At General Mills, a surprise restructuring in a moment of success

The news in late May ripped through the General Mills headquarters workforce even though nearly everyone was still working at home: Some director-level executives had been laid off.

Shock mixed with confusion since the Golden Valley-based food maker at the time was just finishing a fiscal year with its highest sales ever. In just a few days, it became clear to workers that the company was undertaking its biggest restructuring in six years. Over the next few weeks, thousands would await word of their fate.

Since the 1980s, layoffs happened at General Mills every few years, often because it had too many people in certain roles as it bought or sold businesses. But this time was different. The company not only prospered in the pandemic but it seemed to be operating efficiently, a path that executives wanted.

"It's not as if we had employees hanging around wondering what to do," Jeff Harmening, the company's chief executive, said in an interview with the Star Tribune.

The change now unfolding at the company, he said, "all stems from where we see the world moving and what we need to accomplish."

General Mills, he and other executives said in recent weeks, needs to evolve to focus more on consumer data, online shopping and strategy, including mergers and acquisitions. The global pandemic accelerated the need for change.

There was some overlap with its corporate functions and its global activities, but the restructuring — and accompanying layoffs initially of around 800 of its 35,000 employees — is aimed at creating space on the balance sheet for its newest priorities.

"We are operating from a position of strength right now," Harmening said. "The way consumers receive marketing information, the way they shop is different. You can't meet a changing external environment by keeping everything the same internally. We need to keep changing."

General Mill executives have used buzzwords like "data and analytics," "e-commerce" and "digital marketing" in investor presentations for several years. During the pandemic, those themes moved from pocketed corners of the organization to central pillars.

In 2020, many shoppers searched nearly exclusively online for groceries, clothes and household goods. This produced a flood of new consumer data, said Barry Brunsman, a principal at KPMG's Minneapolis office.

"That burst open the door," Brunsman said. "All of sudden, that abundance of data and the emergence of a broader set of data scientists creates the possibility for people to really think about their model."

General Mills' portfolio skews heavily toward traditional packaged foods that are slow to grow and shaped by demographics. Its success of the past year means little for the future, said Myles Shaver, a professor at the University of Minnesota's Carlson School of Management.

"There were pressures on the company before the pandemic and those things are going to manifest again," Shaver said.

General Mills has a long history of entering other businesses, exiting them and making big changes even as its most popular products — Gold Medal flour, Cheerios, Chex, Trix and other cereals, Betty Crocker mixes — sell steadily along.

In the middle of the 20th century, it made kitchen appliances. By the 1980s, it was a conglomerate that also sold toys, operated restaurant chains and fashion retailers like Talbot's and Eddie Bauer. In 2001, it bought Pillsbury, the other big food maker in Minneapolis.

General Mills today is much more focused with about 90% of its approximately $18 billion annual revenue coming from human food and the rest from pet food, a business it re-entered three years ago by purchasing the Blue Buffalo brand.

Six years ago, the company laid off about 5,000 workers in waves. Investors at the time pushed food-industry companies to slash costs and even hand off some manufacturing.

But the arrival of COVID-19 showed the power of large food producers that controlled their manufacturing and relationships with distributors. General Mills quickly implemented safety measures at its plants to keep lines running just when shoppers ambushed grocery stores in the pandemic's early weeks.

Harmening at the time said the company's workers "stepped up in an incredible and safe way to ensure a reliable food supply and we thank all of you."

As a result of that goodwill, General Mills' workers described a sense of being blindsided by the layoffs. For much of June, workers waited to find out if they'd have a job come July.

On Friday, June 18, all North America workers were invited to join a "pre-status" virtual meeting on June 23 or 24. Following that meeting, each employee would receive an e-mail saying one of two messages: continuing with the organization or displaced.

Employees, who spoke on the condition of anonymity to protect their severance pay, described it as feeling impersonal and cold. Different workers called the process upsetting, cringe-worthy or sad.

Harmening said, "Change is hard. It's hard for our employees. It's hard for me as a CEO."

General Mills is likely to run a leaner operation for several months as it evaluates needs, then starts hiring people back with the desired skills, said Anne Sample, a former human resources executive who now runs Navigate Forward, a Minneapolis firm that helps displaced executives.

"You don't want to go back and do a second restructuring six months after the first one," Sample said. "You don't want to break that corporate trust because the restructuring already changes the relationship between the company and the workers."

Her company is working with several laid-off General Mills executives to find new jobs.

"Talent is pretty sticky in the Twin Cities," Sample said, noting that many will land in other high-level roles locally. Her clients, all at the upper levels, are finding new jobs quicker now than before the pandemic.

General Mills leaders and representatives talk about the restructuring as a move into "connected commerce." That's a somewhat broad term that can mean different things to different industries, Brunsman said.

For consumer goods companies, connected commerce generally means getting closer to consumers to understand who likes what — and where.

In the traditional sales model, a food manufacturer like General Mills depends on its retailers to relay back information to them about what sort of products are selling. Or, by buying third-party data.

"That was, at best, a loose connection between the consumer goods company and the people they are actually trying to please with their product," Brunsman said.

General Mills now harvests vast troves of data from two of its own sources: its digitized Box Tops for Education platform and its popular in-house recipe websites, BettyCrocker.com and Pillsbury.com, which saw a huge uptick in site visits during the pandemic.

Armed with detailed data — and with employees who specialize in analyzing it — consumer goods companies can rethink their entire distribution model.

"So instead of thinking about distribution into a region, you can think about distribution into a neighborhood," Brunsman said.

For the U's Shaver, whose research has included how the Twin Cities became home to so many large, publicly traded companies, the latest makeover at General Mills is no surprise.

"Most successful companies are constantly keeping an eye on how they're evolving," Shaver said. "If General Mills was not evolving, I would be much more concerned."