Henkel solution

8/13/2019 Henkel solution

http://slidepdf.com/reader/full/henkel-solution 1/23

GROUP E

TERM PAPER FOR ORGANIZATIONAL BEHAVIOR COURSE

HOW CULTURE AFFECTS STRUCTURE

A CASE STUDY OF HENKEL VIETNAM



EXECUTIVE REVIEW

Any perfect business model’s effectiveness could be changed in a country with

different culture. The story of Henkel group is quite a good example. The wining

culture, codes and values of its own is applicable in almost every country where its

offices are located. But when it comes to Vietnam, the big difference between the

west and the east culture was forgotten in a way that it didn’t change much to adapt

with the new culture.

This leads to some existing problem now at Henkel Vietnam. Departments are

somehow working separately. Each knows themselves and has no tendency in

supporting others due to too many uncertainties at work. And there is no head

director to figure out the solution for all.

In this paper, we would analyze the problem in depth on what are the causes of such

problems and how to solve them all in order to bring the business to the place it

should be at the beginning. The method of doing so is to look at the problem from to

angles. One is from Henkel Vietnam, a foreign company operating in Vietnam, and

CNC APTECH, a Vietnamese company. In doing so, we are not meant to judge

which is better but to compare alternatives and help readers understand the

“Vietnamese way”.

In the end, the problem could be improved by the assigning a country manager. This

would be the local person of this global organization. And with their knowledge, they

would find out a way to reduce the current distance and conflict between those

employees and carry out the true values which were looked for at Henkel with some

adjustments to ignite in Vietnam culture.

From this, our group suggests that each organization should be able to understand

Vietnam in the way it is first before they decide to set up their business here.

Because this would help them accelerate the pace of their revenue growth a lot.

1



INTRODUCTION

Behind every powerful leader is a powerful invisible, which contributes to create a

strong corporate culture. That culture motivates people to work hard and longer for

their company. With stable development, the remaining difference among companies

today is culture factor. Other factors such as technology and business processes are

almost no difference much. For example the reason why we distinguish between

Unilever and P&G is not the quality, the difference is corporate culture and their

brand image.

Culture has considered as an identification sign of each company, enabling us to

distinguish the company with another company. Culture reflects in the work style and

behavior of employees both at work and in life. Corporate culture plays an important

role in the success or failure of that company. Companies which have adaptive

culture will outperform their competitors. Many companies build their own culture on

the basis of inherited cultural traditions. And here, the mission of the Henkel Group is

not out of that goal. Unfortunately, applying corporate culture in this company seems

somehow ineffective and causes some internal problems.

2



THE THEORIES

I. ORGANIZATION DESIGN

An organization’s design is very important to point out the role of the managers and

employees in the organization.

1. Key factors in organization design

a) Environmental factors

There are four most important factors:

An organization must maintain and manage the good relationship with those

factors in order to develop and succeed.

ORGANIZATION

COMPETITORS:make the org. to become productive

DISTRIBUTORS:deliver and sell

products

CUSTOMERS:evaluate the cost

of products

SUPPLIERS:obtain the required

materials

3



b) Strategic factors: one of the most popular competitive strategies was developed

by Michael Porter of Harvard University. According to Porter, there are three

main strategies that an organization can use to take the competitive advantage:

• Organization's ability to provide goods or services with thelowest cost.

Cost leadership strategy

• Organization's ability to provide the unique goods and

services.

Differentiation strategy

• Organization's target on a specific niche in an industry.

Focused strategy

c) Technological factors:

Technology is a process which an organization changes inputs into outputs.

Task interdependence: refers to the extent one person or department’s performance

can affects what other members do.

There are three types of task interdependence:

- Pooled interdependence

- Sequential interdependence

- Reciprocal interdependence

2. Mechanistic and organic organizations

4



Mechanistic

• formal rules and regulations

• centralization of decisionmaking

• narrowly defined jobresponsiblities

• rigid hierarchy of authoritycharacterize

Organic

• informal rules andregulations

• descentralized and shareddecision making

• broadly defined jobresponsiblities

• flexible authority structure

3. Foundation organization designs

Result of various pattern of environmental and technological factors make the design

of an organization may differ and change.

