Case Study: Quality Comes to City Hall

While there are many notable philosophers and theorists in the field of quality management, their philosophies and theories remain just that without practical application. While the quality management gurus and criteria we have studied in Week 2 have been applied to multi-level, complex quality related issues in many industries, in quality improvement for performance excellence needs to address the culture as well as the quality issue.

This case study involves the application of total quality management based on Deming’s theories and practices by the municipal government of Madison, Wisconsin. It is a story of quality, innovation, operating excellence, and renewal, but above all, this is a story of the impact that Deming’s total quality management theories can have on external and internal stakeholders when the concept of service is installed in government

Citation: Sensenbrenner, J. (1991). Quality comes to city hall. Nation’s Business, 79(10), 60.

Through research from sources provided in the course and from academic and scholarly resources outside of the course, determine, analyze and evaluate the following elements:

1. Determine how the quality management philosophies of Deming, Juran, and Crosby were applied to the Madison, Wisconsin’s city government practices.
2. Analyze the impact of Deming’s quality management concept on the external and internal stakeholder cultures of Madison, Wisconsin’s city government.
3. Evaluate how Crosby’s Zero Defects Theory of quality management could improve the services provided by government agencies

Case Study:

How in the world, I wondered, do we get bureaucrats to strive for “continuous improvement?” They invented the status quo!

Government may be the biggest and the oldest industry in the world, but the statement “I’m from the government, and I’m here to help you” is universally considered a bad joke. Increasingly, people don’t believe that government knows how to help or wants to bother. They find concepts like “total quality,” “customer-driven,” and “continuous improvement” foreign to everything they know about what government does and how it works. They wish government would be more like a well-run business, but most have stopped hoping it ever will be.

Today, fortunately, a new channel has opened through which business and progressive business practices can have an impact on the cost, efficiency, and overall quality of government. This channel is the quality movement — the rapidly growing acceptance of the management practices that W. Edwards Deming developed and persuaded Japanese industry to implement after the end of World War II. As more and more U.S. industries work with and profit from Deming’s techniques, we have to wonder whether it’s not possible to develop a public sector that offers taxpayers and citizens the same quality of services they have come to expect from progressive businesses like Motorola and Westinghouse.

My answer to that question is yes, it is possible. Moreover, while I was mayor of Madison, Wisconsin from 1983 to 1989, I took several steps to make it happen.

I acted in response to a changing climate. Just as major corporations like Ford and Harley-Davidson have had to improve or perish, so too the marketplace now confronts governments with shrinking revenues, taxpayer revolts, and a new insistence on greater productivity and better services.

“People are making comparisons,” says one quality expert. “They can call American Express on Monday and get a credit card in the mail by the end of the week, but it takes six weeks to get a lousy driver’s license renewed. You might not think the motor vehicles division competes with American Express, but it does in the mind of the customer.”

Welcome to Madison

These problems came alive for me when I was elected to the first of three two-year terms as mayor of Madison in 1983. As state capital and home of the University of Wisconsin, Madison smolders politically even in quiet times. Although life had returned to relative normalcy after the upheavals of the Vietnam War, government was still on the defensive. The Reagan revolution was cutting sharply into revenues (the city lost 11% of total revenues between 1983 and 1989) even as our service area continued to grow and costs continued to rise.

Madison’s property-tax base is constrained in two ways — naturally by the city‘s location on a narrow isthmus, artificially by the volume of land and buildings devoted to the university and to county and state government. By 1983, we were taxing taxable property nearly to its limit and beginning to turn to controversial measures like ambulance fees to make up the difference.

Budget hearings were becoming an annual nightmare. The people of Madison did not want their services cut or their taxes raised. In their view, cityservices were in a steady decline already, even as they paid more for them. From what I could see, in many cases they were right.

