Analysis of the Organization and Leadership of Unilever

Subject: Management | Topics: Article

1- Introduction

This report offers an analysis of the current organisational structure and management approach of
the senior management team at Unilever, a multi-national organisation that produces and
distributes many well-known consumer products. Recent years have seen the organization
undergo massive transformation, and they have reduced their workforce by some 41% over the
last ten years (Unilever, 2010). They are dual-listed in the Netherlands and the UK, but operate
as a single-entity with the same board and senior team. This structure offers them flexibility and
adaptability across the globe, and also efficiency in production and distribution. It will draw on
the theories of eminent scholars such as Taylor (1999) who proposed the theories of increased
organisational efficiency by utilising an appropriate management structure, and also highlight
how the internal structure of the organisation is influenced by external environment and
organisational structure. This report will consider some of the recent changes and challenges,
which have faced Unilever, and provide and analysis of the likely future challenges facing the
organisation.

2- Organizational History

Unilever is one of the largest businesses in the world, with an annual turnover of nearly 40
billion and in excess of 179,000 employees globally (Unilever, 2010). It was formed in 1930 as
the amalgamation of the UK soap company Lever Brothers, and the Dutch margarine company
Margarine Unie. The main driver for the merger was collaboration, as both companies relied
heavily on palm oil as a major ingredient for their products and by sharing resources they were
able to import and distribute to their factories far more cost effectively (Unilever, 2010). Indeed,
palm oil remains a major ingredient for many products toady, and their continued commitment to
sustainability and efficient distribution is one of Unilevers core corporate strategies (Dhillion,
2007).

The growth of Unilever has been characterised by mergers and strategic acquisitions, not all of
which have been friendly (Polsson, 2008), and their brand portfolio exceeds 400 and includes a
wide range of consumer goods, ranging from foods and beverages to personal care products and
cleaning products. They are listed on both the UK FTSE 100 and the Dutch equivalent the AXE,
and they have 13 brands which generate revenue of over 1 billion per year. The portfolio
includes such well-known brand names as Walls, Ben and Jerrys, Dove, Lipton and Flora, and as
can be seen from the few names mentioned, they are both diverse and equally powerful brands
and market niches. They are also the largest ice-cream manufacturer in the world, controlling
some 73% of the worlds ice cream production and generating revenue of 5 billion per year
alone from ice cream sales in Europe. Unilever have been able to make sales particularly
profitable and efficient through centralisation of their brand under the heart logo, meaning that
they were able to manufacture and distribute under the same brand across Europe with minimum
customisation for local regions (Unilever, 2010).
Unilever has also built strong links with its subsidiary businesses around the world for its teas
and coffees, as much of the raw material required for food stuffs is sourced from African and
Latin American countries, such as cocoa, vanilla, palm oil and coffee beans. To reach the size
and level of diversity that they now control, Unilever have sought to acquire a further brand or
manufacturing interest at the rate of approximately one per year for the last ten years. Such
significant activity in terms of corporate diversity and consolidation makes for an interesting
topic of study. (Full timeline of activities available in appendix 1).

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3- Organisational Structure

Considering the size and scope of the organisation it is understandable that they must operate
within a defined framework, and as noted by Cummings and Worley (2005:136-138) the sheer
size of the company can expose them to the risk of paralysis and stagnation as they are too large
to respond flexibly to external challenges. Therefore Unilever have explicitly set out to create a
management structure, which is capable of making faster decisions and responding more flexibly
to external stimulus. Accordingly Unilever has created a four-tier hierarchical structure, which
helps to funnel information into the business, and allows the senior team to make appropriate
decisions based on available data (Unilever, 2010b).

4- Organisational Culture

Organisational Culture has been defined as the specific collection of values and norms that are
shared by people and groups in an organization and that control the way they interact with each
other and with stakeholders outside the organization, (Hill and Jones, 2001:27). This definition
also helps us to understand the values of the organisation and how they seek to lead and develop
their business. Organisational culture is complex, and can be influenced by a huge variety of
factors as noted by Hofstede (1980) who identified the influenced and effects of multi-cultural
workforces within multi-national environments. He proposed a theory of cultural dimensions
which he used to help explain how multi-cultural influences act upon an organisation with regard
to strategic application as discussed by De Wit and Meyer;

Hofstedes (1993) theory of cultural dimensions implies that although not all the individuals
within a countrys population will have exactly the same characteristics, the cultural dimensions
will colour the institutional and administrative arrangements that are made within the country,
and will set the norms for behaviour.

