The Nestle Organizational Structure Case Study

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Executive summary

Nestle is a multinational company that is involved in manufacturing products, in the nutrition, health and wellness industry. Since its establishment in 1886, it has undergone through several changes which its CEO, Brabeck-Letmathe, says are steady and well calculated. A recent change is use of GLOBE, system Codification-Based Strategy, in information use and sharing.

It was meant to improve productivity, efficiency and increase the quality of customer care services. This system changed the way information is accessed, used and shared among employees in various departments all over the world. This system called for a change in the way employees related with management and vice versa which necessitated a change in the organizational structure of the company.

In this report I take a brief look at some of the changes that have occurred at Nestle over the years and the current change due to GLOBE system and the need for it. The structures of the organizational changes that occur at Nestle are discussed in detail.

This process presented challenges for the implementers and Nestle in general since it was met with resistance and delay. This was countered with intensified campaigns to create awareness and lobby for the changes. Finally, an action plan of the change management activities in Nestle is outlined detailed what will be done in each program, who will do it, for how long and the cost to the company.

The Nestle Change Management

Nestle is a multinational company that is involved in manufacturing products, in the nutrition, health and wellness sector. The buzzword in nestle is ‘good food, good life’ which summarizes its mission of providing their consumers with a broad range of food and beverage products for all events that are the best tasting and most nutritious.

Another buzz word for Nestle is ‘creating a shared value’ which Broeckx, (2007) explains means that the corporation creates and pursues long term sustainable value in actions, strategies and processes to all stakeholders be it consumers, communities, shareholders, employees and business partners.

Beside these, are the corporate, business principles where the company outlines its culture, which has been in use for more than 140 years, and are a manifestation of Nestlé’s thoughts on fairness, honesty and long-term thinking (Nestle, 2011).

The company was founded in 1866 by a Swiss national, Henry Nestle in Vevey, in Switzerland. During this time, marketing of products outside the country was through sales agents. This, however, changed in 1900s when the company started buying subsidiaries in foreign countries. In America, the company launched its products after the First World War in response to increased demand for dairy products.

This was done through acquisition of existing factories, and soon after the Second World War, many executives in the Vevey headquarters were transferred to the country. These moves were part of the changing strategies to increase efficiency and productivity for the company (Douglas & Craig, 2009).

The first major change came in 1974 when the company bought majority shares in the cosmetic giant L’Oreal. This was a well calculated move to increase the company’s growth and diversification. The company was criticized for investing in a company that was debt ridden, but soldiered ahead.

The second major change was in diversifying to the pharmaceutical industry by buying a U. S company, Alcon Laboratories, who were makers of pharmaceutical and ophthalmic products. Many other changes came in the 1980s and 1990s when financial improvement through strategic acquisitions and diversifications.

This necessitated the sale of non-strategic and nonperforming businesses while acquiring others such as the 1984 acquisition of Carnation (Nestle, 2011).

Today the company is continually restructuring its business with an annual budget of $3000 million set aside for this. Nestle CEO, Brabeck-Letmathe says that steady and well calculated change is what Nestle implements and does not do this as a fashion thing but as a well thought long term strategy.

He implemented a complete overhaul of the executive board and replaced them with 10 new executives so as to build on the company’s strength something that has guides the company’s organizational changes. Nestle managers’ commitment is what keeps the company steady with their “steeped in Nestle corporate culture” which orients them to focus on the long term goals of the company rather than short term profits.

This corporate culture also established the company’s major strengths such management of corporate growth and its relation to technology. The executive focuses on strengthening and upholding the company’s strength, as opposed to their completed overhaul (Broeckx, 2007).

The most recent change has been on using and sharing information which gave birth to the Codification-Based Strategy of which nestle chose GLOBE. This connects all Nestle departments around the world, and makes company information accessible to all its employees.

This makes information available to all employees and, therefore, no one is more important than the other due to the information he has that others do not have. Information is power, as it allows communication flow between people in the company. However, in order to access specific information or data, one fills request form.

This means employees should be taught how to access and use this information. This also requires a change in the way communication is carried out in the company since the current model could not support the change in information sharing (Nestle, 2010).

The nature of change

As we have seen above, in order for an employee to access specific information or data, one fills request form. This means employees need to be trained on how to access and use this information. Further, the old organizational structure has to go, which in this case was the top-down approach.

Top-down organizational structure used in Nestle had several limitations; professional development followed a vertical manner within a function which does not encourage networking, communication is done through the ranks which do not encourage contribution from employees, cooperation was shadowed by competition and the obedience orientation which discourages initiative (Broeckx, 2007).

