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HERIOT-WATT UNIVERSITY
PEOPLE, WORK AND ORGANISATIONS – DECEMBER 2020
Section I
Mandatory Case Study
So Fresh workers criticise Cadabra for ‘exploiting our dedication’
Natural food, produce and household products retailer So Fresh was named as one of
America’s best companies to work for 20 years in a row by Fortune magazine. However,
after it was acquired by global e-commerce giant Cadabra in 2017 for $14.3 billion, leaked
company emails, staff talking to the media under conditions of anonymity, and public
announcements in 2018 and 2019 have shed light on how things have changed since.
Michael Blanding, a senior fellow at the Schuster Institute for Investigative Journalism at
Brandeis University, writes that Cadabra’s acquisition of So Fresh was ‘the corporate
equivalent of mixing tap water with organic extra virgin olive oil. You’d be hard-pressed
to find two companies with more different value propositions.’ Despite this, he
continues, it was surprising to read reports shortly after the acquisition about So Fresh
customers regularly finding empty shelves at the grocery. In addition, stories began to
surface about employees crying over the performance-driven working conditions
imposed by Cadabra.
According to Harvard Business School academics Dennis Campbell and Tatiana Sandino,
Cadabra has made its name by being fast, cheap and efficient – using data to drive its
product mix and enforcing strict employee discipline to squeeze out cost savings to pass
on to its customers. So Fresh, on the other hand, prided itself on its personal touch,
empowering individual stores – even individual employees – to make decisions about
product lines that emphasised high-quality, healthy and local foods. That decentralisation,
while giving them a loyal customer base, caused notorious inefficiencies and price rises.
For these reasons it was no surprise that the acquisition was initially met positively by
Wall Street, with hopes that Cadabra’s data-driven business approach might enable So
Fresh to scale up internationally while maintaining its employee-empowered culture.
Working conditions
So Fresh employs around 90,000 staff at 500 stores in the US organised into 10
geographic regions, each with its own president, regional administrative team, store-level
leadership and store-level team members. The average store employs about 190 full-time
and part-time team members, including specialists such as bakers and butchers, and is
open from 7am to 10pm daily.
Since being bought by Cadabra, employees at So Fresh say their working conditions have
declined because of pressure to push Cadabra’s ‘Alpha’ deals and memberships, alongside
widespread understaffing, increased workloads and budget cuts. ‘Cadabra has changed
the company so much, to the point where I can’t recognise So Fresh any more,’ said one
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worker in Harlem. ‘I joined So Fresh at 17, straight from high school, and in the 15 years
I’ve been here it’s been my family and my university, it’s way much more than a job’, he
went on to say.
In early 2018 Business Insider reported that So Fresh employees were being graded with
new scorecards and on-the-spot quizzes that left many terrified of losing their jobs. So
Fresh has eliminated or reduced classes of jobs, such as in-store graphic designers and
payroll benefits specialists, and merged those duties into other positions without
providing workers with additional compensation or training. Profit-sharing for employees
– once a major perk of working for the company – has reportedly been eliminated. In a
statement from March 2019, So Fresh said the cuts were made to support business needs.
Automation
So Fresh has implemented a new inventory-management system aimed at making stores
more efficient and cutting down on food waste. But employees say the retailer’s method
of ensuring compliance is crushing morale. The new system, called order-to-shelf, has an
automated and prescribed set of procedures for purchasing, displaying and storing
products on store shelves and in back rooms. To make sure stores comply, So Fresh
relies on ‘scorecards’ that evaluate everything from the accuracy of signage, damaged
products and breakages, to the proper recording of theft.
Some employees, who walk through stores with managers to ensure compliance, describe
the system as onerous and stress-inducing. An employee from San Antonio So Fresh
said: ‘No one really knows this business model, and those who are doing the scorecards –
even regional leadership – are not clear on practices and consequently are constantly
providing the department leaders with inaccurate directions. All this comes at a time
when labour has been reduced to an insufficient level.’
Interactive touch screens at the So Fresh checkouts in the newly opened West Seattle
store ask shoppers to rate their experience on a scale of one to five stars – just like they
do in product reviews on Cadabra’s online shopping site. The ratings are not meant to
evaluate individual employees, but their arrival caused anxiety for at least one So Fresh
staff member, speaking to the Seattle Times, who said that neither a training video nor
management communications about the technology explained what the ratings data
would be used for.
The star ratings, solicited through touch screens that will be rolled out across stores
nationwide over the next few months, are an extension of the company’s approach to
