Three years ago, Mark Adamson was staring at a company that was losing more than 50 percent of its demand in some of its global businesses. It was the height of the credit crunch, and the situation called for immediate action. Adamson, president and CEO of Formica Corp., an $800 million building products company with more than 3,000 employees, had to make quick decisions to help restructure and refocus the nearly 100-year-old organization.
“Fifty percent of our revenue was disappearing overnight,” Adamson says. “It didn’t happen gradually as you might expect if you have a category decline or a major competitor advance; this happened one week to the next. Any of the normal business decision-making processes that you might expect in largish companies, we just didn’t have the luxury of time to go through that. It was interesting watching management resort back to the old techniques of good judgment, having the balls to make a decision quickly based on the data available and just act.”
The business was kicked into survival mode. The company was losing money, losing employees, and no one could help the organization but itself. Since Adamson was a new CEO at the time, he had begun some restructuring just a few months before the crisis hit.
“We had the management team focused on the need to improve,” Adamson says. “We were ready to hit the deck running, whereas I think some companies were hit unaware and took a couple months to react. It really sorted the men from the boys so to speak in terms of the management team. I thought we really went into the crisis, not in good shape per se, but certainly in good shape managerially in terms of our focus and our ability to address it.”
Adamson had to make quick, sound decisions, rally his team around changes and do what he could to keep Formica from succumbing to the recession while positioning the organization for future growth.
The financial crisis has forced businesses to throw out the old ways of decision-making and implementing changes. It’s a new game, and if you don’t act quickly, you lose to those that do.
“I think the biggest challenge was to react quickly,” Adamson says. “In some respects I’d rather have made an 80 percent correct decision than none at all because the level of need at that time was huge. You needed people that come with a focus and were bright people, intelligent people who could make quick decisions and execute them quickly, and I was fortunate enough to be surrounded by enough of those sorts of people that, within six months of the Lehman situation, we pretty much found a level. The base of earnings was established — it wasn’t good, but it was a base of earnings.
“Those six months during the credit crunch was like triage. You had a patient wheeled in from a traffic accident and there’s blood everywhere. You just have to stop the bleeding. Once you got the patient stabilized … you really did have to redesign your business model for the new edge. The five years of boom — where if you wanted to argue, a fairly average CEO could run a company and make money — was over.”
In any situation where quick decisions and changes are necessary, you have to be able to rally your team together, analyze data quickly and confidently, and make a decision without second-guessing yourself.
“I always find it useful to look to the sporting world for advice on management,” Adamson says. “Alex Ferguson, the manager of Manchester United, is really good at creating a kind of siege mentality — us against the world. I think we did manage to create that internal need where everybody pulled together against a common enemy, which was the economic woes. To do that however, you have to be able to look the people and that team in the eye, and it’s very difficult to do that if you don’t act quickly.”
In order to implement necessary changes and move forward, you need to have the right team in place to do so.
“Unfortunately, you do have to release people,” he says. “You do have to very quickly gauge the people that you think will be at your shoulder acting in a way that you think will get you through the recession. It’s not always the guys and girls who are good at managing status quo. I released some very sound senior management who had served us well in the past but who I just didn’t think were going to get us through the difficult times. You have to have balls, and you have to be cruel in some cases and release those people and create the team that you think will get you through.”
Adamson stopped Formica from bleeding and turned his focus to creating a company that could live on leaner times. Companies have to be able to adjust business models appropriately.
“Having kind of saved the business, it was a matter of growing the earnings with flat revenue,” he says. “I think during the good times a lot of businesses had extended their products, grown their SKUs and grown their product portfolios. What we did was we stripped the product offer right back to what we genuinely thought the customer wanted and needed because during that time of boom, people didn’t talk to their customer base enough. I think a lot of companies during that phase became internalized and just assumed what customers wanted.”
If getting past the survival stage isn’t hard enough, it’s crucial to keep plugging along to restructure what is no longer working and determine where you want to go.
“You’ve got to have people with intellect and experience, some young ducks and old heads, and quickly come up with a destination,” he says. “The key is the destination. There’s always enough brains in an organization to work out how you’re going to execute to get there, but determine where it is you want to get your business. It may be in phases like we did — survival, restructure the business model and then grow. You shouldn’t have 20 phases, but you shouldn’t have one so big that people can’t get their head around it. Break it down into phases of 12 to 18 months. People can get their head around that in the business.
“You then have a rallying call and you can say, ‘In the next 18 months, we’re going to do this. This is what success looks like and this is what happens after that.’”
Part of forming a new destination for your company in a time of restructuring is seeing the positive.
“We were able to paint a picture of what the business could become and in some respects turn the recession into a positive,” Adamson says. “You explain how it would enable us to make the decisions that maybe in the past we wouldn’t have been empowered to make. Our parent company gave us an awful lot of autonomy and leeway to make big, quick decisions and some of these decisions in truth may well be decisions we’ve always wanted to make, but we didn’t have the bravery to do so. This was an opportunity to actually do stuff that historically we might have shucked.
“I don’t want to talk so warmly about the recession, because it was ugly for a lot of people, but it was a great enabler to allow you to do all sorts of things that you might not have otherwise got away with. Any manager that didn’t take advantage of that should be shot. See it as an opportunity.”
During such a time of unrest and uncertainty, you have to remain strong and confident or your employees will lose confidence in the changes.
