PG Procter and Gamble Co

Backlash to U.S.-style management offers a lesson in balancing German values, profit

By Ellen Emmerentze Jervell 

FRANKFURT -- Germany's Henkel AG, a manufacturer of industrial and household staples including detergent and glue, produces financial results anything but humdrum. Over the past eight years, its share price has more than tripled and net earnings have risen almost 60%.

Driving this surge, which surpassed that of rivals Procter & Gamble Co. and Unilever PLC, was Danish ex-Chief Executive Kasper Rorsted, who gave once-sleepy Henkel a jolt of American-style intensity and profit focus that he learned working at Compaq Computer Corp., the aggressive PC pioneer. In eight years as CEO he also expanded Henkel's U.S. footprint with acquisitions and by introducing its Persil laundry soap to America.

Some longstanding employees said they were unhappy with how Henkel's performance and Americanization affected the company culture and felt it gutted what they saw as a fostering environment. Many said they felt demoralized.

Mr. Rorsted is set to become the new chief executive of sportswear firm Adidas AG in October. Henkel's shares slumped when he announced his departure.

Now Henkel's new CEO, Belgium-born company veteran Hans Van Bylen, who took over in May and then last month signed a $3.6 billion deal to buy Sun Products Corp. of Wilton, Conn., faces the challenge of maintaining Mr. Rorsted's streak without pushing staff too hard.

"I took over a very successful company," he said, adding that success requires "highly engaged and motivated employees."

Henkel's makeover typifies forces at play across Europe's largest economy. German corporate culture, with layers of worker protection, has largely resisted globalization but now is succumbing. Culture clashes are "almost everywhere," said Oliver Hecker, district manager at German industrial union IG BCE.

"I would call it figures-focused American meets value-focused German," he said -- referring to a focus on employees and the community as much as shareholders. "In the long term, the question is, what this will do to the German economy?"

Former and current staff of Henkel spoke proudly of working for what many say had been a "typical German company." It offered predictable work hours, extensive training and champagne at Christmas parties.

"I guess it was somewhat leisurely," said Winfried Zander, head of Henkel's workers' council and a 40-year company veteran.

Henkel, founded in 1876, was "a comfortable place to work," said Harvard Business School Professor Robert Simons, who has studied the firm. "Most employees didn't see any reason to change."

Mr. Rorsted did. Large companies lumber because "they can afford to be slow," he said last fall. "Sometimes you need to remove resources to get the job done."

The first outsider and non-German to run Henkel, Mr. Rorsted became CEO in 2008 and soon set aggressive financial targets that one analyst labeled "wishful thinking."

To slash costs and hit targets, Mr. Rorsted moved German administrative jobs to lower-cost countries, closed plants, and shed 800 of Henkel's 1,000 brands. Between 2008 and 2015, the workforce fell roughly 10%, to 49,450 employees.

"When things began to change as fast as they did, it was quite the shock for many," said Mr. Zander.

Almost as unsettling to staff, Mr. Rorsted changed Henkel's official language to English and stopped attending the annual workers' council meeting, a break with tradition that irked many employees.

"The workforce certainly did not see that as a positive signal," said Mr. Zander. "We tried to say that this is important in Germany but he had a different perspective."

Others applauded the change.

"He clearly influenced and changed the Henkel culture," said Tina Müller, a former Henkel marketing manager. "He made it more professional."

He also changed the company's motto from 'A Brand Like a Friend,' to 'Excellence is our Passion,' because "you want to win," Mr. Rorsted said. "And being friendly is not winning."

Posters went up saying "Breaks Are Boring," and "Thank God, It's Monday." In 2008 he scrapped the Christmas party to cut costs.

Unable to push large-scale American-style layoffs under German labor law, Henkel offered early retirement and buyouts. Staff who left were often not replaced, said employees. Some who remained said they felt pressed to shift from highly structured collective-agreement contracts that defined work hours and responsibilities to more open contracts with less defined roles, presented as promotions with higher pay.

A Henkel spokesman denied that employees were pressed to shift contracts. "Some positions are not being replaced while we add new positions in other areas of our businesses," he said of staffing. "Surely, none of our employees was pressured to accept such a promotion."

Increased workloads and demands for speed forced many staff to work more hours than previously, workers said. Some complained of depression or burnout. Several people who took buyouts said they felt pressured to leave.

A current employee said human resources had begun referring to "head counts" rather than "people." "We're all scared of suddenly being insignificant and losing our jobs," he added.

The company spokesman said Henkel follows all labor rules and offers a range of working options but "the speed of change and innovation has increased for all companies globally" over recent years.

Mr. Van Bylen, the new CEO, said he hoped not to be judged in comparison to Mr. Rorsted. "We have to do the right things to capture future opportunities for our businesses," he said.

Mr. Van Bylen plans to attend the annual workers' council meeting, the company said.

Write to Ellen Emmerentze Jervell at ellen.jervell@wsj.com

(END) Dow Jones Newswires

July 28, 2016 02:48 ET (06:48 GMT)

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