a) Describe the new culture of Henkel, in terms of its artifacts as well as content. Critically compare Henkel’s culture before 2008 and after Kasper Rorsted’s arrival. Which key Differences can you identify? How can the new culture drive forward the new strategic objectives? What is the magic recipe that can make a company effective, successful, fruitful and eventually “Number One”? Henkel with Rorsted on the lead and an ambition of becoming the Leader in the market had to move into radical changes.
Radical changes which would lead to the new culture in terms of its artifacts and cultural content. An organizational culture can be described as the sum of the values and practices that a group or the employees within an organization share (McShane & Von Glinow, 2009, p. 416). McShane & Glinow (2009, p 416) describe organizational culture as the “organization’s DNA- invisible to the naked eye, yet a powerful template that shapes what happens in a workplace”. Culture is such a strong concept, it can actually create or even destroy a company (Christensen, 2006).
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An assumption well understood by Rorsted where in the case of Henkel moved into radical changes in terms of its artifacts and cultural content building a new culture by creating five new values. The goal is crystal clear, to make Henkel a winning culture, make Henkel Number One, anything less would be unacceptable. Thus, in order to achieve that Rorsted and the board of directors approved a new vision – “A global leader in brands and technologies” and five new values consisting of the following: 1. We put our CUSTOMERS at the center of what we do. 2. We value, challenge and reward our PEOPLE. 3.
We drive excellent sustainable FINANCIAL performance. 4. We are committed to leadership in SUSTAINABILITY. 5. We build our future on our FAMILY business foundation. All the above brand new inspired values came to replace the old fashioned philosophy of the company where it was mainly consisted of the following artifacts: 1. We are customer driven 2. We develop superior brands and technologies. 3. We aspire to excellence in quality. 4. We strive for innovation. 5. We embrace change. 6. We are successful because of our people. 7. We are committed to shareholder value. 8. We are dedicated to sustainability and corporate social responsibility. . We communicate openly and actively.
10. We preserve the tradition of an open family company. In order for companies to be effective and competitive they must be flexible, open-minded and adaptive to the changes of the society. For the past few decades Henkel’s culture could be expressed in a few words as “we preserve the tradition of an open family” perpetuating and applying this philosophy to all of its components. However company cultures should grow and change over time. And this is what Rorsted manage to achieve. He managed to give a fecelift to the company. “A brand like friend” no longer seemed to express Henkel’s new strategy.
The new competitive culture is not about “being friendly” but being the “winner in every market in which we compete”. Rorsted moved into radical changes in order to build the new culture. He had a clear mission, a vision and the values in order to transform and evolve the company. He placed a great emphasis on the commitment of the employees and tried to build strong and loyal relationships. He empowered and invited employees to play a role in the development of the new values by surveying executives and top managers and held workshops with the Henkel management board to talk over the new vision and values.
He communicated over and over again the new culture and the new values to all employees by using a “360-degree” communication campaign either via Henkel’s intranet, posters, employee magazine and town hall meetings in all major countries, unlike Henkel’s culture before 2008 where few employees, even at the highest levels could remember them. He rewarded and welcomed innovation and placed a great emphasis on recruiting and retaining only the elite employees, the best of the best – the ones who strive for success and winning.
It’s not an easy task to change completely the culture of a company, to set new strategic objectives. However, companies must change over time and not be static (Pfeffer J. , 1998). A strong culture is an asset that a skilled manager can use and apply for the development of a company (Christensen, 2006) and Rorsted understands and applies that well. He managed to match the company’s culture with the strategic goals. He developed a specific and conrete action plan with clear strategic goals and values and tried to communicate it among the employees.
Only a company culture with clear goals adjustable to changencan succed and perform excellency in the long run, as in the case of the “new” Henkel (Christensen, 2006). b) Critically evaluate the new performance evaluation system of Henkel. Which advantages and disadvantages can you identify? Which are the implications of the new system for employee motivation? In terms of the general makeover that Henkel went through the performance evaluation system was not left aside. It was necessary to re-create a new reward system.
A new reward system that would motivate people to perform at their best, and this was essential in order for the goals to be achieved and make the company “The Leader”. The new performance system was based on the “Expectancy theory” providing clear guidelines in terms of motivating people for higher performance, recognition and rewards both financial and not financial (Epitropaki O. , 2013), (McShane & Von Glinow, 2009, pp. 144-145) under the condition of reaching certain outcomes, targets and goals, or in the language of free market, increasing sales. The new system is hard and leaves no room for mistakes.
The goal is clear and must be accomplished at all costs. Throughout 2008 and 2009 Rorsted and his management team worked intensively to create the new program in order to tackle effectively underperformance, setting three new strategic priorities: 1) achieve full business potential, 2) focus more on customers and 3) strengthen the global team. The old system was aged and outdated in all of its parameters. Targets were easy to achieved resulting in a chill-out and steady climate of steady performance with no signs of improvement. Rorsted annotated the old system as the promoter of “happy underperformers”, fans of he second place, which was no longer the case or the motto of the new Henkel. A good rewarding system can play a key role for reinforcing people in terms of their performance, growth and innovation (Nohria, Groysberg, & Eling-Lee, 2008). Indeed according with the testimonies of Henkel’s executives there were many cases where the new reward system was efficient and managed to fulfill its objectives. There were cases were employees showed remarkable improvement and other extremes where individuals were even seeking feedback from their colleagues to ensure that they were on track with their improvement plans.
