Analysis of the Organisation and Leadership of Unilever

Analysis of the Organisation and Leadership of Unilever 1- Introduction This report offers an analysis of the current organisational structure and management approach of the senior management team at Unilever, a multi-national organisation that produces and distributes many well-known consumer products. Recent years have seen the organisation undergo massive transformation, and they have reduced their workforce by some 41% over the last ten years (Unilever, 2010). They are dual-listed in the Netherlands and the UK, but operate as a single-entity with the same board and senior team. This structure offers them flexibility and adaptability across the globe, and also efficiency in production and distribution. It will draw on the theories of eminent scholars such as Taylor (1999) who proposed the theories of increased organisational efficiency by utilising an appropriate management structure, and also highlight how the internal structure of the organisation is influenced by external environment and organisational structure. This report will consider some of t he recent changes and challenges, which have faced Unilever, and provide and analysis of the likely future challenges facing the organisation. 2- Organisational History Unilever is one of the largest businesses in the world, with an annual turnover of nearly  £40 billion and in excess of 179,000 employees globally (Unilever, 2010). It was formed in 1930 as the amalgamation of the UK soap company Lever Brothers, and the Dutch margarine company Margarine Unie. The main driver for the merger was collaboration, as both companies relied heavily on palm oil as a major ingredient for their products and by sharing resources they were able to import and distribute to their factories far more cost effectively (Unilever, 2010). Indeed, palm oil remains a major ingredient for many products toady, and their continued commitment to sustainability and efficient distribution is one of Unilevers core corporate strategies (Dhillion, 2007). The growth of Unilever has been characterised by mergers and strategic acquisitions, not all of which have been friendly (Polsson, 2008), and their brand portfolio exceeds 400 and includes a wide range of consumer goods, ranging from foods and beverages to personal care products and cleaning products. They are listed on both the UK FTSE 100 and the Dutch equivalent the AXE, and they have 13 brands which generate revenue of over à ¢Ã¢â‚¬Å¡Ã‚ ¬1 billion per year. The portfolio includes such well-known brand names as Walls, Ben and Jerrys, Dove, Lipton and Flora, and as can be seen from the few names mentioned, they are both diverse and equally powerful brands and market niches. They are also the largest ice-cream manufacturer in the world, controlling some 73% of the worlds ice cream production and generating revenue of à ¢Ã¢â‚¬Å¡Ã‚ ¬5 billion per year alone from ice cream sales in Europe. Unilever have been able to make sales particularly profitable and efficient through centralisat ion of their brand under the heart logo, meaning that they were able to manufacture and distribute under the same brand across Europe with minimum customisation for local regions (Unilever, 2010). Unilever has also built strong links with its subsidiary businesses around the world for its teas and coffees, as much of the raw material required for food stuffs is sourced from African and Latin American countries, such as cocoa, vanilla, palm oil and coffee beans. To reach the size and level of diversity that they now control, Unilever have sought to acquire a further brand or manufacturing interest at the rate of approximately one per year for the last ten years. Such significant activity in terms of corporate diversity and consolidation makes for an interesting topic of study. (Full timeline of activities available in appendix 1). 3- Organisational Structure Considering the size and scope of the organisation it is understandable that they must operate within a defined framework, and as noted by Cummings and Worley (2005:136-138) the sheer size of the company can expose them to the risk of paralysis and stagnation as they are too large to respond flexibly to external challenges. Therefore Unilever have explicitly set out to create a management structure, which is capable of making faster decisions and responding more flexibly to external stimulus. Accordingly Unilever has created a four-tier hierarchical structure, which helps to funnel information into the business, and allows the senior team to make appropriate decisions based on available data (Unilever, 2010b). The structure of the executive team is set out in the diagram below:- Figure 1:- Corporate Structure of Unilever, adapted from Unilever (2010b) According to Unilever, they believe that this structure gives them suitable balance between corporate governance and organisational flexibility. Each level within the hierarchy serves a different function allowing the other levels of the organisation to concentrate on their core roles. Therefore the two executive directors; Paul Polman (Chief Executive Officer) and Jean-Marc Huà «t (Chief Financial Officer) serve as figureheads for the company. Their leadership styles and approaches will be discussed in more depth below. The ten non-executive directors serve as the independent element in Unilevers governance (Unilever, 2010a) and are drawn from a wide range of backgrounds all having huge experience and expertise in their respective areas. They are both internal and external to the organisation to help provide check and balance in their operational views and it is interesting to