This change in the organizational structure will need management strategies to allow employees to cope with change and contribute to the organization’s goals as they are now empowered.

The organizational structure changes that were implemented in Nestles the structurally changing processes approach that involved making substantial changes to the existing organizational structure. This meant that every employee will be oriented to focus on the changes introduced by GLOBE.

This is in line with the corporate ‘Untouchables’ or strong points of the company that focuses on strengthening its strengths and the role of technology in the company. The GLOBE system was meant to improve productivity, efficiency and increase the quality of customer care services, therefore, need to position the organizational structure to meet these needs (Chaudron, 2006).

The structural approach to managing change was implemented by forming steering committees of senior managers to appoint a multidisciplinary team that will design which actions to be taken in order to realize the goal of the company using this new change in information access.

The team assessed the culture of the company, the system used, and the conditions prevailing in the company and came up with recommendations for action which were reported to the committee of senior managers.

The recommendations focused on things such as self-directed work teams, pay for information and restructuring the company away from traditional roles to focus more on the products, customers and geographical point of reference (Management Decisions and Research Center, 2000).

The advantages with this structure as explained by Chaudron, (2006) are that major issues arising in the company are dealt with upfront as opposed to being postponed to the next meeting or such, some aspects of the company such as direct communication flow from marketers to production and finance department improved the productivity of the company and showing the employees that the company really wanted to change the way the company is run.

The disadvantage is that too much information was being revealed to employees and managers felt as if they were losing their bearing or that their power was being taken away from them (Durant, 2008).

Change structures

A traditional hierarchical, pyramidal organizational structure is what existed in Nestle before the GLOBE system was introduced. This system cannot function effectively and efficiently in such a structure. In order for nestle employees to match their goals with that of the company, share ideas with the management, act proactively and collaborate in making the goals of the company realistic, this structure had to change.

Furthermore, the new system of sharing information required highly skilled and informed employees who will no longer need to be supervised. An organizational structure named ‘Nestle for the future’ was implemented (Chaudron, 2010).

This structure focused on addressing four things that were identified as an impediment to organizational management; align employees’ goals with those of the company, utilizing employees’ insight and action, enhancing cooperation and encouraging employees to be proactive.

To divert the employees towards a performance way of life, a program with five parts was then formulated. These programs were implemented simultaneously (Cummings & Worley, 2008).

The flat and flexible structures

This involved dismantling the pyramidal structure and replacing it with a non-pyramidal structure that focused on networking between management and employees. This reviewed structures and retained fewer hierarchical levels worldwide that allowed flexibility and quickness in responding to issues while still sustaining its growth (Cummings & Worley, 2008).

Inspiring management

A review of how management related with its staff showed that action was needed to encourage contributions and cooperation from the staff. This had to start from the way management saw the staff and in regard to this two programs were developed; Nestle leadership program and the grow people program.

Nestle leadership program

The leadership program was done on four bases. These include change had to start with leadership at the top level managers needed to accept they can improve, outsourcing for the program providers and program to be based on feedback from those working close to the managers, colleagues, superiors and subordinates (Carley & Hill, 2009).

Grow people initiative

This involved changing how people were assessed. These new developments were on the basis of cooperation, promotion of personal development and sharing of the information. This changed the way managers assessed by people by just ‘judging’ them as if they are not involved themselves to making them committed developers of people.

A progress and development was introduced for this purpose. The traditional rating model, which focuses on the past rather than the future, was abandoned (Pries-Heje, 2005).

Long-term development

This was aimed at developing long-term careers not in the previous silo thinking model but in developing talents, and skill in a structure which is flexible and responsive to specific talents of skills. Previously careers moved in a vertical manner within one function which was not sensitive to talents and geographical integration.

This was made possible by the network structure, and a talent pool was established which has more than 2000 names from across the globe (Broeckx, 2007).

Dynamic compensation

The new career paths were important, to achieve this, the flattened organization was structured through creation of a new remuneration model. This model allows staff to raise their salaries without the need for promotion.

This involved laying down concrete measures for measuring pays and compensations which encompass not only past achievements but also long term incentives. In addition to this, a long-term incentive plan was introduced (Broeckx, 2007).

Lifelong learning program

This program involved ensuring continuous education and learning experiences for employees which is very important in the ‘Nestle for the future’ strategy. This is in line with nestles philosophy of continuous learning (Cummings & Worley, 2008).