But I felt boxed in. My previous managerial experience — as the governor’s chief of staff and as deputy state attorney general — was nearly useless in getting a handle on the mixed operations of municipal government. As deputy state attorney general, I had run an office where I was an expert on every aspect of the work, and I practiced a good deal of participatory decision making. As mayor, I could not run an executive office, deal with the city council, and also be an expert on lawn cutting, snow removal, and motor vehicle maintenance. And it was out there on the front lines that systems were breaking down.

For example, a 1983 audit disclosed big problems at the city garage: long delays in repair and major pieces of equipment unavailable for the many agencies that used Madison’s 765-unit fleet of squad cars, dump trucks, refuse packers, and road scrapers.

The audit gave a depressingly vivid and complete picture of the symptoms of the problem (for example, vehicles spent an average of nine days in the garage every time they needed work), but it offered no clear explanation of why things were so bad. Like other managers in similar situations, I felt inclined to call in the shop boss, read him the riot act, and tell him to crack the whip and shape up his department.

Just about then, an assistant in my office suggested I attend a presentation by W. Edwards Deming, the then 82-year-old statistician and guru of the Japanese industrial miracle.

Deming’s approach is no doubt familiar to many businesspeople, but it was unlike anything I had ever heard. It sounded like common sense, but it was revolutionary. American industry, he said, had been living in a fool’s paradise. In an ever-expanding market, even the worst management seems good because its flaws are concealed. But under competitive conditions those flaws become fatal, and that is what we are witnessing as U.S. companies lose market share in one area after another.

If there was a devil in the piece, Deming said, it was our system of make-and-inspect, which if applied to making toast would be expressed: “You burn, I’ll scrape.” It is folly to correct defects “downstream”; the critical issue, he said, is to get your “upstream” processes under control so you can guarantee the outcome every time. To do this, an organization must create a culture of quality; it must master proven quality techniques. Most important, it must define quality — first, as continuous improvement in pleasing customers and second, as reducing the variation in whatever service or product it offers.

As Deming described the organizational changes required to produce his culture of quality, I found myself thinking that this was, perhaps, what I had been searching for. It also occurred to me that it would take a revolution to get it. Autonomous departments are the virtual essence of government bureaucracy, so how was I going to implement Deming’s command to break down barriers? “Cover your ass” and “go along to get along” are ancient tenets of the civil service, so how was I going to follow Deming’s admonition to drive out fear and license more workers to solve problems? Most daunting of all was his command to install continuous improvement not just as a goal but as a daily chore of government. My God, government invented the status quo! And what were the voters going to think of “quality” as a cost item in a city budget?

The First Street Garage

These were some of my thoughts as I headed back to city hall. But I had another: there was nowhere else to go. I had already seen that management by objective and threats of audits were not going to produce change. I might as well try it, I thought. And the city garage, where the rubber hit the road, seemed a likely place to start.

The manager and mechanics at the First Street Garage were surprised to see the mayor and a top assistant show up to investigate their problems; most previous mayors had shown their faces only when they needed a tankful of gas. Over the next few years I learned again and again the crucial importance of the top executive getting personally and visibly involved on the battlefield of basic change.

For the most part, the crew at the garage were doubters. But when I met Terry Holmes, the president of Laborers International Union of North America, Local 236, I looked him squarely in the eye, pledged my personal involvement, and confirmed his membership’s central role. He agreed to participate. We formed a team and gathered data from individual mechanics and from the repair process itself. We found that many delays resulted from the garage not having the right parts in stock. We took that complaint to the parts manager, who said the problem with stocking parts was that the city purchased many different makes and models of equipment virtually every year. We discovered that the fleet included 440 different types, makes, models, and years of equipment. Why the bewildering variety? Because, the parts manager told us, it was city policy to buy whatever vehicle had the lowest sticker price on the day of purchase.

“It doesn’t make any sense,” one mechanic said. “When you look at all the equipment downtime, the warranty work that weak suppliers don’t cover, the unreliability of cheaper machines, and the lower resale value, buying what’s cheapest doesn’t save us anything.”

