Henkel: Building a Winning Culture

Section B - Group 10

Kanishk Shah • B24076

Pritish Singhal • B24090
Rahul Chakraborty • B24091
Misal Gupta • B24333
Reuben Thomas Peter • BL24006
Vivek Chakraborty • BL24007
Overview
Porter’s Five Forces:
1. Threat of New Entrants: Henkel competes with large global brands which have established brands, significant resources, and wide
distribution networks, which would make it difficult for new entrants to compete. The threat of new entrants seems to be high to moderate,
particularly in the consumer goods markets.
2. Bargaining Power of Suppliers: Henkel faced rising raw material costs, which they tried to offset by increasing prices on products. This
suggests that suppliers may have some bargaining power.
3. Bargaining Power of Buyers: In the personal care and beauty products sector, consumers were shown to have significant power as they
cut back on spending, traded down to lower-priced brands, and focused on basic products during the 2008 financial crisis. This indicates a high
bargaining power of buyers due to price sensitivity and many available alternatives.
4. Threat of Substitutes:In the personal care and beauty products market, consumers traded down to lower-priced brands. The threat of
substitutes seems moderate in the markets where Henkel competes as there are alternatives for most of their product lines.
5. Rivalry Amongst Competitors: Henkel operates in highly competitive industries. Henkel was seen as a "happy underperformer" prior to
Rorsted's leadership, indicating significant competitive pressure. Overall, competitive rivalry is high across all of Henkel's business units.
Growth Trends: When comparing sales growth percentages between 2000 and 2010, Henkel's growth has been inconsistent, with a notable
increase of 13% in 2005 and 11.2% in 2010.
Henkel's Performance by Business Unit: Adhesive Technologies experienced the strongest growth between 2006 and 2010, with a 32.6%
increase in sales. This segment also constitutes the largest portion of Henkel's sales at 48%. Cosmetics/Toiletries showed a 14.1% growth in the
same period. Laundry & Home Care had the slowest growth of the three business units, at 4.9%.

Organisational Context:
Strategy: Henkel, under the leadership of CEO Kasper Rorsted, set ambitious financial goals in 2008, aiming for a 14% EBIT margin by 2012. The
company also targeted average organic sales growth of 3-5% and growth in adjusted earnings per share of above 10%. Henkel's strategy was
underpinned by three main priorities: achieve full business potential, focus more on customers and strengthen the global team.
Structure: The DRT process flowed from the bottom-up, beginning at the country level, then to region and global levels, reflecting a hierarchical
structure within the company.
Culture: Rorsted aimed to transform Henkel from a "happy underperformer" to a performance-driven company with a winning culture. The tagline
"Excellence is our Passion" was adopted to reflect the company's new culture and commitment to performance.

HR Culture/ Problem:
Culture Transformation: A major HR issue was transforming Henkel's culture from one of complacency to a "winning culture“. This involved
changing employee mindsets to emphasize performance, accountability, and results.
Performance Management System Overhaul: Henkel needed to create and implement a new performance management system that would
differentiate employees, reward high performers, and address underperformance. The previous system had been ineffective as 95% of employees
Analysis of Exhibits and Case Facts
Exhibit 1: Key Financials of Henkel and Selected Competitors, 2000-2010
This exhibit presents a comparison of key financial data for Henkel and its major competitors, including Procter & Gamble (P&G), Unilever, 3M, and
L'Oreal, over an 11-year period. P&G and Unilever consistently have the highest revenues, significantly exceeding Henkel's revenue. Henkel's
revenue growth was impacted by the divestment of its chemicals business in 2001, which resulted in a significant drop in revenue and a
corresponding negative growth rate in 2002.

Exhibit 2: Henkel Financials by Business Line, 2010

Adhesive Technologies is the largest business unit in terms of sales, with €7,306M, followed by Laundry & Home Care (€4,319M) and
Cosmetics/Toiletries (€3,269M). While each business unit's EBIT margin is similar, the group's overall EBIT margin is lower. This is because costs in
the corporate sector impact the overall group margin.

