Full of Beanz

Saturday, November 1, 2008 - 09:45

CEO of Heinz Australia Peter Widdows credits changes in organisational culture for making Heinz a better company. By Jason Day

'Quality is to a product what character is to a man'. So said the co-founder of the H.J. Heinz Company, the American Henry John Heinz.

In common, no doubt, with the inhabitants of other countries in which its brands reside, Heinz products have fed Australian toddlers, sustained hungry students through university, been a staple of kitchen cupboards for quick meals, and adorned the tops of millions of meat pies.

As buyers of brands such as Heinz Baby Food, Big Red Tomato Sauce, Heinz Soups, Greenseas Tuna and Weight Watchers' meals, most Aussies would have tasted one of these products at some stage.

The American company, founded in 1869 by Heinz and his partner, L. Clarence Noble in Pittsburg, is now a multi-billion dollar international business. In Australia, Heinz products were imported from the 1880s, and it wasn't until 1935 that local operations commenced out of Richmond, Victoria (see boxout).

Currently, there are about 800 staff in Australia and 1200 in New Zealand (worldwide, Heinz has almost 40,000 employees). After merging the Australian Heinz business with Heinz-Watties in New Zealand (both affiliates of the H.J. Heinz Company) in 1998 to form the Heinz Wattie's Australasia union, the business was again restructured into three separate units; HJ Heinz Australia, Tegel Foods New Zealand, and Heinz Watties New Zealand.

Rude health
Internationally, Heinz is in rude health, breaking $US10 billion dollars in sales for the first time last financial year. In Australia, the picture is similar, with good results year on year after a leaner period in the later 1990s and early 2000s. Its local head, Peter Widdows, has been in the top chair since February 2003, and the coincidence between his arrival and better times appears solidly linked.

An engineer with the British Army before returning to university to complete a conversion course in accounting, Widdows hails from Manchester, UK. His career under the Heinz umbrella has involved stints in London, New Zealand and the US, before coming to Australia as Managing Director of the Diverse Business Group (a division of Heinz' Australasian operation), giving him the necessary experience when the top local job was offered.

"I'd been in the region for three years by then," says Widdows. "For me, this is one of the best jobs at Heinz. It's a great place to live and a big business."

Widdows came at a difficult time. While in 1999 the Heinz brand took something of a public relations hit when it shut down the Eden tuna cannery in New South Wales to move production offshore (one in eight of the town's population of 4000 was employed there), simply put, the big issue was declining sales.

"It was going backwards," confirms Widdows. "I wouldn't say it was in dire straits, but for a number of years revenue had been dwindling and the profits had been falling. I wasn't going to be given long to fix it, either. US corporates have a very low tolerance for businesses that are going backwards!"

Apart from the parent company's immediate financial concerns, the Australian operation had other problems. Staff churn was a significant factor - it was costing around $2 million a year to recruit people - and the culture of the company was in a poor state. The organisation was definitely in a rut.

"Internally, it was a very negative 'that's not going to work' type culture," recalls Widdows. "The rewards for success were probably [outweighed] by the penalties of failure; a punitive culture, is probably the best way of putting it. Very aggressive, without a lot of things to be aggressive about, and I think it got itself into a death spiral."

A cultural change
Widdows' exposure to different company cultures as he came through the Heinz ranks, and his position as regional CFO, convinced him things needed changing. It was something, he believes, that was not even understood by the majority of board members.

"If you had worked in a different culture and you came to this one, [you would know that] it wasn't the right culture to run a successful business.

"There wasn't any nurturing, there wasn't any positivity about ideas, and the quickest way to kill an idea is to be very negative about it. There were a lot of things in the old pool that needed changing, including the structure, which was wrong and led to role-clarity issues."

Action was needed, and fast. Salaried staff numbers were reduced by 25 per cent and the board was restructured, with middle-level board members changed. All this happened in two months.

"We had to inspire change very quickly. But it's all about what you do after that, on working to make a more positive place to work," says Widdows.

Management began by engaging all staff. A saying was agreed upon: 'A great place to work' and everyone was asked for input on what a great place to work meant for them. While consultants were a part of the mix, and would be used to measure the effectiveness of the changes, Widdows gives the distinct impression that he wanted everyone, from himself down, to walk the talk. The outcomes have been very positive.

