Managing Change and Development

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This case was prepared by Darcy Langlais (MBA ’07) and Gerry Yemen, senior case writer, under the supervision of Lynn A. Isabella, associate professor of business administration. It was written as a basis for class discussion rather than to illustrate effective or ineffective handling of an administrative situation. Copyright © 2007 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. To order copies, send an e-mail to [email protected]. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of the Darden School Foundation. Rev. 2/08.

JOE WILLIS: FEELING THE HEAT IN THAILAND (A)

Driver: We must speak … quickly. Bad things have been happening here at Fasco. I hear him talking.

Jim Doyle: Wait, hear who talking? What bad things are happening? Driver: Mr. Moot, I hear Mr. Moot. I can’t say much, but it’s not right. The business deals

with Mr. Devakula … the money is not right. That is all I can say. You must not tell Mr. Moot that we spoke of this.

Jim Doyle: I’ll look into the deals with Mr. Devakula. And don’t worry, eh—I won’t let

Allen, or anyone else, know we had this conversation. That conversation between Joe Willis’s boss, Jim Doyle, president of Fasco Motors

headquartered in Eaton Rapids, Michigan, and the general manager’s driver from one of the corporation’s subsidiaries, Fasco Motors Thailand, set in motion the series of events that put Willis in Thailand. It also summarized much of the trouble that Willis now faced. Willis, an Invensys auditing executive, had just spent the better part of the first week of May 2001 in and out of a holding cell, the Bangkok police station, and a Thai courthouse working out visa problems. As a result, Willis was highly suspicious that Allen Moot, a former general manager at Fasco, had stirred up trouble because Willis was a financial auditor from headquarters.

Willis and two other executives from corporate headquarters were to clean up following

the discovery of fiscal mismanagement and Moot’s high-profile firing. Working through his visa problems meant Willis was unable to be physically present in the Fasco office for several weeks. Shortly after his return, Willis worried that the management team he was sent to Bangkok to help rebuild was en route to a breakdown—or had already fallen apart. Because his own success was dependent upon the team’s success, Willis felt tremendous pressure to address the disruptive forces and help the organization move forward. He would like to report some bigger wins back to his boss in Michigan.

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Politics in Freeland Siam was renamed Thailand in 1939—Thai meant “free.” Thailand was the only country

in Southeast Asia never to have been a European colony and that was a great point of national pride (see Exhibit 1 for map). During World War II, the Thais joined an alliance and sided with Japan. Following the war, Thailand adopted a pro-Western foreign policy. Politically, the Kingdom of Thailand was a constitutional monarchy.

In 2001, the population of Thailand was approximately 62 million, 6 million of whom

lived in the capital city of Bangkok.1 While the official language was Thai, English was the secondary language commonly used among the elite and understood by many. The Thais were very religious people with approximately 95% of the population practicing the school of Theravada Buddhism (a very early form of Buddhism). Four percent of the population was Muslim and less than one percent was Christian and Hindu.

American-born Bhumibol Adulyadej was the King of Thailand and the longest-serving

monarch in Thai history. He also was the world’s longest-serving head of state. Born in 1927 in Cambridge, Massachusetts, Bhumibol moved to Thailand the following year after his father earned a certificate in public health at Harvard University. After attending primary school in Bangkok, Bhumibol and the rest of his family left in 1933 for Switzerland where he continued his secondary education. As he studied science at the University of Lausanne, his oldest brother, who had returned to Bangkok, was crowned King of Thailand. Following the mysterious death of his brother, Bhumibol ascended to the throne on June 9, 1946. Over the years, Bhumibol’s stature among Thais rose from figurehead to deity.

Relationships between the Thai government and those visiting from Western countries were sometimes strained. For example, in 2002, two Westerners living in Thailand and working for the Far Eastern Economic Review wrote an article that mentioned strained relations between King Bhumibol and Prime Minister Thaksin Shinawatra.2 The article claimed their fallout was due to a birthday speech the king gave in which he referred to Thailand as being in “a crisis.” The journalists immediately had their work visas revoked and were taken into custody for publishing false reports capable of ruining foreign investment as well as damaging Thailand’s relationships with other countries. With the infamous immigration police detaining the journalists, the outside world feared for the reporters’ lives. Eventually, the prime minister stepped in, and the situation was defused.

