The value driver
Kasper Rorsted, Corporate leader
“A person who has never failed or made a mistake has never taken enough risks.”
Dark wood, sandstone, muted light seeping in through the glass ceiling, an almost meditative silence – when you enter the reception area of Henkel headquarters in Düsseldorf-Holthausen, you intuitively lower your voice and slow your pace. Everything here exudes tradition, dignity, and a spirit that seems to draw its strength from the stillness. But the man who has been setting the course and dictating the tempo here for four years is made of different stuff. Kasper Rorsted is the personification of a new dynamic, at home in the transparency and modernity of the building that houses the Laundry & Home Care business sector and where our meeting takes place.
His employees attest to the seemingly boundless energy of the man at the head of Henkel. Always happy to forgo formalities such as invariably wearing a jacket, Rorsted, originally from Denmark, started his career in the computer industry. In the meantime even the traditionalists here at the Düsseldorf consumer goods company happily overlook such breaches of protocol. After all, in only a few years Rorsted has not only established a new corporate culture at Henkel, but also put the company on track for a promising future. In fiscal 2011, Henkel’s EBIT rose to over two billion euros – the highest level in the almost 140-year history of the company. “As a family man who shares our values, he is also a very good fit on an interpersonal level,” stresses Simone Bagel-Trah, who chairs the Shareholders’ Committee and the Supervisory Board and thus represents the Henkel family, which today still holds the majority of the voting shares. It therefore came as no surprise when, in February 2012, Kasper Rorsted’s contract as CEO was extended for another five years.
The Focus: Kasper, when you were appointed Chief Executive Officer of Henkel in 2008, you said that there would not be a revolution within the company under your leadership, but rapid evolution. What did you mean by that?
Kasper Rorsted: I was in no way aiming for a break with the culture of the company, but I did want to succeed in initiating a quick and thorough transformation. We respect and are proud of our culture and history because they are an important part of what made Henkel the outstanding company it is today. But we need to focus on the future. Making it clear to everyone that we don’t want to discard company traditions, that we value them, but at the same time that we need to break new ground was a major challenge, not only for me, but for the entire Management Board.
The Focus: Wasn’t there any resistance to your plans?
Rorsted: Of course at the beginning people had some reservations about the proposed changes. But I think that is normal in any company. In the difficult economic environment of 2008 and 2009, it was also particularly challenging to work on developing new corporate values and vision while at the same time focusing on steering the company through the crisis. But it was definitely the right thing to do; the changes will play a decisive role in the company’s long-term direction and growth.
The Focus: How did you master these challenges?
Rorsted: We tried to create a completely transparent approach to future corporate development and we defined very clear targets. Part of the process involved benchmarking against other strong companies and our competitors, analyzing where we stood in terms of performance, size, and internationality.
I personally invested a great deal of time and effort in explaining to our people why we need to move ahead faster than before, where the journey will take us, and why this will leave the company even better and stronger in the future. This required a massive communication effort. To be honest, at the beginning I underestimated the amount of work involved.
The Focus: Is transforming a company’s culture primarily a question of communication, then? Doesn’t the substance play a major role as well?
Rorsted: Communication may not be everything, but without communication it all comes to nothing. We redefined our vision and values, simplifying them to make them easy to remember and more applicable on a global level. The simplification was the most important aspect. We needed everyone to understand the core messages. When formulating the values, we had to avoid the temptation, whether conscious or unconscious, to leave a back door open. That would have diluted their effectiveness from the very start.
The Focus: What specific steps have you taken to set this evolutionary change in motion?
Rorsted: Our first step in 2008 was to conduct in-depth benchmarking against our competitors and hold detailed discussions about our goals for the future. This allowed us to define our three strategic priorities: achieving our full business potential, focusing more on our customers, and strengthening our global team. Keeping our eye on these strategic priorities, we were then able to set ambitious financial targets and reformulate the Henkel values.
Henkel already had a strong value-based culture but up to that point it had been expressed in terms of ten values, the exact content of which was not well known to the majority of our employees around the world. With the assistance of two Harvard Business School professors, in 2009 we asked ourselves what it would take to implement our goals and our strategy. What was really important to us? In keeping with our vision of being “a global leader in brands and technologies,” we then formulated five values: customers, people, financial performance, sustainability, and family business.
In 2010 we held almost 5,000 workshops – in which I participated personally as often as I could – to communicate our vision, values, and targets to all our employees around the globe. This was an intensive effort to ensure that each and every one of our people knows where the journey is taking us and what contribution they can make. Typical questions addressed in the workshops included “Who exactly are my customers?” and “What can I personally do to make things better for them?”
The Focus: As you just mentioned, you travelled the globe for months to present and explain the new corporate values to Henkel employees worldwide. Was it a kind of one-man roadshow?
