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In 2019, the HR function at Tetra Pak won a prestigious award for world-class HR, a formal acknowledgement of the company’s first-quartile performance in both efficiency and effectiveness. Yet for the leading food processing and packaging solutions company, the award marks just one stage in its ongoing metamorphosis. CHRO Phil Read comments: “We started over a decade ago and we continue to evolve, driven by the absolute conviction and clarity that HR’s purpose is to deliver success through our people and to help create the business of the future.”
Tetra Pak is the largest of three businesses in the Tetra Laval Group. Its metamorphosis was set in motion (before Read joined the company) by the painful moment in 2005 when the new CEO delivered a stark warning to HR to improve its mediocre performance or potentially be replaced by external suppliers. Cost was also an issue.Tetra Pak had (and continues to have) a wide geographical distribution, with typically small workforces across multiple countries (now a total of 25,000 employees in 82 countries), making economies of scale difficult to achieve. “We were decentralized and doing some things well, but there was duplication and lost productivity – the new CEO effectively gave us a red card” recalls Amit Mittal, Vice President, Talent & Organizational Development.
The HR leadership had to ask themselves tough questions, reverting to first principles to establish the raison d’etre for HR. This necessitated defining HR’s purpose and potential value through the eyes of the different stakeholders, and this has been the lodestone for the function ever since.
Yves Zerbib, Vice President of HR operations recalls: “The shock mobilized us to focus on our different stakeholders. And the stakeholders were telling us that something was wrong. This shifted the focus away from HR efficiency for its own sake toward defining the services around what was key to our different client groups.” After looking at many options, the HR team decided collectively and convinced the CEO that the best option was to retain HR capability but to transform every aspect of what it did.
Keys to metamorphosis
Over the past decade and with the strong support of the executive team, the HR leadership team has altered every aspect of the function. The process of change continues even now as HR embarks on its three-year plan for 2021 to 2023 and works to deliver longer-term goals encapsulated in Tetra Pak’s 2030 strategy. The ongoing metamorphosis of HR is achieved through nine distinct lever
1. Enduring purpose
Clarity and conviction about the purpose of HR has provided direction and stability for the function at every stage of its metamorphosis. “Our vision is ‘success through people,’” explains Read. “We talk about a cool head and warm heart of HR.” HR’s cool head is to have a clear strategic direction, work through data and analytics, and have rigorous project management. HR’s warm heart entails creating an inclusive and fair workplace, responding to client needs, and showing empathy for people’s individual situation.
Client centricity is at the heart of delivering value to the business—and requires client segmentation. “If HR doesn’t segment its client groups, it’s almost over before it has begun,” Read declares. HR has identified five specific client groups: 1) the executive board; 2) senior managers; 3) people leaders; 4) individual employees; and4) other stakeholders such as external candidates, works councils, trade unions, and government labor bureaus. Each group has very specific needs. For example senior managers may need M&A expertise, change management, organizational design, or succession planning. People leaders may need support with delivering people processes, and developing their own leadership. Individual employees expect good leaders, career opportunities, and an equitable and inclusive workplace.
Phil explains: “HR has to both deliver effectively on all these different services, as well as balance these needs and make trade-offs when these inevitably conflict. If you try to optimize the satisfaction of only one client group, you will build an unstable and unsustainable future for your company.”
2. An evolving HR operational model
This has gone through several iterations, but the compelling logic has always been to design around the most value-adding HR services for each client group. Early decisions focused on identifying where centralized processes made best sense and where HR could make gains in productivity and costs. At first glance, the HR operating model is the “three-legged stool.” However, the model has distinct features.
- HR service centers, where 60 percent of the HR population works, provide more than just transactional services such as payroll but other core services, including recruitment and learning delivery.
- Country and Factory HR representatives These are not HR generalists but teams focused on ensuring a permit to operate in each geography, working with employee representatives, with local policies and governments.
- Competency and support centers, responsible for bringing in “the best from outside,” says Read. Unlike traditional centers of expertise, these five centers are responsible for the entire life cycle of a new HR product—from scanning for new ideas, diagnosing client needs and garnering buy-in through to development, deployment, continuous improvement, gauging impact and recognizing the need for an upgrade or replacement.
