Meg Whitman at eBay Inc Web viewIt is now a multi-billion dollar business and has operations located ... exchange ideas , share experiences ... she could gain knowledge about how they

Running head: MEG WHITMAN 1

Meg Whitman at eBay Inc.

McDaniel College

Colleen Nestruck, Sarah Foster, Melissa Hawkins, and Brooke Thomas


eBay is an online auction and shopping website where individuals and businesses can buy

and sell a variety of goods and services worldwide. eBay, founded in 1995, is one of the most

successful enterprises in the dot-com industry. It is now a multi-billion dollar business and has

operations located in over thirty countries. In 2009, eBay’s annual reported sales were $60

billion, which calculates to $2,000 worth of goods sold every second.

eBay’s internal organizational culture is based on trust, respect, autonomy, empowerment

and equality. The employees at eBay are expected to be honest and treat one another with

respect. Open communication and a sense of community are key drivers of the internal company

culture. Employees are encouraged to voice opposing points of view, respectfully discuss their

differences, and support their position. The senior management team operates with this same

philosophy – if there are differences among them, they will discuss the differences, reach a

consensus, and once outside the meeting room, everyone supports the position upon which they

agreed. “eBay’s internal culture mirrors many of the characteristics of its external community

culture in tangible ways: they are empowered to develop recommendations and they embrace a

nonhierarchical, team-based approach to problem solving” (Hill & Farkas, 2000 p.5).

Another observation of eBay’s internal atmosphere becomes very clear when you see that

Meg Whitman works in an open cubicle. Not one of those cubicles with a view but a real one,

with short walls and surfaces piled with paper, wedged tightly between two other people's

cubicles. Seeing Whitman in her cubicle is to be struck by a core truth about eBay: This

company looks like a dot-com, but its soul is utterly corporate (Brown, 2002). The superficial

casual, fundamentally businesslike quality is everywhere at eBay. “Employees are cheerful,

informal, and full of breezy chatter; their no-nonsense cubicles are littered with sports souvenirs,


Godzilla figurines, and Beanie Babies. There are free sodas in the kitchen and electric scooters

for employees to ride” (Brown, 2002, p.1).

The users of eBay also share the feeling of being part of a family and community. “After

the sale, each user is encouraged to submit feedback on his/her trading partner through eBay’s

“Feedback Forum.” As a result, the Feedback Forum has created a self-regulating mechanism

that encourages good behavior. This is just one way that eBay has fostered a strong sense of

community among its users” (Hill & Farkas, 2005 p.3). Unlike most other commerce sites in the

virtual world, eBay is a massive community with a distinct culture, membership, outlook, and set

of traditions. eBay’s business model is a little unusual. They do not build cars, computers, or

yo-yos. They do; however, build something just as important; they build communities. eBay has

created a place where people can come together, exchange ideas, share experiences, and expand

their own businesses. Users feel like they are part of the eBay family. “eBay is a site of the people,

by the people, for the people” (Hill & Farkas, 2005 p.1). “The primary element of our culture is

a respect for our community. It goes far beyond “the customer is always right” because eBay

wouldn’t exist if it weren’t for our community” (Hill & Farkas, 2005 p.4). eBay encourages

their customers to adopt values such as giving people the benefit of the doubt and treating others

with respect (Hill & Farkas, 2005). eBay wants their customers to form trusting relationships

with each other because people have a tendency to not conduct business with others unless they

have a foundation of trust on which to build that relationship.

eBay’s employees and users feel like they are part of a big family. That is what is so

great about eBay—they are literally changing the face of commerce every day. Do they have it

down to a science? Of course not; however, they are learning as they go. Succeeding together

and challenging each other to constantly refine and improve their way of working is part of the


culture. eBay’s employees are the reason they have succeeded and grown. They are also the

reason eBay will succeed tomorrow. As they continue to grow, they will continue to focus on

retaining the fun and the community feeling that makes eBay so unique. The organization’s

nonhierarchical, democratic, community-focused culture is the pinochle of its success, both as a

small company and as a worldwide billion-dollar corporation.

