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First-Person Account
How Owens Corning Trained Managers to Lead Innovation
Vol. 59   No. 2
To encourage development of new products and markets,Owens Corning focused on cultivating its executives’ business skills.

By Robert Paxton, SPHR  2/1/2014
 

In October of last year, Owens Corning celebrated 75 years as a leader in the field of fiberglass technology. The company’s rich history in building insulation, roofing material and glass-fiber-reinforced composite materials began in the 1930s with the invention of fiberglass by the chemical engineer Russell Games Slayter.

Over the years, however, the company’s intense focus on technological leadership came to exceed its ability to commercialize new innovations—and, in 2010, Owens Corning Chairman and Chief Executive Officer Mike Thaman laid out a new vision: to become a "global company where market-leading businesses are built." Thaman turned to the HR leadership to help transform the manufacturer from a company focused inwardly on its franchise businesses to one that was customer-centered.

Owens Corning

Products: Owens Corning produces and sells glass fiber reinforcements and other materials for composite systems, as well as residential and commercial building materials, worldwide.

Ownership: Public (NYSE: OC).

Top HR executives: Dan Smith, senior vice president of information technology and human resources; Robert Paxton, SPHR, vice president of human resources, building materials group and corporate functions.

Employees: 15,000 globally.

2012 net sales: $5.2 billion.

U.S. locations: Global headquarters in Toledo, Ohio; 49 manufacturing and R&D locations in the U.S.

Connections: www.owenscorning.com.

As we discussed this goal with the CEO and Executive Committee, we realized that the root issue was that our general managers didn’t have the strategic marketing skills required to understand and respond to our customers’ needs. Owens Corning’s 35 general managers around the world were accountable for running different businesses and product lines. They ranged from vice presidents running our largest businesses to directors in charge of smaller businesses. Regardless of their level, all were accountable for driving profitable growth in their business.

However, the company’s approach to driving growth was often misplaced. Rather than innovating to meet a market need, the company would create innovative technologies and then try to find customers who might be interested in the new product features. This approach meant that Owens Corning rarely realized the full financial benefit for the value it provided customers, because our sales and marketing organizations lacked the ability to sell our products at higher prices, even though the products performed better or had better features. We lacked the ability to effectively communicate to our customers the superior value our products provided. Moreover, general managers lacked a common language to discuss, and the processes to develop, effective business strategies and plans.

To address these challenges, the HR leadership committed to developing the capabilities of our general managers and other key leaders.

Establishing Expectations

The first step was clarifying what we expected. We started by creating job descriptions for key roles. While this may not sound transformational, it was critical to re-establish roles and responsibilities given our company’s long history. In particular, the general manager position description was rewritten by the CEO. This new job description powerfully articulated the expectation of leaders running Owens Corning businesses to 1) know our customers and markets; 2) develop strategy; 3) execute strategy; 4) direct operations; 5) lead talent; and 6) lead the corporation from a broader enterprise level.

The company’s Executive Committee also developed a set of questions to evaluate business proposals. This was important because business proposals it had reviewed in the past varied greatly in quality. Henceforth, every business case had to answer the following questions:

  1. What is the theory of action, statement of the idea or hypothesis?
  2. What is the market opportunity?
  3. How does this opportunity align with or advance the business strategy?
  4. Who will we sell to and with what solutions?
  5. What is the sustainable competitive advantage? What are the competitive alternatives?
  6. Does this opportunity build synergies and leverage core competencies?
  7. What are the key financial assumptions and risks?
  8. What are the key relationships and dependencies (internal/external)?
  9. What are the talent (skills and competencies) and organization requirements?
  10. What are the next steps to accelerate commercialization of this opportunity?

These questions guided general managers by identifying the core elements that should be included in any business proposal within the company.

Building Skills

Next, we looked to develop the skills required to be successful. After evaluating several executive education options at leading universities, we chose the University of North Carolina Kenan-Flagler Business School Executive Development Program. It was an ideal partner because it had expertise in strategic marketing, pricing and commercializing innovation but was also willing to customize program content to meet our company’s needs.

The first program we developed was a four-day session called Foundations for Building Market-Leading Businesses—in essence, a weeklong MBA crash course. It starts with an explanation of the 10 questions that every business case must answer and provides instruction on marketing and strategy concepts, as well as techniques and tools that can be used to create and evaluate a business case.

