Dr. Justin Essay

Karen Leary Case Study

Executive Summary
Merrill Lynch is a leader in the consumer financial services industry. In response to fierce competition following deregulation of financial institutions in 1985, the company implemented a new strategy and shifted to a customer-oriented approach that emphasized long-term financial planning rather than product-centered structure. Account executives were replaced with financial consultants (FCs), brokers who focused on developing lasting relationships with clients. At the same time, Merrill Lynch had targeted goals for cost control and broker productivity which were supported by restructuring the compensation system to reward asset gathering and top brokers.
Karen Leary worked as an FC at Merrill Lynch for six years before moving to a management role. Two years later, she became resident vice president and general manager of the branch in Elmville, a Chicago suburb. She approaches her new position with energy and enthusiasm. In an effort to ensure that the office culture would allow growth and support Merrill Lynch’s financial planning strategy, she implemented several immediate changes including termination of eight FCs and hiring a new chief compliance officer. Leary’s management style was hands-on and aggressive. She developed innovative sales and training programs as well as a voluntary mentoring program to motivate older, possibly complacent top producers and help younger FCs get started. Although her aggressive approach to sales and compliance paid off with 30% increased business her first year, some FCs found her hands-on style off-putting and complained that she was “always pushing you and looking over your shoulder.”
Leary hired Ted Chung specifically “to attract customers from the thriving community of Taiwanese entrepreneurs that had sprung up around Elmville.” Taiwan-born Chung was in his early forties and had already achieved financial independence as a result of his own entrepreneurial endeavors. Despite a comprehensive hiring process, Leary never felt like she really knew Chung and over the course of his first year of employment Leary became aware of Chung’s still formality and desire for privacy. His behavior at the office was noticeably different from that of his peers.
Four months after his training, Chung brought in a $6 million account from a local Taiwanese industrialist who, according to Chung, only spoke Chinese. Although Chung followed the Merrill Lynch recommendations initially, over time his investments began to depart substantially from the company’s recommendations. Nevertheless, Chung was careful to formally document all activity and fulfill standard compliance procedures. He became frustrated by and resisted Leary and the chief compliance officer’s oversight.
After one year with the company, Chung had yet to secure another client but hinted that there would be accounts soon. During his one year review, he told Leary that he was confident he would soon become one of the top producers and was therefore requesting a private office. Of the 45 FCs at the Elmville office, only the eight best, most productive, and most experienced had private offices. Leary felt that Chung’s request was totally inappropriate and is concerned about his growing displays of ego and temper. Nevertheless, she is committed to developing the Taiwanese market and sees Chung as a valuable asset.

Analysis The breakdown in Leary and Chung’s relationship escalated from a series of miscommunications rooted in cultural differences. While Leary acknowledged that cultural differences existed, she didn’t spend time understanding these differences and how they might affect her management of Chung beyond noting “the fact that he was Asian and I was not.” As described in the Harvard Business Review’s National Culture and Management, “Rather than merely acknowledging that people from another national culture are ‘different’ in some undefined way, managers should be able to identify

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