Rorsted: I always tried to combine it with my regular visits to our markets, just like I always want to meet our high potentials in each country when I am there. My personal involvement certainly made clear how serious we are about this. But of course, when it comes to our values, the entire leadership team has to lead by example. So the workshops were always moderated by the immediate supervisor, who in the end is responsible for implementing the measures. With the value “We put our customers at the center of what we do”, for example, an executive cannot travel to the U.S. for a workshop and come back without having seen a single customer. Because this would send a message to our people there that the customers aren’t very important after all.
This is the advantage of clear and simple values – they can be measured. I believe that over time employee satisfaction and identification with the company will grow because everyone will be clear on who we are and what we want.
The Focus: There is often a large distance to bridge between formulating a set of values and achieving a corporate culture which is an active expression of these values. How much progress have you made along this path?
Rorsted: I believe we have made a real breakthrough. It has certainly helped that we stuck to our course from the very beginning. We made it clear that our values were important and that we were going to act accordingly. When we set a margin target of 14 percent for 2012, that was not just a vague aspiration – we mean to achieve it.
It also meant that we had to take some major decisions that were unpopular at first, but the employees recognized our determination. Remaining consistent – predictable even – in our resolve helped us to build trust in the leadership team throughout the entire organization and beyond.
The Focus: Doesn’t the sort of ongoing evolutionary change that you have been pursuing for three years now place a lot of stress on the company and its employees?
Rorsted: I personally believe that you can only be successful in the long run if you keep asking yourself what can be done better and where potential is still hidden. The world around us is not getting any easier – quite the opposite, in fact. We are seeing more volatility and have to constantly adapt. But we keep our communications as transparent and clear as possible, and everyone knows our strategy and our targets. Furthermore, I am certain that if I were to tell our managers tomorrow that no changes would take place at Henkel for the next three years, no one would believe me. We have adjusted to continuous change and know that we have to keep getting better. Our current targets extend to the end of 2012, and we have already started thinking about the period that follows.
The Focus: Listening to you, the change process seems very straightforward and simple. Why haven’t other firms been as successful? Why do intrinsically good approaches get bogged down so quickly?
Rorsted: There can be a number of reasons. One significant advantage we enjoy at Henkel is the first-rate, highly competent supervisory bodies which were involved in our decision-making from the beginning and fully supported the change process. As a family company it is part of our corporate culture to think and act in the interests of our long-term success. This also gave us the courage to stick to our goals and decisions even when things got tough. Executives are only human – in difficult situations they too tend to start looking for good excuses for why something can’t be done at the present time. But we stayed firm and didn’t let ourselves get derailed by obstacles.
The Focus: And how can you be certain that you have made the right decisions?
Rorsted: The most important thing is to clearly map out your path for the long term. Where do we want to go as a company? Where do we see ourselves in five or ten years? How do we want to be positioned then? I believe that it is essential to start with a relatively clear destination in mind, and work step by step to get there. Then your employees will follow you as well. Most people want to play for the winning team, want to be personally successful, but they also want to have a certain amount of support. Before I joined Henkel, I was told there was not much room for change. That has not been the case. We have been able to achieve everything we have set out to do.
The Focus: What values are personally important to you?
Rorsted: I believe it’s important to be transparent and consistent. I try to establish clear rules of the game. Our people are important to me and I hope that they realize it. In addition, I try not to pass the buck when things aren’t going well, but to shoulder the responsibility myself. I believe one of my strengths is that I’ve never sought security. It doesn’t interest me. I like to win, but I never try to just play it safe. I don’t want to be seen as an administrator, but as an architect. I think this mindset is the key to success.
The Focus: Where does this liberal-minded approach come from?
Rorsted: It’s how I was raised. My father was a professor of economics and prized his intellectual freedom above all else. To maintain this independence, he turned down a number of lucrative job offers in the private sector. He always wanted to be able to speak his mind freely and not be under obligation to adjust his thinking to those paying his salary. That was a key influence. Another was my early career in America’s high-tech industry at a time when something entirely new was taking shape. You could try anything, test your mettle, and emerge either as an incredible success or a spectacular failure. From zero to hero and back again – it was all possible in the blink of an eye. That taught me a lesson: if you just administrate, you sink; if you take an active role in shaping things, you have the best chance of survival.
The Focus: What is the biggest challenge you are facing today?
Rorsted: I invest most of my time and thoughts on whether or not we have the managers we need – not just today, but for the next ten or fifteen years. Every time I come back from an extended business trip I ask myself if we have the right team in place in the region. Not for this quarter – that’ll soon be over. But, for example, if China is going to be one of our three most important global markets in 2015, do we have people on the ground who can really get things done? I believe this is the most important challenge. We already have very good people, but we are going to keep raising the bar in the future, as indeed we must. We can’t afford to rest on our laurels here.
The Focus: In other words, it’s always a little higher, a little further. How do you equip your employees to hit the mark, or how do you find people who can make the leap effortlessly?
