HENKEL: BUILDING A WINNING CULTURE
Group 09
About Henkel and the need for change…..
• German Family
• Competitors : 3M,P&G,Unilever and L'Oréal
• Need for change:
• “ The happy underperformer: always #2 or #3”
• 58% drop in net profit in 2008
Three major business units
Adhesive Technologies (48%) Laundry and Home Care The Cosmetics/Toiletries (22%)
(30%)
Sealants and surface treatments Personal care products such as
to industrial customers in Detergents and related home shampoos, hair coloring, skin
various industries care products creams, deodorants, and toothpastes
Brands: Loctite and Pritt glue Brands: Dial soap, and Persil Brand :Schwarzkopf hair care
sticks laundry detergent products
First one invented glue sticks
As the leader of this business
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Problem Analysis
• Henkel lacked competitive spirit with a slow growth rate of 8%
• Faced immense competition in laundry and personal care market
• Global financial crisis and economic slowdown impacted business
• Shifted focus to basic products, cutting down costs, increasing prices
• Necessity to transform complacent nature of employees
• The overall performance of company declined though the individual performance
remained high
• Hence necessity of overhauling performance management system
• Focus towards entrepreneurship and accountability required
3
Conceptualization of Change process
Before change Towards change….
• Corporate Tagline: “A Brand Like a Friend”
• Transformed Tagline:” Excellence is our
• Henkel regarded as underperformer with low passion”
competitive spirit
• 4 years financial goals Established
• Relatively low market shares and falling
growth of business units • Transform organization into learner and
performance driven
• Strong family-owned foundation is relatively
vulnerable
4
Vision for Change
Vision A global leader in brands and technologies
Change objectives Financial objectives(4 years):
1. 14% EBIT margin
2. 3% to 5% sales growth
3. EPS- Growth (CGAR) of more than 10%
Business objectives: stability of leadership and outstanding performance of
employees
Roadmap ● Establish a winning culture for changing the mindset of organization
● Conduct initiatives of redefining the value, to change the mindset of
organization by communication system.
● Set out a new performance management system to improve managers
capability.
● Launch a bonus compensation system to encourage employees
performance.
5
Henkel - Transition state of change
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Cheerleading-Incentive plan
● Evaluated two criteria : Performance and potential
● Bonus linked to team, group and individual performance
● Group Performance
○ Measured on basis of predefined KPIs
○ Rated on scale of 200
● Team Performance
○ Based on KPIs designed with respect to business unit or local targets
○ Weightage- 30% on company scores + 70% on performance scores
○ Rated on scale of 200
● Individual Performance
○ Based on KPIs(50%) + Rating based on DRT Process(50%)
● Individual bonus payout =Performance( [group + team]) * Performance(individual)
● Additional payout = Payout delivered is doubled if Financial goals are achieved
7
Stretch Goals
• Required to transform the complacent culture towards a winning culture
• Objective probability of attainment unknown but is seemingly impossible given current capabilities
• Means of creating performance pressure to employees
• Necessary to achieve full business potential and focus on customers and strengthen the team
• Allows employees to understand negative consequences to company prestige
• Recognize the employee efforts and implement strategies to achieve better goals
• Bonuses linked to overall company performance pushed the employees to strive to improve performance
How does it Benefit?
• Makes the goals challenging and nurture entrepreneurship
• Employees would be able to see the possibility of achieving
• Applicable at all levels : More efficiency achieved with top performers
8
Forced Distribution method
• Assigns employees to certain category based on their performance
• Managers rank employees into 4 categories:
• Top 10%
• Strong 60%
• Moderate 10%
• Below par 5%
Merits Demerits
• Increases productivity • Quotas can pull down par performers
• Increases competition and performance • Limits creativity and risk taking
• Easy to target people for L&D and appraisals • Impact on corporate culture
• Acts a rationale for benefits and layoffs • Demoralize employees
• Unhealthy competition
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Ways to improve the Change process
• Incentive system to everyone : Raising the bonus for topper levels to encourage employees to
raise their performance
• Identify and manage best practices and communicate to everyone with manuals
• Monitor change process in between to check the path travelling
• Create L&D programs for Poor performers
10
Thankyou
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