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[Iggys bread of the

world]

Executive Summary
Iggys Bread of the World, the bakery store established by the couple, Igor
and Ludmilla Ivanovic in 1994, as a small sized enterprise had grown
exponentially over the years. The success of the business was attributed
to the owners passion, hands-on approach and a genuine interest in the
employees well-being. Due to the growth in the business and inability to
take on new accounts, the couple decided to expand their operations. In
addition, they hired a professional, Matthew McRae as the COO (chief
operating officer) in order to ease their work. However, McRae assembled
his own management team and operational style, being very different
from that of Igor and Ludmilla led to the loss of the culture and workenvironment that was established by the couple over the years. In
addition, McRae had asked for a hike in his compensation. The Ivanovics
had to decide how to respond to McRaes proposal. Upon careful
deliberations of all options and evaluating the criteria of judgment it is
recommended that the Ivanovics reject McRaes proposal and hire a
culturally-fit person having similar capability as McRaes.

Table of Content
Sr. No.

Content

Page No.

1.
2.

Introduction
Problem Statement
Analysis of case facts and underlying
assumptions
Solution objective
Possible Solution Alternative
Solution Analysis
Recommendation
Action Plan
Contingency Plan

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Respons
ible

Introduction
Iggy's Bread of the World was a bakery opened by Igor and Ludmilla
Ivanovic in 1994 in Watertown, Boston, Massachusetts. Iggys Bread of the
World bakery concept was threefold: the quality of the bread, the work
and the employees and the community-they wanted to make a difference
by not treating the customers as numbers. The success of the venture was
solely based on word of mouth and the high quality of their bread. The
philosophy followed by Ivanovics for Iggy's was to include all the
employees in every aspect of the business and not restricting them to the
portion of their work by job rotation policy. Events like celebrating
employee's birthdays, soccer games, offering English classes were
organized to unite the employees.
Within a year, their business grew rapidly to such an extent that they were
functioning beyond capacity and were unable to take on any new
accounts. Igor and Ludmilla had to take critical decision of whether to
expand their business or not. Igor as a first step to expansion decided to
go for physical expansion in 1998 using loans .With the physical capacity
expanded and a new financial structure in place, they began looking for
someone to help them with the financial and administrative side of the
business.
So they decided to hire Mathew McRae first as a consultant and then as a
COO to help them run the company. McRae hired a new management
team without Ivanovics consultation. In addition, his working-style being
very different from that of the Ivanovics, led to a brewing of discontent
among the employees. Igor and Ludmilla were side-tracked in the
organizations decision-making when McRae hired Diane Coleman as VP,
Sales and Marketing. Subsequently, this led to a conflict between McRae
and the Ivanovics. After several mediations, McRae decided to tender his
resignation. Although he took back his resignation the next day, he
proposed for an increase in his compensation and including him in share
of profits. Ivanovics now have to take a call on how to respond to McRae's
demands and ensure a certain future of Iggy's.

Problem Statement
The Ivanovics were faced with the decision as to how they should respond
to McRaes proposal for a significant raise in his salary and bonus with a
view of setting the future course of strategy for Iggys.

Analysis of case facts and underlying assumptions


Ivanovics are passionate about their products, respect their employees
and value their customers a lot. Iggys bread early success can be
attributed to the Ivanovics passion, hands on leadership and training
style and genuine interest in their employees well being.
McRae was first hired as a consultant and was then hired as COO without
any formal recruitment process. McRae recruited new people from his
family and old friends to form the management team. McRae made some
changes which were not appreciated by the employees as they were
feeling discontent and confused. McRae assumed that he need not consult
the Ivanovics before taking staffing decisions.
As per Ludmilla, they thought MacRae was extremely knowledge and
working with his heart and passion so they assumed that MacRae will
easily understand and acclimatized with the culture of Iggys.
Ivanovics assumed that their company performance was deteriorating due
to new management team and also they attributed this to the increase in
discontent among the employees. Ivanovics also assumed that Diane
Coleman was unqualified for the job and a factor in the underperformance
of the organisation as compared to McRae belief that she is a gem and she
should be given little more time.