Our next trip was to the parts purchaser. He agreed with the mechanic. “It would certainly make my job easier to have fewer parts to stock from a few reliable suppliers. But central purchasing won’t let me do it.” Onward to central purchasing, where we heard this: “Boy, I understand what you’re saying because I hear it from all over the organization. But there’s no way we can change the policy. The comptroller wouldn’t let us do it.”

Enter the comptroller. “You make a very strong case,” he admitted. “But I can’t let you do it because the city attorney won’t let me approve such a thing.” On to the city attorney. “Why, of course you can do that,” he said. “All you need to do is write the specifications so they include the warranty, the ease of maintenance, the availability of parts, and the resale value over time. Make sure that’s clear in advance, and there’s no problem. In fact, I assumed you were doing it all along.”

This was a stunning disclosure.

Here was a major failure of a city service whose symptoms, causes, and solution were widely known but that had become chronic because government was not organized to solve it. No doubt there are dozens of large corporations that have made similar discoveries about their own bureaucracies. (Indeed, Deming would not be famous in the business world if this were not the case.) But for me — and, I later learned, for local governments all over the country and the world — this kind of discovery was eye-opening.

This first exercise confirmed point after point of Deming’s paradigm and suggested strongly that what worked for business would work for government. To begin with, the source of the downtime problem was upstream in the relationship of the city to its suppliers — not downstream where the worker couldn’t find a missing part. The problem was a flawed system, not flawed workers.

Second, solving the problem required teamwork and breaking down barriers between departments. The departments were too self-contained to be helpful to one another, and helpfulness itself — treating the people you supplied or serviced as “customers” — was an unknown concept.

Third, finding the solution meant including frontline employees in problem solving. The fact of being consulted and enlisted rather than blamed and ignored resulted in huge improvements in morale and productivity. When we actually changed our purchasing policy, cutting a 24-step process with multiple levels of control to just 3 steps, employees were stunned and delighted that someone was listening to them instead of merely taking them to task.

They were so enthusiastic, in fact, that they began to research the possible savings of a preventive maintenance program. They discovered, for example, that city departments did not use truck-bed linings when hauling corrosive materials such as salt. Mechanics also rode along on police patrols and learned that squad cars spend much more time at idling speeds than in the high-speed emergencies mechanics had imagined and planned for in tuning engines. Various city departments — streets, parks, police — helped the First Street mechanics gather data, and we ultimately adopted their proposals, including driver check sheets for vehicle condition, maintenance schedules for each piece of equipment, and an overtime budget to cut downtime and make sure preventive maintenance work was done.

The result of these changes was a reduction in the average vehicle turnaround time from nine days to three and a savings of $7.15 in downtime and repair for every $1 invested in preventive maintenance — an annual net savings to the city of Madison of about $700,000.

The Second Wave

Despite the satisfying outcome of this first foray into public-sector quality, I understood that we were far from having enough knowledge and experience to develop a program for the entire city work force.

I attended a second, four-day seminar with Deming, and I enlisted the support of university faculty and local and national quality consultants. I also helped found the Madison Area Quality Improvement Network and recruited academic, professional, and corporate members. Today it is the largest and most active community quality council in the world. In the years that followed, corporate and academic experts provided the city with in-kind services that were worth hundreds of thousands of dollars.

I went about setting up a formal quality and productivity (QP) program that would eventually function citywide. I hired a full-time quality and productivity administrator — the first such public-sector position in the country — even though that meant giving up one of the four policy positions on my staff. I also organized a QP steering committee of top managers to direct the effort. Originally, the committee itself was a throwback to an older, hierarchical tradition: all top managers. Within two years, it replaced eight of its own original eleven members with two union presidents — Firefighters and AFSCME — three middle managers, two of our most enthusiastic frontline workers, and the president of the city council.

