The company

The South African Breweries, plc (SAB) is listed in London as a FTSE 100 organization with beer, beverage, hotel, and gaming interests that span 21 countries across Africa, Asia and Europe. The Group also exports products to 45 countries internationally and is currently engaged in extensive expansion of its global beer interests. SAB ranks within the top four brewing companies in the world, together with Anheuser-Busch, Heineken, and the Miller Brewing Company. SAB's latest acquisition of the Pilsener-Urquell and Radegist breweries in the Czech Republic arguably places its volume in excess of 50m hectolitres. The total beverage volumes including carbonated soft drinks, however, amount to approximately 80m hectolitres (which translates into approximately 18 billion drinks served per annum). This case study focuses on the SAB, Ltd. operation in South Africa, which is the largest single country operation, and the original basis from which the international interests have grown.

The unique competitive capability of SAB in South Africa has translated into an organization whose practices benchmark favourably with the top five brewing companies in the world in all areas of the value chain - from manufacturing, sales, and distribution, to support services such as finance, systems, human resources, procurement, and marketing.

With regard to the current share of the market, SAB holds 98 per cent of the beer market and 57 per cent of total alcohol consumed in South Africa. The key focus of the organization is to increase its share of throat, which translates into increased share of alcohol and beverages consumed. The competitive capability of the organization has translated into approximately 70 per cent of total margin of alcohol consumed and 80 per cent of market capitalization value of the South Africa liquor industry. This is the result of decades of sustained improvement in productivity and economic value added.

SAB, Ltd. manufactures and distributes 14 brands in South Africa from seven breweries and eight regions. Some of the key environmental factors that impact upon SAB, Ltd. are shown in Table 1 below:

Table 1: Key environmental factors

The high profile and subsequent impact of SAB on the South African economy makes it essential that environmental factors are dealt with in an extremely professional manner. This requires collaboration with key stakeholders, including other businesses, Government, communities, labour, etc. SAB's impact on South Africa can be seen in the following ways:

• •In terms of excise and company taxation, SAB is the largest single contributor to the fiscus, exceeding the contribution of the mining industry as a whole.
• •Conservatively, the up- and downstream impact of SAB's operations translates into the creation of approximately 400,000 jobs, the majority of these being in Black-owned retail and on-premise outlets, known as "shebeens" and "taverns".

In summary, human capital competitiveness for SAB is based on superordinate goals/driving forces that include the following:

• •achieve and maintain internationally benchmarked levels of competitive performance and productivity across all functions and levels of employment;
• •establish a qualified, educated and flexible workforce that is capable of managing all requirements of changing competitive and technological challenges;
• •ensure optimum efficiency and effectiveness of teams and individuals across the value chain;
• •nurture and develop depth of knowledge and skills in core competencies that drive South Africa's business and industry;
• •optimize multi-skilling and appropriate functional expertise;
• •maintain a reputation of the preferred employer in the markets, enabling the country's capacity to attract and develop, reward and retain the best people;
• •eliminate menial tasks and jobs from SAB (i.e. develop whole jobs and reduce reliance on unskilled labour);
• •outsource non-core activities and categories of employment;
• •optimally reflect the demographics of South African society and utilize diversity as a positive business strategy;
• •value people as a core element of South Africa's success and competitive capability.

In line with the above drivers, the key components of SAB's Human Resources Strategy are:

• •the strategic people review process;
• •the people balance sheet;
• •strategic recruitment;
• •Equity 3;
• •competency acquisition process - training and development;
• •career and succession planning;
• •performance management;
• •information systems;
• •fair policies, procedures and practices;
• •organizational culture;
• •support to international operations.

SAB's pathway to competitiveness

The McKinsey 7-S tool is useful in summarizing key workplace changes within SAB over the last ten-year period. It facilitates the emphasis on systemic linkage for sustainable change. Change processes have therefore been clustered under the headings of:

Shared values

Strategy

Styles

Structures

Staff

Skills

Systems.