- Business Partners, this role has been significantly altered and refined. The company has only 30 HR Business Partners. They have no local geographic responsibilities; they support senior leadership teams at either the global or regional level working on topics such as organizational design, talent management, and capability development.
The operating model has evolved to become what Yves Zerbib describes as a mature organization. “It’s been a step-by-step process for us. Maturity starts with a clear understanding of both the core and strategic services you need to deliver to the organization. The four parts work together in a client-centric way and any significant new initiative is designed and delivered both consistently and speedily. We have also worked hard to break down silos by ensuring everyone across the organization understand their role, they know which bit they will work on, with whom they need to communicate, etc.”
3. Radical simplification
HR metamorphosis is also driven by the principle of “radical simplification.” The HR organization has systematically worked to eliminate duplicated or overly complex systems and processes. For example, in 2016, it became apparent that 397 variable pay programs existed across Tetra Pak. The diverse structure of Tetra Pak had given birth to an “excessive” number of job levels and performance rating structures, says Read. “We recognized we had the opportunity for a radical simplification of the HR infrastructure” he explains.” This involved negotiations with 92 different trade unions and works councils over several months, resulting in the successful rollout of myFuture, an enterprise-wide job and career framework, a single variable pay program and a simplified performance management program in 2017.
4. Rapid and complete technology enablement
Digitalization is central to Tetra Pak’s strategy and the company has moved swiftly to create smart factories using technology such as 3-D printing, advanced robotics, and intelligent labelling.For example, the company has launched the Connected Packaging platform, which will transform cartons into interactive channels and full-scale data carriers that can be accessed by producers, retailers and customers. In 2017, the company embarked on a digital transformation program, prioritizing advanced analytics and a mobile workforce.
HR’s own digital transformation was performed in record time. The migration to a fully global cloud-based complete (not just core data management) HR information system under the branding of myLink was achieved in the space of one year. “The provider advised us that the new system would take about three years to fully implement. I asked what would it take to do it in one year? They said an absolute prerequisite was to take a decision every single day and to stick to it,” says Read. “We said that’s what we’ll do, and we achieved this – through having a great team and a lot of focus!”
Everyone in the HR organization (and the Global Information Management function) committed to the ambitious systems implementation. Critical success factors included the willingness of the HR leadership team to take a collective decision and move forward. There was a strong branding and marketing of the new platform to ensure buy-in across the business. Any updates and communications are bundled so that any changes to the system are released together on an annual basis, and this release management approach has been widely appreciated across the business. The platform that was created in 2016 has allowed Tetra Pak to develop excellent analytics grounded in very solid data and processes.
5. Rigorous portfolio and project management
Part of the success of myFuture stems from Tetra Pak’s capability in portfolio and project management. The HR organization has intentionally drawn on the expertise existing in the company and invested in project management training. HR has consistently delivered on time and on budget for their project portfolio and is now internally regarded as one of the leading functions in project management, helping attract talent into HR. HR has a dedicated project office which translates the three-year people plan into projects and applied rigorous oversight. Portfolio project management helps guide decisions about resource allocation and helps stakeholder management.
The plan portfolio, extrapolated from the three-year people plan, is discussed at various levels with the business to agree key focus areas and the potential timing of projects over three years. Strategic projects with the potential to make a big impact are discussed with global leaders through a business review meeting. Continuous improvement projects or regional projects are agreed at regional levels.
6. Continuous improvement of infrastructure and methods
At any one time, there tends to be between 50 and 60 continuous improvement projects. The CI “infrastructure“ entails rigorous processes and tools to keep these projects on plan with tools such as risk mitigation maps, budget forecasting, stakeholder maps, heat maps, and Tetra Pak’s own toll gate methodology. “I personally spend a lot of my time at the beginning of the planning process ensuring projects have the right scope, metrics, and people” says Read. Different project methodologies are used according to project need. This could include Kanban, Agile, Project Schedule Management, etc.
