Corporate Crunch

By Patrick Kiger

Apr. 13, 2005

In early 2001, then-Unilever co-chairman Antony Burgmans visited one of the global conglomerate’s recent acquisitions, Ben & Jerry’s Homemade Inc. in South Burlington, Vermont. To his puzzlement, the Dutch business leader found the ice cream company’s employees wearing togas.  “He wasn’t familiar with the movie ‘Animal House,’ ” notes Chrystie Heimert, Ben & Jerry’s “public e-lations” director. “Apparently, they didn’t wander the halls dressed like that at Unilever.”

    In keeping with tradition, Ben & Jerry’s employees weren’t about to let their new owner’s visit pre-empt an office costume party.

    Five years later, visiting executives from Unilever, a British- and Dutch-based global giant headquartered in London and Rotterdam with 230,000 employees in 100 countries, have learned to expect togas–or pajamas, or Mardi Gras beads–from Ben & Jerry’s 520 employees.

    “We couldn’t mess with that,” says Sharyn Kolstad, human resources director for Unilever’s North American ice cream operations, which also include the Good Humor, Breyers and Klondike brands.

    Ben and Jerry’s unconventional, anti-big-business values had, after all, emerged as the company’s biggest brand asset.

    How Unilever, whose products include food, home and personal care products, made a successful union with Ben & Jerry’s is a rare story in the highly charged world of mergers and acquisitions. Researchers Mitchell Lee Marks and Philip Mirvis have found that only about 15 percent of corporate mergers achieve their financial objectives, and about half result in culture clashes.

    When Unilever acquired Ben & Jerry’s in 2000 for $326 million, employees and loyal fans feared for the maker of Cherry Garcia and Peace Pops. But instead of melding into another faceless subsidiary–the fate of many acquired companies–Kolstad notes that this integration “has been different in every respect.”

    At Ben & Jerry’s, employees haven’t lost the company’s values of social consciousness and iconoclastic ways they worked so hard to build. Unilever valued not just Ben & Jerry’s share of the gourmet ice cream market, but also its eccentric ambiance.

    As a result, Unilever allowed its acquisition to retain its distinctive identity, while the Vermont company worked to improve its focus on the bottom line.

    So far it seems to be a success. At the time of the merger, Ben and Jerry’s had $237 million in sales and earnings of $3.4 million. Under Unilever ownership from 2001 to 2004, the company increased its global sales by 37 percent, tripled its operating margins and expanded into 13 new countries.

    Though there has been pain from consolidation and downsizing, much of what Kolstad calls “the magic” of Ben & Jerry’s corporate identity has been preserved.

Not the usual acquisition
    Amy Lyman, founder and president of the San Francisco-based Great Place to Work Institute, says that too often new owners eradicate the old corporate culture. She cites the example of Fel-Pro, an automobile gasket maker in Skokie, Illinois, that once won national awards for its family-friendly workplace.

    The company was acquired in 1998 by Federal Mogul, a Southfield, Michigan, auto parts conglomerate, which soon cut out many of the benefits of the acquired company–from its daycare center to the $1,000 savings bonds and baby shoes once given to employees’ children.

    “Employees think, ‘We had some great things here. Why aren’t they looking at them?’ ” she says. “It’s as if everything they’ve accomplished is diminished.”

    M&A study author Mirvis, a psychologist and associate at Boston College’s Center for Corporate Responsibility, says: “Usually, you have the big company saying to the small one, ‘You can pretty much continue to run your own shop–except that we’re cutting your costs, reviewing your marketing plan and approving personnel decisions.’ That sucks the life out of an organization.”

    But Ben & Jerry’s largely has escaped that fate, says Mirvis, a consultant for the Vermont company in the 1980s and more recently for Unilever’s Asian food business. “It may not be quite the off-the-wall organization it once was, but it’s still light-years away from the typical business.”

    It’s hard to imagine a company less suited for integration. Founded in 1978 by Ben Cohen and Jerry Greenfield, who took a correspondence course on ice cream making and set up shop in an old gas station, Ben & Jerry’s became known for both its high-calorie confections and its unabashed left-leaning activism.

    The company donated 7.5 percent of its pretax revenue to various causes, used environmentally friendly unbleached cardboard in its pint containers, paid extra money to small family dairy farms to help keep them solvent and worked to create jobs in low-income areas.