note that the board is very rare in having such a relatively high proportion of female NEDs at 30% (Black, 2003:236-238). The Unilever Executive (UEx) is responsible for managing profit and loss, and delivering growth across our regions, categories and functions (Unilever, 2010a). It comprises ten operational and executive directors all of whom have exceptional qualifications and experience in the fields of science, technology and business. Unilever has also taken care to ensure that the full cross-section of their multi-disciplinary functions and multi-national breadth are represented on the board, with several nationalities being represented. Finally, the three senior corporate officers are responsible for ensuring that the board of Unilever (both executive and non-executive) have all the necessary information to make prudent and timely corporate decisions on both an operational and strategic basis. The senior corporate officers are tasked with ensuring that the structure and framework of Unilever is returning suitable management information on which to base critical decisions (Unilever, 2010a). 4- Organisational Culture Organisational Culture has been defined as the specific collection of values and norms that are shared by people and groups in an organization and that control the way they interact with each other and with stakeholders outside the organization, (Hill and Jones, 2001:27). This definition also helps us to understand the values of the organisation and how they seek to lead and develop their business. Organisational culture is complex, and can be influenced by a huge variety of factors as noted by Hofstede (1980) who identified the influenced and effects of multi-cultural workforces within multi-national environments. He proposed a theory of cultural dimensions which he used to help explain how multi-cultural influences act upon an organisation with regard to strategic application as discussed by De Wit and Meyer; Hofstedes (1993) theory of cultural dimensions implies that although not all the individuals within a countrys population will have exactly the same characteristics, the cultural dimensions will colour the institutional and administrative arrangements that are made within the country, and will set the norms for behaviour. Hofstede, G. (1993) Cultural constraints in management theories, in De Wit, B. and Meyer, R. (2004) Strategy Process, Content, Context, 3rd Edition, Thomson, London pp206. This is strongly evidenced at Unilever where the culture of the organisation is derived from its own multi-national background. This has influenced the process of strategic decision making at Unilever under the systemic approach advocated by Whittington in his work What is strategy and does it matter? (2000). Whittington proposed that organisations in the same circumstances as Unilever would do well to adopt what he described as a systemic approach. In this model the organisation should seek to create a hybrid of processual or delineated strategy on the basis of organisational objective, but that the approach should be tailored or tempered by a respect for cultural differences. Whittington observed that organisational culture is governed by the social structures created by management level, social class and interest groups, and that trying to cut across these groups in certain localised areas was likely to create excessive tension and achieve very little (Whittington, 2000:185-189). It is therefore interesting to observe the influence and effect of Paul Polman as the first external candidate to take the role the Chief Executive Officer. Paul is a Dutch national and has held the role since October 2008. His background and experience in the commercial goods and manufacturing sectors make him an ideal candidate for the role, as he is both financially astute and commercially aware. From the analysis of the company and its operating ethos and mission it can also be implied that his management style is European-influenced and therefore likely to be reflective of an inclusive culture and style in that it is both democratic and laissez-faire (Morgeson, 2005:497-508). Alternatively under the Tannenbaum and Schmidt continuum (1957) it can be suggested that Paul Polman allows freedom of his subordinates to pursue suitable corporate strategies on the basis of their capability and the application of democratic decision-making. Paul Polman succeeded Patrick Cescau as the Chief Executive Officer of Unilever. Patrick Cescau was the former CEO of Unilever and the first group CEO for the company. He is a French national with numerous accreditations to his name and an extremely successful history at Unilever. As reported in the Telegraph (2008), Unilever searched long and hard for a suitable successor to the position and eventually felt that Paul Polman would be a suitable candidate given his own background, capabilities and skills. This was a departure for the Anglo-Dutch company as they had never previously taken an external candidate for the position, preferring to recruit internally. Although Patrick Cescau formally stepped down from his role following his 60th birthday (the main reason for him to leave the post), he has continued to play an active role in corporate life and now serves as a non-executive director to another large multi-national firm. Patrick Cescau was known across the world for his work in regard to sustainability and business growth, and he has proved a hard act to follow (Insead, 2010). 