getting feedback, broadly, from customers on their experience shopping at So Fresh, and
ratings will not be ascribed to individual employees, a company representative said. The
representative also said that ratings will not be used to make any compensation or
scheduling decisions.
However, another worker from So Fresh at West Seattle was worried that too many onestar reviews under the new system could lead to a reduction in bonuses or hours – a
more acute issue in light of the benefits cuts.
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Benefits cuts
In response to public pressure and increasing scrutiny over the pay of its warehouse
workers, Cadabra enacted a $15 minimum wage for all its employees in November 2018,
including workers at So Fresh. All So Fresh employees paid less than $15 an hour saw
their wages increase to at least that, while all other team members received a $1 an hour
wage increase and team leaders received a $2 an hour increase. But since the wage
increase, a number of So Fresh employees from Bellevue, La Jolla, Pasadena, Fort Worth
and Harlem told the Guardian they have experienced cuts that have reduced schedule
shifts across many stores, negating wage gains for employees.
In September 2019 it was reported that So Fresh will be cutting health insurance benefits
from the beginning of 2020 for its part-time employees, many of whom learned of the
move through media reports rather than from managers. This and the lack of detail
provided about the new ratings system raised questions about employee communications
at a time when labour groups are trying to organise the company’s workers.
A part-time employee, who asked not to be named while discussing concerns, and
another So Fresh employee who spoke to a reporter from the Seattle Times, said they only
learned of the health insurance benefit cuts, weeks before they were to take effect, from
media reports, and had not received formal notification from the company.
A Westlake employee, who requested anonymity to describe internal communications,
said health insurance was her main reason for working at the company: ‘I think what is
also distressing, is that I have not heard a word of this from my employer. My insurance
will be taken away in three months and I have been given no notice that I will need to
find an alternative.’
The Seattle Times went on to quote a company spokesperson as saying that So Fresh had
intended to notify employees affected by the cuts in one-to-one conversations. Those
employees ‘in good standing have the opportunity to move into one of the thousands of
full-time roles’, making them eligible for the same healthcare coverage at a lower cost, it
was reported. The majority of the roughly 2,900 employees losing health insurance would
need to work only five more hours a week to meet the 30-hours-a-week threshold to
qualify for the benefit, the company said.
So Fresh co-founder and CEO Xavier Santos said in a video to employees that he would
work to address employee concerns, improve communication and strengthen careerdevelopment opportunities in 2019 as the grocery chain enters its second year under
Cadabra ownership, the Wall Street Journal reported.
An uncomfortable union
Santos’s attitude seems to have changed: he was forced into selling So Fresh to Cadabra
by activist investors, and a year ago made headlines after Business Insider obtained leaked
audio of him describing early conflicts with Cadabra at a company-wide meeting attended
by regional and local managers. ‘I’m sure that Cadabra has probably gotten more
disagreement from me than any other single person, and possibly more than everyone
else combined,’ Santos said, according to Business Insider.
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‘I have done this for 40 years, I am financially secure, I love So Fresh’, he continued. ‘I
ultimately am not afraid to get fired so – not that I think they are going to fire me – but
I’m not afraid of it, so that gives me a position of strength to speak truth to power when
it’s necessary to do so, and I’ve done it many, many times.’
But despite any conflict, Santos, who started So Fresh with his wife more than 40 years
ago, told CNBC his feelings towards Cadabra’s team remained the same as when they
first met during acquisition talks in 2017: ‘My first impression when I met the team was
that these are really, really smart people. Rick [Preston] has built a great team – and that’s
why they’re so successful.’ Preston was ‘brilliant’, he added. ‘I’m less brilliant, but I’ve
also got a great team.’
Assuming Cadabra wants So Fresh to succeed, it might do well to reconsider the benefits
of the grocery chain’s empowerment model. Harvard’s Professor Campbell says that part
of the issue is realising the limits of standardisation, even for a company like Cadabra that
has perfected data-driven management. Associate Professor Sandino suggests Cadabra
may be better off pursuing a concept known as structured empowerment, where a
company standardises operations but allows flexibility for employees to make their own
choices in key areas where having close contact with customers’ matters. In addition,
Sandino says, Cadabra might consider changing its performance measures to focus more
on results rather than processes, holding employees accountable for goals, but giving
them more leeway on how they achieve them.
Sources with acknowledgement to: The Guardian, Seattle Times, Business Insider, Forbes, Quartz Inc.,
Market Watch, CNBC and Harvard Business School Working Knowledge

