1. In the case of Seagram, the CEO turned to values to stimulate change in the organization. Discuss the main issues with which the company was faced at the time and why the CEO used values to drive change in the organization. Do you think his approach was successful? Why or why not?

Leading Culture Change at Seagram Edgar Bronfman, Jr., president and CEO customer and consumer oriented. We of Joseph E. Seagram Sons, Inc., told 200 will honor and reward teamwork; senior managers in February 1995 that his we will lead, not control. We will be vision for Seagram was to be the "best willing to learn. We will develop, train and motivate our people. We will be managed beverage company." honest with ourselves and each other. I have a vision and a belief that we will We will manage based on the values we be best managed. We will be focused articulate and share. on growth; we will be fast and flexible, Bronfman's statement was made in the midst of major change and transformation Source: This case was prepared by The Center for Executive Development, 1996, with at Seagram. The company was attempting to permission of Seagram. increase profits through global expansion,reengineering, and diversification. Seagram more than 70 years. Seagram developed recognized, however, that it could not ulti- a loyal consumer following with premier mately succeed without changing its culture products and premier brands such and work processes. The key to this was Crown Royal, Chivas Regal, Glenlivet the creation of "Seagram Values" later that and Mum Champagne. Primarily opera year. Despite initial skepticism by many ing in North America and Europe, Sex employees that this was nothing more than gram successfully positioned itself in the "flavor of the month," Bronfman was these growth markets for decades. It grew determined to prove that values "will not to 14,000 employees. go away" and those who live the values Over the years, Seagram had a his "will be rewarded." tory of diversification outside of its core Indeed, throughout the following years, businesses. For example in the 1960s and the values played an increasingly central 1970s, it owned a major oil company, role in implementing and shaping Sea- and in 1982, Seagram purchased 25 per- gram's priorities and new culture. It was to cent of DuPont. By the late 1980s, with be a distinct shift away from a once proud Seagram's markets maturing, Seagram be- and successful culture based on individual- gan to diversify again. In 1988 it acquired ism, entrepreneurship, authority, functional both Martell S.A. (cognac) and Tropicana pride, and personal relationships. These Products (fruit juice and juice beverages). characteristics, however, were considered These were the first of many steps taken to be no longer effective. Instead, the new in recognition of the maturing and eroding culture was heralded with values such as of Seagram's core markets. teamwork, innovation, and customer focus. Indeed, by 1992 the operating income Having codified the values and begun to growth of Seagram's core spirits and wine communicate them corporate-wide, Sea- business had stalled. The entire $16 billion gram's leaders faced a series of challenges industry faced harsh new realities: the "new to ensure that the new culture would be sobriety" of the 1990s, increased taxes on implemented, and sustained: How would liquor, the early 1990s recession, increased people be rewarded for values-based be- government regulation, and social criticism havior? How would the evaluation process of spirits marketing. Liquor sales spiraled be conducted? Who should be trained in down, and it was predicted that the decline values? And overall, how would values be would continue for several years. institutionalized into everyday behavior? Bronfman and the Seagram executives recognized the need for strategic reposi- REINVENTING tioning and a redefinition of the company's SEAGRAM competitive advantage. Bronfman declared over and over that Seagram would "not be able to achieve business results with busi- NEW BUSINESS AND ness as usual." Thus Seagram: PERFORMANCE . Expanded its spirits business into China CHALLENGES and other countries in Asia Pacific (Indeed the acquisition of Martell had The Seagram Company, founded in 1924 opened the Asian market for Seagram.) with a single distillery in Canada, had been . Acquired the global fruit juice business a major player in the beverage industry for from Dole Food Company, Inc.Change 257 . Redeemed 156 million of its DuPont shares for $8.8 billion. wanted and how to bring growth back to Seagram. . Purchased 80 percent of the entertain- Under the leadership of senior execu- ment company MCA Inc. (including tives, this effort quickly engulfed the ener- Universal Studios and theme parks) gies of people across the company. With from Matsushita Electric Industrial a mix of enthusiasm and trepidation, the Co., Lid., for $5.7 billion (adding business processes were subjected to care- 15,000 employees). ful scrutiny and a wide variety of efficien- cies and