5- Specific Issues It is useful to compare and contrast specific issues at Unilever and the various approaches which the board of directors have taken when addressing these situations, particularly with regard to the work of Patrick Cescau and his approach to corporate sustainability and social responsibility. Indeed he is quoted as having said that There is no dichotomy between doing business well and doing good; and, in fact, the two go hand in hand. (Insead, 2010). Thus, this element will consider some of the current issues facing Unilever and how they will seek to address them. 5.1- Approaches to Corporate Social Responsibility As noted on the corporate website (Unilever, 2010c), Unilever have a strong commitment corporate social responsibility and sustainability and they have adopted a specific and targeted set of measures and key performance indicators to benchmark their own sustainability performance. It is recognised by scholars such as Atkinson et al (2007:66-68) that there is currently no uniform approach to sustainability or any codified measures of best operational practice. This is despite increasingly stringent legislation which seeks to set out minimum performance standards and has been applied on very few occasions save for flagrant breaches which have resulted in catastrophic consequences (Constanza et al, 2007:203-210). Unilever state that their approaches to Corporate Social Responsibility incorporate business benefits as well as ethical principles (Unilever, 2010c). By this they mean that they have continued the work started by Patrick Cescau seeking to align business activity and ethical ac tivity. They have chosen to apply sustainable principles to as many areas of possible in their business on the simple premise that sustainability makes good business sense. Therefore they have engaged some of the most innovative principles in research and development, agriculture, packaging and manufacturing as they believe that sustainability helps [them] win (Unilever, 2010c). The Unilever website offers several examples of successful case studies where sustainability has proved to be of great business benefit amongst both internal and external stakeholders, and the board of Unilever also recognise that this can only be achieve by impeccable business performance and adherence to best principles in their own right. 5.2- Reputation Management and Diversity Contrastingly it is also useful to consider some of the more controversial activities, which have been undertaken by Unilever in their recent history. Unilever have been accused of causing deforestation by campaigners such as Greenpeace because of the use of palm oil, a major ingredient in many products. In consequence Unilever have committed to sourcing all of their palm oil requirements sustainably by 2015 (Unilever, 2010d). This principle has also been applied with regard to their requirements for tea leaves for their Lipton and PG Tips brands (Unilever, 2010c). Unilever recognise that because of their level of consumption of these raw materials and their need to invest in sustainable practices they will need to work closely with bodies such as the Rainforest Alliance to form synergies, which are beneficial to all stakeholders. However Unilever have a strong commitment to positive diversity as evidenced by their localised products and marketing campaigns, which are specifically aimed to meet the needs of consumers at a localised level. This includes specific beauty products for various nations in response to consumer demand. Examples of such positive diversity can be found in Indian advertising for skin creams (Telegraph, 2007). Although there was some adverse reaction to the advertisement it is also recognised that the product met a considerable demand in India and there was also some evident confusion at a localised level as to why the product might not be required. When compared to the Dove brand real beauty campaign which Unilever have managed since 2007 (Dove, 2010) it can be seen that there is a strong demand for localised product management and positive diversity, which Unilever have responded to. This has helped their own reputational and brand management and has enabled them to react rapidly to con sumer demand, which has served to strengthen their corporate and market position. 6- Management and Leadership Approaches at Unilever Netherlands There are several theories, which can be used to help understand the relationship between managers and employees within an organisation. This element of the report will consider three of the main theories put forward by leading academics in the subject, via Taylor (1999) Maslow (1992) and Fayol (1999). Each of these theories addresses a different aspect of the employee management relationship as will be discussed. 6.1- Taylor and Scientific Management Taylor (1999 cited in Matteson and Ivancevich), identified that to achieve maximum efficiency and effectiveness within an organisation it is necessary to synthesize workflows (1999:12-15) to ensure that there is alignment between resource availability and organisational requirements. Taylor suggested that by measuring and monitoring these objectives and setting out clear processes and procedures for employees to follow, it is possible to significantly increase labour productivity and effectiveness. The cornerstone of Taylors theory was centred on adhering to best practice processes to minimise waste and maximise productivity. Taylors theories were developed whilst observing car production plants, and there are close analogies with regard to the production flows of manufacturing in the Unilever plants. As each of the manufacturing plants owned and operated by Unilever produces products and foodstuff, which their consumers will either ingest or use for personal care, the manufacturing must be of the highest