1 Statistics from Thailand People 2001, http://www.workmall.com/wfb2001/thailand/thailand_people.html

(accessed 3 April 2007). 2 “Thai Police Urges ‘Far Eastern Economic Review’ to Apologize,” [sic] The People’s Daily

http://english.peopledaily.com.cn/200202/26/eng20020226_91004.shtml (accessed 3 April 2007).

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Business Speak: Thai Style

Relationships were the basis of everything that Thai people held important. Longstanding family relationships dictated much of what happened in the Thai world of business. Most initial meetings between foreigners and business people were over lunch or drinks, so the Thais could get to know who they were working with. “Volunteering information is not really part of Thai culture,” Willis said. Only after a relationship had been established could business enter the discussion. And even then, if the relationship felt strained or strange, the business waited for another day. For this reason, it often took a great deal of flexibility and patience for Westerners to do business in Thailand—even though Thais were very welcoming of Westerners.

In contrast to some western cultures, it was very common for Thais to avoid

confrontation at all costs. In fact, they would never say “no,” but instead made implausible excuses or pretended that they didn’t understand English. And not surprisingly, Thais found it very difficult to accept a direct negative answer.

Fasco Motors: Revving the Engine

Fasco Motors was a subsidiary of Invensys and manufactured a complete line of custom fractional horsepower motors, blowers, and gear motors. Founded in 1911 in Rochester, New York, Fasco started with a single manufacturing plant. By 2001, the company had grown to over 5,000 employees located in 13 manufacturing facilities across North America and Asia. In addition to the manufacturing facilities, Fasco maintained a sales presence throughout North America, Europe, and Asia making available a local representative to provide customers with necessary sales and service support.

Fasco powered thousands of products for a diverse line of markets. Each facility

manufactured the entire line of Fasco product for its region. The Thai manufacturing plant was Fasco’s only factory in the Asian–Pacific region, and it employed a management team of 15 executives along with 1,000 direct laborers. Sales offices for the region were located in Melbourne, Australia, and Bangkok, Thailand. The company’s goal was to continually increase its capabilities on a global scale.

The Fasco Motors Thailand plant functioned as a family. Nearly all employees had been

with the company since it opened in Thailand or joined from another branch, such as the office in Australia. Sanga Devakula, a Thai national was part owner of the original partnership. The direct laborers in the factory were mostly Thai natives with little education. As the years went by, Fasco Motors Thailand bought out Devakula’s portion of the company. The Fasco factory moved a significant amount of materials, turning nice profits so expansion became part of the growth strategy. In order to expand, the property adjacent to the factory was purchased from Devakula and construction for the new facility started in late 2000. The management team at Fasco Motors Thailand was largely composed of Thais with a few expatriates in key roles. The team included:

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Jim Doyle: He became president of Fasco Motors after 15-plus years of working for the company. Being Canadian, he started with the company in Canada, was promoted to become a general manager, and then president. Doyle’s authoritative management style provided comfort to some and anxiety to others. Nevertheless, he expected his vision to be carried out with little supervision and little-to-no handholding. While Doyle was rarely in Thailand, he made occasional trips to check on the business in person and attend meetings.

Allen Moot: He was the general manager of Fasco Motors Thailand. His previous

experience included working as a general manager for a smaller company in Indonesia. A middle-aged Australian, Moot joined the company at the beginning of the operation in Thailand. Moot was very adept at doing business with Thais and known for treating his workers well earning popularity among them.

Sanga Devakula: He was a very influential Thai businessman with strong political

connections. Devakula was part owner of the original joint venture to start the Fasco Motors Thailand operations. While he owned a company on the opposite side of Bangkok, which technically was a competitor to Fasco, everyone at Fasco thought of Devakula as part of the family. In fact, his daughter-in-law worked on the Fasco management team.

Ivan Ramsey: He was originally from Ireland and naturalized to become a New Zealand

citizen. His military background suited him well in his position as general manager of Invensys at the parent company in New Zealand. With four years of experience in his current job, Ramsey had become a laid-back manager who preferred to observe and guide rather than micromanage his 400 employees. Ramsey was a rising star but opportunities were limited within the company’s senior positions.

