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Leadership Development and Organization Development within Sara Lee/DE

S.G.A. Tjeenk Willink Utrecht, October 2004

University of Groningen Business Administration Tutors:

Arndt Sorge Ben Emans

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in writing of the author.

Executive summary

The decision of the Global HR Committee of Sara Lee Corporation in February 2004 to point out the leadership development program as a global HR project indicates that leadership development has become a high priority within the organization. In this report the following research question will be answered based on desk research and field research within Sara Lee/DE:

What are the training needs with regard to leadership development within Sara Lee/DE, considering the strategic and structural changes, and what objectives should be taken into account in order to develop an effective leadership development program?

The research objective is to give the Corporate HR department of Sara Lee/DE insight in the training needs with regard to the strategic and structural changes within the organization, and in the way a leadership development program can contribute to these needs in order for this department to be able to develop an effective leadership development program.

Sara Lee Corporation manages her operations through a decentralized structure of business groups and operating companies. In 2000 the company faced the need for some significant changes. Some examples of the realized changes are; the company developed a brand portfolio strategy to ensure that investments are made in brands with the greatest growth potential, the company made a number of moves in each line of business to leverage skills, scale and technology to achieve lower costs. The company combined businesses, created shared services centres and strengthened selected staff functions at the corporate level, and the company concentrated on identifying the best growth opportunities, and on developing the discipline to focus resources on them (Presentation S.McMillan, Chairman’s conference 2003).

Within Sara Lee/DE changes are taking place too. First the Coffee & Tea division will be shortly reviewed and after that the Household & Bodycare division will be shortly reviewed based on internal documents. The objective of the Coffee & Tea division is to realign the organization and processes to deliver; strengthened national product development programs through more efficient use of existing resources, and focusing on ideas with international potential. The focus of the division will be on stronger global brand management, and there will be clear deliverables and responsibilities. To make this new strategy possible, the structure of the Coffee & Tea division has been changed. Since May 2004, there is a new unit Business Development. The Vice President of this unit gets the responsibility and the authority for branding and business development of the division Coffee & Tea. The new organizational structure of the Coffee & Tea division is outlined in appendix 1 (presentation General Managers Meeting, April 21, 2004, Utrecht).

In the Household & Bodycare division changes are taking place too. On July 1, 2003 a new structure has become effective. There is a shift from a local focus to a global focus within the division. Global marketing teams have been established for the brands Ambi Pur, Kiwi and Sanex. Each team is headed by a President Global Brand, who reports to a Regional Vice President. Each President Global Brand will have Profit and Loss responsibility for their brand.

In the new structure there are dual reporting lines. Brand Profit and Loss responsibility are

structured in a matrix-format. The new organizational format of the Household & Bodycare

division is outlined in appendix 2 (presentation Corporate Public Relations Sara Lee/DE, May

2,2003).

According to the interviewed HR managers of Sara Lee/DE there have been no HR initiatives to support the strategy and structure changes within Sara Lee/DE. In the literature it is stated that training activities should help a company achieve its business strategy to contribute to a company’s success (Noe, A., 2002:39). Based on the literature and the interviews with HR managers of the Corporate department of Sara Lee/DE it can be concluded that the current leadership training programs of Sara Lee/DE contribute to individual leader development; the development of intrapersonal and interpersonal skills of the participants. The current training programs are not linked to the business strategy of Sara Lee/DE and do not contribute to organization development. In the literature it is stated that organization development aims to help members of an organization to interact more effectively in pursuit of organizational goals (Noe, A., 2004:443).

A training needs analysis has been conducted to identify and describe discrepancies between the existing performance levels within the organization, and the desired levels. The first part of the training needs analysis; the organizational analysis resulted in the conclusion that training is an useful initiative within Sara Lee/DE given the business strategy, training resources, and the support within the organization. Based on the literature reviewed in chapter six and based on the conducted interviews with HR managers of Sara Lee/DE it can be concluded that the strategic direction of the organization asks for different kinds of managerial behaviour. Collaboration, knowledge sharing, managing relationships, teamwork, balanced decision making, and influencing with limited formal authority are skills that are critical in the new organizational format.

According to the interviewed HR managers of Sara Lee/DE problems have been encountered because of the new organizational structure. For example according to the interviewed HR managers employees do not know how to deal with each other in the new structure because of the new responsibilities. The members of the Boards of Management of the different Lines of Business recognize that because of the strategic and structural changes within the organization there is a need for other types of leadership behaviour. One of the reasons that the leadership development program is a Global HR project is this strong support. The budget for the leadership development program is sufficient.

The Person Analysis has been conducted to identify employees who need training. This involves identifying if current performance or expected performance indicates a need for training (Noe, A., 2002:81). The conclusion based on the literature and the conducted interviews with different HR managers of Sara Lee/DE was that different skills are required of the employees of Sara Lee/DE to be able to operate effectively in the new environment. The performance deficiencies in the organization result from a lack of knowledge, skill, or ability and can be considered as a training issue. Based on the literature it can be concluded that it is important to at least involve top management of Sara Lee/DE in organization development projects, because managers have a big influence on change processes (Schein, E., 1992:316). The management levels A-C should at least be included in the leadership development training program.

Task analysis includes identifying the important tasks and knowledge, skill, and behaviour that

need to be emphasized in training for employees to complete their tasks (Noe, A., 2002:77). The

task analysis has been conducted based on semi-structured interviews with 27 B-E level managers

of Sara Lee/DE. The focus of the task analysis is on competencies because the target group of

the leadership development program is composed of managers that are performing different

kinds of jobs. The competencies that were mentioned by the interviewees most often to be

important for successful performance within Sara Lee/DE are: result orientation, professional

skills, making decisions, knowing the business, establishing and managing relationships, creating,

motivating and developing a team, influencing others, appreciating diversity, set a clear direction, knowledge sharing, change management ability, creativity, commitment to the company, and openness and trust. The outcomes of the different parts of the training needs analysis have been used to determine the objectives of the leadership development training program for B-C level managers. Since the outcomes of the interviews with the 27 B-E level managers are not fully reliable, the objectives have been mainly based on the literature, the outcomes of the interviews have been used to support the conclusions about the training objectives.

