Find answers, ask experts and talk with the procurement community
Do you want to deliver savings faster, reduce risks and transform functional performance?
Industry leading events
Inspirational leading procurement thinkers and innovators, providing unique opportunities to network and share best practice.
The announcement this week that food giants Heinz and Kraft are to merge will have sent shivers down the spines of many procurement chiefs who fear that their company may the next target of the private equity sharks, but is it really something they should fear?
On the surface it sounds scary. The deal to merge Heinz and Kraft was, according to reports, engineered by Brazilian investment firm 3G Capital, and billionaire investor Warren Buffett’s Berkshire Hathaway, owners of Heinz.
Once merged the company is expected to be named as the Kraft Heinz Company and, interestingly for those procurement teams at both organisations, annual cost savings are anticipated to reach $1.5bn by the end of 2017.
3G has built up a reputation of this aggressive cost cutting at the organisations it has taken over. Reports on Reuters suggested that at Heinz the company cut 7000 jobs in 18 months, closed six factories and even limited the number of photocopies staff could make. Allegedly each employee was allowed to print only 200 pages a month and they couldn’t be in colour and had to be double-sided.
The company has also been known for using zero-based budgeting where managers have to justify their budgets each and every year rather than basing a new budget on what was spent the previous year.
Scary stuff indeed.
But, according to Steve Hrubala, global head of sourcing & procurement at private equity firm The Carlyle Group, procurement chiefs shouldn’t read headlines like this and immediately think the worst because the function can thrive during such a situation and open up new opportunities for itself.
In an article in Procurement Leaders Magazine published back in 2013, when mergers and acquisition activity was beginning to ramp up after a period of hibernation during the global financial crisis, Hrubala said that success in any kind of corporate restructuring "correlates closely with a shift in one’s own approach to change, robust team dynamics, clear communication with senior management, and unflagging commitment to excellent customer service".
He added that for the CPO this requires them to be flexible, show initiative, keep a positive outlook and set some meaningful short-term goals for his or her function.
If you don’t, uncertainty and indecision will feed through to your team who will lose motivation and that will increase the risk of you losing valuable people from your team.
Keeping your team motivated and hitting goals will not only help with the transition phase but also keep the profile of the function raised within the business as well as with those new senior managers, which will open the doors for the function to take more responsibility in the inevitable search for more cost savings and new areas of value.
With more mergers and acquisitions sure to take place over the coming months now is the time to start thinking about what you would do in such an event. Failure to do so will leave you and the function on the back foot and in a situation where the function cannot thrive.