BAT South Africa

Now one of BAT Group’s most modern and strategic plants, the Heidelberg factory in South Africa has undergone a remarkable transformation over the last three years. Bernd Meyer, demand chain general manager for the Southern Africa area, talks to Gay Sutton about how he approached changing an entire company culture.

Most successful change initiatives spring from sheer necessity, or from what the consultancy community colourfully calls a ‘burning platform’. For BAT South Africa (SA), the stimulus for change began with a new group-wide strategy. The vision was to move away from many small factories each located close to their local marketplace, and to centralise manufacturing operations to strategically placed, larger and more efficient factories.

The factories in Zimbabwe and Mozambique—with the capacity to produce 1.5 billion to three billion cigarettes a year—were retained to cater largely for their domestic markets. The Heidelberg factory, on the other hand, was to become a state-of-the-art facility. Today, with the transformation largely complete, Heidelberg produces around 26 billion cigarettes a year and has the capacity to ramp up to an output of 35 billion a year. In addition, more than 10,000 tons a year of processed tobacco gets exported to other BAT factories or third parties within Africa and the Middle East. Not only does Heidelberg supply to the South African market, but it exports to more than 25 countries throughout Africa and the Middle East, and the strategy going forward is to focus on growing those export markets’ volume.

In 2006, however, the decision to centralise much of the manufacturing at Heidelberg signalled the beginning of a journey of change for BAT SA, one that presented considerable challenges as well as opportunities. “The first challenge facing us was that, as a result of underinvestment and old technology, the Heidelberg factory was non-competitive with regard to technology and processes,” Meyer says. A 10 year masterplan was put together, detailing the investment that would be needed to bring the factory up to the standard and capacity required for its new role in the region, listing exactly where the investment would go, the outcomes that could be expected with regard to capacity, productivity and the future shape of the business in 10 years. Once approved at a group level, the massive investment programme got underway.

“In all, we have invested more than £70 million bringing in the latest technology, the best-in-class processes and systems, and aligning our operations with the best in the group,” Meyer says. “At the same time, we undertook a 30 per cent expansion to increase the potential capacity of the factory.”

When expansion and refurbishment were well advanced at Heidelberg, the Angola factory was closed in 2007 and Paarl at the beginning of 2008, and some of the machines moved to Heidelberg. “The greatest surprise of the exercise came when we closed the Paarl factory near Cape Town and moved production to Heidelberg near Johannesburg. We found we had completely overestimated the mobility and flexibility of our workforce at Paarl, and far more people than we expected preferred to leave the company rather than relocate.”

In the end, fewer than 40 people out of a workforce of more than 500 at Paarl chose to stay with the company, and this left BAT SA with a considerable shortfall in staff, a difficulty compounded by the challenges in the South African labour market. To tackle the short-term skills shortage, Meyer drafted in a number of experienced and well trained staff from other BAT factories. He was, for example, able to fly in people from the Ukraine to work with his own personnel on the installation and commissioning of the new machines. 

In parallel with this he went on a massive recruitment drive, and put the new employees through an extensive training schedule which included placements to other BAT factories around the world, where they were able to learn and practice the skills and knowledge needed to function at the highest level in Heidelberg. “This was really quite a success story,” Meyer says. “Over the years 2007 and 2008 they picked up the knowledge very quickly. So much so that since 2009 we have been completely self sufficient and nowadays we are even supporting other BAT factories around the world with know-how and resources, such as Mexico, Nigeria, Kenya and Egypt.”

Today, Heidelberg is an impressive plant. Productivity, on a like-for-like basis, has increased by 25 per cent over the past three years. Customer satisfaction too, which is measured regularly by mood tracker surveys, is reflecting significant approval and now tops 85 per cent. “But these improvements have not been driven just by relocating and replacing machines,” Meyer says. “I think the main change came in 2007, when we embarked on a complete culture change agenda.”

Prior to this, there had been little need for change at the factory. Production had largely been for the domestic market where demand was stable, and old habits and practices had become entrenched and unchallenged. Several factors were changing, though. With the expansion of output to incorporate the production volumes from the two closed factories, manufacturing had become much more complex. “Before expansion we had around 150 stock keeping units (SKUs). Now, we have doubled that amount and produce around 300 SKUs.”

In addition, the Heidelberg factory has been increasingly supplying products for export across Africa and to the Middle East. This has not only increased the demand for output but has added to the complexity within the manufacturing plant and the supply chain, and sharpened the focus on quality and customer satisfaction. 

“The interesting thing about the change management agenda we initiated is that it was a multi-faceted exercise,” Meyer explains. “The starting point had been the installation of the new technology. Alongside that it was absolutely essential that we change the whole culture and attitude of the people. The management style needed to change radically and our workforce had to receive the skills and the training they needed in order to improve.”

