Академический Документы
Профессиональный Документы
Культура Документы
for the
Plastics Industry
Roger F. Jones
Endorsed by
CRC PR E S S
Boca Raton London New York Washington, D.C.
2002073734
CIP
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Dedication
iii
Foreward
vi
Technical competence pervades all SPE activities, not only in the publication
of books but also in other areas, such as sponsorship of technical conferences
and educational programs.
Michael R. Cappelletti
Executive Director
Society of Plastics Engineers
Technical Volumes Committee:
Vaman Kulkarni, Chairperson
Isobel Wayrick, Reviewer
GR Technical Services, Inc.
Preface
This book is written for a broad audience in the plastics industry, including
aspiring professionals who wish to become managers, managers already in
place who wish to round out their skills, consultants to the industry, and
university students and faculty in plastics engineering and polymer chemistry
departments. It is meant to be applicable to managing companies throughout
the wide range of sizes that comprise this industry. In the book, I use the
term manager rather than executive because I believe the word is more
inclusive. I define managers as including department heads as well as company
officers (whom I consider to be executives). Additionally, managers direct
other managers, while supervisors direct individual workers and professionals.
The term management refers to the management group as directed by and
including the senior executives and chief executive officer (CEO). Most of the
material presented here is directed toward management, but some is still
applicable to first-level supervision, though this is not the intended audience.
A number of general management topics are discussed within the overall
context of management in the plastics industry. The reader who will benefit
most has at least some passing familiarity with supervising others.
For purposes of this book, the term plastics industry is defined as referring
to the development, manufacture, compounding, and distribution of plastics
materials and their processing or fabrication into items. Polymer processing
machinery, additives, and other suppliers to the industry are described in
somewhat less detail due to the enormous variety of firms comprising this
field and the fact that their involvement in plastics is frequently as divisions
or business units of corporations whose main business is not plastics. This
structure was a necessary compromise in order to keep the book from being
overly broad and within the limits of my own knowledge. The material
presented is based on my experience, extensive research, and interviews with
managers throughout the industry. A bibliography is included that lists some
of my favorite management books and a number of my own publications that
vii
viii
provide more extensive background information for some of the topics that
appear in this book.
I recognize that the plastics industry is in the midst of dramatic and painful
changes due to the impact of increasingly globalized competition as well as
an unusually strong, simultaneous slowing of the world economy. While these
factors are speeding up the rate of change, they do not overturn the fundamental principles of how to manage successfully in the plastics industry.
In general, I have tried to describe typical situations while noting some of
the more interesting and important exceptions. For some of the more egregious
management errors noted, the names of the companies involved are omitted
but the incidents were real. The case histories are based on interviews with
senior executives in the respective companies who were willing to be interviewed and illustrate some examples of successful management in the industry.
Roger F. Jones
Broomall, PA
Acknowledgments
ix
xii
xiii
Contents
Introduction ..................................................................................... 1
1.1 Why a Management Book for the Plastics Industry? ............. 1
1.2 Management as a Career .......................................................... 3
1.3 Six Things Management Must Do ............................................ 7
1.3.1 Organize the Business to Meet Market
and Customer Needs...................................................... 8
1.3.2 Recognize and Manage Change .................................... 8
1.3.3 Develop Company Goals and Get Everyone
Onboard with the Plan ................................................ 10
1.3.4 Continuously Appraise Performance and Provide
Feedback ....................................................................... 11
1.3.5 Lead by Example.......................................................... 12
1.3.6 Ensure That the Business Is Increasingly Profitable .. 13
xiv
xv
8.2
8.3
8.4
8.5
8.6
8.7
8.8
8.9
xvii
Chapter 1
Introduction
1.1 Why a Management Book for the Plastics Industry?
A great many excellent books on management are written from a general
standpoint but none appear to deal with the specific conditions of the plastics
industry. The plastics industry became a major part of the world economy
during the last half of the 20th century. In the United States, it is the fourth
largest sector of the national economy. Although the extensive industry restructuring that began in the 1990s led some to believe that plastics finally had
become a mature business, this is not an accurate characterization. No industry
that normally grows at multiples of the gross domestic product (GDP) and
finds new uses virtually every day meets the classic economic definition of
maturity, which is something that has reached market saturation. Nevertheless,
the plastics industry is being affected by the globalization of competition and
the unusually deep, prolonged, simultaneous worldwide economic slowing
that began in 2000, but these are conditions affecting nearly all manufacturing
industries. Continuing fluctuations in feedstock costs and deflationary pressures
on selling prices of materials are putting heavy strains on profit margins, in
addition to the characteristic cyclicality that has been the bane of both the
chemical and oil industries for many decades.
Indeed, the plastics industry is no longer a specialty business overall, and
some segments have become commodities. In fact, restructuring is being driven
by the transition of a number of former specialty segments into semi-commodities. Management of each of these types of segments and the transitions
between them presents a number of challenges that differ significantly, as
well as differing from those found in truly mature materials industries that
grow at the GDP rate or less. This book tries to highlight these differences
and how to deal with them effectively. Other plastics industry management
issues that differ importantly from more general treatments of management
topics include the foundations of industry segments, the way product and
1
process technology defines the business one is in, organization and staffing,
and the effective use of patents and trade secrets. Some more general management issues are also included to present the plastics concerns in a seamless
matrix, as well as to indicate my point of reference.
Management is as much an art as it is a science. Although one can and
does measure just how successful the management of an enterprise has been
via financial analysis, the building blocks of the management process that
produces these results are human relationships, which cannot be reliably
quantified. Even so, a number of management principles can be applied with
a reasonable expectation of results. One may discover these principles and
when to apply them through trial and error, or learn from the experience and
insight of others. The book will endeavor to explain which management
techniques generally work and which do not, based on the observations and
experiences of many managers in the plastics industry. While most of these
techniques are essentially timeless, the impact of such relatively recent
advances as globalization, the Internet, and information management is incorporated into the picture. The emphasis is on the practical and the applied,
rather than the theoretical.
Benjamin Franklin wrote in Poor Richards Almanac, Experience keeps a
dear school, but fools will learn in no other. To add to that thought, the
most expensive mistakes are those made by senior executives. This book will
try to point out how to avoid making more egregious errors without becoming
paranoid about making mistakes. It is surprising but readily observed that
some specific errors seem to be repeated over and over again in the plastics
industry, mainly in the areas of acquisitions, but also in transitions from one
type or size of business to another. It would seem that most of these seeming
oversights stem either from ignorance or from oversized management ego.
The most common or outstanding lapses will be analyzed in sufficient detail
so that you, the reader, can have the benefit of someone elses tuition bill.
However, this exercise is not conducted for the purpose of holding anyone
up to ridicule, because everyone makes mistakes in life. The authors expectation is that you learn from your mistakes as well as those made by others
and do not repeat those mistakes blindly. As George Santayana told us, Those
who cannot remember the past are condemned to repeat it.
The plastics industry is founded on the bedrock of science and engineering.
Those who work in this industry are, by and large, scientists and engineers
who have learned the enormous value of the scientific method and to apply
it to all aspects of their work. The scientific method calls for the thorough
testing of a hypothesis both to prove and to disprove it before communicating
the findings to colleagues for comment and criticism. Indeed, a hypothesis
cannot be considered proven until other scientists and engineers have been
able to duplicate those same results through independent testing. The objective, in all cases, is to establish an explanation of a finding and also the limits
of the understanding of those findings. The scientific method can and should
be applied in management wherever feasible, recognizing, of course, that the
human factor will introduce variables that cannot be controlled. Therefore,
results may be reproducible, say, only 70 times in 100 tries, but never 99 out
Introduction
Failing to limit their list of objectives to those that are critical to success
and can be done only by the manager
Seeking out and accommodating every point of view or splitting the
difference between them, rather than deciding on a single course of action
and carrying it out
Not being competent to handle the work
A combination of the above
Introduction
Introduction
may often observe that the second generations are usually successful in
carrying on family businesses but the third generations are less apt to show
interest and more prone to sell it.
One myth about successful managers deserves mentioning, if for no other
reason than to refute it. It may be best known from Leo Durochers famous
line: Nice guys finish last. This is really just a variation of the fiction that
managers get more results through fear and intimidation than by being nice.
Frankly, this is nonsense. While it is true that fear and intimidation will work
(for a short while), it is also true that both subordinates and managers will
burn out quickly in such a work environment. This philosophy might be a
holdover from a medieval army command mentality that forcing the troops to
storm the battlements was best achieved by making the foot soldiers understand
that their chances of survival, however slim, would be better by attacking the
enemy than being shot or stabbed from behind by their own officers. The
record shows that there are plenty of nice guys who finish first (because they
are good managers). The usual mixture of human personalities found in
management positions ensures that both kinds will be present. Managers who
cannot focus on the long term are not thinking of the best interests of their
companies, stockholders, employees, customers, or even suppliers.
Introduction
Many forms of change are gradual and therefore not obvious. These are usually
internal, such as the effects of growth (or the lack of it) on the company
culture. One should be regularly looking for telltale signs that they are reaching
the point that they require action. In the case of growth effects, the signs can
include declining sales, excessive late product shipments, low employee
morale and high turnover, quality problems, infighting, and turf wars between
company departments. Management must deal promptly with these problems
before they damage the company, attacking underlying causes as well as
dealing with the symptoms.
10
Often, reorganization is called for and possibly a redefinition of the companys mission. All of these situations also involve the five other responsibilities
of management.
Management must be alert to distinguish between genuine changes in the
business and those that appear to be happening because everyone knows
that they are taking place. It is not unique in the long history of business to
find people swept up by fancied and imagined changes that required specified
actions, and the problem is particularly alive and well today. When it seems
that every company around you is restructuring, it takes courage to recognize
and state boldly that your company may not need to do so. Do not get caught
up in fads. By the time a technique becomes a fad, its principal usefulness
(usually nothing more than shock value) is likely to have passed. The hype
surrounding the advent of e-commerce is a good case in point. E-commerce
was introduced a few years ago as something every company must embrace
or go out of business. This quickly proved to be false, but a number of people
were caught up in the hype and lost a lot of money before discovering that
it was a concept long ahead of its time. People in business cannot afford to
ignore reality in favor of their fantasies for long. Reality seems to have a way
of catching up much more quickly with businesses than it does with some
other endeavors.
Introduction
11
reviews (e.g., monthly) are essential. More detail on business plans is contained
in Chapter 5.
The goal setting and planning of subordinates are often best when done
from the bottom up within the framework established by management, including stretch goals. People who have some say in the development of their
goals and plans, will usually accept them far more readily than if they were
imposed from above. When someone cannot or will not accept reasonable
goals and plans, then it is time for that person to move on to another company.
Life is too short for anyone to continue to work in a place where they are
unhappy and creating dissension. That goes for management, too. If you are
fundamentally unhappy with your own situation, then you cannot do your
job properly and need to make a career change.
Remember that most people respond to what they perceive to be their
own self-interests. There is nothing immoral or shameful in this; it is a normal
fact of life. If people do not look after their own interests, it is unlikely that
anyone else will. You must show them that working as members of a team
toward common goals is indeed in their self-interest.
12
meeting that lasts less than an hour is a good way to supplement regular
informal brief conversations plus brief monthly written reports. An electronic
office database can be useful in keeping track of what is happening within
the company. Help your subordinates to develop a sense of when policy
guidance is insufficient and to come to you for help, but otherwise to handle
matters on their own while keeping you informed. Learn to coach your
subordinates, not to bark out orders. Direct orders are necessary on the
battlefield when lives depend on immediate, unquestioning obedience, but
they are appropriate only under rare circumstances in a business setting.
Positive feedback is an essential part of the process. Make sure you tell
subordinates when they are doing things right (use a did this well/do this
differently approach when giving feedback). Provide such feedback whenever
subordinates give you reports on something substantive that they did. An
occasional error is a necessary part of gaining experience, so lighten up when
this happens. Do not knowingly let a subordinate make a major mistake, of
course, and do not allow subordinates to keep making even minor errors
without sitting down with them to identify the reasons and then developing
actions plan to fix the problems. This is more than a matter of simple fairness;
it is essential to effective personnel utilization. If an individual cannot make
the necessary adjustments to meet the assigned goals and the company
standards for the job, then a clear, written plan must be put in place, with
the employees participation, that not only identifies what has to be done and
when, but also makes it clear that failure to execute on a timely basis will
lead to employment termination. There is absolutely no excuse for the sudden
termination recommendation of employees with years of satisfactory performance reviews in their records. When this happens, management itself has
a serious performance problem. If the managers involved have caused such
a situation to happen by being previously unwilling to talk to subordinates
about performance problems, then the managers themselves have created the
situation and cannot be held blameless.
Introduction
13
14
Introduction
15
This and the earlier comments in this vein will be dealt with in more detail
later in this book.
If your company loses money for a month, with no foreseen reason for
it, you should establish the cause and correct the situation as soon as possible.
If your company loses money for a quarter, then you had better rediagnose
the problem and fix it immediately, because you are unlikely to have the
luxury of another quarter of losses. Your boss will probably decide that you
are not up to handling the issue and replace you.
Now this is certainly not to say that no holds are barred where profits are
concerned. Running a business is just like living your life you must respect
the law and deal ethically with your vendors, customers, employees, and
stockholders. Managers who break the law usually wind up in court, and
managers who treat others unethically quickly get a reputation that harms their
business and their own careers. It may take a while, but people who are
always testing the limits will find them, although usually not until it is too late.
Being really profitable, in the top 10% of your field, requires that you
establish a leadership position in your line of business. A leader provides
products or services that customers recognize as being superior to those offered
by others in terms of value, and being willing to pay for them as such. This
does not necessarily mean that your company must be the biggest in the
industry or even in each product line. Sometimes being second or even third
will allow you to concentrate on some specific area, such as a particular end
use or a class of customer, where you can fully differentiate your offerings.
Being a leader means that you always have new, high-profit potential products
moving through the pipeline that will supplant the old ones when they become
lower profit commodities. It means constantly looking for ways to increase
the value of your company to its customers, in terms of service as well as
products. It means finding ways to differentiate your company from your
competition, both direct and indirect. Only when your company is a leader
can it increase profitability on an ongoing basis.
A number of scandals have surfaced recently over an old problem: certain
publicly held companies have declared bankruptcy after years of reporting
constantly increasing earnings. How could this be? It turns out that they used
questionable, if not fraudulent, accounting practices to hide losses or report
loans as sales revenues. It is an act of pure hubris for a CEO to promote the
companys stock by manipulating earnings in such a fashion that the company
appears to be always headed up in a smooth line. The plastics industry does
have cycles and it is simply not possible for a company to report earnings
increases every quarter or every year without some sleight-of-hand being
involved, even if it is legal. An honest and forthright presentation of financial
and operational facts, warts and all, is a far more sustainable policy that will
lead to the creation of respect and credibility among stock analysts and the
investing public. When earnings weaken, as they surely will at some point,
the companys stock will be much less affected if investors have come to
expect some normal variations or that the company tends to understate rather
than overstate projected earnings.
Chapter 2
17
18
2.1.1 Technology
The most important factor in being successful in polymer manufacturing is,
unsurprisingly, technology. Without state-of-the-art technology (including
equipment) to produce high-performance materials with consistent properties
at competitive costs, no polymer manufacturer can remain in business for
long. Lets restate these three critical elements of technology:
1. High performance
2. Consistent properties
3. Competitive costs
Every one of these legs of the polymer manufacturers stool is critical; without
each of them, the stool collapses. Management must ensure that the companys
technology is at least competitive or better, either through internal research
and development or through licensing, or a combination of both. Technology
advancements include both product and process development. New products
are vital to the growth of a company, but process improvement can make
any product more profitable or enable it to compete against lower cost
materials in new end uses, or both. Process improvement is also needed to
meet environmental mandates to reduce total waste generation as well as to
reduce the toxicity of waste generated. Process improvement may even offer
ways to modify the qualities of old products sufficiently to make them
significantly different from those made with the standard process technology.