In the literature it is stated that tying the training objectives to the gaps identified in the needs analysis is one way to ensure that the training program is effective for the organization and will be salient to the participants (Hughes, R., 1999:100). In the Person Analysis it is concluded that different skills are required of the employees of Sara Lee/DE to be able to operate effectively in the new environment. This is the reason why this training program should be focused on organization development and not on individual leader development like the current leadership training programs of Sara Lee/DE. Organization development programs focus on facilitating change, both strategic and cultural (Noe, A., 2004:443). Based on the reviewed literature and the conducted interviews it can be concluded that the training program of Sara Lee/DE should serve the double purpose of organization development and leadership development. In the literature leadership development is defined as expanding the collective capacity of organizational members to engage effectively in leadership roles and processes (Day, D., 200:1).

In the literature it is stated that an organization is aligned when all employees have a commonality of purpose, a shared vision, and an understanding of how their personal roles support the overall strategy (Kaplan, R., 2004:62). Based on the literature and the conducted interviews it can be concluded that communication and explanation of the strategy, priorities, and related subjects such as roles and responsibilities should be part of the training program.

Behaviour that was found to be important within Sara Lee/DE during the training needs analysis are collaboration and knowledge sharing in an international context. In the literature collaboration is defined as a process through which parties who see different aspects of a problem can constructively explore their differences and search for solutions that go beyond their own limited version of what is possible. Collaboration processes enhance the potential to discover novel, innovative solutions (Hickman, G., 1998:469). In the literature is stated that making existing knowledge widely available in an organization may lead to innovation as well as re-use- individuals given access to existing knowledge for the first time may develop creative new combinations of ideas. Knowledge management is ‘any process or practice of creating, acquiring, sharing and using knowledge, to enhance learning and performance in organizations (Armstrong, M., 2001:312).

Teamwork, managing relationships and influencing with limited formal authority are skills that are critical in the new organizational format as well, and these topics should also be part of the training program. In the literature it is stated that matrix managers must rely more heavily on their personal qualities, on their ability to persuade through knowledge about a program, business, or function. They must use communication and relationships to influence and move things along (Lawrence, P., 1977:55). In a matrix organization tasks, assignment and priority decisions of the functional manager have to be shared with business managers and often come about as the result of decisions made by project or business teams (Lawrence, P.,1977:49).

The training needs have been translated into a training goal and training objectives that will be

described below. The goal of the training program should be; to equip the trainees with

knowledge, skills and attitudes which enable them to interact more effectively in pursuit of the goals of Sara Lee/DE.

The objectives of the training program are:

• On completing the training the trainee will be able to explain the strategy and the priorities of Sara Lee/DE.

• On completing the training the trainee will be able to recall how his or her personal role supports the overall strategy.

• On completing the training the trainee will be able to recall the value of collaboration for Sara Lee/DE and demonstrate effective collaboration skills in an international context.

• On completing the training the trainee will be able to recall the value of knowledge sharing for Sara Lee/DE and demonstrate effective practices of creating, acquiring, sharing and using knowledge in an international context.

• On completing the training the trainee will be able to recall the value of teamwork for Sara Lee/DE and will be able to demonstrate effective participation in international teams.

• On completing the training the trainee will be able to demonstrate effective relationship skills such as listening, encouraging, facilitating, clarifying, and giving socio-emotional support.

• On completing the training the trainee will be able to apply rational persuasion as an influence tactic.

By basing the training program on the objectives as described above, the training program will contribute to leadership development and organization development. After having completed the training program the trainees will be able to interact more effectively in pursuit of organizational goals. There are two issues that have to be taken into account. First, the objectives as described above have been determined by conducting a training needs analysis. This training needs analysis has been conducted within the restrictions of this research. There were restrictions with regard to the data collection methods within Sara Lee/DE. Secondly, the training objectives are based on research conducted in the period March through August 2004. Since a lot of developments are currently taking place within the organization, it is possible that due to recent changes other objectives should also be part of the leadership development training program. Taking these issues into account, the objectives as described above should be considered as a starting point and recent developments within the organization have to be taken into account by the Corporate HR department of Sara Lee/DE when determining the objectives of a leadership development training program.

Leadership development initiatives next to training that can support the strategic and structural

changes and can contribute to organization development within Sara Lee/DE are international

assignments and international project teams. These initiatives are currently only used for

functional reasons and not for developmental reasons. These initiatives can help participants

better understand the organization as a whole, this contributes to alignment. By using these

development methods the managers get international experience and learn to collaborate with

people with another nationality. Repatriates represent a unique vehicle for knowledge transfer

and organizational learning. As was pointed out knowledge sharing is very important in the new

organizational format. These two initiatives also contribute to the development of skills that are

necessary for effective teamwork in an international context. Further research should be

conducted to find out if and how these initiatives can be implemented in the organization.

Table of contents

Introduction 1

1 Introduction to Sara Lee Corporation 3

1.1 Company profile 3

1.2 Company structure 3

1.3 Brand Portfolio 5

1.4 Mission and Strategies 5

1.5 HRM within Sara Lee Corporation 6

2 Research Approach 8

2.1.1 Background problem 8

2.1.2 A systematic training approach 12

2.2 Problem statement 13

2.3 Restrictions of the research 14

2.4 Preconditions 14

2.5 Conceptual model 15

2.6 Data collection 16

2.7 Position in the project 17

3 Business strategy of Sara Lee Corporation 18

3.1 Organizational structure 18

3.2 A need for change 20

4 Organization Development and Leadership Development 23

4.1 Organization Development 23

4.2 Leadership 25

4.3 Leadership Development 27

5 Leadership development at Sara Lee/DE 29

5.1 Leadership competencies of Sara Lee/DE 29

5.2 Leadership training programs at Sara Lee/DE 32

5.3 Leadership development programs next to training 36

6 Training needs analysis within Sara Lee/DE 37

6.1 Training needs analysis 37

6.2 Organizational analysis 39

6.2.1 The link between HRM and strategy 39

6.2.2 Sara Lee/DE Coffee&Tea division 41

6.2.3 Sara Lee/DE Household&Bodycare division 44

6.2.4 Corporate departments 49

6.3 Training resources and support 49

7 Person and Task analysis 51

7.1 Person analysis 51

7.2 Task analysis 53 7.2.1 Interviews with B-E level managers of Sara Lee/DE 54 7.2.2 Outcomes of the interviews within Sara Lee/DE 57

