Question Details

(solution) Case 11 Equal Exchange: Doing Well by Doing Good1 Rev. Dr.

need help with a strategic management Case Analysis. would like answers to be very detailed and in depth. 

Name of case is
Case 11


Equal Exchange: Doing Well by Doing Good©1 Rev. Dr. Benita W. Harris


Asbury United Methodist Church Frank Shipper, PhD


Perdue School of Business, Salisbury University Karen P. Manz


Author and Researcher Charles C. Manz, PhD


Isenberg School of Management, University of Massachusetts © Vividfour / Introduction


In 1983, Rink Dickinson, Jonathan Rosenthal, and


Michael Rozyne were all recent college graduates and


working for a food co-op warehouse in the Boston area.


They began to question the system, asking questions such


as, ?What if food could be traded in a way that is honest


and fair, a way that empowers both farmers and consumers? What if trade supported family farms? use of organic


methods rather than methods that harm the environment?? Almost simultaneously, they started to hear about


groups in Europe engaged in a concept called fair trade.


The advocates of fair trade wanted to ensure that the


producers of products such as coffee, tea, and chocolate


would receive a better price for their crops while also providing support for improvements to their environmental,


social, and political conditions. Dickinson, Rosenthal,


and Rozyne liked the idea. According to Dickinson, they


??were basically food co-op people, interested in connecting small, local farmers with consumers to change


the marketplace,? however, it was not their intention to


found a company. Instead, they took the idea to the board


of directors of the co-op warehouse. Half the board supported the idea and half voted against it. It became apparent to them that if they were going to pursue their vision,


they were going to have to do it themselves. Over the next three years, they met once a month to


develop their plan and raise the capital to establish their


own organization. The three young entrepreneurs quickly


learned that no institution ? including organizations that


specialized in high-impact social justice ventures ? would


lend them money. Thus, fundraising focused on family,


friends, and their contacts. According to Dickinson, the


general pitch was, ?We want you to invest in this project


and it is almost guaranteed to lose all of your money.?


On those terms, they were able to raise $100,000. While


raising money, Dickinson said they used their jobs to


learn about cooperatives, small farmers, entrepreneurship, marketing, and ?making mistakes, right and left.?


The food co-op gave them ?a great environment to learn


some skills.? In 1986, Dickinson, Rosenthal, and Rozyne


were ready to launch Equal Exchange (EE). By that time,


their ambition was ??to change the way food is grown,


bought, and sold around the world.?


EE embarked on its pioneering efforts to sell fair trade


products in the U.S. with coffee from Nicaragua. From the


beginning, EE has paid its producers, typically small farmers indigenous to their region, an above market price for


their products out of a desire to help provide a better, more


stable income and to more equitably distribute the proceeds


of the final sales. EE prominently displays the company


­slogan on each product ? ?Small Farmers, Big Change.?


119 CHE-HITT11E-13-0403-CaseStudy11.indd 119 22/10/13 2:47 PM 120 Part 4: Cases Not content to just ??change the way food is grown,


bought, and sold around the world,? the founders of EE


formally adopted a hybrid worker-owner co-op structure in


1990. They believed this ownership structure would make


its employees feel valued and, in turn, they would invest


their whole being in the organization. Key to this new


structure was shared employee ownership. Each workerowner buys one share of Class A voting stock; no one did,


could, or can own more than one share of voting stock.


Worker-owners can also buy unlimited shares of Class B,


non-voting stock. This structure distributes power, and


potentially leadership, equally across all worker-­owners on


a democratic one-person/one-share/one-vote basis. 2012


Twenty-seven years later not only is EE doing good ? it


is doing well (see Exhibits 1 and 2). EE sales have grown


from zero in 1986 to $1 million in 1991 to $42.8 million


in 2010.2 In 2011, sales increased another 9 percent to


$46.8 million and EE projected that sales would exceed


$50 million in 2012. All EE products (coffee, tea, chocolate bars, cocoa, sugar, bananas, almonds, and olive oil)


are fair trade and most products are organic as well.


Co-Executive Directors, Rink Dickinson and Rob


Everts and the worker-owners of EE are still interested


in changing the world through socially responsible business. Its mission statement reveals the heart of EE:


? to build long-term trade partnerships that are economically just and environmentally sound, to foster mutually beneficial relationships between farmers and consumers


and to demonstrate, through our success, the contribution


of worker co-operatives and fair trade to a more equitable,


democratic, and sustainable world.