Single-site (e.g., metallocene) catalysts are an excellent illustration of this point.
Polyolefins made with these catalysts can be tailored to specific end-use
requirements that will lead to increased market demand.
Patents are a vital part of polymer manufacturing technology. Not only do
they provide protection for costly research and development, but they also
offer a source of income from licensing, as well as a quid pro quo to obtain
access to others patented technology via cross-licensing. Unfortunately, owners of valuable patents must expect that at some point it is likely they will
be involved in litigation to protect their intellectual property. This is more
common in the U.S. than in other countries, owing to the differences in legal
systems. The first polypropylene patents were litigated for a period of more
than 20 years before a final resolution was forthcoming. The winning party,
Phillips Petroleum, won many millions of dollars in royalties as a result. The
subject of patents and other intellectual property is examined in more detail
in the next chapter.
19
20
21
have pricing authority but business managers would generally give their
opinions great weight in making their decisions. Differential pricing within an
industry can cause legal and business problems so that final authority on
prices must reside with one manager.
2.1.3.2 Distributors
Distributors and brokers have the distinct advantage of not being a fixed cost.
They also present a convenient and rapid way to move inventory off the
books and into the marketplace, to be sold to the myriad of small processors
that are very difficult for a manufacturers direct sales force to handle on a
cost-effective basis. Most polymer manufacturers have turned over all lessthan-truckload or even less-than-carload buying accounts to distributors. Producers do this not only because it is more economical, but also because they
can instantly access a much larger number of potential customers through this
channel than directly, and margins may be actually higher than those on direct
sales. The disadvantage of using distributors is that knowledge of the marketplace is more difficult to obtain and less complete.
2.1.3.3 E-Commerce
E-commerce is a form of order processing that replaces an inside sales assistant
using a telephone or fax with a computer. It does not replace outside sales
people. The computer is accessed by customers directly, modem-to-modem
(also called private network), or via the Internet. Using a computer does not
completely eliminate the need for inside sales by any means, but it does
reduce the number of personnel required, and it is more accurate. A computer
can also receive, compile, and analyze far more information than would
normally be the case with a telephone sale. While most e-commerce users
work through private networks, use of the Internet enables companies with
different information systems to work with each other without the necessity
of adopting common systems. Affordable software is now becoming available
that will also permit previously incompatible systems to link together via
private networks without the security risks inherent in using the Internet. In
effect, e-commerce is a logical extension of supply-chain management, which,
in turn, is a part of enterprise resource planning (ERP). At present, only the
largest polymer processors have the capability to use (and demand) the ecommerce route to their suppliers, but this will gradually change, as smaller
companies begin to utilize ERP programs that are user friendlier and less
expensive.
A major drawback to the use of e-commerce is the potential for hackers
to enter a companys system surreptitiously and steal, disrupt, or destroy data
and programs. While data security programs are being upgraded daily, no
system can be considered completely safe indefinitely. There will be an
ongoing war between hackers and information technology security teams for
a long time to come.
22
2.2.1 Technology
As in polymer manufacturing, technology is a key factor to success in compounding. In particular, formulation technology is critical to finding and
holding customers. Compounders must be willing to develop and manufacture
special grades in the smaller volumes that polymer producers cannot or will
not undertake. Customers for special grades usually want them for one of two
reasons (often both):
1. Replace a more expensive material (e.g., a flame-retardant polystyrene to
replace an engineering plastic) or use a recycled product to replace a
prime one.
2. Provide a particular, even unique, combination of properties (e.g., low
friction and electromagnetic shielding or a specific stiffnesstoughness
combination).
Process technology is also important, and this usually involves the use of
twin-screw extruders in addition to single-screw extruders. While it is difficult
23
24
compounds based on those polymers where it makes the most money, but
in practice this is very rare. The compounder is much more concerned with
supplying a material that meets the customers needs at the best overall cost
than trying to push a product that may not perform as well, albeit more
profitable. The danger of losing the business altogether by promoting a secondbest product is too great.
25
maintain long production runs. Brokers are a small subset of the distribution
business; they usually buy and resell surplus stocks and non-prime-quality
materials rather than representing one or more specific manufacturers and
stocking their products. Brokers sometimes do not even take title to the goods
sold, instead receiving a commission from the party requesting the transaction.
26
27
Both of these effects are unlikely to disturb the 70% of customers who buy
based on reliability rather than price, as mentioned earlier (at least for now),
28
but they may cause the 30% who do buy on price to bypass their traditional
distributor or broker.
2.4.1 Technology
The foundation of any processor is technology. A selected process or a series
of processing steps is used to transform polymers or compounds into functional
parts or even completed objects. Processes include injection molding, extrusion, blow molding, rotomolding, thermoforming, compression molding, and
some variations/combinations of the preceding. Processors must have at least
basic competence in the technology of the processes used or they will not
stay in business.
Many processors do more than make parts out of polymers and compounds.
Their technology base often also extends to product design, mold or die
design and construction, and secondary processing (e.g., assembly, decorating,
electroplating). These additional capabilities are important elements of broadening their customer base and improving profitability. These should never be
just me-too efforts, but should be every bit as cutting edge and high quality
as the basic processing equipment. Even something as simple as using the
proper type of resin dryer is critical in making quality parts from hygroscopic
polymers. Automation is another aspect of being a leader; just knowing what
to automate and doing it can be critical to product quality and reproducibility
as well as keeping manufacturing costs down. Mold design and construction
should be of particular interest to a processor, because a poorly designed or
fabricated tool will cause many production problems. It is better to have
complete control over these aspects of a job than to spend hours trying to
fix someone elses mistakes.
29
products for a variety of customers. Custom processors may only work for
one customer, but the vast majority have a large number. The geographic
proximity of processors to their customers is often the single, most critical
consideration for customers who practice kanban, the Japanese word for justin-time inventory management. Some processors are even located in a customers manufacturing park, bringing the time for just-in-time deliveries down
to hours instead of days. However, just as polymer manufacturers, compounders, and distributors must, processors also must diversify their customer base
to assure that their future is not irrevocably tied to the fate of a single account,
however great that account may be. Some captive operations have entered
the custom processing business to utilize otherwise idle machine time and
improve their internal profitability.
Processors are also finding that they need to offer more than just machine
time in order to keep their customers happy as well as to increase business.
Adding additional services is not just a route to improved profitability; it can
also mean survival. As described elsewhere, some processors have gone so
far as to characterize themselves as contract manufacturers, offering design,
production, stocking, and shipping.
While many smaller processors sell through independent sales representatives, the larger, faster growing, and more profitable ones have their own
direct sales force. While independent sales reps offer the protection of reduced
overhead during downturns, they rarely know a companys particular capabilities as well as a full-time employee would. This kind of knowledge should
translate into more business and more profitable business at that. Reps also
generally handle several product lines, and processors will find that they are
competing for a share of the reps time. For this reason, many processors
have a sales manager who is responsible not only for direct sales to the most
important customers, but also for supporting and guiding the rep organization.
2.5.1 Technology
It may seem repetitious, but technology once more is the reason why these
firms exist. The need to process materials more efficiently, to endow compounds with enhanced properties, to measure those properties accurately and
reproducibly, among other things, is what drives the business of this group
of companies. The plastics industry could not exist without these vital technologies. These technologies are also constantly evolving and those who do
30
not keep up with the pace of improvements are likely find themselves in
trouble by offering an obsolete product line.
Crompton management says that the synergy between the various units
technologies enhances growth and profitability. Crompton still has a lot to
prove, however, and intends to install ERP in 2002 to be able to understand
the financial demands and contributions of the extraordinarily large number
of products it makes. Even its size and diversification did not save Crompton
from losing money in 2001, and it is now divesting some product lines to pay
down debt.
31
Chapter 3
3.1 Technologies
3.1.1 Materials
The technical characteristics of materials produced, compounded, or distributed by a company characterize and drive the form in which its business is
conducted. The way to conduct a commodity business is very different from
successfully operating a specialty business or even a semi-commodity business.
A surprising number of commodity company managers seem eager to brush
aside this principle when the occasion arises, with predictably unhappy
consequences.
33
34
35
10
1
1
10
100
10000
1000
Volume, MT/yr.
100000
100
36
10
15
20
25
PP
LDPE/LLDPE
PVC
HDPE
PUR
PS
PET
ABS.
ETP
K MT
M$
37
offsetting products similarly, depending on a number of factors (e.g., performance differences or targeted end uses). Finally, the physical volumes of
commodities that are manufactured, transported, stored, and processed are
entire orders of magnitude larger than the volumes in semi-commodities.
What are the requirements for managing a business based on such materials? Management has to focus on cost control while finding ways to develop
differentiated products. Cost control in the case of commodities usually means
heavy emphasis on minimizing the number of grades produced and maximizing the length of production runs and size of orders; while desirable, such
constraints are not essential for specialized products. Commodity producer
research and development (R&D) must be carefully limited to serving the
largest customers and markets. Commodity materials are, by definition, volume
materials with easy transition between suppliers products and are highly price
sensitive. Logistics play a critical role in cost and customer service. Bulk
shipping is the rule for commodities and requires an investment in transport,
storage, and strategic plant siting. These considerations are only occasionally
found in semi-commodity materials.
Even sales personnel are affected by these factors. Commodity sales representatives have to concentrate on the largest users and try to obtain longterm contracts. Semi-commodity sales representatives are more inclined to
look for new applications or to try to qualify their companies as second
sources for established and growing applications, with the emphasis more on
unit and account profitability than on pure sales volume.
38
semi-commodity companies often fall short. When their R&D teams develop
promising specialty materials, management is often unwilling to support product, application, and market development on a scale necessary for success
because it seems excessively costly. This perception results from their experience in their existing commodity business but such experience is not really
germane to the new business. The half-hearted effort, then, results in technological success but marketing failure. Property modification and enhancement through compounding is another arrow in the quiver when it comes to
broadening unique product market opportunities. For example, adding fiber
reinforcement dramatically increases the usefulness at high temperatures of
such semi-crystalline polymers as nylons. This approach permits making
materials with properties that are custom-tailored to specific applications, when
standard grades do not quite do the job. This is a way to truly create value
for customers and earn their loyalty in return. Needless to say, it is also more
profitable.
Few materials are truly unique. All plastic materials compete with each
other and conventional materials at least to some degree; however, it is the
combination of properties and cost that ultimately decides which material will
be used in any given application. Even those protected by patents must
compete with others that overlap at least some of their properties. For example,
polymethylpentene-1 (PMP) is a relatively unique material. While its optical
properties do overlap those of other transparent polymers, its combination
of gas permeation, light transmission, and heat and chemical resistance set it
apart from such others as PET, PC, or SAN. Its relatively high cost precludes
it from taking over more than a small number of applications from the
competing products, but this pricing structure must also be considered to have
been a choice by the manufacturer to maximize profitability.
Polytetrafluoroethylene (PTFE) is another relatively unique material, both
from the standpoint of its properties and the fact that it is a notable exception
to the pricevolume relationship shown in Figure 3.1, selling in much greater
volume than would be predicted by its price. Nevertheless, PTFE has become
a semi-commodity within its range of applications, in the sense that little
difference exists among standard grades supplied by the various competitors.
PTFE has a remarkable combination of chemical inertness, lubricity, dielectric
properties, and ignition and heat resistance that sets it apart from most other
materials. However, it is not melt-processable, and PTFE processors virtually
constitute a separate community of fabricators because of its special processing
requirements (similar to sintered metal fabrication). Many parts made of PTFE
are machined from stock shapes or cut from skived sheets, due to its processing
limitations. PTFE melt-processable copolymers, such as fluorinated ethylenepropylene (FEP) and perfluoroxyalkoxy (PFA), offer much of the benefits of
the homopolymer while widening its range of applications due to its ability
to be molded or extruded.
Pricing unique materials is a special challenge. One cannot ignore other
materials that come close in properties, because too big a price differential
may allow a competing product to gain a foothold at the low end of some
applications or because of redesign. On the other hand, many applications
39
for unique materials are relatively price insensitive. As a rule, estimating what
will bring the highest total gross profit is the most effective way to set pricing.
A further consideration for unique product management is that continuing
application development is essential to keep sales of these materials from
falling to GDP growth rates when saturation of their initial markets is reached.
40
41
Trade secrets and patents may be licensed to others and it often makes
sense to do so. For the licensee, this route offers fast access to proven
technology without the cost, risk, or delay of having to develop comparable
technology. For the licenser, this route offers an additional source of financial
return on the investment it made to develop the technology and, usually,
access to any improvements made by the licensee. While it is true that by
issuing one or more licenses the licenser may increase competition for itself,
in some situations this can actually be advantageous. The reason is that many
potential large customers for the patented or trade-secret-protected product
may choose not to use a single-source material, out of concern for sufficient
supplies or the monopoly power of the manufacturer to set artificially high
prices, or both. The entry of a second supplier, even though under license
to the first supplier, usually removes these concerns and causes the demand
for the product to grow much more rapidly than would be the case with only
one supplier. Second suppliers also usually develop new applications and
markets faster than one, not only because they bring more assets to bear, but
also because it makes better business sense to find opportunities where the
initial supplier is not active. Finally, patent holders have to recognize that
their monopoly has only a short life and they can gain more during the lifetime
of the patent by licensing to create a strong duopoly that will make it more
difficult for any others to enter the business after the patent has expired.
Unfortunately, not many patent owners have been willing to observe and
learn from the few who have either deliberately pursued limited licensing or
found it the easiest exit from a lawsuit and then succeeded along the lines
described. DuPont and Celanese chose this course after briefly contesting each
others POW patents, and both prospered.
Often, engineering firms or equipment suppliers will furnish technology
packages as part of their products and services. Turnkey plant components
and layouts are usually based on information in the public domain. Individual
equipment items may be patented or trade secrets, but the buyer gets a license
as part of the purchase.
42
from an environmental standpoint. But, because PP, PE, and PET are so widely
used for food packaging, they can pose a litter problem. Management needs
to foster recycling or incineration of these materials wherever it makes economic sense to do so. Furthermore, the economic picture must be addressed
over the long term rather than just on the basis of short-term price fluctuations;
otherwise, recycling firms have been and will be driven from the business if
producers price virgin material below recyclate for any length of time.
Polyvinyl chloride (PVC) has received particular opprobrium from some
environmental groups, because the monomer, vinyl chloride, is a known
human carcinogen, and partial incineration at low temperatures (admittedly a
remote likelihood) of the polymer can lead to the formation of certain dioxins,
which can cause dermatitis in humans and cancer in guinea pigs. Despite
these attacks, it has been clearly demonstrated that PVC can be successfully
recycled or incinerated, although PVC recycling has not benefited from anything approaching the level of municipal collection that PET and PE have.
Engineering and high-performance plastics can be recycled but economics
favor post-industrial rather than post-consumer sources, in order to have an
identifiable and relatively clean waste stream of sufficient size. One such
source, nylon fiber waste, is ideal for recycled nylon molding and extrusion
compounds. Most processors recover sprues, runners, and scrap parts as part
of their normal operations; if recycled material is not permitted to be used in
making parts, then the regrind material can be sold to brokers or other
processors, where it also ends up being recycled.
Thermosetting materials can also be recycled in the form of filler for virgin
compounds. This has been demonstrated for polyester and epoxy molding
compounds; there would seem to be no scientific reason why others could
not be recycled similarly as well.
Many processors do not have the background in chemistry or chemical
engineering to be knowledgeable about the dangers of toxic or dangerous
fumes coming from hot or decomposing polymers. This information is readily
available from suppliers, in simpler form than that contained in a Material
Safety Data Sheet (MSDS), which tends to be quite technical and legalistic. In
addition to technical support from materials suppliers, processors will find
that membership in industry trade associations, such as The Society of the
Plastics Industry, can be very helpful in identifying such problems and taking
steps to deal with them.