Shared values

Following a review of SAB's strategy development and implementation processes in 1990, the company introduced the Integrated Management Process (IMP). The implementation of the IMP was initiated with an exceptionally inclusive process of value sharing, during which approximately 6,000 employees from all organizational levels participated in facilitated workshops. These workshops encouraged open discussion about the history of South Africa, the damaging effects of apartheid, and the important role of shared values in creating a sense of community. The result was the definition and publication of ten values, underpinned by desired behaviours:

Strategy (development and translation)

The IMP consists of three sub-processes: business planning, communication and performance management. The objectives of the IMP are to:

• •effect better strategy translation via a process of cascading goals;
• •ensure an objective process of performance management for teams and individuals;
• •drive appropriate levels of participation and interdependence in the organization.

A brief summary of work done within each of the three sub-processes is described below:

Business planning

The SAB strategic picture is aligned to a clear vision and mission statement:

The challenge represented by the vision is to be in the top five brewers in the world by any measure. SAB's key objective is to be a globally competitive and growth-oriented business. Three strategic themes support this objective:

• •people;
• •growth;
• •reputation (image).

These are diagrammatically represented in Diagram 1 below (and referred to as "the Business Idea"):

Diagram 1: The Business Idea

The Business Idea highlights the key focus areas for future business success and facilitates an understanding of how SAB can systematically enhance its competitiveness in the eyes of its customers, consumers and other key stakeholders. The process is shown as self-reinforcing and self-generative and illustrates that it is the subtle and powerful combination of elements that lead to the success of SAB, rather than any one element on its own. The process of achieving success is the result of systemic change. For this success to be sustainable, it is founded on key success factors in which the company invests, i.e. growth, people and corporate reputation (image). These themes have been anchored through a simple strategic picture, consisting of four core (primary chain) strategies, supported by five support strategies:

Diagram 2: Core and support strategies

Communication

The focus of this "leg" is two-fold:

• •Ensure effective top-down communication to the business about the "big picture", i.e. strategy, progress against strategy, global acquisitions, etc.
• •Ensure effective bottom-up communication about delivery against strategically aligned goals, concerns, suggestions, etc.

The team-based nature of the organization greatly facilitates this communication process (essentially a four-tier team structure in each region). A vast number of communication tools are used, e.g. newsletters, newsflashes, regional visits by directors, feedback sessions, and normal team meetings across the regional team tiers.

Performance management

This is the process of translating strategy into team and individual goals across all levels. These goals are informally reviewed in monthly one-to-one meetings between managers and direct reports, as well as in team meetings. Bi-annual formal performance reviews take place for individuals and teams. For the IMP to be an effective culture driver, it is important to stress the spirit of performance management (i.e. it is not a paper-driven mechanistic process). The "4 As" assisted in this regard, i.e. if done right, performance management should result in:

• •agreement (on goals, on customer requirements);
• •alignment (at all levels and functions in the organization);
• •accountability (clear team and individual goals); and
• •adjustment (quick cascading response within a fast-changing environment).

Styles

Management and self-management

As part of performance management, a set of desired management and self-management practices were introduced:

Table 2: Desired management and self-management practices

These practices have been incorporated into individual goals to ensure compliance through regular one-to-one meetings and performance reviews. Upward feedback is an integral part of the performance review process for managers at all levels.

In addition, an IMP survey was developed to obtain feedback from employees on the application of IMP in their areas. These surveys were conducted on an annual basis from 1993 to 1998 (see the new Organizational Effectiveness Survey in section "Systems"). Effective communication of survey feedback resulted in regional IMP renewal plans, which again were aligned with team and individual goals.

Industrial relations (IR)

SAB and the Food and Allied Workers' Union (FAWU) have committed tremendous time and resources to build strong relationships. Following the communication of the Manufacturing Strategy in 1992-93, the parties undertook a joint World Class Manufacturing (WCM) study tour, which included visits to Volkswagen in Germany, Miller Trenton in the United States, the Coke Wakefield plant in the United Kingdom, etc. This assisted greatly in creating a common picture of the future.

A joint manufacturing task force then carried out an analysis on the impact of WCM on the organization. The task force functioned within the assumption that WCM itself is not negotiable, but that the manner of implementation is negotiable. The team explored the implications of greater workforce flexibility, the need for higher skill levels, the impact of multi-skilling on manning levels, etc. Following this work, a joint visit to the ILO in Geneva took place to prepare for the establishment of a structure called Project Noah. Noah would essentially provide a support structure for SAB retrenchees (see section "Staff").