5



6

Functionaldesign

• the creation of positions, teams, and departments

• the most widely used and accepted form

Placedesign

• establishing an organization’s primary units geographically

• All functional group for one geographic area are in onelocation

Product

design

• the establishment of self-contained units, each capable ofdeveloping, producing, marketing, and distributing its owngoods and services

Multidivisional design

• tasks are organized by division on the basis of the product orgeographic market in which the goods or services are sold

4. Contemporary organization designs



Multinational design

• maintain coordination among products,functions and geographic areas

• produce and sell products and services in two ormore countries

Network design

• subcontract its operations to other firms

• coordinate them to accomplish specific goals

7

EII. ORGANIZATIONAL CULTUR

1. Dynamics of organizational culture

An organizational culture is a collection of unspoken rules and traditions; it reflects

the shared and learned values, beliefs, and attitudes of its members.

Culture influences what happens to employees within an organization.

Organizational culture exists on several levels, which differ from terms of visibility

and resistance to change.



Cultural symbols

physical objects such as words, pictures, gastures that have a

particular meaning within a culturethe most superficial level

Shared behaviors

more visible

norms

and somewhat easier to change thanvalues

Organizational cultural values

collective beliefs, assumptions and feelings about what things are good,normal, rational and valuable

Shared assumptions and philosophies

the least visible, deepest level basic reliefs about reality, human

nature and the way things should bedone

8



2. Types of organizational culture

9

3. Ethical behavior and organizational culture

complex interplay of formal and

• formality, rules, standard operating procedures, and hierarchicalcoordination

Bureaucraticculture

• traditional, loyalty, personalcommitment, teamwork, self-management, and social influenceClan culture

• high levels of risk taking and creativity Entrepreneurialculture

• achievements of measurable anddemanding goals especially in financeand market based Market culture

a) Impact of culture: Organizational culture has a

informal systems that may support either ethical or unethical behavior.



Formal systems

leadership

structure

reward systems

orientation and training programs

decision making processes

Informal systems

norms

heroes

rituals

language

stories

b) Whistle – Blowing is the disclosure by employees of illegal, immoral, or

illegitimate organizational practices organizations that may be able to change the

practice.

4. Fostering cultural diversity

Diversity represents individual differences and similarities among people. There are

3 important issues about diversity:

many differentdimensions

notsynonymous

with differences

includes all

differences andsimilarities

However, with its benefits, cultural diversity also brings costs and concerns,

including communication difficulties, intraorganizational conflict, and turnover.

10



5. Socialization of new employees

Organizational socialization is the process which the managers or senior employees

transfers the organization’s cultural values (the social knowledge and skills needed

to perform organizational roles and task successfully) to the new employees.

There are seven steps in socialization process:

selecting newcandidate carefully

challenging earlywork assignments

training to developcapabilities consistent

with culture

rewarding good performance

adoption of culturalvalue policies

reinforcing folkore

consisting rolemodels and traits

11



THE HENKEL VIETNAM PROBLEM

The company background

Founded in 1876, Henkel Group takes their lead in both consumer and industrial

businesses, majority in three different areas: Laundry & Home Care,

Cosmetics/Toiletries and Adhesive Technologies including well-known brands such

as Persil, Schwarzkopf and Loctite.

Locations

Henkel headquarter is in Düsseldorf, Germany and its subsidiaries take place morethan 75 different countries throughout the world.

Europe

North America

Latin America

Asia-Pacific

Africa & Middle East

12



Henkel in Vietnam

National Starch brand was completely changed into Henkel throughout the world in

late April 2008. Henkel Dongsung Vietnam Co. Ltd., Dong Nai | Adhesives and

National Starch & Chemical Vietnam Co. Ltd., Binh Duong | Adhesives are two of

those companies which had changed from ICI to Henkel, placed in Vietnam. In

addition with the time pressure pushing the change in structure from ICI Group to

Henkel Group, the Globalize structure of Henkel seem has some problems when

applying in Vietnam, especially for Henkel Dongsung Vietnam Co. Ltd.,

The Organization Chart of ICI as follow:

13



And the standard structure of Henkel Group in Head office and other majority

subsidies as follow:

These charts take the same standard structure as a pyramid with Board of

Management will the one who control over the structure. For this reason, the

merging process of ICI and Henkel will have no further obstacles in structuring as

well as humanity, in theory. But in reality, many problems occur related to structure

changing and humanity difficulties.

