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DPI Client Interview
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Every CEO who has acquired another company knows that, as tough as it can be to put the deal together, the real problem is creating a cohesive unit from two, three or more companies. Since he joined Canada's largest envelope maker in 1992, CEO Luc Desjardins' job has been to form efficient, cohesive operations out of a mosaic of acquired companies, first tackling Supremex, then moving on to Mail-Well, Supremex's U.S. parent company. He and the management teams at both companies have achieved startling results. Here is how they did it.
Folding Six Companies Into One1997 was a big year at Supremex. Six acquisitions in as many years had put the paper converting company at the top of its field in Canada. Rocketing from $0 to $185,000,000 (Canadian), these combined companies represented a significant opportunity for further growth -- if the various players could develop a strategy to effectively and quickly fold the individual units into one synergistic whole.
The story began in 1991 when Schroders & Associates, an investment banking firm, bought Supreme in Quebec and Unique in Toronto. Next, they bought Innova from Abitibi-Price. Like the other companies Schroders would acquire, these companies were in the business of "converting" -- cutting, folding and gluing paper into envelopes, courier packs and other similar products. Luc Desjardins joined in February 1992 as CEO with the mandate to blend these three together, turn red ink into black, and add further additions to the mix.
The next couple of years were devoted to improving the efficiency and profitability of these operations, with substantial success.
With the addition of Classic Envelope in Vancouver, the company became the dominant player in the Canadian converting business. Supremex was then sold to Mail-Well in the USA, with Desjardins continuing as CEO. The purchase of Pac National Group in 1996 added the largest single piece of the puzzle, and another turnaround challenge -- PNG was losing money.
1997 was a pivotal year for CEO Luc Desjardins and Supremex, as they took on this new challenge.
As Desjardins recalls, "Supremex had become quite successful and very profitable. We had just acquired Pac National Group, a $62 million company. We needed to integrate this new business quickly with the Supremex Group. The first objective was not to lose any business while we put these companies together.
"If you don't do the integration properly, keeping the right people and structuring it quite fast in the right way, you end up with a shaky operation for a while with a lot of sales at risk. One more problem we had was that the Pac National Group was not profitable. So we needed to turn it around fast, and bring it up to our standards of profitability."
To get there, Supremex needed not only a strategy but more importantly, clean, quick implementation. So they set about looking for a methodology to get it done.
"In my years in different businesses, I have had experience with different strategic planning groups. I felt what we needed was a process that was not overly analytical. I wanted a process that would allow our people in management and leadership positions across Canada to be part of the analysis and decision-making. I didn't want a plan done by a consultant. So I called DPI, because I wanted a process and a facilitator who would ask the right questions -- to make people think through the issues. When I saw the DPI process I was comfortable with it and we took all of our units across Canada through it," Desjardins reports.Michel Moisan, a senior DPI partner in Montreal, facilitated the Strategic Thinking Process at Supremex's six units. Drawing on the accumulated knowledge of Supremex's bright, aggressive management teams, the company completed the first sessions with consensus on a unified strategic direction. More importantly, they established a set of Critical Issues, each assigned to a specific senior manager, which would have to be resolved for the strategy to be successful. Follow-up sessions have been geared to monitoring the progress of the Critical Issues, then re-evaluating and fine-tuning the strategy.
Says Desjardins, "We came out of those sessions with a clear action plan as to how we would get the necessary results in plant operations, equipment, management, business unit structures, product development -- all of the factors we needed to address to bring us the necessary profitability in a short period of time. And we accomplished that. We not only improved the overall profitability of Supremex, but also added significant profit to the Pac National Group, which was not making money before. In all, we added $7 million in profit in 1997 compared to the 1996 results."
Fast Implementation EssentialDesjardins points out that simply going through the first part of the strategy process, the formulation stage, doesn't guarantee results. Critical Issues must be managed and follow-ups must be done, to assure that the plan is on track.
"DPI's Strategic Thinking Process gave us the opportunity to define our priorities. What makes this process different from other methods are the Critical Issues -- prioritizing, giving responsibility, agreeing on the value of accomplishing them, and continuously following up."We were able to achieve fast results," he continues, "because everybody believed in the strategy and objectives. And they believed they were achievable because we had early successes. So we went on implementing our Critical Issues in every region. The quality of implementation continues to be one of our competitive advantages. We have this outstanding team. They are so good and so fast. The combination of strategy development and strategy deployment is what is different about DPI, and what creates success."
As the company has moved these initiatives ahead, new Critical Issues have been brought forward and evaluated, and progress made on each.
"We discovered, for example, that some of our direct customers, such as large banks, had begun outsourcing their paper products, including envelopes, to one source of supply. We identified changes such as this through the Strategic Thinking Process and got ourselves organized to deal with them. A very senior person has been put in charge of business development for these new opportunities. We took the lead and now have professional people helping us grow that new channel proactively rather than being reactive to market changes.
