Harvard Case - Showdown at Cracker Barrel
"Showdown at Cracker Barrel" Harvard business case study is written by Suraj Srinivasan, Tim Gray. It deals with the challenges in the field of Accounting. The case study is 25 page(s) long and it was first published on : Jan 13, 2014
At Fern Fort University, we recommend that Cracker Barrel Old Country Store, Inc. (Cracker Barrel) adopt a multi-pronged approach to address the challenges highlighted in the case study. This approach involves a strategic shift towards a more data-driven decision-making process, a focus on enhancing operational efficiency, and a commitment to fostering a culture of innovation and customer-centricity. This strategy will be implemented through a series of initiatives, including the adoption of activity-based costing, the development of a comprehensive performance management system, and the implementation of a robust risk management framework.
2. Background
The case study revolves around the internal conflict at Cracker Barrel, a popular restaurant chain known for its Southern-themed dining experience and retail store. The conflict arises from the company's decision to implement an activity-based costing (ABC) system, which challenged the traditional cost allocation methods used by the company. This decision was met with resistance from the restaurant operations team, who perceived the new system as a threat to their autonomy and profitability. The case study highlights the challenges of implementing change within an organization, particularly when it involves altering established practices and potentially impacting employee incentives.
The main protagonists in the case study are:
- Sandra Cochran: The CEO of Cracker Barrel, who is driving the implementation of the ABC system.
- Mike Brown: The Vice President of Restaurant Operations, who is resistant to the new system and argues that it unfairly burdens restaurants.
- The Restaurant Operations Team: The employees who are directly impacted by the ABC system and feel threatened by the changes.
3. Analysis of the Case Study
The case study presents a complex scenario that requires a multi-faceted analysis. We can use the following frameworks to understand the situation:
- Strategic Framework: Cracker Barrel's strategic objective is to maintain its competitive advantage in the restaurant industry. The ABC system is a tool to achieve this objective by providing a more accurate understanding of costs and allowing for better resource allocation. However, the resistance from the restaurant operations team threatens to derail this strategy.
- Financial Framework: The case study highlights the importance of accurate cost accounting and its impact on financial performance measurement. The ABC system aims to improve the accuracy of cost allocation and provide a more comprehensive view of profitability. This is crucial for decision-making regarding pricing strategy, resource allocation, and performance evaluation.
- Organizational Framework: The case study demonstrates the challenges of implementing change within an organization. The resistance from the restaurant operations team highlights the importance of communication, stakeholder engagement, and a clear understanding of the benefits of the change initiative.
4. Recommendations
To address the challenges presented in the case study, we recommend the following actions:
1. Enhance Cost Accounting and Financial Reporting:
- Implement Activity-Based Costing (ABC): Continue with the implementation of the ABC system, but ensure that the process is transparent and involves input from the restaurant operations team.
- Develop a Comprehensive Cost Analysis: Conduct a detailed cost analysis using the ABC system to identify areas of potential cost savings and inefficiencies. This analysis should be shared with the restaurant operations team to demonstrate the benefits of the new system.
- Improve Financial Reporting: Enhance financial reporting to provide clearer insights into restaurant-level profitability. This will help to address the concerns of the restaurant operations team and demonstrate the value of the ABC system.
2. Foster a Culture of Innovation and Customer-Centricity:
- Develop a Performance Management System: Implement a performance management system that aligns with the company's strategic objectives and rewards employees for achieving key performance indicators (KPIs) related to customer satisfaction, operational efficiency, and innovation.
- Encourage Employee Engagement: Create a culture of open communication and feedback. Encourage employees to share ideas and participate in decision-making processes.
- Invest in Training and Development: Provide employees with training and development opportunities to enhance their skills and knowledge, particularly in areas related to customer service, technology, and innovation.
3. Strengthen Risk Management:
- Develop a Robust Risk Management Framework: Implement a comprehensive risk management framework to identify, assess, and mitigate potential risks associated with the ABC system and other strategic initiatives.
- Establish a Risk Management Committee: Create a risk management committee to oversee the implementation and monitoring of the risk management framework.
- Conduct Regular Risk Assessments: Conduct regular risk assessments to identify emerging risks and adjust the risk management framework accordingly.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: The recommendations align with Cracker Barrel's core competencies of providing a unique dining experience and offering a wide range of retail products. They also support the company's mission to create a welcoming and hospitable environment for its customers.
- External Customers and Internal Clients: The recommendations prioritize customer satisfaction and employee engagement. The ABC system, when implemented effectively, can help to improve customer service and operational efficiency, which in turn benefits both external customers and internal clients.
- Competitors: The recommendations aim to enhance Cracker Barrel's competitive advantage by improving efficiency, innovation, and customer service. This will help the company to stay ahead of its competitors in the restaurant industry.
- Attractiveness - Quantitative Measures: The recommendations are expected to improve profitability and shareholder value. The ABC system can help to identify cost savings and improve resource allocation, while the performance management system can drive employee productivity and customer satisfaction.
6. Conclusion
Cracker Barrel faces a critical juncture in its history. The implementation of the ABC system presents an opportunity to enhance profitability, improve operational efficiency, and foster a culture of innovation. However, the resistance from the restaurant operations team highlights the importance of effective communication, stakeholder engagement, and a clear understanding of the benefits of the change initiative. By adopting the recommendations outlined in this report, Cracker Barrel can navigate this challenge and emerge as a stronger and more competitive organization.
7. Discussion
Other alternatives not selected include:
- Abandoning the ABC System: This would be a short-sighted decision that would fail to address the need for accurate cost accounting and could lead to further inefficiencies and financial instability.
- Ignoring the Resistance: This would create a hostile work environment and could lead to employee turnover and decreased productivity.
The key assumptions of our recommendations are:
- Management Commitment: The success of these recommendations depends on the commitment of management to implement the changes and address the concerns of the restaurant operations team.
- Employee Buy-in: The recommendations require employee buy-in and a willingness to embrace change.
- Effective Communication: Clear and consistent communication is essential to ensure that all stakeholders understand the benefits of the changes.
8. Next Steps
The implementation of these recommendations should be phased in over a period of 12-18 months. The following timeline outlines key milestones:
- Month 1-3: Conduct a comprehensive cost analysis using the ABC system and develop a communication plan to address the concerns of the restaurant operations team.
- Month 4-6: Implement the ABC system in a pilot program at a select group of restaurants.
- Month 7-9: Develop and implement the performance management system.
- Month 10-12: Conduct regular risk assessments and adjust the risk management framework as needed.
- Month 13-18: Continue to monitor the implementation of the recommendations and make adjustments as necessary.
By following these recommendations and implementing them in a timely and effective manner, Cracker Barrel can overcome the challenges presented in the case study and achieve its strategic objectives.
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Case Description
In the fall of 2011, activist investor, Sardar Biglari, has acquired nearly 10% ownership in the Cracker Barrel restaurant chain. He believes that the board and senior management have failed and the company has underperformed relative to its peers. When he is denied a seat on the board, Biglari initiates a proxy fight in an attempt to win a board position and change the direction of Cracker Barrel's strategy. Two leading proxy advisory firms, ISS and Glass Lewis, disagree on supporting Biglari. One advises shareholders to vote Biglari to the board, while the other advises against it. Shareholders must decide.
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