Hofstede, G. (1993) Cultural constraints in management theories, in De Wit, B. and Meyer, R.

(2004) Strategy Process, Content, Context, 3rd Edition, Thomson, London pp206.

This is strongly evidenced at Unilever where the culture of the organisation is derived from its
own multi-national background. This has influenced the process of strategic decision making at
Unilever under the systemic approach advocated by Whittington in his work What is strategy
and does it matter? (2000). Whittington proposed that organisations in the same circumstances
as Unilever would do well to adopt what he described as a systemic approach. In this model the
organisation should seek to create a hybrid of processual or delineated strategy on the basis of
organisational objective, but that the approach should be tailored or tempered by a respect for
cultural differences. Whittington observed that organisational culture is governed by the social
structures created by management level, social class and interest groups, and that trying to cut
across these groups in certain localised areas was likely to create excessive tension and achieve
very little (Whittington, 2000:185-189).

It is therefore interesting to observe the influence and effect of Paul Polman as the first external
candidate to take the role the Chief Executive Officer. Paul is a Dutch national and has held the
role since October 2008. His background and experience in the commercial goods and
manufacturing sectors make him an ideal candidate for the role, as he is both financially astute
and commercially aware. From the analysis of the company and its operating ethos and mission
it can also be implied that his management style is European-influenced and therefore likely to
be reflective of an inclusive culture and style in that it is both democratic and laissez-faire
(Morgeson, 2005:497-508). Alternatively under the Tannenbaum and Schmidt continuum (1957)
it can be suggested that Paul Polman allows freedom of his subordinates to pursue suitable
corporate strategies on the basis of their capability and the application of democratic decision-
making.

Paul Polman succeeded Patrick Cescau as the Chief Executive Officer of Unilever. Patrick
Cescau was the former CEO of Unilever and the first group CEO for the company. He is a
French national with numerous accreditations to his name and an extremely successful history at
Unilever. As reported in the Telegraph (2008), Unilever searched long and hard for a suitable
successor to the position and eventually felt that Paul Polman would be a suitable candidate
given his own background, capabilities and skills. This was a departure for the Anglo-Dutch
company as they had never previously taken an external candidate for the position, preferring to
recruit internally. Although Patrick Cescau formally stepped down from his role following his
60th birthday (the main reason for him to leave the post), he has continued to play an active role
in corporate life and now serves as a non-executive director to another large multi-national firm.
Patrick Cescau was known across the world for his work in regard to sustainability and business
growth, and he has proved a hard act to follow (Insead, 2010).

5- Specific Issues

It is useful to compare and contrast specific issues at Unilever and the various approaches which
the board of directors have taken when addressing these situations, particularly with regard to the
work of Patrick Cescau and his approach to corporate sustainability and social responsibility.
Indeed he is quoted as having said that There is no dichotomy between doing business well and
doing good; and, in fact, the two go hand in hand. (Insead, 2010). Thus, this element will
consider some of the current issues facing Unilever and how they will seek to address them.

