NetImpactCaseCompetition2015-2016:FinalRound
ImpactInvesting:FlatIronsCattleCompany
Claire Palmer finished her presentation to the Flat Irons Cattle Company’s VP of strategic
philanthropy, Michael Henderson, and his executive staff. She hoped she’d succeeded in
convincingthemaboutthepotentialofimpactinvestingassheopenedthefloorforquestions.
Aftermorecloselyreviewingthesuggestedportfolio,theVPthenaskedheranencouraging
question:“Howwillyouimplementyourstrategy?”
Claire was given one week to devise her comprehensive strategy, at which time she would
presenttoalargerexecutiveteamcomprisingtheVPsofStrategicPhilanthropyaswellasthe
VPsoftheotherdepartments.Sheconfirmedthattheplanwouldbefora25percentportion
of the five percent distribution of the endowment, equivalent to $2.5 million. The VP is not
comfortable using all of the five percent endowment for impact investing but is showing a
high level of faith in Claire by allocating 25 percent. One stipulation he added was that the
investmentsneededtofallinlinewith‘whatthecompanywasreallyabout.’Claireunderstood
this to mean alignment with the Flat Irons Cattle Company mission statement, which states
“Our mission is to provide the highest quality animal protein by raising our cattle the way
farmers,ranchers,andcowboyshavedoneforgenerations.”Shealsowonderediftheymeant
whatthecompany1alonewasreallyaboutorifthatincludedthefoundation2aswell.
Tasked with creating an implementation strategy that spanned four key departments –
Strategic Philanthropy, Marketing, Corporate Social Responsibility, and Research and
Development(R&D)–Clairereturnedtothedrawingboardandstartedponderinghowshe
couldbestutilizethecompanyresourcesavailabletoher.ThisisahugeopportunityforClaire
tomakehermark.Itisalsoatrickysituationforher,assheneedstowinoverherpeersand
superiors while implementing a philanthropic strategy that is inherently riskier than their
currentgrant-makingstrategy.
ClaireranintothemostjuniorexecutiveintheStrategicPhilanthropyteam,PatrickGranger,
whilegrabbingacupofcoffeelaterthatweek.Heencouragedhertonotgettoocaughtupin
the numbers; they were far more concerned about the implementation strategy than the
financial case. Claire was not entirely sure how to take this information. She assumed her
1
FICC’ssloganis“Ranchingasonlyrancherscan.”
Thefoundation’smissionstatementreads:“Ourmissionistofurthertheranchingwaybysupporting
sustainableagriculture,humanrights,animalrights,waterconservation,youth4Heducation,andpromoting
thesportofrodeo.”
2
suggestedportfoliowouldbefinelytunedifthisallcametopass.Shouldsheevenaddressthe
portfolio again? Maybe she could start talking to the people currently writing the grants?
Shouldshetakeamajorstepbackandthinkalotbigger?Howcanshealignthedepartments
to work towards a shared goal while maximizing the use of impact investing in each
departmentastheyworktowardtheirindividualizedgoals?
FlatIronsCompanyStructure
TheFlatIronsCattleCompany(FICC)hasbeenaleaderinthecattleindustrysince1890.
Based in Denver, Colorado, the company has built a brand around ethical and traditional
cattle ranching. Flat Irons’ main campus is located just outside of Denver and includes a
number of buildings, including the corporate office, which houses their core team of
leadersanddecision-makers(seeExhibit1).Allmajordepartmentsarerepresentedhere
as well, including Operations, Finance, Business Development, Marketing, Human
Resources, Research & Development,3 Strategic Philanthropy, and Corporate Social
Responsibility. The surrounding buildings include a butchery, packaging center, and two
warehouses.