In many mergers, “employees think, ‘We had some great things here. Why aren’t they looking at them?’ It’s as if everything they’ve accomplished is diminished.”
–Amy Lyman, founder and president, Great Place to Work Institute

    “The Ben & Jerry’s culture was one of the great strengths of the business,” says Fred “Chico” Lager, who was CEO from 1988-91 and was on the board of directors until 1996. “We took a lot of pride in the alternative way we did things, and that’s what enabled us to compete with larger organizations that had more resources.”

    Ben & Jerry’s won’t reveal its voluntary turnover rate, but human resources director Susan Williams says it’s significantly lower than U.S. workers’ average of about 15 percent.

    Employees don’t just fall in love with Vermont’s small-town folksiness. At most companies, engagement is closely tied to a person’s own job satisfaction, Mirvis says. At Ben & Jerry’s, in contrast, surveys have shown that the degree of passion for the company’s social mission was most important.

    Williams says the company’s workers also value a workplace culture that flouts corporate conventions–an environment in which policies often grow out of what employees already are doing.

    “We had a nap room for years, but the idea just sort of faded away for a while,” Williams says. “Then one day somebody said, ‘Remember when we used to have a nap room?’ One of the employees set it up again in a conference room.”

    But Ben & Jerry’s also struggled with a lack of structure. In a 1994 internal survey, for example, only 29 percent of employees felt that the business ran smoothly, and just half said their supervisors were good at planning and gave them adequate feedback.

    “Ben & Jerry’s was on a trajectory toward becoming more organized, with more analysis and less inspiration,” Mirvis says. “The merger only added to that.”

Complementary flavors
    When co-founder Cohen told The Wall Street Journal in 2000 that “quirky brands don’t usually do well as part of large conglomerates,” he probably echoed the fears of many in the company. But Unilever’s offer was too lucrative for shareholders to turn down. Fortunately for Ben & Jerry’s, Unilever–which is the world’s biggest ice cream maker–isn’t the most conventional outfit, either.

    Formed from a 1930 merger between British and Dutch companies, until recently it maintained dual chairmen in both countries. Unilever didn’t want to change Ben & Jerry’s culture radically.

    “I think everyone realized from Day One that we were not buying a typical business,” Kolstad says. “If we wanted the brand to continue to grow and be vibrant, we’d have to maintain the culture that made them what they are.”

    To show its support for Ben & Jerry’s social mission, Unilever committed at least $1.1 million a year to charitable causes selected by the employees. It also made a $5 million one-time grant to the Ben & Jerry’s Foundation, a separate entity that continues to fund causes such as nonviolence training for protest groups.

    Unilever aroused some anxiety in November 2000 when it appointed Yves Couette, a veteran Unilever executive who previously had been posted in Mexico and India, as the new CEO. (Cohen publicly supported another candidate, longtime company director Pierre Ferrari.)

    But it was six months before Couette reported for work, and that gave employees time to prepare. When he arrived in January 2001, the workforce was ready for him, Williams says. They greeted the French native in berets and dark glasses and played Edith Piaf songs on the public-address system.

    In the company cafeteria, they built a replica of the Eiffel Tower from pint packages of Ben & Jerry’s ice cream. Behind the frivolity, there was an implicit message.

    “The challenge for us in the merger was to keep being who we were,” Williams says. “So we had to turn up the volume, to let them experience us.”

    That sentiment also came across when Couette sent Ben & Jerry’s employees off to a daylong meeting at a local hotel, where they went through the standard Unilever exercise of creating a “brand key.” The goal was to identify the essence of the company brand and how marketing should flow from it. Ben & Jerry’s workforce returned from an off-site meeting and presented Couette with a brand key called “Joy for the Belly and Soul,” illustrated by a diagram in the shape of an ice cream cone.

    “We were Ben & Jerry-izing their process,” Heimert says. “And to add to it, when Yves would walk around the office everybody would have the ice cream cone posted on their wall. At other companies, they probably put it in a drawer. That drove home how passionate everyone is here.”

    Couette said in 2002 that when he first heard about the deal with Ben & Jerry’s, “My first reaction was, they are out of their minds.”