3.2 Markets
The enormous variety of end uses for plastics materials is what gives the
industry its truly dynamic character. It also offers an exciting and defining
challenge to find the optimum mix of markets and customers to pursue that
fits with the products your company makes, the services it offers, and your
financial goals. Many people who have worked in the plastics industry, but
left it to pursue another career, return because they missed the seemingly
endless variety of new applications and business opportunities.
43
Other
16%
Packaging
30%
E/E
10%
Automotive
16%
Construction
28%
Figure 3.3
While some companies have concentrated their efforts on just the larger
end-use markets, many find it safer to spread their business over a number
of application areas. As noted in the previous chapter, the type of products
a company makes shapes its marketing efforts. Figure 3.3 illustrates the relative
proportions of the different major market segments by physical volume. As
noted elsewhere, packaging is the largest end use, followed by construction,
automotive, and electrical/electronic (E/E). Figure 3.4 illustrates the proportions by the process used to convert polymers to parts. Extrusion is the most
significant process, largely because most of the products sold in packaging
and construction are extruded. Injection molding, the next most important
process, is used for most complex parts. Blow molding is also heavily used
for packaging products. Other refers largely to thermoset processes, such as
compression and transfer molding, and reaction injection molding (RIM).
Note that the categorization of a given application by a specific end-use
market may seem somewhat arbitrary and is not always consistent within the
industry. U.S. Department of Labor Standard Industry Classification (SIC) codes
are seldom used by plastics industry market researchers because the categories
tend to be too general. It is common practice to categorize an application by
its most essential attributes. For example, an electrical connector in an automobile wiring harness is generally considered to be an automotive application,
whereas electrical connectors that are used in a variety of end uses are
44
Other
9%
Rotomolding
2%
Blow Molding
15%
Extrusion
45%
Injection Molding
29%
Figure 3.4
3.2.1 Packaging
Packaging constitutes the single largest end use for plastic materials, primarily
the commodity resins: polypropylene (PP), polyethylene (PE), polystyrene
(PS), polyvinyl chloride (PVC), and polyethylene terephthalate (PET). Semicommodity nylon 6 (PA6) is an important exception, because film for food
(mostly meat) packaging is a major market for this polymer. Packaging has
become the major market for plastics because plastics offer better protection
against spoilage and display products more attractively than do conventional
materials. Plastics are also lighter weight than traditionally used paper, glass,
and metal products and offer savings in freight costs (primarily fuel economy).
Because these are incremental advantages, economics are a principal factor
in choosing one material over another and thus tend to favor lower cost,
commodity-type materials.
Film and containers for consumer goods and food constitute the bulk of
this market and are truly commodities, using commodity polymers. Postconsumer recycling is also an important consideration for PE- and PET-based
packaging; some major end users and some government entities even specify
recycled content. One of the attractive aspects of the packaging market is its
relative resistance to economic cyclicality, at least in food packaging. People
45
have to eat, but the growth of convenience foods has been generally growing
even faster than the rate of population increase.
A number of specialty uses, such as industrial machinery and custom
packaging, are much smaller in volume but offer better earnings potential to
both the supplier and the user. These uses can range from made-to-order
polystyrene foam protective moldings to injection-molded acrylic cases for
small tools. Polymethylpentene-1 (PMP) has found some specialty food-packaging applications where its unusual combination of transparency, gas permeability, and heat and chemical resistance properties can sometimes offer
greater value than the commodity polymers mentioned earlier.
While the number of firms using polymers to produce packaging materials
is substantial, the usage by each firm is usually so large that they have
significant purchasing leverage. Polymer shipments are frequently made via
bulk carrier, either rail or truck, to these large users; therefore, expertise in
logistics is often critical to serving these customers. One must remember,
however, that volume packaging applications will always seek to shift to the
lowest priced materials that function satisfactorily.
Packaging materials that come in contact with food require compliance
with Food and Drug Administration (FDA) regulations and, in some cases,
with U.S. Department of Agriculture (USDA) regulations as well. Processors
utilizing such materials must ensure that the parts and films they make are
free of dirt or other contaminants when they are manufactured and packed
for shipment.
As mentioned earlier, selling products for packaging usually requires a
commodity approach to achieve significant, sustained, and profitable market
share. R&D must be targeted very carefully to ensure that the company can
recover the investment. Nevertheless, the relatively steady growth of packaging
makes this a market that should be included in nearly every companys
business plans.
3.2.2 Construction
Construction is a distinctly cyclical industry, and most applications are very
much commodity in nature. Construction is the second largest end-use market
for plastics. Most of the volume usage is processed by extrusion, such as for
piping, conduit, wire insulation, siding, reservoir liners, erosion control netting,
or architectural sheeting. Sometimes this category includes such agricultural
end uses as irrigation pipe and fittings, mulch films, and fencing. As in
packaging, plastics have displaced such traditional materials as wood, glass,
and metal, based on improved performance and lower cost. Considering the
volumes involved, the marketplace tends to favor commodities wherever
possible.
There are a number of regulatory hurdles to overcome in this market before
one can participate fully. For material suppliers, the most prominent ones are
the Underwriters Laboratories (UL) listings mentioned later in more detail, and
the National Sanitation Foundation (NSF) listings that are required by most
46
building codes for materials used to handle both potable and waste water.
For proprietary processors, parts must comply with applicable building codes,
so that you must develop a knowledge base of these requirements in order
to compete effectively. The scope of this knowledge base will have to include
the building codes of major cities, such as New York, as well as regions,
perhaps even other countries, depending on your targeted markets.
3.2.3 Automotive
The automotive industry is the single largest end user for many engineering
plastics, such as nylons (PAs), polycarbonate (PC), acetal (POM), or modified
polyphenylene ether (PPE). It is also an important market for commodity
polymers (e.g., PP, PE, and PVC). The automotive industry is unlike the
packaging industry in that there are relatively few users, and these users are
forcing their suppliers to consolidate by reducing the number from whom
they will buy. Their purpose in doing this is to gain purchasing leverage,
offering the prospect of greater sales revenue per supplier in return for lower
prices. The sales revenue potential of the automotive industry is so large that
many firms are attracted to it, but profitability is not only low but also under
constant and heavy pressure from both customers and competitors which has
forced vendor consolidation, cutting the number of automotive suppliers by
more than two thirds in the past decade, according to an article in the
December 2001 issue of Injection Molding. While the average sales revenue
has risen tenfold during the same period, the top 20% of the suppliers earn
double the earnings before interest and taxes (EBIT) percentage reported by
the rest of the industry. Over the past 5 years, publicly held automotive
suppliers as a whole have reported lower earnings, expressed either as EBIT
or return on investment, than the consumer cyclical companies or the Standard
& Poors 500. Clearly, this is a market where it is dangerous to be anything
other than a leader.
Automotive business is notoriously cyclical, and suppliers can easily find
their orders canceled literally overnight if demand takes a downturn. Automotive business cycles not only include the ups and downs of the overall
economy but also those of individual brands and models. Operating successfully in a cyclical industry requires companies to have considerable flexibility
with respect to manufacturing capacity, such as outsourcing, and financial
reserves, such as lines of credit. Nevertheless, some companies have prospered
by learning how to cope with these problems successfully.
In the past decade, General Motors, Ford, and DaimlerChrysler (the Big
Three) have placed onerous demands on their suppliers to reduce prices by
a fixed amount per year, even retroactively, or face the risk of being phased
out as a supplier. This has prompted a number of suppliers to merge in order
to reduce their costs. Some suppliers have defied these demands successfully,
while others have either switched to supplying other automotive companies
or have reduced (or even eliminated) their exposure to the entire industry.
The Big Three acknowledge that their policies risk losing suppliers but they
47
are gambling that other suppliers will take the place of those who drop out.
It is interesting to note that the Japanese automakers in North America, such
as Honda, Toyota, Nissan, and Mazda, do not have this reputation and have
been consistently taking market share away from the Big Three. Is there is a
connection here? Could it be that the Japanese producers reputed superior
product quality depends at least partly on a more cooperative, truly partnering
relationship with their suppliers?
Another characteristic of this market segment is long lead-times for new
applications, seldom under 18 months and sometimes as long as 3 to 5 years.
This aspect adds risk to involvement in automotive application development.
The increased time to market allows competitors to learn what is going on
and attempt to become involved, even if it is only last-minute bidding. The
additional time also allows the end users to reconsider whether or not they
will really commit to taking a project into production, particularly if styling is
involved.
The automotive market must be addressed as basically a commodity business, regardless of the materials being used. Some exceptions to this generalization can be found, of course, but they are exactly that exceptions.
3.2.4 Electrical/Electronic
At one time, this was everyones favorite end-use market, and it is the third
largest overall. Applications range from tiny connectors to large housings, and,
while commodity materials (mostly housings or wire and cable insulation)
offer important volume, many opportunities can be found for the full range
of engineering and high-performance polymers. In the past, a substantial
number of customers using a wide variety of materials (many custom made)
in significant quantities yielded good revenues with excellent profitability and
high growth rates, but globalization has changed this forever, as industry
consolidation is reducing the number of end users, and outsourcing of production has led to fewer actual manufacturers. All of this, in turn, has resulted
in increasing competitive cost pressures keeping prices and profits down.
In the past decade, E/E buyers have been shifting manufacturing out of the
United States to lower cost countries, such as Mexico and Asia. Sometimes
the polymer sales follow these shifts, but for single-site processors the business
is gone indefinitely if not forever.
Other significant, but temporary, problems in the E/E industry have resulted
in product demand being borrowed from the future, resulting in overproduction to meet a temporary and overstimulated demand. The first problem
stemmed from an overly pessimistic concern about the inability of computer
systems to handle the Y2K problem. The problem itself turned out to be
relatively minor, but many companies and individuals replaced their computer
systems much earlier than they would have otherwise, thus borrowing from
future demand. The second problem occurred as a result of the incredible
hype about the Internet, which resulted in an immense overbuilding of wideband and computer facilities. Both of these runups are currently being digested
48
by the industry but it may be several more years before demand comes back
to normal levels. Meanwhile, E/E manufacturers are under immense pressure
to cut costs just to stay in business. Unlike the automotive industry, E/E is
relying on contracting out manufacturing and product redesign, rather than
pressuring suppliers to cut prices retroactively.
An important aspect of the E/E market is the fast time-to-market (usually
6 months) demands of the industry and the relatively short product life cycles
of perhaps 12 to 18 months. These considerations virtually preclude multiple
sourcing of materials and parts other than the most basic of units, such as
connectors. They also mean that suppliers must work with end users with
new applications from the beginning (for which they will be rewarded with
the business), but they will be unable to displace or even share business with
an existing supplier except in the case of major quality or delivery failures.
Cell phones come to mind as a good illustration of this type of application.
Doing business in this market requires evaluation of every product development, both materials and parts, by R&D with a view toward UL requirements.
This usually means that materials must be offered in flame-resistant formulations if they are not already inherently flame resistant. Regulatory requirements
in several European countries can also mandate that flame resistance must be
achieved without the use of halogenated components. A UL listing for flame
resistance for a qualified product is relatively quick and inexpensive to get
compared to another important UL requirement, the limiting temperature index
(LTI), which specifies the maximum continuous use (operating) temperature
for a material. An LTI will require 6 to 18 months to obtain. The expense of
obtaining and maintaining these listings (there is an annual fee) demands that
the market potential for each product be sufficient to justify them.
Some sectors of the E/E market have been evolving toward becoming
commodity businesses, but there are still a number of high-performance,
attractive opportunities in specialty sectors. New product and application
development has a good chance of resulting in significant, profitable business
in this industry as performance requirements keep ratcheting up. A need exists
for higher temperature resistance materials with processing characteristics
suitable for use in thinner walled, smaller components, among other things.
This is a challenge for everyone in the industry, from polymer manufacturers
through processors.
The largest subcategory of the E/E market, wire and cable, has a range of
commodity, semi-commodity, and specialty applications. Actually, all E/E
products, including wire and cable, eventually wind up in a number of other
markets. This can make for confusing comparisons, depending on the definitions of the markets assigned to various end uses. It also requires caution
when making growth projections to ensure that the eventual end uses are
properly categorized. For example, the top four end uses for wire and cable
are power transmission (power generation to user), communications, electronics (for example, CATV), and buildings. As is evident, these combine both
consumer and industrial users in each subset. The materials range from
polyolefins to fluoropolymers, with over two dozen firms supplying materials
to an even greater number of proprietary processor-end users.
49
50
3.2.7 Other
We needed a category for everything else and this is it; nevertheless, a
few components here are identifiable, and some of the larger ones include
(1) medical and (2) aerospace and military.
The medical market is not only more recession proof than food packaging,
but it is also growing faster. Medical products are of two types, disposables
and durable equipment. Disposables are commodity products (the emphasis
is on cost) but reliability demands are much higher than for, say, housewares,
and this makes profit margins better than in many other commodity markets.
Many of the disposables are relatively high tech, such as catheters, blood
bags, IV bags, etc. Medical durable equipment also offers the opportunity for
51
Chapter 4
54
they are incapable of new thoughts, but because they fear an accompanying
loss of authority, status, and compensation. These people must be brought
on board at the onset or replaced. The usual way to change a culture is to
revise the organizational structure and reassign key people to new responsibilities. The least risky but slowest route to successful culture change is to
accomplish it through one subordinate group at a time, but never forget those
pesky senior managers mentioned earlier.
Even if you are satisfied with the culture and organization that is in place,
you need to understand what makes it work so as to direct its functioning
on an effective and efficient basis. This chapter deals with all of these
considerations.
55
different groups. Big company cultures can all too easily degenerate into
bureaucratic, quasi-government cultures, where job security and turf matter
more than company success. This must be guarded against, obviously.
Frequent restructuring can produce this breakdown when the employees
question managements loyalty to them and decide they will survive best by
hunkering down and trying to ride out the changes.
In addition to being influenced by size, company cultures often reflect the
dominant professional group (e.g., technology or manufacturing or sales) when
the company came into being or went through a reduction in size. Cultures
also reflect the characteristics of the ownership, whether they are a founding
family, institutional investors, or foreign nationals.
Because polymer production has been as a rule parented by basic chemical
or petrochemical companies, polymer manufacturing is almost always associated with big-company, managerial, commodity, and, sometimes, technology
cultures. Compounding, processing, and distribution, on the other hand, are
most frequently found to have small-company, entrepreneurial cultures. We
will examine in greater detail some of the more frequently encountered cultural
varieties in the following paragraphs.
56
and usually shares the founders sense of mission. The employees also usually
exhibit a sense of loyalty to the founder and the company, that has given
them the incentive to work harder (if not smarter).
Entrepreneurial companies are also frequently family owned and managed.
Although Andrew Carnegie thought that succeeding generations never measured up to the founder (from shirtsleeves to shirtsleeves in three generations), a number of small to medium-sized companies have flourished under
family ownermanagers, and even large companies, too, such as Huntsman
Chemical (the Huntsman family). Perhaps the greatest strength found in such
entrepreneurial companies is a continuing clear and consistent vision of the
companys purpose in business, in contrast to many large, publicly held
corporations. As mentioned elsewhere, the chemical industry over the past
decade has seen some of its largest firms decide to change their vision and
become life-science companies, divesting their base businesses (such as plastics) and then realizing too late that they were not big enough to
compete successfully against real life-sciences companies. The result has been
the disappearance from the plastics scene of some of the industrys oldest
names, such as Hoechst and Monsanto. Another benefit is the assurance that
the family has committed to continuing ownership of the company, thereby
giving some measure of security to the employees. Of course, these decisions
are subject to change when generational succession takes place. Jon Huntsman
recently admitted that his family now wants him to take the company public,
even though he went on record ten years previously as saying that
commodity chemicals [are] no place for the investing public. The cycles are
too deep, the basic factors governing business are 7580% outside the control
of managers, and investors dont understand that these types of businesses
have periods in their cycles when business is so weak, dividends cant be
paid. Its OK if a commodity business is part of a much larger company,
because the impact is lessened. But its far better that a commodity company
be private. It can take the up cycles with the down. Huntsman, a cancer
survivor, noted that taking Huntsman Chemical public would be a consideration in the course of his estate planning, a problem that confronts every
entrepreneur who wishes to keep the business in the family as much as
possible.
