When Costs Kiss Goodbye!

Image credit: Kraft Heinz loses a lot of cheese as earnings send stock plunging to …

Interesting article about an investment company (private equity firm) that acquire food businesses (Heinz & Kraft Foods) back in 2013 and 2015 respectively. The firm believed these two companies could unlock more values by using ruthless focus on efficiency. They quickly employed radical cost cutting programs.

They fired thousands of workers, shutdown factories, used zero-based budgeting model (justify cost without regard of previous year spending), remove refrigerators (pantry) in the HQ known for stocking cheese sticks, set default settings of office printers (double sided with black toner) and limit meals spending during travel to $50 a day. Guess what happened next?

These initiatives and cost program led to industry-leading profit margins in less than 2 years! The stock price went up to more than $90 in 2017! See below.

Screenshot 2019-05-18 at 12.55.51 AM

Screenshot 2019-05-18 at 12.55.21 AM

But, unfortunately, it went to nose dive after all the radical cost programs deployed. From my research, Kraft Heinz overlooked the marketing bit, product innovations for their changing customers segments and valuable employees feedback that know how to run your operations especially in different market segments and countries.

Sometimes, big brands and companies make tactical mistakes like this. No doubt long history companies tend to have opportunities to go leaner that it was; things usually get complacent after awhile.

One of the videos, check it out.

Source: https://www.cnbc.com/2019/02/22/kraft-heinz-backers-face-reality-brutal-cost-cutting-isnt-enough.html

Lessons that we could take from here are:

  1. Look at at products and services innovations as growth strategy: There are probably a host of products that could be making money or probably there’d discover that most of the products are obsolete to modern customers. For the record, Kraft Heinz launched new products such as organic version of Capri Sun and expanded its condiment businesses. They tried, probably not enough time to see it through, perhaps these new lineups will grow later.
  1. People are not measured by their salary or price tag, rather by their value brings to the business: I tried looking for some human capital development strategies when the equity firm bought Kraft & Heinz, but I couldn’t find any. Although I may not a fan of “total spoon-feed your talent because you care”, I do believe the management should consider taking longer time to lay offs to ensure the tacit knowledge is transferred to the business. You should pay high for someone that could do more and pay less for someone who can only do routine work.
  1. There’s only so much you can do with cost efficiencies: Key for growth is innovation. I’d expect big brands and companies, should invest in ruthless innovation focus in three areas. First, new products and services that reflect current and future customers needs and wants. Second, leaner processes and automation to bringdown redundancies in capital & assets deployed and reduce wastages. Third, to find market creations opportunities that will need to be invested and R&D. You can read more about this from Clayton Christensen book titled, “The Prosperity Paradox”.

Innovations are for growth. Companies need to spend and invest together with their workforce to improve capability and capacity to innovate. I do hope to see Kraft Heinz able to come out from this plunge and see this only temporarily.

Brickbats please send to donkhairul@gmail.com 

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Why Corporates Need Corporate Innovation?

I will go straight to the point this time, no BS here. 😉

Here are the FIVE Observations that make corporates need Corporate Innovation, within this year:

  1. The corporation no longer effective in capital allocation. It only spend on what it has been doing over the years since its founding days. The growth is stagnant? Right? There have been talks about why the auto market is stagnant, utilities market is stagnant, banking market is stagnant and education market is stagnant? Is it really? Think again. The corporate hiring is all time low, even if they do it is only incremental. How big can you hire anyway? How much capex do you want every year?

  2. The employees in that corporations have been out of touch from the customers worldview and realities – things they go through in every day life. The employees think that if you are an executive or business people, you will need a bank account so you will go to the bank freely without the bank having to promote to you any service. So they hesitantly “provide service” with the hope you will get out the branch quickly. The employees only know their job (think they know?) and only worry (pay attention) to their yearly increment. The employee has never thought how important you are because he is not in the marketing department!
  3. The people in the corporations no longer recognize each others strengths and passion anymore. They know each other by searching the names in the company database by their work title and department. They only care about numbers, bottomlines, KPIs, processes, SOPs and their own bosses. They forget the empathy in their colleagues and the motivation they come to work for.
  4. The corporations are a lot less helping the nation progress and becoming productive. Profiting RM100 million a year isn’t the same as elevating 1,000 people out of electrical poverty or lack internet access. The corporations care-less about the environment they operate and the shared prosperity – they only care about batches of production they need to make, the stuffs they have to deliver. They polluted the areas and take away the prosperous-ness in the areas.
  5. The suppliers and vendors of the corporations are non other than the same big boys instead of local business and startups with creative and innovative products and services with energetic and entreprneurial founders. The corporations with all their busy-ness tending to the bottom line didn’t get out of the building to look for what’s new, what’s better and what’s ahead. They are confined confidently in the comfort of large, air conditioned and well equipped office.

In the Corporate Innovation program, corporations will unbox, rediscover the untapped opportunities within the layers they have and assets they kept are abound; right on their backyard, under their nose and in their neighbourhood.