One of the challenges eBay faced was growing too rapidly, “Internally one of eBay’s

most significant challenges had been scaling the organization fast enough. The company added

60 people to its 135-person staff in the first quarter of 1999 alone (the plan had called for 85 new

hires). eBay projected that by the end of the second quarter of 1999, the company would have

over 300 in-house employees and another 300 or so employees in companies that it had

acquired” (Hill & Farkas, 2005, p. 17). They were doubling the number of people they were

going to have within the company by the end of the year. Growth at this rate was a major

challenge because it required a lot of senior management and human resources professionals to

recruit, hire, and orient this large volume of people. eBay would need to ensure they had

adequate management and support people in place before the recruiting and hiring phase started.

Another challenge eBay faced was ensuring they were hiring quality people; this topic is

discussed later by Omidyar.

There was also a great need regarding the technical aspects of eBay. Since eBay exists in

the virtual, technical world, it was challenging and important for them to understand and forecast

their needs so that they were not caught in a reactive situation. “This rate of growth would put

even more pressure on the company’s technical systems, which had faced several outages over

the past year. The company pointed out in its prospectus that “if we experience frequent or

persistent system failures, our reputation and brand could be permanently harmed” (Hill &


attempted to solve the system issues when she first started; however, even her planning was not

proactive enough to prevent future problems. The ongoing concern for system capability was a

real concern for eBay. Although growth was a good thing, it also meant more technical expertise

and system support would be needed. Ideally a team of employees should have been dedicated

to monitoring the virtual world in which eBay existed so that as problems were encountered they

were quickly addressed and solved.

Omidyar said, “Scaling the community and organization rapidly represents major

challenges in terms of being sure our values and culture are being communicated correctly. On

the organizational side, we have to be sure we are hiring quality employees who fit with the

culture; we can’t afford to let that slip. On the external side, at the rate we are growing, we have

more new people using the service in a quarter year than the total number of people who had

been using the service in the previous quarter. When that happens, how do the values of the

community get communicated to those new people? In the past, those values were

communicated person-to-person; most users would come on as buyers and interact with an

experienced seller, so the right values were being communicated through that interaction. But as

more and more new people interact with one another, they have no basis on which to

communicate values” (Hill & Farkas, 2005, p. 17-18). This is perfectly stated, the challenges

that the company faced related to communicating externally and internally about the company’s

values and objectives. As the company continued to grow, they needed to ensure that their

values and standards were respected and website users were abiding by their guidelines and

rules. If eBay lowered their standards and were not consistent in applying and monitoring their

guidelines, they could face the risk of losing their customer base and reputation. The standards


upon which eBay was founded and continued to embrace throughout its growth included

ensuring the people they hired fit into their community-centered culture.

Lastly, Whitman says, “eBay is really about a unique sense of community that eBay users

are creating for themselves. Can eBay get big while staying small?” (Hill & Farkas, 2005, p.

18). This last question seemed to be the biggest challenge for the company. They wanted to stay

small in terms of their principles and values, but wanted to grow at the same time. eBay needed

to think about what would be best for them in the long run; with the company worth 25 billion

dollars, they did not have much choice – they needed to increase their employee population in

order to maintain and perhaps increase their worth. They needed to look past wanting to be

small and look forward to what the growth of eBay would bring them. If they did not look past

becoming a larger company, they may have found themselves in the midst of a business identity

crisis. People would start to wonder for whom they were really working and if they were willing

to be overworked while eBay decided if they were willing to hire additional employees in order

to continue as a profitable company.

Before starting her career at eBay, Meg Whitman had enjoyed a very successful career in

the business world. She received recognition from previous employers in the form of quick

promotions for her hard work and dedication. This recognition is what made her stand out as a

possible candidate for eBay’s CEO position. Additionally, she had two qualities that Omidyar

was looking for: marketing expertise and perceived cultural fit (Hill & Farkas, 2005). These

qualities were important because eBay was looking to grow as a business and needed someone

with experience to help reach the growth goal while maintaining dedication to the company and

user culture. Whitman agreed to join eBay because of the combination of the benefit of the eBay


product and the connection it had with its users (Hill & Farkas, 2005). Knowing that this

combination was rare, Whitman jumped at the opportunity to join eBay’s team as a leader.

