Let the Good Times Roll: Novelis’ Talent Turnaround

In 2007, aluminum-maker Novelis stood on the brink of bankruptcy, and its talent management function was the equivalent of a rusty old can.

Effectively discarded from metals giant Alcan in a spinoff a few years earlier, Novelis had a global talent management budget of $0. There were no defined expectations of leadership, a high potential program or talent review process. There wasn’t even a careers website.

But new CEO Phil Martens arrived in April 2009 and began polishing up talent management at the Atlanta-based company. With a new team of human resources professionals, Novelis in recent years has launched a talent strategy that includes a sophisticated mix of global talent reviews, succession planning and expansive recruiting.

The push has come amid broader changes at Novelis, such as a new global business strategy, more matrixed management and greater emphasis on employee performance.

The aluminum company and its people management efforts have not been a complete success. Earnings have been uneven since Martens took over (Figure 1), it’s unclear exactly how much the talent investments have paid off, and some employees have chafed at the overhaul. But attrition is a mere 2 percent annually, with about 4,000 candidates applying for the company’s jobs every month.

Moreover, company insiders are confident the talent overhaul is central to the way Novelis has gone from losing $1.9 billion in 2009 to four straight years of profits and its position as the world’s largest producer of rolled aluminum.

“The talent management process is a huge factor in getting alignment of your key people internally and driving their commitment and their energy and their motivation to deal with what were some pretty difficult business circumstances for a long time,” said Derek Prichett, Novelis’ vice president of global recycling and a 20-year company veteran.

Turning Things Around
Novelis buys scrap metal from aluminum producers, melts it and rolls it into sheets. The company says it shipped 2,838 kilotonnes of rolled aluminum in 2012, generating sales of $11.1 billion that year, or about 17 percent of the global market. The company’s end-use markets primarily include packaging, automotive and electronics. Its aluminum can be found in beer cans, casings for flat-screen TVs and Range Rovers.

Novelis is also among the largest companies for used beverage can recycling, a practice increasing in popularity because it allows manufacturers to sidestep the energy-intensive act of extracting metal from ore amid higher prices for fuel oil, natural gas and electricity.

Much of why Novelis had to build its talent management function from scratch has to do with its choppy evolution as an independent corporation.

Novelis was incorporated in 2005 as a spinoff from Canadian mining and aluminum producer Alcan Inc., which was acquired in 2007 by Rio Tinto Group and refashioned as its Montreal-based subsidiary, Rio Tinto Alcan.

Although the spinoff included solid assets from Alcan’s previous rolling division, the company struggled out of the gate. “What we didn’t have was an executive management team who were experienced in running an independent, global business,” Prichett said.

Instead, the company’s top-level leaders consisted of regional executives who were asked to quickly move to global roles. What’s more, almost immediately following the spinoff, Novelis entered into a number of bad business contracts, creating a significant financial drag on the company. “As a result, we were not investing in our business, we weren’t growing, we were very conservative with cash management,” Prichett said.

People management didn’t just suffer in this climate; it hardly existed, said Joanne McInnerney, Novelis’ vice president of talent management. “There was a global HR team of three people,” she said.

The early struggles made Novelis a prime takeover target. And in 2007, Hindalco Industries Ltd., the flagship company of the Aditya Birla Group, a multinational conglomerate based in Mumbai, acquired the company for $6 billion, according to published reports.

The acquisition, while helpful financially in the fact that Hindalco immediately injected cash to stabilize the business, did little initially to address Novelis’ decentralized corporate structure.

In 2009, Hindalco hired Martens, a trained mechanical engineer and 18-year veteran of Ford Motor Co., as Novelis’ CEO. His mandate: turn the company around. His strategy: create a culture centered on a cohesive environment by building a robust executive talent team and a structure that would promote the organizational capabilities needed to make the business successful.

Among Martens’ first orders of business, McInnerney said, was to hire Leslie Joyce, who now serves as Novelis’ chief people officer. She hired McInnerney as well as Bruce MacLane as director of global talent acquisition.

