed
April 3, 2015, www.statistik.at/web_de/statistiken/land_und_forstwirtschaft/preise_bilanzen/preise_preisindex.
EXHIBIT 5: WOOD FLOORING INDUSTRY TRENDS IN SELECTED EUROPEAN MARKETS
Country
Per-capita
consumption
of parquet in
m2
(2013)
General
market
trend
(09/2014)
Explanation of the market trend
Austria 0.77  Estimated 3% decline (Jan. to Sep. 2014)
compared to the same period last year
Belgium 0.19  Stable market demand
France 0.18  Estimated 10–12% decline (Jan. to Sep. 2014)
compared to the same period last year
Germany 0.25  Estimated 1–2% decline (Jan. to Aug. 2014)
compared to the same period last year
Italy 0.13  Low consumption overall; 20% decline in parquet
sales, but also an estimated –15% in ceramics.
Outlook remains negative.
Netherlands 0.05  Significant overcapacity in production (Producers
try to find new export markets. Parquet
consumption continues to decline.)
Spain 0.12  Stable market demand but remaining at a low
level
Sweden 0.65  Estimated 3% increase (Jan. to Sep. 2014)
compared to the same period last year
(Increase in the construction of one-family
houses.)
Switzerland 0.79  Stable market demand
Source: “Press Releases 2014,” European Federation of the Parquet Industry, accessed April 3, 2015,
www.parquet.net/nl/press/press-releases.
75.47 77.06
73.05
71.24
81.53
91.61
94.61
97.74 96.96
60
70
80
90
100
2006 2007 2008 2009 2010 2011 2012 2013 2014
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Page 12 9B16M045
EXHIBIT 6: MAJOR EXPORTING COUNTRIES OF MULTILAYER WOODEN FLOORING PANELS
(EXPORT VALUE IN MILLIONS OF EUROS)
Country 2010 2011 2012 2013 2014
Austria 187.9 192.2 192.0 195.2 179.3
Sweden 130.3 147.4 158.8 175.4 189.9
Germany 123.2 151.8 151.4 155.0 144.6
Poland 112.5 123.7 127.4 142.8 162.1
China 46.4 65.3 71.2 91.9 104.9
Source: “441872 Flooring Panels, Multilayer, Assembled, of Wood (Excl. for Mosaic Floors),” INTRACEN, accessed April 3,
2015, www.trademap.org.
EXHIBIT 7: EXCERPTS FROM THE RULE OF BENEDICT
Excerpt from the Prologue:
“[W]hile there is still time,
while we are still in the body
and are able to fulfill all these things
by the light of this life,
we must hasten to do now
what will profit us in eternity.”
Excerpt from Chapter 31, “What Kind of Man the Cellarer of the Monastery Should Be”:
“Let him regard all the utensils of the monastery
and its whole property
as if they were the sacred vessels of the altar.
Let him not think that he may neglect anything.
He should be neither a miser
nor a prodigal and squanderer of the monastery’s substance,
but should do all things with measure
and in accordance with the Abbot’s instructions.”
Excerpt from Chapter 32, “On the Tools and Property of the Monastery”:
“If anyone treats the monastery’s property
in a slovenly or careless way,
let her be corrected.
If she fails to amend,
let her undergo the discipline of the rule.”
Source: “The Rule of Benedict,” The Order of Saint Benedict, accessed February 20, 2015,
www.osb.org/rb/text/rbemjo1.html.
This document is authorized for use only by Margarita Lozada in OL-501-X4138 Business Foundations 20TW4 at Southern New Hampshire University, 2020.

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Ineffective handling of a managerial situation

W17429
AGODA: PEOPLE ANALYTICS AND BUSINESS CULTURE (A)
Ken Mark wrote this case under the supervision of Professor Kenneth T. Goh solely to provide material for class discussion. The
authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised
certain names and other identifying information to protect confidentiality.
This publication may not be transmitted, photocopied, digitized, or otherwise reproduced in any form or by any means without the
permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights
organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western
University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) [email protected]; www.iveycases.com.