Whitman’s leadership style was transformational. A transformational leader is a person

who “transforms an organization down a new path, develops a vision of what an organization can

be, mobilizes an organization to accept and to work toward the new vision, and institutionalizes

changes that will last over time” (Tichy and Ulrich, 1984, p.65). Meg Whitman embodied all of

these concepts in her development of eBay from the beginning of her employment. When she

first signed on as CEO, Whitman asked herself three questions: “What are these guys doing

right?” “How do I build on what they are doing right?”and “How do I ease the organization into

new ways of doing things in a really positive way as opposed to a negative way?” (Hill &

Farkas, 2005, p. 5). Whitman recognized that eBay had a system that was successful but needed

to be transformed to reach the growth potential that Omidyar envisioned. Furthermore, like a

transformational leader, she recognized that there would need to be changes made in order to

reach the growth potential. In order to mobilize these changes, Whitman knew that she would

have to communicate them effectively. Whitman understood that to maintain these changes over

time she would need to highlight them in a positive manner in order to motivate her followers to

embrace the changes. Having this ideology allowed Whitman to create a new vision for eBay.

After conducting marketing research, Whitman learned that numerous types of people

used eBay to trade merchandise. Furthermore, she found that the educational or professional

background made no difference in the success of a trader. In learning this information, Whitman

and her colleagues branded eBay as “a personal trading community where you can trade

practically anything on earth” (Hill & Farkas, 2005, p. 9). Understanding eBay’s brand,

Whitman was able to develop a vision for eBay. The vision was to make eBay the “world’s


largest online person-to-person trading community” (Hill & Farkas, 2005, p. 9). By emplacing

this vision, Whitman gave a direction for eBay to head. A transformational leader gives

organizations direction to follow but is able to maintain a compatible relationship between the

vision, philosophy, and style of the organization; Whitman herself is a transformational leader.

She created a company vision based specifically on the eBay culture. The most important aspect

of the eBay culture was the feeling of community amongst its users. It was the belief of eBay

that “a strong community affiliation would also encourage greater consumer loyalty and repeat

usage” (Hill & Farkas, 2005, p. 8). Using this belief, Whitman created a vision that promoted

growth and centered on fostering the feeling of community. The vision emphasized global

person-to-person trading without the need for a middle man. Whitman believed that by

expanding the trading neighborhood worldwide eBay would grow as a business because it would

be able to reach more consumers that would allow for more trades to take place. The more

trades taking place, the more eBay would grow financially. However, Whitman recognized that

eBay would have to make several changes to the current corporate structure to reach this goal.

Whitman knew in order to grow eBay to a global competitor the organization could no

longer operate as a flat structure. The company was constantly growing and demanded a high

amount of focus to be able to sustain service. In order to put her plan into action she would have

to overcome this obstacle. For a leader to be transformational the created vision must be

mobilized. Vision is mobilized by communicating it to followers (Tichy & Ulrich, 1984).

Whitman communicated her vision to her teammates by creating a more efficient and stronger

management team that better fit the need of the organization (Hill & Farkas, 2005). One of the

first steps that Whitman took to update her management team was to subdivide her engineering

department into specialized departments. Whitman saw how bogged down the engineers were


and understood that as the company continued to grow this backlog would just continue to

increase until it became unmanageable. Initially Whitman was met with resistance because the

opinion was that the current design was essential to how eBay functioned as a business. After

significantly discussing the continuing challenges that the department would face, Whitman

effectively communicated the necessity of the departmentalization. Most importantly, Whitman

gained commitment and understanding while overcoming resistance to change.

To further strengthen her management team Whitman realized that she would

need to hire more people that had marketing, legal, and customer service experience to contend

with the demands of an expanding business and the challenges that the expansion would create

(Hall & Farkas, 2005). Additionally, two board members that had founded their own companies

and had also created new product markets were hired. She argued that these board members

would be valuable because they would serve as mentors for her (Hill & Farkas, 2005). Aligning

herself with professionals who had experience with new product markets, Whitman was being

very creative. She was smart enough to understand that by working with these professionals she

could gain knowledge about how they dealt with emerging issues that their markets faced which

in turn would give her an advantage in dealing with similar challenges when and if they would

arise. Creativity is an important trait shared by transformational leaders because by being a

creative leader you encourage creativity amongst your followers (Tichy & Ulrich, 1984, Robbins

& Judge, 2010). By developing a unique management team, Whitman was able to create a

support network to mobilize the new company vision.