In 2006, EE announced, ?Our Vision in 20 Years? [To


build] a vibrant, mutually cooperative community of two


million committed participants trading fairly one billion


dollars a year in a way that transforms the world.? Functional Areas at EE


To fulfill its mission and vision, the founders developed


a hybrid model that combined worker-ownership with


a cooperative model to coordinate the functions. EE


is a ­relatively small company. With approximately 100


worker-owners and geographically dispersed operations,


worker-owners may fulfill multiple functions. EE Governance Model EE has a board of directors that is elected by the workerowners. The worker-owners nominate candidates for the


six inside board member positions and a joint, three-­


person committee ? comprised of a worker-owner, a board


member, and a member of the management c­ ommittee ?


nominates candidates for the three outside seats. The


worker-owners elect all nine seats, three each year.


In turn, the board of directors hires EE?s Executive


Director/s. Currently, the position is called ?The Office


of Executive Directors? as it is shared by Dickinson and


Everts. They are mutually responsible for hiring employees Exhibit 1? Sales Growth






















2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 $0 Source: This graph was constructed from financial data published by EE on the Web at CHE-HITT11E-13-0403-CaseStudy11.indd 120 22/10/13 2:47 PM 121 Case 11: Equal Exchange: Doing Well by Doing Good© Exhibit 2? Profit/Loss (pre-tax)


















$160,000 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 ?$40,000 Source: This graph was constructed from financial data published by EE on the Web at who, after significant input from the other worker-owners,


may later become worker-owners themselves.


It is important to note that the Executive Directors


are not board members. According to Lynsey Miller,


Market Development Leader and a former board member, ?They?re at the board table, but they don?t have votes.


They are very active in that discussion and agenda setting.? Thus, ultimately, the worker-owners who elect the


board and hold two-thirds of the seats are responsible for


hiring the Executive Directors.


All members of the board serve three-year terms.


Instead of electing a new board every year and to promote board continuity, two inside directors and one outside director are elected each year.


This circular structure reinforces the following four


concepts at the heart of the EE governance model:


1. the right to vote (one vote per worker-owner, not per




2. the right to serve as leader (e.g., board director, or


other elected office);


3. the right to information;


4. the right to speak your mind.


EE provides the following elaboration of this model on


its Web site:


A worker cooperative is an alternative for-profit structure based upon standard democratic principles. It is not


designed to maximize profits, nor returns to investors,


but rather to bring to the workplace many of the rights CHE-HITT11E-13-0403-CaseStudy11.indd 121 and responsibilities that we hold as citizens in our communities. These principles include one-person/one-vote


equality; open access to information (i.e., open-book management); free speech; and the equitable distribution of


resources (such as income) ?


The delegation of responsibilities is very much like that of


conventional firms ? which allows for efficiency ? except


that at EE those at the ?bottom? of the organizational


chart are, as owners, also at the ?top? of the same chart.3


Everts describes the genesis of this governance model as




From the beginning, it has been a culture in a context of participation and shared ownership of strong management. The


founders were quite clear that ownership would be shared


and that ultimately, accountability for the highest level decisions would be shared and that we would attempt to build


a strong cultural of internal participation and democracy.


There was no interest in having it be a collective.


One important position in this governance model is


the Worker-Owner Coordinator. The worker-owners elect


this individual, but this person is not a board member. The


Worker-Owner Coordinator has many duties, the most


public and demanding of which is facilitating the cooperative meetings that are held at least quarterly. Overall, the


Coordinator is often akin to a police officer directing traffic; he or she does not make the rules of the cooperative,


but is empowered by the cooperative to keep the system 22/10/13 2:47 PM 122 moving smoothly so necessary work may be completed. To


do this, the Coordinator directs the jostling interests, opinions, and emotions of the members as best he or she can.


One goal is to strike a balance between members? rights to


ask questions, be heard, and press for changes with maintaining a safe, respectful, and constructive environment.


The Coordinator is automatically the representative


of the worker-owners on certain ?tripartite? committees,


representing the board and management second. One


example is the committee that nominates outside board


members. The Coordinator also leads the 10-member


worker-owner cabinet. The cabinet is a group of volunteers, accountable to the Coordinator. They carry out


essential cooperative functions such as maintaining the


internal education program and conducting the complex, multi-ballot, multi-site elections.


