Organic farming in the United States is a $US7 billion annual industry and is predicted to become a $US20 billion industry by 2005. Increasing consumer demand for natural produce can be seen in the appearance of numerous organic grocers, health-food shops and health-food sections in supermarkets. BioFoods Corporation has positioned itself as a force in this growing market by forging a new level of industry development.
In 1978, Patricia Owen started a local food delivery business from home in the eastern suburbs of Melbourne. She and many friends had had a long involvement in the organic and biodynamic farming movements and they organised weekly deliveries of produce through their local networks. By the early 1980s, they had established affiliates across the continent.
At the time, Patricia’s husband, Mar-shall, was establishing Nite-N-Day, a network of convenience store franchises. Patricia and Marshall were from farming families and had always had a profession-al association with food. They met and married when they were with the Big-Bag Supermarket chain.
One evening, talking over dinner, Marshall said: “Trish, people have for-gotten that in the pre-industrial era, farms were integral parts of towns and villages. Now, farms have become industrialised outposts and people accept whatever food is delivered to them. Many have forgotten the smell, taste and color of fresh food.”
Conversations with friends and col-leagues over subsequent months led to the founding of BioFoods. The basic charter was two-pronged: to provide people with the freshest possible organic produce and to re-educate people about farming. The Owens built on the idea of Community Supported Agriculture (CSA), which grew out of the bio-dynamic movement. To this they began applying franchising and marketing strategies similar to those of fast-food outlets and convenience stores.
Within a couple of years, BioFoods had revenue of about $450,000 a month but the organisation was struggling for cash and lacked the management talent to take it any further. At this stage, the state of Victoria was its most developed market. The region in which they operated was generating close to $900 mil-lion dollars of produce a year; and this was just a small part of the potential national market.
After knockbacks from 44 venture capitalists, the Owens struck gold with number 45. Floyd Barker at Golden Capital had been through two heart attacks, bypass surgery and, fortunately, a good recovery. He thought the time for BioFoods had come, although he had some doubts about the Owens’ ability to make it work. For 35% of the company’s stock, Barker put up $20 million. Under the deal, the Owens retained 20% of the stock and it was no surprise that they had to give up substantial control. Marshall was offered a five-year senior executive position and Patricia was retained as a consultant on user-friendly issues, including education.
BioFoods became Biofoods Corporation. Barker hired Jack Hager as chief executive. Hager had a solid record with retail and food chains in the US and had political contacts in Australia. Barker and Hager knew the BioFoods vision would complement emerging government policies on safeguarding agricultural lands from urban encroachment. But BioFoods was planning to go one step further.
Since World War II, farming had not only lost its status but, apart from periods of drought, had also become “invisible” to the public. The revised BioFoods charter included bringing farming back into the cities and giving it renewed status by lobbying for an increase in small farming, micro-farming, the creation of farming suburbs and developing a host of new consumer services.
Within two years of Hager’s appointment, BioFoods had secured valuable government support for the development of farming suburbs and farm parks that would eventually become the agricultural equivalents of industrial suburbs and technology parks.
The new model aimed to reduce the use of industrial machinery and chemicals and increase the use of information technology and innovative natural methods of production.
The development of SubFarms (sub-urban farms) served as the public face of farming, a place where families could go for an outing and a meal.
Marshall Owen enjoyed some lime-light and agreed to participate in a short documentary, The Founding of BioFoods. He quoted research findings: “Our position on organic farming is finding greater support with each passing year. Research by the Research Institute of Organic Agriculture in Frick, Switzerland, com-pared organic and conventional farming over a period of 21 years. The study found that crop yields on organic plots were 20% lower than conventional plots but this was offset by ecological and efficiency gains.”
Patricia Owen added: “The key to BioFoods is that we involve families in the decisions that produce the food they eat. Through our farming franchises, BioFoods provides BioFarms with a sophisticated knowledge base to share and improve crop yields, data on storage and transport, data on the genetic integrity of their crops and assistance with financial management.”
The documentary noted that Bio-Foods Farm Parks provided constant monitoring of genetic data of seeds to ensure the genetic integrity of crops. This was fundamental to the marketing strategy because, despite international government support for GM crops, people did not want to consume GM foods if they could help it.
The documentary went on to show BioFoods being condemned by the Transport Union, which had evidence to suggest that BioFarms policies would have a negative effect on employment in the transport industry. Other unions echoed this concern, claiming that farm-related employment would suffer, as organic farms need fewer farm workers.
This information was new to the Owens and they realised that they were out of their depth. In a later media release that got little attention, BioFoods reject-ed the union claims and added that new areas of related employment would emerge.
BioFoods was caught unawares by the Owens’ eagerness to document the growth of “their” business. Hager for-bade all further interviews. He also refused to disclose the BioFoods position on the International Undertaking on Plant Genetic Resources for Food and Agriculture, a movement that aims to conserve seeds so that they are freely available to all. The reporter conjectured that it could have something to do with the fact that Australia, Canada, New Zealand and the US had been slow to support the International Undertaking (IU).
