ProfitAbility Business Simulations Clients - Case Studies - Nestlé
‹ Back to Case Studies‘Thousands of CFOs’ in one business: how Nestlé is improving financial acumen across the globe.
For many years, Nestlé has been attempting to expand business finance beyond the boardroom and into the mainstream of its management population. Not content to rely on strong specialist and centralised financial expertise, the FMCG giant wants all managers to speak the same language—one of sound financial acumen.
Some years ago, concepts such as ‘shareholder value’ and ‘economic profit’ had become central to the then CFO’s pioneering strategy, but were not commonly understood by managers making important decisions every day. The real cost of doing business was not immediately apparent to everyone outside the leadership team. So, in 1999, Nestlé partnered with ProfitAbility with two key objectives:
1. Promote the use of a common financial language across the business, in all countries and at all levels, so that meaningful decisions can be made and acted upon with consistency.
2. Enable each employee to understand clearly how their decisions impact ‘shareholder value’ and how each can do their job better in the light of this understanding.
The ideal outcome was defined as a population of managers across the business that made decisions with a clear understanding of the financial impact, within the framework described by the CFO.
From the outset it was clear that ProfitAbility’s business simulations were very much in tune with Nestlé’s approach. Together, Nestlé and ProfitAbility worked on customising a generic ProfitAbility simulation, to match the specific nuances of Nestlé’s activity within the food industry. The new program was named ‘Value Creation’.
The customisation reflected the relationships between sales volume, price, cost of goods, brand support, research and the capital investment unique to Nestlé. Specific context was created by choosing three Nestlé product categories: coffee, chocolate and ice cream.
For the past seven years, this customised simulation has been run in 2- and 3-day sessions across the Nestlé world.
‘More than 1,000 Nestlé managers go through the programme each year.’
‘Value Creation’ is popular in all continents, with particularly high uptake in Asia (Philippines, Malaysia, Thailand, China, etc.).
Project sponsor, Angus Freathy, says: “The value comes from the fact that the model is sufficiently realistic that we can draw valuable parallels with Nestlé ‘real life’—without being so complex that participants need years of experience to understand it and appreciate its relevance.”
During the design and development, ProfitAbility trainers led several of the programmes, but Nestlé’s intention from the start was to develop its own team of expert facilitators, who bring intimate knowledge of the business to the simulation. The ‘train the trainer’ process is run by Nestlé’s master trainers, who personally advise and accredit each new facilitator—of whom there are currently 15 worldwide. The primary focus is to ensure that the quality of delivery and depth of facilitator understanding is not diluted in any way.
Nigel Downing, co-founder and Director of Operations at ProfitAbility comments:
“The quality and style of the programme is utterly consistent across the globe, which suits Nestlé’s desire for a common approach to financial management and decision making down to the ground.”
Drawing direct comparisons with financial metrics is always difficult with such a large number of variables at work—but it would seem remiss not to mention that Nestlé’s share price has increased by some 50% in the seven years that ‘Value Creation’ has been running...
To Freathy, the programme’s value is self-evident: “Managers who participate in this programme have a much greater understanding of the financial levers available to them and of their inter-dependent effect. Nestlé people now speak the same language and use the same terminology, no matter where in the world they work. For example when we talk about Economic Profit in a cross-discipline, cross-continent meeting, everyone who has experienced ‘Value Creation’ has the same accurate understanding of what we mean.”
‘Value Creation’ also dovetails neatly with many other projects and initiatives across the business. For example, managers’ individual remuneration is influenced by company results, which in turn affects ‘shareholder value’. The programme enables managers to understand how to meet Nestlé’s strategic objectives and, in doing so, positively impact their own bonus.
Building on the long-term success of ‘Value Creation’, Nestlé also runs a supply chain version of the simulation: the role-play version. Nestlé and ProfitAbility are developing new, innovative ways of communicating the important conceptual understanding which is fundamental to the business. New developments include a short, less detailed programme for managers with a less broad role and a strategy implementation simulation called ‘The Matrix’.
And the final word goes to Freathy: “I never cease to be amazed that mature adults, astute business people, are so totally engaged by what superficially looks like a child’s game. The ‘fun’ element is also a critical element of the mixture.
“In my opinion, there is no better training program than ‘Value Creation’ in the Nestlé world—and I’m prepared to bet a cup of Nescafé, a giant scoop of Dreyer’s ice cream or a four-finger KitKat that the participants share my view.”
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