Category winner: Henkel: Building a Winning Culture

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This case won the Finance, Accounting and Control category at The Case Centre Awards and Competitions 2017.
 
The case

Who – the protagonist

Kasper Rorsted, appointed CEO of Henkel in 2008. He was the company’s youngest ever CEO and as a native of Denmark, the first to be born outside Germany or Austria.

What?

Detergent bottleFritz Henkel founded what would become modern-day Henkel in 1876 to manufacture a new laundry detergent. By the 1920s, the company had become a leading German detergent producer and diversified into glues. Most of the company’s infrastructure was destroyed in World War Two, but Henkel re-opened several plants to sell personal care products as well as detergent and adhesives. By 2008, sales had grown to €14 billion across 125 countries.

Why?

When Kasper took over, Henkel was reporting comfortable growth and profits, but many analysts, and some company executives, saw Henkel as complacent and lacking a competitive spirit. One insider referred to Henkel as ‘the happy underperformer’.

Press conferenceWhen?

To catalyse the organisation and signal his commitment to change, Rorsted called a press conference in November 2008 to announce a set of ambitious four-year financial goals for sales growth, EBIT margins (earnings before interest and taxes), and EPS (earnings per share).

Where?

DuesseldorfHenkel was originally established in Düsseldorf in western Germany. In 2008, only 20% of its 55,000 global employees were based in Germany, but the company had preserved its German, family-owned roots. Most of the executive team was German, and the Henkel family played an active role in the company’s shareholder committee.

Key quote

‘Staying where we are is no longer an option. We either move up or move down: we either become relevant or we will be made irrelevant.’ – Kasper Rorsted

What next?

Kasper knew that his ambitious financial goals could only be achieved by transforming the complacency at Henkel into what he called a ‘winning culture’. This comprised two major initiatives: redefining Henkel’s vision and values, and implementing a new performance management system to strengthen management capabilities and increase accountability. How should Kasper tackle these enormous worldwide challenges?

The authors

Robert Simons and Natalie KindredRobert L. Simons and Natalie Kindred

This case was written with a specific course in mind, but it’s also suitable for teaching a number of other topics.

MBA and executive education

‘Thank you so much for this award,’ says Bob. ‘Natalie and I are very pleased to learn that our case is proving to be popular with educators around the world.’

HBSOver the past 30 years, Bob has taught accounting, management control, and strategy execution courses in both the Harvard MBA and executive education programmes. This award-winning case was originally written for Bob’s ‘Designing Competitive Organisations’ second-year MBA course, which he will be teaching again during 2017/2018 along with ‘Driving Corporate Performance’, a programme for general managers and financial executives.

However, as the accompanying teaching note points out, the case is also suitable for courses on management control systems, change management, organisational behaviour, and the consumer products industry.

Key concepts

With its focus on strategy execution, explain the authors in the teaching note, this case illustrates two key concepts: the use of control systems as levers of strategic change and, more specifically, the use of performance management programmes to generate creative tension and performance pressure.

Books and research

Levers of ControlLevers of Organization DesignRobert has written a number of books, including Levers of Control (1995) that describes how effective top managers balance innovation and control. This book won the Notable Contribution to Management Accounting Literature award. The case teaching note also recommends chapter five of Robert’s book, Levers of Organization Design, titled ‘Interactive Networks’, as useful background reading for this case. Robert's latest book is Seven Strategy Questions.

In addition to his books, Robert’s ongoing research into the relationship between business strategy, organisation design, and management control systems has been published in journals such as Harvard Business Review, Capitalism and Society, Sloan Management Review, Strategic Management Journal, Accounting, Organizations and Society, Contemporary Accounting Research, and Journal of Accounting Literature.

In January 2017, Bob published a 15-module series on Strategy Execution (Harvard Business Press). The modules describe the foundations for strategy implementation, teach quantitative tools for performance measurement and control, and illustrate how managers use these techniques to achieve profit goals and strategies.

About the authors

Robert L. Simons is the Charles M. Williams Professor of Business Administration at Harvard Business School.
e rsimons@hbs.edu

Natalie Kindred is Senior Researcher, Agribusiness, at the Case Research and Writing Group, where she was previously a Research Associate.
e nkindred@hbs.edu

 
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