Copyright 2017, Richard Ivey School of Business Foundation Version: 2017-07-19
INTRODUCTION
On a typically hot day in Bangkok, Thailand in early March 2016, Robert Rosenstein, chief executive
officer (CEO) of Agoda Company Pte. Ltd. (Agoda), was having a morning coffee with Peter Allen, vicepresident of People and Organization Development. Agoda, an online accommodation service, was the
Asia-based subsidiary of The Priceline Group, Inc. (Priceline). Rosenstein observed to Allen,
We are a global leader in using data and analytics to optimize our e-commerce platform, but how
advanced are we in terms of data and analytics in the people function? We know that this is
central to the people department mission, but we need to make sure, as we do with our platform,
we can correlate investment with outcomes, while also staying true to our culture. How far along
are we, Peter?
Allen replied, Weve implemented Workday, a human resource (HR) information system that provides a
lot of data, which weve been studying, and we are investing in customization of that platform so it can
serve our specific needs. The challenge was how incremental investments couldor shouldbe
justified. Allen noted:
In particular, were also installing Greenhouse, a new applicant tracking system for recruitment
that will provide us with additional insights into how effectively we are recruiting. We are
starting to look at the recruiting data much more as we look at conversion on our core platform,
finding areas of opportunity and developing best practices.
Helping Allen and his team make this vision a reality was Jeffrey Lee, Agodas director of Operations and
Compensation. Lee had spent the past year overseeing the development and introduction of a number of
software tools to assist managers in compensation and other areas of operations. The next stage of the
operation teams plan was to oversee the implementation of Greenhouse.
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Rosenstein challenged Allen:
We need to be sure these tools provide insights for managers to manage talent more effectively.
We need managers to own the outcomes of talent management rather than delegate that
responsibility to the people team. We need to be very careful about any unforeseen cultural
changes: the last thing we want is to put a system in place that moves us in the wrong direction
from a management philosophy perspective. If managers think that the people team needs to own
more as the result of this new system, we will have done something wrong.
THE GLOBAL ONLINE TRAVEL AGENCY INDUSTRY
In 2016, Priceline and Expedia, Inc. dominated the global online travel agency market, serving consumers
with millions of properties under contract.1 Through online sites such as Booking.com, Agoda,
Priceline.com, OpenTable, Rentalcars.com, and KAYAK, Priceline was the leader in worldwide online
accommodation reservations. Priceline customers could use the groups services to book hotel stays,
rental cars, airline tickets, vacation packages and cruises, and even restaurant reservations. In 2015,
Priceline generated US$2.6 billion2 in net income from $9.2 billion in revenues and $55.5 billion in gross
bookings, employing 15,500 people in total.3 Pricelines success was remarkableespecially considering
that in the early 2000s, it had . Fortunately, the firm had retained enough
cashraised from investors during the dot-com boom of the late 1990sto reinvent itself.
Pricelines turning point was a 2002 decision by Jeffery H. Boyd, then the companys new CEO, to focus
on accommodations, offering great terms to hotelsthe companys suppliersand the strategy of
expanding by acquiring strong regional online travel agency brands. Priceline paid $133 million for
Netherlands-based Bookings in 2005, and two years later, the renamed Booking.com grew from a small
base to account for half of Pricelines bookings.
A focus on expansion in Asia led Priceline to purchase Agoda in 2007 for $16 million in cash and up to
$142 million in performance incentives.
AGODA BACKGROUND
Rosenstein had travelled to Southeast Asia as a backpacker in 1991. Returning in 1998, he invested in an
online hotel reservation business. Along with a co-founder, in 2002, he formed a partnership that would
ultimately launch Agoda in 2005. He led the firm as president and chief operating officer, and managed it
through the acquisition by Priceline, becoming CEO in 2010. By 2016, Agoda had grown from a small
startup with a handful of employees to a multinational with 40 offices in 31 countries, and over 2,500
employees. Agoda, headquartered in Singapore and with a significant presence in Bangkok, served
consumers globally (see Exhibit 1).
With its inventory of more than one million accommodations, Agodas business was remarkably
complex. For example, for each hotel listing, there were typically at least 10 available room types (e.g.,
1 Dennis Schaal, Priceline vs Expedia: By the Numbers in First Quarter 2015, Skift, May 8, 2015, accessed November 1,
2016, https://skift.com/2015/05/08/priceline-vs-expedia-by-the-numbers-in-first-quarter-2015/. 2 All currency amounts are in U.S. dollars unless otherwise specified. 3 EDGAR Online, Inc., Form 10-K (Annual Report), The Priceline Group Inc., 38, accessed November 1, 2016,
http://files.shareholder.com/downloads/PCLN/2762914235x0xS1075531-16-84/1075531/filing.pdf; The Priceline Group,
accessed November 1, 2016, www.pricelinegroup.com/.