Challenges in the Nestle Change Management

Resistance to change by some managers was a major challenge the ‘nestle for the future encountered where some managers had problems with various aspects of the program. The elimination of the rating system for staff to be replaced by the progress and development guide was too much for them.

They argued that, rating employees drive performance, but Nestle is for long term growth not short tern profits. Those that were unable to cope with this quit, while others were given early retirement. It, however, slowed down implementation of the program in some regions. The program was eventually embraced wholly when it benefits were understood and working become more exciting (Broeckx, 2007).

Delay in program implementation was experienced. This was caused by the managers resisting the changes that were introduced. Though various aspects of this program were meant to run simultaneously, this was delayed for close to two years as the program was viewed with a lot of skepticism and others felt threatened by the changes.

The steering committee composed of the senior managers and the team of employees carried out a vast campaign which included visiting different regions and affiliates and giving presentations on the changes and the benefits to be accrued besides other forms of communication.

The Progress and Development Guide, which had brought a lot of issues was put on the website and operated there so as to aid its implementation (Cummings & Worley, 2008).

The unwillingness of the management to share their skills and gifts with other regions, functions and businesses was an impediment that was encountered in the process of implementing the process. In the flat and more flexible model, networking is the core word which means increased communication and sharing of information between the above.

This took three years to see anything substantial which delayed the long-term learning aspect of the program. Communication was intensified through various channels until people were comfortable with the program (Carley & Hill, 2009).

Action Plan

Program aspect	Activities	Actors	Timeframe	Cost in US dollars
Designing and implementing flat and flexible structures	Design fewer management level Seeking contributions from various actors	Senior steering committee Multidisciplinary team Employees and managers	1 year	$10 million
Inspiring management Nestle Leadership programNestle grows people initiatives	Carrying out self assessment program for managers Interviewing a section of subordinates, colleagues and superiors of managers in the self assessment programDeveloping Progress and Development guide activities for employees Organizing seminars, workshops for employees	Managers A training and development company Steering committee Multidisciplinary team Managers Employees Training and development consultant	Long-term (5 years) Long-term (5 years)	$125 million $250 million
Longlife development	Establishing horizontal career paths Establishing levels of networking Mentoring programs Identifying talent and developing it	Training and development consultant Human resources department Steering committee Multidisciplinary team Employees managers	Long-term	$100 million per year
Dynamic compensation	Developing a new remuneration model Carrying out various communication activities	Human resources department Steering committee Multidisciplinary team Finance department Nestle Workers union	Short term (1 year)	$50 million
Lifelong learning	Establishing the learning and education needs for the company Compiling and maintaining a database for Nestle talent pool Mentoring program for young talent to be included in the talent pool Identifying talents need for Nestle Identifying and establishing horizontal career paths Establishing review criteria for talent pool and succession plans	Training and development consultant Human resources department Steering committee Multidisciplinary team Employees managers	Long term	$70 million per year

Reference List

Broeckx, P., 2007. Perspectives for Managers. In R. Hooijberg, J. Hunt, J. Antonakis, & K. Boal, Being There Even When You Are Not:Leading Through Strategy, Strctures and Systems (pp. 96-106). United States of America: IMD International.

Carley, K., & Hill, V., 2009. Structural Change and Learning Within Organisations. United States of America: Carnegie Mellon University.

Chaudron, D., 2010. Begin at the beginning in organizational change. Organized Change Consultancy. Web.

Chaudron, D., 2006. Organized Change: A Tale of Three Vilages: Approoaches to Implementing Organisational Change. The Business Forum, 43-48.

Cummings, T., & Worley, C., 2008. Institutionalizing Structural Change at Hewlett Packard. In T. Cummings, & C. Worley, Organisational Development and Change (pp. 208-216). United States of America: Cengage Learning.

Douglas, S., & Craig, S., 2009. International Brand Architecture: Development, Driver and Design. New York: New York University.

Durant, M., 2008. Managing Organisational Change. United States of America: CCE, CPA.

Kezar, A., 2001. Understanding and Facilitating Organizational Change in the 21^stCentuary: Recent Research and Conceptualizations. United States of America: john Wiley & Sons.

Management Decisions and Research Center., 2000. Organisational Change. Washington, DC: Department of Veteran Affairs.

Nestle., 2010. Current Situation. Web.

Nestle., 2011. History. Web.

Pries-Heje, J., 2005. eGovernment and Structural Reform on Bornholm: A Case Study. Electronic Government: 4th International Conference (pp. 124-145). Coppenhagen: university of Coppenhagen.

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