This document summarizes the evolution of ATH, a medical technology firm, from its founding in 1997 through changes in ownership and management in the 2000s. It describes ATH being acquired by Scepter in 2001, with earn-out clauses incentivizing growth goals. Management pushed for profitability in 2003 but quality issues emerged. In 2004-2005, they refocused on quality, customers, and balanced incentives. New management in 2006-2007 aimed to cut costs while improving quality and developing new products, obtaining an ISO quality certificate but missing some targets.

2. Success and failuresof a firm depend on the management’s attempt to design and use formal control systems to achieve profit and performance goals ATH MICROFINANCE

3. Founding Dr.Charles Casper and John Frost founded ATH in 1997 Purpose - sell a new medical imaging product In 1998 received approval to market its first product Group of doctors convinced to invest in the venture Deal struck with Alumni Capital Partners, a venture capital firm All investment in- product development, tooling and marketing Managers, scientists and marketing personnel hired In 1999 another round of financing 2000- improved product..

4. Selling ATH to Scepter ATH acquired by Scepter Purpose- offer profitable to all . Scepter would add a new product , venture capital firms could cash out profitably , ATH would have access to cash to finance faster growth , Sceptor could increase its presence in the market segment ATH acquired in 2001 by Scepter Earn-out clause – if new product currently being developed by ATH approved by FDA Scepter will pay it $30million , $35million if ATH’s technology proved superior to other existing ones and $120million over a 3 yr period if sales goals and earnings goals were met ATH’s 10 equity-holding managers who chose to stay with Scepter could receive b/w $15million and $7.5million additional payout from the sale of the company

5. Growth Phase : 2001-2002 Original ATH Management team decided to stay with the business FDA approved the new product and initial earn-out was paid New technology in Europe could challenge ATH so next earn-out not paid Profit performance was very disappointing for 2001 and 2002 This was due to heavy investment in development costs For the pay-out of $120million , senior management had to turn around bottom line for 2003…….

6. Push to Profitability : 2003 Motivate employees, to break through in 2003 Each employee would get a cash bonus of 20% of their salary and a free trip to Hawaii The results outstripped expectations; sales quadrupled and profits were $10.6million Euphoria did not last ….. Customer complaints increased , product returns … FDA paid a surprise visit and issued a warning letter

7. Refocus on Process:2004-2005 Focus on :- 1)Develop a vision and belief system where quality , customer value and investment for the future are emphasized 2)Develop a more balanced incentive system , based on customer satisfaction , product innovation , quality etc.. 3)Modify the bonus program for 2004 16%bonus if earn-out goals achieved in absolute terms 8% if earn-out goals as a % of sales 6% bonus subjectively decided by department manager

8. Customer Measures Product Defects Customer Contact Errors Backorders New Product Delays

9. New Management :2006-2007 Growth came to a halt Senior managers began to leave the division after cashing the earn-out New management joined Focus to reduce costs to 90% of their 2005 levels , focus on new product development , attention on customer measures and departmental objectives …. Business met product quality requirements to obtain ISO 9001 quality certificate and customer service target but missed 2 … Two new products withdrawn.

10. New labels …. Product quality ( Product defects) Customer service ( Customer contact errors) On time shipments ( Backorders) New releases(New product delays)