Danone provides Latin America with great latitude as means to grow rapidly

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Danone’s Hernan Valcarce surprised some HR directors by indicating the company’s desire to work with unions.

With its Latin American business growing at double-digit rates yearly, French food and beverage group Danone offers a case study in how to hire and promote staff and organize expanding operations.

It generally leaves control up to managers in each country unit, with headquarters playing a supporting role. It seeks out employees with its “CODE” leadership values:  Committed, Open, Do-er and Empowered. And it works closely with unions to encourage labor participation, generally inviting a union leader per country to France each year for strategy talks.

Hernan Valcarce, Danone’s HR manager for the Americas, shared those insights at the Sept. 10 meeting of WorldCity’s HR Connections, sparking a lively discussion on expansion with counterparts from Visa International, Sabadell bank, Discovery Networks, PepsiCo, Seaboard Marine and other companies.

Danone, born in the 1970s from a joint venture between a Spanish dairy group and French bottling company, posted sales of roughly $17 billion last year, growing even during the world recession.

Valcarce works with Danone Americas operations that generate roughly $4 billion in yearly sales, employ 24,000 people and include 33 factories. Its business spans four divisions:  dairy, water, baby food and medical nutrition. Plans call for speedy growth, partly to distinguish the company from such larger rivals as Unilever and Nestle, and to avoid becoming a target for acquisition, he said.

To promote growth, the company operates in a very market-centered and decentralized way. “The general manager in each country is the owner of the business,” Valcarce told the group.

That means even the name of the company differs among countries. In the United States, where many people cannot easily pronounce the Spanish name Danone (which is Dahn-oh-nay), the results-oriented company opted years back for the more accessible name Dannon.

“This shows an example of pragmatism” by the European conglomerate to achieve its goals in each market, said Valcarce.

Not all multinationals operate with such ample local leeway, participants said. Some are basically top-down, with headquarters setting the tone and little local flexibility. Many try to find a good corporate-local balance, but end up switching every few years between structures with too much central control and ones with too much local sway and too few economies of scale.

“The best solution is a little bit of both, because you need that geographic knowledge and you need that technical expertise,” said Lorena Keough, a managing director at executive search firm Diversified Search Odgers Berndtsen.

Valcarce said his team offer regional guidelines to help boost synergies, and it helps country leaders envision a bold future. “We spend a lot of time on alignment, especially on potential — not on performance,” said the Argentine executive, based in Miami since 2008.

Expanding can be especially complicated in Brazil, the South American giant expected to post 7 percent economic growth this year and to remain on the fast track with massive construction and investment before hosting soccer’s World Cup in 2014 and the Olympics in 2016.

So many multinationals are investing in Brazil these days that it’s tough for multinationals to find top talent, participants said. Costs for executives – already high by global standards — are spiking. And keeping talent is difficult, because local Brazilian firms often try to lure away staff with salaries higher than the market average.

 

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Medtronic is finding it is often more cost-effective to bring external talent to Brazil than hiring within, said Sabine van der Meulen, the medical company’s HR director for Latin America.

“It’s cheaper to bring external talent into Brazil” than to recruit locally in many cases, said Sabine van der Meulen, director of human resources for Latin America for medical equipment maker Medtronic, one of the many multinationals at the meeting now expanding in Brazil.

Add in Brazil’s complex tax laws and generous labor benefits, and staffing and operations gets even more knotty. Multinationals must hire local experts to navigate the hefty and sometimes byzantine rules, further increasing costs there, said participants.

“It’s so complicated and so expensive,” agreed Magali Jarrin, human resources director for Latin America for air-conditioning company McQuay, which is now setting up Brazil operations to tap   construction opportunities. “But can you afford not to be in that market?”

Danone’s labor union focus also prompted discussion, with some managers noting unions tend to be discouraged in the U.S. market.

Valcarce said working with labor unions expands input for managers, “who can’t do everything alone.” It also bolsters teamwork for the long-term. “There is no sustainable growth if we have don’t have the social aspect strong,”  said Valcarce.

HR Connections is one of six event series World City organizes to bring together executives on international business topics. The series is sponsored by the University of Miami School of Business Administration and executive search firm Diversified Search Odgers Berndtson.

The next HR Connections meeting is set for Nov. 5.

 

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