Will Tim Hortons’ Massive Business Transformation Hurt its Brand?

March 9, 2017

 

We want to point our readers to a fascinating story this week in the Globe and Mail’s Report on Business. Marina Strauss wrote a detailed report on the 2014 buyout of beloved Canadian brand Tim Horton’s and what it holds for the company’s culture and prospects going forward. It’s a story worth thinking about because of what it says about culture, about the importance of efficiency and data in business, and about the power – and possible fragility – of iconic brands.

Brazilian company 3G Capital – which also owns Burger King – bought Tim Hortons in 2014. Tim’s was Canada’s largest fast food brand, but its expansion in the United States hadn’t gone as planned and growth of sales at existing stores had begun to flatline. It was far from a turnaround job, based on the company’s renowned brand and relatively efficient organization, yet 3G began a radical – the Globe and Mail says “brutal” – campaign to transform the organization through data, personnel, and culture changes.

Long-tenured employees were brought in for meetings as short as 5 minutes and told to justify their contributions to the company, with many being bought out and hundreds more fired over the following months. As of now, estimates suggest that only about half of Tim’s previous regional and head office staffers remain at the company.  3G began instituting extremely rigorous hours with clear benchmarking and very competitive rewards for success. They began intense cost-cutting, with departments building budgets from scratch every year that must be lower than the year before.

Many large companies have undergone similar transformations in recent years, laying off huge numbers of staff and replacing senior management with ambitious junior leadership, while working to cut costs at every stage. While 3G leadership acknowledge that many of the cost-savings measures are short-term gains, with true profits to come from growing the business, they’ve lowered the cost of goods sold as well as their general administrative expenses. At the same time, they’ve changed the corporate workplace, instituting open plan seating and uniforms for corporate employees, and squeezed longtime suppliers.

It’s a story about the cost savings that business transformation can unlock, but also the external costs of some especially-radical transformations to company culture. The Globe story outlines how the Brazilian company’s actions have erased “50 years of corporate culture” at Tim’s in the pursuit of efficiency and profits.

Behind the Globe’s excellent analysis of the events – which are pretty shocking, and likely intolerable to some who value continuity of a strong workplace culture  – the article raises an interesting question: what, exactly, is the value of a strong corporate culture?

It goes beyond office perks like snack carts and foosball machines and into deeper intangibles like philosophy of work, loyalty, and the connections that people make across decades-long careers. Tim Hortons’ brand has been associated with Canadian national identity for decades and their marketing has shrewdly taken advantage. It has a reputation as the place parents cozy up with their kids after hockey games, the place that grandparents meet over cups of tea. It’s a branding feat that’s worth its weight in gold. And one of the most interesting parts of the Globe article is the suggestion that this changing Tim’s corporate culture – which was previously tight-knit, with strong relationships between franchisees, suppliers and corporate even extending into family ties – will have some knock-on effects for the brand. In short: is it possible to square the image of steam rising off a mug of Tim’s Hot Chocolate at a rural hockey game with the image of the “assembly line” of corporate firings the Globe describes?

The jury’s out. It remains to be seen whether this transformation will hurt the much-beloved Tim Hortons brand within Canada long-term. But what do you think? Does a profound change in attitude at the top tend to trickle down to franchisees? Will it affect the brand? Or is this just a lot of fuss about something that happens from time to time in the corporate world – something that employees are prepared for and don’t take too much to heart?

We encourage everyone to check out the article, and let us know what you think! 

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