standards and quality, with rigorous safety and quality checks at every stage of the process. Unilever have therefore developed and implemented a robust series of controls, which enables them to manage and monitor every part of the production process, and also standardise it across their estate. Such is the level of control exerted by Unilever, that in theory it should be possible to take an employee from a UK manufacturing site and exchange them for an employee from a Dutch manufacturing site, and they should each be capable of performing the necessary roles and functions (Unilever, 2010). Critics of Ta ylors approach such as Daft et al (2010:26), argue that the forced level of direction engendered by the Taylorist approach de-skills and de-motivates employees who effectively become machines who are dehumanised. This is a particularly so on production line, as there is a requirement for absolute conformity as opposed to creativity and individualism. It is a perpetual challenge for Unilever to maintain the interest and enthusiasm of employees who perform repetitive jobs such as those that will be required for a significant proportion of the Unilever workforce. This is something, which was acknowledged and addressed by Maslow (1999, cited in Strage), who noted that employees require more than simple fiscal reward to remain motivated. This has been noted and observed by the management team at Unilever, and when their management approach and corporate culture is applied to the Tannenbaum and Schmidt continuum, as cited in Matteson and Ivancevich, (1999), it can be seen that although so me level of authority must be applied to ensure consistency of process, many of the Unilever employees have a far greater level of freedom and creativity to offer innovative suggestions for product and process improvement. 6.2- Maslow and the Hierarchy of Needs In contrast to Taylor, the Maslow school of thought discusses tools and techniques to help managers to motivate and empower employees to perform to the best of their ability. Maslow (1999, cited in Strage) discusses the hierarchy of needs model, whereby he identified that it was not simply money that motivated employees to work, but many other factors contributed to the desire of employees to perform to the best of their ability. The diagram below outlines what Maslow has identified, in that as each level of need is satisfied, the individual moves up the pyramid to satisfy the next need in the ranking. Figure 1: Maslows Hierarchy of Needs (1999). As Maslows theory suggests, once the basic needs of financial reward for work have been satisfied sufficient to meet the demands of paying bills, then an employee looks for other motivations to come to work, such as feeling valued by their employer, and having their work and achievements recognised. It would seem given that there have been no recent publicised disputes between employees and leaders at Unilever that employees are satisfied with the both the pay and recognition which they receive from the management team. As Maslow noted, once the basic needs have been satisfied, the need to be accepted and to belong is a powerful human motivator. This is closely linked with reward and recognition for work that has been done well or is particularly innovative. Some theorists such as Hackman and Wageman (2005:269) refer to this as celebrating success. They suggest that if major achievements which have been made possible by the co-operative work of the team are celebrated and recognised, this will go on to motivate and encourage employees to continue to perform. Unilever have recently won awards for innovation and environmental achievement (Unilever, 2010), which they were keen to share with the rest of the business, as the entire firm will benefit from such a positive approach (Morden, 1996; McGovern et al, 2008). 6.3- Fayol A third perspective on matters of management and leadership approach is that put forward by Fayol (1999 cited in Matteson and Ivancevich), who similarly to Taylor subscribed to a scientific theory of management. He proposed a general theory of management, suggesting that managers had six primary functions and fourteen further principles of management. In contrast to Taylor, Fayol proposed a far more interactive approach to management techniques, which suggested that process controls were in fact best designed by those people who performed the work every day (ie, the workforce). Fayol argued that if management interacted closely with the workforce and understood their needs and concerns, they would be far better placed to gather feedback about systems and processes and make the necessary efficiency changes. It would seem from the success and growth of Unilever as a multi-national conglomerate that they have been particularly successful and following these principles and instilling a c ollaborative approach which harnesses the power and knowledge of the workforce and uses it to further the growth and development of the business (Fayol, ibid). Examples of this include working with employees to indentify and implement efficiency savings, and also generating a culture of continuous improvement, which builds a self-perpetuating cycle of success (Judge et al, 2002:770-775). When considering these findings in the light of the Blake and Moulton Leadership grid (1964), it can clearly be seen that the leaders at Unilever are at the inclusive and collaborative point on the scale as termed the sound style (previously known as tem style). At this point they have equal concern for both production and people as they recognise that to deliver consistently excellent products they must have committed