What Can We Learn From Ben & Jerry's Rocky Road? --Pun Intended



Ben and Jerry’s Homemade Ice Cream Inc. (Ben & Jerry’s), began as a modest company in the late 1970s. Selling out of a renovated gas station and starting with a moderate $12,000 in start-up capital, Ben Cohen and Jerry Greenfield commenced in a business that would set the standard for socially responsible enterprises (Page & Katz, n.d.).


The Values of Cohen and Greenfield


Cohen and Greenfield were anti-establishment, meaning that they did not want to run a business in the traditional corporate sense. Both Cohen and Greenfield viewed the typical corporation as an entity that cared little about the social impact of its practices. They believed that corporations exploited their employees and the community (Page & Katz, n.d.). Cohen did not want to run a business like every other corporation, so in 1982 he and Greenfield determined that they would run their business in a way that would benefit their employees and become a socially conscious business (Page & Katz, n.d.). Cohen & Greenfield felt a strong urge to grow their business, to become caring capitalists, because the larger the company became, the more good it could do in the community (Page & Katz, n.d.).


Pertinent Issues


With this new concept of corporate caring and a drive to develop a unique business model, Ben & Jerry’s would have some challenges to overcome. Additionally, this new model of running a corporation that cared as much about its employees and community as it did about its bottom line, yielded some unique challenges.


5-to-1 Salary Ratio


Cohen was resolute about creating fair and equal pay for his employees. Where most corporations were accustomed to a 90-to-1 salary ratio between the highest and lowest paid employees—the highest employee earns up to 90 times more income than the lowest employee—Cohen sought to abase this with a 5-to-1 salary ratio (Theroux, 1993). The challenge with this model is that it could create issues in attracting top talent from other organizations because compensation packages at Ben & Jerry’s would not be competitive with industry standards. Fred Lager (Chico), the eventual president and chief executive officer of Ben & Jerry’s, butted heads with Cohen on the issue, but Cohen would not relent. He and others believed that this concept was vital for the morale of the employees and the deeper values of the company (Theroux, 1993).


While having a 5-to-1 salary ratio would not be appealing to most top tier talent, it would attract those who were intrinsically motivated (those motivated by the activity or social impact of their behaviors, more than the wages) (Becchetti, Castriota, & Tortia, 2013). Becchetti, Castriota, and Tortia, posited that intrinsically motivated employees are more productive than their extrinsically motivated peers and that the rewards they receive from working are more than just income. It may be possible that, like Cohen, employees who see the value of their social impact will be willing to trade income in behalf of a higher good.


Growth


Ben & Jerry’s had another challenge; growth. Not only was Ben & Jerry’s having to address internal systems, it had an influx of new employees. These employees brought with them new ideas and many were wary of Ben & Jerry’s agenda (Theroux, 1993). Cohen, being anti-establishment, viewed hierarchy as something to be distrusted (Theroux, 1993). In place of structure, corporate meetings were parties, there was no dress code and no clear job descriptions, yet most understood what was required of them. Cohen was promoting a corporate culture; one that would increase intrinsic drive and spread his mission of joy (Theroux, 1993).


Cultural change: Examples from Google and Facebook.


Google, a contemporary of Ben & Jerry’s, was an unprofitable company with little to no business system when it began. It was not until their launch of AdWords that their business took off (Graham, 2010). Google had to change to accommodate its growth. The company taught its employees to think like entrepreneurs. This concept allowed for innovation and open collaboration between departments (Savoia, & Copeland, 2011). Additionally, a relaxed atmosphere and flat hierarchies (hierarchies in which managers guide and direct rather than control) all benefit a company and allow new ideas to flow freely (Savoia, & Copeland, 2011). Now, Google spends large amounts of money to preserve its culture, hire top talent, and maintain profitability (Kuntze & Matulich, 2010).


Facebook was another company looking to stay within a niche. When it began, members had to have an .edu email address to join. Yet, with protest, it opened to high school students and eventually to any person over the age of 13. Within a three year period, Facebook became the most popular social networking site on the internet (Graham, 2010).


The founders of Ben & Jerry’s were anti-establishment, and in their drive to remain so, might have missed out on opportunities for structured growth. Decision making and communication was challenging (Theroux, 1993). Additionally, Chico—the CEO, would be bombarded with questions and suggestions from every employee at Ben & Jerry’s and this made for a stressful and heavy burden for him (Theroux, 1993). Clear boundaries, policies, and a hierarchy might have been beneficial in this case.


