How I Did It (Corporate Renewal)

Corporate Renewal has been defined as – “the act or process of making changes to a company in order to improve it so that it becomes more successful” (http://dictionary.cambridge.org/dictionary/business-english/corporate-renewal).  Personally, corporate renewal is a fairly new term to me.  I think that in the past when talking about corporate renewal we have called it downsizing or restructuring.  However, these two terms seem to have taken on a negative connotation throughout the past years.  These terms invoke memories of mass lay-offs, which caused high unemployment rates, which caused a slow down in the economy.   Corporate renewal on the other hand invokes thoughts of simply restoring or replenishing. 

            In the article, How I Did It, Greg Babe discusses his implementation of a corporate renewal plan in order to save his company.  Greg Babe is the CEO of Bayer MaterialScience North America (BMSNA), which is based outside of Pittsburgh.  Greg was named as CEO in 2004 and enjoyed several years of success.  However, in 2007, BMS executives wanted to close the North American operations.  The purpose of this article is for Mr. Babe to describe the thought process as well as the steps he took in implementing a successful corporate renewal plan in order to save the North American operations.  This was a fascinating as well as an important document in learning how the plan was put together and how the plan was executed.

            During the meeting with BMS executives, Mr. Babe asks for some time to come up with a plan and five months later he pitched the plan and the BMS executives bought into it.  Mr. Babe knew he had limited time and was ready to begin.  He assembled a team of four key people that consisted of a special projects executive, top controller, marketing executive, and an organizational change professional.  The team identified the weaknesses and how to overcome them.  I found the organization of this team and their findings to be interesting.  They found that their industry was cyclical in the manner that it could be affected by factors that were out of their control.  These factors lead to downturns and they dealt with the downturns in the same manner each time.  I believe they felt themselves to be reactors to adverse affects of their business that were out of their control and thus wanted to change their strategy with the adverse affects in mind in an effort to maintain steady growth.  After a short period of time, the team began to realize that they seemed to be focused on cost cutting instead of growth.  If the focus has continued on cost cutting, then the same tactics would be used.  This would leave them in their current position.  A focus on growth would cause them to transform completely. 

            The new focus of the team was “a truly transformative cost-cutting plan” (Babe), with the main goal being profitable growth.  Mr. Babe stated their goals as such; “We wanted a strategy that would keep us growing at 1% to 2% above GDP in all our areas, but we also wanted to save 25% on our SG&A expenses” (Babe). The manner in which they accomplished this was very informative to me.  First, Mr. Babe appointed a team of hand picked leaders and decided that this transformative process would take 18 months.  This was an extremely quick turnaround time.  The decision was to change every aspect of their business.  Mr. Babe was faced with many difficult situations as well as unpopular but he took the reins as a manager and did what needed to be done in order to save the company.

            This article was so important because it proves that turnarounds can be accomplished in a quick results manner but at the same time be done in an efficient manner that can be sustained by a company over the long run.  Mr. Babe did a five-month analysis of the company to come up with the findings that determined his new strategy going forward.  The four-member team was made up of people with different skill sets that made the analysis super effective.  For me, this article had many suggestions for current managers.  First of all, if managers are really concerned about the health of their companies, they need to be willing to do what is necessary.  Managers must be willing to do what is difficult as well as what is unpopular.  Second of all, managers must not be afraid to surround themselves with smart talented people that they can rely on.  Managers must be able to maintain a talent pull that they can develop over time.  Last of all, managers must be change agents.  Managers must not get stuck in the day-to-day activities and not be able to make the necessary changes or see the changes that they will need to make in order to remain a viable company.  


Reference:
Babe, Gregory S. (2011), "How I did it...The CEO of Bayer Corp on creating a lean growth machine", Harvard Business Review, Jul/Aug 2011, vol. 89 issue 7/8, p.41-45.