57
businesses move into this category when the founder retires or dies, and the
family wishes to retain ownership but employs non-family management to run
things. Managerial cultures are the prevailing ones in publicly owned companies, and they are also usually present when a privately owned plastics industry
company reaches $200 million or more in sales.
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59
This is not a common culture within the plastics industry, but it certainly does
exist. Some European polymer producers exhibit at least some elements of
this culture, and it may also be observed in a few processors, as well as in
a few machinery, additive, and instrumentation companies.
60
Another important difference between American and non-American business cultures is the concept of employment security as a social contract. While
this notion is gradually eroding as global competition becomes more intense,
in Europe, Japan, Latin America, and other areas, there are still strong social
feelings that companies owe their employees lifetime job security. Note that
business owners based in these same cultures by no means consider that
they necessarily owe the same obligation to their American employees as
they do to their society. Major problems can arise when American owners
try to restructure companies that they own in such overseas cultures. Governments and unions will not be the only ones opposed to downsizing;
company managers who are citizens of these countries are likely to be
uncooperative as well.
American business culture is both admired and deplored in many countries,
sometimes by the same people. When people talk about finding a third way
(e.g., between American economic freedom and socialist controlled economies), they often mean that they admire American economic results but do
not want to change what they are doing to obtain those same results. Americans
would be well advised to avoid making a practice of directly comparing
American business methods to the local ones, unless they have an uncommon
ability to do so very diplomatically. It is not difficult to win an argument but
lose friends and business.
61
President/CEO
Administration
Manufacturing
Figure 4.1
Research
&
Development
Functional organization.
Manufacturing
Nylon
Sales/Marketing
Figure 4.2
Stryrenics
Technical
Product organization.
Sales/Marketing
Technical
62
Administration
Manufacturing
Automotive
Sales/Marketing
Figure 4.3
Technical
Market organization.
Electronics
Sales/Marketing
Technical
63
Figure 4.4
North
South
America
America
Geographic organization.
Europe
Asia
64
President/CEO
Administration
Manufacturing
Figure 4.5
Polyolefins
Automotive
Sales/Marketing
Sales/Marketing
Central R&D
Hybrid organization.
65
that is shared this way and build morale by having subordinates bring individuals from the next level down in their organization to brief the meeting
on what is going on in their sections. A different area should be represented
at each meeting, if possible.
Other ways to develop a better understanding of your organizations
workings include being an ex officio member of committees and attending
meetings on an irregular, unannounced basis. Another excellent way is management by walking around going out into the plant, the labs, and the
offices of your company without prior notice, just to see and talk to lower
level employees about their jobs. You might be surprised by what you learn
this way when the information has not been filtered through layers of subordinates. It also helps raise employee morale a surprising amount to see the
boss taking an interest in even entry-level employees and listening to their
views on their work. Make sure that you inform their bosses of any potentially
worthwhile suggestions you hear, and praise both parties for their interest.
Be cautious about using the open-door policy, however. Depending on
how it is utilized, it can be an effective safety valve, but it can also be a major
waste of time and potentially damaging to organizational relationships. There
is nothing wrong with making yourself available to meet with anyone from
any level in the organization up to a point. First of all, I do not recommend
permitting individuals to invite themselves; they should go through their
managers in a direct line to obtain an appointment (but their bosses should
not be able to say no). While those managers do not necessarily have to be
present during the visit, they should be at least involved in arranging the
meeting or they will be resentful that they have been bypassed or not informed
that their subordinate had been in to see you. Second, you will want to limit
the number of such visits you are willing to accept over the course of a month
or you may find that you do not have enough time to take care of your
principal duties properly.
Of course, a major exception to these limits is when someone wants to
blow the whistle on a serious problem. For example, if illegal activities are
going on that have been hidden from you, possibly by your subordinates, it
is absolutely imperative that you keep a channel open whereby you can learn
of these things before it is too late. Whistleblowers come in two varieties,
which cannot be easily sorted out before they arrive on your doorstep: (1)
those who make trouble for others because of personal enmity and/or have
some psychological disorder that compels them to lie, and (2) those who
genuinely care about working in an honest and ethical company and are
willing to put their jobs and reputations in jeopardy in order to give you the
opportunity to put things right.
Either way, your door must be open to such complaints, but then you
need to determine immediately but accurately which type of whistleblower
is in front of you presenting serious complaints. Do not let the first type
destroy the reputations of people who are innocent of the wrongdoing of
which they have been accused. Do not let the wrongdoers destroy the
reputations and careers of the second type who have trusted you to do the
right thing. This may well require having your attorneys bring in experienced,
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Chapter 5
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customers that you can come to some agreement with them to provide for
some cushioning from such rapid changes.
Demand volatility is only one source of deviation from forecast or target
revenues. New product development can be thrown off track by unexpected
difficulties in scale-up. Your customer can be acquired by another company
that decides to scale back or even discontinue the line of business on which
you were counting. An unexpected breakthrough at a customer may suddenly
ramp up the demand for one of your products. You need to have at least
considered what you might do should any of these events take place and
require that you react on a timely basis. Highlow contingency plans (keep
them simple and not too detailed) will answer this need and allow you to
move into action quickly.
Plans are not merely a collection of objectives and considered tactics on
how to reach them. They must include a list of the resources human,
financial, and hardware required to execute them. As described in
Chapter 7, you also need to assess how you will utilize those resources by
their quality; the best must be assigned to the most productive projects.
Business plans may differ according to their objectives and the time period
covered, but the rest of the elements are essentially the same. I recommend
that you develop a business plan that outlines what you want to do over the
next 5 years, but with the principal emphasis and details on the next 12
months. Remember to quantify wherever possible. If you are a successful
small businessman, eventually you are likely to grow to the point where you
will need third-party investment in your company. Your business plan will be
a strong talking point for you to show that you understand how to run a
business on a well-considered and professional basis important nonquantitative considerations for someone who is contemplating investing in your
company. In fact, if you are seeking to get a bank loan or to sell your company,
it will be essential for you to have a business plan with some documentation
to show that you actually use it.
Just what comprises a business plan? Here are the principal components:
Purpose (also called mission or vision) describes succinctly what comprises
the companys principal business and activities.
Business goals are a statement of what you wish to accomplish during
the time period of the plan.
History and analysis include where the company has been, where it is
now, and the choices as to where it will go in the future, as well as
identifying the companys principal strengths and weaknesses, opportunities, and threats and how you propose to deal with them.
Objectives are the intermediate milestones to be achieved on the way
toward attaining your goals.
Projects and programs are specific details on the implementation of what
you wish to accomplish. These may be in outline form and confined to
key actions or activities.
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The sales and marketing element is the most critical part of the plan and
everything else should flow from that. If the company is not generating income,
then it should not be incurring expenses. You should also consider applying
the old travel rule (take half the clothes and twice the money you think
youll need) to sales and expense forecasts, at least to some degree. If your
team is relatively inexperienced and the numbers therefore less reliable,
shading sales forecasts down and expense forecasts up will give you some
breathing room in the event that the forecasts are not as accurate as you
would wish. Accompanying financial details need to be a fundamental part
of your business plan, showing the amount and timing of expenses and
income, cash flow, and, where appropriate, return on investment.
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companies that have been able to make this idea work successfully on a
sustained basis. Even GE walked away from this approach after a few years,
as the result could only be the cannibalization of business in hand rather than
the creation of new business.
The use of project teams and committees is central to integrated management. The input of each affected function is thus made part of the solution
to dealing with problems and improving operations. Committees do much of
the coordination of the various functional groups in a plastics industry company without requiring that senior management be directly involved. Standing
committees are needed to handle matters that are routinely repetitive, such
as raw materials qualification and purchasing. In the latter instance, research
and development (R&D) can present the formulation characteristics of the
materials under consideration; manufacturing, the processing characteristics;
marketing, the customers preferences; and purchasing, cost and logistics
considerations. Committee meetings, although despised and reviled, are really
useful and necessary as interactive communications media within the company.
Project teams are committees that have a specific, short-term purpose and
disband once this purpose has been accomplished. They include members
of different functional groups or different engineering disciplines. An example
might include the development of a major new product for a large customer
or even just putting together a logistics system that will coordinate the business
requirements of the companys largest customers. If the team works so well
together that important synergy would be lost if it was disbanded, then
restructure it as a committee. Otherwise, require that teams be broken up
and the members reassigned when they have achieved their objectives. If the
team is not achieving required milestones, reconsider its objectives and the
resources assigned.
A word of caution: create committees sparingly, keep their membership
size limited (no more than six would be wise), insist that their meetings be
short (preferably less than an hour), and have standing dates never more
frequent than weekly. Poorly run committees are a terrible waste of valuable
time and can damage morale. Well-run committees keep everyone in the
loop, maximize efficiency, and minimize mistakes. The secret to successful
meetings is for the chairman (an honorable word for both genders) to stick
closely to an agenda that addresses only key issues, getting agreement on
work assignment scope and milestones before adjournment, and handling
issues with non-contributing members outside the committee meetings. Do
not allow committee members to interrupt meetings by taking phone calls.
The agenda should be sent to the participants with enough time to prepare
properly; adequate preparation alone is a big step toward keeping meetings
short and productive. Spread committee work around. It is good experience
to rotate membership among different people in the same functional group,
and it keeps the diversion from the groups primary tasks to a minimum. It
is a telling sign that committee-itis has set in if customers, suppliers, or
other employees find they can virtually never reach people who are members
of committees because they are always tied up in meetings.
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speed and relative success of this learning process (e.g., time to market) can
make or break the profitability and competitive advantage of a new product
for a company. The most successful companies in the plastics industry
combine their product development and marketing groups into teams. This
ensures that the companys technical resources are used to meet customer
needs with the least amount of filtering in communications and time loss.
Technical marketing (integrated R&D and marketing) includes characterizing products in terms of the properties used by design engineers for certain
classes of applications. For example, short-term mechanical strength and
stiffness values may serve to make initial material selections but are not
accurate for predicting long-term performance. Marketing must assess which
classes of applications offer sufficient business potential to justify the cost of
obtaining such data as creep and fatigue resistance, with R&D providing the
data. Marketing must also obtain customer feedback to let R&D know if the
data are sufficient to allow the application to go forward or if the product
requires modification. If the product must be modified, R&D will have to
advise marketing about the feasibility and cost (this may require involving
manufacturing), and marketing again will have to determine the market
potential over a range of prices to arrive at a decision.
Another area where R&D and marketing must cooperate closely is costreduction projects. When R&D has been tasked to reduce product formulation
and process costs, the result may not be exactly the same product that has
been approved by customers. Marketing should ensure that the customers are
willing to accept a modified material without requalification this is often
an opening for competitors to have their products qualified at the same time.
It is dangerous to regard cost-reduction programs as an entirely internal matter.
Many companies also offer design services to qualified customers as part
of their sales and marketing package. The services of computer-aided design
(CAD) and computer-aided engineering (CAE) offer a benefit to large customers that may not be available from other competitors. They also provide some
assurance that the application will be a successful one because design problems can be resolved before tooling is built. Although many firms prefer to
maintain CAD/CAE services in-house, sometimes they can be contracted out
successfully.
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5.2.3 Manufacturing
Manufacturing is all too often taken for granted, but its consistent, qualityconscious, timely, and cost-effective execution is crucial to the success of any
non-service company in the industry. The leading firms of the industry have
adopted Total Quality Management (TQM), Six Sigma, or other such techniques
to ensure continuous improvement in consistent quality, which almost always
also results in important cost savings.
Manufacturing consists of processing raw materials into finished products;
in many companies, purchasing is also part of manufacturing. Your suppliers
of raw materials plus the logistics companies that transport and store these
materials constitute your supply chain. You are only doing half the job if you
are managing only your own production scheduling and not the rest of the
supply chain. It is impossible to control costs and quality if you have not
brought your suppliers on board as partners through regular consultation
about your specifications, logistics, how to reduce and control costs, etc. These
matters should never be imposed on suppliers but rather developed jointly
with them. ISO 9000 certification for your company and your suppliers is an
integral part of assuring globally consistent manufacturing quality, just as much
as TQM or Six Sigma programs are.
The industry journals are filled with information about software programs
known as enterprise resource planning (ERP); possibly the best-known provider (but certainly not the only one) is SAP, a German software firm. These
systems allow a company to employ a relational database globally that keeps
track of all its purchases, inventory, manufacturing scheduling, and shipments.
Supplier/customer-compatible ERP systems can effectively integrate the
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5.2.4 Administration
Administration is a sort of afterthought for some, but it has an important
impact on a companys performance. Administration has a number of
components:
Human resources (HR) must serve managements needs to find, hire, and
retain top-quality personnel. HR has to maintain current information on
industry-wide compensation and benefit practices, as well as keep up with
frequent regulatory changes in this area. HR also has to administer the
performance review system to make sure that it is running on time and
properly.
Finance must manage the companys cash flow so that the company
collects and disburses on a timely basis, at minimum net cost. This
responsibility also includes maintaining lines of credit at banks and monitoring the stock and bond markets for suitable opportunities to raise money
if the company is publicly held. Such activities must be conducted with
the utmost integrity and transparency, as recent accounting scandals have
demonstrated. It is not enough to be merely legal.
Management information must provide necessary data accurately and on
a timely basis to every level of management that needs these data to
perform their duties. At one time this was little more than an extension
of the finance group. Today, it provides critical information to all functional
groups, although accurate and timely financial data are still the most
important portion.
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non-core but profitable businesses may cut cash flow, increase cyclicality,
and close the window on unforeseen opportunities outside of traditional
markets. Concentrating primarily on cost cutting to improve profitability is a
defensive measure and invites offensive-minded, aggressive, growth-oriented
competitors to test your willingness to protect your markets.
Staff reductions, product line revisions, and business divestitures are discussed in more detail in Chapters 6, 7, and 8, respectively.
One area for cost savings that is not always thought of in smaller companies
is working capital reduction. If the business is reasonably profitable and
generating good cash flow, management tends to overlook the amount of
money that can be tied up in accounts receivable and inventories while
faithfully writing checks for accounts payable within the standard 30 days. A
good follow-up system for slow-paying customers is worthwhile, but it may
prove easier to raise their prices by a percent or two than to dun them for
payment if their credit is good but they insist on paying in 60 days. Some
suppliers may be agreeable to extending your payment terms; it does not hurt
to ask. The greatest savings, however, are likely to be found in your inventory.
You need to establish standards for inventory turnover and then work on
improving them. Can your vendors ship small quantities on short notice
without necessarily penalizing you on price? Are you insisting that your
customers accept up to 10% overruns on custom work? Do you dispose of
slow-moving inventory on a regular basis to free up space and reclaim working
capital? If you are able to reduce your working capital needs more or less
permanently, this is cash freed up to invest in other needs or even to pay
dividends to shareholders. Do not overlook the spare parts kept in maintenance; they are a form of inventory, too, even if written off when purchased.
Make sure that spare parts are kept within reason and that you are not tying
up space and funds by holding onto equipment and parts that are unlikely
to be used in the near future or cannot be obtained quickly in an emergency.
