Overview In less than two years, Sweet Mountain Bakery's (SMB's) 1 market share has dramatically dropped 18% in the cookies category. The top management team of the Peruvian subsidiary of the largest food company worldwide was shocked to find the main reason for the shift was due to the performance of a small local rm, All You Knead (AYK), which began its operations in the country's Andean area. Despite all hostile counter efforts SMB made, AYK continued growing in different parts of the country. The competition between these rms had become so fierce that employees of SMB and AYK regarded each other as rivals to defeat. SMB, after deploying several aggressive yet ineffective competitive moves, solved the situation with a buyout of AYK. This would allow SMB to get rid of this unexpected, threatening competitor while maximizing its operations to leverage AYK's resources and market position toward continued growth. What was unanticipated in this within-country merger were the serious diversity, equity, inclusion, and belonging (DELB) challenges that emerged once the acquisition process was complete. These challenges have generated a negative organizational environment between the two groups of employees, undermining the efforts to attain efficiency and increase productivity. Victoria Huaman, the Human Resources Vice President post-merger, must play a leading role in identifying these issues and develop recommendations to share with the leadership team toward creating positive organizational change, while dealing with other DEIB issues towards herself as well. Case Introduction SMB Executive Team Meeting As Juan reviewed the applicant les one last time before the meeting came back into session, long-term board members, Jorge and Rafael, queried the qualications of the leading applicant. Jorge asked, \"remind me again what university she received her degree from?\" Rafael replied, \"I don't recall, it was somewhere outside Lima, she was a human resources management major.\" \"Oh, right,\" replied Jorge, \"she came from the Andean region.\" The executive team began to return to the meeting and reassemble. Rafael addressed Juan, \"Juan, as CEO it is up to you, and you know we support you all the way. It is not a matter the board votes on, yet we just want to express we have faith you will do your best to act in the best interest of Sweet Mountain Bakery's stakeholders.\" Juan somberly nodded his head in reply and called the meeting back to order. F ilipe Alonso-Jimenez, SMB's Senior Corporate Attorney was the rst to speak up. \"If you're truly asking for my advice Juan, anyway we compare the credentials of the internal applicants, Victoria Huaman is the best t for the Human Resources Vice President position.\" F ilipe had become agitated with this now half-day summit. F ilipe pressed on, \"Juan, as we've discussed, it's important to not only to avoid aproblem of not hiring her for all of the reasons we have already deliberated, but you do need some form of representation of people that were from the subsumed rm on the leadership team after the acquisition.\" There was a very long pause, but F ilipe was choosing to wait Juan out. Juan, the CEO of the subsidiary of SMB in Peru, trusted his F ilipe's long-standing council, now a decade-long service, but he was deeply uncomfortable with incorporating \"atypical\" new members from the merged rm into the corporate leadership team. Juan reected on a memo (See Exhibit 1) that he received ten (10) months ago written by David Hitt, President of SMB division for Latin American and the Caribbean, addressing the need for diversity in the leadership team. This would be a step towards more diversity in the executive team indeed, he thought, but we still have to deal with our operational failures since the acquisition, which is far from David's expectations, and my past track record. Juan continued to reect on his thoughts. The merger was just shy of being a hostile takeover with the integration of this smaller rm with its headquarters in the countryside. Juan thought to himself, the purpose of this long fraught acquisition deal was to squelch competition and utilize resources, not a strategic decision to integrate leadership into SMB's corporate structure. But yes, probably something had to give. \"Attention everyone\" Juan began as he addressed his key leadership team with his characteristically declarative tone of authority, \"Victoria Huaman will be the new Human Resources Vice President. We are lucky we do not have to displace an SMB leader with this re- organization since Hector, our former Human Resources Vice President, was transferred to a subsidiary in Brazil to be closer to family. And, at least it is not a critical role such as operations or business development.\" Once communicating his decision, Juan began to explain the production growth rate that the company was expecting after the acquisition of AYK, but only F ilipe seemed focused on what he was explaining. Several of the executive team members' displeasure was evident by their closed body language, with even a few murmuring among themselves about this contentious issue. From the far corner of the table, Rafael was supportiver looking at Jorge, even though the candidate he favored, a well-educated young man and a \"one of ours\" business style as he mentioned in the last executive meeting, was displaced by Victoria Huaman (See Exhibit 2). It had been quite some time since there was a leadership change on the senior management team and the addition of Victoria Huaman was what some insiders in the firm might call \"revolutionary.