“I look back now and the management team and I used to walk around smiling,” he says. “People take their lead from the senior management. If you walk into the office every day with a face like a fiddle, looking as if you’ve got the weight of the world on your shoulders — it surprised me in my early days of senior management just how much people would base their rumor mill and their views and emotions on how I looked in the morning when I came into work. You have to be cognizant of that. In times of crisis, do a lot more walking around, a lot more smiling, a lot more talking. People need reassuring.”
Once you have decided on a destination to take the company, make sure you keep everyone in the business informed.
“The ultimate destination was a stronger company with a platform for growth was what the objective was,” he says. “Once you’ve established that destination, very frequently measure against it and communicate. Don’t leave people in the dark.”
Re-evaluate customer relationships
Adamson knew that for Formica to restructure and return to growth, he would have to change how the company worked with its customers.
“What we did was we were very honest and we went to our customers with our assessment of the profitability of that customer, and in some cases, we don’t make money on you,” he says. “We were very pleasantly surprised in how that honesty was repaired with the customers and nobody wants to be a loss-making customer. We were able to work with them and said, ‘Well, one option is to increase price, but it’s really an option of last resort, because you’re in the recession as well and you’re suffering and we don’t want to do that to you. What if we supplied you once a week instead of twice a week? What if we reduced your product offer? Do you really need all these range of products? Could we not reduce that and still be able to give you the chance to fight in your marketplace?’
“As a result of that, we reduced the number of SKUs by over 50 percent. We rationalized our shipping routes, and by and large, we achieved fairly significant increases in profit without necessarily relying on the old levers of just trying to jam the customers with price or slash cost.”
Having engineered the business after the immediate recession to be what they thought was cost efficient, the company generated more revenue out of the customer base and doubled earnings in an 18-month period. To return to growth mode, you have to look externally.
“For those who have had the foresight to have a base to move on from, it’s about consciously changing your focus from inside to outside,” Adamson says. “The recession did bring us all back internally. It focused us all on fixing our cost bases, restructuring our management and our product offer.”
Formica went through this for a period of about six months. Adamson quickly moved to the next phase and focused on customers, top-line growth and innovation.
“The challenge I now face, which is a very different challenge to cost-cutting and profit execution, is how you grow the top line,” he says. “There’s three ways you can grow the top line. You can sit on your ass and wait for the economy to come back, but we’re not doing that. You can convince your existing customers to buy more or you can go out and find new customers. What we’re trying to do is the second one, which is to convince our existing customers to purchase more from us. A key component to that is innovation.”
To aid in the search for innovation, Formica is trying to get to the customer in the marketplace and understand the dynamics of what they want and what they need.
“I think traditionally people think innovation is R&D. If you throw a load of money at your scientists, keep your fingers crossed, something might come out of the other end. What we’ve said is, ‘Innovation is a virtuous circle.’ R&D does have a role in that, but so does customer need. It’s one thing inventing new stuff, but that’s no good if the customer doesn’t want it or if the customer really wants you to go down this path and not the other path.”
Formica is focusing on gathering feedback from its sales force, customer service reps and other avenues the company has to better analyze data on what customers want.
“You’ve got to be able to analyze the feedback and see trends.”
Establishing trends in the marketplace is helpful, but you still have to be certain that the trends work for both you and the customer.
“The customer isn’t necessarily always right. You have to help him understand what he really needs. We’ve done it before and developed products that in truth people said they wanted and when we went to market with a product it was, ‘We said we wanted it, but we’re not going to pay for it.’
“Make sure you understand what they truly want and what they truly value and are prepared to pay for and put your dollars into developing that.”
HOW TO REACH: Formica Corp., (800) 367-6422 or www.formica.com
The Adamson File
President and CEO
Born: Newcastle, Northern England
Education: Graduated with an honors degree in business and finance from Newcastle University
What was your first job, and what did you learn from that experience?
The government in the U.K. decided it didn’t really have a handle on its roads network and needed to survey all of its major trunk roads (interstates) and they needed people who would walk around all summer with these little wheels and computers and … try to take a digital snap shot of every mile of road right across the U.K. We were given these utility trucks and given so many miles a week that we had to perform and were asked to survey these roads. The speed of execution, the prioritization, setting targets, I guess you could say it all started then. It was an outdoors job and you used to get wolf whistled by all the girls driving passed in cars. It was a perfect job for a 19-year-old boy.
What would you say is the best business advice you’ve ever received?
It was the importance of networking. You’re never too senior to benefit from the ability to make a phone call and ask a favor. The power of networking and communicating is huge.
What Formica product are you most excited about?
There’s the 180fx products. It’s a product that really hit the market strongly and is a product that has the look of real granite — big bold patterns with texture. That’s a really exciting product. The other product is a departure for Formica. Formica’s traditionally seen as an interior decoration product. We’ve just embarked in the last 12 months on a product for the exterior of buildings. All the colors and patterns that you got internally from a Formica product, you can now apply to the outside of the building. It’s called Vivix.
If you were going to remodel your kitchen, what Formica products would you use?
I’m not an interior designer, but I operate in this field so some of it rubs off. I think modern kitchens are quite like contrast. I would probably use two patterns. I would have one on the island and on the island I would use our 180fx product and then maybe a more sedate, darker pattern around the outside with one of our etchings products. That allows the 180fx island in the middle to really standout.