How a cumbersome giant learned agility

Speed is not a word that sits comfortably with the physical size of the giant German multinational company Henkel. But it is an attribute that chief executive Kasper Rorsted places above most others when mulling the competitive ascendancy of his consumer and industrial goods company, which now has a presence in at least 125 countries.

Keeping the firm on a clear and simple track has Rorsted away from home three days out of five, and leaves him with belief that economic fluctuation is now a permanent feature of the world economy. It's an environment in which he believes only the agile can win.

What are your current priorities and focus?

I travel [outside Germany] 160 days a year, or three days out of five. The reason for this is we do only 15 per cent of our businesses in Germany. We do 42 per cent of our business in emerging markets. And today we have 53 per cent of our people [in emerging markets] and by the end of this year that will be 55 per cent. So we have moved our structure down to emerging markets during the past three to four years.

Today, China is our fifth-largest country. By 2015, it will be the second-largest country in the world for Henkel. So you simply have to spend time and understand the businesses and cultures of these regions.

I think it's very important for a CEO of a global company that you don't think you can run your global company from one office somewhere in the world. You have to be where the people are and where the business is. It's a very fundamental part of my leadership style that I want to be where our business is; I want to know our senior leaders in these countries.

Will you put more Asians in your top management, or on your board of directors?

Yes, we are already doing that.  We're moving more Asians up.  We have three divisions. The person who runs our adhesive division came up after spending six years in China. We're also taking Asians to Europe.

You are the first non-German to head Henkel in more than 120 years, and also the first who came from the IT industry - which has nothing to do with your current businesses. Back at that time, why did Henkel make so unconventional a decision, to pick you as CEO?

When I asked our chairman back then, why would you give me this job? He said because we share the same values. From a business standpoint, there were two or three reasons why they wanted somebody different. One was, I had an international job since 1990. I grew up in the US, I'm Danish and I had lived in the US, England, Germany and Switzerland. I had a very international background. The second reason was what I had learnt in hi-tech [industries]. The speed of change is so rapid in high-tech. I believe very strongly that you gain competitive advantage if you are quick; if you see things coming and you can react quickly. In hi-tech you [may] have a fantastic year, and the next year will be a disaster. Getting that speed into your organisation, that's important. I will go from here to a town hall meeting [with staff] where I will say: "volatility can lead to death for a company. But it can also lead to prosperity, if you can react quickly". Also, what you learn in a hi-tech company is a tremendous  focus on performance. Performance is the way you attract good people; how you develop good leaders; how you get a good image in the market place. 

These are the reasons why they picked me. They wanted a different generation to come to the company. I put a lot of different nationalities in our senior leadership [team]. I put a lot of women into our senior leadership [team]: 30 per cent of our global leaders today are female, and we grow by 1 percentage point every year. 

How do you move up the speed of your company?

I try to make it flatter; less hierarchical. I try to bring the decision level down to the level where it should be taken; the CEO of the company should not make all the decisions. The decisions in Thailand should be made by Charamporn [Uerpairojkit, president of Henkel (Thailand)].

Then there is [an aspect] that I find very important, and that is standardisation, automation and shared services. Most companies cannot make fast decisions because they are not standardised. It takes too long to understand what the numbers are and there are too many different systems; too much manual work. We've dramatically standardised our systems. In 2005, we had 135 human resources systems. Today we have one. When we close at the end of the month, I know the day after pretty close to what the numbers are.

What are the new values and cultural changes that you have introduced to Henkel?

Until 18 months ago, the company had 10 values and nobody could remember them. Today, we have five. Customers is one, people is two, financial performance is three, sustainability is four and family heritage is five. We have one slogan: "Excellence is Our Passion", and our vision is to become a global leader in brands and technologies. It's very basic. We took every [employee] in the world to a workshop last year and today, we are doing a follow-up.

When I look up my [schedule] when I go to Asia, I say: these are the five values, and value number one is customer; Do I go to the customers? Yes. Value number two is our people: Do I sit down and do a human-resources review, have a town hall meeting [for the staff] and meet our people with high potential? Yes.  If the third value is financial performance, let's sit down and review our financial performance.