Brickbats please send to donkhairul@gmail.com 

#corporateinnovation #innovation

Top Leaders Essentials to Build Connected Team

It is tough being a leader, it gets even tougher when you stumble in the first few months your new leadership role. I know I did. Typically new leaders take about 3-6 months to warm up and get on the zone as top leaders. Top leaders mean C-suite, Executive Vice President, Managing Director, Vice Chancellor or anyone that lead at least 500 and more people in their organization. Leaders can’t choose how others perceived them but they can choose how they want to perceive and treat others.

For those who aren’t leaders, probably you need to understand that it is not easy being a leader.

Take for example for someone who just assumed a CEO role. The person could be the 1st person as a CEO because it is a new company that was set up to undertake larger operation eg. spin-off from a business unit. Another example would be an Executive Vice President (EVP) who took over because the previous person was imprisoned for bribery. Therefore, his new role as EVP was unplanned but he doesn’t have much choice when he was appointed or elected. Or maybe a person who took over a vice chancellor role in a thriving public university and has a vision to take it even to higher level.

You will find that all these leaders have to live up to higher expectation and make those fixes while the “engine is still running”.

It is tough and can be really unreasonable. For those incoming leaders, if you can’t take the heat get out of the kitchen! Fast! If you want to stay on, read up.

Top leaders can’t do much without teams. Leaders that go around the company or organization without enough preparation to become top team player sooner or later will be exposed of his incompetence. Leaders that travel the divisions and blow his own trumpet can only talk but fail to deliver after his warming up period will be brought to chopping block in a matter of time. Leaders that is unable to take feedback and refuse to seek help outside the homogeneity of his surrounding will beat path to hellish resistance for the very same people. Leaders that negate the force of multigenerational workforce and social media will soon realize that his fear is no longer fearful and resentment sometimes can be very objective. Therefore, what can be done? I will highlight some guides that top leaders can follow to build connected team. The original article was published in Harvard Business Review, July 2011, “Are You A Collaborative Leader”. The perspectives are mine.

1. PLAY A CONNECTOR ROLE

Top leaders must realize that the age of everything under one-roof to command and control has gone.

It’s over. It is impossible for top leaders to take stock of everything, evaluate then move on. Simply because they are so many things running at the same time and you need a great reset button if only you want to stop everything to really understand the business of your business. This is impossible to do because while you are transitioning because you are being measured and accounted for the results and performance of that year.

You need to learn to come in just at any point or stage of the business then lean in and show up to lead further. It is no longer hide and seek from your top office where you scavenge information secretly and make closed door decisions.

Worse if your top lieutenants get stuck because you refuse to make decisions for unclear reasons. You are already a top leader and the authorized person to do the job.

Identifying the right people to connect be a daunting task. Just show up to everyone first.

What you need to do next is to connect yourself to as many people in the organization as possible. First you size up your direct reports and then your direct report’s direct reports. This is where social media can help you connect with more people on the go. Where sometimes top leaders use social media to update past events and photos, you can use social media to engage live interaction. For example CEO of Salesforce.com used Chatter as a mean to have all the 5,000 staffs engaged in the 200 top talents company retreat. While it could be easily a closed door “strategy” meeting, with 5,000 all staffs interaction virtually online, it bolster the communication and a lot of things sorted out. It becomes integrated in the overall strategy of the company. Plus, the conversation and activities last for the next few months compare to just few weeks had it was done in a four walled room.

2. TALENT AT THE PERIPHERY

In today’s world, talents are not being developed just in the company. Most talents have some exposure from somewhere else before being brought in to be developed further for the organization. This an important observation because these talents previous experience can be utilized as ingredients for future innovation. Research consistently shown that diverse teams produce better results. It is by taking into account all those learning curves. Top leaders must learn to recognize this because each talent goes through a cycle where sometimes when you meet them they may be at the lowest point of their life, hence they may not look attractive to you. But by connecting and have deep believe in talent top leaders could stimulate the environment where talents can flourish in difficult times.

In multinational, some talents are sidelined because they talk less English, for example. Communication can become a big hindrance where these talents passed from promotions even when they are operating in their home country that don’t require them to master English. France’s Danone for example spend fortunes to hire interpreters where they go to other business units that is less articulate in English.

This is a magnetic strategy when top talents from other companies could be attracted to Danone because of this efforts from top leaders. Afterall, English can be taught quite easily. The same hindrance applies when talents that may have different learning abilities such as dyslexic, autistic or gifted. I will discuss more on these special talents in other article.

There is not talents shortage, talents don’t show up. Top leaders have to reach and find them.

Reckitt Beckinser for example quoted that this diversity in talents and ability to cope with these differences partly help the company to register 17% net income growth on yearly basis from 1999-2000. They are operating in many countries where talents are from Pakistan, China, Britain and Turkey could be very well performed in their home country and line up for next promotions. While there is always possibility of conflict and communication breakdown, they are always open to it and provide constructive feedback to move things forward.

