Fancy toy shop:Firing and hiring presidents as a means to improve the profits

[nure]

"In the last three quarters of this year, under the leadership of our president, Pat Salvo, our profits have fallen considerably. Thus, we should ask for her resignation in return for a generous severance package. In Pat's place, we should appoint Rosa Winnings. Rosa is currently president of Starlight Jewelry, a company whose profits have increased dramatically over the past several years. Although we will have to pay Rosa twice the salary that Pat has been receiving, it will be well worth it because we can soon expect our profits to increase considerably."
----------------------------------------------------------------

Human Resources manager of the Fancy Toy Company recommends to the board of directors that the current president, Pal Salvo, should be fired and a new president, Rosa Winnings, be hired to increase the profit of the company. His recommendation is based on the assumption that the Pat Salvo has been the cause of the declining profit at the Fancy Toy and Rosa Winnings is responsible for the profit of Starlight Jewelry and that she can bring about the same at Fancy Toy. Moreover, the manager implicitly assumes that the company can bear the burden of a generous severance package and doubling the president’s salary. As it stands, however, the recommendations seems to be unconvincing for several reasons.


The assumption that Pal Salvo has been the sole cause of the declining profit is not ascertained by the passage for we do not know anything about the relative performance of other toy companies and the time for which Pal Salvo have been the president of the companies. If all the toy companies have been facing the same problem with worse decline in profit then Pal Salvo is not be blamed and removing him might not be an elixir. Similarly, if he has been the president only for three quarters and the decline in the profit is the result of the previous president’s action then again removing him might not be a good option.


In the same vein the fact that Starlight Jewelry has been earning a huge profit for the several past years does not establish the merit of Rosa Winnings. What if she only became the president a few months ago and her decisions have set the SJ in a course that is going to cripple it. Similarly, if the Jewelry shops are in general experiencing a boom period than there might be little that Rosa might have done to increase the profit at SJ. If any of these scenarios turn out to be good, Rosa might not possess the qualities required by the FYC in its president.


Even if Rosa has been the source of success at SJ, she might not be able to bring about the success at FYC. First, different industries require different tactics. For jewelry, one might need to understand and wow adults and for the toys, the emphasis might be on the children. Similarly, Rosa might understand well and have insight on the operation of the jewelry market but might lack those pieces as far as the toy industry is concerned. If these things are correct, then she might not be able to bring a phenomenal success expected of her.


Moreover, changing a president appears to bring financial burden upon the company. We do not know about the current salary of the president and the size of severance package nor we know about the size of the company. If the salary is presently high, doubling it might not be possible for an ailing company. Similarly, if the size of severance package is huge that might be unfeasible and spiral the company toward still steeper decline of the profits.


In conclusion, there are several loose ends in the recommendation. Unless the manager tightens them up one has to be skeptical of his recommendation.

[auburnph]

quite redundant... i think 3.0 will suffice

[nure]

Hi auburnph,
thank you for your comments. last time i got 4.5 in the awa and unfortunately I havet to take the test again. this time i must get across 5.5. i will be grateful if you could be a bit more elaborate on your comments
nure