Iggy's Bread of the World

Analysis of

Iggy’s Bread of the World

Submitted to Prof. Madhushri Shrivastav In partial fulfillment of the requirement of the Written analysis and communication (WAC) course

Submitted By Vasu Kachhawaha (2013PGP433)

Date: 3rd March 2014

LETTER OF TRANSMITTAL A Report on case Iggy’s Bread of the World

Prof. Madhushri Shrivastav Faculty, Written Analysis and Communication Course IIM Indore

Dear Madam As per your instructions, the case Iggy’s Bread of the World has been analyzed as part of the Written Analysis and Communication course requirement. The report that contains the results of the analysis is attached. It is recommended that the Ivanovics should reject McRae’s proposal and let go the entire existing management team and hire a new team that is culturally fit to the organization.

Yours sincerely Vasu Kachhawaha Section E 2013PGP433 IIM Indore

Executive Summary: Iggy’s bread of the world, the culmination of the dreams of Igor and Ludmilla Ivanovic, saw a phenomenal success in the absence of any form of advertising and solely on the basis of their superior product quality and word of mouth. In order to supplement the explosion of demand, the Ivanovics took loans to support their expansion plans and also hired McRae as the COO to deal with the increased managerial burden. The new COO hired a new management staff but the employees felt the "new management team to be too isolated from the operations and culture" which were at the core of Iggy’s. The new management team was more focused on expanding the business and their own pay plans as McRae pointed out in his proposal to Igor. Since the company needed professional managers to supplement its growth and expansion and the present management team was hampering the very culture of the organization which was at its core, the Ivanovics were in a dilemma as to what they should do. It is recommended that the company should reject his proposal and get rid of McRae and his team and hire a new management team that is competent and culturally fit to the organization.

CONTENTS

Situation Analysis ...........................................................................................................................5 Problem .........................................................................................................................................6 Criteria for Evaluation ....................................................................................................................6 Evaluation of options .....................................................................................................................6 Recommendation ...........................................................................................................................7 Action Plan.....................................................................................................................................7

Situation Analysis Iggy’s Bread of the world was founded by Igor Ivanovic along with his wife Ludmilla in 1994. It was a culmination of their dreams: Igor had a passion for baking and Ludmilla’s passion was to open a restaurant, so they decided to merge their dreams and open a bakery. Iggy’s vision was threefold. Firstly, the bakery promised to deliver the highest quality of bread with the highest standards of service and integrity. Secondly, the owners wanted it to be a place which provided a nurturing and respectful environment at the workplace and fostered cooperation, communication and a sense of accomplishment for all employees. Thirdly, Iggy’s was looking to create long standing relationship with its customers; Iggy’s wanted to make a difference by not treating the customers as numbers. Iggy’s became very popular for the quality of its bread, its signature taste and texture in a short time span and was soon supplying bread to many of the most prestigious accounts. Igor and Ludmilla were personally involved in the bakery’s operations: Igor focused his energies on the baking side of the company while Ludmilla thrived to create a nurturing environment and a positive experience for all its employees. She believed that the energy the employees have, goes through their hand into the bread and so she emphasized that the employees should sort out their differences before work. However, as time passed, Ludmilla was finding it hard to strike a balance between her responsibilities towards the business and her family. She gradually became less involved with the business. Most of the day to day decisions were taken by the employees and Igor and Ludmilla personally intervened only when a significant issue needed their attention. Even though the owners chose not to advertise, Iggy’s popularity was growing by leaps and bounds. Their business had grown to such an extent that they were functioning beyond capacity and were unable to take on any new accounts and were saying no to big name customers. The owners were apprehensive that they would lose out on business if they continued to turndown orders from their prestigious customers. Also they thought that it was almost easier to maintain the value system of an organization when one is ‘larger’ than one that is ‘in-between’ size. They were weighing their options whether to bring in outsiders to cope with the increased administrative burden or not if they expand. They feared that if they did so it would dilute Iggy’s uniqueness. They decided to expand and hence took loans for the same. Matthew McRae was brought in as a COO. Soon after, he began to assemble his own management team. The Ivanovics were worried that changes were happening too quickly and McRae was not giving himself time to get accustomed to Iggy’s before hiring. Many of the employees felt that the new management was too isolated from the operations and the culture at Iggy’s which were at the heart of the company. The Ivanovics began to feel out of touch with the organization. The situation deteriorated further, and McRae and his team even began to take crucial decisions without Igor’s consent. When Igor confronted McRae with the situation, McRae presented a letter of resignation, which he later wanted to take back. McRae was not fulfilling the role he was expected to do and he was not satisfied with his current compensation. Igor suggested McRae to put together some figures of what he thought he should be making and they’ll look at them. His proposal included a significant raise as well as bonuses based on profit, beginning at profit levels below those which had been reached before he was hired.

Problem Statement Should the Ivanovics accept the proposal put forth by Matthew McRae? Options    

Accept the proposal put forth by McRae Reject the proposal, let McRae go and downscale Reject the proposal, let McRae go and hire a new management Request McRae to revise his proposal and arrive at a mutually agreeable pay

Criteria for Evaluation 1. 2. 3. 4.

High Business growth of Iggy’s Work culture and environment is retained High employee morale Control by the Ivanovics is retained

Evaluation of Options: Accept the proposal put forth by Mc Rae: If the Ivanovics accept the proposal it may be possible that through his managerial skills and experience McRae brings about a positive impact on the business at Iggy’s. But definitely it will have a negative impact on the work culture and environment which are at the core of the business and employee morale will go down. Also McRae would be in a better position to exercise control over the firm and control by Ivanovics will reduce. Reject the proposal, let McRae go and downscale The Ivanovics can decide to downscale the business and takeover the management but this is not a good idea because the investment has been made. In such a case business growth of Iggy’s would fall, but since they were already familiar with Iggy’s staff, there would be no delay in them bonding as a team and the employee morale will go up, the culture would be maintained and the control would be retained by the Ivanovics. Reject the proposal, let go of McRae and hire a new COO If a new COO is hired which is culture fit with the organization’s goals and aspirations, all the four criterion will be met. Request McRae to revise his proposal and arrive at a mutually agreeable pay Since McRae’s demand of bonuses based on profits that were too low is totally unjust, the Ivanovics can negotiate the terms to arrive at a mutually agreeable pay that will make both the parties happy. It may result in the business growth of the company but the company culture will suffer and employee morale will go down. Also there are less chances that the control will be retained by the Ivanovics.

High Business Growth

Work Culture is retained

Employee morale is Control is retained high by Ivanovics

Accept proposal

May be

N

N

Y

Reject proposal, downscale

N

Y

Y

Y

Reject proposal, Hire new COO

Y

Y

Y

Y

Negotiate terms, keep McRae

May be

N

N

May be

Recommendation The Ivanovics should reject McRae’s proposal and fire him and his entire management team, as neither they were able to fulfil the task they were hired for nor did they have any understanding of the company and its culture which was at the core to the company.

Action Plan These are the steps the Ivanovics should take: 1. They should ask for a few days to McRae in reaching to a final decision. Meanwhile they should start their search for a new management team. 2. They may use the services of hiring consultants so as to avoid the mistakes they initially did while hiring McRae so that they are able to find a team that is culturally fit to the organization using personality tests. 3. Once they find the right team they should let go the existing team and should introduce the new team to the staff and the organization.