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Page 3 9B17C024
single, double, with or without breakfast, refundable, and non-refundable rates), and each room required
its own web page and selling features. To complicate matters further, each page had to be accessible on
multiple platforms (desktop and mobile, in particular) and translated into 30 languages, with pricing
converted in real time to dozens of different currencies. The technology required to manage this
complexity was a core feature of Agodas business.
Despite its success, Agoda continually faced threats from new entrants; regulatory changes; competitors
that consistently adopted the latest technologies to improve customer experience and operations; and
startups like Airbnb, Inc., which sought to disrupt entire business models. To thrive in this rapidly
changing and highly competitive landscape, it was crucial for Agoda to remain nimble. It not only had to
keep abreast of the latest technological advances that could affect the business, but also attract and retain
top talent from around the world.
Explaining the importance of talent, Rosenstein stated,
I like the combination of high natural intelligence, competitiveness, personal humility, and a strong
ethical foundation. Thats a winning formula for your most important people. When you find
someone who is like this who can add value to your business, be willing to pay up, take less for
yourself, or make whatever sacrifice you need to make, because that is how you make a great
business.4

Rosenstein believed that the relationship between managers and employees was critical to building the
strongest company and getting the best out of employees. Agoda was designed to encourage the manager
employee relationship to flourish, with minimal administrative interference. From the CEOs perspective,
traditional HR functions often impeded good management. Consequently, it was not until 2012 that
Agoda had a real HR function. Before that, the small number of HR staff had responsibilities only for
recruiting and managing payroll, and not staff development.
Rosenstein knew he needed to build recruitment, compensation, performance management, learning and
development, and talent managementtraditional HR functionsfor his rapidly growing company of
1,200 full-time staff. However, he was concerned that an HR bureaucracy would impede or replace good
management by taking ownership away from managers and employees. He also worried that it would
impose rules and policies that inhibited managers ability to make decisions that were best for the
companys business; this was even more of a concern because of the firms diversity.
Agodas employee population comprised over 70 different nationalities working in a number of very
different functions: call centre employees, IT developers, marketing professionals, business development
professionals, and staff in finance, legal, and other areas. Rosenstein believed that an overly intrusive HR
function would damage the relationship between managers and employees, and reduce the sense of
entrepreneurship and flexibility that were core to the company. Yet some form of centralizing and
structure was necessary to help the firm operate and grow.
To ensure that his philosophy on managing talent was sustained while Agoda continued to grow, Rosenstein
turned to Peter Allen. With a PhD in humanities and MBA from The Wharton School at the University of
Pennsylvania, Allen had been a McKinsey & Company consultant in New York, founded Google
University, and worked in talent management at Standard Chartered bank. Allen took the job because he
wanted to see if he could shape the HR function to make a positive difference to this growing company.
4 Kira M. Newman, Launch to Acquisition: Interview with CEO of Agoda (Acquired by Priceline), Tech.Co, February 29,
2012, accessed November 1, 2016, http://tech.co/agoda-2012-02.

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RE-ENVISIONING THE HR ROLE
Allen was sympathetic to Rosensteins concerns about the dangers of imposing unnecessary bureaucracy.
He believed that the relationship between managers and employees was the foundation of a highfunctioning organization. As a result, Allen decided to build an HR function that would not add to the
bureaucracy, but would instead play an advisory role in supporting and enhancing the role of
managementin a sense, an internal consultancy that would help managers become more empowered in
managing talent through data and insights.
Allen explained his rationale:
Some tech firms grow out of an engineering culture in which the fundamental belief is that
managers are bad, so the less management you do, the better. Such firms prefer to minimize or
automate the business of management as much as possible. By contrast, we start with a different
fundamental assumption. We believe that the most important relationship at work is the one
between [managers and their] employees, so we want to help managers do their jobs well by
empowering and supporting them.
One of Allens first moves was to rename his department; he replaced the old Human Resources name
with a new one, People and Organization Development (generally known as the people department).
As Allen explained,
My departments fundamental goal is to help managers manage better, not to manage on their
behalf.
