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Heinz offers Pittsburgh workers a buyout if they are unhappy

| Tuesday, April 15, 2014, 4:00 p.m.

Cutting jobs and closing factories have been the most visible parts of H.J. Heinz Co.'s strategy since Warren Buffett's Berkshire Hathaway and investment firm 3G Capital took the ketchup maker private last year.

But a motivated workforce is just as important, the company noted in a regulatory filing Tuesday that identified “making talent an advantage” among the five “pillars” of its growth strategy. The filing arrives as the company offered buyouts to all 775 of its Pittsburgh employees.

The Downtown-based company acknowledged that some employees at the more than 140-year-old company may be unhappy under the strategy, which since June has focused on cutting costs and rewarding employees for producing results.

“Heinz realizes that its new dynamic and results-driven culture, focused on efficiency and meritocracy, may not be the perfect fit for every employee,” spokesman Michael Mullen said of the buyout offer, which employees have until Monday to decide whether to accept.

Mullen said the severance program “is not about reducing jobs.”

“We plan to backfill every person that elects to participate in this voluntary program,” he said.

The program, which offers a minimum of six month's pay to anyone who leaves, is being offered only in Pittsburgh, Mullen said.

“To offer this voluntary buyout right now would make me think that the Pittsburgh employees maybe haven't readily embraced that culture,” said Daria Crawley, a professor of management at Robert Morris University.

The unusual move to offer a buyout to every employee — Crawley couldn't recall another company taking similar action — signals that Heinz is serious about employees being committed to increasing efficiency and performance, and that it will let go of workers who can't keep up.

“Here's a way that we can have an easier goodbye,” she said of the severance. “They have drawn a line in the sand and said, look, we're going to be honest, this is what we need here.”

3G Capital, founded by a trio of Brazilian billionaires, is managing Heinz and installed one of its partners, Bernardo Hees, as CEO last year. Hees had been CEO of Burger King Worldwide, which 3G purchased in 2010, where he oversaw a shake-up in management, cost-cutting and other changes credited with making the fast-food chain more profitable.

Mullen said Hees was not available for an interview to discuss the changes at Heinz.

In the Securities and Exchange Commission filing, Heinz said the five pillars to its success, in addition to fostering talented employees, were expanding sales of its core products of ketchup, meals and snacks and infant foods; growing in emerging market countries; boosting cost efficiencies globally; and increasing cash and lowering debt.

The company also would be implementing an annual budgeting program that requires “departmental budgets to estimate and justify costs and expenditures from a zero base, rather than focusing on the prior year's base,” according to the filing.

Jim Craft, a professor of business administration at University of Pittsburgh's Katz Graduate School of Business, said the voluntary buyout offer may be unusual in its extent, but doesn't appear inconsistent with Hees' history at Burger King or with his shake-up since arriving in Pittsburgh last year.

“Hees brought in his own folks,” Craft said. “We had turnover of a substantial, if not all the senior management of Heinz (who were) aligned with the former culture.”

The CEO implemented a systematic review of all of Heinz's North American and European operations, which led to thousands of layoffs and about a half-dozen plant closures.

Through the end of 2013, Heinz cut 3,400 employees around the world, bringing total employment to about 28,000. It expects ongoing cost savings of about $250 million a year from layoffs, plant closures and other undisclosed “productivity initiatives,” according to a March SEC filing.

Since June, the company has laid off 600 office workers, including 350 in Pittsburgh; closed three factories in North America, which cost 1,350 workers their jobs; sold off private jets; and reportedly axed executive perks. Mullen declined to comment on specific expenses that were cut.

At the same time, the company is investing $28 million in an Ohio frozen-food plant and hired 249 workers there as it shifts production from the closed factories. It also said it planned to add about 220 employees across four other factories in the United States and Canada.

A workforce that is committed to the changes Hees has made, or have what's known as “high engagement,” is essential to Heinz executing its strategy, Craft said.

“There's good evidence to suggest companies with high engagement are more productive,” he said. And likewise, he said a company saddled with a lot of workers who aren't engaged, produce “just the reverse.”

Alex Nixon is a staff writer for Trib Total Media. He can be reached at 412-320-7928 or anixon@tribweb.com.

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