Game on
GETTING THE TALENT RIGHT IN
CONSUMER PRODUCTS PURE PLAYS
Game on
Getting the talent right in consumer products pure plays
The roster of consumer products
Chairman William P Stiritz said, “The margin and cash
companies spinning off divisions or
private brand business.” In other cases, a new breed of
flow profile of Post Foods is quite different than Ralcorp’s
business units into pure plays has grown
activist investor is calling for companies to drive value
long in the past several years and is
creation by unbundling – and SEC reporting requirements
getting longer. Whether a particular
portfolio is performing. Still other investors, preferring to
make it clear to them how each business in a corporation’s
spinoff is driven by impeccable business
focus only on a business they know well, shy away from
logic, activist investors, or inexorable
umbrella, resulting in a stock price that fails to reflect
collections of disparate businesses under one corporate
market forces, one thing is certain: the
the full value of each SBU. Analysts, too, may have little
move triggers a host of talent challenges.
may find it difficult to accurately evaluate a corporate
capacity to master more than one or two sectors and
You must determine who can best lead
conglomeration of businesses. As James Crown, Chairman
the new standalone company into the
of the Board of Sara Lee Corporation at the time of its split
glare of Wall Street, who should sit in the
more focused shareholder base.”
put it: “These two pure-play companies…will attract a
C-suite, and how to constitute the board
In addition, disparate businesses may be out of phase
of directors for the spinoff and restructure
with each other. For example, the branded pharmaceutical
the existing board. To reduce uncertainty
consistent cash flow. Stephen W. Golsby, retired President
business is cyclical, while the nutrition business delivers
in both organizations, retain and attract
and Chief Executive Officer of Mead Johnson Nutrition,
the best people, and convert the market
from Bristol-Myers Squibb in February 2009. He says, “Even
led the company through its successful IPO separation
opportunity, you must make these many
though Mead Johnson operated semi-autonomously
top talent moves transparently, rapidly,
before the split-off, Bristol Myers Squibb felt that it was not
and – above all – flawlessly.
peer companies.” As he points out, Mead Johnson’s stock
The forces driving spinoffs in the consumer products
sector show no signs of abating. In some cases, boards
getting the full value of Mead Johnson compared with its
debuted at USD$26 and by mid-2013 was hovering at
about USD$80, despite the intervening recession.
simply see an opportunity to create more value. Sara
Though statistically the absolute number of consumer
Lee Corporation’s board, after selling off a number of
spinoff cases is small, our research suggests that consumer
businesses over the years, was left with a US meat business
products spinoffs often do unlock value. Given these
and a pre-dominantly non-US coffee and tea business and
results, the sector is likely to see more pure plays into the
concluded that there was no practical synergy between
foreseeable future – along with the unique board-building
the two. When Ralcorp, a producer of private label food
and talent challenges they present.
products, spun off Post Foods, its branded cereal business,
2 Game on: Getting the talent right in consumer products pure plays
While the dynamics of spinoffs may differ from each other
Although speed is of the essence in spinoffs, naming
and the degree of value each creates may be a matter
specific executives to leadership roles too early in the
of debate, they all share a common element: To get off
process can lead to a loss of focus. Once decisions have
to a fast start and ensure longer-term success for both
been announced about who might join the new board,
companies in a spinoff, getting the talent right is essential.
lead the new company, lead the legacy company, and
In our experience, few talent and leadership issues are
fill other top jobs, individuals naturally begin to focus on
more challenging.
their future responsibilities. For example, members of the
existing board who will serve on the spinoff’s board may
The keys to a fast start
and long-term success
begin thinking about its long-term strategy rather than
about executing the split. Early announcements can also
precipitate contentious horse trading over how resources
are to be allocated between the two companies. Says a
former Chairman who saw his company through a split,
Leaders on the front lines of some recent high-profile
“You might have the designated leader of the spinoff
spinoffs agree. In a series of in-depth conversations, they
company arguing for cash to be left on its balance sheet,
described for us the unique dynamics of talent decisions
or another leader who says that a particular liability
in the midst of a spinoff – the demanding time frame,
doesn’t belong with his business.”
the sheer number of roles to be filled, the ambiguity and
uncertainty in the ranks and at the top. “You must be able
to deal with enormous complexity at the speed of light,”
says Stephen J. Cerrone, former Executive Vice President
Human Resources for Sara Lee Corporation who helped
prepare the organization for the split. “In a 10 month
period, we had to recruit six board members, two CFOs, a
To mitigate those risks the corporate board and executive
team need a high tolerance for ambiguity. And as they
structure the split, they must be able to maintain a delicate
balance: addressing talent issues efficiently while ensuring
that people have the interests of the current shareholders
at heart for as long as necessary.