Althoughthemajorbusinessdecisionsaremadeonthemaincampus,themajorityoftheir
assets are located beyond the city limits. They own and operate five separate ranches
spanning1.3millionacresofland(seeExhibit2).Someofthislandisprivatelyownedby
the firm, but a large portion of it is controlled by the Bureau of Land Management and
UnitedStatesForestService.Thislandisquitemountainousbutlargeportionsofflatlands
are dispersed between mountain ranges. Several small waterways run through the
property, which is a key resource for a variety of wildlife – birds, fish, snakes, mountain
lions,andasmallherdofwildhorseshaveevenbeenspottedbyrancherstendingtotheir
cattle.Therearenoclearlinesdemarcatinggrazinglandfromnon-grazingland.Infact,a
major portion of the ranchers’ work involves tracking down the herds. They have even
recruited neighboring ranchers to help them drive the cattle out of particularly dense
Aspentreegrovesfromtimetotime.Ifyoucatchthesecrewsonacattle-drivingday,you
mightfeelasifyouwerepartofanoldWesternfilm.
In general, the ranchers are exceptionally skilled and knowledgeable about their herds.
Nearlyallarecapableofhandlingsmallinjuries,infections,andothercommonillnessesbut
FICC does have four large-animal veterinarians on retainer for emergency situations and
3
TheResearch&Developmentdepartmentholdsanalmostlegendarystatuswithinthefirm,withmanyof
theiremployeeseventuallymakingtheirwayintotheC-suite.
specificmedicalsupplies.Thesevetshavetheirownprivatepracticesinsurroundingareas
and do not have any official office space to call their own. Most work out of their trucks
when on site. FICC also has a team of in-house lawyers and one out-of-state law firm on
retainerthattheSmithersfamilyhasbeenworkingwithsincebothfirmswerefoundedin
thelate1800s.
Intotal,FICCemploysover500individuals,includingboththoseworkinginthecorporate
officeandthosedoingmorefront-lineworkwiththeanimals.Manyindividualsworkingfor
FICChavebeendoingsoforover20years,especiallytheirranchers.Inthecorporateoffice,
it is common to stay for over ten years. Due to their remarkable rotational executive
trainingprogram,theyareabigrecruiterofMBAstudentscomingoutoftopprogramsin
Colorado and across the nation. In recent years, the company has received an increasing
numberofquestionsfrompotentialMBAhiresregardingthefirm’sdiversity.Althoughthe
rancheshavebeenrecruitingmorefemalesovertheyears,theyarestillheavilydominated
bymales.FICChasseengreatsuccessfromtheirfemaleranchhands,butonlyoneofthe
five ranches is led by a woman. They admittedly are lacking in diversity throughout the
corporate office, but Human Resources is advocating for greater diversity of thought and
backgroundintheirleadershiptrack.
HistoryoftheFlatIronCattleCompanyFoundationGiving
The Flat Iron Cattle Company Foundation was established in 1910, when one of the
company’s founders, Harold David Smithers, passed away and donated a large portion of
his estate. After growing up in poverty, Smithers founded Flat Irons Cattle Company and
became a leading figure in the growing town of Denver, Colorado, contributing to land
conservationefforts,youth4Heducationprograms,andSmither’sfavoritesportofrodeo.
Since that time, the company has found strategic benefit from investing funds into the
foundation,growingtheendowmenttothe$200millionitistoday.Early(andextremely
low cost basis) investments in railroads and oil provide a crucial bulk of this figure. The
foundation’s donation and grant-making processes were not clearly established until the
1970’s, and through the 2000s, the foundation’s strategy appeared to focus more on the
individualinterestsoftheSmithersfamilyratherthanthecompany’slong-terminterests.
Until recently, it has been challenging for the philanthropic department to fund
organizations that did not interest the Smithers family, even if the opportunity showed
greatpromiseforthecompany’sfuture.Thetopthreebeneficiariesovertheyearsareas
follows:ColoradoPublicLandsRestoration(CPLR),YoungFarmersAssociation(YFA),and
RodeoTownUSA(seeExhibit3).