cost savings were identified. In Seagram's success for the late 1990s addition, by examining the best practices and beyond would derive from this very of other companies and determining the different portfolio of businesses and a far true needs of their customers, Seagram more global enterprise. And its young, began to break out of its internally di- vibrant, and visionary CEO had visibly rected culture. After six to nine months taken significant risks and made major of self-examination, the opportunities for new bets for the company. To succeed improvement were huge. would require aggressive development of Yet, there was also increasing recogni- their brands, products, and people to ex- tion that significant barriers to progress ploit their new businesses and improve old existed. The new processes required nu- ones. But as the plans for reinventing Sea- merous changes in how people behaved gram were fashioned, it became more and and interacted with each other-indeed, a more clear that Seagram had to change new culture. Seagram would have to un- every aspect of the way it was managed. learn its old culture typified by silos, risk Indeed, it was then that Bronfman set the aversion, hierarchy, and limited communi- goal of being the "best-managed" com- cation. And it would have to learn how to pany, and a growth goal of 15 percent per be more innovative, cooperative, commu- year-both highly aggressive targets. nicative, and customer-focused. REENGINEERING THE VALUES-THE COMPANY MISSING LINK Toward that end, Seagram began a major Bronfman personally articulated that reengineering effort in 1994. The goal processes would only change if behav- was not only to more effectively manage ior changed-and to change behavior Seagram's business processes and reduce required a new set of underlying values. costs, but also to identify future growth He was convinced that "living the values opportunities. The reengineering task in- would allow them to behave in ways that volved hundreds of employees throughout were new and better at Seagram." And as Seagram, organized into teams to redesign he told one group of managers, and streamline key business processes Performance is not "fine" right now; such as: Business Planning, Management otherwise we would already be growing Information Systems (MIS), Finance, 15 percent a year. If we were doing fine Customer Fulfillment, Marketing, and and living the values, there wouldn't Manufacturing. A top priority of these be the level of frustration there is at teams was to find out what customers Seagram. . . . Values drive behavior,behavior drives our processes, and our processes will drive results. Customer Focus, Respect, Integrity. Team- work, Innovation, and Quality (see Exhibit 1 for values definitions). Along Bronfman personally drafted ten with the values, there also was a summary governing values to present to his top of "Values in Action, a checklist of 200 managers for discussion, debate, havioral examples for living the value and revision at a management meeting in (see Exhibit 2). There was a strong vic February 1995. This began a nine-month that the values had to be measurable in cy process of creating the corporate values. der to be enacted. Supported by the Center for Executive Development (CED), Seagram engaged in INTRODUCING an intensive top-down and bottom-up pro- cess to reach agreement on the right word- THE VALUES ing and the right implementation. Thus, the output of the management A plan was developed to introduce the conference was refined and redrafted by values to Seagram's beverage company the top 15 executives. This in turn was (MCA/Universal would enter the values reviewed and critiqued by over 300 em- process later) which included: (1) a per- ployees through eight- to ten-person focus sonalized communication cascade, (2) a groups. These employees represented a ver- 360-degree feedback process for the se- tical cross-section of the entire company- nior executives, and (3) a training program all businesses, all functions, all levels were for equipping the top 1,200 managers. represented. Moreover, they represented When it came to communicating the a cross-cultural mix of nationalities from values, focus group participants had sent Asia, Europe, North America, and South a strong message that "this should not be America. Indeed, important variations in just another program of the month. No interpretation were found across different hype, no t-shirts, no hats, and no video cultures, and new wording was developed conference with Bronfman announcing the to minimize culturally unclear or irrelevant values to the whole company." In the spirit concepts. Some individuals did feel, how- of the values, Seagram senior management ever, that a corporation did not have the heeded the advice of their "customers right to set values for people to believe in. (i.e., their employees) and decided to try Not only were the employees asked a new technique-a cascade of personal to give feedback on the values draft, but communication meetings. Each