14

Let’s go for the detail of Henkel Dongsung Vietnam Co. Ltd., which placed in Bien

Hoa, Dong Nai province. As every subsidiaries of Henkel around the world, when

merging to Henkel Group, most of the old staff in Dongsung was kept and play

another position due to the changing in organization chart because of the tide time

line of merging (in reality just takes around 1 year to complete the process), that

cause many problems due to the changing in company culture will effect a lot to the

old staff who already get used to ICI culture for a long time. They may not adapt to

the new requirement of Henkel just in a short period of time and finish their new task

in new way of reporting.



In addition, the chart of small subsidiaries will follow the straight-structure, which was

set up to supporting for reporting task (that can be seen as a majority task of small

subsidiaries) shows the huge dependent on humanity. There are five main

departments in Dongsung Vietnam: Finance, IT, HR, Manufacturing and Sales

Department. Each department was set with the main purpose is directly report their

required information to their own department in overseas. The structure can be

illustrated by this chart in every department:

FinanceManager

Supervisor ofFinance Dept Finance Regional

ManagerHeadquarterStaff in

Finance

The fact shows that this kind of organization chart gives Henkel success in many

countries such as European countries and other developed countries. The big

question was raised, why this chart is not work in Vietnam?

Besides of the rushing in merging process, the answers include two parts: human

difficulties and management difficulties.

What is the role of employee in this structure? Straight-structure relies mostly on the

individuals who have full awareness and responsibility of their work. The reporting

systems in Henkel require a lot of information, figures, forecasting and analysis,

which require a lot from the employees who not only have an ability to work as an

individual but also a skill to work as a team, to cooperate with others in company. As

soon as all the staffs had a same goal as their company, this structure is the best

structure that the Headquarter can apply to their subsidiaries overseas.

15



16

Back to Dongsung Vietnam’s case. Vietnam is a developing country; the main

purpose of what people works for is to earn money for their basic needs like foods,

water, clothes, houses, etc. So the awareness of Vietnamese employee is not as

high as European countries or others developed countries. Furthermore, the culture

of Vietnamese people, that extremely different from Western style, has to be

considered in this structure. Vietnamese team seems very close to each other in one

group but not connect with others groups, although they are in one company. This

structure requires a lot from individuals in each department have ability to work

separately because the reports have directly send to their Regional Manager

overseas, but they also have to connect with others departments not only for their

reports but also for achieving the company’s goal. The first problem occur when

many reports require information from others departments such as sales reports

need forecast information in finance team, HR team; or finance reports need

supporting figures from manufacturing team, etc. but because of each head of

department has same position in company so that their staff will follow the same

idea, in their mind they think their position is the same with others department staff,

as the result, every staff in different department refuse to cooperate with each other,

leading to miss the reports deadline or wrong forecasting in figures.

The rest of the question is what is the role of the manager who directly supporting

their staff to meet the company goal? On straight-structure, there is no General

Director as subsidiary level, the one that is the head of the subsidiary and guides the

company in general and connects all the departments together, because this kind of

structure relies on individuals so that every employee has his or her own

responsibility, no need any one for reviewing or pushing behind. But this not works

for Vietnamese’s culture. Vietnamese’s staff still works for their basic needs so they

may not have enough skill to work for the company as a responsible individual

without guiding and reviewing of another person. The fact in Dongsung Vietnam

shows that most of the time department manager has to handle his or her staff and

completes his or her own task, so he or she has no time for connecting with others

departments for company goals.