Our approach is based on a few core principles:
Managers, not HR, should define, live, and develop the companys leadership.
Managers, not HR, should do the hard work of managing peoplehiring, evaluating,
rewarding, and disciplining employeesand managers should be evaluated on their results.
Employees, not HR, should manage up and take responsibility for solving problems
directly with their managers.
Weve also tried to hire the smartest and most talented people we can find, regardless of whether
they have traditional HR backgrounds. Results so far have been promising.5
Allens focus in the people department was to empower frontline managers to make many of the decisions
traditionally carried out by HR. Naturally, for a data-driven company, a large part of the empowerment
would come from providing those managers with the data to make those frontline decisions. The question
was what data to collect, and how to collect, analyze, and present it in a way that empowered managers to
make better decisions.
Data of all kinds was core to Agodas business. With millions of customers around the world, Agoda
needed to keep innovating in its business not by hunches or by intuition, but by solid data wherever
possible. Like other information technology (IT) firms, Agoda relied extensively on data to garner
5 Peter L. Allen, Toward a New HR Philosophy, McKinsey Quarterly, April 2015, accessed November 1, 2016,
www.mckinsey.com/business-functions/organization/our-insights/toward-a-new-hr-philosophy.

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Page 5 9B17C024
insights into its customers. The objective was to do a better job of targeting prospective customers and
retaining existing ones.6

Allen knew that unless the people department operated in the same way as the rest of the company, it
would not have the credibility it needed to help managers make the best possible decisions. However,
when he joined the company, he found that most personnel information was kept on hundreds of
spreadsheets on the computers of different members of the old HR team. Further, performance reviews
were done on paper and kept (though hardly ever consulted) in physical files in the team room. There was
no way to stay up to date, aggregate information, protect employee security, build accurate organizational
charts, or support good management without the kind of information other departments had at Agoda.
For Allen, improving the way the people department worked with managers and other stakeholders was a
priority. His vision was not just about ensuring data could be digitized, centralized, and available in real
time; it involved a fundamental change in the organizational role of the HR departmentfrom one that
established, monitored, and enforced HR policy to one that empowered managers to manage better.
To initiate this transformation of Agodas people department, Allen made a number of changes. One such
change was to persuade the company to adopt best-in-class information systems like Greenhouse and
Workday, and be in a position to customize where needed. These changes would require technical
resources. More importantly, Allen needed to hire great people who would share his philosophy, work
within the culture, and be very comfortable with data. In particular, he knew he would need someone to
take the lead and demonstrate how this new system could empower managers.
This person was Jeffrey Lee, a former McKinsey & Company consultant whom Allen recruited to be the
director of Operations and Compensation. Lee had a wealth of international experience that was relevant
to Agodas international presence. He grew up in Singapore and joined the U.S. Department of State as an
analyst providing coverage of Asia. After completing his MBA at The Wharton School, Lee was recruited
by McKinsey & Company, where he consulted on operations strategy with multinational clients around
the world. Allen thought that Lees consulting experience would place him in a strong position to lead the
people department to develop data-driven insights that would empower managers in managing the talent.
IMPLEMENTING PEOPLE ANALYTICS
Lee was excited about Allens vision of enabling managers with data but realized this was going to be a
challenging undertaking. When I arrived, we were conducting performance evaluations with onemegabyte macro-enabled Excel sheets that were emailed to managers around the world. In addition to
the technical issues of integrating a new human capital management system, Lee had to persuade
managers and his team in the people department to rethink how data was collected, analyzed, interpreted,
and presented. These changes were necessary to be consistent with Allens vision of the people
department as an enabler of managers, rather than a policy-setting and compliance-monitoring unit. Allen
and Lee worked with their team to bring the firms people practices up to speed by focusing on three
areas: compensation and benefits; performance evaluation and promotion; and recruitment.
6 Gil Press, A Very Short History of Big Data, Forbes, May 9, 2013, accessed November 1, 2016,
www.forbes.com/sites/gilpress/2013/05/09/a-very-short-history-of-big-data/2/#6dead6a51af0.

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Page 6 9B17C024
Compensation and Benefits
In many organizations, the HR function determined salary bands and compensation policies for different
roles and positions. At Agoda, managers were encouraged to make compensation decisions based on their
units needs. Allen explained the principle underlying this unconventional approach:
We believe that managers should be able to hire the best people for their roles, without following
arbitrary salary limits. Agoda hires employees from all over the world. Without compensation
flexibility, it would be impossible to hire, say, senior IT talent from Silicon Valley into Thailand.