What else can you do improve performance if cost reduction is not the
only answer? R. Mooney of Deloitte & Touche suggests finding a balance
between profitability and growth, creating separate business structures for
operations that have little in common, improving the use of manufacturing
information technology to increase productivity, and being alert to protect key
customers from the inroads of competitors.
Chapter 6
6.1 Recruiting
How do you find new employees? A number of ways are available, all of
which you will likely want to use at one time or another:
Classified advertisements are the most commonly used method. Trade
publications are the best media to use, although newspapers are useful
for attracting applicants for non-salaried positions. Never use blind ads;
people who are already employed will not respond to them in case their
own employers are the advertiser. Describe your business and the position
to be filled in sufficient detail so that you do not attract unqualified people.
Internet bulletin boards are another form of classified ads.
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Referrals from employees, suppliers, customers, friends are often the best
source of people who will fit well with the organization. These individuals
will want to work with others who have their same motivations.
Universities, technical, and vocational schools are another excellent source
of people, but these will likely be recent graduates and therefore inexperienced, except for cooperative students (as discussed later in this chapter).
Employment and executive search agencies are an expensive option (the
fee is usually 30% of the first years salary) but sometimes necessary to
find just the right person to fill a particular job.
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point out, for example, that your company does not have such positions or
it only hires people with certain experience. You have a responsibility for
building both your companys reputation and that of the industry as being a
good place to work. One day that would-be researcher could find a job with
another company and be in a position to decide whether or not to approve
your products.
Then there are overqualified applicants. These have become an urban
legend candidates who have more education and experience than a job
requires but are rejected because they are overqualified and thought to be a
risk to leave as soon as they find another job. Frankly, most employers would
love to be presented with an overqualified employee, but they seem to be a
rare breed, living mostly in letters to the editor of industry magazines, complaining that no one will hire them. As long as overqualified candidates would
be willing to start out in a job that pays less than they might obtain in one
that matches their qualifications more closely, the odds favor their being hired
and being promoted as soon as an appropriate opening comes up. Alas,
it appears that the overqualified candidate is more likely to be someone whose
personality traits are a problem, rather than someone who knows too much
to hire. The following sections will explain what to look for in a prospective
job candidate.
6.1.1 Education
While I recognize that I am likely biased by my own education, an engineering
degree or at least a degree in a hard science (e.g., chemistry or physics) is
often an essential qualification for people seeking entry-level professional
positions in the plastics industry. This is a technical business above all else,
and anyone who cannot quickly understand the terminology and relationships
between materials and processes is likely to be lost for too long to make a
successful transition into being a contributing member of the team. At middle
and senior management levels, some education in business administration will
be increasingly useful, especially in the more capital-intensive segments of
the plastics industry such as polymer manufacturing.
A bachelors degree is often sufficient for most positions except in research,
where a Ph.D. can be desirable, particularly for polymer chemistry. Nevertheless, a masters degree may be very useful in manufacturing or plant engineering. A masters degree in business administration can be valuable for
general management as well as information management, sales and marketing.
The quality and comprehensiveness of MBA studies vary widely, however.
One needs to inquire closely about just what job candidates have studied and
what they learned.
While I am the happy beneficiary of maximum exposure to liberal arts
courses (history, languages, literature, etc.) in college in addition to my
scientific, engineering, and business administration education, it is usually not
advisable to recruit liberal arts majors directly from college. Nevertheless, this
educational background can be quite helpful for non-technical positions if
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one finds a job candidate who has also had progressive and substantial
experience in the plastics industry for, say, at least 5 years. Experience shows
that one will be much more successful by training a newly minted engineer
for positions in sales and marketing than by attempting to train a recent liberal
arts graduate in the technical aspects of the companys products for these
positions.
A number of universities and colleges have cooperative (co-op) programs,
where engineering students spend three 6-month periods working in industry
in between their four years of undergraduate study. Other schools offer
summer intern programs that allow students to work in industry for shorter
periods of time, but these are less effective. In my experience, graduates from
co-op programs generally exhibit more understanding of what is expected of
them and have a better grasp of how to use their education in the workplace
than do graduates of non-cooperative programs. Should you choose to hire
co-op students, then the institutions will ask you to do so on a regular basis,
which is a reasonable request. The co-op period also gives you a chance to
assess students as future possible permanent employees, without an obligation
to hire them. The students also have a chance to determine whether or not
this is the career opportunity that they want. All in all, this is a winwin
situation.
However good the graduates of coop programs are, it is most unwise to
limit your recruiting to graduates of just a few institutions. Try to blend together
graduates from a number of colleges and universities so as to avoid the
possibility of cliques of alumni forming. Should this situation arise, just the
appearance of favoritism that might accompany it can be devastating to morale.
If it does indeed exist, then you will have closed off the opportunity to hire
and keep motivated people who have fresh points of view and approaches
to the companys business.
6.1.2 Experience
Education is, essentially, learning from other peoples accumulated knowledge
and their experience from applying that knowledge. However, there is no
substitute for tempering and validating lessons learned in college by the reality
check one finds through ones own experience. Therefore, given a choice
between apparently equally educated candidates, one should usually favor
the one with more experience than the other, especially if the experience was
more extensive. Most engineers start out their careers in manufacturing or
R&D, which are great places to gain an understanding of the basics of the
plastics industry. At some point, however, they must also develop at least
some experience in marketing or sales, because this is industry, after all, not
academia or government. In fact, it would not be unfair to say that our industry
has had more than its share of unsuccessful top managers who failed mainly
because they had no significant successful prior experience in marketing and
sales, despite a good track record in technical positions.
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are no more likely to see them change than are people who enter into marriage
expecting to change their spouses. You will then have to decide whether their
particular talents are so great as to require an exception or you should
encourage them to make a career change.
Potential employees should also have a minimum level of self-confidence,
based on their experience with successfully overcoming obstacles and solving
problems. Otherwise, they will be afraid to take even small risks and will
almost certainly make poor supervisors because they will be reluctant to
delegate authority. Self-confidence should not be confused with self-esteem,
which may arise from a false sense of accomplishment. Questioning candidates
about how they have handled problem-solving in the past should reveal
whether or not their self-confidence is justified. Arrogance is a quality to be
avoided entirely.
Finally, consider these thoughts from former U.S. President Calvin Coolidge:
Nothing in this world can take the place of persistence. Talent will not;
nothing is more common than unsuccessful men with talent. Genius will not;
unrewarded genius is almost a proverb. Education will not; the world is full
of educated derelicts. Persistence and determination alone are omnipotent.
The slogan press on has solved and always will solve the problems of the
human race.
6.1.4 References
By all means, ask for references. Yes, these references are going to be a
selection of people who the applicant knows will speak favorably of him but
you can still learn something. Always ask for specific examples of how the
applicant carried out assigned tasks, staying away from meaningless generalizations. For example, do not ask, How well does X get along with fellow
employees? Ask instead, Can you tell me specifically how X handled situations with others who disagreed with her ideas? If an applicant cannot furnish
at least three references that are familiar with his work history, this by itself
should be regarded as a caution sign.
Do not overlook your own contacts at companies where the applicant
worked or with whom he came in contact in the course of work (e.g., sales,
purchasing, and engineering). Sometimes these sources will give you more
useful information than you can obtain from anyone else. The least likely
source of worthwhile evaluations of a candidate is likely to be Human
Resources; the most useful source is likely to be your candidates former boss.
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6.2 Training
Hiring a new employee is a job only half done. New employees must be
trained in the business and procedures of the company. Established employees
also require training to ensure that they stay abreast of the technology of the
industry and that they are prepared for promotion when the time comes.
Training comes about through job experience as well as formal classroom
instruction.
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grandparents, aunts and uncles). Furthermore, management should be encouraging the development of community ties, not disrupting them. As a policy,
individuals should be able to make their own career decisions, not have them
forced upon them, or the company will be creating significant long-term
problems with employee loyalty and job performance.
At any rate, the objective should be to salt the middle- and upper-management ranks with at least a few people who have experience in more than
one environment, function, product, market, or discipline. The process is not
inexpensive but is essential to avoid having a company of one-dimensional
managers.
Engineers and scientists have acquired something of a reputation as not
possessing sufficient people skills to make good managers. While I believe
this is a weak generalization, unfortunately it does have some basis in reality.
Technical people are not inherently poor managers; it is just that their experience in managing others in the technical sphere is not necessarily applicable
in other functions. Engineers and scientists have to supervise technicians very
closely (micromanage), but micromanaging is a shortcoming that any supervisor can develop. It is at the next level of technical management that a
limitation can develop, where managing is often more consultative than
directive in nature more hands-off than is generally needed in marketing
or manufacturing. The single biggest limitation of engineers and scientists
becoming successful senior managers is much more likely to result from a
lack of experience in other functions, especially sales and marketing, rather
than from a lack of people skills.
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and committees can improve their management skills as well. Learned societies
depend on their members participation to function; it is an obligation of a
professional to respond to this need.
The company should also conduct in-house seminars and courses. This
can be a very cost-effective way, for example, to improve planning methodology by using a common approach throughout the company. Also, when
new information technology is adopted, it will be essential to put everyone
through a course on how to utilize it.
Some managers complain that if they pay to train people, then another
company will hire them away. Think about that for a moment do you
really want people who no one else wants? Yes, there is always a risk that
you will train someone and they will repay that investment by leaving. That
risk must be balanced against the superior performance you will get out of
trained people who do stay, or even out of the people who stay only for a
while before they leave. This notion should not require much thought; training
pays for itself many times over, even allowing for some attrition. If your
companys turnover is excessive, training is not causing it. Turnover and
retention is discussed further later in this chapter.
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Examine the distribution of results to be sure that the system genuinely reflects
accomplishments. If the company is not meeting its objectives while almost
all of its employees are, your system is obviously flawed. Be wary of grade
inflation and insist on rankings (these may be subjective, but often they are
the only way to distinguish among similar performers).
6.4 Promotions
Next to making more money, almost every employee wants to be rewarded
for good performance with a promotion, which is not really an appropriate
reward for strong performance money is. Furthermore, not every highperformance employee is necessarily promotable. The famous Peter Principle
is ignored at great risk: people tend to be promoted to the level of their
incompetence. The cardinal principle that must be at the forefront of your
thinking is that you must promote based on your assessment of the individuals
potential capability to do the new job, and not as a reward for doing the
current job well. This is not really all that difficult to do.
When people are promoted to their level of incompetence, you have a
loselose situation. You do not get the performance you expected and either
those individuals will become miserable and quit, or you will wind up firing
them. Thus, you will end up losing superior performers (at their previous
levels). Generally, only in large companies with very resilient people, is it
possible to transfer or demote those who do not work out back to their
previous level and retain them.
Some firms have a fast-track system for identifying and promoting people
who have been identified early in their careers as having high potential. The
idea is to move them up the ladder as quickly as possible, with typical
assignments lasting only 18 to 24 months (vice president by age 35!). In my
experience, and that of many other senior managers, this is a faulty idea with
high-risk consequences, despite its persistence as a method for grooming
senior managers. Among the drawbacks are the following:
People progress at different rates during their careers. Very, very few
individuals can master every position into which they are put in the short
periods of time that fast-track assignments usually require.
Proper management development must include the idea of seasoning,
experiencing the ups and downs in a position that usually do not conform
to any rigid time frame, especially short ones. In particular, the development
of sufficient emotional maturity to be a successful general manager simply
cannot be commanded to take place in an arbitrary time frame.
Employees are not so stupid that they cannot spot when someone is getting
preferred treatment. This shortchanges both those who are on the fast
track and those who are not, because the suspicion has been planted that
the fast trackers have not earned their promotions on the same basis as
everyone else. This can destroy good working relationships all around.
A common tendency is to hire new graduates of the best-known business
schools and put them on the fast track, despite their lack of any industry
experience. This is the least defensible application of the fast track and
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One of the main justifications for fast-tracking managers has been that they
bring new thinking to the upper ranks. Perhaps fresh thoughts are in order
at some firms, but the process of bringing them into the company need not
be so flawed. If fresh thinking is so badly needed, then it is better to hire
promising managers from the outside who can bring fresh experience and a
successful record, rather than simply bringing youth.
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or they will remain demoralized for a longer period than the company can
really afford. Layoffs are not inexpensive, either; severance costs can easily
exceed short-term cost savings. If layoffs cannot be avoided, then management
must ensure that key personnel are not lost in the cutback. Across-the-board
layoffs are a shabby and incompetent way to avoid dealing with the problem
of who is to go do not do it.
Some companies have tried a share the pain approach by applying
compensation cuts to all rather than laying off people. This may make sense
if personnel compensation has been reasonably generous in the past and the
cuts are not drastic. It may also have merit if the companys staff is small and
it is impractical to reduce the number of employees without a serious adverse
impact on operations. The technique is more likely to work if the time interval
that has to be bridged is less than a year, recovery seems highly probable,
and the cuts are restored at the earliest opportunity. Employees who have
been through such situations often have stronger positive feelings about the
company and each other than do those in companies where layoffs were
carried out. Of course, it is essential that everyone share in the cuts, especially
the managers. This approach, however, has significant risk because your better
performers are apt to leave for higher paying jobs if the cuts last for more
than a few months.
An alternative approach in the same vein of share the pain is to ask for
volunteers to be laid off. The layoff period should be short, usually not more
than 30 to 60 days. Volunteers should be guaranteed that they will be brought
back, and that they will receive a significantly better severance package in
the event that permanent layoffs prove necessary later, say, within one year.
During the 1990s, a number of larger companies in the industry managed
downsizing (e.g., layoffs) by offering enhanced early retirement packages
to their older personnel, generally those over 50 years of age. Because anyone
over the age of 45 is protected by federal employment anti-discrimination
laws, this procedure could not be easily limited to weeding out the less
productive employees; everyone in the same category had to have the same
opportunity offered to them. As a result, a number of more desirable employees
were lost along with the less desirable ones. In the opinion of a large number
of outside observers, the mass early retirement of a generation of experienced,
highly competent senior personnel was a bad bargain. The companies may
have been able to reduce their annual compensation costs in the short term,
but they paid a heavy price twice for this action, which more than canceled
out any savings overall. The most obvious price was the cost of the retirement
enhancements, which frequently required the companies to take writedowns
against earnings, typically more than the amount of earnings for one or even
two quarters. The less obvious price came about from operating mistakes that
were likely to have been avoided if the more senior personnel had been on
hand to perform or advise. Some companies realized this and actually rehired
some of the retirees as consultants. Overall, it seems that this approach was
unsound.
Finally, perhaps the most important reason for not using dismissals to deal
with temporary contractions in business is that you will need those trained
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and experienced personnel to handle business when times improve. Remember how expensive and time-consuming it was to find, hire, and train new
people? If you cut staff in a downturn, you will be faced with having to go
through the same cycle of recruiting, hiring, and training all over again, only
this time it will be more difficult to attract top people because you now have
acquired the undesirable reputation of being quick to hire and even quicker
to fire.
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6.7 Retention
Lets return to the subject of retention keeping people. Considering how
much time, money, and trouble are required to find, hire, and train good,
qualified people, it is amazing how few managers think regularly about how
to keep those people. While it is true that no one is indispensable, it is foolish
to ignore the need to keep people when it is really not all that difficult to do.
Corporate loyalty in the days of downsizing and restructuring is not what it
once was, but management can and should find ways to repair that damage.
Why do people stay? The reasons are sprinkled throughout the preceding
sections of this chapter, but the following list pulls them together:
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even for hazards to life and the environment, is significantly greater in the
chemicals and plastics industry than in many others. It is essential that those
entrusted with the operation of equipment and the disposal of materials are
knowledgeable, highly responsible, and trustworthy.