Soon after the documentary aired, agribusiness and biotechnology interests began a media campaign suggesting that dangerous pathogens would be released into communities through the use of farm manure and that consumers should avoid SubFarms. BioFoods announced that simple age-old hygienic procedures prevent such problems and launched a counter-attack using well-documented data showing that pesticide illnesses related to agribusiness numbered about 300,000 a year in the US and represented the highest rate of chemical-related illness of any occupational group.
Patricia Owen felt lost. Even before the issue of the documentary arose, she was troubled by regular disagreements with top management. Five vice-presidents threatened to resign, claiming that she was interfering with their work and taking advantage of her position. On hearing this, Marshall Owen resigned in support of his wife.
Hager suggested that Patricia Owen renew her focus on education. How-ever, senior management soon recommended that the program be deferred or dropped altogether. The Owens argued that the education program was crucial. After months of internal lobbying, the program was rescued and Marshall was retained as a senior consultant on franchising issues. The tensions between the Owens and senior management remain unresolved.
Could Hager have better capitalised on the skills of the Owens from the outset of their relationship? Was the immediate transfer of power from the Owens to Barker and Hager the best solution,or were there other viable power-sharing options? In relation to the documentary, was Hager ‘s decision to silence employees a challenge to freedom of speech? Is Hager setting a good example by not commenting on the BioFoods position in relation to the IU, considering the nature of his business?
Proposed Solution #1
Joanne Fitzgerald AFAIM is an organisational psychologist and socio-analyst and is director of Designed Interventions, an independent consultancy based in Melbourne. Since 1987, Joanne has worked throughout Australia with organisations committed to growth and learning, particularly in times of merger and acquisition. Of late she has specialised in consulting to executives leading change in organisations in the justice, correctional and courts portfolios.
Essentially, the senior management of BioFoods ignored the enormous culture change from family-friendly small business to participant in a politically sensitive industry. The passion and commitment to ideas and ideals that made the “family and friends” company successful were not necessarily the right ingredients for the larger, competitive, aggressive BioFoods Corporation in the public domain. BioFoods fell victim to ineffective management of the transition.
The change from family business to large enterprise requires careful management and strong attention to the integration of values, culture and ideas. Floyd Barker stepped in to “rescue” the smaller company and expand it with his own ideas (and CEO) for development and position. Jack Hager’s task was to establish the new profile and position of BioFoods, employing his own style, visions and understanding of the industry.
The Owens welcomed Barker and his capital, probably without paying enough attention to the implications of the new directions. Family business owners often have their identities inextricably wrapped up in the company, such that they are struggling to separate business goals from their sense of self. Marshall Owen manifests this in seeking the limelight to show off “his” company and in resigning in support of his wife.
The Owens had a great idea and genuine passion for their vision of farms as integral with towns. But their picture stopped there. Hager should have directed his energies to revealing the larger, more business and politically savvy, picture.
The elements of sound transition management were ignored. The management and operating culture of Biofoods would not overnight – and not without intent – be altered to a culture that could operate in the larger political environment.
The case scenario identified Floyd Barker’s concerns that the Owens were limited in their capacity to realise the potential of their business. Yet, instead of doing something about their managerial limitations, they were moved sideways, their areas of control reduced without accountability being reviewed.
The need for a transitional management structure or process was ignored. As BioFoods changed and grew, so too should the structure and functioning of management have changed and grown. This is not to say that the numbers of senior managers needed to grow, but the understanding of roles, the need to share learning among the executive team, and the transitional nature of the new organisation should have been acknowledged and managed. This transformation process would have involved the redefinition of responsibility, authority and relationships.
The attempt to immediately transfer power from the Owens to Barker and Hager was shortsighted. Although the greater part of legitimate power was transferred to Barker and Hager, the Owens, as the founders, still perceived themselves as having great influence in the broader context.
The Owen struggled to reframe their roles in BioFoods. Their desire was to have a larger version of the organisation they alone had controlled; a large, happy farming community all over Australia. They failed to see the obvious threats and competition this vision posed. Their passion led the way and, in the absence of more visible leadership and containment from Hager, their passion tripped them up. Hager’s failure to acknowledge the part the Owens had played contributed to their taking the limelight when offered. To harness their skills better, Hager should have more clearly defined each of their roles initially and progressively. For example, Marshall as senior executive, franchising, and Patricia as consultant for internal education and education of franchisees.
Shortcomings of founders and management
It is clear that the Owens have great skill in expressing their sense of community and village living. But their limitation in business acumen was recognised before Barker’s injection of capital and was not then managed by Hager as CEO.
In relation to the documentary, Hager’s decision to silence employees was not a challenge to freedom of speech. It reflected Hager’s fear that small thinking was a feature of his big enter-prise, jeopardising its profile. Freedom of speech is not about protecting the rights of anyone to say anything, regardless of data, validity, research or support, but rather the right to voice one’s opinion and own it as such. The error for BioFoods seems to have been that the opinions of others in the industry were not considered before the documentary.