\" Background Peru: Country Cultural Background Peru is the third-largest country in South America and has an ancient and rich history based on the Inca empire, which covered Colombia, Ecuador, Peru, Bolivia, Argentina, and Chile, ruling the region during the fteenth century3 4. In addition, Peru is one of the most biodiverse countries in the world, which also has plenty of natural resources as well as different climates all over its territory. This climate diversity allows the growing of abundant types of fruits and vegetables, which turns into a strong competitive advantage for the country through trade opportunities and agricultural activities, using the natural resources it possesses. Moreover, Peru has sovereignty over 200 miles of the Pacic Ocean, which allows an intense fishing activity as well as obtaining valuable sea products for export, such as the fish meal, being the world's leading producer. According to the 2021 International Trade Administration, US. Department of Commerce Country Commercial Guide, over the last 20 years, Peru has been one of the fastest-growing Latin American economies 5 5 In addition, Peruvian society is composed of a highly diverse population, which results in different cultural expressions and pluralistic manifestations of identity (Cox Hall et al., 2022). There are four major languages of Peru, and 72 Indigenous languages and dialects are spoken in the country. Over 80% of Peruvians speak Spanish, which is the official national language, with Quechua is the second most commonly spoken language (13%), followed by Aymara (2%). \"Indigenous languages of Peru are primarily located in the central Andes, in the south near the border with Bolivia, and the Amazon rainforest, in the north near the border with Ecuador.\" 7 Unfortunately, Peruvian society has something that lies beneath the surface that impedes progress. Severe social structural barriers, such as a colonialist past as well as mistrust for collaboration between different local factions and society's groups, hinders the country's opportunities for development. 3 9 According to Klarn, Peruvian society has still not recovered itself from the winner-loser scenario that the Spanish conquest of the Inca empire left by late 1532, emphasizing social inequalities among the conquerors (Spaniards and their local descendants) and Andean populations. Discrimination in Peru reaches traditional educational institutions such as universities, as well as biased job market requirements from most employers.lo 1' This has perpetuated longstanding discriminatory behavior between different factions in the country, resulting in a deep fragmentation between social classes. Furthermore, this social structural barrier has been reinforced over the years by a local government that was careless about distributing geographically correct national resources and opportunities for development,12 which resulted in a migratory phenomenon from the countryside to the capital city, Lima, increasing its population by more than 30%. In addition to this, traditionally, social regulations, as well as economic policies, have largely benefited the minor elite of the Peruvian society, who attain the control of resources and main decisions in the country. 13 14 15 Hence, this unfair situation of institutional mistrust and lack of awareness of the largest population needs have caused several protests and social unrest in Perul, which were emphasized from 2016 onwards. 17 18 A Glance into the Past to Build a Better Future Revisiting a country's history could shed light on business decision-making and governance strategies. Hence, organizations would have to consider structural local patterns that could be deeply influenced by the national contexts' trajectory over time (ancient civilizations, past wars, conquering periods, deep crises, and so on), in order to not only develop proper strategies but to design contingency plans as well as alternative paths for action. The light shed by history is timeless, even being able to illuminate dark places far ahead in the future. Sweet Mountain Bakery (SMB) Company Background In 1990, SMB global MNC established its subsidiary in Peru. It began with a TU-square meters ofce in the business district of Miraores, in the capital city Lima, and with 14 employees. After three years, they created the biggest bakery company in the country, counting on more than 900 employees. The main production facility was located in Chilca, almost 50 Km south of Lima, which represented an investment of nearly USD$ 55 million. After nearly 30 years of continuous growth, the fn'm had attained the leadership position in the market, having up to 75% of market share in its primary product, sweet cookies. SMB was increasing its market share in its sweet