Impact of not implementing change strategies.


In 1999, Ben & Jerry’s reached stagnation and the company began to shrink (Ercoline, 2014). Consumers were becoming more focused on health, ice cream sales flattened, and Ben & Jerry’s experience decreased sales and a lack of expansion (Ercoline, 2014). One might wonder if the corporate structure played a role in this decline.


Caring Capitalism


Having a two part bottom line—social and financial—presented another unique challenge. In addition to looking after the growth and well-being of the company, Ben & Jerry’s had to look after the well-being of the communities and partners it served. They cared about their impact on their employees, the communities they affected, their producers, and their consumers (Theroux, 1993).


The challenge of social responsibility.


While the concept has merit, it may not be possible for companies to be socially responsible in every aspect of their business. Granted, Ben & Jerry’s was contributing more to social programs than any other organization at the time. However, even with 7.5% of pretax profits going to charity, the occasional error occurred (Dennis, Neck, & Goldsby, 1998). For example, Ben & Jerry’s strived to be socially responsible with its Rainforest Crunch ice cream by using almonds from a small cooperative in the Amazon rainforest. When the supply was not able to meet demand, Ben & Jerry’s resorted to getting their nuts from the Mutran family, a notorious Latin-American anti-labor agribusiness (Dennis, Neck, & Goldsby, 1998). While striving to be socially responsible, Ben & Jerry’s inadvertently partnered with an organization that was notorious for anti-social behavior. It seems that profit and production trumped social responsibility in this case. Socially responsible companies should be aware of potential issues like this because it could impact the way consumers view their product and their organization.


Morale and Initiative


Another challenge to Ben & Jerry’s corporate model was that moral and initiative were negatively impacted by the strategies they employed. Chico noticed a drop in initiative among mid-level employees (Theroux, 1993). There was low drive for growth because the incentive for promotion was not significant. As an executive, Chico was earning well below the market rate for his services (Theroux, 1993). This was also true for other executives. If the company did not make changes, there existence might have been undone. There was a growing need for discipline, order, professionalism, and profit orientation, and it had to be done with the social mission in mind (Theroux, 1993).


Industry Changes and Reevaluation of Strategies


With the market turn in 1998, Ben & Jerry’s experienced the outcome of market forces. Consumer buying habits changed and the ice cream industry experienced a slump (Page & Katz, n.d.). When Ben & Jerry’s began their endeavor, ice cream sales were high and they were able to enter a niche market with very little competition (Theroux, 1993). Not only this, but Ben & Jerry’s might not have been privy to the idea of companies paying their employees strong wages while maintaining a strong corporate culture and holding onto their corporate values. Google, even though coming onto the scene later, was able to have structure, profitability, and culture, and maintain their values (Savoia & Copeland, 2011). Cohen seemed inflexible in his determination to be anti-establishment and this might have hurt him in the long run.


Organizational Philosophy and Growth


Cohen’s adamancy on maintaining his core corporate values may have hindered his growth. He was so enthralled with the idea of social responsibility and peace promotion that he failed to put together a formal business plan that sufficiently dealt with the economic aspects of running a business. Little attention was paid to cost and profit, hierarchy was nearly non-existent, and communication was cumbersome (Theroux, 1993). His philosophy was to have a fun, friendly, and direct company that spread joy through its products, economy, and social programs (Theroux, 1993). The idea may have been noble, but lacked the organization the company needed to grow. Without order, it was difficult to make small scale and large scale changes. The company grew, but as soon as the market shifted the growth halted and began to backslide (Page & Katz, n.d.).


Maintaining Corporate Values While Growing


Some might say that growth and values are not capable of cohesion. However, Ben & Jerry’s could have done both if Cohen would have let loose of the rains. He had a CEO, but the power that CEO held was limited by Cohen’s agendas (Theroux, 1993). In time, it appears that when Chuck Lacy was named president, Cohen did relent and allowed for the growth that needed to occur. Ben & Jerry’s finally saw the value of having order and implemented that into its business model. Simultaneously, it held onto its core values and even structured those into its agreement with Unilever when it was acquired (Page & Katz, n.d.).


Cutting back Cohen’s role.