Edward “Ed” Fyvie: He was an Australian citizen raised in South Africa. Fyvie ascended

to become vice president of Invensys, the parent company for the Asian region. After several years with the firm, Fyvie had built a reputation as a leader and mentor. He took time to develop others’ talents and helped individuals learn from their experiences. Although Fyvie had been with the company for years, he was regarded as top talent with unlimited potential.

Joe Willis: He was a U.S. citizen who graduated with his accounting degree from

Virginia Tech in 1996. Shortly thereafter, he passed his certified public accountant (CPA) exam. After three years of international experience in an internal audit position with Universal, Willis joined the audit group at Halliburton for a year. Following that, he joined Invensys’s internal audit group. Willis took the position at Invensys knowing that it would lead to a job outside the United States and possibly outside of the audit function. Fasco Finances: More Fuel, Less Mileage

On one of his very few visits to Fasco Motors Thailand, Jim Doyle stepped out of the

Bangkok International Airport and took a deep breath of the tropical air—a sharp contrast to the

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crisp, brisk climate he grew up with in Canada. Immediately, he saw the familiar face of the Fasco company driver he’d come to slightly know. Following the usual niceties and loading of his luggage, Doyle hopped in the car and sat back to enjoy the arresting scenery and remarkable architecture that lined the trip to his hotel. His thoughts were immediately interrupted, though, when the driver told Doyle of his suspicions that business deals with top executives at the plant were shady at best. That information troubled Doyle for the next few weeks as he tried to conduct business in his usual manner. He kept his ears and eyes open yet tried to avoid judging the situation with information that may or may not have been accurate.

After spending a few days in Thailand, Doyle returned to headquarters in England and

had internal auditors investigate the driver’s allegations. They discovered that the financials were erroneous in three different ways.

1. In buying out Devakula’s portion of the joint venture, Fasco paid several times more than

the market value.

2. When Fasco purchased the additional land for expansion, it paid approximately 47% over the actual market value.

3. Fasco was selling its motors to Devakula’s business for below cost then adjusting the accounting figures to make it look like Fasco was making a profit on each sale. Devakula then sold the motors for their actual worth and made large margins on every motor.

In addition to these three findings, the audit team also discovered that with each fraudulent transaction, personal kickbacks were paid to Allen Moot, the general manager at Fasco. Rebuilding Engines

Given the evidence of the fiscal scandal at Fasco, Doyle decided to fire Moot and send three trusted Invensys executives to the plant in Thailand to help get the business back on track. Ivan Ramsey was to take over as the general manager, Edward Fyvie would be acting regional vice president of operations, and Joe Willis would assist in the rebuilding efforts.

Before they left the United States, each one applied for a non-immigrant visa, which was

required to be filed in their home country. Their pre-obtained visas with a “permission to stay” stamp allowed them 90 days in Thailand. “Fasco Motors Thailand had to sponsor us to obtain documents and applications,” Willis said. “There was paperwork like a letter of recommendation, their company registration, and other company information they had to give the government once we were there.” Once inside Thailand, they could extend their visas, and the final decision on visa applications was always at the discretion of the immigration officer.3 They started the extended work-permit process the first week the group arrived in Bangkok.

3 Thai Visa Forum, “Thai visas, residency and work permits,” http://www.thaivisa.com/275.0.html (accessed 11

February 2008).

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“Normally,” Willis explained, “these things are not an issue unless you have someone call out the dogs.”

Because Moot was such good friends with Devakula, who was highly connected and a

close personal friend of several high-ranking officials in Thailand’s government and police force, it was agreed that Moot would be terminated on the basis of poor performance; no legal action would be taken. The new team of three waited in the lobby of the Hyatt Erawan while Doyle went to the factory and dismissed Moot effective immediately. “We just passed along what information they needed to know,” Willis recalled. “We stuck to the GM being terminated because of performance, and my role was to turn around operations.”

Once Moot was out of the building, the three new members of the management team

were introduced to their Fasco colleagues. While the remaining Fasco management members greeted their new colleagues kindly, they were very skeptical about their presence. Even though they were told Moot was terminated because of poor performance, everyone realized that more was happening. Willis was introduced in a positive manner, yet everyone was suspicious. “Someone mentioned to them that I was from internal audit so that really scared people,” Willis said. “They thought ‘this guy is coming in to check up on all of us, to dig up dirt, and go on a witch hunt.’” After all, poor performance did not call for a visit from the internal audit staff at the parent company.

