Welcome to Season 9 of the Troubleshooting Innovation podcast. Joanie Spencer, editor-in-chief for Commercial Baking, is spending this season with Darlene Nicosia, CEO of Hearthside Food Solutions. They’re talking about operations, culture and innovation … behind the curtain of co-manufacturing. Sponsored by Reading Bakery Systems.

In the second episode, Spencer and Nicosia uncover the most critical factors in creating a cohesive operating culture.

Learn more about this season here, and listen to Troubleshooting Innovation on Apple, Spotify and Google.

Joanie Spencer: Hi, Darlene. Thanks for joining me again this week.

Darlene Nicosia: It’s great to be back with you.

Spencer: We had an amazing conversation last week. We talked about Hearthside’s timeline and your timeline and what led you to Hearthside, and really got an overview of some of your key operational philosophies.

As an engineer and your experience in manufacturing and procurement, I’m ready to take those big thoughts and drill down, and this week it’s on operating culture, which is a super important topic in our industry. So, I’m excited to dive into this with you.

My first question starts with a statement: There is one specific aspect of a contract manufacturer that really sets it apart from branded food manufacturers, and that’s this notion that the process is the product. What does that mean exactly?

Nicosia: I will first tell you, we love and care for our customers’ brands as if they were our own. We do feel like we are an extension of our customers’ brands. So, if you go into any one of our plants, our teams take huge pride in what they do every single day. Our role is to make food that people love, and to do it with quality, passion and efficiency is where we do our best work.

We work incredibly hard to ensure that we deliver the same quality and consistency every day that our customers expect, and their consumers expect. Many of the things that we produce are well-known brands out in the marketplace. Our teams go through extensive onboarding and training, so they do really focus on the quality and consistency of process. We have a program that has a buddy who helps to coach new associates until they’re ready to operate on their own.

We have systems and processes in place to guide and support our teams in delivering these high standards and expectations so that the finished product, every single time, meets or exceeds our customers’, and ultimately their consumers’, expectations. So, I think that there is a bit of magic to the process in contract manufacturing. But I would tell you, we still love all those brands.

Spencer: My observation in just unpacking your answer, I feel like consistency in the product is even more critical for the contract manufacturer, in some respect, than it is for the brand because you are responsible for someone else’s product, and you cannot get that wrong. It has to be consistent. The quality has to be consistent, the look, the taste … everything has to be just exactly spot on every single time. I feel like there’s a little bit more pressure on a co-manufacturer in that regard.

Nicosia: Oh, there’s no doubt. Here’s the biggest thing: We’re producing over 800 different SKUs every single year. So not only do we have to be excellent at producing some of these products repeatedly, but with the amount of flexibility that we have to drive the variety of the portfolio to produce so many different and unique things consistently, is even a bigger challenge for a contract manufacturer than it is for any of our customers who have a much narrower set of products that they’re producing.

Spencer: So, the Hearthside process, it is long established, and really what you’re known for. I would go so far as to say it’s a big part of what has led to Hearthside’s growth of where you are now with 39 facilities worldwide, right?

Nicosia: Our network today is quite extensive. I mentioned on our first podcast that we really have five different platforms we operate from. We have everything from baked snacks to bars to frozen to refrigerated and fresh foods and a huge packaging operation as well. We really do operate across these verticals in these 39 facilities that we have.

Spencer: So, then what was it like for you, as a leader, to come into such a well-established process? And then, how did your engineering background help you assimilate into that?

Nicosia: It’s interesting. I’ve always been extremely analytical. I call myself a problem solver, and that side of my background has probably been one of the key attributes I have relied on, not only throughout my career, but really as I come into Hearthside and lead the organization.

 As an organization, if I look at Hearthside, we have had this foundational strength in continuous improvement. Every day, our teams are focusing on getting better together. They’re focused on really understanding how our operational performance was yesterday and finding ways to beat it and best it from the prior day. We have a mantra; it’s about being the best at getting better. And so, a part of our approach to using data, analytics and discipline processes is really to drive this operational efficiency. We’re focused on reducing waste, reducing energy consumption, driving our overall performance and OEE to drive that productivity for us and for our customers. It really helped me to assimilate into what is a very strong, continuous improvement culture here at Hearthside.

Spencer: This really resonates with me because I have a teenage son who is a competitive swimmer. And so, I live in the world of no matter how great you are, that becomes your baseline for how you need to improve.

Nicosia: I love the parallel of sports. I think you and I’ve talked about this before, but I was an athlete in college. I think about all the things that I learned from being an athlete, I’m sure much like your son, but you don’t become better every day just because you’re an athlete. You must practice, you have to analyze both the things that you’re doing well, and the things you’re not doing so well. You got to take coaching and have somebody else maybe give you some suggestions on how to change your swimming stroke or ways to improve your overall speed in the pool.

