Business Case study

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CAFÉ CUPCAKE 2

Change Analysis: Café Cupcake

Emily Renzi, Daniel Nightingale, Mazin Mozan, Renard Jenkins

Dr. David B. Schreiner

MGT6681XTIB-20T2- Team 1

Troy University

14 November 2020

1

CAFÉ CUPCAKE

Café Cupcake is a fast-casual restaurant chain owned and operated by Emma Bisset, Aneisha Davis, and Jonathan Patel. Offering artisanal cupcakes and southern-style food, the company relies heavily on its regional and store managers to maintain employee and customer satisfaction. They recently implemented new directives for their HR program to resolve the current management and employee dissatisfaction. As they await the measurement results of these changes, they are left with disagreements about the future; expand nationally, focus on market competition toward healthier options, or maximize funds from the IPO.

The PEST analysis, provided in Appendix A, exposed threats and opportunities. Major restaurants are entering the market, bringing a significant amount of competition, offering healthier food options and employee benefits. Also, the food industry's wages tend to be low, causing a high employee turnover rate. Socially, it has been identified that workers are upset with pay, promotions, and work conditions. However, Cafe Cupcake has future opportunities to expand nationally. Management has the power to seek employees' opinions and hire individuals passionate about the food industry. Comment by Blaine Schreiner: This is a weak topic sentence for this paragraph. Better to provide a general statement about the external environment – is it dynamic and ever changing or stable and slow to change? Are the external forces offering more opportunities or more threats?

The 7S analysis, provided in Appendix B, examined the relationship between the hard and soft elements, providing a better understanding of the business's current situation. The strategy and structures were at a disconnect with the employee's concerns. The company's fast growth and success outpaced the leadership's readiness for expansion, creating a gap between them and their employees. Despite their efforts to create a comprehensive human resources plan, the top three leaders couldn't agree on the future. The company didn't have a clear vision because of its three distinctly different individual priorities. Comment by Blaine Schreiner: Do not describe the model.Better to tell the reader an overview of what this analysis found. Comment by Blaine Schreiner: This is not assessed by the 7S model. The earlier statement that the structure is causing issues for the employees is correct. There should be more analysis of what is causing that issue.

The cultural web, provided in Appendix C, shows us that Cafe Cupcake is doing well with its unique approach to fast-casual dining, adding a southern charm to be friendly to its patrons. The company's structure is based on hierarchy, which means the top three managers hold all the power. This poses a problem as they have different views on where to go with the company and need a consensus on direction. The disconnect between leadership has made it, so employees are feeling overworked and underpaid. That, coupled with the manual making their job difficult, has posed problems for them. At the same time, they have tried to make this better with spot bonuses. It has increased their problems, as the employees see it as playing favorites. To combat these issues before the IPO offering, they need to develop a solid plan between the three managers. Getting their employees to embody the companies values before the IPO is critical, as once they commit, it could increase the problems. Comment by Blaine Schreiner: The difference of opinion between the leaders is NOT causing the issues with the employees. The current structure and systems are causing those issues. Comment by Blaine Schreiner: Watch the use of pronouns in these sentences. It is not always clear who you are referencing with their and they. Comment by Blaine Schreiner: company’s

