Introduction:
CEO in 2008: Kasper Rorsted, Studied Economics and offers experience in technological firms. Management design was based on face-to-face conversations and pushing for more performance.
Henkel right up until 2008
Founded in 1876 as a producer of detergent, by 1920 it was a leading German detergent en stuff producer. After WWII: company restarted like a producer of detergent, glu and personal care products. In 08: 14 billion dollars euros product sales over 125 countries:
EMEA: 64%
North America: 19%
Asia-Pacific: 11%
Latin America: 6%
Executive staff mainly Germans and users of the Henkel Family three or more major sections:
Glue Technologies (48%)
Laundry and Home care (30%)
Cosmetics/Toiletries (22%)
Competition: P&G, Unilever and L’Oreal
(See display 1, two, 3)
2012 Goals; 14% EBIT Margin
08: 14 billion dollars in sales (+8%) EBIT-margin (10, 3%) =>no competitive spirit?! (“The happy underperformer) 2nd component to 2008: Financial meltdown: Price maximize by Henkel =>growth out of all business units fell.
Reaction of Rorsted (CEO): transform the company into a leaner and more performance driven company by setting 4-year financial goals (2012) for Sales growth (3-5%)
EBIT-margin (14%)
EPS (Earnings per Share) (above 10%)
Reaction of the market: they will not make it.
Building a winning culture
Rorsted knew that the targets were high, but he wanted to get there by installing “a winning culture within the company. 3 main strategic priorities:
Achieve the full business potential
Focus more on the customers
Strengthen the global team
2008-2009: investments in top-performing brands and high potential markets: e.g.
” Biggest acquisition ever of 3,7 billion euros for the adhesives and electronic material businesses of the National Starch and Chemical Company. ” Dial brand: high investments in North-America =>top brand in body wash markets. Selling underperforming brands.
Searching for cost-efficiencies.
2009-2012: from promise to reality
Rorsted: first do the hard things (close plants, lay off people) then the softer things. For the “softer things everybody in the company needed to be on board = emotional buy-in. redefining Henkel’s vision and valuesimplementing a new performance management system
Vision and Values
Focus on financial goals and priorities =>becoming a winning competitor 10 values (see exhibit 5): but they had little meaning inside the company BUT: the CEO Thought they had..2010: Henkel: ” a global leader in brands and technologies putting customers central
value, challenge and reward people
drive excellent sustainable financial performance
sustainabilitybuild the future on the family foundation
They organised workshops all over the company to introduce the employers to these new values. New tagline: “Excellence is our passion in early 2011
performance management
A lot of employees have careers of over 20, 30 or even 40 years within the company. 2009: new performance management system for 4 layers of management. For each employee there was: 1) the current rating of hisperformance and 2) potential performance for the future. These were put in a grid (exhibit 7) with scores going from L (low), M (moderate) to T (Top) For potential performance numbers were used from 1 to 4 with 4 the limit of performance of someone. These rankings were set up during a Development Roundtable (DRT), a collaborative forum with a group head and his direct reports. Afterwards, the results were discussed during a one-to-one with the employee. DRT-processes were done bottom-up. Targets were set about how many employees should be fitted in a certain category. E.g; 5% had to be L =>triggered a new way of evaluation in the company. Added bonus compensation
Bonusses were from the overall company financial overall performance, team overall performance and person performance.
Group performance: KPI (e. g. EBIT,.. ): 3 per year
Crew performance: idem
Specific performance:
Performance upon 2 evenly weighted specific KPIs
Performance from your DRT process. Each supervisor could get a target added bonus as well. A round desk discussion with Henkel Business owners about the “Winning culture. See case.
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