Henkel: building a winning culture Essay

IntroductionCEO in 2008 Kasper Rorsted, Studied Economics and has experience in technological companies. Management demeanor was based on face-to-face conversations and pushing for more efficiency.Henkel until 2008Founded in 1876 as a producer of detergent, by 1920 it was a leading German detergent en glue producer. After WWII company restarted as a producer of detergent, glues and personal care products. In 2008 14 billion euros sales over 125 countriesEMEA 64%North America 19%Asia-Pacific 11%Latin America 6%Executive team mainly Germans and members of the Henkel Family 3 major business unitsAdhesive Technologies (48%)backwash and Home care (30%)Cosmetics/Toiletries (22%)Competition P&G, Unilever and LOreal(See exhibit 1,2,3)2012 Goals 14% EBIT Margin2008 14 billion in sales (+8%) EBIT-margin (10,3%) = no warring spirit? (The happy underperformer) 2nd part of 2008 Financial crisis Price increase by Henkel = growth in all the business units fell. Reaction of Rorsted (CEO) transfig ure 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 marketplace they will not make it.Building a winning cultureRorsted knew that the targets were blue, but he wanted to get there by installing a winning culture within the company. 3 main strategic prioritiesAchieve the full business potentialFocus more on the customersStrengthen the ball-shaped team2008-2009 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 realityRorsted first do the hard things (close plants, lay make commonwealth) then the softer things. For the softer things everybody in the company needed to be on board = emotional buy-in. redefining Henkels vision and valuesimplementing a new performance trouble systemVision and ValuesFocus on financial goals and priorities = becoming a winning competitor 10 values (see exhibit 5) but they had bantam meaning inside the company BUT the CEO Thought they had..2010 Henkel a global leader in brands and technologies putting customers centralvalue, challenge and reward peopledrive excellent sustainable financial performancesustainabilitybuild the future on the family foundationThey organised workshops all over the company to introduce the employers to these new values. parvenu tagline Excellence is our passion in early 2011performance managementA lot of employees have careers of over 20, 30 or even 40 eld 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 perfor mance 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 square up 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 matched 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 = caused a new way of rating within the company. Bonus compensationBonusses were linked to the overall company financial performance, team performance and individual performance.Group performance KPI (e.g. EBIT,..) 3 per yearteam performance idemIndividual performancePerformance on 2 equally weighted individual KPIsPerformance from the DRT process.Each manager could get a target subvention as well. A round table discussion with H enkel Executives about the Winning culture.See case.