Solution Objective
The solution objective is to increase the revenue, profit and growth of the
firm, improve the relations between Ivanovics and McRae, maintain the
culture and morale of the employees and maintain the image of the firm
on the customer mind.

Possible solution alternative


Possible solution alternative could be:1
2
3
4

Accept McRaes proposal


Reject McRaes proposal and take control
Reject McRaes proposal and hire a suitable replacement
Negotiate with McRae and settle the things

Solution Analysis
Criteria Impact on
Alternatives

Accept McRaes
Proposal
Reject McRaes
proposal and take
control
Reject
McRaes
proposal and hire a
suitable replacement

Profit,
Revenues
and
Growth of
Firm

Relations
between
McRae and
Ivanovics

High

Culture and
Morale of
the
Employees

Firms
Image

Low

Low

Low

Low

Low

High

High

High

High

High

High

High

Low

Low

Low

Negotiate with
McRae & Settle

Option 1: The first alternative i.e. accepting McRaes proposal would


serve the best interest of the firm in terms of profit and growth. However,
the relations between Ivanovics and McRae would be far from normal, thus
affecting the firm since there would be a power struggle due to
contrasting managerial styles. In addition, the culture and morale of the
employees in the firm would be hit as Ivanovics and employee were
unhappy with the operational style of McRae. Accepting McRaes proposal
could mean that the firm and its products have a negative image since the
products quality are likely to be affected due to discontented employees.

Option 2: The second alternative i.e. rejecting McRaes proposal and


taking over the control of Iggys would be good for the firm in terms of the
firms image since it would send out a message that the previous
managerial practices are given importance. In addition, the employee
morale and the culture of the firm would receive a boost. However, there
would be concerns regarding the strategy for growth and revenues
because it was due to inability on Ivanovics part that an outsider was
included in the first place to run the firm.
Option 3: The third alternative i.e. rejecting McRaes proposal and hiring
a culturally fit person with similar capabilities seems like a win-win
situation on all parameters. This would not impact the growth strategy
adversely and also send a clear message to the employees in the firm that
their morale and well-being is being taken care of by the management.
The customers would welcome this decision as the employees welfare
would lead to the good quality of products and thus building up a good
image for the firm
Option 4: The fourth alternative i.e. negotiating with McRae and coming
to an agreement might have a positive impact with respect to the growth
strategy. However, this alternative would lead to sour relations, lead to the
dip in employee morale and dampen the image of the firm.

Recommendation
On the basis of foregoing analysis, it appears that option 3 i.e. rejecting
McRaes proposal and hiring a suitable replacement is a win-win situation
and is recommended. Ivanovics should also follow a formal way of
recruitment for the future potential candidates and they should consider a
person who is more of a culture fit as their initial growth was attributed to
their employee connect culture.

Action Plan
The Ivanovics should follow the following sequence of steps:
1 In consultation with the board, reject McRaes proposal. This would
also set a good precedent for the future.
2 They should search for a suitable replacement. A suitable
replacement for the firm would be someone who has the same
cultural values and considers the employees welfare as important.
In addition, the replacement should also have an eye out for the

growth strategy, thus conveying a positive signal to prospective


clients.
3 Ivanovics could promote the managerial capabilities within the
organization. This could benefit in case of future contingencies.
The action plan would send a clear message to the employees as well as
the customers. Prospective clients would be happy with the growth in
place and the employees would be satisfied with the emphasis back on
the well-being and culture of the firm.

Contingency Plan
1 In future Ivanovics should be more involved with the
management.
2 They could also think of training their future management hires
on the basis of culture, quality and customers success pillars of
Iggys.
3 They should also groom potential leader for the future succession
planning.