DAVID HERRICKCASE STUDY

Partial requirements for fulfillment on MS 630Dr Dorr

February 21, 2014

HISTORY OF RESOURCE UNLIMITED

•Formed in 1985 via merger.

•Had 38,000 miles of pipeline stretching across the country.

•Hard for the company not to make money based upon predetermined costs

Profits (All figures in millions)

1st quarter 2nd quarter 3rd quarter 4th quarter0

50

100

150

200

250

300

350

400

19861987

Gas and oil accounts

The company guessed they had 32 gas and 4 oil accounts in 1988.

Two years later internal figures showed they should have 86 oil accounts but couldn’t project how many gas accounts.

Based upon figures that company had twice as many oil accounts as gas accounts in 1988, safe bet company had 43 gas accounts in 1990.

Discrimination lawsuit

Three male accountants were making $50,000, $55,000, and $52,000 respectively.

Female account was making $32,000.

No mention on how company determined salaries for accounts or entry level management.

Discrimination lawsuit

Female account filed gender discrimination lawsuit.

Mean salary for men $52,333. Standard deviation was $2,516.

Salary to within 2 points $52,333-5032 (2516x2)=$47,301 or to $48,000 suggested to avoid lawsuit.

To be on the safe side company should have risen salary to $50,000 (lowest male salary) to avoid discrimination.

Hedge fund

Accounting department stated 500 gas accounts could supply company cash for 30 days.

CEO transferred 100 gas accounts into hedge fund to ward off creditors.

Plan failed. Company entered into bankruptcy in 1994.

Problems

Company had no clear management style. Appeared to fly by seat of their pants.

Had HR issues with paying employees different amounts based upon gender, and no clear plan to determine starting wage.

Profits were all over the place from 1986 and 1987.

No clear lines of communication. Left hand didn’t know what right hand was doing.