Case Study on SABMiller

This case is about SABMiller and its unique Human Capital Proposition (HCP), which fostered a unique performance culture at SABMiller. Analysts opined that SABMiller seemed to have transformed itself from a South African company into a successful global beer company through its HCP. The case discusses the finer aspects of SABMiller's HCP and its importance in institutionalizing a strong performance culture within the organization. The case also includes details about the "SAB Ways", a proven approach to performance management and reward at South African Brewing Company (SAB). SABMiller was also successful in reshaping the organization culture of Miller Brewing Company (MBC), which it acquired in 2002. Issues: 1. Understand the Human Capital Proposition model of SABMiller and its role in institutionalizing a strong performance culture within the organization & strategy for C & B. 2. Understand the key steps adopted by SABMiller to reshape the organization Culture of Miller Brewing Company Today, SABMiller competes successfully in the global beer industry and is proud to acknowledge that one of our key points of differentiation is our Human Resource Proposition. Whilst virtually all our competitors leverage a brand-led or capital resource-led expansion strategy, our international expansion is driven by our unique people proposition."1 - SABMiller Plc's website, in 2006. "At Miller, we approach the shaping of a performance culture in two ways. Firstly, we use a performance management process to help translate strategic priorities into goals for all teams and individuals. Secondly, we ensure that the structures, processes, roles and skill profiles are in place to ensure that we are able to deliver our strategic priorities."2 - Denise Smith (Smith), Senior Vice President, Human Resources at Miller Brewing Co., in 2006. Banking on its People For the fiscal year 2005, SABMiller Plc. (SABMiller), the second largest brewery company in the world by volume, announced revenues of US$14.54 billion, up 15 percent from the US$12.65 billion it recorded in 2004. Its profit for the year was US$1.14 billion, up 77 percent compared to US$0.65 billion in the fiscal year 2004. These figures signified a clear improvement in the company's financials since the early 2000s. (Refer to

Exhibit I for SABMiller's key financials from 1999 to 2005) Announcing the results, Meyer Kahn, Chairman of SABMiller, said, "Thanks to sustained and careful investment in its portfolio of businesses, productive assets, brands and people over many years, we've enjoyed a third successive year of outstanding results... Most of all, we've benefited from our investment in people. We devote considerable effort to training and developing our employees, building the skills we need for the future, meeting our responsibilities as an employer and making sure our structures and management reflect the societies in which we operate."3 Analysts opined that SABMiller seemed to have transformed itself from a South African company into a successful global beer company. The company said its growth was led by its Human Capital Proposition (HCP), which created a unique performance culture at SABMiller. It had also successfully reshaped the organizational culture of Miller Brewing Company (MBC), a major brewery in the US, which it had acquired in 2002 (Refer to Exhibit II for Financial summary of MBC). The company was banking on its people to deliver the goods in the future as well, by institutionalizing best operating practices and "SAB Ways" in all its global operations. The "SAB Ways" was a proven approach to performance management and reward at South African Brewing Company (SAB) and had been very successful in maintaining the unique performance culture at SAB. SABMiller was formed in 2002 by the merger of SAB and MBC. South African Brewing Company SAB was founded by Jacob Letterstedt in 1895. Initially, it catered its beverages primarily to a new market of miners and prospectors in and around Johannesburg, South Africa. Its raw potato spirit mixed with tobacco juice and pepper was well accepted. It also launched its brand 'Castle Lager,' which went on to become a huge success. In 1897, it became the first industrial company to be listed on the Johannesburg Stock Exchange (JSE). Despite the Anglo-Boer War,4 SAB's profits rose to 100,000 and assets exceeded 1 million in 1901. In 1910, it founded Rhodesian Breweries in Zimbabwe. Over the next few decades SAB consolidated its position despite the setbacks due to World War I and the depression that followed the war. In the early 1950s it established new breweries in Zambia and Bulawayo. In the same year, SAB's corporate office was shifted to London. Following the imposition of a heavy tax on beer products by the South African government in 1955, beer consumers started switching to spirits, which ultimately hurt the beer industry. SAB responded to the crisis by acquiring its two main rivals, Ohlsson's

