Problem
Subject-Organizational Development and change
Case Study
The Missing Ingredient in Kraft Heinz's Restructuring
There has been a company restructuring recipe that has worked for decades. Buy a company, trim the fat, then reinvest to facilitate growth, and make lots of money. But sometimes this recipe doesn't work - and the story of Kraft Heinz is a prime example. Earlier this year, the company suffered a massive loss in less than 24 hours - $4.3 billion, to be precise. And over a two-year period, the fiasco cost Berkshire Hathaway $20 billion, possibly its worst loss ever. In 2015, Kraft met Heinz through a $63 billion mega-merger backed by Warren Buffett's Berkshire Hathaway and Brazilian private equity firm 3G Capital. Zero-based budgeting was at the core of the management team's effort to restructure the company by implementing large-scale cost improvements to boost profit margins and add value.
While investors were hungry for growth, 3G could not change the Kraft Heinz legacy brands quickly enough to meet consumer demand for healthier, fresher and, in some cases, cheaper private-label products. While Jell-O, Kool-Aid, and Velveeta were being stacked onto shelves, the tectonic plates of big-box food were shifting beneath Kraft Heinz's feet, and they could not adapt fast enough. As Kraft Heinz focused on aggressive cost cutting, they significantly impaired their ability to innovate to keep up with the changing landscape.
Activating the Thrive Channel
Activating Thrive means filling an organization with much more focus on opportunities - no matter how daunting the challenges may seem - and cultivating a culture filled with positive emotions like passion, pride, happiness, and a sense of camaraderie. In this environment, activity and communication from leaders and managers touch employees' hearts, not just their minds. Their words inspire people to want to engage, not just have to do their jobs.
Inviting employees, no matter their title or rank, to participate in a restructuring initiative can shift the whole tone of a transformation. The change is no longer a scary event happening to employees, but rather a journey that employees are a part of. One way to invite people to participate is by asking them how they see their responsibilities shifting, rather than telling them how their role will change. Another way is to involve groups of employees in helping to make decisions about when and how people get moved out of the organization - which has the added advantage of enabling better decisions. [Source: James, P and Gaurav, G (2019 September, 26). Harvard Business Review.
Task:
1. In your opinion, identify one model of change that could help Kraft Heinz?
2. Which diagnostic model was contributed to the failure of Kraft Heinz?