CHANGE MANAGEMENT IN ACTION Transforming the corporate culture at Heinz Australia
The Heinz Company's association with Australia began back in the 1880s when Heinz products were first imported from the USA to feed the American miners who came to work in the goldfields. Production first began in Australia in 1935 when Heinz (US) leased a factory in Richmond, Melbourne. During World War II Heinz began operating a factory in Devonport, and, from 1943 to 1946, the company sold 86 per cent of its production to the Commonwealth Government for supply to all the armed services.
Postwar, Heinz Australia continued to expand, establishing new factories and acquiring numerous companies from the 1970s through to the 1990s. In 1998 Heinz Australia merged with Heinz–Watties, New Zealand. In 2003 the Heinz Watties Australasian business was restructured into three separate business units: HJ Heinz Australia, Tegal Foods New Zealand, and Heinz Watties New Zealand. It currently employs around 800 people in Australia and 1200 in New Zealand.
With the restructure in 2003, Peter Widdows was appointed Managing Director of Heinz Australia and the company moved into its new head office at Southbank, Melbourne. In February 2009 Widdows was appointed Chief Executive Officer of Heinz Australasia (Japan, Australia, New Zealand and Korea). The phenomenal success of Heinz in Australia and its influence on Heinz businesses in the Pacific region over the last six years are largely credited to the transformational change Widdows instigated when he took over as Managing Director. As Widdows himself admits, the company was not simply at a standstill, it was ‘going backwards’. Given the US parent company's low tolerance for unprofitable businesses, this was not a sustainable position if the company was to continue operating in Australia.
When Widdows first arrived he encountered a very negative, low-risk, ‘punitive’ culture. It was inward focused, where everything seemed too difficult or too much effort. The emphasis seemed to be on handing out punishment, rather than on rewarding success, which led to resentment and defensiveness amongst staff. Consequently staff morale was low and turnover unacceptably high, costing around $2 million a year to replace departing staff. Based on his experiences of working in different company cultures, Widdows recognised immediately that something was deeply amiss at Heinz Australia. Key problem areas he identified were lack of nurturing and support of staff, little encouragement of new ideas, and a complex organisational structure that was causing conflict and confusion over functional and role responsibilities. Widdows moved swiftly and decisively to instigate change. Within the space of two months, he reduced salaried staff numbers by 25 per cent, and supervised the restructuring of the Board, bringing in new middle-level board members.
Once these hard-nosed changes had been implemented, the focus moved to changing workplace attitudes and behaviours. Widdows and his senior management team sought to engage all staff, working with the mantra ‘a great place to work’. Everyone was asked for their input and ideas on what a ‘great place to work’ meant to them. Senior managers were expected to model the new behaviours to their staff, and ‘walk the talk’. Widdows, for his part, clearly demonstrated to his senior management team how he would behave towards them, and he expected them to show the same respect, and willingness to listen, to their own teams. After the headcount reduction of 25 per cent, there was inevitably considerable cynicism among staff at the start of the cultural change process. However, Widdows’ commitment to building a positive, caring community in which employees’ ideas and contributions were taken seriously and acted upon, gradually won their trust and involvement in establishing ‘a great place to work’. Widdows directly credits the increase in the number and variety of different projects now being implemented to people's new-found confidence and belief that they could succeed.
There were also a number of tangible results. There was an immediate increase in profits from September 2003, with Heinz recording 50 per cent top line growth each year since the end of 2004. The success rate of new products increased significantly, with more than 200 products launched in one year. This is an outcome the company would never have considered possible before. Staff turnover has also fallen markedly from 33 per cent in 2002 to between 7 and 10 per cent at the time of writing, with which the company is satisfied.
The idea of ‘a great place to work’ is now an integral part of the company's culture and influences all it undertakes. There are, for example, ongoing initiatives concerned with staff health, wellbeing and work–life balance. These include payment of gym memberships and annual medical checkups. Another very successful initiative introduced in 2004 was the flexible working week, which includes a shorter working week during summer daylight saving hours as well as flexitime. During the months of daylight saving, staff may take Friday afternoon off once they have finished their work. There is no monitoring of staff against this, which highlights the culture of mutual trust and respect that has developed through the ‘a great place to work’ initiative.
At this stage the focus of the cultural change process at Heinz Australia is concerned with reinforcing and maintaining the new cultural mindset, making sure that the ‘great place to work’ initiative remains a potent driving force. This means constantly communicating that what the company values above all is an engaged and committed workforce, thus ensuring the company is never standing still, and the old complacency and negativity cannot return.
While the global financial crisis has brought many challenges, the company is in robust health and in a stronger position than most because it supplies staple foods. Widdows is well aware, however, of the challenges facing the food industry, such as the effect of large-scale commodity cost increases. For him, there is no turning back. The fact that the ‘a great place to work’ concept has now become a global Heinz initiative, together with Widdows’ promotion to CEO of Australasia, confirm he has the blessing and support of the US head office.39
CASE QUESTIONS
The cultural web is a valuable tool for assessing the ‘cultural health’ of an organisation, helping to identify those aspects that are likely to support or block change.
1. Draw on each of the elements of the cultural web to discuss how the culture at Heinz Australia has changed and is continuing to evolve under Widdows’ leadership.
2. Based on your cultural web audit, identify the key forces for and against change.
3. What appear to be the key strengths of the new culture?
4. What aspects of the organisation need to be monitored and sustained to ensure the organisation does not slide back into the old ways of thinking and working? (Graetz 61-63)
Graetz, Fiona. Managing Organisational Change, 3rd Edition. John Wiley & Sons Australia,, 08/2010. VitalBook file.