Management Mistakes and Successes, Tenth Edition

Chapter 17. Maytag: Incredibly Loose Supervision of a Foreign Subsidiary; Also, the Allure of Outsourcing

The atmosphere at the annual meeting in the little Iowa town of Newton had turned contentious. As Leonard Hadley faced increasingly angry questions from disgruntled shareholders, the thought crossed his mind: "I don't deserve this!" After all, he had been CEO of Maytag Corporation for only a few months, and this was his first chairing of an annual meeting. But the earnings of the company had been declining every year since 1988, and in 1992, Maytag had had a $315.4 million loss. No wonder the stockholders in the packed Newton High School auditorium were bitter and critical of their management. But there was more. Just the month before, the company had the public embarrassment and costly atonement resulting from a monumental blunder in the promotional planning of its United Kingdom subsidiary.

Hadley doggedly saw the meeting to its close, and limply concluded: "Hopefully, both sales and earnings will improve this year."^[262]

THE FIASCO

In August 1992, Hoover Limited, Maytag's British subsidiary, launched a travel promotion: Anyone in the United Kingdom buying more than 100 U.K. pounds worth of Hoover products (about $150) before the end of January 1993 would get two free round-trip tickets to selected European destinations. For 250 U.K. pounds worth of Hoover products, they would get two free round-trip tickets to New York or Orlando.

A buying frenzy resulted. Consumers had quickly ...