CEO DIALOGUE #42 - Poul Weihrauch, Mars

Thank you for inviting me, Jean-François, it's always a pleasure to come to Lausanne and be at IMD.

Yes. Well, we were born in 1911 as a confectionary company, as a snacking company, but of course, the first generation of the Mars family. The second generation moved to the UK in the early '30s with the recipe of the Mars bar and a little bit of money in the pockets, but not a lot. Started off a chocolate company in 1932 in the UK and very quickly made a big success. Such a big success, he thought, "Let me find something new to invest in," and he found a pet food facility up in Manchester, bought that, and that became the start of our pet food business, later pet care business. And during the Second World War, the family got involved and wanted to branch into food, bought a patent to make parboiled rice, started a rice company as well. So fundamentally, we have three businesses: one that is a snacking business, one that is a pet business, and our food business. The pet business is approximately a bit less than 60% of the revenue, we have 4-5% that is our food business and the rest is our snacking business. So we are made up of you can say two very large segments and a smaller segment, and we operate pretty much everywhere around the world. We have facilities in 70 countries, but we sell our products everywhere where it's legal to sell our products. There are a few countries where you can't sell, but you know, everywhere else. One of my joys is no matter where I go on holiday, I can do store checking.

Yes, as you mentioned in your introduction, we are in the process of making an acquisition of Kellanova. It's pending legislatory approval in the United States and in Europe. But the ship we are sailing was a little bit lopsided, so we are managing to correct this a little bit and we'll have two in size largely similar segments. Our snacking segment and our pet segment will be pretty much equal size, and then our food segment will remain as is.

So the role of the family, of course, is they are owners. They are also board members. They're not operationally active in the company. So we have six family members that are on our board. They are frequent visitors to our units around the world. They could participate in town halls. They are active when we have a leadership summit. They really stand as the guardian of the enterprise force. They stand as the guardian for our principles that we have in the company, and they stand also for stability. In a world that is very unstable, family ownership is a big advantage, I would argue. And they also want to see that the company prospers by doing good. So they have put in place a number of governance issues or governance structures that ensures that the company lives up to certain standards. It could be around sustainability, it could be around the how we do our operations. So their role is at many levels in the enterprise.

Yes. The family has a strong belief that I think all of us share, is there's no trade off by doing good and having a business. So there's no conflict between profit and purpose, you could say. So more than 90% of our earnings are invested into the company every year since forever. That's a massive advantage for us as an enterprise, but it's also a big responsibility. It means that our growth activities have to do good as well as grow the company. So I'll give an example. The family in 2017 started a Sustainable in a Generation, and it meant that we should be at the forefront of reducing our environmental impact. So we started investing a lot in this area. And then the family developed what is called our Compass, and the Compass is fundamentally our shareholder objectives. And they are set out around traditional targets such as growth and a strong financial profile, that's quite traditional. Then it has two non-traditional metrics, which is around a positive societal impact and a trusted partner. So on the positive societal impact, we have targets around greenhouse gas, around thriving people in our supply chain, we buy a lot of raw materials in fragile areas of this world, it could be cocoa, it could be palm oil, it could be soybeans, et cetera, and also around plastic recyclability. On trusted partner, it's about our corporate reputation, which is very important if you're family-owned. I'm called Weihrauch, I'm not at the door, but the Mars family name is at the door. So it's very important we behave correctly and have principles. So if I take an example of that, we are investing large amount of money into sustainability. This year as a corporation, we will invest $750 million, a figure we have increased from last year. And we have managed since 2016, we have grown the company 60% and we have lowered the absolute greenhouse gas by 16%. So we have done what we say, we have broken the curve.

Yes, and that's a fallout from a decision made by the family that we want to do good and have a positive impact on society. And I would argue it's one of the advantages of having family shareholders. We can sit down and discuss, okay, there's a lot of inflation in this world. Cocoa has increased by more than 500%. Many enterprises would choose to stop these investments. We don't, we can take a longer-term view. We would like to say, or we like to say that we act in generations and not in quarters.

And this is thanks to the family ownership and thanks to a family that can sit down and say, "No, this is important to us." And it's important to particularly the next generation. I'm sure it applies to the students that study MBA here at IMD as it does for the young people that want to join us. It's important to work for an employer that has a point of view about how you do business. So I would argue we have a very strong advantage of the family ownership thanks to the values and principles that they are guardian of in our company.