chairman, two general counsels, and more – all with the
Once the announcements of future roles have been made,
clock running and something new happening every day.”
a strong Chairman can effectively control the inevitable
From those interviews and our experience assisting
consumer products companies through the talent
challenges of spinoffs, we have distilled some essential
lessons that can help prepare boards, CEOs, and other top
leaders who may be about to plunge into the vortex:
Keep everyone focused on
shareholder value – not on
individual fates
Once your people get wind of a possible spinoff,
jockeying for resources. One Chair, for example, preempted the problem by having the current board make
all of the major decisions about such issues. Another
Chairman, who foresaw contention over the disposition
of talent between the two companies, took an entirely
different, and equally effective, tack. He told the CEOs of
the two companies-to-be that they would have to work
it out with each other and that he would step in only
in irresolvable cases. As he anticipated, he did not have
to intervene in a single case. Though the tactics of each
chairman differed, both approaches were based on the
principles of clarity in the policy and transparency in
the process.
employees at all levels of the organization will naturally
begin to wonder where they might fit in the new order.
Keeping them focused on the existing business requires
a balance of transparency about future plans and
diplomatically communicating the message that the best
thing that they can do for themselves is to continue to
perform their current jobs to their best of their ability.
Heidrick & Struggles 3
Combine speed and care in
building the new boards
In the absence of a well-structured process, hasty
decisions may inadvertently create the loss of focus
among board members that can occur when people learn
prematurely where their futures lie.
Filling a single board seat can be a challenging and timeconsuming process under the best of circumstances.
Filling several seats for the spinoff’s board multiplies
the challenge enormously. You must develop a strategic
profile of the board-to-be, identify several candidates for
each seat, assess them, and successfully recruit the finalists
– all within the year or less that typically elapse between
announcement of a spinoff and its IPO.
Make sure that key leaders
are ready to handle the dual
pressures of running a public
company and a pure play
Some seats should be filled by directors from the legacy
“The spotlight from Wall Street is glaring,” says the former
company to ensure continuity, but their move creates
CEO of a highly successful spinoff. In addition, the other
vacancies on the legacy board. In addition, some skills may
pressures and demands on key leaders in a pure play
no longer be needed on the legacy company’s board, and
can differ significantly from those faced by leaders in a
some members may simply elect to leave on the high note
portfolio of businesses. Further, some of the positions
of a successful spinoff. In any case, the sum of vacancies,
to be filled, like General Counsel and Head of Investor
when both boards are counted, will be high.
Relations, do not exist in the business or division to be
When a board is being formed essentially from scratch
spun off. The board must weigh all of these factors as they
and against the clock, the likelihood of poor ‘fits’
greatly increases. The skill sets and styles of all of the
board members must be identified and combined in a
coherent whole, a problem that requires the board and
develop profiles for key positions, determine whether
to fill them internally or externally, and make these key
appointments:
the executive team of the existing company to work
CEO
out a great many variables simultaneously. Says Bruce
When no one in the existing company with experience as
Carbonari, who as Chairman and CEO of Fortune Brands
sold its golf-related business and then split the remaining
company into Fortune Brands Home & Security and
the spirits company Beam: “It wasn’t a matter of simply
filling board positions, but about working down to the
committees and filling them with the right people.”
a public company CEO – like the current CEO or a member
of the board – is willing and able to take the reins of the
spinoff, the choice can be difficult. The president of the
business prior to the spinoff, who may appear to be the
obvious candidate for CEO of the spinoff, may never
have had to deal with analysts and investors and may
With so many variables to consider and the clock ticking,
not be prepared for the relentless quarterly pace of a
it is tempting to take shortcuts: forego referencing,
public company.
interviews, and assessment and simply recruit people
Even companies that have practiced rigorous CEO
with outstanding resumes or well-known names that
will excite potential investors. But no matter how good
candidates look on paper, there is simply no reason to let
time pressure short-circuit assessment. You can start by
determining the end date when appointments should be
finalized and work backwards from that date to establish
when major milestones in the process must be completed:
final referencing, candidate interviews and assessment,
identification and initial referencing of candidates, and
identification of required competencies.
succession planning may find that they have no “readynow” candidate to assume the top job in the spinoff.
Succession planning takes place within the context
of the existing company. A spinoff is often a relatively
unforeseen event that may be out of sync with that longterm planning. The heir-apparent to the company’s CEO
may be three or more years away from being ready, while
the spinoff might occur in a matter of months. On the
other hand, says Stephen Cerrone, “Succession planning
is designed to prepare people for more difficult, more
complex roles – a spinoff just accelerates the timing.”
4 Game on: Getting the talent right in consumer products pure plays
A growing roster of spinoffs
Pharmaceutical giant Bristol Myers Squibb in
2009 split off Mead Johnson, its nutritional
products business.
