Simplicity is hard work at Kraft

There’s nothing simple about reorganizing a company the size of Kraft Foods into a company that’s ready to grow.  But executives from companies of any size can pull some great nuggets from an article in the Autumn 2009 issue of Strategy+Business magazine.

It's tough to Organize for Growth with this many brands
It's tough to Organize for Growth with this many brands

Written by 11 leaders involved in the “Organizing for Growth” initiative that started back in 2007, Inside the Kraft Foods Transformation outlines why the company decided to simplify reporting structures to give its newly reorganized business units more direct lines of responsibility.  Many of the stories in this piece won’t be useful to my readers either because their companies are too small or because you need decisions like these to be made at the very top of large organizations.

But here are a few things that can apply to companies of all sizes.  Like many companies, Kraft was a metrics-heavy organization, which can make it difficult for leaders to quickly prioritize what is most actionable.  This is particularly true in situations where one unit’s metrics conflict with the metrics of another business area.

So Kraft streamlined the data and created scorecards with less data in a far more understandable format.  Like many companies, Kraft used green to highlight areas where a business was performing as expected, yellow to identify emerging problems, and red to flag areas requiring immediate focus.  The three main measures — which were picked to align with shareholder value — were organic revenue growth, operating income growth, and cash flow.

“I think most people would agree the scorecards have been a big change for the better,” said Brian Davison, vice president of strategic planning.  “Before, we had a culture where, as a business unit manager, you’d want to prepare yourself to be able to answer any question.  Now, to a great extent, you know what’s going to come up in your monthly performance meetings.”

Recognizing that decentralizing the reporting structure could reduce communication among business units and perpetuate the historical failure to share best practices, Kraft also created category-exclusive teams (e.g., their various international chocolate businesses) and collaborative networks to share best practices.

As I reflected on this change, I saw a huge missed opportunity from my past job overseeing Bank of America’s credit-card relationships with alumni associations and athletic departments.  Even though I think we did a great job encouraging account executives to share best practices among the U.S. schools, I realized we never considered that kind of communication with our counterparts in Canada, the United Kingdom, and Spain.

You can feel how difficult making these changes were at Kraft, the internal battles and the struggle to get people to change the way they approached their jobs.  But nobody every said Simple was easy.  It’s a big reason I call the process Bulldog Simplicity because it takes energy, persistence, and tenacity to break through the barriers to get things working the way they should.

What do you think?  Are there places in your organization where you can simplify your scorecards or communicate more efficiently with like organizations?

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