Keeping the Mission(s) Alive
A Written Case Analysis by Mr. Aristotle Metin
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. be 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...