Yes, so I mean, I can speak for myself that if I take my long-term compensation in a US corporation where a lot of compensation is long-term versus European, more than 40% of my compensation are on non-financial metrics. And I don't think there are many CEO of an enterprise this size that can stand up and talk to our Associates and really say, "I take this very seriously." This is an archetype of it being taken serious.

So we absolutely have a performance culture in Mars, Incorporated, and we have targets that are annual, we have quarterly review, we review our performance against peer set every quarter, just like a public-listed company is doing.

We don't talk to investment bankers every quarter, but we talk to our owners, and it's very important for them to know that Mars is a good investment, because at the end of the day, why should they retain an enterprise if it's not a good investment for them and doesn't build the other positive aspects I talked about. So, you know, I would always say that I would happily, if our numbers were public, we would stand in very fine company if we compared this to the performance of public listed companies. So, you know, another way of saying it, life is a marathon and most marathons are won by a sprint, and it's the same in business. You can't just work on the long-term because then you slip on the short-term, and you cannot exclusively work on the short-term because then you miss the guidance and the purpose of where your head is towards. So it's a healthy balance between the two.

We spend more time with our board than a normal public listed company. Now, there are big differences. I'm on the board of a German company where we have four or five meetings per year. A US corporation would typically be 10 to 15. We are more than that because we want our family to have a deeper insight to the company we run for them. We want them to get to know more people than normal. So we have four board weeks per year, they are three days, then we have regular-period updates with them. We have an offsite every two years where we spend three days dedicated to thinking about the future. So we definitely spend more time with it because it's so important that management and board works in conjunction of where we are headed with the enterprise.

Well, if you go back and say, you know, in a way, it's a little bit of a coincidence how they came together. So Forrest Mars Sr. that was in Britain in the '30s, he saw that the Brits loved their dogs particularly, and cats. And that was his idea and said, "Let me get into something where there is a consumer traction here." And likewise with our food business. So what they share is they're all great brands, and what they share is we're all very focused in Mars on consumer centricity, to know what goes on with the consumer to evolve the brand. So our brands have been around for more than 100 years. Then we branched into veterinary healthcare just short of 10 years ago, and there we operate 3,000 veterinary hospitals with different names such as BluePearl, VCA, AniCura around the world. If I take the pet care business, what they all have in common is an understanding of the pet. And if you think about it, we have a purpose called A Better World for Pets, and this purpose is really that everything we do must be in the interest of what is right for the pet. So we started as a pet food company and John Mars bought a small share in a veterinary practice called Banfield. And originally it was with a view to think, "Okay, if I operate hospitals, I will get the best science to be able to develop the best recipes from a health point of view for cats and dogs." We started studying where the industry would evolve and realized very quickly that just like in human healthcare, we are ending up spending more money on healthcare than on food. And we had a purpose on a wall which was called A Better World for Pets. So all of a sudden we thought, hang on, if we are to truly live up to this purpose, we have to evolve into healthcare, because we want to sell pet food at any price point that is the optimal nutrition for cat or dog. And we then wanted to be the best healthcare provider for the pets as well. So we are not in feeding bowls, we are not in leashes; we are in everything that improves the life of a pet. So what does it have in common? A deep understanding of the animals, a deep understanding of the pet parent, and a deep understanding of the brands. Just like in snacking, a focus on the consumer, a focus on the customers we sell through. So they're all sold through some form of retail. And that's also a shared point.

The trade, and in our CPG business, our consumer packaged goods business, a deep passion, dedication for manufacturing and science and technology in development of our brand.

Well, before I answer that, I'll just iterate that more than 60% of our growth is organic.

So job number one in Mars, Incorporated is to grow the fantastic brands we have.

And many times we have actually not integrated an awful lot. If I take the example of Royal Canin. It was acquired more than 20 years ago. It was acquired to get into what is called pet specialty, so pet stores, where we were relatively weak in Mars. We did that and we thought, "Hang on, this is a competency where we are not very strong. Let's respect that and make sure we don't mix it with our competency of selling to large-scale retailers." Out of that then grew a product range to sell into veterinary hospitals,

So basically food that is on prescription by a doctor. And large part of Royal Canin today is not at all integrated. The factories are not integrated, the sales forces are not integrated. They sit either in a separate office or in a separate floor in the office. We buy together, we buy logistics together, we exchange our Associates between divisions, so we develop them, but a large part is still disintegrated, if you will. If we take Wrigley on the other side, we bought it and for a couple of years kept it separate, and then we took time to study what Wrigley was good at. And Wrigley's core competency was really to sell at checkout, to be present wherever money changes hands. And it took us a couple of years to study that, and then we thought, "Ooh, this is the biggest value driver. If we can merge this with our chocolate portfolio, we really create value." So I would say what we are good at is being patient.