Structures

Over the last nine-year period, structures have been aligned with strategies through a variety of interventions. The following is a commentary on some of the key interventions, in chronological sequence.

Best Operating Practice (BOP1) and team-based structures in manufacturing (1992-93)

The first phase of implementation towards World Class Manufacturing (referred to as BOP1) focused on:

• •shop-floor work design via the identification of best operating practices;
• •development and entrenchment of problem-solving skills and practices;
• •establishment of work teams into a team-based organization;
• •introduction of new performance measures;
• •implementation of a Production Support System (PSS) to support shop-floor problem solving;
• •minimizing the "hidden factory" by aligning suppliers' production programmes. (This eliminated raw material stocks through direct deliveries to breweries, and information technology was applied to streamline administration.)

Team-based structures were implemented in all production regions during 1993 and can be summarized as follows:

• •a four-tier team structure across the primary chain; these are cross-functional teams (initially, the formal reporting lines to "functional homes" were maintained; this was later replaced through formal functional integration of support departments, e.g. HR, engineering and quality control);
• •clear problem-solving accountabilities identified at strategic, systemic and situational levels, with the theme being "accountability at source";
• •well-trained team members (training focused on technical skills, problem solving, team goal setting and reviews, waste management, and other aspects of WCM) ; and
• •ongoing focus on sound and mature team dynamics (no functional silos).

Table 3 below shows the four-tier team structure. Between the levels, there are strong team interfaces with good gap management systems.

Table 3: Four-tier team structure

At the time, the Level 1 structure was manned with all the skills required to ensure accountability at source:

• •shift supervisor (leading the shift-based multidisciplinary team);
• •machine operators (multi-skilled for flexibility, but dedicated to one machine), who reported to the supervisor;
• •shift artisans, who reported to the supervisor;
• •quality control technicians, who reported to the supervisor.

Functional integration of HR (1993)

The objective of the team structure was to create a closer alignment between HR and the primary value chain, to ensure value-adding HR roles. At that point, the regional HR structures were fairly traditional (the HR manager heads up the department, with direct reports being the personnel manager, the IR manager, and the training and development manager; functional subordinates reported into these positions). In the integrated structure, all of these roles were drastically changed and repositioned:

• •A regional HR consultant (HRC) reports to the general manager, as a member of the executive (Level 4) team, with no direct reports. This role is accountable for an aligned, value-adding HR function within the region - focusing on strategy translation, whilst being the custodian of HR functional excellence.
• •Three-to-four HR specialists report directly to the departmental heads of the primary chain departments (members of Level 3 teams). Sharing of cross-departmental learnings takes place via a HR "ghost" team/functional forum, lead by the HRC. This team has regular contact to ensure an aligned, consistent HR effort within the region.
• •Three-to-four training specialists also report directly to the departmental heads of the primary-chain departments (members of Level 3 teams). Sharing of cross-departmental learnings take place again via an HR "ghost" team/functional forum, led by the HRC. Regular meetings ensure an aligned, consistent HRD effort within the region.

The underlying philosophy is that line managers are directly accountable for all aspects of people management. The departmental HR specialist and training specialist ensure professional support to the line manager.

Owner-driver conversion (1995 onwards)

SAB started "outsourcing" the driving of distribution trucks to its own employees in 1995. Via a structured process, the employee buys the truck and contracts to SAB as one of its customers - hence, the term "owner-driver". In short:

• •current drivers are selected against communicated criteria and standards;
• •owner-drivers enter into a contract with SAB, spelling out minimum service requirements and compensation;
• •SAB facilitates alternative funding options to enable the employee to buy the truck; and
• •SAB puts in place support processes to help the owner-driver succeed, e.g. entrepreneurial skills, financial management skills, etc.

In excess of 50 per cent of SAB's distribution is currently conducted through its owner-driver network.

New product development (1996)

A New Product Development (NPD) team was established to fill the commercially viable market gaps identified. During the last three years, volume from these "new products" has climbed to 520,000 hectolitres, following innovations mostly in the area of low-alcohol beers and alcoholic fruit beverages. A secondary focus has been on packaging innovations for existing brands.