In2002,thephilanthropydepartmentbroughtinanewvicepresident,MichaelHenderson,
athoughtleaderinstrategicphilanthropyandanadvocateoftheemergingfieldofimpact
investing.Oneofhisfirstactswastorebrandthedepartmentasthestrategicphilanthropy
departmentandcreateanevaluationsystemforanyfuturedonations.HistimeattheFord
Foundation and in his dual Masters Degree in Public Health and Business Administration
providehimwithastrongbackgroundinmeasurementandevaluation,anareaofhistoric
weakness for the foundation that he eagerly wanted to address. Since 2002, the strategic
philanthropy department shifted their evaluation metrics, increased their staff to
incorporate a measurement and evaluation specialist, and received an award from the
Council on Foundations (CoF) for their incorporation of an innovative grant-making
process.
However, one struggle for Michael remains the interest (or meddling) of the Smithers
family in the grant-making process. Michael has been working to streamline the grantmaking process around the foundation’s mission statement, which incorporates more
strategicareasoffocusforthecompanyandthefoundation.Giventheelementarynatureof
this effort, he has not even attempted to broach the subject of impact investing with the
family,decidinginsteadtotakeononechallengeatatime.OnestepMichaelhasmadein
streamlining the grant-making process is a rule implemented in 2005 that only allows
grants to be given to the same grantee for five consecutive years to reduce dependency.
However, past recipients may apply for future grants after three years of not receiving
funds. This new rule caused a stir with the Smithers family, as they had become
accustomed to, and felt entitled to, a greater say in who the grants were being given to.
Basedonthisnewrule,CPLRwillnotbeavailabletoreceiveanothergrantforthenexttwo
years.Theothertwotopbeneficiarieswillbeeligibleforfundingthisyear.
ChangingSegmentationStrategy
ThemarketingdepartmentisledbyAmandaStewart-Jones,apowerhousegraduatefrom
CU-Boulder’s Leeds School of Business. Amanda single-handedly transitioned Flat Irons
CattleCompanyintothedigitalage,increasingthecompany’swebpresenceandincreasing
onlinesales4fortheirbusiness-to-consumer(B2C)segmentby28percentsinceherstartat
the company in 2005. Amanda is known for her creativity and openness to new ideas;
because of her outlook, she could be a strong ally for Claire in implementing impact
4
Productssoldonlineincludetheverypopularsteakofthemonthclub,whichcontributedmosttothis
growthofonlinepurchases.
investing in the company, if it can fit with Amanda’s current priorities. The marketing
department is striving to bring the cattle industry out from the cowboy era and into the
modern age, with a rebranding and more modern look to their materials, in an effort to
capture the younger market and introduce them to their higher quality cattle products.5
While this brand shift appears to be an important strategic move for their B2C segment,
Amanda is not entirely sure how this will affect their business-to-business (B2B) efforts.
Theirlong-standingrelationshipswithcorporatebuyersisinfluencedmoresobyrelational
factorssuchastrustandreliabilitythanvisualdisplays,messaging,orbranding.
FlatIronsCattleCompanyenjoysaleadingpositioninthe45-64yearoldmalepopulation
B2C segment, but wants to increase their share of the 25-44 year old male and female
population(seeExhibits4-6).Thecompany’shiringchoiceforthenewvicepresidentback
in 2005 was driven by this desire, and Amanda is aware of this pressure on her
department.
Themillennialgeneration’sfocusontransparentfoodsourcingandethicalmeatisofhuge
concerntothemarketingteam,whofeelsthatthecompany’simagewasoutoftouchfrom
younger consumers. Fortunately, the company already uses techniques that many
millennialsarelookingforintheirproducts;FlatIroncattleareexclusivelygrassfedfrom
pesticide-free grassland and not given any hormones. FICC does administer annual
vaccinations to their herds and cattle are given antibiotics when necessary, which may
causesomeconsumerstolooktomorenicheproducts,butoverall,FlatIroncattlemeetthe
generalpopulation’sdesiresforhealthyandethicallysourcedmeat.