As a result, giving managers the freedom to compensate employees appropriately was a key to the
companys success.
To empower managers in deciding on compensation, Lee implemented a system to collect real-time
market rates on compensation, presenting the information to managers in a user-friendly format.
Managers were also shown correlations between performance and bonuses in their departments so they
could make informed decisions about allocating bonus payments (see Exhibit 2).
According to Allen, managers were prompted to look at these correlations and see where there were any
discrepancies:
These correlations should generally be positive. If they are not, it is possible that the bonus
allocations are out of sync. Another possibility is that there could be other reasons for the way
bonuses were allocated: sometimes there are specific individual circumstances, or broader
changes in market conditions of which managers are aware, which then alerts us to consider
adjusting compensation across the organization as a whole. The people team provides data and
advicebut does not override or overrule managers, who, after all, are responsible for the
performance of their own teams.
As a check, Rosenstein reviewed compensation for all departments at least once a year. The outcome was
that while salaries were not consistent, even within a single department, managers were able to hire,
reward, and retain the talent they needed most.
Lee also applied analytics to track employee benefit use. As an online travel agency, Agoda provided
employees with a travel benefit: 12 times per year they were able to use discounted rates on personal
accommodation booked through the Agoda website. While there were guidelines about using these
discounts, there were no clear penalties for excessive use. The question was how the company could
prevent employees from abusing their benefits without over-policing.
The people department monitored employee behaviour. However, rather than establishing blanket policies
for dealing with employees found to have abused their benefits, the department brought each case to
managers to resolve. In one case, for example, an employee was found to have used employee discounts
for stays worth more than half his salary. The people team presented data around excess bookings and, in
some cases, the persons compensation to make the point that it was highly probable the employee was
reselling the discount. The manager then acted to rectify the problem. While the outcome may have been
the same as it would have been if HR managed the process, Agodas approach required managers to take
ownership of the problem and resolve it themselves.
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Performance Evaluation and Promotion
Performance evaluation at Agoda was conducted through peer evaluations of employees work habits,
cognitive abilities, and interpersonal skills (see Exhibit 3). Ratings for each employee were collated and
shared with the employee, the manager, and the departmental head (see Exhibit 4). In order for this data
to empower managers, Lee encouraged his team in the people department to constantly look for ways to
identify and collect data that was relevant to managers. Allen explained:
We initially didnt know where to begin, so we started with a 50-question survey. Then, we ran
correlations on the responses to see if there were any key questions that drove the results.
Identifying these questions allowed us to pare the survey down to a handful of questions to make
it easier for employees completing the surveys and for managers.
From his prior consulting experience, Lee was aware that employees in each department performed
different kinds of work and needed to be measured differently. For instance, call centre employees were
managed on actual behaviours, such as the number and duration of calls handled. In contrast, employee
performance in partner marketing could only be measured after a longer period of time. Therefore,
managers in each of these units required different criteria for evaluating employee performance. Rather
than simply applying a common set of criteria to evaluate all employees, Lee regularly engaged with
managers to refine performance measures so they were the most useful to managers.
With this information, managers could help employees with their developmental needs and deploy them
to areas that suited their strengths. By tracking employees improvements in developmental needs over
time, department heads could use this information as another indication of their managers consistency
and effectiveness in managing, rather than rely solely on profit and loss numbers. Lee stated, Many of
our departments award bonuses annually. Some want to award them monthly, and we are developing the
flexibility to provide these managers the tools with which to assess their employees performance,
allowing them to use key performance indicators to award bonuses.
Once again, the people department had to find the right positioningit wanted to give managers the
information required to make and own good management decisions, but it did not want to take over the
responsibility of managing from them. The principle remained the same: ask managers what information
they needed, get good data, analyze it, provide that data to managers in ways that would help them
manage better, and then follow up with them for feedback on the changes.
Lee remarked,
A typical HR department operates like a government monopoly. Theres no competition for its
services. You have to take what it provides. Moreover, you have to comply with its rules. We
look at our people department in a different way. We want to be useful to managers. We wont
spend time developing tools or processes they dont want. Managers are thinking about how we
can help them immediately. If we want our people department to be relevant, if we want a seat at
the table, were going to have to earn managers trust and give them tools, services, and data that
they need. Otherwise, theyll find other ways to collect and use data and cut us out of the loop.