Business and
Technical Writing
FINAL EXAM:
AN INFORMAL PROPOSAL
Purpose
Your final project for the Business and Technical Writing
course is worth 30% of your course grade and requires you
to write an informal proposal in letter form. Your work must
be your own.
Important: Don’t submit your final draft for this project until
you’ve received the evaluations of all your previous written
exams, so you can make use of the evaluator’s comments to
improve your final project.
Preparation
Before you begin this project, review pages 8–16 in Proposals
and Special Projects, which is related to writing informal,
internal proposals. Also study the differences between
proposals and reports (like your field investigation report).
Figure 3 shows the general style and basic format you’ll
use for this final exam. Also review the formatting for a fullblock
style business letter, covered in Writing Effective
Communications. Review the explanation provided in each
study unit related to writing style, tone, audience, word
choice, grammar, spelling, and punctuation.
Gather the brainstorming, freewriting, and graded exams
you’ve already prepared for previous assignments about
Phoenix Advertising. You’ll build on some of the details you
developed and incorporate suggestions from the instructors
evaluating your previous work. You’ll also have to brainstorm
further in order to create facts, figures, names,
numbers, analysis, and proof to support your plan of
action in your proposal.
2 Business and Technical Writing
Background Information
Here’s a brief review of the scenario; also review the full
information provided in the exam section of Organizing,
Illustrating, and Researching Your Material. Phoenix
Advertising, with its main headquarters in Charlotte, North
Carolina, serves clients that include banks, insurance companies,
and retail chains. You’re vice president of human
resources management at Phoenix. You report directly to
Gregory S. Forest, the company president.
You’ve already investigated the branch and provided a report on
the problems there and your recommendations for managing
them (for study units Organizing, Researching, and Illustrating
Your Material and Writing the Report). Mr. Forest has reviewed
that report and now wants you to present to the executive team
a specific proposal developing one of the recommendations you
gave. Following are the primary problems covered in the
scenario but also carefully review the underlying causes you
discovered in your investigation (which you created from
your imagination).
In the last three months, two of the top management people—
an art director and an account executive—have left the branch.
Each left for a position with a competing agency.
Three of the graphic designers and four of the copywriters
are threatening to quit because they feel their creative efforts
are being rejected or revised without consultation. They want
to be part of a collaborative team, not produce work that the
art directors and account executives evaluate arbitrarily.
In an attempt to show increased profitability, the branch
is accepting all potential clients without evaluating the
accounts in terms of current project workload. As a result,
without being given any notice and without compensation for
the additional hours, all employees are working long hours
several days each week. Employee morale and productivity
seem to be decreasing with each passing day.
Final Examination 3
Process
Step 1
Choose one of the problems. Use your brainstorming notes
and the investigative report for the recommendations you
listed to solve that problem. Brainstorm further about the
reasons for and causes of that one problem by delving even
further into the “whys” of that problem. As you did previously,
list several questions and review the answers you’ve discovered.
Explore those answers in greater depth to determine the
fundamental causes of the problem. (Think of the problem
as a set of symptoms of an illness that you need to treat.
What disease is causing the symptoms? What areas of the
body are affected by the disease?)
Step 2
Freewrite further on each recommendation you made in your
investigative report for resolving this problem. Ask yourself
questions about what must change, what you must make
happen with the employees and departments at Roanoke to
solve the problem so it won’t reoccur. Remember that your
primary goal for the proposal is to revitalize the employees
and departments in order to restore the Roanoke branch to
full productivity. Use as a starting point any of the following
that apply to the problem you’ve chosen:
■ What can the executive team do to reverse the downward