Respect the culture that we are acquiring.

There's a reason why these companies are great,

We buy them because they grow fast, they have fantastic brands, they have great people. So respect that, and understand how we amplify it and make it more of a merger than an acquisition. Make it feel that they join our family. Not that they are an adopted child in a family, but they truly join the family. So I would say a lot of soft skills, a lot of respect for what you buy, and really understanding the competences, where they're unique and where they are complimentary. And then there are areas where we don't compromise. Our Five Principles are really important. So how we run the company, the focus on developing people is really important for us. We as a corporation, we spend three to four times more on people development than an average company.

Our CPG business has people staying 3.8 times longer than the average CPG company. So this strong belief that you develop people, because if you grow your people, you grow your business. So those areas are very, very important to us and we don't compromise on them.

Yes. Yeah, we have 18,000 doctors, veterinarians that work for us, and 40,000 veterinary nurses that work for us, a population that was brand new to us. So I think again, respect what you buy, take time to truly understand it, sit down and understand. So we get a new Associate population called veterinarians. Sit down and understand what are the opportunities for this group and what are the things that they really want help with. You need to understand each business model. Take time, be curious.

Really having conversations with a true intention of wanting to listen and understand, and then come in with a belief that we can do better. So I think this point on curiosity, respect for the business, but then again, what we shared with them was a deep understanding of the pet parent. So it was not like the pet that came through the door was completely new to us. We knew the trends of pet parents. We knew that each generation love their pets more. We know that they are more and more concerned about their health.

So we had a deep understanding from a food angle and now got an understanding from in healthcare.

Yes.

Yes. So at its core, we believe that our Associates should run the business as if it was their business. One of our principles is responsibility, and we give a big responsibility early on in people's job and we give a big responsibility to people and leaders that grow through the organization. The expectation is that Associates live by our Five Principles, that they act with integrity and in line with these principles, and take responsibility for the business they run. So it is not a transactional relationship. I always say when I recruit people that it's great to recruit somebody to do a job, but that's not our mission. We want to recruit people to have a career and to not just come for a couple of years and then go somewhere else. Then we have not succeeded in our mission, because the company needs to grow and we as Associates need to grow in this relationship. And in return, there's an investment in your own personal development, your functional development as well as your personal development, and to grow you as a leader. So I've spent 25 years in Mars, and if I think back to joining the company, I've had access to infinite amount of training, I probably needed it as well, in all sorts of aspects of it. And the company is truly at stake for this development of individuals, and therefore we have a healthy mixture of growing leaders from within. 75% of the leaders are grown from within. 25% are recruited from outside, which comes back to your business model. Example, so the person that runs our veterinary health business has spent all of her life in healthcare, and runs a $10 billion business now. We have a science and diagnostic business where we had just brought in a new leader, again, a healthcare leader, and she had spent all her life in healthcare as well. So we look at it and get a healthy mission, but the expectation is that you grow within the company, independent of what level you're recruited at.

Yes, absolutely. All of us have measurements of our leadership performance. We have a Mars Associate Survey every year where we measure the health of the organization. We measure our own individual performances as leaders. We have a team model that all teams in Mars are running of high-performance team culture. So there's a strong expectation of your growth as a leader. There's also a strong expectation that the growth as a leader is mirrored in your growth as a person. It's not just leadership attribute. It is an encouragement to dig deep and understand why your own behaviors are a certain way with an assumption that you have to raise your self-awareness as a leader in order to progress and to know how your interpersonal relationships are developing. So it's a very holistic approach to leadership that I personally have got huge benefit from over the time of my career, both privately as well as professionally.

