The Big Shift: From Farming Co-op to IPO

I’ve always been an old soul. Even when I was young, I imagined ending up in a suit and tie, with a nameplate on my office door and secretary at the ready. But when it finally happened, in 2007, it still felt strange. I was in my late 20s and had just accepted a job that came with that suit and tie, that nameplate on the door, and that poor secretary — who I didn’t know what to do with, since I knew how to use both a computer and a telephone. I had felt like an adult since I joined the Marines out of high school, but now I looked like an adult, too. Even though it wasn’t a big change, it felt like one.

The company that had hired me was in the process of going through a change of their own: the almost unprecedented transition from a farmer owned cooperative to a publically traded company.

Diamond was founded as a grower cooperative in 1912 as a way for California walnut farmers to use increased volume and brand recognition to set better prices. Diamond was originally headquartered in Los Angeles, but they eventually moved north and discovered that the area roughly between the San Joaquin Valley and Redding is one of the best in the world to grow walnuts. Through strong production and sales, they came to control one third of the world’s walnut market.

Diamond Walnuts, Los Angeles, circa 1915

But by the late ’90s, Diamond’s growth had stagnated. A merger with another co-op had proved disappointing, and the board was getting frustrated with a lack of capital to invest in growth. In 2005, the decision was made to go public. The IPO offering was a success and the company now had the funds it needed to improve infrastructure, grow through acquisition, and, most complicatedly, shift away from bulk products (like walnuts for baking, which had long been Diamond’s staple) to higher margin products (like deluxe snack nuts).

Diamond Foods IPO, 2005

It was in the early stages of this transition that I was hired as a sales manager for Diamond. I left my job working with the Dutch growers, moved from Carmel-by-the-Sea to Sacramento (it’s a testament to my then-girlfriend/now-wife that she didn’t complain about moving from one of the most beautiful places in the world to, well, Sacramento), and began my intense education in what it means to institute a change in culture.

Up to this point, I had used data to institute change. In the Marines, I helped build a supply chain management system that vastly improved the synergy of the unit. With the Dutch growers, I sparred with Walmart’s supply chain software to optimize produce sales. While those changes involved people, my core job was using data. My job at Diamond involved lots of data, but my core job was working with people.

I needed to work with manufacturing, supply chain, finance, H&R, accounting, and customers to help the company move from serving the growers (which is what co-ops do) to serving the shareholders (which is what publicly traded companies do). I knew that I needed to understand the people that made up each group before I could start collaborating with them.

In hopes of accomplishing this, I conducted assessment interviews on all levels of the supply chain. I talked to vice presidents, grower representatives, warehouse workers, production forecasters, and lots of folks in between. Of the over two dozen interviews I conducted, two stand out in my memory over the rest. One took place in the nicest office I’ve ever seen, in the Financial District of San Francisco. The other took place hanging from the ladder of a walnut silo four stories above the San Joaquin Valley.

Early in my job, I went to visit the company headquarters, located in the TransAmerica Building — that iconic pyramid that skies over the San Francisco skyline. While I was there, I spent 20 minutes with the CEO, who was responsible for spearheading the move from co-op to IPO. I remember that he had a strong vision for how he wanted the company’s vision to change. And I remember that view: 270 degrees of tall glass walls facing the Bay Bridge on one side and the Golden Gate Bridge on the other. You could see almost the whole of San Francisco. But you couldn’t see to Chico or Marysville or any one of the countless small towns that had been the lifeblood of Diamond for over a century.

TransAmerica Building, San Francisco

Soon after meeting with the CEO, I toured a massive Diamond production facility in one of these little “Diamond towns” with the factory’s operations manager. It’s hard to put into words how big the facility was and how much was going on simultaneously. Walnuts on conveyor belts all over the place, sacks of walnuts on every side of you, people in action everywhere — inspecting, bagging, and moving walnuts.

Like corn and other less-perishable crops, the walnuts were kept in towering silos, so that the newer crop went on top, and the older crop was taken from the bottom, to ensure the full harvest went out before it turned. The operations manager asked if I wanted to go to the top. Since I believe in doing everything you reasonably can to understand the people you’re working with, I followed him along a metal ladder forty feet up the side of the silo.

The operations manager had been with Diamond for 35 years. He was insightful, knowledgeable, and, most of all, proud of what the co-op had accomplished. He told me about the silos and the harvesting and the advances they had made in his time there. As I was climbing and listening and grunting and peeking out at the wide-open space of the valley below, I began to get a sense for how difficult the transition that Diamond wanted to make would be. It was clearly important to this man that he served the growers. It’s how I imagine United Autoworkers in Detroit felt at the height of General Motors. This was a co-op and he was an important part of that co-op. He took pride in his work.

I left the meeting feeling discouraged. I knew that even with good communication, there wasn’t a ton I could do for the operations manager. The company was changing. When somebody’s job changes or becomes superfluous for the good of the company, there’s only so much that can be done to involve them in the new direction.

At the same time, I knew that the people in charge weren’t paying enough attention to involving everyone in the organization they needed to involve in the transition. And I knew that, as a sales manager, I wasn’t in a position to do much about it. The company’s transition was successful in one way, as it did lead to growth, but unsuccessful in another way, as it ended up alienating people who didn’t need to be alienated.

Walnut Processing Facility in Stockton

In the course of my experience, I learned three key things about instituting large scale culture change:

1) Assess before you act. While I still had a lot to learn, one of things I did right was to conduct those interviews. I spent a full two weeks interviewing people before even looking at the data, because to make change in an organization you need to understand the current reality. A mentor once told me: “You can only move at the speed the organization will allow.” If you try and implement a wave of new ideas that will change current policies and procedures AND go against current paradigms, you will fail.

2) Communicate with people across the organization. It’s a well-known statistic in the business world that over 50% of change efforts fail. The reasons for failure are as abundant as they are complex. But among the most common reasons for failure are:

· There’s not enough of a sense of urgency about why the change is happening

· The right people aren’t involved

· There isn’t a compelling vision

The common thread among these three is the importance of communication. It’s vital to communicate to all levels of the organization why it’s imperatives that the change happen NOW. It’s vital to use the knowledge of people across the organization to determine who should be the key partners: whether they be vice presidents, production forecasters, or warehouse workers. It’s vital to communicate within leadership to make sure the vision for change is coherent and convincing enough to inspire the organization.

3) Know what you don’t know. Your late 20s are a great time to begin to recognize your strengths and weaknesses. During my time at Diamond, I began to recognize that, though I had a knack for turning data into actionable intelligence, my strength was not in analyzing data on its own, but in using data to manage people. I also realized, more frustratingly, that I didn’t yet have the tools I needed to manage the type of change happening at a global company like Diamond. But I wanted those tools. Luckily for me, it was at Diamond that I met my mentor: a street-smart Englishman dressed in French collars and designer suits, who would teach me how to navigate the etiquette of Japanese business cards, Spanish lunches, Scandinavian negotiations, and the ins and outs of managing change in a global market. But that’s a story for next time.