Exhibit 3: Selected Henkel Products and Brands by Business Segment

This exhibit provides a list of Henkel's products and brands across its three business segments. It shows that Henkel has a diverse portfolio of
products ranging from laundry detergents (Persil) and home care products to personal care products (Schwarzkopf) and adhesives (Loctite and Pritt).

Exhibit 4: Henkel’s “Winning Culture” Concept and Financial Targets for 2012
This exhibit illustrates the concept of Henkel's "winning culture" and its financial targets for 2012. It shows that the company's vision is to become a "global leader in brands and
technologies", and the financial target was a 14% adjusted EBIT margin.

Exhibit 5: Henkel’s Pre-2010 Values

This exhibit lists Henkel's 10 values before the 2010 transformation. These values were considered to be too broad and not effectively guiding tough
decisions within the company.

Exhibit 6: Henkel Poster Promoting 2012 Goals

The exhibit shows a future news report, celebrating Henkel’s success in achieving its 2012 goals. The poster aims to inspire employees to visualize
how the new values would contribute to the company's success.

Exhibit 7: Henkel Employee Evaluation Grid and Frame of Orientation

This exhibit displays the four-by-four grid used in Henkel's new performance management system. The grid has a vertical "potential" scale (1-4) and
a horizontal "performance" scale (L, M, S, T). It is ensured that managers differentiate employees according to a forced ranking system.

Exhibit 8: Henkel Employer Branding Posters

This exhibit showcases examples of Henkel's employer branding posters used to attract ambitious job-seekers. The posters use humorous slogans
Recommendations
I. Immediate (Short-Term) Solutions and Impact
Continue holding regular Development Roundtable (DRT) sessions, ensuring consistent application of the evaluation grid and the "frame of
orientation" distribution. This will help to maintain accountability, identify high performers, and address underperformance. The DRT process also
helps to calibrate performance across different geographies and roles.
Focus on Employee Communication and Engagement: Continue the "360-degree" communication campaign, utilizing the intranet, posters, employee
magazines, and town hall meetings. Focus on translating the values in ways that front-line employees can relate to.

II. Long-Term Strategic Solutions and Impact

Develop a Culture of Continuous Improvement: Instill a mindset of continuous improvement and adaptation across the company, as this is needed to
maintain a winning culture. This involves constant communication about the need for change.
Strengthen Customer Relationships: Implement customer-focused initiatives that involve all employees. Reinforce the importance of customer
satisfaction and that every role contributes to this goal. This will ensure that the company's efforts are aligned with customer needs, which can
translate to greater market share, growth, and profitability.
Wellness Initiatives and Career Growth Opportunities: Establish programs to mitigate burnout, such as flexible work policies, mental health resources,
and regular check-ins with managers, to help mitigate attrition fears. Also offer clear career progression pathways, mentorship programs, and skills
development initiatives to retain top talent and foster loyalty.

III. Resources Needed, Steps for Implementation, and Timeline

Human Resources:
• Dedicated HR professionals to lead the DRT process and manage the performance management system
• Trainers and facilitators to deliver workshops and training programs
• Managers who are committed to the new culture and willing to provide constructive feedback to employees

Capital:
• Funds for training programs, including the development and delivery of workshops, and related materials
• Investments in technology for automation, data tracking, and management of performance reviews.
• Resources for market research and product development, as well as for employee engagement initiatives.

Timeline:
Immediate (0-6 months): Focus on reinforcing the new performance management system and addressing resistance to change. Enhance feedback mechanisms.
Short-term (6-12 months): Roll out training programs, continue streamlining operations, and develop more specific customer engagement initiatives.
Long-term (12+ months): Focus on fostering innovation and an entrepreneurial mindset. This is a continuous effort that requires on-going evaluation and refinement