When Calgon Carbon Corp. made Randall Dearth its new president and CEO, it was somewhat of an easy transition — the former Lanxess CEO had been a member of the Calgon Carbon board for six years.
“I knew a lot of the high-level issues, the potential emerging markets and a lot about the products and people here,” says Dearth, who in August 2012 joined Calgon Carbon, a 1,100 employee, $562 million global leader in the manufacture, reactivation and application of activated carbon, ballast water treatment, ultraviolet light disinfection and advanced ion-exchange technologies.
Dearth spent his first several months at Calgon getting to know the people, plants and processes, but wasted little time making some necessary changes in the company.
“One of the first things I decided we needed to do was focus on margins and margin improvements,” Dearth says. “Aside from learning the company, I also spent a lot of time trying to come up with programs to help improve the bottom line for our shareholders.”
In doing so, over the past year, Calgon Carbon has implemented a $30 million cost improvement program. Dearth looked at things such as headcount optimization, product rationalization and brought in consultants.
“We’ve done a lot to focus on how we can quickly and effectively improve our margins to give our shareholders a benefit,” Dearth says.
Here is how Dearth used his previous experiences to put it all together to improve Calgon Carbon Corp.
Make an assessment
What excited Dearth about coming to Calgon Carbon was the possibility of using some of his experiences at Lanxess, which helped turn that company around, to see if they were applicable at Calgon.
“Coming into this role I had my toolbox of tools, and the question was could I apply this to Calgon Carbon to help improve margins quickly,” Dearth says.
The biggest obstacle Dearth saw was the company’s culture. He didn’t want to shake things up to a point where the culture would be disrupted.
“You can’t underestimate corporate culture,” he says. “You can come in with a lot of ideas and techniques and be rearing and ready to go, but if you don’t take the time to understand the culture in which you’ve come into, that doesn’t work.”
Dearth was fortunate that he had an overview of the culture from a board perspective.
“It’s not a matter of having the right culture or the wrong culture,” he says. “It’s understanding that it’s different and trying to manage around that.”
Calgon Carbon has been around for more than 70 years. The foundation of the company is very solid, but sometimes that foundation can be the issue.
“When you are a company that’s 70 years old, sometimes you do get into that mentality of this is how we’ve always done it,” says Dearth, who also served as president and CEO of Bayer Chemicals Corp. from 2002 to 2004. “Part of what I’ve done over the last year of being here is really focus on trying new things to make our company better, our employees more efficient and ultimately bring more value to shareholders.
“The other thing I was able to bring to the table coming from both Bayer and Lanxess is a global perspective. As a smaller American company, Calgon hasn’t looked at global opportunities the same way that a bigger company would. I’ve spent a lot of time restructuring our businesses to focus on more global decision-making.”
Implement changes
A decline in gross margin percentage year-over-year, from 32.7 percent to 30.2 percent, had a significant impact on Calgon’s 2012 bottom line. Central to the effort to improve these margins was the company’s launch of a $30 million cost and profit improvement program.
“We have already completed the first phase, which will provide $10 million in annualized savings beginning in 2013,” Dearth says. “The second phase, already well underway, should result in another $10 million in annualized savings beginning in 2014. The third phase, which we have begun to implement, will provide an additional $10 million in annualized savings when completed.”
Cost savings obtained in phase one resulted from personnel reductions worldwide, manufacturing improvements, reduced R&D spending in 2013 and the closure of an idled manufacturing facility in China. Cost-saving opportunities for phase two are the result of product rationalization, global procurement and streamlining of operations.
In addition to these cost saving measures, Dearth decided to restructure the company’s business units, which took a lot of uncertainty out of the organization and had a positive impact on the culture.
“Calgon had previously been structured by function,” Dearth says. “So you had a sales department led by a VP of sales and a marketing department led by a VP of marketing. The regions were totally autonomous and did their own thing.
“Calgon Carbon is big in essentially four segments: municipal water treatment, industrial and food applications, specialty carbon applications and UV technology. So we took our sales people who are focused on these areas and our best marketing people in these areas, and gave them autonomy under the leadership of a business unit head to drive their business.”
Since implementing that change, communication has been much better, and there is a better sense of where the company’s challenges and opportunities are in its markets.
“People have a better sense of the purpose of what their job is and what they themselves can influence,” he says. “Customers like it because now it’s clear as to who knows their business and their markets. It has also increased accountability, and it’s clearer as to who is driving the ship.
