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 / Autumn 2009 / Issue 56(originally published by Booz & Company)


Inside the Kraft Foods Transformation

In April 2007, I wrote a memo to the extended Kraft management team — about 170 people in all — announcing an initiative I called Rewiring Headquarters. (Later, we would change the name to Organizing for Growth.) I said that we would change our operating model to allow more decisions to be made by line-of-business managers, redeploy and eliminate some resources at headquarters, and make Kraft as a whole more effective. I promised we would come up with a set of specific recommendations by the summer. Suddenly we had a timetable.

The defining moment, as I like to think of it, came in July 2007, at a meeting of the Kraft executive team in our Tarrytown, N.Y., offices. This was the first time that I publicly declared to my staff: “We’re going to do this.”

Lance Friedmann: There was discussion and some comment. And then Irene very deliberately went around the room and said to the members of the KET, one by one, “What do you think? Can you support this?”

Irene Rosenfeld: My goal was to get us to a resolution in such a way that the executive team would own it and would be prepared to execute it, coming out of that meeting. But what I appreciated was that even the individuals who did not fully support the decision said so. It wasn’t just, “Let’s salute the flag.” It was more like, “I’ll do what the team decides, but let me tell you first how I really feel.”

Leading the Change

Gary Conte: With a corporate-wide transformation like this, it’s not easy. You’re challenging culture, you’re challenging behavior, you’re challenging self-interest. And there are a million details to iron out. What should the organizational structure be? Who should staff it? Which business processes should change? And what should the motivational processes be?

Within a month of the Tarrytown meeting, we had assigned teams to tackle the eight most important issues involved in the reorganization — what would remain at the corporate core; how shared services would work; people and motivators; the redesign of cross-organization collaboration processes; strategic planning and performance management; how the new model would play out in North America; how it would play out in our international operations; and communications. Each team had a work stream and a deliverable. And each team had at least two KET sponsors — that was critical. It ensured that the solution being developed was consistent with the new model.

The KET sponsors provided a necessary buffer between the team and the rest of the executives. Otherwise, you could imagine that when a team came up with a recommendation that significantly changed another Kraft executive’s role, there would be no one to run interference, validate that it was consistent with the objectives, and help facilitate the discussion. Finally, and perhaps most importantly, being involved in the change process drew the individual KET members into the program. They had some skin in the game.

Brian Davison: One fundamental question, once we had decided to go with accountable business units, was what were the right BUs? For instance, by the time of the Tarrytown meeting, our Canadian business had basically been taken apart, and most of the business decisions about Canada were being made in the United States. With OFG, we decided it made more sense to treat Canada as its own BU with its own dedicated resources, which is what we had historically done. We did a number of such realignments, with the goal of making decisions closer to the consumer.

Irene Rosenfeld: At the same time, we were conscious of the need to preserve our scale advantages. That involved thinking through what this new organization meant function by function, geography by geography. It was never one-size-fits-all. The model we implemented in North America looked quite different from what we implemented in Europe or in developing markets.

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  1. "CEO Forum: Rosenfeld Keeps Kraft from Being Too Cheesy,” USA Today, December 11, 2008: Interview discusses outlook for the recession, the “Innovate with Kraft” program, the glass ceiling, and the turnaround described in this article.
  2. Vinay Couto, Per-Ola Karlsson, and Gary L. Neilson, “Putting Headquarters in Its Place: The New, Lean Global Core,” Booz & Company white paper: Spells out the kind of organizational design that proved relevant at Kraft Foods Inc.
  3. Gary L. Neilson, Karla L. Martin, and Elizabeth Powers, “The Secrets to Successful Strategy Execution,” Harvard Business Review, June 2008: Complements the suggestions in this article by showing why effective organizational redesigns go beyond lines and boxes.
  4. Jaya Pandrangi, Steffen Lauster, and Gary L. Neilson, “Design for Frugal Growth,” s+b, Fall 2008: How to use a similar type of redesign to cut costs and expand simultaneously.
  5. Janet Paskin, “The Corner Office: Cooking Up New Growth,” SmartMoney, July 2009: An interview with Irene Rosenfeld on how Kraft is staying competitive and creative.
  6. Kai Ryssdal, “Conversations from the Corner Office: Interview
    with Irene Rosenfeld
    ,” Marketplace, February 10, 2009: Kraft’s CEO, in a public radio interview transcript, on why it’s a good time to be in the foods business and how the company expects to grow.
  7. Central source for information about the company and its products.
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