8 Training objectives 62

8.1.1 Communication of the strategy of Sara Lee/DE 62

8.1.2 Collaboration and knowledge sharing 64

8.1.3 Managing relationships and teamwork 65

8.2 Objectives of the training program 67

9 Leadership development initiatives next to training 69

9.1 Action Learning 70

9.2 International experience 71

9.2.1 International assignments 72

9.2.2 International project teams 74

9.2.3 The value of international assignments and project teams 74

Conclusion 76

Bibliography 81

Appendix 1-7 84

Introduction

In the research report “Developing Business Leaders for 2010” of the Conference Board that was published in 2002 it is stated that the business challenges projected for the coming years are expected to test both the capability and supply of senior leaders in many industries. Many interviewed business leaders questioned whether any single person would be capable of leading the increasingly complex global organization of the future. They agreed that in the future, only a smaller proportion of the available “gene pool” of executives will be equipped to master the requirements of senior leadership positions in large global companies. Survey respondents and those interviewed were asked to anticipate the key business challenges business leaders will be facing in 2010. By 2010, interviewees expect the following to be the new reality surrounding leadership development:

• Intense competition for individuals capable of leading business organizations.

• An environment of extreme cognitive complexity in many industries, requiring extraordinary strategic thinking skills and the ability to make high-quality decisions quickly in the face of competitive pressure and uncertainty.

• An emphasis in many organizations on leadership skills- as opposed to technical skills and industry knowledge.

• Highly refined communication and talent development skills as critical elements of

‘leadership’.

• An increased priority on executive teambuilding, i.e., staffing and mobilizing a team of talented executives- this is based on the belief that only teams of executives will be capable of creating and implementing winning strategies given the level of complexity anticipated (Barrett , A., 2002:5).

The decision of the Global HR Committee of Sara Lee Corporation in February 2004 to point out the leadership development program as a Global HR project indicates that leadership development has become a high priority within the organization. In this report the following research question will be answered based on desk research and field research within Sara Lee/DE:

What are the training needs with regard to leadership development within Sara Lee/DE, considering the strategic and structural changes, and what objectives should be taken into account in order to develop an effective leadership development program?

The research objective is to give the Corporate HR department of Sara Lee/DE insight in the training needs with regard to the strategic and structural changes within the organization, and in the way a leadership development program can contribute to these needs in order for this department to be able to develop an effective leadership development program.

In the next part of this chapter a short overview will be given of the structure of this report. In

chapter one of the report a short overview is given of the company Sara Lee Corporation. Then,

in chapter two an introduction to the research is given to clarify the background of the research

and to provide insight in the structure of the report. In chapter three the business strategy of Sara

Lee Corporation will be reviewed, because this strategy influences the training and development

needs of the organization. Then in chapter four the literature will be reviewed to give insight into

the concept of Organization Development and the concept of Leadership Development. In

chapter five the current leadership development programs of Sara Lee/DE will be reviewed to give insight in the programs the company offers with regard to leadership development.

In chapter six the first part of the training needs analysis, the organizational analysis, will be reviewed. The training needs analysis consists of an analysis of the organisational variables, the job/task related variables and the person variables. In chapter seven the outcomes of the person analysis and the task analysis are reviewed. In chapter eight the outcomes of the training needs analysis will be used to determine what the training objectives of the leadership development program should be. Information from the training needs analysis will also be used to determine which other programs can contribute to leadership development within the organization and what objectives should be strived for. This will be described in chapter nine. The conclusion in which an answer is given to the research question follows these chapters.

Chapter 1 Introduction to Sara Lee Corporation

This chapter provides a short introduction to the company Sara Lee Corporation. The company profile will be explained in section 1.1. The company structure will be described in section 1.2. A short overview of the brand portfolio of Sara Lee will be given in section 1.3. Then, the mission, strategies, ambitions and values of Sara Lee will be explained in section 1.4. Finally the Human Resources function within Sara Lee Corporation will be reviewed.

1.1 Company profile

Sara Lee Corporation is a global manufacturer and marketer of high-quality, brand name products for consumers throughout the world. With headquarters in Chicago, Sara Lee operates in 55 countries and markets products in nearly 200 nations. The corporation employs 154,800 people worldwide (Sara Lee intranet).

Sara Lee/DE is the successful marriage of two businesses: Sara Lee Corporation of Chigaco, USA and Douwe Egberts (DE) of Utrecht, the Netherlands. The DE part of the name goes back to 1753, when Egbert Douwes opened a small grocery store in the Dutch village of Joure.

Gradually, Douwes and his descendants built a company that grew to become the Dutch market leader for its core products, coffee and tea. Starting in the 1950s, building on the strong domestic position of Douwe Egberts Coffee and Pickwick tea, the company spread its wings internationally. The alliance with Sara Lee Corporation in 1978 opened new horizons. The growth process was accelerated when the company added the international household and body care markets to its traditional activities. Through both autonomous growth and acquisitions Sara Lee/DE has grown into a multinational packaged consumer goods company with annual sales of 5.1 billion euro (Sara Lee intranet).

1.2 Company structure

Sara Lee consists of four divisions: Foods, Branded Apparel, Bakery and DE. Besides

distinguishing four lines of businesses (LoBs), another distinction can be made by countries. The

figure on the next page shows Sara Lee’s structure. Every unique combination of LoB and

country is called an operating company (OpCo).

Figure 1.1 Structure of Sara Lee Corporation

Source: Intranet Sara Lee Corporation

In Food, the company is the largest marketer of packaged meats in the world, selling hot dogs, sausages, sliced meats and other prepared products across the US, Mexico and Europe, under brands such as Jimmy Dean, and Hillshire Farm.

