Page 2 W32234 IVEY | Publishing In the past year of operations, Abimbola had decided to implement a more employee-centred strategy. WST W32234 shifted its focus to expanding the employee base and offering competitive salaries to attract top-tier talent. The company had a total of fifty-two employees across numerous departments, such as sales, customer support, and marketing. Recently, WST had shifted its schedule to a four-day workweek model. Abimbola WORKPLACE SAFETY TRAINERS: RESUSCITATING REVENUE had heard of the four-day workweek several years prior while researching the internal operations of companies overseas, specifically in Scandinavian countries. She wanted WST to adopt this model to attract competent employees, as the organization often had a hard time competing with other businesses on salary. Anthony Mccreery wrote this case under the supervision of Julie Gosse solely to provide material for class discussion. The authors The four-day workweek would grant employees a three-day weekend. Off-days for workers would be split do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. across Fridays and Mondays to ensure that the internal operations of the company could continue without interruption. Unlike other companies that had implemented the four-day workweek, WST did not increase This publication may not be transmitted, photocopied, digitized, or otherwise reproduced in any form or by any means without the mandatory hours for working days and did not decrease salaries as a result of the changes. Despite the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western strategy to split off-days evenly between workers, the four-day workweek had come with some distinct University, London, Ontario, Canada, N6G ON1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com. Our goal is to publish challenges, specifically for the sales and training teams. A common complaint from the sales department materials of the highest quality; submit any errata to publishcases@ivey.ca. was that they were not able to find adequate dates for their clients' training due to a lack of available training Copyright @ 2023, Ivey Business School Foundation Version: 2023-03-06 staff. As a result, Abimbola was keen to continue to hire trainers, and expected a 15 per cent increase in WST's salaries and benefits expense in the 2022 fiscal year. Had it been any other weekend, Jada Abimbola would have been relaxing by the pool with little on her The Impact of COVID-19 mind. On Saturday, June 4, 2022, however, Abimbola was desperately brainstorming ideas to change the strategic position of her company, Workplace Safety Trainers (WST). As the chief executive officer (CEO) In late March 2020, Severe Acute Respiratory Syndrome Coronavirus 2 (SARS-CoV-2), the virus which and owner of the company, she was responsible for high-level decision-making, and the recent plateau in caused the coronavirus disease widely known as COVID-19, became prevalent in Ontario and caused many WST's total sales figure was cause for concern. businesses to halt operations temporarily. During this time, a combination of labour reductions and certification extensions granted by the Ministry meant that companies were purchasing less health and Abimbola flipped through the most recent years' audited financial statements and continued to evaluate For use only in the course Introduction to Business at Ivey Business School from 5/8/2023 to 8/31/2023. Use outside these parameters is a copyright violation. safety training. As a result of the coronavirus lockdown, WST had to transition much of their training to an alternatives. She could continue ongoing operations and hope the company's slumping profitability would turn online delivery system called distance learning. Normally, trainers would drive to a training location and around, or she could start to develop new products to increase the lifetime value of WST's current customer deliver the health and safety courses in person, but synchronous distance learning allowed trainers to deliver base. Ultimately, Abimbola was unsure whether this business was still worth all the stress it caused her. course curricula over Zoom and other meeting apps, effectively replicating the classroom setting online. Abimbola was thrilled with the new distance learning model as it reduced expenses such as vehicle and mileage costs. Training capacity was typically twelve people per class; however, online courses not only WORKPLACE SAFETY TRAINERS allowed greater capacity, but alleviated regional barriers to training and offered convenience for customers. As a result, it was easier for courses to fill quickly. In the 2021 fiscal year, 52 per cent of training sales Internal Operations came from distance learning. Abimbola noted that many players in the health and safety industry offered online courses and blended learning-which included a portion of independent training performed without WST was one of Ontario's foremost private occupational health and safety companies. The company was an instructor-and was interested in expanding this side of the business for WST.' based out of London, Ontario, but provided its services all over