A secondary function for the Coordinator is to give


the ?State of the Cooperative? presentation at the annual


meeting in May. This presentation provides an assessment


of how well EE is functioning as a cooperative, not as a


business per se. The worker-owners can call a meeting of


the cooperative by presenting signatures of 10 percent of


the worker-owners to the Coordinator. If a worker-owner


wants to bring something to an upcoming meeting and has


either the Coordinator?s consent or the required number


of signatures, the Coordinator is responsible for putting


the individual on the agenda and working with that person


so that her/his idea is well thought out and presented.


As can be seen by this description of the governance


model, to be successful, EE must negotiate complex communication and coordination processes. Thus, recruiting, selecting, hiring, developing, and retaining employees who can operate within this governance model and


flex with the needs of the organization is critical. Human Resource Management


The worker-owners focus considerable attention on


human resource management because, with the ownership culture that exists on a daily basis, worker-owners


must be a good fit. Recruitment is probably EE?s area of


least worry. Whenever it does advertise an open position, it has multiple applicants. Because of its reputation,


primarily spread by word of mouth, EE has no problem


obtaining a significant and qualified applicant pool. The


hiring process, outlined in Exhibit 3, is quite extensive


and considered critical to the success of EE. Two unusual


aspects of the hiring process include a three-stage interview and the fact that the hiring process is not considered complete until after the review process and after the


new hire has been on the job for three months. CHE-HITT11E-13-0403-CaseStudy11.indd 122 Part 4: Cases Once hired, new employees are matched with a mentor and put on probation for one year. New employee


turnover during the first year is approximately 5 to


10 percent. After the first year, all worker-owners vote on


whether to offer worker-ownership status to the employee


(i.e., the opportunity to join the cooperative). Before the


vote, the employee?s mentor and the employee?s supervisor circulate written statements on behalf of the candidate. With rare exceptions, only new employees who


have fared well reach this point; new hires that have been


poor employees or seem ill-suited for the co-op are generally weeded out by this time. Almost all worker-owner


candidacy votes are taken online, but current workerowners may also request an in-person meeting for a discussion and vote. In such a case, all worker-owners are


free to discuss the individual?s fit with EE before taking


the vote. Worker-owners can vote ?yes,? ?no,? or ?abstain.?


Unless 20 percent or more worker-owners vote ?no,? the


candidate is welcomed into the co-op. Over 95 percent of


employees who make it to the one-year point are accepted


as worker-owners. Because of its infrequency, when one


is not accepted, it can be a traumatic event for all.


During the probation period (first year of employment) the employee is expected to participate in a curriculum designed to teach about the mission and vision of


EE, how they work, and to prepare the candidate for the


responsibilities of worker-ownership and governance.


The worker-owners feel it is very important to develop


Exhibit 3? Outline of Hiring Process


I. Executive Director Determines Need for Position


II. Executive Director and Chair of Hiring Committee


Agree on Process


III. Hiring Committee Develops Tactics


IV. 100 Point Rating System (20 points for each category)


a. Fit (mandatory)


b. Team (mandatory)


c. Communication (mandatory)


d. Option 1 (e.g. skills, aptitudes)


e. Option 2


V. Recruiting


a. Defining Target Applicants


b. Internal Posting


c. Networks


d. Previous Applicants


e. External Advertising


VI. Essay Questions


VII. First Round Interviews ? Conference Calls with Committee


VIII. Second Round Interview ? In Person, or by Phone


IX. Third Round Interview ? In-person Interview


X. Reference Checks


XI. Offer Letter ? Delivered by Mail for Signature


XII. Three Month Review


Source: Condensed from company documents, 2005. 22/10/13 2:47 PM 123 Case 11: Equal Exchange: Doing Well by Doing Good© and strengthen its worker-ownership culture. To support the development of the culture, EE has developed


an Owners? Manual that is over two hundred pages in


length. To both support this effort for new employees


and to reinforce the worker-ownership culture for all,


?Exchange Time? is held every Thursday morning for


one and a half hours. Exchange Time lectures and discussions cover topics such as fair trade, co-op history,


and issues affecting EE?s farmer partners, among others. New employees are essentially required to attend


while all other employees are encouraged to participate.


The discussions are recorded and shared with remote


employees and regional offices via EE?s intranet. Cody


Squire, who joined EE right out of college a few years


ago, enthusiastically described Exchange Time as:


It?s one structured thing that you can depend on having


every week just to learn about something new, to look


deeper into something you already know about, or to hear


from somebody who has just returned from working with


farmer co-ops in Peru.