Plant and lab people in the chemical and plastics industries must be hired
after a careful screening to ensure that only those who are particularly
conscientious in following established operating procedures are hired. Furthermore, these attitudes must be fostered by training and supervisory reinforcement. Willful disobedience of these procedures or a negligent attitude
cannot be tolerated and appropriate disciplinary procedures must be followed,
including dismissal.
Because plant and lab employees are expected to be a cut above other
non-professionals, they should be paid more than average wage for parallel
jobs in the area. Non-professional personnel tend to be less mobile than
professionals, so compensation must be compared against the area or regional
levels in the industry (effectively there are no national levels per se). You do
not want to lose people for whom you have spent much time and money to
find, hire, and train.
Especially for lab positions, it pays to look for people with at least some
education beyond high school. For example, an associates degree in chemical
technology or a bachelors degree in biology is a good indication that an
individual has the interests and training to be proficient in the lab, even though
if the education does not bear directly on plastics. While a growing number
of institutions are conferring two-year associate degrees in plastics technology,
the number of graduates is still fairly limited; such individuals would be a
find, of course.
6.8.1 Unions
What should you do if a union tries to organize your non-professionals? The
first question to ask is why? Unions almost always enter the picture as the
result of poor employee relations, the handiwork of a poor supervisor or
manger. Because you are presumably paying more than the average wage
although more money may be a union promise, money is seldom the primary
reason for unrest you should take a hard look at your supervisors and
managers. If you can identify problems with the way they are treating the
non-professionals, fix them immediately. This is the kind of problem you
should always be looking for on a routine basis long before a union organizer
shows up. Once a union finds enough support to call for an election, any
steps you take may already be too late.
While it is certainly possible to have a good, constructive relationship with
a union, they almost always add cost to operations through inefficiencies
(work rules), complaints (grievances), and strikes, among other things. It is
quite common for one or more disgruntled employees to bring in union
organizers, participate prominently in the campaign for recognition, and then
resign within a few months after the union has been established.
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Chapter 7
102
For this exercise, Drucker defines revenues and costs a little differently
than many accountants do. First, note that he uses a value-added approach;
in other words, sales revenues are stated net of raw material costs. Second,
he allocates manufacturing cost and general overhead (sales, marketing,
research and development whatever is needed to develop, sell, and maintain
a product) on the basis of time or transactions, not just on the basis of physical
volume (tonnage). What might these factors be in the plastics industry? Here
are a few examples:
For a polymer producer, compounder, or processor, manufacturing transaction costs might include the cost of manning, operating, and maintaining
the equipment incidental to producing a single production order. This
would include a production lot made either to fill several accumulated
orders or for building inventory.
103
For a distributor, service transaction costs might include the time required
by customer service to process an order, either from stock or specially
ordered from the manufacturer.
For an equipment manufacturer, sales transaction costs might include the
time spent preparing the average number of proposals required to obtain
one order.
Automotive
Housewares
Electrical/
electronics (E/E)
Industrial
Medical
Specialty packaging
Recreation
Construction
Total
a
Rounding.
Sales
(M $)
% of
Total
Costs
(M $)
% of
Total
Earnings
(M $)
% of
Total
Contribution
Coefficient (%)
40
35
15
35
31
13
38
28
11
36
27
11
3
7
4
26
61
35
0.7
1.7
2.3
8
7
5
1.5
1.5
113.0
7
6
4
2
2
100
5
6.5
6
3
5
102.5
5
6
6
3
5
99a
3
0.5
1
1.5
3.5
11.5
26
4
9
13
30
100
3.3
0.6
1.8
8.7
20.0
104
40000
35000
30000
Sales
25000
20000
15000
10000
5000
0
1
10
Time
Figure 7.1
105
Repair Job This product has substantial volume and good growth
potential (near the bottom to the middle of the S curve) but low profitability
stemming from a single major defect, a problem that is clearly definable
and readily corrected, such as positioning it in another market. Fix it or
sell/terminate it.
Productive Specialties These products have a distinct but limited market
(relatively low growth) but high profitability and require only limited
resources. These are keepers.
Unnecessary Specialties These products have more variations than are
really needed by the customer or which are sufficiently undifferentiated
from others in that they cannot command a price premium. Eliminate these
products either through consolidation into other products or by termination
(by definition, they have essentially no value to someone else).
Developmental Products These products are still in the introductory
stage and appear to have good potential. The technology is cutting edge,
but the economics are as yet unproven. Often such products do not receive
adequate support because to do so would require drawing down support
from one or more of managements favorites (todays or yesterdays breadwinners) or an investment in management ego. Be careful about deciding
to commit so much support that your developmental products will fail the
test mentioned earlier of establishing positive cash flow after not more
than one year.
Failures These should be obvious, but, unlike Repair Jobs, they have
more than one serious defect and may have the dangerous potential to
become an investment in management ego (see the next category). Terminate as soon as possible.
Investments in Management Ego This is a product that should be a
success but is not; however, management is so convinced that it is the
best in its class that it keeps pumping resources into the product. The
poorer it does, the more management gives to it a sort of death spiral
that, in extreme cases, could actually suck an entire company into it. Most
unfortunately, investments in management ego are a common phenomenon. Someone will have to tell management the cold facts. Fix or terminate,
as promptly as possible.
This method of categorizing products and what to do with them is summarized in Table 7.2. Next, we apply them to our hypothetical product line,
as shown in Table 7.3; a qualitative sales growth rate has been assigned to
each product to help with identifying the categories into which the lines fall.
We will find that some judgment calls will have to be made to fit the products
into the slots, just as in real life.
Automotive has the attributes of a Yesterdays Breadwinner and should be
replaced with something else when the current model year purchasing
contract expires.
Housewares, on the other hand, appear to be a Todays Breadwinner and
should be monitored for loss of growth and profitability.
Electrical/electronic (E/E) is a Tomorrows Breadwinner and is likely to
produce even more revenues if supported strongly.
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Todays Breadwinner
Tomorrows Breadwinner
Yesterdays Breadwinner
Repair Jobs
Productive Specialties
Unnecessary Specialities
Developmental Products
Failures
Investments in
Management Ego
Sales
Volume
Sales
Growth
Contribution
Coefficient
Action
High
Medium
High
Low
Low
Low
Low
Low
Low
Slowing
Growing
None
Low
Varies
None
Unknown
None
None
Medium
High
Low
Low
High
Low
Unknown
Low
Low
Monitor
Support
Milk or sell
Fix or drop
Milk
Drop
Support
Drop
Drop
The Industrial line has the earmarks of a Productive Specialty. The application may not be price sensitive and a price increase could help profits
without harming sales.
Medical is a Repair Job. The product should be repositioned in a new
market, e.g., Instrumentation, and repriced as a Productive Specialty. If
this fails, drop the product only one fix-it attempt is allowed.
Specialty Packaging is a Developmental Product. Assuming the market
analysis and projections are correct, it will be a winner and requires
continued support. The lead times for approval in this market are longer
than for many others, but this should be offset by greater profitability.
Recreation is a clear Failure. The customer has badly misjudged the market
and admits it cannot support the original projected volume or pricing, but
you cannot reduce costs. Drop this product now!
Construction looks like a monument to Management Ego. After a year and
a series of price cuts, sales are stagnant to faltering, and costs cannot be
reduced any further. Admit that this proprietary molded product is a failure
and drop it before any more money is lost on it. Reassign resources to
E/E and Specialty Packaging.
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Sales
Volume
Growth
Contribution
Coefficient
Automotive
High
None
Low
Housewares
High
Growing
Medium
Electrical/
Electronics
(E/E)
Industrial
Medium
Growing
Medium
Low
Low
High
Medical
Specialty
Packaging
Recreation
Construction
Low
Low
Low
Unknown
Low
Unknown
Low
Low
None
None
Low
Low
Total
100
Category
Action
Yesterdays
Breadwinner
Todays
Breadwinner
Tomorrows
Breadwinner
Replace
Productive
Specialty
Repair Job
Developmental
Product
Failure
Investment in
Management
Ego
Milk
Monitor
Support
Fix
Support
Drop
Drop
If you find that you are spending more time on putting out fires than on
smoothing the way for your most successful products, then you may be
misallocating your own most important resource. Much more useful information
than just this topic can be found in Managing for Results, and I recommend
the book for everyone with a serious interest in industrial management.
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34%
35
31
4
5
4
18
The relatively low manufacturing cost is typical when one is making long
production runs of a limited number of products. This cost also includes
depreciation (which may or may not accurately reflect the replacement cost
of the facilities, depending on their age and inflation rates), and how current
the plants level of technology is. Thus, management can be misled into
believing that manufacturing costs are lower than those representative of the
industry if their plant facility is old and nearing full depreciation. This blind
spot, in turn, can lead to a strategy of cutting prices to raise market share.
But, if the result of such a strategy was to lead to net earnings before interest
and taxes (NEBIT) of, say, only 5%, then the company would likely be in
serious trouble, even though it might appear, on paper, to be earning a
respectable return on investment. In actuality, it would risking being unable
to generate enough cash flow to finance growth, plant upgrades, or even
adequate maintenance because it had not adequately addressed replacement
costs. Most polymer producers demand a return on investment of 35 to 40%
to justify new plants. It is unlikely that they actually realize this much on the
average. Research and development costs are a bit higher than in other
segments of the industry because polymer product and process development
require scale-up steps that effectively are unnecessary in the other segments.
7.2.2 Compounder
Compounders usually work on smaller gross margins than polymer manufacturers and therefore must have lower overhead expenses. A specialty compounder might have an expense breakdown such as this:
Raw materials
Manufacturing
Gross margin
Administration
Research and development (R&D)
Sales and marketing
Net before interest and taxes
57%
18
25
3
2
5
15
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7.2.3 Distributor
Distributors have a wide range of gross margins, depending on how they
are compensated (resale vs. commission), the types of materials they handle,
the industries they serve, and their size. In the example below, it is assumed
that a small distributor buys engineering plastic resins from several manufacturers, stocks them for a predictable (but competitive), non-automotive clientele, and resells.
Raw materials
Warehousing and shipping
Gross margin
Administration
Technical service
Sales and marketing
Net before interest and taxes
74%
6
20
3
1
6
10
110
7.2.4 Processor
Processors expense allocations can vary even more widely than those of
distributors, depending on their size and how fully integrated their operations
are. The following example for an injection molder assumes smaller size and
limited integration (e.g., mold maintenance but not mold building, assembly
but not decorating).
Raw materials
Production
Gross margin
Administration
Technical
Sales and marketing
Net before interest and taxes
35
47
18
3
2
5
8
80
20
15
5
Again, return on invested capital varies widely, but some published data
indicate that the numbers are somewhat lower than some of those shown
above, in the 10 to 15% range. A problem in estimating the average return
is in deciding what constitutes a representative business cycle, from peak
to trough.
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112
trading below average, you need to address what is wrong with either the
companys performance or the analysts perceptions and take appropriate
action. In the past decade, the stock market has been a harsh taskmaster,
rewarding and punishing companies with dizzying swiftness, sometimes
unjustly tarring good companies with the same brush as competitors who
have published poor results. While this is a problem that is not completely
in the hands of management, solid, consistent performance over a period of
time will eventually be recognized and rewarded at some level of support for
the stock in the marketplace. Unexpected dips in earnings or periodic writeoffs,
on the other hand, will mark a company as weak or in decline and drop
support levels to a minimum valuation. A continuing low stockprice may offer
an opportunity to take the company private by a management-lead stock
tender offer.
Because most companies also finance their operations through bank loans,
it is important to be aware that bankers also read the stock market reports.
If your companys stock has been swooning, expect a phone call from your
banker asking for an explanation. If your cash flow is running below forecast,
your banker could become concerned about your ability to service your debt.
113
and services that your competitors do not. This is an important technique for
detecting changes coming, so that you are not blindsided.
Customer surveys can also turn up additional important information about
broader needs and problems (market intelligence) that you can use for
directing R&D and strategic marketing projects. After all, your customers are
experts on their business. You would be hard put to find a better, more
credible source of information about the trends in their market.
114
view their business, as well. Several times in the past, people in the plastics
industry have been caught by surprise when trade associations representing
glass, paper, or metal industries initiated a public relations campaign against
plastics. It should come as no surprise, however; after all, just who is it that
loses business when plastics displace other products in packaging, construction, and other end uses? Even construction unions have been an enemy of
plastics when they have believed that converting from traditional materials to
plastics may threaten their jobs and income.
Next, your consultant will want your agreement on how the study will be
structured. At the very least, you will want to know the size, growth trends,
organization, market share (both overall and by individual markets), innovation
record, and production and technical capacities of your principal competitors.
Some of the information you want may simply not be available, such as
production costs, but, as mentioned earlier, a great deal of information is
available from essentially public sources. Talking to knowledgeable sources
in the marketplace takes more time and costs more than just gleaning information from published data, but usually fills in missing details and (perhaps
even more importantly) validates the published data. This is important because
more than one company has thought that it can scare off potential competitors
by inventing creative ways to announce production capacity increases that
turn out to be only on paper. Your competitors management may also reveal
their strategies in public forums, such as trade association meetings and
building dedication ceremonies, not to mention documents filed with the
Securities and Exchange Commission or other public agencies. Your consultant
will locate all of this information, analyze and evaluate it, and then present
it to you in a useful, intelligible form.
Chapter 8
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117
118
on overhead per unit of production capacity, then other, more highly compelling reasons whould have to justify going ahead with the acquisition.
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120
Show the industry how wealthy and powerful your company is. This calls
into question why more attractive internal opportunities for more profitable
growth have not been generated. C. Northcote Parkinson, in Parkinsons
Law, warns us that building corporate monuments is a sign of decline,
not power. This is also a sign that the board of directors is not independent,
but subservient to a CEO who has an oversized ego.
Diversify. This is quite possibly one of the most common and also the
weakest of reasons for acquisition or merger. Only rarely does management
know enough about unrelated businesses that it can effectively oversee
the operations of an acquisition that has nothing in common with the main
line of business. Learning how a new business operates after the acquisition
is much too late. And, there is always the temptation for the acquirer to
dictate how the business should be run, usually to the detriment of the
acquired company. Furthermore, the stock market tends to punish the
valuations of conglomerates that are not exceptionally well managed. Over
the past half-century, virtually every company that has acquired other
businesses in order to diversify has wound up divesting them later or been
acquired itself and broken up. Still, this dismal track record does not seem
to keep managers from acquiring unrelated businesses as a way to smooth
the economic cycle or some other equally attractive delusion.
Acquire a bargain. The urge to buy a troubled company on the cheap
with the premise that it can be turned around quickly is often a trap
waiting for the unwary and inexperienced. Usually, it is very difficult to
know from the outside what the real cause of trouble is or even if it can
be fixed at all. The only certain thing is that troubled companies invariably
soak up a great deal of management time that would otherwise go into
improving your existing business. Obviously, exceptions to this rule can
be found. If you know the company well and have a firm and appropriate
idea as to how to fix it, you stand a good chance of acquiring a winner,
but without this inside knowledge, a buyer is normally headed for trouble.
121
and simply added this capacity and the remaining customers to its own a
far sounder acquisition.
A variation of this blunder is to have the new acquisition report to a
particularly ambitious and/or egotistical manager. Such a manager will never
be able to resist the temptation to put his or her imprint on the new company,
invariably changing the focus away from what made it successful to begin
with. This may not be a bad plan if the acquired company requires a rescue
from the verge of bankruptcy, but it is almost always a guaranteed plan for
failure if the firm was a successful one. This scenario is particularly applicable
if the acquiring company has a culture that demands that its managers show
instant results when they take on new responsibilities.
Replacing key managers in the acquired company with ones from the
acquiring company is another blunder. Unless the acquired company was a
business failure, this makes no sense at all. Human capital is almost always
the most important asset in any acquisition. If management does not respect
the staff of the acquired company, then why was it acquired? And, as noted
earlier, those key managers have a way of winding up in competition with
the acquired company, and now with a grudge, as well not a pretty picture
to contemplate and one that will hurt the acquisition in several ways. Noncompete agreements are not always upheld by the courts, so no foolproof
way exists to keep key managers who have been dismissed from coming back
to haunt you in the marketplace. If they are good, they will know where to
hit you where it really hurts.