The Bakery business holds strong positions in the US, Spain, France and Australia. Bakery products are marketed under brands such as IronKids, Earthgrains, and Bimbo.

The business category Branded Apparel, or what the company calls intimates and underwear, ranks as the largest branded apparel business in the world. The company enjoys leading positions in America and Europe in men’s and women’s underwear, intimate apparel, legwear and casual wear with brands that include Hanes, Playtex, Bali, Wonderbra, L’eggs, Champion, and DIM.

Sara Lee/ DE manages two worldwide divisions of Sara Lee Corporation: Coffee and Tea and Household and BodyCare, including Direct Selling activities. Well known brands of the Coffee and Tea division are Douwe Egberts coffee and Pickwick Tea. Household products is the most global business of the company with a presence in most of the countries of the world, where the company markets a family of products concentrated in the shoe care, body care, air refreshener and insecticide categories under well known brands like Kiwi, Sanex, Duschdas, Ambi-Pur and Catch. Within the Household Products category, the company has a Direct Selling business that markets cosmetics and personal care products door-to-door to consumers in the major markets of the developing world.

1.3 Brand portfolio

Board Corporate

LOB 1

LOB 2 LOB 3 LOB 4

OPCO

OPCO

OPCO

OPCO country 1

OPCO

OPCO

OPCO

OPCO

The majority of the Sara Lee brands are local successes. Only a few brands are internationally well-known brands, for example Champion and Dim. Following is a short overview of some of the brands of Sara Lee classified by the LoBs:

Foods : Sara Lee, Bénénuts, Aoste

Branded Apparel : Hanes, Playtex, Champion, Wonderbra, Lovable, Dim DE : Douwe Egberts, Pickwick, Duyvis, Lassie, Sanex, AmbiPur Bakery : Bimbo, Sara Lee, Master, Martinez

1.4 Mission and strategies

Sara Lee’s mission is: to feed, clothe and care for consumers and their families the world over. In practical terms, that currently translates into a business mix focused on meeting the everyday needs of consumers in three basic areas: food, clothing and household products (Annual report of Sara Lee 2003).

Sara Lee’s ambition is: to be a world class company in building leadership brands in consumer packaged goods and in doing so creating long-term shareholder value.

Sara Lee follows four strategies to create long-term shareholder value. These four strategies are:

1. Drive profitable growth by: anticipating and meeting our consumer’s needs, partnering with our trade customers, investing our cash flow behind internal opportunities and strategic acquisitions.

2. Achieve the lowest possible costs by levering our skills, scale, and technology, while striving for functional excellence in all business processes.

3. Be an employer of choice for highly talented people, retaining and attracting world-class individuals through a philosophy of empowerment and a system of providing rewards commensurate with performance.

4. Adhere to the highest standards of ethical business conduct, treating fairly, and with

respect, all those we touch as a company (annual report of Sara Lee 2003).

Sara Lee’s values:

• Passion for excellence in everything we do

• Appreciation for different backgrounds, ideas, skills, and experiences

• Commitment to treating our customers, colleagues and suppliers with dignity and respect

• Responsibility for giving back to the communities in which we live and work (McMillan, S., A guide to understanding Sara Lee’s mission, values and operating principles).

1.5 Human Resource Management within Sara Lee Corporation

Sara Lee’s HR mission is; to provide leadership in establishing and upholding Sara Lee Corporation as an employer of choice for exceptional people at all levels of the company.

Fulfilling this mission requires that Sara Lee Corporation develops, rewards, retains and attracts highly motivated, talented people. Consequently Sara Lee will:

• Provide employees with access to career development opportunities throughout Sara Lee’s global business operations.

• Provide an equitable total compensation package.

• Promote an inclusive work environment that supports the needs of a diverse workforce.

• Support employees in realizing a balance among their business, home, community and social responsibilities.

• Ensure a safe and healthy work environment for all employees.

• Lead by example, serve as change agents, seek innovative solutions and identify and share best practices across all of our businesses.

• Serve as internal and external ambassadors for Sara Lee and deliver exceptional results to our stakeholders (Internal Communications, May 14, 2003).

The Corporate HR department of Sara Lee/DE is located at the European headquarters in Utrecht. The department delivers services to the Household and Body care (H&BC), Coffee and Tea (C&T) and Direct Selling divisions of Sara Lee/DE. The mission of the department is:

• Making Sara Lee an excellent business and place to work.

• Supporting the business partners to achieve their objectives.

• Translating Sara Lee Global Business Strategy into a global HR Strategy defined by excellent conceptual design, practices, and processes.

• Defining our future work environment and designing the strategy needed to achieve it.

The Corporate HR department of Sara Lee/DE has four different components; Employee Relations and Inclusive Culture, Performance and Talent Management, Learning and Development, and Remuneration (Business Plan of HRC-E 2004).

Global HR projects

The Global HR committee of Sara Lee Corporation decides what projects are global HR projects.

Until now there have been three global HR projects:

Performance Management Plan (PMP):

The goals of this project are: better alignment of individual performance with business objectives, transparency and consistency in the way Sara Lee sets standards and measures them, and efficiency in the performance management process (PMP rollout Guide, June 2003).

Management Review Process (MRP):

The goal of this project is to establish a global web-based talent management application that will elevate talent management initiatives including: succession planning, candidate searching capability, career development, talent pools and retention. The application will allow more depth to MRP, facilitate global career pathing, enhance competency development planning and provide comprehensive data analysis (MRP project plan, 2003).

Recruitment & Selection project:

The goals of this project are: attracting exceptional people, to establish common standards of applicant caliber, establish a common recruitment process, to have a common “branding” of Sara Lee as an employer of choice, to link processes, and to create a provision of reporting and business metrics, and reduced costs (presentation HR Steering committee, November 2003).

The Global HR committee decided in February 2004 that the leadership development program is

a Global HR Project as well. This leadership development program is the subject of this thesis

and will be explained in an in-dept manner in the next chapters.

Chapter 2 Research approach

In this chapter an introduction to the study will be given. Paragraph 2.1.1 clarifies the background of the research. Following this, the problem statement is described. The problem statement makes clear what is being researched and why. The restrictions and preconditions of the research are stated and then the conceptual model gives more insight in the construction of the research and the concepts that are being researched. Finally, the data collection methods of the research are described.