“When everybody had a small piece of it and things went awry, there was really nobody who said I’ll fix it and drive it forward because it was only a piece of their responsibility. That’s what we restructured, and we did it early in my tenure here, and the next step is to take that global.”
Dearth’s success in making all these changes within his first year as CEO started with the team around him.
“First and foremost, you have to understand the team around you, because your team is going to make or break you,” Dearth says. “Are they understanding where we need to go? Are they qualified to do the job? That is critical.”
Secondly, Dearth created a vision of where Calgon needed to go and how it would get there.
“I not only need to buy in to those key people I just mentioned, but the employees, my board of directors and ultimately the investors who are putting their money into our company need to know where I believe this company can go and how I’m going to get them there,” he says.
Lastly, Dearth took the time to understand the organization and its businesses.
“I’ve spent a lot of time asking the right questions and putting task teams together to evaluate whether we are doing something the right way or should be doing it differently,” he says. “You don’t want to get too far into the weeds, because you lose sight of the bigger picture, but it is important to have a good sense of what you’re good at and what you’re not good at, and it all ties into making the decisions to take the company to a different level.”
The next level
Despite all that Dearth has already accomplished to get Calgon Carbon on a better path, there is still a lot of work to do moving forward.
“We’re still dealing with the global economy that is at best a little shaky,” Dearth says. “That is one challenge we need to overcome. We need to constantly be looking at further optimization. China has become a big player in a lot of industries and activated carbon is no exception.
“We need to look at how they will affect our business going forward. Keeping one step ahead of the Chinese competition is a challenge to make sure we’re the best at manufacturing, marketing and have a global presence that we can compete in.”
Another aspect Dearth will continue to focus on is company culture.
“Company culture gets easier and easier once people get it and they understand there is a leader in front of them that they can trust and is taking them where they need to go,” he says. “That doesn’t happen in 10 months. It’s a long process to get everybody on board and that’s still a challenge I have ahead of me.”
Those few challenges aside, Dearth is looking forward to entering three new market opportunities. One is a water ballast treatment system — the U.S. Coast Guard will be requiring ships entering the U.S. in 2014 to have a ballast water treatment system to remove and treat the water going in and out of the ships.
The second one is mercury — all power plants in 2015 that burn coal will be required to remove the mercury, and activated carbon has been shown, and is being used, as the material that can take the mercury out of the smoke stacks when coal is being burned.
Third is related to Calgon’s municipal water business — the U.S. Environmental Protection Agency is requiring that certain disinfection byproducts and certain species that are formed when chlorine is used as a disinfection need to be removed from the water, and activated carbon takes it out. Those municipalities that have this problem need to comply.
“On top of the fact that we’re improving the company’s efficiency, we’re also positioning ourselves for great growth.” Dearth says. “We have a very solid balance sheet and I’d like to expand our business. So we’re looking at both internal cap-x projects and outside investments that can grow our business.” ●
Takeaways:
- Assess your business opportunities and areas in need of improvement.
- Implement changes to address those needs.
- Continue to focus on what will grow the company to the next level.
The Dearth File:
Name: Randall Dearth
Title: President and CEO
Company: Calgon Carbon Corp.
Born: Warren, Ohio
Education: Received a bachelor’s degree in chemistry from Hiram College and a master’s degree in polymer science and engineering from Case Western Reserve University.
What was your first job and what did you learn from it? I was a head lifeguard when I was in high school. That taught me a lot about leadership and being able to rally people around a cause. It was a great way to get a tan too.
What is the best business advice you have ever received? Always ask yourself, ‘Have I created value today?’
Who do you admire in business? I’m a huge fan of Harry Truman. In 1945 when Roosevelt died, here was a guy that was not supposed to be successful, came from humble beginnings and was not prepared at all. However, he let his instincts do what needed to be done and surrounded himself with the best people and things worked out. That’s kind of how I am. I’m given what I have — my training, experiences and background and I’m going to focus on doing the best I can.
What do you like most about Calgon Carbon Corp.? The fact that we’re solving environmental problems, not only for today’s requirements, but for the future.
Calgon Carbon Social Media Links:
LinkedIn: www.linkedin.com/company/calgon-carbon-corporation
Randall Dearth on LinkedIn: http://linkd.in/17PslhD
How to reach: Calgon Carbon Corp., (412) 787-6700 or www.calgoncarbon.com
