Unilever’s Organisational Structure Evaluation And Change Analysis

Unilever’s Organizational Structure Prior to 1996

Identify and evaluate Unilever’s organisational structure prior to 1996. Why did Unilever change from this structure in 1996?

Identify and evaluate the effectiveness of the new organisational structure that Unilever has adopted (from 2004), in achieving their corporate strategy.

Describe the internal and external forces that could have created the need for Unilever to change its organisational structure.)

Organisational change is one of the most persistent, pervasive, and powerful challenges that manager’s face today (Hitt et al, 2008). Using suitable change theories, describe how managers at Unilever could implement the change identified in the case study.

Unilever is a multinational company set up by Margarine Uni (Dutch) and Lever Brothers (British) in the year 1930. Hence, it came to be known as Unilever. Every organization has a different management structure which is best suited and works efficiently by giving good results. Unilever was also doing well and had a decentralized structure. It is a type of structure where the power and authority is transferred from the central unit to the local enterprises (Weingardt, 1971).

In the case of Unilever, they too had diversified the power and authority to the subsidiary units. The subsidiary units of different countries were accountable for their own market. In Europe, Unilever had 17 subsidiary units in different countries. They were independently responsible for the production, sales, distribution through their own supply chains and marketing of the product (Williamson and Wilson, 1970).

The products were also customized as per the need and requirements of the local market. The subsidiary units had the independence to match the products as per the demand of that particular area. The managers were also locally recruited to understand the need and demand of customers. This type of the decentralized structure worked till 1996, when the company finally analyzed the desperate need to change the structure (Weingardt, 1971). There were several reasons behind this decision taken by the organization. Some of them are:

High cost involved – This type of structure was costing heavily to the organizations.

Increasing competition – There were more competitors in the market and the company could not tackle the competition on a global scale with its subsidiaries being independent entities

Decentralized units of manufacture – This kind of manufacturing divisions further increased the cost and it was difficult to sustain with them. Hence, the company decided to have a centralized manufacturing division for particular products. This would save the cost of setting of manufacturing plants for each subsidiary unit (Brinkmann, 1985).

Unilever’s Reasons for Changing Their Organizational Structure

Global expansion – Up till now, the company had 17 subsidiaries in Europen countries and wanted to further expand their business in other continents. This kind of structure would have further caused confusion and lack of vision (Rath, 1982).

Falling prices of shares in the market – The company was also worried about the falling prices of shares. This was creating a negative image for the company.

Ease in decision making – Since there was no single head and each entity were independent, it was difficult to take any decisions.

Facilitate coordination – The company also wanted to have an improved coordination among its subsidiaries. Each one was acting as a single unit and hence coordination and support were lacking.

Loss of brand recognition – There were too many products launched in the market as per requirements for every individual market. Hence, there was loss of identity.

These were some of the reasons that forced Unilever to change its organizational structure.

Despite of the organizational restructuring, Unilever was still to achieve the desired results. The competitors were still having an upper hand and Unilever was not able to stand with them (Mullins, L.J. 2010),. Hence, it decided to go through another restructuring. Though it is not an easy decision for any organization, but Unilever was bound to do so (Mizera, 2012). Some of the major changes that happened during this restructuring were:

Cut down the brands  – The company decided to shrink its number of brands so that it can focus and concentrate on limited products. Initially, Unilever was selling around 1600 brands which were downsized to just 400. These downsized products were marketed strategically on a global scale.

Reduction in manufacturing units – After reducing the number of brands the company also downsized the number of manufacturing units. They were reduced from about 380 plants to just 280 plants.

Product division – The entire Unilever’s product offerings were divided in just two major divisions. They were:

Food

Home and personal care

This helped the organization in proper coordination and management. Now, the food division was only responsible for their range of brands and vice versa. They had to focus on every aspect like product development, product manufacture and product marketing of their brands. There was a proper division of work and hence better focus. For example – Unilever Bestfoods which is located in Europe with headquarter in Rotterdam, was only taking care of food division, however, its home and personal care division located in Europe was only concerned about its own product range (Unilever: Rotterdam becomes centre for marketing and innovation, 2013).

