Growing Pains

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H B R CAS E ST U D Y

Should Maher give
his star performer
star rewards—or
risk her leaving?

AND

COMMENTARY

Growing Pains
by Robert D. Nicoson
•

Six commentators offer
expert advice.

Reprint 96408

Waterway’s CEO is rethinking his compensation policies. Maybe he
should be rethinking his business strategy.

H B R CAS E ST U D Y

Growing PainsCOPYRIGHT © 1996 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED.

by Robert D. Nicoson

“I’m challenged and motivated where I am,
and I like the company. You know that. But I’ve
got to say I’m interested in the opportunity
you’re describing because of the money and
the equity position. For those reasons alone,
it’s tough to pass by. Let me think about it some
more and callyou in the morning. Thanks,
Les.”
That was the extent of the conversation
Cyrus Maher, CEO of Waterway Industries,
overheard when he came around the corner
just outside of Lee Carter’s office. She must
have been talking with Les Finch, Maher
thought. Here’s trouble.
Of course, it didn’t necessarily mean anything, Maher told himself as he passed the office, waving to Carter. Finch, awell-connected
marketing consultant, had been the matchmaker between Carter and Waterway Industries to begin with. With the company in the
fourth quarter of its best year ever, he certainly

wouldn’t be encouraging her to leave. Would
he?
Maher got a cup of coffee in the company’s
first floor kitchenette and deliberately took the
long way back to his office, through the design
room. As always,the atmosphere was upbeat,
but these days he also thought he could detect a
sense of purpose that had never before been a
part of Waterway’s organization.
Founded in 1963 in Lake Placid, New York,
Waterway had started out as a small, highquality canoe maker. Over the years, it had
built a good reputation all through the Northeast and had acquired a base of customers in
the PacificNorthwest as well. By 1982, Waterway was comfortably ensconced in the canoe
market nationwide, and it had maintained a
steady growth right up until 1990. Then, at the
insistence of a friend who was the head of a
major dealer and expedition company, Maher
had decided to venture into kayaks. His friend

HBR’s cases, which are fictional, present common managerial dilemmas
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harvard business review • july–august 1996

page 1

G rowing Pains •• •HBR C AS E S TUDY

Robert D. Nicoson is the director of
human resources for the Pioneer
Group, a financial services and natural
resources company based in Boston,
Massachusetts. He is responsible for all
domestic and international humanresources services, including executive
compensation designand
administration.

had said that kayaks were the next big trend
and that Maher would be a fool not to sign on.
Maher had done some checking and found
the prospects promising. So by the end of 1992,
Waterway had begun selling its own line of
compact, inexpensive, high-impact plastic kayaks. Within one quarter, Maher had known
that the move had been a smart one. Almost
all of Waterway’sexisting canoe customers—
mostly wholesalers who then sold to liveries
and sporting goods stores—had placed sizable
kayak orders. A number of private-label entities had also inquired about Waterway, and
Maher was considering producing privatelabel kayaks for those companies on a limited
basis.
For the most part, the staff had adjusted
easily to the company’s faster pace. The expanded businesshadn’t changed Waterway’s
informal work style, and people seemed to appreciate that. Maher knew that most of his employees were avid outdoor types who viewed
their jobs as a means to an end, and he respected that perspective. On days when the
weather was particularly good, he knew that
the building would be pretty empty by 4 P.M.
But he also knew that his employees liked their
jobs. Work...