Yes. Philosophically, the trigger is really not to just have them on the wall nicely framed, but getting them onto the table when decisions are made and getting into our behaviors about how we act as leaders and how we act as a business. So I would frequently use the principles and I would frequently call them out. So if we, I knock on wood, have a product recall, which we should do absolutely everything to avoid, we apply the principles to see what are the risk factors, where do we need to invest? Are we sure we have checked the assets in our factories, that they are totally up to speed, et cetera? So they live and breathe in many parts of the business. The one that is probably less normal, if you will, is the principle of mutuality, which is the one that's born in 1947, but it very much explains the company and the family's philosophy. And it is that in any relationship, for it to endure, there needs to be a mutual benefit.

A win-win situation over time. And we invest in these relationships. So, you know, when I turn up at an office, it's not uncommon that the taxi company that picks me up has been working for Mars for 45 years and is maybe in the second and third generation as well. Many of our suppliers have been around for a long time. And we look at this in a way because it's okay to have the best deal every single time, but we also need to stay together with suppliers and with customers when we have tough times. So trying to get this balance right between, you know, a win-win situation; this is fundamentally what would protect long-term relationship. And we believe that's a benefit to the business in the exact same way it is between the relationship with an Associate and the company. It has to be mutual.

I mentioned the survey we have every year, the Mars Associate Survey. We actually measure that my leader has used the Five Principles. So we make sure that there's a degree of role-modeling going on without it being artificial. The art is to not sort of label things that are not relevant, but use it naturally so people can see that it's a benefit in the business and in the daily course of life. So it's quite a big effort. All new joiners to the company get a training as well, as an example.

I think the biggest difference in a way is that when you have the job of a CEO, the buck stops with you.

You know, whatever corporate question comes up, it lands on your desk and the journalist will want you to be behind the microphone and answer the question. And that's very important. In the past, you know, I would be number two or three or four in the team and you know, I could always sit in the meeting and say, well, Grant Reid, my good friend and predecessor in the job, well, he would have to deal with that, yeah? And all of a sudden you realize this lands on your shoulder and there's actually only you who can do it. And in that way the job differs quite a lot. You own the relationship with the board, which also changes a lot. And before I was in a division and I would spend most of my time in that division, I would like to think I was an enterprise leader, but I would spend the vast majority of my time. All of a sudden all Associates report to me and I need to represent all of them. I've also found that as a leader I've had to train and appreciate myself for different things. So in the past I would turn up and present in a meeting the pet care business, which I used to run, and then I would leave that meeting and think, "Okay, that presentation went well." And all of a sudden you need to own the entirety of the meeting and value that you can orchestrate a meeting that makes all stakeholders happy. So what success look like and how you look at yourself as successful or not changes quite a lot in a job like this.

Absolutely, more orchestrating.

Even more so.

Sure.

It's a very, very difficult question. As you speak, I had to think of my first coach, who said to me, "Poul, you have been equipped with two ears and one mouth. Use them proportionately," which I will never forget because she had a point. I think a balance between leading with the head and the heart helps this point. I think trying to create an atmosphere where people feel comfortable expressing their dissent. And yet you always need to ask yourself, because in a job like this, people come to you because they need something.

They need a decision, they need the light to shine on them, they need a budget, et cetera. So you always need to be careful about what is at stake in this very moment. So trying to build relationship with people whereby they can come across authentically and we can have a real conversation and talk about what is at stake for the enterprise. So it's not uncommon in our team that the meeting, a discussion will be stopped, and one of the team members will say, "Hang on, what is going on right now is." And, "Here's the situation, here's the behavior, Poul, that you displaced and here's the impact it had on me. Why don't we do it again?"

Absolutely. It's a significant part. And to this authentic relationship, we spend time to get to know each other.

Every time we have a meeting, we were together last week, we thought we were doing a one-hour check-in about what's going on in my life, so both work life and private life, so people know the mindset by which I and all the other team members come into the room. So we spent two, three days together. It's intense. They are important conversations for ourself, for Mars, for our Associates. So it's important to know what our mind state is. So we spend time to check in with each other, and surprisingly, every single time there are good ideas even for what goes on in our life that is coming to the table, in terms of, "Hey, I can help you with that." And good conversations coming out. So yes, we spend time on the what, we spend time on the how, and the who.

