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WEIGHING CAREER CHOICES

Ken Mark prepared this case under the supervision of Professor Eric Morse solely to provide material for class discussion. The
authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised
certain names and other identifying information to protect confidentiality.

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Ivey Management Services prohibits any form of reproduction, storage or transmittal without its written permission. Reproduction of
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Copyright © 2004, Ivey Management Services Version: (A) 2009-09-28

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INTRODUCTION

Alan Bream wanted to carefully consider the two options available to him as he graduated from the Ivey
School of Business in April 2004. The first option was an offer to start as an assistant marketing manager
with a respected consumer packaged goods (CPG) firm. The second was to accept a consulting assignment
as a self-employed contractor, with the current owner of a small tool and die firm. Both offers were for
$70,0001 a year in salary.
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The Assistant Marketing Manager Position

Bream had been one of three candidates from Ivey’s HBA class of 2004 who had received an offer to join
the CPG firm. CPG was based in Toronto and was well known throughout the world for its excellent
training program, preparing candidates for satisfying careers in large companies. At this job, Bream would
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work with a marketing manager to co-ordinate activities for selected Canadian brands. Employees were
expected to be at the office during normal working hours, generally 8:30 a.m. to 4:30 p.m., and were rarely
expected to work weekends. There were typically about 30 new assistant marketing managers in each
year’s class of entrants; all were selected from business schools across the country.

Company representatives had mentioned to Bream that up to 50 per cent of new employees’ first six
months were spent in training: getting them up to speed with the formal and informal networks within the
company, introducing them to the company culture and training them on basic analytical and report writing
techniques.
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During the first three years, assistant marketing managers were evaluated against their peers along five or
six criteria. They were then ranked on a scale of one to four, with “ones” being the top of the class, and

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All amounts in Cdn$ unless otherwise specified.

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“fours” being employees in great need of improvement. Typically, there were only two or three ones and

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the same number of fours in a class of 30 recruits.

Based on these rankings, a salary increase was recommended. While the typical increase was 15 per cent
per year, the “band” (referring to the difference between the lowest and the highest percentage increase)
ranged from 10 per cent to 20 per cent. No employees received increases above 20 per cent per year;

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likewise, the only employees who ran the risk of receiving less than a 10 per cent raise were the ones
ranked “four.” In any case, fours were typically counselled to find suitable employment outside the CPG
firm as soon as possible.

One key benefit at the CPG firm was a company-matched stock purchase plan whereby the firm would
match, dollar-for-dollar, purchases of company stock up to the limit of three per cent of an employee’s
annual salary. Employees had access to a company-sponsored health and dental plan, worth about $4,000

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per year. At this CPG firm, total benefits — including the aforementioned health and dental plan, stock
purchase plan and pension plan — amounted to roughly 20 per cent of an employee’s salary. There were
no performance bonuses offered, other than the yearly salary increases mentioned.

Career progression was a much-discussed topic at the CPG firm. After three to four years, an assistant
marketing manager typically was considered for promotion to marketing manager. Marketing managers
spent an average of five to seven years before they could be considered for promotion to category manager.
Category managers could remain in their position for 10 to 15 years before being considered for the
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general manager position (of which there were only four in the company). There were only two levels
above general manager: vice-president and president.

The Consulting Assignment

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During an in-class consulting project, Bream had been introduced to the owner of a small tool and die firm
located in Toronto. The owner, a 70-year old man whose children were well established in public service
positions, reacted favorably to many of Bream’s suggestions to improve his company’s outdated
procedures. An invitation was extended to Bream to join the company as a full-time (but self-employed)
consultant for an indefinite period of time. The owner offered Bream $70,000 a year, payable in monthly
installments to be deposited directly into his chequing account. Bream would be responsible for his own
taxes and health-care needs (outside of the Ontario Health Insurance Plan). Bream believed that he could
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work out of his apartment, incurring consulting expenses (auto, computer and office equipment, meals,
travel, supplies) of about $30,000 per year.

The most attractive part of this assignment was the fact that the owner was preparing to sell the company in
the near future (within three years). Since Bream possessed current business training and seemed able to
rapidly improve certain operations, the owner saw no reason why a reasonable price for his company could
not be obtained by 2007. Of course, the owner had confided that if Bream was interested in buying out the
eight-employee company, every effort would be made to accommodate him. In addition, the owner was
willing to offer Bream a call option to purchase the company at a current valuation. That way, Bream
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would not be penalized (in the form of having to pay a higher purchase price) for driving up the value of
the company.

At this point, Bream was uncertain about the firm’s actual revenues, which were estimated to be in the
million-dollar range, and what price he could be expected to pay to purchase it. That said, Bream had,
from his limited experience with the company (14 days onsite, mapping out operations and interviewing

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customers), a very positive view of its future prospects. One very exciting opportunity for the company,

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Bream believed, was the fact that it — and most of its Ontario-based competitors — relied on local
businesses to survive. Bream outlined his thoughts for expansion:

Toronto is situated within one day’s truck drive of almost anywhere in the eastern United
States, which is the economic engine of North America. With our relatively low Canadian

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dollar and lower costs of operation, we could be extremely competitive against Detroit- or
Cleveland-based firms. As a start, I would focus on the time-sensitive business segment
that needs emergency replacement parts for vehicles or other equipment. That way, I
would be insulated against the threat of low-priced overseas (read: far away) competitors.

However, Bream knew that along with opportunity came risk. Could he continue to work effectively with
the owner? What if competitive pressures put the firm out of business? What if the owner eventually

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chose to sell the firm to somebody else?

LOOKING AT THE OPTIONS

Bream wanted to look at the economics behind working for himself versus working for a company. First,
he pulled up a copy of the latest Canadian tax guide and estimated federal and provincial taxes for each
income bracket. His rough estimates can be seen in Exhibit 1.
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Bream estimated that Canada Pension Plan (CPP) and Employment Insurance (EI) would cost the full-time
employee five per cent of gross salary. The self-employed entrepreneur would have to contribute 10 per
cent of gross salary to CPP and EI.

Next, Bream went to his computer and created a simple Excel model that compared differences in take-
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home pay between an employee and a self-employed entrepreneur.

This time, unlike most of the other decision points in the hundreds of case studies Bream had read and
analysed in his two years at Ivey, there was no urgent decision to make. If he really wanted to, Bream
could take the entire summer off to ponder his first post-graduate career choice.

Bream was fully aware that while the CPG option would take him on a well-worn path, the other would
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take him through as-yet uncharted territory. Bream knew this was the one decision he did not want to
make in haste.
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Exhibit 1

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ESTIMATED FEDERAL AND PROVINCIAL TAXES

Tax Estimated Total Tax

Bracket rates per bracket

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Under $8,000 0%
$8,000-$35,000 22.05%
$35,000-$70,000 31.15%
$70,000-$113,000 43.41%
$113,000+ 46.41%

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Permissions@hbsp.harvard.edu or 617.783.7860