5.1- Approaches to Corporate Social Responsibility

As noted on the corporate website (Unilever, 2010c), Unilever have a strong commitment
corporate social responsibility and sustainability and they have adopted a specific and targeted
set of measures and key performance indicators to benchmark their own sustainability
performance. It is recognised by scholars such as Atkinson et al (2007:66-68) that there is
currently no uniform approach to sustainability or any codified measures of best operational
practice. This is despite increasingly stringent legislation which seeks to set out minimum
performance standards and has been applied on very few occasions save for flagrant breaches
which have resulted in catastrophic consequences (Constanza et al, 2007:203-210). Unilever
state that their approaches to Corporate Social Responsibility incorporate business benefits as
well as ethical principles (Unilever, 2010c). By this they mean that they have continued the
work started by Patrick Cescau seeking to align business activity and ethical activity. They have
chosen to apply sustainable principles to as many areas of possible in their business on the
simple premise that sustainability makes good business sense. Therefore they have engaged some
of the most innovative principles in research and development, agriculture, packaging and
manufacturing as they believe that sustainability helps [them] win (Unilever, 2010c). The
Unilever website offers several examples of successful case studies where sustainability has
proved to be of great business benefit amongst both internal and external stakeholders, and the
board of Unilever also recognise that this can only be achieve by impeccable business
performance and adherence to best principles in their own right.

5.2- Reputation Management and Diversity

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Contrastingly it is also useful to consider some of the more controversial activities, which have
been undertaken by Unilever in their recent history. Unilever have been accused of causing
deforestation by campaigners such as Greenpeace because of the use of palm oil, a major
ingredient in many products. In consequence Unilever have committed to sourcing all of their
palm oil requirements sustainably by 2015 (Unilever, 2010d). This principle has also been
applied with regard to their requirements for tea leaves for their Lipton and PG Tips brands
(Unilever, 2010c). Unilever recognise that because of their level of consumption of these raw
materials and their need to invest in sustainable practices they will need to work closely with
bodies such as the Rainforest Alliance to form synergies, which are beneficial to all stakeholders.

However Unilever have a strong commitment to positive diversity as evidenced by their

localised products and marketing campaigns, which are specifically aimed to meet the needs of
consumers at a localised level. This includes specific beauty products for various nations in
response to consumer demand. Examples of such positive diversity can be found in Indian
advertising for skin creams (Telegraph, 2007). Although there was some adverse reaction to the
advertisement it is also recognised that the product met a considerable demand in India and there
was also some evident confusion at a localised level as to why the product might not be required.
When compared to the Dove brand real beauty campaign which Unilever have managed since
2007 (Dove, 2010) it can be seen that there is a strong demand for localised product management
and positive diversity, which Unilever have responded to. This has helped their own reputational
and brand management and has enabled them to react rapidly to consumer demand, which has
served to strengthen their corporate and market position.

6- Management and Leadership Approaches at Unilever Netherlands

There are several theories, which can be used to help understand the relationship between
managers and employees within an organisation. This element of the report will consider three of
the main theories put forward by leading academics in the subject, via Taylor (1999) Maslow
(1992) and Fayol (1999). Each of these theories addresses a different aspect of the employee
management relationship as will be discussed.

6.1- Taylor and Scientific Management

Taylor (1999 cited in Matteson and Ivancevich), identified that to achieve maximum efficiency
and effectiveness within an organisation it is necessary to synthesize workflows (1999:12-15)
to ensure that there is alignment between resource availability and organisational requirements.
Taylor suggested that by measuring and monitoring these objectives and setting out clear
processes and procedures for employees to follow, it is possible to significantly increase labour
productivity and effectiveness. The cornerstone of Taylors theory was centred on adhering to
best practice processes to minimise waste and maximise productivity.

Taylors theories were developed whilst observing car production plants, and there are close
analogies with regard to the production flows of manufacturing in the Unilever plants. As each of
the manufacturing plants owned and operated by Unilever produces products and foodstuff,
which their consumers will either ingest or use for personal care, the manufacturing must be of
the highest standards and quality, with rigorous safety and quality checks at every stage of the
process. Unilever have therefore developed and implemented a robust series of controls, which
enables them to manage and monitor every part of the production process, and also standardise it
across their estate. Such is the level of control exerted by Unilever, that in theory it should be
possible to take an employee from a UK manufacturing site and exchange them for an employee
from a Dutch manufacturing site, and they should each be capable of performing the necessary
roles and functions (Unilever, 2010). Critics of Taylors approach such as Daft et al (2010:26),
argue that the forced level of direction engendered by the Taylorist approach de-skills and de-
motivates employees who effectively become machines who are dehumanised. This is a
particularly so on production line, as there is a requirement for absolute conformity as opposed to
creativity and individualism. It is a perpetual challenge for Unilever to maintain the interest and
enthusiasm of employees who perform repetitive jobs such as those that will be required for a
significant proportion of the Unilever workforce. This is something, which was acknowledged
and addressed by Maslow (1999, cited in Strage), who noted that employees require more than
simple fiscal reward to remain motivated. This has been noted and observed by the management
team at Unilever, and when their management approach and corporate culture is applied to the
Tannenbaum and Schmidt continuum, as cited in Matteson and Ivancevich, (1999), it can be seen
that although some level of authority must be applied to ensure consistency of process, many of
the Unilever employees have a far greater level of freedom and creativity to offer innovative
suggestions for product and process improvement.