Yet another mistake is to merge several acquisitions together by creating a
brand-new top-management group while simultaneously reshuffling (or dismissing) the top management of the acquired companies. The new entity is
expected not only to maintain sales and profitability of the acquired companies,
but also to achieve higher revenue and earnings growth (synergy). This
procedure does not appear to have any theory underlying it, but the lack of
a reasonable rationale does not seem to keep people from trying it. A large
plastics conglomerate tried this by buying up regional distributors and trying
to form one large national distributor from the group, dismissing or losing a
number of key personnel in the process. The product lines of the regional
distributors did not complement each other and in some cases actually competed. This meant trying to persuade suppliers to agree to convert regional
representations into national ones, a process that eventually had some success
but only after a period of years. It also meant dropping or divesting some
small but profitable representations that could not be converted. The net result
was that the resulting mashed-together super distributor took years to equal
the sum of the originally acquired parts. It is quite likely that the same net
result could have been obtained at less cost and more quickly by acquiring
one strong regional distributor and putting resources into internal growth and
expansion.
In another case, involving a parallel strategy, a conglomerate company
decided to combine a number of acquired compounders with dissimilar
product lines. A number of senior managers were dismissed and the rest
moved from their original positions (and competencies) to new positions.
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123
a mouse and a hippopotamus is uneasy at best. The simplest ones are normally
the most successful for example, a manufacturing joint venture where the
partners split the costs and the output and market the product independently
of each other. Research and development joint ventures are also relatively
simple but require a firm agreement on the partners goals and their contributions of personnel and funding, as well as the intellectual property rights
that will stem from any results. The most complicated, and potentially contentious, joint ventures are those where one of the partners supplies raw
materials or services to the collaboration on an ongoing basis; agreement on
transfer pricing is usually difficult and subject to frequent demands for renegotiation. The success of merging two similar businesses together just to
achieve greater size is likely to depend on the ability of the two parents to
reach agreement in advance on which one will be the managing partner.
8.8 Divestitures
Divestitures, the opposite of acquisitions, are thought to be necessary when
an acquisition turns out to be worthless or unsuitable for the companys use.
For example, a polymer producer acquired a sheet manufacturer located in a
large city. City building inspectors showed up shortly after the closing and
threatened to cite the company for numerous building and fire code violations
unless they were offered gifts, a practice that had evidently been going on
for years but had not been detected during the due-diligence review. The
union business agent also appeared and it became immediately apparent that
he was also used to receiving gifts in exchange for steering labor contract
negotiations in the companys favor. The acquirer, of course, refused to
continue these practices but was forced to shut down the plant. The acquisition
agreement was then deemed to have been fraudulent, but by this time, the
former owners had disappeared and the acquired company was eventually
liquidated. The way to avoid such a disaster is to use an outside consulting
firm to be responsible for the due-diligence phase to verify that the business
is indeed what the owners represent it to be.
The situation is less disastrous for the case of a joint venture that has not
achieved the goals set for it by one of the partners. That partner may then
wish to divest its interests, most likely selling to the other partner.
Divestiture might be necessary when a relatively independent part of the
company or its business has proven unable to show the required growth or
profitability to keep up with the other parts. Mature product lines can fall into
this category, particularly if they are relatively independent of other lines and
are unable to support the companys overhead costs. Other producers of the
same product may have an interest in acquiring such a business, or sometimes
the managers of this business segment may wish to buy it and run it as an
independent company. This is a good way to free up capital for investment
in more rewarding operations.
A capital-intensive part of the company or its business could have unmet
capital needs that cannot be handled internally. This assumes that the business
124
line is not a new, growing, and profitable one that might represent the future;
otherwise, it would be better to divest lower growth lines in order to finance
the more capital-intensive one. A strain on capital is also a situation that might
well benefit from joint venturing rather than outright divestiture.
Management could decide that the company must change its focus, and a
part of the company no longer fits with the new direction or other parts of
the business require the investment of cash that cannot be easily raised
otherwise. If the part of the company to be divested is big enough, it may
be spun off to the stockholders rather than sold. While this can be a legitimate
basis for a divestiture, many cases of such a splitting off have been less than
successful for both the parent and the spin-off, so that all the ramifications
must be considered very carefully before making such a move. As mentioned
elsewhere, several major chemical companies in the past decade decided they
would focus on life sciences and sold or spun off their basic chemical
operations. Neither parent nor stepchild company fared well afterward; it
appears that they may well have been better off to have kept the chemical
businesses and spun off their life science operations instead. Profitable, growing businesses are not easy to find or grow internally. If they are contributing
to the overall company and are not demanding otherwise scarce high-level
resources, why divest? They should be retained to provide cash flow for core
and new businesses.
125
sector of our industry. This is because there are so many small processors,
almost invariably owned by their entrepreneurial founders. Because the financial barriers to entry in processing are very low (equipment and a building
can be leased rather than purchased), just about anyone can go into business
as a processor; therefore, the primary assets of a processor are the firms
customers and the expertise of the employees. You will need to assure any
potential buyer that these assets are readily transferable if the firm is sold. Do
not overlook the possibility that those employees may be just the ones to buy
your business, possibly through an employee stock purchase program. You
will need expert financial and legal assistance to do this, of course.
Selling your company will be very time consuming. Make sure that you
have delegated as much of your duties as possible (only to capable hands,
of course) so that you will have this time. If you intend to retire, ensure that
you have an effective successor in place who is ready to take over after you
leave. Few potential buyers will have any interest in taking over a company
where they have to provide managerial succession.
If you intend to stay on, you must understand that you will no longer be
the boss. The new owner will have the final say on how the business is run.
Under most circumstances, it makes more sense for a company founder to
plan on leaving after not more than 3 years, during which time you will
facilitate the turnover of the business, particularly in regard to holding the
hands of customers. Even this brief time may be too much if you find you
are having trouble letting go. Your contract should provide for early release
under such circumstances; you will undoubtedly be bound by a non-compete
agreement, in any event.
126
the extent you are permitted to do so, but you may wish to consider asking
for a severance package in the event none currently exists (assuming you will
not hasten your departure by being so bold).
If you are not the senior executive, but someone a little lower down on
the ladder, you have some thinking to do. Why was the company sold? If the
reason was for consolidation, is your department one that could be easily
replaced by an outside group? If you are in sales or manufacturing, you are
likely to be asked to stay. Any other function is likely to experience restructuring and your job may or may not survive. In general, the higher your
compensation, the more closely you will be looked at to determine whether
or not you will be retained. If you do survive the cut, take a look at the new
owners operations to see if it might offer you a chance to move up. Very
often, those who are deemed worthy to remain in their positions are also
those deemed to be highly promotable.
Chapter 9
Case Studies
To help reduce some of the preceding ideas to practice, this chapter will
explore how a few selected companies in the industry have been managed
successfully. The selection of these firms was also based on my knowledge
of the companies, the accessibility of their senior management, and their
willingness to talk about their guiding principles. No claim is made that
inclusion in this chapter constitutes an implied best of category. Furthermore,
these profiles in some respects are a photograph at a moment in time and
may not fairly represent the condition of the company at the time that you,
the reader, take up this book. Not all of my comments or observations are
authorized by the companies analyzed, so reasonable people may differ with
some of my observations and conclusions.
127
128
129
Case Studies
Executive Director
Polystyrenes, Polyurethanes,
Performance Polymers, Polymer R&D
Executive Director
North America (NAFTA)
Executive Director
Corp. Engineering
Southeast Asia, East Asia
Executive Director
Eastern Europe, Africa,
West Asia
Executive Director
Schwartzheide and Antwerp
Plant Sites
Executive Director
European Community
Executive Director
Ludwigshafen
Plant Site
Figure 9.1
Polymers.
rebuilt the site, became a major polymer producer in Germany, and next built
polymer plants in Belgium and Spain. In the 1980s, BASF established a
significant polymer presence in North America, then began setting up an
important and growing polymer position in Asia (Japan, Korea, and China)
during the 1990s.
BASFs emphasis on integration fits closely with its philosophy of making
commodities profitably. When the profit goes out of a product, the company
either divests it or closes it down. BASF has sought to improve profitability
in polyolefins in recent years through consolidation (it bought ICIs polypropylene and Hoechsts polyethylene businesses) and joint venturing (BASF and
Shell have pooled their polyolefins under the company name of Basell, with
BASF as the managing partner). Shells contribution came from buying out
Montedison, Shells partner in their Montell joint venture.
Polyolefins are an example of commodities that are struggling with profitability. At least until recently, it appeared that BASF has had more success
in polyethylene than in polypropylene. Basell Chairman Volker Trautz has
said that the boom-and-bust pricing fluctuations that mark the polypropylene
business have effectively destroyed all of the investment made in this polymer
since its inception. Unfortunately, in the drive for profit improvement via
consolidation (a commodity culture technique), BASF was unable to find a
place for their highly specialized polypropylene product line, Hivalloy copolymers. Hivalloy was a promising specialty business, growing rapidly, when
Basell was formed. BASF turned down offers to divest Hivalloy but within 18
months decided that it could not sustain this business within its culture and
decided to close the operation altogether.
In addition to polyolefins, BASFs principal polymer products consist of
the nylon family, including 6, 66, 610, and 6T, and the styrene family, including,
PS, SAN, ABS, ASA, MABS, SB, polyurethanes, and PVC, as well as POM, PBT,
sulfone polymers, and thermosetting polyesters. The only major thermoplastic
polymer missing from its portfolio is polycarbonate. At one time it also
130
Case Studies
131
132
9.2 Compounding
A great many compounders can be found around the world, but independent
(non-integrated) compounding began in the United States in the 1950s. Here,
we will look at the biggest and one of the smallest in the United States to
see how they successfully fend off competition.
Presidents
Overseas Subsidiaries
Asia, U.S., Europe
President
Asahi Kasei Corp.
Case Studies
133
134
Case Studies
135
unfolding, but General Electrics history suggests that LNPs business strategies
will be changed far more radically than under any of the previous owners.
This theory was reinforced when General Electric named one of its veteran
senior executives as the new CEO of LNP, the first time that any owner has
placed an outside manager at the top of LNP.
136
their activities with the parent company groups; this organizational structure
is still in place. In a complicated series of events, LNP wound up with ICIs
British long-glass compounding plant in 1991 and relocated it to LNPs own
plant in Thornaby-on-Tees, England, 4 years later. In 1996, LNP acquired
Eurostar S.A., a French compounder with a plant near Paris, and merged its
operations into LNP Europe.
LNP formed a sales office in Singapore in 1992 to develop business in
burgeoning Asian markets and then followed with plant construction in
Malaysia in 1995 and two expansions since. While manufacturing and sales
are run independently here, some technical and administrative services are
being provided from the United States until the Asian company becomes large
enough to support this overhead locally.
In 1999, LNP acquired MIXCIM Indstria e Comrcio Ltda., So Carlos,
Brazil, as its first manufacturing presence in Latin America. LNP/MIXCIM is
being run as an independent subsidiary, with sales and R&D located at the
manufacturing site. In 2000, LNP announced formation of a marketing joint
venture with Vetrotex America, the subsidiary of the French glass manufacturer,
to sell long-glass concentrates to injection molders in the North American Free
Trade Association (NAFTA) region. In 2001, LNP built a greenfield plant in
San Luis Potosi, Mexico. This plant is managed within the NAFTA as part of
LNPs North American manufacturing operations. It can be seen that LNP has
typically expanded at existing sites or greenfield facilities but recently has also
added acquisition as a selective tool to solidify its supply base and broaden
its market reach.
LNP Europe
Raamsdonksveer,
The Netherlands
Plants also in UK, France
LNP Japan
Tokyo, Japan
RC Plastics
Houston, TX, USA
LNP Americas
Exton, PA, USA
Plants in PA, IN
and Mexico
K-LNP
Exton, PA, USA
LNP-MIXCIM
Sao Carlos, Brazil
Case Studies
137
138
President
Figure 9.4
VP
Finance
VP
Operations
Sales Mgr.
Plant Mgr.
Lab Mgr.
won most of its points vs. RTP but only won negligible damages and lost on
one issue that has allowed RTP to remain in the business. Because the U.S.
patents expire in 2002, the whole issue will be moot shortly.
LNP has also sought licenses from polymer producers to manufacture
compounds based on unique materials, such as Dows syndiotactic polystyrene, DuPonts amorphous liquid crystal polymers (LCPs), and Shell Chemicals
polyketone. These have not been exclusive agreements, but they protect LNPs
rights to develop patented compounds based on these materials in cooperation
with the polymer producer, without fear of the results being shared with other
compounders.
Case Studies
139
9.3 Distribution
Distribution is another sector in which we find a great many competitors.
Here, we will just feature one unique distributor, one that is owned by a
polymer producer.
140
piece by piece into the parent organization, suggesting that complete assimilation would be Polymerlands eventual fate. However, as time wore on,
General Electric management came to see that integrated distribution via
Polymerland had distinct value apart from its conventional polymer manufacturing business. Polymerland also expanded into Europe in the 1990s, where
it acquired and assimilated an Italian nylon compounder.
9.4 Processing
Over 12,000 processors are located in the United States (some say over 15,000),
but we will look at just two, a large molder and a small extruder. Each has
found a particular way to compete successfully.
Case Studies
141
142
President/CEO
VP
Finance/CFO
VP
North America
Figure 9.5
VP
South America
VP
Europe
VP
China
Nypro, Inc.
143
Case Studies
President
(Sales)
Accounting
Operations Manager
Plant Manager
Figure 9.6
9.5 Equipment
9.5.1 Husky Corporation: Molding Systems
Husky Corporation is not only an injection molding machine manufacturer
but also bills itself as the worlds largest moldmaker. It is a large company
(roughly $700 million in annual sales) but is actually only a small competitor
in a huge worldwide injection molding machine market of an estimated $20
billion, shared by dozens of companies competing in every significant geographic region.
How does a relatively small company survive in such an environment?
Huskys answer has been specialization to attain maximum penetration of
targeted markets and integration to control quality and costs. Husky started
out by making relatively small, high-productivity machines for thin-walled
packaging containers, such as ice cream tubs and lids. Having established a
strong presence in this market, it extended its line of machinery to making
polyethylene terephthalate (PET) injection blow molding systems in 1978.
Because such systems run steadily on the same material, they are ideally suited
to incorporating hot runner molds, which Husky began designing, making,
and supplying. These PET packaging machinery systems also utilize robots
for handling parts; Husky then began designing, making, and supplying robots
as yet another component of a complete, turnkey plant.
Husky is headquartered in Ontario, Canada, but has added manufacturing
sites in the United States (Vermont) and Europe (Luxembourg) and 18 technical
centers throughout the industrialized world. The technical centers serve as sales
and marketing sites where potential customers can see Huskys equipment in
action, even running their own molds. It is difficult to beat an actual demonstration of how ones own tooling will run as an inducement to buy. The
power of live demonstrations is an important reason why participation in trade
shows is an integral part of Huskys marketing plan. The equipment on display
is usually sold during the show and shipped directly to the new owner.
144
Chapter 10
Summary
What have we learned about the requirements of the plastics industry for
successful management that differ from those for other industries?
The plastics industry is fundamentally based on technology that advances
constantly and which shapes the industrys markets and business models.
Many other large industries, such as construction, are not nearly as dependent on technology.
The industry requires technically trained people to manage and run it, but
in an open and shared-decision style rather than by command and control.
Many other large industries do not require as many personnel with such
training, nor do they need such an open management style to succeed.