Hager has not set a good example by not commenting on the BioFoods position on the IU. The company has defined itself as a big operation in this market, yet Hager has with-drawn from any public role that such a position would indicate as appropriate. Furthermore, the IU is a global extrapolation of the BioFoods idea of farms as central to modern life. Hager’s silence may suggest a reluctance to embrace the culture on which BioFoods Corporation is predicated.
Proposed Solution #2
Peter Sugden is a high-performance coach who works with organisations to help their people excel. Whether coaching on the shop floor or in the boardroom,his core approach is to “listen “and facilitate true understanding so that sustainable strategies can be developed. He is an executive member of AIM ‘s Leadership Development Group.
The lack of an effective communication environment in Biofoods shows that crucial communication issues have not been adequately examined.
Biofoods has a creative business model and has gained a great deal of support for its concept from government. However, issues exemplified by the approach taken by Floyd Barker, and the public-relations debacle, reveal underlying problems.
Some big questions arise from the relationship between the Owens and Floyd Barker. Were they effectively working towards the same end, and did the charter of Biofoods reflect the direction of the new corporate structure? It is clear that Patricia and Marshall have a strong altruistic orientation. Their charter talks of re-educating people on farming and the principle of Community Supported Agriculture (CSA). Barker and the Owens are working at cross-purposes.
One party is there to get a return on investment, and the other wants to develop a successful business through the community and employ environ-mentally sound farming practices to achieve it.
In the rush to get more capital and secure a greater market share, it seems that little time was dedicated to understanding the deep effect of the Owens’ new business relationship.
Floyd Barker at the outset was unsure of the their capacity to deliver. The deal meant that the Owens gave up substantial control of the business.
Barker also had a free hand to select the new chief executive. All these changes would have had a dramatic effect on the “baby” the Owens had nurtured. That tensions soon rose between the parties is symptomatic of their conflicting motivations.
The Owens’ appearance in a documentary displayed their obvious passion for the business but left Biofoods Corporation exposed to a public relations disaster. The film highlighted some positive aspects of the business but also showed it being condemned by groups concerned about employment losses and the health risks associated with farming in suburban communities. Clearly, senior management had not briefed the Owens before they were interviewed. The Owens also did not effectively understand their roles and responsibilities.
Statement of account
Who should be held responsible for this situation?
Floyd Barker, management and the Owens must be held to account. Patricia notes that there had been regular disagreements with senior management. Also, the company was unaware of their eagerness to document the growth of their business and was unprepared for some of the issues raised.
Hager “forbidding” further interviews suggests a leader who is reactive to internal communication issues. Hager does not demonstrate a comprehensive understanding of the interpersonal concerns surrounding the business. The Owens and management needed to confront their conflicts openly. Some-one involved, with the foresight to understand the negative effect of this poor communication, should have initiated this process. The question also arises: if there were tensions like this at the top, what was communication like throughout the organisation? And, how were employees dealing with the new management and business structure?
What should have happened to minimise or avoid the problems?
Given the important philosophical stand the Owens took in relation to their business, the community and the environment, you could ask why they saw turnover and market share as a way of achieving the desired outcomes rather than managing more effectively what they had. This aside, Biofoods should have included as a crucial plank in the business plan an internal communications strategy. This would have identified structural considerations such as the corporate culture, the philosophy of management, workflow systems and communication channels. The strategy would have clearly identified the values of the organisation and how effective the communication actually was.
In conjunction with this, the strategy needed to reflect the existing interpersonal dynamics in the organisation. How did people perceive their environment and what anxieties were likely to arise from the corporatisation of the business? Once people’s attitudes and potential behavioral responses had been established, plans could have been put in place that would have anticipated concerns and dealt with them in a transparent and authentic manner. Biofoods is typical of rapidly growing organisations.
An enormous amount of planning and preparation is carried out financially, logistically and procedurally but little strategic consideration is given to resolving the core communications/ performance questions that revolve around the cultural and interpersonal expressions of the organisation.
Senior management and the Owens should have confronted their differences openly. Although this is easy to say, it is probably the hardest task for any leader to face. Resolving disagreements involves understanding the other person’s feelings. The unpredictability of how people might respond in these situations can lead to anxiety. The main stakeholders in Biofoods coped in the same way as is done in many work-places.
It was easier to brush the tensions aside and focus on more tangible and measurable things. The problem with this approach is that by ignoring people’s differences, the effects grow in complexity and size and manifest themselves in unpredictable ways.
Often tensions exist because of a lack of clarity. To listen to the full story with a non-judgmental attitude can open the door to all parties having a more meaningful sense of understanding and consequently put each in a much better position to resolve things so that everyone’s needs are met. This, however, does take time, patience and courage if it is to work.
There are three things you cannot take back: the spent arrow, the spoken word, and the lost opportunity. Biofoods has lost a great opportunity to establish a unique corporate culture – going from being an organisation that merely copes to one that excels.