2.1.1 Background problem

In order to define the problem statement it is first necessary to gain insight into the motives of this research. This research will be conducted on behalf of the Corporate HR department of Sara Lee/DE. First the circumstances within Sara Lee Corporation will be described based on internal documents, then the relationship between Human Resource Management and the strategy and structure of an organization will be briefly reviewed based on the literature.

Sara Lee Corporation is committed to the principle of decentralized management. The company is organized into a large number of discrete profit centers, each led by an operating executive with a high degree of authority and accountability for the performance of the business. Operating executives are selected and developed based on their ability to succeed in this entrepreneurial environment.

Regarding the current business strategy Sara Lee Corporation is committed to applying its financial and management resources toward future growth of a smaller number of more focused business positions. The central goal for the organization is “to become more of a company, and less of a collection”. This means increasing interdependencies among functions and business units (Human Resources manual Sara Lee Foods Europe, 2002). At the moment Sara Lee Corporation is reorganizing her operations. The company is consolidating and integrating certain activities such as purchasing, and accounts payable and payroll, to reduce costs and leverage scale.

There is a need for centralization in the organization because of cost advantages (McMillan, S., intranet, 22-03-2004).

Changes are also taking place within Sara Lee/DE. The objective of the Coffee & Tea division is to realign the organization and processes to deliver; strengthened national product development programs through more efficient use of existing resources, and focusing on ideas with international potential. The focus of the division will be on stronger global brand management, and there will be clear deliverables and responsibilities. The goal is to lead the further development of the product Senseo Crema (the only Global Brand of Coffee & Tea), and to lead the development of new businesses through innovations, as well as global brand management, in close cooperation with the operating companies (presentation General Managers Meeting, April 21, 2004, Utrecht).

To make this new strategy possible, the structure of the Coffee & Tea division has been changed.

Since May 2004, there is a new unit Business Development. The Vice President of this unit has the responsibility and the authority for branding and business development of the division Coffee

& Tea. The new organizational structure of the Coffee & Tea division is outlined in appendix 1

(presentation General Managers Meeting, April 21, 2004,Utrecht).

In the Household & Bodycare division changes are taking place too. On July 1, 2003 a new structure has become effective. One of the reasons for the strategy and structure change is the increasing globalization of consumer brands, and the division’s competitors and customers;

another reason is that there is a lack of resources and international knowledge within countries to lead international projects (Presentation Corporate Public Relations Sara Lee/DE, May 2, 2003).

There is a shift from a local focus to a global focus within the division. Global marketing teams have been established for the brands Ambi Pur, Kiwi and Sanex. Each team is headed by a President Global Brand, who reports to a Regional Vice President. Each President Global Brand has Profit and Loss responsibility for their brand. They set brand strategy and positioning, develop key performance indicators, new product development, identify geographic expansion opportunities, and decide on brand advertising, packaging, design and related budgets. The President Global Brand works closely together with the local operating companies, especially with their General Managers and Marketing Directors. The new organizational format of the Household & Bodycare division is outlined in appendix 2 (Presentation Corporate Public Relations Sara Lee/DE, May 2,2003).

The relationship between Human Resource Management and the structure and the strategy of an

organization will be briefly reviewed based on the literature. Human Resource Management

activities result from and impact on, the strategic activities and international concerns of

multinationals. In the framework of De Cierci and Dowling (1999) that is outlined on the next

page it is highlighted that International Human Resource Management (IHRM) activities in

multinational companies (MNC) are influenced by both endogenous and exogenous factors

(Harzing, A., Ruysseveldt van, J., 1999:73).

Figure 2.1 Integrative framework of strategic HRM in multinational enterprises

Source: Harzing,A., International Human Resource Management, 2004:73

Increasingly the central issue for MNCs is not to identify the best IHRM policy per se but rather to find the best fit for the firm’s strategy, structure and HRM approach. While global strategy is a significant determinant of IHRM policy and practice, it has been argued that international human resources are a strategic resource, which should affect strategy formulation as well as its implementation (Harzing, A., Ruysseveldt van, J., 1999:68).

Human resource development lies at the very heart of managing change through people because the consequence of any change process is that people will need to think and/or behave differently (Thornhill, A., 2000:154).

The strategic and structural changes within Sara Lee Corporation have not been supported by HR practices. The top of the organization realizes that it is important to support these changes with HR practices. One way Sara Lee Corporation wants to support these changes is by implementing a leadership development program. In February 2004 the Global HR Committee of Sara Lee Corporation decided that the Leadership Development Program is a global HR project.

Endogenous factors MNC structure

-structure of international operations

- intra-organizational networks

- mechanisms of coordination MNC strategy

- corporate-level strategy - business level strategy

Strategic HRM HR function strategy HR practices

MNC concerns and goals Competitiveness

Efficiency Balance of global integration and local responsiveness Flexibility Exogenous factors

The Corporate HR department of Sara Lee/DE is responsible for the implementation of the leadership development programs within Sara Lee/DE. Sara Lee Corporation wants to involve all B-G level managers in the leadership development training programs. Three different programs will be offered. The program with B-C level managers as a target group is a leadership development program that will be developed and provided by IMD for Sara Lee/DE and Duke University for the other Lines of Business. These programs will be aligned with the strategy of the line of business.

Two programs will be offered for the managers of the levels D-G . This will be standard global programs provided by a global vendor like IBM or Blanchard. The programs will be aligned with Organizational Development in Sara Lee and will be standardized for Sara Lee Corporation. One of these programs has as a target group D-E level managers and the other program has as a target group F-G level managers.

In this thesis the focus will be on the objectives for the leadership development program for the management levels B-C. The reason is that the program for these managers will be initiated first.

The objective is to start with the roll-out in January 2005. The roll-out of the programs for D-G level managers will probably start in April/May 2005. Another reason is that the program for B-C level managers will be initiated by Sara Lee/DE and will be aligned with the strategy of Sara Lee/DE while the programs for the other management levels will be standardized for all the lines of business of Sara Lee Corporation.