the province. WST primarily offered a variety of mandatory health and safety training courses for organizations, including Workplace Hazardous Alongside remote training, WST instituted a completely remote workforce during the pandemic. Abimbola Materials Information System and Safe Operation of a Lift Truck. Overall, WST offered over sixty courses noticed immediately that a remote workforce was beneficial for the company as it allowed departments to and had an experienced team of curriculum developers who were constantly revising the course offerings recruit from all over Canada and not just in London, Ontario. Abimbola was adamant that when the pandemic to comply with the Ontario Ministry of Labour, Immigration, Training, and Skills Development (the cleared, WST's workforce would remain fully remote. In the 2021 fiscal year, WST ended their rental Ministry) standards. The company delivered training using the expertise of its ten trainers. Over the years, contracts with two training facilities in Mississauga and Cambridge because the office spaces were no longer WST had set a standard for excellence in training based on the feedback surveys that clients completed at fully utilized. Abimbola was somewhat concerned, however, that an ongoing remote workforce could lead to he end of every course with 99 per cent of clients responding that they would recommend WST training long-term inefficiencies and miscommunications. Therefore, for the workforce that remained in London, WST Alongside training, WST also earned revenue through the sale of physical goods, including first aid kits, began renting an office space in a facility starting on January 1, 2022, for $1,200 per month.* automated external defibrillators (AEDs),' and folding stretchers. WST also sold their curricula through the sale of participant manuals and leader guides, which smaller health and safety companies would use to To compensate for the loss of training sales during the coronavirus lockdown, WST decided to start sourcing facilitate their training. and selling personal protective equipment (PPE)." At the height of the pandemic, Abimbola thought that PPE 2 Workplace Safety Trainers' annual fiscal year-end was from September 1 to August 31. 3Blended learning was a mixture of online learning with no trainer present, and in-person learning with a trainer present. 4 All financial figures are in Canadian dollars ($). AEDs, or automated external defibrillators, were devices used to assist those experiencing sudden cardiac arrest. WST offered masks, sanitizer, gloves, alcohol wipes, and other PPE productsPage 3 W32234 Page 4 W32234 sales would continue indefinitely as a new source of revenue for the company. However, as coronavirus cases Government-Subsidized Training Companies started to decrease and restrictions began to loosen in the 2021 fiscal year, PPE sales started to decline and WST had an excess of safety supplies in inventory that became difficult to sell. As a result, Abimbola made In Ontario, there were a few large occupational health and safety companies that were subsidized by the the executive decision to stop sourcing PPE and focus on training sales. This allowed WST to stop renting government and had established brand reputations throughout the province. Government subsidies allowed their warehouse facility as of on June 1, 2022, which resulted in savings of $6,000 per month. these companies to use cash flow to develop courses, which helped them stay current and competitive within the industry. One such company was Workplace Safety & Prevention Services (WSPS). Headquartered in Entering the fourth quarter of the 2022 fiscal year, the mask mandate had been almost entirely lifted in Mississauga, WSPS had a foothold in much of the Greater Toronto Area (GTA). Due to subsidies, WSPS Ontario and training sales had started to increase substantially for WST. Although pandemic restrictions offered a competitive price point on average relative to WST across the fifty courses that they delivered. and lockdowns had eased throughout North America, the economy was still feeling the effects of the Abimbola was often quick to point out that, while WSPS had more clients than WST, the company's lockdowns and restrictions. In June of 2022, increasing inflation rates were impacting WST.' Not only were marketing was often insufficient. In contrast to WST, WSPS had a reactive marketing team that was not prices increasing for physical goods, but the employees' expectations were that cost-of-living adjustments proficient in targeted advertising techniques, which put them at a distinct disadvantage. This allowed WST would be increased year over year for employees within the organization. Abimbola was not interested in to acquire many of WSPS's customers through strong marketing endeavours and a friendly sales approach. increasing WST's already expensive price point because she wanted to remain competitive within the industry, but she was concerned with how this might impact profits moving forward. Private Training Companies Jada Abimbola Private companies like WST existed all across Ontario and varied greatly in size. WST was one of the larger Abimbola