Leadership Team Alignment
Within Australia’s fast-moving, competitive dairy industry, consumers have become more and more sophisticated, with ever-increasing wants and needs. In 2004, the industry was also witnessing dairy production declining, international farm gate milk prices skyrocketing to historic highs, and record global fuel costs.
That same year, Robert Gordon took over as CEO and managing director of Dairy Farmers, an Australia-based milk and value-added dairy company. He knew that his new assignment would not be a cakewalk.
Added to the hostile external atmosphere, the company’s operating expenses were unsustainable. Financially, the company was not performing at capacity. There was unnecessary product proliferation and too much complexity. Organizationally, the company was largely siloed. Each function operated independently and was run by a general manager, sometimes competing with other functions for resources. Bottom line: It was time for radical change.
Gordon knew that beyond charting a new strategic framework for the business, the situation also called for rethinking the way in which his organization operated. His first task was to think through what kind of organization would best enable Dairy Farmers of Australia to meet both its near-term challenges and those further over the horizon. “As I reviewed our situation,” he reflected, “I was convinced that our best bet—indeed, our only bet—was to go horizontal.”
For Gordon and his team, the horizontal vision converted into an increase in organizational brains and performance muscle, from top to bottom. It upped speed to market, provided greater ownership of results, put the focus on the business and its customers, and reduced “hang time” for decisions. As Gordon relates, “The silos have been replaced by cross-functional business teams for each of our categories. Each team is accountable for the profitability of its category and operates fairly autonomously. They report back to the executive team periodically; they bring us into the loop when they have significant resource-allocation issues or need additional substantive funding. Otherwise, they are responsible for executing the strategy that we set together, and so far they’re doing a fine job.”
Three years later, Dairy Farmers had seen a dramatic turnaround. It had become significantly leaner: reducing its product portfolio by more than one third, closing 4 of 15 sites and 17 distribution depots, and divesting non-core businesses. The new lean, horizontal organization had chalked up a number of significant successes:
- It finished the 2007 year having replaced more than 15 percent of its total revenues in commodities with value-added branded sales.
- Time to market for new products was reduced significantly, resulting in Dairy Farmers winning the “New Product of the Year” award from the largest retailer in Australia.
- The company exited 2007 leading the growth rate in every retail market in which it participates and consequently improving market share in every category.
- It is now recognized by the leading financial press as a true Fast-Moving Consumer Goods Business, not just a Dairy Cooperative.
- Following the rebuilding phase of the turnaround, staff turnover dropped significantly. In 2007, only one person left Marketing—only to return three months later because her new employer’s culture was a disappointment after that of Dairy Farmers.