7. Measurement of satisfaction and cost
Measurement continues to be a critical means to evaluate the impact of HR. The main metric is cost and service satisfaction. Satisfaction with major services tends to be over 80 percent. Business leaders are also invited to give feedback to paint a richer picture. Read estimates that the HR metamorphosis has resulted in a contribution to Tetra Pak of €252 million euros from 2011 through 2019. This is calculated by taking the 2011 budget for HR and assuming the function had not made a transformation, then adding salary inflation per year and the proportionate headcount to serve the increase in employees—which would have meant an increase in the HR budget over this period of 57 percent. These numbers are then compared to the actual spend of HR during this period. Over the same period, the budget of HR actually decreased by 18 percent. The cumulative delta is one quarter of a billion EUR.
Cumulative savings of Tetra Pak’s OneHR
Source: Tetra Pak
8. Leadership of change and talent management
The caliber of leadership and talent is a ubiquitous lever to ensure every phase of the HR metamorphosis succeeds, says Amit Mittal, Vice President, Talent and Organization Development. “I don’t think we would be where we are today without the leadership, focus and prioritization provided by our CHRO and the strong governance and support from the executive team.” Amit also points out that new leaders have been brought in, including from other parts of the business. The diversity and wide experience of this team has resulted, he believes, “in a willingness to do something different.”
HR’s proven track record in project management has ensured the function is seen as a trusted strategic partner. Seeing off competing strategy consultants, the HR function led a business transformation effort in 2019 to create “one company” from the three diverse businesses making up the Tetra Laval Group (Tetra Pak, Sidel, and DeLaval). “This was a big organizational change to create a more aligned organization,” says Read. “We were trusted to lead the project. This makes me very proud of my team.”
9. Skill development for HR
A mature HR organization must be competent, with skills and experiences constantly upgraded to meet the changing needs of the business. Tetra Pak has made a significant investment in a competency curriculum for all the new roles in HR and new ways of working. Collaboration and learning are facilitated and actively encouraged through rotations across the HR organization and between HR and the wider business. Various “cross cutting forums” help different HR teams build a shared perspective on a particular challenge or change initiative.
The company has created a HR professional foundation program, training in world class service behaviors, and Tetra Pak’s own continuous improvement methodology, adapted for HR. Read explains: “Everyone has two jobs in Tetra Pak. The first is to do your job. The second is to make your job better continuously.” Change management is also an important skill for anyone working on strategic projects.
There are different curricula for different skill sets but in 2020, three skills have been prioritized for the entire HR organization: 1) An understanding of data and analytics is now a prerequisite; 2) Emotional intelligence—important as HR becomes ever more client centric; and 3) Business acumen. This last skill entails understanding Tetra Pak’s financial performance and linking this to key HR activity such as workforce planning. HR also needs to understand how the people strategy ultimately serves external customers.
Now, with so many of the change levers embedded, the function can focus on helping drive the 2030 strategy. HR’s three-year strategy for 2021 to 2023 is entwined with corporate strategy and will focus on culture and leadership. After intensive internal discussion and external research, the HR leadership team has defined three attributes to drive success: 1) “dynamic,” which involves “hyperawareness and sensing” about the external environment and speedy decision making and execution; 2) “capable”—enabled by individual learning and organizational learning through external partnering; 3) “productive”—every individual should optimize their working day for maximum efficiency in effort, time, and money.
Some 12 cultural “artefacts” have been identified as major levers for cultural change. These include how decisions are taken, meetings run, and budgets set. A new leadership curriculum has been designed, and every individual in Tetra Pak will go through this. “There has to be a shift at every leadership position in the organization. Every individual contributor has to work differently,” asserts Yves Zerbib.
The ongoing evolution of HR continues to be powered by the goals of helping the business succeed through people and of building a sustainable future business. HR is well-positioned to deliver the new priorities for the 2030 plan, as Read explains: “Because we have put the basics in place and gone through our own successful change, we’ve proved ourselves and built up trust across the business. This has now created the space for us to play a very central role in the business’ next phase of cultural and leadership transformation.”