There are four main internal weaknesses with Café Cupcake and two main external threats that need to be addressed. First, "the leadership team… wrestled with what to do with the direct business" as previously mentioned, one wanted national expansion, one wanted product development with healthier food, and the third wanted to focus on maximizing funds from the IPO (Mayo & Beckham, 2018, p.7). Second, Dr. Patel implemented new directives, highlighting the quarterly meetings, roundtable discussions, and weekly webinars for managers. While this will improve the business, there needs to be time to validate these changes; therefore, the IPO option isn't an ideal plan to enforce simultaneously. Third, managers and employees are dissatisfied with work; "managers are overworked and underpaid," and frontline employees feel there is "not enough encouragement" (Mayo & Beckham, 2018, p.11). Employees feel there is a lack of adherence to the policies laid out in the handbook, and the managers feel limited flexibility and innovation are stemming from the handbook. Fourth, managers are known for hiring friends, leading to favoritism in the workplace, and spot bonuses being ineffective. Lastly, external threats include poor customer reviews and market trends for a healthier menu. Comment by Blaine Schreiner: This is a much better topic sentence.The balance of the paragraph should follow this lead and be clear about if a weakness or threat is being identified. Comment by Blaine Schreiner: A decision point with differing opinions is not a weakness unless it creates an inability to move forward. We are a long way from that point as we should be developing a plan to solve this challenge. Comment by Blaine Schreiner: This is not worded as a weakness. It is saying that the new directives need more time. Comment by Blaine Schreiner: These are the key issues of the case. The biggest problem facing the company is this issue – expansion, product development, and the IPO will not be successful unless the problems with hiring, training, and evaluation are addressed.The challenge that has not been identified is that the three top leaders are also overwhelmed and do not have enough time to conduct location reviews. There is a concern that the product and service quality is slipping without that oversight.

We recommend Café Cupcake hold off on the national expansion, focus on improving manager and employee satisfaction, revamp the selection and hiring process, and introduce healthier food choices. In the future, national expansion with its current issues will only spread these problems and make implementing changes more difficult. The HR directives that Dr. Patel introduced needs to focus on creative thinking and innovation. A new packet for selection and hiring needs to be established. We also recommend Café Cupcake adopt some healthier food options to maintain competitive with market trends. Comment by Blaine Schreiner: Good! Just need to include performance evaluation, training, and reward processes. The hiring process will not solve this issue on its own. Comment by Blaine Schreiner: The HR processes that Patel implemented need to be updated as they are not getting the needed results. The conflict has been between having rigid processes or flexible processes. At first, the processes were too rigid and caused some service issues. In response to these issues, the managers were provided flexibility. However, that flexibility is causing problems with the front line staff. The challenge is now how to find the right balance to maintain quality while also having consistent expectations and opportunities for staff. Couple this challenge with the three leaders not having available time to get out to each of the locations and the answer becomes that HR needs to have a dedicated training and development staff. This group would be responsible for all training and performance evaluations. They would ensure consistency across the organization while working with the regional managers to incorporate any needed locational flexibility.

Café Cupcake needs to create a vision for the outcome of these changes, communicating that vision to every employee. Dr. Kotter's 8-Step Process for Leading Change defines vision as "clarify[ing] how the future will be different from the past…" (2020). Café Cupcake needs a vision of improved employee satisfaction, selection, and a healthier menu. To improve employee satisfaction, the managers need to create a new training section for the handbook, giving them ownership of the program. A new selection packet for the hiring process needs to be implemented, comprising an emotional intelligence test and structured interviews for all candidates, utilizing a weighted decision matrix. The new menu should feature those customer favorites and bring new healthy options. Comment by Blaine Schreiner: Instead of telling the leaders a new vision is needed it would be better to suggest what that new vision could be.

To evaluate these changes' effectiveness, the leadership team needs to continue giving questionnaires to evaluate employee satisfaction. The data needs to be tabulated for employees hired utilizing the new selection process compared to the old way. Do these employees stay longer? Are the spot bonuses more useful now that managers have stricter guidance on hiring? Lastly, the new menu needs to be offered at a few select locations as a test, offering customers 10% discount on their next purchase to fill out a questionnaire on the new menu's satisfaction. Comment by Blaine Schreiner: Since the solution presented is to revamp the hiring process, measuring those new hires that stay 6,9,12 months would identify if the new process was beneficial.

References

Mayo, A. J., & Beckham, H. (2018). Recipe for Success: Growth and Evolution at Café Cupcake. Harvard Business School, 9(919), 505th ser.

The 8-Step Process for Leading Change: Dr. John Kotter. (2020). https://www.kotterinc.com/8-steps-process-for-leading-change/.

