Strategy & Organization

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Organisation and Design – Unilever Case

Stephan de Boer Jop Cohen

781550 781657

Prepared for: Dr. Lim

Block: 2122B
Campus: Amsterdam
Date submitted: 21-12-2021
How would you evaluate Unilever’s organisational dynamics and design based
on the perspective of the articles?

Unilever was in bad trouble and was heavily affected by the crisis. Companies in the fast-
moving consumer goods industry are always very much affected by crises. This is due to
several reasons, but one important one is that companies in this sector often suffer from
high inventory, with expensive products that are not sold as expected. Unstable turnover
numbers combined with a strategy was not feasible and could not be maintained, meant
the exit of Unilever’s Anthony Burgmans. This heralded a new era for Unilever, under the
leadership of Paul Polman.

Polman came from outside the company and had a lot of experience in the fast-moving
consumer goods industry. An outsider from the company is beneficial, as years of inside
service by top managers will be negatively related to strategic choices involving new
terrain, e.g., product innovation and unrelated diversification (Hambrick et al., 1984). He
introduced a new organizational culture, focussed on winning with brands and innovation,
winning in the marketplace, winning through continuous improvement, winning with
people. According to Burgelman (1985) it is hard to make organisational changes, as
many change processes are embedded and nested in complex organizational systems. To
overcome this, Mr. Polman made a structured plan for Unilever. At first, he decided what
the change in strategy should be. Then, he found the right people that fit with the new
strategy: he hired many new management people in Unilever from outside the company,
bringing new competencies and skills to innovate in with a different view. Afterwards, he
aligned the structure with the strategy, and worked on a change in culture from the
start. One subject was always at the heart of the changes he introduced in Unilever:
innovation. As an example, he introduced a European Marketing and Innovation Hub in
Rotterdam. Here, 270 employees from nine countries work together to speed up
decision-making and share best practices. He also built 11 Customer Insight and
Innovation Centres, which work continuously to improve the brand and all that it entails
to maintain a competitive advantage.

Moreover, Paul Polman has shown over the years that he is not afraid to take some bold
and major decisions, to ensure the wellbeing of Unilever and its (financial) growth:

- Unilever’s Sustainable Living Plan

Polman presented the Unilever Sustainable Living Plan (USLP) in 2009, with more
than 50 sustainable targets for 2020. Some ambitious goals in this plan: Unilever
would halve the environmental footprint in the entire chain (production and use
by consumers) and switch to 100 per cent sustainably produced raw materials.
The criticism was not mild. Was Polman running a multinational or an NGO?
Polman said about this: "I would forget about the shareholders, be mainly
concerned with the United Nations, not with the company",. Polman gradually
managed to overcome the scepticism and his sustainability gospel was taken
more seriously. Unilever invariably ended up at the top of sustainability lists, the
UN crowned Polman its Champion of the Earth and the Pope asked him for
sustainability advice.

- On Unilever moving away from The Netherlands and becoming UK only

Legally, Unilever still consists of two separate entities, Unilever NV in the
Netherlands and Unilever PLC in the UK with two headquarters, one in the centre
of Rotterdam and one in the centre of London. Special formal provisions enable
them to operate as a single economic entity. However, in 2020 Unilever decided
to move away from its dual corporate structure and will in future be a UK
company only on paper. Unilever is taking the step after one and a half years of
extensive research into simplifying its corporate structure. Paul Polman said about
this: "I have always said: you cannot ask British shareholders to start paying tax
that they are not paying now. If you want to keep Unilever in the Netherlands,
 you can't do that with dividend tax. It became very political. The newspapers
picked up on it. Then it was: Unilever is manipulating the government in order to
get the tax down. While the Netherlands is a tax haven on the verge of morality.
And now you have lost Shell as well. I think that's a shame for the Netherlands."
This shows that Mr.Polman, even though he did not do this as a CEO, was not
afraid to cut his home country out of the business in order to increase the
financial performance of Unilever. After scrapping the Anglo-Dutch structure, the
company hopes to be more flexible when it comes to acquisitions.

In conclusion, Mr. Polman has applied refreshing and bold organisational strategies to
Unilever. By shifting from a vertically integrated company to diversified and organising
into multidivisional structures and international expansion, he enhanced the company's
reputation, financial performance, and the environmental footprint it leaves behind
(Galbraith, 2012).

What would be your advise to Mr. Polman?

The history of Unilever, in common with other companies that were early to
internationalise, demonstrates that regional managers had a high level of decision-
making power. National markets were so different that it was not always possible for
managers at a central level to have the right information about local circumstances to
make the best decisions. At Unilever, geographical clusters have profit responsibility
which may add to the desire for decentralisation in decision-making. The changes in the
composition of the leadership suggest a change to a more category-driven company, with
decision-making now more centralised than before. As decentralisation carries the risk of
less coordination it can, for example, lead to fragmented introduction of products in
various countries and consequently higher marketing and production costs. This is
especially relevant in categories where brands and products have a global reach, such as
in parts of the personal care business. Some advice for Mr. Polman would be to market
and focus more on specific countries where Unilever operates, to market less
international and more personal. Each country and culture has its own norms and values,
customs and traditions, also in the field of fast-moving consumer goods. From the
strategy changes and implemented changes in Mr. Polman's policy, there is a very
international feel, while it would only do the company good to cater more specifically to
countries Unilever is operating in. If this were to happen, it might be possible to generate
more turnover in countries, because there would be more market conformity per country.

Articles used:

Article 2:
Galbraith, J.R. (2012). The future of organization design. Journal of Organization Design,
1(1), pp. 3-6.

Article 3:
Burgelman, R.A. (1985). Managing the new venture division: implications for strategic
management. Strategic Management Journal, 6(1), pp. 39-54.

Article 4:
Hambrick, D.C. and P.A. Mason (1984), The organization as a reflection of its top
managers, Academy of Management Review, 9(2), pp. 193-206.