The brand manager of Trix is on the hot seat these days. Parent company, General Mills, is attempting to remake itself by revamping its product line to be healthier and more nutritious. It's one thing to promote the nutritional value of Cheerios, which is made of whole grains and has only a gram of sugar per serving. It's a lot harder for Trix with 13 grams of sugar -- sweeteners are its top ingredients after whole grain corn cereal. Putting teeth into the company's wellness objectives seems like the right thing to do -- the thinking behind this compensation philosophy is that executives rarely take difficult steps to meet qualitative goals unless they have monetary incentives to do so. The flaw in this compensation philosophy, however, is that it may lead to incremental thinking. Why take big steps to transform a business or brand if it will put at risk the ability to also meet short-term financial metrics. If you are the brand manager of Trix, you won't make big changes to the brand to boost its nutritional value, if the result is that kids are less likely to grab the box for a second, heaping helping.
It's a different story if mothers stop buying Trix because of its high sugar content and the brand incurs a significant loss of market share or profit. Dramatic steps will be the order of the day. But this is more accurately described as a turnaround, not a strategic transformation. Strategic transformation -- ahead of market share or profit declines -- is driven by leadership, not bonus plans.
General Mills realizes this and is hedging its bets. In addition to motivating managers to make healthy changes to its current brands, the company is also making acquisitions to change the composition of the businesses. Next to Cheerios and Trix now sits Cascade, a leading brand of organic, high nutritional value cereals. The brand manager of Trix may fail but General Mills can still succeed in its mission by buying brands like Cascade. For more on the story, see the Wall Street Journal link
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