"What do people want of managers?" asks Widdows. "Of course, they expect you to be able to do the job, but as a person, they expect to be able to walk into your office and predict what your reaction's going to be.

"We hadn't had that in the past. Nobody ever really sat down with our managers and told them what was expected of them."

Quite simply, this was done. Widdows began by talking to his team about how he would behave towards them, and encouraging them to think and do more.

Widdows claims there's no secret magic to implementing such organisational change. While in larger organisations formal lines of communication may be used for such education initiatives, in the 800-strong Heinz company it was simply a case of: 'This is how I like to do things; this is how I'm going to behave. The way I act towards you is how I expect you to behave towards your team', and so on.

"There's always mistrust at the start," admits Widdows of the process. "'Who's this new guy? He's got rid of a quarter of the staff. We don't like him'. While eventually, you gain trust because you're seen to care about the business, it takes time.

"The more you encourage people to try, with the sheer volume of business activity, some things are going to work. In a negative culture, nothing ever happens. The tangible behaviours of a positive one is encouragement, and the lack of repercussions for failure if people are trying to do the right thing."

Positive results
The company can certainly point to results. Widdows says the measurements taken on by external cultural change consultants show improvements in 15 of 16 measures. More tangibly, while revenue took about 18 months to start going up, profit started to turn around almost immediately from September 2003. Heinz's top line growth has been 50 per cent in the past five years, and more projects are getting off the ground.

"That is terrific growth in our industry, and we're launching 200 plus new products in a year. We would just never have got there before, plus the success rate of our new products is far better than it was," he says.

"And it's because people believe now, they've got a confidence that they can succeed. It's hard to explain, but in the past the sheer number and type of our new projects would never have happened, because nobody would have stuck their head up and said, 'You know, this is a great idea, I want to do this,' it would just have been lopped off.'"

Most importantly, staff churn has fallen dramatically. "We had 33 per cent staff turnover in 2002," says Widdows. "As people started to believe that they'd be treated properly, they wanted to stay. Our current numbers range between seven to 10 per cent, which is fairly standard for the industry."

A great place to work
The 'A great place to work' initiative, originally something to hang organisational change on, is now an accepted part of the business and involves a number of ongoing initiatives in health, wellbeing and work/life balance (this includes the payment of gym memberships and also annual medical checkups for all staff).

Widdows says that such has been the success of the local turnaround in organisational culture and the outcomes from it, that the US head office has taken notice. This recently included recognition for the ongoing nature of the workplace initiatives around the program through the presentation to Heinz Australia's HR Director, Peter Pringle, of a Chairman's Award for Excellence. Also, the 'A great place to work' is now a global Heinz initiative.

"Over time, there's been a growing appreciation from the global CEO and others that, in Australia, culture is a real resource, and that culture is about results," says Widdows.

Through new initiatives, Heinz is now more into culture reinforcement than change, enhancing the positives that have been developed and ensuring the message stays that management remains focused on culture. "That sounds easy, but it requires constant effort to feed that beast," says Widdows. "If you leave things alone, they can go stale very quickly."

Some of the practical initiatives include working hours. Widdows noted early in his tenure that people were working ridiculous hours, but with little productivity. So the company introduced two initiatives - summer hours and flexitime.

Summer hours allow office people who work an extra hour from monday to friday to take friday afternoon off. The flexitime arrangement, a semi-formal one where bosses need to note work outputs, allows office workers to operate flexibly around the core hours of 11am-2pm.

Looking ahead, Widdows sees a raft of challenges that the industry will have to face. For example, earlier this year, the company implemented a 5 per cent rise in the price of its baked beans because US bean plantings had fallen almost
50 per cent as farmers switched to corn ethanol production on the back of US subsidies.

Widdows says the company is actually fairly recession-proof as downturns in the economy don't affect the sales of the staples they supply, but he does outline clear challenges faced by food companies from commodity cost increases of an unprecedented level in the past 12 months.

But while the challenges remain, the team under Widdows at Heinz Australia is on a roll.

"The results we are achieving are those of the combined ability of 800 people, and that's the difference between a good and a bad culture."