Interview with Michael O'Hare, chief HR officer at Heineken
David Woods, July 24, 2012
Belfast Boy Michael O’Hare (pictured) wears an emerald green tie, perhaps in honour of his Celtic roots. The province, where two out of five work in the public sector, has not often been associated with producing businesspeople that have set the corporate world alight.
But O'Hare has done just that. He cut his teeth in HR at PepsiCo (which produced other HR greats, including BT's Clare Chapman and CIPD's Jackie Orme), before moving on to head PepsiCo's HR function in the US and then Asia. He also enjoyed a stint as VP HR at PepsiCo food division Frito-Lay and moved into his most recent HR incarnation as chief HR officer (CHRO) at brewer Heineken in 2009.
From his office in Amsterdam, O'Hare devises the global HR strategy for an employer with 70 operating companies and 90,000 employees worldwide. Could he be one of Northern Ireland's greatest business exports? He laughs, admitting: "Probably not. My brother [Eamonn O'Hare] is chief financial officer of Virgin Media."
Despite his evident humility, O'Hare's knowledge of business and HR is impressive, if not intimidating. Having learned about HR in global corporate businesses, his focus on budgets, P&L, acquisitions and key performance indicators is sharp.
He chats casually about business transactions and HR strategy with unrehearsed ease. He has worked in HR for 16 years, with no CIPD or SHRM qualifications. "When I moved to Heineken, the HR department was weak," he offers. "It was an €18 billion organisation, employing 90,000 people and there was a lack of HR processes. I had to redefine everything. The majority of what I have done over the past three years has been plumbing and wiring work that staff can't see - there haven't been a lot of pictures on the walls of the HR house."
But that's not to say O'Hare has been embroiled in process-driven HR - he has shaken up reward strategy twice (he says Heineken is now "world class" on its comp and bens) and is working to change the culture of the organisation from the bottom up.
"Traditionally, Heineken was seen as a job for life," he muses. "But I want there to be a performance-driven culture in the future. PepsiCo is an 'academy company' where people work their way up and then 'graduate' from the company. This is what I want for Heineken. Before, none of our staff had development plans; now 15,000 do.
"I have been forced to put much more structure in place. We need to have world-class marketers to be a world-class brand - but have to understand what a world-class brand can even look like.
"The HR role here is not about being warm and fuzzy. I am no paragon of virtue. I have had to take some risks. In fact, when I first became an HR professional, I knew damn all about HR. But I knew about the connection between business and strategy."
And is the HR department where he wants it to be yet?
O'Hare laughs again: "No," he says. "When I took this role, the HR department was in a toss-up for the worst part of the business. We are not the worst any more. We have gained respect, but HR is a support function, so we will never be the most popular. But I'm not paid to be popular, I'm paid to bring in change for the better of the organisation.
"I have changed the operating structure to take power away from the individual operating companies to a central function. We are a long way from where I want HR to be, but there is a huge amount of effort going in and HR is gaining momentum."
The time is right for a change in gear, considering Heineken's recent growth. Having doubled the size of its operation over three years through M&A, it announced revenues of €17.1 billion at the end of 2011, up from €16.1 billion in 2010, but with profits of €1.56 billion - down from €1.579 billion in 2010. But with growth comes cost and the company's drop in profits could be due to its €900 million increase in expenses in 2011 - mostly in raw materials, consumables and services.
"We are still owned by two families," says O'Hare, "but we have a long-term view. Our stock has doubled in the past three years, so the long-term view plays off."
Growth has come predominantly through acquisition. The most recent big UK deal was the joint purchase, with Carlsberg, of Scottish & Newcastle in 2008. "The company is family run, but global; old, but new; growing in some markets, not growing in others - and this brings huge challenges. But this is a very stable industry."
Global acquisitions of small organisations have meant huge business, with growth coming from emerging markets, including Africa, Asia and South America.
"Emerging markets are experiencing economic growth, high GDP growth and sometimes hyperinflation," O'Hare explains. "Disposable income is becoming higher, but they have lower beverage consumption levels.
"But political instability is part of our business. We are aware of this and of the role we play in these societies. In some African nations, our operations are responsible for as much as 30% of the entire country's GDP."
In December 2011, the company increased its stake in Brasserie Nationale d'Haiti (Brana) from 22% to 95%. And HR was mobilised into the emerging economy of Haiti and its volatile political regime. "In M&A, HR is involved right from the due diligence stages. I have two HR people out there from the start of the purchasing process. Otherwise, it would be naïve - you could find yourself buying a firm with a huge pension liability."
Fundamentally, in spite of its diverse nature, Heineken wants to be seen as a global brand and, as such, global mobility is a high priority for O'Hare and his teams. "Nine out of 10 of our GMs have completed international assignments and some of the places we work are not easy for families. Staff need to be constantly adaptable to change - but we understand the risks and we would never place staff somewhere that is dangerous. At the moment, we have 423 staff on expatriate assignments. They are picking up skills and enhancing the knowledge of local staff worldwide. This is important for the business.
"But we understand the challenges. It is thought 84% of ex-pat assignments fail because of a 'trailing spouse' being unhappy. We are in the process of recalibrating the money we provide, to help with structured schooling programmes and helping them build a social network."
Managing HR across borders is not without hurdles. Each country has a specialist HR team, every region its own HRD. O'Hare speaks to each one fortnightly and meets them four or five times every year.
In more developed markets, the food and drink sector has been suffering from the global recession. According to the Campaign for Real Ale (Camra), 12 pubs close each week in the UK. Heineken has had to react and O'Hare admits there are "huge challenges" ahead, which require a huge PR and public affairs push globally.
"The consumption of beer is shifting from bars to at-home," explains O'Hare. "We are focusing marketing messages on the consumer. We are trying to make our brands more attractive to women. Even if they don't drink beer, they are often the ones buying it…"
The company has just launched a high-level global graduate scheme - choosing 10 entrants from a pool of 20,000 applicants around the globe. In order to even qualify, recruits will need to speak three languages.
O'Hare is focusing on improving the business acumen of his HR departments, with senior HR managers taking part in training days at top business schools. And a group of HRDs in the firm will later this year visit employers in PepsiCo, Avon and American Express, to share ideas.
"I want to culturally challenge them," says O'Hare. "HR has to have intellectual curiosity. Fabulous ideas are coming out of emerging markets and our people have to be aware of these. The HR sector can be too apologetic and people need something to aspire to. HR people can't whine about sitting at the top table if they can't bring a point of view. They need something to aspire to.
"They need to be businesspeople in HR - not HR people in business."