In the next paragraph the objective of this research will be reviewed based on the literature.

2.1.2 A systematic training approach

In this paragraph the systematic training approach as described in the literature will be reviewed to give more insight in the objective of this study.

Campbell (1988) has described a systematic model of training that can easily be adapted to leadership development programs. Some of the major steps in Campbell’s model are:

1. Determining what needs to be learned 2. Determining the training objectives

3. Specifying the learning methods and media 4. Evaluating the training outcomes

It is important to involve the goals of the organization, the current level of leadership skills in the organization, and the gaps that need to be filled through training in order to accomplish the organization’s goals. Systematically determining what leadership gaps need to be filled can be done by accomplishing a training needs analysis. After determining what gaps need to be filled, the next step is to determine the training objectives. In other words, what specific objectives does the training program hope to accomplish, and how do these objectives match up with the leadership gaps to be filled (Hughes, R., 1999:100).

If the training objectives are not tied to the gaps identified in the needs analysis, then the training program will have little, if any, positive impact. In addition, if the training program does not offer any specific training objectives, it will be difficult to evaluate whether or not the training was successful. Tying the training objectives to the gaps identified in the needs analysis is one way to ensure that the training program is effective for the organization and will be salient to the participants. It is important that the needs of the organization and the training objectives determine the learning methods and media to be used in training (Hughes, R., 1999:100).

A final point to consider regarding leadership training involves evaluating the success or effectiveness of the training program. Training effectiveness refers to the benefits that the company and the participants receive from training. Benefits for trainees may include learning new skills and behaviour. Benefits for the company may include increased sales and more satisfied customers (Noe, A., 2002:178). At a minimum, one should ask whether the training was successfully accomplished. This again points out the importance of having clear objectives for a training program (Hughes, R., 1999:100).

In this thesis the focus will be on the first two steps of the model; determining what needs to be

learned, and determining the training objectives. In the next paragraph the problem statement of

the research will be described.

2.2 Problem Statement

The problem statement can be divided into the research objective and the research question. The research question has been defined from the research objective.

Definition of the research objective:

To give the Corporate HR department of Sara Lee/DE insight in the training needs with regard to the strategic and structural changes within the organization, and in the way a leadership development program can contribute to these needs in order for this department to be able to develop an effective leadership development program.

Definition of the research question:

What are the training needs with regard to leadership development within Sara Lee/DE, considering the strategic and structural changes, and what objectives should be taken into account in order to develop an effective leadership development program?

Definition of secondary questions:

• What is the business strategy of Sara Lee Corporation?

• How is organization development and leadership development defined in the literature?

• What kinds of leadership development programs are used at Sara Lee/DE?

- How is leadership defined at Sara Lee/DE?

- What are the current leadership training programs of Sara Lee/DE?

- What other leadership development methods are used next to training?

• What are the training needs of Sara Lee/DE?

- What is the appropriateness of training given the company’s business strategy, its resources available for training, and support by managers and peers for training activities? (organizational analysis)

- Do performance deficiencies result from a lack of knowledge, skill or ability?

- Who needs training? (person analysis)

- What competencies of the employees need to be developed? (task analysis)

• How can the leadership development program contribute to the training needs?

- What are the training objectives that should be strived for?

• Which other methods, next to training, can contribute to leadership development within the organization?

- What are the objectives that should be strived for?

2.3 Restrictions of the research

The research focuses only on Sara Lee/DE. The leadership development program is a global HR project of Sara Lee Corporation, but the Corporate HR department of Sara Lee/DE is only responsible for the HR solutions of the operating companies of Sara Lee/DE and not for the HR solutions of the other lines of business of Sara Lee Corporation.

For the information from employees out of the Corporate HR department of Sara Lee/DE I was mainly dependent on information gathered during interviews conducted based on a questionnaire developed by HR managers of Sara Lee Corporate in Chicago.

2.4 Preconditions

• This research will meet the demands of the University of Groningen.

• This research will give the Corporate HR department of Sara Lee/DE information that is necessary in order to effectively develop an international leadership development program.

• The research will be conducted in the period between March 1

and August 31

2004.

2.5 Conceptual model

A conceptual model gives insight into the concepts that have been researched. The conceptual model gives an overview of the relations between the various aspects this research embodies.

Later on in this thesis, these various aspects will be reviewed in an in-depth manner.

First the business strategy of Sara Lee Corporation will be reviewed, because this strategy influences the training and development needs of the organization. Then the literature will be reviewed to give insight into the concept of Organization Development and the concept of Leadership Development.

The current leadership development programs of Sara Lee/DE will be reviewed to give insight in the programs the company offers with regard to leadership development.

Then the training needs analysis will be conducted. The training needs analysis consists of an analysis of the organisational variables, the job/task related variables and the person variables.

These training needs will be used to determine what the training objectives should be.

Information from the training needs analysis will also be used to determine which other

Current leadership development programs at Sara Lee/DE

Content Goals

Analysis of training needs of Sara Lee/DE related to leadership development

Determining of training objectives of the leadership development training program of Sara Lee/DE Programs next to

training which can contribute to leadership

development within Sara Lee/DE Concepts

of

Organization Development and Leadership Development

Organizational variables

Job/task related variables

Person variables

Business strategy Sara Lee Corporation

programs can contribute to leadership development within the organization and what objectives should be strived for.

2.6 Data collection

The data collection in this research is based on a multi-method approach. This implies that different data collection methods have been used. Adapting a multi-method approach gives the researcher the confidence that the most important issues are addressed; different methods can be used for different purposes in a study. Another reason to use a multi-method approach is that it enables triangulation to take place. Triangulation refers to the use of different data collection methods within one study in order to ensure that the data are telling the researcher what he thinks they are telling him (Saunders et al, 2000:99).

Another advantage of this approach is that the results in a study will be more valid and reliable.

Validity is concerned with whether the findings are really about what they appear to be about.

This approach is more reliable because the different findings from the different sources ensure that the researcher will get the same results when the study is repeated (Saunders et al, 200: 100).