Ralcorp, producer of private label food products,
spun off its branded cereal business, Post Foods, in
early 2012.
Fortune Brands sold its golf division and in 2011 split
its spirits and home products businesses into two
public companies, Beam Global and Fortune
Home & Security.
Kraft Foods Inc. in October 2012, completed its
split into a snacks and confections business called
Mondelez International, Inc. and a North American
grocery business called Kraft Foods Group, Inc.
Foster’s Group split its beer and wine business in May
2011 forming Treasury Wine Estates. The legacy beer
business was subsequently acquired by SABMiller.
Abbott Laboratories separated into two companies
at the beginning of 2013, one in medical products
and consumer nutritional products, which retains
the Abbott name, and the other in research-based
pharmaceuticals, named AbbVie.
Sara Lee, having spun off apparel as Hanesbrands
and sold other businesses, broke the remaining
company into two companies in 2012: Hillshire
Brands, a pure play focused on meat products, and
DE Master Blenders 1753, a pure play focused on
coffee and tea.
Dean Foods completed its split into two companies
in May 2013: a higher-margin, higher-growth organic
foods business and a legacy fluid milk business.
More recently, activist investors were agitating for
PepsiCo, Smithfield Foods and Sony to spin off
certain SBUs to unlock greater shareholder value.
If the company decides that the advantages of having
especially if the CEO is relatively inexperienced there. Most
someone who knows the business outweigh the lack
importantly, an experienced public company CFO can be
of prior public company experience, the board of the
invaluable to a CEO who lacks public company experience.
existing company can take steps to surround the internal
candidate with help – especially with a strong Chairman
who has experience as a public company CEO. In one case,
the existing company decided to install a first-time CEO
with the understanding that he could assume both roles
three years later. The board can also make sure that the
CEO will be surrounded with outstanding external advisors
and internal talent well versed in legal and regulatory
issues, executive search, corporate governance, and any
other areas in which he or she might be weak.
As with the CEO role, the existing company’s succession
planning may not have produced a “ready-now” candidate.
Further, says one Chairman and CEO who guided a major
holding company through a spinoff, “Many divisional CFOs
are more like controllers. They haven’t spent a lot of time
with the balance sheet, other than with working capital,
so they may be unfamiliar with debt structure and equity
arrangements.”
In addition, the CFO should have strong relationships
with analysts, the investor community and credit rating
CFO
agencies.“ The great ones have the ability to take very
One of the most critical internal supports for any CEO is
that anyone could understand,” says Stephen Cerrone. “But
the CFO, who should complement the CEO’s strengths
and compensate for any areas of weakness. For example,
if part of the pure play’s strategy is the acquisition of
similar brands, the CFO should be experienced with M&A,
complicated issues and explain them to analysts in a way
in a pure play it’s even more important because they have
to explain the transition from where the business was to
where it’s going.”
Heidrick & Struggles 5
CMO
CHRO
As in consumer products companies generally, CMOs play
The CHRO must be adept at devising a human capital
a critical role in pure plays but the challenges and focus
strategy for the spinoff, including recruiting talent in the
differ. Initially, the great challenge lies in rebranding the
short term, building a leadership team, interacting with
new business. The company may be launching an entirely
the Board, and developing talent in the long term. As the
new brand name, as Sara Lee did when it spun off its
former division of a larger company transitions to a highly
coffee business as DE Master Blenders 1753. Even if the
focused, single-minded pure play, with pressure on every
brand is familiar, it may need to be repositioned, especially
individual to perform at the highest level in order to grow
if the former owner treated it as an also-ran or a cash cow
the company, he or she must know how to work with the
rather than as a category leader. The CMO must determine
CEO on culture change and on creating the employer
the big initiatives that will drive the rebranding and
value proposition.
repositioning, make sure they are uniformly understood
across geographies, and see that they are executed.
General Counsel
Over the longer term, however, the CMO must have the
The General Counsel, in today’s highly regulated
skills to build the brand or portfolio of brands significantly,
environment should have experience with public
delivering on the significant growth promise of the
company governance, regulatory and compliance issues,
spinoff. As a former head of HR puts it, “Some people
and international legal operations if the pure play is a
know how to do that and some don’t, and it requires some
multinational.
extremely technical expertise in marketing to do it.” That
growth-driving expertise includes marketing and product
innovation, consumer insights, and the ability to work
Head of Communications
closely with R&D.
