Class Session 21
Coverage: Sustaining Corporate Culture in a Growing Organization; Dutch Bros Coffee
Session Objectives: We will discuss the important role beliefs systems in general and corporate culture more specifically
play in our accounting control framework. We will discuss how organizations can build and sustain a company culture. We
will also discuss how culture and formal controls/boundary systems can work together to help ensure employees promoting
an organization’s strategy.
What is Dutch Bros Coffee’s Strategic Positioning/ Customer Value Proposition?
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Speed
Quality
Customer service
Upbeat customer service
Dutch love
Company culture
Giving back to the community
Raised money for charity
Accessibility
Describe the culture that the company founders developed to support and sustain its strategy.
Theres a lot of employee training 45-100 hrs on values and policies and procedures (tests 2x a year)
They commit to training employees even if their employees just think they want a job, the owners care about
upholding culture
There is a celebration (Coach-a-polooza) with motivational speakers, celebrating employees, and emphasizes what
a good employee is
They take the “customer is always right and satisfied rule”
Memorize regular customers orders
They encourage employees to set personal goals
They started merch initiatives
They preferred insider hires so they know the culture
Define Organizational Culture
Two norms and values held by an organization
The vibes you get from interacting with employees
How the founders run the business and the initial value set up
How the values influence how the employees act
“Shares organizationa purpose and values that guide employees decisions in domains where explicit rules and
policies are difficult to define”
Purpose: clear goal or objective for the firm that reaches beyond profit
Values: shared beliefs among employees regarding the “right way” to conduct oneself
From an Accounting Control perspective, what are some of the advantages of maintaining a strong
organizational culture?
Under the original franchise model (Legacy), franchise operators who were typically outsiders to the
company paid an upfront fee of $250,000 and an ongoing 5% sales royalty fee for the right to use the Dutch
Bro’s stand. The franchise agreement involves a 10-year renewable contract.
How much decision-making authority did these franchise operators have?
Assess the overall success of the legacy franchise model.
In response to growing concerns about the efficacy of the company’s culture, Dutch Bros introduced a new
model for franchises, the NewCo model.
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The company awarded franchises only to employees (minimum 3 years with the company with at least
the last year in leadership such as store manager)
Employees needed at least $5,000 in a personal bank account and a good credit score
Employees needed the endorsement of their store’s current operator
Profits split 50%-50% and the company provided financing to new operators to ensure they could get up
and running
When a franchise becomes available, many people from the executive team and current operators
interviewed the candidate, asking operational, cultural, and financial questions.
The franchise agreement involves a one-year renewable contract.
The NewCo model utilized both boundary systems and belief systems to help overcome issues with the
Legacy Franchise Model.
Along several fronts, Dutch Bros wanted customers and broistas to have a consistent experience across
stores. Describe the boundary systems that limited the decision-making authority of the franchise operators.
For other important aspects of the customer experience, operators had complete discretion. However, Dutch
Bro founders wanted to ensure that employees abide by their values (beliefs) when interacting with the
customers.
The NewCo model attempted to better engrain the stated values of the company founders in each new
franchise. Let’s evaluate their approach using the North Star (Selection, Training, Assessment, and
Reinforcement) system
Selection – Includes hiring, firing, and promotion based on fit with the company’s purpose and values
Training and coaching – To understand a company’s culture, employees need to do their work, see how
others do theirs, and receive coaching/training.
Assessment – Conduct periodic evaluations followed by feedback sessions, often with the two important
characteristics: (1) a focus on broad and cross-functional performance metrics, and (2) an emphasis on
adherence to values when pursuing results.
Reinforcement – Ensure that an organization’s purpose and values remain an important part of the
employees’ routines. Reinforcement mechanisms typically include:
 Symbols exemplifying company goals and values (slogans, stories, t-shirts, company mascots, company
heroes, etc.),
 Traditions, such as quarterly or annual events, public recognitions of employees exemplifying values,
non-routine activities that capture the spirit of company values or pursuits.
What are some of the issues created by the NewCo Model?
To address these issues, the company is considering a new, more hierarchical Regional Operator model.
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These operators would be Dutch Bro employees, receiving salary/benefits from the company and
participate in a 50% profit sharing plan.
Employees’ eligibility requirements remained the same to enter the pool
Eligible employees would receive an objectively measured leadership score based on more businessrelated experiences (e.g., years experience as a store manager, years experience with inventory
management)
What are some of the benefits and costs of this objective selection model, relative to the subjective model?
Takeways:
 Highlights the role boundary and belief systems play in offsetting challenges in decentralized
organizations
 We discussed the North STAR system of engraining culture throughout the organization