spiral of employee morale and increased workload
requiring overtime?
■ How can the executive team help the Roanoke branch
retain its current clients and gain new ones?
■ Is training needed for employees and/or managers?
If so, what types of training are required? How can
the executive team accomplish training over time to
minimize impact on business?
■ What can be done to streamline or reorganize the office
procedures or to incorporate new technology to improve
productivity? What training/support will then be needed
to enable the office employees to embrace the changes
and succeed?
4 Business and Technical Writing
Make sure you’ve done enough exploring in Step 1 to guide
your creative efforts toward the changes you’ll make in Step 2.
You want to ensure permanent change, so you must understand
the exact nature of the causes in order to develop a
detailed, logical solution.
Step 3
Wait a day or two before you review your prewriting, so you
can return with fresh eyes to the project. Mark the information
you’ll use in your proposal and freewrite as needed to develop
your ideas on resolving the situation and accomplishing your
goal. Break the overall plan into individual parts or actions so
you can develop each step in the process separately, organizing
a logical flow for each phase from beginning to end.
■ How much time is needed to accomplish each component
or stage of your plan?
■ Are there steps that must be completed before another
phase can begin?
■ How long will it take to complete each step?
■ How will it impact the daily operations of the branch
and headquarters?
Step 4
Now review the people at Roanoke and across Phoenix
Advertising who you’ll need to accomplish each part of
your plan. Your proposal must use people from within the
company—don’t hire outside personnel. Create names and
job titles as well as qualifications to fit your plan. Review
your list of steps and for ask yourself:
■ Who at Phoenix Advertising and/or the Roanoke branch
has the experience, training, and qualifications to achieve
this stage of my plan? What proves he or she is the one
for the particular phase?
■ What exactly do I want that person to do to accomplish
this step? When? How?
■ Who oversees the implementation of each phase?
■ What progress reports must be provided to the executive
team and when?
■ What’s my part in the proposed plan of action?
Step 5
Your next step is to itemize the costs involved in accomplishing
each component of your plan as you outlined it in Step 3. You
may need to research current costs of additional employees,
training/motivational programs, or technology. The Internet
or even phone calls to representative companies in the Yellow
Pages can provide useful information. Your figures should
have some realistic basis. Remember to factor in costs such
as the following:
■ The number of employees involved in each phase
■ The loss of employee time from completing regular
obligations of current job
■ Any travel or materials/workbooks needed for training
Create appropriate budgetary categories related to the stages
of your plan. Establish an overall cost for each phase and
within each phase itemize the different costs involved. Itemizing
is important to provide clear support for your numbers and
line items the executive team can review if the total cost for
the proposal is too much for the company’s budget.
Step 6
Organize your prewriting from Steps 1–5 using the following
main headings:
Introduction
Background
Proposal
Schedule
Staffing
Budget
Request for Authorization
Final Examination 5
Business and Technical Writing
Step 7
Following the outline in Step 6, write a 2–5 page draft of
your proposal in letter format. Use single spacing (unless
the format requires more spacing), bold for headings, and
italics for subheadings.
Introduction. Your Introduction is the only section not
labeled with a heading. As your opening paragraph, it must
begin with an interesting hook, contain your qualifications to
prepare this proposal, and summarize the general problem
and the benefits of your plan.
Background. The Background section must persuade the
executive team that a dire need exists. Summarize the field
investigation of your chosen problem and describe the causes
of that problem. Include specific numbers and percentages
(facts and figures) with explanations to show how you determined
each contributed to the problem. Your reasons must
be based on the facts you uncovered, not the feelings of
employees at the branch. End this section with a bulleted
list of the key phases (stages) you’ll develop in the proposal
section to solve the causes. Phrase each stage as a key
action goal.
Proposal. In your Proposal section, develop the steps needed