was a lifelong resident of London, Ontario. Those who knew her would describe her as an players in the occupational health and safety market in Ontario. Many private providers of health and safety overachiever. In her academic career, she had studied mechanical engineering at Western University (Western) and achieved class-topping grades every year while staying active within the London community. training had one to ten employees, with many consisting of a single trainer who would perform all the copyright violation. training. Many trainers who had worked for WST in the past had moved on to create their own health and While studying at Western, Abimbola started to do consulting projects for smaller businesses in the London safety companies to compete in one niche and/or region. Due to their staffing restrictions, these companies area, and learned the importance of efficient operations within an organization. After finishing her often had a difficult time scaling and needed to purchase course material from WST and other companies bachelor's degree, she started her own London-based consulting firm, which grew to be quite successful to deliver training. Abimbola had noted that, in the past, many of these smaller health and safety companies and had over twenty employees at the time of her departure. Abimbola spent the next ten years of her career made it a priority to offer the lowest price point possible to compensate for the lack of variety and expertise buying companies, changing their strategic direction, and selling them for a profit. She had made the For use only in the course Introduction to Business at Ivey Business School from 5/8/2023 to 8/31/2023. investment in WST in May of 2017, and had hoped to sell the business by 2021. With the pandemic n their curriculum offerings. She also thought that the best way to compete with these private companies was to continue product development and increase the variety of courses and non-PPE-related physical unfolding in 2020, she saw WST's value drop significantly and decided to continue as CEO of the company. goods that WST sold. Abimbola was very engaged as WST's CEO. She ran most management meetings and almost all large-scale decisions required her approval before being implemented. Abimbola saw a lot of value in the work WST Use outside these pa was doing. Even though the investment did not pay out as quickly as she had hoped, Abimbola was insistent Specialty Health and Safety Companies that WST could grow to be the largest private supplier of health and safety training in Ontario. Many public and private companies in Ontario focused on a singular course offering and made it the COMPETITIVE LANDSCAPE foundation of their business model. First aid training was one area of health and safety training where this strategy was prevalent. Many other companies offered few courses and centred their strategy on first aid More companies were becoming increasingly aware of the benefits of health and safety training. While training. Some examples of first aid providers in Ontario included Toronto First Aid, St. John Ambulance, and health and safety training had a large price tag, tactics learned in the courses could help employees prevent the Canadian Red Cross (Red Cross). WST did not offer first aid training and it seemed to Abimbola that it serious accidents from occurring on the job. Not only would these prevention techniques allow for a safer was an obvious next step for the company. However, she was hesitant to enter the already saturated market. workplace, but they would also enable companies to work within regulations and avoid expensive fines. In 2017, one study found that companies were willing to spend up to $1,303 on average per worker per year for occupational health and safety classes." While the potential spend per client was large, the industry was CUSTOMERS saturated with many companies vying for a share of the market. Most of WST's training customers could be categorized as on-site (OS) and in-house (IH) consumer segments. OS consumers consisted of companies that would pay a premium for a trainer to come to their facility and Ryan Rocca, "Here's How Masking Rules Are Changing in Ontario Come Saturday," Global News, updated June 10, 2022, deliver training to several participants, while IH consumers consisted of companies that would pay a smaller accessed July 2, 2022, https://globalnews.caews/8908494/ontario-masking-rules-changes/ fee to send one or more employees to a WST classroom for training. OS clients were usually larger companies Pete Evans, "As Inflation Ticks even Higher, Macklem Won't Rule Out Super-Sized Rate Hike," CBC News, April 22, 2022, accessed July 4, 2022, www.cbc.caews/business/macklem-rate-hike-1.6427361. with a greater demand for training, whereas IH clients were often smaller and more sporadic in their Cost of living adjustments were increases in salary for employees to counter the impact of inflation on employees' lifestyle. purchasing behaviour. OS courses were $1,495 per course on average, while IH courses were priced at $400 Dr. Cameron Mustard with Christina Orchard, "What Do Employers Spend to Protect the Health and