and motivated employees. According to Blake and Moulton (ibid), this leadership style relies on managers recognising that employees must feel as if they are a highly valued part of the organisation, a theory that is closely aligned with that of Maslow who observed that those employees who produced the best work felt that they were suitably rewarded for their efforts. Moreover, as increasing numbers of organisations recognise the benefits of adopting a collaborative and co-operative approach to achieving organisational excellence, current management theory would indicat e that the days of dictatorial mangers are on the decline (Den Hartog and Koopman cited in Anderson et al, 2002:166-168). This also seems particularly likely given the increasing legislation to prevent employers from bullying their employees and behaving in an inappropriate manner (Miner, 2009). Application of the Hersey and Blanchards situational theory model (1999, cited in Gabriel et al, 1999) further underlines that the Unilever management style is one of participating and delegating as opposed to telling employees what to do. Unilever is characterised by open channels of communication, and there are points which against the Hersey and Blanchard model the leadership style could be regarded as selling, this is more to do with the differing levels of maturity in various parts of the business, and particularly in those parts which have been recently acquired. It is interesting to set the Hersey and Blanchard model against the backdrop of situational leadership, as it seems that the characteristics of Unilever are a mature and confident group of leaders who are happy to delegate tasks and responsibility, and thus leverage the best from their employees (Den Hartog and Koopman, ibid). Remembering that the board of Unilever has been secure and stable for some time, it is of lit tle surprise that they are able to adopt and react flexibly to change. Moreover, their considerable experience of acquisition allows them to rapidly assimilate and absorb new businesses into the estate, and embraces the culture changes, which must necessarily follow (Simons and Billing, 1995; Spillane, 2004). Despite the size of Unilever, it is remarkable that they are able to adapt so readily to change at both an internal and external level, and across global boundaries. In some ways their sheer size has enabled them to cushion themselves from some of the worst effects of the recession, coupled with the fact that their diverse portfolio requires them to be adaptive and flexible to consumer trends a style which is reflected in both their culture and leadership. 7- Recommendations to Enhance Management Practices As can be seen from the preceding discussions, the senior management team at Unilever have faced some serious internal and external challenges, both at a local level and a global level. Some of these challenges are outside of their control, however in order to ensure that they remain one of the leading conglomerates in the world they must adapt and respond flexibly to both internal and external challenges. This section of the report considers some recommendations to continue to improve employee motivation and engagement by enhancing and improving management practices, and also offer suggestions based on relevant theory as to how the necessary changes can be embedded. 7.1- Recommendations for Strategic Change and Effective Management Practices Although there are few current difficulties with employee relationships, it is apparent that some significant changes still need to be made in order to secure the future of Unilever in the current turbulent economic environment. Whilst they are far from bankruptcy, recent years have seen considerable expenditure and challenge for Unilever, which has centred on the considerable number if divestments and acquisitions in order to strengthen and consolidate their global brand portfolio (Morden, 1996:458-496). The theories of Taylor, Maslow and Fayol all offer suggestions as to how to engage with employees in times of significant change and challenge. Application of the Tannenbaum and Schmidt continuum (cited in Matteson and Ivancevich, 1999) indicates that the collaborative style of leadership has helped Unilever in managing and instilling change, and it is clear that under modern management practices that for them to continue to be successful they must continue to engage and motivate em ployees, especially those who are new to the culture of Unilever and have joined them through acquisition (Hassard and Parker, 1993:43-45). Furthermore, Gergen (1995) concurs with Hassard and Parker (ibid), in those organisations, which operate in a post-modernist world, should take care to adopt appropriate management styles and techniques, or get left behind their competitors in a rapidly changing world. Taking all of these factors into consideration, and with reference to all of the theories which have been discussed and applied, it is apparent that there is a self-perpetuating cycle and culture of success which is supporting the leaders at Unilever to behave in a manner which is highly likely to assist them in developing a robust business which is fit to operate in current times. The collaborative and communicative style of the leaders should be upheld and gently moulded in newer acquisitions to one which is collaborative and co-operative in approach, drawing on the theories of Maslow to help motivate and engage employees in such a way that they provide constructive criticism and feedback on how best to help Unilever develop in the current challenging environment. 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