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Heinz CEO Defines Leadership Amidst Turnaround

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The one experience David Moran recommends for all MBA graduates is establishing the skill set for a turnaround at a corporate giant. “There’s simply nothing more satisfying,” said Moran, president and chief executive officer of Heinz North America, a key architect of the company’s dramatic turnaround during the past decade, an accomplishment of which he is unabashedly proud: “If my enthusiasm sort of shines through, I won’t apologize for that.”

Moran spoke as part of the W.L. Mellon Speaker Series, a program providing students the opportunity to discuss strategy, global business issues and personal leadership styles with CEOs and leading business executives.

When Moran joined H.J. Heinz in 1998, the company’s top brands, including Ore-Ida and flagship product Heinz ketchup, were declining. “The company at that time did not have a culture that the best and brightest would gravitate to,” Moran said.

Part of that decline stemmed from a shell-shocked grocery industry that struggled to cope with the competition of Wal-Mart, which had decided to aggressively promote its growth in the food business. As volume and traffic fell, supermarkets opted to push their own store brands and sell name brands at a higher price. Heinz increased its discounts to retailers, and got caught in what Moran termed an “inefficiency loop.”

Although changing that strategy was essential to the company’s turnaround, Moran said of equal importance was consistency of purpose among all of Heinz’s thousands of employees.

“Getting everyone moving in the same way: That’s leadership,” Moran said. “The difference between the best and not-the-best is leadership.”

Likewise, he believes in giving autonomy to the company’s brand managers, treating them as CEOs of their particular products. Major decisions about products are made in his office, with the input of all senior advisers; so while brand managers are empowered, the senior management shares responsibility for ideas that both succeed or fizzle.

“We’re a team, and we don’t let teammates fail,” Moran said.

When he arrived, Moran had his work cut out for him. Heinz North America represents 50 percent of the company’s business and encompasses U.S. Consumer Products, U.S. Foodservice and Heinz Canada.

Yet with all that business at stake, the company often relied on observations within its product portfolio, an approach Moran has worked to change by instead emphasizing hard data and market research.

“We called it ‘the golden tongue’: ‘Well, I like the taste of that,’” recalled Moran. “Well good, but 699 other people in focus groups felt the other way. We’re going with the 699!”

Today, Heinz benchmarks its products’ SKUs against the top or second-best selling SKUs in the market, then adjusts quality and flavor until the gap narrows.

“Most diagnostics are done through marketing,” he said. Moran added that while the company currently spends about four percent of its revenue on marketing, he’d like to invest more; by comparison, many companies spend six percent, he said.

Heinz is also following current trends in building consumer convenience, lowering salt intake, and fighting obesity as it works on its products. The next step will be setting trends, which Moran considers the next frontier in the company’s evolution.

He credits the Tepper School with helping the company’s turnaround in part through work done in the B-school's Executive Education program with Robert Dammon, Professor of Financial Economics. In addition, between 16 and 20 Tepper School graduates have been hired by the food company in recent years.

“Carnegie Mellon helped to showed us the way. It’s really about economic profit,” Moran said. “It was about better people doing higher-value work in an aligned structure.”

He noted that on his way into the lecture hall, he met Professor Dammon in the hallway, who said in passing, “Your company is undervalued.” The observation was a point of pride for Moran, who says Dammon gave him the opposite opinion when the Heinz executive first came to the Tepper School.

During his presentation, Moran emphasized the need to build leadership skills, whether natural or acquired, because “companies are hungry for real vision.”

When asked by a student if he has a litmus test for the feasibility of new ideas, Moran answered, “Do big things to big areas. A big idea in Chili Sauce [by contrast]... I wouldn’t even know it when it hit.”
 

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