Inthepastfewyears,Amanda’steamhasalsousedFICC’sphilanthropiceffortsasabridge
betweenthecompanyandtheirgrowingnumberof“consciousconsumers.”Forexample,
they introduced a campaign targeting young mothers that featured beneficiaries of the
Young Farmers Association, connecting Flat Irons’ products with nutritional benefits for
kids and an active lifestyle. Impact investing, with the general population’s lack of
awareness and the technical components of the field, may prove more difficult for the
marketing team to use in their rebranding than traditional philanthropy, but Claire is
convincedthatthemarketingteamcanrisetothechallenge.HerconcernisifAmandasees
itthatwayaswell.ClairewillneedtoclearlyoutlinethebenefitsofthischangetoAmanda
ifClairewantshertochampionthischange.
5
Withthemajorhypesurroundingtheyet-to-be-releasednewversionofTheOregonTrailvideogame,the
departmentisconsideringablendbetweenatraditionalcowboylookandamoregraphic,modernbend.
GrowingInterestinSustainability
In 2005, Flat Irons Cattle Company added a Corporate Social Responsibility (CSR)
departmentaspartofarenewedefforttomanagetheirtriple-bottomlinestrategies.From
thebeginning,thedepartmentdidnotenjoyastronginternalreputationatthecompany.
This could be due in part to the choice of the vice president for the department, Thomas
Jones. Originally a member of the compliance department, Thomas brought a strong
measurementandaccountabilitycomponenttotheCSRteam;hisdata-drivenapproachto
sustainabilityandethicswaslessthaninspiringtootheremployees,andovertime,theCSR
department became quite siloed from the rest of the company. Thomas is strongly
concernedwiththelegalityofthecompany’sactionsandstrivestomaintainapositionof
ethical leadership in the cattle industry. He has been pushing FICC to adopt integrated
reporting, but has not been able to garner the support needed for this costly and timeintensive endeavor.6 His background includes a law degree and extensive working
experiencewiththeFDAasacomplianceofficer,themindsetfromwhichmakesithardfor
himtoinspireothersinthecompanytoengageintheopportunity-oriented,triple-bottom
linemodelthatFlatIronsaspirestopractice.
Thomasfirstheardaboutimpactinvestinginlawschoolandhadconcernsaboutitslegality
then; as Claire starts to work towards gaining his trust and bringing the CSR department
into the fold, she will need to keep Thomas’ predisposition in mind. There are unique
opportunities that the CSR department could provide for this initiative, including staff
volunteerhoursandresearchresourcesthatcouldhelpvettheimpactinvesteeentities,but
thoseresourcesneedtobeapprovedbyThomasfirst.
ContinuedInvestmentinR&D
Thecompanyisalongtimesupporteroftraditionalranchingmethods.Theircoreactivities
include raising, feeding, and selling cattle. They also process a portion of their own meat
and sell certain products, like their jerky line, to distributors for resale. Climate change,
changing grasslands conditions, and water shortages threaten these core business
activities; this concern is evident in the annual R&D budget that FICC uses to fund
innovativeproductsforuseincattleherdhealth,decreasingwaterusage,fightinginvasive
grasslands species, and commoditization of cattle manure (see Exhibit 8). Christina
6
HehasbeenparticularlyinspiredandmotivatedbyNovoNordisk,aDanishpharmaceuticalcompany(see
Exhibit7).
Bradbury,thecurrentvicepresidentofR&D,isanewmemberoftheteam;shejoinedin
2013aftercompletingherPh.D.inFoodScienceandTechnologyfromTexasA&M.Sheis
keen to promote Flat Irons Cattle Company as an innovative firm that pushes the
boundaries of R&D beyond strictly cattle-based research. She is hoping they will invest
moreintosolutionsrelatingtothewatercrisisoccurringinColorado,andtheinvasionof
devastating grassland species. The region has also been fighting one of the worst ‘beetle
kill’blightsoverthepasttenyears.7Toassistinthistransitionintoamorewide-ranging
R&Dmission,ChristinabroughtShawnHowardontoherteam.WithShawn’sbackground
ingrasslandbiodiversityandecosystemresilience,theR&Ddepartmentiswellequippedto
pavethewayforwardforthecompany.