"This is a very specific example of how we have evaluated our opportunities and markets. We have set priorities as to markets and customer groups we will pursue, and those we will not pursue. There are customer segments that are not as profitable, and markets that represent growth. We made decisions about where to put our emphasis. We have been able to extend our market share with large national accounts by making it easier for them to work with us. Today Supremex is the leader in the Canadian market. But if we don't continue to look at developing new services and markets we will not be the leader or as profitable in the future. We cannot pretend that we have reached our goals. We must always be looking ahead," he says.
Today, Desjardins is confident in Supremex's prospects for future growth, and in his people's ability to continue to make it happen. "We have such good management there. They take initiative on their own. And that has helped me in my role for the future.
"The process helped us in many ways in Canada," Desjardins says, "namely, it sped up the implementation of changes and the achievement of our objectives. We did not want the new acquisition to drag on for a long time.
"Once you have a clear strategy, it is much easier to structure the business in the proper way and develop information systems that are supportive to that strategy. Due to the change in direction, we had to acquire a new set of skills. It also became easier for us to look into the future and plan the equipment base that will support our objectives. The time and money invested in the DPI process in Canada was very fruitful and that's why I decided to use it again when I moved to Mail-Well in the U.S."
Next Challenge: The U.S.During the summer of 1998, on the heels of his group's success in Canada, Luc Desjardins was tapped for a new assignment -- CEO of the U.S. envelope printing and converting division of Mail-Well, Supremex's parent. With sales of $850 million (U.S.), the group comprised 34 independent business units, many of which had serious overlaps in territories, products and customers.
"Most of these plants had been an amalgamation of a lot of acquisitions over the last four years," Desjardins explains. "They had been bought, one after another, the way our Canadian business had been built. The assignment here was similar -- to get them all working together, eliminating duplication of efforts, making them more productive and efficient. So the first thing I did was to get the top twenty senior managers together to go through the Strategic Thinking Process."
Again with the help of DPI Partner Michel Moisan, the group quickly came to a realization that many of them were aware of, yet never had the forum to deal with -- the various plants were competing with each other, externally for customers and markets, and internally for capital. "Imagine, for example, a situation where customers were being called on by several different Mail-Well units for the same products!" Desjardin says.
The team also uncovered a significant amount of production duplication and underutilized capacity. The need to reorganize became obvious.
So the first major initiative was to put the company into a form that could make the most of its resources and serve its customers in an efficient, unified manner. The company now consists of six geographic regions, each headed by a Vice President who is also a Plant General Manager. The competition for customers has been reduced, and the regions can now work cooperatively to improve the overall business.
Desjardin says, "The DPI process helped me on the strategic level, but it also helped me to understand my management team better. It helped us prioritize our workload, gave us a clear strategic orientation for years to come and clarified for us how we should restructure our business.
"We've changed the structure," Desjardins continues, "from 34 individual plants that all wanted new equipment, and all competed with each other, to these six regions that work together to maximize equipment and production capability, and go to market in a more comprehensive way. It was badly needed because we were not maximizing our management talent or equipment in each plant. Now we have the top talent running each region, and we can take into account all the plants in every region when it comes to equipment and productivity. There is some unutilized capacity and we'll utilize that before we buy any new machinery.
"We expect that by reorganizing the business by region we will make the best use of the corporate base, reduce duplication of investment and market overlaps, and approach customers as one strong company, producing regionally. We also have a very big opportunity now to develop national accounts. We expect our profits for the next two years to increase to the tune of about $20 million, an improvement of almost 30%!"
As part of the implementation component of the process the management team agreed on seven Critical Issues, or "steps" as Mail-Well calls them, such as optimizing the company-wide equipment base. "So we have a total action plan for the corporation, and the results we expect to achieve," Desjardins reports. Yet the strategy will only achieve its full potential if each region is working toward those same objectives.
"We decided to implement specific activities for the resolution of the Critical Issues in each region, to get buy-in not just from the 20 or so people who worked on the strategy for the overall corporation, but also from the people in the individual regions. So we had the regional Vice Presidents bring their teams together in each region and come up with their own set of steps," says Desjardins.
This kind of collaboration was unheard of at Mail-Well only a few short months ago when each division was pitted against the others.
"They can now say, 'If you're working on that step in your region to get that result, how are you going about it? What can I learn from you to get me there better and faster?' We can all sit and talk about these issues in the same room, all using the same language to do it.
"We did the DPI Process in September 1998 at Mail-Well. The excitement now is at a very high level. We can hardly wait for the bottom line to show that this is all working well. It's nice to have a strategy," Desjardins says, "but 80% of the game is whether you're managing those Critical Issues. DPI gives you a very good follow-up system to make sure they are resolved. We are now on the move to become the leader that we should be in our industry."