The change process began by adjusting the management structure, starting at Meyer’s level at the top of the ladder right down to the shop floor. Where previously there had been nine reporting levels, with a great deal of inefficiency in between, these were reduced to just five. “As a result, communications are now cascading downwards very efficiently, and our speed of decision has increased markedly.”

Several initiatives were introduced to provide an efficient route for communications within the factory. The first was the launch of a factory magazine, purely for the staff at the Heidelberg plant. Plasma screens were installed at strategic points around the site, and these are updated regularly with information on a wide range of topics that relate to the staff and operations. And finally, Meyer now holds regular staff business briefings and breakfast sessions.

Through a bottom-up approach with the implementation of an ‘open door policy’, any employee was encouraged to get in touch with management at any time. Reward and recognition schemes were also used to support the cultural change in the factory, such as the introduction of a non-management bonus system, weekly heroes awards and free lunch for all staff on safety records which also played their part in achieving a better EHS awareness across the factory. External recognition was also given through a local quality award in South Africa; and internationally, through receiving two global BAT EHS awards in one year.

Changing the culture within the organisation, however, has not been easy. Everybody in the organisation was put through change management training, suitably entitled ‘future fit training’. “At the workshops they were able to voice their concerns, but they were also told that change is something that is part of life, and it was up to them whether they saw it as positive or negative. Essentially we were preparing them for the future.”

From 2008 onwards, Meyer introduced a completely new leadership team who brought with them a new set of attitudes and plenty of experience. By also utilising managers from other BAT countries, the increased diversity in the factory had a positive impact. “This helped expand the horizons of local management, showing them that things can be done differently, and that it is crucial to change.” Meyer then began to introduce a new style of management that would enable the company to function at a flexible world class level.

The key to achieving the necessary changes successfully, Meyer believes, comes down to ensuring that all managers follow the same agenda and buy in to it. They were being expected to change their management style, to communicate reasons and expectations with staff rather than simply issue orders, and to give full and fair feedback on performance across the entire spectrum of behaviours, from recognising people for good achievement through to disciplining employees if they did something seriously wrong.

“The workforce, on the whole, found the changes very positive,” Meyer comments. “They were receiving the information they needed, they received feedback on performance, and saw that the disciplinary measures were not only executed on the lowest job grades but were also applied to management staff. And this made the system a lot fairer across all departments. Our biggest challenge was with the middle management. Some managers were just unable to cope with the new leadership style. And we have had to make some really tough calls,” he says.

A major element in bringing about improvements in performance has been the design and implementation of a comprehensive training regime, not only to provide the knowledge and skills to perform to world class level but to maintain performance at that standard. “And this is very much a long term exercise. We’re currently investing heavily in developing our people across all areas of the business,” Meyer says. “We are, for example, sending staff abroad to the machinery suppliers for training. We’re also regularly sending staff to other BAT factories such as Singapore, Brazil and Mexico for training and experience. But most importantly we’re migrating from the old paradigm where operators would receive initial training and nothing more, to receiving refresher training on an ongoing basis.”

Recognising the importance of morale, Meyer has also focused on instilling a sense of pride and belonging among the staff. “I firmly believe that if people have a personal connection to their workplace and their job, they will give their best performance,” he says. He has therefore been investing a considerable amount in refurbishing the factory’s social rooms, upgrading and redesigning the canteen, and changing the look and feel of the factory by, for example, installing pictures of the staff on the walls. And he had a lot of ground to make up: staff morale had been dire.

In 2006 the Heidelberg staff had taken part in the Your Voice survey, a regular group-wide survey analysing the climate of opinion and morale among the staff at each of its sites. “We recorded one of the worst results ever, within the group,” Meyer says. “Today, our staff score us higher than many other fast moving consumer goods international companies here in South Africa, which marks us as an employer of choice in the country. And that has been a massive culture change in just three years.”

Meyer is keen to avoid any sense of complacency, though, and is working to ensure the improvements continue. “We are well ahead of our original 10 year masterplan, but I believe we’re only about 50 per cent of the way to our final destination. We’ve made tremendous progress, which is fantastic. Also by introducing IT systems like the MES (manufacturing execution system), scheduling tools and the warehouse management system, the processes and controls improved significantly in the factory and were a key enabler to deal with the increased complexity and at the same time improve product quality. Now it’s a matter of fine tuning the processes, the performance, product quality and customer service, and making it sustainable. And we’re still not as competitive as the top class factories in Latin America and Eastern Europe,” he warns, “so we still have room for improvement.”

For BAT SA, improvement and change are likely to remain an essential element of working life. The current group trend is to centralise many supply chain processes and management at a regional level. For the Heidelberg plant, that means reporting lines and processes such as procurement, production planning and logistics are being transferred to the regional supply chain in the UK. But with a flexible working culture and staff accustomed to taking change in their stride, Heidelberg is well prepared to implement the changes, adapt and flourish. http://www.batsa.co.za