• by Jack Loechner , Staff Writer @mp_research, April 11, 2018

According to a resent study by McKinsey, reported by Rebecca Johnson, Lauren Ratner, and Kristi Weaver, the pace of change has quickened in the consumer-packaged-goods (CPG) sector, with Consumer preferences and behaviors evolving at an ever-faster rate. E-commerce is producing new channels, nimble competitors are emerging each year, and disruptors such as Amazon are growing. Continuous and increasing change is the new normal.  

Leaders of CPG companies have started to think anew about elements of their businesses, including organizational implications. This shaped the focus of a 2017 research survey conducted by McKinsey’s Consumer Packaged Goods Group,in partnership with the Grocery Manufacturers Association (GMA). The research sought to understand current and emerging best practices for high-performing organizations, focusing on three priorities:

• Become a more agile organization. How agile the CPG companies are today, and what the importance is of agility, what are the key tactics agile companies employ, where have CPG companies made progress, and where there is room for improvement.
• Evolving the roles and skills of top teams. The changing profiles of top-team (C-suite) leaders, what new skills are needed, and how the high-performing companies ensure top teams have those skills.
• Attracting and retaining millennials. The recruiting and retention challenges, and CPG companies rethinking talent management to meet them.

Most CPG companies have made progress in identifying and adopting proven practices in each of these three areas, says the report, but more work needs to be done. As progress is dynamic, not static, companies need to step up to next-tier tactics to stay competitive. 73% percent of respondents said that increasing organizational agility was a top three priority. They want to enable faster and smarter decision making at every level of their business, says the report.

As change in the sector continues to speed up, CPG leaders have concluded that traditional organizational models are a liability, says the report. The slow flow of information in a hierarchy impedes responsiveness, change renders budgets outdated sometimes even before they are completed, and front lines can’t adequately source market signals or act on them quickly enough.

Agile companies embrace changes to structure, process, people, and strategy, according to McKinsey research. Respondents to the survey said CPG companies have made some progress toward agility along each of these dimensions, but more important, the CPG industry still has a way to go.

40% of the surveyed CPG companies have in place well-developed programs to delayer decision making, and another 47% have moderately developed programs in place. CPG companies are standardizing processes for further clarity and autonomy, establishing standard operating procedures for key processes, tying role definitions for managers and employees to the company’s strategies, and dynamically reallocating resources (talent and capital) to high-priority projects on a regular basis.

It is useful for CPG leaders to view the changes they need to make as essentially falling into three themes. A thematic filter allows leaders to more clearly focus actions and achieve results quickly:

• Agile structure. Consider the change agenda as one of moving from organizing as a hierarchy, with rigid systems, talent defined by roles, and internal functions operating as silos, to organizing with organic structures that allow teams to collaborate quickly and effectively around tasks and projects and on core value-added work. These teams would rely on support from a stable core backbone of traditional functions, such as finance and HR, and internal “center of excellence” services.
• Agile working principles. Moving from a hierarchy to more fluid structures will require different working principles to maximize the productivity of teams. Agile working principles include team accountability, a focus on self-organizing and a shared (and urgent) sense of ownership, colocation and constant communication, a relentless focus on prioritization and scope definition, and rapid prototyping.
• Agile leadership mind-sets and behaviors. The way leaders lead in agile organizations changes. They might directly review the work of teams rather than get presentations filtered by layers of management. Agile leaders also could motive the speed of learning over performance, and they should ask teams to “swarm” high priorities rather than multitask across a number of initiatives.

Importantly, Millennials will become the dominant group in the US workforce in just a few years. While there has been a great deal of discussion about the values, expectations, and technology habits of millennials, or about their sense of the nature of work, something else about this generation is of particular concern to HR executives in CPG companies. That is, talented millennials are difficult for companies to retain.

Attracting millennial talent within the CPG sector is a challenge, says the report. 50% of survey respondents said that while their companies were successful at attracting millennials, they could still be more effective. Another 43% of respondents said they struggle to attract talent from this generation. The biggest hurdle to attracting millennials to the CPG sector, respondents said, is meeting the high bar for work–life balance, nearly as important to millennials are the comparisons in pay and role designations, and the brand reputation of the employer within social media.

However, millennials turn over quickly. The top three reasons, according to survey respondents, are ambitions for fast advancement (79% of respondents), having stretch opportunities and a variety of roles (71%), and flexible work arrangements and autonomy (64%).

Strategies developed to secure, and get the most from, talent in previous generations fall short of what CPG companies need to succeed today and tomorrow. New talent strategies for a new era are required, concludes the report.

For the full study, please visit here.