and Chandlers Union Breweries groups in 1956. The acquisitions helped SAB in reducing costs and maintaining profitability. In the 1970s and 1980s, SAB established breweries in Botswana and Angola. Until 1990, SAB remained focused mainly on the South African market. Between 1990 and 1998, SAB expanded its international operations and became the fourth largest brewing group in the world with operations in 19 countries. By 1998, it commanded a 98 percent share of the South African beer market and was considered one of the lowest cost producers of beer in the world. In 1999, SAB moved its primary listing5 back to London, raising 300 million in international markets. It decided to develop and expand its international beer and other beverage operations and to invest in the rapidly-growing casino industry in South Africa. It also acquired controlling interest in Pilsner Urquell and Radegast, a leading brewery in the Czech Republic. SAB's biggest brands at the time included 'Pilsner Urquell', 'Castle Lager' and 'Ursus'. In 2002, it acquired MBC and created SABMiller. Miller Brewing Company MBC was founded in 1855 by Frederick Miller (Miller) in the US, when he purchased the small Plank-Road Brewery, an old brewery started by Frederick Charles Best and abandoned in 1854. The Plank-Road Brewery, now the Milwaukee Brewery, was several miles west of Milwaukee in the Menomonee Valley... Sabmiller's "Performance Culture" SABMiller was well known in industry circles for its performance-oriented culture. Its employees were perceived as being achievement-driven and having a high amount of optimism and passion for their brands and the company. SABMiller put great emphasis on the ability of its people to be in sync with the changing requirements of the market and to avoid complacency at all costs. Norman Adami, CEO and president of MBC, echoed this view, when he said, "The people of SABMiller are restless and never satisfied. Our organisation is characterised by a capacity to re-invent itself and to continuously change within the context of a tough and competitive environment. We are endowed with a healthy dose of self-criticism as well as self-belief."... Human Capital Proposition (HCP) SABMiller's unique HCP arose from its organizational philosophy that people seek accountability and want to influence outcomes that will shape the organization. The company believed that its employees "want to practice self-management in an empowering system that is diverse and unashamedly performance driven."

They pointed out that, though many companies talked about how their organizational culture and their people differentiated them from others, the claims were largely insincere in most of the cases.Though SABMiller followed a decentralized business model, with each country managing its operations as independent business units and recruiting and developing talent locally, the company worked toward maintaining a uniform organizational culture through its HCP. (Refer to Figure I for SABMiller's human capital proposition). All employees were held accountable to the corporate goals and strategy and great care was taken to ensure that people got the right job fit. Analysts felt that SABMiller had probably succeeded more than most other companies in 'walking the talk'. According to the SABMiller, its unique HCP had helped it attract talented individuals with diverse backgrounds. It aimed to be the employer of choice in each country in which it operated. (Refer to Exhibit III for SABMiller's employee value proposition). Performance Management (PM) SABMiller's performance culture was driven by its PM system. The culture was deliberately set to enable the company to achieve its business strategy. The PM system provided the framework for all management behavior. It was based on ten basic principles. The system had top-down goal setting and robust control systems that measured performance against targets. The system enabled people to deliver against actual as well as stretch goals. (Refer to Figure II for the ten principles of the PM system). Strategic People Resourcing (SPR) SABMiller attached a lot of importance to its human capital competitiveness and SPR. The main objective of its SPR was to manage people as a core factor of its business success. SPR was the primary force that drove the "People strategy" of its business and information about people was given the same importance as financial information... This would also create an environment for sustained growth at MBC in the longer term. The culture had been reshaped by restructuring MBC and bringing in new performance management processes, setting clearer goals, and better training and development of its people. Fred's Pub According to Adami, bringing about a change in culture involved engaging the hearts and minds of all the employees. It had to go beyond business and touch the employees on a personal level giving the employees a feeling that whatever they were doing makes a difference. One of the first things Adami did was to build a pub, 'Fred's Pub', named after the company's founder Miller, in MBC's Milwaukee headquarters. He was criticized for this move by some people in the company.

This "out of the box" move was undertaken in order to instill a sense of pride in the employees and also break down the hierarchical barriers. "We work for a brewing company. A Shortly after the acquisition of MBC in 2002, Graham Mackay, the CEO of SABMiller said, "Substantial work is being undertaken to enhance the performance culture within Miller in line with our practices." SABMiller pointed out that mobilizing and invigorating the organization and its people to instill a performance culture at MBC was one of the four components of the turnaround plan, the other three being - building brands and shaping the portfolio, getting sales and distribution right, and cutting costs and raising productivity. The company believed that creating an intense performance culture at MBC was critical to reversing the downward trend in Miller Lite's sales in the short term. We need to be proud of what we stand for, of what we do as a company. We need to be knowledgeable about what it is that we do," explained Adami, "We need to have a more open, engaging, challenging culture, and that's what we're working toward. I think people must not be afraid to talk up. People must feel confident enough to engage in debate and that makes them feel part of what's going on. It's also about enabling change. People talk about the fact that people resist change. They don't resist change. They resist being changed. Change is a constant. It's not a variable. It's really about how you enable change to happen, and it's got to be an environment to enable change."... Outlook Over the years SABMiller had focused on building its people's capability. For the future, the company wanted to decrease its high dependence on recruiting, developing, and exporting South African talent. The company said that its people strategy for the future would focus on embracing global talent, particularly people with top-line capabilities. The company hoped to leverage its global talent pool through SPR. There would also be a focus on developing its global talent pool with training and management development programs...