Evaluation of Unilever’s New Organizational Structure from 2004

Firing of employees on a huge scale – Due to reduction in number of products and manufacturing units there was an obvious reduction in the number of employees. Around 20,000 employees were terminated reducing the liability of the company.

Changes in marketing structure – Unilever also implemented changes in its marketing structure. Now there were marketing managers for each division. These marketing managers were supposed to supervise the brand managers. These brand managers were responsible for individual brands and were answerable to the marketing managers. This type of marketing structure helped in focusing on each and every brand.

All these initiatives taken by Unilever helped in focusing it on brand recognition for many products and helped them retain their brand value. Also the bifurcation of products under two divisions helped in strategic planning and implementation. Reduction in manufacturing units and hence employees resulted in saving a lot of cost to the company. The change in marketing structure in the organization helped the company to focus on each and every product.

There were several factors that left no option for Unilever but to change its organizational structure.  There were several internal as well as external factors. The internal factors were within the organization, however external factors were from outside the organization.

Internal Factors

Designation of authority – There was no adequate designation of authority. The subsidiary units were independent decision makers. They had their own planning and structure according to which they acted. The central binding force was lacking and hence that led to the inadequate division of power.

Increasing costs – The high rising costs were another threat to the organization. Having separate manufacturing units for every subsidiary had a huge cost involved with it.

Lack of common vision – Due to subsidiary units being independent, there was a lack of common vision and focus.

Facilitate coordination – The lack of coordination among subsidiary units was also a major reason for the organizational change.

External Factors

Growing Competition – The increasing number of competitors was becoming a threat to the company. The competitors were gradually increasing their market shares. This competition was not only for branded products, but also non branded  products had increased significantly in the market.

Global expansion – The company was planning a global expansion. Till now the company was only confined to European countries with its 17 subsidiaries. With the existing organizational structure, it was not possible to expand globally. There was a lack of common objective and vision in this type of decentralized structure.

Internal and External Forces that Led to the Change and Need for Change

Lack of brand recognition – Due to customization of products at all units there was no brand identity. This was causing the lack of brand recognition and hence creating a problem for the company.

Too many brands – There were too many brands for a single product range. Hence it was getting difficult to implement the marketing and advertising strategies. Later on, these brands were reduced from 1600 to 400.

There are several challenges for managers at the time of the  organizational changes. These challenges can be on various fronts. It is very crucial for managers to handle these changes in an efficient manner because change is not easily accepted by human mentality. Human beings do not accept change easily and hence it is difficult to prepare them for it. It becomes even tougher if the change happens in an organization and there comes the challenge to the manager.

There are three theories of change that managers can implement in organizations. They are:

The Kurt Lewin Change Management model – This theory works in three stages. These three stages are ‘freeze’, ‘change’ and ‘refreeze’. The first stage ‘freeze’ is about getting ready for the change. All the necessary changes to be done are evaluated. Then comes the second stage the ‘change’. At this stage, the actual change happens. Then is the last stage, which is ‘refreeze’ (Burnes, 2004). This stage is also known as ‘unfreeze’. In this stage, employees adjust to the changes that have taken place.

This theory could have also been applied at Unilever. The employees should have been given adequate and apt lessons on motivation before the change. This would have prepared the employees for the change in the ‘freeze’ stage. In the second stage the organizational change takes place. Communication and motivation are important part of this phase. After that, comes the ‘refreeze’ stage. The managers had to efficiently handle this stage, since it is human tendency to repel to change.

Kotter’s 8 step change model – Kotter’s change model is an eight step process. They are:

Create urgency – In the first step of this model, a well planned need has to be generated for the change. In case of Unilever, employees had to be made aware of the urgency of change (Pollack and Pollack, 2014).

Forming a strong alliance – In this step, employees are convinced about the change. At Unilever also, managers could have persuaded the employees and finally would have convinced for change.

Suitable Change Theories for Managers at Unilever

Create a vision for change – It is important to evaluate all the options available after the change. At Unilever also, it was managers duty to foresee the options available.