cookies category until AYK began formal operations in 2019 (See Exhibit 3). Moreover, SMB has a reputation around the world regarding their accuracy to recruit and promote fiercely competitive as well as highly result-oriented top executives, who received a privileged education and held a resourceful network. These crme de la crme executives are worldwide recognized for their passionate commitment to the job and for their \"elite\" social behavior. .I nan GareiaCeballos, SMB Chief Executive Ofcer Prole Juan Garcia-Ceballos was appointed CEO of SPA/[B in 2016, recruited in by the regional board of directors led by Michael Hitt, who admired Juan's past exceptional leadership performance as regional president of one of the world's largest snack and candy companies in the Latin America marketplace. Prior to joining SMB Juan had experience with strategic tactics from retrenchment, reorganization, and facilitating several acquisitions of small rms, integrating them into the business model. Juan is a results-driven chief executive officer with over eight (8) years of experience leading and increasing growth in medium-sized businesses in domestic and international marketplaces. He has developed intensive, ambitious business strategies, spearheaded the overhaul of various underperforming departments to reduce stagnation and increase growth and productivity, and pushes for constant growth among the management team and general staff alike, which has delivered positive results (See Exhibit 4 for Juan Garcia-Ceballos's resume). All You Knead (AYK) Company Background By the time F austina Yauri launched her latest startup, AYK in 2018, she was already celebrated as one of South America's top \"40 under 40 entrepreneurs\" in the Food and Beverage industry, having launched four (4) different independent businesses in the last 12 years in her home country of Peru. F austina Yauri's serial entrepreneurship ventures focused on the restaurant and food industries, with AYK quickly rising to gain market share of in-country pre- packaged baked breads and sweets. Beginning with her grandmother's recipe for cocadas (coconut cookies) and under 30 bread and dessert products, Yauri began operations selling to Andean region businesses, universities, and hotels. Quickly she secured a contract with a Peruvian Airline, then earned contracts with affiliated international partner airlines, becoming the primary vendor for breads and sweet cookies for ve partner airlines. In her third year of business, she had a signicant breakthrough with marketing and placement in the largest supermarket chain incountry, driving point-of-purchase consumer sales, creating exponential growth. In just a few years AYK grew from five (5) employees in one industrial kitchen to 280 employees and three production facilities located in Cusco, Ayacucho, and Huancavelica. F austina Yauri and her team were proud they held the second position in capturing the sweet cookie market in Peru, right behind a large MN C. Victoria Huaman, Newly Installed 8318 Human Resources Vice President Profile Victoria Huaman began her employment with AYK in 2018 as an intern working as a human resources specialist, assisting with basic hiring and payroll. As a first-generation college student in her family, she appreciated the insights shared through F austina's mentorship, such as specialized course selection and how to balance coursework and internship responsibilities. Victoria quickly became an indispensable member of F austina's team and was offered a permanent position as Human Resources Director in 2020 after obtaining her graduate degree. Victoria appreciated working for a company that was focused on developing a people-centered company culture, offering progressive benets (e. g., investing in employee training and development, health care, childcare, fostering apositive, healthy, and safe work environment), and opportunities for underrepresented working populations. Victoria was inspired to be a part of the unfolding vision of AYK and enjoyed making an impact within the organization as a dedicated senior leadership team. As the company grew, she too grew, becoming an expert in many human resources focus areas, including organizational training and development, and labor relations (See Exhibit 5, Victoria Huaman's resume). AYK Company Buyout Perspective While several investment groups and competitors over the years proposed buy-outs, mergers, and strategic partnership arrangements, F austina Yauri enjoyed the autonomy of AYK's private business model and resisted all offers. That was until two years ago as SMB put the unrelenting, aggressive competitive pressure on. Determined to see the firm survive, and certainly tired of the unaccustomed competitive environment, F austina Yauri took the deal to merge with SMB, knowing holding out would be detrimental to herself, and for AYK employees and all AYK stakeholders. Now she is focusing her energies on her next venture. SMB Company Acquisition Perspective After almost a two-year fight for the share of market, SMB, the largest baking company in Peru as well as the subsidiary of one of the most important food rms worldwide, played its last