Post Graduate Programme in Management

IGGYS BREAD OF THE WORLD

03-MAR-2014

WRITTEN ANALYSIS AND COMMUNICATION TERM III

Report Prepared By:

Shubham Nishad
2013PGP385 SECTION: C

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Letter of Transmittal

03 Mar, 2014 Mrs. Ivanovic President Iggys Bread of the World Analysis of the case Iggys Bread of the World Dear Mam, Following the discussion we had on the case, Iggys Bread of the World and as per your requirement, I am submitting this report to you that analyzes the problem that arose due to the certain actions of Mr. McRae (COO, Iggys Bread of the World) and the Ivanovics after their decision to hire him in order to run their company.

The following pages will give you a detailed analysis of the situation, alternatives available, options, recommendation and an action plan to go with.

Further, I am also ready for any discussion or clarification on this case as and when required by you. Sincerely Shubham Nishad 2013PGP385 PGP 2013-15 Indian Institute of Management, Indore

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Executive Summary
Mr. McRae, the newly hired COO of the Iggys Bread of the World had submitted his resignation letter out of displeasure to Mr. and Mrs. Ivanovic and had later withdrawn it. When he was confronted by Mr. Ivanovic, he came up with a proposal for a hike in his compensation package. Mr. and Mrs. Ivanovic were not happy with the changes that Mr. McRae had brought in the organization which had caused discontent among the employees of the organization. The Ivanovics and the board must decide on the future course of action for Iggys Bread of the World. The alternatives considered are asking Mr. McRae and his team to leave the company or slowing down growth or getting a new team. Also it was considered whether Iggys can accept his proposal and retain him and if he can work on terms that were acceptable to the company as well. On evaluation it was decided that retaining McRae and working towards better cooperation with the Ivanovics would not be the best option. So it was decided that Mr. Igor Ivanovic should take over the management of Iggys Bread of the. It would involve signicant effort and attitude from the side of the Mr. and Mrs. Ivanovics but that would help in reviving the culture of the company and serving their customers in a better way.

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Table of Contents
Executive Summary..........................................................................................................................4

Situation Analysis ............................................................................................................................5 Problem Statement .........................................................................................................................6 Alternatives......................................................................................................................................6 Criteria for Evaluation .....................................................................................................................7 Evaluation of Options ......................................................................................................................8 Recommendation.............................................................................................................................9 Action Plan.9 Contingency Plan.10

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Situation Analysis
Mr. and Mrs. Ivanoics opened a bakery shop, Iggys Bread of the World in 1994 at Watertown which was located five miles downtown from Boston. Mr. Ivanovic advocated the use of only natural organic ingredients as the contents of their bread. Although Mr. Ivanoics had installed state of the art ovens but much of the work was done by hand in order to give the bread their intended flavor and quality. Their philosophy was to embrace a 3-fold unique culture: First, providing very high quality of bread, secondly the owners wanted it to be a good bakery and healthy business where employees can enjoy their work and third, they wanted maintain long relationship with their customers. Mrs. Ivanovic maintained high morale among employees through direct communication, training, unique benefits and a fostering a culture of inclusion through cross training and employee assistance. Mrs. Ivanovic also ensured that every employee was involved in every aspect of their business. Iggys became very popular for their high quality bread within a short span of time and the company grew rapidly. They were operating beyond capacity and within six months, the companys annual revenue had grown to $ 1.57 million and that too with no marketing effort. As time passed, Mrs. Ivanovic was finding it difficult to strike balance between her business responsibilities and her family. Gradually she became less and less involved with the business. Though the Ivanovics were reluctant but this situation compelled them to bring Matthew McRae as the COO to cope with the overwhelming situation. Soon after joining, he began to assemble his own team. Changes were happening quickly and this became the cause of concern for the Inavovics. The employees felt discontented and they felt isolated from the operations and culture at Iggys. The situation deteriorated further, and McRae and his team even began to take crucial decisions without Mr. Ivanovics consent. When Igor confronted McRae with the situation, McRae presented a letter of resignation. In spite of the squabble, Mr. Ivanovic suggested that Mr. McRae put together a proposal regarding the compensation he is expecting. Mr. McRae puts a staggering proposal. The Ivanovics are unsure of how to respond and call a board meeting where McRae presents his proposal.

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Problem Statement
Given the proposal that Mr. McRae has put before Mr. and Mrs. Ivanovic and the Board of Directors, should they accept the proposal of Mr. McRae or should they ask Mr. McRae to leave the company?