Announce the vision – The vision should be efficiently conveyed to the employees. Managers at Unilever should have also effectively communicated the vision to the employees.

Removing Obstacles – All the hurdles that come in the way of change should have been removed. At Unilever as well the managers were supposed to remove these barriers.

Creating quick wins – Nothing motivates employees more than success. An early win at Unilever also would have had a lasting impact.

Build on the change – The wins and loss should be properly evaluated at this stage. Similarly, it was the role of managers to evaluate them.

Incorporate the changes – In the last stage it is the time to finally implement the changes. At Unilever also, managers could have now effectively implement the changes.

The Kubler Ross change curve – This theory bifurcates the change in five stages. They are:

Denial – In this stage, there is a non acceptance of the change. At Unilever it would have been a difficult phase for a manager to handle so much reluctance.

Anger – At this stage, the employees show their frustration in the form of anger. Considering the situation at Unilever, it was a crucial role of manager to handle this anger.

Bargaining – After the employees feel that nothing will work out they move to bargaining mode. The managers at Unilever needed to handle this situation tactfully.

Depression – The employees go to depression phase as they are still not sure about the change. The management at Unilever needed to give motivation sessions to pull the employees out of this situation.

Acceptance – At this stage, finally the employee accepts the change as there is no substitute. Managers at Unilever, play a vital role by regularly motivating them and keep them going (Carpenter, Kübler-Ross and Kubler-Ross, 1979).

These are the three change theories that could have been implemented at Unilever at the time of organizational change.

References

Boyle, M. and Ottensmeyer, E. (2005). Solving business problems through the creative power of the arts: catalyzing change at Unilever. Journal of Business Strategy, 26(5), pp.14-21.

Brinkmann, P. (1985). Towards decentralization. Energy Policy, 13(3), pp.204-214.

Burnes, B. (2004). Kurt Lewin and the Planned Approach to Change: A Re-appraisal. J Management Studies, 41(6), pp.977-1002.

Carpenter, J., Kübler-Ross, E. and Kubler-Ross, E. (1979). Accepting Death: A Critique of Kübler-Ross. The Hastings Center Report, 9(5), p.42.

Church, R. and Clark, C. (2003). Purposive Strategy or Serendipity? Development and Diversification in Three Consumer Product Companies, 1918-39: J. & J. Colman, Reckitt & Sons, and Lever Bros./Unilever. Business History, 45(1), pp.23-59.

Dales, J. and Wilson, C. (1957). The History of Unilever: A Study in Economic Growth and Social Change. I. II. The Canadian Journal of Economics and Political Science, 23(4), p.580.

Fundamentals of Management. (2013). Robbins Decenzo and Coulter, 8th edition(Pearson Education).

Mizera, S. (2012). Sustainability at Unilever: An interview with Lesley Thorne, Global Sustainability Manager. J Brand Manag, 20(3), pp.191-195.

Mullins, L.J. (2010). (2010). Management and Organisational Behaviour, 9th Edition(Pearson Education Ltd, Harlow-UK.).

Pollack, J. and Pollack, R. (2014). Using Kotter’s Eight Stage Process to Manage an Organisational Change Program: Presentation and Practice. Systemic Practice and Action Research, 28(1), pp.51-66.

Ramanna, V. (n.d.). Hindustan Unilever Ltd. SSRN Electronic Journal.

Rath, A. (1982). Local and Global Operations of Multinational Corporations: Unilever in India. Social Scientist, 10(10), p.30.

Robbins Decenzo and Coulter. (2013). Fundamental of Management, (8th Edition).

Unilever 2001: Employees. (2002). Focus on Surfactants, 2002(7), p.5.

Unilever 2004 review. (2005). Focus on Surfactants, 2005(5), p.7.

Unilever: Rotterdam becomes a centre for marketing and innovation. (2013). Focus on Surfactants, 2013(2), p.7.

Weingardt , C. (1971). Organization Structure and Communication in the Unilever Company. International Studies of Management & Organization, 1(4), pp. 377-393.

Williamson, H. and Wilson, C. (1970). The History of Unilever: A Study in Economic Growth and Social Change. Southern Economic Journal, 36(3), p.342.