The steering committee issued a mission statement that envisioned employee involvement, customer input, continuous improvement, creativity, innovation, and trust. On a more practical level, it said that the hallmarks of quality in Madison city government would be excellence “as defined by our customers,” respect for employee worth, teamwork, and data-based decision making. We called this foursquare commitment the Madison Diamond.

Finding the lofty words was the easy part; now we had to live up to them. The first task was to recruit the initial cadre of what we hoped would become a quality army. We set out to identify pioneers in several city departments — managers and frontline employees with the imagination and motivation to lead the way. Their most important characteristic, I found, regardless of political philosophy or training, was a strong ego: the capacity to take responsibility for risks, share credit for success, and keep one eye on the prize. We found enough of these people to begin a new round of experiments like our successful First Street prototype.

This second wave included projects in the streets division, the health department, day care, and data processing. We expanded the lesson we’d learned about purchasing at the First Street Garage to create a citywide “Tool Kit” program that got workers directly involved in choosing the most cost-effective tools and materials for their jobs. City painters picked the most durable, long-lasting paints for city housing projects, for example, and police officers chose the equipment they would be using every day in their patrol car “offices.” Selections had to be made on the basis of hard data, however, so running the comparisons became quality projects for the employees.

In the health department, the challenge was simply to give citizens quicker, better answers to their questions about clinics and programs. Employees began to sample and analyze the questions that were coming in, then on the basis of that data they set up briefings for phone receptionists so they could answer most questions directly. They also created a clear system of referrals for more complicated requests. Follow-up studies showed considerable improvement in the department’s level of “customer” satisfaction.

By gathering and analyzing data, the day care unit shortened its waiting list for financial assistance by 200 names, while data processing customized and thus greatly improved its relations with internal customers.

As with our first experiments at the garage, the second wave of quality initiatives worked minor wonders in productivity and morale, and they met with little resistance — so long as the projects stayed small. But as the program grew to involve more departments and demand more time of managers, opposition began to emerge. I had expected problems from structural sources: the 14 different unions that represented 1,650 of Madison’s 2,300 employees; the strong civil service system that included and protected all of the city‘s mid-level managers and most of its department heads; the 22-member, nonpartisan city council (meaning no partisan bloc for the mayor’s program); and Madison’s “weak-mayor” system of government that invested little authority in the chief executive.

But it turned out that the city council supported the program, and the unions grew increasingly helpful. The real opposition was not structural but bureaucratic. There were individual mangers who could not tolerate the idea of bringing their employees into decisions or who resented taking time to reassess tried and true procedures. There were employees who scorned the program as faddish and who looked on enthusiastic colleagues as management finks. There were cynics who tried to exploit the program by packaging their pet projects as QP initiatives, and I had political opponents in a few departments who tried periodically to entice some reporter into probing the “QP boondoggle.”

Most surprising and disappointing to me were the barriers I discovered between work units, including even units in the same department. One department head told his middle managers that he expected them to deal with quality problems while he, as he put it, “protected” the department from the rest of city government! He could hardly have devised a better way to nip cooperation in the bud and help problems multiply.

The most unsettling indication of how far we had to go came early in the program when all the individual team members in our second wave of projects independently resigned. They felt their managers, who should have been giving them guidance and support, were simply cutting them adrift and thus setting them up for failure and blame. For their part, the managers believed that all they had to do was make an initial statement of support and invite subordinates to “call if you have a problem.” Employees, of course, took this to mean, “I expect you to take care of it.”

I addressed this problem by discussing it directly with all the people involved. I then restructured our procedures to require specific work plans and regular, scheduled meetings between the frontline project teams and their managers. Contacts had to stop being intrusions into a manager’s schedule. They had to become predictable exchanges of information and assistance to which team members were entitled.