17

Furthermore, straight-structure locates managers of each department through the

same scale of level, so no one would get the full responsibility when things happen

to the company. A real case happened in Dongsung Vietnam in year 2009, when the

company had a full stock take in December 2009 with Auditor, they find out the big

lost in inventory. Finance was the one who reconcile the stock take figures with the

system and found out the lost, they raised the question to manufacturing department,

who take responsibility of the inventory in warehouse. Manufacturing manager

claimed that the old warehouse keeper was the one who take this responsibility but

he resigned last 2 months and now no one can contact with him. He also claimed the

purchasing department about the daily stock in and out report and financedepartment for the reconciling the different between real stocks and accounting

system. Purchasing department give their argument about the wrongly counted of

warehouse when goods delivered. No one takes full responsibility but claimed other

departments and nothing was done during 6 more months. In the end, after getting

lot meetings with others parties overseas, the internal auditors of Headquarter were

involved to investigate the case and find out the solution.



ANALYSIS AND SOLUTION

We will look at Henkel Vietnam side-by-side with a Vietnamese company, CNC

APTECH. It is doing business in education and training industry and has three

training centers. By doing so, we will understand how Vietnamese doing business in

Vietnamese way. And that helps us somewhat understand the Vietnamese culture in

working place. The comparison is meant to shed some light to our analysis and

generate alternatives rather than judge which one is better.

A good start is hal f success

Apparently, the problem, if any, could be attributable to both the event of merging

and culture differences. On the one hand, the hasty merge created discrepancy

between the organization’s and employees’ expectations. The company expects its

new employees to adapt smoothly to the new structure while the employees expect

their new employer to keep the same structure or change just a little bit. On the other

hand, the differences between Vietnamese and European, in particular German,

cultures contribute vastly to the problem.

As a matter of fact, both ICI (the former owner) and Henkel (the new owner) have

somewhat the same kind of structure, i.e. the product-based division. However, the

cultural aspect could pose a serious resistance. In this case, the company may need

to give some orientation training to the employees, who could be seen as newly-

recruited employees. This kind of training will give the employees a clear view of the

company’s expectations, organizational structure as well as management style.

When employees are fully aware of what and how they are expected to perform and

what kind of working environment they are in, they would adapt much better.

This orientation process cannot be overestimated. In CNC APTECH, for every new

employee, the CEO spends lots of time talking to him/her about the company, both in

and after the selection process. Because he also is the founder of the company, the

conversation could be quite personal but the new people can comprehend the true

‘soul’ of the company. His ambition is the company’s vision; his personality dictates

how things should be done. Officially, there is no such thing as ‘orientation training’in CNC APTECH, but in every sense it does exist. That is an invaluable practice that

18



19

almost applicable only to SMBs. The process requires a true leader, not just a

manager, to guide people through the core values of the company. It may sound

ambiguous but the result would be a clear understanding of what the company

expects from the employees.

Unless all or most of these expectations are made clear, it is pretty hard for

employees to perform at their best regardless organizational structure, culture, etc.

For such a large corporation as Henkel, although it is impossible for new people to

have a personal guidance from the very top positions, it has advantage of a well-

organized, full-fledged HR department. Hence instead of an informal, personal

guidance, a systematic, well-prepared process could be used to help new employees

have an internal look of the organization.

It is quite ironic that CNC APTECH does not even have a dedicated HR unit.

Actually, it is a common practice for Vietnamese SMB. In CNC APTECH, the head of

each center takes the main responsibility in the recruitment process. However, the

CEO himself involves deeply in the process to make sure the new people are ‘his

type’. Henkel Vietnam did not have such luxury because it took over the whole

workforce of ICI. Therefore, the Vietnamese HR team should have worked closely

with their counterparts from Henkel global to make sure those people fit well into

their new organization.

A good start is half success. Regardless its structure or culture, an organization

should always give its new employees appropriate orientation training. In fact, this

aspect could also be seen in the light of cultural differences. Most Vietnamese

employees are used to autocratic management style and therefore are unlikely to

change the way they do things unless instructed to do so. In other word, they find it

hard to self-adapt. A strong leadership and significant involvement of the Henkel’s

international HR team are essential.

Mutually destructive assurance

One thing stands out clearly when we look at Henkel Vietnam. That is its functional

departmentalization. This kind of structure probably is one of the very first kinds of

departmentalization, and it is still very popular in Vietnam. Vietnamese employees

are used to it, and they stick to it very well. The problem is functional division is also



20

notorious for creating oases within the company. One may argue that other kinds of

division were born only because someone tried to bring down the invisible walls

among specialized departments.