We try to look at it as if the values drive the behaviour of our people and the agenda,   so if we say customers are important, that means our senior leaders have to go out and meet customers.

What is the hardest part of your job as CEO of the company?

The hardest part I always find is making the hard people decisions that you need to make. What I mean by this is removing people that can't do their job, and separating those who you like personally from those who are doing a good job. What I hate is making the hard decisions [such as] moving jobs from the West to the East; closing manufacturing plants in the US and Europe and easily opening them in Asia. But that's the most important part, because if I don't set that tone I cannot expect anybody else to do it. I've made changes since I took over in 2008. Of our top 200 leaders, we've changed 100; fifty per cent of our leaders have been changed. Some of them because of performance and some from a values stand point: they didn't fit into our company.

Has that been a generation change, that you have introduced?

It's a generation change. We have much younger [staff] today because you get more rewards for performance than for seniority. You don't get rewarded or removed because you are young or you are old. Some leaders can make the step up to the next level and [a new] culture, and some cannot.

How much "faster" is Henkel today than it was before?

I think we're much faster. We started as the first German company to undertake restructuring in 2008 - in the financial crisis. And we said we would do that in three years. We did it in 20 months. When we bought National Starch we said we would take    three and half years to integrate. We took two years. We're good at executing quickly.

Syoss is [a haircare] product we introduced in March and April of 2009. Today the product is in 40 countries. It will probably make half a billion dollars in revenue this year.

[However], we will never be quick enough. We're too slow in increasing some of our prices when the raw materials go up. You can't sit and wait half a year and hope that they will come down. I always try to say: here is what we did well, and here is what we did not do well. It's important that you make the decisions at the right time - and have the courage to make them.

I read from a newspaper that you were once fired from HP. At that time, did you feel discouragement?

In 2004, I was fired as [one of] the last three Compaq executives. As a leader you tend to feel things are personal when they are never personal. Of course I didn't like it and I don't think anybody likes it. I had a great advantage in that within 60 days I had 11 job offers, so for me it was not that I had not performed well. I was discouraged because I think you work with an ambition of doing a very good job.

I think that as a leader, you also learn from setbacks.  If you look [at the business] environment that we have today, companies that do well will be good companies because they're capable of dealing with economic setbacks, political unrest, raw material problems, [disasters, like in] Japan. And there is no doubt that my career setback in 2004, over time, made me a better leader. I think it is sometimes good for you to get some bad experiences in your career; some setbacks, and then ask yourself: "What could have been done differently? What mistakes did I make?" Instead of just thinking that everything you do is correct . It has made me a more mature leader.  I became more focused on what's really important and what's not so important; what I should get excited about. I think I'm also more calm as a leader. When people ask me today if I'm concerned about the financial crisis, [I can say] I'm not concerned. I think we know what we need to do.

What is your viewpoint of the state of the world economy and that in Asia?

I don't think the world will come back to the [conditions we enjoyed] before 2008. What I mean by that is, before 2008 we had very stable development. I think those days are gone forever. I think what you will see moving forward is an economy that will fluctuate. Right now, the world economy is growing by 3 per cent, so the underlying growth rate is actually okay. I don't think that fluctuation will go away. You have seen the [situations in] Libya, Syria, Japan, Europe, political unrest in Thailand. This is a trend that will not change. It is the migration of economic power to the East. That migration will accelerate further.   

So if you ask me, am I concerned? I'm not concerned [about the] overall direction, but I expect constant fluctuation and volatility in the global economy. That's why the speed element is so very important. Europe will overcome the problem with Greece. Greece [represents] only 2.5 per cent of European GDP. Its not a financial  issue, it's a political issue. I'm not concerned that the world will [suffer] another financial crisis.

What are Henkel's Asean strategies?

We will continue to overinvest, not only in people, but also in manufacturing plants here. We're discussing "what will be the next China?" There'll never be a "next China" - we're thinking conceptually. Thailand is a core hub for logistics and supply chain for our cosmetics set-up all over Asia.

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