Waking up Sleeping Beauty: the Carcano case

In many family firms, success is intimately linked to the entrepreneur who started the business: the leadership style, methods for selecting collaborators, managerial practices – all these things are inextricably tied to the personality of the leader of the company. So the organizational structure that emerges as a result is highly personalized, inspired more by myriad informal practices that have materialized over time, rather than consolidated management principles. As company size grows and the business landscape evolve, sooner or later the time comes to rethink the organizational dynamics from a managerial standpoint. It can’t be delayed any longer. And this very often coincides with the moment that the head of the company steps down.

The more deeply engrained certain practices are, the more complex it is to manage this delicate transition. With a history spanning over 130 years, and five decades of direct and personal connections between the head of the company and the work force, in addition to deep roots in the community, the challenge would look like an insurmountable one. But in 2012, this was exactly the situation facing Carcano, a long-standing company that produces and processes aluminum packaging, based in Mandello del Lario and Delebio, Italy.

A close look at the history of Carcano will help us comprehend the difficulties involved in instigating change. Originally the company processed metal alloys, but since the early 1900s Carcano has specialized in aluminum packaging, with operations based in Mandello. In the ‘40s, the company initiated a process of upstream vertical integration of the production chain – an unconventional strategy in the industry – by opening a production plant in Delebio, Valtellina for aluminum sheets. In 1956, ownership of the company passed from the eponymous founder to the then General Manager Riccardo Zelioli, with minority shares distributed to some of the other company employees.

For over fifty years, Zelioli remained at the helm of the company, with a management style centered on a network of direct, informal relationships with the work force. Managers and employees were almost all locals who had personal ties with Zelioli, and also extensive experience in the field, but a relatively low level of formal education. As time went by, the average age of company employees rose. And as employees aged so did their skill sets, with no investments in training to update their competencies. What’s more, the lack of performance assessments and incentive systems led to fossilized roles, which were assigned to people more on the basis of their status and their relationship with the boss, instead of their track record.

In 2012, when Riccardo Zelioli died, the realization hit with full force: the company needed to change direction. At this crossroads, it was time to pass the torch at the top. But among the obstacles on the path forward was the fallout from the economic crisis that had struck in 2008 (which hit Mandello harder than Delebio). What’s more, tensions were surfacing among the heirs to the family business and minority shareholders, as the ownership structure became more and more fragmented with each new generation. The new CEO, Ettore Zelioli (Riccardo’s son), was aware that the only chance of saving the company and ensuring its survival was to make a drastic change in the managerial practices and the organization structure.

This is what motivated the decision seek help from the outside. So an external consultant was hired in 2014 and tasked with conducting a careful analysis of the situation to come up with a business plan. In doing so, a number of managerial goals were set: to ensure that the company adopted a long-term development approach; to rework the overall corporate strategy, specifically verifying whether Carcano’s mix of products, markets, and technologies were still sustainable; and to revamp organizational practices and structures in a coherent way, to ensure proper implementation of the plan. The owners found this business plan so convincing, they decided to make a radical move: in October 2014 they hired the consultant on as Carcano’s new CEO. Now it was up to him to put the plan into practice.

The first step in the 2015-2017 industrial plan called for reorganizing the work force; there were too many employees and they didn’t have what it would take to help achieve the new corporate goals. So company and trade unions sat down and drew up a downsizing plan, based on early retirement packages, voluntary resignations and outsourcing for certain roles. At the same time, the company needed an injection of young blood. So new employees were recruited in part via digital channels and selected based on a meticulous analysis of their CVs, to verify their potential and actual competencies. At the top of the company, a new managerial line was established based on functions, with the head of each one reporting directly to the CEO. Each manager was given a broad mandate which corresponded to precise, measurable targets – a clean break with the past. In addition to redefining roles, the company also redesigned the incentive system and introduced a variable component for managers and employees that was contingent on company performance.

New investments were earmarked for training and for hiring qualified professionals. An actual in-house school was established for employees, with a focus on technical competencies as well as managerial topics. As for hiring, the plan was to bring on board 20 young specialized engineers by 2020. To foster internal communication and engagement in terms of corporate goals, the company promoted dedicated committees and events, some for top management and others open to all employees. Last of all, to contend with the issues related to the fragmentation of ownership, an agreement was drawn up among several shareholders which ultimately amounted to 70 percent of shares.

Overall, also in light of the deteriorating competitive context, the company chose to encourage dissemination of an innovative approach in the organization. This was done not only by bringing in new resources, young candidates with better qualifications, but also by delegating more responsibilities and introducing a system of targets and performance assessments.

By 2017, after three years, the new direction of the company seemed to have led to important outcomes in terms of profits and prospects in the medium to long term. But the organizational evolution is not yet complete. Carcano still hasn’t fully transitioned from a “personalized” company to a structure that is fully professional and managerial. This goal must still be top priority in the new business plan for 2019-2022.

• The unique characteristics inspired by the company leader that form the foundation of an organization’s success can fossilize and over time may come to represent an obstacle to change. Adopting an outsider’s perspective, a more articulated structure, and a modern managerial approach are all ways to revitalize the organization.

• Practices for recruiting, selecting, and managing personnel have to be revamped at the same time. A personal relationship with the boss must be replaced by criteria based on efficiency and merit, verified through a careful analysis of competencies and performance. This kind of approach is essential to ensure greater openness to innovation.

• The process of organizational change must not only be planned, but constantly monitored as well. If need be the plan should also be revised and adapted in light of internal resistance, implementation gaps, and the evolution of the external context.