The data collection methods that have been used for this research are:

Field research:

• Interviews Desk research:

• Internal documents

• External documents

• Scientific literature

The first sub-question about the strategy of Sara Lee Corporation has been answered by analysing annual reports, presentations and information on the intranet. Also interviews have been conducted with various managers of the Corporate HR department. This were semi-structured face-to-face interviews. In semi-structured interviews, the researcher will have a list of themes and questions to be covered (Saunders et al, 2000: 243). Scientific literature will also be reviewed.

The second sub-question about organization development and leadership development has been answered by reviewing the scientific literature.

The third sub-question about the different leadership development programs that are offered at Sara Lee/DE has been answered by analyzing information on the intranet, the training map of Sara Lee/DE 2004, internal reports and presentations. Also semi-structured interviews have been conducted with the employees of the Corporate HR department that are responsible for the training programs. Scientific literature has also been reviewed.

The fourth sub-question about the training needs of the organization has been answered by

analyzing information on the intranet, internal reports and presentations. Semi-structured

interviews have been conducted with different HR managers of Sara Lee/DE. Scientific literature

has also been reviewed. The information needed for the task analysis has been gathered by

conducting semi-structured behavioural event interviews with 27 B-E level managers. I was

present during the interviews to take notes. I was responsible for analyzing and processing the data of the interviews.

The last sub-question about the other methods that can be used next to training for the

development of leadership has been answered by reviewing the scientific literature and by

interviewing managers of the Corporate HR department. Also the outcomes of the interviews

with the 27 B-E level managers have been used to answer this sub-question.

Chapter 3 Business strategy of Sara Lee Corporation

To contribute to a company’s success, training and development activities should help a company achieve its business strategy. A business strategy can be considered to be a plan that integrates the company’s goal, policies, and actions. The strategy influences how the company uses physical capital, financial capital and human capital. The business strategy helps direct the company’s activities to reach specific goals. The goals are what the company hopes to achieve in the short-, and long term future. The specific business strategy chosen is based on considering the company’s competition. That is, how will the company compete to achieve its missions and goals (Noe, A., 2002:39)?

To use human capital to gain a competitive advantage requires linking the company’s human resource management practices to the business strategy. Strategy influences the type, level, and mix of skills needed in the company (Noe, A., 2002:40).

In this chapter, the business strategy and structure of Sara Lee Corporation will be reviewed. The structure of the organization will be reviewed based on literature and internal documents. The strategy of the organization will be reviewed based on internal documents. The objective of this chapter is to give background information that contributes to an understanding of the reasons for the initiative of a global leadership development program within Sara Lee Corporation.

3.1 Organizational structure

In this paragraph the literature and internal documents will be reviewed to give insight into the structure of Sara Lee Corporation.

There are three different organizational models, each characterized by distinct structural configurations, administrative processes, and management mentalities. These organizational models are; the multinational model, the international model and the global model. Although this is a convenient typology, few MNCs will neatly fit any of these three ideal types (Bartlett, A., Ghosal, S., 1989:49).

The multinational organizational model was the classic organizational pattern adopted by companies expanding in the prewar period. Economic, political, and social forces encouraged these companies to decentralize their organizational assets and capabilities to allow foreign operations to respond to the differences that distinguished national markets. The resulting configuration of distributed resources and delegated responsibilities can be described as a decentralized federation. The multinational organization is defined by these characteristics: a decentralized federation of assets and responsibilities, a management process defined by simple financial control systems overlaid on informal personal coordination, and a dominant strategic mentality that viewed the company’s worldwide operations as a portfolio of national businesses (Bartlett, A., Ghosal, S., 1989:49).

Products or services are differentiated to meet differing local demands, and policies are

differentiated to conform to differing governmental and market demands. Local demand is

determined by cultural, social, and political differences between countries. Subsidiaries operate

relatively independently from headquarters: they buy/sell a very low proportion of their

input/output from/to headquarters. They are responsive to the local market, and adapt both

products and marketing to local circumstances (Bartlett, A., Ghosal, S., 1989:49).

The total level of control exercised by headquarters over these subsidiaries is rather low, especially the two direct control mechanisms: personal centralized control and bureaucratic formalized control, which are used to a very low extent. Control mechanisms can be defined as the instruments that are used to make sure that all units strive towards common organizational goals. The control mechanism personal centralized control is also described as centralization, and hierarchy. The control mechanism bureaucratic formalized control is another direct control mechanism. The control mechanisms in this category are impersonal and indirect. They aim at pre-specifying, mostly in a written form, the behaviour that is expected from employees. This type of control can also be defined as formalization, rules, regulations, paper system and programmes ( Harzing, A., van Ruysseveldt, J., 2004:58).

The second type is the international organization model. This organization structure and process became predominant in the early postwar decades. While local subsidiaries are often free to adapt the new products or strategies, their dependence on the parent company for new products, processes, or ideas dictates a great deal more coordination and control by headquarters than in the multinational organization (Bartlett, A., Ghosal, S., 1989:50).

The global configuration is based on a centralization of assets, resources, and responsibilities;

overseas operations are used to reach foreign markets in order to built global scale. The role of the local units is to assemble and sell products and to implement plans and policies developed at headquarters (Bartlett, A., Ghosal, S., 1989:51).

On the intranet of Sara Lee Corporation is stated that the organization manages all her operations through a decentralized structure of business groups and operating companies with management centers in Cincinnati for meats, St Louis for Bakery, Winston-Salem, North Carolina, Paris and London for Intimates and Underwear, and Utrecht, The Netherlands for Coffee and Household Products (Steve Mc Millan, speech at Kellogg School of Management Marketing Conference, 2003). Based on the literature reviewed above Sara Lee Corporation can be characterized as a multinational organization.

3.2 A need for change

In this paragraph the strategy of the organization and the need for change within Sara Lee Corporation will be discussed based on literature and internal documents.

With dispersed resources and decentralized decision making, subsidiaries of the multinational company can respond to local needs, but the fragmentation of activities inevitably carries efficiency penalties. Learning also suffers, because knowledge is not consolidated and does not flow among the various parts of the company. Local innovations often represent little more than the efforts of subsidiary management to protect its turf and autonomy, or reinventions of the wheel caused by blocked communication or the not-invented-here syndrome (Bartlett, A., Ghosal, S., 1989:59).