to solve the problem. Use a phrase or word for each goal you
listed in the Background section and italicize it. (You’ll use the
same phrases or words in the Schedule and Budget sections.)
Then write at least one paragraph for each goal, outlining
what actions are involved in that phase. Develop detailed,
clear-cut solutions to the underlying issues and causes you
identified in the Background section.
Schedule. Your Schedule section must use the italicized
words to outline the phases described in the Background
and Proposal. Use column format.
Staffing. The Staffing section describes, in paragraph form,
the specific people, their qualifications, and their assignments
as related to each phase of the proposed solution.
Budget. Your budget section must itemize the primary steps
of your plan. Use a table format with your own headings for
each column. The first column will use the phases from the
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Final Examination 7
project outlined in the Proposal and Schedule sections. Be
sure to show under each major phase the related costs for
accomplishing it.
Request for Authorization. The Authorization section must
suggest a time frame for approval of your plan. Since this
section is also the last thing the executive team will read,
persuasively provide assurance that your proposal will
achieve your goal. Summarize the problems and describe
the benefits of your plan for Roanoke branch, their clients,
and Phoenix Advertising as a whole.
Step 8
As you write, follow the ABC’s for constructing your paragraphs.
Allow your first draft to sit for several days before
you revise it. During that time, review those sections of the
study units discussing various aspects of writing, revising,
and editing, such as
■ Correct, varied construction of sentences
■ Coherence
■ Appropriate word choice for purpose and audience
■ Grammar, spelling, and punctuation
After revising and editing your first draft as best as you can,
ask another person to read your proposal aloud. Listen for
awkward phrases, missing words, and unclear sentence flow.
Also ask for the reader’s feedback on clarity, logical flow, and
so on. Finally, refer to the evaluation criteria and Step 7 as
you give your work one final review before you complete your
final draft.
Evaluation Criteria
Your instructor will use the following criteria to evaluate
your proposal:
Introduction (5 points)
The introduction includes a brief statement of purpose for
the proposal and an overview of the writer’s qualifications
to make the proposal. It also grabs the reader’s attention.
Business and Technical Writing
Background (15 points)
This section details the various causes underlying the chosen
problem and convinces the reader that the need for action
exists. It ends with a bulleted list of goals showing the main
phases of your plan solution.
Proposal (15 points)
The proposal opens with a clear statement of purpose. Using
subheadings related to the Background’s list of goals, it
describes in persuasive fashion the detailed actions needed
to accomplish each phase.
Schedule (5 points)
The schedule establishes a realistic time frame for each stage
of the plan.
Staffing (10 points)
A specific in-house employee is assigned to each component of
the proposal and the description of that person’s credentials
convinces the reader that the employee is the best choice to
accomplish that part of the plan.
Budget (10 points)
In column/table format, the budget itemizes the realistic
costs for each phase/related step of the plan.
Request for Authorization (5 points)
A suggested time for approval is given. The reader is persuaded
the problem will be solved by the proposed plan. It closes in
a thoughtful, personal way.
Style, coherence, and tone (10 points)
The proposal reflects proper business tone and style. Through
the use of transitions and/or connective explanation, the
sections, paragraphs, and sentences flow clearly and logically.
Grammar and mechanics (20 points)
The proposal uses standard English grammar and word
usage appropriate for business context. A variety of sentence
types and length are used without any run-ons or fragments.
There are no spelling and punctuation errors.
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Final Examination 9
Format (5 points)
The proposal uses the full-block, business letter format,
including company address/letterhead, date, return address,
salutation, and closing with a simulated signature above the
typed name and title. It’s formatted in Times New Roman
font, size 12, with correct page numbering and is 2-5 singlespaced
pages. All required student information is included.