move, buying the rival rm, All You Knead (AYK). The acquisition was planned to be a success, neutralizing the competitor as well as capturing resources toward economies of scale in supply, manufacturing, and distribution. Complications Arise Growth was expected, however, there has been a cooling of the workplace climate as departments and employees are not communicating well with each other. They have remained in silos, neither collaborating nor synergizing as was expected. Moreover, conicts among employees in the middle ranks and in the front-line were unexpectedly frequent and difficult. Since the acquisition, labor complaints have dramatically increased. Victoria received supervisor complaints that tardiness, absenteeism, and presenteeism behaviors were evident like never before, and growing. Several past AYK production workers complained to Victoria that their new team members from SMB ignored, dismissed, or rushed them, saying things such as \"can you speed it up\" and \"It's hard to understand your accent.\" The divide between groups was physically evident when Victoria walked the break areas in different facility locations, seeing little evidence of employees from the former two companies spending time eating together or casually talking. Even re-formulating teams to intermix the two former company team members appeared to just create minimally transactional relationships between these employees, with no evidence of social ties emerging. Worse, beyond having a strained and detached work environment, evidence of a growing hostile workplace environment existed, as several employees in different departments reported workplace mistreatments such as abusive supervision, bullying, incivility, social undermining, and interpersonal conict (Hershcovis, 2011). Reports of discriminatory behavior surfaced, ranging from perceived unequal treatment among workers related to time-off request approvals and other worker policies to operational 5 sabotage within production and warehousing. In one instance, machine operators discovered material irregularities, resulting in substandard quality products. Several occurrences of warehouse employees discovering already loaded trucks with inaccurate amounts of inventory upon review of the customers' original orders. A number of these miscounted orders that were not caught pre-delivery generated client complaints in addition to reverse logistics costs. On several occasions, already placed merchandising material at stores were removed before the assessment day. According to the stores\" owners, representatives from the same company removed them. This situation affected decisionmaking processes and created production, distribution, and sales losses due to employees directly or indirectly refusing to function together in some work teams. Not only are production numbers behind the forecast (See Exhibit 6), but quality problems (e. g., packaging, poor storage practices, ingredient measurement) are occurring well beyond past tolerances for either firm (See Exhibit 7 illustrating the control chart of cookies' sweetness level). According to the data, after the acquisition process was complete in the fourth quarter of 2022, quality results were outside the limits of control related to sugar levels. This resulted in product waste, higher costs, decreased production, and customer complaints. All of this has disrupted the ow of production, stocking, warehousing, logistics, along with creating complications for the company's long-term clients, retailers, vendors, and suppliers across upstream and downstream processes. Finally, due to all the aforementioned issues in several key areas and functions in the company, sales monthly average decreased 3.5% during the first six months after the acquisition. Expectations were for the opposite, an increase of the same magnitude (see Exhibit 8). CEO Juan Garcia-Ceballos called an emergency senior management meeting with an appeal for root cause analysis and a plea for solutions to correct the trend. Investors will not tolerate another quarter of poor performance, especially when initial expectations were growth projections. The Dilemma Focusing on these symptoms, Victoria Huaman, newly promoted Human Resources Vice President of the rm after the acquisition, investigated the problem, nding something awful as well as heartbreaking; the two groups of employees that come from these two companies were discriminating against each other due to their social class, education, lifestyle, and birth-origin differences. She recently participated in a meeting with the production supervisors, who expressed their concerns about the increased weekly absenteeism. In a desperate tone, one shift supervisor exclaimed, \"how would people be motivated to come to work if they are treated so badly?\" Another supervisor added, \"they are probably looking for another job, at a place they feel welcome.\" Victoria was surprised to hear these reections, but then recalled an email she had received two weeks ago via the \"Speak Up Program,\" an employee engagement anonymous reporting portal for suggestions and feedback. The letter noted workplace ostracism and lack of integration (See Exhibit 9)