In place of being an active participant in the growth of his company, Cohen would need to trust those he hired to maintain his values while allowing them to do what is needed for growth. He could act as a support and ensure that his value are being honored while maintaining a presence that lets everyone know he still cares about the organization and their well-being. To maintain a competitive edge, however, Cohen needs to allow those who have the expertise that he does not have to run the business effectively.


Executive coaching as a developmental strategy.


It seems that Cohen was set in his views, but he may have missed opportunities that were available to him. Quite possibly, he may have had much to think about and no-one to confide in. Perhaps having someone to help him through his thinking and decision making processes would have benefited him. An organizational development strategy that could have benefited Cohen is executive coaching. Muchinsky (2012) defines executive coaching as “an individualized developmental process for business leaders provided by a trained professional” (p. 194). As a business leader, Cohen’s one-sided view could have blinded him to possibilities. Perhaps he struggled with his executive team because they were expected to do what he told them. An executive coach, on the other hand, acts as an external resource for companies; someone who does not have a vested interest in the company and can help individuals gain a different perspective. Executive coaches are individuals who understand a client’s business and are widely read on topics and research that would help that client (Levinson, 1996). Bozer, Sarros, and Santora (2014), found that educational background and a clear theoretical framework can help coaches assist executives and owners more effectively. Conceivably, Cohen could have hired a well-educated coach that understood his business to help him see possibilities. This might have impacted the outcomes and allowed him and his executive team to have breakthroughs sooner than they did.


Conclusion


In closing, Ben & Jerry’s showed the world that the concept of social responsibility and profitability could co-exist. Cohen did not like structure and traditional corporate ideas, but eventually allowed those concepts to seep in for his company’s well-being. Many companies have struggles as they figure out systems that work. Google and Facebook had their struggles and so did Ben & Jerry’s. Despite this, they were able to maintain their culture and build profitable businesses. Certainly, many business owners struggle with the idea of letting go of control of their business. With trust, the right people, and perhaps a little coaching, they can do so. Ben & Jerry’s did not always make the best decisions, but they did the best they could with what they had. In the end, their model found the right mold and because of that, they are still in business today.


References


Becchetti, L., Castriota, S., & Tortia, E. C. (2013). Productivity, wages and intrinsic motivations. Small Business Economics, 41(2), 379-399. doi:http://dx.doi.org/10.1007/s11187-012-9431-2


Bozer, G., Sarros, J. C., Santora, J. C., (2014), Executive coaching: Guidelines that work, Development and Learning in Organizations: An International Journal, 28 (4), 9 – 14. doi:http://dx.doi.org/10.1108/DLO-05-2013-0020


Dennis, B., Neck, C., & Goldsby, M. (1998). The scoop on Ben & Jerry’s Inc.: An examination of corporate social responsibility. Journal of Managerial Psych Journal of Managerial Psychology, 13(5/6), 387-393. doi:10.1108/02683949810224363


Ercoline, K. (2014). Beyond puffery: Providing shareholder assurance of societal good will in crowdfunded benefit corporations. American University Law Review, 64(1), 165-185. Retrieved from http://search.proquest.com/docview/1629660769?accountid=458


Graham, P. (2010, April 5). 6 companies that succeeded by changing their business model. Retrieved July 13, 2015, from https://www.chargify.com/blog/6-companies-that-succeeded-by-changing-their-business-model/


Kuntze, R., & Matulich, E. (2010). Google: Searching for value. Journal of Case Research in Business and Economics, 2, 1-10. Retrieved from http://search.proquest.com/docview/759568085?accountid=458


Levinson, H. (1996). Executive coaching. Consulting Psychology Journal: Practice and Research, 48(2), 115-123. doi:http://dx.doi.org/10.1037/1061-4087.48.2.115


Muchinsky, P. (2012). Psychology applied to work (10th ed.). Summerfield, NC: Hypergraphic Press.


Page, A., & Katz, R. (n.d.). Freezing out Ben & Jerry: Corporate law and the sale of social enterprise icon. Retrieved July 12, 2015, from http://www.smarthealthtalk.com/uploads/5/8/6/5/5865198/ben_and_jerrys.pdf


Savoia, A., & Copeland, P. (2011). Entrepreneurial innovation at Google. Computer, 44(4), 56-61. doi:http://doi.ieeecomputersociety.org.contentproxy.phoenix.edu/10.1109/MC.2011.62


Theroux, J. (1993). Ben & Jerry's Homemade Ice Cream Inc.: Keeping the Mission(s) Alive. New York, NY: McGraw-Hill Companies.

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