A company’s ability to respond to the strategic task demands of today’s international operating environment is constrained by its internal capabilities, which are shaped by the company’s administrative heritage. Internal capability is developed over a long period of time and cannot be changed overnight (Bartlett, A., Ghosal, S., 1989:36).

In the next part of this paragraph the need for change within the organization will be described based on internal documents.

In may of 2000 Sara Lee Corporation faced the need for some significant changes. There were four major issues that had to be tackled. The growth of the company had slowed to a crawl.

Overall internal unit growth had slowed in the major markets and for several years most of the expansion had come from acquired businesses. The company had become less competitive. The requirements for sustaining a competitive advantage had changed and the organization had not.

For example, the meat business, which was organized at the time into 10 distinct companies, could not compete any longer with the strong unified approach taken by the others in the market.

By staying internally focused and not changing with the market, several of the important businesses had begun to lose some of their competitive viability. There was a shift in power; Sara Lee Corporation was losing ground to her customers. The portion of sales that went to the top ten customers had doubled in the prior seven years to a remarkable level. This development, coupled with a much more informed and empowered consumer put tremendous pressure on the everyday pricing, the marketing programs and the overall business flexibility in going to market.

Lastly, the valuation of Sara Lee by the investment community was very weak as Wall Street concluded the prospects were slow to no business growth (McMillan, S., speech at the Kellogg School of Management Marketing Conference, 2003).

A thing that has to change within the organization is; being just a collection of many, self- contained companies with their own infrastructure, operations and limited critical mass. The company has reorganized into fewer, larger, more powerful and more efficient groups, and has focused on regional and global initiatives like procurement, shared services and IT. The company is starting to approach the major customers from both a business group and a total corporate- wide perspective. Sara Lee Corporation wants to take advantage of the corporate scale to lower costs and improve results.

Some changes have already been made, but the company is still changing. The four “P’s” that

guided the reshaping – Portfolio, Productivity, Product and People- remain the strategic

framework for the actions to date (McMillan, S., Chairman’s Conference 2003, 7).

Portfolio: The company divested 20 businesses representing 25% of the revenues, and acquired The Earth grains Company as a strategic growth platform for the Sara Lee brand. The company increased the focus on marketing and new product investment behind brands and businesses that have the most growth potential, while managing the non-growth businesses differently, with an intense focus on cash generation and returns. The company developed a brand portfolio strategy to ensure that investments are made in brands with the greatest growth potential.

Productivity: The company made a number of moves in each line of business to leverage skills, scale and technology to achieve the lowest possible costs. The company combined businesses, created shared service centers and strengthened selected staff functions at the corporate level.

Product: Sara Lee Corporation concentrated on identifying the best growth opportunities, and on developing the discipline to focus resources on them. The company continues to look for value- added, non-commodity products, and stays focused on the needs of the customers and consumers.

People: People are the key of all the efforts to change. Without success in this area, the efforts will amount to little (McMillan, S., Chairman’s Conference 2003, 7).

“In order to achieve our goals, we need strong and effective builders that can build collaboratively. If we collaborate, we can:

• Drive out costs and generate funds to invest in our business.

• Leverage our skills and scale with our customers.

• Learn from each other and share best practices and good ideas.

• Provide broad career opportunities to attract the best and the brightest.

• Expand the geographic reach of our products.

We must build a team that has the capability, attitude and commitment- in essence, the leadership- to execute our strategies, serve customers and meet our goals” ( Steve MC Millan at the Chairman’s conference 2003,7).

The top of the organization wants to create alignment on an international level. Because of the

decentralized organization structure employees are focused on their own business and on short

term results. The efficiency of the organization suffers from this fragmentation. In order to create

alignment in the organization it is important that the employees cooperate and not only focus on

their own local business. One of the ways the company wants to support this change is by

implementing a leadership development program. The emphasis of the leadership program

should be on relationship building, engagement and connectivity .

Chapter 4 Organization Development and Leadership Development

In this chapter the literature will be reviewed to give insight into the concept of Organization Development. The concept of leadership as well as the concept of leadership development will be reviewed based on the literature.

4.1 Organization Development

In this paragraph the literature will be reviewed to give insight into the concept of Organization Development.

Organization Development (OD) can be defined as a planned activity or organization-wide effort managed from the top and directed to increasing organizational effectiveness and health through interventions in the organization’s processes using behavioural science knowledge and techniques (Kurb, M., 1989:167). OD helps to create a learning environment through increased trust, confrontation of problems, employee empowerment and participation, knowledge sharing, work design, cooperation between groups, and allowing employees to maximize their skills and grow (Noe, A., 2004:443).

OD aims to help members of an organization to interact more effectively in pursuit of organizational goals. OD is a long-range approach to change that emphasizes lasting rather than temporary change and seeks to influence an organization’s culture and norms by changing values, attitudes, knowledge, behaviour, processes and structure (Noe, A., 2004:443).

OD is a top-to-bottom strategy for change that recognizes the importance of gaining the commitment and involvement of top management and any other person or group that could significantly influence the outcome of the effort. OD focuses firstly on organizational and group change and secondly on individual change (Kurb, M., 1989:168).

The OD process involves planned interventions and improvements in an organization’s processes and structure and consists of the following stages:

• Entry stage: preliminary needs assessment, program design and negotiation, commitment building.

• Diagnostic stage: analysis of organizational strengths, weaknesses and needs; processing the results and feeding them back through the system.

• Change stage: improvement changes in an organization using OD intervention techniques such as problem solving, team building, training, strategic planning, etc.

• Evaluation stage: another diagnosis and comparison of the results with the previous ones, analysis of changes in productivity, profit, turnover, etc., identification of new problems to be resolved in the future.

• Follow-up stage: used to sustain the improvements made during the OD program (Kurb, M., 1989:168).

Organization Development is part of a larger human resource field that is unified in its focus on

people-primarily people in organizational settings. OD activities are affected by -and, in turn

affect- other HR activities (Rothwell, W., 1995:30).