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The teaching objectives for this four-part case series lie at two distinct levels. Ostensibly the main teaching objectives relate to understanding Danica Purg's own entrepreneurial leadership style and its appropriateness for her own as well as other small and large organizations. But never far from the surface are underlying questions and related teaching objectives about the type of managers, leaders, and entrepreneurs that the world (and particularly her part of the European world) will need in the future, and how the needed capacities can best be developed- a subject on which she has strong and provocative opinions.

The teaching objectives for this four-part case series lie at two distinct levels. Ostensibly the main teaching objectives relate to understanding Danica Purg's own entrepreneurial leadership style and its appropriateness for her own as well as other small and large organizations. But never far from the surface are underlying questions and related teaching objectives about the type of managers, leaders, and entrepreneurs that the world (and particularly her part of the European world) will need in the future, and how the needed capacities can best be developed- a subject on which she has strong and provocative opinions.

The teaching objectives for this four-part case series lie at two distinct levels. Ostensibly the main teaching objectives relate to understanding Danica Purg's own entrepreneurial leadership style and its appropriateness for her own as well as other small and large organizations. But never far from the surface are underlying questions and related teaching objectives about the type of managers, leaders, and entrepreneurs that the world (and particularly her part of the European world) will need in the future, and how the needed capacities can best be developed- a subject on which she has strong and provocative opinions.

The teaching objectives for this four-part case series lie at two distinct levels. Ostensibly the main teaching objectives relate to understanding Danica Purg's own entrepreneurial leadership style and its appropriateness for her own as well as other small and large organizations. But never far from the surface are underlying questions and related teaching objectives about the type of managers, leaders, and entrepreneurs that the world (and particularly her part of the European world) will need in the future, and how the needed capacities can best be developed- a subject on which she has strong and provocative opinions.

This paper studies the interplay between the operational and financial facets of capacity investment. We consider the capacity choice problem of a firm with limited liquidity and whose access to external capital markets is hampered by moral hazard. The firm must therefore not only calibrate its capacity investment and the corresponding funding needs, but also optimize its sourcing of funds. Importantly, the set of available sources of funds is derived endogenously and includes standard financial claims (debt, equity, etc.). We find that when higher demand realizations are more indicative of high effort, debt financing is optimal for any given capacity level. In this case, the optimal capacity is never below the efficient capacity level but sometimes strictly above that level. Further, the optimal capacity level increases with the moral hazard problem's severity and decreases with the firm's internal funds. This runs counter to the newsvendor logic and to the common intuition that by raising the cost of external capital and hence the unit capacity cost, financial market frictions should lower the optimal capacity level. We trace the value of increasing capacity beyond the efficient level to a bonus effect and a demand elicitation effect. Both stem from the risk of unmet demand, which is characteristic of capacity decisions under uncertainty.

The case deals with a dramatic series of suicides at France Télécom between 2008 and 2009. Over a period of 18 months preceding the date of the opening lines of the case, 23 France Télécom employees took their lives. Many of the deceased had left notes blaming work-related stress or management decisions as the reasons for their extreme actions. The French government found it necessary to intervene and demand France Télécom’s management to indicate to the workforce and society that they were taking the situation seriously. The case briefly describes the history of France Télécom, the change initiatives following the deregulation of the European telecommunications industry, and the development of the attention of the French nation and international public toward the company in the aftermath of the suicides and suicide attempts. The case closes citing the response of the government, the company, the unions, psychologists, and stock analysts after a crisis meeting between French Labor Minister Xavier Darcos and France Télécom’s PDG (Chairman of the Board and CEO) Didier Lombard in September 2009.

The case serves as a fertile basis for discussion on responsible leadership, corporate culture, human resources management practices, adaptive change management, corporate social responsibility, or business ethics. It puts the students in a deep thinking mode on questions about the responsibility of organizational leaders for creating healthy working cultures, the impact leadership decisions have on people’s lives, and their own choices as managers or employees in difficult organizational situations. The case can also be used as introductory stimulus material for in-company management training programs on workplace health or suicide prevention.