Ben and Jerry’s Home-Made Ice Cream

Ben & Jerry’s Homemade Ice Cream Inc: Keeping the Mission(s) Alive A Written Case Analysis by Mr. Aristotle Metin CASE BACKGROUND The U.

S. Ice Cream Industry The total retail value of ice cream and related products in the United States was about $9. 8 billion in 1990. The superpremium ice cream market held about 9. 5% of the ice cream industry in the US.

By 1990, Ben & Jerry’s was a strong # 2 in the superpremium ice cream market and the fifth largest ice cream maker of any type in the United States. Ben & Jerry’s Home-made Ice Cream Inc.Incorporated in 1977 by Ben Cohen and Jerry Greenfield, the first Ben & Jerry’s Home- made Ice Cream shop was opened in Burlington with an investment of $12,000. The company was known for “standing for something better than a typical corporation”.

Its business mission was primarily to “become a growing force for social change. ” Since its inception, the ice cream company was now gearing for further business growth. It had grown tremendously (9000%) from 1981 to 1997; with a yearly average growth in net income of not less than 12%.Stockholders equity had an average 3-year growth of 20% from 1986 to 1989. In 1990, Ben & Jerry’s Ice Cream was a public traded company.

The 5-to-1 Policy This compressed salary structure means the highest paid employee (including corporate officers) will be paid at the rate no more than five times what the lowest paid employee could earn for an equivalent work week. It was applicable to regular, full-time employees with a regular work week of at least 30 hours. The ratio was based on a 48-hour and 52 week employment scheme.For example, if the hourly rate were $6. 50 then the maximum annual salary payable would be $81, 120 ($6. 50 x 48 hours x 52 weeks x 5).

On the other hand, the compensation of corporate officers may be a combination of salary and performance bonus. Combined, these two cash compensation must, however, be within the limitation of the 5-to-1 ratio. The Board of Director at any time can change or eliminate the 5-to-1 salary ratio. CENTRAL ISSUES AND PROBLEM STATEMENTS With a tough market and competitive environment, how can Ben & Jerry’s Home-made Ice Cream Inc.

e able to develop business strategies for growth yet maintain its corporate social mission? How can Ben & Jerry’s Home-made Ice Cream Inc. strike a balance between becoming an attractive and competitive employer and promoting fair wealth distribution via the 5-to-1 salary ratio policy? FACTORS AFFECTING THE PROBLEM STATEMENT Ben & Jerry’s Mission Statement Ben & Jerry’s Mission was consists of three (3) interrelated parts: Product, Social and Economic. Recruitment and Retention As Ben & Jerry’s continue to grow, attracting the best and most suitable managers and employees had become difficult.There was a growing sentiment that the 5-to-1 salary policy was a “major barrier to offering competitive compensation packages to prospective candidates. ” Also, the salary compression began to equalize middle and upper-level compensation.

Moreover, Ben & Jerry’s salary scale offered 25% below competitive market rates. The 5-to-1 Policy Debate Economic Business-like Faction (Chico’s)Social Mission Faction (Ben’s) •The policy is a major barrier to offering competitive compensation packages to prospective candidates. •Top management was paid substantially below market rates for their work which affected motivation. The policy has caused problems in the hiring of competent professionals in key spots •Morale of existing managers was affected due to limited incentive for promotion.

•Questions on justice and equity1. It symbolized values which were central to the company’s identity and success. Changes to the policy may devastate morale. 2.

Supporters of for the 5-to-1 salary policy believed that it “was part of the animating spirit at the company” and that it was a “source of pride, cohesion, loyalty and motivation” central to the long-term success of Ben & Jerry’s. 3.The dissolution of the company is at stake. It is a battle for the heart and soul of the company. Leadership Chico Lager was Ben & Jerry’s general manager and the defacto head of the “economic mission”. Business-minded, Chico was concerned on profitability.