Alternatives:
Following are the alternatives that can be implemented in order to solve the issue: (1) Accept the proposal put forth by Matthew McRae. (2) Reject the proposal, ask Mr. McRae and his team to leave and let Mr. Ivanovic take over the management of Iggys. (3) Reject the proposal, ask Mr. McRae and his team to leave and hire a new management. (4) Request Mr. McRae to revise his proposal and arrive at a mutual understanding after negotiating the raise and bonus.

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Criteria for Evaluation:

S. No.
A B C D

Criteria
Impact on the future business/growth of Iggy Impact on the reputation of Iggy Impact on the work culture of the company and the employees Cost Implications for the company

Weightage
30% 25% 25% 20%

Table: 1 Alternatives (Points out of 5) Criteria A B C D Total Weightage 30% 25% 25% 20% 1 3 2 2 2 2.3 2 3 4.2 4.5 2.5 3.575 3 4 3 3 3 3.3 4 3 2.5 2.5 3 2.75

Note: Points have been awarded out of 5, 5 being the highest and 1 the lowest.

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Evaluation of Options:
(1) Accept the proposal put forth by Matthew McRae Although Matthew McRae is well qualified and has been successful in the past. He only focused on the business of Iggys Bread of the World and neglected the culture which was an important part of Iggys Bread of the World. He brought too many changes in the company which caused discontent among the employees and also the Ivanovics. Mr. McRae also assumed too much autonomy and hired Ms. Diane Coleman without even consulting Mr. and Mrs. Ivanovic. Also his proposal shows that he is interested only in monetary compensation which is not in resonance with the culture and philosophy of the company. Also if he is retained by the company, the Ivanovics will have little control over the operations of the company. So the Ivanovics should not use this option and ask him to leave.

(2) Reject the proposal, ask Mr. McRae and his team to leave and let Mr. Ivanovic take over the management of Iggys Under the leadership of Mr. McRae the discontent had grown among the employees. During the tenure of Mr. McRae, the changes happened very quickly. Many of the employees felt that the management team was too isolated from the operations and culture. Since Mr. Ivanovic is already familiar with the staff at Iggys Bread of the World, he could easily formulate a plan to cope up with the situation. Due to his presence, the employees will feel less apprehensive and discontent. He would be able to retrieve the culture at Iggys and restore the reputation of the company of supplying high quality bread. He can also take the help of Mr. Nikol in managing business. So he should take over the management of Iggys. Mrs. Ivanovic should use this alternative.

(3) Reject the proposal, ask Mr. McRae and his team to leave and hire a new management. The actions on the part of Mr. McRae and the proposal has left little choice with Mr. and Mrs. Ivanovics but to let Mr. McRae go. But Mr. and Mrs. Ivanovics had hired him because due to high growth, they were not able to manage the business. Also since the Ivanovics do not have much experience in managing business, so they can hire a new a new management team. But hiring a new COO may again create the same problems, so Mrs. Ivanovics should not use this alternative.

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(4) Request Mr. McRae to revise his proposal and arrive at a mutual understanding after negotiating the raise and bonus Previously Mr. McRae had successfully run a leasing company. He was also very knowledgeable about the business. Letting him go may not be a good option. So Mrs. Ivanovic could ask Mr. McRae to revise his proposal and try to sort out the problem by mutual understanding. But if the Ivanovics agree to the proposal, they may have little control in the operations of the company. So Mrs. Ivanovic should not use this option.

Recommendation:
Since the actions of Mr. McRae have created discontent among employees and the proposal is unreasonable, so Mrs. Ivanovic should not accept Mr. McRaes proposal and ask him to leave the company. Mr. Ivanovic should take over the management at Iggys as this will help alleviating the feeling of discontent among the employees and help in future growth of the company.

Action Plan:
(1) Mrs. Ivanovic should put her proposal of letting go Mr. McRae and his team before the Board of Directors. (2) Mrs. Ivanovic should call up a meeting with Mr. McRae and ask him and his team to leave the company. (3) Mrs. Ivanovic should talk to Mr. Ivanovic and ask him to take over the management at Iggys. (4) Mr. Ivanovic should take over the management of the company and he should take the help of Mr. Nikola in managing business of the company.

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Contingency Plan:
If the above plan does not work out, then Mrs. Ivanovic should hire a new management team in order to run their business. Their business is growing very rapidly and due to this reason they had hired Mr. McRae. Also the Ivanovics have very little experience in running the business, so they may not be able to manage their business. So Mr. and Mrs. Ivanovic should hire a new management team. They should convey all their expectations to the new COO and ask him first to first understand the culture of the company. They should ask him to consider culture of the company and expectations of the employees while taking any major decision. Also they should have control over the company and the actions of the new COO so that they can avoid any such problem in future.

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