Leading Culture Change at Seagram
Background information
The Joseph E. Seagram Sons, Inc. was founded in 1924, with a single distillery in Canada. The company has been a major player in the beverage industry for over seventy years. The company enjoys a loyal customer base following the production of premium products such as Chivas Regal, Mum Champagne and Crown Royal. With primary operation based in Europe and North America, Seagram successfully positioned itself in the growth market and it expanded to the employee capacity of 14, 000 implying that business was booming and the company enjoying huge profits (Brännback, & Carsrud, 2012). The company has been famous following a history of diversification outside its core businesses for example; it owned major oil companies in the 1960’s and 70’s, in the late 1980s it acquired Tropicana Products and Martell S.A. These actions led to the eroding of the company’s core markets of liquor and venture of new harsh realities such as high operating costs and low profits. This led to reengineering the company with the goal of effectively managing its business processes, reduction of operational costs and identification of future growth opportunities. Under the senior executives’ leaderships, employee efforts were directed to scrutiny of business process and identification of many efficiency and cost saving measures. Furthermore, examination of other companies’ best practices and determination of consumer needs were also strategies directed towards effective management of Seagram Inc. This paper offers a situational analysis of the desired culture change at Seagram, it explores available alternatives to deal with the identified challenges, discusses the recommended course of action and finally the impact of the implementation process.
Problem Statement
The major problem at Seagram was the present culture and work processes that posed a challenge in the attempt to make profits through global expansion, diversification and reengineering. Seagram Inc. carried out operations based on a proud and successful culture that was characterized by entrepreneurship, individualism, functional pride, authority and personal relationships. Reinvention of the company’s work culture to be innovative, communicative, cooperative and customer focused however, posed several challenges regarding how the new culture would be implemented and sustained. The senior management faced the issue of maintaining an image of who they are to the world and employees. This challenge was attributed to lack of an effective communication culture.
Situational Analysis
Following the new ventures resulting from diversification, the company faced the challenge of increased taxes on liquor, increased government regulation and social criticism of spirits marketing following the early 1990 recession. The sale of liquor went down and it was predicted that the trend would continue for several years to come (Brännback, & Carsrud, 2012). This triggered the need for strategic repositioning and redefinition of the company’s competitive advantage. The subsequent success realized in the late 1990s was derived from the diversity portfolio and transformation into a global enterprise. Effective success strategies would require aggressive employees to exploit the new business ventures and improve the old ones, development of new brands and products. However, reinvention of Seagram’s business was not a sufficient strategy to ensure its success hence the need to transform how the company was being managed.
In order to create culture change within the organization, the key was creation of company values. Despite criticism from other employees, the company’s Chief Executive Officer, Bronfman, ensured that values played a central role in shaping priorities and steering the desired new culture in the following years. Bronfman believed that organizational change was based on behavior change, which required a new set of underlying values (Bourgeois, Duhaime, & Stimpert, 2001). Following the correct process of drafting, reviewing and finalizing the values (participation of both executives and employees), the company’s values included: consumer focus, innovation, quality, teamwork, respect and integrity. Following the opinion that the values had to be measurable in order to be enacted, the company designed a “values in action” checklist of to provide examples of values in practice. The new culture was completely different from the previous on at it was characterized with values such as customer focus, team work and innovation.
Drafting the values does not mean any change for the company hence the need for a plan to ensure their introduction and implementation within the organization. The introduction process include a personalized communication flow, an all rounded feedback process for the senior executives and a training program to the top one thousand manager to equip them with leadership skills. The three processes could be further discussed to enhance their understanding.
Communication: it involved division of employees into focused groups but with a different perspective from other prior business programs. The new technique-personal communication cascade-involved each manager meeting with his or her direct reports (employees) to discuss the values and their implication in their specific business environment. Division of employees into focused groups was a strategy to ensure that the introduced values were being practiced on the ground level. Employees were anxious to see if the management was practicing the values themselves.