Internal and External Customers

The parts-purchasing and preventive-maintenance improvements I described at the First Street Garage are examples of projects in one department that helped other departments do their jobs more efficiently. Another example involved trash collection workers analyzing the pattern of injuries in their own work, weighing and measuring the refuse put out at the curb by residents, and studying the lifting requirements of the refuse-packer trucks. Their proposals for restrictions on the size of bundles and better design of new trucks reduced neck and lower back injuries, saved lost time, and made working conditions safer, at no extra cost to the city.

In another project, seven city departments that used maps in their work got together, identified duplications of effort, and created a computerized database and a uniform map bank available to all departments as well as to Madison’s private gas and electric utilities.

Long lines of trash-filled trucks at the city‘s recycling plant gave rise to another project. Employees clocked truck arrival times, noted how they clustered, and proposed a staggered schedule of trash collections that would cut waiting time. This proposal not only made the system more efficient; it also saved the money we were thinking of spending on an expanded dumping floor. But until the data had been gathered, no manager was in a position even to consider such a solution.

In projects that serve internal customers, government workers benefit directly at the workplace while taxpayers benefit from cost efficiencies and more smoothly functioning institutions. But such initiatives rarely make headlines, which go instead to projects that serve external customers and visibly change public-service delivery. In Madison, the most celebrated example was the creation of the experimental police district.

During the late 1960s and early 1970s, violent antiwar demonstrations turned Madison into a kind of battleground. At one point, the governor called in the Wisconsin National Guard to secure the university campus. The harsh tactics used to put down these demonstrations left much of the community with a distrust of the police.

The officers themselves felt battle scarred and alienated from the city they were hired to protect. When a young police chief named David Couper arrived in 1972 with newfangled philosophies of conflict management and citizen service, he was assailed with a series of grievances and lawsuits from veterans on the force.

Couper, a former marine, responded to these tests with what he now calls a typical military approach: “You’ll be nice to citizens, or you’ll have hell to pay!” This got him nowhere, of course, and after several frustrating years he took a sabbatical, rethought his management approach, and familiarized himself with Deming’s quality gospel. He then decided, as he puts it, “to run the department for the 95% who did their jobs well, rather than write the rules for the 5% who were difficult.”

He identified progressive officers interested in transforming the department and rebuilding community confidence. Together they created an elected employee policy-making council, a committee to look at the department’s future, and a police mission statement that made peacekeeping the department’s primary role and put law enforcement second.

This was a risky move, considering the probable reaction if people thought the police were neglecting detection and apprehension, but the new strategy had broader implications. It meant the department could deploy resources to work on the underlying causes of crime, interact with schools and neighborhood organizations, develop relationships with minority and student leaders, and put a higher priority on outreach. Most important, perhaps, it created the “constancy of purpose” that Deming has always put first on his list of techniques for achieving total quality.

In 1986, Couper and 50 police volunteers decided to test the new mission statement. They believed that a decentralized police district with a neighborhood headquarters would lead to more effective peacekeeping by giving better service to residents and by encouraging officers to “adopt” the neighborhood and vice versa. Police precincts were an old idea, but this was different: officers in the district would elect their own captains and lieutenants, determine their own staffing and work schedules as a team, and network with neighborhood associations to set law-enforcement priorities. Having worked with Couper for 14 years, the union had learned to trust him, and it accepted the idea.

Several months of surveys and data analysis resulted in the Madison Experimental Police District on the city‘s South Side, with its station house located in the aldermanic district of a relatively junior member of the city council. Because the officers had done their homework, they were able to nip in the bud an effort by the council president to locate this political plum in her own ward. They could show that their proposed location provided the best service to priority areas and populations, including the elderly, as well as the fastest access to all parts of the district.

Soon, South Side residents were seeing their police on the streets, at neighborhood meetings, and at their doorsteps to interview them about their concerns. Home burglaries decreased 28% between 1986 and 1989, while the rest of the city saw a 15% increase. Other statistics were equally impressive. Dollar savings included the reduction of overtime to 200 hours for the whole experimental district in 1988, compared with 980 hours for an equivalent number of officers from the central office. This savings was achieved after officers in the district ran a study of the kinds of calls that kept police on duty beyond their regular shifts. They discovered that a high percentage of such calls were not urgent, so they arranged with dispatchers to put these calls on a “B” list if they came in less than 45 minutes before the end of a shift. When new officers came on, they would take those calls first and attend to them at regular pay.