I’m sure those same things resonate in the business environment, for me, I know it does. We talk as a team about what are the things that we’re doing well, but let’s also talk about the things that aren’t going so well and find out why they aren’t working and do after action reviews. Like how you would as an athlete, practicing and thinking through how to get better, our teams are doing that in the continuous improvement culture that we have.

Spencer: I’ve had that conversation with my kid, and he doesn’t listen to his mother. He’s a teenager. So, I can tell him it doesn’t matter how much innate talent you have, you are only successful when you work at it every single day. And he didn’t listen to me until he started swimming in meets, and then after every race, he comes to me and says, “What was my seat time? What was my finish time?” Every single race, he wants to see continuous improvement. Sports, manufacturing and business, I think all have that at their heart.

Nicosia: That is awesome. Well, someday when he’s looking to enter the working world, hopefully there’s a job out there for him that gives him the same reward as he has today.

Spencer: So, we talked about this, Hearthside manufactures in so many different categories. Of course, baking is one of them. With your engineering lens, have you been able to identify operational efficiencies across categories?

As you know this podcast is for the baking industry, so when you look at the other categories where you’re producing, do you see efficiencies that easily translate into baking production? Is there anything that stands out that can be applied to baking? And then vice versa, are there baking efficiencies that you’re able to apply in other categories?

Nicosia: Absolutely. If I look across so many of the things that we’re doing from an operational efficiency standpoint, there isn’t any aspect of our business that somehow isn’t an area of focus where we’re using some sort of engineering or operational expertise in it to make it better. These operational efficiencies have been implemented across all aspects of our business, but if I picked one, I think about so much is happening today with data and technology and how you apply it on the shop floor to really collect real-time processing data. It is about how you understand it and how you’re operating. Not only giving the operators immediate feedback on how a piece of equipment is operating, or where you have defects and what may be causing the defect. It gives you precise information to go and adjust a specific piece of machinery where before this data was available, you wouldn’t know exactly where on the line, part of the process was breaking down. It would take you a very long time to troubleshoot, you’d have a lot of waste because of it, and it would take you a while to get back in alignment.

I think our ability to use real-time information to try and understand why something may not be performing where we need it and then very quickly, make the changes necessary is hugely important for our business. It’s immediately transferable to pretty much any part of our manufacturing operation. I think back to some of the things that I learned back in my days at Coca-Cola, but a lot of it there is very similar when you think about ingredient blending and batching, and how products are made versus how we make them today in a baking operation. I think our ability to really use technology to confirm ingredients, to make sure that we have the right amount of ingredients for a very particular recipe so that we ensure that the product comes off the line has the same consistency is so critically important.

I think there are still more ways that we could use data information, technology and process to really drive efficiency. I think about all the different customers that we serve, and many of them have common ingredients, common commodity ingredients, a lot of them have their own specialized ingredients. But there are things that we could probably do to drive even more efficiency by taking those common ingredients and being able to utilize them in a different way in the batching process. That’s just maybe one example to draw a parallel between my prior life and this life where I see some of the similar principles.

Spencer: Do you think that these efficiencies could eventually lead Hearthside to break into other categories? Or are you more focused on just really being the best at getting better in the categories that you serve right now and just dialing that in and continuously improving that?

Nicosia: I think that is more of a strategic question than it is an operational one. We do have broad capabilities today, but we’re always looking for adjacencies. I think a lot of that comes through the conversations that we have with our customers. We will often talk to them about new things that we see coming into the marketplace. We might see emerging technologies that we’re using in the manufacturing process, and we try to engage in conversations about do we want to scale this? Is this something that we should be making an investment in? Should we build a production line that fully supports this new capability? The biggest base that I have seen innovation just coming out of COVID, is the proliferation of packaging.

If you think about where we were during the pandemic, certainly larger size packs were necessary. Obviously, you saw this change in packaging dynamics to more club size. As people are getting out and about, returning to work to some degree, certainly moving more freely, as well as the compounding impact of inflation, you now are seeing a lot of revenue growth management strategies coming forward. How do you create more offerings for consumers that have affordability packs and things like that? So, we do see a lot of transformational work going on, as it relates to new packaging trends, new packaging sizes and really trying to offer consumers some solutions, while our customers continue to look for ways to grow their businesses.

Spencer: That is interesting. So, you sparked a question for me, when you talk about the things that changed, specifically in terms of packaging, during COVID and then once we got on the kind of on the other side of the pandemic, then things change drastically again. I remember we did the executive profile for the magazine last year. And in that interview, you said something that was interesting, and I loved it. You said, “One of my biggest beliefs is that speed wins.” Speed to market for brands is critical right now. How does operational efficiency ensure speed to market for brands, especially when we’re talking about a company with 39 different plants?