6.2- Maslow and the Hierarchy of Needs

In contrast to Taylor, the Maslow school of thought discusses tools and techniques to help
managers to motivate and empower employees to perform to the best of their ability. Maslow
(1999, cited in Strage) discusses the hierarchy of needs model, whereby he identified that it was
not simply money that motivated employees to work, but many other factors contributed to the
desire of employees to perform to the best of their ability. The diagram below outlines what
Maslow has identified, in that as each level of need is satisfied, the individual moves up the
pyramid to satisfy the next need in the ranking.

Maslows Hierarchy of Needs (1999).

As Maslows theory suggests, once the basic needs of financial reward for work have been
satisfied sufficient to meet the demands of paying bills, then an employee looks for other
motivations to come to work, such as feeling valued by their employer, and having their work
and achievements recognised. It would seem given that there have been no recent publicised
disputes between employees and leaders at Unilever that employees are satisfied with the both
the pay and recognition which they receive from the management team. As Maslow noted, once
the basic needs have been satisfied, the need to be accepted and to belong is a powerful human
motivator. This is closely linked with reward and recognition for work that has been done well or
is particularly innovative. Some theorists such as Hackman and Wageman (2005:269) refer to
this as celebrating success. They suggest that if major achievements which have been made
possible by the co-operative work of the team are celebrated and recognised, this will go on to
motivate and encourage employees to continue to perform. Unilever have recently won awards
for innovation and environmental achievement (Unilever, 2010), which they were keen to share
with the rest of the business, as the entire firm will benefit from such a positive approach
(Morden, 1996; McGovern et al, 2008).

6.3- Fayol

A third perspective on matters of management and leadership approach is that put forward by
Fayol (1999 cited in Matteson and Ivancevich), who similarly to Taylor subscribed to a scientific
theory of management. He proposed a general theory of management, suggesting that
managers had six primary functions and fourteen further principles of management. In contrast to
Taylor, Fayol proposed a far more interactive approach to management techniques, which
suggested that process controls were in fact best designed by those people who performed the
work every day (ie, the workforce). Fayol argued that if management interacted closely with the
workforce and understood their needs and concerns, they would be far better placed to gather
feedback about systems and processes and make the necessary efficiency changes. It would seem
from the success and growth of Unilever as a multinational conglomerate that they have been
particularly successful and following these principles and instilling a collaborative approach
which harnesses the power and knowledge of the workforce and uses it to further the growth and
development of the business (Fayol, ibid). Examples of this include working with employees to
indentify and implement efficiency savings, and also generating a culture of continuous
improvement, which builds a self-perpetuating cycle of success (Judge et al, 2002:770-775).

When considering these findings in the light of the Blake and Moulton Leadership grid (1964), it
can clearly be seen that the leaders at Unilever are at the inclusive and collaborative point on the
scale as termed the sound style (previously known as tem style). At this point they have
equal concern for both production and people as they recognise that to deliver consistently
excellent products they must have committed and motivated employees. According to Blake and
Moulton (ibid), this leadership style relies on managers recognising that employees must feel as
if they are a highly valued part of the organisation, a theory that is closely aligned with that of
Maslow who observed that those employees who produced the best work felt that they were
suitably rewarded for their efforts. Moreover, as increasing numbers of organisations recognise
the benefits of adopting a collaborative and co-operative approach to achieving organisational
excellence, current management theory would indicate that the days of dictatorial mangers are on
the decline (Den Hartog and Koopman cited in Anderson et al, 2002:166-168). This also seems
particularly likely given the increasing legislation to prevent employers from bullying their
employees and behaving in an inappropriate manner (Miner, 2009).