Recruitment
Having made some headway in giving managers the data they needed to manage their staff, Allen and Lee
saw the next step as developing Agodas analytics capabilities in recruiting talent. To sustain Agodas fast
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pace of growth, there was a constant need for new talentboth local and foreign expertsin critical
areas like programming, product management, design, learning and development, and finance. Allen and
Lee were convinced that getting recruitment to work, and work well, was critical to the companys growth
and continued success.
Despite a growing recruitment team and a multi-million dollar annual recruitment budget, the company
had limited insight into the effectiveness of its recruiting efforts. The people team hoped to gain insights
such as the following:
Which universities, agencies, and other sources were producing the candidates most likely to be
hired/successful?
Were managers interviewing candidates efficiently and effectively?
Were there managers who could consistently identify top performers?
How long did the recruiting process typically take? How could Agoda expedite this process?
Should the recruiting function sit inside the department, reporting directly to the business heads?
Did candidates experience affect the companys reputation and its ability to attract top talent?
Was the internal referrals program effective?
Agoda sent out a People Team Survey with the objective of learning about the likelihood of employees
referring potential employees (see Exhibit 5). To gain insight into Agodas recruitment efforts, Allen and
Lee envisioned an applicant tracking system that would enable the people department to track, collate,
analyze, and present data about applicants. In addition to ensuring that job applications were reviewed
and acted on in a timely manner, such a system could potentially give managers feedback on successful
recruitment practices and hiring decisions. However, Lees experience in implementing a people analytics
platform made him sensitive to some of the challenges and drawbacks that were important to consider.
CHALLENGES IN IMPLEMENTING ANALYTICS
First, Allen and Lee recognized that the effective use of analytics for managing talent boiled down to
employees deeply ingrained beliefs about the role of the HR function in the organization. The
perception of the HR function as adding to the bureaucracy is so ingrained, even within the people
department, remarked Lee. Were working hard to change the perception that HR departments serve a
command and control function. We need to constantly remind ourselves that our job is to deliver value
to managers by empowering them with data.
However, this philosophy was not always easy to embrace. For example, some of Lees analysts in the
people department were concerned that the constant iteration and customization of surveys for different
business units created analytical challenges. Not only was it difficult to track performance over time, but
it was also difficult to benchmark performance across units. From Lees perspective, this trade-off was
very clear: empowering managers with data, even at the cost of consistent benchmarking, was the main
role of the people department.
Second, most managers believed themselves to be good at what they did. While providing managers with
evidence about their successes reaffirmed these beliefs and would be received positively, their reactions
to evidence about their shortcomings were more unpredictable. Managers could become defensive and
more resistant to change, or misinterpret the data, resulting in unexpected behaviours.
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For example, providing data showing that a longer orientation program resulted in happier, more
productive employees could prompt managers to simply lengthen their orientation programs without
paying attention to the quality of those programs, or the trade-offs they might require. Similarly,
collecting employee feedback on a proposed new change (championed by the manager) could result in
managers electing not to share information about new initiatives in the future. Another risk was that
managers would teach to the test by behaving in ways that might make employees happy in the short
term but might not improve their performance.
The opportunity to gain a competitive advantage through data had to be tempered with the fact that many
companies still had not become competent at leveraging the data they were collecting. Agoda had
advanced systems, including people technology infrastructure, to manage its workforce (see Exhibit 6).
However, a recent commentary by Brendan Marr, an author focused on data, analytics, metrics, and
improving business performance, caught Allens eye:
[I]n the rush to avoid being left behind, I also see that many companies risk becoming data rich
but insight poor. They accumulate vast stores of data they have no idea what to do with, and no
hope of learning anything useful from.
To add to the problem, a lot of data has a lifespan. At some point in time, it becomes no longer
relevant, inaccurate or outdated. But often it is held onto anyway in the mistaken belief that
someday it might come in useful.
It is important to remember also that collecting and storing data costs moneydata requires
storage, electricity to power it, and, if the information is sensitive (including customer records),
attention to be spent on security and data compliance.7
Third, there were concerns about data collection methods. If employees were being asked for their
opinions through online surveys, how could the people department ensure that appropriate questions were
being asked? How would it know if the surveys were sent out in the right frequency? Too little data
would not be informative, but survey fatigue was a risk, too.