manager also to identify behavioral examples of met with his or her direct reports to dis- the values in action, and to make suggestuss the values and what it meant to live tions about how to introduce and commu- them in their specific business environ nicate the values. The employee version ment. The communication plan was led by was much simpler, shorter, and easier to Bronfman, who held a two-hour meeting understand by all levels and all cultural with his direct reports to discuss the val backgrounds. These inputs were then fed ues. Next, the top 15 executives met with back to the top executives who once again their direct reports who, in turn. met with redrafted the values. their direct reports, and so on, to discuss With this draft, the company appeared the values, until all employees at Seagram ready to finalize the values: Consumer & had participated in a "cascade" meetingEXHIBIT The Seagram Values As Seagram Employees We Commit to the Following Values: Consumer and customer focus: Everything we do is dedicated to the satisfaction of present and future consumers and customers. Respect: We treat everyone with dignity, and we value different backgrounds, cultures, and viewpoints. Integrity We are honest, consistent and professional in every aspect of our behavior. We communicate openly and directly. Teamwork: We work and communicate across functions, levels, geographies, and business units to build our global Seagram family We are each accountable for our behavior and performance. Innovation: We challenge ourselves by embracing innovation and creativity, not only in our brands, but also in all aspects of our work. We learn from both our successes and failures. Quality: We deliver the quality and craftsmanship that our consumers and customers demand-in all we do-with our products, our services and our people. By living these values: We will achieve our growth objectives, and we will make Seagram the company preferred by consumers. customers, employees, shareholders, and communities.EXHIBIT 2 Seagram Values in Action Consumer and We demonstrate through our actions that consumers and customers have top priority in our daily work. customer focus We treat each person we deal with as a customer. We work continually to understand our consumer and customer's requirements and anticipate future needs. We seek ideas and contributions from people, regardless of their level. Respect We have a climate where issues are openly discussed and resolved. We have a balance between our professional and private commitments. We deliver what we promise. Integrity We disclose facts even when the news is bad. We make decisions based on what's best for the company, rather than personal gain. We share across borders, across affiliates and across functions to learn from one another. Teamwork We work together to achieve consistent, shared goals. We consider the impact our activities have on other areas of Seagram. We create an atmosphere where continuous improvement and creative thinking are encouraged. Innovation We look for new ways to remove layers of bureaucracy to enable speed and action. We have patience with new ventures and recognize there will be failures. We produce results that consistently meet or exceed the standards of performance our consumers and customers expect. Quality We consistently improve our processes to better serve our customers. We get the job done accurately and on time.Implementing Change 261 second, focus group participants had DEEPENING THE NEW also said, "people are waiting to see if management is really serious about liv- CULTURE ing the new values themselves." As a re- sult, a 360-degree feedback tool based on Together, these three steps helped to the six values was developed. The survey launch Seagram's culture change. After questions were directly derived by asking the values were created, Seagram execu- focus group participants to identify key tives faced numerous issues in ensuring behaviors required for living the values that the values would indeed be rein- (see Exhibit 3 for a sample page). His- forced and institutionalized. These issues torically, Seagram managers provided were most typically crystallized at the little feedback except through an annual concluding day of each values training top-down review. Given their lack of ex- program. On these Fridays, participants perience and lack of trust, the 360-degree spent a full morning in dialogue with one process was carefully implemented, using or two senior Seagram leaders. The com- the help of professional coaches; a third- mon themes of the Friday sessions-and party data processor; and clearly defined the challenges for senior management to developmental, not evaluatingurposes. resolve-are summarized below: Initially, Bronfman himself and the top 15 executives participated in the 360-degree 1. "WHAT SHOULD BE feedback process. Next, the top 200 se- DONE WITH THE VARIOUS nior managers were evaluated and person- RECOMMENDATIONS ally coached during the training program. FOR ACTION RAISED BY Each manager