I think always put the company first. You know, it's nice that I'm the CEO, it's nice that Joe does a good job, but we need to act in the interest of the company. And what the company needs in that example that you mentioned, Jean-François, is that Joe needs to move on. So it's my job as the leader to have that conversation with Joe. So we have a process that we simply go through, which is called a management development review, where we look at the performance of all of our leaders, we look at who is ready to take the job now, who is ready to move to another function, has skills where they can move, and who is ripe for move out as well. Those conversations take place, but I think it has to start from a place, what does the organization Mars, Incorporated need? And it's all nice to be the number one of an organization, but it comes with a deep responsibility as well, and you can't shy away from that. And I think this is part of, I would say it's part of a performance culture, but it's also part of caring for the organization. Because if you don't live up to this responsibility about having the best leaders at all level, who eventually is paying the price? The people below, the Associates that work for a leader that is not performing will eventually pay the price, and we can't accept that. That's not kindness from our side. So I think it's a heavy responsibility that all levels of the organization has to carry.

We are three, four mates from Aalborg University that meet every year, and one of them said to me, "Poul, you were always ambitious." So in all honesty, at least they, Kim, my friend, did observe that. I have always been ambitious and curious. I'm a bit of a sports fanatic. I love team sports, I love winning in team sports, and clearly this is part of my DNA. But I never sat and had a plan. At some stage I realized, "I actually think I can do that job a little bit better."

And then I got to that job and then I thought, "I think this could be done a little bit differently." But it has never been any thought-through plan, which I actually think is an advantage.

Most conversations at the lunch table would revolve around football and politics.

That's still the same.

It will be less loud than what it used to be and it would be more aware about who is around you when you have those loud conversations about football and politics. But I think energy has always been around.

And then as part of the leadership journey, you learn a lot about yourself and become much more self-aware about the impact you have on all the people. That's probably the biggest difference.

So I joined Mars, as I said, 25 years ago, and after a couple of years, all leaders that got to sort of general manager of a country were sent to leadership training with a lot of 360, a lot of in-depth psychological studies, and from that moment on was offered to have a coach.

And I took that offer because I thought it was an amazing gift that somebody would actually at work have somebody to develop you, not just as a leader, but as personal development and leadership development does go hand in hand. It was an amazing gift. So it has been very conscious for me, including professors, particularly Ben Bryant at IMD has helped me an awful lot both in team management and personal development and leadership development. So it has been very conscious and an area I have invested a lot of time into.

I would spend time, my current coach, I would spend time with him offsite for a couple of days. We will work on topics. We will probably spend four, five days per year together.

It could be walking in the mountains and discussing a topic where I need to develop a strategy for. It could be an area where I need to develop myself, where he brings psychological insights to me. So it's substantial time. We have the same in our team. We have a team coach that helps us develop as a team. So it's in many different aspects. We also have a 360 process at work where we give each other 360 feedback, which also helps your development. So it's a substantial amount of time. And I found out that you are never there.

You need to constantly develop. There's a toolbox that can always be expanded as a leader and as a person, and I think the investment in how you use that toolbox and expanding is a big part of the leadership journey.

Well, a good family helps.

As a start. Looking after yourself, to really have a notion that if you don't look after yourself, how can you look after others? So I try and stay as fit as I can by doing exercise. It's a bit of a respite. There's no mobile phone when I do exercise, no music on, it's just enjoyment.

Taking moments out where you sit and reflect, very, very low alcohol consumption.

Don't eat too much when you travel. Try and get your sleep. So try and have some basic rules that helps your mental health, helps your physical health, and check in with yourself and find out, you know, where's the barometer right now? Is it in line or are we a little bit off track? So a couple of practices, but of course, I have probably missed more parent-teacher conferences than many people have. Would I have loved to continue to play football longer than I did? Yes, but we started moving country every three years, et cetera. So there are definitely areas where you simply have to let go and say, "I concentrate on my family, my job, and a few friends," and that limits, of course, the scope of your social activities as well.

Yes. I say no often, yes. When you have a job like this, you can spend time doing things permanently. So unless you say no and feel okay with yourself of saying no, because it's often people that with the best intentions invite you to do this and participate in that, et cetera. But if you do that, I think you disappear and your prioritization disappears.

Yes, absolutely. And once or twice a year, I look at my calendar. I look at the time I allocate to various things. I go back to my three to five priorities I want to achieve and I ask myself if the percent of time allocated is high enough to my three to five priorities. It tends not to be, but I firmly believe the fact that I do the exercise probably keeps myself a little bit on my toes.

I am lucky to work with amazing people around me that give me positive energy, that makes me better every day, that I learn a lot from, and that's the reason why I get up in the morning.

Thank you for hosting me.