Safety of Workers, per attendee on average. Despite the higher price point for OS courses, 66 per cent of sales at WST came from Institute for Work & Health, September 2018, accessed July 4, 2022, www.iwh.on.ca/summaries/issue-briefing/what-do- IH courses, as classrooms could be filled with up to 12 participants. While WST earned more revenue from employers-spend-to-protect-health-and-safety-of- workers#:~:text=Key%20messages, employers%20in%20Ontario%20was%20%241%2C303. IH courses, Abimbola was always more interested in developing relationships with accounts that couldPage 5 W32234 eventually turn into OS purchasers, as these clients had a lifetime value four times higher than that of 1H clients,lo OS customers oen bought a variety of training, and usually were more willing to spend money on physical goods, WST found that the majority of their training was purchased by companies within certain industriesiprimarily manufacturing and construction, with additional clients in the health care and food services industries. A distinct benet of both OS and 1H customers was the cyclical nature of health and safety training. On average, certications would expire every three years, requiring customers to recertify, thereby extending the client relationship with WST Therefore, it was integral to the organization that trainers leave a positive impression on a client, as this would almost guarantee iture sales. OPTIONS FOR CONSIDERATION Abimbola was considering many options for the future of WST. To identify the next steps for the business, she lcnew that proper quantitative and qualitative considerations would have to be evaluated Abimbola needed to ensure that WST's next steps stayed within the Ministry guidelines and regilations and did not tarnish the company's excellent brand reputation. Status Quo When analyzing the financial statements from the past few years, Abimbola attributed declining net income to a steady decrease in revenue as a result of the coronavirus lockdowns (see Exhibits 173 for WST's nancial statements and ratios and balance sheets). Given that pandemic restrictions had been relaxing in recent months, she was confident that 2022's scal year-end total sales would equal that of the 2019 scal year at $7.50 million. Abirribola had already noticed trends suggesting that $7.35 million of these sales would come from training, with government grants adding $100,000 in sales. Now that WST was focused on reducing its spending for PPE physical goods, the estimated cost of goods sold for 2022 was anticipated to decrease to l l per cent of sales. Given WST's employee-centred vision for the first nine months of scal year 2022, meals and entertainment expenses were set to increase, and a $40,000 budget had been set aside for meals and entertainment for the remote workforce. Another operating expense that was forecasted to increase was advertising, Abimbola wanted to empower the marketing team to become more creative in their digital advertising techniques and had budgeted $120,000 to the department for these initiatives, With the fully remote workforce, WST could also save on ofce and general expenses. Abimbola expected that this expense would decrease by $50,000, First Aid Expansion Over the past several years, many customers had been disappointed when they were nirned away om WST while seeking rst aid training. Ambibola thought that now was the perfect time to capitalize on WST's current client base and start offering rst aid training. However, current curriculum team capacity concerns and strict government restrictions on rst aid training meant that WST would have to deliver the course using third-party materials through the Red Cross. One reason why Abimbola was interested in Red Cross first aid was that it used a blended learning model, which meant that the rst day of the two-day course would be delivered completely online without the need for a trainer. This meant WST would only need to book trainers for a single day for first aid classes. ' The lifetime Value of a customer represented the prot thal an organization would receive from a customer over that customer's active purchasing lifetime. For use erily in the course lntroduclien le Business al lvey Business Soho from 58/2023 le Elm/2023 Use oulSide these parameters is a copyr Page 6 W32234 To deliver Red Cross training, ve WST trainers would take eight days of training on their off-days so that no loss of revenue would be experienced by the company,ll Aer nishing the training, those ve WST trainers would be illy qualied to deliver Red Cross rst aid courses. Data analysts at the company had performed a market analysis to determine the forecasted number of rst aid classes WST would likely run in a single year. They projected twenty 1H courses per year with an average of twelve participants per course, and thirty OS courses per year with an average of ten participants per course. The price point for [H courses would be set at $125 per participant, with OS courses being listed at $1,650 per course. These prices would undercut the majority of competitors in Ontario, which would help WST capture new clients, To deliver training through the Red Cross, WST