Profitel’s Inc - Case Study

Jhonloyd De Torres
Organizational Behavior

For long years, Profitel, a government-owned telephone monopoly, had no

competition. The company's near-exclusive ownership over telephone copper wire
across the nation maintains its profit margins above 40 percent even as a publicly
traded business today. Profitel's wholesale business continues to be a source of
revenue for rivals in the telephone and DSL broadband industries, as it yields
significantly higher profits than comparable wholesale services in numerous other
nations. Profitel, however, faces fierce competition in the cellular (mobile) phone
industry as well as in other cutting-edge fields like voice-over-Internet. challenge
Profitel's hegemony. Profitel's board of directors chose to choose an outsider as the
company's new CEO in response to these risks.

Despite receiving interest from a number of deserving candidates for Profitel's

top position, the board ultimately decided on Lars Peeters, who had served as the CEO
of a publicly traded European telephone company for six years before taking a brief
leave of absence to lead a cellular telephone company in the United States until it was
taken over by a larger company. The board of Profitel was astounded by its good
fortune; Peeters offered a wealth of industry expertise and international experience, as
well as a high-octane energy level, self-assurance, decisiveness, and a friendly but
powerfully persuasive interpersonal approach.In addition, he exuded a certain
"presence" that made people take notice and value his leadership. Peeters's plan to
increase Profitel's profit margins also won the board over. This involved cutting costs
through layoffs and the reduction of ancillary services, investing heavily in the newest
wireless broadband technology (for both computer Internet and mobile phones) before
competitors could establish a foothold, and applying pressure to the government to
deregulate Profitel's established and developing businesses. One board member
pointed out that Peeters had employed the same tactic in his two prior CEO
appointments when he presented his plan to the group. Peeters disagreed, stating that
every circumstance is different.

Peeters was as decisive an executive as his reputation suggested. He recruited

two executives from the European company where he had worked before taking over as
CEO of Profitel. Together, they implemented the new wireless broadband technology for
cell phones and the Internet and reduced the workforce by 5% over the course of the
following two years. The implementation of wireless technology and decreasing
expenses resulted in a slight increase in costs. Profitel's list of wireless broadband
subscribers expanded swiftly because, despite its exorbitant costs, there was little
competition for the technology, and Profitel was driving users from the outdated network
to the new one. Nonetheless, Profitel's customer satisfaction scores decreased.
According to a national consumer study company, Profitel's broadband provided the
lowest value in the nation. The company's poor public image and layoffs also
contributed to a drop in employee morale. Experts in the field have also pointed out that
Profitel chose its wireless technology without considering other, new options that were
gaining traction in other nations. Peeters's vigorous opposition to governmental
regulation also had unforeseen repercussions. Criticizing the government and its
telecommunications regulator made Profitel appear even more conceited in the eyes of
both customers and government officials, rather than leading to less regulation.

The company's poor share price, which had dropped 20% since Peeters was
hired, worried Profitel's board. A few board members were also concerned that the
company was betting on the wrong cellular technology and that subscriber levels would
fall well short of what Peeters's strategic strategy called for in order to turn a profit.
When a foreign-owned rival secured a $1 billion government contract to enhance
broadband services in the nation's outlying regions, this worry became more plausible.
Profitel had indicated high costs and minimal corporate investment in its bid for that
regional broadband upgrade, but Peeters had been certain Profitel would get the
contract due to its dominance in the market and its current infrastructure with the new
wireless network. Profitel's board dismissed Peeters and the two executives he had
hired from the European company after the government made a different decision. The
board now needed to determine what went wrong and how to prevent this issue in the
future.

1. Which perspective of leadership best explains the problems experienced in this

case? Analyze the case using concepts discussed in that leadership perspective.

The efficacy and accomplishments of an organization as a whole are attributed to its

members' ability to influence, inspire, and enable others to participate. This is known as
leadership. In this instance, Lars Peeters, the recently hired CEO of Profitel, falls short
of his position due to a deficiency in essential components necessary for efficient
leadership. Together with his executive group, which he recruited from his prior job,
Profitels' success and reputation with clients, officials, and even staff members were
weakened.The leadership philosophies that I believe best describe the current issues
are as follows: Contingency Perspective: Lars failed to fully recognize the Profitless
position and modify their goals and style accordingly. Rather than leveraging the ideas
and perspectives of the staff as a valuable asset, Lars and his executive team
proceeded with their plans, ignoring any criticism. Behavioral Perspective: Despite
driving the organization to meet a goal, Lars exhibits task-oriented conduct, but he lacks
people-oriented behavioral abilities. This could account for his disdain for the
confidence of his subordinates and the low morale among his staff. Transformational
Perspective Lars was unable to provide Profitel with a strategic plan. By utilizing one, he
could have improved commitment and provided performance-based rewards, thus
boosting employee morale.

2. What can organizations do to minimize the leadership problems discussed

above?

In this instance, Profitels made the broad decision to choose Lars as CEO based
more on his reputation than on how his experience may help their business. Lars took
the initiative to carry out all significant decisions without consulting or involving anyone
else. The board of directors need to have exercised greater prudence by supervising
important decisions, as they appeared to have little influence over the company's
growth. Additionally, they ought to have assessed his performance externally by talking
to customers and internally by getting input from staff members.