Case study: Kimberly-Clark’s Andean ascent

The story
In 2004 Kimberly-Clark, the US company whose brands include Huggies nappies and Kleenex tissues, renewed its attempts to set up a pan-Andean regional management structure.

An Argentine, Sergio Nacach, became general manager for a market that encompassed Peru, Ecuador, Bolivia, Colombia and Venezuela. He was charged with boosting growth in sales and profits.

Kimberly-Clark’s development in Latin America had come largely through acquisitions. The purchased companies often kept their original management who, having sold the business, were not committed to change or to improving financial performance.

The challenge
Mr Nacach had to battle expectations among the staff.

First, earlier efforts to create a pan-Andean management structure had failed because of the autonomy of the acquired units and cultural differences between the countries.

Second, the market appeared to have little potential. The countries were relatively poor: some items, such as nappies, were sold in single units because consumers could not afford to buy them in bigger quantities.

In addition, the goods – tissues, nappies, feminine hygiene products, paper towels – were humdrum everyday consumer staples.

Overall, the assumption was that sales growth would merely match that of personal income.

The strategy
Mr Nacach set out to institute “a winning culture” that focused on employees. Although the idea of building a culture that engaged staff was not new, it was implemented infrequently – especially in Latin America, with its more paternalistic and hierarchical traditions.

Mr Nacach instituted several actions, including:
● Eliminating status symbols that separated employees from the leadership. This included removing security barriers to the executive floor and making it common practice for everyone to use each other’s first names.
● Using newsletters and frequent meetings to share information with everyone, so employees knew how they were doing and what they might do more effectively.
● Decision-making was devolved to local units. Now they could tailor their marketing and sales efforts – by responding to regional feast days, for instance.
● Organising the company into “geographic business accountabilities”, where people with different roles worked together and were jointly responsible for financial results. This entailed altering the pay structure so that employees were rewarded for overall financial performance in a geographic area.

This solved the typical organisational silo problem in which units do not communicate with each other. For example, the marketing department previously rolled out promotions and advertising without telling sales or manufacturing.
● Achievements were recognised at fun events. In 2007, for example, a Star Wars-themed awards ceremony in Cusco had everyone in costume.

What happened
Sales increased from $519m in 2005 to more than $1bn in 2008, while operating income soared from $63m in 2005 to $200m in 2008.

The Andean units became more integrated with local communities through charitable projects. This gave employees a sense that their work made a difference to local people as well as to the company.

Many leaders in the region also obtained positions in other parts of the company. Most recently, Mr Nacach was appointed head of all Latin American operations.

Key lessons
Organisational culture is a source of competitive advantage in all sectors and all countries, not just high-tech sectors or in the US or western Europe.

It is possible to improve results dramatically, even in seemingly mundane businesses.

“High-commitment” work practices that touch employees’ hearts and minds invariably make good business sense.
- Financial Times, 21 May 2012