Comment-inspiring Forum

>> Thursday, May 22, 2008

Here is the key section that the commenter was responding to from the employee forum held a week prior. These are not the full remarks, but certainly the section that applies to me and many other people.

Thanks, [SR VP Technology]. I think we can all get excited about this. [SR VP Technology] is a bit of a prophet and we are so fortunate to have him leading our research and development function.

What I take away from [SR VP Technology]'s comments is if we do things right, we've got an unlimited future. While our products and priorities may change over time, our values will not.

Today I want to deliver a message that your senior management team remains fully committed to setting the standard for safety and integrity in our businesses. We're committed to delivering strong financial returns to shareholders, providing value to customers, managing sustainably and leading in innovation.

We'll continue to attract and retain talented people who are diverse and importantly who embrace change while making our communities better places to live. I want to emphasize that we are a company that will grow but as bright as the future is, we can only have the ability to reach it if we have the determination to take dramatic steps today to shape our company's future. We won't get there by taking incremental steps. Business and economic conditions just won't afford us that luxury. Make no mistake, the future of our company's at stake here. Either we'll control our destiny or it will be controlled for us.

I don't say this to alarm you. I say it because you might already be reading what others are saying about us. If you looked at some of the analysts' reports following our earnings call and if you listened carefully to [VP Investor Relations]'s comments this morning, you'll know that there's a viewpoint out there that says that if we don't get our arms around our overhead costs, then someone, perhaps a private equity firm or another company, will come in and do it for us.

I want to control my own destiny and I know each of you do too. That's why over the next 4 months you'll see [this company] take definitive steps to quickly resize the company to reflect our more focused business portfolio.

Why is this necessary? Well let's start with the fact that we're already a drastically different company than we were just 24 months ago. The combination of our [sold division] operations with [some other company] is successfully behind us. We expect to close the sale of our [Division A] to [yet another company] in August. We've made other adjustments in order to focus our portfolio, to respond to market conditions and to implement our strategic plan.

By this September we'll have 35% fewer employees than we do today. By September both our revenues and our employees will be down to just over half of what we were just 2 years ago. This is a huge change. Unfortunately we haven't yet reduced the size of our business and functional support services to match these changes in our portfolio. Yes, we've made progress but the gaps between where we are and where we need to be are wide. Current market conditions today widen that gap even more. Today our non-manufacturing costs are significantly higher than where they should be if our businesses are to remain competitive. Future adjustments in our business portfolio will likely increase this gap further. Closing this gap quickly then is critical to the survival of our company and our ability to grow in the future and take advantage of the opportunities that [SR VP Technology] has laid out for us this morning.

Getting our costs calibrated in present circumstances can't be achieved by incremental steps nor by attrition. Instead it will take direct action to significantly resize the company, actions of a magnitude that we've never had to take before in my memory.

We start with an operating philosophy for [this company] where business leaders are clearly responsible and accountable for achieving operating and financial results. Costs and activities that can be best be managed and controlled at the business level will be moved into the business. It will be the responsibility of each operating leader then to manage these costs and maintain necessary service levels. No longer can a business point to corporate overhead as the reason that profits are too low. Those costs will reside within each business and business leaders will be accountable for justifying these expenses.

Now this doesn't mean we won't have any corporate staff. It means the corporate staff will be resized appropriately for our scale and our portfolio. There are certain activities that will require specialized skills where we need common processes for governance and compliance where shared services add value. We'll look at each and every dollar of support costs to ensure that the expense lines up with the business strategy. We'll relook at how service is provided. If we can't afford an activity we'll let it go. If reorganization is warranted, we'll reorganize.

Now for many of you this is not a surprising message. You've probably been waiting for your leaders to recognize this need for change. The changes now in front of us are major, they're far-reaching and they will likely touch every part of the company.

You're probably thinking leadership and change start at the top. I agree. I inherited a talented and dedicated, hard-working senior management team from [former CEO & President] and during my transition I've come to rely on their guidance and counsel. As the [Senior Management Team (Senior VPs)] now prepares to ask many of you to make extremely difficult changes in your organizations and livelihoods, we're asking ourselves the very same questions. Let me emphasize that there are no sacred cows in this restructuring process. We intend to challenge everything that we do at all levels in the company.

What will this process look like for you? Unfortunately, I don't have all the answers today but I can tell you that we expect to have plans in place by July. All of our senior business and staff leaders are thoroughly engaged in this process today. We're challenging each other to get this right so that we can make the necessary changes and then move on, move on to the challenge of growing our company for the future.

Times like this present a true test of our values. We will not abandon our core value of respect for each other during this process. We will move quickly and decisively. We will communicate at key [SR VP Technology]tones and use existing tools, processes, policies and resources to work through these changes and we'll take these actions with an eye on future opportunities for growth. We've defined our strategy. We'll continue implementing that strategy with discipline, with conviction and with decisiveness. That's my focus and it's the focus for every leader at [this company].

We're concentrating on the portfolio of businesses that we believe are core and where we can see the opportunity to be global leaders. We're already positioned to be a world leader in [Division B]’s ownership and management. We have proven expertise in [y] development and sales. We're expanding our international [Division B] and we'll retain select manufacturing businesses that realize value from our [Division B] in a capital efficient manner.

We're committed to the research and development necessary to stay on the cutting edge of new product development and to respond to the growing expectations for innovative uses for [x] and [y]. In all of this, I'm committed to making the decisions that will ensure the sustainability of this enterprise for all of our key stakeholders and that includes customers and suppliers without whom we wouldn't be here, the communities in which we operate, the providers of our capital, both lenders and shareholders and importantly our employees and their families and retirees. In this effort I ask for your help, your support and your understanding as we move forward. We've got a lot of work in front of us but we're going to move quickly.

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