As eBay grew there were substantially more people trading many different types objects.

The vast quantity of people and the types of objectives being traded forced Whitman to deal with

community safety issues (Hill & Farkas, 2005). The previous policy on community safety had


been to hope that users would abide by the user agreement and for members to take

responsibility for safety issues themselves. With the growth occurring, Whitman’s “instinct told

her to take action” (Hill & Farkas, 2005, p. 12). The challenge she faced by stepping in and

taking charge was that she threatened to portray eBay negatively because it would change eBay’s

role as a market place an enforcer. Whitman knew that the user community would not be happy

with any policy that allowed eBay to interfere with the traditional trading methods that the

company was founded on. However, realizing that safety issues were more about the “character

of the company”, Whitman convinced the management team to take a proactive response (Hill &

Farkas, 2005, p. 12). The initiation of this new proactive response technique was an indicator of

the “shaping and reinforcement of a new culture that fits the revitalized organization” (Tichy &

Ulrich, 1984, p.69). Due to Whitman’s transformational leadership, she was not only able to

create a vision and mobilize it, but she was also able to institutionalize the change. Whitman

further demonstrated this with the decision to eliminate the sale of guns and ammunition on

eBay. Once again the challenge arose to be proactive or hands-off like the traditional regime.

After much thought about how maintaining the sale of firearms would affect the business in the

long run, Whitman was able to come to her decision. She explained to her management team that

eliminating the sale of guns “was the right thing to do” (Hill & Farkas, 2005, p. 14). Whitman

understood that while eBay was formed on community and the interactions between people not

interactions between eBay and people, that eBay still had a responsibility to their users. By

enforcing this new policy Whitman recognized that in order to be the largest person-to-person

trading community worldwide changes in policy would have to be adapted to ensure the best

environment for trading. Whitman institutionalized the necessary changes by altering how she

made decisions, communicated to users and to employees, and problem solving.


The Kruse International acquisition proposed to be extremely profitable for eBay

while simultaneously presenting major challenges. If I were Meg Whitman, I would analyze how

the acquisition of Kruse International would affect the eBay community, their future growth

opportunities, and how the two companies would integrate. In 1999, within a two-month time

period, eBay signed a strategic partnership agreement with AOL and acquired Butterfield &

Butterfield, which served as two potentially profitable major deals. Their next move was to

purchase Kruse International, Whitman stated that “Kruse’s excellent reputation, leadership

position and expertise…will assist eBay’s presence” in the automobile market (eBay Press

Releases, 1999).

Acquiring Kruse International would have its pro’s and con’s. By purchasing the

company, eBay would continue to build on its high-end market which begun with the acquisition

of Butterfield and Butterfield. In addition, eBay could open its doors to the collector automobile

market through the world’s most respected dealer. Kruse was a very reputable company with

strong customer and employee relations that mirrored eBay’s values. They had an in-house

team, which appraised, authenticated and rated a wide range of automobiles as well as an

extensive relationship with collectors and dealers (eBay Press Releases, 1999), helping to

eliminate any issues of fraud.

The Kruse International acquisition did have some downsides. eBay faced a lot of

backlash from customers after the Butterfield and Butterfield purchase. Customers felt that eBay

was abandoning the people who contributed to the overall success and prosperity of the

company. If eBay continued to grow so rapidly and acquire Kruse, the customer base that first

supported eBay, may no longer exist causing the sales to decrease and destroying the eBay

community.


Another negative factor of the proposed acquisition was the technical issues eBay was

encountering. In the preceding years, the system had several outages and eBay feared that the

issue had to be resolved; otherwise, it would affect the reputation and brand of the company. It

was a necessity for eBay to have the proper technical support; especially when entering a new

high-end market with high-end customers.