Allen and Lee also expressed concern about how something as subjective as employee performance could
be measured accurately. Its much more complex and difficult to pin down employee performance than
dealing with financial transactions. Money you can count; performancehigh or lowis a little more
difficult to determine, said Allen. How do we decide what makes a good manager and create a program
that develops these attributes?
Fourth, Lee wondered how the information should be presented: Should we send out our conclusions
and back them up by providing managers with the raw data? Or should a summary page be sufficient?
And, frankly, what would make managers actually pay attention and act on the information they
received? If the goal was to have managers make decisions based on data, the question was how to
encourage managers to pay attention and use the data as a basis for change, rather than just treat it as a
report to be perused, or worse, ignored.
Lee toyed with the idea that the people department should implement a league review format,
comparing the hiring and management performance of managers with each other. My dream state is that
7 Barnard Marr, Big Data Overload: Why Most Companies Cant Deal with the Data Explosion, Forbes, April 28, 2016,
accessed November 23, 2015, www.forbes.com/sites/bernardmarr/2016/04/28/big-data-overload-most-companies-cantdeal-with-the-data-explosion/#383d1b7c3920.

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each hiring manager has his or her own baseball card. There would be statistics on it, a managers
scorecard if you will, and managers results would be available for all to see. But what kind of
consequences would such a scorecard have? Rating systems had worked before in getting managers to
complete performance evaluations; what else could they be extended to?
Fifth, Lee wondered about privacy concerns. Was the overall effort to monitor and track employees too
intrusive? How would these efforts at data collection affect Agodas organizational culture, productivity,
and innovation?
Sixth, Allen and Lee had to overcome practical and technical challenges. The people department managed
a significant amount of employee testing, evaluation, performance, and feedback data. There were weekly
pulse surveys, a 60-question online employee engagement survey administered annually, and exit
interviews. There was semi-annual performance review data, other survey information, and data from a
new learning management system on the way. These groups of data were housed in six different datasets.
We want to have an integrated platform that allows us to collect and analyze employee data. We are
aiming to invest in a unified system in the next few months, said Lee. However, consolidating data
would require a significant investment of resources. Was it worth the cost and effort when the team was
already overstretched? What additional insights could be gained? How else might managers be
empowered, and how might this impact be quantified? How could the people department encouragenot
forcemanagers to behave in ways that would have better outcomes?
CONCLUSION
CEO Robert Rosensteins questions returned to the fore: How could Agoda correlate data and system
investment with outcomes, and what would it take to make this system work? How would the people
team persuade managers to use itand what would be the implications for Agoda culture if they did?
This process of shaping the culture and changing behaviourwithout creating resentment or taking away
managers independencewas a crucial one, and both Rosenstein and Allen knew it.
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EXHIBIT 1: AGODA GROWTH SINCE 2007
Source: Company files.
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EXHIBIT 2: CORRELATION BETWEEN BONUS AND PERFORMANCE AT AGODA
Source: Company files.
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EXHIBIT 3: AGODA DEPARTMENTAL EVALUATION
Source: Company files.
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EXHIBIT 4: SAMPLE REPORT FROM AGODA EMPLOYEE ENGAGEMENT SURVEY 2015
Notes:
Employee engagement is about more than just satisfaction. It is a mutually beneficial relationship
between the employee and organization. Engagement is a good indicator of how connected employees
are to the company and to helping it to achieve its goals.
Top 3 highest-scoring questions against Agoda overall:
Q49. Senior managers are available and accessible when employees need them
Q48. Senior management provides effective leadership
Q54. Agoda has clear processes and systems to help me contribute ideas for improvement
Top 3 highest-scoring questions:
Q59. I understand what would be considered discrimination or harassment in the work place
Q60. I understand when I should go to my manager with problems versus when I should go to the
Legal and Compliance team with problems
Q1. I have a clear understanding of the goals and objectives of my team
Source: Company files.
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EXHIBIT 5: AGODA PEOPLE TEAM SURVEY (RECRUITING)
Source: Company files.
EXHIBIT 6: AGODA PEOPLE TECHNOLOGY INFRASTRUCTURE
Source: Company files.
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