AsClaireconsidershowtoincludeR&Dinherimplementationstrategy,itisvitalthatshe
considertheimpactofaninvestmentintoafledglingcompany.IfFlatIronsCattleCompany
commitsaProgram-RelatedInvestment(PRI)toacompanythroughthefoundation,they
cannotlateracquirethecompany.Thiscausesadilemmaaroundfosteringmarketchange
toward more socially-responsible products through foundation-led investments. If they
weretoacquireauniqueproductorconceptinitsearlystages,theymaygainacompetitive
advantage.R&Dcloselywatchesthemarketforinnovativeproductdevelopmentsandaims
to purchase such concepts. Impact investing is a new variable in these decisions that
Christina may not be against, but will keep a wary eye on as the company moves their
philanthropicbudgetinthatdirection.
Claire is aware that Program-Related Investments (PRIs) prevent the corporation from
acquiringthatcompanydowntheline;thiswillbeacriticalquestionforhertoaddressin
herimplementationplan.IftheR&DdepartmentisonboardwithusingPRIsthenperhaps
thefoundationcanbeusedtofostermarketchangebysupportingcompanieswithshared
values and triple-bottom lines. On the other hand, there could be serious competitive
advantagesavailabletoFICCiftheydonotinvestthroughaPRI.Namely,theycouldacquire
innovative firms developing new products. Claire is wondering how Amanda and the
marketingdepartmentcouldspinbothtypesofinvestment.
7
Causedbythemountainpinebeetle,Dendroctonusponderosae.Amongotherthings,suchasitseffectonthe
carboncycleandwaterresources,itcausesgravefirehazardstoFICC’sranchingterritories.Keepingtheir
1.3Macresoflandsafeandaccessibletofiresafetypersonnelisamonumentaltask.
CalltoAction
Claire’sstrategywillneedtoincorporateeachgroup’sleadershipwhilekeepinginmindthe
desiredcommunicationsandimplementationstream.ThinkingbacktowhatPatrickGranger
told her over coffee, she may need to use a variety of persuasion techniques to get all the
importantplayersonboard.Despiteherowntendenciestowardlogicaldecision-making,she
understands business decisions are not made in a vacuum. History and long-held traditions
needtobetakenintoconsideration.Therearealsoavarietyofpersonalitiestocontendwith.8
Shewillneedtothinklikeanexperiencedexecutivetogetthisdoneeffectively.Clairewantsto
make it perfectly clear to the VPs how each of their departments will benefit from the
foundation’s use of impact investing, and how they will be able to advance their own
departments’ goals. Claire will have roughly 15 minutes to present her plan to the VPs. In
additiontotheabove,Clairehassetthefollowinggoalsforherself:
● Profile each department with a focus on each department’s incentives to join in this
impact investing initiative, while also acknowledging possible concerns from each
departmenthead.
● BrieflyoutlineaninternalcommunicationsstrategythatwillenableClairetoclearly
bringalldepartmentsonboard.Thismayrequireeducatingeachdepartmentleader
astohowtheycanusethetoolofimpactinvestingwellintothefuture.
● Create a sample portfolio of $2.5M that collaborates with each department,
contributes to each department’s ability to meet their own internal goals, and
facilitatesFICC’soverallmission.
Anotetotheteams:
● Considerthehumanelementofchangeinanorganization,specificallywhowillbe
hardesttoconvinceandhowtoaddressthisroadblock
● Do not be tempted by overly complicated financial statements, but be prepared to
justifyanythingthatyoupresent
● BuildyourpresentationfromClaire’spointofview:thatofajuniormemberofthe
companypresentingtosomeofthemostseniorleaders.
