Whitbread Plc and Change Management

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Traditionally a vertically integrated brewing company, Whitbread (WB) had to face a new market situation in 1992. Anti-monopoly regulations limited the company’s opportunities to profit from economies of scale and further growth opportunities in the beer industry. As a consequence, WB proactively started to diversify and grow a leisure division that was successfully headed by Dean Thomas, who was appointed CEO in 1997. At that time, it seemed clear to outsiders that the beer business would not be profitable in the long-run. However, Thomas adhered to WB’s legacy and tried to close a huge deal to acquire new pubs. Only after the deal had failed, which triggered a severe company crisis (WB’s stock price crashed, Thomas’ reputation and credibility were harmed due to his failure to clearly communicate and explain his strategy internally and externally), he realized that an overall strategic change was necessary. Consequently, he sold the beer business in 2000 and focused solely on the leisure business. The key challenge was to transform the operations-focused single business suffering from “institutionalized underperformance” into a high-performance and brand-led multi-business company.

In a first step, Thomas unfreezed the organization and restructured it to a decentralized federalization. He significantly reduced the headquarter staff and eliminated duplicated positions, but he missed to strategically define and clearly communicate the role and added value of the headquarters as well as the employees’ responsibilities. The new structure increased the autonomy of the divisions and its managers, which created latitude for opportunistic behavior. This was further aggravated by the fact that the divisional heads did not have to team up on strategic issues and individually reported to the CEO and CFO. Thomas, who was known as being collaborative and consensus-oriented, neglected to form a top management team that worked together jointly and whose members identified...
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