Rorsted: I believe we have one of the best evaluation systems in the industry. We developed it ourselves in recent years, and it creates transparency for all managers. Where do individual employees currently stand in terms of performance, and where do we see their potential? This is the foundation, a process we conduct with all 9,000 managers worldwide. Then we have a full range of HR development tools that can be applied according to the potential of the individual candidate. Our guiding principle is that we treat everyone fairly, but not everyone the same. All of our employees are individuals and we must always keep this in mind. We are completely transparent with our people about where they stand. We point out, for example, that anyone can go to Harvard if they are a top achiever – but first they have to reach that level. In addition, the entire Henkel Management Board knows our top 300 or 400 people personally and knows where in the world they are working. This enables us to keep things manageable and personal despite the size of the company. If you don’t do that, you can’t do anything for your employees’ professional development or give them useful feedback.
Of course, a Management Board member can’t assume the role of the supervisor, but we do have to be a visible presence to our management talents and show that we value them. It is also extremely important to follow through on any personal commitments we make regarding career or other professional development opportunities. As a leader, when you promise something, you have to stick to it.
The Focus: Other corporate decision makers like to talk about strategies, innovations, strong brands. It’s interesting that you are talking about people.
Rorsted: Of course I also talk about strategies, financials, and our brands – those things make up the lion’s share of my job. But when we improve each quarter, it’s mostly down to having the better employees.
The Focus: Of your 47,000 or so employees, more than 80 percent work outside Germany. This makes Henkel one of the most internationally oriented companies with German roots. Diversity must play an important role in the company. Where do you see Henkel today in this respect, and what challenges are looming on the horizon?
Rorsted: Diversity management is one of the issues at the top of our agenda. Our executive management team is already very international, but I see a clear need for improvement at other levels. We now generate about 42 percent of our sales in the growth regions of the world. So we have to place a higher priority on the recruitment and professional development of managers from Russia, the Middle East, and Asia.
And I have similar views about women in management positions. At Henkel 30 percent of our managers are already women. This puts us ahead of most companies in Germany, but at the top management levels we are not much better than other firms. There’s still plenty of room for improvement.
The Focus: What do you think of a mandatory quota for women in management – the subject of heated debate in Germany?
Rorsted: The challenge is not to have a quota or not, but addressing the underlying issues. Once they have been addressed, a quota becomes useless. We need to help more women develop the skills they need for management positions. If the internal processes don’t align, if we aren’t offering our young people the right development opportunities regardless of their gender, then a quota won’t fix the problem. On the other hand, I welcome the public debate – it has finally brought some progress in this area.
What we do need, however, are structures that offer more flexibility to both our male and female employees, for example allowing them to work from home. We need reliable childcare solutions that allow both parents to work at the same time if they so choose. In addition, I believe the culture of ‘face time’ that still prevails in Germany is outdated. Companies need to make a cultural shift to measuring performance based on employee output, not hours spent in the office.
The Focus: After a career devoted solely to IT, at the age of 42 you decided to change industries. What were your reasons?
Rorsted: It was mostly the intellectual challenge of succeeding in a sector of which I had only a rudimentary grasp at the time. If I had failed I could always have returned to familiar ground, after all. But there was also the fact that I found Henkel fascinating as a company.
The Focus: You clearly contemplated the possibility of failure – when you consider a candidate today, do you also look at how they have dealt with setbacks or personal failure in their careers?
Rorsted: I believe that someone who has always stuck to safe and familiar territory usually won’t know how to react when the going gets really tough. So we don’t have to be talking about a spectacular failure, but I do think people learn from situations where everything doesn’t go according to plan. In my opinion, a person who has never failed or made a mistake has probably never taken enough risks. Every business decision contains an element of risk. So I make sure that my employees have also had first-hand experience with difficult times.
The Focus: You just said that it was an intellectual challenge that brought you to Henkel. What challenges are you looking forward to in the coming years?
Rorsted: Making Henkel even better. We have already accomplished a great deal, but we are aiming even higher.
Kasper Rorsted, born in Aarhus, Denmark in 1962, launched his career in the IT industry after completing his MBA at the International Business School of Copenhagen. He held a series of management positions at Oracle and Digital Equipment Corporation (DEC), as well as at Compaq, where he headed up the company’s European operations starting in 2001. He retained this position following Compaq’s takeover by Hewlett-Packard (HP). The surprising break came in 2004, when HP CEO Carly Fiorina, herself under enormous pressure, fired him by telephone during a family vacation.
After a hiatus of several months, on April 1, 2005 Rorsted joined the Management Board of Henkel, a Düsseldorf-based company. When Ulrich Lehner retired as planned in 2008, Rorsted stepped into his shoes and was appointed CEO. Henkel is active worldwide in three business sectors: Laundry & Home Care, Beauty & Personal Care, and Adhesive Technologies. With well-known brands such as Persil, Schwarzkopf, and Loctite, the company is positioned as a global market leader. In 2011 Henkel reported sales of 15.6 billion and an EBIT of over 2 billion – the highest in the company’s history to date. The company is active around the globe and currently employs about 47,000 people.
Kasper Rorsted is married and has four children. He runs and plays tennis to keep in shape and is an enthusiastic skier. In his youth he was a member of the Danish junior national handball team. In addition, he is a self-confessed fan of soccer team Bayern Munich.