Under the new system, bonuses were linked to overall company’s financial performance, team performance and individual performance. People knew in advance their goals and this can lead to better planning and long term success (Epitropaki O. , 2013), and by having team-oriented set goals people are motivated to work harder not only for their personal goals as for the goals of the whole company in general as this will result in better bonuses (Armstrong, 1996).
Accordingly, the new performance measurement system was estimated by both past and future employee performance and the ratings were summarized by two scales, promoting fairness and objectivity, a vertical “potential” using numerical grades 1. 2. 3. 4, and a horizontal “performance” one using letterr grades namely “L” for low, “M” for moderate “S” for strong and “T” for top performance. ?n this way employees could know well in what category they belong and what to do in order to improve themselves and gain better bonuses ad more positive rewards.
Research suggests that in general Henkel’s new reward systems manages to motivate people for higher achievement (Maccoby, 2010), and as the rising in sales reveals, numbers never lie, it can be concluded that the new system is indeed effective. However, in some cases even though the new system promoted justice and objectivity it doesn’t seem to take under consideration the human factor, the emotional state of the individual which plays a very important role in the outcome of the model. For the new Henkel people are machines, numbers.
If someone cannot meet requirements then comes out of the game. The business always comes first. The individual’s personality is an important factor affecting the outcome of the model (Hogg & Vaugham, 1998, pp. 84-89). However, Henkel’s employees generally welcomed the new rewarding system with enthusiasm and managed to adapt to the new winning culture. There were though some cases where some employees were actually forced to resign as they were unable to handle competition. Employees who considered themselves as really good were suddenly rated as moderate or weak.
This caused a lot of tension and frustration, as well as demotivation and several complaints in terms of the way the new values were communicated. . c) Describe Kasper Rorsted’s leadership style and evaluate his effectiveness as a leader of the change initiative. Which are his strengths and weaknesses? “Charisma” is the most often word used by people in order to describe the characteristics and qualities of a good and successful leader (Khurana, 2002). At the most basic level however, a leader is someone who leads other (McShane & Von Glinow, 2009, p. 60). In terms of how Rorsted accomplished to make Henkel Number can be described as a “Transformational Leader” (McShane & Von Glinow, 2009). He had a clear vision of how he wanted to transform he company, a drive, a commitment as well as the skills to accomplish it. Literature suggests that as “transformational Leader” can be described the ones who have the ability to motivate in a positive way as well as inspire employees to a new set of values, behaviors and accomplishment of specific tasks (McShane & Von Glinow, 2009, p. 371).
A “transformational leader” has a clear vision and can act accordingly in order to achieve his/her goals, as in the case of Henkel where Rorsted’s clear vision was to make the company a winning culture by setting an ambitious four-year financial plan for sales growth. Another characteristic of this type of leadership is apart from having a vision to be able to communicate it amongst all the employees in order to be on the same track. Rorsted placed a great deal of emphasis on how to communicate the new culture amongst all the 48000 Henkel’s employees by running a serious of workshops.
The next step is to model the vision, building in such a way employees trust towards the achievement of the goals. For this purpose he formed several “Vision & Values” workshops executed by managers in over 60 countries. They didn’t only communicate the new vision they tried to demonstrate how that would fit into their day-to-day work. They also came in touch with the customer by designing “meet your customer” programmers” with assigned accountability and due dates.
Finally, building commitment is the last characteristic of a “Transformational Leader”, build commitment towards the vision and “transform the vision into reality” (McShane & Von Glinow, 2009, p. 374). For the fulfillment of this purpose Rorsted used toolkits which included two imagined news stories “from the future”- one celebrating Henkel’s realization of its 2012 goals and the other describing the company’s failure to meet them. A visual interpretation of how the new values would affect the company in both positive and negative ways (McShane & Von Glinow, 2009, p. 75). Rorsted is a strong Transformational Leader with a clear vision and dedication upon the completion of his goals, which formulate in a great extent his strong leadership talents. However there are some flows in his management skills. Transformational leadership relies at the most on the skills of the leader. But what happens in the case where employees cannot follow or resemble his new philosophy? There were some cases where people were resistant to change and the only solution was to dismiss them.
Its easy for employees to be demotivated and work under the feeling of fear, loose interest and their loyalty towards their leader, and “transformational Leaderships” relies on the reciprocal relationships that employee and leaders form (McShane & Von Glinow, 2009, p. 375) . This may destroy the trust that followers had built on the leader, which took so much effort to be built. Consequently this might lead to a great failure in the future with a major cost, both financial and psychological. Leadership should not only lay on getting employees moving towards the same goal but also try to align them together (Kotter, J. P. , 2001).