BOP2: Revised team-based structures in packaging (1997 onwards)

To kick off the second phase of implementation towards World Class Manufacturing, a jointly managed pilot took place at SAB Alrode (line 12) to develop future structures and work practices. In the BOP1 structures, various competencies were still vested in "functional" people. The outcome of the line 12 pilot was a step change in skill level in all Level 1 positions, defined by very specific selection criteria - essentially a fundamental repositioning of roles within the team.

The Level 1 team now consists of four "building block" positions, designed on the assumption that maintenance is the core competence in packaging and that product quality is key.

Table 4: Level 1 team

BOP operators, process operators, and process artisans report directly to the team leader. This team is fully self-sufficient in that there is no external (day-shift-based) support for the team in the form of artisans or quality control technicians. The team is autonomous and equipped for the full range of its outputs. Tremendous work has taken place to anchor the new work practices post implementation, including a focus on performance management and competency acquisition.

Following the line 12 pilot, this structure has been rolled out to five of the six major packaging lines in SAB. This process will continue in 2000.

Organization development resourcing (1998)

To ensure a professional approach to implementing change interventions, and specifically to the change management aspects involved, an organization development role was added into the central office HR structure in 1998. A change management process has been developed (based on the work by John Kotter) to ensure appropriate focus on both the pre- and post-implementation challenges.

Staff

Equity (affirmative action)

SAB has been involved in Equity as a strategic initiative since 1971. At that time, 1 per cent of all salaried staff were Black, Asian or Coloured (hereinafter referred to as Black). By 1978, Black employees constituted 13 per cent of salaried staff. This was achieved by appointing Black employees into real jobs (no tokenism, no tolerance for a different set of standards). Today, 55 per cent of total salaried staff and 22 per cent of all executives are Black.

Both the external environment as well as internal demands on SAB have changed dramatically over the last 25 years, necessitating the ongoing adaptation of Equity to keep it on track. The third phase of SAB's Equity Programme was launched in 1998, focusing on four aspects:

• •race and gender headcount (being in the top five organizations in South Africa);
• •people development (ranging from executive to shop-floor development);
• •the human dignity aspects relating to Equity (eliminating subtle discrimination, valuing diversity, ensuring equitable treatment);
• •commercial equity (use of Black-owned small/micro/medium enterprises as preferred suppliers).

The primary challenges of Equity 3 are as follows:

• •maintain the current level of focus on headcount, whilst simultaneously significantly increasing "dignity" investment. Human dignity is a crucial and historically neglected area of Equity strategies;
• •ensure that racial normalization remains the foremost priority, even though gender targets have been established during this phase. It is this "focus" argument that results in the absence of disability targets; and
• •continue and further the investment in commercial equity.

Annual assessments against regional Equity 3 plans are monitored by regional structures, referred to as Employment Equity Consultative Committees (EECCs). Goal achievement against plans form part of team and individual goals, which are reviewed as per the IMP. This review links to reward, either in the form of executive incentive schemes or annual increases (for non-executive managers).

Progress in commercial equity has resulted in the development of many Black-owned entrepreneurial ventures, and this is witnessed by the fact that SAB currently spends in excess of R400 million (approximately US$70 million) with these organizations per annum.

Strategic people review

Since SAB's entry into the global arena, a number of international acquisitions have been made which have resulted in additional resourcing requirements. This, linked with the scarcity of skills (especially technical skills), has resulted in a more structured approach to strategic people resourcing. A key tool is the People Balance Sheet (PBS), which represents an amalgamation of the key data relating to human resources, for the purposes of interpretation and action - i.e. the "people bottom line".

The purpose of the PBS is to consolidate data in a consistent manner in order to:

• •support SAB's strategic theme of people (attracting, developing and retaining talent);
• •consolidate relevant data aimed at alerting SAB to current and future gaps and trends around people issues.

The PBS is treated as a means to an end, a template with which to consolidate meaningful people data in order to facilitate interpretation and decision-making. Data are collated every quarter at regional level (also within central office departments), including current equity numbers (race and gender), detailed potential-and-performance grids, labour turnover analyses (desired vs. undesired), scarce skills, retention risks, etc.