All rounded feedback tool: the system was based on the six values developed. The focused groups were asked questions specifically to identify key behavior changes required to put the values in practice. Previously, the managers at Seagram provided little feedback except during the annual up and down reviews. Training was therefore necessary following their lack of experience and trust to fully implement the all rounded feedback process. Seagram hired professional coaches, developed a third party data processor and defined developmental rather than evaluative purposes in carefully implementing the 360-degrees process. The selected 200 managers were then evaluated and personally coached during the training program. A session was created when the managers shared their findings with those who offered feedback and further be involved in the development of an action plan for the improvement of the designed values.
Training: the company designed two value training programs “the Seagram challenge” and “leading with values”. The later program targeted the top 200 managers while the first program was designed for the remaining one thousand managers. However, the focus of the two programs was on the six values, other organizations best practices and how to practice the values at Seagram on a daily basis. Each program consisted of a mini case study of company’s situations in which the values were tested. Participants were presented with the opportunity to develop personal action plans and recommendations for the entire company.
Despite the need for organizational culture change and measures to implement the same put in place, the company’s executives faced numerous challenges in ensuring the vales would be institutionalizes and reinforced. First, at the end of every training session participants would come up with excellent recommendations for action. Some of the recommendations could be acted on by the participants while others required support from the senior management. However, there was no clear mechanism for the implementation and follow up of these many wonderful ideas (Brännback, & Carsrud, 2012). Secondly, the employees raised the question whether value violators would be punished. The argument was that if the management was serious about implementing the values, then those who practiced otherwise should be fired or demoted. There was no defined time for the employees to change and this made it difficult to assess who value violators were. For example, using Bronfman’s diagram for reference, the challenge lied on the fact that other employees were classified as former heroes because despite their violation of values the still achieved results. Punishing such employees would also violate the value of respect.
Thirdly, a challenge lied on how to recognize and reward value champions as recommended by mangers. Employees were divided on whether effective actors should receive financial bonuses or recognition. Those against the financial bonuses scheme argued that it was expected of everyone to practice the values and therefore nobody should be paid extra to do it. In any case historically, participants pointed to the performance management and incentive system and looked for changes. The fourth challenge was based on Seagram’s acquisition of MCA/universal hence having an all new employee base. Since the values were created and training conducted with Seagram managers, questions arose on how to integrate the new employees. A section of Seagram managers argued that the new employees were from a different company and practiced different organizational culture hence new values should be developed specific to them; others expected the new employees to subscribe to the designed values since they were acquired while others did not consider the issue as a matter of priority. Last but not least was the issue on how to deeper institutionalize the values across Seagram and how to sustain the momentum and attention on values. There were no clear set plans for questions raised at the end of every training session such as extension of training from the top 1, 200 to the 15,000 employees, opportunities for alumni gatherings and communication support to maintain the spotlight on values.
SWOT Analysis
Strengths: Seagram can bank on the fact that the newly acquired employee will bring with them diversity in organizational culture. These values can be used to further develop the values already designed for the company for better end results. The company also enjoys a loyal consumer base for its premium products and has been constantly expanding to other regions around the world over the years.
Weaknesses: Seagram’s major weaknesses at this time of crisis involved deteriorating net income after tax and social criticism to spirits marketing. The other weakness is of the diverse opinion of executives and employees regarding the implementation of the designed values.
Opportunities: opportunities existed in diversification and venturing into new markets following the identified strengths which if explored would lead to profit making and expansion hence greater success.
Threats: Seagram faces fewer threats from increased operational costs and minimal barriers to entry.
Available Alternatives
Strategy refers to the formulation of organizational long term objectives and goals and their implementations. Seagram had the goal of venturing into the global market to explore new opportunities, make profits and reduce operation costs. As discussed, continuous strategic redirection of long term objectives and goals with involvement of external and/ internal conditions, the result is confusion. The company has identified the need for culture change as the strategy to identify new markets, minimize operational costs and make profits. However, other alternative such as global branding, mergers and acquisitions could also be effective if successfully implemented.
Mergers and acquisition lead to diversification of products, new employees and new customer base. This can be classified as majorly revenue gain. However, the con of mergers and acquisitions is the lack of consideration for cultural differences which may inhibit successful adaptation of the designed values. Global branding on the other hand is an effective strategy since venturing into new markets could transform to increased revenues. However, it could be difficult to obtained new customers that are already loyal to other well established beverage companies.
