Case 5: Whitbread PLC (David Thomas)

Case information
Organization, management and culture
 Reduce the size of headquarter to change the costly status and
bureaucratic drag.
 Clarify the roles and responsibilities for the remaining employees
 Group executive
 Thomas evaluation (p.7): collaborative, approachable, hard to not like
Future Whitbread: strategy to concentrate on lodging, eating out, and active
leisure; areas of the business that were profitable and could be grown.
 Getting out businesses that didn’t fit.
 Sold: brewing, off-license and pubs
Financial performance and investor confidence
 To restore investor confidence: Whitbread would not be pursuing any
major acquisition/ announced new set of financial goal/tendency talk
about the good and avoid bad with investment community/ increasing

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transparency of company.
Good to great

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 Changes: Whitbread had to change the structure because it was shifting
fully from one industry to another/ Thomas also had to change the culture

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and management of the employees to suit the new market venture
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The strategic fitness process (SFP) (p.19 & p.20)
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 Def: guided strategic leadership process (p.6)
o Designed to enable leaders to overcome organizational silence
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about the misalignment with the environment and chosen

strategy.
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o Change the structure, processes, and behavior of an

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organization.
o Well-documented process with the help from professional
consultants
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o Senior teams develop a consensus on firm’s strategy---feedback

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from all department---change the org based on the effective

feedback
o Four ideas (p.6)
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Role of CEO: Has he done enough?

• Thomas’s idea of leadership involved taking in feedback from the SFP
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meeting, however he failed to use it effectively.

• He presented a plan that aimed at providing direction and was not an
action plan.
• He decided it was time to re-read the feedback by the task force, and
work on improving the plan
• Alongside the other executives, he met to reevaluate the goals for the
company by aiming to double the company by 2010.
• The new plan was headed by the executive team as a group and they all
took responsibility for it.
• It was met with “spontaneous applause” by the task force.
Evaluation

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 If we evaluate the change journey, we see that the main problems were
•
lack of communication and leadership.
• Thomas decided to form a team and implement SFP on Parker’s
suggestion.
• Thomas was unable to come up with a concrete plan to change the
internal structure of the organization.
• He was unable to properly implement the SFP.
• The first action plan presented by him initially received no support.
• By the end of his term, he had only planned the change journey, he was
counting on his successor to implement it.
Recommendations:
• Thomas needed to understand the underlying problem first:
“communication and leadership”
• The company needed to have company goals that aligned with
department goals.
• Follow a plan and abide by it.
• Incorporate the team as a whole and then move forward.

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• Thomas needed to use time effectively to bring about change.

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• Needed a concrete way to track performance and give follow up feedback.

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• A leader sets an example by walking the walk rather than just talking the
talk.

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Transformation in the culture, behavior and leadership style
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Sensing disequilibrium:
 TIME OF THE INCIDENCE: the disequilibrium was experienced in 1999
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after the failure of the merger with Allied Domecq

 SIGNS OF DISEQUILIBRIUM: there were both external and internal signs
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of disequilibrium
o INTERNAL: the employees did not have a clear vision of what was
happening the organizational deal to merge with Allied
o A large number of staff were fired due to the shutting down of
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several pubs and bars

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o Management lost faith in the continuity of the brewery

o EXTERNAL: government change in legislative laws on anti-
monopoly
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o The failure in merger with Allied caused a disequilibrium

o Stakeholders lost credibility in Whitbread
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o There was a fall in Whitbread ranking on the FTSE 100 ranks

o Customers also withdrew their purchase of Whitbread shares
causing a drop from E11-E4
Future Whitbread
 Focus on the business that were profitable and sold the business were not
(brewing, off-license and pubs), which equals to half of the company and
half of the workforce(60,000)  cut the ties with the past.
Financial performance and investor confidence
 New goal and strategy: not acquisition, new financial goals achieving by
organic growing.

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  Increase the transparency of the company to financial markets with
regard to the performance and returns of each brand.
 Changing people behaviors.  changing management attitudes:
 For shareholders benefits, not for indulgences of management.
 Brand management company, not operation led company.
 Changing leadership to be the best in the industry.
 Leaders are responsible for each brand and report the results for their
brands.  problems are exposed, and push them to solve.
Good to Great : to get new vision and value for the company
 Executive team + 40 managers (leadership team)
Strategic fitness process
 a guided strategic leadership process by which senior teams develop
consensus on their firm’s strategic and organizational direction;
 get feedback from all parts of the organization in a safe and effective
manner on the quality of the strategic direction as well as the org’s
capacity to implement it

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 based on the feedback change the org to enable effective implementation.
 Well-documented process

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 There are four ideas at the heart of SFP
1. Leadership has to define clearly of the business strategy and the

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values, how their leading affect the attitudes and behaviors in the
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org, which influence performance.
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2. Leadership needs honest feedback (unvarnished truth) about
senior management’s strategic intent, values, effectiveness of org,
and leadership.
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3. Leaders must change policies and behavior as needed.

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4. Honest conversation has to be continuous, and occur at every level

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of the org increased sense of partnership with employees and an

increase in their commitment to the mission of the org.
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1. Get “the statement of strategic and organizational intent” from statement

from Good to Great.  it did not specify what the company is, just what the
company is not. & it seems not from executive team’s ideas themselves,

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 rather than written by a committee after the meeting. + not specific
enough
2. Form 8 managers fitness task force to conduct 12*8 =100 one-to-one
interviews with key people under the help from consultants.
4. Why Whitbread - the reason Whitbread existed was unclear+ role of the
corporate center? +different divisions have different measurement, not
consistent across the company.+ not clear future direction (strategy, financial
metrics, structure, values and culture).
 Brand management – own or acquired brand? + How to manage existing
brand?+ people do not have skills to be a brand-focused company. + clash
between brand management company vs operation led company—focus
on customers.
 Culture - “institutionalized underperformance”: nice culture, people, did
not address tough issue quickly, took the safe choice, and did not address
performance issues. +do not look at competitors. + need a tougher and
consensus culture which value employee’s skills, give clear direction,

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hold people accountable, and reward people’s success to the org.

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5. The executive group discussed with consultants for the corporate

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strategy: considering less on developing synergies and more on branding.

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6. Develop the “first action plan” by David not the whole executive group.

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Not an action plan. rs e
8. 11 point plan – group + individual executive took responsibility for
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developing the details of the plan, which they will implement. :
 Reconstructuring – eliminate large multi-brand divisions, restaurants and
hotels. + big brands managing directors report directly to the chief
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executive. + brand heads

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 Master class and the brand template –

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 Personal development – world-class managers as benchmark & each

leadership team members was evaluated  create a personal development
plan
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What did Thomas changed at Whitbread?

 Strategy: concentrate on lodging, eating out, and active leisure areas, new
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financial goals: 5% sales growth, 10% earning growth, and 1%

improvement return on capital, 11 point plan for future direction.
 Structure: reduced the size of Whitbread’s HQ from hundreds to 40 and
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increased autonomy for divisions.

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 System: open and honest communication between employees and

executives, empowerment and engagement across companies.
 Style: collaborative, approachable, and consensus
 Staff: clarified the roles and responsibilities of staff and their relationship
to the division
 Skills: from beer workers to leisure business employees
 Shared value: low-performance oriented to trust, challenge, engagement,
and win

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