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Henkel: Building a Winning Culture
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Question 1: Write down in a sentence or two your definition of

winning culture.
A winning culture is all about creating a competitive and innovative mission that
effectively communicates its employees the path for success and the values that
help to excel in its area of business.

Question 2: What do you like about Rorsteds approach?

Rorsteds words and actions were aligned and in tandem with each other, which
forms an important characteristic for being a leader. He rightly identified the
required ingredients for winning culture. They are:
1. Achieve full business potential
2. customer focus
3. Strengthening of global team.
It established a clear focus and rendered the necessary change required in the
Henkels vision statement and the values that need to be focussed on to become
a leader in the market. This focus also helped the organization in implementing
the new performance management system by reducing the number of values
and the KPIs in the performance management system and also increases
accountability. Rorsted knew that in order to ramp up the performance of the
company, he needs to communicate a clear long term strategy with a set of
measurable objectives backed by setting specific targets. Hence he announced
the following targets to be achieved in the next 3 years:
1. Increase in pre-tax margins to 14%.
2. Above average EPS and Sales
3. The market share in the emerging countries would be required to rise from
33% to 45%
He communicated these objectives very clearly and thus formed a coalition
among all the employees including the top management to create a winning
culture.
In order to achieve these objectives Henkel needs to focus on markets and
products with potential for sales. Henkel had more than 1000 brands and 200
production sites across the globe and three separate business units. The
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company needed to cut a number of brands so that the marketing resources can
be focused on the strongest brands. It was also required to consolidate the
manufacturing sites, lay off performing but non-cooperative employees in order
to achieve this herculean task. Rorsted took these tough decisions in the light of
greater good.
Rorsteds approach that leads to the change in the way the company operated:
1. A sense of urgency:
He announced the targets to be achieved in next three years to public,
thus setting the objectives and the targets to be achieved.
2. Formation of a Coalition:
Involved every employee of the organization in the change process to
create a winning culture that made every department and employee to
work towards a common mission.
3. A new changed vision statement:
He changed the vision statement focusing on the values that mattered the
4.

most and which conveys the change that is expected to its employees.
Communicating the Change:
Vision and Value workshops were conducted by line managers in over 60
countries. A 360 degree communication campaign was launched to

communicate the new vision and values.

5. Remove Obstacles:
He took tough decisions to close some factories and brands.
6. Short term Goals:
The short term goals of the company helped the employees to see where
the company is heading towards. The performance management system
too helped the employees to realize their position in the company.
7. Focus on the goal:
The focus was on the long term goal of 14% EBIT margin by the end of
2012 and didnt get contended even when the company EBIT touched
13.7%..
8. Anchor the changes in your department culture:
He changed the core of the culture by redefining values and implementing
new performance management system. The face to face interaction with T
category employees and getting feedback from them personally led to
increased motivation among the employees.

Question 3: What are the risks?

1. Performance deterioration :
Since the bonus were related to the overall performance of the team
rather than individual performances, a good performer might end up

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getting low bonus when his/her team didnt perform up to the mark. This
would lead to deterioration of the performance of the star performers.
2. Loss of not bad employees:
The frame of orientation ranking system required 5% of the employees
to be in L category; so, even if there were no poor performers the bottom
5% of the M category performers would be categorized into L. This
would lead to excessive pressure on the employees as they would feel
insecurity regarding their jobs which would affect the company in long
term.
3. Risk of lobbying:
Since the employees would not want to be in the bottom 5%, they could
use unfair means to please their manager. This system can thereby end up
encouraging blame game and lobbying.
4. Emotional disconnect:
The new system forced the employees to move out of their comfort zones
and no one really likes to accept such changes in the system. Hence, this
system was not very popular amongst the employees which would
encourage them to seek new opportunities.
5. Time consuming:
More than 400 Sessions were held to help employees appreciate the new
vision statement and understand the relevance of the new system. These
sessions consumed the entire day of the employees which resulted in the
loss of their productive time.

Question 4: Assuming that the 2012 EBIT goal is achieved, how

should Rorsted motivate high performance for the next five
years?
Assuming that 2012 EBIT goal is achieved, the following actions can help Rorsted
to motivate employees for high performance during upcoming five years:
1. The bonus i.e. the variable salary should have individual performance as a
component, which would ensure good performance by the hard working
employees and keep them motivated to perform better.
2. Defining the employee goals at the beginning of the appraisal cycle would
help the employee to understand what is expected from him so that he
can work in the right direction. This would also bring transparency in the
appraisal system as the employees would know if they have or have not
met the expectations.

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3. Providing feedback at regular intervals would help them know their current
position with respect to the goals set and also guide them in the right path
and excel in their careers.
4. Employees should be rewarded and recognized on doing some exceptional
job and on meeting the expectations which will foster their desire to
perform better or even exceed the expectations.
5. The top management should have meetings with the immediate managers
of the employees to understand the issues faced by them and also
address

the

urgent

ones

immediately.

This

would

help

the

top

management to do away with issues faced by low performing employees

and maintain the emotional connect with all the employees.
6. Employees should be given opportunities to try move cross functionally so
that they explore themselves. This would ensure overall development of
the employees and help the poor performers to excel in new direction
where they can turn out to be star performers.

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