Although this triage meant some delay in police response for some police customers, I never received a single complaint about it. Tax dollars were saved, and surveys showed that citizens were satisfied with police service and that 85% of officers in the special district had higher levels of job satisfaction than in their previous assignments.

Remaking City Government

As the business reader knows, Deming-style quality is not a quick fix or a magic bullet; it is a top-to-bottom revolution in the definition of “business as usual” that takes years to accomplish. There’s no reason in the world to think it can be done more quickly or easily in government than in industry. But in Madison, we saw encouraging gains in just a few years.

Some wary union leaders and members turned out to be among my strongest backers. Terry Holmes, the tough master mechanic and longtime union president, became a staunch ally. “Before the quality program, all we did was put out fires,” he once told me. “Morale was low. The message from management was, ‘You don’t know what you’re talking about. Do as you’re told.'” Once the program was well under way, however, the message became, “You and your teammates understand your work better than management can. Tell us how to help you do it better.”

Some managers who were initially highly skeptical became advocates of the program over time. Speaking of his own subordinates’ quality team, one department head told me, “I had a ‘show-me’ attitude for three years — and they finally showed me.”

In 1987, I offered my five best managers merit raises from a special pool of money I had set aside for recognition. To my astonishment, all five refused the money. To single them out as heroes, they said, would be setting up a star system and, by implication, denying credit to the efforts of their teams. What people wanted and needed was regular, daily feedback about the things they were doing well, pats on the back, notes from the CEO or, in this case, the mayor. They were performing as teams and they wanted to be recognized as teams.

We made immense progress in the six years I was in office. By the end of 1988, we had trained 75 team leaders (who have a stake in the outcome of team decisions and who lead team meetings) and facilitators (who come from other divisions or departments, have no stake in decisions, and take special responsibility for maintaining group process). We had also developed nearly two dozen projects and produced good enough results to warrant inviting all of the city‘s departments to apply for what we called “transformation status.”

Transformation status meant a long-term, departmentwide commitment to the new management practices, including continuous qualityimprovement and training for all employees in quality-improvement skills and data-gathering techniques. The first two departments to accept the challenge were the police department and the Madison metro bus system. A year later, the streets division and the health department joined them.

When I left office in 1989, Madison city departments were running between 20 and 30 quality improvement projects at a time, five agencies were in transformation, the city was giving training in quality to every municipal employee, joint efforts were under way with several state agencies eager to follow our lead, and city workers left and right were continuing to invent service improvements for internal and external customers. If I ever had questioned the feasibility of applying Deming’s principles to public-sector services, my doubts had long since vanished.

In politics as in business, however, nothing is simple. On the plus side, my quality program was streamlining Madison city government, and — though I insisted on giving credit to the people who earned it — producing political capital for me. In my 1989 reelection campaign, I received the rare combined endorsement of the unions representing police officers, sheriff’s officers, firefighters, and streets maintenance workers. Local papers praised my efforts to modernize public-sector management, and the nationwide State and Local Government Labor-Management Committee, organized by AFSCME, the AFL-CIO, and the U.S. Conference of Mayors, singled out Madison’s accomplishments in a television documentary that was broadcast across the country on Labor Day.

But this recognition was not enough to win me a fourth term. Other political factors were more compelling. There was my incumbency itself — no Madison mayor had been elected to a fourth term in more than 50 years. There was the reemergence of a popular mayor of yesteryear in the field of candidates. And, most fatefully of all, there was a major money referendum on the ballot. The issue was a lakefront convention center expected to cost $46 million. I believed the center was important for the city; many others did not. I campaigned hard for the center as well as for my reelection, and we both went down to defeat by nearly identical margins.

