Essay, Pages 4 (944 words)
The Nestle Company underwent a first order change. A first order change involves keeping things stable. It did not encourage a total change of how things were done and to ensure this, new managers were trained of the corporate culture of the company so that they could not divert from it with their own ideas. The Nestle Company was solely propelled by the senior management who were slow to adapting far reaching changes. There was no much involvement of other lower level managers.
Brabeck Letmathe, the Chief Executive Officer of Nestle, proposed an incremental change as the way to go for Nestle. This, however, is contradicted by his rather sudden replacement of the executive board where the new one was responsible for executing change. The transition from old practice of business was instituted fast, not progressively as the CEO had suggested. The total overhaul of the decision making organs of the company meant that the CEO wanted to end some business practices that were going on.
Such change required him to make a total and sudden change for his objective to be achieved. The change, however, when evaluated against the idea of incremental change in the organization goes against the vary idea.
Changes in an organization the size of Nestle requires great precaution and a sudden change, if not properly evaluated, may hurt the firm in future. I would agree with Brabeck that change has to be smooth and sensitive. However, the firm should not be so rigid to change.
Some changes may have to be implemented fast and on this Brabeck was wrong. The diversification of the Nestle Company from a food industry to the cosmetic industry required new systems. Technology is not much an issue in the food industry as much as in the cosmetics industry. It is therefore desirable that the CEO evaluated the culture of adopting change. If anything, the changes he declined to move fast on were majorly his, not the company’s. As much as the CEO of a company has control of the company, they should not overrule the existing structures because they contributed to the success of these companies at one time or the other. As he admits thereafter some strategies that the company had used in the past could still contribute to successes in the future. He did not have to dismiss the whole executive board. It may partly explain why the company later acquires another company that was heavily indebted.
The change that managers would propose for Nestle is for Nestle not to take up L’Oreal because of its huge debt and no promising profits in the near future. Acquisition of a company that had the debts the amount L’ Oreal had required a lot of money to be pumped into the business. It would take a long time before the acquiring company clears these debts and begins to earn profits from it. The lower level manager must have found a problem with this. The company had also realized at one time that change may be needed fast and the culture of the Nestle Company of only progressively taking up any major changes must have been a problem to these managers. Managers may have proposed a quick uptake of technology for greater efficiency especially since Nestle had diversified form food to other sectors. The Nestle management would argue that the acquisition of L’Oreal would in the long term reap profits than the single products line, its food industry. The management too would suggest slower uptake of technology. The management here does not realize that an industry like cosmetics would require more efficient technology than the food industry.
There are lessons that can be drawn from studying the Nestle case. First a thorough evaluation needs to be done before on acquisition is initiated and such evaluation should involve all middle level managers. The lack of a better evaluation led Nestle to putting lots of money to revive the acquired company, funds that were really unnecessary or at least they did not achieve the main objective. Secondly, it is not enough that a company just focuses on the long-term goals. The cultures of companies should be such that they allow change so that they would take advantage of short-term goals. Short term goals need not be viewed as interruptions but as connectors to the long term goals of the company. The emphasis should rather be on harmonizing the short-term goals with the long term-term ones so that the company would not miss current time opportunities to earn profits.
Lesson three is that the overall management of companies should not always be for the senior managers. Junior ones may also have big ideas and a firm’s culture should allow generation and build up on them. Vertical integration of the leadership of a company needs to be done. With Nestle it seems that the employees and other staff just report to work to do what they are instructed to do. They are not allowed to make any meaningful contribution in the running of the Company. Nestle coach the new staff to run the firm the way they always used to run. History has shown that the companies that companies that allow the staff to make contribution to the running of a business prosper. Nestle should try this. (Megone, 2002).
- Dunford R, & Akin G, (2006), Managing Organizational Change; A Multiple Perspectives Approach, McGraw-Hill Irwin.
- Megone, C. & Robinson S. (2002). Case Histories in Business Ethics. Routledge Publishers, Oxon].
- Shih, M & Yong C. (2002). Asian Economic Crisis, Business Strategy and Planning and Control Systems: An Empirical Study Using Latent Variables Modeling, National University of Singapore.