The nature of the industry is for segments of it to be in frequent transition
between different cultures of growth, size, and style. Prompt recognition
of these changes and adapting to them is a top priority for management,
because a mismatch of culture, style, and technology within a company
will not produce successful results. Developing new applications and
products requires an integrated technical marketing effort that is essential
to success.
The average life cycle of a product varies from very long to quite short
as one moves downstream from polymer production to finished parts. This
would suggest that increased focus on product and application development would be required as one moves downstream, but in fact, research
and development expenditures as a percent of sales are typically higher
as one moves upstream. The companies that are exceptions to this rule
are usually more profitable than other companies in their sector. While
this characteristic is not peculiar to the plastics industry, it demonstrates
that many plastics companies could improve their financial results by
changing their business structure, emphasis, and culture, with respect to
research and development and accompanying value pricing.
145
146
Successful management in the plastics industry is not the result of luck or the
personal accomplishments of the chief executive officer. It is the result of
applying the analysis, logic, and creativity characteristic of the scientific method
used to discover technology to the problems of organizing, planning, and
executing business decisions, then inspiring others to carry them out.
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Paramus, NJ, 1999.
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Drucker, P., Innovation and Entrepreneurship, Harper & Row, New York, 1985.
Drucker, P., The Essential Drucker, HarperCollins, New York, 2001.
Jones, R., Cultures in Collision: Foreign Ownership of U.S. Plastics Companies, Society
of Plastics Engineers Annual Technical Conference, Detroit, MI, May 1992.
Jones, R., Strategic Partnerships for the 21st Century, Society of Plastics Engineers Annual
Technical Conference, Indianapolis, IN, May 1996.
Jones, R., U.S. Independent Compounding Past, Present, Future, Plastics Engineering,
May 1996
Jones, R., Guide to Short Fiber Reinforced Plastics, Hanser, Munich, 1998.
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Peters, T., In Search of Excellence, Warner Books, New York, 1982.
147
Index
150
Commodity
cultures, 57, 58
polymers, 19, 34
producer research and development,
37
Communications, signal loss in, 20
Community
liaison, 4
relations, proactive approach to, 4
Company(ies)
acquisition of for wrong reasons, 146
boards, majority membership of, 66
capital-intensive part of, 123
goals, 10
publicly held, 111
recruiters, 85
selling of, 124
sold, 125, 126
stepchild, 124
urge to buy troubled, 120
Company culture and organization,
5368
board of directors, 6668
management styles, 6466
size intertwined with culture, 5460
commodity culture, 5758
entrepreneurial culture, 5556
managerial culture, 5657
nationality/ethnic culture, 5960
technology culture, 5859
tailoring organizational form to
business needs, 6064
hybrid organizations, 64
organizing by function, 6061
organizing by geography, 63
organizing by market, 6263
organizing by product, 6162
Compensation, 126
changes, displeasure over, 91
cuts, 95
goals, 122
plans, 90
Competition, globalization of, 1
Competitive rankings, 113
Competitor(s)
elimination of, 119
growth-oriented, 80
management, strategies revealed by,
114
reason for acquiring, 115
using time zone against, 138
151
Index
Compounders, 108
Compounding
custom, 22
global, 134
regional, 138
Compression molding, 28
Computer-aided design (CAD), 74
Computer-aided engineering (CAE), 74
Confidential information, 87
Consolidation, of companies, 30
Consultants, 96, 114
Consumer goods, 49, 131
Continuing education, 89
Contract manufacturers, 29
COO, see Chief operating officer
Corporate governance model, 67
Corporate loyalty, 97
Corporate monuments, 120
Cost(s)
benchmark for allocation of, 107110
compounder, 108109
distributor, 109
machinery manufacturer, 110
polymer manufacturing, 107108
processor, 110
definition of, 103
opportunity, 101
pressures, 49
sales transaction, 103
savings, 80
service transaction, 103
Credit
decisions, 79
risky, 79
Crompton, 30
Cross-licensing, 18, 117
CTP, see Certified Thermoplastics
Culture(s), see also Company culture and
organization
business, difference between
American and non-American,
60
change, slowest route to successful, 54
commodity, 57, 58
entrepreneurial, 55
German, 68
management ignoring, 53
managerial, 56
quasi-government, 55
technology, 58
Currency exchange considerations, 19
Custom compounding, 22
Customer(s)
best interests of, 7
competitors, 113
dealing ethically with, 15
direct sales relationships with, 20
dropping of, 79
feedback, 74
-focused companies, 54, 63
just-in-time, 24
lists, 87
needs, 8, 17
on loan from supplier, 25
perception of company by, 75
relationships
distribution, 25
processing, 28
satisfaction, 112
slow-paying, 80
surveys, 113
D
DaimlerChrysler, 46
Davis-Standard, 30
Debts, 79
Decision-making authority, 71
Deloitte & Touche, 80
Delphi, 22
Demand volatility, 70
Developmental products, 105, 106
Differential pricing, 21
Dioxins, formation of, 42
Direct sales, 20
Discounts, retroactive, 76
Distributors, 109, 121
Divestitures, see Acquisitions, joint
ventures, and divestures
Do as I say not as I do philosophy, 12
Dow, 118, 131, 138
Downsizing, 95, 97
Downstream
activities, 58
polymer processing steps, 17
processing, 18
Dual-career families, 88
Due-diligence review, 123
DuPont, 41, 127, 131
152
amorphous liquid crystal polymers,
138
Zytel nylon, 75
E
Earnings
before interest and taxes (ELIT), 46
manipulation of by CEO, 15
tax-sheltered, 140
EBIT, see Earnings before interest and
taxes
E-commerce
business-to-business, 27
compounding and, 24
effects of, 27
introduction of, 10
long-term value of, 14
order processing, 21
pressure to use, 77
use of by polymer producers, 20
Economies of scale, 116
Educational background, 83
Embezzlement, 66
Employee(s)
best interests of, 7
dealing ethically with, 15
entry-level, 65
morale, 9
overqualified, 83
potential, 86
stock-ownership plan (ESOP), 140
training of new, 88
Employment
agreements, 86
lifetime, 5
offers of, 82
termination, 12
End-use market, favorite, 47
Engineering polymers, 113
Enterprise resource planning (ERP), 21,
76, 77, 119
Entrepreneurial culture, 55
Entrepreneurial founders, 125
Entry-level employees, 65
Environmental laws, violations of, 66
Equipment types, 39
ERP, see Enterprise resource planning
Errors, repeated, 2
F
Family-owned businesses, 5657
Farm irrigation products, 139
Fax-back system, 26
FDA, see Food and Drug Administration
Federal employment anti-discrimination
laws, 95
Feedback, positive, 12
Feedstock costs, fluctuations in, 1
FEP, see Fluorinated ethylene-propylene
Financial statements, 111
Flame-resistant formulations, 48
Fluorinated ethylene-propylene (FEP),
37, 38
Food and Drug Administration (FDA), 45
Food packaging, 44
Ford, 46
Frivolous lawsuits, 79
Functional organization, 61
G
GDP, see Gross domestic product
Gender discrimination lawsuits, 94
General Electric, 71, 94
corporate structure, 134
Lexan polycarbonate, 75
Polymerland, 118, 139
General Motors, 22, 46
Geographic area management, 128
Geographic organization, 63
Germany
corporate governance model used in,
67
culture, 68
GHA Plastics, 135
Global compounding, 134
Global marketing, 128
Globe-spanning companies, 77
153
Index
Goal(s)
setting, responsibility for, 10
stretch, 11
Golden handshakes, 122
Government law, violation of, 93
Grant back, licenses involving, 117
Greenfield plant, 136
Gross domestic product (GDP), 1
H
Hoechst, 56
Homopolymer, DuPont rival for, 131
Honda, 47
HR, see Human resources
Human capital, 121
Human resources (HR), 78
Husky Corporation, 143
Hybrid organization, 64
Hypothesis, testing of, 2
I
Illegal activities, 65
Incompetence, people promoted to level
of, 92
Industrial components, 50
Industrial Revolution, 99
Industry segments, foundations of, 1731
compounding, 2224
e-commerce, 24
geographic dispersion for customer
focus, 24
supplier relationships, 2324
technology, 2223
distribution, 2428
customer relationships, 2526
effects of e-commerce, 2728
geographic dispersion, 27
supplier relationships, 26
equipment, additives, and other, 2931
critical mass, 30
customer relationships, 31
technology, 2930
polymer manufacturing, 1722
routes to market, 2021
scale and integration, 1920
technology, 18
processing, 2829
J
Japanese consumer goods companies,
131
Job enrichment, 88
Joint ventures, see Acquisitions, joint
ventures, and divestitures
Just-in-time customers, 24
Just-in-time deliveries, 122
Just-in-time inventory management, 29
K
Kanban, 29
Kawasaki, 134
Knowledge workers, 64, 71
Kraton thermoplastic elastomer
compounds, 26
154
Labor peace, 68
Lawsuits
age discrimination, 94
American, 59
frivolous, 79
gender discrimination, 94
patent, 40
race discrimination, 94
Layoffs, due to restructuring, 94
LCPs, see Liquid crystal polymers
Leadership by example, 12
Licenses, grant back, 117
Lifetime employment, 5
Limiting temperature index (LTI), 48
Liquid crystal polymers (LCPs), 34, 138
Liquid Nitrogen Processing (LNP), 134
business strategy, 135
Engineering Plastics, 118, 137
parent holding company, 135
LNP, see Liquid Nitrogen Processing
Logistic costs, 19
Lone wolf personalities, 85
Loyalty
corporate, 97
need for, 13
LTI, see Limiting temperature index
M
Machinery manufacturers, 110
Make-or-buy situation, 40
Management
competitors, strategies revealed by,
114
ego, investments in, 105, 106
error, 8
geographic area, 128
guiding principles, 7
ignoring of culture, 53
information, 78
performance problem of, 12
positions, personalities found in, 7
responsibilities, 715
business organization, 8
change, 810
company goals, 1011
leading by example, 1213
155
Index
O
Objectives, failures to prioritize, 3
OEMs, see Original equipment
manufacturers
One-stop shopping, 40
Opportunity cost, 101
Order processing, 21
Organization
functional, 61
geographic, 63
hybrid, 64
lacking trust, 13
market, 62
need for loyalty, 13
product, 61
Original equipment manufacturers
(OEMs), 24, 28
OSi Specialties, 30
Outplacement counseling, 94
Overqualified applicants, 83
Overseas manufacturers, 127
Overseas markets, favorite route to, 116
Overseas operations, companies with, 67
Ownership
cultures reflecting characteristics of, 55
stability, 134
Packaging
containers, thin-walled, 143
market, 44
specialty, 50, 103
Patent(s)
holders, monopoly of, 41
lawsuits, 40
licensing of, 41
Payroll, 13
PBT, see Polybutylene terephthalate
PC, see Polycarbonate
PEEK, see Polyetheretherketone
Perfluoroxyalkoxy (PFA), 38
Performance reviews, 91, 93
Personality(ies)
lone wolf, 85
156
Private network, 21
Problem-solving, 86
Processing
equipment, 39
principal forms of, 44
Product(s)
average life cycle of, 145
category checklist, 106
developmental, 105
introductions, 102
line(s)
effect of verbund on, 130
mature, 123
regional distributor, 121
revisions, 80
method of categorizing, 105
organization, 61
recognition, 75
sales revenue, 102
specifications, 73
Todays Breadwinner, 104, 105, 106
Tomorrows Breadwinner, 104, 105,
106
Yesterdays Breadwinner, 104, 105, 106
Production, contracted out, 96
Profit
highest total gross, 39
margins, strains on, 1
Profitability
analysis, current, 103
commodities struggling with, 129
improving, 63
major factor in, 23
potential, 104, 107
Project teams, short-term purpose of, 72
Promotions, 92
Proprietary processor-end users, 48
PTFE, see Polytetrafluoroethylene
Public domain, 40
Publicly held company, 111
PUR, see Polyurethanes
Purchase contract, 76
PVC, see Polyvinyl chloride
Q
Quasi-government cultures, 55
Index
R
Race discrimination lawsuits, 94
R&D, see Research and development
Reaction injection modeling (RIM), 43
Recruiters, company, 85
Reducing unit costs by spreading, 115
Regional compounding, 138
Repotted managers, 122
Research and development (R&D), 37,
72, 127
carte blanche of, 73
commodity producer, 37
inability to pay for, 58
joint ventures, 123
product units incorporating sales and
marketing and, 62
seeking people for, 82
Resources
assigning of, 106
waste of, 146
Responsibility, sharing of, 11
Restructuring
corporate loyalty in days of, 97
layoffs due to, 94
Retention, 97
Retroactive discounts, customer demand
for, 76
Return on investment information, 110
Review data, drawback of common, 91
RIM, see Reaction injection modeling
Rotomolder, 39
S
Salary
reviews, 91
structure, 90
Sales
direct, 20
growth S curve, 104
profitable, 14
representative, 20, 37
transaction costs, 103
SAN, see Styrene acrylonitrile
Scandals, 15
Schmoozing, 25
Scientific method
creativity characteristic of, 146
157
value of, 2
wishful thinking and, 3
SCM, see Supply-chain management
Self-confidence, 86
Self-worth, 6
Selling incremental barrels, 14
Semi-commodity(ies), 1
business, 33
companies, 38
sales representatives, 37
Service
-oriented activities, 4
transaction costs, 103
Shared-decision style, 145
Share the pain approach, 95
Shell Oil, 130, 138
SIC codes, see U.S. Department of Labor
Standard Industry Classification
codes
Silicon Valley, 27
Six Sigma, 76, 141
Socialists, 13
Spare parts, as form of inventory, 80
Specialty packaging, 50, 103
Speed-of-delivery, 40
Staffing for success, 8199
compensation and reviews, 9092
firing and personnel layoffs, 9396
plant and laboratory non-professional
personnel, 9799
promotions, 9293
recruiting, 8187
education, 8384
employment agreements, 8687
experience, 8485
personality traits, 8586
references, 86
retention, 97
training, 8890
continuing education, 8990
job enrichment and rotation, 8889
using temporary and other nonemployee personnel, 9697
Stepchild company, 124
Stockholders
best interests of, 7
dealing ethically with, 15
Stock market, 120
Stretch goals, 11
Style, shared-decision, 145
Styrene acrylonitrile (SAN), 34
158
T
Tax-sheltered earnings, 140
Team spirit, 97
Technical marketing, 74
Technologies and markets, business
operation shaped by, 3351
markets, 4251
automotive, 4647
construction, 4546
consumer goods, 4950
electrical/electronic, 4748
industrial components and semifinished shapes, 50
other, 5051
packaging, 4445
technologies, 3342
materials, 3339
patents, trade secrets, and licensing,
4041
processing equipment, 3940
regulatory and environmental
issues, 4142
Technology
access to, 117
constant evolution of, 89
critical elements of, 18
cultures, 58
integration of marketing and, 73
patented, 136
Teflon, 135
Temporary personnel, stereotype, 96
Thermoforming, 28
Thermoplastic(s), 33
elastomer (TPE) compounds, 26
high performance grades (TPUs), 34
Thermosetting materials, recycling of, 42
Thin-walled packaging containers, 143
Timeliness, 59
Todays Breadwinner, 104, 105, 106
Tomorrows Breadwinner, 104, 105, 106
U
UL, see Underwriters Laboratories
Underwriters Laboratories (UL), 45
Unions, 98, 99
Uniroyal Chemical, 30
Universities, cooperative programs, 84
Urgency, 59
USDA, see U.S. Department of Agriculture
159
Index
W
Wacker Chemie, 131
Whistleblowers, 65
V
Value pricing, 145
Vendors
competitors, 113
dealing ethically with, 15
Verbund, 130
Y
Yesterdays Breadwinner, 104, 105, 106
Y2K problem, 47