Topics covered include market segmentation, identifying and articulating a customer value proposition, mapping out the value chain within an industry and determining strategic control points. The program also explores how to conduct a conjoint analysis (to determine customers’ willingness to pay more for various features) and establish vertical incentive alignment (to show customers how they benefit from working with Owens Corning). We’ve delivered the program throughout the U.S., Europe and Asia to senior and midlevel managers, and feedback has been fantastic.

For individuals in the process of developing a business proposal, we sponsor "Boot Camps" as a follow-up to the Foundations program. These are intensive sessions in which the team applies learning from the Foundations session. After creating a business proposal, they present it to another team, solicit feedback and decide whether to pursue it.

One benefit of this process is that it forces busy people to dedicate time to working together and focusing on strategic thinking. The participants value the time it gives them to concentrate on strategy and develop effective working relationships through a meaningful shared experience. Given the momentum and positive feedback we received from the Foundations program and the Boot Camps, we decided to further engage our leaders in learning and applying strategy processes in their businesses by creating the Business Leadership Council (BLC). The BLC incorporates many aspects of the Foundations program and Boot Camps but is much more robust in several ways. For one thing, it is sponsored by CEO Thaman and Senior Vice President of HR Dan Smith, and they participate in every minute of every session, providing meaningful feedback to participants.

For another, the content is very strong. The program consists of four two-day sessions over a two-year period. While still focusing on strategy development and execution, the content of the BLC is more thorough, diverse and comprehensive than prior programs. The first three workshops cover strategic marketing, effective decision-making and risk management, and strategic pricing and game theory. The fourth is focused on how to be an enterprise leader at Owens Corning. UNC Executive Development facilitates the first three workshops, and we partnered with Root, a management consulting company that specializes in employee engagement, to design and deliver the fourth.

The first cohort was a group of 15 senior leaders from Owens Corning businesses throughout the world. Since then, three similar cohorts have also participated in the program.

Supporting Change

The support we provided to our leaders was key to our transformation. Our chairman/CEO and senior vice president of HR provided valuable feedback and mentoring, which framed participants’ perspectives and opened up lines of communication that extended beyond the classroom. The UNC and Root faculty have been fantastic resources, providing additional advice and consulting help to participants. We have also invested in developing the change management capability of our managers by teaching them key methodologies, skills, considerations and approaches to initiating and sustaining change in their businesses and with external stakeholders.

Finally, and perhaps most important, the cohorts provide one another with tremendous support through facilitated calls, work assignments and discussions between sessions. Their shared experiences have brought members of our management team closer together and have generated more spontaneous interaction and sharing across the organization.

It is usually very difficult to correlate the impact of development programs directly back to business results, but we have reason to believe that the BLC program and other talent management practices at Owens Corning have advanced our pursuit of being a "global company where market-leading businesses are built." For example:

Chief Financial Officer Michael McMurray recently indicated that the business plans presented by each of our businesses during our 2014 strategic planning process were the best he has seen during his tenure. He credited the improvement to the development of general managers and key finance functional leaders.

Owens Corning has launched significant game-changing innovations in each of its businesses, allowing us to secure our market share in key segments and improve pricing. We’ve launched new products in the alternative-energy, transportation and communications markets and made significant enhancements to our roofing and insulation products. New products launched since 2010 accounted for $853 million in sales in the first half of 2013, more than 30 percent of total company sales.

Financial indicators and performance in each of our businesses show progress. Our roofing business has improved margins on earnings before business, interest and taxes; some of our composites products added features that allowed higher prices; and our insulation business has delivered a quarterly profit for the first time since 2008.

The company has shown that it can evaluate and execute strategic decisions quickly, including investing in new facilities, canceling projects, pursuing strategic partnerships and making critical pricing decisions. We also recently completed an acquisition in the shortest time in the company’s history.

Our senior-leader succession depth and quality metrics have improved as we have been able to better coach, mentor and manage key talent through increased interaction.

Business leaders tend to convey an activity’s value by allocating time, people and budget resources to it (or, conversely, by removing resources when they don’t see value).

We continue to invest in the development of our leaders. One proof point is that Owens Corning’s third BLC cohort is in the process of its two-year journey, and our Executive Committee has approved our fourth BLC cohort to start in March 2014. I am also fortunate to have the continued support of the senior executives who have invested their time teaching others in the program. Business is good.


Robert Paxton, SPHR, is vice president of human resources, building materials group and corporate functions, at Owens Corning.
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