Situation Analysis:

Iggy’s Bakery of the World was set up by Igor Ivanovic along with his wife Ludmilla,
with a view to pursue his passion for baking and create a quality product. Iggy’s vision
was threefold. Firstly, the bakery promised to deliver a very high quality of bread.
Secondly, the owners wanted it to be a good bakery and a healthy business; a place where
employees enjoyed their work and were involved in the process. Thirdly, Iggy’s was
looking to create long standing relationships with its customers.

Iggy’s became very popular for the quality of its bread in a short time span and was soon
supplying bread to many of the most prestigious accounts in Boston. Igor and Ludmilla
were personally involved in the bakery’s operations and ensured that Iggy’s employees
were also involved in every aspect of the business. However, as time passed, Ludmilla
was finding it hard to strike a balance between her responsibilities towards the business
and her family. She gradually became less involved with the business. Igor and Ludmilla
trusted their employees to make the right decisions when it came to small matters, and
personally intervened only when a significant issue needed their attention.

Even though the owners chose not to advertise, Iggy’s came to be renowned and the
business grew quickly. Within a year, their business had grown to such an extent that
they were functioning beyond capacity and were unable to take on any new accounts. The
owners were apprehensive that they would lose out on business if they continued to turn
down orders from their prestigious customers. The sudden surge in demand compelled
them to take loans to expand. Igor and Ludmilla were reluctant to bring in outsiders to
cope with the increased administrative burden because they feared that this would dilute
Iggy’s uniqueness.

In the following year Iggy’s was moved to Cambridge, and Matthew McRae was
brought in as a COO to cope with the overwhelming situation. Soon after, he began to
assemble his own management team. The Ivanovics were worried that changes were
happening too quickly. Many of the employees felt that the new management was too
isolated from the operations and the culture at Iggy’s. The Ivanovics began to feel out of
touch with the organization. The situation deteriorated further, and McRae and his team
even began to take crucial decisions without Igor’s consent. When Igor confronted
McRae with the situation, McRae presented a letter of resignation. In spite of the
squabble, Igor suggested that McRae put together a proposal Iggy’s

The Problem:
Should the Ivanovics accept the proposal put forth by Matthew McRae?

Options:
1. Accept the proposal put forth by Matthew McRae
2. Reject the proposal, let go of McRae and let Igor take over the management
3. Reject the proposal, let go of McRae and hire a new management
4. Request McRae to revise his proposal and arrive at a mutual understanding after
negotiating the raise and bonus

Criteria for Evaluation:

1. Impact on the business at Iggy’s
2. Impact on Iggy’s reputation
3. Impact on the work culture and environment amongst the already demoralized
staff

Evaluation of Options:
Accept the proposal put forth by Matthew McRae:

In the proposal made by McRae, he promised profit levels for Iggy’s which were far
lower than those which the Iggy’s had otherwise achieved when the Ivanovics were
themselves managing the company. Many of the employees were already disconcerted
because of the lack of involvement of the McRaes team in the operations and culture that
Iggy’s stood by. The image of high quality that the Ivanovics had built around Iggy’s was
also at stake. There was also a question as to whether McRae and his team would be able
to sustain the profits at the current levels. Further, the Ivanovics would have to comply
with Matthew McRae’s request for a significant raise, as well as bonuses based on profit.

Reject the proposal, let go of McRae and let Igor take over the management

Igor could step in and take over the reins of the company once again. Since Igor was
already familiar with Iggy’s staff, there would be no delay in them bonding as a team and
quickly adopting a strategy to cope with the current situation. This would also save Igor a
lot of time and money which would otherwise have to be incurred if they chose to hire a
new COO. Igor would also be able to restore Iggy’s reputation for being a company
supplying quality bread with a personal touch.

Reject the proposal, let go of McRae and hire a new COO

The new management would have to be quick to imbibe the Iggy way and restore
momentum to the operations at Iggy’s.