He wanted to hire and retain the best possible managers who were crucial for him to bring the company to a profitable direction. For him, the 5-to-1 policy had become detrimental to put in place the management staff he needed to run Ben & Jerry’s. With this pressure and predicament, Chico had become stressed and worn out.Ben Cohen was the founder and so-called driving force of the business social mission, was completely committed to the philosophy behind the 5-to-1 policy.

There was strong belief in the company that “the 5-to-1 rule symbolized values which were central to the company’s identity and success. ” Ben’s (and supporters) idealistic views have tied the 5-to-1 policy to the company’s aspirations of becoming a venue for advancing social change, of promoting “caring capitalism”, of developing the company’s unique culture of social activism.However, with the growing concerns on the 5-to-1 policy, Ben began to be “disenchanted” with the direction the company was heading. Chuck Lacy was set to assume the company presidency.

His major concern was to bring balance between the debates on the 5-to-1 policy: Chico’s “economic faction” and Ben’s “social mission faction”. He intended to discuss his position on the 5-to-1 policy to the Board; and his recommendation/s on the 5-to-1 policy could set the tone for his strategic plans. ALTERNATIVE COURSES OF ACTION The dilemma in Ben & Jerry’s were embodied in the following organization change principles: Strategic purpose change. These initiatives attempt to reinvent an organization by changing its strategic intent, core purpose, or mission. Examples include shifting from selling individual products to selling complete solutions that add value for the customer or expanding from local to global markets.

The 5-to-1 policy may affect the over-all branding and organizational “self-image”; but its realistic impact may yet to be determined. •Structural change. These programs attempt to reconfigure the organization in order to achieve greater overall performance.Examples include mergers, acquisitions, consolidations, divestitures, promotions, layoffs, or the arrival of a new leader. Mr.

Chuck Lacy was in the best (and exciting) position to effect structural change as he may serve as champion and mediator between the two pros and cons 5-to-1 policy factions. •Process change. These programs concentrate on altering how things get done. Examples include reengineering a process or introducing a new technology.

Setting the required processes to enable Ben & Jerry’s transition from “adolescence to adulthood” can be the primary, most important reason for the review of the 5-to-1 policy.Opportunity needs for recruitment can be, among others, the basic initial step to incorporate policy revisions allowable as per # 6 & #7 of the Policy Memorandum. •Cultural change. These programs focus on a company's operating values, norms of behavior, and the relationship between its management and employees. Shifting from command-and-control to participative management or reorienting a company from an inwardly focused "product push" mentality to an outward-looking customer focus were examples of cultural change.At Ben & Jerry’s, a comprehensive review and re-consideration of the 5-to-1 policy can catalyze Cultural Change.

It must be noted that the Ben & Jerry’s social mission, social activism and caring capitalism philosophies serve as the company’s competitive advantages. RECOMMENDATIONS AND ACTION PLANS The following Action Plans are based on Harvard Manage Mentors’ principles on Organizational Change Management: 1. First, Mr. Chuck Lacy can mobilize energy and commitment by identifying business problems and solutions; pros and cons of the 5-to-1 policy.Without taking a stronger stance between the Chico and Ben factions, Mr.

Lacy is most qualified a leader to secure approval from the board regarding policy review. He may opt to come up with salary policies applicable on per a level basis: Staff, Middle Management, and Executive. 2. Next, develop and communicate a shared vision of the change program. Mr. Lacy can serve as mediator between Chico and Ben; resolve differences; and come up with a balanced, applicable for approval by the board members.

3. Then, identify the leadership. Mr.Lacy was in the best position to present alternatives to the 5-to-1 policy and to champion its indoctrination and implementation. 4. Then, create near-term wins by focusing on results, not activities.

5. Next, institutionalize success through formal processes, systems, and structures. 6. Finally, monitor and adjust strategies in response to problems in the change process.

References: 1. Harvard Management Mentor: Change Management 2. “The Emperors of Ice Cream” by Diana B. Henriques, June 19, 1994, New York Times 3.

Ben & Jerry’s: the Anti-Mc Donald? Online article at http://sociology. morrisville. edu/infospace/ti6. html