The negative side of functional division is magnified in Vietnam. One can see that

while German value discipline, personal responsibility, and end results, Vietnamese

value just-doing-my-work mentality. This attitude could be traced back to a long

period of centralized and planned economy, where the quality of the final result is not

a concern, everyone were just trying to finish the planned tasked, quantity ruled and

quality suffered. In addition, Vietnamese usually are not expected and encouraged to

break away from the assigned duty. Hence, there is no need to concern about

others’ work and result.

Furthermore, Vietnamese culture is heavily influenced by ‘clan and tribe’ mentality

although it may not be very visible. Throughout her history, unless there were

imminent and prominent danger of invasion and extinction (as a nation) from

outsiders, Vietnam in general has suffered from fragmentation and struggling among

groups of different areas, families, classes and so on. This applies to working places

also, and it makes the matter of functional division even worse. Somehow the

negative aspects of functional division and Vietnamese culture fit perfectly. This

mutual interaction is proved to be so much destructive to Henkel Vietnam.

In CNC APTECH, the structure is basically geographic. The three centers compose

the backbone of its organizational structure. Each one has its functional staff and the

center head is only second to the CEO. In addition, the company culture is highly

sales-oriented. Each center has a clear and strict sales target, and everyone has

his/her target also. That forces each individual do whatever it may take to achieve

the assigned targets. Each employee is responsible for their result to the center

heads, and center heads, in turn, take full responsibility to the CEO.

Headless Chicken Lit tle

A common goal for everyone, or lack of it, is a serious problem for Henkel Vietnam

when there is no one to be in charge of the whole organization here. It is not a

problem of management but leadership. It is because assigning targets is easy; the

oversea Regional manager could do that without much difficulty. On the other hand,



21

keeping them from losing sights of the targets, and pushing them toward targets are

hard. It requires strong leadership.

It is easy to see the lack of a top manager in Henkel Vietnam who looks after all units

in the company. But more than that is the lack of true leadership. While it is obvious

that leadership is essential anywhere, it is especially indispensable in such country

as Vietnam, where collectivism rules. People are basically afraid of taking personal

responsibility and require a very strong leader to keep everything from losing track

and falling apart. It may sound contradictory, but collectivism leads to dire need of a

leading individual; and its highest form is personality cult, which is common

throughout the history of countries with collectivism.

Hence the thorough cure for the problem is to get rid of the current structure

completely. A product-based structure should be adopted. Of course it would not be

easy. Another way around is to make the structure less rigid using job rotation, job

enrichment, mutual training, enhancing communication. However, regardless of what

is done to the structure, there must be a top executive for the whole nationwide

operation. And the head of each department must be responsible to that person,

more than to the over functional managers. The basic problem here is leadership

and common goal, or lack of them. Dual-boss is better than no boss at all.

In sum, there are three problems that keep haunting Henkel Vietnam. The first is the

absence of orientation training and all the haste from the merging process. The

second one has to do with the fact that the negative aspects of the functional division

match pretty well with some Vietnamese cultural values. And finally, the biggest

problem is the lack of true leadership. In order to solve the problem, we should set

the courses of action that have the priorities in reversed order of that list above, i.e.

solving the leadership problem first, then the structure, and so on.



CONCLUSION

To find out carefully about the company culture is very important in organize its

structural model, especially when it is set up overseas. As we had known, company

culture evolves and changes over time. When employees leave the company and

replacements are hired, the company culture will change. Or when the environment

in which the company operates (the laws, regulations, business climate, etc.)

changes, the company culture will also change. These changes may be positive, or

they may not. So how can you know these changes are good or bad? It also

depends on the way how the executive managers manage their company. Besides

knowing culture of the country where you establish the company, you have to know

inside your internal structure and what happen around like listen to your employees,

your suppliers, and your customer. Decide what you want the company culture look

like in the future by set up its own strategic goals, which model should apply best to

your company structure.

Having said that, one must not forget that human factor still is the decisive one. In

this case, it is the leadership. At the end of the day, structure is just a product of

human beings. The mutual interaction among structure, culture and leadership must

be understood clearly in order to ensure the success of one business.

22

Documents

Henkel solution