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Published: August 27, 2009

 
 

Inside the Kraft Foods Transformation

Sanjay Khosla: There was a good reason for our varied models. Kraft Foods International, which I was brought in to run, shared North America’s problem of being too internally focused; and as in North America, it made tremendous sense for us to push decision making down to the unit level — in this case, a region or country. His­torically, what was good for one market was seen as be­ing good for every market. And that clearly was not true.

Irene Rosenfeld: It’s vitally important, when you’re making a change like this, to have the right people in place. In our case, the people running the businesses could no longer principally be marketers; they needed to become general managers. And the functional executives had to move to being functional leaders, capability builders, managers of careers, and sharers of best practices. Not everybody was able to make that transition.

Karen May: In retrospect, it was the business leaders who thought, “What’s the big deal? We’ve been operating like this for a long time” who had the most trouble growing into their responsibilities. The stronger BU managers knew they were taking on a huge shift. They would say, “This means my team has to be different and my talent needs to be different.” When you heard that, you had more of a feeling of comfort.

Irene Rosenfeld: To give BUs a better chance of succeeding, we changed the way we aggregated data on the individual businesses and evaluated their performance. We had always been a very metrics-oriented organization, but by now we had binders and binders of data, and it had become impossible for any one person to understand what they needed to do. And we often had situations where the metrics for the functions were in conflict with the business units’ metrics.

Brian Davison: We decided to distill what was important to any given business’s performance, and present it in a scorecard that could be understood at a glance. We used green highlighting to show areas where a business was performing as expected, yellow to pinpoint emerging problems, and red to flag areas requiring immediate attention. The three main measures on the scorecard — which we picked for their alignment with shareholder value — were organic revenue growth, operating income growth, and cash flow.

I think most people would agree the scorecards have been a big change for the better. Before, we had a culture where, as a business unit manager, you’d want to prepare yourself to be able to answer any question. Now, to a great extent, you know what’s going to come up in your monthly performance meetings.

Gary Conte: We also took a fresh look at decision rights. We had a lot of policies, either created over the years to address internal needs or inherited from companies we acquired. There were policies for every aspect of global company-wide activity: accounting procedures, employment, acquisitions, materials, selling to consumers, business processes, cash flow, employee gifts, and so on. Some of the policies no longer made sense; others required too many levels of approval. We eliminated many old policies, updated others, and put all of them in a consistent format; we made them easy to search for on Kraft’s intranet. People can use this intranet site to ask for notifications of changes in the policies, or to ask questions about them, or to request an exception or suggest a change. Most importantly, if a policy isn’t on the site, then that policy sunsets. We no longer have people following policies that aren’t current or relevant. And the quick access that managers have to these policies lets them know the boundaries and the reasons behind them; it frees them to innovate without feeling they need to seek approval from some other person or place.

 
 
 
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Resources

  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. www.kraftfoodscompany.com: Central source for information about the company and its products.
  8. For more business thought leadership, sign up for s+b’s RSS feed.