The Head of Communications should of course have the
Because pure plays aren’t subject to the internal
where one slip in product quality or a financial setback
competition for resources that occurs in portfolios
of businesses, they can more easily capitalize on
opportunities for innovation. Some pure plays, like
Hillshire Brands, have established the role of Chief
Innovation Officer. “We deliberately created the role to
focus on learning from our consumers through active
engagement and dialogue,” says Mary Oleksiuk, the
company’s Chief Human Resources Officer. “It is critical
for us, combining art and science and driving specific
key performance indicators, processes, and culture. The
incumbent not only needs marketing capabilities but also
should have run a business.”
usual media and public relations skills. But in a pure play,
can get greatly magnified in the press and the public
consciousness, experience with crisis communications can
be critical. The leader must be able to respond quickly and
transparently, contain the damage, and maintain public
confidence in the company while strategically supporting
the CEO and CFO in investor messaging.
“In a pure play,” says one CHRO, “you don’t need to deploy
sophisticated leadership models – you need leadership
skills around agility, focus, and the will to win. In the
C-suite you need behaviors in action: leaders who are
deep experts, hands-on, and move fast between strategy,
execution, and people.”
In a pure play there are no other businesses to take up
the slack for a bad quarter or a bad year. The pressure to
grow, to enhance operational performance, and to create
value falls squarely on one business and one business
only – and its people. “There is no hiding ‘B’ players, who
may have been inadvertently tolerated before a spinoff,”
says one CEO. “Growth expectations are going to rise for
the business and drive higher performance standards
accordingly.”
6 Game on: Getting the talent right in consumer products pure plays
Take advantage of the
opportunity to promote
the employer brand
A spinoff not only requires rebranding of the business
externally, but internally as well. Partly, the new employer
brand will depend on the strategy you intend to pursue.
But even if the business strategy remains the same, the
simple fact that the company is now a pure play has
numerous implications, with both positive and negative
connotations, depending on the interests and ambitions
•
of individual employees:
The narrower focus of the business may offer fewer
Mary Oleksiuk, who joined Hillshire Brands after its
spinoff, sums up the attraction of working for a pure
play this way: “It’s the opportunity to make an impact. In
the pure play, every position counts. It’s energizing and
challenging every day. We have four different generations
of employees under one roof and we keep the best of
them by offering development opportunities tied to our
strategy – innovation, acquisitions, and market growth.”
The business
experience of
a lifetime
•
opportunities than conglomerates for people to
broaden their skills across divisions, disciplines, and
Amid the multiple pressures of a spinoff – its speed,
geographies. But that singular focus enables people
complexity, and implications for your future – it’s easy
to deepen their core skills significantly and their
to overlook the obvious: it’s one of the great ‘stretch’
knowledge of the sector and have real impact on
business experiences you are likely to undergo in your
the business.
career. Whether you are a board member, a member
The “no-place-to-hide” nature of pure plays, noted
above, typically entails a high-performance, highaccountability culture with a bias for action and an
insistence on excellence in execution. Many people
thrive in such an atmosphere and enjoy the challenge;
•
others may not.
The smaller size and geographic reach may restrict
development opportunities somewhat, but it also
enables greater work/life balance.
of the executive team, or one of the trusted advisors
or consultants assisting with the transition, you are
helping create what is effectively a new company. The
hours are long, the decisions are tough, and challenges
are daunting. But there are few other development
opportunities like it.
“It’s the most unbelievable experience that I’ll probably
ever have,” says a top executive who spent 20 months
working day and night with his colleagues on a major
spinoff. “There were a lot of people involved, and when I
It is as important to think through these internal branding
look back on it I wish we had emphasized its impact on
issues as carefully as you think through the external
development. We focused intensely on the issues, but
rebranding of the company. Establishing and promoting
every once in a while I would be sitting with one of my
the employer brand will not only make it clear what kind
direct reports, working far into the evening, and I would
of people you want to attract but may also reignite the
say, ‘I know this seems like a nightmare, but trust me –
motivation of current employees. Mead Johnson, sent an
you want to do this.’” n
unmistakable signal that the new company represented
a decisive break with the past by moving headquarters
from the legacy location in Evansville, Indiana, to Chicago.
Similarly, Hillshire Brands moved from Downers Grove,
Illinois, to downtown Chicago, a location that CEO Sean
Connolly told shareholders would “provide a recruiting
advantage for highly talented innovators who are seeking
a fast-paced and exciting workplace.”
Heidrick & Struggles 7
Heidrick & Struggles is the premier provider of senior-level
Executive Search, Culture Shaping and Leadership Consulting
services. For 60 years, we have focused on quality service and
built strong leadership teams through our relationships with
clients and individuals worldwide.
www.heidrick.com
Torrey Foster
Torrey Foster is an alumnus of Heidrick & Struggles' Chicago office.
+1 (312) 496 1521
[email protected]
Nilgun Langenberg
Nilgun Langenberg is an alumna of Heidrick & Struggles' Amsterdam office.
+31 20 4627786
[email protected]
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