Reference no: EM132174342

Case: Hershey Aligns Training with Strategy

Hershey Foods is the leading North American manufacturer of chocolate-related grocery products and exports those products to over 90 countries. Hershey sells its products to distributors (such as large grocery and drug store chairns, small retailers, wholesalers, and brokers) who then sell these products to their customers. Hershey's success depends on those retailers doing a good job of promoting Hershey products in theirnstores. Knowing the importance of prudct promotion, HHershey participates in a practive kmown as "trade funding". This practice has the manufacturer reinvest some of its profits back into joint promotional programw with its distributors. For examply, Hershey might provide financial support to a grocery chain to create displays promoting Mother's Day specials or to promote "threee for the prie of two" specials. At the begining or 2002, Hershey senior executives decided that siggnificant changes were needed in this strategy.

Prior to 2002, Hershey's "trade funding" was done on a promotion-by-promotion basis with each customer. The customers felt that the promotional strategies were too complex and Hershey executives felt that it was dificult to decide how to allocate the funds to maximise mutual benefit. in addition, there was no connection between a customer's sales of Hershey products and how much funding they received. Other aspects of the way the customers marketed Hershey's products, such as pricing, shelf space, and location, were not connected to the funding discussions with custtomers. On the basis of these issues and a customer satisfaction survey, Hershey decided to revise its strategy. The key elements of the new strategy were as follows:

i. Hershey and each customer would develop an annual promotional plan for which Hershey would allocate funds.

ii. The annual plan would include a negotiated agreement on issues such as pricing, shelf space, and other marketing issues outside of "special" promotional events.

iii. The amount of funding customers would receive would be based on theri past sales record and ffbaility to execute the aggreed-upon annual plan.

The new strategy was called "Blue Chip" and was introduced at their two-day Sales Summit held in May 2002. Not only was it introudced, it was the main event ad its focus was to provide the entire sales force with knowledge, skills, and attitudes (KSAs) needed to implement the Blue Chip Strategy. interestingly, this event came at a time when Hershey's first-wuarter financial numbers weree down; they were in the middle of a management reorganization; the union workers in the largest factory were on strike; and the sale of the company was being quiely explored. Most companies would put the implementation of the new strategy on hold until they has a clearer picture of how everything would "shake out". What made Hershey decide differently? This wasn't just sales training; it was a change in strategy that signaled to bothe Hershey empoyees and customers that they were changing how they did business. As Bernie Banas, VP of sales at the time, said "We were going through a transition ... it is critical to both Hershey and four customers that we execute the transition flawlessly". This wasn't just training foucsed on skill gaps; it was training that connected directly to Hershey's business goals and strategy.

So what did the training focus on? Before any specific training, it put the need for change into a context that all the sales force could understand and then provided a new strategy that would address the needs. This was followed by delivery of trining, which focused on the key KSAs the sales force would need to implement the new strategy. The discussion of Hershey's strategic business needs included discussions on the following:

i. Areas of customer dissatisfaction with current processes.

ii. A shift from a relationship-based selling process to one that was more data driven.

iii. The new pay for performance-based approach for working with customers.

iv. The increased sophistication of customer buyers in terms of purchasing and negotiating knowledge and skill.

v. The need to include all sources of value and negotiating leverage in discussions with customers.

The Blue Chip Strategy was then described in terms of 1) its benefits to customers, 2) its ability to motivate customers to do better planning and to incorporate all aspects of product promotion in the plan, and 3) Hershey's ability to gain compliance to the annual plans. The training was kicked off by the senior excutives, who directly connected the training objectives to the business needs. These training objectives were based on wht was goint to be needed in terms of KSAs to effectively implement this new strategy. In other words, a future-oriented performance gap was evident based on the KSAs employees would need to implement the new strategic plan, making them highly relevant. The content of thei training was based on the tehnical aspects of the Blue Chip program as well as neggotiation skills. The negotiation skills helped the sales force effectively balance Hershey's interests with themaintenance of a collaborative relationship with the customer. All the training was focused on the pracical application of thenew KASs. Experiential and discovery learning trechniques were used to deliver this training.

The new strategy proved very successful for Hershey as its financial numbers have improved, and so have its surverys of customer satisfacion. The new strategy would not have been successul if the sales force didn't implement it correctly. The training provided at the"Summit" as well as the follow-up training and coachin of the sales teams, was keyy to the strategies' successful implementation. But just as critical were the changes to the internal reinforcement systems at Hershey that supported the changes that werre required of the sales force.

As a side not, Hershey has an interesting training philosophy. They believe that visible short-term victories lead to credibilityy and future funding for long-term training and development projects. One rule of thumb is that every year's trainig budget should include at leasrt one key strategic initiative that is "close to return on investment (ROI)". This could not be made clearer than the June 2008 annoucementt that HERSHEY is once again rshaping its market strategy. Dettails regarding internal training were not available as this was being written, but giben the history, you van bet that they have that base covered.

Question 1: What are the salient issues in this write-up?

Question 2: What made Hershey decide differently by going ahed with the planned strategy rather than put it off until it was more certain of its situation?

Question 3: What were the short-term and long-term goals of the training?