Top leaders need to recognize this and do not always expect the very best from what they see as “very best”. They are differences which may be unpleasant to them but incumbent to talents surroundings that need encouragement. Top leaders broadmindedness is sought when it comes to assessing development potentials.

3. COLLABORATE AT THE TOP FIRST

Top leaders must show good examples. It is expected. To encourage collaboration, they must be good collaborators as well.

They need to show their authenticity of being an effective and efficient productive collaborator. It is common where top leaders came from a particular unit before they were promoted to their current job. Usually when this happen, the previous unit they came from are very likely to get most of his attention and support. Part of the problem is because he ha

Showing good examples are motivating. Guess what, people are watching you!

It is always been with the current members. In this case, top leaders seen as having a personal journey rather than integrated and collective journey of everyone.

It is the job of top leaders to foster everyone into large single team.

Sometimes the direct reports composed his own team and has different personal journey. Very territorial, turf defending and roof top fiefdoms. They know that they have problems in terms of their function, region, product or service but no one asks the hard question to align all these. Therefore it is top leaders job to bring all these into a coherent organization through engagement process. Top leaders need to arrest politics especially from the senior management group. There should be more rewards when they collaborate rather than promoting their own agendas. CEO of Reckitt Beckinser, Bart Becht said that

“We go out of our way to make sure that politics get eradicated. I think they are bad for organization and they’re poisonous.”

Another observation in terms of goals setting for organizational performance is to set learning goals compared to typical performance goals. According to psychologist Carol Dweck, people are driven to do tasks by either performance or learning goals. When performance goals dominate, people are motivated to show others that they have valued attributes such as intelligence and leadership. When learning goals dominate, they are motivated to develop the attribute. Performance goals induce people to favor tasks that will make them look good over tasks that will help them learn. A shift toward learning goals will make managers more open to exploring opportunities to acquire knowledge from others.

4. SHOW STRONG HAND

New top leaders will always find it difficult when to make the call. They will usually take their time to the point when they couldn’t find any other excuses or any more time to make that decision call. While it is understandable adjusting can take time, but fear for not being liked after a decision made is partly a life of top leaders. It could be just a self-thinking from those tiny voices in your brain. Some top leaders wait trying to get the “big picture” and understand them clearly before making any forward decision. Top leaders can do it better. They can learn and break away from this by making small decisions with big impact to build confidence and personal power for bigger decision. It’s a great feeling once your feel powerful and confidence.

Leaders have to exercise the power assigned to them to move things, not to stop them.

When leaders foster good collaboration, they have tendencies to get everyone on board and getting consensus before going ahead. Not every decision requires this. Some decision is unpopular and off limit by normal standard. If everything is debatable and need a committee to decide, top leaders will struggle to make decision. Collaboration now become not oil greasing the wheel but the sand grinding to a halt. Top leaders must be effective in enforcing strong leadership and decisions down to direct reports because it is expected. Maybe to 3 levels below them as well. Top leaders should be comfortable playing key role in forming and disbanding teams and collaborators when they see opportunities. It should be very fluid but must be clearly explained to all collaborators. Although constructive feedbacks are encouraged, battles aren’t left raging on. It is ok to have a culture where a person can propose or oppose an idea in open meetings. If there is no decision made after a meeting, then the person chairing the meeting is expected to make one. As Cyrus the Great once said, “Diversity in counsel, unity in command.”

5. LOOSENING CONTROL WITHOUT LOOSING CONTROL

Top leaders used to know every nook and cranny of things in the organization. Sometimes they demand to know and put their foot down.

But with technology top leaders are caught up with so many other things especially if they are running global business and interactions. The world has become extremely interconnected, integrated and if top leaders don’t know how to tap into the power of those connections, they are risking of being left behind. People might have heard of them but unable to follow.

Harnessing WE is crucial. Let’s get going!

Leaders today must learn how to harness ideas, talents, and resources from all areas of the organizations and all kinds. To do this top leaders may require retooling talent strategies, revamp communication channels to build strong connections with both inside and outside the organizations. They can do this by collaborating authentically to wield influencers rather than authoritatively stomp down to move forward. Top leaders also must learn quickly how to promote productive discussions, squash politicking and make final calls for things that matter. Recent appointment of Nadella to Microsoft as a CEO a good case in point. He quickly seized the opportunity to declare the next path for Microsoft and to do that they need to behave like a hungry start up. Only time will tell whether he did the right thing but he took charge and lead. In this way they probably can spur innovations faster than competition and it is more valuable given the complexity of collaboration. Getting that value is the heart of collaborative leadership.

In summary, top leaders of today’s organization should consider applying and adjusting themselves to use this guide in their daily practices. These essentials are the non-negotiables in running today’s organizations and enterprise. However as top leaders, your intuition will make a difference to what degree your application of these essentials work in your organization. Wish you all the best!

Brickbats please send to donkhairul@gmail.com