● For your communications strategy and example portfolio, keep in mind your dual
audiences:theVPboardofStrategicPhilanthropyandtheotherdepartmentVPs
8
DuringherMBAClairefrequentlyusedthetoolsprovidedbyTypeCoachtohandledelicategroupsituations
EvaluationCriteria:
OVERALL
Clarity
UNSATISFACTOR
Y
COMPETEN
T
DISTINGUISHED
1
2
3
1
2
3
1
2
3
1
2
3
1
2
3
1
2
3
1
2
3
1
2
3
Ideasexplainedwell,integrationwith
visualprops,strongintroductionand
conclusion,demonstratesintimate
knowledgeofmaterial,quantitative
support,teamworkswelltogetherin
expressingacohesiveproposal
Delivery
Fluidsentences,easytransitions,clear
enunciation,volumeappropriateforspace,
wellpaced,eyecontact,physical
movementsarepurposefulandnot
distracting,polished,professional,<15
min.
Q&A
Allteammembersaccuratelyanswer
questionsrelatedtotheirpresentationand
broaderquestionsaboutimpactinvesting
oralternativeideas
PROPOSAL
Feasibility
Portfolioandamountsseemreasonable,
abletoclearlyexplainwhyspecific
investmentswerechosen
Persuasiveness
AbletoeffectivelypersuadeVPstoaccepta
changetoimpactinvesting
Creativity
Demonstratesinnovativethinkingin
relationtotheportfolioand
communicationtechniques
StrategicThinking
Exemplifieslong-termstrategicfocusof
FICCandthefoundationandisinlinewith
theirmissions
TRIPLE
BOTTOM
LINE
Economic/Financial
PositivelyimpactsFICC’sand/orthe
foundation’sfinancialposition(shortterm/long-term)
Environmental
1
2
3
1
2
3
Minimizestheimpactonthelocal
environmentandecosystems
Social
Positivelyimpactsthecommunityand
localeconomy
TotalPoints:
APPENDIX
Exhibit1:FlatIronsCattleCompanyPartialOrganizationalChart
Exhibit2:MapofFICCRanchingLand
Exhibit3:TopThreeFoundationBeneficiaries9
Beneficiary
GiftAmount
FocusArea
Notes
ColoradoPublic
LandsRestoration
(CPLR)
$3.7Mintotal
Landconservation
andgrasslands
restoration
TheSmithersfamilyknewthedirectorof
CPLRfromtheirchurch;thefamilieswere
closeandspentsummerstogetherinthe
RockyMountains.
YoungFarmers
Association(YFA)
$2.5Mintotal
Youth4H
education
programs
Smithers’closefriendstartedthe
organizationanditisaSmithersfamily
traditionthatallkidsparticipateintheYFA
summerprograms.
RodeoTownUSA
$1.7Mintotal
Rodeoclassesand
outreachto
encourage
participationinthe
sport
Smithers’bestchildhoodfriendisthemain
donorforthisorganizationandwasthe
maincontactwhenSmithers’joinedthe
donorlistasasupporteroftheDenver
RodeoSeries.
Exhibit4:PercentageofBrandedPackagedMeatB2CSalesbyGender
9
Fictionalorganizations
Exhibit5:PercentageofBrandedPackagedMeatSalesbyAgeGroup
Exhibit6:ApproximateMarketShare10
Company
B2BCattleSales
B2CPackagedMeat
FlatIronsCattleCompany
~52%
~9%
YeehawBeef
~28%
~22%
Round‘EmUp
~14%
~7%
CinchCattle
~2%
~28%
Vaquero
~2%
~14%
Mignon
~2%
~20%
10
Fictionalorganizations
Exhibit7:IntegratedReport11
11
http://www.novonordisk.com/content/dam/Denmark/HQ/Commons/documents/Novo-Nordisk-Annual-Report-2014.pdf
Exhibit8:R&DProjectBudgetPercentagesfor2013and2014