Application of the Hersey and Blanchards situational theory model (1999, cited in Gabriel et al,
1999) further underlines that the Unilever management style is one of participating and
delegating as opposed to telling employees what to do. Unilever is characterised by open
channels of communication, and there are points which against the Hersey and Blanchard model
the leadership style could be regarded as selling, this is more to do with the differing levels of
maturity in various parts of the business, and particularly in those parts which have been recently
acquired. It is interesting to set the Hersey and Blanchard model against the backdrop of
situational leadership, as it seems that the characteristics of Unilever are a mature and confident
group of leaders who are happy to delegate tasks and responsibility, and thus leverage the best
from their employees (Den Hartog and Koopman, ibid). Remembering that the board of Unilever
has been secure and stable for some time, it is of little surprise that they are able to adopt and
react flexibly to change. Moreover, their considerable experience of acquisition allows them to
rapidly assimilate and absorb new businesses into the estate, and embraces the culture changes,
which must necessarily follow (Simons and Billing, 1995; Spillane, 2004). Despite the size of
Unilever, it is remarkable that they are able to adapt so readily to change at both an internal and
external level, and across global boundaries. In some ways their sheer size has enabled them to
cushion themselves from some of the worst effects of the recession, coupled with the fact that
their diverse portfolio requires them to be adaptive and flexible to consumer trends a style
which is reflected in both their culture and leadership.

7- Recommendations to Enhance Management Practices

As can be seen from the preceding discussions, the senior management team at Unilever have
faced some serious internal and external challenges, both at a local level and a global level. Some
of these challenges are outside of their control, however in order to ensure that they remain one
of the leading conglomerates in the world they must adapt and respond flexibly to both internal
and external challenges. This section of the report considers some recommendations to continue
to improve employee motivation and engagement by enhancing and improving management
practices, and also offer suggestions based on relevant theory as to how the necessary changes
can be embedded.

7.1- Recommendations for Strategic Change and Effective Management Practices

Although there are few current difficulties with employee relationships, it is apparent that some
significant changes still need to be made in order to secure the future of Unilever in the current
turbulent economic environment. Whilst they are far from bankruptcy, recent years have seen
considerable expenditure and challenge for Unilever, which has centred on the considerable
number if divestments and acquisitions in order to strengthen and consolidate their global brand
portfolio (Morden, 1996:458-496). The theories of Taylor, Maslow and Fayol all offer
suggestions as to how to engage with employees in times of significant change and challenge.
Application of the Tannenbaum and Schmidt continuum (cited in Matteson and Ivancevich,
1999) indicates that the collaborative style of leadership has helped Unilever in managing and
instilling change, and it is clear that under modern management practices that for them to
continue to be successful they must continue to engage and motivate employees, especially those
who are new to the culture of Unilever and have joined them through acquisition (Hassard and
Parker, 1993:43-45). Furthermore, Gergen (1995) concurs with Hassard and Parker (ibid), in
those organisations, which operate in a post-modernist world, should take care to adopt
appropriate management styles and techniques, or get left behind their competitors in a rapidly
changing world.

Taking all of these factors into consideration, and with reference to all of the theories which have
been discussed and applied, it is apparent that there is a self-perpetuating cycle and culture of
success which is supporting the leaders at Unilever to behave in a manner which is highly likely
to assist them in developing a robust business which is fit to operate in current times. The
collaborative and communicative style of the leaders should be upheld and gently moulded in
newer acquisitions to one which is collaborative and co-operative in approach, drawing on the
theories of Maslow to help motivate and engage employees in such a way that they provide
constructive criticism and feedback on how best to help Unilever develop in the current
challenging environment. Whilst it is appreciated that management culture and organisational
culture is not something that can be changed overnight, as reliance on technology increases and
organisations must become more adaptable to survive, it is likely that the current culture will be
fit to see Unilever through into the future.