Within the first week, Willis uncovered evidence that several managers had knowledge of

the fraud. Upon the discovery, he met with Ramsey and Fyvie who together decided to fire those directly responsible and not those who were just following their boss’s orders. Thus three more individuals were let go. “They were all highly visible people,” Willis said. “The director of human resources and her husband the production manager, along with a sales supervisor— Devakula’s daughter-in-law.” With four members of the former management team now fired, the fraud investigation ended and the turnaround process began. “Our priority was to try to build trust among the remaining employees and ourselves,” Willis said. “We needed some allies in the plant, maybe a couple of people who would be willing to be tied to us foreigners.” Engine Seized

The peaceful start to Willis’s Monday morning had ended early that second day of May

when a Thai official barged into his office and started taking pictures of him. Willis had survived that first week working as an Invensys executive at Fasco Motors Thailand and was pleased at how everything was going. Startled and confused as the camera continued to click, Willis demanded to know who this man was and what he was doing in his office. The photographer briskly identified himself as a member of the Immigration Police and demanded to see Willis’s passport and work permit. Hoping to clear up some confusion, Willis explained that his lawyers were in the process of changing his work permit and that he had been told it was acceptable, even commonplace, for someone to start work in Thailand before their paperwork had been finalized. The immigration officer took Willis’s passport, handcuffed him, and paraded him out

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to the car. While everyone else at the company avoided the alarming intrusion, one Thai sales manager stood beside Willis as he was being marched out. Once outside, Willis saw Fyvie doing the same “perp” walk—Ramsey was out of town and escaped arrest. Together, the pair was driven to a remote building and tossed into an interrogation room—fearing for their lives.

While confined to the interrogation room, Willis and Fyvie were both questioned

extensively and late into the night. One officer revealed that his superior told him directly to arrest Willis, Fyvie, and Ramsey. Another officer entered the room holding a fax written in Thai that read: “Three new managers at Fasco Motors are working without permits and using counterfeit passports.” Their passports were confiscated, and the two men were given these options: Sign paperwork admitting that they were working illegally, or go directly to prison.

Willis and Fyvie had heard stories of other foreign executives working in Thailand who

had terminated nationals and then mysteriously been hauled off to prison, not being released for years. They had also heard accounts of people who had been released only to be murdered on their way home. “We were tired and hungry,” Willis said. “At one point they did allow that same Thai Fasco sales person to bring us food.” Both men decided to sign the paperwork, and they were allowed to go home under the explicit understanding that they would report to the police station the following morning. Just as a precautionary measure, Willis and Fyvie switched hotels.

As ordered, the pair returned to the police station the next morning and spent the next

three days at a courthouse. Their Thai lawyers spoke broken English so Willis and Fyvie were unsure that they were getting all the information when translated. “Our sales guy had stuck around, and he translated for us,” Willis said. “You could really see from his facial expression that it hurt him personally to see us going through that.”

Finally, they were released but warned not to show up at the office without the proper

permits. After consulting with Doyle and counsel in the United States, they did not risk showing up at the office. Instead Willis and Fyvie secretly worked from the hotel over the following several weeks. During this time, they discovered that a partner in the Thai law firm they had hired for representation was a close personal friend of Moot and Devakula. Since they believed that Devakula was responsible for encouraging the immigration police to make the arrests, they fired their lawyers. Their new attorney took four weeks to get work permits and have their passports returned. This meant the new senior executives were away from the office for quite some time.

Given their absence, the Fasco management team remained dubious about the motives for

the parent company executives being in Thailand. Many worried they still could lose their jobs. As a result, when problems arose in the manufacturing plant, managers kept that information from Ramsey, Willis, and Fyvie for fear of losing their jobs. With productivity and teamwork eroding, Willis felt pressure to do something to help improve relationships among members of their broken team. Amidst all this chaos, Ramsey, Willis, and Fyvie asked themselves two big questions: What should they do, and how could they get started?

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Exhibit 1

JOE WILLIS: FEELING THE HEAT IN THAILAND (A) Map of Thailand

Source: CIA: The World Factbook, https://www.cia.gov/cia/publications/factbook/geos/th.html (accessed 3 April 2007).

This document is authorized for use only in Intro to Organizational Leadership by Dev Team from August 2011 to December 2017.