Midterm 2 Part 2:

Problem 1: (10 Points)

Consider a factory that produces light bulbs.  The factory has an old piece of equipment, and the factory owner is considering replacing the old equipment with a new machine.  The owner is considering two options, with the following details:

• The factory sells each light bulb for $0.40, the discount rate is 12%, and the corporate tax rate is 25%. The purchase of the machine occurs at year 0 and subsequent cash flows occur from years 1 through 10. Assume straight-line depreciation to zero for both machines. Assume no investment in net working capital. There is no salvage value.
• The factory needs only one new machine. Which machine should the factory owner buy?

Problem 2: (20 Points)

Your company, Dawgs “R” Us, is evaluating a new project involving the purchase of a new oven to bake your hotdog buns. If purchased, the new oven will replace your existing oven, which was purchased seven years ago for a total installed price of $1 million.

You have been depreciating the old oven on a straight-line basis over its expected life of 15 years to an ending book value of $250,000, even though you expect it to be worthless at the end of that 15-year period. The new oven will cost $2 million and will fall into the MACRS five-year depreciation class life. If you purchase the new oven, you expect it to last for eight years. At the end of those eight years, you expect to be able to sell it for $100,000. (Note that both of the ovens, old and new, therefore have an effective remaining life of eight years at the time of your analysis.) If you do purchase the new oven, you estimate that you can sell the old one for its current book value at the same time.

The advantages of the new oven are twofold: Not only do you expect it to reduce the before-tax costs on your current baking operations by $75,000 per year, but you will also be able to produce new types of buns. The sales of the new buns are expected to bring your company $200,000 per year throughout the eight-year life of the new oven, while associated costs of the new buns are only expected to be $80,000 per year.

Since the new oven will allow you to sell these new products, you anticipate that NWC will have to increase immediately by $20,000 upon purchase of the new oven. It will then remain at that increased level throughout the life of the new oven to sustain the new, higher level of operations.

Your company uses a required rate of return of 12 percent for such projects, and your incremental tax rate is 34 percent. What will be the total cash flows for this project?

Using project cash flows; solve for NPV, IRR, Payback period, Discounted payback period and Profitability Index of the project and define the investment decision as accept or reject for each method. (Assume your benchmark for payback and discounted payback period methods as 5 years or less)

Note: MACRS 5 yr is as follows; 20%, 32%, 19.20%, 11.52%, 11.52%, 5.76%

Problem 3: (20 Points)

Download daily prices for Apple Inc (AAPL) and Simon Property Group (SPG) from the last two years. (Between 11/15/2018 and 11/15/2020) (You may get the data from finance.yahoo.com or other sources online and use adjusted close prices)

In an Excel spreadsheet;

1. Calculate daily percentage returns for both stocks and then calculate their average return, variance, standard deviation of returns.
2. Calculate covariance and correlation of APPL and SPG
3. Consider you have a portfolio consists of 200 shares of Apple (Share price is $118) and 500 shares of SPG (Share price is $80). Calculate portfolio expected return, variance, and standard deviation
4. APPL beta is 1.35 and SPG beta is 1.34. Calculate expected return of each stock with a risk free rate of 1% and expected market return of 3%.

Problem 4: (10 Points)

Consider the following two bonds:

Bond A

Term to maturity: 10 years from today

Face value: $1,000

Annual Coupon rate: 6%

Number of payments per year: 2

Bond B

Term to maturity: 20 years from today

Face value: $1,000

Annual Coupon rate: 9%

Number of payments per year: 2

• Compute the price for each bond. The current YTM for each bond is 8%. Then make a table comparing the bond prices when the YTM varies from 1%, 2% … 17%.

Address the following questions in 5–7 pages:

1. Compare and contrast how each of the following uncovers value:
   • English and Dutch auctions.
   • Sealed-bid first-price auctions and Vickery auctions.
2. Compare and contrast surge pricing and congestion pricing. Give an example of each currently in use.
3. Identify three examples of auctions used in finance, e-commerce, and/or e-games. Explain the following in-depth:
   • The need for an auction to uncover value in the product or service.
   • How the type of auction used to uncover the value of the product or service is better at uncovering value than other types of auctions.
4. What are the advantages or disadvantages of auctions as revenue generators for not-for-profit organizations?
5. Suggest ways in which a for-profit company, such as the company for which you work or a company for which you aspire to work, can use auctions or dynamic pricing to better uncover value and increase revenue.

This course requires the use of Strayer Writing Standards. For assistance and information, please refer to the Strayer Writing Standards link in the left-hand menu of your course. Check with your professor for any additional instructions.

Acceptable Types of Publications

A high-quality, professional business publication is one that is primarily directed at reporting or analyzing the workings of the business. Examples are the Wall Street Journal, Bloomberg, and Reuters. Avoid general news publications such as USA Today, the Washington Post, and the New York Times. Other articles and resources can be found at the Strayer Library.
Please do not rely on Wikipedia, Investopedia, or similar websites as references at any time in this course.
The specific course learning outcome associated with this assignment is:

• Propose ways in which a company can use auctions to better uncover value and increase revenue.

Please note the above submission rules are no longer applicable to this assignment per university policy.  There is one and only one submission opportunity.  Please do not do a submission test and note that the instructional team will evaluate the similarity report and contact you if there is an issue