    But he had no intention of fixing what wasn’t broken. He quickly established rapport with the workforce, coming to the office in casual attire and volunteering to mix the mulch at a company-sponsored project to build a local playground.

“It may not be quite off-the-wall organization it once was, but it’s still light-years away from the typical business.”
–Philip Mirvis, psychologist and associate at Boston College’s Center for Corporate Responsibility

    Pretty soon he was even emulating Cohen’s anti-corporate rhetoric, envisioning Ben and Jerry’s as “a grain of sand in the eye of Unilever.” Instead of trying to change Ben & Jerry’s organizational style and processes, Williams says, Unilever simply provided clearer structure. The CEO organized leaders of marketing, finance, human resources and public relations into a committee that mimicked the old informal hallway meetings.

    The company whimsically held a contest to come up with the committee’s tongue-in-cheek name–Managers of Mission, or “Mom,” as everyone now calls it.

    Unilever also allowed Ben & Jerry’s to pick which parts of the parent company’s human resources policies it wanted to adopt, Kolstad says. When Ben & Jerry’s did implement a Unilever program, it was free to modify it. In the case of Unilever’s standard global development evaluation for employees, for example, Ben & Jerry’s shortened the document and added the company’s social mission as one of the performance goals.

    “Unilever had a good process, but we needed to make it ours,” Williams says.

Improving the bottom line
    When Couette arrived, Heimert says that “100 people wanted to know if Unilever would maintain Ben & Jerry’s social activism. Another 50 asked about maintaining the product quality. I don’t think anybody asked about the third leg of the stool, which is making money.”

    Obviously, that had to change, but Unilever used persuasion rather than coercion. The new CEO argued that the best way to spread Ben & Jerry’s enlightened ethic throughout the business world was to make the company successful.

    Changing mind-sets wasn’t easy. The workforce, though skilled at making quality ice cream and creative at marketing it, wasn’t up to speed on boring stuff such as corporate finance. When the Burlington Free Press once noted that nobody below CEO level knew how much profit the company made on a pint of ice cream, it was taking a bit of poetic license, but not that much.

    Williams decided to give employees a remedial course in financial fundamentals. To make it fun, she hired a consultant who taught accounting and finance to employees by having them operate a lemonade stand.

    But unlike other bottom-line-conscious companies, Unilever didn’t require Ben & Jerry’s to quantify the dollars-and-cents impact of its human resources policies. Instead, Williams says, once management decides a program is needed, the only charge is to deliver it within budget.

    “I can’t say that because everyone took the lemonade-stand training we’re showing a 2 percent improvement on our profits,” Williams says. “But I don’t need to. We measure return by whether or not the company achieves its overall goals.”

    Ben & Jerry’s transition to Unilever hasn’t been pain-free, Williams says. In October 2002, the company eliminated 52 jobs, mostly at headquarters, as Unilever’s North American ice cream division consolidated some support operations. The company also announced that it would close two facilities and shift operations to a third plant that was being expanded, with a net loss of 69 jobs.

    But Unilever gave Ben & Jerry’s considerable leeway to soften the blow. The manufacturing workers, for example, were given a year’s notice and offered positions at other locations. The company sold one of its plants to another ice cream maker, which hired some employees who hadn’t wanted to move.

Learning from each other
    In late 2004, Couette returned to Unilever, where he now heads the beverage division in Rotterdam. His replacement as “chief euphoria officer,” Walt Freese, so far has made no major changes. (Freese joined Ben & Jerry’s in 2001 and was chief marketing officer from 2001-2004.)

    While Ben & Jerry’s did go through downsizing, its integration with its corporate parent also has created opportunities.

    Jobs at Ben & Jerry’s are now posted throughout the Unilever corporate empire. That gives the Vermont company access to a larger global pool of talent than it ever had as an independent. Ben & Jerry’s staffers can find out about career opportunities at other Unilever companies–though few seem to want to move.

    Meanwhile, the two companies are continuing to learn about each other.

    “I went to a corporate communications meeting in Paris, and they were surprised when I wasn’t wearing a tie-dyed T-shirt and Birkenstocks,” Heimert says. “Of course, when we go out, we dress a little more conventionally than when we’re at the office.”

    And the togas are left behind.

Workforce Management, April 2005, pp. 32-38Subscribe Now!

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