1. A History of Innovation
Kellogg
Company
A History of Innovation
Graham Thompson
Jonathan Seppi
Inho Suh
Charles Stein

2. Background A.K.A. Kellogg, Kellogg’s, or Kellogg’s of Battle Creek
Founded in 1906
Global Headquarters in Battle Creek, MI, USA
Executive Statement:
“W.K. Kellogg put his signature on every package of cereal to express his personal pledge to quality and nutrition. In doing so, he began building trust in the Kellogg brand. A century later, our vision is to be the food company of choice.”

3. Organizational Architecture
U-Shaped
CEO, COO, and VP all serve on the board of directors
Each in charge of a region or department

4. Decision Rights Final decision rights to board of directors
Division of company focused into regional branches
Kellogg North America, Kellogg Europe, etc.
Provides excellent architecture for decision making
Separated by department
Investing separated from accounting.
Properly divided decision rights so specific knowledge can stay relevant

5. Business Environment: Competition
Main Competitors:
General Mills
Nestle
Ralcorp Holdings
Kellogg Company holds 34% market share
Largest of all competitors

6. Business Environment: Diversity
Manufacturers in 18 countries
Marketed in over 180
Use Transnational Strategy

7. Business Environment: Relationships
Requires suppliers to follow code of conduct
Failure to comply requires suppliers to take immediate action to correct deficiency at the risk of termination of contracts.
Focus on ensuring responsible and reliable suppliers
Failing to do so could reflect poorly and have perverse effects on products

8. Employee Evaluation: K-Values
Evaluations are defined by K-Values:
Integrity
Accountability
Passion
Humility
Simplicity
Results
Evaluated on how well their conduct follows these core values and code of conduct
W.K. Kellogg Award given to those who best embody the values

9. Employee Evaluation: Performance Evaluations
The Nominating and Governance Committee is in charge of conducting the performance evaluations of employees
Review performance reviews, comments, and report to the board
Also in charge of selecting the nominees qualified to become board members
Evaluate directors who are subject to renomination
Reviews director’s compensations by performance assessments

10. Incentive Structure: Kellogg Share Incentive Plan
In UK employees may contribute up to 1,500 pounds annually to invest in Firm Stock
Match contributions on a 1:1 basis and buy common stock at market value
Plan expires when employees leave organization
Eligible employees also income and tax benefits if the shares are held for a specific number of years

11. Incentive Structure: Feeling Gr-r-reat
Incentives to “get healthy and stay healthy”
Provides numerous health related benefits to the employees
Health screenings
Flu shots
Health coaching
Exercising
Weight management

12. Incentive Structure: Stock Options
Executive Directors stock options
Directors may convert all available compensation into units which are credited to accounts
Units have value equal to Kellogg’s common stock
Dividend equivalents are earned on the whole units into accounts
Units may be paid in cash or shares of stock either in lump sum or over 10 installments throughout the year
Payments begin when director’s service as director terminates
Limit 150,000 shares

13. Current Issues Cereal recall
June 2010 voluntary recall of over 28 million boxes of cereal
Odd smell and flavor made some customers ill
Approx. 20 complaints
No serious health risks were posed by the problem
Employee Satisfaction
Disconnect between employees and managers because of the size

14. Capacity to Solve Issues
Health concerns dealt with by massive Recall
Efficiency, scope, and speed of recall shows the capacity to deal with problems
Employee issues
Handled by Human Resources
Vast internal scope makes problem difficult
Office politics do exist frequently
Currently attempting to divide the company by region and department to make employees feel more comfortable with managers

15. Future of Kellogg Company
Creating closer relationships between company and its suppliers
Keep organizational architecture clear and structured
Continue to be the world’s leading producer of cereal

16. End
Graham Thompson
Jonathan Seppi
Inho Suh
Charles Stein