Regional executive teams (Level 4) analyse and interpret the data and identify a small number (three-four) of regional key focus areas for action planning. The result of this exercise is a focused and systemic resourcing process to provide cover for key positions in SAB, both locally and in international operations. Again, regional SPR plans are included in team and individual goals, and delivery (and non-delivery) is linked to compensation.

The career development process

The philosophy of this process is embodied in the spirit of the IMP. Each person takes charge of his/her career, with the organization playing a facilitator role. Roles and responsibilities are defined in Table 5 below.

Table 5: Roles and responsibilities

Some key principles in career development are:

• •Performance (track record) will remain the determining factor in promotions.

• •Career development can take place within the confines of one's current job and is not synonymous with grade movement. Career development is about continuous learning rather than upward movement.
• •Organizational career development is, in one sense, nothing more than sound management practice in the people management domain.
• •The key objective is to ensure that SAB has sufficient skills to meet current and future business objectives.

From a company perspective, this means that the process of career development is designed to:

• •support business strategies in all functional areas;
• •ensure depth of skills, so that there are enough people with the right skills to fill key management positions in future (referred to in terms of cover ratios);
• •develop organization capability via the acquisition, development and retention of core competencies in key areas ;
• •provide a sound basis for equity planning;
• •ensure a supply of staff to SAB's international operations where required.

From an employee perspective, career development is about individuals taking charge of their careers and maximizing development opportunities. It involves the identification of competencies and development needs at present, as well as what is needed in order to further their careers in the desired directions.

Project Noah

For SAB, increased competitiveness to survive and grow is an imperative. The quest for world-class performance inevitably results in significant organizational restructuring, with consequent job modification or loss. In 1996, SAB and FAWU discussed their mutual concerns - and FAWU's particular concern - about employee security and the effects of global competitiveness. This resulted in the birth of an initiative called Project Noah, aimed at developing alternatives for employees who have been retrenched. SAB and FAWU attended a workshop at the headquarters of the International Labour Organization (ILO) in Geneva, Switzerland. These interactions with the ILO, and with business and labour internationally, reinforced the realities of competitiveness and pointed to the need for creative strategies, which focused on the development of small new enterprises as a global priority. A joint statement of intent emerged from this workshop as the rationale and principles for Project Noah.

Essentially, Project Noah establishes centres in cities or towns in South Africa, where retrenchments of SAB employees are anticipated. These centres are temporary, with a lifespan of about eight months, and are staffed with contractors who provide administrative, business and psychological support for retrenchees.

Noah neither replaces nor interferes with any SAB/FAWU agreements and industrial relations processes. Management and the union negotiate on retrenchments and severance packages without any involvement from Noah. While SAB funds all of the services and support given to retrenchees, there is no longer an employment relationship between these people and SAB or Noah itself. Retrenchees therefore use the Noah services voluntarily, in line with their own unique needs. Noah cannot guarantee employment. It can at best provide optimum support to enable retrenchees to pursue new careers. It recognizes that individual commitment, effort and enterprise are prerequisites for success.

While many obstacles and frustrations do occur, Noah is encouraged by the success it has achieved to date: 161 small, micro and medium-sized businesses have been initiated with retrenchees. These businesses cover a range of industries from farming to manufacturing and service businesses and have been of real value to both the employed and unemployed in South Africa.

Additionally, Noah has also established a business incubator, which has the capacity to house and nurture over 20 small businesses at any given time. As a joint venture with Government, the community, and labour, SAB also initiated a rural micro incubator in the Eastern Cape, which has initiated in excess of 100 businesses over the past nine months.

Skills

The Competency Acquisition Process (CAP)

During 1994-95, a more formalized process of competency acquisition was introduced. This represents an integrated, systematic and efficient process of employee development aimed at:

• •ensuring appropriate education, training and development for optimal employee competence in pursuit of business goals;
• •facilitating external recognition for competencies, in alignment with national legislation (ref. the South African Qualifications Act, 1995, et al).

The strategic intent of the CAP is to create high-performance opportunities for the employees of a global company. As such, it is integrated with all the people practices in the organization, such as IMP, Equity, etc. At senior management level, it enhances the emphasis on self-management and self-development, whilst at the shop floor level, its emphasis is on the redress of past inequities.