was encouraged to share the findings with those who gave them PARTICIPANTS IN THE feedback and develop an action plan for PROGRAMS?" improvement in modeling the values. At the close of each training program, Finally, the third ingredient for intro- participants presented recommendations ducing the values was training. To this for action to a senior executive. How- end, Seagram, assisted by CED, designed ever, there was no clear mechanism for two values training programs: "Leading implementation and follow-up. Partici- With Values" and "The Seagram Chal- pants could take some actions, while oth- lenge." The first program targeted Sea- ers required senior management support. gram's top 200, while the second program Participants often wondered aloud, "What was designed for approximately 1,000 will be done with all these good ideas?" middle managers. The two programs fo- cused on the six values, best practice ap- 2. "ARE WE GOING TO plications in other companies, and how to live the values at Seagram on a daily PUNISH THE VALUES basis. Each program included mini-case VIOLATORS?" studies of Seagram situations in which If management was serious about the val- the values were put to a test. Participants ues, many argued, the values "violators" were encouraged to develop personal ac- should be demoted or fired. Many pointed ton plans and recommendations for the to a dramatic diagram that Bronfman company. often referenced-a 2 X 2 portrayingEXHIBIT 3 Sample Still-degree FeedbaCk FEW\" Value Total 6. This executive is approachable and friendly. 1. This executive seeks ideas from people . regardless of their level in the organization. 3. This executive is careful to consider another person's idea before accepting or rejecting it. 4. This executive explains issues and answers questions when communicating. 5. This executive treats people fairly when they make a mistake. 2. This executive supports peeple in their efforts to balance props . . . . . Sion their private lives. al tlme With 7. This executive provides ' ' periodic fee to tell others where they stand in tea:baCk of performance. ms ' Total Supervisor Peers Direct Reports Self Total Supervisor Peers Direct Reports Self Total Supervisor Peers Direct Reports Self Total Supervisor Peers Direct Reports Self Total Supervisor Peers Direct Reports Self Total Supervisor Peers Direct Reports Self Total Supervisor Peers Direct Reports Self Total Supervisor Peers Direct Reports Self Module 3 Implementing Change 263 EXHIBIT 4 The Personal Consequences Were Made Very Clear SUCCESS AND HOW WE ACHIEVE IT Make the Type I Former Heroes Type II Numbers New Heroes Type IV Miss the Newly Type III Numbers Unemployed Potential Heroes Executives Inappropriate Appropriate Values Values How Results Are Obtained values (high versus low) on one axis and 4. "WHAT SHOULD BE DONE results (high versus low) on the other (see WITH THE NEW EMPLOYEES Exhibit 4). It labeled those who violated the values while still getting good results (15,000) WHO HAVE BEEN as "former heroes." But, many asked, ACQUIRED FROM MCA/ wouldn't punishing such people violate UNIVERSAL?" the value of "respect"? And how much With the values having been created and the time should people be afforded to change? training conducted with Seagram's manag- Some wanted the 360-degree process to ers, the question increasingly arose as to move from developmental to evaluation how to integrate the new employees ac- purposes so that low scorers would be quired from MCA/Universal. Some argued "penalized" in their annual reviews. that they were a totally different company and culture, and should develop their own values. Some felt that having been acquired, 3. "HOW WILL WE they should be expected to subscribe to the RECOGNIZE AND REWARD values developed by the parent. Still others THE VALUES CHAMPIONS?" said that this was not a high-priority issue. Managers often stated that people who behaved consistently in line with the val- 5. "HOW DO WE SUSTAIN ues should be recognized and rewarded. THE MOMENTUM AND Some argued that those who "lived" the ATTENTION ON VALUES?" values should be given financial bonuses AND "WHAT SHOULD BE and/or recognition. But others said that DONE TO INSTITUTIONALIZE people should not be paid extra to live the THE VALUES DEEPER AND values-it was expected of everyone. In WIDER ACROSS SEAGRAM?" any case, participants pointed to the per- formance management and incentive sys- By the Friday session when enthusiasm tem and looked for changes. reached its peak, participants searched for 264 Managing Change ways to sustain the interest. They asked LEADERSHIP RESPONSE about (a) training that extended beyond the top 1,200 to the 15,000, (b) opportuni- The next phase of the Seagram culture ties for "alumni" gatherings, and (c) com- change journey was beginning. And there munication support to keep the spotlight was a full plate of challenges-and no. on values. No clear plans for any of these shortage of opinions about what should be were set. done. It was time to set out the next steps