It was 2015 when the acquisitive Brazilian investment giant, 3G Capital, took over Kraft Foods and merged it with HJ Heinz, the catsup maker, which it already owned. In this deal, Warren Buffet provided much of the cash, knowing full well that there were profits to be made, given the strong reputation of 3G Capital of being world-class when it comes to cost-cutting.
Kraft Foods, producers of famous consumer products such as Oscar Meyer, had been struggling for years in the very competitive food products industry, saddled with old manufacturing facilities and excess personnel. Clearly, the company was fat and happy making mediocre profits but disappointing Wall Street regularly because of its bloated structure which prevented anything spectacular from happening from a profit perspective.
3G immediately went to work and within a little over 2 years Kraft Heinz was operating at the highest profit margin versus its peers in the U.S. food industry. One example that enabled them to achieve these results was the complete overhaul of the ancient Oscar Meyer food processing plant, eliminating 500 jobs while increasing the output of the facility by 17%.
What 3G Capital has exploited very successfully over recent years is the fact that most organizations get fat and bureaucratic over time, due to three basic human tendencies that all courageous leaders need to guard against:
1.) Managers Consistently Ask for More People, Regardless of Their Situation – In general, no matter whether an organization is thriving or struggling, the manager of that group seems to always come up with an argument for why they need more people. When asked to take on a particular task or expand the capabilities of their organization, rarely do they pass up the opportunity to ask for more people in order to do this, claiming there is no way they can cut anything they are currently doing to take on the task, and there is no way they can squeeze extra work into their existing staff.
2.) Managers Are Always Arguing that Their Work/Projects are a Key Priority – Their creativity in finding ways to defend their projects is limitless. They will endlessly fight off any suggestion that some of their projects are less important than others and should be eliminated or reduced in size.
3.) Managers Form Fiefdoms and Duplicate Existing Corporate Services & Systems – Most managers want total independence. They want to have their own systems group, duplicating the efforts of any corporate system resources. They believe they need their own financial and HR resources, thus duplicating the corporate finance/HR resources. You get the idea!
Stepping back, the strong leader will recognize the fact that all humans are wired with these tendencies; yes, that includes you and me! Leaders need to rise above these tendencies and lead!
