Case Study: Nestlé - Core Values

In 2001, Nestlé was the largest and most diversified food company in the world, with nearly 500 factories in more than
100 countries. In fact, over the period 1867–2000 it surpassed other food manufacturers and purchasers of agricultural raw
materials in scale of operations. Over 230,000 people worldwide work in Nestlé's factories, research laboratories and
offices. In 1999 Nestlé generated a total income of 4,007 million Swiss francs. This case study is based on a series of
interviews with prominent Nestlé managers engaged in strengthening Nestlé's core values.

Although core values can be propagated across a multicultural corporation in a variety of ways, Nestlé adopts certain
approaches that are characteristic of it. These approaches have been used consistently and for a considerable length of
time, even though the company's various Principles have been written down only recently. One important approach is
careful and meticulous selection of personnel. This approach has been enshrined in the Nestlé Corporate Business
Principles. Potential employees are assessed as to whether they possess the attributes that would enable them to fit into the
Nestlé way of life. An assessment is also made of whether they can achieve complete integration into Nestlé culture over
time. Nestlé's selection process has been so effective that most of its employees have pursued a lifetime career, spanning
at least 30 years with the company. This lifetime association with Nestlé enables employees to completely imbibe and
operationalize the Nestlé core values. Additionally, new recruits are given extensive coaching as well as training, to
ensure that they fully understand Nestlé's core values. Both the Nestlé Management and Leadership Principles document
and the Nestlé Corporate Business Principles document contain personal messages from the CEO. The CEO, as well as all
senior managers, makes it clear that they expect all employees to subscribe to and implement the company core values. Of
course, members of the top management echelon also live the core values themselves so that they serve as role models.

Nestlé uses extensively another means to propagate its core values: its international management cadre. Members of this
cadre go from country to country working as managers in different Nestlé branches. These international management
cadre managers ensure that the Nestlé core values are institutionalized at all Nestlé locations. They occupy a significant
proportion of the key positions at all Nestlé branches, and can therefore exert a tremendous amount of influence. All
managers of Nestlé, irrespective of ethnic origin or geographic location, are part of the Nestlé culture and share the same
core values. Additionally, by rotation, they spend some time at the Nestlé headquarters in Vevey, Switzerland. During the
initial stages of their career, Nestlé employees (from all over the world) attend residential training programmes at Vevey,
which are of approximately one month's duration. These programmes reinforce the core values which Nestlé employees
have already assimilated. They also make Nestlé employees realize that regardless of where they are from, they all share
these core values.

Although Nestlé's core values are the glue that holds together all its managers distributed across more than 100 countries,
the company is also sensitive to local cultures. Brabeck, CEO of Nestlé, has remarked, 'Since Nestlé's activities in
Switzerland, its country of origin, account for less than 2 per cent of its global turnover, Nestlé learned very early to
respect the social, political and cultural traditions of all countries in which the products are produced and sold, and to be a
highly decentralized people and products oriented company rather than a systems oriented company.' The interesting
question that presents itself is, how does Nestlé manage the dialectic between having well-entrenched core values, and
respecting national cultures?

Vietnam is a country in which Nestlé has established a branch only recently (in 1996). It is a challenging country in which
to start operations. In the first instance, it is a communist country with a state controlled market. Additionally, the cultural
ethos and ambience of Vietnam are quite unique. When Nestlé started its branch in Vietnam, it had to embed and
institutionalize its core values there from scratch. Nestlé's initial step was to translate the two documents, Nestlé
Management and Leadership Principles, and Nestlé Corporate Business Principles, into Vietnamese. During translation, it
was found that some concepts could not be translated literally. Literal translations would lead to some loss of intended
meaning. Hence, some of the concepts were elucidated using Vietnamese metaphors and symbols. For example, recourse
was made to the metaphor of the family. The sort of relationship that Nestlé expects from employees was compared to the
sort of relationship that exists between family members. The importance of teamwork and team spirit was likewise
advocated by reference to family values. Thus, a document was created especially for Nestlé Vietnam that encapsulated
the Nestlé core values in the local idiom. This document is given to every employee who joins the branch. Before
employees can join Nestlé Vietnam, they have to satisfy the recruitment criteria. This includes whether the prospective
employees can understand and appreciate the core values of Nestlé, and align themselves with these core values.
Individuals who will be unable to operationalize Nestlé core values, because of either their background or their
personality, are screened out. The background of a prospective employee is thoroughly checked. This is to ascertain what
kinds of influence have conditioned him or her. At Nestlé branches that have been in existence for some time,
considerable autonomy is given to line managers in the matter of recruitment. In start-up branches like Nestlé Vietnam,
however, the HR department and top management are very closely involved in the recruitment process. They admit into
their fold only those individuals who can subscribe to Nestlé core values. Nestlé believes that if employees are deficient in
technical skills, but have the appropriate attitudes and values, they can be trained and learn those skills. On the other hand,
values are more difficult to change. If prospective employees have attitudes incompatible with Nestlé's core values, then
no amount of coaching can successfully bring them in line with Nestlé's expectations.