Competence is understood as the knowledge, skills and attributes required for successful workplace performance, and the competencies required for a particular job are described in a document known as a Competence Guide. The component parts of the Competency Acquisition Process are as follows:

• •Competency Guides (per position) which contain discreet descriptors of required performance in order for the incumbent to be successful in a job. They also contain the criteria against which the individual may be measured in order to assess current competence. Finally, they contain information which directs the incumbent (as a learner) to resources of varying types, which will enable self-directed learning or formal training interventions;
• •a workplace assessment process which consists of (i) diagnostic assessments to determine training gaps, (ii) formative assessments to determine progress against individual training plans, and (iii) summative assessments toward sign-off against competency standards.

The competency acquisition process has been incorporated into individual goals, linked to self-development and the development of subordinates.

The SAB Training Institute applies the competency acquisition process to all segments of the value chain. It develops and implements innovative, creative and effective learning solutions to meet business needs in line with strategy. Learning solutions incorporate current technology aids, such as multi-media, telephonic conferencing, and both intranet and internet.

Some of the Training Institute's recent achievements are:

• •successfully repositioning itself as a corporate university;
• •a strong technical skills focus through the application of CAP (in line with manufacturing strategy) focusing on the training of team leaders, apprentices, artisans and operators;
• •the District Managers' Development Programme (in line with with S&D strategy);
• •the Sales Academy for Sales Representatives (again driving the growth theme) ;
• •a post-graduate qualification designed to cover SAB's specific mix of brewing skills, in conjunction with Heriot Watt University;
• •executive development programmes linked to six international business schools (Stanford, Michigan, Harvard, Wharton, Kelogg and Insead);
• •leadership and management development programmes (Beer Challenge, Management Challenge, EVA, MDP, Systems Thinking, People-centred Management, etc.).

Training spent as a percentge of payroll over 1997 and 1998, against ASTD benchmarks is shown in Graph 1.

Graph 1:Total training as percentage of payroll

Systems (or measures) to monitor and measure the impact of change initiatives

A variety of mechanisms have been put in place to measure the impact of change initiatives.

The new Organizational Effectiveness Survey

In 1999, the IMP survey was expanded into an Organizational Effectiveness Survey, which obtains feedback from employees on a number of change dimensions, including IMP. The graph below presents the results from the 1999 Organizational Effectiveness Survey (all grades). The dimensions are: equity (A), ethics (B), work attitudes (C), industrial/employee relations (D), organizational health (E), company image (F), and IMP (G).

Graph 2: Results from the 1999 Organizational Effectiveness Survey

Internal audits

Common practice is the use of self-auditing mechanisms. These are completed by regions and presented to divisional "custodians". Some examples include:

• •Guide to Systems Excellence, which measures and monitors success of the regional SAP implementation (1998 to current), data accuracy and integrity, desired user behaviours, etc.;
• •HRD Review Document, which measures and monitors regional training and development processes, progress on competency acquisition, etc.;
• •world-class manufacturing audits, which measure and monitor regional progress in terms of team problem-solving processes, BOP2 restructuring processes, etc.

Awards

The two most important award ceremonies in SAB take place annually to reward regions for exceptional performance in line with strategy:

• •In sales and distribution, gold and silver awards are given to sales teams. Measures are aligned with the S&D strategy, focusing specifically on growth targets and customer service ratings.
• •In production, awards are given for the best performing region and for the most improved region. Measures are aligned with the manufacturing strategy, including product quality, continuous improvement, cost leadership, and a special measure known as "busting a gut", which looks at the sheer effort put into focus areas for improvement.

Key challenges for the future

Some of the key challenges for the next three-year period are:

• •Strategic people resourcing

• •Attracting talent
• •Developing talent to ensure accelerated entry and competence
• •Retaining talent
• •Maintaining the focus on Equity
• •Corporate reputation
• •Enhancing SAB's image with key stakeholders
• •Maintaining the reputation of a role model company
• •Organizational effectiveness
• •Improving on all aspects required to sustain the status of "a high performance, high involvement company"
• •Growth
• •Meeting volume targets
• •Growing market share by expanding existing markets and focusing on new markets

• •Support to international operations
• •Leveraging and delivering value through sharing of resources, best practice and learnings

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