would have to pay $350 for the upfront application and an annual fee of $250, Certicates for participants would be purchased from the Red Cross at a rate of $20.50 per participant. One concern Abimbola had was that trainers were already fully utilized and there was no room in their schedule to accommodate additional classes. To account for this, WST trainers would use the fth day of their four-day workweek to deliver the eight-hour first aid courses. In total, vehicle and mileage costs for trainers for the in-person training would cost $4,200 annually. WST would need to purchase the appropriate materials to run the first aid classes, including mannequins and reusable course booklets, Abimbola estimated that the total cost of this upfront purchase would be $20,000. Logbook Product Offering When recently researching typical products offered by other health and safety companies, Abimbola had been shocked to learn that many larger competitors sold logbooks. In essence, logbooks were occupational health and safety checklists which allowed operators and facilitators within a company to document completed steps in any given health and safety procedure (see Exhibit 4). The booklets would act as reminders of the tasks to complete, and would support workers in doing their due diligence in providing a safe workspace. Abimbola thought it was a waste of potential that WST did not sell these booklets, as the curriculum team had already developed these checklists as a part of their course development across almost thirty courses. This meant that with no upfront investment, WST could begin a production run of logbooks and start selling the physical goods to existing clients who had taken the corresponding training. The obvious next step was to compile these checklists and sell a line of logbooks across various categories, with a focus on heavy machinery operation. As with some of WST's other bulk-order printed products, the company would purchase the logbooks from a printer overseas, The cost per logbook would be $535 with an additional $0.40 in shipping charges per book. WST would sell the logbooks exclusively through the sales team and would offer a $2.50 commission on each book sold to incentivize the department to promote this product to their clients. To produce further demand, a $2,000 advertising budget would be set aside for each production run of three thousand books to increase demand from new and existing accounts, Abimbola thought an appropriate price point for the logbooks would be $24.95. In the past, WST had experienced supply chain issues when purchasing products from printers overseas. The logistics team at WST had difculty forecasting demand and managing supply chain slowdowns, which would inevitably result in shipping delays to the end customer and unhappy clients. Abimbola was also somewhat hesitant to start selling more physical goods as she had experienced losses in the past with failed product launches. Despite the past failures, she knew WST had the opportunity to tap into its twelve thousand active clients to produce additional physical goods sales. Abimbola only wanted to pursue this alternative if the resulting prot would total $50,000. \" Training would cost a total of $800 per WST trainer and the duration oitraining would be eight hours per day. Trainers would be paid an average of $30.12 per hour (in addition to their current salary) for the additional time worked ior rst aid training (both receiving and delivering lhe lraining on lheir elf-day). W32234 W32234 Page 9 Page 10 EXHIBIT 2: WORKPLACE SAFETY TRAINERS BALANCE SHEET EXHIBIT 3: WORKPLACE SAFETY TRAINERS FINANCIAL RATIOS AS AT AUGUST 31 FOR FISCAL YEARS 2020 AND 2021 2021 2020 2020 2021 Assets Current Assets: Liquidity Cash and cash equivalents $ 304,473 $ Current ratio 0.87 1.09 753,980 Acid test 0.49 0.80 Accounts receivable 982, 121 Inventory 268, 116 731,610 Prepaid expenses 115,895 31,279 Efficiency Total Current Assets $ 1,442,464 $ 1,745,010 Age of receivables 43.6 days 38.1 days Age of inventory 124.5 days 107.3 days Age of payables 145.5 days 534.3 days Fixed Assets: Land, net $ 418,980 $ 418,980 Property and equipment, net 1,556,023 1,693,700 Stability 16.9% 28.1% Total Net Fixed Assets $ 1,975,003 $ 2, 112,680 Net worth to total assets Interest coverage 5.20 3.65 Intangible Assets: $_ 1,244 $_ 2,379 Total Assets $ 3,418,711 $ 3,860,069 Growth 2020-2021 Sales -12% -32% Liabilities Net income For use only in the course Introduction to Business at Ivey Business School from 5/8/2023 to 8/31/2023. Use outside these parameters is a copyright violation. Current Liabilities: Total assets -11% 47% Accounts payable $ 656,531 1,072,361 Equity Income taxes payable 117,094 277,430 Source: Company files. Unearned revenue 471,814 567,768 Current portion of long-term debt 75,486 78,186 Total Current Liabilities $ 1,320,925 1,995,745 Long-term Liabilities: Long-term debt $ 1.135,826 $ 1,211,312 Total Liabilities $ 2,456,751 $ 3,207,057 Shareholders' Equity: Share capital $ 400,061 $ 400,061 Retained earnings 561,899 252,951 Total Equity 961,960 $ 653,012 Total Liabilities and Equity $ 3,418,711 $ 3,860,069 Source: Company files