In addition to Exchange Time, EE has ?10 percent


time. Employees can use 10 percent of their work time for


purposes unrelated to their core functions. This time can


be used to cross-train, work on governance committees,


or learn more about EE?s products. For example, Miller


used her 10 percent time to serve on the board of directors, where she helped create the 20-year vision for EE.


Mike and his colleague in Quality Control, Danielle, led a


program called ?The Brew Crew,? a year-long curriculum


on coffee. People from other departments participate in


coffee quality trainings every two weeks for a year.


To develop future leaders, EE uses an unusual 360


degree peer evaluation process in which peer, subordinate,


superior, and self-evaluations are performed. The unusual


aspect of EE?s process is that all who provide feedback


must sign their forms. In other words, the feedback is not


anonymous. Alison Booth, Manager of EE?s espresso bar


in Seattle, Washington, described how it worked for her:


If I?m being evaluated, my supervisor and I will have access


to them? Sometimes they are just nice to hear, but not terribly helpful; sometimes they?re a little hard to hear. Most


of the time, people are really careful to give constructive


criticism, to give specific examples of things we could do


better or things we did well.


Then, I do a self-evaluation and my boss does a supervisor?s evaluation. He combines his thoughts with my evaluation and the peer evaluations and pulls them all together.


We talk about what?s working, areas for improvement, and


what to focus on in the next year. CHE-HITT11E-13-0403-CaseStudy11.indd 123 To further increase intellectual capital, EE maintains a


library to which all employees have access. Mike described


the library as, ?Awesome ? it?s full of DVDs and books


on anything from economics to feminism to fair trade


to.?? The worker-owners also have responsibility for


the education committee, originally a board committee.


EE identifies education as a ?? vital function. In shifting accountability for this committee, Worker-Owners


became more accountable for their own education and


the orientation of new employees to our co-operative.?4


The worker-owners staff many roles in this model


and share in both profits and losses. Because EE operates as a worker cooperative, profit sharing is referred to


as ?patronage.? ?Patronage? is a common term used in


cooperatives where co-op members receive a share of the


profits, or bear a portion of losses, based on the extent


they have participated in the co-op. At EE, all workerowners who have worked a full year receive the same


amount without regard to rank or seniority as all contributed the same amount of labor time. The total potential patronage distribution consists of 40 percent of net


income after state taxes and preferred dividends are paid.


Half of this distribution is reinvested in EE, and half is


paid in cash. In years of losses, the Patronage rebates are


charges against the retained distributions.


In terms of benefits, EE ?is generous? according to


Brian Albert, EE?s Chief Financial Officer who joined EE


after approximately thirty years with some well-known


international firms. For example, it offers all employees twelve sick days each year. A worker-owner can


use them for him/herself, to take care of a sick child, to


attend a doctor appointment, or to spend time with a


sick parent. Additionally, all worker-owners receive two


weeks of vacation for the first two years. After that, they


receive four weeks. After their eighth year, they receive


five weeks. In addition, employees receive the standard


holidays including the Friday after Thanksgiving.


EE is also generous in the area of pay, paying above


average for novice level jobs, but below average for


senior level management positions. It maintains a topto-bottom pay ratio of four-to-one. It clearly states on


its Web site that EE adopted this ratio to reflect the fair


trade ethic inside the corporation. Production


EE has not been content to be a single-product company.


Its four major products and their percentage of sales


are coffee (80.1 percent), chocolate (16.1 percent), tea


(2.7 percent), and snacks (1.1 percent). Snacks include


products such as Organic Tamari Roasted Almonds. 22/10/13 2:47 PM 124 Part 4: Cases In 2010, EE increased its stake in Oke USA, an importer


and seller of organic bananas, to 90 percent. Oke USA


sales were $4.4 million in 2010. In 2011, EE introduced


organic olive oil. Ninety percent of EE?s coffees are certified organic and 100 percent of its tea, cocoa, chocolate,


sugar, and bananas are certified organic.


To produce organic coffee, chocolate, tea, and its


other products for sale to others, EE first secures the


raw materials. The producers of these products come


from around the world. EE buys raw product from four


continents ? North and South America, Africa, and


Asia ? and almost exclusively from developing countries


(see Exhibit 4).


