Diageo Case Study Building Global HR Capability

1. Diageo Case StudyBuilding Global HR Capability John Archer Jamie Claar Moses Clocuh Shun Okabe Dimitra Patrikarakou Anthony Turner Mario Paez Villarreal

2. Introduction – Diageo History • Diageo is one of the leading consumer goods industries • United Distillers • Guinness • Vintners • Pillsbury • Burger King • In 2001 the strategic focus changed from being a consumer goods to a sole premium drinks business, deposing of Pillsbury and Burger King by 2002. • Diageo differentiates between the following brands • Global Priority • Local Priority • Category management brands • Need for development of global HRM processes that meets the needs of being locally responsive

3. Introduction – Diageo History Source Diageo Web Site

4. The Diageo HR Challenge • Diageo’s aim is to move its HR function away from central control while maintaining a global policy and HR culture while allowing local divisions to be responsive to local market needs. • How could some of the core HRM practices such as capability development, rewards and recognition be managed in an integrated fashion across the entire group? • How could the effective dissemination of knowledge be achieve across differentiated markets • How could successful learning process between the different markets be maintained • How could the effective transfer of people between different markets categories be assured

5. Applied to the Schuler Framework • Exogenous • Factors • 20 Major Players • Based in regional • Centres • MNE Concerns • and Goals • Cost • Efficiency • Local Responsiveness • Flexibility • Learning and transfer Functions Orientation Resources Location Issues Need to maintain Local responsiveness And global integration How do the operations Fit within the strategic Objectives • Strategic MNE • Components • Major Markets • Key Markets • Venture Markets Policies Staffing Flexibility Compensating Developing • Endogenous • Factors • Structure • HQ • Strategy • Experience

6. Value- based market differentiation – Exogenous Factors • Major markets • - Biggest contribution to operating profits • e.g. USA, Great Britain, Ireland, Spain • Star performers – Guinness, Johnnie Walker • Venture markets • Combination of small sales and marketing companies with • distribution • Collectively significant part of the business • Flexible organisation utilised to respond to market demands • Key Markets • Strong presence, but contribution to overall profits limited • e.g. Taiwan, Korea, Japan

7. United Kingdom Global Priority brands Local priority brands Category management brands Matrix chart – Strategic MNE Components

8. Endogenous Factors • The HR structure was hierarchical, with everything done from the center and on a cost basis for four different business. In the new model it was consider that they had strategic alignment immediately. • The centralized system had come at the cost of a reduction and possibly loss of skills at the local management level. • Initial strategy was growth and increase market share • There was the need to re-strategise, Diageo decided to: • consolidate operations in beverage alcohol • acquire leading brands • grow brands to maximise shareholder value • HR considered vital and as a leading edge. An important decision taken to change the structure of HR to align with strategic plan. • Policy facilitated by Diageo`s experience in managing international operations

9. SIHRM Issues • The key issue was a shift from a hierarchical structure along business lines to a market segmentation. • Major markets • Key markets • Venture market • Inter-unit links • Decentralisation of HR into market differentiation and centralisation of some HR task within the market segments and at HQ. • Maintain global integration whilst promoting local responsiveness • HR net work supported by technology – telephone, video conferencing, internet • Internal operations • Each segment led by local champions –The Group People Director • Local champions to fit company strategy into their local market by disseminating it from the global HR networks.

10. Diageo HRM Functions & Policy Global Process: The People Development Phase • “The Diageo Way of Building Talent” - Specified the behaviours that committed Diageo to “winning through people” • People Performance Management - Designed to support the creation of common systems and processes across the initial 4 merged businesses - Six Organisational and five leadership capabilities • Central process development - focus shifted towards establishing global networks as there was no longer a need to integrate the 4 very diverse businesses - Management Perspective shifted - Priority to seek out best HR practices around the world and then design global processes around them

11. Diageo HRM Functions & Policy • Capability development programmes • More decentralised model-taking place – no longer run by the corporate center • Position the entire people agenda around the “drumbeat” of performance • Pressing functional HR issues that needed to be looked at with a global perspective • Attempted to make Major Markets self-sufficient • Expected to have sufficient resources of their own – delivery and implementation of processes and practices • Ideal situation yet some managers did not have some of the knowledge and expertise needed • PPM –“Calibrating” employees - In an effort to eliminate any competency gaps - Carried out via a global HR network –towards more global co-ordination

12. Diageo HRM Functions & Policy Resourcing and Talent Management • Employee Value Proposition (Globally Driven) - Tapped into marketing for “employer branding” • What message do we want to send out to potential employees? • Important for the message to make sense in all of Diageo’s markets • Mobilised and leveraged global career website • Linked into company website where positions are advertised worldwide internally • Enabled more consistent communication with Recruiters - Recruitment Policy – Operational integration • Consistency important - Instead of concentrating on cost they now concentrate on deliverables • Global HR set the standard requirements yet markets had some autonomy - Reward and Recognition Policy • Managing Paradoxes – How to differentiate between markets • Business strategy conflicted with desire to move employees across markets

13. Diageo – The Way Forward • Organisation and People Strategy • The aim is to release the potential of every employee • Recognition and Reward • Talent Management (Personnel Development) • Organisational Effectiveness • Project Perfect Serve • A model to accelerate the deployment of the O&P Strategy, • To provide improved levels of service, • At a lower cost with faster implementation • Global • Policy is developed centrally and deployed to the whole organisation • Business Support • Local HR resources execute global policy • Service Delivery • Services are pooled, eliminating expensive duplication.

14. Did Diageo Policy Meet the requirements of SIHRM • Inter unit Linkages • A key objective is balance the needs for co-ordination and control. • Largely met with network HR system model where best practices were identified and policy driven back into operating divisions through HR champions with full political backing from HQ, enabling the company to be flexible and promote learning in the organisation. • Project perfect serve enables learning from multiple Diageo companies and markets. coordinating centrally and then driving it throughout the Diageo Global Network, maintaining a global HR policy consistency, but allowing flexibility where it is required, such as in recruitment. • SIHRM Policies and Practices • Must be relevant to the strategic needs of the company with relation to recruitment of quality people, rewarding performance, and providing a framework for staff development. • The incremental policy development finally being put together into the O&P strategy addressed all the issues and practices needed for a successful SIHRM policy.

15. Q&A