Martens spent his first 100 days visiting the company’s various plants, which span nine countries and four continents. He also held leadership conferences with the aim of setting an aggressive agenda to change Novelis’ disjointed corporate culture.

At a leadership conference in Miami shortly after taking over, according to an interview Martens gave with the New York Times in October, he combated the fragmented culture by printing T-shirts that said “One Novelis.”

Said Martens in the Times interview: “I told everyone at the end of the day: ‘On the way out, there are tables out there with new shirts. If you want to come in to the meeting tomorrow, you have to have it on. If not, you can go find something else.’”

Talent to the Rescue?
In addition to establishing the company as “One Novelis,” McInnerney said four other elements encompassed Novelis’ turnaround strategy. Novelis would focus on core premium products; pursue growth through capital investments in emerging markets; establish itself as a leader in recycled content; and expand its brand.

The ultimate goal, McInnerney said, was for Novelis to double its profitability between fiscal 2011 and 2016. And none of it, she said, was feasible without a comprehensive talent management function.

Once the executive team was established, McInnerney said the function aimed to design a talent strategy by building a foundational infrastructure to help Novelis follow through on its newfangled mission.

The strategy included three parts: deployment, acquisition and development.

Deployment involved initiating Novelis’ first global talent review. “Everyone hoarded their talent before,” McInnerney said, reflecting on the prior decentralized nature of the company. The first talent review allowed the function to take misplaced talent, identify their strengths and place them in markets that would benefit the company’s new strategy the most. Novelis now has a global talent review every six months.

The second phase — acquisition — began in 2009. Because Novelis previously had no careers section on its website, McInnerney said the function started by building a basic Web page with a simple resume capturer. As the first few months passed, the function added a comprehensive global applicant tracking system integrated with job boards, assessments and standard interview tools.

McInnerney said the ultimate goal during the acquisition phase was to expand hiring to form a rich employee population centered at Novelis’ headquarters, which was moved from Toronto to Atlanta. In 2009, Novelis’ Atlanta office housed roughly 75 employees; by 2013, there were 400, including scientists at the company’s brand-new research and technology function, as well as human resources, information technology, procurement and supply chain employees.

“All of that was built from the ground up,” McInnerney said.

Perhaps the most ambitious of the three talent strategy phases would be development. The phase began with what the company termed its “Leadership Essentials,” launched in April 2010. These represented the core leadership traits desired to take Novelis out of survival and into growth.

They are: leads as one Novelis; demonstrates character; delivers results; drives operational excellence; puts safety first; champions talent; and accelerates change.

Once created, these characteristics acted as a base for an in-depth assessment of Novelis’ leadership pool — a process McInnerney said led to the creation of five global development programs open to all Novelis workers and dedicated to high-potential employees.

“We built high-potential executive programs to really be a culture enabler and break down those silos,” she said, “but also to enable those executives for what was going to be tremendous growth in the industry and in our company.”

The leadership development programs would reach every geographical region and employee level. The most significant program to date, the Global Leadership Program, or GLP, would be for its most top-level leaders.

With a focus on global strategy — a business component essential to Novelis’ desire to expand its reach in emerging markets — the GLP aimed to create a truly global leadership experience, McInnerney said. Using techniques and content from Duke University as well as content created by executives internally, the program now lasts a little over a year and is customized to the company’s specific business needs.

Participants attend several intensive sessions around the world for a few weeks at a time, said Prichett, who recently completed the program. Between each in-person meeting is a project sponsored by a Novelis executive that aims to build off session content while also tackling specific business issues faced by the company.

“We were formed into teams and each team acted as kind of an internal group with some kind of mandate,” Prichett said. “We were given some sort of business problem. In our case, as an example, we were asked to make recommendations about what our asset footprint should look like in 2020.”

To date, the company says the following GLP recommendations have been implemented:

• Novelis’ sustainability initiative was created in May 2011 to improve the life cycle impact of the company’s aluminum products to meet targets.