Recommended Course of Action
In order to clearly define the company’s intention, there is need to communicate its corporate strategy functions which include its mission, validation of proposals coming from functional and business strategy functions and finally identification and exploitation of the link between business units and allocating resources following strategic priorities. Seagram Inc. should also reengineer its competitive position in order to establish a more profitable and sustainable position against forces that determine industry competition. Seagram uses value chain to enhance its competitive position and a defined framework for assessing the industry’s attractiveness. Finally, Seagram can engage in stakeholder motivation using both economic and non-economic gains. This strategy allows the stakeholders to understand the organization and its environment. This makes them act in ways that are expected to produce favorable results for the organization.
The company’s management team’s adoption of the values in different departments will determine the amount of time, costs and emotionally effective decisions by other employees. Those in leadership should therefore ensure they advertise the developed values to be used as a measuring stick of how departments act depending on the circumstances (Bourgeois, Duhaime, & Stimpert, 2001). The values should therefore be used as a method of communication of what is expected of the employees rather than a measure of success. The management should create an environment that constantly empowers employees with resources that help facilitate the desired change.
The true measure of success should be in the growth of individual departments within the company whereby each department will be expected to meet with their direct manager and determine how the values specifically apply to their department. Furthermore, it is upon individuals to interact with the management to determine how the values relate to the distinct operational functions within their job description. Employees will be charged with the responsibility of providing measurable goals, including a date to achieve various objectives.
Implementation/Implication
Organizational culture change at Seagram implied a damaged heritage for the acquired company (MA/Universal) while the company itself would enjoy the benefit of a strengthened brand. Adoption of the values would imply a stronger drive for improved performance by the employees leading to higher revenue. The leadership team would have better control of the organization leading to efficiencies following the alignment of procedures and processes. Finally Seagram would enjoy a better alignment of goal and overall good reputation.
The drivers for change in the implementation of values will include strong leadership hence the need to train mangers in order to make then effective. The company should have good support from the leadership team. Good communication both vertically and horizontally should be emphasized to make employees aware of the desired change. Seagram should exercise empathy and respect for the acquired company despite the difference in organizational culture (Bateman & Snell, 2007). Finally, Seagram should have a good and clearly defined strategy and plan to be accomplished and lastly required resources such as financial and human.
Designed implementation strategies include:
Creating a vision: senior management should develop a new mission statement, which incorporates the developed new values, and also develop new strategies to execute the vision
Communicating the vision: effective communication can be done through advertisements on television, emails and bulletins; this calls for constant feedback during transition
Establishing a sense of urgency: this follows a close examination of the limitations of the present culture and the resulting outcomes; this should communicate the need for change to the senior management
Forming a powerful guiding coalition: a selected group of the management team should be selected to champion the change, the press should be used to maintain the momentum and finally support should be sought from both internal and external environments (Thompson & Martin, 2005)
Empowering employees to act on the vision: the working environment should be designed in a manner that allows employees to enact change, ensure employee commitment and finally identify and remove obstacles.
Planning for and creating short term wins: plan for a corporate bonding session between Seagram and the acquired company employees while advocating for the message of change. This helps merge cultures, motivate employees and act as a platform to air and negotiate new and realistic working conditions such as increase in wages.
Combining gains and producing more change: the consequent synergies derived short term wins should be used to determine long term transformations yet to be tackled in future such as union resistance.
Institutionalizing new approaches: by drafting the connection between new values, behavior and organizational performance. New employees should adopt the new values which should be documented for reference by all employees.
References
Bateman, T. S., & Snell, S. (2007). Management: Leading & collaborating in a competitive world. Boston, Mass: McGraw-Hill/Irwin.
Bourgeois, L. J., Duhaime, I. M., & Stimpert, J. L. (2001). Strategic management concise: A managerial perspective. Fort Worth: Harcourt College Publishers.
Brännback, M., & Carsrud, A. L. (2012). Family Firms: Case Studies on the Management of Growth, Decline, and Tran Bourgeois, L. J., Duhaime, I. M., & Stimpert, J. L. (2001)sition. Dordrecht: Springer.
Thompson, J. L., & Martin, F. (2005). Strategic management: Awareness and change. London [u.a.: Thomson Learning.
