Transformation Unilever: success or failure?
How can you organize your products, services and entire organization in a sustainable way? We often get this question from our customers. They know that it is not enough just to change the strategy or organizational structure. They understand that you have to deal with the existing culture if you want to use, implement and realise new values such as sustainability. People will respond to this and not all will be positive. If you do not involve them properly, you will create your own resistance. The farmers and builders in the Netherlands have recently been on strike against the new measures aimed at achieving a sustainable agriculture and economy. How is that possible?
The big fight for sustainability
Jeroen Smit wrote the book Het grote gevecht about the Dutchman Paul Polman, former ceo of Unilever. The young Polman wants to become a vicar, but is still studying business economics. After his studies, he joined the American result-oriented company Procter & Gamble, where he worked in the financial department, then in the marketing department, and quickly made a career in Europe. He would like to become CEO, but the company chooses a different Dutchman. He leaves the company disappointed and joins the Swiss competitor, Nestlé, as a CFO with the prospect of becoming CEO there. When the CEO of Nestlé leaves however, they do not choose Polman, but someone else. Polman also leaves this company and is asked for the CEO function at Unilever, which he accepts.
Unilever is successful when Polman joins, but lacks a strong growth strategy. In his research into Unilever’s roots, he discovers that the English founder, William Lever, used his soap to improve the hygienic living conditions of the English population. This inspires Polman. He wants to show Unilever that it is possible to make money by doing the right thing. He then formulates his ambition: a doubling of turnover in ten years and a halving of CARBON emissions through the ‘Unilever Sustainable Living Plan’.
Unilever, history and background
Unilever is an old successful company that was created in 1930 by the merger of British soap manufacturer Lever Brothers and the Dutch Margarine Union. Both products use palm oil as a raw material and they are both sold to consumers with a lot of marketing in stores and supermarkets all over the world.
Unilever had two leaders, two shareholders and is listed on two stock exchanges until 2005. This was four years before Polman took office and it was a result of the merge between the Dutch and the British company. If there is good cooperation, both parts of the company benefit from each others knowledge and contacts in the various markets around the world. For example, the English organisation has good contacts in its home market and English-speaking countries such as America and India. The Dutch organisation has these contacts in the European market and beyond with Indonesia. The disadvantage, however, is that a lot of consultation is required about all decisions, which means that everything goes more slowly. Moreover, both parts want to be in charge and both want the savings to be realised for the other. Of course, they would like to have the investments for the development of new products and new factories in their own country. In this way, the organisation has been optimised for each country and not for the whole world. This is in contrast to the previous multinationals where Polman worked, which focus on the world with their products and can therefore develop global brands much faster and easier.
Polman’s transformation approach for 154,000 employees
Polman begins his term of office by communicating a clear goal: to double Unilever’s turnover in ten years to 80 billion euros and halve the company’s CARBON emissions. He also considers shareholders to be less important than sustainability and therefore focuses on making the company more sustainable. He wants to invest in people and brands. To grow sales, he focuses on the emerging markets such as India, China and Indonesia and also wants to have global products with more than one billion sales.
In order to achieve the cultural shift towards sustainability, Polman invites Unilever’s top 100 to a personal Purpose Leadership programme, led by an external consultant. In four days they have to know what their purpose is in life. Most Unilever leaders do not find this easy and have to go deep for that. They have to determine the reason for their lives, while at work they are paid to achieve the agreed results. They will also receive a second training course on coaching people and a third training course on working together, with a strong focus on achieving results.
In the office they now have to integrate their personal purpose into the Unilever business model. They should be an example of ‘Doing Well by Doing Good’. Not everyone finds this easy. They also have to send a report to Polman, who reads them all personally and gives everyone feedback. Polman also uses this information to put them at locations in the global Unilever organisation that he thinks are good for them. For example, the current CEO, Jope, has to move from Scotland to China because it would be good for him. About his own role, he says, “The biggest challenge is to maintain my humility.”
Polman communicates his message of sustainability a lot externally and makes new connections with organisations outside Unilever such as the United Nations and NGOs. This gives him a lot of energy. He likes to give numerous lectures, presentations and thinks along with sustainability issues. At one point he even communicates that Unilever is the largest NGO in the world. The people within Unilever are surprised by this statement, but as long as the financial results are good, no one will stop him.
Hostile takeover bid by short term financially driven shareholders
Polman is able to increase its turnover considerably in the first few years, partly by investing heavily and by opening factories in the emerging markets of India, China and Indonesia. But after a few years the turnover does not grow anymore and stops around fifty billion euros. Heinz Kraft made a hostile takeover bid at the beginning of 2017. Polman can reject the offer, but Unilever is now forced to pay out much more money to the shareholders. The shareholders have thus won over sustainability and are once again number one.
In order to keep their profits, the suppliers also have to contribute: they are forced to collect ten percent of their price. The suppliers of palm oil and tea are small farmers. With this discount he not only gets them into their living expenses, but also into everything that they could still conduce to Unilever’s sustainability goals. After ten years of being CEO, Polman leaves Unilever. The company has grown tremendously in terms of turnover, but has not achieved all of its sustainability goals. His attempt to halve the emissions of greenhouse gas and the water footprint has been unsuccessful – Unilever’s footprint per consumer use has even slightly increased.
Has Polman successfully transformed Unilever now?
Transformation lessons from Polman’s approach
A few months after his resignation as CEO, Polman makes a number of observations about his approach in Jeroen Smit’s book:
- I have not listened enough to the people around me.
- I have not made enough of a real team of my Executive Leadership Team.
- I have used a clear top-down approach to change, but how many people have I been able to reach?
- I have been communicating a lot outside the company to make sustainability known, but what have I really achieved with that?
- I like to work eighty to one hundred hours a week, but not everyone wants it or is able to do it.
- I could have helped my managers become more successful.
- As a pioneer, I was five to ten years ahead of the rest.
- The financial markets and shareholders have not changed.
How do you create a sustainable transformation?
“The wicked leader is he who the people despise. The good leader is he who the people revere. The great leader is he who the people say, ‘We did it ourselves’.” Lao Zi
As the Chinese philosopher Lao Zi pointed out, it is much better to let people do it themselves and guide them through it, so that they can really do it themselves. Polman has worked very hard himself, but how many people within Unilever has he really been able to reach? How many Unilever people are now working on sustainability on a daily basis? He brought his message outside Unilever rather than focusing his attention, knowledge and passion on the people in his organisation. The latter could have helped them to develop and realise their own sustainability story.
He could have started a voluntary sustainability programme in which all Unilever employees themselves, on the basis of their internal conviction, belief, mission or purpose, could fill in and realise their own sustainability and that of Unilever, for example in one hour to one day a week. He could have encouraged them to communicate their personal and organisational sustainability actions and stories to everyone. He would not have been alone in his fight, but with a very large group of Unilever sustainability volunteers. Then he would have started an internal movement at Unilever that could have brought much more strength, success and sustainability to Unilever than one man could have achieved on his own, even if he is the CEO.