• Novelis’ Chief Technical Officer Organization, which was created in January 2012 and includes the appointment of a chief technical officer to recognize business opportunities at the intersection of R&D and manufacturing.

• And finally, in May 2011 Novelis implemented what it calls footprint optimizations, a strategy of investing in core premium products and divesting “noncore” assets.

Emilio Braghi, Novelis’ vice president of operations, said an indirect but equally valuable result of programs like the GLP is the relationship building and internal information gathering they provide. “The training very much closed the gap between the awareness of company strategies and objectives and our individual activity,” he said.

A Work in Progress
Not everyone gives full credit for Novelis’ turnaround to the development of a global talent management function.

Jeffrey Cramer, a fixed income analyst with Morgan Stanley who covers Novelis, wrote in an email: “I’m guessing that [the creation and growth of talent management] helped, but I feel contract restructuring with its customers and a more robust risk management infrastructure have been the primary drivers.”

Indeed, at about the same time Martens took over as CEO, much of the previous financial strain had subsided. Most of the bad contracts were renegotiated and “we got rid of some of the things that were causing us to lose money,” Prichett said.

Moreover, not all employees have embraced the change, as shown by a number of postings on the employee reviews section of Glassdoor.com.

“Not employee oriented. Canceled bonuses for many employees while executives got millions in stock options. Now they’re discontinuing medical for retirees,” reads one anonymous entry from a former employee of five years.

“Matrix organization is not working. People in Atlanta office, with no experience, are directing employees with 10-plus years of experience,” reads another from a former 10-year employee with the company.

Additionally, Martens’ approval rating on the site is a paltry 35 percent, although that figure is derived from just 17 ratings from a company of more than 11,000 employees.

In response to these comments, McInnerney said the culture shift has many long-term Alcan employees upset. The previous culture was a bit less performance oriented and more “service, tenure, entitlement” oriented, she said, adding that a lot of these issues are on “a better path forward.”

Prichett also acknowledged some of the headwinds that come with massive culture change, especially when it comes to the shift from a traditional hierarchical structure to a matrix organization, designed to promote a horizontal flow of skills and information.

“I don’t think the organization is fully comfortable with the matrix yet,” he said. “We’re still in a growing process, and it creates some confusion about who’s doing what, who’s ultimately accountable for certain decisions.”

To be sure, many of the reviews on Glassdoor express satisfaction and optimism about Novelis’ future. Prichett and McInnerney share that optimism, especially when it comes to the role talent management should continue to play as it continues to work toward its profitability goal by 2016.

The company reported a net income of $116 million at the end of fiscal year 2011, according to filings disclosed on its website, compared with a net loss of $1.9 billion in fiscal year 2009. At the end of fiscal year 2013, the most recent year results were available, net income was $202 million.

By these measures, Novelis is well on its way to its profitability goal of $232 million by fiscal year 2016.

Prichett said although most external observers won’t necessarily place a high premium on the role of talent management in Novelis’ turnaround and subsequent growth, internally it has been significant. He said it is a mantra the company’s most senior executives, including its CEO, have preached on a day-to-day basis.

When asked what the next big challenge is from a talent management perspective, McInnerney said: “Just using the analytics to understand the workforce, understand our market dynamics and to be two or three years ahead of the curve like we were when we started this journey. Just move fast. We’ve got to be five steps ahead of the business.”

Like going from an old can to a Range Rover.

Recycling Hits High
The rate at which the United States recycled aluminum cans hit a 20-year high in 2012, according to an October report by a consortium of industry groups, including the Aluminum Association, the Can Manufacturers Institute and the Institute for Scrap Recycling Industries.

The U.S. recycled 62 billion cans in 2012, the report said. That’s equivalent to 67 percent of the 92 billion cans produced that year. The U.S. rate still trails that of Brazil and countries in Western Europe.

Novelis said it recycled about 54 billion used beverage cans in its fiscal year 2012, which runs August to August. The company’s goal is to use recycled material for four-fifths of its production by 2020. Today, about 47 percent of its product comes from recycled material.