A version of this article was originally published by Knowledge at Wharton
The impact of the financial crisis began to hit DuPont about a month after the collapse of Lehman Brothers in September 2008. Sales volume slid, good customers canceled orders and employees were gripped by fear and uncertainty.
As the environment worsened and sales fell by up to 50 percent in some units, DuPont CEO Ellen J. Kullman ordered two traumatic restructurings. Perhaps more importantly for DuPont's future, Kullman also concluded that the company faced a "new reality" requiring fundamental changes if it were to remain successful.
Her challenge was balancing the need for immediate action to maintain the company's financial stability during the crisis, while focusing on strategic objectives that would preserve the company's leading market position in the future. Among the highest hurdles: motivating employees to work on the things they could control and avoid becoming paralyzed by the market's volatility.
"The question is, given the megatrends in the world and given the new economy, what changes do we have to make to continue to be successful?" asks Kullman, 53, a 20-year DuPont executive who became CEO in January. "There is no playbook for what we are experiencing today."
Kullman's first step was "understanding the dynamic relationship between what should not change ... and what has to change -- and having absolute clarity on that." Deciding what would not change was easy: the company's commitment to science and innovation as primary drivers of growth since its founding in 1802 as a maker of black powder. Deciding what to change was far more difficult.
Kullman identified three trends that would transcend the current crisis and provide a strategic framework for the company's annual $1.4 billion investment in research and development -- increasing agricultural productivity, reducing dependence on fossil fuels and protecting lives.
But organizing the company to respond to these long-term trends during a period of extreme uncertainty required strong leadership and specific initiatives. Kullman shares four leadership principles that she has implemented to guide DuPont through the financial crisis since October 2008.
The first principle: Focus on what you can control. Kullman realized she needed to shift the company's attention from what was going wrong to the immediate action required to protect DuPont's financial position as revenues fell dramatically.
"We realized that what we had to protect ... mostly was our financial stability and flexibility, so we had to focus on cash. To preserve cash, she issued four financial directives: Maximize variable contribution dollars, drastically reduce spending, zero-base capital expenditures and significantly reduce working capital.
Promoting DuPont's innovations -- 901 new product launches last year and a record 500 in the first quarter of this year -- proved an effective way to generate sales and increase variable contributions.
The second of her leadership principles for the crisis has been to "adopt a new trajectory by rethinking your business model." For DuPont, that meant "getting people to think differently" about a business model that had always measured success based on plant capacity and capital investment: The change has involved developing service-based models providing new ways to engage with customers and monetize products.
Recently, DuPont's applied biosciences unit developed a high-performance plastic polymer, grain Hytrel, made from renewable agricultural sources that addressed the auto parts industry's need for sustainable products. As a newcomer, DuPont was able to win business from a demanding global parts maker, Denso Corp., by providing "real innovation" in sustainability that "they think is important to their future."
How do you incite the change required for new trajectories in a global organization with 60,000 employees in more than 70 countries? Kullman recommends a viral approach, starting with a small pilot program in one area, generating interest, and communicating its success to other parts of the business.
Kullman's third crisis leadership principle: Communication is key. "I'm a firm believer that there is a direct correlation between growth and the success of our communication. When we have an aligned team that understands" very clearly what the goals and the trade-offs are, "that's when things can absolutely happen," Kullman says.
In announcing two restructurings within five months since December 2008 -- unprecedented at DuPont -- Kullman insisted that her leadership team "get out in front of the troops" with a consistent message. "It's not something they can delegate."
If company leaders aren't willing to "get out and communicate on the really tough issues, then the credibility our organization has in the decisions we are making is always going to be called into question," Kullman says.
The last of her four crisis leadership principles is to maintain pride around the company's mission. "There's nothing like a bad economy to get people confused about what their mission is. They start thinking their mission is to reduce cost. That's a tactic, that's not our mission," Kullman says.
During informal weekly meetings with employees, Kullman says she was amazed that the "No. 1 question was about whether we are going to stick with our mission." She quickly realized that "people are scared (and) people want direction." Making sure that people understand the mission -- and linking their daily activities to the company's broader purpose -- is essential to reducing fear, maintaining morale and keeping employees motivated, Kullman says.
DuPont's mission is "sustainable growth," defined as increasing shareholder value by reducing the company's environmental footprint -- and that of its customers, Kullman says. The mission includes "denominator strategies," such as reducing waste and fossil fuel usage at its chemical plants. It also involves "numerator strategies," such as inventions supporting biofuels, photovoltaics and other forms of renewable energy, or hurricane-resistant building materials that help save lives.
"It's really critical that we maintain the focus on the mission and keep reminding people of it. People have a lot of pride in the mission and they want to understand that the mission is not going to change, even though the world around it has changed tremendously. You've got to capture that heart and soul," Kullman says. "That's how we're going to be successful."