If eBay failed to acquire Kruse they would be able to focus on retaining their current

customer base and provide them with a sense of security. This would restore the customers’

faith in eBay and give the company time to address the technical issues and secure a stronger

customer support system. Although eBay wanted to grow, this move would help them to slow

down a little and truly analyze the long-term effects of their strategic marketing plans.

By failing to take advantage of the Kruse acquisition, eBay would not have the

opportunity to attract more buyers and sellers. The company would not be able to open its

market to the collectible automobile industry; especially without the help of Kruse and it’s

already established following.

When considering the purchase of Kruse, my decision would have been influenced

mainly on how to remain loyal to the current customers and how to successfully integrate Kruse

and eBay. In order to maintain the current customers, I would have implemented extra

incentives to our unique users program. These incentives would serve as reminder to our

customers that we did appreciate them and all they contributed to eBay. I would also continue to

work on increasing eBay’s system capacity and back up capabilities so the system shortages and

outages could be eliminated or at the very least, reduced by frequency.

It would have been essential to discuss the integration of Kruse International with Dean

Kruse and Pierre Omidyar would have been to communicate the values of eBay with Dean Kruse


and make sure he understood its importance both internally and externally. He would have

needed to adapt to the job attitude of eBay and become another one of eBay’s many

transformational leaders. There would also have been a need to effectively determine how to

handle the Kruse operations. Questions should have been addressed such as whether or not

Kruse International should remain in Indianapolis and then build another branch closer to the

eBay headquarters or if they should completely relocate. Every action and decision made to

integrate Kruse and eBay would have needed a strong strategic plan in order to ensure

cohesiveness and productivity.

When making the decision to acquire Kruse International I would have weighed whether

the senior management team felt we could successfully integrate the two companies and continue

to communicate and uphold the values of the company. As Whitman stated, “At its core, eBay is

not about auctions. Auctions are enablers. Auctions make it fun. Auctions represent a platform.

But eBay is about a unique sense of community that eBay users are creating themselves” (Farkas

& Hill, 2005). Overall, I would make sure that the acquisition of Kruse International was one

that would be just as rewarding and beneficial as the previous alliances and acquisitions.

eBay, like many businesses, was designed because a person had an idea to make

something better. Omidyar wanted to create a place where the general public could work

together and “all users had equal access to information and treated one another with honesty and

respect” (Farkas & Hill, 2005, p. 2). With this vision in mind Omidyar created a market place

based on community. Users loved the market place that eBay provided and year after year more

and more users signed on to eBay. eBay was a huge hit and grew rapidly. As a result of how

quickly eBay grew, many challenges surfaced. In order to help overcome the obstacles created

by organizational growth Omidyar hired Meg Whitman. Whitman was a transformational leader


that recognized that eBay had to experience revitalization in order to remain a top competitor in

the trading world. Whitman was able to create a new company vision, mobilize the vision, and

maintain the institutional changes necessary to ensure the success of the new vision. This tactic

opened the door to new market of high-end goods but also came with a price. Whitman faced

several criticisms for supporting the acquisition of auction houses and changing the policy for

what could or could not be traded on eBay. The criticism taught Whitman and the members of

eBay is that while their users may not always agree with the choices the business makes, making

those choices are necessary. Furthermore they protect the integrity of the organization and the

safety of the users. The result of this logic is a very successful business that provides numerous

different objects that can be traded by people all over the world to people all over the world.

References


Brown, E. (2002). How can a dot-com be this hot? Fortune, 145(2), 78-84. Retrieved from

Business Source Premier database.

eBay press releases. (1999). Retrieved from: www.pages.ebay.com.

Hill, Linda A., &Farkas, Maria T. (2005). Meg Whitman at eBay Inc. (A). Harvard

Business School, Case Number 9-401-024. Boston, MA: Harvard Business

School Publishing

Robbins, Stephen P., Judge, Timothy A. (2010). Essentials of Organizational Behavior;

tenth edition. Upper Saddle River, NJ: Pearson Prentice Hall.

Tichy, N. M. &, Ulrich, D.O. (1984). The Leadership Challenge. MIT Sloan Management

Review, p.65-73.

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Meg Whitman at eBay Inc Web viewIt is now a multi-billion dollar business and has operations located ... exchange ideas , share experiences ... she could gain knowledge about how they