Nicosia: I think one of our biggest strengths is in both our R&D and our commercialization capabilities. They work with our customers daily to utilize all kinds of capabilities. Whether it’s in creating new recipes with better-for-you ingredients, or you think about some new on-trend flavors, or the ability to help customers address inflation with new pack sizes, I think speed to market is important.

One of the great things about our network is that we have R&D capabilities, we have pilot lines, and then we have skilled manufacturing capabilities. And to have the ability to do ideation into piloting something and offering test market opportunities to then being able to very quickly scale and have common partner do that across those opportunities, is something that I think Hearthside does really better than anybody in the industry. It is definitely something that is a competitive advantage for us and allows the customers to partner with us the ability to really not only get speed to market but have the opportunity to scale quickly.

Spencer: This all ties to the overarching topic of operating culture. And culture is something that is getting a lot of attention in our industry lately, a lot more than ever before. As a leader, I’m interested in your perspective, because you’re new to the company and new to the industry after only being here for a year. Where do you see the intersection between culture and operations? Do you think that you can achieve excellence in one without excellence in the other?

Nicosia: I love that question. They’re inextricably linked; there’s no way you can separate them. First, if you don’t own things like safety and quality, and have an operational mindset for driving performance in everything that you do, if you don’t collaborate and drive teamwork, you’re not going to have a successful operation. All those things are the foundations of having a great culture. There is no way to separate them.

I think you’ll find that they feed each other. If you own safety together, you protect your people, but it breeds into quality. Then people understand that you must use those same behaviors to drive quality of product. If you’re driving quality of product, you have less waste. If you are focused on reducing waste, you’re going to have better performance, OEE and everything else. It is absolutely a linked chain.

When you’re doing those things successfully, it breeds this culture of winning, a culture of confidence in your team, a culture of engagement with people. I think that’s what everybody wants to ultimately tap into … the passion of their people and to really be a great place to work. Maybe there’s a pyramid there somewhere, I don’t know.

Spencer: If there’s not, we need to make one. We can trademark it. So, Darlene, from where you sit, how do you think a company can ensure a cohesive operating culture? Specifically for you, how do you keep so many facilities that make so many different products in so many different regions of the world operating on the same standards?

Nicosia: I do think first it is about mission and vision and values, making sure that people know what you stand for. For us, we want to create food people love. And it comes out of our focus on manufacturing excellence. I think when you talk about values, certainly it’s centered around our customers, but it’s focused on people who celebrate and really feel like they’re empowered to drive business performance. It’s about owning safety and things like that. It’s about driving continuous improvement in everything that we do.

I think as you talk to people about where we’re trying to go as a business and our overall ambition, we talk about the mission that we have and the values that we have. In fact, it brings to mind the fact that as we came together as a new leadership team, when I came into the business 14 months ago, we came together, and we also implemented something that is really our growth behaviors.

Our growth behaviors are really founded in things that are around inclusivity, collaboration, being iterative, and this whole idea of being agile and flexible in our work environment, but it is also about continuous improvement and really being the best at getting better, which is foundational to what we do.

When you talk to people about what it’s like to live those growth behaviors and to have a growth mindset and to act on your own, people understand it and it serves as the principles and the ways that they go about doing their work every single day. I think for many companies, people were coming out of the pandemic and were looking for a bit more direction. I think our growth behaviors have certainly served a purpose to help guide people so that they can take the actions that ladder up against our mission and our vision.

Spencer: I was going to ask you what personal investment this requires, but you answered it, with two key words: growth behavior.

Nicosia: That’s great. I would tell you, first of all, you must walk the talk, and the second thing you have to do is be open, be visible and be accessible. That’s certainly something that I try to do in my own leadership style. I spend a lot of time getting out into our facilities and meeting with our teams. I equally spend time out in the marketplace with our customers. I think that openness also is something that allows us to continually take feedback. And then again, go back to the growth behaviors, we reiterate what we’re hearing and what is necessary for the business.

Spencer: I love that. I need a piece of word art that has “Growth Behavior” on it and hang it on my wall because I really like the connotation that comes with those words. I think that’s great. And I think that’s a good note to end on. We’ve covered a lot, and I really enjoyed marrying the ideas of operating and culture. And looking at it from a very technical and operational perspective, but also how those feeds into the culture of Hearthside’s manufacturing. This was a great conversation.

Next week, we’re going to talk about product innovation. I think this is something that is a big differentiator for Hearthside. I’m excited to get your perspective on how product innovation is playing a new role in contract manufacturing.

Nicosia: I look forward to it. It’s been great to talk to you again this week, and I look forward to seeing you next week.