One of the core values of Nestlé is that its employees should have intercultural competencies and be able to interact
effectively with people from all over the world. Hence, as part of the recruitment process at Nestlé Vietnam, prospective
employees' attitudes to foreigners are assessed. Also assessed is how they view people from other parts of Vietnam.
Preference is given to prospective employees who are tolerant and liberal thinking, and have experience of associating
with people from diverse backgrounds. Sometimes it transpires that prospective employees would not like to work with
foreigners from other parts of Asia, such as Malaysians, Japanese or Taiwanese. They do not mind working with
Europeans, however. In such cases, Nestlé Vietnam tries to ascertain whether the prejudice emanates from ignorance or
from a deep-rooted emotion. If it is the former, training and coaching can eradicate the prejudice, as can first-hand
experience of working with Malaysian, Japanese or Taiwanese managers. This is particularly true of young recruits who
are perceived as being malleable. They are very receptive to being guided by a coach or mentor, much more so than in the
case of their European counterparts.

Thien Luong Van My, currently Issues Manager - Public Affairs at Nestlé headquarters in Vevey, Switzerland, and
Country Head of Nestlé Vietnam for the period 1996–2000, comments: They really enjoy this coaching like from an elder
brother to a younger brother or sister. They really like to be guided not only about how they should work, but about how
they should behave as well. And we pay a lot of importance to our newly joined recruits' patterns of interaction. We
observe them closely. And the elder brother recommends to his younger sibling how he can improve himself. This system
appears to be working for us. We started in 1996 with three employees. I had a driver and a secretary.

Today, there are 300 employees with Nestlé Vietnam, all of whom are committed to Nestlé's core values. The core value
of team spirit had to be nurtured with special effort at Nestlé Vietnam in its early years. It is the experience of Nestlé
Vietnam that the Vietnamese are a fairly individualistic people. They may be loyal to a small group of people who are
usually family members. Nestlé Vietnam was in its crucial initial six years when headed by Thien, who is Vietnamese and
grew up there. He therefore positioned himself as the patriarch of the company, somebody who could be considered an
uncle or elder brother. He then capitalized on his position to encourage team spirit. He also ensured that team spirit was
propagated in a manner appropriate to the Vietnamese culture. For instance, a practice integral to Vietnamese culture is
showing respect and deference to elders. At Nestlé Vietnam, a few units are headed by individuals who are younger than a
few of their subordinates. A careful watch is kept on these individuals, to ascertain whether they treat those subordinates
who are older than them with respect and regard.

Thien and the other expatriate Nestlé employees who set up Nestlé Vietnam were succeeded by Vietnamese managers in
early 2001. This has contributed to institutionalizing the Nestlé core values at the branch. It also signifies that the branch
has assimilated the Nestlé core values. In fact, the job success of Thien and his expatriate colleagues is being evaluated in
terms of the performance of their successors.

The core values of an organization determine the nature of its corporate culture. The corporate culture can influence the
mind-sets of its employees, which in turn will have been shaped by a wide variety of factors. For individual employees,
one of these factors is definitely their ethnic culture. When an organization has branches in different locations and
cultures, it is inevitable that those branches are affected by local cultures in more ways than one. However, there may be
individual employees whose cultural backgrounds give rise to values that conflict with the core values of an organization.
The resulting dissonance can be resolved satisfactorily by the employees either leaving the organization, or modifying
their values. In other words, the core values of an organization are superordinate.