For example, coffee is grown largely in developing


countries and is often the second most valuable commodity (after oil) exported by them, according to John


M. Talbot, a sociology professor at the University of the


West Indies in Jamaica.i The large multinationals typically buy their raw materials from either large plantations or large sellers of coffee. The large sellers depend on


middlemen, often referred to as ?coyotes,? to buy coffee


from small growers. According to an article in the April


25, 2011 issue of Time magazine, Ugandan coffee farmers


receive 0.66 percent of the retail value of their product. In


contrast, the U.S. Department of Agriculture estimated


that U.S. farmers receive 12 percent of the retail value.


EE buys directly from cooperatives that represent small producers, thereby helping these co-ops to


internalize the activity and profits formerly captured


by the middlemen (see comparison of supply chains


in Exhibit 5). EE buys raw materials from over forty


small farmer cooperatives in twenty-five countries at


prices higher than typical. In its 2009 annual report,


EE defined it sourcing standards as: ?? Quality - Find the best beans.


?? Flavor - Select sweet beans with unique flavor characteristics.


?? Farmer Partners - Trade with small farmer cooperatives that share our vision of community




?? Direct Relationships - Import directly from farmer




?? Fair Price - Pay above the market price, often above


fair trade prices.


?? Environment - Support sustainable agriculture, the


preservation of sensitive areas, and reforestation of


degraded land.


?? Commitment - Source all our coffee according to


the quality of the beans and the quality of the source.


EE supports the cooperatives with both financial and


technical assistance. In its 2008 Disclosure Document to


Sell Class B Preferred Stock, the relationship with small


farmers was described as follows, ?Our Commitment:


we pay a fair price to the farmer, trade directly with


democratic co-ops, supply advanced credit, and support sustainable agriculture.? In other words, EE goes


beyond just paying a fair price; it pre-pays on its contracts with the cooperatives. It also provides assistance


to the cooperatives to ensure they can provide a high


quality product.


Mike Mowry, a quality control specialist, described


what he did on a trip to Nicaragua as follows:


We do a lot of work going down and actually training


about quality. Even with their quality departments, we do


extensive training on how to roast samples and how to cup


coffee.5 The whole idea is collaborating with their tasters


and our tasters. Exhibit 4? Where EE Buys from Small Farmers by Country, 2010
















Paraguay EL Salvador




Dominican Republic


Colombia Ethiopia Uganda


Tanzania India


Sri Lanka


Sumatra South Africa Source: Information taken from EE Web site at i. Cacao, the key ingredient for chocolate, is also only exported by developing countries. CHE-HITT11E-13-0403-CaseStudy11.indd 124 22/10/13 2:47 PM 125 Case 11: Equal Exchange: Doing Well by Doing Good© Exhibit 5? EE versus Conventional Supply Chain EQUAL EXCHANGE COFFEE CHAIN


















DISTRIBUTOR CONSUMER Source: EE pamphlet. EE maintains that ?great? coffee can be obtained


from many sources. What sets it apart is that it buys


?great? coffee from ?great? sources.


EE also provides assistance to the small farmer coops beyond food products. For example, it has provided assistance for training programs for women in


Guatemala, an ecotourism project in Nicaragua, and new


classrooms in El Salvador.


When all of the sourcing standards work well, quality product is shipped to EE for further processing.


However, sometimes EE has to break off a relationship


with a co-op for either quali...


Solution details:

This question was answered on: Jan 30, 2021

PRICE: $15 (25.37 KB)

Buy this answer for only: $15

This attachment is locked

We have a ready expert answer for this paper which you can use for in-depth understanding, research editing or paraphrasing. You can buy it or order for a fresh, original and plagiarism-free solution (Deadline assured. Flexible pricing. TurnItIn Report provided)

Pay using PayPal (No PayPal account Required) or your credit card . All your purchases are securely protected by .

About this Question






Jan 30, 2021





We have top-notch tutors who can do your essay/homework for you at a reasonable cost and then you can simply use that essay as a template to build your own arguments.

You can also use these solutions:

  • As a reference for in-depth understanding of the subject.
  • As a source of ideas / reasoning for your own research (if properly referenced)
  • For editing and paraphrasing (check your institution's definition of plagiarism and recommended paraphrase).
This we believe is a better way of understanding a problem and makes use of the efficiency of time of the student.


Order New Solution. Quick Turnaround

Click on the button below in order to Order for a New, Original and High-Quality Essay Solutions. New orders are original solutions and precise to your writing instruction requirements. Place a New Order using the button below.


Order Now