I take consolation in the fact the election was not a referendum on the quality and productivity program. To the degree that QP played a role, it was an asset, and even though I lost, I believe the culture of quality that my administration introduced into city government will survive, maybe even flourish. The city departments that embraced it and saw its power are still active believers, and my successor has given QP his cautious support.

Implementing a Deming quality strategy is not simply a matter of adopting a new set of slogans or a new accounting system. It’s a matter of radical restructuring — part sociology, part systems theory, and part statistics — all aimed at liberating human ingenuity and the potential pleasure in good work that lie at least partially dormant in every organization.

It may appear that corporations are in a stronger position to implement Deming’s methods than are governments. Market forces exert great pressure on businesses to undertake fundamental change for the sake of efficiency and survival. But governments today are under equally ferocious pressure to economize. Deep federal deficits, state and local budget-balancing requirements, and the trials of finding revenue in times of economic contraction or slow growth will make life challenging for state and local government managers for years to come.

My experience in Madison convinces me that quality-oriented businesses can contribute to keeping the public sector strong and efficient. As taxpayers, as providers of goods and services to government, and as community citizens, businesses have a direct interest in lending a hand. If businesses insist on quality, offer their expertise, share their training programs with government executives and team leaders, and search for quality programs to translate into public operations, the payback can be substantial. Who knows — we may actually get governments that are there to help us.

Reprint 91208

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The paper should contain the following APA formatted elements:

1. Title Page.
2. Abstract.
3. Body of the essay (Your researched response.).
4. Conclusion.
5. References Section.

The requirements below must be met for your paper to be accepted and graded:

1. Write a response between 750 – 1000 words for the body of the essay (The title page, abstract, conclusion and References section are not counted toward the word requirement.) (approximately 4-6¬ pages) using Microsoft Word in APA style,
2. Address all three elements fully.
3. Use font size 12 and 1” margins.
4. USE ONLY 3 REFERENCES!!!
5. References must come from sources such as, academic and scholarly journals and essays found in EBSCOhost, CNN, online newspapers such as, The Wall Street Journal, government websites, etc. Sources such as, Wikis, Yahoo Answers, eHow, blogs, etc. are not acceptable for academic writing.
6. Cite all reference material (data, dates, graphs, quotes, paraphrased words, values, etc.) in the paper and list on a reference page in APA style. Provide citations everywhere information from the sources is used for foundational support and for validation of opinions.
7. Use the third person narrative and avoid the use of the first and second person narrative and terms such as; I, me, myself, you, your, yourself, we or us (or related form such as let’s (let us) or we’ll, we’ve (we will / we have) among others). This will prevent the author or other parties from becoming the subject matter and will maintain the focus of the paper on the central theme and subject matter found in the elements.
8. Be informational and avoid being conversational.

Purpose of Assignment

The purpose of this assignment is to demonstrate to students how the issuance of debt to purchase outstanding common stock could affect the value of the company’s equity and redefine the capital structure. The problem will also allow students to explore the effect of corporate taxes through debt financing.

Assignment Steps

Resources: Corporate Finance

Scenario: Hightower, Inc. plans to announce it will issue $2.0 million of perpetual debt and use the proceeds to repurchase common stock. The bonds will sell at par with a coupon rate of 5%. Hightower, Inc. is currently an all-equity company worth $7.5 million with 400,000 shares of common stock outstanding. After the sale of the bonds, the company will maintain the new capital structure indefinitely. The company currently generates annual pretax earnings of $1.5 million. This level of earnings is expected to remain constant in perpetuity. The tax rate is 35%.

Prepare a MEMO advising the management of Hightower, Inc. on the financial impact based on the points below. Make sure to include introduction and conclusion paragraphs that are separate from the body of your paper. Word has templates you can download as it relates to memos. CALCULATIONS SHOULD BE ADDED AS AN APPENDIX. ONLY FINAL ANSWERS SHOULD BE INCLUDED IN THE DISCUSSION. Listed below are the ONLY two questions that I want answered for this assignment.