Appendix A – PEST Analysis

Political	Economic	Social	Technological
THREAT: *Department of Food Services regulating the menus  *Government increasing taxes  OPPORTUNITY: * Create a Union for employees	THREAT: Comment by Blaine Schreiner: These are internal items as they can be controlled by the company.Biggest external forces are social – people moving to healthier items; economic – income correlates with eating out; technology – increase in delivery services Strong external forces provide opportunities and threats. *Major fast food restaurants entering the market with  healthier food options *Employment turnover rates are  increasing each year *Low wages are being offered OPPORTUNITY: *Expand restaurants to other regions *Offer bonuses and incentives	THREAT: *Stressful working conditions * Constant change of work schedules in the food industry * Hiring the wrong people to fill positions OPPORTUNITY: *Conduct town halls with employees *Seek feedback from employees/customers	THREAT: *Competitors offering online ordering OPPORTUNITY: *Expand to social media platforms to advertise * Use surveys to gather details from customers

Appendix B – Star Model Analysis

Hard Ss

Strategy: The company focused on maintaining their niche by providing casual luxury feel with southern hospitality while meeting the trends of healthier food choices and the expansion of their location to include an IPO option.

Structure: There were 6 regional managers who were each responsible for up to 7 cafes. Additionally, they formed a separate baking division. The leaders of the company goal were to have the managers to be operationally efficient and attuned to costs but also have the freedom to act like owners of their own family business. Comment by Blaine Schreiner: Use present tense – there are 6 managers who are responsible. Comment by Blaine Schreiner: What about flat-hierarchical; centralized-decentralized; formal-organic?

Systems: Davis and Bisset developed a formal handbook of policies and procedures for all business activities.

1.   Manager’s bonuses and promotion were based on product and services consistency.

2.   Store managers were given authority to conduct hiring and promotion for their restaurants and were also empowered to give spot bonuses of $20-$50 to employees who exhibited exemplary service or teamwork.

Soft Ss

Skills: Frontline employees and assistant managers lacked the flexibility and decision-making skills to adjust to the evolving menu and operation. Patel introduced: Comment by Blaine Schreiner: Are these actions successful at developing the skills needed?

· An incentive system that allowed employees to purchase stock.

· Management skills workshops seminars and coaching.

· Quarterly meetings for assistant managers, store managers and regional managers as well as more informal roundtable discussion.

· Weekly webinars on a variety of topics were launched.

Staff:  The staff often expressed dissatisfaction with the company compensation, working conditions, and promotions. Patel developed a comprehensive HR strategy in 5 general areas:

-Recruiting -Onboarding -Performance management -Incentives -Development 

Style : The company differentiated themselves from competitors by providing a southern charm and comfort food menu in a casual fast-food setting. However, the market trend was heading toward healthier menu items with fresh, natural, nutritious offerings.   Comment by Blaine Schreiner: This element also includes management/leadership style – Are they rigid and formal or organic and informal? How are decisions made?

Subordinate Goals: The company’s guiding concepts and values were the original authentic idea of how the business was created which is to provide a home feeling atmosphere with a southern style service. This “vision” was fostered by the company’s leaders to expand to other locations while maintaining that identity.

Appendix C – Cultural Web Analysis

Rituals/ Routines	In recent years they have added a bonus system linked to productivity. Managers can spot give employees $20-50. Employees feel as though the managers play favorites though.
Stories	Employees’ remark that they are overworked and underpaid. Complaining that they are asked to put on a smiling face to fit into the southern charm of the café. While being pushed to get orders out fast.
Symbols	The Café Cupcake is a southern-style eatery where they focus on providing the southern charm. Friendly employees, and a menu that rotates around traditional southern comfort food.
Power Structures	The company’s most influential parties are the top three managers. Emma, Aneisha, and Dr. Patel. This is where all the changes that need to be made come from.  Comment by Blaine Schreiner: What about the regional managers? Can they make decisions?
Organizational Structures	The company has a more hierarchical structure. Starting at the top with their three managers, going down to regional managers, to the store managers, and finally the café employees.
Control Systems	The café has a handbook that they employees have to follow. This tool essentially ties the hands of the employees when it come to making decisions.
The Paradigm	There appears to be a shared belief in the company that café cupcake has cornered the market on the fast-casual dining experience. Though this has come at a cost as employees feel overworked and underpaid.