• Construct the company’s market value balance sheet immediately after the announcement of the debt issue.

• What is the company’s stock price per share immediately after the repurchase announcement?

HRT 4100 Article 7 Review Form

Jim Collins Interview

Overview of Article Reviews and Forum Participation. (3 points). After reading Article 7 complete this review form and then upload your answers to the Article 7 forum in Blackboard as your first thread. This must be completed before the cutoff date and time specified in the course schedule. NOTE: To receive credit for this assignment you must submit your completed article review form and contribute a minimum of three additional comments to the forum by the cut-off date and times.

My expectations for your responses to the questions are a minimum of 2-pages (single-spaced, 12 point font) for each article review. Your article review should cover the three statements/questions, which are listed below.

• Note cutoff dates and times. No late submittals accepted.
• Use spelling, grammar check, and page numbers.
• Article Review Assignments are open book, open note.
• Your completed answers to the questions must be uploaded to the appropriate forum by the cutoff date and time.
• To receive credit for the assignment you must contribute a minimum of three comments to the forum in addition to your initial thread (completed Article Review Form).

Here are your three questions. Begin your answer immediately after each question.

1. Summarize the relevant points of the article (list and explain the major and minor points made by the author).

2. How could you apply the elements of the article to you becoming an effective leader (how could this article be used to help make you a better leader)?

3. How you feel about the article (what is your reaction to the article—do you agree with it or not and why)?

1. Business productivity and cost reduction were
   the top concerns by a wide margin among the top five (5) management concerns.
   Give your opinion on whether or not you agree with this assertion. Justify your
   response.

2. Select two (2) out of the top five (5)
   management concerns that you believe is the most important. Then, select one
   (1) out of the five (5) most influential ITs that you believe would support the
   top management concern that you previously selected. Next, analyze whether or
   not changing your management concern would impact the IT that you chose.
   Justify your response.

(The top five management concerns are
(1) business productivity, (2) IT and business alignment, (3) business agility
and speed to market, (4) business process reengineering , and (5) IT
reliability and efficiency). 

(The five most influential ITs are:
(1) business intelligence, (2) cloud computing, (3) enterprise resource
planning, (4) software as a service, and (5) collaboration and workflow tools).

Read the following scenario.

Futuretek sells high-tech computer chips and software to smartphone manufacturers worldwide. Futuretek maintains two software databases: one containing Futuretek’s customer list with nonpublic contact information for key personnel, and the other containing customer purchasing trends. The information in the two databases is available for employees to view and use in connection with their job duties.

Dana is a computer programmer for Futuretek. Dana plans to run her own company one day and design and sell her own computer chips to smartphone companies. As an employee, she has access to the two databases containing Futuretek’s key purchaser and purchasing trends information.

Dana decides to leave Futuretek and start her own computer chip business. Before she leaves, she makes a copy of the two databases on a portable hard drive. Dana uses the information to contact Futuretek’s customers and offer them cheaper, but comparable, computer chips manufactured by Dana’s new company, SmartChip.

Futuretek becomes aware of Dana’s actions and asks you, the chief operations officer, for advice and recommendations on what to do.

In a 5- to 10-slide Microsoft® PowerPoint® presentation, complete the following:

• Determine whether Dana has taken Futuretek’s intellectual property (IP), and if so, describe the type(s) of IP that was taken.
• Explain any civil actions in tort or criminal actions that may be brought against Dana or SmartChip.
• Assume Futuretek sues SmartChip, and Futuretek wins the lawsuit. Recommend ethical policies that SmartChip can put into place to prevent future legal claims and litigation against the company.
• Recommend risk management procedures that Futuretek can implement to avoid or limit this type of activity from happening to the company in the future.

Cite a minimum of two references according to APA guidelines.